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Annual Financial Statements as of December 2017 and Management Report for the fiscal year 2017
RENK Aktiengesellschaft
At a glance
€ million 2017 2016 Change in %
Order intake 434 486 (10.6)
Sales revenue 469 496 (5.3)
Order backlog1) 748 799 (6.3)
Headcount 2,235 2,205 +1.4
Change in
€ million
Operating profit 60 67 (7)
Profit before taxes 61 65 (4)
Profit after tax 43 44 (1)
Earnings per share in € 6.30 6.50 –
Dividend distribution per share in € 2.20 2.20 –
Operating return on sales in % 12.8 13.5 –
Capital expenditures2) 19 25 (6)
Depreciation and amortization on noncurrent assets 19 19 –
Internally financed R&D expenditures 14 11 +3
Cash flows from operating activities 25 57 (32)
Cash flows from current investing activities (24) (25) +1
Net cash flow 1 32 (31)
Cash and cash equivalents1) 199 214 (15)
Total equity1) 422 390 +32
1) As of December 31, 2017, as against December 31, 2016 2) For property, plant and equipment and intangible assets
Financial reporting dates at www.renk.eu
RENK – a company of MAN Group
RENK Group Annual Report 2017 1
Content Page Supervisory Board 2 The Executive Board 3 Report of the Supervisory Board 4 RENK Stock 10
Corporate Governance Statement in accordance with section 289f HGB and section 315d HGB for fiscal year 2017 12 Management Report of the RENK Group for the Fiscal Year from January 1 to Decem-ber 31, 2017 23 Business activities and management of the RENK Group 25 RENK AG – Business focus 25 Internal management system and value management 26 Business performance and economic situation of the RENK Group 29 Economic environment 29 Summary by the Executive Board 29 Forecast variance analysis 32 Results of operations 35 Income statement 40 Financial position of the RENK Group 42 Cash flow – development of cash and cash equivalents and term deposits 42 Net assets 44 Capital information/disclosures in accordance with section 315a(1) HGB 47 Closing statement by the Executive Board on the dependent company report in accordance with section 312 AktG 48 Research and development 50 Capital expenditures and environmental management 51 Employees 53 The segments 57 Report on risks and opportunities 70 Remuneration report for fiscal year 2017 80 Forecast 90 RENK AG Consolidated Financial Statements for the Fiscal Year from January 1 to Decem-ber 31, 2017 95 Consolidated Income Statement 96
Reconciliation to Total Comprehensive Income for the Period 96
Consolidated Statement of Financial Position 97
Consolidated Statement of Changes in Equity 98
Consolidated Statement of Cash Flows 99
Notes to the Consolidated Financial Statements 100
Principles of Financial Reporting 100
Notes to the Consolidated Income Statement 120
Notes to the Consolidated Statement of Financial Position 127
Other disclosures 141
Events after the end of the reporting period 165
Members of the Supervisory Board and the Executive Board and their mandates 166
Responsibility statement 173
Audit Report for the consolidated financial statements of RENK AG 174
Six-year Overview 182
2
Supervisory Board
Dr. Ingrun-Ulla Bartölke Wolfsburg
Chairwoman of the Supervisory Board
Head of Group Accounting and
External Reporting at Volkswagen
Aktiengesellschaft
Roberto Armellini*) Augsburg
Deputy Chairman of the
Supervisory Board
Managing Director IG Metall Augsburg
Michael Behrendt Hamburg, Germany
Chairman of the Supervisory Board of
Hapag-Lloyd AG
Hardy Brennecke Wolfenbüttel
Head of the Executive Office for the
Commercial Vehicles division of
Volkswagen Aktiengesellschaft
Secretary General of Volkswagen
Truck & Bus GmbH
Joachim Drees Stuttgart
Managing Director of
Volkswagen Truck & Bus GmbH
Chairman of the Executive Board of MAN
SE
Chairman of the Executive Board of
MAN Truck & Bus Aktiengesellschaft
Dipl.-Ing. (FH) Rainer Handschuh*) Augsburg
Chairman of the Group Works Council of
RENK AG
Chairman of the Works Council of RENK
AG, Augsburg plant and RENK Test System
GmbH
Christiane Hesse Wunstorf
Member of the Board of Management
(Human Resources and Organization) of
Volkswagen Financial Services Aktien-
gesellschaft
Dipl.-Ing. (FH) Frank Hoffmann*) Augsburg
Head of Vehicle Transmissions at RENK
AG, Augsburg
Thorsten Jablonski Ilsede
Head of Transmissions
Head of Kassel site for Volkswagen
Aktiengesellschaft
Herbert Surmann*) Rheine
Chairman of the Works Council RENK AG,
Rheine plant
Walter Vogt*) Eltville
Labor union secretary at IG Metall
Executive Board, Frankfurt/Main
Ingo Weidner*) Hanover
Deputy Chairman of the Works Council of
RENK AG, Hanover plant
As of February 8, 2018 *) elected by employees
RENK Group Annual Report 2017 3
The Executive Board
Dipl.-Ing. (FH) Florian Hofbauer Dipl.-Kfm. (Univ.) Christian Hammel
Landsberg Munich
Spokesperson
Engineering and Sales Administration and Production
4
Report of the Supervisory Board
Ladies and Gentlemen,
In fiscal year 2017, the Supervisory Board at-
tended to the situation and development of
the company in depth and on an ongoing ba-
sis. It regularly and comprehensively per-
formed its duties in accordance with the law,
the Articles of Association and its Rules of
Procedure. We advised the Executive Board
on its management of the company and
monitored its activities.
The Executive Board informed the Supervi-
sory Board regularly and promptly by de-
tailed written and oral reports about business
performance, relevant business events and
the development of the results of operations,
net assets and financial position. In addition,
the reporting to the Supervisory Board com-
prised corporate planning including develop-
ments deviating from it and their causes, the
strategic focus of the company, the risk posi-
tion and the content and structure of the risk
management system. In the context of its
monitoring duties, the Supervisory Board as-
sured itself that the Executive Board has in-
stalled an effective compliance system for the
RENK Group and was informed of activities
undertaken in this field.
The Supervisory Board was involved in an ad-
visory capacity in all questions and decisions
of material importance to the company. Fur-
thermore, I consulted with the members of
the Executive Board in regular discussions
outside the Supervisory Board meetings on
matters and issues relevant to the company,
including business development and strate-
gic projects.
The Supervisory Board held four meetings in
fiscal year 2017; the average attendance rate
was 97.92%. One resolution of the Supervisory
Board was adopted by way of circulation.
In fiscal year 2017, no members of the Super-
visory Board participated in only half or less
than half of the meetings of the Supervisory
Board and the committees to which they be-
long.
Work of the committees The Supervisory Board has formed three joint
committees, each consisting of two share-
holder representatives and two employee rep-
resentatives - the Audit Committee, the Exec-
utive Personnel Committee and the Media-
tion Committee in accordance with section
27(3) of the Mitbestimmungsgesetz (MitbestG
– German Codetermination Act). There is also
the Nomination Committee that consists ex-
clusively of shareholders.
The Audit Committee met four times in fiscal
year 2017. It dealt in depth with issues of ac-
counting and the annual financial statements
of RENK AG, the consolidated financial state-
ments, the management reports, the depend-
ent company report and the audit reports of
the auditor. In addition, the Audit Committee
discussed with the Executive Board the half-
yearly report for 2017 prior to its publication.
Other issues handled by the Audit Committee
were the discussion of the audit engagement
for the audit of the annual and consolidated
financial statements for 2017, the audit focus
and the discussion of and decision on the se-
lection procedure for the audit from fiscal
year 2020. Moreover, the Audit Committee
dealt with the monitoring of the accounting
process, the effectiveness of the internal con-
trol system and the internal risk manage-
ment system. The Audit Committee also dis-
cussed the internal audit system and compli-
ance issues. Furthermore, the Audit Commit-
tee discussed the implementation of CSR re-
porting and the efficiency and effectiveness
of its work. The topics of the last meeting of
the Audit Committee were the annual review
RENK Group Annual Report 2017 5
of its guiding principles for auditor network
services, the new audit reports and opinions
and the new accounting standards effective
from 2018.
The Executive Personnel Committee met four
times in the year under review. In particular,
its tasks included preparing resolutions of
the Supervisory Board on the remuneration
of the Executive Board and the diversity con-
cept for the Executive Board of RENK AG.
The Mediation Committee did not have to be
convened in fiscal year 2017. The Nomination
Committee met once in the year under re-
view.
Issues in the Supervisory Board Regular topics of discussion in the Supervi-
sory Board included the business perfor-
mance of the RENK Group and strategic is-
sues. Furthermore, the work of the commi-
ttees was reported on at the meetings of the
Supervisory Board.
On March 6, 2017 the Supervisory Board
mainly dealt with the 2016 consolidated fi-
nancial statements and the 2016 annual fi-
nancial statements of RENK AG, the respec-
tive management reports and the dependent
company report; the auditor also submitted
the audit reports and reported on the key
findings of the audits. Further topics of this
meeting included the coordination of the
agenda and proposed resolutions for the 2017
Annual General Meeting.
Furthermore, the Supervisory Board ap-
proved the figures for the variable remunera-
tion of members of the Executive Board for
fiscal year 2016 presented at this meeting and
resolved to adjust the basic remuneration for
Mr. Hofbauer.
There was another meeting of the Supervi-
sory Board before the Annual General Mee-
ting on April 26, 2017. Among other things,
this meeting adopted the resolution to issue
the audit engagement to Pricewaterhouse-
Coopers GmbH Wirtschaftsprüfungsgesell-
schaft (PwC) – subject to the Annual General
Meeting selecting PwC as the auditor. More-
over, the Supervisory Board discussed the re-
muneration of the Executive Board at this
meeting.
The focus of the meeting on Septem-
ber 21, 2017 was the strategy of the RENK
Group. The Supervisory Board also updated
its Rules of Procedure at this meeting.
At the meeting on December 5, 2017, the Su-
pervisory Board confirmed the objectives for
its composition and resolved a skills profile
for the Supervisory Board. It also discussed
and resolved a diversity concept for the Su-
pervisory Board and the Executive Board at
this meeting. Another key topic of this mee-
ting was the implementation of the German
Corporate Governance Code and the renewal
of the declaration of conformity.
Corporate governance and the Declaration of Conformity The application of the German Corporate
Governance Code in the RENK Group was the
subject of the Supervisory Board meeting on
December 5, 2017. Following this meeting the
Supervisory Board and the Executive Board
issued the annual declaration on the recom-
mendations of the Code in accordance with
section 161 of the Aktiengesetz (AktG – Ger-
man Stock Corporation Act). This Declaration
of Conformity has been published on RENK
AG’s website.
There were no reports of conflicts of interest
among members of the Supervisory Board
within the meaning of item 5.5 of the German
Corporate Governance Code in the year under
review.
Further information on corporate govern-
ance at RENK can be found in the corporate
governance report.
6
Audit of the 2017 annual and consolidated financial statements and the dependent company report The annual financial statements and Manage-
ment Report of RENK AG, and the consoli-
dated financial statements and the Group
management report, for the fiscal year from
January 1 until December 31, 2017 were
audited by the auditor elected by the Annual
General Meeting on April 26, 2017, Pricewater-
houseCoopers GmbH Wirtschaftsprüfungs-
gesellschaft, Munich. Each was issued with an
unqualified audit opinion. The Supervisory
Board defined the regularity of accounting
for development services as an area of em-
phasis of the audit. The auditor also assessed
the internal control system and the risk ma-
nagement system, concluding that the Execu-
tive Board has taken the measures required in
accordance with section 91(2) AktG to ensure
early detection of any risks that could jeo-
pardize the going concern of the company.
In accordance with section 312 AktG, the Ex-
ecutive Board prepared a report on relations
with affiliated companies (dependent com-
pany report) for fiscal year 2017. The auditor
examined the dependent company report
and issued the following opinion:
“Based on our audit and assessment, which
we have carried out in accordance with pro-
fessional standards, we hereby confirm that
1. the factual statements made in the report
are correct,
2. the company’s compensation with respect
to the transactions listed in the report was
not inappropriately high.”
The Supervisory Board endorsed the results
of the audit of the dependent company re-
port performed by the auditor.
The members of the Audit Committee and
the Supervisory Board members received the
annual financial statement documents in-
cluding the dependent company report and
the audit reports of the auditor in time for
the meetings of those bodies on Febru-
ary 26, 2018. The auditor reported in detail at
both meetings on the main results of his
audits and was available to provide additional
information.
Taking into account the audit reports of the
auditor, the conversation with him and its
own findings, the Audit Committee prepared
the documents for our own audit of the con-
solidated financial statements, the annual fi-
nancial statements of RENK AG, the manage-
ment reports for the RENK AG and the RENK
Group and the dependent company report,
and reported on them at the Supervisory
Board meeting on February 26, 2018. It then
recommended that we approve the annual fi-
nancial statements.
In the knowledge of and taking into account
the report of the Audit Committee and the
auditor’s report, and in talks and discussions
with him, we subjected the documents to a
detailed examination. The final audit of the
annual financial statements of RENK AG, the
consolidated financial statements and the
management reports did not give rise to any
objections. We came to the conclusion that
they are correct and that the assessments of
the Executive Board on the situation of the
company and the Group as presented in the
management reports are consistent with the
assessments of the Supervisory Board. At our
meeting on February 26, 2018 we therefore
endorsed the results of the audit by the audi-
tor and approved the annual financial state-
ments and the consolidated financial state-
ments prepared by the Executive Board. The
annual financial statements were thereby
adopted.
We examined the proposal for the appropria-
tion of profits by the Executive Board, taking
into account the interests of the company
and its shareholders in particular, and en-
dorsed the proposal.
RENK Group Annual Report 2017 7
According to the final results of our audit,
there are no objections to the declaration by
the Executive Board at the end of the depen-
dent company report.
Personnel changes in the Supervisory Board Dr. Jeske and Dr. Pachta-Reyhofen had re-
signed as members of the company’s Supervi-
sory Board effective from the end of the An-
nual General Meeting on April 26, 2017. Mr.
Hardy Brennecke and Mr. Joachim Drees were
elected to the Supervisory Board as their suc-
cessors by the Annual General Meeting on
April 26, 2017. Furthermore, Ms. Christiane
Hesse and Mr. Thorsten Jablonski, who had
been appointed to the Supervisory Board of
RENK AG by MAN SE, were confirmed by the
Annual General Meeting on April 26, 2017.
Our thanks We would like to thank the members of the
Executive Board and the employees of the
RENK Group for their hard work and dedica-
tion. We thank the employee representatives
for their objective and constructive coopera-
tion in the interests of our company.
On behalf of the Supervisory Board
Augsburg, February 26, 2018
Dr. Ingrun-Ulla Bartölke
Chairwoman of the Supervisory Board
8
RENK Group Annual Report 2017 9
10
RENK Stock
Stock market environment 2017 2017 was defined by a volatile upswing on the
international stock markets. The DAX, Ger-
many’s benchmark index, was also higher
than at the end of 2016.
Promising economic developments in key in-
dustrial nations, the improved situation on
the US labor market, the results of the elec-
tions in the Netherlands and France and the
proposed US tax reform, which provides relief
for corporations, had a positive impact.
At times prices were hit by uncertainty re-
garding the economic policy of the new US
government, the election results in Europe,
the monetary policy of both the US Federal
Reserve and the European Central Bank, the
strong euro and international crises.
Performance of RENK shares In this volatile stock market environment
with strong economic and political influ-
ences, RENK’s shares developed very posi-
tively over the course of the reporting period.
Starting at a closing price of € 101.15 at the
end of 2016, the share price climbed to
€ 113.01 by the end of 2017, up by € 11.86 or
11.7% on the figure for the previous year. Ta-
king into account the distribution, this meant
a total return for RENK shareholders of 14.26%
in 2017.
Furthermore, looking back over five years,
RENK’s shares (not including dividends) have
risen by an average of 9.2%.
The Executive Board and the Supervisory
Board will be proposing the distribution of a
dividend – as for the previous year – of € 2.20
for fiscal year 2017 at this year’s Annual Ge-
neral Meeting. This corresponds to a dividend
yield based on the closing price for 2017 of
around 1.9%.
RENK Group Annual Report 2017 11
Key performance indicators for RENK shares
in € 2017 2016
Earnings per share 6.30 6.50
Cash dividend per share 2.20 2.20
Market capitalization1) in € million 791 708
Closing price2) 113.01 101.15
High2) 123.85 104.45
Low2) 95.85 92.55
Price-earnings ratio 17.94 15.51
Dividend yield on shares3) in % 1.9 2.2
Total return on shares4) in % 14.3 (1.4)
Number of shares outstanding 6,800,097 6,800,097
1) Based on 7 million shares 2) Daily closing price on Frankfurt stock exchange 3) Cash dividend based on closing price for the year 4) On reinvestment of cash dividend at end of month following Annual General Meeting
12
Corporate Governance Statement in accordance with section 289f HGB and section 315d HGB for fiscal year 20171)
At RENK, the management and control of the
company and the Group are geared towards
ensuring sustainable value added and an ap-
propriate result in accordance with the prin-
ciples of the social market economy.
Corporate governance is defined by the appli-
cable laws, in particular company law, the Ar-
ticles of Association and internal regulations,
and by national and international standards
of good and responsible management. The
German Corporate Governance Code (Code)
provides conduct recommendations and su-
ggestions for corporate governance as ap-
plied in the RENK Group in line with acknow-
ledged standards.
(a) Corporate Governance at RENK2)
The Executive Board and the Supervisory
Board of RENK have dealt extensively with
the corporate governance system and compli-
ance with the recommendations and sugges-
tions of the Code. They are aware that good
and transparent corporate governance, con-
sistent with both national and international
standards, is essential for the responsible and
long-term management of a company.
Declaration of conformity On December 5, 2017, the Executive Board and
the Supervisory Board issued the declaration
of compliance reproduced below in accor-
dance with section 161 of the German Stock
Corporation Act (AktG):
“The Executive Board and the Supervisory
Board of RENK AG declare that the reco-
mmendations of the Government Commis-
sion on the German Corporate Governance
Code as amended on February 7, 2017 promul-
gated by the Federal Ministry of Justice on
April 24, 2017 in the official section of the
Bundesanzeiger (the Federal Gazette) are
complied with effective immediately, with the
exception of items 4.2.3(2) sentence 3 (for-
ward-looking variable remuneration), 5.4.1(6)
to (8) (disclosure of proposals of candidates
for election) and 7.1.1 sentence 2 (intra-year fi-
nancial information).
1.) The recommendation of item 4.2.3(2)
sentence 3 is not complied with in that
the assessment base for variable remu-
neration components is not essentially
forward-looking. The current remunera-
tion system is based on the recommen-
dation found in the version of the Code
dated May 5, 2015. As the Supervisory
Board considers a long-term assessment
basis that is essentially forward-looking
to be appropriate, an adjustment of the
remuneration system in line with the
recommendations of the current version
of the Code is being prepared but has not
yet been completed or implemented.
1) The Corporate Governance Statement in accordance with section 289f HGB and section 315d HGB is part of the Group management
report not included in the audit. 2) Also “Corporate Governance Report” of the Executive Board and the Supervisory Board in accordance with item 3.10 of the German
Corporate Governance Code as amended February 7, 2017
RENK Group Annual Report 2017 13
2.) Regarding the recommendation in items
5.4.1(6) to (8) of the Code on the disclo-
sure of certain circumstances of nomina-
tions by the Supervisory Board to the An-
nual General Meeting, the requirements
of the Code are unspecific and unclear in
their application. A departure from the
Code as regards this matter has thus
been declared as a precaution. Regardless
of this, the Supervisory Board will en-
deavor to comply with the requirements
of items 5.4.1(6) to (8) of the Code.
3.) The recommendation of item 7.1.1 sen-
tence 2 (intra-year financial information)
is not complied with as the Executive
Board and Supervisory Board of RENK AG
consider an obligation to release quar-
terly publications in addition to the sta-
tutory requirement of the Wertpapier-
handelsgesetz (WpHG – German Securi-
ties Trading Act) to be unnecessary.
The Executive Board and the Supervisory
Board of RENK AG further declare that the
recommendations of the Government Co-
mmission on the German Corporate Gover-
nance Code as amended on May 5, 2015 pro-
mulgated by the Federal Ministry of Justice
on June 12, 2015 in the official section of the
Bundesanzeiger were complied with in the
period December 2016 to April 24, 2017, with
the exception of items 5.4.1(5) to (7) (disclo-
sure of proposals of candidates for election;
items 5.4.1(6) to (8) in the February 7, 2017 ver-
sion of the Code). The reasons for the excep-
tion are explained above.
From April 24, 2017 until the time that this
declaration of conformity was issued, the re-
commendations of the Government Commi-
ssion on the German Corporate Governance
Code as amended on February 7, 2017 promul-
gated by the Federal Ministry of Justice on
April 24, 2017 in the official section of the
Bundesanzeiger (the Federal Gazette) were
complied with, with the exception of items
4.2.3(2) sentence 3 (forward-looking variable
remuneration), 5.4.1(2) sentence 1 and (4) sen-
tence 1 (preparation of a skills profile and ef-
forts to adhere to it), 5.4.1(5) (résumés for all
Supervisory Board members), 5.4.1(6) to (8)
(disclosure of proposals of candidates for
election) and 7.1.1 sentence 2 (intra-year finan-
cial information). The reasons for the depar-
tures from items 4.2.3(2) sentence 3, 5.4.1(6) to
(8) and 7.1.1 sentence 2 are explained above.
The new recommendations of item 5.4.1(2), (4)
and (5) added effective from April 24, 2017 –
which relate to the composition of the Super-
visory Board and the preparation of a skills
profile for the body as a whole, striving to ad-
here to the skills profile for the body as a
whole and publishing résumés for all Supervi-
sory Board members supplemented by over-
views of their main activities in addition to
their Supervisory Board appointment on the
company’s website – have been complied
with since December 5, 2017 when this was
discussed accordingly and resolved by the Su-
pervisory Board.”
14
Annual General Meeting The Annual General Meeting is the forum for
shareholders of RENK AG to exercise their
voting rights, to obtain information and to
engage in a dialog with the Executive Board
and the Supervisory Board.
RENK AG’s Annual General Meeting is orga-
nized and held with the goal of providing all
shareholders with information quickly, com-
prehensively and effectively both before and
during the Annual General Meeting. The invi-
tation to the Annual General Meeting is pub-
lished in the Bundesanzeiger (the Federal Ga-
zette) and is made accessible to shareholders
and all other interest parties on RENK’s web-
site, together with all reports and submi-
ssions for the Annual General Meeting.
To make it easier for shareholders to exercise
their rights in person and to facilitate voting
representatives, in addition to the option of
authorizing a bank, shareholder associations
or other persons, there is the possibility of
authorizing a RENK employee as a voting rep-
resentative.
Cooperation between the Executive Board and the Supervisory Board In accordance with German stock corporation
law, RENK AG has a dual management struc-
ture with an Executive Board and Supervisory
Board. Both governing bodies work together
closely for the good of the company and
strive to sustainably increase the value of the
company for the shareholders.
The Executive Board performs management
and operational functions on its own respon-
sibility, the Supervisory Board performs mo-
nitoring and consulting functions. Both the
Executive Board and the Supervisory Board
work on the basis of the applicable legal regu-
lations and their respective Rules of Proce-
dure. The Executive Board informs the Super-
visory Board promptly and comprehensively
on strategy, planning, business development
and the risk position. Transactions and
measures that require the approval of the Su-
pervisory Board are presented to it in time.
The Executive Board also informs the Chair-
man of the Supervisory Board immediately of
extraordinary events.
The Executive Board The Executive Board is the management body
of RENK AG and has two members as of De-
cember 31, 2017. The members of the Execu-
tive Board conduct all the company’s busi-
ness with joint responsibility. The Executive
Board is appointed by the Supervisory Board.
The Executive Board’s work is governed by its
Rules of Procedure.
The Executive Board determines the business
objectives for the entire RENK Group. It en-
sures compliance with legal provisions, offi-
cial regulations and internal company poli-
cies. The Executive Board also ensures open
and transparent corporate communications.
The risk management system assists the Ex-
ecutive Board in recognizing business and fi-
nancial risks and taking appropriate
measures to reduce risks.
In accordance with the specifications of the
German Stock Corporation Act and item 4.3.4
of the Code, Executive Board members only
can perform sideline activities with the prior
consent of the Supervisory Board. The Execu-
tive Board members are further required to
disclose conflicts of interest to the Supervi-
sory Board and the other members of the Ex-
ecutive Board without delay. Executive Board
members did not report any conflicts of in-
terest in the year under review. In addition,
companies of the RENK Group did not per-
form any transactions with members of the
Executive Board or their related parties in the
year under review.
RENK Group Annual Report 2017 15
Supervisory Board The Supervisory Board, consisting of an equal
number of employee and shareholder repre-
sentatives, is the monitoring and consulting
body of RENK AG.
In accordance with section 96(1) alt. 1 and sec-
tion 101 AktG in conjunction with section 1(1)
and section 7(1) sentence 1 no. 1 of the Mitbe-
stimmungsgesetz (MitbestG – German Codeter-
mination Act), the Supervisory Board consists
of twelve members. Six of these are shareholder
representatives elected by the Annual General
Meeting and six are employee representatives
elected in line with the German Codetermina-
tion Act. Since January 1, 2016, the statutory
minimum share of 30% women and men must
also be taken into account in new elections to
fill single or multiple Supervisory Board seats.
For information on the composition of the Su-
pervisory Board and the Supervisory Board
committees formed plus further details of the
changes occurred in the year under review,
please see the report of the Supervisory Board
and the notes to the consolidated financial
statements.
In light of the purpose of the company, its size
and the share of its international activities, the
Supervisory Board of RENK AG is endeavoring
to achieve a composition for the Supervisory
Board that takes the following elements into
account:
At least one seat on the Supervisory Board for
persons who especially embody the criterion
of internationality.
At least one Supervisory Board member
elected by the shareholders who has no po-
tential conflicts of interest and are indepen-
dent within the meaning of item 5.4.2 of the
Code.
Generally no persons should be considered
for election who have reached the age of 70
by the time of the election or who have al-
ready been a member of the Supervisory
Board of the company for more than 20 years.
All these criteria are met or are complied with.
Mr. Michael Behrendt is considered an inde-
pendent member of the Supervisory Board as
defined by the Code.
Furthermore, the Supervisory Board resolved a
skills profile for its composition in accordance
with item 5.4.1 of the Code in December 2017. In
line with this, the Supervisory Board of RENK
AG as a whole should have the following skills
and expertise:
In-depth knowledge and experience from the
company itself.
Management or monitoring experience at
other medium-sized or large enterprises.
Experience in key areas for the RENK Group,
such as mechanical engineering and infor-
mation technology.
Expertise in the field of finance.
All these criteria are met or are complied with.
Supervisory Board members did not report any
conflicts of interest in the year under review.
The appointments of Supervisory Board mem-
bers in bodies of other companies are shown in
the notes to the consolidated financial state-
ments.
Remuneration system of the Executive Board and the Supervisory Board For details of the remuneration system for the
Executive Board and the Supervisory Board,
please see the remuneration report in the ma-
nagement report.
Compliance report 2017 In fiscal year 2017 RENK systematically imple-
mented and continued to develop the compli-
ance program covering the combating of co-
rruption, antitrust law, data privacy and money
laundering.
16
RENK has established compliance as an integral
part of its corporate culture. The compliance
management system is coordinated, taught and
constantly refined by the compliance officer on
the basis of the MAN SE compliance program.
He reports directly to the RENK AG Executive
Board and functionally to the Audit Committee
of the Supervisory Board.
The compliance officer is assisted by a deputy
and two other employees in the area of revie-
wing business partners. The Rheine and Hano-
ver plants are also assisted by “compliance
champions” – managers who are not full-time
compliance employees but who assume special
responsibility for compliance at their sites.
Furthermore, the compliance officer can use
the resources of MAN’s corporate compliance
office. In particular, training and information
materials and e-learning courses are managed
from here. Policies are adapted to RENK’s struc-
ture and business model.
The compliance organization and the introduc-
tion of new compliance measures were closely
coordinated with the Executive Board and plant
management teams on the basis of identified
risks. The Risk and Compliance Board, which
meets quarterly, is informed of the progress in
measures and coordinates the next steps as
necessary.
Ethical principles of conduct and compliance
requirements for RENK are established in the
Code of Conduct. Rules substantiating the Code
of Conduct are contained in the following com-
pliance policies:
policy on the handling of gifts, hospitality
and invitations,
policy on the involvement of business part-
ners,
policy on the handling of donations and
sponsorship activities,
policy on compliance with antitrust provi-
sions,
policy on the fight against terrorism, corrup-
tion and money laundering.
policy on the handling of personal data.
In addition to the Code of Conduct for Employ-
ees, RENK has issued a Code of Conduct for Sup-
pliers and Business Partners that defines cer-
tain minimum ethical standards that RENK’s
suppliers and sales support business partners
must agree to comply with.
The integrity of business partners is checked as
a mandatory requirement and they are subject
to an approval process.
In the induction phase after joining the com-
pany, the Compliance Officer introduces new
employees to the compliance organization,
compliance processes and compliance tools,
and takes the opportunity to discuss the com-
pany’s expectations of employees.
In addition, in line with their risk classification,
employees also receive compliance awareness
training in classroom sessions and e-learning.
As per the policy on the involvement of busi-
ness partners, the integrity of sales support
business partners is checked as a mandatory re-
quirement and they are subject to an approval
process. The integrity checks conducted in the
reporting period and the scheduled follow-up
inspections did not lead to any objections.
The electronic monitoring system, also known
as the continuous controls monitoring system
(CCMS), for the early identification of possible
compliance risks and policy violations in pur-
chasing and payment processes, was still ru-
nning at all RENK sites in Germany in the re-
porting period. CCMS reporting consists of vari-
ous check files. Changes in the extent of control
and control irregularities are evaluated on a
monthly basis and assessed in a meeting with
the Head of IT, Head of Finance and the Compli-
ance Officer, and finally reported to the RENK
Risk and Compliance Board.
RENK Group Annual Report 2017 17
The compliance officer and the compliance
help desk, which can be used by all employees
for matters concerning compliance, received 28
inquiries for the RENK Group and 26 for RENK
AG in the reporting period (compliance officer
(25 and 23), MAN compliance helpdesk (3)).
These were answered by the compliance officer
and documented.
No compliance violations were identified in the
reporting period.
MAN’s “Speak up!” whistleblower portal helps
to detect and avoid dangerous risks. Through
“Speak up!”, tips concerning severe compliance
violations, particularly in the area of white co-
llar crime (such as corruption), antitrust law
and privacy, are received and processed.
RENK employees and third parties therefore
have another way to provide tips on compli-
ance violations – confidentially, internationally
and at any time – other than contacting the
compliance officer directly. Compliance viola-
tions are not tolerated at RENK under any cir-
cumstances. Information on possible violations
is examined in detail, violations are stopped
and sanctioned as far as labor law allows. Fur-
thermore, the findings from investigating com-
pliance violations are used for the continuous
improvement of the compliance system. No tip-
offs of compliance violations were received
through the whistleblower portal in the year
under review.
MAN Corporate Audit conducted an audit of
the compliance management system and the
business partner process from July 10 to
July 28, 2017.
The objective of the audit was to determine
whether:
there is an effective compliance management
system;
internal rules, policies and instructions are
adhered to;
the handling of business partners is in order.
The results found that the processes were es-
sentially in order and that there were no hu-
man errors.
Transparency RENK publishes a financial diary with all the
important dates for shareholders on the web-
site www.renk.eu under the “Investor Relations”.
Furthermore, this website also provides all
other important information that can be ac-
cessed by shareholders and interested mem-
bers of the public, thereby allowing the simul-
taneous and comprehensive communication of
relevant information. This includes annual re-
ports and half-yearly reports, press releases and
invitations to and agendas for the Annual Ge-
neral Meeting including the other documenta-
tion that must be published in connection with
the Annual General Meeting
Furthermore, such information that must be
disclosed immediately in accordance with capi-
tal market disclosure obligations is also pub-
lished on the www.renk.eu homepage under
“Investor Relations”. In particular, examples of
such information are:
In accordance with Article 19 of Regulation
(EU) No 596/2014 of the European Parliament
and of the Council of 16 April 2014 on Market
Abuse (Market Abuse Regulation), persons
who perform management duties and their
related parties must report to the issuer and
the Bundesanstalt für Finanzdienstleistungs-
aufsicht (BaFin – German Federal Financial
Supervisory Authority) the purchase and sale
of RENK shares and financial instruments
that reference RENK shares. No transactions
were reported in fiscal year 2017.
In accordance with Article 17 of the Market
Abuse Regulation, issuers are required to dis-
close inside information that relates to them
directly without delay.
In accordance with section 40 WpHG, Ger-
man issuers must immediately publish notifi-
cations that they receive of shares of voting
rights in the company being exceeded or
fallen below.
18
Accounting and audit of the financial statements The annual consolidated financial statements
of the RENK Group are prepared by the Execu-
tive Board based on the International Financial
Reporting Standards (IFRS), as adopted in the
European Union, and the single-entity financial
statements of RENK AG in accordance with the
German Commercial Code (HGB) and the Ger-
man Stock Corporation Act (AktG). The consoli-
dated financial statements of the RENK Group
and RENK AG are audited by the auditor and
the Supervisory Board.
In line with the recommendation in item 7.1.2
sentence 2 of the Code, the half-yearly report is
discussed at RENK by the Executive Board with
the Audit Committee prior to its publication.
The publication deadlines for the consolidated
financial statements and the half-yearly report
stipulated in item 7.1.2 sentence 4 of the Code
are complied with.
The Audit Committee of the Supervisory Board
proposes an auditor to be elected for the com-
pany to the Supervisory Board. The Annual
General Meeting appointed Pricewaterhouse-
Coopers GmbH Wirtschaftsprüfungsgesell-
schaft as the auditor for fiscal year 2017 on
April 26, 2017. The auditor provided the Supervi-
sory Board with a statement regarding its inde-
pendence, which serves as proof of the auditor’s
independence. In addition to granting the audit
engagement and agreeing the fee, the Supervi-
sory Board arranged the immediate reporting
by the auditor to the Supervisory Board in the
event of findings or events of material im-
portance in the performance of the audit of the
financial statements and of the discovery of in-
accuracies in the declaration of conformity is-
sued in accordance with section 161 AktG.
(b) Other corporate governance practices
RENK AG is the managing parent company of
the RENK Group. In addition to monitoring its
operating activities, it also defines the develop-
ment of the overall strategy and structure of
the RENK Group.
RENK’s reputation, the trust of our customers,
investors, employees and public opinion are
crucially dependent on the proper conduct of
all the employees of our Group.
RENK has therefore adopted the MAN Group’s
Code of Conduct in full as a binding standard
for day-to-day work. A key objective of the Code
of Conduct is to eliminate advantages granted
and accepted as a means of achieving business
goals. RENK’s standing among the competition
is owed solely to the quality and specific cus-
tomer benefits of its products and services. This
is made clear to our employees in part by trai-
ning, but above all by exemplary conduct of
management. Furthermore, the requirements
of the Code of Conduct are defined in greater
detail in policies.
The appreciation of our employees – regardless
of nationality, culture, religion, sex and age – is
a central concern for RENK’s management. We
treat our employees fairly and openly and with
understanding and tolerance. And we expect
precisely this attitude from our employees in
their dealings with their colleagues, business
partners and third parties. Our social responsi-
bility also includes various preventive
measures for occupational safety and organiza-
tion that provide our employees with the best
possible protection and a positive working en-
vironment. We expect our employees to display
entrepreneurship. In return, we allow our em-
ployees to share in the company’s success.
Another key aspect of RENK’s corporate gover-
nance is responsibility towards investors, which
is quantified by appropriate target returns. The
continuous pursuit of these goals requires that
we strengthen our market position specifically
in our core business. The external growth stra-
tegies that can be used for this, such as coope-
rations, joint ventures, business acquisitions
and the establishment of global distribution of-
fices, are reviewed continuously together with
the possibilities for internal growth and imple-
mented specifically in the context of financial
opportunities.
RENK Group Annual Report 2017 19
(c) Working methods and composition of the Executive Board, the Supervisory Board and its committees
The composition of the Executive Board, the
Supervisory Board and the Supervisory Board
committees is presented in the notes to the an-
nual financial statements. The Executive Board
has no committees.
Please see under (a) for information on the
working methods of the Executive Board and
the Supervisory Board.
Working methods of the Supervisory Board committees The Supervisory Board has formed three joint
committees, each consisting of two shareholder
representatives and two employee representa-
tives - the Audit Committee, the Executive Per-
sonnel Committee and the Mediation Commi-
ttee in accordance with section 27(3) of the Mit-
bestimmungsgesetz (MitbestG – German Code-
termination Act). There is also the Nomination
Committee that consists of two shareholder
representatives. The main role of the commi-
ttees is to prepare the resolutions by the full
Supervisory Board. In individual cases, deci-
sion-making powers and responsibilities of the
Supervisory Board are transferred to the
commi-ttees.
The role of the Nomination Committee is to
identify candidates for Supervisory Board ap-
pointments who best meet the selection crite-
ria, taking into account the statutory provisions
and the regulations implemented in accor-
dance with the Declaration of Conformity of
the company, and to propose to the Supervisory
Board suitable candidates for its nominations
to the Annual General Meeting.
The Mediation Committee performs the duties
assigned to it in accordance with section 27(3)
MitbestG.
In particular, meetings of the Audit Committee
are held in connection with the financial state-
ments meeting of the Supervisory Board and
the half-yearly report. Further meetings of the
Audit Committee are convened as necessary.
Please also see the report of the Supervisory
Board for information on the work of the co-
mmittees.
(d) Target for share of women
For the period from January 1, 2017 to Decem-
ber 31, 2021, in accordance with section 111(5)
AktG, the Supervisory Board has set a target for
the share of women in the Executive Board of
0%.
In accordance with section 76(4) AktG, on
July 27, 2015 the Executive Board set targets for
the share of women in the first and second
management levels below the Executive Board
of 0% and 12.8% respectively. The deadline for
achieving these targets was set as June 30, 2017.
The target was not met for the second manage-
ment level below the Executive Board.
The share of women at the second manage-
ment level below the Executive Board was 10.3%
as of June 30, 2017. The lower deviations results
from the departure of two female managers.
The duties of one of these managers were rea-
ssigned to other organizational functions and a
new manager was not appointed to fill this role.
For the other position, it was not possible to
find a female manager with a corresponding
skills profile.
20
The share of women at the second manage-
ment level is therefore similar to the share of
women in the overall workforce. In particular,
the instructions by the Executive Board to in-
crease the share of women in the overall work-
force, and among academics especially, is in-
tended to help achieve the share of women sti-
pulated by the Executive Board. RENK traditio-
nnally fills most of the management positions
from within its own ranks. In light of this,
women are favored for nomination for the re-
gular training programs for junior managers.
For the period from January 1, 2017 to Decem-
ber 31, 2021, in accordance with section 76(4)
AktG, the Executive Board has again set a target
for the share of women of 0% for the first ma-
nagement level and 12.8% for the second ma-
nagement level below the Executive Board.
(e) Disclosures on compliance with the minimum share of women and men in the Supervisory Board
In accordance with section 96(2) sentence 1
AktG, the supervisory board of a listed stock
corporation subject to the German Codetermi-
nation Act must consist of at least 30% women
and at least 30% men.
The shareholders have objected to full compli-
ance in accordance with section 96(2) AktG.
Thus, the Supervisory Board must consist of at
least two women and two men – in terms of
both shareholders and employees.
The shareholder members of the Supervisory
Board are two women and four men, and this
requirement is therefore fulfilled. The em-
ployee members of the Supervisory Board are
six men and no women. However, as these are
what are known as pre-existing appointments,
this is not a contravention of the legal regula-
tion.
(f) Diversity concept for the Executive Board and the Supervisory Board
The Supervisory Board of RENK AG resolved a
diversity concept for the Supervisory Board and
the Executive Board in December 2017.
The diversity concept for the Executive Board
consists of the following components:
Stipulation of a target for the share of women
in the Executive Board of 0% in accordance
with section 111(5) AktG. However, the Super-
visory Board supports the activities of the Ex-
ecutive Board to increase the share of women
at the highest management levels in the com-
pany, including in terms of developing poten-
tial successors for the Executive Board.
Appointments for members of the Executive
Board should generally end one year after
they reach the age of 65. This age limit will in-
crease in line with the development of the
standard retirement age for the statutory
pension system and the Supervisory Board re-
serves the right to make exceptions in indi-
vidual cases.
Executive Board members should have many
years of management experience and as
much experience as possible from different
professions.
Among other things, the Executive Board as a
whole should have long-term experience in fi-
nance and HR management.
The Supervisory Board decides who should be
appointed to a specific Executive Board posi-
tion in the interests of the company and taking
into account all the circumstances of the indi-
vidual case.
The diversity concept for the Supervisory
Board comprises the following components:
RENK Group Annual Report 2017 21
The objectives set for the composition of the
Supervisory Board.
The skills profile for the Supervisory Board.
The gender quota of 30%, which is already
prescribed by law for the composition of the
Supervisory Board of RENK AG in accordance
with section 96(2) sentence 1 AktG and must
be adhered to accordingly.
With the exception of the gender quota on the
Supervisory Board of RENK AG in accordance
with section 96(2) AktG, which was not met on
account of existing appointments (for reasons
see “Disclosures on compliance with the mini-
mum share of women and men in the Supervi-
sory Board”), all the above criteria are met or
adhered to.
(The Corporate Governance Statement can also be found on the Internet under www.renk.eu in In-
vestor Relations under the section of the same name.)
22
,
RENK Group Annual Report 2017 23
Management Report of the RENK Group for the Fiscal Year from January 1 to December 31, 2017
Order intake and operating profit remain at a high level
Order intake € 434 million (previous year: € 486 million)
Sales revenue € 469 million (previous year: € 496 million)
Headcount 2,235 (previous year: 2,205)
Operating profit € 60 million (previous year: € 67 million)
Operating return on sales 12.8% (previous year: 13.5%)
Earnings per share € 6.30 (previous year: € 6.50)
Net cash flow € 1 million (previous year: € 32 million)
Proposed dividend: distribution of € 2.20 per share
(previous year: € 2.20)
Outlook 2018
Order intake increased significantly
Sales revenue higher than previous year
Operating profit at similar level
Operating return on sales still in double digits
24
RENK Group Annual Report 2017 25
Business activities and management of the RENK Group
RENK AG – Business focus The origins of RENK AG date back to 1873
when Johann Julius Renk founded a small
workshop for the mechanical production of
gear wheels in Augsburg Lechviertel. In 1879
the young firm moved to the Göggingen
neighborhood, which is still the Group’s
headquarter today. The company was trans-
formed into a stock corporation as early as
1897 – 120 years ago. RENK has been a part of
what is now the MAN Group since 1923. Fo-
llowing the majority takeover of MAN SE by
Volkswagen AG in 2011, RENK also became a
member of the Volkswagen Group.
Today, RENK is a key provider of premium
pulsion technology for a wide range of appli-
cations. It has a global outlook and major pro-
duction locations (branches) in Augsburg,
Rheine and Hanover.
RENK has made it its goal to maintain and ex-
pand its top technological position in key are-
as and to achieve profitable growth in the fu-
ture. The main pillars of this strategy are dis-
crete internationalization measures, a dedi-
cated focus on customer requirements, ope-
rational excellence in all fields and a constant
willingness to innovate.
Overview of divisions The Special Gear Units business comprises
large-gear production at RENK AG’s Augsburg
site and RENK-MAAG GmbH, Winterthur,
Switzerland. The product range extends from
stationary gear units for a variety of indus-
trial applications, including the cement in-
dustry, to turbo gear units of up to 140 MW
transmission capacity to complex gear units
for fast craft and naval applications with up
to 90 MW transmission ratings.
The Vehicle Transmissions business is a
leading manufacturer of fully automatic
transmissions for medium-weight and heavy
tracked vehicles, and also offers a broad range
of powerful test rigs for a variety of indus-
tries.
RENK’s automatic power-shift transmissions
are suitable for rear or front installation with
all modern diesel engines. Electronically con-
trolled and monitored, the units are built at
RENK AG’s Augsburg site. Vehicle Transmi-
ssions business also includes the French sub-
sidiary RENK France S.A.S., Saint Ouen
l’Aumône, which currently mainly performs
maintenance services for French army
tracked vehicle transmissions.
RENK’s test rig activities are also assigned to
Vehicle Transmissions. RENK Test System
GmbH (RTS) in Augsburg and its US subsidi-
ary RENK Systems Corporation, Camby (IN),
USA, design and produce customized test rigs
for development, production and quality as-
surance for automotive, aviation, railway ve-
hicles, tracked vehicles and wind turbines.
The Standard Gear Units business comprises
large-gear production at RENK AG’s Rheine
site. It specializes in marine gear units for
merchant ships, ferries, LNG/LPG tankers,
supply vessels and special ships. It also manu-
factures gear units for turbine plants and
couplings for industrial applications. The site
is also the center for RENK’s offshore wind
turbine activities.
The Slide Bearings business at RENK AG’s
Hanover site and the American sales com-
pany RENK Corporation, Duncan (SC), USA,
supply hydrodynamic, lubricated slide bea-
rings in particular. These are used for electric
motors, generators, pumps, blowers, water
turbines, conveyors and marine applications.
RENK has been a leading provider for stan-
dard series for years.
26
Intensive cooperation in the Group Combining the individual strengths and
product expertise of the individual divisions
creates the potential for synergies that can be
leveraged by the divisions working together
on larger projects. In addition, selective pro-
duct allocation allows the optimization of
large-gear unit production and assembly ca-
pacity.
Honing the competitive edge RENK’s competitive capability is built on
maintaining a leading technological position
in individual application areas, its global
presence in its relevant markets and service
quality tailored to the needs of international
customers.
Internal management system and value management
Internal management process in the RENK Group RENK is incorporated in the internal manage-
ment process of the Volkswagen Group. The
starting point for the internal management
of the RENK Group is medium-term planning,
which is produced once per year and forms
the core of operational planning for a period
of five years.
When planning the company’s future, the in-
dividual planning components are deter-
mined on the basis of the timescale involved.
The coordinated results of the upstream pla-
nning processes are used as the basis for the
medium-term financial planning. This com-
prises the upfront investments needed for al-
ternative products and the implementation
of strategic options, the financial planning of
the income statement, cash flow and balance
sheet planning, profitability and liquidity.
The first year of the medium-term planning
period is then fixed and a budget prepared
for the individual months.
During the year, the budget is reviewed each
month to establish the degree to which the
targets have been met. Target/actual compa-
risons, prior-year comparisons, variance ana-
lyses and, if necessary, action plans to ensure
targets are met are used in this process. For
the current fiscal year, revolving monthly
forecasts are prepared for the coming three
months and the full year. This is done taking
into account the current risks and opportuni-
ties. The focus of internal management du-
ring a year is therefore on adapting ongoing
operations to internal and external circum-
stances. At the same time, the current fore-
cast serves as a basis for the medium-term
and budget planning that follows it.
Key performance indicators in the RENK Group The most important financial performance
indicators in the RENK Group are sales reve-
nue, operating profit and operating return on
sales. The operating return on sales is the ra-
tio of the operating profit generated to sales
revenue. The most important non-financial
performance indicator is order intake.
Target returns In accordance with the objectives of the MAN
Group, RENK is striving for an operating re-
turn on sales of 9.0% within a range of +/-2
percentage points throughout a business cy-
cle in its Power Engineering business area. In
2017 the operating return on sales was 12.8%
after 13.5% in the previous year.
RENK Group Annual Report 2017 27
* Owing to the change in the financial reporting of the Volkswagen Group, from fiscal year 2014 operating profit as a percentage of sales revenue is reported as the operating return on sales. To ensure comparability, the operating return on sales was also calculated for fiscal year 2013.
28
21,1
RENK Group Annual Report 2017 29
Business performance and economic situation of the RENK Group
Economic environment The world economy achieved gross domestic
product (GDP) growth of 3.2% (2.5%) in 2017.
Economic momentum increased year-on-
year in both the advanced and the emerging
economies.
GDP growth in Western Europe picked up
slightly over the year to reach 2.3% (1.8%). The
majority of countries in this region increased
their growth rate. Uncertainty stemmed from
the UK’s exit negotiations now underway
with the European Union, and the question
this entails of the future nature of relations.
The general upward trend intensified in Cen-
tral Europe, and in Eastern Europe the eco-
nomy grew much more strongly than in the
previous year. Russia ended its recessive
phase with a growth rate of 1.6% (-0.4%).
In Germany, the continuing optimistic senti-
ment among consumers and the good situa-
tion on the labor market led to stronger GDP
growth in 2017 than in the previous year of
2.5% (1.9%).
The growth rate of the US economy was
higher than in the previous year at 2.2%
(1.5%). Above all, the economy was aided by
private consumer spending and the expan-
sive monetary policy. Private gross invest-
ment performed positively as well. The US
dollar was slightly weaker than in the previ-
ous year.
Brazil moved on in the year under review af-
ter bottoming out economically: Economic
output increased by 1.0% (-3.5%). Nonethe-
less, the situation for South America’s largest
economy remained tense, due in part to po-
litical uncertainty.
The Chinese economy expanded at the high
level of the previous year with a growth rate
of 6.9% (6.7%). The Indian economy conti-
nued its positive trend but growth was less
rapid than in the previous year at 6.5% (7.1%).
The reform measures introduced have had
since a dampening effect. Japan reported
solid GDP growth of 1.8% (0.9%).
According to the German Engineering Associ-
ation (VDMA), after a slight decline in the pre-
vious year, sales revenue in the global engi-
neering sector climbed by around 6% in 2017,
which was significantly more than originally
expected. There were upward movements in
many countries, especially China, the most
important production location in global me-
chanical engineering. Revenue for German
mechanical engineering industry was also
around 3% higher than in 2016.
Summary by the Executive Board In line with its broad product portfolio and
its presence on a wide range of markets,
RENK again faced different situations and cir-
cumstances on its individual target markets
in 2017. The relevant performance indicators,
compiled at the level of the RENK Group,
therefore did not stray far from the ranges es-
timated at the start of the year. Closer exami-
nation reveals that, thanks to this broad posi-
tioning, positive and negative developments
in individual, only somewhat correlated busi-
ness areas are at least partially offset.
RENK’s business model, with its often signifi-
cant but relatively few large projects com-
pared to the total volume, entails a high level
of volatility in terms of the accuracy of order
volume, structure and timing planning.
RENK’s typical customer-oriented one-off and
small-series production also makes exact
planning difficult, and can lead to both risks
and opportunities.
30
RENK’s Executive Board is not entirely satis-
fied with its volume of order intake or sales
revenue, but the positive development in op-
erating profit and operating return on sales
compared to assumptions is cause for opti-
mism.
The tables below provide an overview of the
individual figures forecast for the year under
review 2017 and their attainment. For detailed
information on the development of key per-
formance indicators, please see the sections
“Results of operations” and “The segments”.
RENK Group Annual Report 2017 31
32
Forecast variance analysis
RENK Group
Results 2016 Forecast 2017 Adjustment of forecast
for 2017 during year
Results 2017
Order intake € 486 million Slight decline – € 434 million
Sales revenue € 496 million
Equal to previous year’s level – € 469 million
Operating profit € 67 million Tangible decline – € 60 million
Operating return on sales 13.5%
Double-digit, but tangible decline – 12.8%
Special Gear Units segment
Results 2016 Forecast 2017 Adjustment of forecast
for 2017 during year
Results 2017
Order intake € 214 million Slight decline – € 154 million
Sales revenue € 162 million Slight increase – € 162 million
Operating profit € 15 million Tangible increase – € 11 million
Operating return on sales 9.1% Slight increase – 6.8%
Vehicle Transmissions segment
Results 2016 Forecast 2017 Adjustment of forecast
for 2017 during year
Results 2017
Order intake € 135 million Tangible decline – € 124 million
Sales revenue € 158 million
Equal to previous year’s level – € 151 million
Operating profit € 26 million Tangible decline – € 27 million
Operating return on sales 16.7% Tangible decline – 17.7%
RENK Group Annual Report 2017 33
Standard Gear Units segment
Results 2016 Forecast 2017 Adjustment of forecast
for 2017 during year
Results 2017
Order intake € 57 million Slight increase – € 88 million
Sales revenue € 101 million Significant decline – € 78 million
Operating profit € 13 million Not by a long way – € 8 million
Operating return on sales 12.4% Not by a long way – 10.7%
Slide Bearings segment
Results 2016 Forecast 2017 Adjustment of forecast
for 2017 during year
Results 2017
Order intake € 90 million
Equal to previous year’s level – € 84 million
Sales revenue € 90 million
Equal to previous year’s level – € 88 million
Operating profit € 14 million Slight decline – € 14 million
Operating return on sales 15.1% Slight decline – 16.0%
34
RENK Group Annual Report 2017 35
Results of operations
Order intake € 434 million RENK received new orders worth € 434 mil-
lion in fiscal year 2017. As expected, order in-
take was therefore below the previous year’s
level (€ 486 million). However, as a result of
different developments in the individual seg-
ments, the decline was stronger than origi-
nally planned. Incoming orders in Special
Gear Units fell short of expectations, which
had already been lowered slightly at the be-
ginning of the year compared to the record
level of 2016. This was mainly due to the post-
ponement of major navy projects. By con-
trast, order intake for Vehicle Transmissions
did not decrease as much as originally ex-
pected thanks to more positive development
in after-sales and maintenance. Incoming or-
ders for Standard Gear Units developed sig-
nificantly better than anticipated at the be-
ginning of the year, with key contributions
from new orders in the Standard Gear Units
business unit, mainly for wind turbine and
marine gear units. The development in order
intake in Slide Bearings was close to the fore-
cast, only slightly below the previous year’s
level.
36
Sales revenue down on previous year RENK generated sales revenue of € 469 mil-
lion in 2017 after € 496 million in the previ-
ous year. The original goal of constant sales
revenue compared to the previous year was
thus not achieved. Revenue remained on par
with the previous year’s level in Special Gear
Units, and the slight increase planned was
not achieved in part due to postponements.
In Vehicle Transmissions as well, the target
set at the beginning of the year of sales reve-
nue level with the previous year was not fully
achieved. Owing to the order intake situation
in the previous year, there was little way to
influence the forecast significant decline in
sales revenue for Standard Gear Units, and
the actual decline was therefore almost ex-
actly as predicted. As assumed at the begin-
ning of the year, sales revenue in Slide Bea-
rings was roughly at the same level as the pre-
vious year.
RENK Group Annual Report 2017 37
Order backlog of € 748 million In fiscal year 2017, RENK generated € 35 mil-
lion more in sales revenue than new orders
received in the same period. Together with
other changes, this caused the order backlog
to decline from € 799 million as of the begi-
nning of the year to € 748 million as of the
end of the year. With the exception of the
clear increase in Standard Gear Units, the or-
der backlog declined in all segments. The im-
pact of these declines varied according to the
different lead times for orders in the individ-
ual segments. Given the often very long lead
times in Vehicle Transmissions, the effect was
strongest here in absolute terms because a
large amount of its deliveries were for major
orders received several years ago.
38
Operating profit of € 60 million RENK generated an operating profit of
€ 60 million in fiscal year 2017 after € 67 mi-
llion in the previous year. The operating
profit thus underwent a noticeable decline as
anticipated at the start of the year.
The Special Gear Units reported a significant
decline in its operating profit to € 11 million
instead of the strong growth that had been
forecast. In addition to a lack of earnings con-
tributions as a result of increases in sales re-
venue that had been budgeted but did not
materialize, the revenue mix was also less
profitable compared to the previous year and
forecasts. In addition, cost structures were
less favorable due to delays and the post-
ponement of orders.
Vehicle Transmissions performed substan-
tially better than forecast, maintaining the
previous year’s level instead of a notable de-
cline in earnings. All the segment’s business
areas matched the previous year’s levels
again in 2017.
The earnings situation in Standard Gear
Units was likewise much better over the
course of the year than originally assumed.
Thanks also to orders received at short notice,
capacity utilization was considerably better
than expected and thus the decline in ear-
nings was less severe.
Instead of the slight decline forecast, Sliding
Bearings was again on par with the previous
year’s earnings thanks to slight changes in
the product mix.
The RENK Group therefore reported an ope-
rating return on sales of 12.8% (previous year:
13.5%) for fiscal year 2017 – slightly higher
than the figure planned at the beginning of
the year. The better than expected earnings
in Vehicle Transmissions, Standard Gear
Units and Slide Bearings were offset by the
disappointing performance by Special Gear
Units.
RENK Group Annual Report 2017 39
40
Income statement1)
2017 2016
€ million in % € million in %
Sales revenue 469 100.0 496 100.0
Cost of sales (364) (77.5) (376) (75.9)
Gross profit 106 22.5 120 24.1
Other operating income 13 2.9 15 3.0
Distribution expenses (35) (7.5) (36) (7.3)
Administrative expenses (20) (4.2) (18) (3.6)
Other operating expenses (4) (0.8) (13) (2.7)
Operating profit 60 12.8 67 13.5
Financial result 1 0.2 (3) (0.5)
Profit before taxes 61 13.0 65 13.0
Income tax expense (18) (3.9) (20) (4.1)
Profit after tax 43 9.1 44 8.9
Earnings per share in € 6.30 – 6.50 –
Distribution per share in €2) 2.20 – 2.20 –
1) Minor differences in totals or percentages in the statements and tables below can occur as a result of the commercial rounding of amounts in the thousands of euro.
2) 2017: Proposal to the Annual General Meeting
RENK Group Annual Report 2017 41
The gross margin fell from 24.1% in the previ-
ous year to 22.5% in fiscal year 2017. This was
caused in part by the different product mix of
the orders invoiced. Selling and administra-
tive expenses climbed marginally and thus
remained almost at the previous year’s level.
Other operating income was down € 2 million
year-on-year at € 13 million, mainly on ac-
count of lower income from the reversal of
provisions. Other operating expenses de-
creased significantly to € 4 million (previous
year: € 13 million) in 2017. In particular, this
item had included provisions for capacity ad-
justments and higher currency translation
charges in the previous year.
The financial result was slightly positive in
fiscal year 2017 after the negative impact of
an impairment loss on the carrying amount
of an equity investment in the previous year.
At € 18 million, tax expenses remained below
the previous year’s figure of € 20 million in
2017 as well. The tax rate was 30.0% after
31.5% in the previous year. This results from
the respective income tax rates for the do-
mestic and foreign Group companies and
from prior period and deferred taxes. In total,
the profit after tax amounted to € 43 million
after € 44 million in the previous year. Ear-
nings per share therefore declined from
€ 6.50 to € 6.30.
42
Financial position of the RENK Group
Principles and objectives of financial management As in previous years, RENK’s financial ma-
nagement was performed centrally by MAN
SE.
The aim of central financial management is
to ensure sufficient liquidity at all times, to
limit financial risks and thereby to enhance
enterprise value.
This comprises safeguarding liquidity re-
sources for operating activities, investment
and targeted growth in addition to the hed-
ging of currency risks. Liquidity is managed
by the MAN Group’s central cash manage-
ment system, which includes RENK AG and its
consolidated subsidiaries.
Cash flow – development of cash and cash equivalents and term deposits
€ million 2017 2016
Cash and cash equivalents at beginning of period 214 117
Cash flows from operating activities 25 57
Cash flows from current investing activities (24) (25)
Net cash flow 1 32
Change in deposits – 80
Cash flows from investing activities (24) 55
Cash flows from financing activities (15) (15)
Net change in cash and cash equivalents (15) 97
Cash and cash equivalents at end of period 199 214
RENK Group Annual Report 2017 43
RENK generated cash flows from operating
activities of € 25 million in fiscal year 2017 af-
ter € 57 million in the previous year. The
main reason for this decline was the changes
in working capital, in particular the high net
reduction in prepayments received in Vehicle
Transmissions and Special Gear Units as a re-
sult of the processing of the corresponding
orders.
Following the completion of the major multi-
purpose hall investment project for Special
Gear Units in the previous year, the high level
of investment in property, plant and equip-
ment and intangible assets in fiscal year 2017
was significantly lower than in the previous
year. Investments originally planned for 2017
were also postponed to later years. Further
details can be found in the section “Capital
expenditures, environmental management”.
The total net cash flow for fiscal year 2017
therefore amounts to around € 1 million after
€ 32 million in the previous year. In the previ-
ous year, the company reported a change in
deposits that were added to cash and cash
equivalents. Cash flows from financing activi-
ties included dividends paid. The reported
cash and cash equivalents thus fell to
€ 199 million as of the end of 2017 after
€ 214 million at the beginning of the year.
44
Net assets
€ million Dec. 31,
2017
Dec. 31,
2016
Property, plant and equipment and intangible assets 198 200
Other and financial investments 9 4
Inventories 181 182
Trade receivables 88 86
Other current and noncurrent assets 6 4
Taxes 19 18
Cash and cash equivalents 199 214
Assets 700 708
Equity 422 390
Pensions 11 15
Other provisions 57 62
Prepayments received, current and noncurrent 142 168
Trade payables 35 36
Other current and noncurrent liabilities 29 32
Taxes 5 4
Equity and liabilities 700 708
RENK Group Annual Report 2017 45
With capital expenditure significantly below
the previous year’s level in fiscal year 2017 as
well, property, plant and equipment and in-
tangible assets declined slightly from
€ 200 million to € 198 million as a result of
depreciation and amortization. Financial as-
sets increased by € 5 million to € 9 million as
a result of the formation and acquisition of
non-consolidated subsidiaries. The were only
minor changes in the amounts of receivables
and other assets compared to Decem-
ber 31, 2016. Please see “Financial position of
the RENK Group” for information on the de-
velopment of cash and cash equivalents.
RENK’s equity rose by € 32 million from
€ 390 million to € 422 million over the course
of fiscal year 2017, bringing the equity ratio
from 55.1% to 60.3%.
Provisions for pension obligations decreased
slightly in fiscal year 2017 from € 15 million to
€ 11 million. This was due to the positive de-
velopment of the fair value of the plan assets
against which the present value of pension
commitments is charged. Current and non-
current prepayments received declined by
€ 26 million in total to € 142 million, as these
were deducted in line with the recognition of
sales revenue from the corresponding orders
on delivery, particularly in Vehicle Transmi-
ssions and Special Gear Units.
Distribution constant at € 2.20 per share The goal of RENK’s dividends policy is still to
allow shareholders to participate appropri-
ately in business performance on the one
hand, while ensuring the RENK Group’s fu-
ture viability by increasing its equity on the
other. RENK AG has reported net income for
fiscal year 2017 in accordance with the Ger-
man Commercial Code of € 38.2 million (pre-
vious year: € 39.3 million). The Executive
Board transferred € 19.1 million of this (previ-
ous year: € 19.7 million) to retained earnings.
Including retained profits brought forward,
the net retained profits therefore amount to
€ 26.7 million (previous year: € 22.6 million).
The Executive Board and the Supervisory
Board propose to the Annual General Mee-
ting the distribution of a dividend for fiscal
year 2017 as in the previous year of € 2.20 per
share. Measured against the closing price of
RENK shares of € 113.01 as of Decem-
ber 31, 2017, this corresponds to a dividend
yield of 1.9% (previous year: 2.2%).
46
RENK Group Annual Report 2017 47
Capital information/disclosures in accordance with section 315a(1) HGB1)
The disclosures on individual matters in ac-
cordance with section 315a(1) HGB are as fol-
lows:
Clause 1: Composition of subscribed capital. The share capital of RENK AG of € 17.9 million
is divided into 7 million no-par value bearer
shares. There are no other classes of shares.
Clause 2: Restrictions on voting rights or the transfer of shares. Each share grants one vote; there are neither
restrictions on voting rights nor restrictions
concerning the transfer of shares.
Clause 3: Direct or indirect shareholdings of more than 10% of the capital. MAN SE, Munich, held 76% of the subscribed
capital of RENK AG in the fiscal year. Through
their investment in MAN SE, Volkswagen
Truck & Bus GmbH, Braunschweig, its parent
company Volkswagen Aktiengesellschaft,
Wolfsburg, and Porsche Automobil Holding
SE, Stuttgart, and their controlling sharehold-
ers also indirectly held 76% in the subscribed
capital of RENK. RENK AG was not advised of,
nor is it aware of, any other direct or indirect
shareholdings in the capital of the company
exceeding 10% of the voting rights or the re-
levant reporting thresholds of theWertpapier-
handelsgesetz (WpHG – German Securities
Trading Act).
Clause 4: Bearers of shares with special rights granting control. There are no special rights granting control.
Clause 5: Control of voting rights for employee shareholdings in capital. There is no control of voting rights.
Clause 6: Statutory provisions and regulations in the Articles of Association on the appointment and dismissal of members of the Executive Board and amendments to the Articles of Association. The appointment and dismissal of the Execu-
tive Board are regulated by section 84 of the
Aktiengesetz (AktG – German Stock Corpora-
tion Act). Members of the Executive Board are
therefore appointed by the Supervisory Board
for a maximum of five years. In accordance
with Article 5 of the Articles of Association,
the Executive Board of RENK AG consists of at
least two persons. The number of members is
determined by the Supervisory Board.
In accordance with section 179(2) AktG,
amendments to the Articles of Association
can be resolved by the Annual General Mee-
ting with a three-quarter majority of the capi-
tal represented.
1) Please also see the consolidated financial statements for the required capital disclosures in “Equity”.
48
Clause 7: Powers of the Executive Board to issue or redeem shares. The authorization of the Executive Board to
buy back own shares ended on Novem-
ber 8, 2007. 199,903 own shares or 2.86% of
the total number of shares had been bought
back by this date.
The Executive Board is authorized, with the
approval of the Supervisory Board, to dispose
of or acquire own shares in a manner other
than on the stock market or by way of offer to
all shareholders with shareholders’ preemp-
tive rights disapplied,
if the own shares acquired are sold at a
price not significantly less than the market
price of the shares of the company,
and/or
if this is done as consideration in the con-
text of a business combination or to ac-
quire companies or equity investments in
companies.
The Executive Board is also authorized, with
the approval of the Supervisory Board, to
withdraw own shares without this requiring
an additional resolution by the Annual Ge-
neral Meeting.
These authorizations were not exercised in
the year under review. There is no authorized
capital for the issue of new shares.
Clause 8: Material arrangements in the event of a change of control following a takeover bid. There are no such arrangements.
Clause 9: Compensation agreements with members of the Executive Board or employees in the event of a takeover bid. There are no change-of-control regulations
either for members of the Executive Board of
RENK AG or its employees.
Closing statement by the Executive Board on the dependent company report in accordance with section 312 AktG
In accordance with section 312 of the Aktien-
gesetz (AktG – German Stock Corporation
Act), the Executive Board of RENK AG has pre-
pared a dependent company report. It lists all
the transactions with affiliates of MAN SE in
fiscal year 2017. The closing statement by the
Executive Board on this report ends as fo-
llows:
“The Executive Board hereby declares that,
according to the circumstances known to it at
the time that each transaction was per-
formed, our company received appropriate
consideration for each transaction.”
RENK Group Annual Report 2017 49
50
Research and development
Constant change processes, accelerated inno-
vation and increased global networking are
posing new challenges for companies. Not
just accepting these challenges, but also hel-
ping to shape them is a basic requirement for
being able to compete successfully on the
market moving ahead.
Research and development play a prominent
role in this. Most of the products in RENK’s
range have long lifecycles, hence our innova-
tion management focuses on progress that
benefits customers in addition to the tar-
geted development of new products. Here
RENK cooperates with various universities
and research institutes.
In fiscal year 2017 RENK invested € 14 million
(previous year: € 11 million) of its own funds
in the development of new products and the
enhancement of existing ones. RENK there-
fore continued its long-term strategy of gea-
ring its development work towards customer
demand for technologically advanced con-
cepts and integrated service packages in the
past year.
As in previous years, development activities
for high-end marine gear units in Special
Gear Units focused on the optimization and
advancement of the CODELAG technology,
which allows various combinations of gas
turbines and electric motors. Based on this,
RENK developed its innovative AED (Ad-
vanced Electric Drive) module, which can be
used as a primary or auxiliary drive for low-
noise drives. The first systems have since
been delivered. This technology is being de-
veloped continuously to tap additional appli-
cation areas in the marine sector and outside
RENK’s previous fields.
In the stationary gear units, the drive concept
for high-performance vertical mill drives for
cement, COPE ® (COmpact Planetary Electric
Drive) developed in the last few years was
supplemented by a version designed for the
specific requirements of the middle market.
Development work in turbo gear units fo-
cused on variable transmission models and a
newly designed series with planetary gear
units.
Vehicle Transmissions also concentrated on
continuing projects initiated in previous
years. This included both the ongoing deve-
lopment of individual transmission compo-
nents and extending the existing product
portfolio, where initial trial activities were al-
ready begun. An additional area of focus was
the cooperation with system providers for the
integration of RENK transmissions in their
vehicles.
As in the past, the R&D work of RENK’s test
rig business is closely aligned to the require-
ments of specific customer applications. Fur-
thermore, work continued intensively on the
“Acoustic Roller Dynamometer” project and
the previous theoretical approaches were
tested and verified on a 1:1 experimental
setup.
Activities in Standard Gear Units also focused
on continuing development projects initiated
in previous years. The focus in marine gear
units was on the advancement and cost opti-
mization of dredger gear units and on hybrid
drive system components. A wide range of
different versions were designed, for example
for railway drives or wind turbine drives, in
the couplings unit.As in previous years, Slide
Bearings focused on process improvements
in coating techno-logies, for instance with a
view to cutting back on resources and opti-
mizing costs by reducing the storage of
metal.
In addition, work continued on optimizing
the product portfolio in terms of its specific
performance limits within a fail-safe indica-
tor field.
RENK Group Annual Report 2017 51
Capital expenditures and environmental management
In fiscal year 2017, RENK invested € 19 million
in property, plant and equipment and intan-
gible assets, € 6 million less than the previ-
ous year’s figure of € 25 million. RENK’s long-
term investment policy is geared towards the
current expected market requirements for
RENK products and services, and the continu-
ous improvement of cost structures to stand
up to intensive competition.
Most of capital expenditure again related to
the Augsburg plant in fiscal year 2017. In addi-
tion to a number of smaller measures, the
priority for activities in Special Gear Units
was the long-term restructuring and renewal
of gear grinding technology. Efforts in Vehicle
Transmissions focused on continuing the re-
organization of the assembly processes that
began in the previous year. Furthermore, the
infrastructure in production was optimized
and added to.
In logistics, design and planning work for the
new goods receiving, testing and storage cen-
ter to the south of Augsburg continued; con-
struction work is to begin in the course of
2018. This state-of-the-art logistics center will
create the framework for the centralization
and more efficient handling of logistics pro-
cesses. In addition, the space created at the
main plant can be used for the needs of the
other segments.
At the Standard Gear Units site in Rheine,
new machinery and grinding technology was
brought and updated for the processing cen-
ters. A similar thing happened at the Hanover
Slide Bearings site, where a new universal test
rig was put into operation.
In line with planning, RENK France also con-
tinued and almost completed its extensive,
long-term modernization and renovation of
the building infrastructure for production,
technology, administration and distribution.
RENK expanded its global presence as part of
its internationalization strategy in 2017 as
well. New subsidiaries were created in India
and South Korea to strengthen new equip-
ment business thanks to their local position-
ing on the one hand and, on the other, to
open up the possibility of tapping service po-
tential for RENK that was previously inacces-
sible due to time and cost constraints. RENK
also rounded off its range of high-quality ma-
rine construction and services with the acqui-
sition of what was Damen Schelde Gears B.V.
in the Netherlands (in the future: Schelde
Gears B.V.). € 5 million in total was invested in
founding or acquiring these companies.
Environmental issues are a top priority at all
RENK’s production sites. The monitoring
audit for the environmental management
system (DIN EN ISO 14001) of RENK AG’s
Augsburg site introduced in 2012 was success-
fully carried out in fiscal year 2017. The envi-
ronmental management systems at RENK
AG’s Hanover site and RENK-MAAG GmbH in
Switzerland are also certified to ISO 14001.
RENK AG’s second environmental program is
now running at the Augsburg site. It defines
the goals and measures for protecting the en-
vironment for 2015 to 2018. With this pro-
gram, the company is committed to imple-
menting further voluntary protective
measures in the different environmental
fields that go beyond the extent required by
law. In some parts of the hall, the lighting sys-
tem has been changed to long-lasting and en-
ergy-saving LED lighting. The commissioning
of an extraction system for an oil bath in the
hardening shop has reduced soot emissions.
An open boring mill at the Hanover site was
replaced by a completely enclosed universal
CNC table boring mill, including robotic tool
change and air filtration. This makes a signifi-
cant contribution to improving air quality
and reducing noise in the production hall.
52
All container pitches at the site were checked
and optimized in line with the new Ver-
ordnung über Anlagen zum Umgang mit wa-
ssergefährdenden Stoffen (AwSV – German
Ordinance on Systems for the Handling of
Water-Hazardous Substances). These preven-
tive measures to secure container pitches sig-
nificantly reduce environmental risks due to
water-hazardous substances.
The roof insulation on the administrative
building at the Rheine site was renovated and
brought up to date. This will allow a signifi-
cant reduction in heating costs. Double-digit
savings in the consumption of cooling lubri-
cants is expected thanks to the introduction
of fluid management for production machin-
ery that uses them. The preparations for the
introduction of paperless production and as-
sembly in the entire production area are
largely complete, and paperless assembly be-
gan in the initial pilot areas. Substantial re-
ductions in paper consumption are expected
here.
RENK-MAAG renovated and insulated the
cooling tower at its Winterthur site.
These measures entail advantages in terms of
energy efficiency, carbon footprint and waste
gas management.
RENK Group Annual Report 2017 53
Employees
The RENK Group employed 2,235 people on
December 31, 2017 (previous year: 2,205). It
also had 74 subcontracted employees (previ-
ous year: 44). The number of employees in
Germany was 2,068 (previous year: 2,041), at
the foreign companies this figure was 167
(previous year: 164).
RENK’s many years of success are closely
linked to the high level of skill and dedication
of its employees, and their sense of identity
with the company. Preserving these qualities
while at the same time empowering the com-
pany and its employees for evolving challen-
ges within and outside the company was a
key area of manager and employee develop-
ment.
Guiding principles The company’s management devised new
corporate guiding principles at the end of
2016. This includes the basic principles of the
company and is intended to serve as a guide-
line for employees and their actions. The va-
lues established in it are the measure for our
day-to-day activities and support us both in-
ternally and externally. RENK’s success is built
on both understanding and practicing com-
mon values.
Implementation of the RENK strategy Managers and employees will only success-
fully implement RENK’s strategy if they know,
understand and can identify with it. Only
then will they be able to make their contribu-
tion. To achieve this and to get all managers
involved, the “RENK Summit”, a meeting of
more than 100 managers from different sites,
was held in Würzburg for the first time in No-
vember. Embedded in the RENK guiding prin-
ciples, work was done to implement the 2025
corporate strategy in various formats.
Leadership focus – Assessment of RENK’s guiding management principles Good management is not just crucial to busi-
ness success, but also to employee satisfac-
tion. In the employee survey last conducted
in 2016, more than 73% of staff stated that
they are satisfied with their supervisor’s ma-
nagement. While this value shows that RENK
is on the right path and that the different HR
development programs for management are
having an effect, there is still a focus on hel-
ping managers to improve their leadership
skills.
A feedback process on the basis of RENK’s
guiding management principles was
launched for this purpose. The RENK guiding
management principles comprise ten ma-
nagement principles. These describe key su-
ccess factors for management roles at RENK.
Recruitment and loyalty – the best talent for RENK, even from a school age Competition for the most talented people has
become even greater in light of the good state
of the economy and the high employment
rate this entails. For this reason, RENK takes
selective measures to establish contact with
potential applicants long before they enter
the workforce. For example, RENK is a spon-
soring company for the regional “Jugend
forscht” contest for the first time. Together
with MAN Diesel & Turbo, RENK will be or-
ganizing the event for the Swabia region of
southwestern Germany. This grants RENK ac-
cess to school students who love technology
from as early as fourth grade, who can prove
what they know and what they can do with
their own projects in a number of math and
natural sciences fields.
54
RENK is pursuing the same goal by offering a
number of high school student internships.
The pool of suitable applicants for training
places is growing increasingly small. This is
why it is important to show school children
early on how appealing it can be to train with
and later work for RENK.
As in previous years, RENK relies on its inten-
sive university marketing activities in com-
peting for the best academic graduates. By
awarding a high number of internships, dis-
sertations and working students, RENK can
show students how exciting it is to work in
the world of drive technology and position it-
self as a top employer. Its success can be seen
by the fact that around 50% of the open aca-
demic positions at the Augsburg plant were
filled from among this group of applicants
and its own dual students. In addition, RENK
participates in relevant university fairs and
organizes its own presentations by its tech-
nical departments at different universities.
Groups of engineering students regularly
visit the individual plants and gain an over-
view of the various career opportunities at
RENK through keynote speeches and com-
pany tours.
RENK is also pursuing the goal of signifi-
cantly increasing the share of women among
its employees. Women of equal aptitude are
favored for vacancies. Unfortunately, the in-
terest in technical vocational training careers
and engineering is not yet at the same level
among women. In order to increase the share
of female applicants for vocational training
careers, “Girls’ Day” events were held at all
sites, where participants not only learned
about technical vocational training careers,
but were also given the chance to demon-
strate their skills in small practical activities.
Given the high complexity of the work in-
volved and the extensive training required, it
is important that RENK not just finds the
right employees but also ensures their long-
term loyalty to the company. In addition to
intensive induction programs, introductory
days and corporate events, such as the Christ-
mas market, this goal will also be aided by the
RENK Academic Onboarding Program, which
was first held in 2016 and is repeated every
year. As well as boosting loyalty among aca-
demically trained employees, this is also ex-
pected to assist in the expansion of key skills
and the improvement of interdisciplinary co-
operation. Alongside various components
such as external team-building exercises, mu-
tual presentations on activities and areas and
job rotation, participants are currently work-
ing on the general RENK issue of “Employer
Branding”. The goal is to further consolidate
the RENK brand as a top employer.
Employee participation in business success RENK’s image as an employer and employee
motivation depend not least on an attractive
salary package. Accordingly, the great co-
mmitment by employees will be rewarded for
fiscal year 2017 by allowing them to partici-
pate directly in business performance. This
profit-sharing is based on the stipulated tar-
gets.
Company pension plan RENK rewards the long-term loyalty of its em-
ployees with an additional attractive com-
pany pension plan in the form of the MAN-
Profit-Sharing and Pension Plan (MEV). In
addition to employer contributions, employ-
ees have the option of voluntary deferred
compensation as part of their personal pen-
sion provision. Such contributions are free
from tax and social security contributions up
to the statutory contribution assessment cei-
ling. The company supports this voluntary
deferred compensation with additional top-
ups.
Promotion of occupational health management In the third year since its launch, occupa-
tional health management again focused on
occupational integration management. With
suitably appropriate preventive measures
taken by the integration management team
in cooperation with safety engineers and
works physicians, attempts are being made to
RENK Group Annual Report 2017 55
prevent future long-term illnesses and to
allow employees to take part in work again af-
ter a long-term illness. One of the key areas
for occupational integration management at
the Augsburg plant was helping an employee
who needs a wheelchair take part in normal
working life. A number of alterations were
made in close cooperation with the employ-
ees of the integration office for this purpose.
In cooperation with the company health in-
surance system, previous health-based activi-
ties such as the free back school, health weeks
in the works restaurant, colon cancer scree-
ning, vaccination consulting and skin scree-
ning were continued. The employee restau-
rant set up in Augsburg in 2016 was even
more frequently attended in 2017 than in its
successful first year, and contributes to
healthy eating habits among employees, even
with vegetarian dishes that have been well ac-
cepted.
Employee vocational training and continuous professional development RENK continues to develop the technical and
managerial skills of its employees so that
every site will still have well trained and
highly motivated employees in the future.
The success of the vocational training con-
cept at RENK has again been highlighted by
numerous awards at all sites. At the end of
2017 a total of 119 vocational trainees (previ-
ous year: 123) were being trained either di-
rectly at RENK’s individual divisions or by
RENK indirectly at the MAN vocational trai-
ning center in Augsburg. Of RENK AG’s 111 vo-
cational trainees (previous year: 113), the
Augsburg plant accounted for 69 (previous
year: 67), Rheine for 28 (previous year: 32) and
Hanover 14 (previous year: 14). There were
also five vocational training places at RTS,
two at RENK-MAAG and one at RENK France.
15 of the 119 vocational trainees are doing
combined studies of either mechanical engi-
neering or mechatronics at a university para-
llel to their vocational training.
More and more, RENK is developing away
from being a manufacturer of gear units and
towards being a provider for end-to-end sys-
tems. This requires that employees have addi-
tional electronics expertise in addition to
their excellent knowledge of engineering.
This is why electronics was one of the main
areas of continuous professional develop-
ment. In addition to various basic training
units, several employees were financed to
fully train as industrial electricians, which
they completed with great commitment and
excellent performance.
Another focus was on communication trai-
ning. Regardless of whether the task at hand
is to “present information convincingly” or to
“conduct difficult employee appraisals”, good
communication is crucial. To advance the
company’s many projects successfully, a uni-
form project management system was set up
and a number of employees from all sites
were trained in the same way. Furthermore,
corresponding training was provided for pro-
ject contractors. This ensures that all employ-
ees who regularly work in project teams have
a common understanding of and approach to
achieving their goals and milestones faster.
Our thanks to the employees and their representatives We would like to thank all our employees for
their great dedication and contribution to the
successes achieved. Our thanks also go to the
employee representatives on the Supervisory
Board, the members of the Works Council and
the Economic Committee for continuing the
open and constructive cooperation of past
years.
We will fondly remember the members of
staff and former employees who passed away
in the period under review.
56
RENK Group Annual Report 2017 57
The segments
The segment tables below show order intake
and sales revenue for the individual seg-
ments and intersegment transactions.
Special Gear Units (Augsburg plant/RENK-MAAG)
€ million 2017 2016 Change*
Order intake 154 214 (60)
Sales revenue 162 162 0
Operating profit 11 15 (4)
Operating return on sales (%)* 6.8 9.1 (2.3)
* Calculated in € thousand
General economic conditions As in previous years, 2017 was characterized
by divergent developments on the individual
target markets of Special Gear Units.
The procurement activities of government
contractors continue to dominate the market
for marine gear units. The general demand
for technically sophisticated gear sets for na-
vies and coast guards continued in the re-
porting year, based both on many countries’
ongoing need to replace partially outdated
units, and new or extended requirement pro-
files. High-end solutions that enable a combi-
nation of different drive sources optimized
for the respective application situation are
frequently used here. In addition to supply-
ing complex gear sets and partial drive sys-
tems for frigates, corvettes and patrol vessels,
there is also growing demand for system con-
sulting and support for system integration
for the entire drive system. Beyond govern-
ment applications, this transmission techno-
logy is also used in highly discerning market
segment for mega-yachts, where similar de-
mands are made in terms of performance,
flexibility, noiselessness and smooth ru-
nning.
By contrast, conditions on the markets for
stationary gear units remained difficult in
2017 as well. The price of oil has not yet
reached the level necessary to kick-start more
extensive, long-term investment in oil pro-
duction, particularly in offshore or deep sea
projects. Declining revenues in oil-producing
countries are also causing budget cuts and
shifts in investment not just to oil production
but also to infrastructure projects – both in
countries with offshore oil production and
conventional oil-producing countries. The
market for turbo gear units has not yet reco-
vered from its collapse a few years ago, and
there was a shrinking trend in the volumes of
gear units needed for cement grinding plants.
As a result, the lack of satisfactory capacity
utilization among suppliers again led to con-
tinued intensive competitive and thus price
pressure on all sub-markets for industrial
gear units in 2017.
The same is also true for our Swiss company.
Some positive nonrecurring factors for RENK-
MAAG resulted from the relocation and mo-
dernization of steel mills in China, which
were initiated with the aim of reducing air
pollution in urban areas.
58
Business development As expected, order intake in Special Gear
Units fell short of the high level of the previ-
ous year at € 154 million in fiscal year 2017
(€ 214 million). As had been forecast, the re-
cord level of incoming orders for marine gear
units in Augsburg was not repeated, and pro-
jects originally expected to be implemented
in 2017 were postponed to later years. In addi-
tion to follow-up orders under US Navy pro-
curement programs that have been running
for several years, the first call-off orders were
also placed a new US Coast Guard program. In
addition, there were orders for single ships or
small series for use in a number of states. Or-
ders were also taken in the mega-yacht seg-
ment.
Incoming orders for stationary gear units al-
most matched the previous year’s level in
2017. Growth in orders for gear units for ce-
ment mills almost completely offset declines
for industrial and turbo gear units. The order
volume for the Swiss company RENK-MAAG
was significantly higher than in the previous
year.
At € 162 million, sales revenue in Special Gear
Units was exactly level year-on-year. Both
marine gear units and stationary gear units
continued the previous year’s sales revenue
volumes. As part of the deliveries for long-
term projects for individual navies, activities
in marine gear units focused on the initial de-
livery of the first highly complex ship set for
the Italian Navy. Furthermore, the highly so-
phisticated AED system was delivered for an
Antarctic research vessel as of the end of the
year. The slight increase in industrial gear
units in stationary gear units offset the
changes in the other product areas. RENK-
MAAG also achieved sales revenue slightly
higher than the previous year’s level in 2017.
In December 2017 RENK acquired all shares in
what was Damen Schelde Gears B.V., an expert
for marine gear units based in Vlissingen in
the Netherlands. As part of the marine gear
units business area, under the new name of
Schelde Gears B.V., the company will continue
its previous activities – mainly engineering
and after-sales services for the marine sector
– within the RENK Group, thereby supple-
menting RENK’s product range for these
applications.
Result Special Gear Units generated an operating
profit of € 11 million in fiscal year 2017, down
€ 4 million on the figure for the previous
year. Less favorable cost structures due to a
less profitable revenue mix and short-term
postponements contributed to this decline.
The operating profit of the Swiss company
RENK-MAAG was also significantly lower than
in the previous year. Accordingly, the opera-
ting return on sales in Special Gear Units de-
creased from 9.1% in the previous year to
6.8% in the year under review.
RENK Group Annual Report 2017 59
Outlook The promising overall market situation for
complex gear units for use in naval and coast-
guard vessels is not expected to change sub-
stantially in 2018. There is still substantial po-
tential worldwide, but the scope and timing
of implementation is difficult to assess in in-
dividual cases, especially as political develop-
ments and considerations play a greater role
in decision-making.
We also expect little movement in industrial
gear units. There will be no tangible improve-
ment in the difficult market environment for
all main product areas. Individual turbo
applications appear promising, and potential
exists in the plastics processing industry. In
stationary gear units as well, political deve-
lopments are weighing on sales opportunities
– Iran, for example, will make only slow pro-
gress working through its investment backlog
as a result of sanctions in 2018. In the Middle
East, necessary investment in, for instance,
the cement mill area or oil and gas produ-
ction is failing because the continuing insta-
bility does not allow for regular construction
site operation.
RENK-MAAG will continue to pursue the path
it has embarked on in 2018, focusing on ex-
panding its market presence and further de-
veloping individual product groups.
60
RENK Group Annual Report 2017 61
Vehicle Transmissions (Augsburg plant/RENK France/RTS/RENK Systems)
€ million 2017 2016 Change*
Order intake 124 135 (11)
Sales revenue 151 158 (7)
Operating profit 27 26 1
Operating return on sales (%)* 17.7 16.7 1
* Calculated in € thousand
General economic conditions There were no significant changes in the
basic market situation for RENK as a manu-
facturer of transmissions for medium-weight
and heavy tracked vehicles in the year under
review. The part of the world market accessi-
ble to RENK consists of a relatively small
number of procurement programs that usu-
ally take years to carry out with low annual
shipments. It remains RENK’s primary goal to
participate in the majority of these procure-
ment programs for which opportunities are
still open, but it is becoming increasingly di-
fficult to forecast both the timing and con-
tent of actual implementation. For one thing,
decision-making in potential customer coun-
tries is influenced by a variety of domestic,
foreign and fiscal policy factors that can
range from local to global. For another, the
impact assessment of a restrictive German
export approval policy is not going unnoticed
by decision-makers. This is apparently moti-
vating the need to specifically strengthen or
consciously build up alternative providers.
After-sales business continues to be defined
by strong competition, especially for mainte-
nance. It is not always the case that contrac-
tors have complied with the required quality
criteria in the past. As an original equipment
manufacturer (OEM), RENK is also standing
by its established high technical standards for
maintenance.
As in previous years, RENK France’s activities
focused on the maintenance and repair of
gear models manufactured for the French
army.
The market for technically sophisticated test
rig applications was mixed in 2017, driven by
a more restrictive investment policy on the
part of some potential customers and in-
creased crowding out among suppliers. There
are also increasingly protectionist tendencies
in some regions and for certain applications.
Business development At € 124 million, order intake in Vehicle
Transmissions as a whole was € 11 million
lower than in the previous year. Unlike in
2016, vehicle transmissions in Augsburg was
not awarded a major order for new transmis-
sions in 2017. This gap was not entirely filled
by increased incoming orders for repairs and
after-sales services. Orders for HSWL 354 se-
ries gear units were particularly important
here. RENK France’s incoming orders were in
line with the previous year’s level in 2017. The
aviation and vehicle industries accounted for
most of the order intake for test rigs.
At € 151 million, sales revenue in Vehicle
Transmissions business was also unable to
match the previous year’s figure in 2017
(€ 158 million). RENK AG’s vehicle transmis-
sions business achieved a slight increase,
thanks in particular to higher deliveries of
HSWL 256 series gear units for the PUMA and
AJAX programs and the RK 325 series. RENK
France generated revenue in line with the
previous year. Test rigs reported a clear de-
cline in sales revenue, which was mainly
driven by test rigs for the aviation, railway
and vehicle industries.
62
Result Vehicle Transmissions generated an opera-
ting profit of € 27 million in fiscal year 2017
after € 26 million in the previous year. All
business areas – of RENK AG, RENK France
and RENK test rigs – maintained their opera-
ting profit at the respective level of the previ-
ous year. The operating return on sales there-
fore improved by one percentage point from
16.7% in the previous year to 17.7% in the year
under review.
Outlook The general shape of the market for tracked
vehicle transmissions will not change in the
coming years, and the procurement practices
of individual countries will define further de-
velopment. Irrelevant considerations from
various corners frequently play a defining
part in decision-making – such as demands to
share expertise, local participation in value
added, or even other forms of compensation.
The significance of new competitors is likely
to rise, and in some cases their targeted su-
pport from individual states is a counter-re-
action to Germany’s export control policy, es-
pecially as there is no uniform procedure
within the EU in this regard. The implications
of the intention expressed by NATO Member
States to increase defense spending are still
unclear. It remains to be seen whether this
will be reflected in procurement projects rele-
vant to RENK.
RENK France will continue its current busi-
ness model in 2018. The prospects in service
business remain stable, and there are indivi-
dual opportunities in retooling business out-
side France. The RENK test rigs unit antici-
pates further sales opportunities primarily in
the railway and aviation industries. There are
only few large-scale wind power projects.
There is highly substantial competitive pre-
ssure for contracts in the automotive indus-
try.
RENK Group Annual Report 2017 63
64
RENK Group Annual Report 2017 65
Standard Gear Units (Rheine plant)
€ million 2017 2016 Change*
Order intake 88 57 31
Sales revenue 78 101 (23)
Operating profit 8 13 (5)
Operating return on sales (%)* 10.7 12.4 (1.7)
* Calculated in € thousand
General economic conditions Again in 2017, there were no signs of lasting
improvement in the Standard Gear Units
market for civil marine gear units. The slight
increase in the price of oil has not yet invigo-
rated new construction in the offshore sector.
There were also hardly any new orders for li-
quefied natural gas (LNG) tankers on account
of the current surplus capacity. The only new
builds were for floating storage regasification
units (LNG FSRUs). Demand for dredgers ra-
llied slightly towards the end of the reporting
period as a result of greater demand for
coastal protection and waterway mainte-
nance.
Demand for turbo gear units remained al-
most unchanged at a low level. Key customers
are still complaining that capacity utilization
is too low, and are therefore downsizing on
RENK’s target markets (energy generation, oil
and gas), even going as far as plans to shut
plants down.
The positive overall economic development
in German mechanical engineering has not
yet reached the part of the couplings market
relevant to RENK: manufacturers of drive
technology.
Changes in the legal framework in Germany
(amendment of the German Renewable Ene-
rgies Act) is having a clear impact on the
country’s wind power industry. Smaller sys-
tem provi-ders seem to be facing serious di-
fficulties, with gains more likely for large pro-
viders. An unmistakable price war is develop-
ing between component manufacturers,
which is being fueled by Eastern European
and Chinese suppliers entering the market.
Business development After a sharp slump in the previous year, or-
der intake in Standard Gear Units increased
significantly in 2017. Incoming orders of
€ 88 million mark growth of 55% over the pre-
vious year’s figure of € 57 million. Significant
increases were generated by marine gear
units, including for dredger and LNG FSRU
ships. In the wind power sector there were
additional orders for existing wind farms and
the order for a prototype. Couplings were no-
ticeably reinvigorated, while the previous
year’s level for stationary gear units was al-
most maintained.
As a result of the low order intake in the pre-
vious year, sales revenue for Standard Gear
Units declined from € 101 million in 2016 to
€ 78 million in 2017. This was crucially caused
by the slump in wind turbine gear unit deli-
veries, where no relevant new orders were re-
ceived in the previous year. In the other pro-
duct groups, increases in stationary gear
units and couplings virtually offset the down-
turn in marine gear units.
Result Even though the contraction in sales revenue
was not quite as extreme as feared in 2017,
operating profit still took a heavy hit. It fell
from € 13 million in the previous year to
€ 8 million in fiscal year 2017, which was sig-
nificantly higher than expected at the begi-
nning of the year. In the previous year the
operating profit also included the provisions
66
recognized for the planned capacity down-
sizing. The operating return on sales was
therefore 10.7% for fiscal year 2017 after 12.4%
in fiscal year 2016.
Outlook Standard Gear Units business assumes that
conditions on its sales markets will remain
challenging in 2018.
There are currently no signs of easing on the
commercial maritime market. The potential
for LNG-FSRUs is expected to remain virtually
the same, while there could be a slight in-
crease for dredgers and RoPax ferries (roll-
on/roll-off ferries with passenger cabins). A
noticeable recovery is not expected for the
offshore market.
New and expanded systems for energy gene-
ration and in the oil and gas sector will pre-
sumably remain isolated in 2018 as well. This
could only be aided in the short term by a
rise in the price of oil because then, for in-
stance, fracking technology would become
more attractive again.
While there is no discernible improvement
on the couplings market for the applications
of oil and gas, shipbuilding or the steel indus-
try, isolated opportunities could arise in
other fields. Similarly, there could be indivi-
dual opportunities in the wind sector, though
the competitive situation constitutes a major
challenge, particularly in Asia.
RENK Group Annual Report 2017 67
68
Slide Bearings (Hanover plant/RENK Corporation)
€ million 2017 2016 Change*
Order intake 84 90 (6)
Sales revenue 88 90 (2)
Operating profit 14 14 0
Operating return on sales (%)* 16.0 15.1 0.9
* Calculated in € thousand
General economic conditions 2017 was once again characterized by global
political and regional crises. The develop-
ment of Slide Bearings business at RENK, as a
manufacturer of components for mechanical
and plant engineering and ship and marine
technology, is highly dependent on the initial
conditions for these primary requisitioners.
The positive general sentiment in the highly
mixed drive technology sector reported in
the year under review has not yet had a posi-
tive effect on the standard e-bearings seg-
ment. The key customers here are found in
the electrical engineering sector, which tends
to be at the late end of a recovery cycle. The
trends already seen in previous years conti-
nued in 2017 as well - production capacity is
migrating to future growth markets, while
emerging and developing economies are
promising much stronger growth momen-
tum than the fully developed yet somewhat
shrinking markets of the industrialized na-
tions. This is being further intensified by the
transformation processes in the industria-
lized nations away from energy traditionally
produced with rotary machines and towards
renewable energies. This will lead to signifi-
cant structural adjustments for the manufac-
turers of large systems for conventional
power plants – even going as far as mass
downsizing and plant closures.
For RENK this meant an increase in competi-
tive pressure from aggressive bearing manu-
facturers, e.g. from the mid-market segment,
and also the continued substitution of slide
bearings with rolling bearings for the lower
power ranges.
Potential for special bearings identified in the
past can also only be achieved to a limited ex-
tent because, for example, the continued
sanctions against Russia prohibit the delivery
of goods with which to replace its naval fleet.
The willingness to invest in technologically
sophisticated applications where RENK is tra-
ditionally strong, such as the oil and gas in-
dustry, is still being greatly stifled by general
economic developments.
Business development Owing to the short lead times for standard e-
bearings, this market situation was also re-
flected in the order intake for Slide Bearings
business; at € 84 million, 6% fewer orders
were received in 2017 than in 2016 (€ 90 mil-
lion). In particular, there were declines in
standard e-bearings and other horizontal
bearings.
At € 88 million, sales revenue in Slide Bea-
rings business was almost on par with the
previous year in 2017 (€ 90 million). This was
also affected by the standard e-bearings situa-
tion.
RENK Group Annual Report 2017 69
Result The operating profit for Slide Bearings was
level with the previous year at € 14 million in
2017. Declines in standard e-bearings were
compensated by positive effects from bea-
rings for projects. As a result of the slight de-
cline in sales revenue, the operating return
on sales for Slide Bearings business therefore
amounted to 16.0% in fiscal year 2017 (previ-
ous year: 15.1%).
Outlook The market conditions for Slide Bearings’
standard e-bearings business will not change
fundamentally in 2018. The trends observed
thus far will continue. Political developments
at both the global and regional level – such as
a change in US policy, Brexit or the situation
in Brazil – can have a significant impact.
Structural changes in the energy-producing
industry will continue to progress; previous
applications for slide bearings will shrink and
it will be challenging to compensate for this
with other applications. Investment propen-
sity in the oil and gas industry will continue
to be largely determined by the development
of the price of oil – growth can only be ex-
pected if a stable, adequate price level is an-
ticipated.
70
Report on risks and opportunities*)
Company-wide risk management system Doing business means constantly being ex-
posed to risk. RENK defines risk as the threat
that events, decisions or actions will prevent
the company from achieving defined goals or
successfully pursuing certain strategies. In or-
der to leverage market opportunities the
company consciously takes risks if it can
thereby expect an appropriate contribution
to enterprise value. Risks that threaten the
company’s continued existence should not be
taken or, if they are unavoidable, must be
minimized with appropriate measures. This
requires an effective risk management sys-
tem tailored to the needs of business activi-
ties and that provides the necessary infor-
mation early on to guide the company.
Risk management at RENK is incorporated
into the risk management system of the MAN
Group. It is an integral part of corporate ma-
nagement and business processes and is
composed of the core elements of corporate
planning, including a review process during
the year, risk and opportunities management
(“risk management”), the internal control sys-
tem and the compliance management sys-
tem.
One of the goals of corporate planning is to
guarantee that risks and opportunities are
identified and assessed early on so that suita-
ble measures can be taken. Risk management
is set up at all levels to provide current and
relevant information on the development of
material risks and opportunities and on the
effectiveness of the measures taken at an
early stage. The internal control system fo-
cuses on the close monitoring and contro-
lling of risks, in particular with regard to the
effectiveness of business processes, the relia-
bility of financial reporting and compliance
with legislation and regulations. The RENK
compliance system assists in ensuring com-
pliance with all laws applicable to the com-
pany, internal guidelines and codes of con-
duct. It places special emphasis on the issues
of combating corruption, antitrust law, data
privacy, preventing money laundering and
combating terrorism. Details of this can be
found under “Compliance system”.
Organization of risk management and the internal control system Overall responsibility for setting up and
maintaining an appropriate and targeted sys-
tem for the early identification of risks lies
with the RENK Executive Board. RENK’s Exec-
utive Board has organized the extent and
structure of risk management and the inter-
nal control system in line with the company’s
specific requirements. The industrial gover-
nance management concept calls for local de-
cision-making processes for operations in the
RENK Group. The management is responsible
for ensuring that in addition to the RENK AG,
by far the most important company, the
other RENK companies are included in the
risk management and internal control system
to the necessary extent. The Group-wide po-
licy for risk and opportunities management
and the internal control system provides the
framework for a Group-wide concept of risk
management and the internal control sys-
tem, and contains regulations for structural
organization, processes and reporting.
*) Includes the report in accordance with section 289(4) HGB
RENK Group Annual Report 2017 71
Structural organization The structural organization for risk manage-
ment and the internal control system is based
on the RENK management hierarchy. Roles and
bodies have thus been set up. There are coordi-
nators for risk management and the internal
control system to ensure that the processes de-
fined in the Group policy are implemented.
They also play a part in the ongoing develop-
ment and improvement of the risk manage-
ment system. RENK has set up an interdiscipli-
nary Risk and Compliance Board that acts as a
central controlling and monitoring body for
risk management, the internal control system
and compliance. In the course of discussions by
the Risk and Compliance Board, the risk situa-
tion is assessed and measures for managing
risk and remedying control weaknesses are re-
solved.
Risk management processes The standard risk management control process
comprises the phases of identification, analysis,
assessment, controlling, monitoring and com-
munication. Risks and opportunities are classi-
fied as either short-term, i.e. until the end of
the fiscal year, or long-term, i.e. up to five years.
Risks are assessed according to their probability
of occurrence and the extent of possible loss on
a gross and net basis, whereby the net assess-
ment includes any measures implemented to
mitigate risk. Qualitative analyses are also pos-
sible. The planned operating profit of the re-
spective organizational unit is taken as the ba-
sis for assessing the materiality of such a net
analysis. Within their areas of responsibility,
risk officers define and implement risk-mini-
mizing measures in addition to monitoring
their effectiveness. Using uniformly defined
risk areas, any risk clusters can be identified
early on and actively handled.
The Risk and Compliance Board assesses the
current risk situation by discussing and com-
paring risks and opportunities, resolving
measures and monitoring their effectiveness.
Discussions focus on the causes of risk and
measures. The risk and opportunities situation,
and the measures taken to manage and amelio-
rate this situation, are reported to the Executive
Board. Furthermore, the Supervisory Board re-
ceives regular reports on the risk position and
the effectiveness of the internal control system
in Audit Committee meetings.
Moreover, risk management and the internal
control system are subject to constant further
development in order to take into account
changes in conditions and to further increase
their benefit at every level of the company.
Accounting-related risk management system and internal control system Generally, risk management and the internal
control system, as an integral component, com-
prise the accounting-related processes and all
risks and controls with regard to financial re-
porting. This applies to all aspects that can sig-
nificantly affect the consolidated financial
statements. Risk management assesses identi-
fied risks in terms of their influence on the con-
solidated financial statements and takes corre-
sponding measures to manage and control risk.
The internal controls are geared towards limi-
ting risks of material misstatements in finan-
cial reporting, risks of non-compliance with
regulatory standards or due to fraud, and mini-
mizing operational and business risks (such as
asset risks resulting from unauthorized opera-
tional decisions or obligations illegitimately en-
tered into). Accounting controls have to provide
reasonable assurance that the Group’s financial
reporting process is in accordance with IFRSs,
the German Commercial Code and other ac-
counting-related rules and laws, and that it is
reliable.
72
As the MAN Group has, RENK has structured
and documented the internal control system in
place in accordance with the recommendations
of the Committee of Sponsoring Organizations
of the Treadway Commission (COSO) in order to
systematically assess the effectiveness of inter-
nal controls. The documentation covers all
standard business processes, including pro-
cesses relevant to the preparation of financial
reporting with the respective necessary con-
trols. It also comprises controls for business-
specific risks. The scope of the documentation
is determined by the companies that are mate-
rial to the consolidated financial statements or
whose qualitative characteristics imply greater
exposure to risk. This is reviewed annually
based on defined criteria.
Key elements of risk management and control
in financial reporting are the clear allocation of
responsibilities and controls in the preparation
of financial statements, transparent rules
thanks to policies on accounting and the prepa-
ration of financial statements, appropriate re-
gulations governing access to the IT systems
relevant to financial reporting and the clear as-
signment of responsibilities when using exter-
nal specialists. The dual control principle and
the separation of functions are also key princi-
ples in the financial reporting process that are
implemented in the internal controls at RENK.
The effectiveness of accounting-related internal
controls must be assessed at least once per
year, primarily in the process of preparing the
financial reporting. Identified weaknesses in
controls and agreed measures are included in
the quarterly reports to the Risk and Compli-
ance Board. In addition, Corporate Audit at
MAN SE, acting on behalf of the RENK Executive
Board as an independent internal auditor, as-
sesses the regularity, the security and the ma-
nagement and monitoring processes for ac-
counting-related internal controls.
The internal control system is regularly checked
for completeness, suitability and effectiveness
to ensure that the rules for reducing procedural
and organizational risks are complied with at
all levels.
Opportunities and risks RENK classifies the material opportunities and
risks for RENK that can have a significant im-
pact on the net assets, financial position and re-
sults of operations on the basis of the five risk
areas of market, products, processes, employees
and finance.
Market RENK anticipates opportunities for profitable
growth in the medium- to long-term in all areas
of the transportation and energy markets. The
fundamental global economic trends will pre-
sumably continue. In particular, these include
sustained albeit moderate growth, the interna-
tional division of labor along value chains and
thus a high level of global transport. Further-
more, there is growing demand for energy and
the necessary innovation due to climate policy,
which is gaining momentum. As part of its stra-
tegic focus, RENK is continuously working to re-
alize these market opportunities worldwide.
In our opinion, risks to a continuation of world
economic growth mainly lie in turbulence on
the financial markets, protectionist tendencies
and structural deficits that could endanger the
development of advanced and emerging econo-
mies. The global transition from an expansion-
ary to a more restrictive monetary policy also
means risks for the general economic environ-
ment. In addition, uncertainty is entailed by
the implications of the UK’s planned exit from
the EU. While the UK is not currently a main
area for RENK’s business activities, there could
be further imponderables owing to its coopera-
tion in international projects.
RENK Group Annual Report 2017 73
The consistently high private and public debt in
many places is also hampering growth pro-
spects and can lead to negative market reac-
tions. Growth declines in key countries and re-
gions often directly affect the global economy
and therefore constitute a central risk. The eco-
nomic development of some emerging econo-
mies is inhibited mainly by a dependence on
capital imports and energy and commodity
prices in addition to socio-political tension.
Furthermore, risks are arising from flawed gov-
ernment structures and the absence of rule of
law.
Geopolitical tensions and conflicts are another
major risk factor in the development of indivi-
dual economies and regions. As a result of ri-
sing global economic interrelations, even local
developments can harm the world economy.
For example, an escalation of the conflicts in
Eastern Europe, the Middle East or Africa can
trigger further disruptions on the global energy
and commodity markets and exacerbate migra-
tion trends. Additional negative effects could
result from an exacerbation of the situation in
East Asia. The same is true of armed hostilities,
terrorist activities or the spread of infectious
disease, which can lead to sudden and unex-
pected market reactions.
Overall, we are not anticipating a global rece-
ssion in the coming year. Given these risk fac-
tors, however, a decline in global economic
growth or a phase of below-average growth
rates is possible.
As part of the capital goods industry, RENK is
also subject to fluctuations in the investment
climate. Even small fluctuations in growth rates
or forecasts, or alterations in government in-
vestment subsidies, can result in significant
changes in demand for capital goods on the
RENK Group’s markets, cancellations of orders
already booked or the reorganization of longer-
term business relationships. RENK’s methods
for countering these economic sales risks in-
clude flexible production concepts and cost
flexibility through subcontracted employees,
working time accounts, short-time work and, if
necessary, contractual compensation arrange-
ments.
The overall economic environment can also
mean opportunities for RENK, if actual develop-
ment deviates positively from forecasts.
In addition, there are risks that protectionist ef-
forts, minimum requirements in terms of the
share of local production in individual coun-
tries or changing competitive conditions on the
sales markets of the RENK Group adversely af-
fect the planned growth. The markets for pro-
ducts in the military environment are also sub-
ject to further risks on account of their depen-
dence on political decision-making – as regards
opinions on export control law, the stipulations
made by supplier countries such as Germany or
France and the respective political environment
in the target countries. There are also uncer-
tainties due to cash-strapped public sectors in
many countries, and possibly demands for local
content and technology transfer. In particular,
failure to achieve a necessary level of localiza-
tion can lead to additional import duties or
penalties. Furthermore, across all product areas
on many markets, RENK faces substantial com-
petitive and price pressure that can lead to a de-
terioration of the profit margins it can achieve.
Changes in legislation, affecting taxes or cus-
toms, or to other provisions in individual coun-
tries can likewise entail risks to RENK. RENK
constantly monitors and assesses its economic,
political, legal and social environments in order
to take into account the resulting risks and op-
portunities in a timely manner when making
business decisions. Further information on the
current developments in connection with the
economic situation and the repercussions of
this can be found in the sections entitled “Eco-
nomic environment”, “Outlook” and in the
comments on the individual segments under
“The segments”.
74
Products As a provider of premium technology, RENK’s
mission is to develop high-quality technologi-
cally and economically advanced products and
launch them on the market, which opens up
opportunities for RENK in a wide range of mar-
ket segments. Abandoning such a mission
would constitute an irresponsible risk to the
Group’s market position. Still, introducing new
products entails design and market risks. RENK
counters these with meticulous strategic pla-
nning that analyzes developments in its mar-
ketplace and business environment. Ensuring
that RENK products are of a consistently high
quality is an essential prerequisite for tapping
further global market potential. This is reflected
by extensive capital expenditures in corre-
sponding production capacity and equipment
in the fiscal year and previous years. In order to
meet the future requirements of advancing di-
gitization, the segments are expanding their
business models and seizing the challenges of
digital transformation as an opportunity.
Products that have already been introduced on
the market are subject to risks in terms of the
product quality expected by customers. Poor
quality can lead to warranty and guarantee
costs, and to losses of market share or lower
profit margins. In extreme cases, product liabi-
lity claims and damages are possible. Suppliers
and the components they provide must un-
dergo a strict approval procedure to ensure that
high quality standards are maintained. Once
production has begun, established in-process
quality assurance measures ensure that manu-
facturing defects are identified and fixed in
good time. Later, when the products are in use,
any defects that arise are recorded, analyzed
and fixed together with the service operations.
RENK’s international presence with a variety of
products and services leads to the diversifica-
tion of its economic base. This counteracts the
risks of dependence on major customers or on
individual products and markets. However, this
also entails risks of patent infringements by
third parties and the unauthorized disclosure
of the company’s specific expertise by third
parties. We therefore monitor our sales markets
and protect the company’s expertise with legal
action where necessary.
Long-term customer contracts harbor addi-
tional risk potential. Changes in a market’s po-
litical or business framework can lead to addi-
tional expenses in the handling of major pro-
jects. Whenever agreements with customers in-
clude warranties or guarantee obligations, there
is the risk of illegitimate claims. This risk is
managed by formulating contracts with the ut-
most care.
RENK also monitors technological advances
and new developments to be able to respond to
these technological changes promptly with a
revised product focus.
Processes RENK sees the continuous optimization of busi-
ness processes in Development, Purchasing,
Production, Sales and Administration as an on-
going challenge to increase the efficiency of
these processes and also to counteract the
sometimes significant cost risks in these areas.
For example, suppliers are monitored preve-
ntively and continuously to detect significant
risks of delays in delivery or loss of suppliers at
an early stage and thus to mitigate their im-
pact. RENK also decisively and systematically
improves the underlying processes with regard
to the optimized commitment of current as-
sets.
Risks can arise in handling major projects that
may only be recognized in the course of the
project. These can include problems in contract
design, the miscalculation of orders, changes in
economic and technical conditions, flaws in
project management or inadequate perfor-
mance by subcontractors. The RENK Group
minimizes these risks with comprehensive pro-
ject management and order controlling. All ma-
jor projects are submitted to the Executive
Board of RENK AG for approval. Orders already
approved and ongoing that deviate signifi-
cantly from their planned development are
logged as critical orders in a special reporting
RENK Group Annual Report 2017 75
system and regularly presented to the Execu-
tive Board.
Business processes at RENK AG are closely su-
pported and in some cases even made possible
by IT. This leads to efficiency gains but also har-
bors risk. Parts of its infrastructure can mal-
function as a result of accidents, disasters, tech-
nical disruption or Internet attacks, thereby im-
pairing or completely shutting down business
processes. Moreover, there are the risks of un-
authorized access, theft and the destruction or
misuse of business data and information. The
resulting financial damage and loss of reputa-
tion can affect individual companies or even
the Group as a whole. To safeguard the availa-
bility, authenticity, integrity and confidentiality
of information while reducing and avoiding
risks, and to minimize identified and potential
risks, RENK uses a risk-oriented information se-
curity management system and state-of-the-art
hardware and software technologies with effec-
tive IT organization mechanisms in conjunc-
tion with a constantly evolving internal IT con-
trol system.
The centralization and selective sourcing of IT
operations and the systematic introduction of
IT service management processes in accordance
with the ITIL (IT Infrastructure Library) organi-
zational standard assist in the efficient support
of business processes. By organizing its infor-
mation security based on the internationally
recognized ISO 27001 safety standard, RENK has
significantly improved the transparency and
operational security of its IT processes and in-
frastructure.
The internal control system plays a crucial role
in all business processes, including the ac-
counting process, as it is designed to ensure
compliance with the relevant regulations and
to reduce unavoidable risks, thereby protecting
assets. It makes a vital contribution to protect-
ing RENK’s assets.
Employees A key component of RENK’s corporate strategy
is to be perceived as a top employer to remain
attractive to skilled and motivated employees
moving ahead. A significant factor in RENK’s
success is the highly qualified specialists and
managers who set new technological bench-
marks with RENK products and effectively and
efficiently manage its operations.
Opportunities for RENK lie in the continuing
professional training of all employees from
trainees to management. This forms the funda-
mental basis for a sustainable and trusting cus-
tomer relationship with recurring business su-
ccess on all markets. RENK actively monitors
the changes in the world of work and the asso-
ciated new requirements for professional
knowledge in the context of work process digi-
tization. Risks lie in being unable to staff key
positions in good time and in line with future
requirements. Thanks to a wide array of HR
marketing activities, the company has su-
cceeded in recruiting and ensuring loyalty to
the company among excellently qualified spe-
cialists and managers.
An intentional or grossly negligent violation of
the law or regulations by employees or mana-
gers would be a material risk to RENK. RENK
counters the risks of corruption, antitrust law,
money laundering and terrorism funding with
a variety of measures as part of its compliance
system. In particular, these include the Code of
Conduct, compliance policies and training, the
compliance help desk, the “Speak Up!” whistle-
blower portal and regular compliance risk as-
sessments and communications measures. For
further information, please refer to the section
“Compliance system”.
76
Finance As an international player, the RENK Group is
exposed to significant market price, liquidity
and credit risks. RENK addresses these risks,
which can also represent opportunities due to
market fluctuations, with its Group-wide finan-
cial risk management. There are also risks from
changes in the value of equity investments and
pension obligations.
Market price risk also comprises currency, in-
terest rate and commodity price risks. If trans-
actions are conducted in a currency other than
RENK’s functional currency, they are exposed to
a currency risk that can affect prices for goods
and services as well as profit margins. RENK
therefore largely hedges its currency risks from
orders, receivables and liabilities and, in part,
those from planned sales. The inclusion of sub-
sidiaries from countries outside the euro area
in the consolidated financial statements gives
rise to risks affecting profit or loss due to cu-
rrency translation. RENK does not hedge these
translation risks with derivative financial in-
struments. The hedging activities of the RENK
Group and its operating companies are handled
centrally by MAN SE as a counterparty. Substan-
tial quantities of raw materials are also needed
for the manufacture of products. Commodity
market price trends or escalator clauses in con-
tracts with suppliers expose RENK to commod-
ity price risks that cannot always be passed on
to customers and that therefore erode profit
margins. Such risks are counteracted with long-
term supply agreements and escalator clauses
in contracts with customers.
Liquidity risk describes the risk that RENK is
unable to adequately meet its financial obliga-
tions. Inflows and outflows of cash are moni-
tored and managed at all times to safeguard li-
quidity. Moreover, cash flow trends are moni-
tored in the context of detailed financial pla-
nning. The company’s inclusion in the central
cash management of the MAN Group ensures
the availability of the necessary funds.
The operating activities of the RENK Group ex-
pose it to credit risk. This includes the risk that
a partner does not meet its contractual obliga-
tions on account of its own economic situation
or the political environment, thereby causing a
financial loss to RENK. These sovereign and
counterparty risks are reduced by the careful
selection of business partners, suitable contract
and payment terms, guarantees and letters of
credit.
If there are indications of impairment on an
equity investment carried at cost, RENK is ex-
posed to the risk of an impairment loss in net
profit or loss. Further information on this can
be found in the notes to the consolidated finan-
cial statements.
The derivative hedges for currency risks – to the
extent that they are used at RENK – are compo-
nents of economic hedges whose effectiveness
is regularly checked. These hedges are ac-
counted for as cash flow hedges in currency risk
management. Further information on the ma-
nagement of market price, liquidity and credit
risks can be found in the notes to the consoli-
dated financial statements.
To reduce the inherent financial risks and, in
part, on account of legal regulations, the de-
fined benefit obligations of the RENK Group are
largely covered pension assets kept separate
from working capital.
Assessment of the risk and opportunities situation of the Group by the Executive Board As in previous years, the market risks continue
to outweigh the other risk areas, though the
overall risk position has not changed signifi-
cantly. The opportunities identified can only
partly counteract the risks. It should be noted
that the realization of market opportunities is
already included in sophisticated internal pla-
nning. Based on the risks reported in the Risk
and Compliance Board, the Executive Board is
satisfied that there are no significant risks in
the respective segments that, individually or
collectively, are not covered by the budgeted
RENK Group Annual Report 2017 77
operating profit on the basis of the net assess-
ment. This also applies to risks for which a
higher gross loss was calculated, as risk-mitiga-
ting measures were taken or a low probability
of occurrence was assumed. Regarding the indi-
vidual risk areas, the Executive Board antici-
pates the most significant short-term risks in
the market risk area. In particular, this concerns
the uncertainties and the strong competitive
pressure in many markets relevant to RENK, i.e.
in business areas of Special Gear Units, Stan-
dard Gear Units and Slide Bearings.In product-
related risks, the focus is on potential technical
risks and warranty claims based on customer-
oriented use of RENK products. The quantified
short-term risks in the processes and employ-
ees risk areas are of lesser importance.
On the basis of the risk management system es-
tablished by the MAN Group and introduced at
RENK, the Executive Board has again found that
no risks are discernible at the current time that
could lead to a lasting and substantial impair-
ment of the net assets, financial position and
results of operations of the RENK Group. The
risk management system implemented and the
related organizational measures thus allow the
Executive Board to learn of risks in a timely
manner and to initiate adequate measures.
Given the partially uncertain development, the
focus of activities in 2018 will continue to be on
the management of market risks.
Compliance In fiscal year 2017 RENK systematically imple-
mented and continued to develop the compli-
ance program covering the combating of cor-
ruption, antitrust law, data privacy and money
laundering.
RENK has established compliance as an integral
part of its corporate culture. The compliance
management system is coordinated, taught and
constantly refined by the compliance officer on
the basis of the MAN SE compliance program.
He reports directly to the RENK AG Executive
Board and functionally to the Audit Committee
of the Supervisory Board.
The compliance officer is assisted by a deputy
and two other employees in the area of review-
ing business partners. The Rheine and Hanover
plants are also assisted by “compliance champi-
ons” – managers who are not full-time compli-
ance employees but who assume special re-
sponsibility for compliance at their sites.
Furthermore, the compliance officer can use
the resources of MAN’s corporate compliance
office. In particular, training and information
materials and e-learning courses are managed
from here. Policies are adapted to RENK’s struc-
ture and business model.
The compliance organization and the introduc-
tion of new compliance measures were closely
coordinated with the Executive Board and plant
management teams on the basis of identified
risks. The Risk and Compliance Board, which
meets quarterly, is informed of the progress in
measures and coordinates the next steps as
necessary.
Ethical principles of conduct and compliance
requirements for RENK are established in the
Code of Conduct. Rules substantiating the spe-
cification of the Code of Conduct are contained
in the following compliance policies:
policy on the handling gifts, hospitality and
invitations,
policy on the involvement of business part-
ners,
policy on the handling of donations and
sponsorship activities,
policy on compliance with antitrust provi-
sions,
policy on the fight against terrorism, corrup-
tion and money laundering,
policy on the handling of personal data.
In addition to the Code of Conduct for Emplo-
yees, RENK has issued a Code of Conduct for
Suppliers and Business Partners that defines
certain minimum ethical standards that RENK’s
suppliers and sales support business partners
must agree to comply with.
78
The integrity of business partners is checked as
a mandatory requirement and they are subject
to an approval process.
In the induction phase after joining the com-
pany, the Compliance Officer introduces new
employees to the compliance organization,
compliance processes and compliance tools,
and takes the opportunity to discuss the com-
pany’s expectations of employees.
In addition, in line with their risk classification,
employees still receive compliance awareness
training in classroom sessions and e-learning.
As per the policy on the involvement of busi-
ness partners, the integrity of sales support
business partners is checked as a mandatory re-
quirement and they are subject to an approval
process. The integrity checks conducted in the
reporting period and the scheduled follow-up
inspections did not lead to any objections.
The electronic monitoring system, also known
as the continuous controls monitoring system
(CCMS), for the early identification of possible
compliance risks and policy violations in pur-
chasing and payment processes, was still run-
ning at all RENK sites in Germany in the report-
ing period. CCMS reporting consists of various
check files. Changes in the extent of control
and control irregularities are evaluated on a
monthly basis and assessed in a meeting with
the Head of IT, Head of Finance and the Compli-
ance Officer, and finally reported to the RENK
Risk and Compliance Board.
The compliance officer and the compliance
help desk, which can be used by all employees
for matters concerning compliance, received 28
inquiries for the RENK Group and 26 for RENK
AG in the reporting period (compliance officer
(25 and 23), MAN compliance helpdesk (3)).
These were answered by the compliance officer
and documented.
No compliance violations were identified in the
reporting period.
MAN’s “Speak up!” whistleblower portal helps
to detect and avoid dangerous risks. Through
“Speak up!”, tips concerning severe compliance
violations, particularly in the area of white col-
lar crime (such as corruption), antitrust law and
privacy, are received and processed.
RENK employees and third parties therefore
have another way to provide tips on compli-
ance violations – confidentially, internationally
and at any time – other than contacting the
compliance officer directly. Compliance viola-
tions are not tolerated at RENK under any cir-
cumstances. Information on possible violations
is examined in detail, violations are stopped
and sanctioned as far as labor law allows. Fur-
thermore, the findings from investigating com-
pliance violations are used for the continuous
improvement of the compliance system. No tip-
offs of compliance violations were received
through the whistleblower portal in the year
under review.
MAN Corporate Audit conducted an audit of
the compliance management system and the
business partner process from July 10 to
July 28, 2017.
The objective of the audit was to determine
whether:
there is an effective compliance management
system;
internal rules, policies and instructions are
adhered to;
the handling of business partners is in order.
The results found that the processes were es-
sentially in order and that there were no hu-
man errors.
RENK Group Annual Report 2017 79
80
Remuneration report for fiscal year 2017
Remuneration of members of the Executive Board In accordance with the statutory rules, the total
remuneration of individual Executive Board
members is set by the full Supervisory Board.
The subject matter is prepared by the Supervi-
sory Board’s Executive Personnel Committee.
At the proposal of the Committee, the structure
of the remuneration system for the Executive
Board is also discussed by the full Supervisory
Board and – in accordance with the recommen-
dation of the German Corporate Governance
Code (GCGC, item 4.2.2) – regularly reviewed
and revised as necessary.
The objective and purpose of this is to establish
appropriate remuneration. In particular, the cri-
teria for this are the duties of the respective
member of the Executive Board, his personal
performance, the economic situation, the su-
ccess and the future prospects of RENK and the
RENK Group and the question of what is usual
for remuneration, taking into account the peer
group and remuneration structure otherwise in
place at RENK.
Remuneration structure and components Remuneration for members of the Executive
Board consists of a salary and benefits in kind
not related to performance, pension contribu-
tions and performance-based components. The
performance-based, variable remuneration
takes into account individual performance, the
company’s success and long-term strategic ob-
jectives. The remuneration structure and its
components are based on the respective em-
ployment contract.
(a) Fixed remuneration
The fixed remuneration is paid as a monthly
salary. There are also benefits in kind, including
in particular the provision of company cars and
the payment of insurance premiums. The fixed
remuneration is regularly reviewed and revised
as appropriate to take into account the general
pay trend and the responsibilities of the respec-
tive Executive Board member.
(b) Variable remuneration
A new system of variable compensation was in-
troduced for the members of RENK AG’s Execu-
tive Board from fiscal year 2016. The variable
compensation is calculated on the basis of
three equally weighted components, each of
which is limited to 200% of the target value:
Long-term incentive (LTI)
Corporate bonus (CB)
Personal performance bonus (PPB)
The long-term incentive is directly linked to
the goals of the Volkswagen Group’s 2018 strat-
egy and is based on the performance criteria
derived from the strategy. The calculation is
based on a four-year period.
The target areas are:
Top customer satisfaction
(measured by the customer satisfaction in-
dex)
Top employer
(measured by the employee index)
Increase in sales
(measured by the growth index) and
Increase in return
(measured by the return index)
The customer satisfaction index is calculated
using indicators that reflect customers’ overall
satisfaction with the delivering dealers, new ve-
hicles and service operations on the basis of
their last workshop visit. The employee index is
determined from the indicators “employment”
and “productivity” and from the participation
rate and the result of employee surveys. The
growth index is calculated from the indicators
“delivery to customers” and “market share”.
RENK Group Annual Report 2017 81
The return index is calculated from the devel-
opment of the return on sales and the dividend
on ordinary shares.
The indices calculated for customer satisfaction
and on employees and the sales situation are
added together and the result is then multi-
plied by the return index. This method ensures
that the LTI is only paid out if the Group is fi-
nancially successful as a whole. This is because
the return index is zero if the return on sales
does not exceed a threshold of 1.5%. Conse-
quently, the overall index for the fiscal year in
question is then also zero.
Taking into account the four-year average of the
overall indices – for the year under review and
the three preceding fiscal years – the maximum
amount of the LTI was set at € 255 thousand for
the Chief Executive Officer and € 230 thousand
for the second member of the Executive Board.
The corporate bonus allows the Executive
Board to share in the business success of the
RENK Group. This success is measured by the
operating profit of the RENK Group. The calcu-
lation is based on a two-year period.
The achievement of targets is measured using
the following system:
The average value of the operating profit of the
RENK Group for the last two fiscal years (inclu-
ding the fiscal year in which the bonus is
granted) is compared against a target value set
by the company’s Supervisory Board before the
beginning of the fiscal year in which the bonus
is granted. The target value is 100% target
achievement. The target value is reviewed by
the Supervisory Board at regular intervals, at
least every three years, and adjusted if neces-
sary.
The resulting percentage ratio between the
average value and the target value is the per-
centage value for the target, which is capped at
200% of the average. The Supervisory Board has
set the target value at € 55 million.
The personal performance bonus honors indi-
vidual performance in the previous fiscal year
on the basis of target achievement according to
the individual target agreement and perfor-
mance evaluation. Quantitative and qualitative
factors are used to determine the bonus. The
personal performance bonus is set by the Su-
pervisory Board of the company.
(c) Company pension plan
Pension benefits for members of the Executive
Board comprise old age, disability and survi-
vors’ benefits. Entitlements to such benefits are
accumulated under a defined contribution,
fund-based system, the Capital Account Plan.
Each year RENK AG pays a contribution of 20%
of eligible pay, which is the total of the contrac-
tually agreed fixed and variable remuneration.
Additional contributions through gross de-
ferred compensation are possible. The contri-
butions paid and interest on them are accumu-
lated in individual capital accounts. The perfor-
mance of capital account is directly linked to
the capital market and defined by a basket of
indices and other suitable parameters. Invest-
ment risks are gradually reduced with increa-
sing age (lifecycle concept). On retirement, the
credit in the capital account, or at least the total
contributions paid, can be paid out in a lump
sum, in installments or converted into an an-
nuity. In the event of disability or death, the
balance accumulated, or at least capital in the
amount of four times the fixed annual remu-
neration, is paid out.
Special employment contract regulations In the event of a member of the Executive
Board’s appointment ending early without
cause and at the instigation of the company,
the member in question receives the fixed re-
muneration, the bonus, insurance premium al-
lowances and pension plan contributions until
the regular end of his term of office, or for a
maximum of two years. Any income from other
activities will be offset.
82
In the event of a member of the Executive
Board’s appointment ending at his own instiga-
tion – which is possible giving notice without
stating grounds – he will receive his pay only
until the end of his notice period. There are no
special regulations for a change of control.
Remuneration of members of the Executive Board in 2017 The total remuneration of active members of
the Executive Board for their activities in fiscal
year 2017 amounted to € 1,548 thousand plus
€ 196 thousand for pensions (previous year:
€ 1,478 thousand plus € 186 thousand for pen-
sions). Individual details broken down by fixed,
performance-based and long-term incentive
components can be found in the table in the
notes to the consolidated financial statements
and the tables below.
The individual remuneration of members of
the Executive Board is reported in this remu-
neration report on the basis of the uniform
sample tables recommended in the GCGC as
published on September 30, 2014. A key feature
of these sample tables is the separate reporting
of benefits granted and amounts actually paid.
The targets (payment on 100%) and the mini-
mum and maximum values possible are shown
under benefits.
RENK Group Annual Report 2017 83
Remuneration of members of the Executive Board in 2017 (granted)
€ thousand Florian Hofbauer
Chief Executive Officer
2017 Minimum Maximum
Fixed remuneration 255 255 255
Additional benefits 31 31 31
Total 286 286 286
Short-term variable remuneration
Personal performance bonus 127 0 255
Long-term variable remuneration
Corporate bonus 127 0 255
Long-term incentive 127 0 255
Total 382 0 764
Pension cost 101 101 101
Total remuneration 769 387 1,152
€ thousand Christian Hammel
Production and Administration
2017 Minimum Maximum
Fixed remuneration 230 230 230
Additional benefits 51 51 51
Total 281 281 281
Short-term variable remuneration
Personal performance bonus1) 115 0 230
Long-term variable remuneration
Corporate bonus 115 0 230
Long-term incentive 115 0 230
Total 345 0 690
Pension cost 95 95 95
Total remuneration 721 376 1,066
84
Remuneration of members of the Executive Board in 2016 (granted)
€ thousand Florian Hofbauer
Chief Executive Officer
2016 Minimum Maximum
Fixed remuneration 245 245 245
Additional benefits 26 26 26
Total 271 271 271
Short-term variable remuneration
Personal performance bonus 123 0 245
Long-term variable remuneration
Corporate bonus 123 0 245
Long-term incentive 123 0 245
Total 368 0 735
Pension cost 95 95 95
Total remuneration 733 366 1,101
€ thousand Christian Hammel
Production and Administration
2016 Minimum Maximum
Fixed remuneration 230 230 230
Additional benefits 49 49 49
Total 279 279 279
Short-term variable remuneration
Personal performance bonus 115 0 230
Long-term variable remuneration
Corporate bonus 115 0 230
Long-term incentive 115 0 230
Total 345 0 690
Pension cost 91 91 91
Total remuneration 715 370 1,060
RENK Group Annual Report 2017 85
Remuneration of members of the Executive Board in 2017 (actually received)
€ thousand Florian Hofbauer
Chief Executive Officer
2017
Fixed remuneration 255
Additional benefits 31
Total 286
Short-term variable remuneration
Personal performance bonus1) 194
Long-term variable remuneration
Corporate bonus 173
Long-term incentive1) 152
Total 519
Pension cost 101
Total remuneration 906
1) 2017: According to figures currently available
€ thousand Christian Hammel
Production and Administration
2017
Fixed remuneration 230
Additional benefits 51
Total 281
Short-term variable remuneration
Personal performance bonus1) 173
Long-term variable remuneration
Corporate bonus 154
Long-term incentive1) 136
Total 462
Pension cost 95
Total remuneration 838
1) 2017: According to figures currently available
86
Remuneration of members of the Executive Board in 2016 (actually received)
€ thousand Florian Hofbauer
Chief Executive Officer
2016
Fixed remuneration 245
Additional benefits 26
Total 271
Short-term variable remuneration
Personal performance bonus1) 184
Long-term variable remuneration
Corporate bonus 150
Long-term incentive1) 145
Total 479
Pension cost 95
Total remuneration 845
€ thousand Christian Hammel
Production and Administration
2016
Fixed remuneration 230
Additional benefits 49
Total 279
Short-term variable remuneration
Personal performance bonus1) 173
Long-term variable remuneration
Corporate bonus 141
Long-term incentive1) 136
Total 449
Pension cost 91
Total remuneration 819
RENK Group Annual Report 2017 87
Remuneration of members of the Supervisory Board The structure and amount of the remuneration
of the Supervisory Board are determined by the
Annual General Meeting and regulated in Arti-
cle 12 of the Articles of Association. They take
into account the duties and responsibilities of
the members of the Supervisory Board.
The annual remuneration consists of the fol-
lowing components:
Fixed remuneration of € 10,000.
Additional remuneration for the chair and
deputy chair of the Supervisory Board, and
for the chair and members of a committee,
with the exception of the Mediation Commi-
ttee. The chair of the Supervisory Board is
granted double the fixed remuneration, the
deputy chair and the chair of a committee
one and a half times this amount, a commi-
ttee member 1.25 times the amount. If mem-
bers perform several functions, remuneration
is based on the function with the highest re-
muneration entitlement.
Supervisory Board members’ expenses are also
reimbursed.
Remuneration of members of the Supervisory Board in 2017 The total remuneration payable to members of
the Supervisory Board for 2017 amounts to
€ 92,341 (previous year: € 100,000). An indivi-
dual breakdown of the remuneration of the
members of the Supervisory Board who served
on the Supervisory Board in 2017 can be found
in the notes to the consolidated financial state-
ments.
Furthermore, members of the Supervisory
Board did not receive any further remuneration
or benefits for services rendered personally, in-
cluding in particular consulting and mediation
services in the year under review.
Former members of the Supervisory Board who
left the Supervisory Board before Janu-
ary 1, 2017 are not paid any remuneration.
88
Events after the end of the reporting period
There were no special events after December 31, 2017 with a material effect on the net assets, finan-
cial position and results of operations.
Separate non-financial report
RENK Aktiengesellschaft exercises the option provided by section 289b(2) HGB and section 315b(2)
HGB to exempt itself from issuing a non-financial declaration and a non-financial Group declara-
tion, and refers to the combined separate non-financial report of Volkswagen AG for fiscal year 2017,
which is available in German at https://www.volkswagenag.com/presence/nachhaltigkeit/docu-
ments/sustainability-report/2017/Nichtfinanzieller_Bericht_2017_d.pdf and in English at
https://www.volkswagenag.com/presence/nachhaltigkeit/documents/sustainability-re-
port/2017/Nonfinancial_Report_2017_e.pdf from no later than April 30, 2018.
RENK Group Annual Report 2017 89
90
Forecast
The expected development of the RENK
Group and the general conditions for its busi-
ness activities are described below. Risks and
opportunities that could cause a departure
from the projected developments are pre-
sented in the report on risks and opportuni-
ties.
Our assumptions are based on the current as-
sessments of external institutions, including
economic research institutes, banks, multina-
tional organizations and consulting firms.
We expect that the growth of the global eco-
nomy will slow slightly in 2018. We see risks
in protectionist tendencies, turbulence on
the financial and structural deficits in indi-
vidual countries. Furthermore, growth pro-
spects will continue to be weighed down by
geopolitical tensions and conflicts. We there-
fore anticipate somewhat diminished mo-
mentum for both the advanced and the
emerging markets compared to 2017. We ex-
pect the highest increases in the emerging
economies of Asia.
Moreover, we assume that the growth of the
global economy will continue in the years
2019 to 2022.
Economic growth in Western Europe will pre-
sumably slow down slightly in 2018 com-
pared to the year under review. The major
challenges are solving structural problems
and the uncertain outcome and implications
of the exit negotiations between the EU and
the UK.
For Central Europe we anticipate lower
growth rates in 2018 than in the past fiscal
year. The economic situation should con-
tinue to stabilize in Eastern Europe, unless
there is a further escalation of the smolde-
ring conflict between Russia and Ukraine.
Russia’s economic output will presumably
continue to rise following last year’s growth.
Gross domestic product in Germany is ex-
pected to rise less energetically in 2018 than
in the year under review. However, the stable
situation on the labor market is likely to con-
tinue and support private consumer spen-
ding.
We expect that the economic situation in the
US will continue to improve in 2018. Growth
in Canada is likely to decelerate, while it will
remain virtually constant in Mexico.
Brazil’s economy is fully expected to continue
to stabilize in 2018, achieving slightly higher
growth than in the year under review.
The Chinese economy will presumably con-
tinue to grow at a relatively high level in 2018,
though with less momentum than in previ-
ous years. For India we expect a rate of expan-
sion in line with 2017. It is anticipated that
the economic situation in Japan will deterio-
rate over the year under review.
According to the German Engineering Associ-
ation (VDMA), international mechanical engi-
neering grew by 6% in 2017, significantly
more than forecast. The VDMA is forecasting
further expansion in 2018 – albeit at a lower
rate of 4%. Obstacles to stronger growth are
believed to lie in the lingering structural
problems and continuing uncertainty over
political and economic development in many
regions. The VDMA is forecasting growth in
sales revenue for German mechanical and
plant engineering of 3%, which should also
benefit the market for drive technology.
The Executive Board anticipates that RENK
will experience a clear recovery in fiscal year
2018 compared to 2017, assuming that
planned major projects – particularly in Spe-
cial Gear Units and Vehicle Transmissions –
are implemented as planned. Sales revenue is
expected to be slightly higher than the previ-
ous year’s level in 2018. The operating profit
RENK Group Annual Report 2017 91
of the RENK Group should remain almost at
the level of 2017 in 2018, hence the operating
return on sales will decline slightly but stay
in the double digits.
RENK will continue its long-term strategy in
2018 as well. Safeguarding its top technologi-
cal position in gear units and slide bearings
will therefore remain at the heart of research
and development activities. Also, technologi-
cal change and changing market and cus-
tomer requirements can only be mastered
with appropriately qualified and motivated
employees, hence training and continuous
professional development will be of central
importance. Finally, the material groundwork
also has to be in place if the coming cha-
llenges are to be mastered. The continuation
of the long-term investment program will
provide the basis for this.
RENK’s assessment of the developments in
the individual segments is as follows:
In 2018 – as in 2017 and 2016 – order intake in
Special Gear Units will be largely determined
by orders for complex marine gear units;
some more major projects are expected to
reach the tendering phase in 2018. This would
result in a noticeable increase in incoming
orders compared to 2017 for the entire seg-
ment. Sales revenue should rise slightly in the
new fiscal year. Owing to the continuing
tense market situation, an operating profit at
the level of the previous year and thus also an
operating return on sales in line with that of
2017 are expected.
If the major projects planned are imple-
mented on time, Vehicle Transmissions can
look forward to a significant increase in new
orders in 2018. Sales revenue is also set to rise
substantially as planned deliveries are imple-
mented. Taking into account a change in the
revenue mix, this will be reflected in slight
growth in operating profit, hence the opera-
ting return on sales will be at a similar level
to 2017.
Fiscal year 2017 developed better than ex-
pected one year ago for Standard Gear Units.
Order intake and sales revenue should be able
to continue the 2017 level in 2018. In the
Standard Gear Units as well, a slight decline
in operating profit and the operating return
on sales is forecast owing to changes in the
product mix.
With no sign of a significant improvement in
the initial situation on the markets for Slide
Bearings, only a marginal increase in orders
is anticipated for fiscal year 2018. Sales reve-
nue will be at a similar amount to 2017; ope-
rating profit and operating return on sales
will therefore be down slightly.
92
The forward-looking statements and information described above are based on our current expecta-
tions, assumptions and estimates, and they therefore entail a series of risks and uncertainties. A va-
riety of factors, many of them outside our control, can influence our business activities and their
outcome.
These factors can result in the actual performance of RENK Group deviating significantly from the
forward-looking statements.
Augsburg, February 8, 2018
RENK Aktiengesellschaft
The Executive Board
The Board of Management
Florian Hofbauer Christian Hammel
RENK Group Annual Report 2017 93
94
RENK Group Annual Report 2017 95
RENK AG, Augsburg RENK Consolidated Financial Statements for the Fiscal Year from January 1 to December 31, 2017
Content
Page
Consolidated Income Statement 96
Reconciliation to Total Comprehensive Income for the Period 96
Consolidated Statement of Financial Position 97
Consolidated Statement of Changes in Equity 98
Consolidated Statement of Cash Flows 99
Notes to the Consolidated Financial Statements 100
Principles of Financial Reporting 100
Notes to the Consolidated Income Statement 120
Notes to the Consolidated Statement of Financial Position 127
Other Disclosures 141
Events after the end of the reporting period 165
Members of the Supervisory Board and the Executive Board and their mandates 166
Responsibility statement 173
Audit Report for the consolidated financial statements of RENK AG 174
Six-year Overview 182
96
Consolidated Income Statement
€ thousand Note 2017 2016
Sales revenue [6] 469,406 495,867
Cost of sales (363,796) (376,230)
Gross profit 105,610 119,637
Other operating income [7] 13,380 15,118
Distribution expenses (35,094) (36,406)
General administrative expenses (19,889) (17,788)
Other operating expenses [8] (3,960) (13,450)
Operating profit 60,047 67,111
Interest expense [9] (462) (488)
Other financial result [9] 1,619 (2,058)
Financial result 1,157 (2,546)
Profit before taxes 61,204 64,565
Income tax expense [10] (18,376) (20,343)
Profit after tax (share of RENK shareholders) 42,828 44,222
Earnings per share in € (basic and diluted) [11] 6.30 6.50
Reconciliation to Total Comprehensive Income for the Period
€ thousand 2017 2016
Profit after tax 42,828 44,222
Items not reclassified to profit or loss
Remeasurement of pension plans1) 6,021 (4,178)
Deferred taxes1) (306) 3,143
5,715 (1,035)
Items reclassified to profit or loss in the future
Currency translation differences1) 2) (2,771) 521
Change in fair values of derivatives2) 1,908 1,117
Deferred taxes (610) (335)
(1,473) 1,303
Other comprehensive income for the period 4,242 268
Total comprehensive income 47,070 44,490
Other comprehensive income for the period as of Dec. 31 (11,390) (15,632)
1) No deferred taxes relate to currency translation differences. 2) Please see chapter “Derivative financial instruments and hedging strategies” for information on the reclassification
of recognized gains and losses to the income statement.
RENK Group Annual Report 2017 97
Consolidated Statement of Financial Position
Assets
€ thousand Note Dec. 31, 2017 Dec. 31, 2016
Intangible assets [14] 1,657 1,356
Property, plant and equipment [15] 196,686 198,223
Other and financial investments [16] 9,079 3,687
Deferred tax assets [10] 7,652 10,498
Other noncurrent financial assets [19] [28] 126 8
Other noncurrent receivables [19] 32 37
Noncurrent assets 215,232 213,809
Inventories [17] 180,503 182,086
Trade receivables [18] 87,883 86,323
Current income tax receivables 11,581 7,318
Other current financial assets [19] [28] 2,866 1,915
Other current receivables [19] 3,380 2,327
Cash and cash equivalents [20] 198,553 213,957
Current assets 484,765 493,926
699,997 707,735
Equity and liabilities
€ thousand Note Dec. 31, 2017 Dec. 31, 2016
Subscribed capital 17,920 17,920
Capital reserves 10,669 10,669
Retained earnings 404,651 376,783
Accumulated other comprehensive income (11,390) (15,632)
Equity [21] 421,851 389,740
Pension provisions [22] 10,505 15,108
Deferred tax liabilities [10] 4,739 3,429
Prepayments received, noncurrent*) 70,606 96,366
Other noncurrent provisions [23] 8,052 7,050
Other noncurrent financial liabilities [26] [28] 0 295
Other noncurrent liabilities [26] 76 101
Noncurrent liabilities and provisions 93,978 122,349
Effective income tax provisions 390 950
Trade payables [24] 34,635 36,447
Prepayments received, current*) [25] 71,055 71,230
Current income tax payables 2 7
Other current provisions [23] 48,917 55,423
Other current financial liabilities [26] [28] 1,175 2,040
Other current liabilities [26] 27,995 29,549
Current liabilities and provisions 184,169 195,646
699,997 707,735
*) Adjustment of prior-year information. Please see the information in the notes.
98
Consolidated Statement of Changes in Equity
€ thousand Subscribed
capital
Capital
reserves
Retained
earnings
Other
comprehensi
ve income
for the
period
Total
As of Dec. 31, 2015 17,920 10,669 347,522 (15,900) 360,211
Profit after tax – – 44,222 – 44,222
Other comprehensive income for the period – – – 268 268
Total comprehensive income – – 44,222 268 44,490
Dividends paid – – (14,960) – (14,960)
Other changes – – (1) – (1)
As of Dec. 31, 2016 17,920 10,669 376,783 (15,632) 389,740
Profit after tax – – 42,828 – 42,828
Other comprehensive income for the period – – – 4,242 4,242
Total comprehensive income – – 42,828 4,242 47,070
Dividends paid – – (14,960) – (14,960)
Other changes – – 0 – 0
As of Dec. 31, 2017 17,920 10,669 404,652 (11,390) 421,851
See also the supplementary disclosures on equity in the notes to the annual financial statements.
RENK Group Annual Report 2017 99
Consolidated Statement of Cash Flows1)
€ thousand Note 2017 2016
Cash and cash equivalents at beginning of period 213,957 117,061
Profit before taxes 61,204 64,565
Income taxes paid (20,038) (28,177)
Depreciation, amortization and impairment losses on intangible assets and property, plant and equipment [14] [15] 18,925 19,295
Impairment of other and financial investments [16] – 1,847
Change in provisions for pension obligations 1,378 (5,124)
Gains/losses from asset disposals (19) 230
Other non-cash expenses and income (906) (1,050)
Change in inventories 133 (10,598)
Change in receivables (2,725) (3,334)
Change in liabilities and prepayments received (28,005) 13,193
Change in other provisions (5,098) 5,729
Cash flows from operating activities2) 24,849 56,576
Payments to acquire property, plant and equipment and intangible assets [14] [15] (18,735) (24,520)
Capital contributions in other and financial investments, acquisition of non-consolidated subsidiaries [16] (5,392) (1,000)
Proceeds from asset disposals 479 612
Cash inflow from deposits – 80,000
Cash flows from investing activities (23,648) 55,092
Dividends paid [21] (14,960) (14,960)
Cash flows from financing activities (14,960) (14,960)
Effect of exchange rate changes on cash and cash equivalents (1,645) 188
Change in cash and cash equivalents (15,404) 96,896
Cash and cash equivalents at end of period [20] 198,553 213,957
1) See also the supplementary disclosures on the statement of cash flows in the notes to the annual financial statements.
2) The cash flows from operating activities include interest income of € 350 thousand (previous year: € 167 thousand), interest expenses of € 154 thousand (previous year: € 110 thousand) and income from other and financial investments of € 1,217 thousand (previous year: € 1,660 thousand).
100
Notes to the Consolidated Financial Statements
Principles of Financial Reporting
(1) General principles
RENK Aktiengesellschaft (hereinafter: RENK AG) is a listed corporation domiciled at
Gögginger Strasse 73, Augsburg, Germany. It is registered with Augsburg Local Court
under HRB 6193. The RENK Group develops, produces and distributes high-quality
drive technology worldwide. Its divisions are Special Gear Units, Vehicle Transmi-
ssions, Standard Gear Units and Slide Bearings.
As a 76% subsidiary of MAN SE, Munich, RENK AG is included in the consolidated fi-
nancial statements of MAN SE. In turn, MAN SE is a subsidiary of Volkswagen Truck &
Bus GmbH, Braunschweig, a wholly owned, direct subsidiary of Volkswagen Aktienge-
sellschaft, Wolfsburg. Volkswagen Truck & Bus GmbH holds 74.55% of the capital in
MAN SE. MAN SE and thus RENK AG as well are included in the consolidated financial
statements of Volkswagen Aktiengesellschaft, the ultimate parent company, which are
published in Bundesanzeiger (the Federal Gazette).
These consolidated financial statements of RENK AG for the fiscal year from January 1
to December 31, 2017 were prepared in line with section 315e(1) of the German Co-
mmercial Code (HGB) in accordance with the International Financial Reporting Stan-
dards (IFRS) of the International Accounting Standards Board (IASB), as applicable in
the European Union as per Regulation (EC) No. 1606/2002 of the European Parliament
and of the Council, and the supplementary provisions of the Articles of Association.
They were prepared on February 8, 2018 and approved for submission to the Supervi-
sory Board by way of resolution of the Executive Board.
The consolidated financial statements have been prepared in euro, the functional cu-
rrency of the RENK Group. Unless otherwise stated, all figures are in thousands of euro
(€ thousand). Minor differences in totals or percentages can occur as a result of the
commercial rounding of amounts.
RENK Group Annual Report 2017 101
(2) Consolidation and measurement of equity investments
(a) Equity investments
The equity investments of RENK AG include subsidiaries, other equity investments
and financial investments. All material domestic and foreign subsidiaries that RENK
AG controls directly or indirectly are included in the consolidated financial state-
ments. Control exists when RENK AG directly or indirectly has power over the poten-
tial subsidiary on the basis of voting or other rights, is exposed to positive and nega-
tive variable returns and can affect the amount of the variable returns on the basis of
voting rights.
Other equity investments include interests in non-consolidated affiliated companies
and financial investments.
(b) Basis of consolidation
Companies included In addition to RENK AG, the consolidated financial statements include the following
wholly owned subsidiaries:
RENK France S.A.S., Saint-Ouen-l’Aumône/France,
RENK Corporation, Duncan (SC)/USA,
RENK Test System GmbH, Augsburg,
RENK-MAAG GmbH, Winterthur/Switzerland and
RENK Systems Corporation, Camby (IN)/USA
Companies not included The subsidiaries and financial investments not included in the consolidated financial
statements are insignificant overall to the net assets, financial position and results of
operations of the RENK Group. These are recognized, in some cases applying practical
expedients, in the consolidated financial statements at their respective cost, taking
into account any impairment losses required.
Please see the corresponding note for a full list of shareholdings of the RENK Group.
The RENK Group founded the following companies and performed the following ac-
quisition in fiscal year 2017. These are not included in the consolidated financial state-
ments as they are insignificant overall to the net assets, financial position and results
of operations of the RENK Group.
RENK Gears Private Ltd., Bangalore/India, was founded on entry in the commercial
register on June 5, 2017. As part of the founding act, RENK AG acquired 99% of shares
and RENK Test System GmbH 1% of shares. The newly founded Group company es-
sentially performs sales and service activities in addition to local procurement and
assembly activities for RENK products in India. The initial capital amounted to
around € 1,402 thousand (converted).
102
Furthermore, on entry in the commercial register on August 30, 2017, RENK AG
founded RENK Korea Co., Ltd., Busan/South Korea, as the sole shareholder. The main
activities of the company are sales and marketing activities, in addition to assembly
and service activities, for RENK products in South Korea. The initial capital
amounted to around € 676 thousand (converted).
Effective December 8, 2017, RENK AG acquired all shares in Damen Schelde Gears B.V.,
Vlissingen/Netherlands, with share capital of € 4,222 thousand. The new subsidiary
will continue its previous activities in the areas of construction, sales and service for
complex marine gear units.
There was no separate reportable goodwill for the fiscal years 2017 and 2016.
(c) Other equity investments and financial investments
Equity investments for which a quoted market price or a reliably determinable fair
value is available are measured at that value. Financial investments in equity instru-
ments that are allocated to the available-for-sale category, but for which there is no
quoted price on an active market and whose fair value cannot be reliably determined,
are excluded from measurement at fair value. These equity investments are measured
at cost. If there are indications of impairment on an equity investment carried at cost,
an impairment test is performed and any impairment loss is recognized in profit or
loss.
(d) Currency translation
Transactions in foreign currencies are translated using the relevant exchange rates at
the time of the transaction. In subsequent periods, monetary assets and liabilities are
measured at the middle rate at the end of the reporting period; exchange rate differe-
nces are recognized in profit or loss. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the exchange rate at the
date of the transaction.
The financial statements of companies from countries outside the euro area are trans-
lated into euro using the functional currency concept. The functional currency is de-
termined by the primary economic environment, it is the respective local currency of
the companies consolidated.
The financial statements are translated using the modified current rate method, ac-
cording to which items in the statement of financial position – except equity – are
translated using the rate at the end of the reporting period, while income statement
items are translated using weighted average exchange rates. Except for other compre-
hensive income, equity is translated at historic rates. The resulting translation diffe-
rences are recognized in other comprehensive income until the disposal of the subsi-
diary and reported as a separate item in equity.
RENK Group Annual Report 2017 103
Overview of key exchange rates
Middle rate Average price1)
Dec. 31, 2017 Dec. 31, 2016 2017 2016
US dollar 1.19875 1.05600 1.18351 1.05483
Swiss franc 1.16935 1.07490 1.16860 1.07537
Pound sterling 0.88730 0.85850 0.88282 0.84472
Chinese yuan 7.80085 7.33320 7.80623 7.30168
Japanese yen 134.87000 123.50000 133.60947 122.43667
1) Weighted average price
(3) Accounting principles
The presentation in the statement of financial position distinguishes between current
and noncurrent assets and liabilities. Assets and liabilities are classified as current if
they are due within one year or within the longer operating cycle. Deferred tax assets
and liabilities and assets and provisions from defined benefit pension plans are shown
as noncurrent items. The consolidated income statement has been prepared using the
cost of sales method.
With the exception of certain items such as financial instruments at fair value, availa-
ble-for-sale financial assets and provisions for pensions and similar obligations, the
consolidated financial statements are prepared on the basis of cost.
The consolidated financial statements are based on the financial statements of
RENK AG and its consolidated subsidiaries, which are prepared using the same Group-
wide accounting policies as the Volkswagen and MAN Groups.
104
(a) Revenue recognition
Sales revenue is recognized at the date on which the products or goods are delivered
or services rendered and risk has been transferred to the customer. The amount of
sales revenue must be reliably determinable and the recoverability of the receivable
must be assumed. Discounts, customer bonuses and rebates reduce sales revenue.
Sales revenue from customer-specific construction contracts is accounted for using
the percentage of completion method.
(b) Operating expenses
Operating expenses are recognized when the service is utilized; expenses for adverti-
sing and sales promotion and other sales-related expenses are recognized at the time
they are incurred. The cost of sales consists of costs of the products and merchandise
sold. In addition to the direct material and manufacturing costs, production costs also
comprise production-related overheads, including depreciation of production equip-
ment.
Warranty provisions are recognized when the products are sold. Expenses for research
are immediately recognized in profit or loss. Interest and other borrowing costs are
recognized as expenses in the period in which they arise, with the exception of bo-
rrowing costs that are capitalized as part of the cost of qualifying assets. A qualifying
asset is an asset that necessarily takes a period of at least a year to get ready for its in-
tended use or sale. No borrowing costs were recognized in either of the past two fiscal
years.
(c) Intangible assets
Individually acquired intangible assets are carried at cost. Intangible assets acquired in
a business combination are measured at fair value at the acquisition date.
If the intangible assets have a finite useful life they are amortized on a straight-line ba-
sis over their period of use. The amortization period for software is predominantly
three years. Licenses and similar rights are amortized over their contractual terms of
use. If the useful life cannot be determined, there is no amortization. Instead, the in-
tangible assets are tested for impairment at least once a year and impairment losses
are recognized if necessary. No goodwill or other intangible assets with an indefinite
useful life were capitalized as of December 31, 2017 or the same date of the previous
year.
Expenses for the development of new products or series are capitalized when the new
products or series are technically and economically feasible, are scheduled for internal
use or for sale, the expenses can be measured reliably and sufficient resources to com-
plete the development project are available. Development costs that do not meet these
criteria and all research costs are recognized immediately in profit or loss. The capita-
lized development costs are amortized on a straight-line basis from the date of launch,
typically over five to seven years. While a development project is still in progress, the
RENK Group Annual Report 2017 105
amounts capitalized to date are tested for impairment at least annually. No such deve-
lopment costs were capitalized as of the end of the 2017 and 2016 reporting periods.
(d) Property, plant and equipment
Property, plant and equipment are measured at historic cost less depreciation and im-
pairment losses. Investment grants are deducted from cost. The cost of internally ge-
nerated assets includes directly attributable production costs and pro rata production
overheads. Where property, plant and equipment consist of material identifiable com-
ponents with different useful lives, these components are recognized and depreciated
separately. Borrowing costs were not included in cost for the 2017 and 2016 fiscal years.
Expenses for maintenance and repairs are recognized in profit or loss, unless they
must be capitalized.
Property, plant and equipment are depreciated on a straight-line basis over their ex-
pected useful life. The useful lives of property, plant and equipment are reviewed at
the end of each reporting period and adjusted if necessary. Depreciation is essentially
based on the following useful lives:
in years
Buildings 10 to 50
Improvements 5 to 33
Technical equipment and machinery 5 to 21
Other equipment, operating and office equipment 3 to 15
(e) Leases
Leases for property, plant and equipment (investment leases) must be classified as
either a finance lease or an operating lease. The leases reported by the RENK Group are
classified as operating leases and the lease payments are recognized as an expense. As-
sets leased under operating leases are carried at cost and depreciated to their residual
value on a straight-line basis over the lease term. Impairment is recognized in the
form of write-downs and adjustments to the lease installments. RENK leases assets
only to a limited extent.
106
(f) Impairment
If there are indications that the carrying amounts of intangible assets, property, plant
and equipment, other equity investments and financial investments carried at cost or
other receivables may be impaired, an impairment test is performed. The intangible
assets with indefinite useful lives, capitalized development costs and goodwill are
tested for impairment at least annually. At the RENK Group, there were no items in the
statement of financial position subject to an annual impairment test as of the end of
the 2017 and 2016 reporting periods.
The recoverable amount of the asset in question is calculated to determine the extent
of a possible impairment loss. The recoverable amount is the higher of the fair value
less costs to sell and value in use. The value in use is the present value of the expected
cash flows. A weighted average cost of capital before taxes (WACC) that reflects the
market conditions is used as the discount rate. The discount rate is calculated on the
basis of the interest rate for risk-free investments, a market risk premium and the bo-
rrowing rate and taking into account specific peer group information for the beta fac-
tors and the debt-to-equity ratio. The underlying assumptions are reviewed on an on-
going basis and adjusted as necessary. The weighted average cost applied in 2017 was
8.0% (previous year: 7.9%). If a recoverable amount cannot be determined for an indi-
vidual asset, the recoverable amount of the smallest identifiable cash-generating unit
to which the asset in question can be assigned is determined. If the recoverable
amount of an asset is lower than its carrying amount, an impairment loss on the asset
is immediately recognized in profit or loss.
If an asset or cash-generating unit on which an impairment loss was recognized later
has a higher recoverable amount, an impairment loss is reversed up to no higher than
the amortized cost that would have resulted without the impairment. The impairment
loss is reversed in profit or loss and is recognized in other operating income. The re-
versal of impairment losses on goodwill is not permitted. There was no recognized
goodwill in the RENK Group as of the end of the 2017 or 2016 reporting periods, nor
were any reversals in income required to be recognized for assets or cash-generating
units.
RENK Group Annual Report 2017 107
(g) Inventories
Inventories are measured at the lower of cost or net realizable value. Cost includes di-
rectly attributable production costs and pro rata fixed and variable production over-
heads. The allocated overheads are mostly determined on the basis of normal capacity
utilization. Distribution expenses, general and administrative expenses and borro-
wing costs are not capitalized. Raw materials and merchandise are measured at
weighted average cost.
(h) Customer-specific construction contracts
Customer-specific construction contracts are accounted for using the percentage of
completion method. Under this method, pro rata sales revenue and the cost of sales
are reported in accordance with the progress achieved by the end of the reporting pe-
riod. This is based on the contract sales revenue agreed with the customer and the ex-
pected contract costs. The percentage of completion is calculated as the share of the
costs incurred by the end of the reporting period in the total forecast contract costs
(cost to cost method). If the result of a customer-specific construction contract cannot
be reliably determined, sales revenue is only recognized in the amount of the order
costs incurred (zero profit method). Under the percentage of completion method, the
parts of the contract for which sales revenue has been received are recognized net of
prepayments received under trade receivables in the statement of financial position.
Expected losses from customer-specific construction contracts are immediately recog-
nized in full as an expense by writing down capitalized assets and recognizing provi-
sions.
(i) Primary financial instruments
Financial instruments are agreements that give rise to a financial asset at one entity
while at the same time giving rise to a financial liability or equity instrument at an-
other. Regular way purchases and sales of financial instruments are recognized at the
settlement date, i.e. the date on which the asset is delivered.
Primary financial instruments include, in particular, customer receivables, loans, fi-
nancial investments, securities, cash and cash equivalents, financial liabilities and
trade payables. Primary financial instruments are carried at fair value on initial recog-
nition. Fair value on initial measurement is generally the transaction price, i.e. the
consideration given or received. After initial measurement, primary financial instru-
ments are measured at either fair value or at amortized cost, depending on the cate-
gory to which they belong.
A distinction is made between the following categories of financial asset:
financial assets at fair value through profit or loss,
financial assets held to maturity,
loans and receivables, and
available-for-sale financial assets.
108
Financial liabilities are assigned to the following categories:
financial liabilities at amortized cost, and
financial liabilities at fair value through profit or loss.
The RENK Group does not use the “financial assets held to maturity” category. Simi-
larly, the option of recognizing financial assets and liabilities at fair value through
profit or loss is not exercised.
Subsidiaries that are not consolidated for reasons of materiality do not fall within the
scope of IAS 39 and IFRS 7.
The amortized cost of a financial asset or financial liability is the amount
at which the financial asset or financial liability was measured on initial recognition,
less any repayments and
any write-downs for impairment or uncollectibility and
plus or minus the cumulative distribution of any difference between the original
amount and the amount repayable on maturity (premium, discount), which is amor-
tized using the effective interest method over the term of the financial asset or fi-
nancial liability.
Loans and receivables are carried at amortized cost. In the RENK Group this category
mainly includes receivables from customers, other financial receivables, loans and
cash and cash equivalents. Non-interest-bearing and low-interest-bearing receivables
with a remaining term of more than twelve months are discounted by discounting the
future cash flows at the market rate.
The risk of default of financial assets in the loans and receivables category is taken
into account by recognizing specific valuation allowances and portfolio-based allo-
wances.
Specifically, significant individual receivables are checked for objective evidence of in-
dividual impairment. A potential impairment is assumed if certain circumstances ex-
ist, such as late payments over a certain period, the initiation of enforcement
measures, imminent insolvency or over-indebtedness, application for or opening of
insolvency proceedings or failure of restructuring measures. If an individual impair-
ment is determined, specific valuation allowances are recognized in the amount of the
losses already incurred applying uniform Group standards.
To calculate portfolio-based allowances, insignificant loans and significant individual
receivables without evidence of impairment are grouped into homogeneous portfo-
lios. As long as there is still uncertainty as to which receivable is impaired, average his-
torical probabilities of default are used for the respective portfolio.
Bad debt allowances on receivables are usually recognized in a separate allowance ac-
count. They are derecognized at the same time as the corresponding impaired receiva-
ble.
RENK Group Annual Report 2017 109
Financial instruments that are held neither to maturity nor for speculative purposes
and that do not belong to any other category are classified as available-for-sale finan-
cial assets. Available-for-sale financial assets are measured at fair value. In the RENK
Group this category mainly includes securities and financial investments. The differ-
ence between the cost and the fair value is recognized in accumulated other compre-
hensive income after taking into account deferred taxes. Available-for-sale financial
assets are impaired when there is objective evidence of permanent impairment. If the
fair value is, for example, permanently or significantly below the carrying amount, the
impairment loss is recognized in profit or loss.
For securities the fair value is usually a market price. Financial investments are also
classified as available-for-sale financial assets. If these have no listed market price and
the fair value cannot be reliably determined with reasonable effort, they are measured
at cost. Available-for-sale financial assets are written down when there is objective evi-
dence of permanent impairment. The impairment loss is recognized in profit or loss.
With the exception of derivative financial instruments, financial liabilities are subse-
quently measured at amortized cost.
Financial assets and liabilities are reported at their gross value. They are only offset
when this is legally enforceable for RENK at the current time and it actually intends to
offset them.
RENK uses the central financial management of the MAN Group. Under a cash pooling
process, the balances of the RENK accounts included are closed out by MAN SE, usually
daily, and thus transformed into receivables from/liabilities to MAN SE. As part of its
central financial management, MAN SE manages and guarantees the MAN Group’s li-
quidity and credit supply with corresponding transactions on the international finan-
cial markets. Given their cash-like nature, RENK reports the receivables from financial
transactions with MAN SE as cash and cash equivalents. They essentially result from
central cash pooling and from highly liquid investments of a temporary nature at
MAN SE. By contrast, deposits made with MAN SE of an investment nature are re-
ported as other assets. Analogously, liabilities resulting from the central financial
management of the MAN Group are reported as financial liabilities.
(j) Derivative financial instruments
The RENK Group uses derivative financial instruments to hedge foreign currency, in-
terest rate and other price risks that can mainly arise from operating activities. The
most important derivative financial instruments for RENK are currency forwards and
options.
Derivative financial instruments are measured at fair value on initial recognition and
at the end of each subsequent reporting period. Derivative financial instruments are
recognized on the trade date.
The fair value for listed derivatives is their positive or negative market value, taking
counterparty risk into account as applicable. If no quoted market prices are available,
fair values are calculated based on the conditions at the end of the reporting period,
110
such as interest rates or exchange rates, and using recognized models, such as dis-
counted cash flow models or option pricing models.
The recognition of gains and losses from measurement at fair value is dependent on
the derivative’s classification.
Derivative financial instruments that do not meet the criteria of IAS 39 with regard to
hedge accounting are measured at fair value through profit or loss.
A requirement for hedge accounting is that a clear relationship is documented be-
tween the hedged item and the hedging instrument and that its effectiveness has been
demonstrated. If these criteria are met, the hedge is designated and documented as ei-
ther a cash flow or fair value hedge from this time. RENK uses cash flow hedges only.
In a cash flow hedge, the recognized assets and liabilities, unrecognized firm commit-
ments and highly probable forecast transactions are hedged against the risk of fluctu-
ating cash flows. The effective portion of the change in the fair value of the derivative
financial instrument in a cash flow hedge is recognized in accumulated other compre-
hensive income after the deduction of deferred taxes. Once the hedged item is recog-
nized in profit or loss, the pro rata equity is reclassified to other operating income or
expenses. The ineffective portion of the change in fair value is immediately recog-
nized in profit or loss. When the hedging instrument expires or is sold, terminated or
exercised, or the hedge no longer exists but the proposed transaction is still expected
to occur, the unrealized gains/losses accrued from this hedging instrument to date re-
main in equity and, in accordance with the above, are recognized in profit or loss
when the hedged item is recognized in the income statement. If the originally hedged
transaction is no longer expected to occur, the cumulative unrealized gains and losses
reported within equity until then are also recognized in profit or loss.
(k) Income tax expense
Provisions for taxes include current income tax liabilities. Deferred taxes are reported
in separate items of the statement of financial position and the income statement.
Provisions for potential tax risks are recognized based on the best possible estimate.
The likely amount of the tax arrears payment is used as a basis for recognized income
tax items.
Deferred tax assets and liabilities are recognized for temporary differences between
the financial reporting and the tax basis, for temporary differences in profit or loss
arising on consolidation and for tax credits and tax loss carryforwards. Deferred taxes
are measured at the prevailing tax rate at the end of the reporting period or the future
tax rate highly likely to be used.
Deferred tax assets are only recognized to the extent that taxable profit will be availa-
ble for the utilization of the deductible temporary differences. Valuation allowances
are recognized for deferred tax assets whose realization is not expected in the foresee-
able future. Deferred tax assets for tax loss carryforwards are usually measured based
on future taxable income for a planning period of five fiscal years.
RENK Group Annual Report 2017 111
Deferred tax assets are offset against deferred tax liabilities if they relate to the same
taxation authority and to the extent that their maturities match.
Changes in deferred taxes in the statement of financial position lead to deferred tax
expense or income. If the change in deferred taxes results from items recognized di-
rectly in equity, the change in deferred taxes is also recognized directly in equity.
(l) Pensions and similar obligations
Pension obligations from defined benefit plans are calculated using the projected unit
credit method. The future benefit obligations are measured on the basis of the bene-
fits accrued pro rata by the end of the reporting period and discounted to present
value. Their measurement reflects assumptions about the future development of cer-
tain parameters that affect the future level of benefits.
Provisions for pension obligations are reduced by the fair value of the plan assets held
to cover the pension obligations. If plan assets exceed obligations, the excess is only
recognized in other assets if it will result in a refund from the plan or a reduction of
future contributions.
The service cost, which represents the benefits of active employees accumulated in ac-
cordance with the benefit plan in the fiscal year, is reported in functional expenses.
Net interest income and expenses are calculated by multiplying the net asset or net
liability by the discount rate and are included in interest expense.
Remeasurements of the net asset or net liability include actuarial gains and losses
arising from differences between the actuarial assumptions used and the actual
trends, changes in actuarial assumptions and the return on plan assets, not including
amounts included in net interest income or expenses. Remeasurements are recog-
nized net of deferred taxes in equity.
Payments for defined contribution plans are recognized in functional expenses.
(m) Other provisions
Other provisions are recognized for all identifiable risks and uncertain obligations re-
sulting from past events that will probably lead to a future outflow of resources and
whose amount can be reliably estimated. They are measured at the best estimate of
the expenditure required to settle the obligation. The provision is carried at its net
present value where the time value of money is material. The discount rate is based on
market interest rates.
A reimbursement of third parties anticipated in connection with a provision is recog-
nized as a separate asset if its realization is as good as certain. Provisions are regularly
reviewed and adjusted as further information develops or circumstances change. If a
change in an estimate results in a reduction of the obligation, the provision is reversed
accordingly and the income is recognized in other operating income.
112
Provisions for warranties are recognized at the time of sale of the products concerned
or the performance of the relevant service. Their measurement is based primarily on
historical experience. Individual provisions are also recognized for known losses. Pro-
visions for restructuring measures are recognized when the Group has produced a de-
tailed, formal plan of measures containing information on the division affected, the
estimated number of employees and a cost estimate and the parties concerned or
their representatives have been informed accordingly. Provisions for outstanding
costs and other commitments are measured on the basis of services yet to be per-
formed, usually in the amount of the production costs expected to be incurred. Provi-
sions for anticipated losses from onerous contracts are recognized when the expected
benefit resulting from the contract is less than the unavoidable costs to fulfill the con-
tract.
(n) Estimates and judgments
When preparing consolidated financial statements, to a certain extent assumptions
and estimates are made that affect the amount and reporting of the recognized assets
and liabilities, income and expenses and information on contingent assets and liabili-
ties in the reporting period. The estimates were made on the basis of past experience
and other relevant factors, including the assumption of going concern. All estimates
and assumptions are made to the best of knowledge and belief to provide a true and
fair view of the net assets, financial position and results of operations of the Group.
Any uncertainty is adequately reflected in valuations, although future events can still
differ from these estimates and have a material effect on the net assets, financial posi-
tion and results of operations of the RENK Group. Estimates and judgments are re-
viewed on an ongoing basis.
The assumptions made regarding the following matters as of the end of the reporting
period are of particular significance:
If intangible assets, property, plant and equipment, other equity investments and fi-
nancial investments carried at cost or other financial receivables are tested for impair-
ment, this requires a forecast of future cash flows for the calculation of the recoverable
amount and their discounting, among other things. Such cash flows are based on fore-
casts that are in turn based on the business and financial planning approved by the
management. Other material assumptions relate to the weighted average cost of capi-
tal and tax rates.
Estimates of the useful life of depreciable assets are based on past experience. If, in the
context of the review of useful life, a change is made in estimates, the remaining use-
ful life is adjusted and any impairment loss is recognized.
Individual construction contracts are accounted for using the percentage of comple-
tion method. Sales revenue is accounted for using the percentage of completion
method. This method places considerable importance on accurate estimates of the
percentage of completion. Depending on which method is used to determine the per-
centage of completion, significant estimates include contract revenue, total contract
costs, the remaining costs to completion, contract risks and other assessments. The
RENK Group Annual Report 2017 113
management of the operating units is continuously reviewing the estimates for such
construction contracts and adjusts them as necessary.
Determining impairment of financial assets requires estimates of the level and proba-
bility of occurrence of future events. As far as possible, estimates are derived from past
experience.
Pensions and similar obligations are measured using actuarial methods. These are
mainly based on assumptions relating to discount rates, salary and pension trends
and mortality. These actuarial assumptions can differ significantly from actual deve-
lopments due to changes in market and economic conditions and therefore lead to a
substantial change in pensions and similar obligations. The underlying assumptions
are presented in the “Pensions and similar obligations” section.
As the Group operates in several countries, it is subject to different tax laws. The ex-
pected current income taxes and the deferred tax assets and liabilities must be calcu-
lated for each taxable entity. This requires, among other things, assumptions about
the interpretation of complex tax regulations and the ability to generate sufficient
taxable income within the respective tax type and jurisdiction. If these assumptions
differ from the actual outcome of such tax uncertainties, this can affect tax expenses
and deferred taxes. The best estimate of the expected tax payment is used for recog-
nized uncertain income tax positions.
Depending on the matter at hand, the measurement of other provisions and similar
obligations is complex at times and entails estimates to a considerable extent. The as-
sumptions made by management with respect to the timing and amount of utiliza-
tion are based, among other things, on historical data, available technical data, esti-
mates of cost trends and potential warranty claims, discount rates and possible reco-
verable amounts. Litigation and other legal proceedings simultaneously give rise to
complex legal issues and are subject to many difficulties and uncertainties. A provi-
sion is recognized for this if it is likely that, in connection with these proceedings, a li-
ability has been incurred that will probably lead to an outflow of resources and its
amount can be reliably estimated. Assessing whether a present obligation as of the
end of the reporting period is as a result of a past event, whether a future outflow is
likely and whether the obligation can be estimated reliably requires considerable judg-
ment and significant estimates by management. Future events and developments as
well as changes in estimates and assumptions can lead to an amended assessment at a
future date. Additional expenses that can have a material effect on the net assets, fi-
nancial position and results of operations of RENK thus cannot be completely ruled
out. Changes in contractual or actual circumstances are monitored and assessed as re-
gards the potential impact on the amount and reporting of the recognized assets and
liabilities, income and expenses and information on contingent assets and liabilities
in the reporting period. Developments in these general conditions that deviate from
assumptions and are beyond management control can cause amounts to differ from
the original estimates.
114
(o) Change in reporting
As of December 31, 2017, the company is reporting the current and noncurrent por-
tions of prepayments received. Data for the previous year have been adjusted to the
new form of presentation for ease of comparability. This change in reporting has no
effect on profit or loss in either the current fiscal year or the previous year.
Jan. 1, 2016 Jan. 1, 2016 Dec. 31, 2016 Dec. 31, 2016
Previous
reporting
New
reporting
Previous
reporting
New
reporting
Prepayments received, noncurrent – 73,152 – 96,366
Noncurrent liabilities and provisions 24,430 97,582 25,983 122,349
Prepayments received, current 154,306 81,154 167,596 71,230
Current liabilities and provisions 279,962 206,810 292,012 195,646
Total assets 664,602 664,602 707,735 707,735
(4) Statement of cash flows
In the statement of cash flows, cash flows are divided into cash flows from operating
activities, cash flows from investing activities and cash flows from financing activities.
The effects of changes in the basis of consolidation and exchange rates are eliminated
in the respective positions. The effect of exchange rate changes on cash and cash
equivalents is reported separately.
Cash flows from operating activities are calculated using the indirect method. Non-
cash operating expenses and gains/losses from asset disposals are therefore elimi-
nated in cash flows from operating activities.
Besides additions to property, plant and equipment, cash flows from investing activi-
ties also include deposits of an investment nature in intangible assets and other equi-
ty investments and financial investments. Proceeds from these items are offset
against each other. Any proceeds from the disposal of subsidiaries are shown net of
their cash and cash equivalents as of the date of disposal.
Cash flows from financing activities consist of the following cash transactions: divi-
dend payments, proceeds from and payments for securities, the borrowing and repay-
ment of financial liabilities. The RENK Group had no financial liabilities in either 2017
or 2016.
The cash and cash equivalents shown in the statement of cash flows correspond to the
“Cash and cash equivalents” item in the statement of financial position. Cash and cash
equivalents include bank balances, highly liquid investments of a temporary nature
that are only subject to minor risks of fluctuations in value and the receivables under
the MAN Group’s internal cash pooling.
RENK Group Annual Report 2017 115
(5) New and revised accounting pronouncements and methods
(a) Impact of new and revised IFRSs
RENK has implemented all accounting standards endorsed by the EU and effective for
financial periods from January 1, 2017.
Since 1 January 2017, the amendment to IAS 12 (Income Taxes) has clarified the ac-
counting for deferred tax assets for unrealized losses on assets carried at fair value.
Since 1 January 2017, the International Accounting Standards Board has made
amendments to IFRS 12 (Disclosure of Interests in Other Entities) as part of the im-
provement of International Financial Reporting Standards (2016 Annual Improve-
ment Project). These clarify that disclosures in accordance with IFRS 12 are also re-
quired for subsidiaries, joint arrangements, associates and unconsolidated struc-
tured entities, even if they have been classified as “held for sale” or “intended for dis-
tribution to owners” or are part of a discontinued operation.
Since January 1, 2017, IAS 7 (Statement of Cash Flows) requires additional disclosures
in the notes on cash and non-cash changes in financial liabilities resulting from fi-
nancing activities in the statement of cash flows. The disclosures are required for the
first time for the 2017 annual financial statements. As RENK does not have any finan-
cial liabilities and had none in the previous year, such disclosures are not required in
these consolidated financial statements.
The amendments and other accounting standards effective for the first time in fiscal
year 2017 have no effect on the presentation of the net assets, financial position and
results of operations in the RENK consolidated financial statements.
(b) New and revised IFRSs not adopted
RENK did not adopt the following accounting standards that have been adopted by the
IASB but that are not yet effective for the fiscal year in the 2017 consolidated financial
statements.
116
Standard/Interpretation
Published by
IASB
Mandatory
application1)
Endorsed
by EU
Anticipated impact
IFRS 2 Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions
Jun. 20, 2016 Jan. 1, 2018 No No impact
IFRS 4 Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts
Sept. 12, 2016 Jan. 1, 2018 Yes No impact
IFRS 9 Financial instruments July 24, 2014 Jan. 1, 2018 Yes Detailed descriptions after the table
IFRS 9 Amendment – Prepayment features with negative compensation
Oct. 12, 2017 Jan. 1, 2019 No No impact
IFRS 10 IAS 28
Consolidated Financial Statements and Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
Sept. 11, 2014 Postponed2) No No impact
IFRS 15 Revenue from Contracts with Customers including Amendments to IFRS 15: Effective date of IFRS 15
May 28, 2014 Jan. 1, 20183) Yes Detailed descriptions after the table
IFRS 15 Clarifications to IFRS 15 – Revenue from Contracts with Customers
Apr. 12, 2016 Jan. 1, 2018 No Additional practical expedients for the transition period; otherwise no material impact.
IFRS 16 Leases Jan. 13, 2016 Jan. 1, 2019 Yes No classification as a finance or operating lease for lessees, instead basic recognition of all leases in the form of a right-of-use asset and a lease liability. No material impact, but additional disclosures.
IFRS 17 Insurance contracts May 18, 2017 Jan. 1, 2021 No No impact
IAS 28 Amendments: Long-term Interests in Associates and Joint Ventures
Oct. 12, 2017 Jan. 1, 2019 No No impact
RENK Group Annual Report 2017 117
Standard/Interpretation
Published by
IASB
Mandatory
application1)
Endorsed
by EU
Anticipated impact
IAS 40 Amendments: Transfers of Investment Property
Dec. 8, 2016 Jan. 1, 2018 No No impact
IFRIC 22 Foreign Currency Transactions and Advance Consideration
Dec. 8, 2016 Jan. 1, 2018 No Translation of advance payments denominated in foreign currency into the functional currency at the spot rate on the day of payment. No material impact
IFRIC 23 Uncertainty over Income Tax Treatments
Jun. 7, 2017 Jan. 1, 2019 No No material impact
Improvements to International Financial Reporting Standards 20164)
Dec. 8, 2016 Jan. 1, 2018 5) No No material impact
Improvements to International Financial Reporting Standards 20176)
Dec. 12, 2017 Jan. 1, 2019 No No material impact
1) Initial adoption mandatory for the RENK Group. 2) The IASB resolved on December 15, 2015 to postpone the date of initial adoption indefinitely. 3) Postponed until January 1, 2018 (IASB resolution of August 11, 2015). 4) Minor amendments to a variety of IFRSs (IFRS 1 and IAS 28). 5) This relates to the first-time adoption of the amendments to IFRS 1 and IAS 28. 6) Minor amendments to a variety of IFRSs (IFRS 3, IFRS 11, IAS 12 and IAS 23).
IFRS 9 – Financial Instruments IFRS 9 amends the accounting requirements for the classification and measurement
of financial assets, impairment on financial assets and hedge accounting. The RENK
Group will use the modified retrospective transition approach, under which the cumu-
lative effects are recognized in the opening statement of financial position for 2018.
The classification and measurement of financial assets is determined by the business
model applied and the structure of cash flows. On initial recognition, a financial asset
is classified either as:
at amortized cost;
at fair value through profit or loss; or
at fair value through other comprehensive income.
In the future, financial investments must always be recognized at fair value, even if the
company in which the investment is held is not listed. This is expected to give rise to
an increase in value in the seven-figure range. If the equity investment is not held for
trading, IFRS 9 allows for changes in value to be recognized on OCI. The RENK Group
intends to exercise this option for the relevant equity investment. The increase in
118
value resulting from the first-time adoption of IFRS 9 has thus been recognized in ac-
cumulated other comprehensive income. Also in the event of subsequent derecogni-
tion, e.g. when selling the equity investment, the cumulative changes in the value of
financial investments will no longer be reclassified to profit or loss. Under IFRS 9, the
classification and measurement of financial liabilities is largely unchanged compared
to the current accounting requirements of IAS 39.
The model for calculating impairment losses and recognizing loss allowances is chan-
ging from an incurred loss model to an expected credit loss model. The RENK Group
will apply the simplified approach allowed by IFRS 9 to calculate impairment losses on
trade receivables. Applying this approach, the loss allowances on the individual recei-
vables are calculated using a provision matrix with provision rates graded depending
on the number of days that a receivable is past due. On first-time adoption, the
amended measurement method results in an increase in loss allowances of around
€ 0.5 million. These amounts are recognized in retained earnings. The increase in the
loss allowance results from the requirement to recognize loss allowances for non-im-
paired financial assets.
With regard to hedge accounting, the standard extends the designation options and
introduces a requirement to implement more complex accounting logic. Furthermore,
IFRS 9 eliminates the quantitative thresholds for effectiveness testing. In particular,
reclassification practice will change under IFRS 9. The more substantial the exchange
rate fluctuations, the higher the compensating effect of hedges on operating
profit/loss. As this will continue to apply under IFRS 9, we do not expect our operating
profit/loss from hedges to change significantly compared to the current accounting
treatment. No first-time adoption effects will result from these hedges as the new re-
gulations for hedges are applied prospectively with currency forwards.
This will also lead to significantly more extensive disclosures in the notes.
IFRS 15 – Revenue from Contracts with Customers IFRS 15 updates the accounting treatment of revenue recognition. For certain types of
contracts, the RENK Group expects sales revenues to be recognized later than under
current accounting, particularly if the transaction price is divided among several per-
formance obligations. “Other provisions” and “Other liabilities” will be adjusted in line
with this. Total sales revenue is unlikely to change, or will only change insignificantly,
as a result of IFRS 15.
In addition, there will be changes in the statement of financial position as the RENK
Group will group prepayments received and other deferred items relating to sales re-
venue under IFRS 15 and report these under the new item “Contractual liability” in the
future. The amount reported in the statement of financial position will increase be-
tween ten and fifteen million as a result of the accounting for prepayments that are
unconditional but that have not yet paid by the customer in the form of cash. This will
also lead to significantly more extensive disclosures in the notes.
The RENK Group uses the modified retrospective transition approach, under which the
cumulative effects are recognized in the opening statement of financial position for
2018. It is assumed that this will have no effect on retained earnings.
RENK Group Annual Report 2017 119
IFRS 16 – Leases IFRS 16 amends the requirements for accounting for leases. The central objective of
IFRS 16 is the recognition of all leases in the statement of financial position. Accor-
dingly, lessees will no longer distinguish between finance and operating leases. In-
stead, they must recognize a right of use and a lease liability for all leases in their
statement of financial position in the future. Exceptions only apply for short-term and
low-value leases. During the term of the lease, the right of use must be amortized and
the lease liability must be carried forward using the effective interest method and ta-
king lease payments into account. New lessee accounting will generally lead to higher
noncurrent assets and noncurrent liabilities. In the income statement, a reduction in
operating profit and an increase in financial result are expected. This will also lead to
significantly more extensive disclosures in the notes. Lessor accounting is essentially
the same as the current requirements of IAS 17. Lessors must continue to distinguish
between finance and operating leases in the future on the basis of the distribution of
the risks and opportunities from the asset. The impact of IFRS 16 on the consolidated
financial statements is currently being examined.
120
Notes to the Consolidated Income Statement
(6) Sales revenue
€ thousand 2017 2016
Germany 146,866 200,193
Other EU countries 153,519 109,769
Other European countries 30,048 28,239
Asia 73,883 92,796
Americas 56,684 59,404
Africa 3,644 3,002
Australia and Oceania 4,762 2,464
469,406 495,867
Sales revenue from customer-specific construction contracts amounted to
€ 21,813 thousand (previous year: € 35,888 thousand).
(7) Other operating income
€ thousand 2017 2016
Income from reversal of provisions 10,544 11,171
Income from currency translation differences and derivatives 1,130 1,724
Prior-period income 543 1,079
Income from asset disposals 115 204
Income from reversal of bad debt allowances on receivables and receivables written off 69 119
Income from penalties 4 12
Other income 975 809
13,380 15,118
Please see “Other noncurrent and current provisions” for information on income from
the reversal of provisions.
Income from currency translation differences includes gains from exchange rate
changes between the origination and payment date of receivables and liabilities in for-
eign currency and price gains from measurement at the closing date. The resulting ex-
change rate losses are reported in other operating expenses.
RENK Group Annual Report 2017 121
(8) Other operating expenses
€ thousand 2017 2016
Expenses from currency translation differences and derivatives 1,428 3,163
Addition to miscellaneous other provisions 675 1,168
Surety and bank fees 598 642
Bad debt allowances on receivables and other assets and write-off of bad debts 153 1,264
Personnel expenses 98 5,386
Losses on asset disposals 97 434
Allocated costs – 792
Other expenses 911 601
3,960 13,450
Personnel expenses had included the addition to other provisions for capacity adjust-
ments in Standard Gear Units in the previous year.
Other operating expenses comprise the expenses not allocated to functional ex-
penses, in particular the cost of sales.
The changes in the expense from derivatives essentially result from changes in US do-
llar exchange rates between the transaction rate and the rate at the realization date.
(9) Interest expense and other financial result
Interest expense
€ thousand 2017 2016
Interest cost on provisions and liabilities 224 312
Interest and similar expenses 238 176
Interest expense 462 488
The effect of changes in the discount rate for liabilities and other provisions resulted
in an expense of € 59 thousand in fiscal year 2017 (previous year: € 73 thousand) and is
included in interest expense.
122
Other financial result
€ thousand 2017 2016
Income
Income from equity investments 1,217 1,660
Other interest and similar income 352 113
Income from the fair value measurement of derivatives 798 1,050
Expenses
Expenses from equity investments – (1,847)
Expenses from measurement effects and write-downs of financial instruments (748) (3,034)
Other financial result 1,619 (2,058)
€ 56 thousand (previous year: € 48 thousand) of interest income results from financial
transactions with MAN SE. Exchange rate hedges invoiced in the reporting period and
the measurement of amounts in foreign currencies resulted in income of € 50 thou-
sand as against expenses of € 1,984 thousand reported in the previous year, which
played a key role in the development of the “Other financial result”.
(10) Income tax expense
€ thousand 2017 2016
Current taxes
Germany 14,153 17,361
Outside Germany 998 1,707
Deferred taxes
Germany 2,115 1,062
Outside Germany 1,110 213
18,376 20,343
The tax expense forecast for fiscal year 2017 results from applying the domestic tax
rate of 32.01% (unchanged year-on-year) for the 2017 assessment period to the profit
before tax. This tax rate still takes into account German municipal trade tax of 16.19%
and German corporate income tax of 15.0% and the solidarity surcharge of 5.5% of cor-
porate income tax, both of which were unchanged as against the previous year.
RENK Group Annual Report 2017 123
Reconciliation of forecast to current income taxes:
€ thousand 2017 % 2016 %
Profit before taxes 61,204 100 64,565 100
Forecast tax expense 19,591 32.0 20,667 32.0
Difference due to changes in tax rates 79 0.1 118 0.2
Tax-exempt income (916) (1.5) (1,670) (2.6)
Non-deductible expenses 214 0.3 840 1.3
Taxes for previous years and other (592) (1.0) 388 0.6
Current tax expense 18,376 30.0 20,343 31.5
The current tax expense includes a prior-period income tax expense of € 1,331 thou-
sand (previous year: € 497 thousand).
Deferred taxes are attributable to the following items:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Deferred tax assets
Intangible assets 17 37
Property, plant and equipment 122 –
Other equity investments and financial investments – 4
Inventories 14,556 11,124
Receivables and other assets 4 15
Pensions and similar obligations 14,305 13,784
Liabilities and other provisions 3,892 4,847
Loss carryforwards 2 145
Impairment losses on deferred tax assets – –
Gross amount 32,900 29,956
of which noncurrent 14,325 13,970
Offset (26,248) (20,697)
Consolidation 1,000 1,240
Carrying amount in statement of financial position 7,652 10,498
124
€ thousand Dec. 31, 2017 Dec. 31, 2016
Deferred tax liabilities
Intangible assets 9 1
Property, plant and equipment 11,399 10,251
Inventories 56 55
Receivables and other assets 3,753 4,428
Pensions and similar obligations – –
Liabilities and other provisions 15,566 9,272
Gross amount 30,784 24,006
of which noncurrent 11,408 10,252
Offset (26,248) (20,697)
Consolidation 203 121
Carrying amount in statement of financial position 4,739 3,429
In connection with investments in subsidiaries there are temporary differences for
which no deferred taxes were recognized in the amount of € 295 thousand (previous
year: € 386 thousand).
(11) Earnings per share
2017 2016
Profit after tax in € thousand 42,828 44,222
Weighted average shares outstanding (in thousands) 6,800 6,800
Earnings per share in € 6.30 6.50
In accordance with IAS 33, earnings per share are calculated from the consolidated
profit after tax and the average number of shares outstanding in the year. There were
no instruments as of either December 31, 2017 or December 31, 2016 that would dilute
earnings per share.
(12) Other income statement disclosures
The cost of materials is as follows:
€ thousand 2017 2016
Cost of raw materials, consumables and supplies, and of purchased merchandise 169,736 161,285
Cost of purchased services 49,940 17,984
219,676 179,269
The cost of sales includes research and development costs of € 14,098 thousand (previ-
ous year: € 11,316 thousand).
RENK Group Annual Report 2017 125
Staff costs break down as follows:
€ thousand 2017 2016
Wages and salaries 142,854 146,426
Social security and post-employment expenses 30,625 28,405
173,479 174,831
RENK employed 2,112 people (previous year: 2,104) on average over the year. Of these,
1,210 (previous year: 1,225) worked directly and 902 (previous year: 879) indirectly in
production. There were 37 employees in the non-active phase of early retirement (pre-
vious year: 33). On average, 107 people (previous year: 115) were in vocational training.
Lease expenses amount to:
€ thousand 2017 2016
Rental and lease expenses 2,049 2,186
2,049 2,186
126
(13) Total remuneration for work by the auditor
In the year under review, the Supervisory Board proposed PricewaterhouseCoopers
GmbH Wirtschaftsprüfungsgesellschaft, Munich, (PwC) as the auditor; the Annual
General Meeting endorsed this proposal on April 26, 2017.
The table below shows the fees charged for the work of the auditor PwC and the com-
panies of the international PwC network in fiscal year 2017 and 2016:
€ thousand 2017 2016
Audit of the financial statements 202 189
Other assurance services 44 20
Tax advisory services 2 2
Other services – –
Auditor remuneration 247 211
The fees charged for work by the German auditor PwC and its affiliated German com-
panies in fiscal year 2017 totaled € 219 thousand (previous year: € 179 thousand).
€ 175 thousand (previous year: € 159 thousand) of this related to the audit of the finan-
cial statements and € 44 thousand (previous year: € 20 thousand) to other assurance
services.
Audit services comprise the audit of the consolidated and single-entity financial state-
ments of RENK AG and its subsidiaries. Other assurance services essentially include
certificates for ERP system changes.
RENK Group Annual Report 2017 127
Notes to the Consolidated Statement of Financial Position
(14) Intangible assets
€ thousand Licenses,
software
and similar
rights
Other
intangible
assets
Total
Gross carrying amount on Jan. 1, 2016 14,188 5,865 20,053
Cumulative depreciation/amortization and impairment losses (12,709) (5,865) (18,574)
As of Jan. 1, 2016 1,479 0 1,479
Additions 764 – 764
Reclassifications 45 – 45
Disposals (393) – (393)
Depreciation/amortization (907) – (907)
Cumulative depreciation/amortization on disposals 368 – 368
Currency adjustment – – –
As of Dec. 31, 2016 1,356 0 1,356
Gross carrying amount on Jan. 1, 2017 14,648 5,912 20,560
Cumulative depreciation/amortization and impairment losses (13,292) (5,912) (19,204)
As of Jan. 1, 2017 1,356 0 1,356
Additions 1,129 – 1,129
Reclassifications 55 – 55
Disposals (840) – (840)
Depreciation/amortization (863) – (863)
Cumulative depreciation/amortization on disposals 832 – 832
Currency adjustment (12) – (12)
As of Dec. 31, 2017 1,657 0 1,657
Gross carrying amount on Dec. 31, 2017 14,550 5,435 19,985
Cumulative depreciation/amortization and impairment losses (12,893) (5,435) (18,328)
Amortization of intangible assets is included in the functional expenses, in the cost of
sales in particular.
128
(15) Property, plant and equipment
€ thousand Land and
buildings
Technical
equipment
and
machinery
Other
equipment,
operating
and office
equipment
Prepay-
ments and
assets under
construction
Total
Gross carrying amount on Jan. 1, 2016 102,471 194,356 49,868 30,898 377,593
Cumulative depreciation/amortization and impairment losses (40,177) (105,559) (38,278) – (184,014)
As of Jan. 1, 2016 62,294 88,797 11,590 30,898 193,579
Additions 4,959 8,050 2,803 7,944 23,756
Reclassifications 6,197 21,641 1,609 (29,492) (45)
Disposals (1,561) (4,269) (16,845) – (22,675)
Depreciation/amortization (2,616) (11,969) (3,225) – (17,810)
Impairment losses – (579) – – (579)
Cumulative depreciation/amortization on disposals 1,206 3,911 16,741 – 21,858
Currency adjustment 78 21 9 31 139
As of Dec. 31, 2016 70,557 105,603 12,682 9,381 198,223
Gross carrying amount on Jan. 1, 2017 112,182 219,900 37,455 9,381 378,918
Cumulative depreciation/amortization and impairment losses (41,625) (114,297) (24,773) – (180,695)
As of Jan. 1, 2017 70,557 105,603 12,682 9,381 198,223
Additions 615 3,752 6,998 6,241 17,606
Reclassifications – 4,002 78 (4,135) (55)
Disposals – (2,847) (1,269) – (4,116)
Depreciation/amortization (2,595) (11,715) (3,752) – (18,062)
Cumulative depreciation/amortization on disposals – 2,714 951 – 3,665
Currency adjustment (319) (203) (45) (8) (575)
As of Dec. 31, 2017 68,258 101,306 15,643 11,479 196,686
Gross carrying amount on Dec. 31, 2017 112,339 223,665 43,130 11,479 390,613
Cumulative depreciation/amortization and impairment losses (44,081) (122,360) (27,486) – (193,927)
Depreciation on property, plant and equipment is included in the functional expenses,
in the cost of sales in particular.
RENK Group Annual Report 2017 129
Leased assets were tested for impairment as part of the regular inventory of property,
plant and equipment. There were no impairment losses on property, plant and equip-
ment in the reporting period. An impairment loss on technical equipment and ma-
chinery was recognized in the Slide Bearings segment in the amount of € 579 thou-
sand in the previous year. The recoverable amount, which is the same as the value in
use, was € 719 thousand as of the date of the impairment test.
(16) Other equity investments and financial investments
The equity investments in Renk Gears Private Ltd., Bangalore/India, Renk Korea Co.,
Ltd., Busan/South Korea, and Damen Schelde Gears B.V., Vlissingen/Netherlands, which
were acquired in the fiscal year 2017, are reported at a cost of € 5,392 thousand.
An impairment loss of € 1,847 thousand was identified in intra-year testing at RENK
Shanghai Services Commercial Co. Ltd, Shanghai, China (RSH) in the previous year.
This was included in the Group’s “Other financial result” for 2016.
(17) Inventories
€ thousand Dec. 31, 2017 Dec. 31, 2016
Raw materials, consumables and supplies 26,371 27,729
Finished goods and work in progress 153,393 149,997
Prepayments for inventories 739 4,360
180,503 182,086
Consumption of inventories of € 294 million (previous year: € 312 million) was recog-
nized in the cost of sales in the reporting period.
Write-downs on inventories of € 2,415 thousand were recognized in fiscal year 2017
(previous year: € 4,070 thousand).
(18) Trade receivables
€ thousand Dec. 31, 2017 Dec. 31, 2016
Customer receivables 73,636 69,684
Receivables from affiliated companies 6,665 4,744
Receivables from customer-specific construction contracts (PoC receivables)1) 7,582 11,895
87,883 86,323
1) Of which receivables from affiliated companies of € 138 thousand (previous year: € 835 thousand)
In line with the operating cycle, all trade receivables are reported as current.
130
PoC receivables are calculated as follows:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Production costs and pro rata receivables from customer-specific construction contracts 61,479 52,567
Used prepayments received (53,897) (40,672)
7,582 11,895
Specific valuation allowances on trade receivables developed as follows:
€ thousand 2017 2016
As of Jan. 1 613 209
Addition 20 430
Utilization (344) (1)
Reversal (31) (26)
Currency translation differences (14) 1
As of Dec. 31 244 613
In fiscal year 2017, there were specific valuation allowances on receivables with a gross
carrying amount of € 118 thousand (previous year: € 612 thousand).
Portfolio-based allowances on trade receivables developed as follows:
€ thousand 2017 2016
As of Jan. 1 651 669
Addition 87 71
Reversal (42) (90)
Currency translation differences (4) 1
As of Dec. 31 692 651
RENK Group Annual Report 2017 131
(19) Other noncurrent and current assets and receivables
€ thousand Dec. 31, 2017 Dec. 31, 2016
Other tax assets 2,500 1,815
Commission claims 1,539 922
Prepaid expenses 788 405
Derivative financial instruments 796 153
Miscellaneous other assets 781 992
6,404 4,287
Other assets break down as follows according to maturity:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Other noncurrent assets and receivables 158 45
Other current assets and receivables 6,246 4,242
6,404 4,287
Derivative financial instruments are carried at fair value. They are used to hedge cur-
rency risks on customer orders and other foreign exchange positions.
(20) Cash and cash equivalents
€ thousand Dec. 31, 2017 Dec. 31, 2016
Bank balances, cheques, cash in hand 263 810
Receivables from financial transactions with MAN SE 198,290 213,147
198,553 213,957
Receivables from financial transactions with MAN SE essentially result from the cen-
tral cash pooling of the MAN Group and from highly liquid investments at MAN SE.
These investments are of a temporary nature and are only subject to insignificant risks
of fluctuations in value.
(21) Equity
The share capital of RENK AG of € 17,920,000 is divided into 7 million no-par value
shares with equal rights. All shares are fully paid up. In the year under review, MAN SE,
Munich, held 76% of the subscribed capital of RENK AG.
132
A total of 199,903 treasury shares or 2.86% of the share capital (share of capital: € 512
thousand) were held by the company on December 31, 2017. The capital reserves relate
exclusively to share premiums in the context of capital increases by RENK AG. The ac-
cumulated other comprehensive income predominantly results from the fair value
measurement of provisions for pension obligations.
In accordance with the provisions of the German Stock Corporation Act, the net re-
tained profits of the Group parent RENK AG are available for distributions. The net re-
tained profits of RENK AG amount to € 26,738 thousand as of December 31, 2017. The
Executive Board and the Supervisory Board propose to the Annual General Meeting on
April 27, 2018 the distribution of a dividend for fiscal 2017 unchanged as against the
previous year of € 2.20 per share. With 7,000,000 no-par value shares less the treasury
shares without dividend rights in accordance with section 71b of the Aktiengesetz
(AktG – German Stock Corporation Act) (199,903 shares), this corresponds to an
amount of € 14,960,213.40. Shareholders’ entitlement to the dividend arises only with
the resolution by the Annual General Meeting.
The most important goals of capital management at RENK are sustainably increasing
enterprise value and safeguarding the liquidity and creditworthiness of the Group.
Factors contributing to this are the reduction of the cost of capital, the optimization of
the capital structure and effective risk management.
RENK AG is not subject to any capital requirements on the basis of its Articles of Asso-
ciation.
(22) Pensions and similar obligations
The RENK Group grants its employees retirement benefits in accordance with the
country-specific circumstances in the form of defined benefit or defined contribution
pension plans.
In defined contribution plans, contributions are paid to state or private pension funds
on the basis of legal or contractual regulations. There are no further payment obliga-
tions other than the payment of contributions.
The expenses for pensions amounted to € 16,620 thousand (previous year:
€ 14,647 thousand). These are included in the respective functional costs. The net inter-
est expense from additions to provisions for pension obligations is reported in inter-
est expense.
Current contributions are recognized as an expense in the respective year; in 2017
they amounted to a total of € 10,971 thousand (previous year: € 11,151 thousand) in the
RENK Group. These were paid in full in Germany (previous year: € 10,693 thousand) as
a contribution to the statutory pension system.
RENK Group Annual Report 2017 133
The following amounts were recognized in the statement of financial position for de-
fined benefit pension plans:
€ thousand 2017 2016
Present value of externally financed obligations 157,261 157,883
Plan assets at fair value (147,266) (143,245)
Funding status on December 31 9,994 14,638
Present value of unfunded obligations 480 435
Surplus in accordance with IAS 19.64 31 35
Carrying amount on December 31 10,505 15,108
of which provisions for pension obligations 10,505 15,108
(a) Pension plans in Germany
As one of the essential elements of its remuneration policy, the RENK Group provides
its domestic employees with benefits under a modern and attractive occupational
pension system for the time after their active working life. This provides reliable addi-
tional income on retirement and risk protection for disability and death.
Under the current pension plans, the active employees receive employer contribu-
tions linked to their remuneration and, in addition, also have the option of personal
provision through deferred compensation (paid for by the employer for employees
subject to collective bargaining agreements). When actively working, employees ac-
crue pension capital from employer- and employee-financed contributions and re-
turns from investment on the capital market. On retirement this pension capital is
paid out as a lump sum or in installments, or in certain cases can be converted into an
annuity. Employees’ investment risks are gradually reduced with increasing age (lifecy-
cle concept). The performance of the pension capital is derived from the return on the
investments. As required by law, at least the total contributions paid for the employee
will be paid out on retirement.
Former employees, pensioners or employees who have left the plan with vested bene-
fits have pension commitments from closed pension funds, which are predominantly
geared towards providing lifetime annuity payments. These commitments entail the
usual longevity and inflation risks, which are regularly monitored and evaluated.
The domestic pension assets of the RENK Group are managed by the MAN Pension
Trust e.V. and MAN Pensionsfonds AG. These assets are irrevocably unavailable to the
RENK companies and must be used exclusively to fund current pension payments or
for employee claims in the event of insolvency. The proper management and use of
trust assets is monitored by independent trustees. MAN Pensionsfonds AG is also sub-
ject to the supervision of the German Federal Financial Supervisory Authority (BaFin).
The pension assets are invested by professional investment managers according to in-
vestment guidelines set by an Investment Committee. The strategic allocation of plan
assets is based on asset liability management studies conducted at regular intervals.
134
(b) Pension plans outside Germany
In Switzerland, the defined benefit pension claims and the actuarial reserves are ma-
naged in an industry-wide company pension institution. Employees accrue pension
capital with this institution, which is then converted into a lifelong pension under the
conditions prevailing at the time. The pension institution is managed conservatively
based on government regulations. If the claims are no longer covered by capital due to
negative market developments, restructuring contributions can be levied from the
affiliated employers and their employees.
Obligatory post-employment benefits are paid in France.
(c) Funding status
The calculation of the present value of defined benefit pension obligations is based on
the following assumptions:
in % Germany Outside Germany1)
2017 2016 2017 2016
Discount rate as of Dec. 31 1.60 1.60 0.73 0.73
Salary trend 3.60 3.20 1.02 1.02
Pension trend 1.50 1.50 – –
Fluctuation rate 4.39 4.42 7.73 7.12
1) Weighted average rates
The Heubeck 2005 G mortality tables adapted to empirical MAN-specific data were
used as the biometric data in Germany; the BVG 2015 GT mortality tables were used in
Switzerland.
Discount rates are based on the yields on corporate bonds with high credit ratings,
with a maturity and currency matching the respective obligations. Pension and pay
trends either correspond to contractual adjustments or are based on those found in
the general regulations applicable. Pay trends comprise expected wage and salary in-
creases that also take into account increases resulting from career development.
RENK Group Annual Report 2017 135
The present value of defined benefit obligations developed as follows:
€ thousand 2017 2016
Defined benefit obligation on January 1 158,318 143,316
Current service cost1) 4,945 2,462
Interest expense 2,204 3,243
Actuarial gains (-)/losses (+) due to changes in demographic assumptions 1,450 131
Actuarial gains (-)/losses (+) due to changes in financial assumptions 35 11,303
Actuarial gains (-)/losses (+) due to experience adjustments 487 441
Employee contributions to funds 1,271 1,343
Pension payments from company assets (3,397) (1,022)
Pension payments from fund (5,007) (3,155)
Other changes 21 14
Currency differences from plans abroad (2,588) 243
Defined benefit obligation on December 31 157,740 158,318
1) Including past service cost of € -2,421 thousand in the previous year.
Changes in the main actuarial assumptions would have had the following effects on
defined benefit obligations:
Dec. 31, 2017 Dec. 31, 2016
Defined benefit obligation
if
€
thousand
% €
thousand
%
Discount rate +0.5 percentage
points 149,772 (5.3) 150,065 (5.5)
(0.5) percentage
points 166,717 5.4 167,634 5.6
Salary trend +0.5 percentage
points 158,070 0.2 158,666 0.2
(0.5) percentage
points 157,462 (0.2) 158,013 (0.2)
Pension trend +0.5 percentage
points 164,278 4.0 164,450 3.7
(0.5) percentage
points 151,757 (3.9) 152,663 (3.7)
Longevity + 1 year 160,815 1.9 161,412 1.9
The sensitivity analyses shown each take into account the change in one assumption
with the other assumptions unchanged from the original calculation, i.e. possible co-
rrelation effects between the individual assumptions are not taken into account.
136
To analyze the sensitivity of the defined benefit obligation to a change in the assumed
life expectancy, the age of beneficiaries was increased by one year as part of a compa-
rative calculation.
As in the previous year, the weighted average term to maturity (Macaulay duration) of
the defined benefit pension obligations is eleven years.
The defined benefit obligation is divided among the members of the plan as follows:
€ thousand 2017 2016
Active members 88,617 88,267
Former members 6,339 8,179
Beneficiaries 62,784 61,872
Defined benefit obligation 157,740 158,318
The maturity profile of the payments for the defined benefit obligation is shown be-
low by breaking down the present value of the obligation by the maturity of the un-
derlying payments:
€ thousand 2017 2016
Payment due
Within one year 6,526 6,458
Between one and five years 25,447 26,713
More than five years 125,767 125,147
Defined benefit obligation 157,740 158,318
The development of plan assets is shown by the table below:
€ thousand 2017 2016
Plan assets on January 1 143,245 127,274
Interest income from plan assets – in amount of interest rate 2,039 3,004
Return on plan assets not recognized in interest income 7,734 7,721
Employer contributions to funds 1,006 7,536
Employee contributions to funds 600 614
Pension payments from fund (5,007) (3,155)
Other changes 21 14
Currency differences from plans abroad (2,372) 237
Plan assets on December 31 147,266 143,245
RENK Group Annual Report 2017 137
The investment of plan assets resulted in income of € 9,773 thousand (previous year:
€ 10,725 thousand), € 8,457 thousand (previous year: € 9,444 thousand) of which re-
lated to Germany and € 1,316 thousand (previous year: € 1,282 thousand) of which to
other countries.
In the next fiscal year employer contributions to plan assets are expected to amount
to € 4,028 thousand (amount stated in previous year: € 3,998 thousand).
The plan assets are invested in the following categories:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Quoted
price on
an active
market
No
quoted
price on
an active
market
Total Quoted
price on
an active
market
No
quoted
price on
an active
market
Total
Cash and cash equivalents 5,624 – 5,624 7,422 – 7,422
Equity instruments 6,187 – 6,187 6,655 – 6,655
Debt instruments 10,147 – 10,147 10,925 – 10,925
Direct investments in real estate – 6,383 6,383 – 6,566 6,566
Equity funds 29,282 – 29,282 24,191 – 24,191
Pension funds 48,849 – 48,849 50,493 – 50,493
Real estate funds 5,336 – 5,336 3,516 0 3,516
Other funds – 1,310 1,310 – 1,256 1,256
Other 2,688 31,462 34,149 1,643 30,579 32,222
Plan assets at fair value 108,111 39,155 147,266 104,844 38,401 143,245
The plan assets are 29% (previous year: 30%) invested in domestic assets, 52% (previ-
ous year: 52%) in other European assets and 19% (previous year: 18%) in assets from
other regions.
(d) Expenses for pension obligations
The following amounts were recognized in the income statement:
€ thousand 2017 2016
Current service cost 1) 4,945 2,462
Net interest expense (+)/income (-) 165 239
5,110 2,701
1) Including past service cost of € -2,421 thousand in the previous year.
138
(23) Other noncurrent and current provisions
€ thousand As of Jan.
1,2017
Utilization Addition Reversal Interest
cost
Other1) As of Dec.
31, 2017
Warranties 38,241 (4,758) 7,484 (8,782) – (81) 32,105
Outstanding costs 6,350 (1,296) 3,013 (871) – 2 7,199
Obligations to employees 10,122 (1,545) 1,676 (826) 55 (10) 9,472
Miscellaneous other provisions 7,760 (1,686) 2,504 (67) – (317) 8,194
62,473 (9,284) 14,676 (10,544) 55 (406) 56,969
1) Including currency translation differences
Other provisions break down as follows according to maturity:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Noncurrent Current Noncurrent Current
Warranties 2,102 30,003 1,521 36,720
Outstanding costs – 7,199 – 6,350
Obligations to employees 5,095 4,376 4,599 5,523
Miscellaneous other provisions 855 7,339 930 6,830
8,052 48,917 7,050 55,423
Provisions for warranties relate to legal and contractual warranty obligations and to
goodwill towards customers. The timing of the utilization of provisions for warranties
is dependent on the occurrence of the warranty claim and can extend over the entire
warranty and goodwill period. In particular, the reversal of the provision for warran-
ties also includes the amicable settlement of the arbitration proceedings with a Special
Gear Units customer. Provisions for outstanding costs were recognized for outstan-
ding services for invoiced customer contracts, contract components and obligations
under maintenance and service agreements.
Noncurrent obligations to employees relate in particular to partial retirement and an-
niversaries. Current obligations to employees primarily relate to planned expenditure
for staff restructuring measures in the Standard Gear Units segment.
Miscellaneous other provisions essentially relate to provisions for anticipated losses
from onerous contracts and penalties.
RENK Group Annual Report 2017 139
(24) Trade payables
€ thousand Dec. 31, 2017 Dec. 31, 2016
Trade payables 34,635 36,447
There are trade payables to affiliated companies of € 1,041 thousand (previous year:
€ 570 thousand).
(25) Prepayments received
€ thousand Dec. 31, 2017 Dec. 31, 2016
Prepayments received, noncurrent 70,606 96,366
Prepayments received, current 71,055 71,230
Prepayments received 141,661 167,596
Prepayments received from affiliated companies amounted to € 701 thousand (previ-
ous year: € 1,860 thousand). Prepayments received but not yet used of € 717 thousand
(previous year: € 3,044 thousand) relate to customer-specific construction contracts;
this figure includes no prepayments from affiliated companies in the fiscal year (previ-
ous year: € 771 thousand). Please see “Principles of Financial Reporting” for details of
the adjustment of prior-year information.
(26) Other noncurrent and current liabilities
€ thousand Dec. 31, 2017 Dec. 31, 2016
Employee-related liabilities 26,616 28,453
Social security liabilities 982 1,014
Liabilities from other taxes 415 134
Derivative financial instruments 43 1,706
Miscellaneous other liabilities 1,190 678
29,246 31,985
Employee-related liabilities mainly include wages, salaries and social security contri-
butions not yet paid at the end of the reporting period, deferred vacation not yet
taken and annual bonuses.
The liability derivative financial instruments included in other liabilities are mostly
used to hedge currency risks in customer contracts.
140
Other liabilities break down as follows according to maturity:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Other noncurrent liabilities 76 396
Other current liabilities 29,170 31,589
29,246 31,985
RENK Group Annual Report 2017 141
Other Disclosures
(27) Contingent liabilities
€ thousand Dec. 31, 2017 Dec. 31, 2016
Repayment obligations 14 12
14 12
With regard to the liabilities of RENK subsidiaries from their business relationship
with MAN SE, RENK AG has issued MAN SE a perpetual payment guarantee that is un-
likely to be utilized in light of the comfortable liquidity position.
Contingent liabilities are usually measured in the amount of the maximum claims on
RENK. Any rights of recourse are not deducted.
(28) Other financial obligations
Other financial obligations comprise rental and lease agreements. These are mainly
building rentals and vehicle leases. The maturities of future rental and lease payments
until the end of their minimum term are as follows:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Due within one year 1,521 1,680
Due between one and five years 3,406 4,043
Due after more than five years 1,726 1,684
6,653 7,407
The purchase commitment for the acquisition of intangible assets and property, plant
and equipment was € 2,666 thousand as of the end of the reporting period (previous
year: € 3,076 thousand). The commitment value for the acquisition of inventories and
services was € 88,202 thousand (previous year: € 84,114 thousand). The financial obli-
gations to third parties under investment projects initiated were within normal limits.
142
(29) Additional information on financial instruments
This section contains additional information on the significance of financial instru-
ments and on individual items of the statement of financial position and the income
statement that relate to financial instruments.
The following table shows the reconciliation of statement of financial position items
to the classes of financial instruments as of December 31, 2017, broken down by carry-
ing amounts and fair values of financial instruments, and the allocation of statement
of financial position items to the measurement categories.
€ thousand At fair value
In other
comprehen
sive
income1)
In profit or
loss2)
At amortized cost3) Hedging
derivative
financial
instruments
Not covered
by IFRS 7
Statement of
financial
position item
as of
Dec. 31,
2017
Carrying
amount
Carrying
amount
Carrying
amount
Fair
value
Carrying
amount
Carrying
amount
Noncurrent assets
Other and financial investments 774 – – – – 8,305 9,079
Other financial assets – 10 7 7 109 – 126
Current assets
Trade receivables – – 87,883 87,883 – – 87,883
Other financial assets – 490 2,188 2,188 188 – 2,866
Cash and cash equivalents – – 198,553 198,553 – – 198,553
Noncurrent liabilities
Other financial liabilities – – – – – – –
Current liabilities
Trade payables – – 34,635 34,635 – – 34,635
Other financial liabilities – 43 1,132 1,132 – – 1,175
1) Corresponds to the measurement category “Available for sale financial assets” under IAS 39. 2) Corresponds to the measurement category “Financial instruments measured at fair value through profit or loss”
under IAS 39. 3) Includes the measurement categories “Loans and receivables” and “Financial liabilities at amortized cost”.
RENK Group Annual Report 2017 143
The following table shows the carrying amounts, the measurement categories by class,
the fair values and the fair value hierarchy under IFRS 7 as of December 31, 2016:
€ thousand At fair value
In other
comprehensi
ve income1)
In profit or
loss2)
At amortized cost3) Hedging
derivative
financial
instruments
Not
covered
by IFRS 7
Statement
of financial
position
item
as of
Dec. 31,
2016
Carrying
amount
Carrying
amount
Carrying
amount
Fair
value
Carrying
amount
Carrying
amount
Noncurrent assets
Other and financial investments 774 – – – – 2,913 3,687
Other financial assets – – 8 8 – – 8
Current assets
Trade receivables – – 86,322 86,322 – – 86,322
Other financial assets – 153 1,762 1,762 – – 1,915
Cash and cash equivalents 213,957 213,957 213,957
Noncurrent liabilities
Other financial liabilities – 20 – – 275 – 295
Current liabilities
Trade payables – – 36,447 36,447 – – 36,447
Other financial liabilities – 585 629 629 827 – 2,040
1) Corresponds to the measurement category “Available for sale financial assets” under IAS 39. 2) Corresponds to the measurement category “Financial instruments measured at fair value through profit or loss”
under IAS 39. 3) Includes the measurement categories “Loans and receivables” and “Financial liabilities at amortized cost”.
144
The cumulative carrying amounts of financial instruments, broken down by IAS 39
measurement category, are as follows:
€ thousand Dec. 31, 2017 Dec. 31, 2016
Measurement category in accordance with IAS 39
Assets Equity and
liabilities
Assets Equity and
liabilities
Available-for-sale financial assets 774 – 774 –
Financial instruments measured at fair value through profit or loss 796 43 153 604
Loans and receivables 288,632 – 302,050 –
Financial liabilities at amortized cost – 35,767 – 37,076
The fair values were calculated based on the market conditions at the end of the re-
porting period and the measurement methods described below. They are the prices at
which one party would assume the rights or obligations from these financial instru-
ments from an independent third party. There were no significant changes since the
previous year in the measurement methods applied.
Cash and cash equivalents, trade receivables, other financial assets, trade payables and
miscellaneous financial liabilities predominantly have a short remaining term. Their
carrying amounts as of the end of the reporting period therefore approximately
match their fair value. Furthermore, appropriate impairment losses are recognized on
trade receivables when there is objective evidence.
Available-for-sale financial assets include equity shares of € 774 thousand (previous
year: € 774 thousand). These are measured at cost applying the practical expedient.
These are shares in unlisted companies for which the measurement by discounting of
forecast cash flows has been dispensed with given the lack of reliably determinable
cash flows. The shares of unlisted companies relate to companies for which there are
no quoted market values as there is no active market for these shares. There is cu-
rrently no intention to sell these shares.
The future cash flows for derivative financial instruments without option compo-
nents, particularly currency forwards, are calculated using forward curves. The fair
value of these instruments is the total of the discounted cash flows. The options on
currency pairs are measured on the basis of standard option pricing models, i.e. gene-
ralized Black-Scholes formulas.
RENK Group Annual Report 2017 145
Financial assets and liabilities measured at fair value and hedge derivative financial in-
struments are level 2 of the fair value hierarchy with the exception of other equity in-
vestments, which are level 3.
The following table provides an overview of the fair value of the financial assets and
liabilities at amortized cost by level:
€ thousand Dec. 31, 2017 Level 1 Level 2 Level 3
Noncurrent assets
Other financial assets 7 – 7 –
Current assets
Trade receivables 87,883 – 87,883 –
Other financial assets 2,188 – 2,188 –
Cash and cash equivalents 198,553 198,553 – –
Current liabilities
Trade payables 34,635 – 34,635 –
Other financial liabilities 1,132 – 1,132 –
€ thousand Dec. 31, 2016 Level 1 Level 2 Level 3
Noncurrent assets
Other financial assets 8 – 8 –
Current assets
Trade receivables 86,322 – 86,322 –
Other financial assets 1,762 – 1,762 –
Cash and cash equivalents 213,957 213,957 – –
Current liabilities
Trade payables 36,447 – 36,447 –
Other financial liabilities 629 – 629 –
146
Fair value hierarchy: The classification and reporting of the fair values of financial instruments are based
on a fair value hierarchy that reflects the significance of the inputs used for measure-
ment and breaks down as follows:
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 an asset
or liability either directly (as a price) or indirectly (derived from prices). The fair values
of level 2 financial instruments are calculated based on the conditions at the end of
the reporting period, such as interest rates or exchange rates, and using recognized
models, such as discounted cash flow models or option pricing models.
Level 3: Input data used for the measurement of the asset or liability not based on observable
market data (unobservable inputs). For level 3 receivables the fair value is determined
taking into account individual loss expectations that are essentially based on assump-
tions by the company regarding the counterparty’s credit.
In the fiscal years 2017 and 2016 there were no reclassifications between levels 1 and 2
and no reclassifications into or out of level 3.
The interest income and expenses generated in connection with financial assets and
financial liabilities are as follows:
€ thousand 2017 2016
Interest income 194 89
Interest expense (208) (137)
Interest income on impaired financial assets is of secondary importance due to the
usually short time before the expected payment.
The following tables contain information on the offsetting effects on the consolidated
statement of financial position and the financial impact of offsetting in the case of in-
struments which are subject to a legally enforceable master offsetting agreement or
similar agreement.
The “Financial instruments” column shows the amounts that are the subject of a mas-
ter offsetting agreement, but that cannot be offset because the conditions have not
been met. Offsetting can only occur given certain future events, such as the insolvency
of one of the parties. The columns “Collateral received” and “Collateral provided” show
the amounts of cash collateral or collateral in the form of financial instruments re-
ceived/pledged in relation to the total amount of assets and liabilities.
RENK Group Annual Report 2017 147
Financial assets
€ thousand
Carrying amount in
statement of financial
position
Amounts not offset in the statement of
financial position
Net amount of financial
assets
Financial
instruments
Collateral
received
Net amount on
Dec. 31, 2017
Derivative financial instruments 797 (43) – 753
€ thousand
Carrying amount in
statement of financial
position
Amounts not offset in the statement of
financial position
Net amount of financial
assets
Financial
instruments
Collateral
received
Net amount on
Dec. 31, 2016
Derivative financial instruments 153 (153) – 0
Financial liabilities
€ thousand
Carrying amount in
statement of financial
position
Amounts not offset in the statement of
financial position
Net amount of financial
liabilities
Financial
instruments
Collateral
provided
Net amount on
Dec. 31, 2017
Derivative financial instruments 43 (43) – 0
148
€ thousand
Carrying amount in
statement of financial
position
Amounts not offset in the statement of
financial position
Net amount of financial
liabilities
Financial
instruments
Collateral
provided
Net amount on
Dec. 31, 2016
Derivative financial instruments 1,704 (153) – 1,551
The net gains and losses from financial instruments are shown in the table below:
€ thousand 2017 2016
Loans and receivables (191) (4,435)
Available-for-sale financial assets 1,217 907
Financial liabilities at cost (1,095) (2,457)
Financial assets and liabilities at fair value through profit or loss 218 1,050
Net gain (+)/net loss (–) 149 (4,934)
Net gains and losses from loans and receivables primarily contain changes in valua-
tion allowances and currency translation and the reversal of impairment losses.
The net gains or losses from available-for-sale financial assets comprise the net in-
come from other and financial investments.
The net gains or losses from financial assets and liabilities measured at fair value
through profit or loss include changes in the fair value of derivative financial instru-
ments not used in hedge accounting.
The net gains or losses from financial liabilities at cost mainly result from currency
translation.
(30) Derivative financial instruments and hedging strategies
On account of its business activities and international orientation, the assets, liabili-
ties and planned transactions of the MAN Group are subject to market, credit and li-
quidity risks. There is a Group-wide risk management system to identify, quantify and
mitigate these risks. RENK is integrated into this risk management system and uses
the instruments thus available.
RENK Group Annual Report 2017 149
(a) Risk management of the MAN Group
The companies of the MAN Group hedge their currency risks at market conditions via
the central Group Treasury of MAN SE. This uses primary and predominantly deriva-
tive financial instruments. In countries where exchange control regulations or regula-
tory provisions do not allow MAN SE to hedge its risks, foreign currency interest and
money market transactions are entered into by MAN SE in the name and on behalf of
the respective Group company. Derivative financial instruments are recognized on the
trade date.
The risk positions of the Group are hedged externally with banks within predeter-
mined risk limits by Group Treasury. Hedging is carried out with due regard for banks’
risk management requirements and is subject to stringent monitoring, which is gua-
ranteed in particular by the strict separation of functions in trading, settlement and
control.
Liquidity management and investment in the MAN Group is centralized under Group-
wide cash management. When investing cash and cash equivalents, financial institu-
tions and investment vehicles are carefully selected and diversified with a limit sys-
tem. The limits and their utilization are reviewed regularly. The majority of cash and
cash equivalents are held in cash deposits at banks with an investment grade rating.
The Executive Board and the Supervisory Board of MAN SE are regularly informed
about the market price risks of the MAN Group. Compliance with policies is monitored
by the internal audit function.
(b) Currency risk at RENK
For each RENK company there is a currency risk if it performs transactions and incurs
future cash flows in a currency other than its functional currency. To reduce the effect
of exchange rate fluctuations, the RENK companies continuously quantify the ex-
change risk and hedge all material risks by using currency forwards and options.
In the RENK Group, all firm customer contracts, its own orders, receivables and liabili-
ties in foreign currency are hedged. Currencies with a high correlation to the euro,
such as the Danish krone, and equity investments or equity-type loans in foreign cu-
rrencies are hedged only in individual cases. In addition, there is hedging for planned
sales revenue in foreign currency from series production business within defined
hedging ranges and, occasionally, for customer projects whose materialization is
highly probable. The Executive Board of RENK is regularly informed of the currency
positions of the RENK Group.
As of the end of the reporting period, RENK’s foreign exchange exposure is primarily
from transactions in USD, CHF, JPY and CNY. Thanks to the currency forwards and op-
tions in place for these currencies, RENK was not exposed to any significant risks.
These hedges are accounted for as cash flow hedges in the RENK Group.
150
In connection with cash flow hedges, total unrealized gains and losses of € 1,397 thou-
sand (previous year: € 277 thousand) were recognized in equity for the measurement
of derivatives (before tax). Over the course of the fiscal year realized gains and losses
of € -511 thousand (previous year: € -840 thousand) were taken from equity to profit or
loss for the period.
The maximum remaining term of cash flow hedges for future transactions is 57
months as of the end of fiscal year 2017. The occurrence of and therefore recognition
in profit or loss for the period are expected for 28.6% of hedged future transactions in
the first quarter of 2018. A further 33.1% of the planned transactions are expected to go
ahead by the end of 2018.
In a sensitivity analysis, the primary and derivative financial instruments in place at
the end of the reporting period were measured in a hypothetical scenario. The effects
of a 10% appreciation/depreciation of a currency per currency pair as of December 31,
2017 and December 31, 2016 are as follows:
€ thousand Dec. 31, 2017
Equity Net profit/loss for the
period
Currency pair +10% (10)% +10% (10)%
Euro/US dollar 1,910 (1,910) 10 (10)
Euro/Swiss franc – – (1,628) 1,628
Euro/Chinese yuan – – 90 (90)
Euro/Pound sterling – – (33) 33
Euro/Japanese yen – – 72 (72)
Euro/Norwegian krone – – 4 (4)
Swiss franc/US dollar – – 50 (50)
€ thousand Dec. 31, 2016
Equity Net profit/loss for the
period
Currency pair +10% (10)% +10% (10)%
Euro/US dollar 2,902 (2,902) (458) 458
Euro/Swiss franc – – (957) 957
Euro/Chinese yuan – – 80 (80)
Euro/Pound sterling – – (45) 45
Euro/Japanese yen – – 303 (303)
Swiss franc/US dollar – – 20 (20)
RENK Group Annual Report 2017 151
(c) Commodity price risk at RENK
RENK is exposed to the risk of changes in commodity prices and their availability, i.e.
commodity procurement risk, both in connection with the procurement of the means
of production but also in the procurement of energy (electricity, gas, oil, etc.).
As far as possible, this risk is countered by fixed price agreements with suppliers.
Owing to the variety of commodities used and the resulting quantities, each compara-
tively small, the hedging of prices using corresponding instruments on the financial
markets is not a substantial alternative for RENK. RENK had no commodity derivatives
in fiscal year 2017.
There were no significant risk clusters in the past fiscal year.
(d) Credit risk at RENK
On account of its operating activities, RENK is exposed to credit risk, i.e. the risk that a
counterparty does not meet its contractual obligations and thus causes a financial
loss. Credit risks include direct counterparty risk and the risk of a deterioration in
credit quality.
The maximum credit risk is reflected by the carrying amounts of financial assets re-
ported in the statement of financial position. Credit risks are minimized, and risk pro-
visions calculated, mainly with the following measures:
Sovereign and counterparty risks arising from business operations are continuously
assessed locally. Security levels and forms are determined based on this. Outstanding
debts are also continuously monitored locally. If default risks arise, allowances are re-
cognized. Credit risk is limited by various, sometimes country-specific, forms of secu-
rity. Letters of credit, credit insurance, guarantees, warranties, retention of title and
customer prepayments are used. In project business, the risk of default is minimized
by prepayments and by obtaining collateral.
RENK recognizes appropriate risk provisions for credit risks in connection with its
business operations. This entails the ongoing monitoring of all receivables. Allo-
wances are recognized if there is objective evidence of default or other contractual
anomalies. Significant individual receivables and receivables whose collectibility is in
doubt are assessed on an individual basis. Taking into account country-specific risks
and any collateral received, other receivables are placed into groups of similar con-
tracts and impairment requirements are subsequently determined.
There were no significant clusters in terms of credit risk in the RENK Group in the past
fiscal year.
152
Maturities of financial assets not impaired:
€ thousand 2017 2016
up to 30 days past due 8,584 9,990
31–60 days 2,024 2,460
61–90 days 3,321 682
91-365 days 2,544 1,327
> 1 year 535 177
Assets, past due, not impaired 17,008 14,635
Assets, not past due, not impaired 74,908 74,110
Carrying amounts of financial assets not impaired 91,916 88,745
To cover the credit risk of these receivables and of receivables not past due, impair-
ment losses are recognized at group level based on historical experience.
Regarding the receivables and other financial assets that are neither impaired nor past
due, there are no indications of a default in payment as of the end of the reporting pe-
riod.
In line with the nature of RENK’s inclusion in the central financial management of the
MAN Group agreed with MAN SE, a significant portion of RENK’s financial assets is
concentrated on a single partner, MAN SE. This portion is therefore subject in princi-
ple to the same risks that MAN SE as a whole is exposed. These risks are limited by the
risk management mechanisms installed at MAN SE.
RENK Group Annual Report 2017 153
(e) Liquidity risk at RENK
Liquidity risk describes the risk that the RENK Group is unable to adequately meet its
payment obligations or can raise liquidity only at a higher price.
RENK is included in the liquidity management system of the MAN Group. To limit this
risk, inflows and outflows of cash and maturities are monitored and managed at all
times. Financing requirements are covered by both operating cash flow and external
financing. There were therefore no significant risk clusters in the past fiscal year.
Cash for the operating units is essentially managed centrally as part of cash pooling.
The cash and cash equivalents of the Group companies and MAN SE are merged daily.
Thus, liquidity surpluses and requirements can be managed as necessary. For external
financing, the opportunities on the financial markets are tracked continuously to en-
sure financial flexibility and to limit refinancing risks.
In certain countries (such as Brazil and China), the Group can only dispose over local
cash and cash equivalents internationally in compliance with the applicable foreign
exchange restrictions. Other than this there are no significant restrictions.
Cash and cash equivalents are essentially used to finance working capital and short-
term obligations. Management is informed regularly about cash inflows and outflows.
The cash flows at RENK are dominated by the maturities arising from business opera-
tions. These are predominantly of a short-term nature. Cash clearing takes place
through the inclusion in the central financial management of the MAN Group.
The following table shows how the cash flows of liabilities, derivative financial instru-
ments and contingent liabilities affect RENK’s liquidity situation:
154
Maturities1)
€ thousand Dec. 31, 2017 Dec. 31, 2016
2018 2019 to
2022
> 2022 2017 2018 to
2021
> 2021
Cash outflows from primary financial liabilities 35,767 – – 37,076 – –
of which trade payables 34,635 – – 36,447 – –
of which other financial liabilities 1,132 – – 629 – –
Cash outflows from liability derivative financial instruments and gross fulfillment2) (2,216) – – (24,306) (6,261) –
Associated cash inflows 2,138 – – 22,682 5,755 –
Potential cash outflows from contingent liabilities3) 14 – – 12 – –
of which for repayment obligations 14 – – 12 – –
1) The procedure for calculating the amounts was as follows: – If the maturity date is not fixed, the liability is assigned to the earliest maturity date. – Interest payments for floating rate interest are taken into account in line with the conditions as of the end of the reporting period. – It is assumed that the cash outflows will not occur earlier than shown.
2) In accordance with the requirements of IFRS 7, only undiscounted cash flows of the contractual interest and principal payments are shown.
3) There are guarantee obligations for guarantees under trade obligations. The maximum possible cash outflows are shown. The amounts are assumed to be due in the first year.
(f) Breakdown of hedging instruments by type of hedge
The table below shows the fair values of hedging instruments. These essentially relate
to currency forwards.
€ thousand Dec. 31, 2017 Dec. 31, 2016
with a
positive
market
value
with a
negative
market
value
with a
positive
market
value
with a
negative
market
value
Cash flow hedge 297 – – 1,102
297 – – 1,102
155RENK Group – Annual Report 2017
(31) Remuneration of the Executive Board
The remuneration of the members of the Executive Board of RENK Aktiengesellschaft
consists of fixed remuneration and variable remuneration (see remuneration report).
Furthermore, members of the Executive Board receive a pension commitment.
Total Executive Board remuneration in accordance with section 314(1) no. 6a HGB and
IFRS amounts to € 1,744 thousand in 2017 (previous year: € 1,664 thousand).
The tables below show the individual remuneration for the active members of the
Executive Board for 2017 (2016).
€ thousand Florian Hofbauer Christian Hammel Total
2017 2016 2017 2016 2017 2016
Fixed remuneration1) 286 271 281 279 567 550
Variable remuneration2) 519 479 462 449 981 928
Pension cost 101 95 95 91 196 186
Total 906 845 838 819 1,744 1,664
Present value of pension obligation 2,315 2,081 324 199 2,639 2,280
1) Non-performance-based remuneration component including additional benefits 2) Performance-based remuneration component: 2017 – according to figures currently available
Short-term employee benefits comprise fixed and variable remuneration. The pension
cost and the present value of the pension obligations are assigned to the accumulated
post-employment benefit obligation. There are no other long-term employee benefits,
termination benefits or share-based payments.
There was no subsequent adjustment of the bonus in variable remuneration in 2017 or
in the previous year.
The reported pension cost exclusively comprises the service cost incurred in the re-
spective fiscal year.
The pension benefits for former members of the Executive Board of the company and
their surviving dependents amounted to € 262 thousand (€ 259 thousand). Total provi-
sions of € 3,686 thousand were recognized for pension obligations to former members
of the Executive Board and their surviving dependents (previous year: € 6,162 thou-
sand).
Information on the members of the Executive Board, including their memberships of
other statutory supervisory boards and similar executive bodies, can be found in the
“Members of the Supervisory Board and the Executive Board and their mandates” sec-
tion.
156
(32) The Supervisory Board
The remuneration of the members of the Supervisory Board is regulated in the Arti-
cles of Association. They provide for fixed remuneration of € 10,000. The chair of the
Supervisory Board receives double the fixed remuneration, the deputy chair and the
chair of a committee one and a half times this amount, a committee member 1.25
times the amount. There is no separate remuneration for the chair or members of the
Mediation Committee. If members perform several functions, remuneration is based
on the function with the highest remuneration entitlement.
Any expenses arising are also reimbursed.
Remuneration of the Supervisory Board in €
Name Membership
period
Total
Dr. Ingrun-Ulla Bartölke Full year –
Roberto Armellini* Full year 15,000
Michael Behrendt Full year 15,000
Hardy Brennecke from April 26 –
Joachim Drees from April 26 7,591
Rainer Handschuh* Full year 12,500
Christiane Hesse Full year –
Frank Hoffmann Full year –
Thorsten Jablonski Full year –
Dr. Hans O. Jeske until April 26 3,222
Dr. Georg Pachta-Reyhofen until April 26 4,028
Herbert Surmann* Full year 12,500
Walter Vogt* Full year 12,500
Ingo Weidner* Full year 10,000
Total 2017 92,341
Total 2016 100,000
* These employee representatives have declared that they pay their Supervisory Board remuneration to the Hans Böckler Foundation in accordance with German Trade Union Confederation policy.
The employee representatives on the Supervisory Board also employed at RENK addi-
tionally receive their standard pay as employees. Information on the members of the
Supervisory Board, including their memberships of other statutory supervisory
boards and similar executive bodies, can be found in the corresponding section.
157RENK Group – Annual Report 2017
(33) German Corporate Governance Code
On December 5, 2017, the Executive Board and the Supervisory Board issued the decla-
ration of compliance reproduced below in accordance with section 161 of the German
Stock Corporation Act (AktG):
“The Executive Board and the Supervisory Board of RENK AG declare that the reco-
mmendations of the Government Commission on the German Corporate Governance
Code as amended on February 7, 2017 promulgated by the Federal Ministry of Justice
on April 24, 2017 in the official section of the Bundesanzeiger (the Federal Gazette) are
complied with effective immediately, with the exception of items 4.2.3(2) sentence 3
(forward-looking variable remuneration), 5.4.1(6) to (8) (disclosure of proposals of can-
didates for election) and 7.1.1 sentence 2 (intra-year financial information).
1.) The recommendation of item 4.2.3(2) sentence 3 is not complied with in that the
assessment base for variable remuneration components is not essentially for-
ward-looking. The current remuneration system is based on the recommenda-
tion found in the version of the Code dated May 5, 2015. As the Supervisory Board
considers a long-term assessment basis that is essentially forward-looking to be
appropriate, an adjustment of the remuneration system in line with the reco-
mmendations of the current version of the Code is being prepared but has not
yet been completed or implemented.
2.) Regarding the recommendation in items 5.4.1(6) to (8) of the Code on the disclo-
sure of certain circumstances of nominations by the Supervisory Board to the
Annual General Meeting, the requirements of the Code are unspecific and un-
clear in their application. A departure from the Code as regards this matter has
thus been declared as a precaution. Regardless of this, the Supervisory Board will
endeavor to comply with the requirements of items 5.4.1(6) to (8) of the Code.
3.) The recommendation of item 7.1.1 sentence 2 (intra-year financial information) is
not complied with as the Executive Board and Supervisory Board of RENK AG
consider an obligation to release quarterly publications in addition to the statu-
tory requirement of the Wertpapierhandelsgesetz (WpHG – German Securities
Trading Act) to be unnecessary.
The Executive Board and the Supervisory Board of RENK AG further declare that the
recommendations of the Government Commission on the German Corporate Gover-
nance Code as amended on May 5, 2015 promulgated by the Federal Ministry of Justice
on June 12, 2015 in the official section of the Bundesanzeiger were complied with in the
period December 2016 to April 24, 2017, with the exception of items 5.4.1(5) to (7) (dis-
closure of proposals of candidates for election; items 5.4.1(6) to (8) in the Febru-
ary 7, 2017 version of the Code). The reasons for the exception are explained above.
From April 24, 2017 until the time that this declaration of conformity was issued, the
recommendations of the Government Commission on the German Corporate Gover-
nance Code as amended on February 7, 2017 promulgated by the Federal Ministry of
Justice on April 24, 2017 in the official section of the Bundesanzeiger (the Federal Ga-
zette) were complied with, with the exception of items 4.2.3(2) sentence 3 (forward-
158
looking variable remuneration), 5.4.1(2) sentence 1 and (4) sentence 1 (preparation of a
skills profile and efforts to adhere to it), 5.4.1(5) (résumés for all Supervisory Board
members), 5.4.1(6) to (8) (disclosure of proposals of candidates for election) and 7.1.1
sentence 2 (intra-year financial information). The reasons for the departures from
items 4.2.3(2) sentence 3, 5.4.1(6) to (8) and 7.1.1 sentence 2 are explained above.
The new recommendations of item 5.4.1(2), (4) and (5) added effective from
April 24, 2017 – which relate to the composition of the Supervisory Board and the pre-
paration of a skills profile for the body as a whole, striving to adhere to the skills pro-
file for the body as a whole and publishing résumés for all Supervisory Board mem-
bers supplemented by overviews of their main activities in addition to their Supervi-
sory Board appointment on the company’s website – have been complied with since
December 5, 2017 when this was discussed accordingly and resolved by the Supervi-
sory Board.”
159RENK Group – Annual Report 2017
(34) Segment reporting
The activities of the RENK Group are still divided into the reportable segments Special
Gear Units, Vehicle Transmissions, Standard Gear Units and Slide Bearings. The ma-
nagement of each of these segments reports directly to the Executive Board of RENK
AG in its function as the responsible chief operating decision maker.
The Special Gear Units segment comprises large-gear production at RENK AG’s Augs-
burg site and RENK-MAAG GmbH, Winterthur, Switzerland. The product range extends
from stationary gear units for a variety of industrial applications, to turbo gear units,
to complex gear units for fast craft and naval applications.
The Vehicle Transmissions segment is a leading manufacturer of fully automatic
transmissions for medium-weight and heavy tracked vehicles, and also offers a broad
range of powerful test rigs for a variety of industries. It comprises the corresponding
activities at RENK AG’s Augsburg site, the French subsidiary RENK France S.A.S., Saint-
Ouen-l’Aumône, RENK Test System GmbH (RTS) in Augsburg and its US sales company
RENK Systems Corporation, Camby (IN), USA.
The Standard Gear Units segment includes large-gear production at RENK AG’s Rheine
site. It specializes in marine gear units for merchant shipping, LNG/LPG tankers, spe-
cial ships and offshore wind turbine gear units. It also manufactures gear units for tur-
bine plants and couplings for industrial applications.
The Slide Bearings segment at RENK AG’s Hanover site and the American sales com-
pany RENK Corporation, Duncan (SC), USA, primarily supply hydrodynamic, lubricated
slide bearings. These are used for electric motors, generators, pumps, blowers, water
turbines, conveyors and marine applications.
The financial performance indicators for segments are sales revenue, operating profit
and operating return on sales. The operating return on sales is the ratio of the opera-
ting profit generated to sales revenue. The non-financial performance indicator is or-
der intake as measured by reference to binding incoming orders. Segment infor-
mation is determined applying the same accounting policies as those used in the
preparation of the consolidated financial statements. Transactions between segments
are performed on an arm’s length basis.
160
Segment information by segment
€ thousand Special Gear Units
2017 2016
Order intake from third parties 151,328 210,940
Order intake from other segments 2,281 2,636
Total order intake 153,609 213,576
Sales revenue with third parties 160,775 154,896
Sales revenue with other segments 1,655 7,267
Total sales revenue 162,430 162,163
Order backlog Dec. 31 239,473 256,066
Operating profit 10,988 14,797
Capital expenditures 7,902 13,234
Depreciation1) 7,405 8,091
Operating return on sales 6.8% 9.1%
1) Depreciation and amortization for 2017 includes no impairment losses (previous year: € 579 thousand).
161RENK Group – Annual Report 2017
Vehicle Transmissions Standard Gear Units Slide Bearings Consolidation Group
2017 2016 2017 2016 2017 2016 2017 2016 2017 2016
122,556 134,798 78,772 52,294 81,447 87,564 – – 434,103 485,596
1,566 253 9,676 4,687 2,465 2,065 (15,989) (9,641) – –
124,122 135,051 88,448 56,981 83,912 89,629 (15,989) (9,641) 434,103 485,596
149,149 157,533 72,717 97,548 86,765 85,890 – – 469,406 495,867
1,767 253 5,216 3,559 1,517 3,780 (10,155) (14,859) – –
150,916 157,786 77,933 101,107 88,282 89,670 (10,155) (14,859) 469,406 495,867
426,343 459,137 61,313 51,875 32,643 37,353 (11,847) (5,805) 747,925 798,626
26,698 26,376 8,303 12,501 14,113 13,508 (55) (71) 60,047 67,111
7,011 7,392 2,059 1,857 1,763 2,037 – – 18,735 24,520
5,658 4,675 3,534 3,597 2,405 2,987 (77) (55) 18,925 19,295
17.7% 16.7% 10.7% 12.4% 16.0% 15.1% – – 12.8% 13.5%
162
Segment information by region
€ thousand Germany Rest of
Europe
Other
regions
Total
2017
Sales revenue 146,866 183,566 138,974 469,406
Payments to acquire property, plant and equipment and intangible assets 15,935 2,630 170 18,735
2016
Sales revenue 200,194 126,593 169,080 495,867
Payments to acquire property, plant and equipment and intangible assets 21,521 2,103 896 24,520
(35) List of shareholdings of RENK AG as of December 31, 2017
Name and registered office of the
company
Share of
capital in %
Local
currency
(LC)
Exchange rate
(EUR/LW)
Equity
(1,000 LC)
Result
(1,000 LC)
RENK France S.A.S., Saint-Ouen-l’Aumône, France 100 EUR 1 20,419 1,519
RENK Corporation, Duncan, South Carolina, USA 100 USD 1.1988 12,128 980
RENK Test System GmbH, Augsburg 100 EUR 1 8,641 (80)
RENK Systems Corporation, Camby, Indiana, USA 100 USD 1.1988 1,222 551
RENK Transmisyon Sanayi A.S., Istanbul, Turkey1) 55 TRY 3.7263 4,819 857
RENK UAE LLC, Abu Dhabi, United Arab Emirates1) 49 AED 3.8790 25,815 10,354
COFICAL RENK MANCAIS DO BRASIL LTDA, Guaramirim, Brazil1) 98 BRL 3.4372 19,144 1,065
RENK-MAAG GmbH, Winterthur, Switzerland 100 CHF 1.1694 15,979 472
RENK Shanghai Service and Commercial Co., Ltd. Shanghai, China1) 100 CNY 7.3332 4,466 (2,623)
RENK (UK) Ltd., London, UK (inactive) 100 GBP n/a n/a n/a
Renk Gears Private Ltd., Bangalore/India2) 100 INR 76.5670 108,000 n/a
Renk Korea Co., Ltd., Busan/South Korea2) 100 KRW 1,278.2200 900,000 n/a
Damen Schelde Gears B.V., Vlissingen/Netherlands2) 100 EUR 1 1,397 n/a
1) As of: December 31, 2016 2) Equity is stated as of the acquisition date on account of the new formation/acquisition.
163RENK Group – Annual Report 2017
(36) Equity investments in RENK AG
The share of the voting rights held by MAN SE in RENK AG is 76%.
In accordance with section 21(1) of the German Securities Trading Act (WpHG),
Volkswagen Truck & Bus GmbH, Braunschweig, informed RENK AG on April 18, 2013
that its share of the voting rights exceeded the threshold of 75% on April 16, 2013 and
amounted to 78.86% (5,519,903 of 7,000,000 total voting rights in RENK AG) on that
day. All of the above 5,519,903 voting rights were attributed to Volkswagen Truck & Bus
GmbH in accordance with section 22(1) sentence 1 no. 1 WpHG through MAN SE. In ac-
cordance with section 21(1) sentence 1 WpHG, Volkswagen Aktiengesellschaft, informed
RENK AG on November 14, 2011 that Volkswagen Aktiengesellschaft’s share of the vo-
ting rights exceeded the threshold of 75% on November 9, 2011 and amounted to
78.86% (5,519,903 of 7,000,000 total voting rights in RENK AG) on that day. All of the
above 5,519,903 voting rights were attributed to Volkswagen Aktiengesellschaft in ac-
cordance with section 22(1) sentence 1 no. 1 WpHG through MAN SE and – since the
transfer of the shares held by Volkswagen Aktiengesellschaft in MAN SE to Volkswagen
Truck & Bus GmbH on April 16, 2013 – also through Volkswagen Truck & Bus GmbH.
Furthermore, Porsche Automobil Holding SE and its controlling shareholders in-
formed RENK AG in accordance with section 21(1) WpHG that the equity investments
of Volkswagen AG and Volkswagen Truck & Bus GmbH are also attributed to Porsche
Automobil Holding SE and its controlling shareholders.
The difference between the above equity holding of MAN SE of 76% and the above eq-
uity holdings of Volkswagen Truck & Bus GmbH and Volkswagen Aktiengesellschaft of
78.86% is due to the fact that the latter includes 199,903 (2.86%) voting rights that are
held directly by RENK AG as treasury shares.
RENK AG was not advised of, nor is it aware of, any other direct or indirect sharehol-
dings in the capital of the company exceeding 10% of the voting rights or the relevant
reporting thresholds of the German Securities Trading Act.
164
(37) Related party disclosures
Related parties as defined by IAS 24 are natural persons and companies that can be in-
fluenced by RENK AG, that can significantly influence RENK AG or that are influenced
by another related party of RENK AG.
Given its shareholding of 76% in RENK AG, MAN SE is its parent company and there-
fore a related party of RENK. This also applies to the subsidiaries of MAN SE and the re-
lated parties of MAN SE itself. In particular, these include Volkswagen Truck & Bus
GmbH, Volkswagen Aktiengesellschaft and Porsche Automobil Holding SE with all
their affiliated companies.
Exchanges of goods and services between RENK and its related parties are conducted
as at arm’s length.
Essentially the following types of transactions are performed with companies of the
MAN Group:
Deliveries of goods to MAN companies, in particular gear units and bearings for
ships and turbines, plus test rigs and related services.
Sourcing from MAN companies, mainly primary materials for gear unit production
such as cast components.
Other services and reciprocal services, such as debit and credit interest from inter-
company payment transactions with MAN SE, and cost reimbursements for other
services.
The exchange of services with companies of the Volkswagen and Porsche Groups re-
late to individual projects to supply test rigs and related services. RENK purchases ser-
vices, e.g. in the context of vehicle leases.
The table below shows the extent of relationships between RENK and MAN SE:
€ thousand 2017 2016
Services rendered (income) 56 49
Services received (expense) 855 914
Receivables (Dec. 31) 199,086 213,300
Liabilities (Dec. 31) 43 1,706
MAN SE provided RENK companies with direct and indirect guarantees of
€ 9,794 thousand and derivative hedges with a nominal value of € 27,989 thousand as
of December 31, 2017. There are receivables of € 198,290 thousand (previous year:
€ 213,147 thousand) from cash management with MAN SE and other MAN companies
as of December 31, 2017.
165RENK Group – Annual Report 2017
The table below shows the extent of relationships with other companies of the MAN
Group, Volkswagen and the Porsche Group:
€ thousand 2017 2016
Services rendered (income) 22,363 21,001
Services received (expense) 5,270 6,411
Receivables (Dec. 31) 4,855 4,228
Liabilities (Dec. 31) 1,497 3,117
Other related parties are the subsidiaries of the RENK Group that are not included in
the consolidated financial statements. The exchange of services essentially comprises
the supply of parts and the performance of services at market rates. The following ta-
ble shows the extent of services:
€ thousand 2017 2016
Services rendered (income) 6,138 6,788
Services received (expense) 1,449 1,197
Receivables (Dec. 31) 1,948 1,351
Liabilities (Dec. 31) 246 84
Trade receivables from and trade payables to affiliated companies are reported under
notes (18) and (24). There are financial obligations to affiliated companies under ope-
rating leases of € 190 thousand (previous year: € 231 thousand).
Outstanding items in connection with related parties are not collateralized, nor had
valuation allowances been recognized as of the end of the reporting period.
Related parties of RENK also include persons who can influence or be influenced by
RENK AG, such as the members of the Executive Board and Supervisory Board of RENK
AG, the members of the Executive Board and Supervisory Board of MAN SE, the mem-
bers of management and the Supervisory Board of Volkswagen Truck & Bus GmbH
and the members of the Executive Board and Supervisory Board of Volkswagen AG.
Please see “Remuneration of the Executive Board” and “Supervisory Board” for disclo-
sures required in accordance with IAS 24 on management remuneration for key posi-
tions.
(38) Events after the end of the reporting period
There were no special events after December 31, 2017 with a material effect on the net
assets, financial position and results of operations.
166
Members of the Supervisory Board and the Executive Board and their mandates
(39) Supervisory Board
Dr. Ingrun-Ulla Bartölke Wolfsburg
Chairwoman of the Supervisory Board
Head of Group Accounting and External Reporting at
Volkswagen Aktiengesellschaft
Volkswagen Bank GmbH 2)
SEAT S.A., Spain 4)
Roberto Armellini*) Augsburg
Deputy Chairman of the Supervisory Board
Managing Director IG Metall Augsburg
VALEO Schalter und Sensoren GmbH (Deputy Chairman)1)
AGCO Fendt GmbH1)
Michael Behrendt Hamburg, Germany
Chairman of the Supervisory Board of Hapag-Lloyd AG
Barmenia Allgemeine Versicherungs-AG (Deputy Chairman)1)
Barmenia Krankenversicherung a. G. (Deputy Chairman)1)
Barmenia Lebensversicherung a. G. (Deputy Chairman)1)
Esso Deutschland GmbH1)
ExxonMobil C. E. Holding GmbH1)
Hapag-Lloyd AG (Chairman)1)
MAN Diesel & Turbo SE1)
MAN SE1)
MAN Truck & Bus AG1)
*) elected by employees 1) Memberships of statutory supervisory boards in Germany 2) Memberships of statutory supervisory boards in Germany (Group mandates) 3) Memberships of comparable supervisory bodies in Germany and abroad 4) Memberships of comparable supervisory bodies in Germany and abroad (Group mandates)
167RENK Group – Annual Report 2017
Hardy Brennecke Wolfenbüttel
Member of the Supervisory Board since April 26, 2017
Head of the Executive Office for the Commercial Vehicles division of
Volkswagen Aktiengesellschaft
Secretary General of Volkswagen Truck & Bus GmbH
Joachim Drees Stuttgart
Member of the Supervisory Board since April 26, 2017
Managing Director of Volkswagen Truck & Bus GmbH
Chairman of the Executive Board of MAN SE
Chairman of the Executive Board of MAN Truck & Bus AG
Veritas AG1)
Volkswagen Financial Services AG1)
MAN Diesel & Turbo SE2)
Sinotruk (Hong Kong) Ltd., China3)
Dipl.-Ing. (FH) Rainer Handschuh*) Augsburg
Chairman of the Group Works Council of RENK AG
Chairman of the Works Council of RENK AG, Augsburg plant and RENK Test System
GmbH
Christiane Hesse Wunstorf
Member of the Board of Management (Human Resources and Organization) of
Volkswagen Financial Services AG
EURO-Leasing GmbH4)
MAN Financial Services GmbH4)
MAN Financial Services (S.A.) (Pty.) Ltd., South Africa (Chairwoman)4)
VDF Faktoring A.S., Turkey (Chairwoman)4)
VDF Filo Kiralama A.S., Turkey (Chairwoman)4)
VDF Servis ve Ticaret A.S., Turkey (Chairwoman)4)
VDF Sigorta Aracilik Hizmetleri A.S., Turkey (Chairwoman)4)
Volkswagen Doğuş Finansman A.S., Turkey (Chairwoman)4)
Volkswagen Financial Services Digital Solutions GmbH4)
Volkswagen Financial Services South Africa (Pty.) Ltd., South Africa (Chairwoman)4)
168
Dipl.-Ing. (FH) Frank Hoffmann*) Augsburg
Head of Vehicle Transmissions at RENK AG, Augsburg
Thorsten Jablonski Ilsede
Head of Transmissions/Head of Kassel site for Volkswagen Aktiengesellschaft
Volkswagen Automatic Transmission (Dalian) Co., Ltd., China (Chairman)4)
Volkswagen Automatic Transmission (Tianjin) Co., Ltd., China4)
Volkswagen Transmission (Shanghai) Company Ltd., China4)
Dr. Hans O. Jeske Wesel
Member of the Supervisory Board until April 26, 2017
Former member of the Executive Board of MAN Diesel & Turbo SE
RWTÜV GmbH3)
Dr. Georg Pachta-Reyhofen Niederpöcking
Member of the Supervisory Board until April 26, 2017
Former Chief Executive Officer of MAN SE
MAN Diesel & Turbo SE (Chairman)1)
Herbert Surmann*) Rheine
Chairman of the Works Council RENK AG, Rheine plant
169RENK Group – Annual Report 2017
Walter Vogt*) Eltville
Labor union secretary at IG Metall Executive Board, Frankfurt/Main
Baugenossenschaft Darmstadt eG (Deputy Chairman)1)
IBM Deutschland GmbH1)
Mercedes-Benz Bank AG1)
Ingo Weidner*) Hanover
Deputy Chairman of the Works Council of RENK AG, Hanover
As of December 31, 2017 or, if earlier, date of resignation.
(40) Committees of the Supervisory Board
Members of the Committee for Management Board Personnel Dr. Ingrun-Ulla Bartölke (Chairwoman)
Roberto Armellini (Deputy Chairman)
Joachim Drees
Dipl.-Ing. (FH) Rainer Handschuh
Members of the Nomination Committee Dr. Ingrun-Ulla Bartölke
Joachim Drees
Members of the Mediation Committee Dr. Ingrun-Ulla Bartölke (Chairwoman)
Roberto Armellini (Deputy Chairman)
Joachim Dress
Dipl.-Ing. (FH) Rainer Handschuh
Members of the Audit Committee Michael Behrendt (Chairman)
Walter Vogt (Deputy Chairman)
Dr. Ingrun-Ulla Bartölke
Herbert Surmann
170
(41) The Executive Board
Dipl.-Ing. (FH) Florian Hofbauer Landsberg
Spokesperson
Engineering and Sales
RENK Shanghai Service and Commercial Co., Ltd., China4)
Dipl.-Kfm. (Univ.) Christian Hammel Munich
Production and Administration
RENK Gears Private Ltd., India4)
RENK Korea Co. Ltd., Korea4)
Augsburg, February 8, 2018
RENK Aktiengesellschaft
The Executive Board
The Board of Management
Florian Hofbauer Christian Hammel
1) Memberships of statutory supervisory boards in Germany 2) Memberships of statutory supervisory boards in Germany (Group mandates) 3) Memberships of comparable supervisory bodies in Germany and abroad 4) Memberships of comparable supervisory bodies in Germany and abroad (Group mandates)
171RENK Group – Annual Report 2017
172
173RENK Group – Annual Report 2017
Responsibility statement
To the best of our knowledge and in accordance with the applicable accounting princi-
ples, the consolidated financial statements give a true and fair view of the net assets,
financial position and results of operations of the Group, and the management report
of the Group includes a fair review of the development and performance of the busi-
ness and the position of the Group, together with a description of the principal oppor-
tunities and risks associated with the expected development of the Group.
Augsburg, February 8, 2018
RENK Aktiengesellschaft
The Executive Board
Florian Hofbauer Christian Hammel
174
INDEPENDENT AUDITOR’S REPORT
To Renk Aktiengesellschaft, Augsburg
REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND OF THE
GROUP MANAGEMENT REPORT
Audit Opinions We have audited the consolidated financial statements of Renk Aktiengesellschaft, Augsburg, and its
subsidiaries (the Group), which comprise the consolidated statement of profit or loss for the finan-
cial year from 1 January to 31 December 2017, the consolidated statement of comprehensive income,
the consolidated statement of financial position as at 31 December 2017, and the consolidated state-
ment of changes in equity and consolidated statement of cash flows for the financial year from 1
January to 31 December 2017, and notes to the consolidated financial statements, including a su-
mmary of significant accounting policies. In addition, we have audited the group management re-
port of Renk Aktiengesellschaft for the financial year from 1 January to 31 December 2017. We have
not audited the content of those parts of the group management report listed in the “Other Infor-
mation” section of our auditor’s report in accordance with the German legal requirements.
In our opinion, on the basis of the knowledge obtained in the audit,
the accompanying consolidated financial statements comply, in all material respects, with the
IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant
to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in
compliance with these requirements, give a true and fair view of the assets, liabilities, and finan-
cial position of the Group as at 31 December 2017, and of its financial performance for the financial
year from 1 January to 31 December 2017, and
the accompanying group management report as a whole provides an appropriate view of the
Group’s position. In all material respects, this group management report is consistent with the
consolidated financial statements, complies with German legal requirements and appropriately
presents the opportunities and risks of future development. Our audit opinion on the group ma-
nagement report does not cover the content of those parts of the group management report listed
in the “Other Information” section of our auditor’s report.
Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reserva-
tions relating to the legal compliance of the consolidated financial statements and of the group
management report.
Basis for the Audit Opinions We conducted our audit of the consolidated financial statements and of the group management re-
port in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subse-
quently as “EU Audit Regulation”) and in compliance with German Generally Accepted Standards for
Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public
Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are fur-
ther described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial State-
ments and of the Group Management Report” section of our auditor’s report. We are independent of
the group entities in accordance with the requirements of European law and German commercial
and professional law, and we have fulfilled our other German professional responsibilities in accor-
175RENK Group – Annual Report 2017
dance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Au-
dit Regulation, we declare that we have not provided non-audit services prohibited under Arti-
cle 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinions on the consolidated financial statements
and on the group management report.
Key Audit Matters in the Audit of the Consolidated Financial Statements Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements for the financial year from 1 January to 31 Decem-
ber 2017. These matters were addressed in the context of our audit of the consolidated financial
statements as a whole, and in forming our audit opinion thereon; we do not provide a separate audit
opinion on these matters.
In our view, the matters of most significance in our audit were as follows:
❶ Management and measurement of inventories
❷ Completeness and measurement of provisions for warranty obligations arising from sales
❸ Customer-specific construction contracts
Our presentation of these key audit matters has been structured in each case as follows:
① Matter and issue
② Audit approach and findings
③ Reference to further information
Hereinafter we present the key audit matters:
❶ Management and measurement of inventories
① EUR 26 million in raw materials, consumables and supplies, EUR 153 million in work in pro-
gress, and EUR 0.7 million in prepayments were recognized under "Inventories" in the con-
solidated statement of financial position of Renk Aktiengesellschaft, Augsburg. From our
point of view, this balance sheet item is of particular importance due to its material
amount and the fact that the measurement of inventories is to a large extent based on esti-
mates and assumptions made by management. The reliability of the processes and controls
put in place is also a material requirement for managing inventories of work in progress.
② Given that the management and measurement complexity of inventories gives rise to an
increased risk of accounting misstatements, we assessed the Group's processes and controls
relating to the management and measurement of inventories. Our specific audit approach
included testing of the controls and substantive audit procedures, in particular:
observing stocktaking at multiple sites;
auditing the measurement of inventories.
176
We verified the appropriateness of the systems, processes and controls in place, and that
the estimates and assumptions made by management are sufficiently substantiated and
documented to ensure that inventories are properly recognized.
③ The Company's disclosures relating to inventories are contained in notes (3)(g) and (17) to
the consolidated financial statements.
❷ Completeness and measurement of provisions for warranty obligations arising from
sales
① In the consolidated financial statements of Renk Aktiengesellschaft, Augsburg, EUR 32 mi-
llion in provisions for obligations arising from sales are reported under the "Other provi-
sions" balance sheet item. These obligations arise under statutory and contractual guaran-
tee obligations with customers. Warranty claims are calculated on the basis of losses to date
and estimated future losses. In addition, assumptions must be made about the nature and
extent of future warranty claims. These assumptions are based on qualified estimates.
From our point of view, this matter was of particular importance for our audit because the
recognition and measurement of this material item is to a large extent based on estimates
and assumptions made by the Company's management.
② With the knowledge that estimated values result in an increased risk of accounting mis-
statements and that the measurement decisions made by management have a direct and
significant effect on consolidated net profit/loss, we assessed the appropriateness of the
carrying amounts, including by comparing these figures with historical data and using the
measurement bases presented to us. We evaluated the entire calculations for the provisions
using the applicable measurement inputs and assessed the planned timetable for utilizing
the provisions.
In doing so, we were able to satisfy ourselves that the estimates applied and the assump-
tions made by management were sufficiently documented and supported to justify the
recognition and measurement of the provisions for warranty obligations arising from sales.
③ The Company's disclosures on other provisions are contained in notes (3)(m) and (23) to the
consolidated financial statements.
❸ Customer-specific construction contracts
① In the consolidated income statement of Renk Aktiengesellschaft, Augsburg revenue from
customer-specific construction contracts amounting to EUR 22 million are reported. Reve-
nue for this material item is recognized in accordance with the percentage of completion
(PoC) method. This issue was of particular importance for our audit due to the complexity
of the applicable accounting standard and the requirement for estimates and assumptions
on the part of management with corresponding ranges from an accounting point of view.
② As part of our audit, we evaluated the processes and controls established by the Group for
the purposes of recognizing revenue from customer-specific construction contracts. On
this basis, we evaluated the determination of the degree of completion of customer-specific
construction contracts on the basis of the cost-to-cost method and the resulting proportion
177RENK Group – Annual Report 2017
of revenue and profit recognized. For this purpose, we satisfied ourselves of the progress of
the respective projects, among other things based on interviews with project managers and
by inspecting project documentation.
We were able to satisfy ourselves of the appropriateness of the systems, processes and con-
trols in place, and that the estimates and assumptions made by management are suffi-
ciently documented and substantiated to ensure that revenue is properly recognized.
③ The Company's disclosures on customer-specific construction contracts are contained in
note (3)(a), (3)(h) and (6) to the consolidated financial statements.
Other Information The executive directors are responsible for the other information. The other information comprises
the following non-audited parts of the group management report:
the group statement on corporate governance pursuant to § 289f HGB and § 315d HGB
the corporate governance report pursuant to No. 3.10 of the German Corporate Governance Code
The other information comprises further the remaining parts of the annual report – excluding
cross-references to external information – with the exception of the audited consolidated financial
statements, the audited group management report and our auditor’s report.
Our audit opinions on the consolidated financial statements and on the group management report
do not cover the other information, and consequently we do not express an audit opinion or any
other form of assurance conclusion thereon.
In connection with our audit, our responsibility is to read the other information and, in so doing, to
consider whether the other information
is materially inconsistent with the consolidated financial statements, with the group management
report or our knowledge obtained in the audit, or
otherwise appears to be materially misstated.
Responsibilities of the Executive Directors and the Supervisory Board for the Consolidated Financial Statements and the Group Management Report The executive directors are responsible for the preparation of the consolidated financial statements
that comply, in all material respects, with IFRSs as adopted by the EU and the additional require-
ments of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial
statements, in compliance with these requirements, give a true and fair view of the assets, liabilities,
financial position, and financial performance of the Group. In addition the executive directors are
responsible for such internal control as they have determined necessary to enable the preparation
of consolidated financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the consolidated financial statements, the executive directors are responsible for as-
sessing the Group’s ability to continue as a going concern. They also have the responsibility for dis-
closing, as applicable, matters related to going concern. In addition, they are responsible for finan-
cial reporting based on the going concern basis of accounting unless there is an intention to liqui-
date the Group or to cease operations, or there is no realistic alternative but to do so.
178
Furthermore, the executive directors are responsible for the preparation of the group management
report that, as a whole, provides an appropriate view of the Group’s position and is, in all material
respects, consistent with the consolidated financial statements, complies with German legal re-
quirements, and appropriately presents the opportunities and risks of future development. In addi-
tion, the executive directors are responsible for such arrangements and measures (systems) as they
have considered necessary to enable the preparation of a group management report that is in ac-
cordance with the applicable German legal requirements, and to be able to provide sufficient appro-
priate evidence for the assertions in the group management report.
The supervisory board is responsible for overseeing the Group’s financial reporting process for the
preparation of the consolidated financial statements and of the group management report.
Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report Our objectives are to obtain reasonable assurance about whether the consolidated financial state-
ments as a whole are free from material misstatement, whether due to fraud or error, and whether
the group management report as a whole provides an appropriate view of the Group’s position and,
in all material respects, is consistent with the consolidated financial statements and the knowledge
obtained in the audit, complies with the German legal requirements and appropriately presents the
opportunities and risks of future development, as well as to issue an auditor’s report that includes
our audit opinions on the consolidated financial statements and on the group management report.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally
Accepted Standards for Financial Statement Audits promulgated by the Institut der
Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from
fraud or error and are considered material if, individually or in the aggregate, they could reasonably
be expected to influence the economic decisions of users taken on the basis of these consolidated
financial statements and this group management report.
We exercise professional judgment and maintain professional skepticism throughout the audit. We
also:
Identify and assess the risks of material misstatement of the consolidated financial statements
and of the group management report, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate
to provide a basis for our audit opinions. The risk of not detecting a material misstatement resul-
ting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit of the consolidated financial
statements and of arrangements and measures (systems) relevant to the audit of the group ma-
nagement report in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an audit opinion on the effectiveness of these systems.
Evaluate the appropriateness of accounting policies used by the executive directors and the rea-
sonableness of estimates made by the executive directors and related disclosures.
Conclude on the appropriateness of the executive directors’ use of the going concern basis of ac-
counting and, based on the audit evidence obtained, whether a material uncertainty exists related
to events or conditions that may cast significant doubt on the Group’s ability to continue as a go-
ing concern. If we conclude that a material uncertainty exists, we are required to draw attention in
179RENK Group – Annual Report 2017
the auditor’s report to the related disclosures in the consolidated financial statements and in the
group management report or, if such disclosures are inadequate, to modify our respective audit
opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s
report. However, future events or conditions may cause the Group to cease to be able to continue
as a going concern.
Evaluate the overall presentation, structure and content of the consolidated financial statements,
including the disclosures, and whether the consolidated financial statements present the under-
lying transactions and events in a manner that the consolidated financial statements give a true
and fair view of the assets, liabilities, financial position and financial performance of the Group in
compliance with IFRSs as adopted by the EU and the additional requirements of German commer-
cial law pursuant to § 315e Abs. 1 HGB.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or
business activities within the Group to express audit opinions on the consolidated financial state-
ments and on the group management report. We are responsible for the direction, supervision
and performance of the group audit. We remain solely responsible for our audit opinions.
Evaluate the consistency of the group management report with the consolidated financial state-
ments, its conformity with German law, and the view of the Group’s position it provides.
Perform audit procedures on the prospective information presented by the executive directors in
the group management report. On the basis of sufficient appropriate audit evidence we evaluate,
in particular, the significant assumptions used by the executive directors as a basis for the pro-
spective information, and evaluate the proper derivation of the prospective information from
these assumptions. We do not express a separate audit opinion on the prospective information
and on the assumptions used as a basis. There is a substantial unavoidable risk that future events
will differ materially from the prospective information.
We communicate with those charged with governance regarding, among other matters, the planned
scope and timing of the audit and significant audit findings, including any significant deficiencies in
internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with the
relevant independence requirements, and communicate with them all relationships and other ma-
tters that may reasonably be thought to bear on our independence, and where applicable, the re-
lated safeguards.
From the matters communicated with those charged with governance, we determine those matters
that were of most significance in the audit of the consolidated financial statements of the current
period and are therefore the key audit matters. We describe these matters in our auditor’s report un-
less law or regulation precludes public disclosure about the matter.
OTHER LEGAL AND REGULATORY REQUIREMENTS
Further Information pursuant to Article 10 of the EU Audit Regulation We were elected as group auditor by the annual general meeting on 26 April 2017. We were engaged
by the supervisory board on 12 June 2017. We have been the group auditor of the Renk Aktiengesell-
schaft, Augsburg, without interruption since the financial year 2010.
We declare that the audit opinions expressed in this auditor’s report are consistent with the addi-
tional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form
audit report).
180
GERMAN PUBLIC AUDITOR RESPONSIBLE FOR THE ENGAGEMENT The German Public Auditor responsible for the engagement is Holger Graßnick.
Munich, February 8, 2018
PricewaterhouseCoopers GmbH
Wirtschaftsprüfungsgesellschaft
Klaus Schuster Holger Graßnick
Wirtschaftsprüfer Wirtschaftsprüfer
(German Public Auditor) (German Public Auditor)
181RENK Group – Annual Report 2017
182
€ million 20121) 20132) 2014 2015 2016 2017
Order intake 525 504 666 483 486 434
Germany 176 196 137 181 173 153
Outside Germany 349 308 529 301 313 281
Sales revenue 476 485 480 487 496 469
Germany 165 168 153 147 200 147
Outside Germany 311 317 327 339 296 322
Order backlog Dec. 31 634 648 827 812 799 748
Germany 296 323 295 297 256 242
Outside Germany 338 325 532 515 543 506
Employees Dec. 31
Headcount – 2,306 2,196 2,198 2,205 2,235
Core workforce employees on Dec. 31 2,098 2,199 2,112 2,087 2,194 2,203
Capital expenditures and financing
Payments to acquire property, plant and equipment and intangible assets 28 27 38 41 25 19
Depreciation of property, plant and equipment, amortization of intangible assets and impairment 14 16 17 21 19 19
Cash flows from operating activities 66 85 35 101 57 25
Net cash flow (free cash flow until 2013) 35 56 (3) 60 32 1
Key performance indicators (%)
Operating return on sales – 13.5 15.0 14.0 13.5 12.8
Equity ratio 48.1 52.1 55.6 54.2 55.1 60.3
Key performance indicators for RENK shares
Earnings per share as per IAS 33 (in €) 6.74 6.39 7.17 6.14 6.50 6.30
Dividend per share (in €) 2.00 2.00 2.20 2.20 2.20 2.20
Price-earnings ratio 10.80 13.07 11.66 17.05 15.51 17.94
Balance Sheet
Noncurrent assets 184 163 185 207 214 215
Inventories 164 157 179 171 182 181
Other current assets 81 94 155 170 98 106
Cash and cash equivalents 125 167 70 117 214 199
Equity 266 303 327 360 390 422
Pensions 30 9 25 16 15 11
Other noncurrent liabilities and provisions 31 10 9 8 11 13
Prepayments received 100 133 110 154 168 142
Other current liabilities and provisions 127 126 118 127 124 113
Total assets/total capital 554 581 589 665 708 700
Income statement
Sales revenue 476 485 480 487 496 469
Cost of sales (356) (377) (362) (377) (376) (364)
Gross profit 120 108 118 109 120 106
Other expenses and income (54) (43) (46) (42) (53) (46)
Operating profit (EBIT) 66 66 72 68 67 60
Net interest income 0 0 0 (4) (2) 1
Profit before taxes 66 66 72 64 65 61
Income tax expense (20) (23) (23) (22) (21) (18)
Profit after tax 46 43 49 42 44 43
1) Adjusted in 2013 due to the retroactive amendment to IAS 19 (2011) 2) Adjusted of individual prior-year figures due to transition to the financial reporting of the Volkswagen Group
Six-year Overview
183
RENK Group – Annual Report 2017
184
185
RENK Group – Annual Report 2017
186
Products and Services
Vehicle transmissions Fully automatic shift, reverse and steering transmissions with brake systems and final
drives for tracked vehicles of medium and large weight classes.
Industrial gears Gear units for cement plants, spur and planetary gear units for turbomachinery, in
particular for the petrochemical industry and for power plants, high-performance gear
units for the plastics industry, gear units for wind turbines.
Marine gear units Gear units for merchant vessels, ferries, cruise liners and naval craft with diesel engine
or turbine drive and electric drive, marine reversing gear units, reduction and control
gear units for ship generator systems.
Slide bearings Standard and special horizontal and vertical slide bearings for electrical machinery,
blowers, compressors, pumps, turbines and general mechanical engineering, slide
bearings for transmissions, marine shaft bearings and thrust bearings.
Couplings Curved-tooth couplings for industrial applications of all kinds, for ship and marine en-
gineering, for rail vehicles, steel multi-disc clutches for slow- and high-speed indus-
trial systems, diaphragm couplings for high-speed machinery, safety couplings, tor-
sionally flexible couplings.
Test systems Test rigs for development and quality assurance for the automotive industry, the avia-
tion industry and railway engineering.
187
RENK Group – Annual Report 2017
Produced with firesys
www.firesys.de
RENK Aktiengesellschaft
Gögginger Str. 7386159 AugsburgGermanyPhone: +49 821 5700-0Fax: +49 821 5700-460
www.renk.eu
A company of the MAN Group
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