1. Performance

1.1 Segment information

Segment performance

Discontinued operations

Conzzeta is selling its Glass Processing segment with the aim of streamlining and reducing the complexity of the Group’s business portfolio. On January 25, 2019, Conzzeta reported signing a binding agreement, with the transaction expected to be completed by the end of the first quarter.

The Glass Processing segment offers solutions worldwide for processing architectural and automotive glass. All companies in the business unit are affected by the sale. These companies are listed in note 4.2.

The overall impact of the discontinued operations on the individual items in the consolidated income statement is shown below.

Accounting principles

For the purposes of segment reporting the revenues of the economically similar FoamPartner and Schmid Rhyner business units are grouped together in a single reporting segment. Given that this aggregated reporting segment is characterized by similar value drivers (e.g. innovation, life cycle, raw materials used) and risk factors, the informative value of the disclosed key figures per segment is not adversely affected.

1.2 Revenue growth and other operating income

Geographical information

Comparable net revenue

The effects of transactions as part of acquisitions and divestments are recognized as changes in the scope of consolidation. Figures on a comparable basis take account of currency translation effects and changes in the scope of consolidation.

Other operating income

Other operating income includes mainly, among other items, revenues from sales of materials, waste and scrap, from insurance contracts, and from the sale of property, plant and equipment and investments. A gain of CHF 10.8 million was recorded in the previous year, due to the sale of holdings in Woodbridge FoamPartner Company in Chattanooga, Tennessee, USA, and Bystronic (Tianjin) Machinery Co. Ltd. in Tianjin, China.

Accounting principles

Revenues are recognized when goods or products are delivered or a service performed, and the benefits and risks as well as the power of disposal are transferred to the buyer. If the installation of the product at the recipient’s premises is an essential contract component, the revenue is not recognized until the installation is concluded. Longer-term orders are recognized using the completed contract method. The net revenue corresponds to the expected equivalent value of the service rendered, net of sales and value-added tax, any sales deductions such as sales bonuses, granted rebates and discounts as well as value adjustments and currency effects on trade receivables. Separable revenues are recognized and measured individually.

1.3 Operating expenses

Cost of materials

Cost of materials summarizes the overall cost of raw materials, intermediates and supplies, as well as merchandise held for resale and expenses for third-party manufacturing, handling or processing of the Group’s products (external services).

In relation to total revenue growth of 19.7%, the increase in material expenses was disproportionately low at 18.2%. The ratio of material costs to total revenue (materials ratio) was 48.7%, which was 0.6 percentage points lower than in the previous year. The materials ratio is influenced mainly by changes in inventories of semifinished products, work in progress and finished products. Adjusted for this effect, it is 0.4 percentage points lower than the previous year. The improvement in the materials ratio can mainly be attributed to better purchase conditions in the Sheet Metal Processing segment, which more than compensated for significantly higher raw material prices in the Chemical Specialties segment.

Personnel expenses

The increase in personnel expenses amounts to 19.1% and is with 22.5% in relation to total revenue in line with previous year.

As at the balance sheet date, the number of employees rose by 11.5% over the previous year to 5ʼ259. This rise can be attributed to the acquisition of companies and the enhanced market presence in the Sheet Metal Processing and Outdoor segments. The average headcount in the reporting year was 5ʼ091 full-time positions. The average number of full-time positions increased by 6.0% on a comparable basis.

Other operating expenses

Other operating expenses include the cost of repairs and maintenance on property, plant and equipment, sales provisions, expenses for guarantees, assembly, transport and energy, as well as sundry expenses for production, development, sales and administration. In the year under review, additional costs were incurred for projects and growth initiatives, particularly in the Sheet Metal Processing and Sporting Goods segments.

1.4 Income taxes

Current taxes on income include taxes paid and owed on taxable income of the individual companies.

The expected tax rate fell from 20.9% to 19.7%, a drop of 1.2 percentage points, which is mainly attributable to the US tax reform. The effective tax rate for the ordinary result before taxes is 20.4% (2017: 22.3%). Effects from non-capitalizable loss carryforwards slightly increased the tax rate whereas other influences contributed positively due to a favorable tax environment.

Deferred taxes are measured using the announced tax rates for the temporary differences in individual companies. The deferred tax assets from offsettable loss carryforwards and from temporary valuation differences amount to CHF 14.9 million (2017: CHF 11.5 million). In view of uncertainty about the future scope for offsetting, the tax effects from loss carryforwards amounting to CHF 8.1 million (2017: CHF 8.4 million) were not capitalized. This evaluation is based on the projected income tax rates. Deferred tax liabilities amount to CHF 18.8 million (2017: CHF 20.2 million).

Significant estimates made by management

In order to determine the amount of current and deferred income tax assets and liabilities, significant estimates need to be made. Some of these estimates are based on the interpretation of existing tax legislation and regulations. Various internal and external factors may have favorable or unfavorable effects on the income tax assets and liabilities. These factors include, but are not limited to, changes in tax laws and regulations, changing interpretations of existing tax laws and regulations, changes in tax rates, and changes in overall levels of pre-tax earnings. Any such changes may impact the current and deferred income tax assets and liabilities recognized in the balance sheet in future reporting periods.

Accounting principles

Income taxes include current and deferred income taxes. Provisions are made for all tax obligations, regardless of their payment date. Deferred income tax is provided for all temporary differences arising between the tax bases of assets and liabilities and their carrying value for reporting purposes, using the currently enacted tax rates on an entity level. The change in these deferred taxes is recorded under tax expenditure. The deferred tax assets from offsettable loss carryforwards and from temporary valuation differences are only capitalized when in all probability future taxes on profits can be offset.

1.5 Earnings per share

In the reporting year, as in the previous year, there was no dilution of earnings.

Accounting principles

Earnings per category of share were calculated on the basis of the portion of net income attributable to the shareholders in Conzzeta AG, based on their portion of the share capital and the average number of outstanding shares (issued shares less treasury shares).