Annual Report 2006 - Evonik Industries

Transcription

RAG BETEILIGUNGS-GROUP
2006 ANNUAL REPORT
P E N T- U P E N E R G Y R E L E A S E S
N EW FORCES.
This Report is not intended for distribution
in the United States of America, Canada, Australia or Japan
*
2006 ANNUAL REPORT
RAG Beteiligungs-AG
Rellinghauser Straße 1 –11
45128 Essen
Germany
E-Mail: [email protected]
www.rag.de
Etna, Sicily
Crater Lake, Oregon
Fujisan, Japan
Hekla, Iceland
Kilauea, Hawaii
RAG, Essen
Pico del Teide, Tenerife
Pinatubo, Philippines
Popocatépetl, Mexico
Santorini, Greece
Stromboli, Sicily
Vesuvio, Italy
*ACTIVE
It takes a long time for pent-up energy to explode, but once it does,
it releases a new force. RAG Beteiligungs-AG's planned IPO under a new name
will bring a new force to capital markets.
2006 ANNUAL REPORT
N EW FORCES.
*
2006 ANNUAL REPORT
RAG Beteiligungs-AG
45128 Essen
Germany
www.rag.de
Etna, Sicily
Crater Lake, Oregon
Fujisan, Japan
Hekla, Iceland
Kilauea, Hawaii
RAG, Essen
Santorini, Greece
Stromboli, Sicily
Vesuvio, Italy
*ACTIVE
127
Stromboli (926 m), Sicily
Group Structure
Publication Credits
Key Figures
RAG BETEI LIGUNGS-GROUP
CH EMICALS
EN ERGY
R E A L E STAT E
Specialty
Materials
Building
Blocks
Feed
Additives
Coatings &
Colorants
Exclusive
Synthesis &
Catalysts
Superabsorber
High
Performance
Polymers
Aerosil &
Silanes
Care & Surface
Specialties
Advanced
Fillers &
Pigments
C4Chemistry
As of January 1, 2007
Specialty
Acrylics
Methacrylates
Energy
Real Estate
€ million
14,793
14,181
EBITDA
€ million
2,280
2,107
EBIT
ROCE
Energy
Real Estate
S H A R E D S E RV I C E C E N T E R
Consumer
Solutions
%
15.4
14.9
€ million
1,234
1,108
%
8.8
7.8
Net income
€ million
1,045
195
Total assets
€ million
21,043
23,750
Equity ratio
%
20.5
22.1
Cash flow from operating activities
€ million
1,098
1,147
Capital expenditures1)
€ million
959
1,194
Depreciation and amortization1)
€ million
974
980
Net financial debt
€ million
5,434
5,649
43,175
45,196
Number of employees as of December 31
1)
2005
Sales
EBITDA margin
Technology
Specialties
2006
Intangible assets; property, plant and equipment; investment properties
Publisher
RAG Beteiligungs-AG
45128 Essen, Germany
www.rag.de
Contact
Communications and Management Board Office
Telephone + 49 (0) 201-177 38 99
Fax
+ 49 (0) 201-177 29 11
Investor Relations
Telephone + 49 (0) 201-177 20 89
Fax
+ 49 (0) 201-177 20 97
[email protected]
Design and layout
Kuhn, Kammann & Kuhn AG, Cologne, Germany
Photography
Vulkanarchiv, Bochum, (cover, p. 2, p. 4)
Getty Images (p. 6)
Corbes (p. 8)
Claudia Kempf, Wuppertal (p. 10)
Translation
Gehlert GmbH, Legal and Financial Translations,
Frankfurt am Main, Germany
Typesetting
Zerres GmbH, Leverkusen, Germany
Printing and lithography
Laupenmühlen Druck GmbH & Co. KG, Bochum,
Germany
127
Group Structure
Publication Credits
Key Figures
CH EMICALS
EN ERGY
R E A L E STAT E
Specialty
Materials
Building
Blocks
Feed
Additives
Coatings &
Colorants
Exclusive
Synthesis &
Catalysts
Superabsorber
High
Performance
Polymers
Aerosil &
Silanes
Care & Surface
Specialties
Advanced
Fillers &
Pigments
C4Chemistry
Specialty
Acrylics
Methacrylates
Energy
Real Estate
€ million
14,793
14,181
EBITDA
€ million
2,280
2,107
EBIT
ROCE
Energy
Real Estate
Consumer
Solutions
%
15.4
14.9
€ million
1,234
1,108
%
8.8
7.8
Net income
€ million
1,045
195
Total assets
€ million
21,043
23,750
Equity ratio
%
20.5
22.1
€ million
1,098
1,147
€ million
959
1,194
€ million
974
980
Net financial debt
€ million
5,434
5,649
43,175
45,196
1)
2005
Sales
EBITDA margin
Technology
Specialties
2006
Publisher
RAG Beteiligungs-AG
www.rag.de
Contact
Telephone + 49 (0) 201-177 38 99
Fax
+ 49 (0) 201-177 29 11
Investor Relations
Telephone + 49 (0) 201-177 20 89
Fax
+ 49 (0) 201-177 20 97
[email protected]
Design and layout
Photography
Getty Images (p. 6)
Corbes (p. 8)
Translation
Typesetting
Germany
01
CONTENTS
02
10
12
57
63
117
ACTIVE
Foreword
Management Report
12 The RAG Beteiligungs-Group: Ready for the stock market
14 Economic environment
18 RAG Beteiligungs-Group operations
23 Financial performance
24 Cash flow
28 Financial position
29 Technology Specialties
32 Consumer Solutions
34 Specialty Materials
36 Energy
39 Real Estate
40 Other operations
43 Human resources
46 Non-financial performance indicators
47 Risk report
52 Outlook
54 Events after the balance sheet date
Consolidated Financial Statements of
RAG Beteiligungs-AG
Notes to the Consolidated Financial Statements of
RAG Beteiligungs-AG
Other Information
02
Releasing energy to effect change.*
*POWER
Pent-up energy rushes forth, altering the landscape. The sheer force that
unleashes hidden potential can only surge straight ahead, effecting change,
creating space for something new. It’s a force to be reckoned with.
왘 ACTIVE
Foreword
Management Report
Consolidated Financial Statements
Notes
Report of the Supervisory Board
Corporate Bodies
Major Shareholdings
03
Piton de la Fournaise (2,631 m), Kapor crater, La Réunion
04
Creativity forges a new world and new values.*
* ST R U C T U R E
The forces of nature join together to form a backdrop of impressive beauty and
transparency. While nature may leave things to chance, the new industrial group
will take fate into its own hands when it goes public. The three business areas – Energy,
Chemicals, and Real Estate – will stand for stable dividends and growth potential.
The new company will create value for investors, employees, and customers.
왘 ACTIVE
Foreword
Management Report
Notes
Corporate Bodies
Major Shareholdings
White calcium terraces, Pamukkale, Turkey
05
06
Ambitious goals.*
*YIELD
Once it erodes, lava turns into fertile topsoil, providing a basis upon which new life can flourish.
But first the ground needs to be worked before it can bear fruit. The new RAG Beteiligungs-Group
has created this sort of basis with attractive business areas aimed at market and technological
leadership. Going public will accelerate growth of this young company.
왘 ACTIVE
Foreword
Management Report
Notes
Corporate Bodies
Major Shareholdings
Tea plantation, Mount Fuji (3,776 m), Japan, Honshu island
07
08
Forging the future from enormous potential.*
* C R E AT I O N
When primeval forces are at work, an island can arise from nowhere. New territory.
Thanks to its bold new strategic orientation, RAG Beteiligungs-AG has created
the backdrop for a new company. Going public will put a face on this potential.
왘 ACTIVE
Foreword
Management Report
Notes
Corporate Bodies
Major Shareholdings
09
Atolls of the Maldives
10
Ladies and Gentlemen,
Over the past three years, we have completely restructured RAG Beteiligungs-AG. The
move required resolve, persistence, and a dedicated adherence to our strategy. We streamlined our portfolio at a rapid pace and continued at high momentum to complete the
reorganization of our corporate structure. RAG Beteiligungs-AG today is a different company than it was just a few years ago. It possesses both substance and energy. The industrial enterprise now has a clear profile, is growth oriented and is creating value – for its
employees, its future shareholders and the state of North Rhine-Westphalia. Now we’re
ready for the next step. Going public, and the direct access to the capital market that this
will provide us, will fuel a new phase of profitable growth.
The complete acquisition of Degussa in 2006 was a crucial step for our company. We
were able to carry out the shareholder squeeze-out in the record time of just three and
one-half months. Degussa’s sale of its Construction Chemicals activities to BASF and the
sale of DBT GmbH to Bucyrus in the U.S. were other major milestones in an in-depth portfolio adjustment. These transactions embodied the best-owner principle, meaning that
they were executed by mutual consent with the employee representatives. This bodes well
for all employees, including those under the new owners.
Concurrently, we have been creating the framework for a modern, efficient company.
We will thus be able to reduce administrative costs significantly while structuring
management and service processes much more effectively. Our group will become faster
on its feet. The transformation of RAG Beteiligungs-GmbH into a publicly held company
(NewCo), the staffing of the NewCo management board, and the transfer of staff to the
new Corporate Center and Shared Service Center were pillars of our reorganization. Our
new structure now stands.
We were successful even during our last year of restructuring as the 2006 figures
impressively demonstrate. Group sales climbed 4 percent to €14.8 billion. EBIT surpassed
the billion euro mark, growing 11 percent to €1.2 billion despite the fact that Construction
Chemicals, Saar Ferngas, and DBT were reported as discontinued operations and were
not included in EBIT. We were also able to reduce net debt in the course of the year by
approximately €200 million to €5.4 billion. Making it all the more remarkable is the fact
that these figures already take into account the Degussa takeover.
The next tasks await us on our path to the capital markets in the weeks and months
to come:
쮿 Establishing a foundation to deal with inherited coal mining liabilities of unlimited
duration
쮿 Renaming the industrial group
쮿 Passing a coal mining financing law that will anchor the future of the German coal
mining industry and thus guarantee the principle of social compatibility (i.e., no forced
redundancies)
쮿 Listing NewCo on the stock exchange
ACTIVE
왘 Foreword
Management Report
Notes
Corporate Bodies
Major Shareholdings
From left to right: Dr. Alfred Oberholz (Chemicals), Dr. Klaus Engel (Chemicals), Dr. Alfred Tacke (Energy), Dr. Werner Müller (CEO),
Ulrich Weber (Human Resources), Dr. Peter Schörner (Real Estate and Controlling), Heinz-Joachim Wagner (CFO)
Our thanks go to all those involved in the political process, to the IG BCE trade
union, and to our shareholders who have supported us along the way. We also thank
our employees, whose commitment has brought the Group to where it is today. Our
planned IPO is a bold signal that expresses optimism about the future – of our company,
of all our employees and of the state of North Rhine-Westphalia.
Dr. Werner Müller, Chairman of the Management Board
11
12
Combined Management Report 2006
of the RAG Beteiligungs-Group and
RAG Beteiligungs-AG
This management report is a combined Management Report of RAG Beteiligungs-AG
and RAG Beteiligungs-Group. Due to the influence of the segments, statements made by
the RAG Beteiligungs-Group regarding developments within these segments also apply
to RAG Beteiligungs-AG. The consolidated financial statements were prepared in accordance with International Financial Reporting Standards (IFRS), and the separate financial
statements of RAG Beteiligungs-AG were prepared in accordance with the provisions of
the German Commercial Code (HGB).
THE RAG BETEILIGUNGS-GROUP: READY FOR THE STOCK MARKET
The goal is to float the RAG Beteiligungs-Group, which comprises the industrial activities
of the RAG Group, on the stock market. In recent years, we have undertaken a radical program of strategic realignment. What used to be a heavily diversified group of companies
has been transformed into a modern industrial enterprise, encompassing business areas in
the promising fields of energy, chemicals, and real estate. An important milestone in this
process was the takeover of Degussa in September 2006. In the course of strategic realignment, we have also divested ourselves of more than 480 companies that were operating in
areas outside of our core target markets. The combined annual sales of these companies
was in excess of €8 billion. More than one-quarter of these divestments were completed
in fiscal 2006. Furthermore, we implemented Project “Sirius”, which involved a comprehensive review and optimization of all management and service processes within the Group,
creating a flexible and powerful organization that is able to meet the challenges of
international competition.
Well positioned
The Chemicals business area of the RAG Beteiligungs-Group encompasses the operations
of Degussa. We are the global market leader in specialty chemicals and the third-largest
German chemicals company. The chemicals operations are broken down into 12 business
units, each of which is allocated to one of the three segments of Technology Specialties,
Consumer Solutions, and Specialty Materials. These segments represent the strong core
competencies of the Chemicals business area, and each brings together activities that
have comparable business models and similar factors determining their strategic success.
Our strategy is to achieve market leadership in all of our chemicals activities, an objective
that we have already achieved in more than 80 percent of our activities. In addition to our
strong customer focus, research and development are key elements in our bid to consolidate and build upon our global technological leadership. We already generate 20 percent
ACTIVE
Foreword
왘 Management Report
Notes
Corporate Bodies
Major Shareholdings
of our sales in the Chemicals business area from products that are less than five years old.
The Chemicals business area has production facilities in more than 27 countries. We intend
to benefit in the medium term, in particular, from the strong growth in Asia, Eastern
Europe, and Latin America.
The Energy business area covers the activities of STEAG. This is an area in which we
have been planning, building, and operating coal-fired power plants for nearly 70 years.
The total installed electrical output is around 9,000 megawatts. We are Germany’s fifthlargest power generator and operate eight coal-fired power plants across the country as
well as an additional three large-scale coal-fired power plants in Columbia, Turkey, and
the Philippines. Our key competitive strengths are technological leadership in coal-fired
electricity generation, decades of wide-range experience in the power generation industry,
a strong international profile, and an excellent reputation for putting together complex
project financing. We have also achieved a strong market position in the production of
energy from biomass and biofuel as well as in geothermal energy. We are the global leaders
in the use of mine gas for energy generation. Over the medium term, we aim to significantly strengthen our position in the power generation market. A key area in which we
hope to achieve this is the planning, financing, construction, and operation of coal-fired
power plants in Germany in line with the “Clean Competitive Electricity from Coal” (CCEC)
concept, which aims to optimize the use of resources and generate substantial cost
savings with exemplary efficiency. The laying of the foundation stone for the most modern
coal-fired power station in Europe in November 2006 in Duisburg-Walsum represented
a major step forward in this direction.
The Real Estate business area encompasses the operations of RAG Immobilien. This
business area focuses on leasing residential space to private households. With a total of
more than 65,000 residential units housing more than 150,000 people, we are one of the
largest providers of residential property in Germany. The high quality of our properties is
one of our key competitive advantages, and our vacancy rates are well below the industry
average. In the medium term, we plan to significantly expand this portfolio. We believe
the market for high-quality residential property in the Rhine-Ruhr area offers excellent
prospects, with industry forecasts anticipating long-term stable growth. We plan to round
out our portfolio with further acquisitions in the attractive Rhineland corridor between
Düsseldorf and Bonn.
Successful completion of Degussa takeover
Finalization of the Degussa takeover in 2006 represented a major step forward in focusing
our business portfolio. In January 2006, RAG Projektgesellschaft mbH made a voluntary
public offer to the shareholders of Degussa AG for their shares in the company. By the end
of March 2006, RAG Projektgesellschaft mbH had acquired direct and indirect shares representing more than 95 percent of the share capital of Degussa AG and began transferring
the shares of minority shareholders to the majority shareholder in return for adequate
cash compensation pursuant to Section 327a of the German Stock Corporation Act
(“shareholder squeeze-out”). The shareholder squeeze-out and conclusion of a control and
profit and loss transfer agreement with RAG Projektgesellschaft mbH was resolved by the
annual general meeting of Degussa AG held on May 29, 2006. Both resolutions took effect
upon entry in the commercial register on September 14, 2006. Trading in Degussa AG
shares was suspended at the close of trading on September 15, 2006.
13
14
Project “Sirius” creates lean and efficient Group structure
In line with our objective of putting the RAG Beteiligungs-Group on the stock market,
we initiated Project “Sirius” in the summer of 2005. The project focused on optimizing all
management and service processes within the Group. We were able to complete this
project in just 15 months. As a result, our Group has been managed by a strategic Corporate Center since January 1, 2007. Key employees from RAG Group headquarters and the
head offices of Degussa, STEAG, RAG Immobilien, and RAG Coal International along with
other Group companies were brought together in the new Corporate Center. At the same
time, the top-level companies in the subgroups were transformed into GmbHs (private
limited companies). The Corporate Center and the operating units are supported by RAG
Service GmbH, to which all company-wide support services such as administrative and
IT, purchasing, and payroll for RAG, Degussa, STEAG, RAG Immobilien, and RAG Coal International have been transferred. Around 4,700 employees were affected by the structural
changes, all of whom were assigned new tasks and functions within the Group. The
Group now has a much flatter structure with short decision-making routes between the
operating businesses and the head office, resulting in greater transparency and
significantly reduced administrative costs.
ECONOMIC ENVIRONMENT
The global economy
The global economy continued its growth trajectory in 2006, although the regional
centers of growth shifted. This was particularly true for the industrialized nations. The U.S.
economy lost some of its momentum from previous years, and the Japanese economy
remained at the moderate pace of expansion that began in the second quarter. In the
eurozone, however, the economic upturn gained further ground. The competitive position
of German companies improved perceptibly as a result of ongoing restructuring, which
helped to drive growth and significantly improved the competitiveness of the German
economy.
The overall strength of the European economy pushed the euro to a new high against
the U.S. dollar of USD 1.34 in December 2006 following a slight mid-year dip. Due to the
persistent weakness of the Japanese yen (JPY), the euro also appreciated substantially
against this currency over the course of the year, reaching a record high of JPY 157 at the
end of December 2006.
Producer prices rose by 5.5 percent in 2006. This was the strongest growth in 24 years,
primarily as a result of rising energy prices, which increased on average by 16 percent.
At the end of the year, the price of natural gas was almost 10 percent higher than at the
beginning of 2006. Oil markets witnessed an abrupt turnaround in the summer. Prices fell
from the high of USD 78 reached at the start of August to just USD 57 (Brent crude) at the
end of October. The main reasons for this sharp drop in the price of oil were an amelioration
of conditions at various crises points in the Middle East and the failure of the anticipated
season of fierce hurricanes to materialize in the Gulf of Mexico. These factors caused the
risk premium that had already been priced in by the market to decrease dramatically.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
The German economy continued to grow at a rapid pace, providing significant
impetus to the eurozone as a whole. The gross domestic product (GDP) grew by 2.9 percent in real terms, while consumer prices rose only 1.7 percent. As in previous years, growth
continued to be underpinned by strong export growth. Domestic demand also picked up
considerably. In the construction sector, capital spending increased in 2006 for the first
time in 10 years, and the economic growth increasingly benefited the labor market.
Europe as a whole experienced dynamic economic growth. Domestic demand picked
up dramatically on the back of the perceptible improvements in the labor market. The key
driver was capital spending, particularly in the construction sector. GDP increased in
Europe by 2.7 percent in real terms, while consumer prices rose 2.2 percent. Strong exports
underpinned growth, mainly in the new member states of the European Union. In Russia,
growth in real GDP is expected to be 6.5 percent for 2006. Due to the strong economic
data in the eurozone, the European Central Bank raised interest rates on five separate
occasions from 2.25 percent to the most recent rate of 3.5 percent in order to counter
inflationary tendencies.
Until the spring of 2006, the United States was one of the main engines driving global
economic growth. As the year progressed, however, growth in the U.S. began to lose some
of its momentum. In particular, a slight downturn in the real estate market had a curbing
effect on the economy as a whole. Nonetheless, real GDP rose by 3.5 percent in the U.S. The
increase in consumer prices was limited to 3.2 percent thanks to declining energy prices.
In Japan, the economic recovery continued at a steady pace, while consumer prices
saw further moderate growth. Production was driven by strong exports and steady
domestic demand, which was underpinned primarily by high levels of corporate capital
expenditures. Real GDP growth was 2.3 percent. The increase in producer prices reached a
historically high level due to increases in the price of raw materials and commodities
along with strong consumer demand.
Asia’s emerging economies experienced strong expansion in 2006, although growth
has declined slightly of late. Following rapid growth in the first half of the year, domestic
demand cooled in most of the region’s major economies, while foreign trade – particularly
within Asia – saw very strong growth. The smaller economies benefited the most from the
robust growth in intra-regional trade. Overall, foreign trade remained a key growth factor
for the region. China’s economy grew more strongly in 2006 than in the past 11 years,
achieving double-digit growth rates once more. In China and Hong Kong, real GDP rose by
10.7 percent in 2006, while an increase of 5.2 percent is expected for East Asian economies.
In recent months, prices in Asia have reflected the slight increase in inflationary pressures,
resulting in particular from higher commodity prices.
15
16
Growth momentum continued in Latin America in 2006, with real GDP forecast to
increase by 4.3 percent. This growth has been driven by the strong domestic demand seen
in most countries. As a leading producer of raw materials, Latin America has also benefited
from the strong price increases in commodity markets. The inflation rate continued to fall
and general economic conditions in the individual countries varied greatly.
Sectors
Germany’s chemical industry continued to grow in 2006 in the face of global economic
growth. The upturn in domestic demand was particularly encouraging, driven primarily by
industry and the construction sector. Overall sales revenues in the German chemical industry reached a level of €162 billion, while production of chemicals increased by 3.5 percent.
Commodity prices and energy prices stagnated at a high level. The good performance of
the chemicals industry enabled many companies in the sector to pass on most of the price
rises in energy and commodities to customers. Further price increases were observed for
primary chemicals in the petrochemicals sector. In contrast with the previous year, fine
chemicals and specialty chemicals benefited particularly strongly from the healthy economic growth. Worldwide, the chemicals industry increased production by 4.2 percent. The
growth rate in the EU was slightly lower at 3.6 percent. Asia experienced above-average
growth in production of 6.5 percent. Growth in the U.S. was substantially below the global
average at just 2 percent.
Although the energy sector was depressed by the regulation of the German electricity
supply business, the negative effect of this was more than offset by the increase in electricity and gas prices and the weather-driven boost in sales volumes at the beginning of
2006. Energy consumption in Germany rose in 2006 by 1.2 percent to 493 million tce (tons
of coal equivalent). Consumption of natural gas increased by 1.5 percent. The use of natural
gas for power generation increased by a hefty 4 percent. Consumption of diesel and heating oil increased, while sales of petroleum fuels and naphtha for the chemical industry fell.
Overall, oil remained by far the biggest source of energy, accounting for nearly 36 percent
of the total. The use of coal increased in both the electricity generation industry and the
steel industry, up 1.7 percent for the two industries combined. Coal covered 13 percent of
the total primary energy requirement in Germany. Hydroelectric and wind power generation declined, but power generation from wood, biofuel, and other renewable energies
increased. In total, renewable energies accounted for 5.3 percent of primary consumption,
up 16 percent from the previous year.
The German housing market has been experiencing something of a boom for the
past few years. Increasing amounts of foreign capital have flowed into the sector since
2004, and there is a growing trend toward the purchase of large blocks of residential housing. Over the past three years, approximately 550,000 homes have been acquired for a
total amount of some €20 billion. For the most part, the sellers have been local municipal
authorities and large companies. This illustrates the continuing trend for companies to
focus on their core business and the growing use of property sales by local authorities to
keep public sector finances in balance. Moreover, the fact that property prices in Germany
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
fell by 2 percent between 1995 and 2005 while rising substantially in other European
countries – in some cases by well more than 100 percent – is an argument in favor of
investing in the German residential property market. The market as a whole is characterized by long tenancy periods (10 years on average), low vacancy rates, and a low level of
new construction.
Legal influences on the Group
The new European policy on chemicals will take effect on June 1, 2007 in the form of the
REACH directive (Registration, Evaluation, and Authorization of Chemicals). The Directive
aims to improve safety in the handling of chemical substances with particularly dangerous
properties. These types of substances are used by nearly all companies in the manufacturing sector. For the chemicals industry, this new EU legislation on the registration, evaluation, and authorization of chemicals is the most significant regulatory development for
decades. REACH presents a tremendous challenge for the industry as its implementation
involves substantial additional costs and greater bureaucracy. Nevertheless, we welcome
this chemicals legislation as it allows us to plan our business with greater certainty.
One particularly positive aspect is that our in-house expertise will be better protected.
Implementing the Directive will, however, entail increased costs, primarily because of the
more stringent authorization procedures and the introduction of the screening test for
registration of substances that are toxic to reproduction.
In the Kyoto Protocol, the signatory states committed to reduce their collective
emission of greenhouse gases to an average of 5.2 percent below 1990 levels by the year
2012. For EU countries, the objective of a preventive climate policy is to achieve an
8 percent reduction. One policy instrument for working toward this objective is the issue
of emissions rights. In 2005, a new market was created in Europe with the launch of emission trading, which allocated emission rights to companies that operate relevant industrial plants. These certificates are only valid in the initial allocation period (2005 to 2007).
The current uncertainty about the future of emissions trading in the second allocation
period (2008 to 2012), the recent fall in commodity prices, and the unusually warm winter
in 2006 have pushed the price of emissions rights to a record low. At the beginning of
2006, the price reached almost €30 on the Leipzig electricity exchange, but by December
had fallen to €6.55 per certificate. Within the RAG Beteiligungs-Group, the Energy and
Chemicals business areas, in particular, are subject to emission trading. As a major energy
consumer, the Chemicals business area is also affected by the impact of emission trading
on energy costs.
17
18
RAG BETEILIGUNGS-GROUP OPERATIONS
The RAG Beteiligungs-Group operates in the attractive business areas of energy, chemicals,
and real estate. Under its new operational structure, the operating business is now broken
down into five segments: Technology Specialties, Consumer Solutions, Specialty Materials,
Energy and Real Estate.
Summary of business trends
We enjoyed considerable success in fiscal 2006, expanding our core business activities in
all regions. Sales rose by 4 percent to a total of €14.8 billion. EBIT improved by 11 percent to
€1.234 billion, with the Chemicals business area making a major contribution based on
higher sales volumes, high capacity utilization, and considerable success with cost-cutting
measures. Earnings in the Chemicals business area continued to suffer, however, from further increases in the cost of energy and raw materials relative to the previous year, as it
was only possible to pass on these cost increases to customers in the form of higher prices
to a limited extent. The Energy and Real Estate business areas also produced good results,
but did not match the results of the prior year, which had been enhanced by special items.
Total profit before tax nearly tripled to €1.502 billion, primarily as a result of gains on
the disposal of our Construction Chemicals activities.
Strong global presence
RAG Beteiligungs-Group operates around the world. In fiscal 2006, we generated 60 percent of our sales outside Germany, representing a year-on-year increase of 2 percentage
points in the share of sales generated abroad. In Germany, sales increased slightly to
€5.941 billion. Germany is our largest single market, accounting for 40 percent of total
sales. Sales in the rest of Europe increased by 5 percent to €3.788 billion, or 26 percent of
total sales. We also continued to grow our business in North America, achieving an 8 percent increase in sales to a total of €2.211 billion, or 15 percent of total sales. In Asia, our
business activities experienced considerable growth. Due to the first-time consolidation
of various companies, sales in Asia increased by 7 percent to €2.152 billion, likewise representing 15 percent of total sales. We also achieved significant sales growth in Central and
South America with a 14 percent increase in sales to a total of €469 million.
RAG Beteiligungs-Group: Sales by region
€ million
2006
2005
Germany
5,941
5,896
Rest of Europe
3,788
3,596
North America
2,211
2,050
Asia
2,152
2,006
Central and South America
469
411
Rest of world, consolidation
232
222
14,793
14,181
External Group sales (continuing operations)
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
The regional breakdown of employees as of December 31, 2006 reveals a similar
picture: 66 percent of our employees (28,593 people) work in Germany. The decline of
3 percentage points in the share of employees working in Germany compared with the
previous year is a result of divestments made during the year. A total of 4,379 people
were employed in the rest of Europe, equivalent to 10 percent of the total workforce (2005:
11 percent). In North America, the number of employees fell by 14 percent to 3,691. The
proportion of employees working in North America thus fell by 1 percentage point to
9 percent. In Asia, the number of employees increased by 48 percent to 5,757, bringing the
percentage of the workforce employed in Asia to 13 percent (2005: 9 percent). This was
attributable in large part to the first-time consolidation of joint ventures in China. In Central and South America, the number of employees dropped by 7 percent to 469.
RAG Beteiligungs-Group: Number of employees by region
2006
2005
28,593
31,272
Rest of Europe
4,379
4,929
North America
3,691
4,294
Asia
5,757
3,891
469
506
Germany
Central and South America
Rest of world
Number of employees (continuing operations)
286
304
43,175
45,196
Optimization of the business portfolio
In the course of focusing on the identified growth areas, we continued optimizing our
portfolio in fiscal 2006 and selectively expanding our core operations. In addition to the
takeover of Degussa – our most significant acquisition in 2006 – we divested ourselves
of various companies and acquired others.
In the Chemicals business area, transfer of our Food Ingredients activities to Cargill,
a U.S. firm in Minneapolis, which had been agreed in September 2005, was completed in
April 2006 after all authorizations had been granted. The Water Chemicals business was
also sold off in the spring of 2006 to another U.S. firm, Ashland Inc. We sold our Construction Chemicals activities to BASF AG, Ludwigshafen, effective July 1, 2006. Oxxynova GmbH
& Co. KG, Marl, was sold to a subsidiary of the ARQUES Group, Starnberg, in October 2006.
Raylo Chemicals Inc. in Canada and its Clover Bar location were sold to Gilead Sciences,
Foster City, California. At the end of December 2006, we divested ourselves of the
Industrial Chemicals business via two management buyouts. In China, we reinforced our
Chemicals activities by investing in several joint ventures.
In the Energy business area, our 76.9 percent share in Saar Ferngas AG was sold to
RWE Energy AG, Dortmund, effective December 31, 2006. The transaction, which will take
us out of the gas distribution business, has not yet been approved by cartel authorities,
however. Furthermore, 49.9 percent of our 100 percent stake in SOTEC was sold to BKB AG
Helmstedt, a 100 percent subsidiary of E.ON Kraftwerke GmbH with an option to sell the
remaining shares in 2008. We also acquired shares in Elektrocieplownia Zdunska Wola
Sp.z.o.o., Zdunska Wola, Poland, as part of our Zdunska Wola district heating project.
19
20
In the Real Estate business area, RIAG Gebäudemanagement GmbH was sold to GHH
Facility Management Holding GmbH, Osnabrück, and the operations of RAG Gewerbeimmobilien GmbH (RGI) were sold to COVER Projektentwicklung GmbH, Düsseldorf,
both effective January 1, 2007. Acquisitions included a large property portfolio in the
Cologne area consisting of more than 300 apartments, also as of January 1, 2007. We had
already begun adding to our portfolio in this region effective January 1, 2006, by taking
over the 3.86 percent minority share in Rhein Lippe Wohnen GmbH held by Deutsche
Annington Immobilien GmbH.
We also disposed of various non-core activities in fiscal 2006. The Electronic Systems
business, which included the STEAG HamaTech Group, was sold in January 2006. In
addition, we divested ourselves of the Mining Technology and Coal Specialties businesses
by selling our shares in DBT GmbH to Bucyrus International Inc., a strategic investor in
Milwaukee, Wisconsin, USA, at the end of December 2006 and reaching agreement
with a private investor to sell off Enerco Holding B.V.
The discontinued operations include Construction Chemicals, Gas Distribution, and
Mining Technology along with Food Ingredients.
Research and development to ensure the future
For a technology-driven industrial enterprise such as the RAG Beteiligungs-Group, research
and development (R&D) are of critical importance to future viability. Our R&D activities
are market driven. Particularly in the Chemicals business area, customer demands are
taken into account as early as possible in the design phase of new products and applications. Distribution and marketing partners are included in this broad cooperation in all
phases of research and development, increasing our chances of achieving successful innovations and shortening development cycles.
All of our R&D efforts are aimed at maintaining and expanding on the technology
leadership we have attained in many areas of specialty chemicals and in power plant technology. At the same time, advances in product and process quality are increasing efficiency
and contributing to improving added value, thus securing our strong position in the global
market.
Our R&D activities can be divided into two categories. Strategic research focuses on
establishing new businesses and developing future-oriented technology platforms. In the
Chemicals business area this occurs via interdisciplinary research activities, led by Creavis,
which concentrate on new technologies, applications, and system solutions for markets
promising above-average growth in the future. The majority of our R&D funds, however,
are invested in the individual segments in order to improve our products and applications.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
In the Chemicals business area, R&D expenditures in fiscal 2006 came to €304 million,
an increase of approximately 3 percent over the previous year. More than 2,300 employees
worked at more than 35 R&D locations all over the world. We increased our emphasis on
cooperation with universities and other institutions, in which we invested some €10 million
in 2006. Our patent applications increased by approximately 350 to nearly 20,000. Trademark registrations and trademark applications amounted to approximately 7,500. In
comparison with Chemicals, activities in the Energy business area have much longer development cycles and lower R&D momentum. The number of patents in the Energy business
area increased to around 200. We are currently researching new solutions in a total of
14 projects.
In the Chemicals business area, our strategic research involves four different concepts:
Project houses, internal start-ups, research on individual topics, and science-to-business
centers. We work on research topics of particular interest in our project houses, where
interdisciplinary teams of scientists work together on projects having a time limit of three
years. The project houses work in close collaboration with our business units and external
partners such as academia, research institutes, and customers. The end result of the
projects is commercialization within an existing business unit or as an internal start-up. By
contrast, the science-to-business center concept is guided by the idea of an intragroup
research company to facilitate the development of new business into finished products for
end users. All activities and resources – from fundamental R&D and product development
to pilot production – are combined under one roof in centers created especially for this
purpose. These centers house not only the equipment, laboratories, and pilot installations
we use for strategic development activities, they also serve as a common working environment for internal and external partners. This system ideally combines universities’
research capacities and industry’s practical expertise with the momentum and modern
technology of start-up companies.
The Nanotronics science-to-business center concentrates on developing system
solutions for the electronics industry based on nanomaterials. In the “Solar Cells” project,
flexible thin-layer solar cells are developed that have as much capacity as conventional
solar cells but can be manufactured much more inexpensively due to continuous production
processes. “Printable Electronics” focuses on the promising markets for radio frequency
identification tags (RFID), a technology that will revolutionize global logistics processes in
the near future. The “Transparent Conductive Films” project involves development of these
films, which are the main components of flexible display applications and mobile information, communication, and entertainment products. What all of these projects have in
common is that they use attractive “roll to roll” printing technologies, which enable
considerable cost reductions in comparison with the lithographic printing procedures
commonly used in the electronic industry. The nanotronics projects receive funding from
the German State of North Rhine-Westphalia and are co-financed by the European Union.
The objective of the new “Bio” science-to-business center is to expand on the
Chemicals business area’s already strong position in the area of white biotechnology.
The center benefits from advances in the field of bioprocesses already achieved in
the Biotechnology and ProFerm project houses. White biotechnology is primarily based
on achieving natural, biological resources using fermentation or enzymatic catalysis,
offering economically and ecologically promising alternatives to conventional industrial
21
22
processing. White biotechnology is currently making enormous progress based on
new findings in gene research and system biology in particular. This requires intensive
interdisciplinary collaboration between chemists, molecular biologists, geneticists,
microbiologists, information scientists, and process engineers. Together with universities
and industrial partners, some 60 highly qualified employees will create new types of
products manufactured using biotechnology in the fields of life sciences and cosmetics
and develop new production processes based on renewable raw materials. The RAG
Beteiligungs-Group is investing a total of €50 million in the “Bio” science-to-business
center over a period of five years. The biotechnology projects also receive funding from the
State of North Rhine-Westphalia and are co-financed by the European Union.
Internal control system
The internal control system of the RAG Beteiligungs-Group is based on an integrated,
value-oriented system of performance ratios made up of cash flow figures, ROCE (return
on capital employed), and value added. These internal management ratios serve to assess
the financial success of individual activities as well as the Group as a whole. We gauge
our progress against these ratios in aiming for the greatest possible growth in enterprise
value, thus securing the continued existence of the company, making us attractive to
investors, and securing our employees’ jobs.
ROCE measures the return received on capital employed. It assesses whether enough
returns are generated to pay for the costs of capital. If ROCE exceeds the costs of capital,
value added is generated. ROCE is calculated by dividing EBIT by the capital employed. The
value added results from the difference between ROCE and the costs of capital multiplied
by capital employed.
The costs of capital are computed using the capital asset pricing model (CAPM). We
review the premises upon which this calculation is based on an ongoing basis. A calculation of the weighted average cost of capital for the RAG Beteiligungs-Group results in a
figure of 8.0 percent before taxes.
In 2006, we generated ROCE of 8.8 percent, which is more than the costs of capital as
well as the ROCE for 2005 of 7.8 percent. The significant rise in EBIT was primarily responsible for this improvement. It should be noted that the capital employed includes the capital
commitment from the takeover of Degussa. Accordingly, value added in the amount of
€114.8 million resulted for 2006.
For corporate management purposes, return on capital employed is supplemented
by cash flow figures in order to optimize interest, taxes, and investments along with operating efficiency. Achieving positive cash flow over the long term has become one of our
central objectives. The most significant cash flow figures are cash flow from operating
activities and free cash flow.
For more information on cash flow in 2006, please see page 27.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
FINANCIAL PERFORMANCE
Sales trend
Sales of the RAG Beteiligungs-Group rose by 4 percent to €14.8 billion. The three segments
of the Chemicals business area contributed significantly to this growth. These segments
were able to continue expanding in a favorable global economy. The Chemicals business
area was also increasingly successful over the course of the year in passing on the considerable increases in the price of raw materials to customers. By contrast, sales in the Energy
segment declined. Sales for the Real Estate segment remained basically unchanged.
RAG Beteiligungs-Group: Sales by segment
€ million
2006
2005
Technology Specialties
4,806
4,264
Consumer Solutions
2,453
2,240
Specialty Materials
2,839
2,532
Energy
2,574
2,765
353
361
Real Estate
Other operations, consolidation
External Group sales (continuing operations)
1,768
2,019
14,793
14,181
Earnings trend
We increased EBIT by 11 percent to €1,234 million. The Technology Specialties and Consumer Solutions segments benefited from the price increases implemented, a rise in
volume sales, and noticeable cost reductions to generate earnings well above last year’s
level. The Specialty Materials segment slightly improved earnings amidst a corresponding
increase in quantities sold. In the Energy segment, EBIT declined but remained at a high
level due primarily to the sustained upward trend in power generation. The Real Estate
segment experienced a decrease in EBIT as a result of special items from the sale of
activities in the areas of land development and commercial real estate based on a change
of focus to residential real estate in 2005.
The net interest expense increased by €54 million to €479 million due to financing
costs for acquisition of the remaining Degussa shares.
Non-operating income from continuing operations amounted to – €702 million (2005:
– €424 million). The income generated in the amount of €447 million was offset by
expenses of €1,149 million. This income resulted primarily from the disposal of non-core
activities, including Raylo (Fine Chemicals), the 49.9 percent stake in SOTEC, and the reversal of provisions. Significant expenses related to provisions recognized for partial retirement schemes and personnel cuts in connection with the Group-wide Project “Sirius”.
Within the Chemicals business area, negative effects resulted from the “Degussa 2008”
project along with additional restructuring projects, expenses relating to the disposal of
non-core activities, and impairment losses. The loss of €424 million generated in 2005 was
due to divestment of non-core activities and impairment losses on assets with indefinite
useful lives in the Chemicals business area.
23
24
The pre-tax income from continuing operations of €53 million was less than the pretax income of €259 million achieved in 2005 due to non-recurring losses.
Pre-tax income from discontinued operations improved considerably to €1,449 million, primarily due to gains from the sale of Construction Chemicals and Food Ingredients
activities. This figure also includes the operating result from these two businesses until
their disposal plus the operating result from the Mining Technology and Gas Distribution
activities held for sale, which have not yet been divested. The previous year’s figure of
€261 million mainly includes the operating result from the above activities.
We nearly tripled our pre-tax profit to a total of €1,502 million (2005: €520 million)
due largely to profit from discontinued operations.
After subtracting the income tax expense of €351 million, net income after minority
interests had also risen considerably to €1,045 million (2005: €195 million). The income tax
rate fell to 23 percent (2005: 45 percent), given that the gains from the disposal of the
divested activities were largely tax free.
RAG Beteiligungs-Group: Reconciliation of EBIT to net income
€ million
2006
2005
EBIT
1,234
1,108
–
Net interest expense
– 479
– 425
–
Non-operating result (continuing operations)
– 702
– 424
=
Profit before taxes (continuing operations)
53
259
+
Profit before taxes (discontinued operations)
1,449
261
=
Profit before taxes (Group)
1,502
520
–
Income tax expense (continuing operations)
– 10
– 183
–
Income tax expense (discontinued operations)
– 341
– 49
=
Profit after taxes
1,151
288
–
Minority interests
– 106
– 93
=
Net income (Group)
1,045
195
FINANCIAL SITUATION
Efficient financial risk management
The RAG Beteiligungs-Group is exposed to financial risks as part of its normal business
operations and the resulting financing activities. Our financial management is aimed
at guaranteeing transparency, flexibility, and planning security in connection with risk
management in order to limit market risks, liquidity risks, and credit risks to benefit enterprise value as well as the earnings power of the Group. Our main objective is to guarantee
the solvency of the Group at all times. This aims to limit fluctuations in cash flow and
earnings without having to forego opportunities resulting from favorable market developments.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
To reach this goal, we have established a systematic financing and risk management
system consisting of internal guidelines that set out binding rules on action to be taken,
responsibilities, and controls in accordance with acknowledged best practice. Financial risk
management involves identifying and assessing all financial risk positions in the Group.
Targeted measures are implemented to hedge risks on this basis. Risk management is
undertaken centrally at RAG AG, which carried out all necessary functions for RAG Beteiligungs-AG until December 31, 2006. We pursue strict separation of the financial management and financial controlling functions as set forth in the Minimum Requirements for
the Trading Activities of Credit Institutions (MaRisk) commonly applied to banks and the
requirements of the German Control and Transparency in Business Act (KonTraG).
Due to price fluctuations, all financial instruments of the Group are exposed to the
possibility of impairment losses. In order to make a realistic assessment of this risk, valueat-risk and cash-flow-at-risk are determined on a regular basis. Value-at-risk and cashflow-at-risk quantify potential losses in market value of all non-derivative and derivative
financial positions in the event of extreme changes in the underlying interest rates and
exchange rates.
Financial risk management is supported by Group-wide treasury management
systems along with binding guidelines and principles. To mitigate financial risks, we enter
into hedging transactions, which also include the use of derivatives to hedge underlying
transactions. These derivatives are implemented exclusively for hedging purposes, i.e., only
in connection with the corresponding underlying transactions arising from ordinary business activities that have a risk profile opposite to that of the hedging instrument. The
derivative financial instruments employed are products common on the market such as
currency forwards and currency options, interest rate and currency swaps, and options
on swaps.
Commodity risks result from changes in the market prices of purchased raw materials. The business areas of the RAG Beteiligungs-Group are responsible for commodity management. Procurement risks are identified, and effective measures to minimize risks are
established. For example, price volatility is compensated by cost escalation clauses and
swap transactions.
Existing credit risks are systematically reviewed upon concluding a contract and then
continuously monitored. In the course of analyzing creditworthiness, maximum limits are
established for the respective contracting partners. This is essentially accomplished on the
basis of ratings given by international rating agencies and our own internal credit reviews.
Credit management also extends to derivative financial instruments, where a risk of
default exists in the amount of the positive fair value. This risk factor is minimized by the
high standards placed on the contracting partner with respect to creditworthiness.
Detailed information on the derivative financial instruments used and their measurement and accounting treatment may be found in the notes to the consolidated financial
statements under No. 16f (pages 94 and 95) and No. 22c (page 103).
25
26
Diversified financing structure
In fiscal 2006, we agreed on a syndicated credit facility at market conditions with a group
of German and international banks. The credit facility totals €5.25 billion and has a term of
5 years. The agreements with the banks stipulate that certain financial ratios must be
maintained, mainly with regard to debt in relation to EBITDA, capital cover, and interest
cover. We had no trouble meeting these ratios in fiscal 2006. The financing package served
to finance the acquisition of the 49.9 percent stake in Degussa. Shares in Degussa were
provided as collateral for the credit.
Intragroup cash and cash equivalents are concentrated in a cash pool at the level of
RAG Beteiligungs-AG. To meet short-term financing requirements, the sum of €2.25 billion
is available at RAG Beteiligungs-AG as a tranche of our syndicated credit facility with a
term until 2011. The credit facility was not drawn on in 2006. Moreover, bilateral credit
agreements totaling €600 million have been entered into for RAG Beteiligungs-Group,
€400 million of which were concluded directly with RAG Beteiligungs-AG. These credit
arrangements were not availed of in 2006.
For the “Walsum 10” power plant project, STEAG-EVN Walsum 10 Kraftwerksgesellschaft mbH has taken out project financing amounting to €615 million at market
conditions from a group of banks. As of December 31, 2006, approximately €60 million of
this financing had been drawn on. The build up will take place over the term of the project.
In August 2006, the Real Estate business area was granted a credit line of €600 million, which it utilized in full.
As of December 31, 2006, RAG Beteiligungs-Group had net financial liabilities of
€5.434 billion (2005: €5.649 billion). The main components of these liabilities are a credit in
the amount of €879 million that is part of the syndicated credit facility of RAG Beteiligungs-AG, a capital market bond issued by Degussa in the amount of €1.25 billion maturing in December 2013, real estate financing in a total amount of €1.5 billion, and project
financing in the Energy business area of €1.3 billion.
RAG Beteiligungs-AG has no significant off-balance sheet financing instruments that
could negatively impact current or future financial position, financial performance, cash
flow, or other items.
Capital expenditures
Our investment activities are intended to expand on our good market positions and
strengthen businesses and markets in which we see growth potential and opportunities
for high returns.
The total investment volume of the RAG Beteiligungs-Group rose significantly to
approximately €4.5 billion in fiscal 2006. Most of this sum – €3.5 billion – was attributed
to financial investments, including the takeover of Degussa, which accounted for €3.437
billion.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
RAG Beteiligungs-Group: Capital expenditures of continuing operations
€ million
2006
2005
227
238
Consumer Solutions
160
232
Specialty Materials
170
206
Energy
229
270
Real Estate
78
111
Other
95
137
959
647
312
1,194
700
494
Financial investments
3,536
174
Total capital expenditures
4,495
1,368
thereof within Germany
thereof international
1)
Additions to intangible assets (excluding goodwill due to consolidation), property,
plant and equipment, and investment properties
Investments in intangible assets, property, plant and equipment, and investment
properties decreased to €959 million from €1.194 billion in 2005. Investments focused on
Germany, which accounted for 67 percent of total investments in property, plant and
equipment. Capital spending in the Chemicals, Energy, and Real Estate business areas
declined due to divestments in these areas. Our objective is to allocate capital resources
optimally and invest in high-yield investment projects.
Detailed information on the accounting treatment of intangible assets, property,
plant and equipment, and investment properties may be found on pages 74 to 75 of the
notes to the consolidated financial statements.
Cash flow
Cash flow from operating activities remained nearly constant in 2006, declining slightly to
€1.098 billion from €1.147 billion in 2005.
Net investment expense increased to €733 million in fiscal 2006 (2005: €452 million),
primarily due to payments for acquiring long-term equity investments in the amount
of €3.536 billion (2005: €174 million), which mainly related to the purchase of the Degussa
shares. The cash outflow was countered by proceeds from disposals, which increased
considerably to €3.524 billion (2005: €458 million).
Cash flow from financing activities improved to – €232 million (2005: – €790 million).
Financial liabilities increased to €4.552 billion (2005: €1.935 billion), chiefly due to financing
the Degussa shares. These borrowings were offset by repayments of financial liabilities in
the amount of €4.654 billion (2005: €2.448 billion).
27
28
Cash and cash equivalents increased to €444 million as of year-end 2006 (2005:
€401 million).
RAG Beteiligungs-Group: Cash flow statement for continuing operations
(excerpt)
€ million
2006
2005
1,098
1,147
Cash flow from investing activities
– 733
– 452
Cash flow from financing activities
– 232
– 790
444
401
Cash and cash equivalents as of December 31
Please see page 62 in the notes to the consolidated financial statements for the
complete cash flow statement.
FINANCIAL POSITION
Total assets of RAG Beteiligungs-Group declined by more than €2.7 billion to €21.0 billion,
mainly as a result of the sale of Construction Chemicals and other activities. The maturity
structure of the balance sheet remained essentially unchanged. The share of non-current
assets in total assets amounted to 68 percent. Non-current assets are fully covered by
long-term financing when the share of non-current assets in total assets equals 48 percent and the equity ratio is 21 percent.
Non-current assets declined by €1.6 billion to €14.2 billion. The divestment of Construction Chemicals alone effected a decrease of €1.4 billion. An additional decline in
assets of €1.6 billion resulted from other disposals, particularly Water Chemicals, Food
Ingredients, and Raylo Chemicals. Another major factor in the decrease in non-current
assets was the reclassification of non-current assets from the discontinued operations of
Mining Technology and Gas Distribution to current assets in the amount of €1.3 billion.
Recognition of goodwill of €1.8 billion from purchase of the Degussa shares had the opposite effect, as did recognition of the majority of internally generated intangible assets
acquired in connection with acquisitions.
Current assets declined by €1.1 billion to €6.8 billion due to the disposal of Construction Chemicals (€0.9 billion) and other activities (€2.0 billion). Reclassifications of assets
from discontinued operations to non-current assets and disposal groups held for sale
served to increase current assets.
Equity declined by €0.9 billion to €4.3 billion, mainly as a result of the purchase of
the minority interests in Degussa. The share of equity attributable to this transaction
amounted to €1.6 billion. Nevertheless, the equity ratio remained nearly constant at
21 percent (2005: 22 percent).
Long-term debt declined by €1.0 billion to €10.2 billion. Of this amount, €0.5 billion
was attributable to the disposal of the activities sold. Short-term debt declined by €0.8
billion to €6.6 billion, primarily due to the divestment of Construction Chemicals (€0.4
billion) and other activities (€0.6 billion). Reclassifications of long-term debt of disposal
groups led to an increase in short-term debt of €0.8 billion.
ACTIVE
Foreword
Notes
29
Corporate Bodies
Major Shareholdings
RAG Beteiligungs-Group: Balance sheet structure
€ million
Non-current
assets
Current assets
Total assets
왘
왘
2006
2005
2006
2005
14,240
15,860
4,320
5,249
(68 %)
(67 %)
(21 %)
(22 %)
10,169
11,123
(48 %)
(47 %)
6,803
7,890
6,554
7,378
(32 %)
(33 %)
(31 %)
(31 %)
21,043
23,750
21,043
23,750
왗
Equity
왗
Non-current
liabilities
왗
Current
liabilities
TECHNOLOGY SPECIALTIES: THE SEGMENT AND ITS PERFORMANCE
Products manufactured in the Technology Specialties segment are processed primarily
by companies in the pharmaceuticals, chemicals, plastics, rubber, and paper industries.
These include organic specialty products and intermediate products that are important
components in the synthesis of pharmaceuticals and agrochemicals as well as input
materials for the plastics industry. Hydrogen peroxide, for instance, is an important bleaching and oxidation agent in the paper and pulp industry. Particle and filler systems based
on carbon blacks and fumed silicas are used in particular in the tire industry for rubber
reinforcement. The Technology Specialties segment comprises the five business units of
Building Blocks, Exclusive Synthesis & Catalysts, C4-Chemistry, Aerosil & Silanes, and
Advanced Fillers & Pigments.
This segment bundles the specialty technologies of the RAG Beteiligungs-Group in
organic and inorganic synthetic chemistry with expertise in particle and filler technologies. These are fields in which innovations occur rapidly. As a result, these technologies are
utilized for new, future-oriented activities such as nanostructured materials and new
processes for manufacturing solar silicon for photovoltaic installations. RAG BeteiligungsGroup is the world market leader with its special catalysts developed in-house for the production of biodiesel. Based on expertise in the production of hydrogen peroxide, a new
and innovative process for producing propylene oxide – an important base product in the
plastics industry – was developed jointly with a customer.
Technology Specialties takes its cue from the industries that buy its products –
responsiveness to customers is crucial both in production as well as in service and logistics. Consequently, numerous production facilities are operated accordingly in Europe,
North and South America, and Asia. In the coming years, Technology Specialties expects to
see sustained, above-average growth in the Asia-Pacific region. The outlook is also very
promising in the Eastern European countries of the EU.
30
Significant rise in earnings
Fiscal 2006 was very successful. Sales rose by 13 percent to €4.8 billion with quantities sold
increasing significantly. EBIT rose to €460 million, surpassing the 2005 level by 49 percent.
All five business units contributed to the earnings improvement. The Building Blocks business unit benefited from a perceptible rise in quantities sold as well as the success of cost
reduction measures to contribute earnings well over the previous year’s level. In the Exclusive Synthesis & Catalysts business unit, earnings rose primarily as a result of appreciably
lower expenses and depreciation and amortization due to restructuring measures and
increased quantities sold. The C4-Chemistry business unit was able to pass on most of the
significantly higher raw materials costs to customers, resulting in earnings over the previous year’s level. The Aerosil & Silanes business unit increased earnings considerably on
the back of a noticeable rise in demand, high capacity utilization, and cost savings. The
Advanced Fillers & Pigments business unit succeeded increasingly over the course of the
year in adapting sales prices to rising raw materials and energy prices. Earnings improved
markedly thanks to the significant increase in quantities sold and lower costs.
Earnings before interest, taxes, depreciation and amortization (EBITDA) in the Technology Specialties segment rose 19 percent to €829 million, with the EBITDA margin rising to
17.3 percent. ROCE improved from 7.3 percent to 11.8 percent thanks to the good operating
earnings trend and lower level of capital employed. It should be noted that these increases
occurred in spite of the fact that the takeover of Degussa negatively impacted EBIT and
ROCE, as a portion of the goodwill resulting from the acquisition was allocated to the
Technology Specialties segment.
Technology Specialties: Key financial indicators
€ million
2006
2005
External sales
4,806
4,264
EBITDA
829
696
EBIT
460
309
Capital employed (as of December 31)
3,886
4,212
EBITDA margin
%
17.3
16.3
ROCE
%
11.8
7.3
Technology Specialties’ investments in property, plant and equipment decreased slightly
to €227 million (2005: €238 million). Major projects involved expansion of manufacturing
facilities in the Building Blocks business unit in order to increase production of hydrogen
peroxide, a bleaching agent, to 70,000 tons per year in Barra do Riacho, Brazil. The Aerosil &
Silanes business unit will be expanding production capacities at the Rheinfelden location
until the end of 2007 due to increased demand for aluminum oxide. Aluminum oxide is
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
used in the photographic paper, coatings, and chip industries, for example. Advanced Fillers
& Pigments made good progress in expanding carbon black capacities. Capacity expansion
was completed in Qingdao, China, and expansion of the carbon black plant in Paulina,
Brazil, will be completed at the start of 2007. At the silica plant in Wesseling, several installations are being replaced as part of a modernization project that has been ongoing since
2006 and will be completed in 2007.
Technology Specialties: Capital expenditures
€ million
1)
2006
2005
227
238
Research and development
The Building Blocks business unit has developed a new hydrogen peroxide-based product
to fight microbes such as viruses, bacteria, algae, and plankton in ship ballast water. Called
PERACLEAN® Ocean, this product is entering the next test phase, making it the first active
substance to be granted approval for further testing in ship and land trials.
The C4-Chemistry business unit is launching a new rapid gelling agent, isononyl
benzoate (VESTINOL INB), on the market step by step. This softening agent will increase
the productivity of our customers in the PVC processing industry, especially in the production of floor coverings. When used together with our main softening agent, Di-isononylphthalate (DINP, VESTINOL 9), this new agent will enable savings in formulation
costs depending on the customer’s specific formulation. As opposed to competing
products used today, INB has been proven to be non-toxic to reproduction. This agent is
thus exempt from specific EU labeling requirements, making it a preferred alternative for
our customers, particularly in view of future EU chemicals legislation (REACH).
The Aerosil & Silanes business unit has developed a nanostructured indium tin oxide
(ITO) called AdNano® ITO that was awarded Degussa’s in-house innovation award in 2006.
AdNano® ITO combines transparency with electrical conductivity and absorption capacity
for infrared radiation. One possible application is transparent films to reduce sun insolation through car and building windows and thereby produce efficient heat insulation.
Introduction of new, dust-free aerosil granulates (AEROPERL®) will enable a broad spectrum of applications ranging from cosmetics to catalyst carriers in automotive catalytic
converters. Complex, modern chips are structured in many layers, all of which must be
absolutely even to avoid malfunction. Our newly developed nano-sized ceroxide meets the
requirements of the next generation of chips in the manufacture of semiconductors. This
substance is used in the critical step of chemical mechanical planarization (CMP) and
enables the individual, highly sensitive layers to be polished to an extremely fine finish.
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CONSUMER SOLUTIONS: THE SEGMENT AND ITS PERFORMANCE
The Consumer Solutions segment primarily serves customers in the consumer goods
industry in the areas of body care, hygiene and nutrition. It comprises three business units –
Superabsorber, Care & Surface Specialties, and Feed Additives – which use customized
substances and system solutions to produce shampoos that make hair smooth and glossy,
skin-protecting and age-defying creams, environmentally-friendly detergents, superabsorbent diapers, and animal feedstuffs with optimum nutritional properties.
The segment has extensive know-how in the area of applied interfacial and polymer
chemistry, which it puts into practice for industrial applications such as stabilizing
polyurethane foams or dosing crop protection products more economically. The high-quality specialty products and system solutions offered by Consumer Solutions often supply
our customers’ products with the extra added value needed to convince consumers to buy
their products. Intensive research and development and productive collaboration with
customers are among the factors contributing to our strategic success. Where necessary,
development partnerships closely link our business units with leading end producers.
Consumer Solutions intends to considerably expand its activities in the future. Examples of our expansion include the world’s largest DL-methionine facility, which was put
into operation in Antwerp in June 2006, along with the acquisition of the superabsorber
business from Dow Chemicals and expansion of superabsorber capacities in Germany and
the U.S. The Asian market is also of great significance, especially for the Feed Additives
business, which involves the essential amino acids DL-methionine, L-lysine, L-threonine,
and L-tryptophane for healthy and environmentally-friendly animal nutrition.
Earnings improve substantially
Sales in the Consumer Solutions segment rose by 10 percent to €2.453 billion. EBIT
improved considerably to €191 million (2005: €71 million). The Superabsorber business unit
reported higher earnings, compared to the previous year, based on increased quantities
sold. Increased demand, improved capacity utilization, and ongoing rationalization measures led to a rise in earnings in the Care & Surface Specialties business unit. The Feed
Additives business unit made increasing progress in adapting sales prices to the considerable rise in raw materials prices experienced already in the previous year while increasing
quantities sold, thus generating greatly improved earnings.
EBITDA in the Consumer Solutions segment rose by 50 percent to €374 million.
The EBITDA margin increased accordingly to 15.2 percent. ROCE grew from 3.3 percent to
8.8 percent based on the good operating earnings trend. It should be noted that the
increases occurred in spite of the fact that the takeover of Degussa negatively impacted
EBIT and ROCE, as a portion of the goodwill resulting from the acquisition was allocated
to the Consumer Solutions segment.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
Consumer Solutions: Key financial indicators
€ million
2006
2005
External sales
2,453
2,240
374
249
EBITDA
EBIT
191
71
2,161
2,144
EBITDA margin
%
15.2
11.1
ROCE
%
8.8
3.3
Capital expenditures in the Consumer Solutions segment decreased by 31 percent in 2006
to the current €160 million (2005: €232 million). The Superabsorber business unit expanded
superabsorber capacities at the Krefeld location and at two locations in the U.S. as well as
manufacturing capacities for acrylic acid, a raw material, at the plant in Marl. This business
unit has thus positioned itself for significant increases in demand from the market while
also securing backward integration of raw materials. Furthermore, the Superabsorber
business was acquired from Dow Chemicals in the U.S. The purchase covers production
facilities in Rheinmünster/Baden-Baden and a contract manufacturing agreement with
Dow’s Midland, MN location. In addition, Dow will supply acrylic acid, a key raw material,
to RAG Beteiligungs-Group under a long-term agreement. In the Feed Additives business
unit, the world’s largest DL-methionine facility in Antwerp, Belgium, is now fully operational with an annual production capacity of 120,000 tons. The new plant procures all
important preliminary products from integrated raw materials production to ensure the
highest possible degree of production efficiency as well as uninterrupted supplies.
Consumer Solutions: Capital expenditures
€ million
Capital
1)
expenditures1)
2006
2005
160
232
The Care & Surface Specialties business unit has introduced more than 30 new products
to the market. These include a new Wet Wipe concentrate that offers many advantages for
the growing cosmetic tissue market, as the cosmetic oils produced are especially skinfriendly and simple to manufacture. The emulsifiers used are manufactured using sustainable raw materials. Care & Surface Specialties also focuses on identifying substances that
positively affect age-related changes to the skin. In order to discover effective ingredients,
we implement the DNA chip technology developed in cooperation with the University of
Regensburg. This enabled us to find a new substance that has been proven to accelerate
skin regeneration and reduce wrinkles. Research on ionic solvents – basic liquid chemicals
with saline loading properties – has led to new fields of application ranging from fragrance
33
34
fixing to antistatic finishing of synthetics. The Care & Surface Specialties business unit
received Degussa’s in-house innovation award for TEGOSPHERE®, a new method for encapsulating active ingredients that ensures that the substances are released onto the skin at
exactly the right moment to improve absorption.
SPECIALTY MATERIALS: THE SEGMENT AND ITS PERFORMANCE
The materials manufactured by the Specialty Materials segment are used primarily for the
industrial production of durable industrial goods and capital goods, especially in the automotive, construction, aviation and aerospace industries. Customers utilize our high-quality
polymers as transparent plastics in the semi-finished products area, as resin and coating
additives, and as structural components for demanding applications in automotive and
aircraft construction. The Specialty Materials segment is made up of four business units:
Coatings & Colorants, High Performance Polymers, Specialty Acrylics, and Methacrylates.
The segment encompasses all business of the RAG Beteiligungs-Group involving highperformance materials, which hold leading competitive positions due to superior material,
processing, and application competence. Many of the products are manufactured in a
chemical production network on the basis of methyl methacrylate (MMA). The competitive
advantages of this integrated production structure enables to systematically penetrate
new application markets in specialized areas such as pharmaceutical polymers and optoelectronics. The business units focus on providing customer-specific solutions: The
approach not only emphasizes innovative products and application technology, but also
marketing and direct dialog with customers.
Specialty Materials intends to continue expanding its global market position. A major
integrated production network will be established by 2009 in Shanghai for this purpose.
This world scale facility will use MMA at an annual capacity of around 100,000 tons to
manufacture highly refined methacrylate specialty products and polymers. These are used
as components for a variety of products such as LCD flat screens, scratch-resistant, noncorrosive coatings, high-quality adhesives, modern automotive interiors, and numerous
plastics applications. The segment has for some time now operated in the high-growth
Asian region as a major supplier of high-quality preliminary products that fulfill the
highest of safety standards, such as background lighting for flat screens and transparent
noise control walls.
Significant increase in demand
Specialty Materials grew sales by 12 percent to €2.839 billion, with quantities sold
increasing considerably. EBIT increased 7 percent over the 2005 level to €250 million. The
Coatings & Colorants business unit was increasingly able to adapt prices to the higher
cost of raw materials. Earnings rose in comparison with the previous year amidst a significant rise in quantities sold. Strong demand led to a significant earnings increase in the
High Performance Polymers business unit. Earnings in the Specialty Acrylics business unit
also improved thanks to increased quantities sold and higher sales prices resulting from
passing on the costs of raw materials, some of which had increased considerably. The
Methacrylates business unit saw decreased earnings, however, as only some of the
increases in raw materials costs could be passed on to customers.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
The Specialty Materials segment generated EBITDA of €455 million, a rise of 7 percent
over 2005. The EBITDA margin decreased slightly to 16.0 percent. ROCE grew from
8.8 percent to 9.4 percent as a result of the improvement in earnings. It should be noted
that these increases occurred in spite of the fact that the takeover of Degussa negatively
impacted EBIT and ROCE, as a portion of the goodwill resulting from the acquisition was
allocated to the Specialty Materials segment.
Specialty Materials: Key financial indicators
€ million
2006
2005
External sales
2,839
2,532
455
426
EBITDA
EBIT
250
234
2,661
2,670
EBITDA margin
%
16.0
16.8
ROCE
%
9.4
8.8
Investments in property, plant and equipment of the Specialty Materials segment
decreased to €170 million (2005: €206 million). The Coatings & Colorants business unit has
expanded its entire production line for isophorone chemicals at the Herne location, with
the start of operation planned for 2007. This project entailed capital expenditures in the
high double-digit million range. Isophorone and the products derived from it are used in
many different areas. In a multi-step process, isophorone diamine and isophorone diisocyanate are derived from isophorone for use as solvent-free coatings for industrial flooring
and for the manufacture of light-resistant and weather-resistant automotive coatings
as well as high-quality car interiors. The base product, isophorone, is utilized as a special
solvent.
Specialty Materials: Capital expenditures
€ million
Capital expenditures 1)
1)
2006
2005
170
206
The Coatings & Colorants business unit has developed a new type of colorant system
called POLYTREND® that can be dosed in liquid form for dyeing plastics. This product was
developed in response to customer requests for a simplified process and offers a
previously unknown variety of colors. A total of 16 color-coordinated base colorants enable
plastics to be dyed directly during extrusion processing or injection molding.
New paint and coating raw materials now enable an emission-free alternative to
thermal curing for coil coating: UV curing. Almost no solvents are released in the UV curing
process, and it uses much less energy than thermal processes.
35
36
The High Performance Polymers business unit progressed with advances in its work
on very high viscosity, melt-proof VESTAMID® extrusion molding materials based on a
completely new technology platform, development of which began in 2005. Initial success
was achieved with the launch of VESTAMID LX9020 for the crude oil industry. Substantial
quantities of this innovative product have been sold since mid-year 2006 for the production of “umbilicals” – metal-sheathed conveyor lines extending from the ocean floor to the
drilling platform. This business unit anticipates consumption to continue rising significantly over the next few years.
The Specialty Acrylics business unit anticipates a high number of opportunities to
apply its oil additives in new applications, on the basis of biodiesel produced from palm oil.
Sales of biodiesel are increasing steadily due to rising oil prices and high demand. However, biodiesel made from palm oil exhibits very high pour points (+ 13°C), and therefore
requires an essential additive for use in automobiles or machines. As the world market
leader in pour-point depressants, the Specialty Acrylics business unit’s comprehensive
experience will facilitate further product development in this area. New polymerization
techniques for adhesives and additives allow customers to manufacture low-solvent and
solvent-free formulas. The markets targeted are coatings and colorants, adhesives, and
sealing compounds.
ENERGY: THE SEGMENT AND ITS PERFORMANCE
The Energy segment bundles commercial power and heat production activities with
power plant-related services. The Energy segment is the market and technology leader in
coal-fired electricity generation, it utilizes refinery byproducts for supplying energy, and is
increasingly active in the field of renewable energies. The total installed electrical output
is around 9,000 megawatts. Germany’s fifth-largest power generator operates eight coalfired power plants across the country as well as an additional three large-scale coal-fired
power plants in Columbia, Turkey, and the Philippines. Long-term provision and supply
contracts with key accounts secure sustained return on capital and stable earnings.
This segment’s competence covers the entire value chain of coal-fired power plants,
from planning and financing to construction and plant operation. Own in-house global
coal trading activities ensure that fuel is procured at low cost. The Energy segment offers
supply and disposal services for residues from power plants and industrial facilities. It also
has a strong competitive position in contiguous technologies such as the production of
energy from refinery byproducts, biomass, biofuel, and in geothermal energy generation.
The segment is the global leader in the use of mine gas for energy generation, and plans
to significantly expand this leading position over the medium term.
In the next few years, two new coal-fired power generation units with installed
capacities of 1,500 megawatts are to be built in collaboration with partners in Walsum and
Herne. The plants will be constructed using the innovative CCEC concept. In addition,
possibilities for developing further thermal power plant projects outside of Germany are
being reviewed. Electricity and heat production in biomass and geothermal installations
is another growth field that is being explored.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
Operating profit at high level
Sales in the Energy segment amounted to €2.574 billion in 2006, falling below the record
level of €2.765 billion achieved in 2005. This sales includes international coal trading
activities amounting to €830 million (2005: €973 million). Additional electricity generation
sales due to weather conditions and prices had a positive effect on segment sales.
Although EBIT decreased by 4 percent to €393 million; lower than the record earnings generated in 2005, it remained at a high level, thanks in particular to electricity production.
The Energy segment generated EBITDA of €495 million in 2006 (2005: €509 million).
The EBITDA margin increased to 19.2 percent. ROCE improved slightly to 15.9 percent (2005:
15.5 percent) due to a lower level of capital employed.
Energy: Key financial indicators
€ million
2006
2005
External sales
2,574
2,765
495
509
EBITDA
EBIT
393
411
2,473
2,653
EBITDA margin
%
19.2
18.4
ROCE
%
15.9
15.5
Investment in property, plant and equipment decreased 15 percent to €229 million in fiscal
2006 (2005: €270 million). In November 2006, the Energy segment put the Mindanao coalfired power plant into operation in the Philippines after a three-year construction period.
The project volume totaled USD 305 million, most of which was attributable to prior years.
This facility will supply electricity to the Philippine’s state energy supplier, the National
Power Cooperation (NPC), over a period of 25 years.
In June 2006, the Lünen biomass power generator was officially commissioned by
STEAG Saar Energie AG (majority stakeholder) and REMONDIS GmbH & Co. KG. The plant,
which has an installed capacity of 20 megawatts, was constructed in 18 months and will
process approximately 135,000 tons of matured timber from the region each year. The
project had an investment volume of more than €54 million.
In November 2006, STEAG Saar Energie and Michelin Reifenwerk officially commissioned the new central power plant at Michelin’s Bad Kreuznach plant. The 10 million euro
project was realized within 14 months. The plant has been able to lower its energy costs
and carbon dioxide emissions substantially by installing a gas turbine and replacing steam
boilers. STEAG Saar Energie has been contracted by Michelin to operate the plant for the
next 12 years.
Energy: Capital expenditures
€ million
1)
2006
2005
229
270
37
38
The Energy segment’s R&D activities are aimed at ensuring a secure, economic, and environmentally-friendly supply of energy. To this end, the segment is involved in the German
Federal Ministry of Economics and Technology R&D program, CO2 Reduction Technology
(COORETEC), together with other power plant operators such as E.ON, RWE, Vattenfall,
and EnBW as well as universities and major research centers. The program aims to reduce
greenhouse gas emissions in the short to medium term by increasing efficiency and to
develop and market technologies for cost-effective separation and storage of CO2 from
exhaust gas (carbon capture and sequestration) in the long term.
In order to further increase the efficiency of coal-fired power plants, it is necessary to
raise steam temperatures to over 700°C. This can only be accomplished using nickel-based
steel alloys. Examples of this type of research in connection with COORETEC involve studying the characteristics of nickel-based alloys such as strength and deformation behavior,
corrosion and slag behavior, and the non-destructive testing of the alloys. The projects run
for approximately four years beginning in 2006.
Another project to increase efficiency and raise effectiveness that the segment is
working on in collaboration with other partners is the COMTES 700 project subsidized by
the Research Fund for Coal and Steel (RFCS) as a joint EU project. This project also aims
to increase permissible steam temperatures to over 700°C. To accomplish this, the world’s
largest testing facility incorporating components from new, high-capacity materials has
been installed at the Scholven power plant and operated for more than 5,000 hours to
date. The tests, which have been conducted in close cooperation with manufacturers,
represent a milestone on the path to achieving a coal-fired power plant with an efficiency
factor of more than 50 percent. The costs for a 700°C, 400 megawatt power plant are
being calculated in a pre-engineering study supported by the State of North Rhine-Westphalia. The objective is to construct a demonstration facility between 2010 and 2012.
The Energy segment is also developing resource-friendly concepts for power plants
to enable secondary fuel burning and the use of biomass. In order to implement these
types of facilities and take advantage of the economic benefits they offer, a competency
network for fuel and power plant firing has been established. The Energy segment is a
major player in this network of universities and industrial enterprises, contributing its own
valuable expertise in hot gas purification gained in a project on pressurized pulverized coal
combustion.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
REAL ESTATE: THE SEGMENT AND ITS PERFORMANCE
The Real Estate segment focuses on residential real estate with an emphasis on leasing
residential units to private households. The segment also actively manages its housing
portfolio. A small portion of the housing portfolio is sold each year based on comprehensive analyses that take into account cost effectiveness, expected future maintenance
expenses, regional focuses, and the state of repair of the buildings. The segment rounds
out its activities with the development and construction of turn-key single family homes,
duplexes, and condominiums to be sold to end users and investors.
Nearly the entire housing portfolio is located in North Rhine-Westphalia. Significant
locations are Essen as well as the regional companies in Dortmund, Duisburg, and
Herzogenrath. With a total of more than 65,000 residential units, RAG Beteiligungs-Group
is one of the largest residential property companies in Germany. The high quality of our
properties is one of our key competitive advantages, and our vacancy rates are well below
the industry average.
The medium-term strategy of the Real Estate segment focuses on expanding the
achieved position. The segment thus plans to supplement its portfolio with further
acquisitions in the Rhineland corridor between Düsseldorf and Bonn that offer attractive,
long-term value growth potential. We also plan to reduce the portfolio by approximately
2.5 percent each year as part of portfolio optimization.
Sales nearly constant
Sales of the Real Estate segment fell by 2 percent from the previous year to €353 million.
EBIT for fiscal 2006 decreased by 14 percent to €112 million in comparison with the previous year, since the figures for 2005 included special income from the sale of land and
commercial real estate based on a change of focus to residential real estate. Expenses for
reorganizing business processes had a negative impact in 2006.
EBITDA for the Real Estate segment fell 10 percent to €155 million, and the EBITDA
margin decreased to 43.8 percent. ROCE decreased from 7.7 percent to 6.5 percent based
on an increase in capital employed.
Real Estate: Key financial indicators
€ million
2006
2005
External sales
353
361
EBITDA
155
173
EBIT
112
130
1,729
1,679
EBITDA margin
%
43.8
47.8
ROCE
%
6.5
7.7
39
40
Capital expenditures in the Real Estate segment declined to €78 million in 2006, down
from €111 million in 2005. The segment conducted a major investment project in the
Cologne region in order to increase the Company’s presence in this attractive residential
property market. Major real estate holdings consisting of more than 300 residences were
purchased in this region at the close of 2006/start of 2007.
Real Estate: Capital expenditures
€ million
1)
2006
2005
78
111
OTHER OPERATIONS
The Group’s other continuing operations include tar refining activities and various other
non-core activities as well as Degussa’s Corporate Center, the Creavis research company,
and the service areas of Degussa.
Other Operations: Key financial indicators
€ million
2006
2005
External sales
1,768
2,019
– 13
– 91
– 96
– 211
EBITDA
EBIT
Sales from other continuing operations decreased to €1.768 billion in 2006 from
€2.019 billion in 2005. The decline resulted from various divestments, in particular of the
Bakelite Group and of STEAG HamaTech. EBIT improved to a loss of €96 million (2005:
loss of €211 million). The good performance of the foreign tar refinery companies, which
benefited from the rising trend in the aluminum and chemicals industry, as well as site
services in Marl, was offset by higher costs for Degussa’s Corporate Center, expenses for
various intragroup projects carried out by Degussa, and strategic research expenses.
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
ECONOMIC SITUATION OF RAG BETEILIGUNGS-AG
RAG Beteiligungs-AG, with registered offices in Essen, has a central, coordinating function
in the RAG Beteiligungs-Group. RAG Beteiligungs-AG holds the shares in the companies
belonging to the Group either directly or indirectly. In fiscal 2006, RAG Aktiengesellschaft
(RAG AG), Essen, was the sole shareholder of RAG Beteiligungs-AG. RAG Beteiligungs-AG
was created on October 11, 2006, when RAG Beteiligungs-GmbH was transformed into an
AG (public limited company). In its initial session on September 14, 2006, the Supervisory
Board of RAG Beteiligungs-AG appointed Dr. Werner Müller, Dr. Klaus Engel, Dr. Alfred
Oberholz, Dr. Peter Schörner, Dr. Alfred Tacke, Ulrich Weber, and Heinz-Joachim Wagner to
the Management Board of RAG Beteiligungs-AG with immediate effect and named
Dr. Werner Müller Management Board Chairman.
The separate financial statements of RAG Beteiligungs-AG were prepared in accordance with the accounting principles of the German Commercial Code (HGB).
The financial performance of RAG Beteiligungs-AG was characterized by a significant
rise in net investment income to €2.181 billion (2005: €264 million), primarily due to the
high profits generated from the divestment of subsidiaries. Net interest income was considerably weaker, mainly as a result of borrowings to finance the Degussa takeover. Profit
from ordinary activities reached a record level of €1.904 billion (2005: €260 million). After
making allocations to reserves, profits of €221 million were transferred to RAG AG.
RAG Beteiligungs-AG: Income Statement
€ million
2006
2005
Net investment income
2,181
264
– 208
– 59
41
75
Net interest expense
Other operating income
Other operating expenses
46
12
Write-downs of investments
64
10
1,904
260
74
0
221
102
1,609
157
Profit from ordinary activities
Taxes
Profits transferred under a profit and loss
transfer agreement
Net income
Total assets of RAG Beteiligungs-AG more than doubled in the year under review,
totaling €10.650 billion at year-end 2006 (2005: €4.960 billion). One reason for the
increase was a restructuring of financial clearing in the Group. In December 2006, responsibility for financial clearing for the RAG Beteiligungs-Group was shifted from RAG AG to
RAG Beteiligungs-AG. Since then, RAG Beteiligungs-AG has acted independently in the
capital market, a situation which has contributed to the increase in receivables and other
41
42
assets to €2.791 billion (2005: €335 million) as well as in liabilities to €6.795 billion
(2005: €2.675 billion). The takeover of Degussa by RAG Beteiligungs-AG and its subsidiaries
essentially resulted in an increase in financial assets to €7.775 billion (2005: €4.606 billion).
Equity increased in the amount of net income by €1.609 billion to €3.849 billion. This sum
was taken to revenue reserves, with €47 million allocated to the statutory reserve and
€1.562 billion to other revenue reserves.
RAG Beteiligungs-AG: Balance Sheet
Assets
€ million
Non-current assets
Dec. 31, 06 Dec. 31, 05
7,775
4,606
Financial assets
7,775
4,606
Current assets
2,875
354
Receivables and other assets
2,791
335
84
19
10,650
4,960
Cash and cash equivalents
Equity and liabilities
€ million
Equity
Dec. 31, 06 Dec. 31, 05
3,849
2,240
Issued capital
466
466
Capital reserve
720
720
2,663
1,054
6
45
Revenue reserves
Provisions
Liabilities
6,795
2,675
10,650
4,960
Cash flow from operating activities decreased to – €37 million in fiscal 2006. The
decline in comparison with 2005 resulted from a substantial increase in interest expense
based on financing the Degussa purchase. Cash flow from investing and financing activities for 2006 was also heavily affected by acquisition of the remaining Degussa shares.
RAG Beteiligungs-AG: Cash flow statement (excerpt)
€ million
2006
2005
– 37
50
– 3,233
568
3,335
– 599
84
19
Cash and cash equivalents as of December 31
ACTIVE
Foreword
Notes
Corporate Bodies
Major Shareholdings
As in the previous year, RAG Beteiligungs-AG had no employees in fiscal 2006. All necessary functions were performed by employees of RAG AG in fiscal 2006. As of January 1,
2007, employees were transferred to RAG Beteiligungs-AG, primarily from RAG, Degussa,
STEAG, RAG Immobilien, and RAG Coal International. Since then, all management and control functions have been carried out by the Corporate Center of RAG Beteiligungs-AG. At
the end of January 2007, RAG Beteiligungs-AG had 447 employees.
HUMAN RESOURCES
The primary objective of Project “Sirius” was to create a modern, integrated industrial
enterprise able to meet the requirements of the capital markets. Project “Sirius”, which
focused on optimizing all management and service processes in the Group, affected some
4,700 employees in various administrative units. The comprehensive restructuring of the
Group presented human resources with great challenges. A wide variety of tasks were
required, some of which extended into 2007. These included allocating employees within
the new Group structure and creating standardized remuneration systems. We developed
and implemented the entire restructuring process, including development of personnel
policies in terms of change management, in a constructive partnership with our employee
representatives and the industrial trade union for mining, chemicals, and energy.
2006 Employee Survey: Ponder. Propose. Participate.
Some 46,000 employees in 52 countries speaking a total of 16 languages were called upon
to take part in the 2006 Employee Survey conducted under the slogan of “Ponder. Propose.
Participate.” A total of 70 percent of those surveyed took the opportunity to express their
opinions. Especially during a time of radical change, this high participation rate shows just
how active our employees are in contributing to the restructuring process.
Our employees consider the Group to be well-positioned for further development.
They give us particularly good marks for technical competency, entrepreneurial activities,
and our willingness and ability to implement changes. On the whole, the employees surveyed felt that the quality of management had improved in their specific working areas –
an indication that the improvements called for in the last survey have taken effect. However, the process of strategic restructuring has led to some uncertainties. Some employees
expressed a desire for improvements in opportunities, for employee development and
their working conditions.
We will study the results of the survey very carefully and initiate the appropriate
measures, all of which should be devised by the spring of 2007 in order to be able to continue on our path toward a common identity.
Taken as a whole, the results of the survey clearly indicate the areas in which the
Group has already succeeded and those where there is still room for improvement. This
knowledge is of incalculable value for a Group intent on actively shaping its future.
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Employee profit sharing plans
The concept of allowing employees to participate in the profits of a company is not new.
Nonetheless, many German companies do not offer any such possibilities, a situation that
has recently been the subject of political discussion. RAG Beteiligungs-AG is planning to
introduce a nationwide employee profit sharing plan. This will allow our employees in Germany to participate directly in the financial success of the Group as well as promoting a
basic understanding of concerns related to the capital markets.
Incentive and compensation systems
Profit and target based remuneration components are crucial elements of modern
compensation systems. At present, a total compensation package is being developed that
will reflect the individual achievements of our employees, the success of the Company
and offering incentives for our staff to increase productivity and value added. This compensation will form a critical foundation for reaching our corporate goals.
Company pension plans
Individual responsibility is playing an increasingly central role in securing a high standard
of living, even with respect to retirement. This is why the subject of retirement benefits
and the selection of employer-financed retirement models is so important to employees.
This issue is all the more crucial in consideration of the fact that statutory pension benefits are being steadily reduced. The RAG Beteiligungs-Group offers a broadly based retirement portfolio that allows employees to make selections based on their individual needs.
For more information on defined benefit obligations with regard to company pension
plans, please see No. 20 of the notes to the consolidated financial statements, pages
98 to 100.
Employee and management development
In the course of restructuring the Group, decisions were made on the staffing of future
management positions in the summer of 2006. This represented a milestone in systematic, Group-wide succession planning.
In addition, the process of defining areas of responsibility for employees in executive
positions was begun throughout the Group. This process is of crucial importance to the
successful future of the Group and will affect all Group management tools such as
employee reviews and target setting, forming a basis for lasting and successful employee
and management development.
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Another element in preparing executive staff and employees in all Group functions to
meet the challenges of the future is the Business Academy, which was initiated in 2006 in
cooperation with the University of St. Gallen in Switzerland. The Business Academy offers
a platform for discussing topics of strategic relevance to the Group. The Academy is based
on the concept of an interactive network to convey experience and knowledge of best
practices.
Vocational training
Vocational training is an important element in securing the future of the Company in
all business areas. It also makes a major socio-political contribution to reducing unemployment among young people. Our ratio of apprentices to employees of approximately
7.4 percent puts us in the lead among German industrial companies. In the summer of
2006, we hired 730 young people at the start of their professional careers to fill our own
human resources needs. In addition, some 30 apprentices were hired on behalf of third
parties.
Another 75 young people were offered the opportunity to work towards achieving
the qualifications for a future apprentice position. In September 2006, we added another
50 apprenticeships in response to the call from regional and federal governments to
create more positions for trainees.
All in all, in 2006 we offered career perspectives to some 2,590 young people.
Workforce
As of December 31, 2006, a total of 43,175 people were employed by the Group. The
number of employees in continuing operations decreased by 2,021. The Group employed
12,050 less people than at year-end 2005. The decline was mainly due to the disposal
of Construction Chemicals and Food Ingredients, which reflected the comprehensive
realignment and continued streamlining of the Group’s portfolio.
RAG Beteiligungs-Group: Number of employees
2006
2005
14,296
13,388
5,542
6,405
Specialty Materials
7,264
7,345
Energy
4,890
4,741
630
681
Consumer Solutions
Real Estate
Other operations
10,553
12,636
Number of employees (continuing operations)
43,175
45,196
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NON-FINANCIAL PERFORMANCE INDICATORS
To ensure the long-term financial success of our enterprise, all relevant aspects of
environmental protection, safety, and health must be given full consideration. Only
through steady growth, in which social values are placed on an equal footing with
financial aspects, will we be able to fulfill our social responsibilities.
Occupational health and safety, environmental protection
An integrated management approach forms the basis for sustained development of
occupational health and safety as well as environmental protection. This approach must
be implemented consistently in order to further the process of steady improvement and
meet our high standards for modern occupational health and safety and protection of the
environment.
Based on the guidelines developed for the Group, we have developed a joint policy for
occupational health and safety and environmental protection. The principles and guidelines, which are binding for the Group as a whole, illustrate the way in which we define our
social and ecological responsibility. At the same time, these principles and guidelines offer
a clearly defined scope of action for all responsible parties.
In 2006, we began recording on-the-job accidents in accordance with international
standards in order to improve transparency in the area of work safety. We hope to achieve
more precise information on how accidents occur through this process. The frequency of
accidents per one million working hours equaled 4.1 in fiscal 2006. This figure can not be
directly compared with figures from prior years since previous figures involved on-the-job
accidents resulting in an incapacity to work of more than 3 calendar days.
Climate protection and emissions trading system
We place great emphasis on a responsible approach to the environment and natural
resources. The need to protect the global environment is particularly important in an
industrial enterprise focusing on chemicals and energy, which is why we have underlined
this approach in our environmental protection guidelines that are binding for the entire
Group.
In the Energy segment, the efficiency increases in fossil-fuel power plants and combined heat and power generation in particular are aimed at reducing CO2 emissions and
utilizing scarce energy resources more efficiently. The segment is also active in the area of
energy production from mine gas, biomass, and geothermal energy. Extracting energy
from renewable resources contributes to reducing greenhouse gas emissions. In addition,
the Energy segment develops and implements climate protection projects in the form of
joint implementation projects in Eastern Europe and in accordance with clean development mechanisms in China.
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Production in the three segments of the Chemicals business area is energy intensive
and utilizes large quantities of raw materials. For this reason, production processes are
continuously optimized, and resources are used sparingly. The Chemicals segments also
contribute to climate protection by developing new products and technologies, for example on the basis of renewable raw materials. In the Real Estate segment, high priority is
placed on optimizing the energy use of existing homes, and energy efficient construction
is given precedence in new building projects.
In the Technology Specialties, Consumer Solutions, Specialty Materials, and Energy
segments, many of our plants are directly subject to EU directives regarding CO2 emissions. Most of the plants concerned are part of the Energy segment. In fiscal 2006, we
emitted approximately 27.7 million tons of CO2 from plants subject to the Emissions
Trading Directive.
Health management
RAG Beteiligungs-Group operates a modern occupational health management system.
This system is able to respond to changing conditions such as demographic transformation and increasing sensitivity to potential health risks emanating from production
and products, and its benefits go far beyond traditional health promotion, i.e., care of
individual employees through Group medical services. Occupational health at the RAG
Beteiligungs-Group is leading the way among German industrial companies. Our system
is characterized by individual healthcare along with future-oriented, innovative health
prevention measures. Our occupational health program is closely linked to scientific health
research, which is carried out by our Institute for Industrial Science in collaboration with
the Institute for Industrial Medicine, Social Medicine, and Social Hygiene of the University
of Cologne hospital.
RISK REPORT
The risk management system of RAG is based on the integration of the risk management
process into existing planning, management, control, and reporting processes on all levels
of the Group. This applies to both the consolidated financial statements of RAG Beteiligungs-Group and the separate financial statements of RAG Beteiligungs-AG.
Risk strategy
Risk management is a central component of our value-oriented corporate management
and serves to deliberately safeguard existing and future profit potential through comprehensive risk and reward management. Our strategic corporate planning enables us to
consider potential risks and rewards in our long-term corporate decisions and to gear our
portfolio management as well as operating business planning toward these risks and
rewards. We enter into business risks only when we are convinced that doing so will lastingly increase enterprise value and that any possible effects will remain manageable. We
look to the risk-adjusted, segment-specific costs of capital as indicators, and we concentrate our business activities on our Group’s core competencies. We thus create a basis for
responsible corporate conduct in the sense of finding a balance between the interests of
limiting risks and the goal of adding value.
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Development and organization of risk and reward management
The objective of our risk management is to recognize risks and rewards early on, to assess
their effects, and to introduce suitable risk prevention and hedging measures, including
risk monitoring. We ensure that our targets are reached by implementing standards
throughout the Group. The RAG Beteiligungs-Group has a Group-wide internal risk monitoring system. This system includes organizational risk hedging strategies and internal
monitoring systems along with a Group internal audit team that acts in a monitoring and
advisory capacity independent of specific processes. Risk management also involves independent regulations set out in binding guidelines that are implemented as part of the risk
monitoring process. Essential elements of the monitoring process are Management Board
meetings, dialog regarding targets, strategic and operational planning, preparation of
investment decisions, and monthly management reporting. The results of risk inventories
conducted at least once annually in the organizational units are incorporated into the
planning process. The monthly reports serve to communicate current risks and rewards to
the entire Group. In addition, any risks arising unexpectedly are communicated directly
to the departments responsible outside of normal reporting channels. Risk management
at RAG follows the principle that primary risk responsibility lies with the organizational
unit, which as the risk owner is responsible for early detection, risk management, and risk
communication. Within the organizational units, risk management agents are in charge of
coordinating risk management activities and ensuring that risks are communicated to
the next level. Risk management is rounded out by a risk committee and a Group working
party for risk management that are coordinated by the risk management agent of the
RAG Group, which assumed responsibility for this function as of December 31, 2006, also
on behalf of the RAG Beteiligungs-Group.
In fiscal 2006, the RAG Group’s internal audit department continued its review of the
risk management systems of a number of organizational units of the RAG BeteiligungsGroup and established that statutory and corporate obligations were being met. In addition, the risk management system was included in the audit of the consolidated financial
statements in accordance with procedures for publicly listed stock corporations. The
audit found that the risk early warning system of the RAG Beteiligungs-AG is capable of
identifying at an early stage any events that could jeopardize the continued existence
of the Company.
Risks relating to the market and competition
Because of the nature of its activities, the RAG Beteiligungs-Group is exposed to constantly changing political, social, demographic, legal, and economic circumstances both in
Germany and abroad. We counteract the risks arising from these circumstances by closely
observing the political and economic climate, anticipating market developments, and
consistently developing our portfolio in line with the Group strategy. One area in which
risk is concentrated is indicated by the intense competition in the various market segments. In the Chemicals segments, in particular, competition from low-wage countries
with aggressive pricing policies leads to major competitive pressure. We respond to this
pressure by increasing regional diversification, expanding our production base, and tapping new markets in regions with high growth rates such as China and Eastern Europe.
The affected operating business units also reduce competitive pressure by implementing
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measures to increase customer ties, particularly strategic research partnerships with
customers, and by undertaking customer relationship management and improving cost
positions as well as the services offered. In the Energy segment, adverse effects may result
from the overall energy policy situation, which may entail legislative intervention for the
purpose of market regulation and climate policy restrictions. Particularly worth mentioning in this context are future regulatory measures aimed at further reducing CO2 levels,
although it should be noted that our own efforts already focus on reducing specific CO2
emissions at our power plants by means of additional efficiency increases and innovative
technologies. In the Real Estate segment, a strategy based on a combination of modernization, demolition, new construction, and the targeted acquisition of attractive housing
stock is used to counter potential adverse effects on the sustainability and earnings power
of the housing portfolio due to regional or demographic factors and take advantage of the
continued profitable growth of this segment. We are counteracting the intense competition in the German real estate market, which has been exacerbated by foreign investors,
by honing our profile as an alternative municipal partner and improving operating management of our residential portfolio.
Risks relating to production and the environment
As an industrial enterprise, the RAG Beteiligungs-Group is subject to risks arising from
business interruption, quality issues, and unexpected technical difficulties as well as risks
related to product safety, occupational health and safety, and the environment. Groupwide guidelines on project and quality management, product safety, occupational health
and safety, and environmental protection ensure that risks are effectively reduced. Business interruption insurance has been taken out to cover the risk of production interruptions. In addition, all production processes are certified in accordance with international
standards and constantly developed and improved, installations are carefully maintained,
and employees receive suitable and advanced training. Sufficient accounting provisions
have been made for any necessary rehabilitation of contaminated sites. As an enterprise
with significant activities in the chemical industry that is aware of its responsibility, the
RAG Beteiligungs-Group operates these processes in accordance with the global responsible
care initiative of the chemical industry.
Procurement risks
Potential risks may also arise based on the availability of raw materials and energy as
well as primary and intermediate products and dependence on their prices. The Chemicals
business area is particularly dependent on crude oil prices and on exchange rates, which
heavily influence both commodities prices as well as energy costs. We counter these risks
by optimizing global purchasing activities and entering into long-term supply contracts
wherever possible or finding alternative suppliers. Moreover, we investigate possibilities
for using substitute raw materials in different production processes and are working on
developing alternative production technologies. Should procurement costs rise despite
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these measures, it is not always possible to pass them on directly to our customers due to
competitive considerations. With respect to the power plant park operated by the Energy
business area, the decreasing availability of German ballast coal poses a challenge that we
are meeting by implementing appropriate process and plant-related measures as well as
suitable procurement activities.
Distribution and sales risks
Certain operating units are dependent on key accounts. Any decline in demand from
customer sectors serviced by the Chemicals business area or intensified competition from
existing customers could negatively impact the chemicals business. We respond to these
risks through ongoing monitoring of our markets, acquiring new customers, developing
customer strategies, and making efforts to tap new applications and markets at an early
stage. In the Energy business area, we see risk potential in the expiration of long-term
electricity supply agreements, which, however, could quite likely entail opportunities for
concluding beneficial follow-up contracts or subsequent marketing.
Interest rate and currency risks
In connection with its entrepreneurial activities, the RAG Beteiligungs-Group is exposed to
interest rate and currency risks. Currency risks arise on the purchasing side based on raw
materials procurement, and on the sales side based on end product sales. The goal of our
currency management is to safeguard our operating business against fluctuations in
earnings and cash flow due to exchange rate changes on currency markets. This applies to
the U.S. dollar in particular. We use currency forward transactions and currency options to
hedge the currency risk arising from a rise in the euro against the U.S. dollar, which would
lead to more expensive exports to U.S. dollar regions. Interest rate management also aims
to protect Group earnings from negative effects of fluctuations in market interest rates.
The risk of interest rate changes is managed by utilizing primary and derivative financial
instruments, particularly interest rate swaps and currency options, to achieve a ratio of
fixed to variable interest rates based on suitable to cost-risk aspect considerations.
To mitigate these risks, we enter into hedging transactions, in which derivative financial instruments are also employed. These derivatives are implemented exclusively for
hedging purposes, i.e., only in connection with the corresponding underlying transactions
arising from ordinary business activities that have a risk profile opposite to that of the
hedging transaction. The type and scope of the underlying hedging transactions are
governed in the Group’s binding financial guidelines. Both fixed contractual agreements
as well as planned transactions are hedged.
For a detailed explanation of interest rate and currency management as well as
the use of derivative financial instruments, please see pages 106 to 107 of the notes to the
consolidated financial statements.
Liquidity risks
Central liquidity risk management, which is centered around a Group-wide cash pool, has
been established to control liquidity risks. Degussa has been included in full in RAG Beteiligungs-AG’s liquidity management since December 2006. The purpose of the central
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liquidity risk management system is to ensure that the necessary funds are available on
time and in the required currency to finance the current operational business and to guarantee that the funds for current and future investments are available to all companies in
the Group. Sufficient credit lines are available for unforeseen liquidity risks, among other
things in the form of a revolving credit facility in the amount of €2.25 billion via RAG
Beteiligungs-AG.
Please see pages 106 to 107 of the notes to the consolidated financial statements for a
detailed portrayal of liquidity risks and the management of these risks.
Risks relating to acquisitions and divestments
The long-term development of the RAG Beteiligungs-Group can be promoted by expanding individual businesses. Decisions made in this regard are implemented in particular by
taking over suitable companies or by acquiring majority stakes in them. Potential companies are subjected to an intensive due diligence process in advance of the acquisition.
These investigations center on strategic relevance, management quality, and development
potential. New companies in the portfolio are systematically integrated into the Group
and its existing risk management processes. In connection with value-oriented internal
control processes and portfolio analysis, all operating business units are reviewed on an
ongoing basis to determine their long-term profitability potential and their appropriateness with respect to Group strategy. The ensuing restructuring and divestment requirements are consistently and systematically implemented. Subsequent liability and warranty
risks arising from divestments are subject to a systematic post-transaction management
process.
Legal risks
Risks from litigation can never be completely ruled out. Especially in cases of divestment
and acquisition, warranty claims may be made against the RAG Beteiligungs-Group. In its
operating business, the Group is subject to liability risks arising from potential damage
claims in connection with product liability, patents, tax law, competition regulations, cartel
law, and environmental regulations on the one hand and through violation of statutory
requirements on the other. For the controlled handling of such risks, we have developed a
concept involving high quality and security standards. To protect against the financial
consequences of damages that may nonetheless arise, insurance policies have been taken
out to cover property damages, product liability, and other risks. Provisions have been
recognized where necessary.
Personnel risks
The realization of strategic and operational goals in the organizational units depends on
the knowledge and skills of our highly qualified specialists and executives. In order to
secure appropriately qualified employees for future as well as current needs and establish
lasting relationships with these employees, the RAG Beteiligungs-Group offers an
attractive compensation system as well as systematic employee development programs
with a variety of opportunities for professional and personal training and development. In
addition, intensive contacts are maintained with universities and professional associations
for the purpose of recruiting talented junior employees for the Company.
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IT risks
Guidelines and regulations applicable to the entire Company describe in detail how to
handle data and use information systems securely. Internal communications also serve to
sharpen all employees’ focus on the topic of IT security. The latest protection technologies
are employed to guarantee the highest possible levels of data security. Adherence to these
regulations is also expected from external service providers commissioned by the RAG
Beteiligungs-Group.
Other risks
We have made additional preparations in the event of an outbreak of a new influenza
pandemic as feared by the World Health Organization (WHO). Special pandemic plans
have been developed at numerous locations, and their effectiveness has been tested in
trial runs. These plans are continuously updated to reflect the current state of knowledge.
Comprehensive information and training materials have been prepared for employees
and made available on the Intranet, for example.
Overall assessment of the risk position
An assessment of the risk position has found that given the measures implemented as
well as those planned, there are no existing risks that – either individually or in conjunction with one another – entail any effects that would endanger the existence of the RAG
Beteiligungs-Group or RAG Beteiligungs-AG.
OUTLOOK
Conditions are favorable for a further good performance. The economy in the industrial
nations is rising, and production is still increasing significantly. While the VAT increase and
a flattening out of the world economy have slowed domestic demand in Germany and
weakened exports, rapid improvement in the unemployment rate will positively impact
demand. On the whole, there are numerous opportunities for a sustained upswing in
Germany and a lasting reduction in the number of unemployed persons, driven by an
upturn in the world economy.
We plan to float RAG Beteiligungs-AG on the stock market under its new name as an
integrated industrial enterprise boasting the attractive business areas of Chemicals,
Energy, and Real Estate. In 2006, we made significant progress toward meeting this goal
thanks to a number of crucial measures and decisions implemented. We intend to fulfill
the remaining legal and organizational requirements for a successful IPO for our Company
during the course of 2007.
With its focus on the Chemicals, Energy, and Real Estate business areas, the RAG
Beteiligungs-Group is well-positioned for the planned stock market flotation. In addition
to innovations and an increase in commitments in the growth regions of Asia and Eastern
Europe on the part of our Chemicals business area, we plan to increase concentration
on high-margin transactions in the Energy and Real Estate business areas and expand our
leading positions in these markets.
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Major optimization projects such as Project “Sirius” and “Degussa 2008” are still being
implemented. Project “Sirius” is aimed at lowering administrative costs on a sustained
basis by reducing personnel and materials costs. “Degussa 2008” pursues the primary goal
of becoming even more involved in growth markets, offering customized solutions to
customers in the areas of marketing, sales, and innovation, and further increasing the
company’s competitive position by ensuring state of the art production and a high level
of employee competency.
The Chemicals business area will continue to benefit from the upward trend of
the world economy. Our broad product portfolio, which includes a variety of applications,
customers, and regions, affords us a stable basis for participating in the global upswing.
We anticipate steady organic growth over the next few years from our own innovations as
well as growth in the Asian and Eastern European regions. We will also make investments
to increase our share of businesses with leading market positions, without compromising
our financial objectives or return targets in the process. To optimize our business portfolio,
we will continue to undertake small-scale acquisitions and divestments. Such activities
represent a continuous process of adapting to changing conditions and serve to supplement our investment activities. We are also aiming to further increase our productivity by
optimizing processes and structures.
In the Energy business area, we began a comprehensive program of capital spending
with the start of construction of Europe’s most modern coal-fired power plant at our
Duisburg-Walsum location. We intend to be a major participant in the high demand for
renewal and replacement at this German power plant park. Together with municipal
utility companies, we are planning to construct another 750 megawatt power generation
unit (“Herne 5” project). Construction is planned to start in the summer of 2008, with commissioning in the fall of 2011. The technical concept corresponds to that of “Walsum 10,”
though this project will allow decoupling from district heating. Herne 5 will be marketed
to municipal energy supply companies to a large extent. In addition, we intend to take
advantage of opportunities to build power plants and supply energy for industrial enterprises. For the ROGESA project, which involves construction of an industrial power plant at
the Dillinger Hütte facility in Saarland, a general contractor agreement was concluded
with AE&E Inova. The start of construction is slated for the summer of 2007, with commissioning in May 2009. Blast furnace gas will be used to fuel the plant, which will have an
installed output of 90 megawatts.
Our Real Estate business area took strategic action in the year under review in preparation for fiscal 2007. The business area is anticipating a good overall business trend. Our
objectives include increasing our property holdings by purchasing housing companies
and housing inventories. These activities are intended to reinforce our portfolio through
purchases of existing units and new construction projects as well as through investments
in property expansion and conversion and to ensure the future viability of our business.
Activities in the Real Estate business area will focus on selected locations within the Rhine
corridor along with Ruhr area locations offering good perspectives.
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The RAG Beteiligungs-Group has created the basis for positive development by undertaking extensive optimization and restructuring measures in recent years. In connection
with portfolio optimizations, we disposed of a number of activities during the course of
2006, for which reason we anticipate slightly lower sales in 2007.
Transfer of management functions for the industrial activities of the RAG Group from
RAG AG to RAG Beteiligungs-AG as of January 1, 2007 will effect an increase in personnel
expenses in particular for the RAG Beteiligungs-Group. As a consequence, we expect EBIT
to decline in 2007.
A positive free cash flow is anticipated for fiscal 2007. Disposals of Mining Technology
and Gas Distribution activities will contribute to this increase.
In the Energy business area, planned increases in investment activity are expected to
raise capital employed and have a slightly negative effect on overall ROCE.
EVENTS AFTER THE BALANCE SHEET DATE
Cornerstones of agreement on coal mining policy
On February 7, 2007, the “Cornerstones of an Agreement on Coal Mining Policy between
the German Government, the States of North Rhine-Westphalia and Saarland, RAG AG,
and IG BCE” was signed, pursuant to which the German federal government and the states
of North Rhine-Westphalia and Saarland have agreed to end coal mining subsidies by
the end of 2018. The agreement pledges to avoid forced redundancies. In 2012, the German
Bundestag will review the decision to end coal mining subsidies on the basis of a joint
report prepared by the federal government and the state governments of North RhineWestphalia and Saarland. The review will consider aspects of economic viability, energy
supply reliability, and other energy policy objectives.
North Rhine-Westphalia will no longer contribute to the coal mining subsidies
(current production) after 2014. The federal government will be exempted from the obligations to provide structural aid. RAG AG will provide the state of Saarland with structural
aid in the amount of €100 million.
The goal of the agreement reached is to end subsidized coal mining without having
to resort to operational layoffs. To this end, early retirement plans, which are already
accompanying the ongoing adjustment processes, will be continued until coal mining
operations have ceased.
The German federal government and the states of north Rhine-Westphalia and
Saarland will until 2018 jointly provide the funds necessary to end subsidized coal mining
without forced redundancies on the basis of existing model calculations and the results
of an exert opinion on the costs for coal mine closures, existing environmental damage,
and inherited coal mining liabilities of both limited and unlimited duration. This government funding is also a prerequisite for the entire equity holdings of RAG AG being used to
finance inherited liabilities of unlimited duration.
The subsidies will be regulated through legislation as well as a framework agreement
between the German government and the states concerned.
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The legislation to be presented by the federal government will stipulate the level of
subsidies to be provided each year by the German government starting in 2009 until the
mines are shut down. In 2007, RAG will receive a grant notice enumerating the subsidies
for mine closures from 2009 until the end of 2012. This new grant notice will continue to
limit subsidies when a certain price on the world market is exceeded (Kappungsgrenze)
and allow for an economic price adjustment clause (Sprechklausel) to avoid underfunding,
as did earlier notices. On the basis of this grant notice, RAG AG will adjust its mining
operations to reflect an expected capacity of 12 million tons in 2012.
To finance inherited liabilities of unliminted duration, the states of North-Rhine
Westphalia and Saarland will make special arrangements with a private law foundation
to be established by RAG in what is known as a “negative legacy” agreement (Erblastenvertrag). The proceeds from the flotation of the shareholdings of RAG AG will be added to
the “negative legacy” agreement, which will be guaranteed by North-Rhine Westphalia
and Saarland. The federal government will cover one-third of the states’ guarantees.
The financing phase-out requires all current RAG shareholders to sell their shares in
RAG AG to the foundation to be established by RAG for €1 each, without subjecting the
public sector to any detrimental conditions.
Decisions will be made on dissolution of the joint liability arrangement between
RAG’s coal and industrial activities, on the method of realization of RAG Beteiligungs-AG –
most probably through an initial public offering – and on maintaining a minority share in
RAG Beteiligungs-AG’s shareholdings by the foundation, after an expert opinion has been
made available on the value of the shareholdings and realization options.
In our opinion, implementation of these cornerstones will ensure that the funds
provided by the public sector and the realization of RAG Beteiligungs-AG will be sufficient
to finance the phase-out process and to overcome the legacy inherited from RAG AG’s coal
mining operations.
In addition, this offers promising prospects for the RAG industrial enterprise and its
nearly 45,000 employees, which, coupled with the planned public offering, will enable new
growth potential.
Based on the grant notice issued to RAG AG by the public sector approving subsidies
for the years from 2006 to 2008, RAG AG is obligated to transfer funds of €150 million
annually from its holding operations to its coal mining operations. RAG AG will ensure that
in 2007 and 2008, this contribution will be rendered by RAG Beteiligungs-AG.
Essen, March 8, 2007
This Report contains forward-looking statements that are based management’s current expectations, estimates, and
projections on the basis of the information available at present. These statements are not guarantees of future performance and involve certain risks, uncertainties, and assumptions, which are difficult to predict. Actual future results and
trends may differ materially from what is forecast in forward-looking statements due to a variety of factors, such as if risks
or uncertainties materialize or assumptions prove incorrect.
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왘 Consolidated Financial Statements
Notes
Corporate Bodies
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Consolidated Financial Statements 2006
of RAG Beteiligungs-AG
(formerly RAG Beteiligungs-GmbH), Essen
58 Income Statement
59 Balance Sheet
60 Statement of Changes in Equity
62 Cash Flow Statement
63 Notes to the Consolidated Financial Statements
64 Segment Reporting
66 Basis of Presentation
66 New Financial Reporting Standards
68 Adjustments of Previous Years’ Figures
69 Scope of Consolidation
70 Principles of Consolidation
71
Currency Translation
72
Accounting Policies
81
Notes to the Non-Current Assets Held for
Sale and Discontinued Operations
84 Notes to the Income Statement
89 Notes to the Balance Sheet
108 Notes to the Cash Flow Statement
109 Notes to the Segment Report
113 Other Disclosures
116 Disclosures in Accordance with National Requirements
Other Information
117 Auditor’s Report
118 Report of the Supervisory Board
120 Corporate Bodies and Offices Held
124 Major Shareholdings
57
58
Consolidated Income Statement
RAG Beteiligungs-AG
for the year ended December 31, 2006
€ million
Note
2006
2005
Sales
(3)
14,793.4
14,181.1
– 92.4
– 12.7
78.1
93.7
1,092.8
1,243.3
Changes in inventories of finished goods and work in progress
Other own work capitalized
(4)
Raw materials and consumables used
(5)
7,740.8
7,360.3
Personnel expense
(6)
3,079.0
2,984.9
Depreciation, amortization, and impairment losses
(7)
1,508.4
1,307.8
(8)
3,086.6
3,249.5
+ 457.1
+ 602.9
145.4
78.4
Profit before financial result and income tax expense (continuing operations)
Interest income
Interest expense
(9)
(9)
624.2
503.2
Result from investments accounted for using the equity method
(10)
+ 50.0
+ 70.1
Other financial result
(11)
Financial result
Profit before tax (continuing operations)
Income tax expense
(12)
Profit after tax (continuing operations)
Profit after tax (discontinued operations)
(2)
Profit after tax
thereof attributable to:
Minority interests
Equity holders of RAG Beteiligungs-AG (net income)
Earnings per share (basic and diluted) in €
(31)
+ 24.6
+ 10.9
– 404.2
– 343.8
+ 52.9
+ 259.1
10.3
182.6
+ 42.6
+ 76.5
+ 1,108.9
+ 211.5
+ 1,151.5
+ 288.0
+ 106.2
+ 1,045.3
+ 92.9
+ 195.1
+ 2.24
+ 0.42
ACTIVE
Foreword
Management Report
Notes
59
Corporate Bodies
Major Shareholdings
Consolidated Balance Sheet
RAG Beteiligungs-AG
as of December 31, 2006
€ million
Note
Dec. 31, 2006
Dec. 31, 2005
Intangible assets
(13)
4,483.0
4,118.7
Property, plant, and equipment
(14)
5,605.3
6,630.9
Investment properties
(15)
1,630.5
1,656.7
Investments accounted for using the equity method
(16)
279.4
414.7
Financial assets
(16)
1,639.1
1,867.5
Deferred tax assets
(24)
496.7
1,086.2
Other receivables
(18)
Non-current assets
106.6
85.2
14,240.6
15,859.9
Inventories
(17)
1,899.0
2,510.1
Current tax assets
(24)
95.0
96.9
Trade receivables
(18)
2,354.1
3,229.7
Other receivables
(18)
410.6
525.5
Financial assets
(16)
285.1
229.3
(27)
444.3
400.9
(1)
1,314.6
898.1
Non-current assets held for sale and disposal groups
Current assets
6,802.7
7,890.5
Total assets
21,043.3
23,750.4
Dec. 31, 2006
Dec. 31, 2005
466.0
466.0
Reserves
3,404.6
2,766.0
Equity attributable to equity holders of RAG Beteiligungs-AG
3,870.6
3,232.0
€ million
Note
Issued capital
Minority interests
449.2
2,017.3
(19)
4,319.8
5,249.3
Provisions for pensions and similar obligations
(20)
4,070.3
4,300.7
Other provisions
(21)
1,270.9
1,339.2
Deferred tax liabilities
(24)
961.4
1,494.3
Current tax liabilities
(24)
112.1
100.9
Financial liabilities
(22)
3,571.9
3,676.3
Other payables
(23)
Equity
Non-current liabilities
182.7
211.2
10,169.3
11,122.6
Other provisions
(21)
1,310.0
1,752.6
(24)
226.1
304.4
(22)
2,306.7
2,373.3
Trade payables
(23)
1,264.8
1,821.7
Other payables
(23)
588.9
874.4
(1)
857.7
252.1
6,554.2
7,378.5
21,043.3
23,750.4
Liabilities of disposal groups
Current liabilities
Total equity and liabilities
60
Consolidated Statement of Changes in Equity
RAG Beteiligungs-AG
as of December 31, 2006
Issued
capital
€ million
Balance as of January 1, 2005
Note (19)
466.0
Capital increase/reduction
Dividends
Transactions with equity holders
Profit after tax
Other comprehensive income/loss (OCI)
Total income recognized in equity
Other changes
Balance as of December 31, 2005
466.0
Capital increase/reduction
Dividends
Transactions with equity holders
Profit after tax
Other comprehensive income/loss (OCI)
Total income recognized in equity
Other changes
466.0
ACTIVE
Foreword
Management Report
Notes
Reserves
Capital Accumulated
reserve
profits
722.5
1,859.6
Accumulated other comprehensive income/loss (OCI)
Availablefor-salesecurities
17.0
Cash flow
hedges
Revaluation
reserve for
successive
acquisitions
Currency
translation
adjustment
46.1
31.5
– 139.9
61
Corporate Bodies
Major Shareholdings
Equity
attributable
to equity
holders of
RAG Beteiligungs-AG
Minority
interests
Equity
3,002.8
1,966.6
4,969.4
0.0
4.2
4.2
– 69.8
– 69.8
– 183.1
– 252.9
– 69.8
– 69.8
– 178.9
– 248.7
195.1
195.1
92.9
288.0
– 0.1
– 30.5
10.6
143.2
123.2
110.9
234.1
195.1
– 0.1
– 30.5
10.6
143.2
318.3
203.8
522.1
0.1
– 1.0
– 3.4
– 2.0
– 13.0
– 19.3
25.8
6.5
722.6
1,983.9
13.5
40.1
– 9.7
3,232.0
2,017.3
5,249.3
15.6
0.0
12.3
12.3
– 235.0
– 235.0
– 73.0
– 308.0
– 235.0
– 235.0
– 60.7
– 295.7
1,045.3
1,045.3
106.2
1,151.5
– 197.5
– 165.1
– 29.8
– 194.9
– 197.5
880.2
76.4
956.6
1,045.3
5.3
27.1
5.3
27.1
0.0
– 0.3
– 8.3
10.8
1.8
– 2.0
– 8.6
– 6.6
– 1,583.8
– 1,590.4
722.3
2,785.9
29.6
44.5
38.1
– 215.8
3,870.6
449.2
4,319.8
62
Consolidated Cash Flow Statement
RAG Beteiligungs-AG
€ million
Note
Profit before financial result and tax (continuing operations)
+/– depreciation, amortization, impairment losses/reversal of impairment losses
2006
2005
+ 457.1
+ 602.9
+ 1,460.8
+ 1,240.0
–/+ gains/losses on disposal of non-current assets
– 131.4
– 251.5
–/+ change in inventories
– 78.9
– 113.3
–/+ change in receivables and other assets
+ 482.7
– 65.5
+/– change in provisions
– 376.0
– 369.5
+/– change in liabilities (excl. financial liabilities)
– 389.7
+ 479.3
–
– 225.2
– 316.3
interest paid
+
interest received
+ 58.1
+ 41.1
+
dividends received
+ 25.3
+ 60.5
–
income taxes paid
Cash flow from operating activities (continuing operations)
(25)
– 184.9
– 161.1
+ 1,097.9
+ 1,146.6
–
cash payments for investments
– 994.7
– 1,092.9
+
cash receipts from disposals
+ 262.3
+ 321.6
Acquisitions, investments and loans
–
cash payments for investments
– 3,535.8
– 174.3
+
cash receipts from disposals
+ 3,524.0
+ 458.2
+ 11.2
+ 35.5
– 733.0
– 451.9
+ 12.3
+ 4.2
– 73.0
– 183.1
– 69.8
– 98.6
–/+ change in current securities and deposits
Cash flow from investing activities (continuing operations)
(26)
+/– cash receipts/cash payments relating to capital contributions
–
cash payments to minority interests
–/+ profit transfer of the previous year/dividends paid1)
+
increase in financial liabilities
+ 4,552.3
+ 1,935.2
–
repayment of financial liabilities
– 4,654.0
– 2,447.9
Cash flow from financing activities (continuing operations)
– 232.2
– 790.2
Change in cash and cash equivalents (continuing operations)
+ 132.7
– 95.5
Cash and cash equivalents as of January 1 (total)
400.9
473.8
–
– 92.7
– 67.8
Cash and cash equivalents as of January 1 (continuing operations)
308.2
406.0
+/– change in cash and cash equivalents (continuing operations)
+ 132.7
– 95.5
cash and cash equivalents as of January 1 (discontinued operations)
+/– effect of exchange rates and other changes in cash and cash equivalents
Cash and cash equivalents as of December 31 (continuing operations)
+
cash and cash equivalents as of December 31 (discontinued operations)
Cash and cash equivalents as of December 31 (as reported on the balance sheet)
1)
Profit transfer/dividends paid without tax charge (stand-alone)
(27)
+ 3.4
– 2.3
+ 444.3
+ 308.2
–
+ 92.7
444.3
400.9
– 102.3
– 98.6
ACTIVE
Foreword
Management Report
왘 Notes
Corporate Bodies
Major Shareholdings
Notes to the Consolidated Financial Statements
RAG Beteiligungs-Group 2006
63
64
Consolidated Segment Reporting
RAG Beteiligungs-Group
Business segments
Note (28)
€ million
External sales
Intersegment sales
Total sales
Result from investments accounted for using
the equity method
Consumer Solutions
Specialty Materials
2006
2005
2006
2005
2006
2005
4,806.1
4,264.3
2,453.0
2,239.9
2,838.9
2,531.6
335.5
301.1
83.9
82.5
37.3
45.1
5,141.6
4,565.4
2,536.9
2,322.4
2,876.2
2,576.7
11.7
9.9
21.5
19.1
6.7
9.7
112.7
109.0
69.2
71.1
48.9
43.9
EBITDA1)
829.4
695.9
373.9
249.1
454.9
425.7
EBIT2)
460.4
309.3
190.9
70.6
249.9
234.4
Capital employed (as of Dec. 31)
3,886.0
4,212.3
2,161.1
2,144.4
2,660.5
2,670.0
ROCE (in %)
11.8
7.3
8.8
3.3
9.4
8.8
EBITDA margin (in %)
17.3
16.3
15.2
11.1
16.0
16.8
227.0
237.8
160.1
231.5
170.0
206.2
Depreciation and amortization
341.7
360.6
181.3
158.5
204.2
189.6
Other significant non-cash expenses
717.8
716.7
228.1
143.0
261.7
230.4
Segment result
– 37.9
94.3
98.4
39.4
175.2
279.0
Segment assets
4,908.0
5,915.1
2,574.0
2,839.0
3,137.7
3,132.9
1,981.0
1,997.2
712.6
745.7
1,176.9
1,157.3
Segment liabilities
1)
Adjusted for non-operating items of – €272.2 million (2005: – €143.2 million), cf. Note (30)
2)
Adjusted for non-operating items of – €701.9 million (2005: – €424.3 million), cf. Note (30)
Geographical segments (regions)
Note (29)
Germany
€ million
Sales
Segment assets
2006
Rest of Europe
2005
2006
2005
5,941.0
5,896.2
3,788.5
3,596.2
11,666.3
11,291.6
1,231.0
1,923.3
647.1
700.2
83.9
194.2
ACTIVE
Foreword
Management Report
Energy
incl. Coal Trading
왘 Notes
Energy
excl. Coal Trading
Real Estate
65
Corporate Bodies
Major Shareholdings
Other,
consolidation
Group
(continuing operations)
2006
2005
2006
2005
2006
2005
2006
2005
2006
2005
2,574.4
2,765.4
1,744.4
1,792.7
353.2
361.2
1,767.8
2,018.7
14,793.4
14,181.1
163.3
207.7
27.9
27.3
3.3
3.7
– 623.3
– 640.1
0.0
0.0
2,737.7
2,973.1
1,772.3
1,820.0
356.5
364.9
1,144.5
1,378.6
14,793.4
14,181.1
9.7
19.2
7.8
10.7
0.0
0.0
0.4
12.2
50.0
70.1
50.1
58.1
50.1
46.0
0.0
0.0
– 1.5
132.6
279.4
414.7
495.2
509.4
458.0
465.8
154.7
172.5
– 28.0
54.6
2,280.1
2,107.2
392.8
411.3
357.5
377.8
111.9
129.9
– 172.3
– 47.3
1,233.6
1,108.2
2,473.4
2,653.4
2,416.8
2,569.6
1,728.6
1,678.8
1,075.2
808.5
13,984.8
14,167.4
15.9
15.5
14.8
14.7
6.5
7.7
8.8
7.8
19.2
18.4
26.3
26.0
43.8
47.8
15.4
14.9
229.2
270.3
228.2
261.5
77.5
110.8
94.7
137.3
958.5
1,193.9
87.5
92.9
85.7
85.0
47.4
46.9
111.6
131.1
973.7
979.6
263.2
442.5
211.6
386.6
135.9
59.8
899.5
1,161.0
2,506.2
2,753.4
421.5
428.9
382.6
370.8
66.0
137.5
– 266.1
– 376.2
457.1
602.9
2,351.1
2,733.9
1,968.0
2,164.0
1,874.7
1,841.6
1,812.5
1,221.4
16,658.0
17,683.9
1,604.4
1,942.4
1,195.1
1,365.0
287.5
323.2
2,970.8
3,120.2
8,733.2
9,286.0
North America
2006
2005
Asia
Central and
South America
2006
2005
2006
2005
Other,
consolidation
2006
2005
Group
2006
2005
2,211.2
2,049.8
2,152.5
2,005.5
468.6
411.4
231.6
222.0
14,793.4
14,181.1
1,409.4
1,862.6
1,048.9
1,191.2
165.3
172.3
1,137.1
1,242.9
16,658.0
17,683.9
92.7
74.4
108.1
212.9
24.9
7.8
1.8
4.4
958.5
1,193.9
66
BASIS OF PRESENTATION
The following standards and interpretations are required to
be applied for the first time in fiscal 2006:
RAG Beteiligungs-AG (formerly RAG Beteiligungs-GmbH) was
쮿 IFRS 6 “Exploration for and Evaluation of Mineral Resources;”
established on October 11, 2006 by means of a reorganization
쮿 Amendment to IAS 19 “Employee Benefits: Actuarial Gains and
through a change of the legal form. RAG Beteiligungs-AG, a stock
Losses, Group Plans and Disclosures;”
corporation as defined by German law, is a direct subsidiary of
쮿 Amendment to IAS 21 “The Effects of Changes in Foreign
RAG Aktiengesellschaft, Essen. A control and profit and loss trans-
Exchange Rates: Net Investment in a Foreign Operation;”
fer agreement has been concluded between RAG Aktiengesell-
쮿 Amendments to IAS 39 “Financial Instruments: The Fair Value
schaft (“RAG”) as the sole equity holder and RAG Beteiligungs-AG.
Option;”“Financial Instruments: Cash Flow Hedge Accounting of
RAG Beteiligungs-AG and its subsidiaries are included in the con-
Forecast Intragroup Transactions;”
solidated financial statements of RAG Aktiengesellschaft, which
쮿 Amendments to IAS 39/IFRS 4 “Financial Instruments/
are published in the electronic Federal Gazette (elektronischer
Insurance Contracts: Financial Guarantee Contracts;”
Bundesanzeiger).
쮿 Amendment to IFRS 1/IFRS 6 “First-Time Adoption of
The registered offices of RAG Beteiligungs-AG are located at
IFRS/Exploration for and Evaluation of Mineral Resources;”
Rellinghauser Strasse 1 – 11, Essen, Germany. The Company is
쮿 IFRIC 5 “Rights to Interests arising from Decommissioning,
entered in the Commercial Register of the Local Court of Essen
Restorations and Environmental Rehabilitation Funds;”
under No. 19474 (formerly Local Court of Essen, No. 5398). The
쮿 IFRIC 6 “Liabilities arising from Participating in a Specific
business activities of the Company are described under “Notes to
Market – Waste Electrical and Electronic Equipment.”
Segment Reporting.”
These consolidated financial statements of RAG Beteiligungs-AG were prepared on a voluntary basis. As permitted by
None of the financial reporting standards applied for the
first time in fiscal 2006 had a material impact on the consolidated financial statements of RAG Beteiligungs-AG.
Section 315a (3) of the German Commercial Code (HGB), the
consolidated financial statements have been prepared in accor-
Financial reporting standards not applied early
dance with International Financial Reporting Standards (IFRS)
The IASB adopted other financial reporting standards that were
and comply with these standards. The IFRSs comprise the stan-
not yet required to be applied in fiscal 2006 and which RAG
dards (International Financial Reporting Standards and Inter-
Beteiligungs-AG did not apply voluntarily before they took effect.
national Accounting Standards) approved by the International
In addition, the application of these new financial reporting
Accounting Standards Board (IASB), London, and the interpreta-
standards requires their adoption by the European Union in its
tions of the International Financial Reporting Interpretations
endorsement procedure:
Committee (previously known as the Standing Interpretations
쮿 IFRS 7 “Financial Instruments: Disclosures;”
Committee) as adopted by the EU. Additional disclosures were
쮿 IFRS 8 “Operating Segments;”
made under national requirements pursuant to Section 315a (1)
쮿 Amendment to IAS 1 “Presentation of Financial Statements:
of the German Commercial Code (HGB).
Capital Disclosures;”
These consolidated financial statements cover the fiscal
쮿 IFRIC 7 “Applying the Restatement Approach under IAS 29
year from January 1 to December 31, 2006 and have been prepared
Financial Reporting in Hyperinflationary Economies;”
in euros. All amounts are quoted in millions of euros (€ million),
쮿 IFRIC 8 “Scope of IFRS 2;”
unless stated otherwise.
쮿 IFRIC 9 “Reassessment of Embedded Derivatives;”
쮿 IFRIC 10 “Interim Financial Reporting and Impairment;”
NEW FINANCIAL REPORTING STANDARDS
쮿 IFRIC 11 “IFRS 2 – Group and Treasury Share Transactions;”
쮿 IFRIC 12 “Service Concession Arrangements.”
Financial reporting standards that have already taken
effect
applied – insofar as relevant to the consolidated financial
The IASB has revised or newly issued various standards and inter-
statements of RAG Beteiligungs-AG – for the first time on their
pretations that are first required to be applied in fiscal 2006.
effective dates.
RAG Beteiligungs-AG elected for early application of interpretation IFRIC 4 “Determining whether an Arrangement contains
a Lease” before this standard took effect as of January 1, 2006.
These (revised) standards and interpretations will be
IFRS 7 introduces additional disclosure requirements with
regard to financial instruments, requiring both qualitative and
ACTIVE
Foreword
Management Report
왘 Notes
Corporate Bodies
Major Shareholdings
quantitative disclosures related to the risk exposure resulting
contract and reported separately in the financial statements as a
from financial instruments and management’s policies for diver-
stand-alone derivative. Subsequent reassessment of a contract
sifying such risks. The new standard replaces IAS 30, which is only
is prohibited unless there is a change in the terms of the original
required to be applied by financial institutions, as well as the
contract that significantly modifies cash flows. The interpretation
existing disclosure requirements set out in IAS 32. The standard
must be applied for fiscal years beginning on or after June 1,
must be applied for fiscal years beginning on or after January 1,
2006. Earlier application is encouraged. The effects of the inter-
2007. Earlier application is encouraged. IFRS 7 will have conse-
pretation on the consolidated financial statements of RAG
quences on the extent of reporting on financial instruments in
Beteiligungs-AG are currently being reviewed.
the consolidated financial statements of RAG Beteiligungs-AG.
IFRS 8 governs the disclosures related to business segments,
IFRIC 10 relates to provisions included in IAS 34, IAS 36, and
IAS 39 on the reversal of impairment losses recognized for good-
products and services, and regions as well as customer relation-
will and certain financial assets. IFRIC 10 concludes that an entity
ships of the reporting entity. It replaces IAS 14. In accordance with
shall not reverse an impairment loss recognized in a previous
IFRS 8, the structure of segment reporting must correspond to
interim period, if the reasons for such impairment have ceased
the internal structure that governs the reporting to key decision-
to exist by the reporting date of the related annual financial
makers of the company (management approach). In contrast,
statements. The interpretation must be applied for fiscal years
IAS 14 prescribes that segment reporting must be structured in
beginning on or after November 1, 2006. Earlier application is
accordance with the source and nature of a company’s risks and
encouraged. The interpretation currently does not affect the
rewards (risks and rewards approach). The standard must be
consolidated financial statements of RAG Beteiligungs-AG.
applied for fiscal years beginning on or after January 1, 2009.
IFRIC 11 provides guidance on questions as to how IFRS 2
Earlier application is permitted. IFRS 8 will have consequences on
should be applied to agreements on share-based payments in
the type and extent of segment disclosures in segment reporting
which the entity grants equity instruments of the relevant
included the consolidated financial statements of RAG Beteili-
company itself or equity instruments of other group companies.
gungs-AG.
The interpretation stipulates that, in the event a company grants
The amendments to IAS 1 expand disclosure requirements
its own equity instruments, such equity instruments should be
to include information on the “economic” capital of an entity and
accounted for as equity-settled transactions, regardless of the
the control of this capital by management. The amendments to
method in which the company acquires these equity instruments.
IAS 1 must be applied for fiscal years beginning on or after Janu-
In addition, the interpretation contains provisions governing
ary 1, 2007. Earlier application is encouraged. The amendment will
when a share-based payment of a group company that grants
not have a material impact on the consolidated financial state-
equity instruments of the parent company for the purpose of
ments of RAG Beteiligungs-AG.
receiving goods and services should be accounted for as cash-
IFRIC 7 contains instructions for applying IAS 29 when
settled transactions and when these are considered equity-
hyperinflation is identified for the first time. Accordingly, IAS 29
settled transactions. The interpretation must be applied for fiscal
should be applied as though it had always been applied. The
years beginning on or after March 1, 2007. Earlier application is
interpretation must be applied for fiscal years beginning on or
permitted. This interpretation is not currently relevant to the
after March 1, 2006. Earlier application is encouraged. This inter-
consolidated financial statements of RAG Beteiligungs-AG.
pretation is not currently relevant to the consolidated financial
statements of RAG Beteiligungs-AG.
IFRIC 8 stipulates that IFRS 2 also extends to those trans-
IFRIC 12 governs the accounting treatment of service
concession agreements entered into by companies that offer
public services – such as the building, operation and maintenance
actions in which the reporting entity receives no compensation
of roads, airports, prisons or energy distribution infrastructures –
or no equivalent compensation. This also relates to transactions
on behalf of local authorities. The interpretation must be applied
in which the entity cannot clearly identify the goods or services
for fiscal years beginning on or after January 1, 2008. Earlier appli-
received. The interpretation must be applied for fiscal years
cation is permitted. The effects of the interpretation on the con-
beginning on or after May 1, 2006. Earlier application is encour-
solidated financial statements of RAG Beteiligungs-AG are cur-
aged. The interpretation does not affect the consolidated
rently being reviewed.
financial statements of RAG Beteiligungs-AG.
IFRIC 9 governs the time of the assessment as to whether
an embedded derivative should be separated from the host
67
68
ADJUSTMENTS OF PREVIOUS YEARS’ FIGURES
In fiscal year 2006, RAG Beteiligungs-AG classified the
Construction Chemicals, Gas Distribution, and Mining Technology
If the criteria for classification as a discontinued operation are
activities as discontinued operations for the first time. Food
met in accordance with IFRS 5 “Non-current Assets Held for Sale
Ingredients had been classified as a discontinued operation in
and Discontinued Operations,” such discontinued operation must
fiscal 2005 (see Item 2 of these Notes). Therefore, only the prior
be presented separately from the continuing operations in the
year figures for Construction Chemicals, Gas Distribution, and
income statement. The amounts presented for this discontinued
Mining Technology had to be adjusted in the income statement:
operation for prior periods should be adjusted accordingly.
Income statement
Dec. 31, 05
published
Construction
Chemicals
Distribution
Technology
18,060.7
– 1,967.2
– 1,158.3
– 754.1
14,181.1
+ 51.5
– 18.7
– 0.1
– 45.4
– 12.7
93.8
– 0.1
€ million
Sales
Changes in inventories of finished goods and work in progress
Other own work capitalized
Change IFRS 5 Dec. 31, 05
adjusted
Gas
Mining
93.7
1,303.3
– 46.4
+ 15.8
– 29.4
1,243.3
Raw materials and consumables used
9,872.4
– 924.9
– 1,104.8
– 482.4
7,360.3
Personnel expense
3,573.7
– 397.9
– 11.1
– 179.8
2,984.9
Depreciation, amortization and impairment losses
1,413.7
– 81.4
– 8.2
– 16.3
1,307.8
3,802.8
– 445.4
– 13.2
– 94.7
3,249.5
Interest income
95.3
– 12.8
– 2.2
– 1.9
78.4
Interest expense
546.7
– 35.0
– 3.1
– 5.4
503.2
Result from investments accounted for using the equity method
Other financial result
Income tax expense
Profit/loss after tax (continuing operations)
Profit/loss after tax (discontinued operations)
Profit/loss after tax
+ 94.6
– 24.5
+ 70.1
+ 15.8
– 4.9
+ 10.9
199.1
+ 9.2
– 7.8
– 17.9
182.6
+ 306.6
– 169.8
– 26.0
– 34.3
+ 76.5
– 18.6
+ 169.8
+ 26.0
+ 34.3
+ 211.5
+ 288.0
+ 0.0
+ 0.0
+ 0.0
+ 288.0
thereof attributable to:
Minority interests
+ 92.9
+ 92.9
Equity holders of RAG Beteiligungs-AG (net income)
+ 195.1
+ 195.1
Cash flow in the cash flow statement for the previous year
was also adjusted retroactively due to first-time application of
IFRS 5.
Cash flow statement
Dec. 31, 05
published
€ million
Change IFRS 5 Dec. 31, 05
adjusted
Mining
Construction
Chemicals
Gas
Distribution
Technology
+ 1,386.2
– 120.0
– 42.7
– 76.9
+ 1,146.6
– 523.1
+ 44.0
+ 14.0
+ 13.2
– 451.9
– 916.2
+ 65.0
+ 25.8
+ 35.2
– 790.2
– 53.1
– 11.0
– 2.9
– 28.5
– 95.5
Change in cash and cash equivalents
ACTIVE
Foreword
Management Report
왘 Notes
SCOPE OF CONSOLIDATION
Corporate Bodies
Major Shareholdings
Purchases and sales of investments in subsidiaries
The following significant investments or increases in investments
Information on the group of consolidated companies
in subsidiaries are worthy of mention:
The term for acceptance of the voluntary public partial
In addition to RAG Beteiligungs-AG, the consolidated financial
statements include all significant German and foreign sub-
acquisition offer made by RAG Projektgesellschaft to the share-
sidiaries directly or indirectly controlled by RAG Beteiligungs-AG.
holders of Degussa AG (“Degussa”), Düsseldorf, for purchase of
Significant associates and joint ventures are accounted for using
their shares at a price of €42 per share ran from January 27 to
the equity method if significant influence can be exercised. First-
February 27, 2006. A total of 2.19 percent of the Degussa shares
time consolidation or deconsolidation is always carried out as of
were acquired in connection with this offer. Additional Degussa
the date of acquisition or loss of control.
shares were acquired outside of the offer, in particular the
All of the main subsidiaries included in the consolidated
Degussa shares held by E.ON AG (E.ON), Düsseldorf, (42.86 per-
financial statements, and the enterprises accounted for using the
cent), which were acquired at a price of €31.50 per share. The
equity method, are listed after the independent auditors’ report.
stake in Degussa held directly or indirectly by RAG Projektge-
The group of consolidated companies of RAG Beteiligungs-
sellschaft mbH exceeded the threshold of 95 percent required to
AG comprised a total of 326 (2005: 505) fully-consolidated compa-
initiate a shareholder squeeze-out. On May 29, 2006, the Degussa
nies as of the balance sheet date. A total of 26 (2005: 31) compa-
Shareholders’ Meeting resolved to squeeze out the remaining
nies were accounted for under the equity method.
minority shareholders on the request of RAG Projektgesellschaft
mbH and consented to concluding a control and profit and
Number of
2006
2005
Consolidated companies
RAG Beteiligungs-AG and fully
consolidated subsidiaries:
loss transfer agreement with RAG Projektgesellschaft mbH. The
full acquisition of Degussa was finalized upon registration of
the squeeze-out resolution in the Commercial Register on September 14, 2006. The minority shareholders were granted a cash
Germany
135
174
International
191
331
Investments accounted for using
the equity method:
compensation amounting to €45.11 per share. Even the shareholders who had previously tendered their shares within the context of the public purchase offer received €45.11 per tendered
Germany
16
18
International
10
13
352
536
Degussa share, taking into account amounts already received. A
total of €3,436.8 million was paid for the Degussa shares in
2006. After deducting the acquired minority interests of €1,611.5
million, goodwill was capitalized in an amount of €1,825.3 million.
The consideration agreed for further investments or
In the year under review, 10 German subsidiaries and 12
foreign subsidiaries were consolidated for the first time. A total
of 167 subsidiaries, 133 of which were foreign, were sold. A total of
21 subsidiaries, 9 of which were foreign, were merged. A further
13 subsidiaries, 10 of which were foreign, left the group of consolidated companies.
In addition, 3 associated German companies and one
foreign associated company were accounted for using the equity
method for the first time. One foreign associated company was
sold. One additional foreign associated company was merged.
Another 7 associated companies, 2 of which were foreign, were no
longer accounted for using the equity method.
increases in investments totaled €67.5 million.
69
70
The combined effect of the investments or increases in
agreement, in which a purchase price of €540 million was agreed
investments in subsidiaries on the balance sheet at the time of
initial consolidation was as follows:
upon, had been signed in September 2005.
In June 2006, RAG Beteiligungs-AG (Technology Specialties
segment) and Gilead Sciences, Inc., Foster City, California, USA,
Fair
value
amount
Carrying
amount
Non-current assets
55.1
54.7
Current assets (excluding cash
and cash equivalents)
23.5
23.5
14.8
14.8
5.8
0.8
47.9
47.6
€ million
Current liabilities
Contingent liabilities
Net assets
0.0
1,856.8
Minority interests
1,607.8
The gross purchase price amounted to €115 million. The business
sold comprised the activities related to the exclusive synthesis
of active ingredients and primary products of active ingredients
for the pharmaceutical and bio-pharmaceutical industry. The
transaction was completed in November 2006, and the company
was subsequently deconsolidated.
In addition to the disposals mentioned above, Oxxynova
GmbH & Co. KG, Marl, RIAG Gebäudemanagement GmbH, Dort-
39.7
Goodwill/negative goodwill
Cost (purchase price)
signed an agreement for the sale of Raylo Chemicals Inc., Canada.
44.6
mund, the STEAG HamaTech Group, and the Industrial Chemicals
business were also sold in 2006.
The effect of the disposals of these subsidiaries on the
balance sheet at the time of deconsolidation was as follows:
3,504.3
€ million
The following significant sales of investments in subsidiaries
should be noted:
In February, RAG Beteiligungs-AG sold its Construction
Non-current assets
1,560.6
Current assets
(excluding cash and cash equivalents)
1,919.0
Chemicals activities to BASF Aktiengesellschaft, Ludwigshafen,
for a net purchase price of €2.2 billion at a transaction value
278.9
97.6
(including liabilities assumed) of more than €2.8 billion. The
Current liabilities
638.9
transaction was executed in July 2006. The effect of the disposal
of the Construction Chemicals on the balance sheet at the time
of deconsolidation was as follows:
PRINCIPLES OF CONSOLIDATION
€ million
The financial statements of the German and foreign subsidiaries
Non-current assets
1,388.7
Current assets
(excluding cash and cash equivalents)
included in the consolidated financial statements have been
prepared in accordance with uniform accounting policies.
794.7
77.2
At the time of acquisition, equity is consolidated by offsetting the proportionately remeasured equity of the subsidiary
236.8
against the investment carrying amount. The assets, liabilities,
Current liabilities
360.9
and contingent liabilities of the subsidiaries are therefore recognized at fair value. If shares are already held in a subsidiary prior
In March 2006, negotiations related to the sale of the
to the transfer of control, the fair values of the assets, liabilities,
Water Chemicals activities, which belonged to the Consumer
and contingent liabilities may change depending on the timing
Solutions segment, to the U.S. company Ashland Inc. were
of the pro-rated acquisition. Any change relating to the shares
concluded successfully. The purchase price, including liabilities
previously held is to be taken into account as a revaluation and
assumed, amounted to €120 million. The transaction was com-
recognized in the revaluation reserve as a special component of
pleted in the second quarter.
equity. The excess of the purchase price over the fair value of net
In April 2006, the sale of the former Food Ingredients
business to the U.S. company Cargill was completed after the
anti-trust authorities had granted their approval. The sales
assets acquired is reported on the balance sheet as goodwill.
Negative goodwill is recognized immediately in income. Any
ACTIVE
Foreword
Management Report
왘 Notes
residual goodwill is recognized in the calculation of net disposal
71
Corporate Bodies
Major Shareholdings
CURRENCY TRANSLATION
income as part of deconsolidation.
To the extent that additional shares in an already fully-
In the separate financial statements of the subsidiaries, business
consolidated company are acquired, the costs of acquiring such
transactions in a foreign currency are measured at the exchange
additional shares are offset against the related minority interests.
rate at the time of initial recognition. Any exchange rate gains
Any remaining excess of the purchase price over the fair value of
and losses arising on the valuation of monetary assets or liabili-
net assets acquired is reported on the balance sheet as goodwill.
ties in foreign currency up to the balance sheet date are recog-
Since this type of transaction is not dealt with in any standard,
nized in income in other operating income and expenses.
the management decided to apply this accounting method after
considering all circumstances.
All intercompany income and expenses, gains and losses,
The functional currency translation method is used for the
financial statements of foreign subsidiaries. In the consolidated
financial statements, items for all foreign subsidiaries are
and receivables and payables between the subsidiaries included
translated from local currency to euros at exchange rates on the
in the consolidated financial statements have been eliminated.
balance sheet date, because these enterprises operate their
Any write-downs related to intercompany transactions in the
businesses independently in local currency. The same procedure
individual financial statements have been reversed.
is used for translating adjustments to the carrying amount of
The same principles of consolidation also apply to invest-
foreign enterprises accounted for using the equity method.
ments accounted for using the equity method, in which any
Goodwill is translated as an asset of the financially independent
goodwill on the balance sheet is recognized in the carrying
foreign subunits using the closing rate. Sales and expenses are
amount of the investment. The financial statements for all signif-
translated at average exchange rates in effect during the year.
icant investments accounted for using the equity method have
Differences compared to the prior-year currency translation as
been prepared in accordance with uniform accounting policies.
well as translation differences between income statement and
balance sheet are recognized directly in equity and reported in
accumulated other comprehensive income/loss.
Currency translation has been based, among other things,
on the following exchange rates:
Annual average rates
1 € equals
2006
Closing rates
2005 Dec. 31, 06 Dec. 31, 05
Australian Dollar (AUD)
1.66
1.63
1.67
1.61
Pound Sterling (GBP)
0.68
0.68
0.67
0.68
Brazilian Real (BRL)
Renminbi Yuan (CNY)
US Dollar (USD)
Japanese Yen (JPY)
2.74
3.03
2.82
2.76
10.02
10.21
10.28
9.52
1.26
1.24
1.32
1.17
146.20
137.10
156.93
138.90
The median of the exchange rates at the end of the past
thirteen months is used as the annual average rate.
72
ACCOUNTING POLICIES
value of the plan assets. Any amount exceeding the 10 percent
threshold must be recognized in income over the expected
Management judgments
average remaining working lives of the employees covered by the
In the process of applying the Company’s accounting policies,
plan starting in the following year.
management makes various judgments that do not represent
If RAG Beteiligungs-AG were to include all actuarial gains
estimates during the determination of the value of assets and
and losses in income immediately, pension provisions would
liabilities. Judgments made by management may significantly
increase by €824.2 million (2005: €1,080.5 million).
affect the amounts recognized in the consolidated financial
statements.
The Management Board of RAG Beteiligungs-AG has made
Assumptions and estimation uncertainty
The preparation of the consolidated financial statements involves
the following judgments that could significantly impact the
assumptions and estimates concerning the future. The actual cir-
financial position and financial performance of the RAG Beteili-
cumstances in practice will of course rarely match the estimates
gungs-Group:
that have been made. Adjustments to estimates are immediately
recognized in income as soon as better information is available.
(a) Property, plant and equipment and investment properties are
Those estimates and assumptions that could involve a material
measured at amortized cost:
risk in the form of an adjustment to the carrying amounts for
After recognition as an asset, the aforementioned assets are
assets and liabilities within the next fiscal year are shown below,
recognized at cost less any accumulated depreciation and any
in the Notes to the Income Statement and in the Notes to the
accumulated impairment losses. However, the option exists
Balance Sheet.
of carrying items of property, plant, and equipment at a revalued
amount equal to their fair value on the date of the revaluation
(a) Value of goodwill
less any subsequent accumulated depreciation and subsequent
A review of the value of intangible assets, particularly goodwill,
impairment losses. Investment properties may also be carried
requires making assumptions and estimates of future cash flows,
at their fair value.
annual growth rates, exchange rates, and discount rates. The
If, for instance, RAG Beteiligungs-AG were to recognize its
investment properties at fair value instead of at amortized cost,
the total would be €1,234.3 million higher (2005: €684.5 million).
related assumptions may be subject to changes which may lead
to impairments in future periods.
An increase in the corresponding discount rates due to
changes in the capital markets by 10 percent does not require any
(b) Capitalization of borrowing costs:
further impairment.
Companies are given the option of capitalizing borrowing costs
that are directly attributable to the acquisition, construction or
(b) Value of deferred tax assets
production of a qualifying asset as part of the cost of that asset
Deferred tax assets may only be recognized to the extent it is
instead of recognizing them as an expense.
probable that sufficient taxable profit will be available in the
RAG Beteiligungs-AG capitalized borrowing costs of €24.1
million in fiscal 2006 (2005: €13.1 million).
future. Deferred taxes are computed using the tax rates specified
under current legislation that will be applicable to the period in
which the temporary differences are likely to be reversed. If these
(c) Recognition of actuarial gains and losses for defined benefit
expectations are not met, the carrying amount of the deferred
pension plans:
tax assets must be reduced by recognizing an impairment charge
RAG Beteiligungs-AG reports actuarial gains and losses only if the
in income.
balance of accumulated actuarial gains and losses not yet recognized in income exceeds the higher of the following amounts at
the end of the prior reporting period: 10 percent of the present
value of the defined benefit obligation or 10 percent of the fair
ACTIVE
Foreword
Management Report
왘 Notes
73
Corporate Bodies
Major Shareholdings
(c) Measurement of provisions for pensions and similar obligations
ratings. Non-current receivables and liabilities with a remaining
The measurement of provisions for pensions and similar obliga-
term to maturity of more than 15 years are discounted at a
tions is based, among other things, on assumptions related to
uniform blended interest rate. The discount rates used within the
discount rates, long-term expected return on plan assets, future
RAG Beteiligungs-Group are as follows:
salary and pension increases, health care cost trend as well as
mortality tables. These assumptions may deviate from actual
Interest rate in %
data due to a change in economic conditions or a change in the
Years
Euro
USD
GBP
JPY
market situation.
1
4.07
5.34
5.54
0.74
A reduction of the discount rate used by one percentage
2
4.12
5.15
5.49
0.92
point results in an increase of the present value of the defined
3
4.12
5.08
5.47
1.09
benefit obligation by €1,331.0 million. Conversely, an increase
4
4.12
5.07
5.41
1.23
in the discount rate by one percentage point results in a decline
5
4.12
5.09
5.36
1.36
of the defined benefit obligation by €1,046.8 million.
6
4.12
5.06
5.31
1.47
An increase in health care cost trends by one percentage
7
4.14
5.08
5.25
1.57
point leads to an increase of the accumulated health care benefit
8
4.15
5.14
5.19
1.66
obligation by €10.0 million and of the pension expenses by €1.0
9
4.17
5.11
5.14
1.73
million. Conversely, a reduction of the cost trend by one percent-
10
4.19
5.17
5.09
1.81
age point leads to a reduction of the accumulated health care
11
4.20
5.19
5.05
1.87
benefit obligation by €9.0 million and of the pension expenses by
12
4.21
5.21
5.00
1.93
€1.0 million.
13
4.23
5.23
4.96
1.98
14
4.24
5.24
4.91
2.04
(d) Measurement of other provisions
15
4.26
5.26
4.87
2.09
Other provisions, in particular provisions for recultivation and
> 15
4.70
environmental protection, litigation risks as well as restructuring
are by nature subject to a high degree of estimation uncertainty
in respect to the amount and timing of the obligations. The Com-
Changes in interest rates may have material consequences on
pany must in some cases make assumptions based on historical
the level of the carrying amount of non-current receivables and
data with regard to the probability of occurrence of the obliga-
liabilities.
tion or future developments, such as the costs to be recognized
for measuring an obligation. These assumptions may be subject
Revenue recognition
to estimation uncertainty, especially in the case of non-current
Revenues received for the sales of goods and services in the
provisions. Furthermore, the amount of non-current provisions is
ordinary course of business and other revenues are recognized as
particularly dependent on the market discount rate selected and
described below:
its development.
(a) Sales revenue
(e) Discounting of non-current receivables and liabilities
The Technology Specialties, Consumer Solutions and Specialty
The measurement of non-current receivables and liabilities
Materials segments generate their revenues mainly from the
bearing no interest or without market-based interest as well as
sale of specialty chemicals products to industrial customers for
of non-current other provisions is largely dependent on the
further processing.
discount rate selected and its development. In the RAG Beteili-
The Energy segment generates revenues mainly from
gungs-Group, interest rates staggered on the basis of currencies
planning, building and operating power plants as well as decen-
and remaining term to maturity are used. They correspond to the
tralized energy supply plants in Germany and foreign countries. If
interest rates for industrial companies with top-notch credit
the customer retains substantially all risks and rewards incidental
to ownership of the plants, the Company recognizes revenues
from finance leases. In addition, commissions are generated
74
within the scope of worldwide coal trading with customers in
Interest income is recognized pro rata temporis using the
the power generation industry, the iron and steel industry, and
effective interest method. Revenues from royalties are deferred in
the heating market .
accordance with the relevant agreements and are recognized pro
The Real Estate segment comprises revenues generated
from income from leasing and managing apartments, new
rata temporis. Dividend income is recognized as soon as the right
to receive the payment arises.
construction of single and multi-family homes for third parties,
and the sales of housing stock.
The following revenue recognition procedure applies to all
segments:
The amount of sales revenue is agreed in writing between
Intangible assets
Intangible assets acquired for a consideration are capitalized at
cost. Intangible assets with finite useful lives are amortized.
Intangible assets with indefinite useful lives are not amortized,
the parties involved. Sales revenues are measured at the fair
but tested for impairment annually. The assessment with regard
value of the consideration received or the receivable, taking into
to the indefinite useful life also must be reviewed annually.
account the amount of value-added tax, any trade discounts, and
volume rebates. The general prerequisite for the recognition of
(a) Goodwill
revenue is that the amount of revenue and the amount of the
Goodwill is subject to an annual impairment test and measured
related costs can be reliably determined. In addition, the inflow of
on the basis of historical cost less accumulated impairment
economic benefits should be classified as reasonably probable.
losses. For the impairment test, goodwill is allocated to cash gen-
Revenue from the revenue of goods is recognized, subject to
erating units (CGUs). CGUs are only aggregated to the extent they
the general prerequisites, when a company has delivered prod-
represent a single segment. Sometimes, business areas are
ucts to a customer and the risks and rewards from the sales have
defined as CGUs. In this case, the impairment test is performed
been transferred to the customer. General risks in a sales trans-
on the basis of the business areas concerned. Subsequently,
action are accounted for with appropriate provisions on the basis
assets and overheads allocable to the superordinate holding
of previous experience.
structure are taken into account in the impairment test on the
Revenue from transactions involving the rendering of
relevant segment level.
services is recognized, subject to the general prerequisites, when
the stage of completion of the transaction can be reliably deter-
(b) Patents, Licenses and Trademarks
mined.
Patents, licenses and trademarks are measured at amortized cost.
Generally, such revenue is recognized in the fiscal year in
They are amortized over the estimated useful economic life of
which the service is provided. Where the performance of services
5 to 25 years on a straight-line basis. The useful economic life of
covers more than one period, the revenue recognized is based
some of the rights cannot be determined accurately because they
on the proportion of the overall contracted service already per-
are related to brands that may be exploited without restriction.
formed. In a customer-specific construction contract whose
The useful lives are reviewed annually to determine whether they
completion date extends beyond the balance sheet date, revenue
may continue to be classified as indefinite. If the assessment of
and expenses are recognized in accordance with the percentage
useful life has changed, with the useful life now considered as
of completion. The percentage of completion is calculated using
being definite, the carrying amount of the brand is amortized
the ratio of costs incurred up to the balance sheet date compared
over the expected remaining useful life on a straight-line basis.
to the estimated overall contract costs.
Brands with an indefinite useful life are subjected to an annual
impairment test.
(b) Other revenues
The requirement for the recognition of other revenues is that
(c) Capitalized development costs
the amount of the revenues can be reliably determined and that
Development costs are capitalized if they can be clearly assigned
the inflow of economic benefits can be classified as reasonably
to a newly developed product or process that is technically
probable.
ACTIVE
Foreword
Management Report
왘 Notes
realizable and is intended for marketing or the enterprise’s own
Corporate Bodies
Major Shareholdings
Expenses for general overhauling and major inspections
benefit. Capitalized development costs mainly relate to the devel-
(major repairs) are capitalized if it is probable that future benefits
opment of new products and are amortized on a straight-line
will flow from the existing asset. These expenses are depreciated
basis over their estimated economic useful life of 3 to 15 years.
over the period until the next major repair. Ongoing repairs and
other maintenance are recognized in the period in which they are
(d) Other intangible assets
carried out.
Other intangible assets mainly relate to acquired customer
Expenses in connection with pre-planning and basic
relationships. They are amortized over their expected useful life.
planning of investment projects are capitalized and depreciated
The expected useful life was estimated based on general contrac-
over the useful life of the relevant investment project.
tual provisions and previous experience, and mainly ranges
If material portions of an item of property, plant, and
between 2 and 11 years. In addition to the useful life, the amount
equipment have different useful lives, these parts are accounted
of amortization takes into account the probability of continuing
for and depreciated separately.
existence of the customer relationship in the form of a “churn
Gains and losses from disposals are calculated as the
difference between the net disposal proceeds and the carrying
rate.”
amount of the asset and are then recognized immediately in
Property, plant, and equipment
income (under other operating income and expenses).
Property, plant, and equipment is measured at historical cost of
purchase or cost of conversion less depreciation and impairment
losses. Cost of purchase includes expenditure directly attributa-
Investment properties are real estate held as a financial
ble to the acquisition. Costs of conversion include direct costs as
investment to generate rental income or for purposes of capital
well as allocable material and production overheads, including
appreciation. They are measured at amortized cost and are
depreciation. Costs resulting from decommissioning after the use
amortized on a straight-line basis over the useful life of the asset
of an item of property, plant, and equipment are included in the
from 25 to 80 years. The fair value of investment properties is
cost as of the date of purchase or conversion. In addition, the cost
determined by internal professionals. In previous years, this was
may also contain the transfer of gains or losses from cash flow
essentially performed on the basis of relevant property bench-
hedges recorded in equity that were entered into in connection
marks or the gross rental method in accordance with the German
with the purchase of property, plant and equipment in foreign
Valuation Regulation (WertV) based on the future rental income
currencies as well as the costs of borrowing.
that can be generated and sustained and market interest rates. In
Depreciation charges are recognized on a straight-line basis
over the expected useful life of the asset:
certain cases, the benchmark method was used instead where
this can be justified.
As of December 31, 2006, the investment properties
Years
Buildings
Useful economic life
5 – 50
Plant and equipment
chemical plants
power plants and components thereof
allocated to the Residential Real Estate segment were valued for
the first-time in accordance with the discounted cash flow (DCF)
procedure by internal professionals.
The DCF model maps future cash flows that determine
5 – 25
12 – 50
decentralized power supply
8 – 15
other plant and equipment
3 – 25
Furniture and office equipment
3 – 25
the property value and represent an income-based property
valuation, as is common for residential properties used for rental
purposes.
75
76
Inventories
value of the plan assets. Actuarial gains and losses result from
Inventories are stated at the lower of cost or net realizable value.
the difference between the expected and actually calculated
The cost of inventories of similar quality or intended for similar
pension obligations as of the balance sheet date as well as from
use is determined on a standardized basis using the first-in-first-
deviations of the expected from the actual fair value of plan
out-method or the weighted-average-cost method. The costs of
assets, as determined at year-end. Actuarial gains and losses are
finished goods or work in progress include the costs of raw mate-
recorded only if the balance of accumulated actuarial gains
rials and supplies, direct personnel costs, other direct costs and
and losses not yet recognized in income exceeds the higher of the
overheads allocable to production (based on normal operating
following amounts at the end of the prior reporting period:
capacity). Inventory costs may also include gains or losses from
쮿 10 percent of the present value of the defined benefit
qualifying cash flow hedges reclassified from equity in cases
obligation
where the hedges were entered into for the purchase of raw
쮿 10 percent of the fair value of the plan assets.
materials as well as the costs of borrowing.
Emission rights acquired for a consideration are stated at
Any amount exceeding the 10 percent threshold must be
amortized in income over the expected average remaining
the lower of cost or net realizable value. Emission rights allocated
working lives of the employees covered by the plan starting in
at no charge are recognized at a memo value. Provisions for the
the following year.
obligation to grant emission rights are measured at the capitalized
At year-end, the balance of the pension obligations is
amount of any emission rights existing. If the obligation exceeds
compared with plan assets using the fair value (funding status).
the amount of the capitalized rights, the surplus amount is
The pension provisions are calculated by taking into account the
measured at the average price for the three months immediately
asset ceiling with regard to the plan assets as well as after
preceding the reporting date.
deducting the unrecognized actuarial gains and losses and past
If the reason for an impairment ceases to exist, the previously recognized impairment loss is reversed (written up), up to
no more than historical cost.
service costs.
Defined contributions result in an expense in the period in
which payment is made. Obligations from defined contribution
plans exist under occupational pension commitments as well as
Provisions for pensions and similar obligations
state plans (statutory pension insurance).
The measurement of provisions for pensions and similar obligations is carried out using the projected unit credit method for
Other provisions
defined benefit obligations as specified in IAS 19. This method
If legal or constructive obligations to third parties exist as a result
takes into account both the pensions and vested entitlements
of past events and are likely to lead to an outflow of funds, then
known to exist at the balance sheet date and also any future
other provisions are created. In addition, a reliable estimate of the
expected increases in salaries and pensions. The provisions are
amount of the obligation must be possible. If there are a number
calculated using actuarial methods. The German companies carry
of obligations of this type, the probability of outflow of economic
out the calculation using the biometric base values in the 2005 G
resources is determined by considering all these obligations
Klaus Heubeck mortality tables. Pension commitments outside of
together as a whole. Restructuring provisions are only recognized
Germany are calculated according to country-specific accounting
when there is a constructive obligation due to a detailed formal
principles and parameters. The provisions are reduced by the fair
plan and when the restructuring plan raises a valid expectation
on the part of those affected that the restructuring measures will
be actually executed.
Provisions are reported at their settlement value and also
take into account future increases in costs. Non-current provisions are discounted to present value. Current provisions, and the
short-term element of non-current provisions, are not discounted. The provisions are adjusted over time to account for any
new information obtained.
ACTIVE
Foreword
Management Report
왘 Notes
Performance-related remuneration
Corporate Bodies
Major Shareholdings
Actual income taxes for the current and earlier periods are
Degussa’s Long-Term Incentive Plan is a performance-based
measured at the amount of the expected payment to, or refund
remuneration system providing long-term incentives for
from, the tax authorities.
Deferred taxes are computed using the tax rates specified
members of the Management Board and other executives. The
resulting obligations are determined in accordance with IAS 19
under current legislation that are, or will be applicable, to the
“Employee Benefits” and recognized in income.
period in which the temporary differences are likely to be
reversed. Deferred taxes for German companies continue to be
Deferred taxes, income taxes
computed using an overall tax rate of 39 percent. This includes
For tax purposes, RAG Beteiligungs-AG is deemed a controlled
German corporation tax at 25 percent, the solidarity surcharge of
company of RAG Aktiengesellschaft and it is not deemed a tax-
5.5 percent on corporation tax, and trade tax of 13 percent. For
able entity pursuant to German tax laws. For the purposes of the
foreign companies, the respective national tax rates apply. These
IFRS consolidated financial statements, RAG Beteiligungs-AG has
range from 19 percent in Slovakia and Poland to 35 percent in the
accounted for income taxes for the Company as if the Company
USA.
were an independent operation and no fiscal entity agreement
had been concluded with another company not included in the
Actual taxes are measured using the company-related tax
rates applicable on the balance sheet date.
group of consolidated companies. This is in line with a substanceover-form method (stand-alone approach). The tax assets and tax
Financial instruments
liabilities recognized on the basis of the stand-alone approach
Contractual rights and obligations are accounted for as financial
are settled within the scope of the tax allocation procedure with
instruments which result in an inflow or outflow of financial
the fiscal entity parent. Tax expenses and tax income resulting
assets or the issue of equity instruments. They are distinguished
from the stand-alone approach not covered by the allocation
in non-derivative and derivative financial instruments.
procedure are recognized directly in equity. In addition, the RAG
Beteiligungs-Group will apply the following procedure:
Deferred taxes are created in accordance with IAS 12 to cover
Financial instruments are measured upon initial recognition
at cost, and subsequently at either amortized cost or fair value.
The cost corresponds to the fair value of the consideration given
temporary differences between tax accounts and IFRS financial
or received, including transaction costs which can be directly
statements relating to the carrying amounts and measurement
attributed. They are calculated by discounting expected cash
of assets and liabilities. Tax losses carried forward that can
flows with the effective interest rate to the date of purchase
probably be used in the future are capitalized in the amount of
(present value). The effective interest rate takes into account all
the deferred tax asset. Deferred tax assets are always recognized
allocable interest-type fees. Within the scope of subsequent
on the basis that there is likely to be future taxable income
measurement, the cost is measured with the effective interest
against which the temporary differences can be reversed. To the
rate. The basis for the fair value is the quoted or market price if
extent that the realization of deferred tax assets is unlikely, their
the financial instrument is traded in a reasonably active market.
carrying amounts are subject to a valuation allowance.
If such a price is not available, prices of timely transactions are
Deferred tax assets and liabilities are netted off, providing
used. In all other cases, established measurement methods are
the company is entitled to set off actual tax liabilities and assets,
used, such as comparisons with the market values of similar
and providing the deferred tax assets and liabilities relate to the
financial instruments, discounted cash flow analyses and option
same tax authority.
pricing models.
(a) Non-derivative financial instruments
In the RAG Beteiligungs-Group, non-derivative financial instruments that are reported as financial assets are classified either as
“loans and receivables” or “available for sale.” These assets are initially recognized as of the settlement date. Financial assets are
derecognized when the contractual rights to the cash flows have
77
78
lapsed or have been transferred and the Group has transferred
lasting shortfall in the fair value compared to the carrying
substantially all risks and rewards incidental to ownership. The
amount is considered an indicator of impairment. With regard to
Group had no financial assets that were sold through securitiza-
equities, when the fair value is 30 percent below the carrying
tion or repurchase agreements and that were still reported in the
amount within a period of more than 12 months, this is consid-
financial statements in whole or in part (continuing involve-
ered an indicator of impairment. If such an indicator exists, losses
ment).
recognized in accumulated other comprehensive income/loss are
Non-derivative financial instruments which are reported
transferred from equity to the income statement. If the reason
as financial liabilities are classified as “at fair value through profit
for an impairment loss ceases to exist, the related write-ups are
or loss” or “liabilities at amortized cost”. Financial liabilities are
generally recognized directly in equity. Only for debt securities
derecognized upon repayment, i.e. when the obligation has been
attributable to this category are write-ups recognized in income,
settled or cancelled or has expired.
up to the amount of the original impairment losses. Write-ups
In the following sections, the categories used within the
Group are described:
The category “loans and receivables” includes trade
are not recognized for equity investments and other financial
assets for which a fair value may not be reliably determined.
In the RAG Beteiligungs-Group, the category “at fair value
receivables, receivables from finance leases, and loans. Assets in
through profit or loss” comprises only the portion of the Degussa
this category are measured at amortized cost using the effective
bond hedged through a fair value hedge. Financial instruments
interest method. Non-current assets in this category bearing non-
of this category are recognized at each balance sheet date at fair
market interest rates are recognized at present value. Impairment
value. Any gains or losses from changes in the fair value of such
losses are recognized if objective evidence based on historical
instruments must be recognized in income. The Group did not
data indicates that the settlement amounts due will not be fully
make use of the option to voluntarily classify financial instruments
recoverable on the normal terms. The amount of the impairment
in this category (fair value option).
loss is measured as the difference between the carrying amount
The category “liabilities at amortized cost” includes trade
for the asset and the present value of estimated future receipts
receivables, bonds, loans, and receivables from finance leases,
calculated using the effective interest rate. Impairment losses are
with the exception of the Degussa bond, part of which is catego-
taken to income. If the reason for an impairment loss ceases to
rized as “at fair value through profit or loss.” The liabilities are
exist, the related write-ups (i.e. reversals of impairment losses)
measured at amortized cost using the effective interest method.
are recognized in income, up to amortized cost.
Liabilities without market-based interest rates are recognized at
The category “available for sale” includes equity holdings
present value.
that are not consolidated or accounted for using the equity
method and other securities. Such available-for-sale assets are
(b) Derivative financial instruments
generally measured at fair value, including transaction costs
Derivative financial instruments are primarily used to hedge risks
directly attributable to the purchase of this financial asset. Assets
related to foreign currencies, commodity prices, and interest
for which a fair value does not exist or cannot be determined, e.g.
rates. For this purpose, hedging instruments in the form of inter-
in the case of unlisted equity securities, are reported at amortized
est rate swaps, cross-currency swaps, options, currency forwards,
cost. Changes in the fair value are recognized directly in equity
and commodity futures are accounted for as derivative financial
(in accumulated other comprehensive income/loss), taking into
instruments. Upon initial recognition, such financial instruments
account deferred taxes. A review is carried out as of each balance
are recognized at fair value as an asset or a liability. The initial
sheet date to assess whether objective evidence indicates that
recognition is performed as of the settlement date. Transaction
an impairment of a financial asset has occurred. A material or
costs, if any, are directly recognized in income. The fair value of
derivatives generally is equivalent to the quoted or market price.
If there is no active market, the fair value is determined on the
basis of accepted calculation methods. The fair value of currency
forward contracts is based on the forward price at the balance
ACTIVE
Foreword
Management Report
왘 Notes
Corporate Bodies
Major Shareholdings
sheet date. The market price of options is calculated using
soon as the underlying transaction also has an impact on income.
recognized option pricing models. Commodity derivatives are
These amounts are included in net interest income for interest
measured on the basis of spot prices and forward rates, and
rate hedges, in the related sales item for hedges of sales, and in
interest rate derivatives are measured by discounting future cash
cost of materials for purchase transactions. If the hedged future
flows. Stand-alone derivative financial instruments are catego-
transaction is linked to a non-financial asset or liability, any gains
rized as “at fair value through profit or loss.”
or losses previously recognized in accumulated other comprehen-
Hedge Accounting is subject to certain criteria. In particular,
hedge accounting requires detailed documentation of the hedge
sive income/loss are included in the initial measurement of asset
or liability cost.
relationship and evidence of expected and the actual hedge
The purpose of hedges of a net investment is to hedge the
effectiveness of between 80 percent and 125 percent. Hedge
foreign currency risk associated with equity investments with a
accounting must be discontinued when the criteria are no longer
foreign functional currency. Such hedges are treated as cash flow
met. For cash flow hedges, hedge accounting must be discontin-
hedges. Gains or losses accounted for in accumulated other
ued if the occurrence of the forecast transaction is no longer
comprehensive income/loss are recognized in income on the
probable. In this case, the amount recognized directly in equity
sales of the foreign subsidiary.
in accumulated other comprehensive income/loss must be
transferred to the income statement.
Depending on the type of the hedging relationship, hedging
instruments are measured as follows:
Derivative financial instruments included in other contracts
or non-derivative financial instruments (embedded derivatives)
are separated from the host contract, provided certain requirements are met, and accounted for as stand-alone derivatives.
The purpose of fair value hedges is to hedge the fair values
of recognized assets and liabilities. Changes in the fair value
Impairment test
of hedging instruments are recognized in the same income
An impairment test in accordance with IAS 36 “Impairment of
statement item as changes in the fair value of the hedged item,
Assets” is performed for non-current assets if there are indica-
irrespective of the original accounting treatment related to the
tions that impairment has occurred, with few exceptions. Good-
hedged item. These changes must relate to the hedged risk. If
will and other intangible assets with an indefinite useful life
off-balance sheet, firm commitments are hedged, changes in the
should be tested for impairment at least once a year. The test
fair value of the firm commitment with respect to the hedged
involves a comparison to establish the higher of fair value less
risk result in the recording of an asset or a liability with a corre-
costs to sell and value in use for each asset or cash generating
sponding amount recognized in income. Due to the procedure
unit (CGU). The fair value less costs to sell is determined on the
applied, the changes in the fair value of the hedged item and the
basis of a market value. The value in use is determined, as in the
hedging instrument offset each other in the income statement
previous year, using past values over a three-year medium-term
of the period in the case of an effective hedge.
planning period. This medium-term planning is based both on
The purpose of cash flow hedges is to hedge the risk of
experience and on expectations with regard to future market
volatility in the future cash flows of a recognized asset or liability
development. The main economic data, such as growth of the
or of a highly probable forecast transaction. Changes in the fair
gross domestic product and trends in interest rates, exchange
value of hedging instruments are taken directly to accumulated
rates, and commodity prices as well as market prices for CO2
other comprehensive income/loss in relation to their effective
certificates, etc., underlying the medium-term planning were
portion. The ineffective portion of fair value changes is recognized
determined by RAG Beteiligungs-AG centrally and derived from
in the income statement. Any amounts recognized in accumu-
market expectations. The risk-free interest rate applicable to all
lated other comprehensive income/loss are taken to income as
CGUs has been assumed to be 4.25 percent (2005: 4.1 percent).
A growth discount has been assumed for the individual CGUs.
79
80
These CGU-specific growth rates have been derived from experi-
Non-current assets are no longer amortized, but are meas-
ence and future expectations. The long-term average growth
ured at the lower of the carrying amount and fair value less costs
rates for the relevant markets in which the CGUs operate are not
to sell. The profit or loss from the measurement and the sales of
exceeded. In addition, CGUs have been allocated an appropriate
these assets is reported in income of the continuing operation,
financial markets beta factor, determined by comparison with
unless a discontinued operation is involved.
data of peer group companies. The parameter used are set out in
items (7) and (13) in the notes.
If the reason for an impairment loss ceases to exist, the
related write-ups are recognized in income, except if goodwill is
involved.
A discontinued operation represents either a major line of
business or geographical area of operation of the company that is
being disposed of in its entirety or in part pursuant to a single
plan, or a newly acquired subsidiary classified as held for sale.
The profit or loss from the measurement, disposal and
continuing operation of discontinued operations is reported in
Leasing
income separately from the continuing operations.
A lease is an agreement whereby the lessor conveys to the lessee
in return for a payment or series of payments the right to use
Contingent liabilities and other financial commitments
an asset for an agreed period of time. The RAG Beteiligungs-
Unless they must be reported as part of a company acquisition,
Group is a party to operating leases and finance leases as both
contingent liabilities represent possible or present obligations
lessor and lessee.
arising from past events, and for which an outflow of resources is
A lease is classified as a finance lease if it transfers
not unlikely, but that are not recognized in the financial state-
substantially all the risks and rewards incidental to ownership of
ments. Other financial commitments result from unencumbered
an asset. If RAG Beteiligungs-AG acts as the lessee in a finance
pending legal transactions, continuous obligations, obligations
lease, the assets are recognized in property, plant, and equipment
imposed by public law, or other economic commitments that are
at the lower of fair value or present value of the non-cancelable
not already reported under liabilities in the financial statements
minimum lease payments. The obligation resulting from future
or contingent liabilities, providing they are material to an
lease installments is recognized as a liability at the discounted
assessment of financial position.
settlement value. If RAG Beteiligungs-AG is the lessor, assets held
under a finance lease are not included in property, plant, and
equipment, but presented as a receivable at an amount equal to
the investment in the lease.
Operating leases are any leases not classified as finance
leases. Expenses and income from operating leases are
recognized in the income statement in the period in which they
are incurred.
Non-current assets held for sale, disposal groups and
discontinued operations
Non-current assets are classified as held for sale if their carrying
amount will be recovered principally through a sales transaction
rather than through continuing use. The asset must be available
for immediate sale in its present condition subject only to terms
that are usual and customary for sales of such assets and its sale
must be highly probable. If the related liabilities will be sold as
part of the transaction, they are separately reported as liabilities
of the disposal group.
ACTIVE
Foreword
Management Report
왘 Notes
NOTES TO THE NON-CURRENT ASSETS HELD FOR
SALE AND DISCONTINUED OPERATIONS
81
Corporate Bodies
Major Shareholdings
company Bucyrus International Inc. Milwaukee, Wisconsin (USA)
acquired all voting shares of DBT, corresponding to 49.9 percent
of the entire share capital. Bucyrus will acquire the non-voting
Non-current assets held for sale and groups of assets to be
shares of DBT, corresponding to 50.1 percent of the entire share
disposed of together in a single transaction as well as directly
capital, at a fixed price in a forward sale. In the transitional
associated liabilities (disposal groups) must be stated separately
period, the majority package will be held by Hamburg Trust. The
from other assets and liabilities in the balance sheet. The
net purchase price amounts to USD 731.0 million. Of that amount,
amounts presented for these assets and liabilities for prior
USD 710.0 million will be paid in cash and USD 21.0 million in
periods are not to be reclassified or re-presented.
shares of the buyer. The transaction is valued at USD 831 million,
If a disposal group meets the criteria for classification as a
taking into account the liabilities acquired. The sale is subject
“discontinued operation,” it must be presented separately from
to approval by the German Antitrust Office and is expected to be
the continuing operations in the income statement. The amounts
completed in the first quarter of 2007. DBT offers complete
presented for these discontinued operations for prior periods are
system solutions for underground coal mining worldwide and is
to be adjusted accordingly.
the global market leader in bracing equipment.
Furthermore, the cash flows of these discontinued operations
must be reported separately.
In a purchase agreement dated November 2, 2006, RAG
Saarberg Energiebeteiligungs GmbH sold 76.9 percent of its
shares in Saar Ferngas AG, which represents the gas distribution
(1) Non-current assets held for sale and disposal
groups
activities, to RWE Energy AG. The purchase price amounted to
Based on the strategic restructuring of the RAG Beteiligungs-
Antitrust Offices and has not yet been completed. Approval is
Group, various activities were planned for disposal and allocated
expected in the first half of 2007. Saar Ferngas, a company of
to the assets held for sale and disposal groups.
the Energy segment, procures, transports, stores, and delivers gas
In a purchase agreement dated December 16, 2006, RAG
Coal International AG and RBV Verwaltungs-GmbH sold 100 per-
€367.0 million. The sale is subject to approval by the German
and is the market leader in Rhineland-Palatinate and Saarland.
Furthermore, the strategic positions of various other
cent of their shares in DBT GmbH (DBT) which represents the
non-core activities of the Group were examined in recent months
mining technology operations. In a first step, the exchange-listed
and it was decided to plan for their sale.
Balance
sheet
€ million
Discontinued activities
Mining
Technology
Gas
Distribution
Other
Dec. 31, 06
Intangible assets
48.2
3.5
44.7
–
Property, plant and equipment
177.2
105.2
67.5
4.5
Financial assets
232.5
11.2
221.2
0.1
45.2
26.3
8.3
10.6
Current tax assets/deferred tax assets
Inventories
446.9
418.8
25.0
3.1
Trade receivables
311.3
132.5
164.4
14.4
Other receivables
30.2
17.2
12.4
0.6
23.1
18.8
0.1
4.2
1,314.6
733.5
543.6
37.5
82
Balance
sheet
€ million
Mining
Technology
Gas
Distribution
Other
Dec. 31, 06
Total income/expense recognized in equity
Provisions
Current tax liabilities/deferred tax liabilities
– 4.5
– 0.8
– 1.5
– 2.2
303.3
190.9
111.1
1.3
17.0
10.0
5.8
1.2
Trade payables
190.1
58.1
123.7
8.3
Other payables
347.3
324.7
22.2
0.4
857.7
583.7
262.8
11.2
Furthermore, the activities classified in the previous year as
Degussa signed a purchase agreement on March 30, 2006
held for sale have now also been sold and are no longer reported
with Ashland Inc., Covington, KY (USA) for the Water Chemicals
as non-current assets held for sale or disposal groups.
activities. Including the net financial liabilities to be assumed,
The Food Ingredients activities were sold by Degussa to
Cargill, Minneapolis, MN (USA), in September 2005 subject to
approval by the European anti-trust authorities, which was
granted on March 29, 2006. The closing was on April 5, 2006. The
purchase price was €540 million.
the purchase price comes to €120 million. The transaction was
completed in the second quarter of 2006.
Electronics Systems primarily includes activities of the
STEAG HamaTech Group, which was sold on January 27, 2006.
In addition, parts of the Mining Technology operations were
already sold in the first quarter of 2006.
Balance
sheet
Chemicals
€ million
Electronic
Systems
Mining
Technology
Other
Dec. 31, 05
Intangible assets
198.4
194.0
4.3
0.1
–
212.6
186.0
23.6
3.0
–
0.0
–
–
–
0.0
Financial assets
8.5
7.2
–
0.1
1.2
Current tax assets/deferred tax assets
6.4
1.8
4.3
0.3
–
Inventories
235.3
179.4
49.4
6.5
–
Trade receivables
135.4
114.4
17.6
3.4
–
Other receivables
44.8
41.2
3.3
0.3
–
56.7
36.6
0.5
19.6
–
898.1
760.6
103.0
33.3
1.2
ACTIVE
Foreword
Management Report
왘 Notes
Balance
sheet
€ million
83
Corporate Bodies
Major Shareholdings
Chemicals
Electronic
Systems
Mining
Technology
Other
Dec. 31, 05
Total income/expense recognized in equity
– 6.6
– 6.9
0.3
–
–
Provisions
82.7
65.7
7.8
9.2
–
Current tax liabilities/deferred tax liabilities
50.6
47.4
0.6
2.6
–
29.7
24.2
5.5
–
–
Trade payables
56.0
46.5
9.1
0.4
–
Other payables
Impairment losses of €50.7 million (2005: zero) were
33.1
24.4
4.7
4.0
–
252.1
208.2
27.7
16.2
0.0
(2) Discontinued operations
recognized for non-current assets held for sale and disposal
Construction Chemicals, Gas Distribution, Mining Technology, and
groups, €22.0 million of which was reported as depreciation and
Food Ingredients meet the criteria for classification as “discontin-
amortization and impairment losses and €28.7 million as other
ued operations,” whereby Food Ingredients was discontinued in
operating expenses.
2005. The profit/loss after tax expense from discontinued operations recognized in the income statement contains the current
income from the actual operating activities of the operations as
well as the proceeds from the disposal (including gains and losses
from remeasurement) of these operations.
The current profit/loss after tax is broken down among the
discontinued operations as follows:
Income statement
€ million
2006
2005
3,595.0
4,523.8
thereof Construction Chemicals
1,110.0
2,045.2
thereof Gas Distribution
1,422.1
1,174.3
thereof Mining Technology
943.4
830.9
119.5
473.4
3,328.9
4,262.6
985.3
1,884.6
1,365.0
1,140.5
Income
thereof Food Ingredients
Expenses
871.4
778.7
107.2
458.8
Profit/loss from discontinued
operations (before taxes)
+ 266.1
+ 261.2
66.0
49.7
48.9
– 9.2
– 3.8
7.8
Income tax expense
17.0
17.9
3.9
33.2
+ 200.1
+ 211.5
Profit from discontinued operations
(after taxes)
84
NOTES TO THE INCOME STATEMENT
The proceeds from disposal after tax are broken down
among the discontinued operations as follows:
(3) Sales
Income statement
€ million
2006
Income from the disposal of
discontinued operations (before taxes)
+ 1,183.4
+ 1,169.5
2005
+ 0.0
2005
12,986.7
538.9
658.2
23.9
15.5
Revenues from rental income
(investment properties)
318.4
319.6
Revenues from finance leases
192.2
201.1
+ 13.9
274.6
14,793.4
14,181.1
€ million
2006
2005
Income from the disposal of assets
200.1
410.9
Income from the reversal of
provisions
342.0
278.0
7.3
34.4
90.1
4.0
120.5
205.5
Revenues from services
Revenues from construction contracts
Income tax expense
2006
13,720.0
Revenues from sales of goods
€ million
– 0.0
295.2
Income from the disposal of
discontinued operations (after taxes)
(4) Other operating income
– 20.6
+ 908.8
+ 0.0
The cash flows from operating activities, investing activities,
and financing activities are broken down as follows among the
Income from the reversal of deferrals
discontinued operations:
Income from the measurement
of derivatives
(excluding interest rate derivates)
Cash flow statement
€ million
2006
2005
+ 50.8
+ 267.6
– 30.0
+ 120.0
+ 37.9
+ 42.7
+ 44.9
+ 76.9
– 2.0
+ 28.0
Gains on currency translation of
monetary assets and liabilities
Income resulting from the elimination
of negative goodwill
20.0
2.3
Other income
312.8
308.2
1,092.8
1,243.3
– 50.1
– 85.2
– 15.0
– 44.0
Income from the disposal of assets mainly comprises €75.9 mil-
– 11.5
– 14.0
lion (2005: €158.6 million) from the sale of property, plant, and
– 23.6
– 13.2
equipment, and €110.9 million (2005: €251.3 million) from the sale
–
– 14.0
of investments.
– 76.3
– 124.0
– 7.0
– 65.0
– 31.3
– 25.8
– 38.0
– 35.2
–
+ 2.0
– 75.6
+ 58.4
Change in cash and cash equivalents
(discontinued operations)
ACTIVE
Foreword
Management Report
왘 Notes
Furthermore, other income includes reversals of impairment
85
Corporate Bodies
Major Shareholdings
(5) Raw materials and consumables used
losses on assets of €32.2 million (2005: €27.7 million. Pursuant to
IAS 36 “Impairment of Assets,” €19.8 million (2005: €15.4 million)
€ million
is distributed to the following segments/ cash generating units
Cost of raw materials and supplies
and purchased goods
(CGUs):
Cost of services used
Reversal of impairment losses
€ million
2006
2005
2005
6,826.8
6,651.7
898.1
707.4
Impairment losses on raw materials
and supplies and purchased goods
16.6
3.8
Reversals of impairment losses on
raw materials and supplies and
purchased goods
– 0.7
– 2.6
7,740.8
7,360.3
–
2.1
Consumer Solutions
–
0.4
0.0
0.5
–
3.1
Residential Real Estate
19.7
8.6
Land Development and
Commercial Real Estate
0.1
0.3
–
0.4
19.8
15.4
Other
Specialty Materials
2006
Energy
Decentralized Energy Supply
(6) Personnel expense
Real Estate
€ million
Other
Other CGUs
2006
2005
2,484.6
2,421.7
Social security contributions
376.4
403.2
Pension expenses
186.4
134.4
Wages and salaries
31.6
25.6
3,079.0
2,984.9
The interest expense on the accrual of interest on pension
provisions as well as the expected income from the plan assets
are reported in the interest result, see item (9) in the Notes.
(7) Depreciation, amortization, and impairment losses
This item includes depreciation and amortization over the useful
life of assets as well as impairment losses recognized as a result
of impairment tests as set out in IAS 36 or IAS 39.
Total
thereof depreciation
and amortization
€ million
2006
2005
Intangible assets
419.6
308.4
227.3
249.7
192.3
58.7
971.2
872.2
696.3
679.3
274.9
192.9
69.8
55.2
50.1
50.6
19.7
4.6
Financial assets, other receivables
2006
2005
thereof impairment
losses
2006
2005
47.8
72.0
–
–
47.8
72.0
1,508.4
1,307.8
973.7
979.6
534.7
328.2
86
(a) Impairment pursuant to IAS 36
Impairment losses resulting from impairment tests pursuant to
IAS 36 relate to the following cash generating units (CGUs):
Impairment losses
Risk-adjusted
discount rate in %
€ million
2006
2005
2006
2005
325.7
197.4
8.21
5.80 – 6.201)
Consumer Solutions
58.9
0.0
8.85
–
Specialty Materials
18.1
6.2
9.14
5.61)
Energy
Power
11.3
2.1
8.92
8.51
Decentralized Energy Supply
–
0.1
–
7.40
Coal Trading
–
2.5
10.69
13.69
13.9
4.4
5.92
6.31
5.8
0.1
6.00 – 7.50
7.08
Real Estate
Land Development and Commercial Real Estate
Other
Electronic Systems
Tar Refining
Construction Plastics
Corporate/Services
Other CGUs
1) Weighted
–
9.3
–
–
3.0
3.0
9.93
9.73
–
0.5
–
5.60 – 6.001)
46.8
29.4
4.00 – 6.201)
6.20 – 9.021)
3.4
1.2
–
11.09
486.9
256.2
Average Cost of Capital (WACC) after taxes. All other discount rates refer to WACC before taxes.
For the CGUs listed above, the recoverable amount was
determined on the basis of value in use.
Within the Technology Specialties, Consumer Solutions and
Specialty Materials CGUs, impairment losses were recognized
primarily for intangible assets, land and buildings, and plant and
equipment that had been reported at a lower market value on
the respective date of acquisition.
Within the Power Generation CGU, the district heating
plants were fully impaired.
The impairment losses reported for the Real Estate CGU
were for the most part incurred for land and buildings. These
impairment losses are in connection with the introduction of
a new discounted cash flow-based valuation method and the
associated retailoring of the portfolio areas with the consequence of impairment losses and reversals of impairment losses,
which largely offset one another in result.
The impairment losses of the Corporate/Services CGU
relate mainly to other investments.
ACTIVE
Foreword
Management Report
왘 Notes
87
Corporate Bodies
Major Shareholdings
(9) Interest result
(b) Impairment pursuant to IAS 39
Impairment losses on financial assets and other receivables,
which are basically calculated pursuant to IAS 39, were attributa-
€ million
ble mainly to receivables at €28.4 million (2005: €29.5 million)
Income on securities and loans
and loans and other investments at €19.4 million (2005: €39.2
Interest and similar income from
interest-rate derivates
57.1
7.1
Other interest-type income
31.8
58.9
million).
(8) Other operating expenses
€ million
2006
193.6
59.4
1.9
Other interest-type expense
89.6
47.3
Net interest expense for pension
benefit obligations
179.5
200.9
31.6
40.4
624.2
503.2
– 478.8
– 424.8
89.8
341.5
293.8
121.5
Interest expenses on the accrual of
interest for other provisions
37.1
69.8
408.2
426.6
Selling expenses
569.1
529.7
Miscellaneous tax expense
103.8
44.9
1,350.4
1,493.5
3,086.6
3,249.5
Other expenses
78.4
250.6
19.1
76.2
Administrative expenses
145.4
Interest expense on financial liabilities
13.5
Rental expense on leases
Losses on the measurement
of derivatives (excluding interest rate
derivatives)
Interest income
Interest and similar expense on
interest rate derivates
179.9
158.9
12.4
Interest expense on finance leases
41.4
Losses on currency translation
of monetary assets and liabilities
2005
56.5
2005
Losses on the disposal of assets
Repairs and maintenance expenses
2006
Interest expenses
Borrowing costs of €24.1 million (2005: €13.1 million) were
capitalized. The assumed interest rate for financing costs was
based on the average loan interest rate in the period under
review and was determined at 3 percent.
Other operating expenses contain directly allocable operating
The increase in interest expense on financial liabilities
expenses of €264.2 million (2005: €248.3 million) on investment
and other interest-type expense results from the financing of the
properties that generate rental income. Expenses of €10.9 million
purchase of the additional shares in Degussa in 2006.
(2005: €11.0 million) were incurred on investment properties that
do not generate rental income.
At €0.5 million (2005: €0.2 million), the ineffective portion of
foreign exchange derivatives from cash flow hedges is reported
in expenses from the measurement of derivatives.
A total of €0.4 million of the interest income (2005: €0.0
million) is attributable to the ineffective portion of cash flow
hedges and €0.1 million (2005: €2.0 million) is attributable to fair
value hedges.
88
(10) Result from investments accounted for using the
equity method
The tax reconciliation shows the change from the expected
income taxes to the effective income taxes on the income
statement. Effective income taxes include actual income taxes
€ million
2006
2005
and deferred taxes. Expected income taxes are based on an
Profit/loss transferred
unchanged overall tax rate of 39 percent, comprising German cor-
+ 0.2
+ 8.6
Income from measurement using
equity method
57.7
150.2
Expenses from measurement using
equity method
4.3
94.6
Impairment losses
3.6
–
poration tax at 25 percent, the solidarity surcharge at 5.5 percent,
–
5.9
+ 50.0
+ 70.1
(11) Other financial result
€ million
Net income from other investments
Other financial income
Other financial expense
(thereof relating to other periods)
Deferred tax
(thereof relating to other periods)
2006
2005
+ 52.9
+ 259.1
20.6
101.0
5.8
4.4
Variances from expected tax rate
– 38.6
– 28.9
Changes in the valuation allowances
on deferred tax assets, losses not
affecting deferred taxes, and use of
loss carryforwards
– 21.4
84.5
59.4
0.2
Profit before income tax expense
Expected income taxes thereon
Variances from differing rates of
municipal trade tax
2005
+ 24.6
+ 11.2
0.0
0.2
Changes to the tax rate and
tax legislation
0.0
0.5
Non-deductible expenses
+ 24.6
+ 10.9
Income taxes break down as follows:
Current tax
€ million
2006
(12) Income tax expense
€ million
and the average trade tax.
2006
2005
8,3
157,0
(– 18,9)
(27,0)
2,0
25,6
(14,5)
(86,9)
10,3
182,6
11.7
49.1
Tax-free income
– 40.1
– 51.4
Gain/loss on companies accounted
for using the equity method
– 19.5
– 36.9
Non-deductible goodwill impairment
losses
13.5
0.0
Other
18.9
60.6
Effective income tax (current
income tax and deferred tax)
10.3
182.6
Effective tax rate (in %)
19.5
70.5
The deviations from the expected tax rate result from lower
national tax rates of the foreign subsidiaries compared to the
overall tax rate of 39 percent. The changes to the tax rate and tax
laws are almost solely attributable to tax legislation in Turkey
with impacts on the reporting of deferred taxes for the Iskenderun
power plant company. The item “Other” contains outside basis
difference and actual and deferred income taxes from previous
periods.
ACTIVE
Foreword
Management Report
89
Corporate Bodies
Major Shareholdings
왘 Notes
NOTES TO THE BALANCE SHEET
(13) Intangible assets
Goodwill
Patents,
licenses
and
trademarks
2,526.1
2,385.9
190.1
535.5
5,637.6
Currency translation
2.6
16.6
0.1
5.5
24.8
Additions from business combinations
17.4
0.1
4.1
21.6
€ million
Capitalized
developOther
ment intangible
costs
assets
Total
Historical cost
Other additions
Disposals
Reclassifications
Other additions
Disposals
Reclassifications
23.4
31.6
1.7
4.8
61.5
– 146.1
– 213.0
– 9.9
– 6.2
– 375.2
2.5
4.9
– 4.4
15.5
18.5
2,425.9
2,226.1
177.6
559.2
5,388.8
– 41.2
– 9.5
– 0.1
– 6.5
– 57.3
18.0
5.6
0.1
23.7
1,861.3
25.9
0.6
9.3
1,897.1
– 929.9
– 511.5
– 36.0
– 39.8
– 1,517.2
0.3
9.2
1.2
-0.3
10.4
3,334.4
1,745.8
143.3
522.0
5,745.5
272.9
656.1
15.1
102.6
1,046.7
0.3
9.6
0.0
1.7
11.6
0.0
Impairment losses
0.0
Disposals
Reclassifications
0.0
168.8
17.2
106.7
292.7
29.1
25.2
4.4
58.7
0.0
0.0
– 55.8
– 81.6
– 5.8
– 4.4
– 147.6
2.6
– 4.7
0.0
10.1
8.0
220.0
777.3
51.7
221.1
1,270.1
– 0.6
– 5.8
0.0
– 0.1
– 6.5
125.6
12.0
93.9
231.5
139.2
13.9
4.7
192.3
0.0
Impairment losses
34.5
Disposals
0.0
– 110.3
– 285.9
– 7.5
– 27.1
– 430.8
5.7
0.3
– 0.1
5.9
143.6
756.1
70.4
292.4
1,262.5
Carrying amounts as of December 31, 2005
2,205.9
1,448.8
125.9
338.1
4,118.7
3,190.8
989.7
72.9
229.6
4,483.0
Reclassifications
90
The carrying amount of goodwill is apportioned to the following
cash generating units (CGUs).
Goodwill
€ million
Dec. 31, 06 Dec. 31, 05
Energy
Growth
discount in %
2006
2005
0.7
0.7
394.8
392.4
Gas Distribution
–
46.4
–
1.0
Decentralized Energy Supplies
–
2.1
–
1.0
Coal Trading
–
0.0
1.0
1.0
Construction Chemicals
–
333.0
–
1.5
1,174.3
597.6
1.5
1.5
Consumer Solutions
604.3
301.7
1.5
1.5
Specialty Materials
979.3
508.4
1.5
1.5
37.9
21.2
1.0
1.0
–
2.5
–
1.0
0.2
0.6
0.5 – 1.0
1.0 – 1.5
3,190.8
2,205.9
Real Estate Services
Additional CGUs
The goodwill attributable to the CGU Energy of €394.8 mil-
Furthermore, this balance sheet item includes amortization
lion results from earlier acquisitions of shares of STEAG AG, Essen.
of €0.4 million (2005: 0) on trademarks for which the estimation
Goodwill of €2,757.9 million was apportioned to the CGUs Tech-
of the useful economic life was changed from indefinite to
nology Specialties, Consumer Solutions, and Specialty Materials
definite during the period under review.
Capitalized development costs mainly refer to the purchase
from the various acquisitions of Degussa shares.
Patents, licenses and trademarks include trademarks having
of Degussa shares and the ensuing disclosure of hidden reserves.
an indefinite useful economic life in the amount of €460.0 million
They can be broken down according to the activities in Specialty
(2005: €538.1 million). They are apportioned to the following
Materials, Consumer Solutions and Technology Specialties. Expen-
segments:
ditures for research and development, which were recognized as
an expense, came to €308.5 million (2005: €305.0 million).
Trademarks with an indefinite useful economic life
€ million
Trademark Degussa
Consumer Solutions
Specialty Materials
Dec. 31, 06 Dec. 31, 05
173.2
173.2
–
32.3
120.4
153.3
40.0
41.5
126.4
137.8
460.0
538.1
Trademarks with an indefinite useful economic life were
lower than in 2005, primarily due to the sales of the Construction
Chemicals segment, a reassessment of the useful economic life
from indefinite to definite, and due to impairment losses.
The carrying amount of intangible assets whose title is
restricted amounted to €0.1 million in 2005.
As in 2005, there were no obligations relating to the
acquisition of intangible assets.
ACTIVE
Foreword
Management Report
91
Corporate Bodies
Major Shareholdings
왘 Notes
(14) Property, plant and equipment
€ million
Land, land
rights and
buildings
Plant
and
equipment
Other
plant,
office
furniture
and
equipment
4,204.2
14,081.6
1,620.0
686.7
20,592.5
96.5
327.1
27.9
29.8
481.3
Advance
payments
and
construction in
progress
Total
Historical cost
Other additions
Disposals
Reclassifications
Other additions
Disposals
Reclassifications
8.1
101.4
1.9
0.2
111.6
198.1
456.6
191.7
646.3
1,492.7
– 539.1
– 1,377.5
– 460.8
– 61.6
– 2,439.0
46.0
414.8
13.9
– 537.3
– 62.6
4,013.8
14,004.0
1,394.6
764.1
20,176.5
– 53.7
– 202.9
– 13.8
– 21.4
– 291.8
13.2
31.8
1.5
4.2
50.7
68.4
373.2
76.4
506.7
1,024.7
– 661.5
– 1,268.3
– 304.7
– 42.2
– 2,276.7
101.5
388.3
24.8
– 660.3
– 145.7
3,481.7
13,326.1
1,178.8
551.1
18,537.7
2,024.6
10,673.6
1,266.1
17.8
13,982.1
31.9
210.5
19.5
1.5
263.4
0.0
1.5
0.0
125.1
641.1
193.6
Impairment losses
56.8
131.9
3.5
Disposals
Reclassifications
1.5
959.8
0.7
192.9
– 1,829.4
– 1.0
– 7.3
– 0.3
– 311.4
– 1,136.0
– 365.3
– 16.7
– 8.6
– 8.2
0.3
– 8.4
0.2
– 16.1
1,917.8
10,515.6
1,108.7
3.5
13,545.6
– 20.0
– 135.9
– 9.8
– 0.7
– 166.4
0.0
88.5
544.0
86.0
0.1
718.6
Impairment losses
47.0
194.1
9.7
24.1
274.9
Disposals
0.0
0.0
– 260.7
– 965.0
– 236.1
– 2.2
– 1,464.0
31.8
– 8.0
– 0.1
0.0
23.7
1,804.4
10,144.8
958.4
24.8
12,932.4
2,096.0
3,488.4
285.9
760.6
6,630.9
1,677.3
3,181.3
220.4
526.3
5,605.3
Reclassifications
Carrying amounts recognized on the basis of finance leases are as
other plant, office furniture and equipment, €3.1 million (2005:
follows: land, land rights and buildings, €52.7 million (2005: €60.5
€5.3 million).
million); plant and equipment, €50.7 million (2005: €39.0 million);
92
The carrying amount of property, plant, and equipment
There are further obligations of €789.1 million relating to
pledged as security for own liabilities amounted to €93.9 million
the acquisition of property, plant, and equipment (2005: €258.3
(2005: €213.4 million). Another €159.8 million was subject to other
million).
restrictions on title (2005: €277.7 million).
(15) Investment properties
€ million
Land,
land
rights
Buildings
Total
409.9
2,306.1
2,716.0
0.0
0.0
0.0
27.7
64.1
91.8
– 28.2
– 66.8
– 95.0
– 0.6
19.3
18.7
408.8
2,322.7
2,731.5
– 0.4
– 1.1
– 1.5
Historical cost
Other additions
Disposals
Reclassifications
0.0
Other additions
Disposals
Reclassifications
0.0
7.1
57.3
64.4
– 14.4
– 32.4
– 46.8
– 6.8
– 37.2
– 44.0
394.3
2,309.3
2,703.6
28.6
1,050.2
1,078.8
0.0
0.0
0.0
0.3
52.0
52.3
Impairment losses
0.3
4.3
4.6
– 0.7
– 10.9
– 11.6
Disposals
– 7.7
– 42.1
– 49.8
Reclassifications
– 4.1
4.6
0.5
16.7
1,058.1
1,074.8
– 0.7
– 0.7
Business combinations
Impairment losses
0.0
0.4
49.7
50.1
2.1
17.6
19.7
– 0.8
– 19.0
– 19.8
Disposals
– 2.3
– 22.9
– 25.2
0.0
– 25.8
– 25.8
16.1
1,057.0
1,073.1
392.1
1,264.6
1,656.7
378.2
1,252.3
1,630.5
Reclassifications
ACTIVE
Foreword
Management Report
왘 Notes
93
Corporate Bodies
Major Shareholdings
The other additions contain retrospective costs of purchase of
The carrying amount of investment properties whose title is
€16.8 million (2005: €9.6 million). The fair value of investment
subject to restrictions as to disposition amounted to €1,235.5 mil-
properties is €2,864.8 million (2005: €2,341.2 million). The increase
lion (2005: €1,249.1 million).
in fair value results from the change of the underlying valuation
There were further obligations of €3.2 million in 2005 relating to the acquisition of investment properties. Only contractual
method, see “Accounting Policies.”
obligations exist over and above the statutory requirements for
repairs, maintenance, and improvements on existing leases.
(16) Investments accounted for using the equity
method, financial assets
€ million
Dec. 31, 06
Dec. 31, 05
thereof
with a
term to
maturity
of more
Total than 1 year
thereof
with a
term to
maturity
of more
Total than 1 year
279.4
279.4
414.7
414.7
Other investments
103.3
103.3
153.5
153.5
Loans
331.2
192.9
326.2
234.5
27.2
11.8
115.6
89.9
Receivables from finance leases
1,311.1
1,240.9
1,321.4
1,246.8
Receivables from derivatives
146.3
90.2
171.8
142.8
5.1
–
8.3
–
2,203.6
1,918.5
2,511.5
2,282.2
Securities and securities-type claims
Other financial assets
(a) Investments accounted for using the equity method
The financial key figures for significant joint ventures
The financial key figures for significant investments in associates
accounted for using the equity method are summarized as
accounted for using the equity method are summarized as
follows with respect to the shares held by RAG Beteiligungs-AG:
follows with respect to the shares held by RAG Beteiligungs-AG:
€ million
2006
2005
€ million
2006
2005
Non-current assets as of December 31
53.9
112.0
Non-current assets as of December 31
186.6
316.7
Current assets as of December 31
27.9
37.6
Current assets as of December 31
257.8
339.8
Non-current liabilities as of December 31
51.5
59.4
Non-current liabilities as of December 31
51.8
106.6
Current liabilities as of December 31
6.8
35.6
Current liabilities as of December 31
217.0
270.6
Income
51.5
154.2
Income
88.0
383.6
Expenses
45.3
143.1
Expenses
40.7
307.5
The disclosures for 2006 relate to the 80.0 percent stake in
REG Raffinerie-Energie oHG, Cologne (power plant). Due to the
absence of a voting majority, the company is only accounted for
using the equity method.
94
(b) Other investments
No conditional lease payments from finance leases were
Other investments represent investments in unlisted equity
collected in 2006. As in 2005, no impairment losses were recog-
securities and are accounted for at cost as it is not possible to
nized on irrecoverable outstanding minimum lease payments.
reliably determine fair value.
The receivables from finance leases comprise €794.9 million
(2005: €930.7 million) relating to the lease agreement for
(c) Loans
the Iskenderun power plant in Turkey. The lease has a term of
Loans are subject to interest rate risk, which can influence market
20 years and will end on November 22, 2019. A discount rate
value or future cash flows. They are accounted for at cost. Under
of 18.4 percent was applied in calculating the lease receivables.
the assumption a loan is measured at a risk-free interest rate
Furthermore, an amount of €173.7 million results for the first
according to the yield curve as of the reporting date, fair value for
time from an agreement for the purchase of electrical power
loans in the Group is €0.7 million higher than the carrying
from the power plant in Mindanao in the vicinity of Cagayan de
amount.
Oro, Philippines, which was commissioned in 2006. The lease
agreement of STEAG State Power, Inc. Makati City, Philippines
(d) Securities and securities-type claims
has a term of 25 years and will end on November 14, 2031. For the
Securities and securities-type loans are subject to interest rate
purpose of calculating the lease receivables, a discount rate of
risk, which can influence market value or future cash flows. If no
13.7 percent was applied. When the contract expires, the object
market price is available, they are measured at amortized cost.
of lease will be transferred to the lessee.
Listed securities are subject to market value risk.
Moreover, the receivables from finance leases comprise
€202.7 million (2005: €216.8 million) relating to the lease agree-
(e) Receivables from finance leases
ment for the STEAG Leuna refinery power plant. The lease had
The transition from gross investment in leases to the present
an original term of 12 years and would have expired in November
value of outstanding minimum lease payments and their due
2008. In 2006, the lessee exercised the contractually agreed
dates is set out as follows:
option to renew the lease for another 8 years until November
2016. For the purpose of calculating the lease receivables, a
€ million
Dec. 31, 06 Dec. 31, 05
Total
Total
2,914.1
(0.0)
2,706.1
(169.7)
due within 1 year
270.4
279.8
due in 1 to 5 years
1,064.0
983.4
1,579.7
1,442.9
1,603.0
1,383.2
1,311.1
1,322.9
–
1.5
Gross investment
(thereof non-guaranteed residual value)
due in more than 5 years
Interest included therein
Net investment
Accumulated impairment losses
Carrying amount of receivables
from finance leases
less present value of non-guaranteed
residual values
1,311.1
1,321.4
discount rate of 10.0 percent was applied.
(f) Receivables from derivatives
Receivables from derivatives are broken down as follows:
€ million
Dec. 31, 06 Dec. 31, 05
Total
Total
86.2
63.5
Receivables from interest-rate derivatives
37.1
92.0
Receivables from commodity derivatives
2.6
0.8
Receivables from foreign exchange
derivatives
Receivables from other derivatives
20.4
15.5
146.3
171.8
–
140.0
1,311.1
1,181.4
due within 1 year
70.2
74.6
embedded derivative in the form of a swap involving the price of
due in 1 to 5 years
374.3
366.8
coal and electricity in a long-term supply agreement. This item is
866.6
740.0
offset in the amount of €14.0 million (2005: €13.1 million) from
Present value of outstanding
minimum lease payments
Receivables from other derivatives relate primarily to an
an energy supply agreement, accounted for under liabilities from
other derivatives. Furthermore, a put option with a positive
market value exists which relates to the sales of own shares in a
joint venture. The nominal amount of the embedded derivatives
is €84.8 million (2005: €66.0 million).
ACTIVE
Foreword
Management Report
왘 Notes
95
Corporate Bodies
Major Shareholdings
The following nominal values are hedged together with the
liabilities from derivatives. In currency derivatives, the nominal
volume corresponds to the hedged foreign currency volume
translated into euros; in interest rate derivatives, it is the sum of
the underlying transactions hedged over the term; and in commodity derivatives it is the hedge costs translated into euros.
Depending on the type of the embedded derivative, the nominal
volume of the embedded derivatives corresponds to one of the
above definitions of nominal volume.
Nominal volume of the derivative financial instruments:
€ million
Dec. 31, 06
thereof
with a
term to
maturity
of more
than
5 years
Total
thereof
with a
term to
maturity
within
1 year
Foreign exchange derivatives
3,219.6
2,948.4
Interest rate derivatives
2,669.8
121.9
Commodity derivatives
81.9
79.1
Other derivatives
84.8
–
6,056.1
3,149.4
2,906.7
Where the preconditions for hedge accounting are met,
Dec. 31, 05
thereof
with a
term to
maturity
of more
than
5 years
Total
thereof
with a
term to
maturity
within
1 year
271.2
3,732.7
3,306.2
426.5
2,547.9
2,230.3
663.9
1,566.4
2.8
2.0
2.0
–
84.8
100.0
–
100.0
6,065.0
3,972.1
2,092.9
Cash Flow Hedge Accounting:
interest rate, foreign exchange and commodity derivatives are
In the Energy segment, primarily interest payments from power
reported as a fair value hedge, cash flow hedge or hedge of a
plant project financing were hedged against interest rate
net investment. Embedded derivatives do not regularly qualify
changes until 2026 using interest rate swaps and interest rate
for hedge accounting.
caps; goods and input materials were hedged against price risks
The following significant hedging transactions were
included in hedge accounting in the year under review:
until 2007 using forward exchange contracts and commodity
swaps The associated fair values of the interest rate derivatives
are €8.6 million, the foreign exchange derivatives – €0.9 million
Fair Value Hedge Accounting:
The €1.250 billion bond issued by Degussa AG in November 2003
and the commodity derivatives – €0.8 million.
In the Chemicals business area, sales presently planned at
was hedged against fluctuations of the base interest rate until
approximately €460.0 million were hedged against currency
2013 at a volume of €750 million using receiver interest rate
fluctuations using forward exchange contracts. The fair value of
swaps. As of the balance sheet date, the fair value of the interest
the hedging instruments included in the hedge accounting was
rate hedging instruments was €15.5 million. The effectiveness
€13.9 million. Furthermore, planned purchases of raw materials
of the hedges was verified applying the cumulative dollar offset
were hedged against price fluctuations until 2007 using com-
method and via the critical term match approach. Arising from
modity swaps having a fair value of – €4.2 million.
the fair value hedge, expenses of €43.2 million from the market
In addition, cash flow hedge accounting was used to hedge
value of derivatives and €43.1 million from the market value of
currency risks arising from foreign currency transactions in the
the bond were reported in interest income.
other activities of the RAG Beteiligungs-Group. In these companies, the fair value of the hedging instruments is €3.4 million. In
addition, 50 percent of the selling price of DBT was hedged using
currency forwards having a fair value of €1.1 million.
96
On the Group level, swaptions were used to hedge interest
(g) Collateral
rate changes from the planned borrowing of €500 million in
Financial assets pledged as security for own liabilities amounted
the capital market. The transaction is expected to take place in
to €714.6 million (2005: €716.9 million). In addition, €70.0 million
August 2007 and will have a term of 5 years. The value fluctua-
(2005: €31.6 million) was pledged as security for guarantees
tions of the intrinsic value of the swaptions will be recognized
furnished, and another €472.5 million (2005: €447.7 million) was
directly in equity with no impact on earnings. As of the balance
subject to other restrictions on disposition. The majority of the
sheet date, the associated hedge reserve amounts to €1.3 million.
secured assets relates to power plants used as collateral for loans
In addition, €400 million of the borrowing from the revolving
from the project financing in connection with the finance leases.
credit facility of RAG Beteiligungs-AG planned for June 2007 with
a term of 4 years was hedged against rising market interest rates
(17) Inventories
using swaptions in 2006. The borrowing is no longer expected
due to the Group’s business development. The hedge accounting
€ million
was terminated and an amount of €0.8 million was withdrawn
Raw materials and supplies
from the hedge reserve and recognized in income.
Work in progress
The effectiveness of the hedging relationships is verified
applying the dollar offset method, the critical term match, the
Finished goods
Dec. 31, 06 Dec. 31, 05
527.8
643.0
314.0
408.8
1,057.2
1,458.3
1,899.0
2,510.1
hypothetical derivatives method and sensitivity analyses. A total
of €0.9 million was recognized in income as an ineffective portion
from the measurement of cash flow hedges.
The carrying amount of inventories pledged as security for own
liabilities amounted to €31.9 million (2005: €41.7 million).
Hedge of a net investment:
In the international power plant projects in the Energy segment,
the proportional equity of the company is hedged against the
exchange rate risk using currency derivatives. The associated fair
value of the hedging instruments is €50.9 million. In fiscal year
2006, €2.9 million was withdrawn from the hedge reserve and
recognized in income. In addition to these hedges, hedge reserves
of €26.9 million exist from former hedging relationships in
connection with subsidiaries in the United Kingdom. They are
proportionally recognized in income and derecognized when,
for example, the subsidiary is sold. The dollar offset method is
applied to verify the effectiveness of the hedging relationships.
ACTIVE
Foreword
Management Report
왘 Notes
97
Corporate Bodies
Major Shareholdings
(18) Trade receivables, other receivables
€ million
Trade receivables
Receivables from construction contracts
Miscellaneous tax receivables
Advances to suppliers
Miscellaneous other receivables
Prepaid expenses
Dec. 31, 06
Dec. 31, 05
thereof
with a
term to
maturity
of more
Total than 1 year
thereof
with a
term to
maturity
of more
Total than 1 year
2,354.1
–
3,229.7
–
1.0
–
9.7
1.9
90.3
8.1
82.7
0.9
54.3
0.8
34.5
5.6
264.4
32.0
389.8
54.2
107.2
65.7
94.0
22.6
2,871.3
106.6
3,840.4
85.2
Receivables from construction contracts include €1.0 million
statement for the year under review that is attributable to the
(2005: €9.7 million) of costs incurred including contract margins.
equityholders of RAG Beteiligungs-AG. In accordance with the
As in 2005, there were no progress billings with customers and
German Joint Stock Corporation Act (AktG), the distribution of
withholdings thereon.
profits is subject to a restriction and an amount of €151.4 million
As in 2005, receivables pledged as security for own liabilities
(2005: €95.9 million) is correspondingly held in the statutory
amounted to €1.0 million. In addition, €0.7 million (2005: €0.8 mil-
reserve. Retained earnings (including net income of the current
lion) was pledged as security for guarantees furnished, and
fiscal year) comprise a further amount of €2,634.5 million (2005:
another €26.9 million (2005: €135.9 million) was subject to other
€1,888.0 million). Of that amount, €2.7 million (2005: €16.6 mil-
restrictions on disposition.
lion) relates to reserves pursuant to the company’s Articles of
Incorporation. The reserves may only be released to fulfill their
(19) Equity
intended purpose.
(a) Issued capital
The fully paid-up issued capital held by the sole shareholder RAG
(d) Accumulated Other Comprehensive Income/Loss (OCI)
Aktiengesellschaft amounts to €466,000,000 as of the balance
The accumulated other comprehensive income/loss (OCI) com-
sheet date. It is divided into 466,000,000 bearer shares.
prises gains and losses that are accounted for directly in equity.
The reserve from the measurement of available-for-sale securi-
(b) Capital reserve
ties contains remeasurement gains and losses not recognized in
Capital reserves primarily include other capital reserves pursuant
income resulting from the change in the market value of finan-
to Section 272 (2) no. 4 of the German Commercial Code. In 2005,
cial instruments that are only expected to be temporary. In 2005,
they included reserves from the valuation of 585,600 outstanding
the net change in available-for-sale securities resulted in gains
stock option rights to management and employees of STEAG
from disposal of €2.1 million that were taken to income. The
HamaTech AG, Sternenfels and its subsidiaries. The company was
hedge reserve (see also item 16 f in the Notes) comprises net
sold in early 2006.
gains or losses from changes in the market value of the effective
portion of cash flow hedges. The change in the hedge reserve
(c) Accumulated profits
includes – €2.7 million (2005: €16.6 million) accounted for as part
Accumulated profits contains the profit achieved in the current
of the acquisition costs for an underlying transaction. The net
fiscal year and retained earnings from previous years. The profit
change also includes a profit of €8.9 million (2005: loss of €1.7
corresponds to the Group profit after tax reported on the income
million) that was recognized in income. The revaluation reserve
for the successive acquisition of Degussa shares increased
by €10.6 million in 2005 due to consolidation of a Degussa
98
subsidiary that had previously been accounted for using the
equity method. After €2.0 million was released to accumulated
profits, the revaluation reserve still amounted to €38.1 million as
of the balance sheet date. The cumulative translation adjustment
contains the exchange differences from the financial statements
of foreign companies.
(e) Minority interests
The proportions of issued capital and reserves of consolidated
subsidiaries not attributable to equity holders of RAG Beteiligungs-AG are reported under minority interests.
(20) Provisions for pensions and similar obligations
Provisions for pension obligations are accrued to cover benefit
In German companies, occupational pension schemes are
plans for pensions, invalidity and support for surviving depend-
predominantly on the basis of defined benefit plans. The defined
ents. The benefit obligations vary depending on the legal, tax and
benefit plans in Germany are primarily financed by provisions
financial circumstances in the country in which the company
and by the assets of the pension funds.
operates. The amount of the obligations normally depends on the
length of service and the salary of the employees concerned.
At approximately 97.5 percent (2005: 95.3 percent), the
Foreign companies may run both defined contribution plans
and defined benefit plans.
In addition to the expected return on plan assets as
majority of the provisions for pensions recognized as of the
weighted averages, the premises on which the actuarial calcula-
balance sheet date were attributable to Germany.
tion of the obligations is based are shown below:
Group
Percent
Germany
2006
2005
2006
2005
Discount rate as of December 31
4.60
4.39
4.50
4.25
Future increases in remuneration
2.73
2.75
2.51
2.47
Future increases in pensions
1.54
1.58
1.50
1.50
Expected return on plan assets as of December 31
5.31
5.51
5.00
5.00
Health care cost trend
8.91
9.94
–
–
The expected return on plan assets is determined based
on public capital market studies and forecasts as well as internal
historical data for each group of assets.
ACTIVE
Foreword
Management Report
왘 Notes
The present value of the defined benefit obligation changed
2006
2005
8,494.2
7,612.8
Current service cost
144.2
137.9
Interest cost
347.7
366.0
Employee contributions
40.2
13.7
Defined benefit obligation
as of January 1
Actuarial gains/losses
– 184.6
889.0
Benefits paid
– 406.4
– 398.9
8.3
– 2.8
16.4
– 195.0
– 384.0
– 17.0
– 0.2
–
–
– 1.6
41.9
90.1
Past service cost
Reclassifications as per IFRS 5
Curtailments
Settlements
as of December 31
The experience adjustments for defined benefit obligations
and for the plan assets are as follows:
as follows:
€ million
8,033.9
8,494.2
€ million
Experience-based adjustments for
defined benefit obligations
Experienced-based adjustments
for plan assets
Fair value of the plan assets
as of January 1
2006
2005
2005
46.7
63.9
– 13.6
– 50.3
between the defined benefit obligation and the fair value of the
plan assets, is reconciled with the pension provisions shown in
the balance sheet as follows:
€ million
Dec. 31, 06 Dec. 31, 05
Present value of the defined
benefit obligation
8,033.9
8,494.2
3,137.9
3,114.8
4,896.0
5,379.4
– 1.5
+ 3.9
– 824.2
– 1,080.5
–
– 2.1
4,070.3
4,300.7
Funding status
Actuarial gain (+)/loss (–)
The fair value of the plan assets changed as follows:
2006
The funded status, which is defined as the difference
Unrecognized past service cost
€ million
99
Corporate Bodies
Major Shareholdings
Other changes
(including asset ceiling)
Pension provisions
3,114.8
2,973.9
Expected return on plan assets
164.1
161.5
Employer contributions
99.7
80.0
Employee contributions
13.4
13.7
€3,453.6 million (2005: €3,613.1 million) were covered by assets
Actuarial gains/losses
13.6
50.3
partially or in full. In addition, the defined benefit obligations
– 150.2
– 141.3
8.2
– 79.1
– 104.5
–
– 21.2
55.8
3,137.9
3,114.8
Benefits paid
Reclassifications as per IFRS 5
as of December 31
As of the reporting date, €4,496.2 million (2005: €4,744.2
million) of the defined benefit obligations were not covered and
include health care obligations amounting to €84.1 million (2005:
€136.9 million).
Of the €3,137.9 million (2005: €3,144.8 million) total fair
value of the plan assets as of the balance sheet date, 26.0 percent
(2005: 30.55 percent) was attributable to equities, 65.2 percent
(2005: 65.35 percent) to fixed income, 4.6 percent (2005: 2.2 percent) to real estate and 4.2 percent (2005: 1.9 percent) to other
In the year under review, the actual return on plan assets
came to €177.8 million (2005: €211.8 million).
Next year, we expect to incur employer contributions of
€66.4 million.
assets. As of the balance sheet date, no portion (2005: €2.0 million)
was attributable to own shares in subsidiaries included in the
consolidated financial statements as well as owner-occupied
property.
100
Pension provisions changed as follows in 2006:
The total expense for defined benefit plans breaks down as
follows:
€ million
Pension provision as of January 1
Net expense recognized in income
Pension payments, employer and
employee contributions
Changes in the consolidated group
Reclassifications in accordance
with IFRS 5
Other changes
as of December 31
2006
2005
4,300.7
4,414.0
350.0
322.7
– 328.9
– 320.3
5.0
– 141.2
– 240.3
–
–
€ million
2006
2005
Current service cost
140.8
127.1
Interest cost
340.5
355.4
– 161.0
– 154.5
29.5
84.3
Expected return on plan assets
Amortization charges
Losses from plan adjustments
and curtailments
0.1
– 0.8
1.8
Effect of asset ceiling
0.1
– 88.8
– 16.2
23.7
Net pension expense
350.0
322.7
4,070.3
4,300.7
Of the total expense, €8.4 million (2005: €1.0 million) was
attributable to preventive medicine benefits.
The pension provisions on the balance sheet also include
The interest expense and the expected income from the
concessionary fuel allowances in Germany and entitlements to
plan assets are reported in interest income; the other amounts
medical services by retirees of the American companies.
are reported in personnel expenses as pension expenses.
The actuarial loss was €824.2 million (2005: €1,080.5 mil-
A total of €15.9 million (2005: €12.6 million) was paid into
lion), falling outside of the permitted corridor. Calculation of the
defined contribution plans of the foreign companies; this is also
corridor and amortization is undertaken for each plan included.
reported in personnel expenses as pension expenses.
Furthermore, €154.5 million (2005: €165.6 million) has been
paid into government defined contribution plans (statutory
pension insurance) in Germany and abroad. They are reported as
social security contributions in personnel expenses.
(21) Other provisions
Other provisions relate to the following:
€ million
Total
Personnel
Environmental protection and recultivation
Restructuring
Other obligations
Dec. 31, 06
Dec. 31, 05
thereof
thereof
with a
with a
term to
term to
maturity
maturity
within
of more
1 year than 5 year
thereof
thereof
with a
with a
term to
term to
maturity
maturity
within
of more
1 year than 5 year
Total
1,079.7
493.5
119.4
1,048.8
519.5
119.9
314.7
51.9
96.6
332.2
42.1
50.1
122.5
64.1
12.3
125.4
54.2
16.2
1,064.0
700.5
86.4
1,585.4
1,136.8
71.1
2,580.9
1,310.0
314.7
3,091.8
1,752.6
257.3
ACTIVE
Foreword
Management Report
왘 Notes
101
Corporate Bodies
Major Shareholdings
In the year under review, provisions changed as follows:
Environmental
protection,
recultiPersonnel
vation
€ million
Additions
Restructuring
Other
obligations
1,048.8
332.2
125.4
1,585.4
643.2
26.5
52.8
642.7
Amounts utilized
– 493.1
– 17.8
– 37.8
– 646.9
Amounts reversed
– 30.7
– 22.4
– 13.7
– 286.4
Reclassifications
– 95.1
0.2
– 4.2
– 124.5
– 6.3
– 2.1
– 0.3
– 9.9
Interest adjustments
Provisions in respect to personnel are created for a number
18.5
0.7
1.3
– 0.8
– 5.6
– 2.6
– 1.0
– 95.6
1,079.7
314.7
122.5
1,064.0
Provisions for restructuring are based on any restructuring
of different reasons. These include provisions for vacation entitle-
measures to be implemented. Restructuring measures are
ments and days off, occupational health checks and bonuses and
defined as a program planned and controlled by the company to
performance-related pay.
materially alter one of the company’s fields of activity or the way
Provisions for environmental protection and recultivation
in which this activity is carried out. Provisions for restructuring
are created as a result of contractual terms, or conditions imposed
may only be created for the costs that can be directly attributed
by authorities or the law. Obligations include biological soil
to the restructuring. These costs include: severance packages,
reclamation and site decontamination for chemical operations.
redundancy and early retirement payments, costs for the termination of contracts, dismantling obligations, the costs of biological
soil reclamation, rental expenses for unused facilities and all
other expenses solely attributable to the closure or the processing of the restructuring program.
Other obligations are essentially provisions for the
following items:
€ million
Additions
Selling
activities
Other
taxes
Dismantling
obligations
274.5
34.5
87.5
151.0
71.6
9.1
Amounts utilized
– 117.0
– 11.8
– 3.8
Amounts reversed
– 36.4
– 0.9
– 10.5
– 4.2
0.9
– 6.1
– 3.1
– 0.1
0.0
Interest adjustments
– 4.3
0.1
0.6
Reclassifications
– 91.1
– 0.1
0.1
169.4
94.2
76.9
102
(22) Financial liabilities
€ million
Dec. 31, 06
Dec. 31, 05
thereof
with a
term to
maturity
of more
Total than 1 year
thereof
with a
term to
maturity
of more
Total than 1 year
Bonds
1,265.7
1,265.2
1,456.1
1,304.2
Liabilities to banks
3,858.1
2,051.8
3,257.3
2,067.4
Loans from non-banks
110.4
70.7
116.5
83.4
Liabilities from finance leases
140.1
130.0
150.0
139.2
Liabilities from derivatives
35.6
11.5
109.1
44.9
Liabilities from finance bills
0.1
–
0.8
–
468.6
42.7
959.8
37.2
5,878.6
3,571.9
6,049.6
3,676.3
Other interest-bearing liabilities
(a) Bonds, liabilities to banks
(b) Liabilities from finance leases
The amount under bonds is mainly comprised of a bond issued by
Liabilities from finance leases are recognized if the leased asset is
Degussa with a nominal amount of €1,250.0 million maturing
in the beneficial ownership of the Group and is capitalized under
in 2013 and an annual coupon of 5.125 percent. The bond is
property, plant, and equipment. The reconciliation of future
recognized at the issuing price of 98.99 percent; the discount is
minimum lease payments to their present values and due dates
credited over the term of the bond using the effective interest
is as follows:
method.
Liabilities to banks include a syndicated credit facility for
€ million
€879.0 million. The interest on the loans draws on the syndicated
credit facility is based on EURIBOR corresponding to the loans
draw plus a margin.
Bonds and liabilities to banks are subject to interest rate
risk, which can influence market value or future cash flows. As of
Dec. 31, 06 Dec. 31, 05
Total
Total
243.3
279.4
due within 1 year
23.1
24.7
due in 1 to 5 years
92.5
97.3
Future minimum lease payments
127.7
157.4
the balance sheet date, the market price of the bond was €1,232.1
Interest included therein
103.2
129.4
million. The fair values of the other liabilities are nearly identical
Present value of future minimum
lease payments (liabilities under
finance leases)
140.1
150.0
10.1
10.8
to the carrying amounts. Interest rate hedges are entered in for
significant variable interest-bearing liabilities. The interest rate
risk of the bond is hedged by a fair value hedge of €750.0 million.
In 2006, RAG Beteiligungs-AG entered into a syndicated
credit facility for €2,250 million which runs until 2011. It had not
been drawn on as of the reporting date and serves to cover shortterm borrowing requirements. The Company also has bilateral
credit lines in the amount of €600 million, most of which have
not been drawn on.
With respect to its financial liabilities, the Group has not
violated payment agreements. Shares in consolidated subsidiaries
are pledged to secure loans in the amount of €1.479 billion.
due within 1 year
due in 1 to 5 years
53.6
52.9
76.4
86.3
ACTIVE
Foreword
Management Report
왘 Notes
103
Corporate Bodies
Major Shareholdings
(c) Liabilities from derivatives
(d) Financing structure
Liabilities from derivatives are broken down as follows:
As of December 31, 2006, the financial liabilities were structured
as follows:
€ million
Dec. 31, 06 Dec. 31, 05
Total
Total
Liabilities from foreign exchange
derivatives
9.2
51.8
Liabilities from interest rate derivatives
1.7
43.2
Liabilities from commodity derivatives
8.6
0.1
Liabilities from other derivatives
16.1
14.0
35.6
109.1
Years
Maturity
in
€ million
Interest
duration
in
€ million
2007
2,306.7
3,472.6
2008
256.0
241.0
2009
211.0
225.0
2010
199.0
214.0
2011
148.0
236.0
> 2011
See item (16 f) in the Notes for information on liabilities
2,757.9
1,490.0
5,878.6
5,878.6
from derivatives.
(23) Trade payables, other payables
€ million
Trade payables
Payables from construction contracts
Dec. 31, 06
Dec. 31, 05
thereof
with a
term to
maturity
of more
Total than 1 year
thereof
with a
term to
maturity
of more
Total than 1 year
1,264.8
–
1,821.7
–
0.1
–
1.9
0.2
Miscellaneous tax liabilities
94.3
–
137.8
0.0
Customer advances received
162.2
12.4
295.3
8.8
Miscellaneous other liabilities
315.2
13.6
403.3
15.5
Deferred income
Liabilities from construction contracts include €0.1 million
(2005: €0.2 million) of costs incurred including contract margins,
€2.1 million of which was billed to customers in 2005.
199.8
156.7
247.3
186.7
2,036.4
182.7
2,907.3
211.2
104
(24) Deferred taxes, current tax
Deferred tax and current tax reported on the balance sheet are
broken down as follows:
€ million
Deferred tax assets
Current tax assets
Dec. 31, 06
Dec. 31, 05
thereof
with a
term to
maturity
of more
Total than 1 year
thereof
with a
term to
maturity
of more
Total than 1 year
496.7
336.0
1,086.2
781.6
95.0
–
96.9
–
961.4
839.7
1,494.3
1,309.4
338.2
112.1
405.3
100.9
In accordance with IAS 1, the current elements of deferred
taxes are reported on the balance sheet under non-current assets
and liabilities.
Deferred taxes have been posted in relation to the following
items:
Deferred tax assets
€ million
2006
2005
2006
2005
20.0
32.7
512.9
757.2
468.5
675.0
766.9
874.1
26.1
37.1
373.3
488.7
110.6
110.1
85.5
84.0
34.7
67.3
49.5
93.6
Provisions
622.6
691.0
71.8
118.0
Liabilities
107.6
177.3
40.2
107.1
–
0.0
45.9
64.3
218.1
311.2
–
–
9.7
56.7
–
–
20.6
21.9
25.7
30.6
Assets
Intangible assets
Property, plant, and equipment and investment properties
Financial assets
Inventories
Receivables and other assets
Liabilities
Special tax allowance reserves (in accordance with local law)
Loss carried forward
Tax credits
Consolidation
Other
Deferred taxes (gross)
Valuation allowances
Netting
Deferred taxes (net)
The reduction in both deferred tax assets and liabilities
primarily resulted from the reclassification of the discontinued
operations Construction Chemicals, Gas Distribution, and Mining
Technology. In addition, changed tax legislation in Turkey led to
54.7
142.0
31.4
36.0
1,693.2
2,322.3
2,003.1
2,653.6
– 154.8
– 76.8
–
–
– 1,041.7
– 1,159.3
– 1,041.7
– 1,159.3
496.7
1,086.2
961.4
1,494.3
ACTIVE
Foreword
Management Report
105
Corporate Bodies
Major Shareholdings
왘 Notes
a reduction of the deferred tax assets and liabilities for the
Iskenderun power plant company.
No deferred tax assets were recognized for temporary
differences amounting to €219.4 million as it is unlikely that
sufficient taxable income will be available in future for their
realization.
Deferred tax liabilities of €32.3 million (2005: €41.7 million)
have been credited to accumulated other comprehensive
income/loss. Of this amount, €57.8 million (2005: €28.9 million)
was attributable to currency translation adjustments, and
€23.6 million was charged (2005: €12.8 million credited) to hedge
reserves.
In addition to tax loss carry forwards to which deferred
taxes have been assigned, there are loss carry forwards that
cannot be utilized and to which no deferred taxes have been
assigned. See the table below for details:
€ million
Dec. 31, 06 Dec. 31, 05
Total
Total
Corporation income tax
1,085.5
822.3
Municipal trade tax
1,564.5
1,022.3
405.3
499.5
Foreign taxes
Tax credits
–
5.5
3,055.3
2,349.6
Time-limit breakdown for the utilization of German and
foreign loss carry forwards:
Corporation income tax
€ million
Local tax
Tax credits
2006
2005
2006
2005
2006
2005
Up to 1 year
–
–
–
–
–
–
2 to 5 years
1.5
–
–
–
–
–
6 to 9 years
–
–
–
–
–
–
404.5
492.4
–
–
–
–
1,084.8
829.4
1,564.5
1,022.3
–
5.5
More than 9 years
Unrestricted
106
Financial risk management
The objective of interest rate management is to protect the
As an enterprise operating at an international level, the RAG
Group net income against negative impacts from market interest
Beteiligungs-Group is always exposed to financial risks. An
rate fluctuations. Risk is controlled through the use of original
important objective of company policy is to limit market, liquidity
and derivative financial instruments, in particular interest rate
and default risks to the enterprise value and the performance of
swaps and interest rate caps. Taking cost-risk aspects into
the Group in order to hold cash flow and income fluctuations
account, this results in an appropriate proportion of fixed interest
largely in check without missing out on opportunities presented
rates (interest rate locked in longer than one year) and variable
by positive market developments. To this end, a systematic
interest rates (interest rate locked in less than one year). The
financial and risk management was established. The risk position
hedge of the net borrowing requirements through fixed interest
was controlled centrally at the level of RAG Aktiengesellschaft,
rates is 44 percent as of December 31, 2006.
which carried out all necessary functions for RAG BeteiligungsAG until December 31, 2006.
Derivative financial instruments are used to reduce financial
The concepts of cash flow at risk and value at risk (VaR)
were applied in measuring the market risks in the interest and
currency area. The former refers to the current interest payments
risks. They are solely associated with the corresponding underly-
that are subject to an interest rate risk as well as outstanding
ing transactions arising from the original business activity that
payments in foreign currency that are in turn subject to a
have a risk profile opposite to the hedging transaction. The
currency risk. The parameter VaR indicates the maximum loss
instruments themselves are marketed products such as forward
arising from original and derivative financial instruments for one
exchange transactions and options, interest rate and currency
month based on a given probability. The development of this risk
swaps, currency forwards and options on swaps.
measure is observed monthly and reported to the Chief Financial
Officer.
(a) Market risk
VaR is calculated on a one-month horizon with a confidence
Market risk can basically be broken down into currency, interest
interval of 99 percent. The calculation is performed using a
rate and commodity risks:
Monte Carlo simulation of the risk variables. (interest rates and
Currency risks arise on the purchasing side through the
purchase of commodities and on the sales side through the sales
currencies).
The risk positions analyzed for the calculated VaR are
of end products. The objective of currency management is to
primarily financial liabilities (e.g. loans) and fixed interest rate
hedge the operational business against income and cash flow
investments. Added to this are financial derivatives such as
fluctuations due to price changes in the foreign exchange
options that have a time-related current value. Financial liabilities
markets. The majority of the currency risks result from the price
in foreign currency which are offset by sales in the same currency
development of the euro in relation to the US dollar (USD).
are not taken into account.
About 75 percent of the proportion of Group sales in USD or
In principle, VaR is a theoretical construct which has to
in currencies moving in close step with the USD is hedged on the
function under numerous assumptions. If they do not entirely
production side in the USD area. The remaining currency risk con-
correspond with reality, inaccuracies in the risk measurement
sists of the sales risk in the export business with the USD area
are unavoidable. For the model used by RAG Beteiligungs-AG, this
and is hedged by currency forwards and currency options.
applies primarily to the normal distribution assumption for the
risk variables and for the assumed one-month horizon.
As of December 31, 2006, the value for VaR from foreign
currency positions amounts to €25.4 million and €43.8 million
from interest positions. Due to diversification effects between
interest rate and currency risks, the total VaR in the Group
amounts to €47.2 million.
ACTIVE
Foreword
Management Report
왘 Notes
Commodity risks result from market price changes of
Corporate Bodies
Major Shareholdings
(c) Default
purchases of commodities. The business units of the RAG Beteili-
Default risks are initially examined in detail on conclusion of the
gungs-Group are responsible for commodity management. They
agreement and then monitored on an ongoing basis so that it is
determine the procurement risks and take effective risk-minimiz-
possible to react promptly to a worsening of the creditworthiness
ing measures. Price volatilities are, for example, evened out by
of a contracting partner. The initial review of default risk includes
price escalator clauses and swap transactions. The availability
the consideration of the contracting partner’s rating and the
and the price dependence of raw materials, primary and interme-
company’s own credit reviews. In the case of banks, the review
diate products are of great significance for the Group’s price situ-
includes their deposits in deposit insurance systems. In the case
ation. In this connection, the dependence of significant commod-
of export orders, the political risk is first analyzed in order to form
ity prices on exchange rates and the crude oil price is important
a total risk consisting of political and economic risk. In the course
to the Group. The Group reduces the price and acquisition risks in
of analyses of creditworthiness, maximum limits are established
procurement markets through worldwide purchasing activities
for the respective contracting partners. This is essentially accom-
and optimized procedures for the purchase of additional, imme-
plished on the basis of ratings of international rating agencies
diately available quantities of raw materials. In addition, the use
and our own internal credit reviews. For export financing the con-
of substitute raw materials is examined for various manufactur-
tracting partners must at least have an investment grade rating.
ing processes and work is carried out to develop alternative
production technologies.
In addition to the increased costs for raw materials, recent
Creditworthiness management also extends to derivatives
where a risk of default exists in the amount of the positive fair
value. This risk is minimized by the high requirements expected
significant rises in energy prices in particular have impacted the
of the contracting partner with respect to creditworthiness. Only
Group’s production costs. Derivative financial instruments were
marketable instruments having adequate market liquidity are
used in 2006 to hedge procurement price risks.
used for this purpose. Therefore, significant default risks do not
exist in this area.
(b) Liquidity risk
Liquidity risk is controlled by centralized financial planning which
ensures that the necessary funds to finance the current operational business and to guarantee that the funds for current and
future investments in all companies in the Group are available
on time and in the required currency at optimal costs. As part of
liquidity risk management, the Group companies are responsible
for the ongoing determination of their liquidity requirements.
Liquidity planning is performed on a monthly rolling basis over a
period of 15 months. Whenever legally possible and economically
feasible, the existing liquidity is pooled though central cash
management. Central liquidity risk management brings about
cost-effective borrowing and advantageous financial equalization. Unutilized credit lines of greater than €2,850.0 million,
including a revolving credit facility of €2,250.0 million are available for liquidity hedging.
107
108
NOTES TO THE CASH FLOW STATEMENT
The total price of subsidiaries sold amounted to €3,443.0
million (2005: €335.4 million), €3,439.7 million of which was
The cash flow statement is broken down into cash flows from
settled by cash and cash equivalents (2005: €328.4 million). The
operating, investing and financing activities. It shows the net
disposals involved an outflow of cash and cash equivalents of
change in cash and cash equivalents from continuing operations.
€97.6 million (2005: €60.2 million).
Interest paid as well as interest and dividends received are
attributed to the operating activity, dividends paid to financing
(27) Cash and cash equivalents
activity.
The cash and cash equivalents of €444.3 million (2005: €400.9
million) correspond to the cash and cash equivalents available as
(25) Cash flow from operating activities
The cash flow from operating activity is calculated using the
of the balance sheet date.
Cash and cash equivalents include credit balances at banks
indirect method. The profit before financial result and income tax
(term to maturity < 3 months) together with checks and cash on
expense of the continuing operations is adjusted for the effects
hand. The carrying amount of cash and cash equivalents pledged
of non-cash expenses and income for items to be allocated to
as collateral amounted to €75.0 million (2005: €81.5 million).
investing or financing activities. In addition, the changes in the
amounts reported in the balance sheet are calculated and
included in income.
(26) Cash flow from investing activities
Cash flows from investing activities relate to cash inflows and
outflows from the acquisition and disposal of subsidiaries.
The cash payments for acquisitions, investments, and loans
include €3,436.8 million for the acquisition of the Degussa stock.
Furthermore, a total of €42.5 million (2005: €132.6 million) was
paid for the acquisition of subsidiaries consolidated for the first
time. This amount involves an outflow of cash and cash equivalents of €36.5 million (2005: €122.2 million). The acquisitions
resulted in cash and cash equivalents acquired of €14.8 million
(2005: €12.5 million).
ACTIVE
Foreword
Management Report
왘 Notes
NOTES TO THE SEGMENT REPORT
Corporate Bodies
Major Shareholdings
(c) Specialty Materials
The Specialty Materials segment encompasses all business of the
The section on segment reporting shows the financial position
RAG Beteiligungs-Group involving high-performance materials,
and performance of the RAG Beteiligungs-Group broken down by
which hold leading competitive positions due to superior material,
business segment and region.
processing, and application competence. Many of the products
are manufactured in a chemical production network on the
(28) Reporting by business segment
basis of methyl methacrylate. This segment’s materials are used
The segment reporting takes into account the Group’s internal
primarily for the industrial production of durable industrial goods
reporting and organizational structures and its grouping of simi-
and capital goods, especially in the automotive, construction,
lar products and services. In the course of the strategic restructur-
aviation and aerospace industries. Customers utilize our high-
ing of the RAG Beteiligungs-Group in preparation for the IPO, the
quality polymers as transparent plastics in the semi-finished
management structure for reporting purposes will be changed as
products area, as resin and coating additives, and as structural
of January 1, 2007. The segment reporting is already based on the
components for demanding applications in automotive and
future reporting structure. The new industrial enterprise will be
aircraft construction.
subdivided into the segments Technology Specialties, Consumer
Solutions, Specialty Materials, Energy, and Real Estate.
(d) Energy
The Energy segment bundles commercial power and heat pro-
(a) Technology Specialties
duction activities with power plant-related services. The Energy
The Technology Specialties segment bundles the specialty
segment is the market and technology leader in coal-fired
technologies of the RAG Beteiligungs-Group in organic and in-
electricity generation, it utilizes refinery byproducts for supplying
organic synthetic chemistry as well as the expertise in particle
energy, and is increasingly active in the field of renewable ener-
and filler technology. The products are then processed primarily
gies. The total installed electrical output is around 9,000 mega-
by companies of the pharmaceuticals, chemical, plastics, rubber,
watts. Germany’s fifth-largest power generator operates eight
and paper industries. These include organic specialties and inter-
coalfired power plants across the country as well as an additional
mediate products that are important components in the synthesis
three large-scale coal-fired power plants in Columbia, Turkey, and
of pharmaceuticals and agrochemicals as well as input materials
the Philippines. This segment’s competence covers the entire
for the plastics industry. Hydrogen peroxide, for instance, is a
value chain of coal-fired power plants, from planning and financ-
significant bleaching and oxidizing agent for the paper and pulp
ing to construction and plant operation. Own in-house global
industry. Particle and filler systems based on carbon blacks and
coal trading activities ensure that fuel is procured at low cost. The
silica from this segment are used in particular in the tire industry
Energy segment offers supply and disposal services for residues
for rubber reinforcement.
from power plants and industrial facilities. It also has a strong
competitive position in contiguous technologies such as the
(b) Consumer Solutions
production of energy from refinery byproducts, biomass, biofuel,
The Consumer Solutions segment has extensive know-how in
and in geothermal energy generation. The segment is the global
the area of applied interfacial and polymer chemistry, primarily
leader in the use of mine gas for energy generation.
serving customers in the consumer goods industry in the areas of
body care, hygiene and nutrition. The products of this segment
(e) Real Estate
are customized substances and system solutions which produce
The Real Estate segment focuses on residential real estate with
shampoos to make hair smooth and glossy, skin-protecting and
an emphasis on leasing residential units to private households.
age-defying creams, environmentally-friendly laundry deter-
The segment also actively manages its housing portfolio. A small
gents, super-absorbent diapers, and premium feeds for livestock.
portion of the housing portfolio is sold each year based on comprehensive analyses that take into account cost effectiveness,
expected future maintenance expenses, regional focuses, and
the state of repair of the buildings. The segment rounds out its
109
110
activities with the development and construction of turn-key
External sales represents the sales generated by the seg-
single family homes, duplexes, and condominiums to be sold to
ments with counterparties outside the RAG Beteiligungs-Group.
end users and investors. Nearly the entire housing portfolio is
Sales generated between business segments are shown as inter-
located in North Rhine-Westphalia. Significant locations are
segment sales. Inter-segment sales are billed as if they were to
Essen as well as the regional companies in Dortmund, Duisburg,
third parties. Sales by region is segmented in accordance with the
and Herzogenrath. With a total of more than 65,000 residential
location of the customer.
units, RAG Beteiligungs-Group is one of the largest residential
The Company’s internal control variable is return on capital
employed (ROCE). It is determined by comparing the performance
property companies in Germany.
variable EBIT (earnings before interest and taxes) with capital
(f) Other, consolidation
employed. Capital employed is recognized at the value of the
“Other, consolidation” includes the Group activities that are not
reporting date for determining the key figures.
The Management Board considers EBIT in particular as a
assigned to a segment or the Corporate Center. In addition, it
includes effects from intercompany elimination. Continuing oper-
suitable standard for measuring the operating performance of
ations that were no longer among the core activities were reclas-
each segment as it contains the significant variables that the
sified from the segments to “Other, consolidation.” The segment
management of the particular segment can influence. EBIT shows
data of the previous year were adjusted accordingly. The changes
earnings before interest and taxes, adjusted for non-operating
of the previous year’s values under “Other, consolidation” were
items. The non-operating result recognizes business transactions
primarily related to the reclassification of land development/
that are rarely of significance for purposes of internal control
commercial real estate and real estate services out of the Real
after their occurrence and are important for the assessment of
Estate segment. The significant segment data attributable to
financial performance.
this for 2005 are shown below:
In the year under review, the non-operating result came
to – €701.9 million compared to – €424.3 million in 2005. Income
€ million
Sales
Segment results (continuing operations)
Segment assets (as of December 31)
Segment liabilities (as of December 31)
2005
of €446.6 million was offset by expenses of €1,148.5 million.
87.3
The income resulted primarily from the disposal of non-core
– 35.9
227.1
82.1
activities, including Water Chemicals, the Raylo fine chemicals
activities, the 49.9 percent interest in SOTEC as well as the
release of provisions for operations sold. Significant expenses
related to provisions for part-time retirement and the staff reduction in connection with the Group-wide project “Sirius”, charges
(29) Reporting by geographical segment
from the project “Degussa 2008” and additional restructuring
The definition of segments by region follows geographical
projects within the Chemicals business area, losses from the sale
criteria that are explained in detail below.
of non-core activities as well as impairments in the Chemicals
business area. Among other things, the 2005 value of – €424.3
(30) Notes to the segment data
million was influenced by charges related to the divestment of
The segment data are derived from the consolidated data of the
non-core activities due to impairment losses in the Chemicals
companies included in each segment as well as the consolidation
business area.
effects that have arisen on the level of RAG Beteiligungs-AG and
In determining EBITDA, EBIT is adjusted for depreciation/
can be assigned to the segment. This relates primarily to goodwill
amortization, impairment losses and reversals of impairment
and hidden reserves and charges together with any resulting
losses which are not already a component of the non-operating
effect on income. The segment data are explained below:
result. The EBITDA margin is derived from the ratio of EBITDA to
sales.
ACTIVE
Foreword
Management Report
왘 Notes
The reconciliation shown below represents the relation
111
Corporate Bodies
Major Shareholdings
The segment result corresponds to profit/loss before
between the internal control variables EBITDA and EBIT and the
financial profit/loss and income tax expense of the continuing
external performance variables segment result and profit/loss
operations.
before income expense of the continuing operations:
Segment assets comprise intangible assets, property, plant
and equipment, investment properties, inventories, and non-
€ million
EBITDA
+/– depreciation, amortization,
impairment losses/reversal of
impairment losses
+/– depreciation, amortization,
impairment losses/reversal of
impairment losses related to
non-operating activities
2006
2005
+ 2,280.1
+ 2,107.2
interest-bearing receivables (excluding receivables relating to
tax assets). In addition, the segment assets include amounts for
the sale of non-current assets held for sale and disposal groups,
if they can be allocated to the continuing operations. Assets by
– 1,476.2
– 1,280.1
region are segmented in accordance with the location of the
company.
The segment assets are reconciled with total assets as
+ 429.7
+ 281.1
+ 1,233.6
+ 1,108.2
– 701.9
– 424.3
+/– result of investments accounted
for using the equity method
– 50.0
– 70.1
+/– other financial result
– 24.6
– 10.9
Segment result
+ 457.1
+ 602.9
+
deferred taxes
+/– financial result
– 404.2
– 343.8
+
current tax assets
+
+ 52.9
+ 259.1
=
EBIT
+/– non-operating result
=
=
Profit before tax
follows:
€ million
Segment assets
Capital employed is calculated by first determining the sum
of intangible assets, property, plant and equipment, investments,
investment properties, inventories, trade receivables, and other
non-interest bearing assets and subtracting from this sum the
non-interest-bearing provisions, trade payables, and other noninterest bearing liabilities and deferred tax liabilities.
16,658.0
17,683.9
–
2,687.1
496.7
1,086.2
95.0
96.9
investments accounted for
using the equity method
279.4
414.7
+
other investments
103.3
153.5
+
loans
331.2
326.2
+
securities and securities-type
claims
27.2
115.6
1,311.1
1,321.4
5.1
8.3
+
receivables from finance leases
+
other financial assets
+
cash and cash equivalents
444.3
400.9
+
non-current assets held for
sale and disposal groups
1,314.6
898.1
non-current assets held for
sale and disposal groups
(included in segment assets)
– 22.6
– 259.3
21,043.3
23,750.4
–
property, plant and equipment, and investment properties in
the period under review. Additions resulting from changes in the
scope of consolidation are not included. Capital expenditures by
region is segmented in accordance with the location of the company.
Depreciation and amortization relate to intangible assets,
property, plant and equipment, and investment properties.
Other non-cash expenses mainly include impairment losses
on segment assets, allocations to provisions, expenses arising
from accounting using the equity method, and the reversal of
prepaid expenses.
adjustments of segment assets
in previous year
+
Capital expenditures relates to additions to intangible
assets (excluding goodwill arising from business combinations),
Dec. 31, 06 Dec. 31, 05
=
Total assets
112
Segment liabilities comprise provisions and non-interest-
Segment result of the discontinued operations
bearing liabilities (excluding tax liabilities). Moreover, the segment
The table below reconciles the segment results of the discontin-
liabilities contain amounts for liabilities of a disposal group if
ued operations to their profit/loss after income tax expense.
they can be allocated to the continuing operations. The liabilities
The segment result corresponds to profit/loss before financial
can be reconciled with total assets as follows:
profit/loss and income tax expense.
€ million
Segment liabilities
+
Dec. 31, 06 Dec. 31, 05
€ million
2006
2005
+ 1,304.5
+ 182.8
8,733.2
9,286.0
Gas Distribution
+ 33.8
+ 5.3
–
1,201.2
Mining Technology
+ 72.0
+ 55.7
4,319.8
5,249.3
Food Ingredients
+ 27.9
+ 18.6
Segment result
+ 1,438.2
+ 262.4
adjustments of segment liabilities
in previous year
+
equity
+
deferred taxes
961.4
1,494.3
+
current tax liabilities
338.2
405.3
+
bonds
1,265.7
1,456.1
Financial result
+ 11.3
– 1.2
+
liabilities to banks
3,858.1
3,257.3
Income tax expense
340.6
49.7
+
loans from non-banks
110.4
116.5
+
liabilities under finance leases
140.1
150.0
+ 1,108.9
+ 211.5
+
other financial liabilities
468.7
960.6
+
liabilities of the disposal groups
857.7
252.1
–
liabilities of the disposal groups
(included in segment liabilities)
– 10
– 78.3
21,043.3
23,750.4
=
Total equity and liabilities
Profit after income tax
The Food Ingredients business is part of the Consumer
In contrast to the previous year, solely the continuing
operations are shown in the segment reporting. The total segment
data for 2005 was adjusted to reflect the new form of presentation. Amounts reclassified from the segment assets and segment
liabilities for the adjustment of the previous year’s figures
for the discontinued operations Construction Chemicals, Gas
Distribution, and Mining Technology are shown separately in
the corresponding reconciliation to total assets.
Solutions segment. The remaining discontinued businesses are
not allocated to any particular segment.
ACTIVE
Foreword
Management Report
왘 Notes
OTHER DISCLOSURES
Corporate Bodies
Major Shareholdings
Performance-related remuneration
In addition to base remuneration and short-term incentives, the
(31) Earnings per share
remuneration of the RAG Beteiligungs-Group contains the long-
Basic earnings per share as reported on the income statement
term incentive plan (LTI Plan) for executives of the Degussa sub-
reflects net income divided by the weighted average number of
group. The Degussa LTI plan is recognized as a non-current remu-
shares outstanding. Net income is defined as total net profit for
neration component by applying IAS 19 “Employee Benefits.”
the year after profits attributable to minority interests and
As a component of this plan, Degussa offers its executives
including the result from discontinued operations. Earnings per
performance options. By availing themselves of these options,
share may be diluted by potential common shares.
they participate in the performance of the Company and thus in
its long-term corporate success. The value of these options is
Number of shares
2006
2005
Weighted average number
of shares outstanding (basic)
466,000,000
466,000,000
Potentially diluting common
shares
–
–
466,000,000
466,000,000
2006
2005
+ 42.6
+ 76.5
+ 1,108.9
+ 211.5
Profit after tax attributable
to minority interests
+ 106.2
+ 92.9
Profit after tax attributable
to equity holders of
RAG Beteiligungs-AG
+ 1,045.3
+ 195.1
from continuing
operations
+ 0.09
+ 0.17
from discontinued
operations
+ 2.38
+ 0.45
minority interests
+ 0.23
+ 0.20
+ 2.24
+ 0.42
Weighted average number
of shares outstanding (diluted)
€ million
Profit after tax
Profit after tax
calculated based on defined key business figures.
The key figures ROCE and EBITDA (as EBITDA outperformance
compared to a peer group of specialty chemicals companies)
Basic and diluted earnings
per share in EUR
Earnings per share (basic
and diluted) in € attributable
to equity holders of RAG
Beteiligungs-AG (net income)
not tied to the value of the Company’s stock price but instead is
were selected as measurement variables for the Degussa LTI plan.
113
114
The Degussa LTI plan is offered to the members of the
Management Board of Degussa (until 2005) and to around 190
Degussa executives. The scope of participation in the LTI plan is
based on the number of performance options allocated, which is
determined by the Supervisory Board Steering Committee of
Degussa for the members of the Management Board or by the
Management Board for the eligible executives.
The number of performance options allocated under the
Degussa LTI plans for 2003 to 2006 is shown below:
LTI-Plan
Balance as of January 1
Issued
Exercised
Lapsed
Balance as of December 31
A term of five years was set for each of the Degussa LTI
2006
2005
2004
2003
0
1,093,551
1,020,442
643,778
808,042
0
0
0
0
0
0
0
21,700
205,400
191,700
122,129
786,342
888,151
828,742
521,649
The provision for the LTI plan comes to €10 million in the
plans for 2003 to 2006. The five-year term of the LTI plan is
year under review (2005: €5 million). The underlying economic
broken down into an initial two-year waiting period within which
data made it impossible to exercise options in the reporting year
the performance options may not be exercised and a three-year
for the LTI plans for 2003 and 2004 and thus no payments were
exercise period including four exercise windows.
made. The beneficiaries of the LTI plan for 2003 were eligible to
For the performance options to be exercised, a specific ROCE
exercise for the first time in 2005. The resulting payment was €16
target value for Degussa must first be exceeded. If ROCE exceeds
million, of which approximately 7 percent was paid to members
this exercise hurdle, the number of exercisable performance
of the Management Board of Degussa.
options changes in relation to the ROCE value achieved. The calculation formula to be used is determined based on the capital
Related parties
costs of the Degussa subgroup (WACC – weighted average cost of
Over and above the subsidiaries included in the consolidated
capital) and must be redefined annually for each plan.
financial statements, the RAG Beteiligungs-Group also maintains
The value of the exercisable performance options is calcu-
relationships with related parties. All material relationships
lated based on EBITDA performance. The value for Degussa must
under corporate law with subsidiaries, associates and related
at least correspond to the average EBITDA performance of the
companies are included in the list of major shareholdings after
peer group companies in order for the performance options to
the Independent Auditors’ Report.
retain their value. If this threshold is exceeded, the value of the
Related parties with which the RAG Beteiligungs-Group
performance options changes as a function of the EBITDA outper-
maintains business relationships are significant associates and
formance achieved by Degussa compared to the peer group.
joint ventures of the RAG Beteiligungs-Group, RAG Aktiengesellschaft as sole shareholder of RAG Beteiligungs-AG, affiliated
companies of RAG Beteiligungs-AG in the RAG Group and the following shareholders of RAG Aktiengesellschaft that can exert a
significant influence, together with selected group companies:
E.ON AG, RWE AG, and ThyssenKrupp AG.
ACTIVE
Foreword
Management Report
115
Corporate Bodies
Major Shareholdings
왘 Notes
The value of transactions between the RAG BeteiligungsGroup and these companies was as follows:
RAG
Beteiligungs-Group
Affiliated
companies
RAG AG
Equity holders of
RAG AG
€ million
2006
2005
2006
2005
2006
2005
2006
2005
Goods and services supplied
139.3
831.8
322.3
451.6
10.4
50.6
1,365.2
1,284.1
Goods and services received
41.6
137.2
308.3
264.6
5.8
96.3
248.2
1,214.6
1.6
0.9
3.9
23.8
1.3
5.4
8.2
23.7
Other income
Other expense
–
–
148.1
129.1
–
4.3
0.2
0.2
Receivables as of December 31
62.6
119.5
149.1
151.6
–
4.2
174.2
256.2
Liabilities as of December 31
55.6
55.0
531.8
1,217.7
9.1
32.3
95.2
212.0
The receivables as of the balance sheet date relate for the
Related parties include the management members who are
most part to supplies of coal and electricity and financial rela-
directly or indirectly competent and responsible for the planning,
tionships with RAG. The liabilities mainly consist of deferred
management, and monitoring of the Company’s activities as well
income from the settlement of contractual adjustments relating
as their family members. In the RAG Beteiligungs-Group, these
to the purchase of electricity and liabilities from the supply of
parties have included the Management Board and Supervisory
coal and electricity as well as liabilities from financial relation-
Board of RAG Beteiligungs-AG (formerly the management and
ships with RAG. In addition, receivables and liabilities from the
advisory council of the former RAG Beteiligungs-GmbH) since
supply of gas were included in the previous year.
September 14, 2006 as well as the other management of the RAG
Furthermore, RAG Beteiligungs-AG acquired am additional
Beteiligungs-Group. Other management consists of the Manage-
42.68 percent of the shares in Degussa from E.ON., see Notes
ment Board and managing directors of subgroup parent compa-
regarding “Scope of Consolidation.”
nies.
The sole shareholder RAG Aktiengesellschaft centrally
The managing directors of the former RAG Beteiligungs-
provides management, control and administrative services for
GmbH are senior executives of RAG Aktiengesellschaft and
RAG Beteiligungs-AG, the charges for which are not passed on to
received no separate payments from the Company for their
RAG Beteiligungs-AG. Based on the total costs incurred by RAG in
activity.
the past, the amount estimated for this purpose comes to €110.7
million.
The advisory council of RAG Beteiligungs-GmbH received
€0.1 million (2005: €0.1 million) for its activity.
The following payments were made to the Management
Board and the Supervisory Board of RAG Beteiligungs-AG and the
other management of the RAG Beteiligungs-Group:
Management Board
members of
RAG Beteiligungs-AG
€ million
Other
management
2006
2005
2006
2005
Current benefits due
5.2
–
15.5
13.4
Post-employment benefits
13.1
–
27.8
37.0
Termination benefits
–
–
13.1
3.1
LTI Plan as of December 31
–
–
–
1.1
116
Post-employment benefits include pension obligations
at the present value of the defined benefit obligations. Pension
DISCLOSURES IN ACCORDANCE WITH NATIONAL
REQUIREMENTS
benefits earned in the year under review (current service cost)
amounted to €2.8 million (2005: €2.1 million).
Apart from the relationships stated above, the RAG Beteili-
Disclosures pursuant to Section 313 (2) and 313 (4) of
the German Commercial Code (HGB)
gungs-Group maintained no other significant relationships with
The disclosures with respect to the shareholdings of RAG Beteili-
related parties.
gungs-AG and of the RAG Beteiligungs-Group are not made in
the Notes but rather in a separate list. This list indicates which of
Contingent Liabilities and Other Financial
Commitments
these companies have availed themselves of the exemptions
The RAG Beteiligungs-Group recorded the following contingent
sure of annual financial statements and the preparation of the
liabilities as of the balance sheet date:
notes to the accounts and the management report.
€ million
allowed by Section 264(3) of the HGB with respect to the disclo-
Dec. 31, 06 Dec. 31, 05
Obligations from the issue and
transfer of bills of exchange
–
0.2
Obligations from guarantees
198.3
363.7
Liabilities on warranties
209.3
257.7
407.6
621.6
Number of employees pursuant to Section 314 (1) No. 4
of the HGB
The number of employees as an average for the year in the
continuing operations was as follows:
€ million
2006
2005
13,491
12,938
Consumer Solutions
6,107
6,110
ships, collectively owned enterprises, and as the general partner
Specialty Materials
7,272
7,131
in limited partnerships.
Energy
4,798
4,795
645
687
11,402
13,484
43,715
45,145
Legal liabilities exist for investments in general partner-
The following additional financial obligations also exist:
Real Estate
The nominal values of obligations in relation to future
Other
minimum lease payments on assets leased under operating
leases are due as follows:
In addition, an average number of 7,701 persons (2005:
€ million
Dec. 31, 06 Dec. 31, 05
13,522) were employed in the discontinued operations.
Due within 1 year
57.6
71.3
Due in 1 – 5 years
265.9
203.8
Due in more than 5 years
161.9
157.2
Compensation of the Supervisory Board and Management Board pursuant to Section 314 (1) no. 6 of the HGB
485.4
432.3
The managing directors of the former RAG Beteiligungs-GmbH
are senior executives of the sole shareholder RAG Aktiengesell-
In the period under review, payments on operating leases
of €76.4 million (2005: €111.0 million) were recognized in income.
This sum included contingent rental payments of €0.1 million
(2005: €0.0 million).
schaft and receive no separate payments from the Company for
their activity; see also the Notes pertaining to “Related Parties.”
The remuneration paid to the Advisory Council totaled
€76,983.33 in 2006.
The remuneration paid to the Management Board of RAG
Events after the balance sheet date
The publication of these consolidated financial statements was
Beteiligungs-AG in 2006 totaled €5,150,457.54.
No remuneration was paid to the Supervisory Board in 2006.
approved by the Management Board of RAG Beteiligungs-AG on
the date of signing.
Essen, March 8, 2007
RAG Beteiligungs-AG
The Management Board
Dr. Müller
Dr. Engel
Dr. Tacke
Dr. Oberholz
Wagner
Dr. Schörner
Weber
ACTIVE
Foreword
Management Report
왘 Notes
Corporate Bodies
Major Shareholdings
Auditor’s Report
Auditor’s Report
entities to be included in consolidation, the accounting and
“We have audited the consolidated financial statements
consolidation principles used and significant estimates made by
prepared by the RAG Beteiligungs-AG, Essen, comprising the
the Parent Company´s Board of Managing Directors, as well as
balance sheet, the income statement, statement of changes
evaluating the overall presentation of the consolidated financial
in equity, cash flow statement and the notes to the consolidated
statements and the combined management report.We believe
financial statements, together with the group management
that our audit provides a reasonable basis for our opinion.
report, which is combined with the management report of the
Our audit has not led to any reservations.
parent company, for the business year from January 1 to Decem-
In our opinion based on the findings of our audit the consol-
ber 31, 2006. The preparation of the consolidated financial
idated financial statements comply with the IFRSs as adopted by
statements and the combined management report in accordance
the EU and the additional requirements of German commercial
with the IFRSs, as adopted by the EU, and the additional require-
law pursuant to Section 315a (1) HGB and give a true and fair view
ments of German commercial law pursuant to Section 315a (1)
of the net assets, financial position and results of operations of
HGB (“Handelsgesetzbuch”: German Commercial Code) are
the Group in accordance with these requirements. The combined
the responsibility of the parent company’s Board of Managing
management report is consistent with the consolidated financial
Directors. Our responsibility is to express an opinion on the con-
statements and as a whole provides a suitable view of the
solidated financial statements and on the combined manage-
Group’s position and suitably presents the opportunities and
ment report based on our audit.
risks of future development.”
We conducted our audit of the consolidated financial statements in accordance with Section 317 HGB and German generally
accepted standards for the audit of financial statements promul-
Duesseldorf, March 9, 2007
gated by the Institut der Wirtschaftsprüfer (Institute of Public
Auditors in Germany) (IDW). Those standards require that we
PricewaterhouseCoopers
plan and perform the audit such that misstatements materially
Aktiengesellschaft
affecting the presentation of the net assets, financial position
Wirtschaftsprüfungsgesellschaft
and results of operations in the consolidated financial statements
in accordance with the applicable financial reporting framework
and in the combined management report are detected with
reasonable assurance. Knowledge of the business activities and
Dr. Vogelpoth
Sprinkmeier
the economic and legal environment of the Group and expecta-
Wirtschaftsprüfer
Wirtschaftsprüfer
tions as to possible misstatements are taken into account in the
determination of audit procedures. The effectiveness of the
accounting-related internal control system and the evidence supporting the disclosures in the consolidated financial statements
and the combined management report are examined primarily
on a test basis within the framework of the audit. The audit
includes assessing the annual financial statements of those
entities included in consolidation, the determination of the
117
118
Dr. Wulf H. Bernotat, Chairman
Ladies and Gentlemen,
During the past fiscal year, the Supervisory Board maintained
continuous dialog with the Management Board of RAG Beteiligungs-AG and advised and monitored the Management Board in
its management of the Group. The Supervisory Board was
apprised of the Group’s performance and of strategic and operational issues in the development of the Group at two Supervisory
Board meetings. The Management Board also provided us with
written reports on business performance and on issues of particular interest. The Supervisory Board has been directly involved in
all decisions requiring its consent and has made such decisions
after a period of intensive review.
The Chairman of the Supervisory Board was informed in
detail and without delay of events of material importance to the
performance of the business and the management of the Group,
both in the context of and outside of Supervisory Board meetings. The Steering Committee supported the Supervisory Board in
the preparation of its work, as did the Finance and Capital Expenditures Committee. Discussions during the past fiscal year were
dominated by the ongoing positioning of the Group to meet
capital market requirements. The Group achieved major milestones in optimizing its portfolio with the complete acquisition
of Degussa AG, disposal of the Construction Chemicals business
by Degussa AG, and finding an investor for DBT GmbH. Project
“Sirius”, which involved changes to the corporate and Group
ACTIVE
Foreword
Management Report
Notes
왘 Report of the Supervisory Board
organization, was the subject of intense discussions at Supervisory
Board meetings. The resulting Group restructuring was completed in the year under review, paving the way for significant
gains in efficiency. All of the steps in this process were carried out
in close coordination with the Supervisory Board.
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Düsseldorf, has audited the annual financial statements of RAG Beteiligungs-AG, the consolidated
financial statements, and the combined management report of
RAG Beteiligungs-AG and the Group and endorsed them with an
unqualified audit opinion pursuant to Section 322 of the German
Commercial Code (HGB). The audit engagement for the annual
financial statements also included an audit of risk management
procedures voluntarily requested by the Supervisory Board. The
financial statements, the combined management report, and the
auditors’ reports have been supplied to all members of the
Supervisory Board. The financial statements were discussed in
great detail in the financial review meeting of the Supervisory
Board. The auditor reported on the material findings of the audit
at the financial review meeting. We concur with the findings
of the auditor and raise no objections to the reports. The Supervisory Board has approved the annual financial statements and
the consolidated financial statements. The annual financial
statements for 2006 have thus been ratified.
The Supervisory Board wishes to thank the members of
the Management Board and the employees and works council
members of RAG Beteiligungs-AG and its affiliated companies
for their hard work and dedication. We would particularly like to
thank all employees celebrating service anniversaries in the year
under review as well as those employees who retired in 2006 for
their many years of service to the Company. Together with the
Management Board, we remember all those employees who
passed away during the year and convey our deepest sympathies
to their families and friends.
The Supervisory Board
Essen, March 2007
Dr. Wulf H. Bernotat, Chairman
Corporate Bodies
Major Shareholdings
119
120
Corporate Bodies and Offices Held
SUPERVISORY BOARD OF RAG BETEILIGUNGS-AG
Ludwig Ladzinski, Bottrop
Deputy Chairman
Dr. Wulf H. Bernotat, Duesseldorf
Chairman
Chairman of the Management Board of E.ON AG
a)
Allianz AG
Chairman of the Working Group of Works Councils
in the RAG Group and
Chairman of the General Works Council of
Deutsche Steinkohle AG
a)
RAG Aktiengesellschaft
Bertelsmann AG
E.ON Energie AG (Chair)
E.ON Ruhrgas AG (Chair)
Metro AG
RAG Aktiengesellschaft (Chair)
b)
Dr.-Ing. Ekkehard D. Schulz, Duesseldorf
Deputy Chairman
Chairman of the Management Board of ThyssenKrupp AG
a)
E.ON US Investments Corp. (Chair)
Bayer AG
E.ON Nordic AB (Chair)
MAN Aktiengesellschaft (Chair)
E.ON Sverige AB (Chair)
E.ON UK plc (Chair)
RWE AG
ThyssenKrupp Elevator AG (Chair)
Hubertus Schmoldt, Hanover
ThyssenKrupp Services AG (Chair)
First Deputy Chairman
Secretary General of the Mining, Chemical and Energy
Industrial Union (IG BCE)
a)
Bayer AG
Deutsche BP AG
DOW Olefinverbund GmbH
E.ON AG
AXA Konzern AG
ThyssenKrupp Technologies AG (Chair)
Jan Zilius, Cologne
Deputy Chairman
Member of the Management Board of RWE AG
a)
Harpen AG (Chair)
RWE Dea AG (Chair)
Fritz Kollorz, Recklinghausen
Deputy Chairman
Former Member of the National Executive of the Mining,
Chemical and Energy Industrial Union (IG BCE)
a)
DSK Anthrazit Ibbenbüren GmbH
STEAG Aktiengesellschaft
TUI AG
Vattenfall Europe AG
Vattenfall Europe Generation Verwaltungs-AG
RWE Energy AG
ACTIVE
Foreword
Management Report
Notes
왘 Corporate Bodies
Major Shareholdings
Martin Becker, Großrosseln
Dietmar Hexel, Berlin
Deputy Chairman of the Works Council of the Saar Mine,
Member of the Managing Board of the German
Confederation of Trade Unions (Deutscher Gewerkschaftsbund)
a)
a)
Berthold A. Bonekamp, Essen
a)
Georgsmarienhütte Holding GmbH
b)
DGB Vermögenstreuhandgesellschaft mbH
Berlinwasser Holding AG
Wolfgang Junge, Hamm
RheinEnergie AG
Chairman of the Works Council of the Ost Mine
RWE Rhein-Ruhr AG (Chair)
a)
RWE Westfalen-Weser-Ems AG (Chair)
b)
STEAG Aktiengesellschaft*
Dr. Manfred Krüper, Duesseldorf
Berliner Wasserbetriebe AöR
Member of the Management Board of E.ON AG
(until November 30, 2006)
RWE Energy Nederland B.V.
RWE Npower Holdings plc
a)
Degussa AG*
E.ON Energie AG
STOEN S.A. (Chair)
equitrust Aktiengesellschaft (Chair)
Východoslovenská energetika, a. s.
VICTORIA Lebensversicherung AG
Klaus Brandner, MdB, Berlin
SPD spokesman on the economy and employment in the
German Bundestag
a)
VICTORIA Versicherung AG
b)
E.ON North America, Inc. (Chair)
Dr. Norbert Lammert, MdB, Berlin
Dr. Ludger Diestelmeier, Essen
President of the German Bundestag
Managing Director of the administrative company
RAG Beteiligung mbH
a)
b)
Kultur Ruhr GmbH
Ruhrfestspiele Recklinghausen GmbH
Dr. Hans Michael Gaul, Duesseldorf
Member of the Management Board of E.ON AG
Ingrid Matthäus-Maier, Frankfurt
a)
Degussa AG*
Speaker of the Management Board of KfW
Bankengruppe (effective October 1, 2006)
DKV Deutsche Krankenversicherung AG
a)
Allianz Versicherungs-AG
E.ON Energie AG
Deutsche Telekom AG
E.ON Ruhrgas AG
Salzgitter Mannesmann Handel GmbH
STEAG Aktiengesellschaft*
VOLKSWAGEN AG
b)
E.ON Nordic AB
E.ON Sverige AB
Ralf Giesen, Hanover
Secretary of the Board of the Mining,
Chemical and Energy Industrial Union (IG BCE)
a)
Deutsche Post AG
Altana AG
121
122
Prof. h.c. (CHN) Dr. Ulrich Middelmann, Duesseldorf
Deputy Chairman of the Management Board of ThyssenKrupp AG
a)
Commerzbank AG
E.ON Ruhrgas AG
LANXESS AG
LANXESS Deutschland GmbH
ThyssenKrupp Elevator AG
ThyssenKrupp reinsurance AG (Chair)
ThyssenKrupp Stainless AG (Chair)
ThyssenKrupp Steel AG (Chair)
b)
Hoberg & Driesch GmbH (Chair)
ThyssenKrupp Acciai Speciali Terni S.p.A.
ThyssenKrupp (China) Ltd.
ThyssenKrupp Risk and Insurance Services GmbH (Chair)
Elvira Rohde, Essen
Chair of the Group Works Council of RAG
Aktiengesellschaft (until December 31, 2006)
a)
Dr. Klaus Sturany, Dortmund
a)
Commerzbank AG
Hannover Rückversicherung AG
Heidelberger Druckmaschinen AG
RWE Energy AG
RWE Power AG
RWE Systems AG (Chair)
b)
Österreichische Industrieholding AG
RWE Npower Holdings plc
Gerald Weiss, MdB, Berlin
Chairman of the Committee on Labor and
Social Issues of the German Bundestag
a)
ACTIVE
Foreword
Management Report
Notes
MANAGEMENT BOARD OF RAG BETEILIGUNGS-AG
왘 Corporate Bodies
Major Shareholdings
Heinz-Joachim Wagner, Bad Nauheim
b)
Degussa Brasil Ltda. (Chair)
Dr. Werner Müller, Muelheim a. d. Ruhr
Degussa Corp. (Chair)
Chairman
Pensionskasse Degussa VvaG
a)
Degussa AG (Chair)
Degussa Bank GmbH
Deutsche Bahn AG (Chair)
WestLB
Deutsche Steinkohle Aktiengesellschaft (Chair)
B. Metzler Seel. Sohn & Co. Holding AG
STEAG Aktiengesellschaft (Chair)
B. Metzler Seel. Sohn & Co. KGaA
b)
g.e.b.b. Gesellschaft für Entwicklung, Beschaffung
und Betrieb mbH (Chair)
Ulrich Weber, Krefeld
Stadler Rail AG
a)
Degussa AG
Deutsche Montan Technologie GmbH (Chair)
Dr. Klaus Engel, Muelheim a.d. Ruhr
Deutsche Steinkohle Aktiengesellschaft
b)
Degussa International AG (President)
HDI Privat Versicherung AG
Personalstiftung of Degussa International AG
HDI Industrie Versicherung AG
Degussa CEE GmbH (Chair)
HDI Service AG
STEAG Saar Energie AG
Dr. Alfred Oberholz, Marl
a)
Oxeno Olefinchemie GmbH (Chair)
b)
Degussa Antwerpen NV (Chair)
Saar Ferngas AG
b)
RAG BILDUNG GmbH (Chair)
a)
Membership on other statutory
b)
Membership on comparable German and foreign
Degussa Brasil Ltda.
Degussa (China) Co., Ltd. (Chair)
Degussa Corp.
Degussa Taiwan Ltd. (Chair)
Dr. Peter Schörner, Bochum
a)
Degussa AG
Deutsche Steinkohle Aktiengesellschaft
STEAG Aktiengesellschaft
b)
RAG BILDUNG GmbH
Dr. Alfred Tacke, Essen
a)
Saar Ferngas AG (Chair)
STEAG Saar Energie AG (Chair)
supervisory boards (on December 31, 2006)
supervisory bodies of business enterprises
(on December 31, 2006)
*
until December 31, 2006
Degussa AG, as of January 2, 2007 Degussa GmbH
STEAG AG, as of January 2, 2007 STEAG GmbH
123
124
Major Shareholdings
Equity1)
As of December 31, 2006
I.
RAG Beteiligungs-AG share including
holdings pursuant to Section 16 AktG
Direct
Indirect
Total
€ million
%
%
%
Consolidated companies
Other companies
Germany
1.
RAG Immobilien Holding GmbH, Essen
168.0
100.00
100.00
2.
RAG Projekt-Beteiligungs-GmbH & Co. KG, Essen
343.3
99.00
99.00
6,514.1
100.00
100.00
251.9
100.00
100.00
5.00
3.
RAG Projektgesellschaft mbH, Essen
4.
RBV Verwaltungs-GmbH (formerly RB Verwaltungsgesellschaft
für die Beteiligung an der Rütgerswerke mbH), Essen
Subgroup RAG IMMOBILIEN
Germany
5.
RAG Immobilien GmbH (formerly RAG Immobilien AG), Essen
121.5
95.00
100.00
6.
Aachener Bergmannssiedlungsgesellschaft mbH, Herzogenrath
29.5
100.00
100.00
7.
EBV GmbH, Herzogenrath
30.1
100.00
100.00
8.
Gesellschaft für Wohnen Datteln mbH, Datteln
23.1
73.40
73.40
9.
Lünener Wohnungs- und Siedlungsgesellschaft mbH, Lünen
36.0
100.00
100.00
10.
Montan-Grundstücksgesellschaft mbH, Essen
36.6
100.00
100.00
11.
RAG Immobilien Management GmbH
(formerly RH Immobilien GmbH), Essen
12.
RAG Wohnimmobilien GmbH, Essen
13.
Rhein Lippe Wohnen GmbH, Duisburg
1.1
100.00
100.00
42.5
100.00
100.00
169.2
100.00
100.00
14.
Siedlung Niederrhein GmbH, Dinslaken
56.5
100.00
100.00
15.
Walsum Immobilien GmbH, Duisburg
24.5
94.90
94.90
16.
Wohnbau Auguste Victoria GmbH, Marl
35.1
100.00
100.00
17.
Wohnbau Westfalen Beteiligungs-GmbH, Essen
85.5
100.00
100.00
18.
Wohnbau Westfalen GmbH, Dortmund
138.1
100.00
100.00
19.
Wohnungsbaugesellschaft mbH „Glückauf“, Moers
52.7
100.00
100.00
94.90
100.00
100.00
100.00
Subgroup STEAG
Germany
20.
STEAG AG, Essen
509.9
21.
RAG Saarberg Energiebeteiligungsgesellschaft mbH,
Saarbrücken
209.2
22.
RAG Saarberg GmbH, Saarbrücken
468.1
94.90
94.90
23.
RAG Trading GmbH, Essen
35.0
100.00
100.00
24.
RAG Verkauf GmbH, Essen
25.
Saar Ferngas AG, Saarbrücken
26.
5.10
0.5
51.00
51.00
140.2
76.88
76.88
SOTEC GmbH, Saarbrücken
20.5
50.10
50.10
27.
STEAG Entsorgungs-GmbH, Dinslaken
34.0
100.00
100.00
28.
STEAG Fernwärme GmbH, Essen
20.5
100.00
100.00
29.
STEAG Saar Energie AG, Saarbrücken
40.9
100.00
100.00
International
30.
Compañia Eléctrica de Sochagota S.A.E.S.P., Tunja
108.3
51.00
51.00
31.
Iskenderun Enerji Üretim ve Ticaret Anonim Sirketi, Ankara
895.0
51.00
51.00
ACTIVE
Foreword
Management Report
Notes
Equity1)
STEAG State Power, Inc., Makati City
Direct
€ million
32.
125
Corporate Bodies
왘 Major Shareholdings
%
75.7
Indirect
Total
%
%
89.00
89.00
Subgroup RAG Coal International
Germany
33.
RAG Coal International GmbH
(formerly RAG Coal International AG), Essen
34.
DBT GmbH, Lünen
53.7
100.00
100.00
35.
RAG Coal International Verwaltungs GmbH, Essen
18.7
100.00
100.00
36.
RÜTGERS Chemicals GmbH (formerly RÜTGERS Chemicals
Aktiengesellschaft), Castrop-Rauxel
61.1
100.00
100.00
333.5
100.00
100.00
37.
Rütgers GmbH, Essen
457.0
100.00
100.00
38.
RÜTGERS Rail Verwaltungs GmbH, Essen
49.7
100.00
100.00
39.
SAGumex GmbH, Essen
25.6
100.00
100.00
International
40.
DBT America Inc., Houston
35.6
100.00
100.00
41.
DBT Australia LAD Pty., Argenton
19.2
100.00
100.00
42.
Enerco Holding B.V., Buchten
21.5
100.00
100.00
43.
Mars Laminate Systems Corp.
(formerly Isola Holdings USA Corp.), Wilmington
– 0.3
100.00
100.00
VFT Belgium N.V., Zelzate
30.4
100.00
100.00
99.42
100.00
100.00
100.00
44.
Subgroup Degussa
Germany
45.
Degussa AG, Düsseldorf
46.
Degussa Initiators GmbH & Co. KG, Pullach
47.
Goldschmidt GmbH, Essen
127.0
100.00
100.00
48.
Oxeno Olefinchemie GmbH, Marl
38.6
100.00
100.00
49.
Röhm GmbH (formerly Röhm GmbH & Co. KG), Darmstadt
50.
RohMax Additives GmbH, Darmstadt
51.
Stockhausen GmbH, Krefeld
2,739.3
7.3
0.58
168.2
100.00
100.00
31.2
100.00
100.00
127.4
100.00
100.00
International
52.
Cyro Industries Inc., Rockaway
147.2
100.00
100.00
53.
Degussa (China) Co., Ltd., Peking
62.8
100.00
100.00
54.
Degussa Amalgamation Ltd., Milton Keynes
798.1
100.00
100.00
55.
Degussa Antwerpen N.V., Antwerp
130.0
99.99
99.99
56.
Degussa Brasil Ltda., São Paulo
96.6
100.00
100.00
57.
Degussa Canada Inc., Burlington
47.4
100.00
100.00
58.
Degussa Corporation, Parsippany
1,289.1
100.00
100.00
69.5
100.00
100.00
144.6
100.00
100.00
59.
Degussa Japan Co., Ltd., Tokyo
60.
Degussa UK Holdings Ltd., London
61.
Goldschmidt Chemical Corp., Hopewell
– 6.9
100.00
100.00
62.
Laporte Speciality Organics Limited, Milton Keynes
625.6
100.00
100.00
63.
Nippon Aerosil Co., Ltd., Tokyo
47.3
80.00
80.00
64.
RohMax USA, Inc., Horsham
32.8
100.00
100.00
65.
Stockhausen Inc., Greensboro
47.0
100.00
100.00
126
Equity1)
€ million
II.
Direct
Indirect
Total
%
%
%
Joint ventures (accounted for using the equity method)
Subgroup STEAG
Germany
66.
Pfalzgas GmbH, Frankenthal
67.
REG Raffinerie-Energie oHG, Köln
III.
41.4
50.00
50.00
5.6
80.00
80.00
Associates (accounted for using the equity method)
Subgroup STEAG
Germany
68.
Fernwärmeversorgung Niederrhein GmbH, Dinslaken
33.2
26.00
26.00
69.
Kraftwerk Bexbach Verwaltungsgesellschaft mbH, Bexbach
24.2
33.33
33.33
25.0
48.90
48.90
6.4
75.00
75.00
International
70.
IV.
ARKAD Deniz Tasimaciligi A.S., Istanbul
Joint ventures (not accounted for using the equity method)
Subgroup STEAG
Germany
71.
V.
Kraftwerk Voerde STEAG-RWE oHG, Voerde
Associates (not accounted for using the equity method)
Subgroup STEAG
Germany
1)
72.
energis GmbH Dienstleistungen für Energie und Umwelt,
Saarbrücken
73.
Ferngas Nordbayern GmbH, Nürnberg
74.
SpreeGas Gesellschaft für Gasversorgung und
Energiedienstleistung mbH, Cottbus
20.6
31.10
31.10
75.
Stadtwerke GmbH Bad Kreuznach, Bad Kreuznach
56.9
24.52
24.52
76.
Stadtwerke Trier Versorgungs GmbH, Trier
47.6
24.90
24.90
132.3
26.12
26.12
8.8
20.00
20.00
Amounts originally denominated in foreign currencies have been translated at the closing rates prevailing in December
127
Group Structure
Publication Credits
Key Figures
CH EMICALS
EN ERGY
R E A L E STAT E
Specialty
Materials
Building
Blocks
Feed
Additives
Coatings &
Colorants
Exclusive
Synthesis &
Catalysts
Superabsorber
High
Performance
Polymers
Aerosil &
Silanes
Care & Surface
Specialties
Advanced
Fillers &
Pigments
C4Chemistry
Specialty
Acrylics
Methacrylates
Energy
Real Estate
€ million
14,793
14,181
EBITDA
€ million
2,280
2,107
EBIT
ROCE
Energy
Real Estate
Consumer
Solutions
%
15.4
14.9
€ million
1,234
1,108
%
8.8
7.8
Net income
€ million
1,045
195
Total assets
€ million
21,043
23,750
Equity ratio
%
20.5
22.1
€ million
1,098
1,147
€ million
959
1,194
€ million
974
980
Net financial debt
€ million
5,434
5,649
43,175
45,196
1)
2005
Sales
EBITDA margin
Technology
Specialties
2006
Publisher
RAG Beteiligungs-AG
www.rag.de
Contact
Telephone + 49 (0) 201-177 38 99
Fax
+ 49 (0) 201-177 29 11
Investor Relations
Telephone + 49 (0) 201-177 20 89
Fax
+ 49 (0) 201-177 20 97
[email protected]
Design and layout
Photography
Getty Images (p. 6)
Corbes (p. 8)
Translation
Typesetting
Germany
2006 ANNUAL REPORT
N EW FORCES.
*
2006 ANNUAL REPORT
RAG Beteiligungs-AG
45128 Essen
Germany
www.rag.de
Etna, Sicily
Crater Lake, Oregon
Fujisan, Japan
Hekla, Iceland
Kilauea, Hawaii
RAG, Essen
Santorini, Greece
Stromboli, Sicily
Vesuvio, Italy
*ACTIVE

Annual Report 2006 - Evonik Industries

Transcription

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