Technologies · Systems · Solutions - Dürr

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118 33. Risks 34. Financial instruments Use of derivative financial instruments The Group operates in countries in which there are political and commercial risks. From a current perspective, the Group is not aware of the effects of such risks for the Group and they are therefore not included in the consolidated financial statements. Dürr may be involved in lawsuits, including product liability, in the normal course of business. There are no such matters pending that the Board of Management expects to be material in relation to the Group’s business or financial position. Legal costs are expensed as incurred. There is litigation pending relating to a tax field audit conducted in 2000. A demand for backtax of € 900 thousand plus possible interest is currently being negotiated. The Board of Management estimates the chances of the Group winning the litigation as more likely than not. The legal counseling and consulting fees associated with the case have been posted against earnings. Dürr is currently involved in arbitration proceedings against Alstom S.A. regarding the acquisition of Dürr Systems S.A.S., Courbevoie (France). In the agreement underlying this transaction, Alstom S.A. on the one hand and Dürr AG and Dürr Systems GmbH on the other agreed to an equity guarantee for the acquired Dürr Systems S.A.S. and its subsidiaries as well as a gross margin guarantee for certain projects. The parties to the contract cannot agree on the actual amount of these guarantees. Since May 2001, the arbitration proceedings have therefore been pending at the International Chamber of Commerce (ICC), Paris (France). At a hearing on March 3, 2003, the court of arbitration decided to appoint a preliminary expert. According to the report of this expert from March 2004, both Alstom S.A. and Dürr have justified claims. At a hearing before the court of arbitration on April 14, 2004, at which the report was discussed, the parties were asked to comment on the question of whether Dürr has forfeited the right to have a final expert appointed to decide finally on the amount of the equity as of February 17, 2000, the date of the takeover by Dürr. In a preliminary judgment, the court of arbitration came to the conclusion on November 10, 2004, that Dürr had not lost this right and that a final expert could be appointed. On December 12, 2004, the preliminary expert was appointed by both parties as the final expert. Dürr was instructed to prepare a revised consolidated balance sheet as of the cutoff date for discussion with Alstom S.A. by mid-March. The parties have to identify the disputed points and comment on them. The next hearing of the court of arbitration has been scheduled for the end of April 2005. As of December 31, 2004, and December 31, 2003, Dürr has therefore recorded a receivable based on its claim against Alstom S.A. Depending on the outcome of the arbitration proceedings, a deviation from the receivables posted will lead in subsequent reporting periods to a change in goodwill without effect on income. Dürr considers it to be more probable than not that the main claims of Dürr will be asserted. Due to its international operations, Dürr is exposed to currency risks. The Company is also exposed to interest risks and credit risks. The general regulations for a Group-wide risk policy are laid out in the Group guidelines. Derivative financial instruments are used in the Group to minimize the risks concerning changes in exchange rates and interest rates on cash flows and the change in fair value of receivables and liabilities. In addition, interest swaps are used to optimize interest payments. Dürr is exposed to credit loss in the event of non-performance by counterparties (banks) to the financial instruments described below.
Credit risk Currency risk Interest rate risk Liquidity risk Fair value Consolidated financial statements of Dürr AG All financial derivatives and their underlyings are subject to ongoing and regular internal 119 control and measurement in accordance with a directive of the Board of Management. Derivative contracts are only entered into with banks with a good credit standing. Interest swaps were only entered into with German banks. Derivative financial instruments are only entered into to hedge the operating business. The credit risk results from the danger that business partners fail to perform their obligation with primary and derivative financial instruments and that capital losses are incurred as a result. Credit ratings are performed for all new customers. Existing customers are analyzed regularly based on their payment behavior. As we do not conclude any general netting agreements with our customers, the sum of the amounts reported under assets also represents the maximum credit risk. There is no apparent concentration of credit risk from exposures to a single debtor or to groups of debtors. Currency risks exist in particular where receivables or liabilities exist or will arise in the ordinary course of business in a currency other than the local currency of the Company. Forward exchange transactions are entered into to hedge against exchange rate fluctuations from cash flows relating to anticipated purchasing and sales transactions with terms of up to 18 months. In the 2004 reporting period, revolving forward exchange transactions were entered into to hedge against exchange rate fluctuations of intercompany loans with terms of up to one month. To manage the market risk for changes in interest rates of existing and anticipated variable-rate liabilities to banks, the Company entered into interest swaps with residual maturities of up to 14 months. Unused credit lines at the disposition of the Group ensure that it has sufficient funds. The financial instruments of the Group not accounted for at fair value mainly consist of cash and cash equivalents, trade receivables, trade payables and other liabilities, overdraft facilities and long-term loans. The carrying value of cash and cash equivalents and of overdraft facilities approximates fair value due to the highly liquid nature of these instruments. The fair value of receivables and payables based on the normal credit terms of trade also approximates their carrying value at historical cost. The fair value of non-current liabilities is based on the current interest rate for borrowing at similar terms and conditions with the same due date and credit rating. With the exception of the bond, the fair value of debt capital corresponds closely to the net carrying amount. As of December 31, 2004, the bond is listed at 108.20% which is equal to a fair value of € 216,400 thousand. Depending on their fair value on the balance sheet date, derivative financial instruments are reported under other assets (positive fair value) or other liabilities (negative fair value) respectively.
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Technologies · Systems · Solution
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Continuing operations Paint Systems
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Technologies · Systems · Solution
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Contents 4 Letter from the Chairman
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Letter from the Chairman of the Boa
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Board of Management of Dürr AG Ste
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Report of the Supervisory Board The
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Report of the Supervisory Board Mem
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Bond ISIN (Reg S): XS0195957658 ISI
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Dürr on the capital market 15 With
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Dürr on the capital market We repo
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Application of powder paint base co
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RoDip dip-painting process: In the
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Dürr designs and supplies perfectl
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Final Assembly Systems Product line
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Cylinder head cleaning: A highpress
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Dürr Ecoclean systems ensure optim
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Automatic wheel mounting system of
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Measuring Systems Product lines Bal
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Paint distribution center in an aut
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Discontinued operations Development
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September PUSH symposium On behalf
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Sales of passenger cars and light t
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Consolidated management report Impr
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Consolidated management report Cons
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Amounts in €m Total incoming 2004
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Amounts in €m 2004 2003 Total inc
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100 90 80 70 60 50 40 30 20 10 Fina
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Consolidated management report Curr
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Consolidated management report In d
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Page 97 and 98: Investments in associates Financial
Page 99 and 100: Cash and cash equivalents Borrowing
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Page 107 and 108: Amounts in €k Impairment test for
Page 109 and 110: 21.Trade receivables Consolidated f
Page 111 and 112: Nature and purpose of reserves Divi
Page 117 and 118: 29. Segment reporting Paint Systems
Page 121: 31. Contingent liabilities 32. Othe
Page 125 and 126: 36. Other notes Subsequent events G
Page 131 and 132: Property, plant and equipment Amoun
Page 139 and 140: Italy Olpidürr S.p.A. Novegro di S
Page 141 and 142: Financial calendar for 2005 April 2
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