Group Annual Report
2006
B S H B O S C H U N D S I E M E N S H A U S G E R ÄT E G M B H
People trust the BSH brands,
each one of which offers the highest quality, award-winning design,
and superb service. Our expertise encompasses the full range of
modern home appliances. A range that includes cookers, dishwashers,
washing machines, and dryers, refrigerators, and freezers plus laundry
care, floor care, and a host of outstanding consumer products. Our
products are an indispensable part of daily life, the world over.
Main Brands
Special Brands
Regional Brands
Group Annual Report 2006
Konzern-Geschäftsbericht 2006
CONTENT
5
Foreword
8
Award-winning Quality
For BSH, quality matters – in all things. A host of national and international awards
and accolades are testimony to the company’s success.
14
Zero Defect System
The early planning stage of new factories and production lines is when the
foundations are laid for BSH’s exemplary production quality.
20
Not just any Coil
In the quest for new procurement markets, quality is always a priority.
26
Part of a Global Network
As a global business, BSH relies on totally networked processes.
This in turn demands universal IT availability.
32
The Key to Delighted Customers
Time and again, BSH Customer Service manages to exceed customer
expectations. Making it an important tool for securing customer loyalty.
38
Career Material
BSH searches out the best people worldwide, then retains them
with special career development programs.
44
Supervisory Board Report
46
Board of Management, Supervisory Board
48
48
57
60
62
Management Report
Business Performance
Assets, financial position, and results of operations
Significant opportunities and risks for future development
Outlook
64
64
65
66
67
68
Group Financial Statements
Consolidated Statement of Income
Consolidated Balance Sheet
Consolidated Statement of Cash Flow
Statement of recognized income and expense
Consolidated Statement of Changes in Shareholders’ Equity
69
Notes to the Consolidated Financial Statements
88
Consolidated Statement of Changes in Assets
92
Share owner BSH Bosch und Siemens Hausgeräte GmbH
93
Independent Auditors’ Report
94
Summary of Past Performance
3
4
“We can look back on a
successful 2006.” –
Dr. Kurt-Ludwig Gutberlet,
President and CEO of BSH.
FOREWORD
Striking the right balance
For BSH, 2006 was a record year on the sales and growth fronts. At EUR
8.3 billion, Group sales were more than 13 percent up on the previous
year. In Germany sales rose 15 percent, in the rest of Western Europe –
including Turkey – 10 percent, and outside Western Europe by an even
higher figure of 20 percent. We were able to increase our market share in
all European countries. Significant expansion of our worldwide manufacturing capacity saw us open Europe’s most modern washing machine production line in Nauen, and further extend our Appliance Park in Nanjing,
China, while in Russia work continues on the new refrigeration products
facility in St. Petersburg, which will enable us to serve the local market
directly from 2007. BSH’s global headcount rose to almost 38,000 people,
distributed across 44 different countries.
These bare statistics represent the high point, to date, of a history lasting
nearly 40 years, during which BSH has progressed from German exporter to
become the world’s third-largest home appliance maker – a success story of
which we can all be proud.
The fruits of a consistent strategy
In 2006, the overall economic situation presented a rather more favorable
picture than the preceding twelve months. Over the past year, the global
economy has performed surprisingly well, showing growth of nearly 4 percent. The robust expansion of investment in fixed assets that has now
lasted some three years has given new impetus to private consumption,
while oil prices, which fell back markedly during the second half of the
year, provided additional support.
Though these developments were clearly helpful, they alone do not explain
BSH’s success. The fact is that we still face a situation characterized by
continued price erosion affecting home appliances, coupled with significant
increases in the cost of raw materials such as steel, which directly impact
manufacturing costs. We are also confronted by new competitors from lowwage economies who aggressively leverage their cost advantages in the
global struggle for market share. Against this background, BSH’s success
can only be attributable to the efforts we have made in recent years to
advance our company. BSH’s success is the result of a consistent strategy.
5
6
The BSH Board of
Management (from l. to r.):
Jean Dufour,
Dr. Wolfgang Colberg,
Dr. Dr. h. c. Robert Kugler,
Dr. Kurt-Ludwig Gutberlet
FOREWORD
Creating values through quality and innovation
This strategy is aimed clearly at generating further growth. We are seeking
the growth that allows us long-term freedom of action and, as set out in
our Corporate Principles, growth that creates new values. Here we pursue
quality without compromise, not just in our products but also in our
processes and management. We aspire to offer our dealers and customers
the best quality at all times, and in doing so put our faith in innovations
capable of meeting tomorrow’s requirements today. And this includes not
just intelligent technology directed towards higher performance and
greater operating convenience, but also, as a central aim, environmental
and energy efficiency of our appliances.
Securing the future
Even before the publication of the recent UN report on climate change, we
knew that energy efficiency and the conservation of resources were issues
of absolutely fundamental significance for the fate of our planet. So for
many years now, we have focused our attention on developing particularly
energy-efficient appliances. Since 1990, for instance, we have succeeded
in cutting the electricity consumption of refrigerators by up to 79 percent,
with the equivalent reductions for cookers, washing machines, and dishwashers reaching 30 to 40 percent, depending on individual features.
Simply replacing the 188 million or so appliances that are more than ten
years old, with new, energy-efficient products, would save 44 billion kilowatt-hours of electricity, enough to supply some ten million households.
Which is why BSH has signed up to various initiatives designed to ensure
that we make full use of existing energy efficiency possibilities, and that
we can achieve the objectives of the Kyoto Protocol on reducing greenhouse gases. And in the future, too, we will continue our efforts to achieve
further cuts in the energy requirements of our home appliances. For we are
convinced that in doing so we will not only make a decisive contribution
towards protecting the environment, but at the same time ensure lasting
competitiveness and safeguard the jobs of our workforce.
Dr. Kurt-Ludwig Gutberlet
Dr. Wolfgang Colberg
Jean Dufour
Dr. Dr. h. c. Robert Kugler
7
Award-winning
Quality
For BSH, quality matters – in all things. A host of national
and international awards and accolades are testimony to
the company’s success.
10
Quality – a matter of trust
“Quality” – hardly any other term can be
applied to so many different conditions and
characteristics. Virtually everything possess
some sort of quality, good or bad. This is true
especially of companies and their products.
It is product quality alone that decides whether
a company will retain its customers, and ultimately its business success.
Head of sales Ditmar
Krusenbaum (left) accepts
the “Supplier of the Year
Award 2006” on behalf of
BSH.
In industry, the definition of the term “quality”
has itself been standardized. According to DIN ISO 8402, quality is an attribute that must be required of every product irrespective of the cost of producing that product, “Quality is the totality of features and characteristics
of a product or service that bear on its ability to satisfy stated or implied
needs.”
Customer satisfaction – always the top priority
So quality is about customer expectations. But if quality is a matter of
satisfying customer requirements, then it is important to do everything
possible to maintain the highest level of customer satisfaction worldwide.
Some of the tools used to achieve this include smart innovation management in new product planning and development, high-quality production
in an international manufacturing network, and rigorous quality controls
before appliances leave the factory coupled with comprehensive aftersales service. Also important, of course, is the systematic development of
the right supply companies. Any end product is, after all, only as good as
the quality of its component parts.
Quality is not something that happens overnight. It requires a long, sustained effort. Proof that BSH has understood this message from the outset
is provided by the many awards it has received for the quality of its products and services over the years. It is also confirmed by customer satisfaction surveys conducted by independent institutes. A survey of some
20,000 representative households in Germany carried out by the German
The outstanding design of
the BSH brands continues
to win national and international honors.
In 2006 alone, BSH picked
up 32 “iF design awards”
AWARD-WINNING
consumer research organization GfK found, for instance, that BSH is
ranked No. 1 for customer service. Customer satisfaction is without doubt
the most important accolade a manufacturer can receive. The company’s
own ambition to be the “industry benchmark” has, however, been more
than underscored by a whole host of other awards.
Awards as a quality benchmark
Awards such as the “German Logistics Award” were presented to BSH
last year by the German Logistics Association. The award went to BSH for
its successful introduction of the “Total Customer Logistics – The Key to
Delighted Customers” initiative which puts the focus of customer service
logistics wholly on customer satisfaction. This concept covers all stages of
customer support in repair and servicing situations and succeeded in
recent years not only in reducing costs in spare parts logistics, but also
achieved increased customer satisfaction at the same time. BSH is the
only company to have received this award for a second time.
In the creative artistic sphere, too, the quality of BSH products has
attracted attention and numerous awards. Home appliances must after all
convince consumers with their design. Take, for instance, the induction
wok from Gaggenau, which has been singled out as one of the top 100
design classics of the third millennium. BSH carried off 32 of the 108
awards in the Household/Living category in the 2006 “iF design awards.”
In the same year, the BSH brands Bosch and Siemens won the coveted
“red dot award” a total of eight times.
BSH also scores highly as an exemplary employer. In March 2007, the
magazine “karriere” in conjunction with the Corporate Research Foundation (CRF) set out to find the top employers in Germany – the third time
these rankings have been compiled. A total of 85 companies made the
list, with BSH achieving a prestigious fourth place. In the search for Germany’s top employers, 14 criteria were rated including opportunities for
advancement, employee satisfaction, and market position. In the categories of employment and promotion opportunities, sustainability/busi-
Smooth-running spare
parts logistics is an
important factor in
customer satisfaction.
BSH won the 2006
“German Logistics Prize”
in recognition of its
efforts.
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12
The “Supplier of the Year
Award” is voted for by
retailers from right across
Europe, making it one of
the most important such
honors.
ness development, compensation and benefits, and working time models,
BSH scored the maximum number of points.
Praise from partners
Accolades from partner companies are further proof of BSH quality at
work in its partnerships. Europe’s leading buying group in consumer electronics, the Netherlands-based Euronics International, presented BSH
with its “Supplier Of The Year Award 2006” in the White Goods category.
More than 6,000 dealers took part in the poll. Factors judged included
product innovation and performance as well as features such as marketing performance, after-sales service, and speed of delivery. “Our members
present this award to celebrate the contribution of their most valued partners in industry,” said Euronics President Werner Winkelmann: “Your sustained effort to enhance partnership between industry and the retail trade
is marked by us with this prize which is awarded by dealers from all over
Europe, and as such couldn’t be more genuine.”
Quality – in environmental matters, too
The BSH focus on the future is also reflected in the list of awards the company has received since 1995 for its practical commitment to environmental protection. Some of the many awards include first prize in the Bavarian
Communication Association’s “Ecology and Communication” awards, a
prize for wastewater management from the University of São Paulo, Brazil,
for the gas cooker factory in São Paulo, Spain’s environmental award, and
the BDI (German Industry Association) prize in the category “Environmental protection technology transfer to developing and newly industrialized
countries.” In the German ranking of sustainability reports for 2005 – carried out by the environmental body future e.V. and Germany’s Institute for
Ecological Economic Research (IÖW) – BSH was rated first in the electrical
engineering/ technology sector. For the first time in these rankings, the
points score per page was published. BSH came out on top with a score
of 13.3 points per page.
AWARD-WINNING
In 2006, BSH President and CEO, Dr. Kurt-Ludwig Gutberlet, was awarded
a special international prize from B.A.U.M., the German Association for
Environmental Management. B.A.U.M. honored Gutberlet for the pioneering position BSH has established for itself over many years in the fields of
corporate citizenship and sustainable development.
Enshrined in the Corporate Principles
The national awards won by BSH in the many countries where it has
regional offices are almost too numerous to mention. Here are just two
examples. BSH Sprzet Gospodarstwa Domowego Sp. z o.o has picked up
the “Pearls of the Polish Economy Award” for the third time. The award is
presented by the Polish Academy of Sciences and the magazine Polish
Market. As one of just six companies to receive the accolade, BSH’s Polish
subsidiary impressed the jury with its high profitability, dynamic sales,
and productivity.
The special international
prize awarded by B.A.U.M.
honors BSH’s exemplary
commitment to society
and the environment.
Readers Digest magazine has been conducting annual consumer studies
in Europe since 2001. The magazine’s readers are asked to rate aspects
including quality, price/performance ratio, consumer needs, brand recognition, and brand trust. Since the start of the Most Trusted Brand study,
the BSH brand Bosch has been the undisputed champion in the Home
Appliances category in Russia.
The company is rightly proud of these honors. Dr. Kurt-Ludwig Gutberlet
also sees in them a clear vindication of the course the company is following: “Naturally, we are delighted by these awards. BSH has been pursuing
a consistent quality policy for years and we have also enshrined this in
our Corporate Principles. This quality policy has helped make us great and
will ensure our continued growth.”
One of the first “design
classics of the third millennium“ – the induction wok
from Gaggenau.
13
Zero Defect
System
The early planning stage of new factories and
production lines is when the foundations are laid
for BSH’s exemplary production quality.
16
Corporate quality standard
The washing machine
factory in Nauen, near
the German capital Berlin,
is the most modern in
Europe.
Whether it’s a washing machine factory in
Brandenburg, Germany, or a dishwasher plant
in Turkey – the same quality and production
standards apply in both, as indeed they do in
all BSH production facilities. While the production lines installed in these two factories in the
past year were entirely new, they benefited
from extensive experience in production quality
gained over the years. BSH Bosch und Siemens
Hausgeräte GmbH was able to draw on a wealth
of resources to create the most modern facilities of their kind.
Nauen in Brandenburg, just a few kilometers from Berlin, is the location
for Europe’s most advanced washing machine factory. In 2007 alone,
Herbert Exler, Managing Director of the Nauen home appliance plant, is
planning to build 900,000 of the latest generation of front-loading washing machines for sale throughout Europe. Dr. Jörg Ulrich, responsible for
dishwasher production at the Cerkezköy factory in Turkey, has similar
plans. What these two production facilities have in common is that they
were planned and built within the space of a year and went into full-scale
production without a hitch. And as if that weren’t enough – both have been
delivering top-quality appliances from the outset, without any start-up
problems whatsoever.
Continuous quality testing
Taking the washing machine as an example, Herbert Exler explains the
BSH philosophy when it comes to production quality. “Customers generally expect to be able to use a washing machine for more than 2,000
hot washes, they expect it to be easy to use, quiet, and environmentally
friendly. On top of that, there are all sorts of statutory regulations on
safety and ISO certification. But we have long since ceased to be satisfied
by these requirements alone. Instead, a whole array of in-house quality
tests during and immediately after the production process mean that we
achieve a standard that elevates BSH products to a quality level all of
their own.”
Dr. Jörg Ulrich is head of
BSH’s new dishwasher
factory in Çerkezköy, Turkey.
MANUFACTURING
If the highest possible level of product quality is to be achieved from the
outset, then all the steps needed to secure this top quality must be considered in the early planning stages of the factory or production line.
Here, Dr. Ulrich quotes work with analysis tools, digital simulation of the
manufacturing workflow, and meticulous fault analysis in the early stages:
“When processing high-quality materials such as stainless steel, for
example, material flow and component handling must be planned with
great precision, in order not to impair the quality of the materials.”
Critical scrutiny of every detail
The “production system” principle which originated in Japan played a key
role in production planning in both these factories. Developed primarily
by the automaker Toyota in the post-WWII years, in the ideal scenario it
enables the entire value chain to be managed from the initial manufacturing/production stage all the way to the end product. One of the principles
underlying the production system is the critical scrutiny of every detail
of a manufacturing process. This involves analyzing literally every single
subprocess of the production process, looking for any source of defects
however small, so that virtually every production defect, every source of
“waste” can be eliminated from the outset.
“The process starts very early, right at the development stage, in fact,”
explains Dr. Ulrich,“for we want to eliminate defects even before they occur.”
One of the methods used here is Failure Mode and Effects Analysis or FMEA
for short. “Here we check whether certain issues may have an impact on
defects farther down the line in production,” continues Dr. Ulrich, “and
we then eliminate these potential defects in a totally structured way.”
At the same time, the resulting findings are fed back into a continuous
improvement process which benefits the entire organization.
Another important principle is Poka Yoke, which also has its origins in the
production system. This is based on a recognition that no individual and
indeed no system is capable of entirely avoiding unintentional mistakes.
It is possible, however, to achieve “zero defect” quality by using a key/lock
principle. Dr. Ulrich quotes a simple example. “We used to have cable
harnesses where all 20 cables had the same connectors and sockets. If
you weren’t careful, it was easy to make a mistake with one or other of
the cable connections. Now for each individual connection we have a
special connector pair which is unique, so there is absolutely no risk of
getting it wrong.”
Quality is an aspect that
receives due attention right
from the planning stage
for new factories. At BSH,
Group-wide standards provide the basis for avoiding
errors and waste in all its
various forms.
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18
Both the Nauen facility where the latest generation of BSH washing
machines is produced and the factory in Turkey were established and
developed according to a unified set of principles. These principles apply
to all BSH facilities worldwide. Similarly, the continuous quality controls
in all BSH factories are all based on the same standards. “We attach the
utmost importance to continuous optimization and improvement of our
products all along the value chain,” explains Nauen boss Exler. Which
means that in every factory, every single appliance is tested to confirm
that all its programs are working and then inspected for flaws like scratches
or dents, however small, before it leaves the factory. If an appliance is
found to have a defect, delivery of the entire production batch is halted
until it is confirmed that the particular defect does not affect any other
appliances in the batch.
“We want to be best in
production and best in
flexibility.” – Herbert
Exler, manager of the
Nauen home appliance
factory.
Random sample audits
But it doesn’t end there. In addition to 100 percent of appliances being
subjected to program tests and flaw inspections, appliances are also
sampled to undergo audits. This involves appliances being selected at
random from the production process, so that an end user simulation can
be performed as part of the Quality Management Audit (QMA) process.
These washing machines are loaded and then have to run through their
full program complete with water and detergent. Speaking about this
audit, Herbert Exler explains, “If the machine fails in this test program, a
very thorough investigation is conducted to see where the fault crept in
and who was responsible for it.” Another team, the Quality Management
Supplier Team, looks after the supplier side of things. In Jörg Ulrich’s factory, this team is responsible for the quality of the components from suppliers. “As early as the supplier selection stage, this team will go into a
supplier’s factory, work with the supplier to analyze potential weak points
in the manufacturing process, and then methodically optimize the supplier’s
MANUFACTURING
processes, using the Six Sigma method for example, until all requirements
are satisfied.” When it comes to quality audits, Jörg Ulrich describes quality assessment by external audit institutes as the “ultimate.” Which is why
he arranged for his factory in Cerkezköy to undergo certification by the
TÜV (the German Technical Inspection Authority) – and of course it came
through with flying colors.
Herbert Exler and Jörg Ulrich are agreed that the rigid quality management
system has obviously paid off in the two BSH factories in Nauen and
Cerkezköy. “The rigorous application of our quality methods and our total
quality-driven production system have enabled us to create the right environment where defects are systematically eliminated. Our retailers and
our end customers can have complete confidence in this.”
The BSH production system
is not limited to the pure
manufacturing process, but
aims to achieve constant
optimization of the entire
value-creation chain – from
purchasing through to delivery of the finished product.
19
Not just any
Coil
In the quest for new procurement markets, quality is always
a priority.
22
The challenge in global procurement
Buying steel is a science in itself. It calls for
many very diverse qualities on the part of the
experts from Corporate Procurement at BSH,
including extensive knowledge of the marketplace, a keen eye, analytical understanding
and clear judgment, not to mention an ability
to see into the future. In global competition,
the search for new procurement markets presents entirely new challenges – and sometimes
psychology, too, has a special role to play.
For years now, price levels
of home appliances have
fallen, while those of steel
and other raw materials
have increased – presenting a challenge to the
purchasing specialists at
BSH, which continues to
put its faith in optimum
quality.
Different cultures
Steel is supplied in huge drums or coils weighing up to 30 tons. Just as
not all steels – and not all coils for that matter – are the same, so one
supplier is not the same as the others. For BSH buyers this means that
in a climate of increasing internationalization, they have to engage with
the distinctive cultural identities of their supplier companies around
the globe. Stefan Raab, responsible for global steel procurement at the
company’s Munich HQ, quotes the example of a meeting with a Russian
supplier. “We met for dinner one evening, four of us from BSH and four
from this Russian company. We had just sat down to eat when another
three Russians and their interpreters turned up unannounced. Instead of
going to the trouble of moving to a bigger table, we all just moved up to
make room for them. This down-to-earth, informal way of doing things
was a real ice-breaker. We had very useful talks that evening and built a
sound basis for future collaboration. Of course,” continues Raab, “the
technical, quality, and commercial conditions must be right, first and foremost. But the human component is often just as important for a successful
partnership. And the way that component works is totally different from
one continent to another, often indeed from one country to another.”
When seeking new suppliers, technical, qualitative
and economic factors are
thoroughly analyzed.
The human element also
plays a major role in effective
cooperation though.
PURCHASING
Winning new markets locally
“Sourcing goes global” – this is the motto of BSH Procurement, which
is why the BSH Procurement organization has been given a more international focus in the past year. “Increasing globalization means that we
are facing ever fiercer competition,” explains Raimund Denk, Head of
Corporate Procurement. If BSH factories worldwide are to be guaranteed
the best, most cost-effective sources of supply with quality assured, it is
especially important for the procurement strategists to study local market
conditions and so acquire new markets.
Stefan Raab reduces the argument for this new focus to a simple denominator: “We are seeing a downward trend in the price of large household
appliances, at the same time costs of important raw materials like steel
and plastics are rising. This is the core problem we have to solve – and
one of the ways of doing this is by greater leveraging of synergies in the
BSH procurement network.” Closer coordination of worldwide procurement
activities not only secures better terms and conditions, it also supports
compliance with uniformly high quality standards.
This is why, as part of the global restructuring process, two regional
umbrella organizations were set up for Asia and North America. “The task
of the business managers for these continents is to integrate regional
procurement competence into the global BSH procurement network and
to leverage local synergies. Servicing new procurement markets is timeconsuming and costly – this makes the whole process simpler and more
efficient,” explains Raimund Denk.
Optimizing costs and benefits
The company as a whole will benefit from the new structure as very many
suppliers can be used across different product ranges. The idea is to pool
quantities, optimize logistics, and leverage cost advantages. “We are very
demanding when it comes to quality and innovative capacity. Before we
23
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choose a new supplier, we have to establish whether there really is a good
‘fit’ between the companies and whether cooperation can be sustained in
the long-term,” explains Stefan Raab.
Even if, on the face of it, steel is not technically very complex, quality is a
priority here, too. Raab stresses: “We are looking for partners who not
only have the right sheet steel, but who are good at cutting it, coating it,
and above all have the ability to interface smoothly with our factories.
We call this “process quality” and it is becoming increasingly important.”
Divisional head Raimund
Denk (right) in conversation with his colleague
Dr. Martin Seidel, who is
responsible for strategy
and methods within BSH’s
Corporate Procurement
function.
It is also becoming increasingly important to provide long-term planning
certainty for the future. As a result, the task facing Corporate Procurement
now extends far beyond its original remit – Forward Sourcing is the name
of the game. This means that the Procurement Logistics people have to
consider which suppliers will still be around in two, three, and five years,
and what the demand structure of the BSH global production network will
look like then.
“We think the whole process through. When the investment decision is
being taken for a new location, potential procurement sources are examined even at that early stage,” explains Raab, describing the complex
procedure that starts with initial analysis of possible partners in a region
and involves several audits and extensive sampling. Commercial and
technical meetings are held, but issues such as how the potential supplier
handles complaints and product liability are also explored.
PURCHASING
Professional, trustworthy, fair
LCC sourcing is another area of activity for BSH Procurement. This refers
to procurement in countries with comparatively low manufacturing costs
such as China, Eastern Europe, and Mexico. In these countries, the plan is
that, over a period of years, partnerships will be systematically developed
with supplier companies. The BSH buyers support their suppliers actively
as they acquire the necessary competences. “This is a very different way
of working,” says Raimund Denk. “The buyer is evolving from a procurement
manager into an all-round vendor manager.”
With projects such as these, BSH is not only securing for itself important
procurement markets of the future, it is also taking on a corporate social
responsibility role in the countries in which it operates. All the company’s
activities comply with the strict Code of Conduct of the European Committee of Household Appliance Manufacturers. BSH has also signed up to
the principles of the Global Compact, an initiative launched by the United
Nations to ensure that globalization benefits all of mankind. Within this
strategic organizational framework, the company seeks to conduct its
procurement business in a professional, trustworthy, and fair manner.
Raimund Denk, the architect of the new organizational alignment in Procurement, is confident about the future: “An international company like
BSH, one of the main players in the industry, relies on a good working
relationship with its partners worldwide. In Procurement, we are ideally
placed to meet the challenges of the future.”
“Closer coordination of
global purchasing activities allows us to realize
plenty of synergies.” –
Raimund Denk, head of
Corporate Procurement,
believes BSH is becoming
more competitive.
25
Part of a Global
Network
As a global business, BSH relies on totally networked
processes. This in turn demands universal IT availability.
28
As elementary as electricity
BSH’s “central nervous
system” – a mainframe
system located near
Munich controls all IT
applications via a global
network.
“In actual fact, information technology is entirely secondary” – a provocative pronouncement from a company CIO,
but Dr. Jürgen Sturm, Head of IT operations for BSH worldwide, adds, “It’s the business processes that come first.
IT is unimportant as long as it works perfectly – as elementary in fact as electricity. We are not aware of it until it is no
longer there. Virtually all business processes today rely on
information technology. Rather than being an end in itself,
IT is indispensable for robust processes, growth, and innovation.”
So information technology is, after all, hugely important for Jürgen Sturm.
He is responsible for ensuring a constant flow of information in all areas
of BSH and for ensuring that information is always available in the right
place. Only then can users transform this information into decisions and
actions. “Process excellence” is the magic formula. And CIO Sturm and
his people play a key role in delivering this process excellence, so crucial
to the smooth interaction of all functions and areas.
The IT revolution
A few years back, the function of the then data processing organization in
BSH was still to provide and update hardware and software for corporate
HQ and for production, customer service, and sales locations in Germany.
Today that organization has evolved into a global, in-house IT service
provider with a staff of over 800. It delivers IT solutions – from development and implementation through to round-the-clock user support – for
all BSH business processes. Something else that has changed is that now
virtually every desktop has a computer with processing power that was
once the preserve of the company mainframe. Today’s mainframes are
called high-performance servers. At BSH these are located in a secure
environment in a Munich suburb and are linked to every single computer
in the company worldwide.
The individual IT functions
are described in a product
catalog which runs to over
a hundred pages.
I N F O R M AT I O N T EC H N O LO GY
As a service provider, Corporate IT provides support to all BSH departments and subsidiaries around the world. The service offering is presented
in an IT product catalog comprising some 100 IT products and services.
The activity-based costing model is used to charge for services provided.
For Jürgen Sturm, the focus is firmly on his customers. “We work closely
with Process Management at BSH to identify the requirements presented
by the various business processes. This means we can be confident that
we are developing and supporting the solutions that are actually needed.”
These solutions are then, says Sturm, “implemented on the basis of consolidated standard software platforms,” which means that these solutions
rely in the first instance on the quality of proven standard products which
are then adapted to meet the specific requirements. The main benefit to
the user is a coherent, standardized IT environment, but it has also enabled
a permanent reduction in the costs of service provision in recent years.
Tools for optimum results
Delivering IT functionality, reliability and a good price/performance ratio
for existing process requirements – this is only part of his role, as Jürgen
Sturm sees it. The BSH vision of being a benchmark for the industry is one
he embraces for his own organization, too. This means that he wants to
provide BSH employees with the best IT products at all times, enabling
them to achieve optimum results. For example, the demand for mobility
and collaboration across facilities is increasing rapidly. Employees expect
their tools and resources to be available to them anytime, anywhere – at
any one of the BSH sites, at home or on the move. Reliable, secure access
to information is required at all times. “Having the right information at the
right time can, for instance, make all the difference to a member of the
sales team in a meeting with a customer.”
Whether in manufacturing
or administration – today,
information technology
is an indispensable tool in
every area of day-to-day
business.
29
30
Growing complexity brings new challenges
Ever-growing complexity brings with it new challenges. Participating as a
partner in an international development, production, or supply network
means that all the critical information has to be provided to every part of
the organization using an integrated product data management system.
The right tools must be available throughout the entire product life cycle –
form initial concept through to delivery of the finished product. A digital,
virtual factory simulation can be used, for example, to plan new product
production down to the last detail in advance. This allows product innovations to be analyzed quickly, based on the electronic design, and then
progressively transformed into reality using an Integrated Product and
Process Design system.
The IT division’s offering
ranges from software
licenses to major projects
like the installation of manufacturing networks and
round-the-clock support.
In the value chain, too, a company like BSH is no longer alone. Customers,
suppliers, and partner companies are all integrated into the service delivery
process and must therefore also be integrated into the processes and the
supporting IT tools. “In our 44 factories worldwide we have an electronically networked supply chain extending from material planning and provisioning by our suppliers, via global production and logistics processes
through to our customers and in some cases to their customers as well,”
explains Jürgen Sturm. “A kitchen manufacturer can, for example, call off
his order-picking instructions from us, so that all the products ordered from
us are delivered promptly, ready for installation when needed. Our success as a top-performing company is linked to the fact that we always
meet our customers’ expectations when it comes to delivery performance
and on-time delivery.” The same applies to our customer service. “Our
networked systems mean that the customer service process starts as soon
as a customer calls our Service Center. The necessary spare parts are
automatically sourced for the service vans and everything is put in place
to enable the service engineer to deal with repairs in one visit wherever
I N F O R M AT I O N T EC H N O LO GY
IT boss Dr. Jürgen Sturm
regards himself as an inhouse service provider.
His aim is to support all
BSH processes smoothly
and with optimum effectiveness, thus continuously
improving quality.
possible. Here again, it’s a question of process excellence and that is
simply unthinkable today without IT.”
Excellent processes, excellent management
Process excellence in existing processes is just one side of the story.
The other is the strategic alignment of these processes, the art of taking
the right decision at the right time, and here, too, IT has its part to play.
Increasingly, global economic planning today calls for the application of
“business intelligence.” This term refers to the methods and techniques
used for the systematic analysis of vast quantities of data on the company, the competitive environment, and market trends. “We are able,”
explains Dr. Sturm, “to analyze global business trends precisely according
to brands, products, and regions. Management can identify anomalies
early and take specific countermeasures. One of BSH’s great strengths
is that it is able to utilize all the available information and transform it
quickly and effectively into appropriate action.” Here, too, though, Dr.
Sturm does not want to overstate the role of IT. “Of course, we are not
responsible for management decisions. We simply supply the relevant
information.” And – ever the service provider – he adds, “Nothing that
we do in IT, is done for the sake of IT. It is all for our customers.”
31
The
Key to
Delighted Customers
Time and again, BSH Customer Service manages
to exceed customer expectations. Making it
an important tool for securing customer loyalty.
34
Service that delights
Delight is not perhaps the word that immediately springs to mind when your washing
machine or other home appliance breaks
down. Yet “delight” is an expression used
repeatedly by Stefan Recknagel, Head of Spare
Parts Logistics at BSH, Fürth, when talking
about customer service support – and with
good reason, with quite a number of good
reasons, in fact.
BSH’s customer service
engineers in Germany, the
Benelux states and Austria
get their supplies direct
from the central German
warehouse in Fürth.
Service engineers in overshoes
Imagine, for instance, that your cooker isn’t working. Outside, it is pouring with rain and the BSH service engineer has just rung the doorbell.
But before stepping inside to inspect the appliance in the kitchen, he
first puts on a pair of plastic overshoes. “To stop the floor getting wet
and dirty. This aspect of our service produces a really positive surprise
effect. Every customer is delighted,” says Recknagel. Which is why
in the community of satisfied BSH customers this is known as the
“delight factor.” And the BSH success model “Total Customer Logistics” operates under the slogan “The key to delighted customers.”
When we talk of delight factors we mean all those things that no one
expects when they buy a home appliance. The fact, for instance, that
spare parts remain available for ten years or more. Or that customers
are offered a loan appliance as part of our collection and delivery service. Many people who buy BSH products also appreciate the fact that
they can use payment vouchers to settle bills for spare parts, thus
avoiding COD charges.
“Logistics serves to
differentiate us, as well
as cutting costs.” – Stefan
Recknagel, Head of Spare
Parts Logistics.
CUSTOMER SERVICE
It is all about the positive feeling that our trained staff leave with their
customers. After all, says Recknagel, quoting a well-known saying in the
industry, “A customer’s first washing machine is sold by the Sales team –
all the rest are sold by Customer Service.” Increasingly, good service today
is becoming a competitive factor and is seen as a product life cycle service.
Being kept waiting in endless queues when you ring the call center, staff
at the other end of the line who can’t help because they don’t really understand what you are talking about – a familiar story in the big, bright world
of consumer products, but one BSH customers recognize only from hearsay.
This is because keeping everything “in-house” is another important principle in the service that our company provides. Take our friendly service
engineer in his overshoes, for instance – he has been tested, taken on,
and trained by BSH. And our call center personnel have, without exception, acquired within the organization an understanding of the technical
subtleties of BSH appliances and interpersonal communication.
“Our brands have their own special image, our service must come up to
the same high standard.” This is the point made by Rüdiger Jahn who
heads the international customer service organization from company HQ
in Munich. He expresses the BSH service strategy as follows, “It is our
intention to deliver service using our own staff wherever and whenever
this is economically viable.”
Part of the quality circle
When a faulty appliance is repaired, there is an obvious benefit to the
customer, but that is not the end of it. Instead, repair findings are fed
back via a very short loop to Quality Management and so have a direct
impact on the design of individual appliance types. In the time it takes
to say “fast fault feedback” – the long name for this standard process –
the service engineer will have pressed the button and e-mailed his repair
analysis direct to the factory in question. The combination of numbers on
the appliance data plate ensures that it is sent to the right recipient. Quality
control personnel then head straight for the production line to investigate
how the defect described could have occurred. Changes will be made to
component quality, if necessary.
Rüdiger Jahn, head of BSH’s
worldwide customer service
organization, is determined to
deliver the absolute best in
service quality: “Nothing less
will do.”
35
36
In the customer service
function, levels of new
orders fluctuate sharply,
calling for flexibility in all
processes and workflows.
The transfer of know-how is a two-way process, however. “The customer
service consultants are closely involved in the development of an appliance, checking whether it is repair-friendly, and whether special tools will
be needed,” explains Jahn, describing the proven production process at
BSH. The consultants, in turn, then act as trainers for the technicians.
Three or four times a year there is an international meeting at the Munich
HQ. Technician trainers from all over the world attend, to be briefed on
the design of new appliances. Again, the scale of the operation is huge.
In 2006 alone, BSH produced 18,000 new product variants or built modifications to products. Customer Service Logistics has to be able to manage
this level of complexity.
Winner of the German Logistics Award
Proof that it is meeting this challenge is provided by a prestigious award.
In 2006, BSH received the coveted German Logistics Award for its exemplary spare parts logistics. BSH is the first company in the 22-year history
of the award to win the title for a second time; its experts first won the
award back in 1997. “Spare parts logistics is absolutely fundamental to
good service,” says Stefan Recknagel. “We were able to win the support of
the jury because here, too, it is all about delighting the customer.”
And so the circle closes. The team was able to achieve a quantifiable
increase in customer satisfaction while at the same time achieving an
almost 30 percent cut in spare parts logistics costs.
“We run a continuous
innovation process
designed to meet the
expectations of our
customers and boost
satisfaction ratings.” –
Stefan Recknagel.
Central to customer satisfaction here was the Kano model with its three
different factors. First there are the basic factors, for instance ensuring
that a shipment leaves the Central Warehouse in pristine condition. Next
are the performance factors, such as 24-hour call center availability and
speed of delivery. And then the third category, the delight factors that have
the potential to surprise and delight the customer.
CUSTOMER SERVICE
40,000 spare parts a day
“Logistics with the focus fully on customer loyalty” is how Recknagel
describes the thrust of his company’s extremely successful, award-winning concept.
The degree of precision and fine-tuning required in the operation’s internal processes and machinery is demonstrated by the statistics alone for
the Fürth Central Warehouse. Around 7,000 shipments totaling some
40,000 spare parts are dispatched far and wide every day. Deliveries go
out overnight to BSH service engineers, the repair trade, and end customers in Germany, the Netherlands, Belgium, Austria, Italy, and Slovenia.
“These countries benefit from a daily inventory availability of over 97
percent. That makes us logistics champions,” says Recknagel.
Beyond Europe, too, this concept of a central logistics structure with
extremely high parts availability is setting the standard. BSH has set up
similar warehouses in the USA and Asia. The global spare parts logistics
network reflects the international nature of the company.
People with the delight factor
As well as logistics, process quality, and the right infrastructure, “soft
factors” also play a key role. As Jahn and Recknagel know from numerous
customer surveys, “The friendliness, integrity and helpful attitude of our
service engineers are seen as key criteria when our overall performance is
rated by customers. This represents an extra dimension to quality.” These
customer surveys are conducted regularly in all countries and evaluated
using a standard scoring system. “Did the call center handle your call efficiently?” – “How long did you have to wait for the service engineer?” –
“Were the right spare parts available?” – are just some of the questions
that may be asked in the search for perfection within the organization.
The fact that we are getting ever closer to this goal is demonstrated by the
growing sales figures, increased customer satisfaction, and not least, by
industry recognition such as the German Logistics Award. Rüdiger Jahn
sums up the delight factor as it applies to his people when he says, “We
will do all in our power to be the best customer service provider in each
and every marketplace. This is our aspiration.”
Highly competent, obliging
and friendly – BSH’s
customer service engineers
enjoy the same positive
image worldwide.
37
Career Material
BSH searches out the best people worldwide, then retains
them with special career development programs.
40
Challenges and opportunities
BSH headquarters – for
many junior recruits the
first stop en route to an
international management
position.
When 25-year old Bostjan Gorjup came to BSH
HQ in Munich as a trainee, what amazed him
most was the size and international scale of
the company. “The building, the huge lobby,“
he remembers, “and then knowing that the company with its tens of thousands of employees
was all managed from here. That really impressed
me.” The young Slovenian is used to it all now –
the international environment, strategic thinking, and multi-digit columns of figures in his
reports are all in a day’s work. Six years after his traineeship, Gorjup is now
Commercial Manager with BSH Slovenia. At first glance, this might seem
like an utterly exceptional career, but it is in fact the result of a systematic,
sophisticated selection and training process at BSH. What it does mean
is that applicants who secure a place on one of the training programs
can look forward to excellent career opportunities later in the company.
Three pillars of training
Looking back now the 31-year old Bostjan Gorjup calls it a “huge opportunity and a huge challenge” to have been through the trainee program.
He worked for 15 months in various corporate departments and in the
factory at Traunreut. When he returned to BSH Slovenia, armed with a firm
grasp of all aspects of controlling, his career was not long in taking off.
Gorjup has since been awarded a place in the JEP, the Junior Executive
Pool, another staff development program.
From skilled workers to management staff – the BSH quality standard
applies not only to its products but also to the people employed by the
company worldwide. Their systematic training and development is driven
by the ever increasing challenges posed by globalized competition.
The training concept is based around three pillars or three different programs. An essential component is vocational training for a variety of
careers including Commercial Officer, IT specialist or Mechatronics Engineer. The German “dual education” model, a carefully balanced system
Bostjan Gorjup’s career
with BSH started with a
trainee program, and today
he is Commercial Manager
in Slovenia.
EMPLOYEES
where phases of classroom learning alternate with on-the-job training, is
applied by BSH to its subsidiaries in other countries. The result is that the
strict guidelines of the German Chamber of Industry and Commerce also
apply to apprentices in Turkey or China, for example. “The standard is
very, very high,” says Jörg Wagmüller, who is responsible for these corporate programs at BSH. This close mix of theory and practice also applies
to the second pillar, the Vocational College route, where suitably qualified
applicants study for a Bachelor of Arts/Bachelor of Engineering at a Vocational College. This internationally recognized qualification is comparable
with a Bachelor degree from other universities. “Every three months our
students switch between college and on-the-job training. This allows them
to put what they learn in the classroom into practice immediately,” says
Wagmüller.
Who is right for BSH?
The third pillar is the international trainee program where graduates are
selected and groomed for leadership positions with BSH. This is one of
many reasons why BSH is highly attractive to students. The company regularly ranks among the 100 most popular employers in an annual survey
of 20,000 final-year students conducted by the Berlin Trendence Institute
and the magazine Wirtschaftswoche. BSH was again awarded the title of
Top Employer in 2006/2007. It is hardly surprising then that there were
around 1,000 applicants last year for the 15 places on the trainee program
in Germany alone – there are 30 places worldwide. Students are made
aware of BSH through university recruitment fairs and a modern, international advertising strategy. “From these applicants – who have to satisfy
the highest quality criteria even to be considered for training – we then
select the candidates who best suit our requirements,” explains Andrea
Werner, responsible for Personnel Development at BSH.
When it comes to the actual selection procedure, BSH does not do things
by halves. The process involves several stages, from a careful analysis of
the application documents through to personal interviews. Those candidates left in the running then have to attend a one-day Assessment Center
and prove themselves in one-to-one interviews, role plays, and group exer-
Whether in Germany or
China – professional training at BSH is to the same
high standards right across
the world.
Jörg Wagmüller (left) is
head of BSH’s HQ training
programs; Andrea Werner
(far right) is responsible for
Personnel Development.
41
42
cises. In the tasks they set, what the BSH assessors are looking for, Jörg
Wagmüller stresses, is not so much the “right” solution, instead the candidates have to demonstrate how they develop their strategies in the group.
Analytical thinking, team spirit, communication skills, leadership – these
are the criteria being observed. “Using behavioral exercises, interviews,
and psychological aptitude tests, we want to get a complete picture of the
applicants – and an accurate prediction of their possible future progression
in the company,” says Wagmüller.
The BSH Academy offers
employees a wealth of
training and continuing
education opportunities
leading to qualifications.
Joined-up thinking
Mobility, flexibility, openness, a capacity for joined-up thinking, plus, of
course, in-depth technical knowledge – these are essential requirements
for anyone who wants to succeed in the company. Applicants’ social skills
which are also assessed in Orientation Centers as part of career development reviews, play a particularly important role here. In a global company,
employees must be able to conduct themselves confidently in any setting
and be open to other value systems in their dialog with different cultural
groups. This is why the corporate, international personnel pools in particular are used to identify and then develop leadership talent worldwide.
Just as Bostjan Gorjup was observed closely by his manager and then
nominated for the JEP, hundreds of managers all over the world are doing
the same every day. Standard forms and checklists help to ensure that the
same standards are applied in every country when assessing potential
and that the same high standard is maintained throughout the company.
The basic entry criteria for the International Management Pool (IMP) include
international mobility, fluency in the company languages, at least one
job/location rotation in BSH, and management or project experience gained
in a previous role. The following points are used to assess the potential
of an aspiring candidate for the IMP: High level of motivation and commitment, systematic analytical thinking, capacity for work, positive attitude,
and leadership qualities. This is the “right stuff ” from which successful
BSH managers are made. And it is how the company is able to recruit its
strong management team from its own ranks – and retain it in the longterm by creating an attractive, challenging work environment.
EMPLOYEES
A strategic role
This is why Joachim Ries, Head of Corporate Personnel at BSH for more
than two years, sees HR work as a strategic role. As Ries puts it, “The
task is to identify highly motivated talent early enough in all areas of our
company and then to champion and also to challenge that talent so that
the requirements of the company are met. We must be clear from the outset which positions are to be filled by which people in the future. Only
then can we fully prepare the individual for his future role and so ensure
that HR work is integral to the company’s development. This applies to
appointments to key positions in Production and Development as well to
Management.”
In addition to the training programs described above, BSH therefore also
provides a whole range of opportunities for continuous professional
development (CPD) which employees can access on an individual basis.
One example is the international CPD portal of the BSH Academy, which
has just been updated to include additional offerings for Poland and the
USA. Employees are able to set up their own training account and plan
their own personal CPD program. “Of course, this calls for a high degree
of initiative and entrepreneurial behavior on the part of our employees,”
says Joachim Ries, “but developing this entrepreneurial attitude – taking
responsibility for the company and for one’s own personal development –
is in itself a key part of our HR policy.”
Network of friends
Bostjan Gorjup, the Commercial Manager from Slovenia, would advise
everyone to take advantage of the wide range of training opportunities
on offer in the company. Apart from the actual training aspect, he sees
another benefit. “The network it creates is hugely important. I benefit from
my contacts in the company every single day. I have learned to follow a
clear goal and to take responsibility at the corporate level.” And finally,
says Gorjup with a smile, he has made a lot of good friends this way.
“And that makes the commitment to BSH all the more enjoyable.”
Preparing for tomorrow’s
challenges: the BSH training
programs.
Joachim Ries, Head of Corporate Personnel, believes
that establishing and
expanding strategic, crossborder HR activities is an
important priority.
43
44
Supervisory Board Report
During the year under review, the Board of Management reported regularly
to the Supervisory Board on the performance of the company and on its
major decisions, both orally and in writing.
The 2005 financial statement, the development of business during fiscal
2005 and in the year 2006, and the Business Plan 2007, including HR and
financial planning, were explained to the Supervisory Board by the Board
of Management at the two regular Supervisory Board meetings held during the year. The Board of Management reported to the Supervisory Board
on the company’s economic development and the competitive situation
in the relevant markets, particularly in Europe, North and South America,
and China, as well as the objectives of the corporate growth program, and
progress in implementing the plans. The Supervisory Board provided comprehensive advice on these topics.
Rudi Lamprecht,
Chairman of the
Supervisory Board.
The Supervisory Board also discussed the Board of Management’s report
on workforce developments and the situation in the product divisions, in
particular the strategic orientation and current measures focusing on the
Refrigeration, Home Laundry, and Consumer Products divisions, the airconditioning business and the investment projects in China and Russia.
The Supervisory Board was informed about the restructuring of the Berlin
home laundry factory and business in Latin America, as well as changes
to the manufacturing network. The Supervisory Board called for a mutually
acceptable solution to the discussions about the Berlin location. The
Supervisory Board also addressed the effects of rises in the cost of raw
materials, the development of prices in the marketplace, and the increase
of VAT in Germany, as well as seeking details from the Board of Management about the Group’s risk management system.
The Supervisory Board’s discussions also encompassed Mergers and
Acquisitions in the home appliance sector and Research and Development
topics, including the development of new appliance ranges, the energy
efficiency of home appliances, and issues around the further reduction of
energy consumption.
In addition to its official sessions during the course of the year, regular
discussions also took place between the Board of Management and the
Chairman of the Supervisory Board and his deputies.
The financial statement of BSH Bosch und Siemens Hausgeräte GmbH and
the consolidated financial statement as of December 31, 2006, and the
management report for BSH Bosch und Siemens Hausgeräte GmbH and
the Group management report have been audited by Deloitte & Touche
GmbH Wirtschaftsprüfungsgesellschaft, Munich, and have been given
their unqualified approval. The reports prepared by the auditors were
presented to all members of the Supervisory Board. The Supervisory Board
thoroughly examined the documents concerned, which were also discussed in full at the Supervisory Board’s meeting to approve the balance
sheet, which was held in the presence of the auditors.
SUPERVISORY BOARD REPORT
The Supervisory Board raises no objections and concurs with the findings
of the audit. It approves the financial statement of BSH Bosch und
Siemens Hausgeräte GmbH and the consolidated financial statement,
and recommends that the shareholders adopt the financial statement
and the consolidated financial statement and to approve the Board of
Management’s proposal about the use of net income.
Dr. Karl Strobel stepped down from his position with the Supervisory
Board with effect from February 28, 2006. We would like to thank him
for his valuable contributions. His successor is Mr. Volker Pruschke, who
was elected to the Supervisory Board, effective March 1, 2006.
Dr. Robert Kugler retired from the Board of Management on December 31,
2006. We have thanked him for his particular efforts in developing the
various business areas and the Group’s manufacturing network.
Professor E. h. Werner Vogt became an Executive Vice President with effect
from January 1, 2007, assuming responsibility for the product divisions,
and for Electronics, Drives and Systems, and Corporate Technology.
The Supervisory Board would like to thank the Board of Management and
the company’s employees for their successful endeavors over the past year.
Munich, May 8, 2007
For the Supervisory Board
Rudi Lamprecht
Chairman of the Supervisory Board
45
46
Board of Management
Dr. sc. pol. Kurt-Ludwig Gutberlet
Chairman
Chief Executive Officer
Corporate Strategy,
Corporate Communications,
Law and Industrial Policy,
Auditing,
Consumer Products (from March 1, 2006),
Customer Service
Dr. sc. pol. Wolfgang Colberg
Chief Financial Officer
Finance and M&A, Business Administration,
Corporate Development and Controlling,
Personnel Director, Human Resources,
Information Technology, Purchasing,
Tax, Insurance
Jean Dufour
Chief Sales and Marketing Officer
Corporate Sales,
Brand Management,
Logistics
Dr. techn., Dr. h. c. Robert Kugler
(until Dec 31, 2006)
Chief Operating Officer
Chief Technology Officer
Product Divisions,
Electronics, Drives and Systems,
Consumer Products (until Feb 28, 2006),
Corporate Technology
Prof. E. h. Werner Vogt
(from Jan 1, 2007)
Chief Operating Officer
Chief Technology Officer
Product Divisions,
Electronics, Drives and Systems,
Corporate Technology
Supervisory Board
BOARDS
Rudi Lamprecht, München
Chairman
Member of the Managing Board of Siemens AG
Dr. rer. pol. h. c., Dr. techn. h. c. Jürgen Radomski,
München
Member of the Managing Board of Siemens AG
Elmar Freund, Bad Neustadt
Vice-Chairman
Chairman of the Group Works Committee
Gotthard Romberg, Stuttgart
Formerly Member of the Board of Management
of Robert Bosch GmbH
Wolfgang Chur, Stuttgart
Vice-Chairman
Member of the Board of Management
of Robert Bosch GmbH
Wolfgang Rückert, Traunreut
Vice-Chairman of the Works Committee,
Traunreut plant
Ellen Bonna-Knöpp, Giengen
Chairperson of the Works Committee,
Giengen plant
Artur Fischer, Rosenheim
Senior authorized representative of the
IG Metall trade union,
Rosenheim Administrative Office
Peter Kern, Frankfurt
Union secretary to the executive committee
of the IG Metall trade union
Gerhard Kümmel, Stuttgart
Member of the Managing Board
of Robert Bosch GmbH
Dr. rer. pol. Peter Moritz, München
Member of Executive Management,
Siemens Financial Services GmbH
Volker Pruschke, Stuttgart
(from 01.03.2006)
Director, Central Sales and
Marketing Department
Consumer Goods and Industrial Technology;
Marketing Communications, Brand Management
Robert Bosch GmbH
Dieter Schweisfurth, Hamburg
Head of Sales, Bosch Northern Region,
BSH Bosch und Siemens Hausgeräte GmbH
Dr. oec. Karl Strobel, Stuttgart
(until 28. 02. 2006)
Director, Central Sales and
Marketing Department
Consumer Goods and Industrial Technology;
Marketing Communications, Brand Management
Robert Bosch GmbH
Franz Veh, Dillingen
Chairman of the Works Committee,
Dillingen plant
Lothar Wiedeberg, Berlin
Vice-Chairman of the Works Committee,
Berlin plant
Prof. Dr.-Ing., Dr.-Ing. E. h. Klaus Wucherer,
Erlangen
Member of the Managing Board of Siemens AG
47
48
Management Report
A. Business performance
Economic climate, macroeconomic trends and sector performance
The global economy delivered a pleasant surprise in 2006 with growth
approaching 4 percent. Significant growth in capital investment for the
third year in a row has provided increasing stimulus for consumer spending. The noticeable slip in the price of oil in the second half of the year
also provided a boost to consumption.
However, the excellent level of growth in the global economy masked
changes in regional performance, some of which were substantial. At first
glance, growth of 3.3 percent in the USA (2005: 3.2 percent) appears to
be good, but the reality was that the brisk start to the year gave way to a
significantly weaker growth rate as the year wore on.
Economic development in the newly industrialized countries was considerably more robust. Despite a slowdown in demand from the USA, there
was no change in the strong growth rate of 4.6 percent in Latin America,
driven in particular by very high raw material prices. The Brazilian economy experienced an acceleration in growth (up 2.8 percent), the critical
drivers in this case being an increasing rate of capital investment and the
return of strong growth in consumer spending. The emerging economies
of South-East Asia continued to top the global economic growth tables
generating an increase in gross domestic product of 9.2 percent (2005:
9.1 percent). A significant factor behind this increase was the return of
accelerated growth in China, where growth of 10.7 percent was at a level
last seen in 1995. The only country able to keep up with this pace was
India, where economic output was up 9.2 percent.
The European economy also performed significantly better than in 2005.
The economy over the continent as a whole registered growth of 3.3 percent in 2006, one percentage point higher than in 2005. There is no doubt
that a major contributing factor was the improvement in growth in Central
and Eastern Europe. This was based, in particular, on a strong sustained
growth rate of 6.7 percent in Russia, thanks to high raw material prices.
The biggest surprise was in Western Europe, where the countries in general have been trailing behind global growth trends for some time. Growth
of some 2.8 percent represented a noticeable improvement in the expansion of gross domestic product compared with 2005 (up 1.6 percent).
The growth was attributable to the favorable global economic climate and
also positive changes in the job market. Within Western Europe, the
French economy fell significantly short of expectations, whereas Germany
was a real surprise, returning an upturn of 2.7 percent, which was the
strongest growth in five years. Apart from a substantial increase in export
volumes, the main contributory factor to Germany’s performance was a
significant increase in capital investment by the private sector. The economy was given a further boost by increased consumer spending, stimulated by a drop in unemployment, and by purchases brought forward to
beat the increase in value-added tax due to take place on January 1, 2007.
BUSINESS PERFORMANCE
MANAGEMENT REPORT
The excellent performance of the German economy and noticeable
improvement in consumer confidence was also evident in the demand for
household appliances in Germany. The good news was that not only
were unit sales higher than in 2005, but for the first time in several years
revenue in the sector was also up over the previous year, exceeding all
expectations with growth of around 8 percent. The demand for built-in
appliances was significantly higher than that for freestanding appliances.
The average revenue level, which had been slipping over a number of
years, finally moved upward again in 2006. Price increases by manufacturers were not the only factor behind this upturn: there was a significant
shift in consumer purchasing patterns back toward high-quality brands
and in favor of more expensive appliances with a higher specification.
In contrast to 2005, growth in Europe in 2006 did not suffer from the
adverse impact of contraction in Germany and the United Kingdom, the
two largest individual markets that prevailed in 2005. This resulted in
stronger growth in demand for home appliances in 2006 versus the prior
year. Among the Western European countries, above-average growth was
recorded primarily in Spain, Turkey, and the Scandinavian countries, as
well as in Germany. However, growth was also good in the large French,
British, and Italian markets. Once again, growth in Central and Eastern
Europe was above the average rate in Western Europe. The overall market
growth rate for Europe, including Turkey and Russia, was 6 percent.
South-East Asia and Latin America also saw substantial rises in unit
sales volumes. Performance in Brazil considerably exceeded that of 2005.
Coupled with a continued rise in the value of the Brazilian real, this led
to double-digit growth in the region when measured in euros. China also
exceeded the previous year’s performance, again by a considerable
amount. There is no sign at all that the pace of growth in China is beginning to subside.
In contrast, North America experienced a slight drop in unit sales volumes; however, a rise in average sales revenue did result in overall revenue growth in this region.
Measured in euros, the overall global market for household appliances
recorded revenue growth of 5 percent.
Revenue trends
In the year under review, consolidated revenue in BSH Bosch und Siemens
Hausgeräte GmbH (referred to in the text as “the Group” or “BSH”) was
EUR 8.308 billion, a year-on-year increase of 13.2 percent. This equates to
a rise of 12.7 percent after adjustment for currency movements.
Consolidated revenue in Germany was up 14.6 percent at EUR 1.817 billion. Group revenue outside Germany rose by 12.8 percent, accounting for
78.1 percent of total revenue, which was almost the same level as in 2005
(2005: 78.4 percent).
The Group increased its revenue in Western Europe, including Turkey but
excluding Germany, by 9.5 percent, outperforming the market in many
Western European countries. The growth in revenue was above average in
Northern Europe (21.9 percent) and Spain (13.0 percent).
Sales by Region
1.5% Others
7.1% Asia
3.4% Latin America
6.1% North America
21.9% Germany
8.0% Eastern Europe
52.0% Western Europe
excluding Germany, including Turkey
49
50
MANAGEMENT REPORT
BSH continued its success story in Eastern Europe, generating a 17.0 percent increase in revenue. All countries saw growth in revenue, with Russia,
Poland, and the Ukraine as the major contributors.
The ranges of home laundry appliances, cookers, and dishwashers produced by BSH in North America helped the Group to generate further
year-on-year growth in revenue in the period under review (5.4 percent).
However, BSH sales slackened in the second half of the year as a result
of the difficult trading environment in the region.
In Latin America, strong demand for high-quality BSH products generated
an extraordinary 32.9 percent growth in revenue.
A similar picture of excellent BSH revenue growth was evident in Asia,
where China (41.8 percent) and Australia (15.6 percent) were the most significant contributors.
Production
BSH operates a worldwide development and manufacturing network
comprising 44 production facilities at 31 sites, allowing it to compete
at an international level in a globalized economy. The significant growth
in BSH revenue resulted in an equally significant increase in output.
The highest increases in output rates were recorded in facilities outside
Europe, although European facilities, including those in Germany, still
managed to achieve extraordinary improvements in output performance.
The Group registered a significant increase in production capacity utilization in all areas of production.
In the marketplace, BSH faces a number of challenges including high
customer expectations regarding the quality of BSH products, rapid
changes in global markets, and competition from other major international
companies. The Group successfully meets these challenges by enhancing
production flexibility and focusing on increases in productivity and cost
efficiency.
BSH also continues to make no compromises in setting the highest standards of quality for its products, while at the same time accommodating
different regional customer requirements in terms of equipment, function,
and design.
Procurement
The year began with indications of a slight easing in major primary materials markets, but these gave way to a critical turnaround during the second quarter. Nonferrous heavy metal prices shot up within a few weeks, in
some cases by over 100 percent.
The impact of these developments on the cost of materials was only
cushioned in BSH by the application of a great deal of effort and by the
fact that BSH had the benefit of existing long-term supply agreements.
Most of the impact from the increase in material prices will therefore be
felt in 2007 since there has been no sign of any easing on raw material
markets in the meantime.
BUSINESS PERFORMANCE
Apart from the upward trend in raw material prices, BSH purchasing and
materials planning also faced the challenge of ensuring that the required
material quantities were available for production at the right time. Difficulties in this regard arose from expansion in the global economy and the
increasing demand linked to the strong revenue growth in BSH in 2006.
Long-term relationships with suppliers proved to be extremely valuable in
this situation. In addition, BSH used the involvement of new, international
suppliers, primarily in low-cost countries, to improve its competitiveness
and to increase local content in products manufactured in plants outside
Germany. However, the sustained growth in the global economy indicates
that pressure on procurement markets will continue in 2007.
Investment*
Given the background of market shortages, BSH predicts that the trend
toward rising prices for raw materials and other primary products will
continue. BSH is employing a variety of measures to limit the impact of
this trend and is therefore continuing to give its global sourcing activities
the highest priority. The objective of these activities is to create an internationally balanced supplier portfolio, providing BSH with access to a
long-term competitive supplier base. Accompanying this approach, BSH is
also looking to achieve further savings from the development of suppliers
and the streamlining of purchasing logistics for BSH facilities, as well as
aiming for global bundling of its purchasing requirements. This strategy
is based, in particular, on BSH’s regional market knowledge and international purchasing network, underpinned by an emphasis on uniform
standards and processes to support and control procurement activities.
in EUR million
400
350
358
333
300
250
200
150
100
One of the key ongoing priorities in purchasing is to reduce the cost of
materials, the principal focus being on an intensive search for ways to
reduce consumption of raw materials and nonferrous heavy metals and
replace them with other materials.
Capital investment
Investment by the Group in intangible assets and property, plant, and
equipment (excluding goodwill) climbed 7.5 percent to EUR 358 million,
which equates to 4.3 percent of revenue.
50
0
2006
2005
* Investments in intangible
assets and property, plant,
and equipment (excluding
goodwill)
Depreciation*
Germany accounted for EUR 100 million of the total invested in property,
plant, and equipment; the greater part of the remaining EUR 248 million
was directed toward Turkey, China, Spain, Russia, Poland, and the USA.
in EUR million
300
For procurement reasons, 30.9 percent of this capital investment was targeted at new products, 28.3 percent at infrastructure activities (including
environmental protection), 10.8 percent at the replacement of assets, and
30.0 percent at expansion and rationalization activities.
250
Finances
Loans of EUR 141 million were repaid in the year under review, primarily
in Brazil, Turkey, and Germany. Liabilities to banks rose by EUR 170 million
in 2006 following the drawdown of a low-interest loan with a value of
EUR 197 million from BSH Finance Management GmbH, Vienna, Austria.
At the balance sheet date, cash and cash equivalents decreased to
EUR 305 million, mainly as a result of an increase in inventories and trade
receivables.
100
281
223
200
150
50
0
2006
2005
* Depreciation of intangible
and tangible fixed assets
(excluding goodwill)
MANAGEMENT REPORT
51
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MANAGEMENT REPORT
In the year under review, BSH also stipulated a long-term syndicated loan
of EUR 500 million with 22 international commercial banks.
A central Treasury Controlling unit provides continuous monitoring, identification and evaluation of potential treasury risks in the Group.
Currency risks in operating activities are continuously ascertained, evaluated, and hedged with a defined hedging policy in a rolling process with
a horizon of up to twelve months. BSH hedges currency risks using forward exchange contracts and option contracts. In 2006, BSH managed to
counter interest rate risks that materialized during the course of the year
by taking out fixed-interest loans beforehand.
The BSH risk-conscious investment strategy proved to be a sound approach
during the 2006 difficult bond markets and extremely volatile stock markets. However, the Group was still able to benefit from significant gains on
securities.
BSH retained its external long-term rating of “A-/stable” from international
rating agency Standard and Poor’s in 2006.
Human resources and social issues
At December 31, 2006, BSH employed a total of 37,954 people worldwide,
including apprentices/trainees. Of this total, 23,731 (2005: 21,453) were
employed internationally and 14,223 (2005: 14,088) in Germany. At the
balance sheet date, there were 447 employees in various stages of
apprenticeship/traineeship in Germany.
Workforce by Region
13% Asia
5% Latin America
38% Germany
Increases in the number of people employed were mainly concentrated
in the companies in China, Turkey, Spain, Poland, and the USA. Minor
personnel restructuring was carried out in Latin America and Greece for
local facility-related reasons.
4 % North America
9% Eastern Europe
31% Western Europe
excluding Germany, including Turkey
At December 31, 2006
In 2006, BSH systematically continued the development of its HR activities in line with the increasingly international perspective of the business,
a process that had begun in 2005. The human resources strategy and
action plan is focused on identifying and ensuring appointments made
to key functions in the Group, its subsidiaries and in the individual sales
areas. Key factors are consistent utilization of the full potential of the
people already at BSH and a long-term plan to ensure the necessary supply
of young managerial talent for the future. The strategy also includes the
creation and implementation of concrete human resources skills and qualifications development programs as well as recruitment activities.
An IT-supported system has been introduced with the aim of improving
the process for leveraging HR potential. The system will significantly
enhance the quality of data supporting the process for ensuring the future
supply of new managers in BSH by eliminating the loss of data between
interfaces.
A new, attractive design for BSH job advertisements brings together an
appealing human approach with the functional presentation of the BSH
product portfolio.
BUSINESS PERFORMANCE
In the year under review, BSH set up a working group to identify the impact
of demographic changes at an early stage, assess the resulting new requirements as far as BSH is concerned, and create a suitable action plan.
BSH continued to play its part in the German government’s Ausbildungsoffensive campaign to create more training opportunities for young people
by offering the same high number of vocational training positions and
combination in-house / vocational college studentships through its training
and apprenticeship programs. Once again the group trained considerably
more people than necessary simply to meet its own needs. The application
process for all training and apprenticeship programs uses the assessment
center method to select individuals based on potential. The content of the
programs has been even more closely aligned with BSH requirements for
new managerial talent.
Since 2006, the BSH Academy has also been offering e-learning language
courses as part of the central training program. BSH is providing this service in collaboration with an award-winning international partner in this
field, renowned for offering courses with advanced educational content
and methods.
As part of an international skills development cooperative venture, the
first international companies (Poland and the USA), as well as all German
sites, have been connected to the central BSH professional development
portal. In 2007, BSH will continue to focus activities intensively on the
international application of standardized training administration processes,
and on the publication and use of advanced training courses via this SAPsupported platform, the objective being to create a global BSH education
and training database.
In line with the increasing internationalization of human resources activities, BSH is increasing the number of employees on international delegation.
At the same time, BSH is now appointing local managers to two-thirds of
its international managerial posts. To enable the company to remain competitive at an international level, a new department, “Compensation and
Benefits,” has been created with the objective of developing remuneration strategies and systems to meet the requirements of the market and
competitive environment, while taking into account local circumstances
and basic remuneration principles in the companies concerned.
On January 1, 2006, new arrangements for occupational retirement pensions came into force in Germany with the introduction of the BSH-Pensionskapital scheme. Under the defined benefit scheme now in force, annual
capital modules are credited to a postretirement benefit account. Existing
vested pension entitlements have been transferred into the new system
as “initial modules.” Implementation of the scheme has been the subject
of comprehensive communication with employees. As a result, there has
been a high level of acceptance of the BSH-Pensionskapital scheme
among employees.
MANAGEMENT REPORT
53
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MANAGEMENT REPORT
In 2007, BSH will also be introducing the new collective framework agreement on pay for hourly-paid and salaried employees in the German metals
and electrical industry (ERA). Extensive preparatory work for this change
was also carried out in 2006.
Environmental Figures
for Production
Energy per
ton product
(kWh/t product)
Waste per
ton product
(kg/t product)
Water per
ton product
(m3/t product)
714
796
88.1 89.2
1.51
Environmental protection
Environmental protection is a key priority in the area of corporate social
responsibility (CSR) for BSH. The company has underlined its corporate
commitment by declaring its support for the United Nations Global Compact and signing the CECED Code of Conduct, the code of conduct of the
home appliance industry. In the year under review, a CSR progress report
was submitted providing information on action taken, results achieved,
and future plans. The internal obligation to implement these principles is
firmly anchored in the corporate principles and in the Business Conduct
Guidelines published in 2006.
1.68
CO2 emissions
57.8
per ton product* 49.5
(kg/t product)
2006 2005
*Excluding proportion from
electrical energy generation
and transport
In 2006, the CEO of BSH, Dr. Kurt-Ludwig Gutberlet, was awarded the
international B.A.U.M. prize for BSH’s pioneering work in the sphere of
corporate citizenship and sustainable development. The German Environmental Management Association (Bundesdeutsche Arbeitskreis für Umweltbewusstes Management e.V. – B.A.U.M.) awarded the prize in recognition
of BSH’s long-standing and exemplary commitment to environmental and
social responsibility.
A particular example of this responsibility is the Protos vegetable oil
cooker developed for use in developing and newly industrialized countries. BSH combined its core competence in cooking appliances with input
from the Leyte State University in the Philippines to produce a vegetable
oil cooker as a healthy alternative to open fires. The development of the
vegetable oil cooker provides impressive confirmation that BSH is meeting
the objective of its binding environmental policy introduced in 1995,
namely to set the standard in sustainable development through responsible and frugal use of natural resources in both production and products.
A central concern of BSH is to develop and produce energy-saving and
water-saving household appliances in an environmentally friendly manufacturing process. Innovative technological and environmental standards
are rigorously applied within the BSH Group to ensure that this objective
is achieved. A centrally controlled environmental and quality management
system throughout the Group ensures both compliance with, and further
development of, the standards across all products and at all production
sites.
A total of 37 of the Group’s 44 plants, including all of the European sites,
were certified under ISO 14001, the international standard for environmental management systems, in the year under review.
Global operating expenses and capital investment for production-related
environmental protection during 2006 amounted to EUR 19.3 million.
In the year under review, BSH implemented the EU Directives on waste
electrical and electronic equipment (WEEE) and on the restriction of the
use of certain hazardous substances in electrical and electronic equipment (RoHS) in line with the requirements of national legislation.
BUSINESS PERFORMANCE
BSH also continues to be actively involved in an appropriate implementation of the EU framework directive on the eco-design of energy-using products (EUP) for products in the household appliances sector. Over the last
15 years, BSH has been able to achieve energy consumption reductions in
its leading products of 31 percent (electric cookers) to 78 percent (refrigerators).
BSH is working hard in its own product marketing and within the European Committee of Domestic Equipment Manufacturers (CECED) to accelerate the replacement of the high number of inefficient old appliances still
in use throughout Europe. There are around 188 million large appliances
more than ten years old still being used in homes in the now 25 member
states of the European Union. 44 billion kilowatt hours of electricity and
22 megatons of CO2 could be saved each year if these appliances were
replaced by new, highly efficient equipment.
The BSH Group published its 14th Environmental and Corporate Responsibility Report during the year under review. Additional information about
environmental protection within the Group and at our international production facilities is available on the Internet at www.bsh-group.com.
Research and development
In the year under review, BSH’s innovative strength and its development
expertise continued to be important elements in helping the Group secure
further economic success. The Group invested EUR 235 million in research
and development in 2006, which equates to 2.8 percent of revenue and
a year-on-year increase of 27.7 percent, enabling BSH to continue to
maintain its excellent position vis-à-vis its international competitors. The
importance of research and development to the Group is also highlighted
by BSH’s global development network comprising over 1,900 employees.
The manufacture of new, innovative, high-quality products enables the
company to be successful in the marketplace. This is also underscored by
the success of the company in product tests carried out by German and
other European consumer organizations. In almost 95 percent of the 68
tests carried out involving BSH products, the Group’s products emerged
as “Overall winner” and/or “Best buy.”
Presently, in order to be accepted by end consumers, our home appliances must feature an appealing, sophisticated design in addition to
embodying innovation and quality. This applies especially in markets
that are now largely saturated. By meeting all these requirements, we
can clearly differentiate ourselves from our competitors and, in the end,
ensure that our products are sold.
Research and
Development Costs
in EUR million
250
235
200
184
150
100
50
0
2006
2005
as a percentage of sales
3.0
2.5
2.8
2.5
2.0
1.5
1.0
0.5
BSH’s strength in innovation and differentiated brand design was underlined once again in 2006 with the award of 59 German and international
design prizes.
As always, BSH’s primary objective is to ensure that it remains ahead of
the competition in terms of innovation. To this end, BSH has for a number
of years been pursuing a successful intellectual property strategy, the
core element of which is the maintenance of the Group’s own portfolio of
industrial property rights.
0
2006
2005
MANAGEMENT REPORT
55
56
MANAGEMENT REPORT
Under this portfolio strategy, BSH has continued to increase the number
of its industrial property rights on a global basis. For example, the number
of first-time patent applications submitted in Germany in 2006 was up
15 percent over 2005. The year under review also saw BSH take successful
action against third-party infringements of existing property rights.
Significant events in 2006
BSH continued the expansion of its business activities in the growth markets of China and Russia in the year under review.
Further expansion took place in 2006 at the Appliance Park operated by
BSH Electrical Appliances (Jiangsu) Co. Ltd., Nanjing, China. Washing
machine motors, together with gas cooktops and cooker hoods specially
developed for the Chinese market, are now manufactured alongside the
existing production lines for small appliances. In addition to production
facilities, the Appliance Park is also home to the largest white goods warehousing and logistics center in China and a research and development
center.
In Russia, work on the new refrigeration products plant and logistics center in St Petersburg neared completion, with direct supplies to the local
market expected to commence from early 2007.
At Nauen, Brandenburg, Germany, BSH has opened the most up-to-date
washing machine production line in Europe, demonstrating that, with
state-of-the-art technology and flexible production arrangements, Germany can also successfully manufacture products for the global market.
The global BSH sales network will henceforth be further reinforced by the
addition of new sales companies in Canada, Malaysia, and in the Ukraine.
Given the close economic, linguistic, and cultural relationship between
Spain and Latin America, BSH Electrodomésticos España, S.A., Huarte,
Spain, in 2006 acquired a majority stake in BSH Continental Eletrodomésticos Ltda., São Paulo, Brazil, which is managed as a subgroup.
Also in 2006, further subsidiaries of BSH Germany were brought under
the umbrella of BSH Home Appliances Holding GmbH. This Vienna-based
company now manages the majority of the Group’s European subsidiaries.
A S S E T S , F I N A N C I A L P O S I T I O N , A N D R E S U LT S O F O P E R AT I O N S
MANAGEMENT REPORT
B. Assets, financial position, and results of operations
Following the increase of 10.4 percent in current assets and 13.6 percent
in noncurrent assets, total assets increased to EUR 5,950 million, a rise
of EUR 625 million. The proportion total of assets accounted for by current
assets fell to 57.1 percent, whereas the corresponding proportion for noncurrent assets rose by 0.7 percentage points to 42.9 percent.
The rise in current assets of EUR 320 million was primarily the result of
the EUR 331 million increase in trade receivables and the EUR 191 million
increase in inventories, offset by cash and cash equivalents decrease of
EUR 270 million at the balance sheet date.
The factors responsible for increasing trade receivables included very high
revenue in the last quarter of 2006, including increased revenue in countries with longer payment terms having a particular impact.
The increase in inventories is a function of the high revenue in December
2006 and January 2007 and the downtime in production facilities at the
end of the year due to public holidays and the need to carry out maintenance work.
The fall in cash and cash equivalents was caused by the increase in trade
receivables and inventories, and also by the rise in noncurrent financial
assets, which accounted for an increased 12.5 percent share of total
assets (2005: 9.3 percent). The net cash used in investing activities also
had an impact. The reasons behind the net cash outflows in investing
activities included capital investments in intangible assets and property,
plant, and equipment, an increase in financial receivables, and net additions in securities.
Net cash from operating activities was significantly below the figure for
2005, mainly as a result of the substantial increase in inventories and
trade receivables.
Net cash from financing activities saw just a small increase on 2005 since
the drawdown of loans more or less offset the repayment of financial liabilities.
Cash and cash equivalents at December 31, 2006, were EUR 305 million
taking into account changes caused by exchange rate fluctuations.
Property, plant, and equipment increased by a total of EUR 49 million to
EUR 1,284 million in the year under review, taking into account total
depreciation for the year.
Current liabilities, measured as a proportion of total equity and liabilities,
increased by 0.9 percentage points to EUR 2,017 million, whereas noncurrent liabilities fell by 0.6 percentage points. However, in absolute
terms, noncurrent liabilities rose by EUR 168 million to EUR 1,876 million.
All items under current liabilities registered a change, in particular trade
payables with an increase of 21.7 percent.
The main factors behind the increase in noncurrent liabilities were the
financial liabilities (up EUR 127 million) following the drawdown of a lowinterest loan from BSH Finance Management GmbH, Vienna, Austria, and
the increase in noncurrent provisions (up EUR 89 million). Provisions for
pensions and other postretirement benefits fell by EUR 24 million as a
result of the switch to the BSH-Pensionskapital scheme in Germany.
Balance Sheet Structure*
2006
2005
11%
Cash, cash equivalents, and securities
36 %
Receivables and other assets
17 %
16 %
Inventories
38 %
37 %
Noncurrent assets
5,950
5,325
Total assets (in mill. of EUR)
2006
2005
10 %
9%
13 %
Trade accounts payable
14 %
29 %
30 %
Provisions
12 %
13 %
Other liabilities
35 %
35 %
Shareholders’ equity
5,950
5,325
Total liabilities and shareholders’ equity
(in EUR million)
6%
39 %
Financial liabilities
*Not broken down according to maturities
57
58
MANAGEMENT REPORT
Equity rose by 10.7 percent to EUR 2,057 million, with retained earnings
and other reserves registering a notable increase of 16.1 percent to EUR
1,539 million. There was only a negligible change in consolidated net
profit for the year because of the increase in income tax expense in 2006.
BSH 2006 revenue increased year-on-year by almost EUR 1 billion, exceeding its own ambitious target increase for the year. Overall, BSH achieved a
13.2 percent increase in consolidated revenue for the year.
Sales Trend
in EUR million
9
8
8,308
7
7,340
Based on efficient production structures and substantial improvements in
procurement, BSH managed to generate a slight drop in the ratio of cost
of sales to revenue. This meant that it was able to achieve an increase in
gross profit significantly in excess of the growth in revenue.
The sharp growth in revenue resulted, in particular, in an above-average
rise in selling expenses, whereas administrative expenses only saw a
slight upward movement. Overall, the figure for selling and administrative
expenses equated to 24.8 percent of revenue, an increase of 0.3 percentage points over 2005.
6
5
4
3
As planned, research and development expenditure rose by 27.7 percent
and amounted to EUR 235 million in the year under review. The ratio of
research and development expenditure to revenue rose to 2.8 percent.
2
1
0
2006
2005
Profitability Trend*
in EUR million
There was only a minor change to net interest income/expense and other
net financial income/finance cost, the total of which was EUR 26 million
compared with EUR 22 million in 2005.
500
400
In 2006, other operating expenses exceeded other operating income by
EUR 42 million (2005: income of EUR 26 million). There was a slight
improvement in net exchange rate gains/losses and write-downs rose by
EUR 15 million after offsetting of reversals of write-downs on receivables.
The largest change was in the new provision expense and in income from
the reversal of non-earmarked provisions. Other operating expenses were
offset by other operating income for the year.
542
500
400
Profit before tax rose substantially to EUR 542 million, which equates to
an increase of 8.4 percent.
Income taxes climbed from EUR 114 million to EUR 170 million. While
effective taxes remained at almost the same level, there was a sharp drop
in income from deferred taxes, the principal influencing factors being
differences in tax rates, the reduction in temporary differences, and the
effects of differences in the basis for assessing tax.
300
200
100
0
2006
2005
* Profit before income taxes
The consolidated net profit for 2006 fell by EUR 14 million to EUR 364 million and there was no change in minority interest.
A S S E T S , F I N A N C I A L P O S I T I O N , A N D R E S U LT S O F O P E R AT I O N S
Key factors affecting profits
Again in 2006, a key priority of BSH was to secure the competitiveness
of the Group in the medium and long term. BSH therefore continued its
ongoing activities to enhance efficiency and drive down costs in all production and administrative processes, systems, and business units, the
objective being to stabilize and improve the net profit for the Group.
As in previous years, the companies in Spain, Turkey, Poland, China, and
the United Kingdom were among the greatest contributors to the performance of the Group. They accounted for a substantial proportion of net
profit with significant increases in revenue and profit.
Company profits suffered from the negative impact of action taken to
realign production and administrative structures, in particular in Germany,
Spain, China, and the USA. This was countered by the introduction of the
BSH-Pensionskapital scheme in Germany.
Overall, the profit trend in Group companies was very positive, both in
Germany and abroad.
Accrued employee leave and flexitime liabilities increased because of
the high level of capacity utilization in plants.
Warranty provisions were adjusted in line with the growth in revenue and
costs in the year under review.
Provisions for risks from pending litigation were reversed since the reasons for these provisions no longer applied.
As in 2005, further provisions were recognized or adjusted to take into
account financial risks at the balance sheet date.
MANAGEMENT REPORT
59
60
MANAGEMENT REPORT
C. Significant opportunities and risks for future development
BSH central risk management and business continuity management were
subjected to further development in the year under review. The central
crisis management organization also drew up rules of procedure. The
crisis handbook prepared in the year under review is intended to provide
assistance in the handling of potential events against the background of
the prevailing tense security situation.
The Group renewed its insurance program for 2006 with the current scope
of cover based on the inexpensive level of premiums available. The scope
of cover for bad debt risks was extended at favorable market terms.
Internal control systems in the local companies concerned are used to
ensure compliance with national legislation and control costs in the
implementation of the EU Directives on waste electrical and electronic
equipment (WEEE) and the restriction of the use of certain hazardous
substances in electrical and electronic equipment (RoHS). Any particular
impact from this implementation is reported as part of the risk management process.
The Group employs the treasury controlling and value contribution monitor
used in the finance unit to control interest and currency management
activities. These information systems are used to support the identification
and assessment of interest rate and currency risks throughout the Group
and to manage hedging transactions.
The situation in raw material markets underwent a massive shift in the
second quarter of the year under review. The price of nonferrous metals
(e.g. copper, nickel, zinc) shot up within weeks, sometimes by more than
100 percent. BSH was able to substantially cushion the effect on its cost
of materials because it had entered into a significant number of long-term
supply agreements prior to the deterioration in the market. Most of the
effect of the increase in raw material prices will therefore not be felt until
2007. BSH foresees that the difficulties and volatility in raw materials and
primary materials markets will continue into 2008.
Apart from the strategic use of global procurement markets, BSH also
continued in 2006 to develop systematic risk management to avoid the
risk of business failure on the part of suppliers. The starting point was
the construction of a list of suitable criteria and early identification of
suppliers possibly at risk for business failure, including recommended
strategies to avoid such potential failures. In 2007, standardized procedures for single sourcing and multiple sourcing will also be developed
and introduced.
As before, the greatest challenges in future development include aggressive pricing and marketing strategies on the part of competitors.
SIGNIFICANT OPPORTUNITIES AND RISKS FOR FUTURE DEVELOPMENT
The merger with Maytag has allowed Whirlpool to secure its position as
the clear market leader in North America, where growth is currently
weaker. At the same time, Asian competitors are strengthening their
activities in global markets and increasing competitive pressure in global
household appliance markets, which are already under strain because of
overcapacity.
As an enterprise operating at a global level, BSH has voluntarily committed
to an internal code of conduct in addition to its obligation to comply with
various legal and social requirements. This code of conduct is expressed
in various additional requirements and auditing standards.
The weak legal framework and continued political uncertainty in some
regions, together with overarching standards and requirements, can have
a noticeable impact on the value creation process in BSH.
However, BSH is able to state, in conclusion, that it knows of no risk at
this time that constitutes a threat to the continued existence of the Group
as a going concern.
MANAGEMENT REPORT
61
62
MANAGEMENT REPORT
D. Outlook
BSH is expecting a slight easing-off in growth in the global economy in
2007. However, given some decrease in raw material prices and an
extremely dynamic environment for capital expenditure, this should just
be a natural fluctuation within the economic cycle.
Economic growth is likely to slow down noticeably in the USA in particular.
The correction already evident in the residential real estate market and
the structural crisis in the US automotive industry are likely to have an
impact that will increasingly spread to the rest of the economy. Consumer
spending, in particular, is likely to see a contraction, especially since
there is little room for further reduction in saving that would allow spending levels to be maintained. Sluggish economic performance in the USA
will also have an adverse impact on prospects in Latin America.
2007 will see the dynamic growth process in China continue apace, due
to increasing investment largely directed toward infrastructure expansion
and modernization, among other things. However, the increase in gross
domestic product in China is expected to fall to 9.5 percent because the
Chinese government has been making a significant effort to prevent the
economy from overheating.
Weaker growth in the USA and China will also lead to slow growth in the
emerging economies of South-East Asia, which are heavily dependent on
exports. However, the economic recovery process is well entrenched and
it is highly unlikely that a slump will result.
Growth in the European economy is coming under pressure from two sides:
slower growth in the global economy and substantial increases in taxes in
some European countries at the start of 2007. The increase in value-added
tax in Germany, in particular, is likely to cast a cloud over the economy
in general, with consumer spending being affected first and foremost.
Europe is expected to see growth of 2.5 percent in 2007 compared with
3.3 percent in 2006, and growth of just 2 percent is forecast for Germany.
Currently, the opportunities and risks in this overall economic scenario are
evenly balanced. On the one hand, growth prospects are being threatened
by geopolitical conflicts and by a correction in global imbalances, such as
the high US current account deficit. On the other hand, however, the
global environment for capital investment is turning out to be distinctly
robust at the moment. Given that some raw material prices are now hovering significantly below recent highs, there is at least a chance of some
acceleration in growth, particularly in the industrialized countries.
Against this overall economic background, BSH is predicting that growth
in the household appliances market in Europe will be lower than in 2006.
This very much depends on whether and how quickly the demand for
household appliances in Germany manages to recover from the increase
in value-added tax which has an overall dampening effect on the economy
and consumption. If there is little expansion in demand in North America
and Latin America, the impact of exchange rates could cause further slackening in market growth when measured on the basis of the euro. On the
positive side however, the greatest boost for growth in the global home
appliances market in 2007 will again come from Asia, in particular China.
OUTLOOK
In summary, BSH forecasts that there will be further unit growth in global
demand for electrical household appliances and this will be accompanied
by an increase in global revenue in the sector, although this growth is
likely to be lower than in 2006.
BSH expects revenue growth in Western Europe to be lower than elsewhere because of the continued pressure on prices resulting from aggressive marketing by competitors. Strong revenue growth in Asia is predicted
to continue, especially in China. A substantial increase in revenue is also
forecast for Eastern Europe. As far as North America is concerned, BSH
expects to see revenue growth that is above the growth rate forecast for the
market as a whole. BSH has only budgeted for a minimal rise in revenue in
Germany because of the increase in value-added tax on January 1, 2007.
Despite the massive cost increases resulting from the rise in raw material
prices, which will be felt much more strongly by BSH in 2007, the BSH
budget sets a challenging target for growth in net profits.
To ensure that these targets are achieved, BSH is focusing, in particular,
on even more intensive sales activities in North America, Asia, and Eastern
Europe. The Group’s objective is to reinforce its position in regional markets, particularly with the new plant in Russia and the expansion of production facilities in China, and to continue to build on the strength of its
position in the marketplace vis-à-vis competitors.
The continued excellent performance of the Group will also be supported
by the launch of new products, the implementation of the strategy concept for Latin America, and the ongoing development of benchmarking
projects.
The drive behind the main brands of the Group and increasing consumer
awareness of energy efficiency give BSH good reason to believe that further
revenue and profit potential can be realized in both the freestanding and
built-in appliance segments.
The Group achieved all its revenue and profit targets for the month of
January 2007. Germany, Eastern Europe, and China made a significant
contribution to this excellent performance and to the achievement of the
planning targets.
The strategic alignment of the Group and a positive start to the new fiscal
year indicate that BSH will again be able to achieve its ambitious corporate targets in fiscal 2007.
Munich, February 26, 2007
BSH Bosch und Siemens Hausgeräte GmbH
The Board of Management
MANAGEMENT REPORT
63
64
Group Financial Statements
January 1
to December 31, 2006
(in EUR million)
Consolidated Statement of Income
Note
2006
2005
Revenue
4
8,308
7,340
Cost of sales
5
5,399
4,859
2,909
2,481
Gross profit
Selling and administrative expenses
6
2,063
1,800
Research and development expenses
7
235
184
Other operating income
8
160
134
Other operating expenses
8
202
108
1
1
9
0
0
Net interest expense
10
– 11
–5
Other financial result
11
–15
–17
542
500
170
114
372
386
8
8
364
378
Goodwill impairment
Income from investments
Profit before income taxes
Income taxes
12
Profit after income taxes
Minority interest
Consolidated net profit
13
CO N S O L I D AT E D B A L A N C E S H E E T
G R O U P F I N A N C I A L S TAT E M E N T S
Consolidated Balance Sheet
Note
31.12.2006 31.12.2005
ASSETS
Current assets
Cash and cash equivalents
15
305
575
Securities
16
22
20
Trade accounts receivable
17
1,809
1,478
Other current assets
18
243
177
Inventories
19
1,019
828
3,398
3,078
Total current assets
Noncurrent assets
Noncurrent financial assets
20
746
493
Property, plant, and equipment
21
1,284
1,235
Intangible assets
22
229
229
Deferred tax assets
12
293
290
Total noncurrent assets
2,552
2,247
Total assets
5,950
5,325
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Financial liabilities
23
263
220
Trade accounts payable
24
611
502
Other current liabilities
25
705
661
Current provisions
25
438
375
2,017
1,758
582
455
Total current liabilities
Noncurrent liabilities
Financial liabilities
23
Other noncurrent liabilities
26
5
17
Noncurrent provisions
26
415
326
Provisions for pensions and
other postretirement benefits
27
856
880
Deferred taxes
12
18
30
1,876
1,708
Total noncurrent liabilities
Shareholders’ equity
Subscribed capital
28
125
125
Retained earnings and other reserves
28
1,539
1,325
364
378
29
31
Total shareholders’ equity
2,057
1,859
Total shareholders’ equity and liabilities
5,950
5,325
Consolidated net income
Minority interest
28
as at
December 31, 2006
(in EUR million)
65
66
G R O U P F I N A N C I A L S TAT E M E N T S
CO N S O L I D AT E D S TAT E M E N T O F C A S H F LO W
Consolidated Statement of Cash Flow
(in EUR million)
Note
2006
2005
542
500
–8
–8
Depreciation and amortization of tangible and intangible assets
282
224
Other noncash income and expenses
– 88
– 44
Profit before tax
Minority interest
13
3
2
–5
0
–145
– 90
Change in inventories
– 205
– 52
Change in trade accounts receivable
and other receivables
– 355
– 208
–5
–3
Change in trade accounts payable
and other payables
175
130
Change in provisions
134
105
–7
– 90
318
466
–3
0
– 364
– 332
Gains and losses on disposals of assets
Non-cash interest
Income taxes
Changes in assets and liabilities
Change in securities (held for trading)
Change in deferred taxes
Cash inflow from operating activities
29
Payments for financial investments
Payments for investments in intangible assets
and property, plant, and equipment
Proceeds from the disposal of assets
Increase in financial receivables
Decrease in financial receivables
Investments in securities (available for sale)
Sales of securities (available for sale)
Cash outflow from investing activities
29
Minority interest
Dividends
Proceeds from the issue of financial liabilities
Repayment of financial liabilities
Net cash provided by/used in financing activities
29
Net change in cash and cash equivalents
Cash and cash equivalents at the beginning of the year (Jan. 1)
Effect of exchange rate changes on cash and cash equivalents
Effect of changes in the consolidated group on cash
and cash equivalents
Cash and cash equivalents at the end of the year (Dec. 31)
29
29
8
8
– 201
–4
7
2
– 416
– 258
328
222
– 641
– 362
–1
4
– 130
– 134
328
636
– 141
– 476
56
30
– 267
134
575
428
–3
8
0
305
5
575
S TAT E M E N T O F R ECO G N I Z E D I N CO M E A N D E X P E N S E
G R O U P F I N A N C I A L S TAT E M E N T S
Statement of recognized income and expense
2006
2005
8
28
Actuarial losses on defined benefit pension plans
– 22
– 23
Exchange differences on translating foreign subsidiaries
– 34
43
9
5
Income and expense recognized directly in equity
– 39
53
Net profit after tax
372
386
Total recognized income and expense for the year
333
439
Gain on available-for-sale financial instruments
Deferred tax relating to components of income and
expense recognized directly in equity
(in EUR million)
67
G R O U P F I N A N C I A L S TAT E M E N T S
CO N S O L I D AT E D S TAT E M E N T O F C H A N G E S I N S H A R E H O L D E R S ’ EQ U I TY
Consolidated Statement of Changes in Shareholders’ Equity
st
tere
orit
y in
Total
shareholders’
equity
Min
Fair
-v
me alue m
nt o
f se easur
e
cur
itie s
Act
ua
on rial ga
pen
sion ins/lo
pro sses
visi
ons
Equ
ity h
of t
o
he lders
pa r
ent
Ret
a
ine
de
arn
pita
At December 31, 2004
ings
Cur
re
adj ncy tr
ust
me anslat
ion
nt
Accumulated other comprehensive income
l
Note 28
d ca
(in EUR million)
Su b
scri
be
68
125
1,442
–1
10
– 49
1,527
26
1,553
– Profit after income
taxes
–
378
–
–
–
378
8
386
– Dividend payments
–
–130
–
–
–
–130
–4
– 134
– Foreign currency
translation differences
–
–
43
–
–
43
1
44
– Financial instruments
–
–
–
25
–
25
–
25
–
–
–
–
–15
–15
–
– 15
125
1,690
42
35
– 64
1,828
31
1,859
– Profit after income
taxes
–
364
–
–
–
364
8
372
– Dividend payments
–
– 125
–
–
–
–125
–5
– 130
– Foreign currency
translation differences
–
–
– 34
–
–
– 34
–2
– 36
– Financial instruments
–
–
–
9
–
9
–
9
Net actuarial
gains/losses
–
–
–
–
– 14
– 14
–
– 14
– Other changes
–
–
–
–
–
–
–3
–3
125
1,929
8
44
– 78
2,028
29
2,057
– Pensions:
Net actuarial
gains/losses
At December 31, 2005
– Pensions:
At December 31, 2006
Notes to the Consolidated Financial Statements
1 General
BSH Bosch und Siemens Hausgeräte GmbH was
formed in 1967 as a joint venture of Robert Bosch
GmbH, Stuttgart, and Siemens AG, Berlin and
Munich. The activities of the BSH Group (hereafter referred to as “Group” or “BSH”) comprise:
the manufacture or procurement and marketing,
as well as research and development, of industrial products in the area of electrical engineering,
precision mechanics, and related technology,
especially in the area of home appliances; the
manufacture or procurement and marketing of
goods for use as accessories, auxiliary materials,
or tools with the manufactured or marketed
products. The address of the Group’s registered
office is Carl-Wery-Strasse 34, 81739 Munich,
Germany. The Supervisory Board will approve
the consolidated financial statements for publication on May 8, 2007.
2 Presentation of accounting policies
The following accounting policies were used
in the preparation of the consolidated financial
statements of BSH:
2.1 Statement of compliance
The consolidated financial statements of BSH
for the year ended December 31, 2006, have
been prepared in accordance with the mandatory International Financial Reporting Standards
(IFRS) issued by the International Accounting
Standards Board (IASB), London, applicable at
the balance sheet date.
2.2 Basis of presentation
The Group currency of BSH is the euro; unless
stated otherwise, all amounts are reported in
millions of euros (EUR million).
The income statement is presented using the
cost of sales method. To enhance the clarity of
presentation, various items have been aggregated on the face of the balance sheet and
income statement. These items are disclosed
and explained separately in the notes to the
financial statements.
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
The consolidated financial statements have
been prepared on the basis of historical cost,
with the following exceptions:
– “Financial assets held for trading” and “Available-for-sale financial assets” are recognized
at fair value.
The accounting policies described below have
been consistently applied over the reporting
periods covered by these consolidated financial
statements.
The companies in the Group have consistently
applied the accounting policies.
2.3 Newly issued accounting standards
All International Financial Reporting Standards
(IFRS), International Accounting Standards (IAS),
and interpretations of the International Financial
Reporting Interpretations Committee/Standing
Interpretations Committee (IFRIC/SIC) mandatory
for fiscal year 2006 have been applied.
The following standards/interpretations have
not been applied in advance of their mandatory
implementation date: IFRS 7, IFRIC 7, IFRIC 8,
IFRIC 9 and IFRIC 10. The effects are not expected
to be material.
2.4 Foreign currency translation
Foreign currency transactions included in the
single-entity financial statements of BSH GmbH
and the subsidiaries are translated at the
exchange rate prevailing at the transaction date.
At the balance sheet date, monetary items
denominated in foreign currency are recognized
using the closing rate. Any translation differences are recognized in the income statement.
The financial statements of consolidated subsidiaries prepared in foreign currency are translated on the basis of the functional currency
concept (IAS 21 “The Effects of Changes in
Foreign Exchange Rates”) using the modified
closing rate method. The foreign subsidiaries
that are part of the BSH Group carry out their
activities independently from a financial, economic, and organizational point of view, and
69
70
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
for this reason, the functional currency is always
the same as the company’s local currency. The
Turkish company, which is included in the consolidated financial statements, is the only
exception, and prepares its annual financial
statements in euros. All assets and liabilities
(but not shareholders’ equity) are translated at
the closing rate. Items included in the income
statement are translated at the annual average
rate. All resulting exchange rate differences are
taken directly to a currency translation reserve
in equity.
IAS 27, applying accounting policies that are
uniform throughout the BSH Group.
In the individual financial statements of BSH
Bosch und Siemens Hausgeräte GmbH and
subsidiaries, foreign currency receivables and
payables are measured on initial recognition at
the exchange rate on the date of the transaction. Any exchange rate gains and losses at the
balance sheet date are recognized in income.
The entities included in the consolidation also
include a special fund. As of December 31, 2006,
eight (2005: eight) companies were not consolidated because they have no operating activities
or the operating activities are insignificant.
This has no material impact on the net assets,
financial position, and results of operations of
the Group. In addition, BSH Bosch und Siemens
Hausgeräte Altersfürsorge GmbH, Munich, is not
consolidated because its assets are defined as
plan assets and these are deducted from pension provisions in accordance with IAS 19. The
consolidated financial statements and group
management report of BSH GmbH are published
in the electronic German Federal Gazette. See
Annex II for more information on shareholdings.
Changes in exchange rates against one euro for
the most important currencies used in currency
translation are as follows:
Closing rate
Average rate
12/31/2006 12/31/2005
2006
2005
US-Dollar
1.3170
1.1797
1.2561
1.2439
Sterling
0.6715
0.6853
0.6817
0.6838
Brazilian real
2.8193
2.7680
2.7327
3.0281
10.3137
9.5138
10.0049
10.1787
Chinese yuan renminbi
2.5 Basis of consolidation and
consolidation principles
The consolidated financial statements include
BSH GmbH and all companies under its control.
This control usually exists if BSH GmbH, directly
or indirectly, holds over 50% of the voting rights
of the subscribed capital of an entity and has
the power to govern the financial and operating
policies of the entity. The interests of minority
shareholders in the Group’s equity are reported
separately on the face of the balance sheet and
income statement.
Germany
Other
Countries
Total
11
50
61
First consolidated 2006
0
0
0
Deconsolidated in 2006
0
0
0
11
50
61
Consolidated as of Dec. 31, 2005
Consolidated as of Dec. 31, 2006
See section 3 of the notes for more information
on changes to the basis of consolidation.
Acquisitions are accounted for on the basis of
the fair value applicable at the date of acquisition or first-time consolidation. Any positive
difference between purchase price and fair value
is recognized as goodwill.
Intragroup balances, intragroup transactions,
and any resulting intragroup profits and losses
are eliminated in full. Deferred taxes are recognized for consolidation transactions recognized
in the income statement.
Companies are consolidated from the time the
BSH Group obtains the option of control and
deconsolidated when the option of control
ceases.
2.6 Revenue
Revenue from the sale of products is recognized
when ownership or risk is transferred to the
customer, a price has been agreed or can be
determined, and its payment can be expected.
Revenue is reported net of discounts, price
reductions, customer bonuses, and rebates.
The financial statements of BSH GmbH and its
consolidated subsidiaries have been prepared,
audited, and consolidated in accordance with
Royalties are recognized on an accrual basis in
accordance with the substance of the relevant
agreement.
A C C O U N T I N G A N D V A L U AT I O N M E T H O D S
2.7 Research and development costs
Research expenditure is expensed as incurred.
Likewise, development expenditure is recognized as an expense when incurred. Project
development costs that fully meet the following
criteria are exempt from this rule:
– The product or system is clearly defined and
the relevant expenditure can be clearly
assigned and reliably measured;
– The technical feasibility of the product can be
demonstrated;
– The product or system will be either marketed
or used internally;
– The assets will generate future economic
benefits (e.g., the entity can demonstrate the
existence of a market for the product or, if it
is to be used internally, its usefulness);
– There are adequate technical, financial, and
other resources to complete the project.
Costs are capitalized from the time the above
criteria are first met. Costs recognized as
expenses in previous accounting periods are
not capitalized retrospectively.
2.8 Trade accounts receivables
Trade receivables are reported at amortized cost.
Any necessary write-downs, which are based
on the probable risk of default, are taken into
account. Non-interest-bearing or low-interestbearing receivables with maturities of more
than one year are discounted. If the requirements of IAS 32.42 are met, receivables and
payables are netted.
2.9 Inventories
Inventories are recognized at the lower of cost
and/or net realizable value. Net realizable value
is the estimated selling price in the ordinary
course of business less the estimated costs of
completion and the estimated costs necessary
to make the sale. Work in process and finished
goods are recognized at cost. This includes all
costs that are directly attributable to the manufacturing process, plus a reasonable portion of
the production overhead, including productionrelated depreciation and amortization, proportionate administrative expenses, and proportionate social security costs. Borrowing costs are
not capitalized. Inventory risks that result from
the duration of storage or reduced marketability
are taken into account by applying write-downs.
Lower values as of the reporting date due to
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
reduced sales proceeds are recognized accordingly.
2.10 Financial assets
The shares in non-consolidated affiliated companies and associates reported under financial
assets are recognized at cost, unless a different
market value is available.
According to IAS 39, financial investments are
broken down into the following categories:
(a) Held to maturity investments
(b) Financial assets held for trading or at fair
value through profit or loss
(c) Available-for-sale financial assets
(d) Loans and receivables
Financial assets with fixed or determinable payments and fixed maturity that the Company has
the positive intent and ability to hold to maturity, other than loans and receivables, are classified as held-to-maturity investments. Financial
assets acquired or incurred principally for the
purpose of generating a profit from short-term
fluctuations in price or dealer’s margin are classified as financial assets held for trading.
Financial assets held for trading and available
for sale are recognized at market value, if available. If no market value is available, they are
recognized at cost.
Changes in the fair value of financial assets
held for trading are recognized through the
income statement.
All other financial assets, other than loans and
receivables originated by the Company, are
classified as available-for-sale financial assets.
Until realized, gains and losses on the fair-value
measurement of an available-for-sale financial
asset are recognized directly in equity, taking
deferred taxes into account.
An impairment loss is recognized on availablefor-sale securities and financial assets whose
market value has fallen below their cost and this
fall is not expected to be reversed.
2.11 Property, plant, and equipment
Property, plant, and equipment is measured
at cost, less straight-line depreciation and, in
some cases, impairment losses. Low-value
71
72
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
assets are fully depreciated in the year of acquisition. The cost of self-created property, plant,
and equipment comprises all direct costs and
a reasonable portion of the necessary material
and production overheads. This includes production-related depreciation and amortization,
as well as a proportion of the costs for the Company’s pension plan and voluntary employee
benefits. Borrowing costs are not capitalized.
Depreciation is based on the following useful
lives:
Buildings
12 – 33.3 years
Machinery and equipment
6 – 13.0 years
Office equipment and vehicles
3 – 8.0 years
Land is not depreciated
In accordance with IAS 36, “Impairment of
Assets”, impairment losses are recognized on
property, plant, and equipment if both the realizable value and the value in use of the asset
concerned fall below its carrying amount.
Depreciation and impairment losses are
reported under functional costs and other operating expenses.
2.12 Intangible assets (excluding goodwill)
Purchased and self-created intangible assets
are recognized at cost. Assets with finite useful
lives are amortized over their useful lives using
the straight-line method.
Amortization is based on the following useful
lives:
Normal useful life in the company (contract,
license period, etc.)
Purchased software
4 years
Self-created intangible assets
4 – 6 years
The expense is allocated to functional area
according to source. If impairment is identified,
an impairment loss is recognized. If the reasons
for an impairment loss no longer apply, the
impairment loss is reversed, but such that the
increased carrying amount of the asset does not
exceed the carrying amount initially recognized
for the asset net of amortization that would otherwise have applied. Assets with infinite useful
lives are not amortized.
Amortization and impairment losses are
reported under functional costs and other operating expenses.
2.13 Goodwill
Goodwill is capitalized in accordance with IFRS 3.
Goodwill is tested for impairment regularly at
least once a year; if required, an appropriate
impairment loss is recognized. In accordance
with IAS 36, “Impairment of Assets“, an impairment requirement is determined by comparing
the expected future discounted cash flows of
the cash-generating unit in question with the
relevant goodwill amount assigned to the unit.
2.14 Pension provisions
Provisions for pensions and other postretirement
benefits are recognized using the projected unit
credit method as specified in IAS 19, “Employee
Benefits”. In addition to the pensions and vested
benefits known as of the balance sheet date,
this method takes into account expected future
increases in salaries and pensions. Provisions
for pension obligations are recognized net of
any plan assets where such assets exist. The
calculation is based on actuarial reports taking
into account biometric calculation methods.
As specified in IAS 19.93A, onward actuarial
gains and losses incurred in the fiscal year are
reported in the statement of recognized income
and expense (SORIE) and recognized directly in
equity.
2.15 Provisions
A provision is reported only if a present (legal
or constructive) obligation exists as a result of
a past event, it is probable that an outflow of
resources embodying economic benefits will be
required to settle the obligation, and a reliable
estimate can be made of the amount of the obligation. Provisions are tested at each balance
sheet date and adjusted to the current best
estimate. Where the effect of the time value of
money is material, the provision amount is the
present value of the expenditure expected to
be required to settle the obligation. Where discounting is used, the carrying amount of a provision increases in each period to reflect the
passage of time. This increase is recognized
under other net financial income/finance cost.
The related change in tax provision is recognized under tax expense.
N O T E S T O T H E S T AT E M E N T O F I N C O M E
2.16 Derivative financial instruments
Derivative financial instruments are classified
as financial assets/liabilities held for trading at
fair value. Changes in their value are recognized
under other operating income/expense. Changes
in interest rate derivatives are reported under
other net financial income/finance cost.
4 Revenue
Revenue was primarily generated from electrical
appliances and gas appliances, as well as from
related customer services; it breaks down as
follows:
Germany
Derivative financial instruments with a positive
market value are reported under other assets;
derivatives with a negative market value are
reported under other liabilities.
2.17 Leases
A lease is classified as an operating lease if the
lessor retains substantially all the risks and
rewards incident to ownership. Lease payments
under an operating lease are recognized as an
expense and allocated equally to each period of
the lease term.
2.18 Government grants
A government grant is not recognized until there
is reasonable assurance that the Company will
comply with the conditions attaching to it, and
that BSH will receive the grant. Government
grants are recognized as income on a systematic
and rational basis over the periods necessary to
match them with the related costs that they are
intended to compensate. Grants received for the
acquisition of property, plant, and equipment
are treated as a reduction in the purchase cost
of such assets. Other grants received are initially
recognized as a liability on the balance sheet
(deferred income under other liabilities) and
then recognized in income with the corresponding depreciation over the useful life of the asset
concerned.
3 Changes in the consolidated group
There were no changes in the consolidated
group compared with the previous year.
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
2006
%
2005
%
1,817
21.9
1,586
21.6
4,319
52.0
3,946
53.8
Western Europe
(excluding Germany,
including Turkey)
Eastern Europe
665
8.0
568
7.7
North America
510
6.1
484
6.6
Latin America
282
3.4
212
2.9
Asia
587
7.1
429
5.8
Other Countries
128
1.5
115
1.6
Total
8,308 100.0
7,340 100.0
5 Cost of sales
The cost of sales figure of EUR 5,399 million
(2005: EUR 4,859 million) comprises the full
production-related costs incurred in the manufacture of the products sold.
6 Selling and administrative expenses
Selling and administrative expenses amounted
to EUR 2,063 million (2005: EUR 1,800 million)
and comprised solely costs, income, and
expenses allocated to these categories. General
administrative expenses include personnel and
material costs, and depreciation/amortization
in head office departments, that cannot be
assigned to production, sales and marketing,
or research and development.
7 Research and development costs
Research and development costs of EUR 235
million (2005: EUR 184 million) include research
costs and development expenditure that has
not been capitalized. In 2006, the amount of
capitalized development costs was minor (2005:
EUR 3 million).
73
74
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
8 Other operating income and expenses
2006
2005
Income from the reversal of provisions (not function-related)
11
47
Income from foreign currency transactions
26
24
Income from the reversal of valuation allowances and write-ups
12
20
Leasing income
3
2
Income from the disposal of assets
1
2
Income from foreign exchange derivatives
41
4
Income from costs transferred to third parties
22
7
Miscellaneous other operating income
44
28
160
134
Expenses to set up provisions (not function-related)
47
37
Expenses incurred through foreign currency transactions
30
30
Expenses incurred through valuation allowances
29
22
4
5
Total other operating income
Expenses in connection with the disposal of assets
11 Other financial result
Other financial result from the market-value
measurement of financial instruments, the disposal of securities, the measurement of receivables for liabilities denominated in foreign currency, the reversing of the discount to provisions, together with other financial income and
expenses. In 2006, available-for-sale financial
assets were sold. This resulted in a reduction in
equity of EUR 17 million (2005: EUR 10 million)
and the recognition in income of an equivalent
figure under other financial result.
12 Income taxes
By origin, the BSH Group’s taxes on income
break down as follows:
6
4
Losses on foreign exchange derivatives
19
8
Expenses from cost transfers
15
0
Effective taxes
181
193
Miscellaneous other operating expenses
52
2
Deferred income taxes
–11
–79
202
108
Total income taxes
170
114
Other taxes
Total other operating expenses
9 Income from investments
Income from investments primarily comprises
dividends paid by Kreisbaugesellschaft Heidenheim GmbH, Giengen.
10 Net interest expense
Interest income
Interest expenses
2006
2005
52
41
– 63
– 46
–11
–5
– thereof affiliated companies:
EUR 0.3 million (2005: EUR 0,3 million)
Net interest cost
Interest income and expense calculated under
the effective interest rate method was recognized
in income for financial assets and financial liabilities not measured at fair value.
2006
2005
Income taxes paid or payable in the various
countries as well as deferred taxes are reported
under income taxes. Deferred taxes are calculated on the basis of temporary differences
between the carrying amounts of assets and
liabilities in the IFRS financial statements and
the tax base, and on the basis of consolidation
transactions and recoverable loss carryforwards.
The calculation is based on the tax rates
expected to be in force in the various countries
at the time the tax materializes. In all cases, the
rates are derived from the laws and provisions
in force or enacted at the balance sheet date.
The corporate income tax rate in 2006 in Germany was 25% plus a solidarity surcharge of
5.5% of the corporate income tax itself. Taking
into account municipal trade tax (average trade
tax multiplier of 380%), the overall tax rate for
German companies was around approximately
39% (2005: 38%).
N O T E S T O T H E S T AT E M E N T O F I N C O M E
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
Deferred tax assets are recognized to the extent
that it is probable that future taxable profit will
be available. At each balance sheet date, a new
assessment is made of unrecognized deferred
tax assets and of the carrying amount of
deferred tax assets.
Deferred tax assets and liabilities are derived
from the following individual balance sheet
items:
The reported income tax expense in the year
under review of EUR 170 million is EUR 42 million lower than the expected income tax
expense of EUR 212 million that would in theory
arise if the German tax rate of 39% were to be
applied to the consolidated profit before tax.
Intangible assets and property, plant, and equipment
Deferred tax
assets
2006
2005
2006
2005
5
6
69
86
Receivables and other assets
20
27
18
11
Inventories
50
40
5
4
Liabilities
34
19
3
3
107
125
0
0
93
88
1
4
107
96
0
0
17
19
0
0
0
0
6
9
Total, gross
433
420
102
117
Pension provisions
Other provisions
Tax loss carryforwards
Tax credits
The reconciliation between the expected tax
expense and the reported tax expense is as
follows:
Profit before tax
Available-for-sale securities
2006
2005
542
500
Expected taxes when using the tax
liabilities
Valuation allowances on loss carryforwards
– 56
– 43
0
0
Offsets*
– 84
– 87
– 84
– 87
Deferred taxes after offsetting
293
290
18
30
rate applicable to the parent company
of 39% (2005: 38%)
212
191
Differences due to the tax rate
–70
– 53
56
62
– 29
– 86
* Under IAS 12 (“Income Taxes”), deferred tax assets and liabilities are offset under certain
circumstances. Tax assets and liabilities have only been offset if they are levied by the same tax
authority.
Permanent differences
(incl. non-deductible
goodwill/operating expenses)
Effect of differences in the tax base
1
0
Reported income tax expense
170
114
Effective tax burden in %
31.4
22.8
Other differences
Deferred taxes recognized directly in equity
comprise deferred taxes on available-for-sale
financial assets of EUR 4 million (2005: EUR 5
million) and on actuarial losses on pension obligations of EUR 46 million (2005: EUR 38 million).
As of December 31, 2006, the BSH Group had
unutilized tax loss carryforwards of EUR 375 million (2005: EUR 313 million). The following table
shows the utilization periods for tax loss carryforwards:
Utilization periods
within one year
2006
2005
0
0
90
65
285
248
375
313
can be carried forward with restrictions,
more than three years
can be carried forward without restrictions
Deferred tax assets of EUR 51 million (2005: EUR
53 million) have been recognized on an amount
of EUR 210 million (2005: EUR 186 million) of the
total tax loss carryforwards that can probably be
recovered. This led to a deferred tax expense of
EUR 2 million (2005: deferred tax income of EUR
28 million).
75
76
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
13 Minority interest
The profit attributable to the minority interest in
BSH Ev Aletleri Sanayi ve Ticaret A.Ş., Istanbul,
and BSW Household Appliances Co., Ltd., Wuxi,
is EUR 8 million (2005: EUR 8 million).
17 Trade accounts receivables
Trade accounts receivable (third parties)
Wages and salaries
Social security contributions
Retirement and support services
Personnel expenses
2006
2005
1,232
1,146
198
229
84
73
1,514
1,448
2
8
Valuation allowances
–108
–104
Trade accounts receivable, net
1,809
1,478
Trade accounts receivables include an amount
of EUR 0.3 million due after one year (2005: EUR
0.2 million).
18 Other current assets
Other receivables due from third parties
The breakdown of the average number of
employees for the year is as follows:
2005
BSH GmbH
Prepaid expenses
2005
106
38
1
0
12
12
11
11
115
116
Current derivative financial instruments
blue-collor staff
6,820
6,861
(note 30)
white-collor staff
5,265
5,211
Amounts receivable from tax authorities
346
346
Other companies in Germany
1,641
1,702
Companies outside Germany
23,024
21,259
Total
37,096
35,379
apprentices
2006
Other receivables due from
nonconsolidated affiliated companies
2006
2005
1,574
Trade accounts receivable
(non-consolidated affiliated companies)
14 Other income statement disclosures
The functional costs include the following personnel expenses:
2006
1,915
15 Cash and cash equivalents
The breakdown of cash and cash equivalents is
as follows:
and employees
Write-downs on other current assets
Total other current assets
–2
0
243
177
Prepaid expenses primarily consist of lease
payments and IT service payments made in
advance.
19 Inventories
2006
2005
42
38
6
11
Deposits with banks
257
526
Work in process
Cash and cash equivalents
305
575
Raw materials, consumables, and supplies
Checks
Cash on hand
Finished goods and merchandise
2006
2005
719
575
36
36
204
166
Spare parts
46
42
All items under cash and cash equivalents are
due within three months, as in 2005.
Advance payments made
14
9
1,019
828
16 Securities
In accordance with IAS 39, securities are classified as available for sale and recognized at a
market value of EUR 22 million (2005: EUR 20
million).
The spare parts item comprises components
held in warehouses to cover a 10-year parts warranty on household appliances. The write-down
included in the year under review was EUR 96
million (2005: EUR 84 million).
Total
NOTES TO THE BALANCE SHEET
20 Noncurrent financial assets
Noncurrent financial assets comprise the following:
Financial assets
Financial investments
Other noncurrent assets
Noncurrent financial assets
2006
2005
714
467
4
1
28
25
746
493
The following table shows the breakdown of
other noncurrent assets:
2006
2005
5
6
3
0
Miscellaneous other noncurrent assets
20
19
Total other noncurrent assets
28
25
Loans (to third parties)
Noncurrent derivative financial instruments
(note 30)
21 Property, plant, and equipment
The statement of changes in assets (see Annex I)
shows a breakdown of the property, plant, and
equipment items aggregated on the face of the
balance sheet, together with the changes in
these items in the year under review.
An additional depreciation expense of EUR 11
million was recognized in 2006 owing to changes
in the estimates of the useful lives of assets.
At the balance sheet date, obligations incurred
in connection with the acquisition of property,
plant, and equipment amounted to EUR 3 million (2005: EUR 13 million). In 2006, availability
restrictions amounted to EUR 9 million. Government grants with a total value of EUR 8 million
were deducted from new additions in the year
under review, and further government grants
with a value of EUR 8 million were recognized
as deferred income.
22 Intangible assets
Please refer to the statement of changes in
assets for information on changes in intangible
assets.
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
Additions under this item included the costs of
purchased software, tool licenses, and industrial
and similar rights. A significant item in intangible
assets was goodwill, for the most part attributable
to BSH-TR and BSH-USA. Additions to intangible
assets (goodwill) of EUR 6 million resulted from
the acquisition of additional shares in a subsidiary
(2005: EUR 6 million).
To meet the requirements of IFRS 3, in combination with IAS 36, and to test for goodwill
impairment, the cash-generating units have
been defined to coincide with the legal entities,
and an impairment test has been performed.
For the impairment test, the carrying amount
of each cash-generating unit is determined
by allocating assets and liabilities, including
attributable goodwill and intangible assets. An
impairment loss is recognized if the recoverable
amount of a cash-generating unit is lower than
its carrying amount. The recoverable amount is
the higher of fair value less costs to sell and
value in use.
For its impairment tests, BSH uses a Discounted
Cash Flow (DCF) method to determine the expected
future cash inflows of the cash-generating unit.
The calculation of the cash flows of each cashgenerating unit is based on business plans
with a planning horizon of three years. We have
assumed a uniform rate of increase due to
inflation of 1.0% after the end of the three-year
planning period. Country-specific discount rates
vary between 8% p.a. and 13.9% p.a. (between
6.5% p.a. and 9% p.a. in 2005), including the
risk mark-up.
All goodwill items recognized in the balance
sheet and assigned to cash-generating units
were tested for impairment. An impairment
loss of EUR 1 million (2005: EUR 1 million) was
recognized as a result.
77
78
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
23 Current and noncurrent financial liabilities
Current and noncurrent financial liabilities comprise solely liabilities to banks.
The liabilities to banks have the following
remaining periods to repayment:
Interest rate type
Fixed
2006
2005
up to one year
263
220
1– 5 years
382
205
over 5 years
200
250
Total
845
675
Interest rate
Currency
Up to 1 year
Over 1 year
Carrying
amount at
Dec 31, 2006
1.3%
BRL
16
–
16
Fixed
2.4%
EUR
104
–
104
Fixed
2.7%
EUR
_
545
545
Fixed
15.5%
TRL
81
–
81
Variable
1,9% – 3.4%
EUR
11
–
11
Variable
3.8% – 10.5%
USD
11
4
15
Variable
0% – 5.5%
GBP
13
_
13
Other
27
33
60
Total
263
582
845
Interest rate type
Interest rate
Currency
Up to 1 year
Over 1 year
Carrying
amount at
Dec 31, 2006
Fixed
3.3%
EUR
–
300
300
Fixed
4.5%
EUR
–
26
26
Fixed
5.1%
EUR
_
26
26
Fixed
5.5%
EUR
–
51
51
Fixed
7.0%
EUR
20
–
20
34
Variable
2.4% – 6.0%
EUR
34
–
Variable
4.0% – 18.9%
USD
33
–
33
Variable
14.2% – 19.1%
BRL
19
_
19
114
52
Other
Total
220
455
24 Trade accounts payables
Trade accounts payables are recognized at the
higher of their nominal amount and repayment
amount; all trade accounts payables are due
within one year, as in 2005.
25 Other liabilities and provisions (current)
The breakdown of items under current provisions and other current liabilities is as follows:
2006
2005
49
77
Other provisions
389
298
Current provisions
438
375
Notes payable
90
62
Advance payments received
14
31
383
316
Provisions for taxes
Deferred liabilities
Deferred income
Taxes payable
6
3
56
107
Current derivative financial instruments
2
9
Miscellaneous other liabilities
154
133
Other current liabilities
705
661
(note 30)
The statement of changes in provisions (note
26) gives details of changes in current provisions.
26 Other liabilities and provisions (noncurrent)
The following table shows the breakdown of
noncurrent other liabilities and noncurrent provisions:
2006
2005
Loans
0
13
166
Miscellaneous other provisions
5
4
675
Other noncurrent provisions
5
17
Liabilities to banks due within one year are
reported as current financial liabilities; liabilities
to banks due in more than one year are classified as noncurrent financial liabilities.
Provisions for taxes
102
76
Other provisions
313
250
Noncurrent provisions
415
326
NOTES TO THE BALANCE SHEET
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
The statement of changes in provisions shows the changes in other current and noncurrent provisions:
Provisions
for taxes
Personnel
and social
security
obligations
Obligation
relating to
the sales
function
Other
provisions
Total
153
222
241
85
701
0
0
–3
0
–3
76
53
96
17
242
Jan. 1, 2006
Exchange rate differences
Use
Reversal
Additions, including interest cost
Reclassification
Dec. 31, 2006
Current portion of provisions
Noncurrent portion of provisions
The additions include expenses from reversing
the discount of EUR 5 million (2005: EUR 4 million). Reclassifications are reported under
accrued expenses.
The provisions for personnel and social security
obligations include primarily obligations for
partial retirement, personnel restructuring, and
long-service bonuses. The provisions for obligations relating to the sales function include
primarily provisions for warranty obligations.
Other provisions include provisions of EUR 14
million (2005: EUR 19 million) for put options.
27 Provisions for pensions and
other postretirement benefits
27.1 Defined benefit plans
There are postretirement benefit entitlements
for employees in Germany, primarily granting
capital/pension benefits and fixed individual
amounts. For employees in other countries
(Belgium, United Kingdom, Sweden, Switzerland, and Norway), the benefits mainly depend
on the number of years of service and the salary
received immediately prior to retirement.
The postretirement benefits granted in France,
Greece, Italy, Austria, and Turkey are lump-sum
payments.
The postretirement benefits in Germany are
mainly financed by the recognition of pension
provisions; part of the obligation is met through
a support fund. In other countries, they are
mainly financed through insurers and pension
funds.
2
13
35
18
68
75
107
165
112
459
1
4
0
1
6
151
267
272
163
853
49
140
187
62
438
102
127
85
101
415
The defined benefit obligation is measured
annually using the projected unit credit method.
In accordance with IAS 19.93A, the SORIE method
is used to determine the pension provisions and
the pension costs. Actuarial gains and losses
are disclosed in the SORIE statement and recognized directly in equity.
The breakdown of pension obligation funding is
as follows:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
45
39
44
36
Present value of funded pension obligation
814
85
836
79
External plan assets
Present value of unfunded pension obligation
– 66
– 61
– 62
– 53
Unrecognized actuarial gains (+)/losses (–)
0
0
0
0
Unrecognized past services costs
0
0
0
0
793
63
818
62
Pension obligation
79
80
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
The pension provisions changed as follows in the course of fiscal 2006:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
818
62
778
58
Exchange rate differences
0
–2
0
2
Transfer values
0
0
0
0
– 32
–1
– 30
–1
Brought forward
Pension and capital amounts paid by the company
Employer contributions to external funds
–6
–5
–1
–6
Reversal (-)/addition (+)
–11
8
51
3
Deferred compensation
3
0
3
0
Amount disclosed in the SORIE
Pension provison
21
1
17
6
793
63
818
62
The expense recognized in the income statement breaks down as follows:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
Service cost
22
5
18
5
Interest cost
34
5
37
5
Expected return on external plan assets
–3
–3
–4
–2
and settlement
– 64
1
0
–5
Reversal (-)/addition (+) of deferred compensation
–11
8
51
3
Expense (+)/income (–) from curtailment
The total expense is recognized in the functional areas.
The reconciliation of benefit obligations and assets is as follows:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
881
115
839
103
2
0
3
0
22
5
18
5
Present value of the obligation at beginning of year
Deferred compensation
Service cost
Employee contributions
Interest cost
Actuarial gain (–)/loss (+)
Effect of curtailments and settlements
0
1
0
1
34
5
37
5
21
2
18
10
– 64
1
0
–5
0
Transfer values
0
0
0
Exchange rate effects
0
–2
0
2
Total amount of pensions and capital paid
–37
–3
–34
–6
Present value of the obligation at end of year
859
124
881
115
62
53
61
44
Expected income from external plan assets
3
3
4
2
Actuarial gain (+)/loss (–)
0
1
1
4
Effect of curtailments and settlements
0
0
0
0
Employer and employee contributions to external funds
6
7
1
7
Exchange rate effects
0
0
0
0
Amounts of pension and capital paid by external funds
–5
–3
–5
–4
Market value of plan assets at end of year
66
61
62
53
Market value of plan assets at beginning of year
For 2007, contributions paid to external funds are expected to be a total of
EUR 6 million.
NOTES TO THE BALANCE SHEET
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
The actual return on plan assets was as follows:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
Expected return on external plan assets
3
3
4
2
Actuarial gain (+)/loss (–)
0
1
1
4
Actual value of plan assets at end of year
3
4
5
6
The amounts disclosed in the statement of recognized income and
expense (SORIE) are as follows:
Actuarial gain (+)/loss (–)
Effect of asset limitation (IAS 19.58(b))
Amount disclosed in the SORIE
Total amounts disclosed in the SORIE
Deferred taxes on actuarial gains (+)/losses (–)
Total amounts recognized in equity
Net actuarial gains/losses reported in equity
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
–21
–1
–17
–6
0
0
0
0
–21
–1
–17
–6
–112
–12
– 91
–11
8
0
6
2
43
3
35
3
– 69
–9
– 56
–8
The actuarial gains and losses incurred are attributable to the following
categories:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
Difference between expected and
0
1
1
4
17
1
18
–1
assumptions
– 38
–3
– 36
–9
Total actuarial gains (+)/loss (–)
– 21
–1
–17
–6
actual return on external plan assets
Difference between expected and actual values
Adjustment due to changes in measurement
The breakdown in the other prior reporting period in accordance with IAS
19.120 A (p) is as follows:
Germany
Other
countries
2004
2004
Present value of unfunded
post-retirement benefit obligations
41
30
External plan assets
61
44
3
3
–74
–5
0
0
Actual income from external plan assets
Actuarial gains (+)/losses (-)
included in SORIE
Target/actual variance
81
82
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
The breakdown of the reported plan assets is as
follows:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
%
%
%
%
Shares and other securities
22.2
52.5
26.3
53.3
Bonds
33.6
29.8
36.5
28.6
Real estate
12.2
6.9
13.0
7.4
Other assets
32.0
10.8
24.2
10.7
100.0
100.0
100.0
100.0
Total
20.7% (2005: 19.5%) of the plan assets reported
for Germany are invested in the sponsors of the
support fund.
The expected return on the reported external
plan assets is as follows:
2006
2005
%
%
Shares and other securities
8.5
8.3
Bonds
5.8
5.5
Real estate
4.8
4.5
Other assets
5.3
5.0
Weighted total
6.1
6.0
The expected return on external plan assets for
companies outside Germany ranges between
4.0% and 6.7%. The expected return on each
asset class is comparable to that reported for
Germany.
The expected return per asset class is derived
from the relevant risk premium on the return
on AA-rated corporate bonds (the return on A Arated corporate bonds determines the relevant
discount rate).
The calculation of the pension obligations and
pension expense was based on the following
assumptions:
Germany
Other
countries
Germany
Other
countries
2006
2006
2005
2005
%
%
%
%
4.5 / 4.25
4.50
4.25
4.30
Expected return on external plan assets
5.00
5.10
6.00
5.20
Salary inflation
3.00
3.70
2.50
3.60
Pension inflation
1.80
–
1.50
–
Imputed interest rate
In Germany, the pension obligations of BSH
Bosch und Siemens Hausgeräte GmbH have
been remeasured as of December 31, 2006,
using a discount rate of 4.5% p.a. A remeasurement has not been carried out for the other
German companies.
The measurement assumptions for companies
outside Germany are weighted average values.
In Germany, the 2005G Heubeck tables were
used as the basis for the biometric calculation.
Employee turnover probabilities were estimated
for specific age groups and genders.
27.2 Defined contribution plans
In 2006, the Company made contributions of
EUR 80 million (2005: 73 million) to defined
contribution plans (employer contributions to
statutory pension insurance).
27.3 Partial retirement agreements and
long-service bonus commitments
In some countries, there are also obligations
relating to partial retirement agreements and
long-service bonus commitments. The amount
of the obligation for these plans was around
EUR 122 million at the end of 2006 (2005: EUR
115 million); the expense recognized in 2006
amounted to EUR 7 million (2005: EUR 3 million).
28 Shareholders’ equity
The statement of changes in shareholders’
equity shows the changes in the BSH Group’s
equity and its components.
The exchange differences resulting from the
translation of the financial statements of
subsidiaries outside Germany are recognized
directly in equity in the currency translation
reserve.
In accordance with IAS 19, the actuarial
gains/losses item comprises actuarial
gains/losses on pension provisions (net of
deferred taxes) recognized directly in equity.
The reserve for available-for-sale securities
includes the measurement gains or losses on
securities and derivative financial instruments,
net of deferred taxes, recognized directly in
equity.
NOTES TO THE BALANCE SHEET
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
The minority interest item includes the paid-in
capital and the net profit for the year generated
by the sales companies whose shares are held
by Robert Bosch GmbH and Siemens AG. This
item also includes the minority interest in the
equity of BSH Ev Aletleri Sanayi ve Ticaret A.Ş.,
Istanbul, and BSW Household Appliances Co.,
Ltd., Wuxi, including any attributable pro rata
profit or loss.
been adjusted for exchange rate effects. The
exception to this is the figure for cash and cash
equivalents. Cash and cash equivalents
includes an amount of EUR 1 million (2005: EUR
4 million) that is subject to exchange control
restrictions. In accordance with IAS 7.31 and IAS
7.35, the cash provided by operating activities
includes the following inflows and outflows:
The management of the Group is proposing
that, of the reported net profit for the year of
EUR 364 million, a total of EUR 152 million be
distributed to the shareholders and EUR 212
million be retained and carried forward to the
next fiscal year.
Income taxes paid
29 Notes to the cash flow statement
The cash flow statement reports how the BSH
Group’s cash and cash equivalents changed in
the course of 2006 as a result of cash inflows
and outflows. In accordance with IAS 7 (“Cash
Flow Statements“), a distinction is made
between cash flows from operating, investing,
and financing activities.
The cash flow statement is determined using
the indirect method starting from the profit
before tax. The net cash from operating activities is determined after applying adjustments
for non-cash income and expenses, primarily
depreciation and amortization, and after taking
into account any changes in working capital.
Investing activities comprises additions under
noncurrent assets and the purchase or sale of
securities. Cash flows from financing activities
shows cash inflows and outflows from the drawdown or repayment of financial liabilities and
from dividends.
2006
2005
145
90
Interest paid (third parties)
58
30
Interest received (third parties)
42
29
Non-cash interest
–5
0
30 Financial instruments
A financial instrument is a contract that simultaneously leads to a financial asset in one entity
and a financial liability or equity instrument in
another. Financial instruments involve primary
as well as derivative assets or liabilities. Derivative financial instruments are used to hedge
items on the balance sheet and future cash
flows.
IAS 39 gives four categories of financial instruments:
– Financial investments held to maturity
– Financial assets/liabilities held for trading
– Available-for-sale financial assets
– Loans and receivables
In the BSH Group, financial instruments are
generally classified as “loans or receivables” or
as “available for sale”. “Regular way” purchases
and sales of financial instruments are recognized or derecognized using settlement date
accounting.
30.1 Primary financial instruments
The cash and cash equivalents reported in the
cash flow statement comprises cash in hand,
checks, and bank balances, providing they are
available within three months. The effect of
exchange rate changes on cash and cash equivalents and the effect of changes in basis of consolidation are reported separately. The changes
in the balance sheet items reported in the cash
flow statement cannot be directly reconciled to
the balance sheet statement because they have
Available-for-sale financial instruments
Available-for-sale financial instruments are
always reported at fair value. The fair value is
generally the market value. If there is no active
market, fair value is determined using a generally accepted measurement technique.
83
84
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
Investments in nonconsolidated subsidiaries
and associates
Shares in nonconsolidated subsidiaries and
associates are always reported at amortized
cost; impairment losses are recognized where
appropriate. There is no active market for these
companies and fair value cannot therefore be
reliably determined with reasonable time and
effort.
Loans/receivables and financial liabilities
Loans, receivables, and liabilities are measured
at amortized cost using the effective interest
rate method, providing they are not related to
hedges. In particular, these are
– Loans under financial assets
– Trade receivables and trade payables
– Other current assets and liabilities.
Loans and receivables under financial assets
have a maturity of up to 36 years (2005: 37
years), whereas trade account receivables and
payables are due within one year.
The amortized cost of a financial liability is
calculated as the amount in which a financial
asset or a financial liability was measured on
initial recognition, less any repayments, impairment losses, or uncollectibility write-downs, and
net of the premium/discount. The premium/discount is allocated using the effective interest
rate method over the life of the financial asset
or liability.
For current receivables and liabilities, amortized
cost is the nominal amount or the repayment
amount.
The BSH Group is not exposed to any relevant
interest rate risks on either the assets side or
liabilities side. For more information see note 23.
There is no substantial concentration of payment default risk in reported receivables, nor is
disclosure required.
30.2 Derivative financial instruments
Hedging policy and financial derivatives
The activities of BSH are impacted by a number
of factors, including exchange rate fluctuations.
It is the aim of the Company’s business policies
to limit these risks with hedging measures.
Hedging transactions are conducted exclusively
with first-rate national and international banks.
A limit is imposed on transactions with each
contract partner.
Binding internal rules and guidelines provide
firm guidance on permitted actions and responsibilities for hedging, especially the hedging
relationship with operating business and financial investment or financing transactions. BSH
does not use derivative financial instruments
for speculative purposes. A Treasury Committee
defines the hedging strategy once a quarter.
Changes in fair values of derivative financial
instruments are recognized in the income statement.
Exchange rate risks
As a basis for controlling its exposure to
exchange rate risks, BSH primarily uses a
Group-wide cash-flow reporting system, differentiated by currency; the subsidiaries outside
Germany prepare rolling monthly reports for
headquarters.
Most of the hedging instruments used are forward exchange contracts; options are used in
some cases. To monitor the risks from financial
derivatives, hedges are marked to market on
each bank working day; this valuation, plus
additional information such as exchange rate
gains or losses and risks, is available to the
employees concerned and to the managers
responsible.
The nominal volumes of the reported hedges
represent the total of purchase and selling
amounts on which the hedges are based.
NOTES TO THE BALANCE SHEET
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
Nominal volume
Market value
2006
Period to maturity
up to
1 year
2005
1 to
5 years
up to
1 year
1 to
5 years
2006
2005
Currency derivatives without hedge
Forward exchange contracts
659
0
446
0
5
–6
Currency options
225
0
126
0
0
0
30
49
76
55
6
9
Other currency derivatives
Interest rate and other derivatives without hedge
Interest rate swaps
Other interest rate derivatives
Other price hedging instruments
0
0
10
0
0
0
50
0
0
0
1
0
6
0
38
0
0
0
0
0
25
0
0
–1
Currency derivatives with fair-value hedge
Forward exchange contracts
The market values disclosed in the above list
were determined on the basis of information
available on the balance sheet date. They represent the settlement amounts (redemption values)
of the financial derivatives. Redemption values
are calculated on the basis of quoted prices and
standardized procedures. The maximum credit
risk of derivative financial instruments is limited
to the total positive market values in the event
of default by a contract partner of BSH GmbH or
the BSH Group companies.
Interest rate risks
Exposure to interest rate risks, i.e. possible
fluctuations in the value of financial instruments due to changes in market interest rates,
may arise particularly on medium-term and
long-term receivables and liabilities. The BSH
Group is not exposed to any relevant interest
rate risks either on the liabilities side or on the
assets side.
31 Leases
The breakdown of future minimum lease payments under non-cancelable leases is as follows:
Maturity
The minimum lease payments relate primarily
to rents paid for real estate. Payments under
rental agreements and leases amounting to EUR
49 million were recognized in income in 2006
(2005: EUR 39 million).
The leases for the land belonging to BSHAF-D
and leased to BSH-D and BSH Hausgeräte Service
Nauen GmbH (BSHHSN-D) had initial terms that
expired on March 31, 2003 (BSH-D) and November 30, 2005 (BSHHSN-D) respectively. From
these dates, the lessees had the right to request
from the lessor a five-year renewal of the lease.
This option is available up to four times. BSH-D
exercised its first option for a renewal up to
March 31, 2008; BSHHSN-D also exercised its
first option for a renewal up to November 30,
2010. BSHAF-D is assuming that the leases will
be renewed on all four occasions.
32 Contingent liabilities and
other financial liabilities
No provisions have been recognized for the
following contingent liabilities, stated at their
nominal values, because it is not deemed
probable that the risk will occur.
2006
2005
within one year
47
41
second to fifth year
84
88
Surety and letters of support
after fifth year
88
79
Guarantees on notes
219
208
Other contingent liabilities
0
0
18
68
Total
Total
2006
2005
15
16
3
52
85
86
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
33 Related party disclosures
The following companies or persons are related
parties for BSH GmbH under IAS 24:
– Robert Bosch GmbH, Stuttgart, Germany
– Siemens AG, Munich and Berlin, Germany
– Companies directly or indirectly controlled
by BSH GmbH
– Other consolidated and non-consolidated
affiliated companies of the Robert Bosch
Group and the Siemens Group
– Members of the executive management or
the Supervisory Board
– Companies in which Robert Bosch GmbH,
Siemens AG, or members of the management
hold a significant portion of the voting rights.
Transactions with these related parties are
conducted on an arm’s length basis. The goods
and services bought from related parties mainly
comprise production supplies and sales services, and a small amount of training and other
services. The goods and services supplied to
related parties primarily involve the sale of
household appliances.
The remuneration paid to the Supervisory Board
amounted to EUR 0.1 million (2005: EUR 0.1 million); executive management remuneration
amounted to EUR 3.7 million (2005: EUR 2.7 million). Former members of executive management and their surviving dependents received
payments of EUR 1.8 million, including pensions
and transitional payments (2005: EUR 1.8 million). As of December 31, 2006, provisions
amounting to EUR 22.2 million (2005: 22.5 million) were recognized for pensions and benefit
entitlements for these persons.
In 2006, as in 2005, there were no loans to
members of the executive management or the
Supervisory Board. The members of the executive management and the Supervisory Board
are listed in the annexes.
Munich, February 26, 2007
BSH Bosch und Siemens Hausgeräte GmbH
Executive management
87
G R O U P F I N A N C I A L S TAT E M E N T S
Appendix I
Consolidated Statement of Changes in Assets
January 1 to
December 31, 2006
(in EUR million)
I. Property, plant, and equipment
Dis
p os
a ls
ns
itio
A dd
Cha
n
con ges in
s ol i
da t t h e
ed g
rou
p
Cur
re
tion ncy tr
diff ansla
ere
nce s
Jan
. 1,
200
6
Purchase and production cost
Not
e
88
20
Land and buildings
709
–9
0
17
8
Technical equipment and machinery
1,329
–10
0
75
51
Other equipment, operating, and
office equipment
1,068
–8
0
100
42
Assets under construction
59
0
0
122
1
Advance payments on property,
plant, and equipment
53
–1
0
34
0
3,218
– 28
0
348
102
Patents, licenses, etc. (excl. software)
33
–3
0
1
1
Software
48
0
0
6
1
Goodwill
187
–3
0
6
0
4
0
0
3
0
272
–6
0
16
2
29
0
0
0
0
3
0
0
0
0
32
0
0
0
0
3,522
– 34
0
364
104
II. Intangible assets
21
Purchased intangible assets
Advance payments on intangible assets
Self-created intangible assets
Software
Development expenses
C O N S O L I D AT E D S T AT E M E N T O F C H A N G E S I N A S S E T S
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
Carrying
amounts
Dec
. 31
, 20
Rev
e
rsal
06
tion
s
Rec
lass
ifica
Dis
p os
a ls
ear
*
nt y
Cur
re
Cha
n
con ges in
s ol i
da t t h e
ed g
rou
p
Cur
re
tion ncy tr
diff ansla
ere
nce s
Jan
. 1,
200
6
06
Dec
. 31
, 20
Rec
lass
ifica
tion
s
Depreciation, amortization, impairment losses
Dec. 31,
2006
18
727
290
–2
0
27
5
0
0
310
417
–4
1,339
979
–5
0
106
46
– 45
0
989
350
99
1,217
714
–4
0
134
39
45
0
850
367
– 70
110
0
0
0
3
0
0
0
3
107
– 43
43
0
0
0
0
0
0
0
0
43
0
3,436
1,983
– 11
0
270
90
0
0
2,152
1,284
0
30
27
–2
0
1
1
–3
0
22
8
4
57
39
0
0
7
1
3
0
48
9
0
190
2
0
0
1
0
0
0
3
187
–4
3
0
0
0
0
0
0
0
0
3
0
280
68
–2
0
9
2
0
0
73
207
0
29
7
0
0
3
0
0
0
10
19
0
3
0
0
0
0
0
0
0
0
3
0
32
7
0
0
3
0
0
0
10
22
0
3,748
2,058
–13
0
282
92
0
0
2,235
1,513
*there of 33 Mio. EUR Impairment of tangible fixed assets and 1 Mio. EUR Impairment of intangible fixed assets.
89
G R O U P F I N A N C I A L S TAT E M E N T S
Consolidated Statement of Changes in Assets
January 1 to
December 31, 2005
(in EUR million)
I. Property, plant, and equipment
Dis
p os
a ls
A dd
itio
ns
up
Cha
con nges i
s ol i n t h
da t
ed g e
ro
Cur
r
tion ency t
diff rans
ere
nce las
Jan
. 1,
200
5
Purchase and production costs
Not
e
90
20
Land and buildings
624
20
0
29
6
1,249
31
0
49
59
976
21
0
106
59
Assets under construction
67
2
0
82
1
Advance payments on property,
plant, and equipment
37
0
0
50
0
2,953
74
0
316
125
Patents, licenses, etc. (excl. software)
29
3
0
1
0
Software
43
1
0
5
1
Goodwill
181
0
0
6
0
0
0
0
4
0
253
4
0
16
1
19
0
0
4
0
Development expenses
0
0
0
3
0
Intangible assets under construction
6
0
0
0
0
25
0
0
7
0
3,231
78
0
339
126
Technical equipment and machinery
Other equipment, operating, and
office equipment
II. Intangible assets
21
Purchased intangible assets
Advance payments on intangible assets
Self-created intangible assets
Software
C O N S O L I D AT E D S T AT E M E N T O F C H A N G E S I N A S S E T S
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
Carrying
amounts
Dec
. 31
, 20
Rev
e
rsal
05
tion
s
Rec
lass
ifica
Dis
p os
a ls
Cur
re
nt y
ear
up
Cha
con nges i
s ol i n t h
da t
ed g e
ro
Cur
r
tion ency t
diff rans
ere
nce las
Jan
. 1,
200
5
05
Dec
. 31
, 20
Rec
lass
ifica
tion
s
Depreciation, amortization, impairment losses
Dec. 31,
2005
42
709
268
4
0
22
4
0
0
290
419
59
1,329
926
18
0
77
55
13
0
979
350
24
1,068
659
11
0
111
54
–13
0
714
354
– 91
59
0
0
0
0
0
0
0
0
59
– 34
53
0
0
0
0
0
0
0
0
53
0
3,218
1,853
33
0
210
113
0
0
1,983
1,235
0
33
20
3
0
4
0
0
0
27
6
0
48
33
0
0
7
1
0
0
39
9
0
187
1
0
0
1
0
0
0
2
185
0
4
0
0
0
0
0
0
0
0
4
0
272
54
3
0
12
1
0
0
68
204
6
29
5
0
0
2
0
0
0
7
22
0
3
0
0
0
0
0
0
0
0
3
–6
0
0
0
0
0
0
0
0
0
0
0
32
5
0
0
2
0
0
0
7
25
0
3,522
1,912
36
0
224
114
0
0
2,058
1,464
91
92
Share owner BSH Bosch und Siemens Hausgeräte GmbH
as at December 31, 2006
Appendix II
Capital
investment in %
Consolidated subsidiaries according to IAS 27.12
Capital
investment in %
South America
BSH Electrodomésticos S.A., Buenos Aires
Germany
Constructa-Neff Vertriebs-GmbH, Munich
50
100
BSH Continental Eletrodomésticos Ltda., São Paulo
100
BSH Continental da Amazônia Ltda., Manaus
100
Neff GmbH, Munich
100
BSH Electrodomésticos S.A.C., Callao-Lima
100
BSH Hausgeräte Service GmbH, Munich
100
Briky S.A., Montevideo
100
BSH Hausgerätewerk Nauen GmbH, Nauen
100
BSH Hausgeräte Service Nauen GmbH, Nauen
100
Asia
Gaggenau Hausgeräte GmbH, Munich
100
BSW Household Appliances Co., Ltd., Wuxi
60
BSH Vermögensverwaltungs-GmbH, Munich
100
BSH Home Appliances Co., Ltd., Chuzhou
100
BSH Hausgeräte Vetriebs GmbH, Munich
100
Jiangsu BS Home Appliances Sales Co., Ltd. Nanjing
100
Europe
BSH Electrical Appliances (Jiangsu) Co., Ltd. Nanjing
100
BSH Home Appliances Ltd., Hong Kong
100
BSH Home Appliances S.A., Brussels
100
BSH Home Appliances Ltd., Tel Aviv
100
BSH Hvidevarer A/S, Ballerup
100
BSH Home Appliances Pte. Ltd., Singapore
100
BSH Kodinkoneet Oy, Helsinki
100
BSH Home Appliances Ltd., Auckland
100
BSH Electroménager S.A.S., Saint Ouen
100
BSH Home Appliances Pty Ltd, Clayton, Victoria
100
Gaggenau Industrie S.A.S., Lipsheim
100
BSH Home Appliances Ltd., Bangkok
100
BSH Ikiakes Syskeves A.B.E., Athens
100
BSH Home Appliances Manufacturing Ltd., Kabinburi
100
BSH Home Appliances Ltd., Milton Keynes
100
BSH Home Appliances FZE, Dubai
100
BSH Elettrodomestici S.p.A., Milan
100
BSH Huishoud-elektro B.V., Amsterdam
100
Africa
Gaggenau Nederland B.V., Nieuwegein
100
BSH Home Appliances (Pty) Ltd., Johannesburg
BSH Husholdningsapparater A/S, Oslo
100
100
BSH Hausgeräte Gesellschaft mbH, Vienna
100
Consolidated subsidiaries according to IAS 27.13 (b)
BSH Home Appliances Holding GmbH, Vienna
100
Robert Bosch Hausgeräte GmbH, Munich
BSH Finance Management GmbH, Vienna
100
Siemens-Electrogeräte GmbH, Munich
–
Constructa GmbH, Munich
–
BSH Sprzet Gospodarstwa Domowego Sp.z o.o.,
–
Warsaw
100
BSHP Electrodomésticos, S.U., Lda., Carnaxide
100
Not Consolidated subsidiaries according to IAS 27.13
BSH Electrocasnice S.R.L., Bucharest
100
BSH Bosch und Siemens Hausgeräte Altersfürsorge GmbH,
OOO BSH Bytowaja Technika, Moscow
100
Munich
OOO BSH Bytovye Pribory, St. Petersburg
100
BSH Hushållsapparater A.B., Stockholm
100
Not consolidated subsidiaries due to immateriality
BSH Hausgeräte AG, Geroldswil
100
BSH Home Appliances Sarl, Tunis
100
BSH Drives and Pumps s.r.o., Michalovce
100
BSH Home Appliances Sdn. Bhd., Kuala Lumpur
100
BSH Hišni Aparati d.o.o., Nazarje
100
BSH électroménagers S.A., Luxemburg
100
BSH Electrodomésticos España, S.A., Huarte
100
TOV BSH Pobutova Technika, Kiew
100
BSH PAE, S.L., Vitoria
100
BSH Home Appliances Ltd./Électroménagers BSH Ltée,
BSH Ufesa Industrial, S.A., Echarri-Aranaz
100
Mississauga
BSH Krainel, S.A., Vitoria
100
BSH domácí spotřebiče s.r.o., Prague
100
BSH Ev Aletleri Sanayi ve Ticaret A.S., Istanbul
BSH Háztartási Készülék Kereskedelmi Kft., Budapest
95,31
100
North America
BSH Electrodomésticos S.A. de C.V., Mexico
100
BSH Home Appliances Corporation,
Huntington Beach/New Bern
100
100
100
Several subsidiaries without business operations
Profilo Elektrogeräte-Vertriebsgesellschaft mbH, Munich
100
Linectra AG, Zurich
100
Independent Auditors’ Report
We have audited the consolidated financial
statements prepared by BSH Bosch und
Siemens Hausgeräte GmbH, Munich, comprising
income statement, balance sheet, statement of
changes in equity, cash flow statement, and the
notes to the consolidated financial statements,
together with the group management report for
the business year from January 1 to December 31,
2006. The preparation of the consolidated
financial statements and the group management
report in accordance with IFRS as adopted by
the EU, and the additional requirements of
German commercial law pursuant to § 315a
Abs. (paragraph) 1 HGB are the responsibility
of the parent company’s management. Our
responsibility is to express an opinion on the
consolidated financial statements and on the
group management report based on our audit.
We conducted our audit of the consolidated
financial statements in accordance with § 317 HGB
and German generally accepted standards for
the audit of financial statements promulgated
by the Institut der Wirtschaftsprüfer (Institute of
Public Auditors in Germany). Those standards
require that we plan and perform the audit such
that misstatements materially affecting the presentation of the net assets, financial position,
and results of operations in the consolidated
financial statements in accordance with the
applicable financial reporting framework and in
the group management report are detected with
reasonable assurance. Knowledge of the business activities and the economic and legal environment of the Group and expectations 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 group 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 entities to be included in consolidation, the accounting and consolidation
principles used, and significant estimates made
by management, as well as evaluating the over-
N O T E S T O T H E C O N S O L I D AT E D F I N A N C I A L S T AT E M E N T S
all presentation of the consolidated financial
statements and the group management report.
We believe that our audit provides a reasonable
basis for our opinion.
Our audit has not led to any reservations.
In our opinion, based on the findings of our
audit, the consolidated financial statements of
BSH Bosch und Siemens Hausgeräte GmbH,
Munich, comply with IFRS as adopted by the EU,
the additional requirements of German commercial law pursuant to § 315a Abs.1 HGB, and give
a true and fair view of the net assets, financial
position, and results of operations of the Group
in accordance with these requirements. The
group management report is consistent with the
consolidated financial statements and as a
whole provides a suitable view of the Group’s
position and suitably presents the opportunities
and risks of future development.
Munich, February 28, 2007
Deloitte & Touche GmbH
Wirtschaftsprüfungsgesellschaft
Signed: Dr. Plendl
Signed: Prosig
Wirtschaftsprüfer
Wirtschaftsprüfer
(German Public Auditor)
93
94
Summary of Past Performance
BSH Bosch und Siemens Hausgeräte GmbH (Group)
(in EUR million)
2006
IFRS
2005
IFRS
2004
HGB
2003
HGB
2002
HGB
2001
HGB
2000
HGB
1999
HGB
8,308
13
78
7,340
7
78
6,844
9
77
6,296
0
74
6,289
3
73
6,092
–3
71
6,278
15
71
5,484
4
68
38.0
35.5
34.5
34.4
35.7
35.6
36.5
36.3
1,514
1,448
1,486
1,458
1,448
1,392
1,354
1,276
Investment in tangible fixed assets*
as % of Sales
358
4.3
333
4.5
278
4.1
275
4.4
278
4.4
220
3.6
190
3.0
228
4.1
Depreciation of tangible fixed assets*
as % of capital investment
281
78
223
67
197
71
188
68
175
63
197
89
207
109
259
114
Balance sheet total
5,950
5,325
4,311
3,844
3,611
3,584
3,493
3,141
Fixed assets
2,259
1,957
1,571
1,484
1,277
1,291
1,154
994
Inventories
1,019
828
741
643
669
633
669
608
Trade receivables
and other current assets
2,052
1,655
1,587
1,407
1,181
1,209
1,295
1,141
Share capital and reserves
as % of balance sheet total
2,057
35
1,859
35
1,535
36
1,176
31
961
27
837
23
711
20
631
20
Provisions
1,709
1,581
1,462
1,426
1,380
1,322
1,255
1,162
EBITDA
834
731
770
696
684
715
593
525
EBIT
553
505
541
486
474
470
348
202
Results from ordinary activities
542
500
520
473
434
459
312
168
Net income for the year
(until 2003 before profit transfer)
372
386
367
278
257
241
199
57
Sales
Year-to-year change (%)
Foreign share of sales (%)
Workforce
(in thousands
at Jan. 1 of the following year)
Personnel expenses
*Including intangible assets, excluding goodwill
Helsinki
Oslo
St. Petersburg
Chernogolovka
Stockholm
Moscow
Ballerup
Toronto
Warsaw
Amsterdam Nauen
Berlin
Lódz
Bad Neustadt
Milton Keynes Brussels
Bretten
Prague
Luxembourg
Michalovce
Dillingen
Giengen
Traunreut
Lipsheim
Munich
Paris
Vienna
Budapest
Geroldswil
Nazarje
Milan
Huntington Beach
New Bern
La Follette
Santander
Vitoria
Estella
Lisbon
Mexiko City
Kiew
Bucharest
Chuzhou
Çerkezköy
Huarte
Nanjing
Istanbul
Esquiroz
La Cartuja
Wuxi
Athens
Hong Kong
Montãnana
Tunis
Tel Aviv
Kabinburi
Bangkok
Dubai
Kuala Lumpur
Singapore
Johannesburg
Callao
Hortolândia
São Paulo
Group Headquarters
Auckland
Melbourne
Subsidiaries
Factories
Buenos Aires
Cooking
Washing/Drying
Refrigeration/Freezing
Consumer Products
Dishwashing
Motors, pumps
Wide-coverage sales and customer service network
At as: May 2007
BSH Bosch und Siemens Hausgeräte GmbH
Carl-Wery-Straße 34
D-81739 Munich
Tel.
Fax
+49 89 4590-01
+49 89 4590-23 47
www.bsh-group.com
© BSH Bosch und Siemens Hausgeräte Gmbh, 2007
General information and ordering the following reports:
Konzern-Geschäftsbericht 2006
Group Annual Report 2006
Verantwortung für Umwelt und Gesellschaft 2006
Environmental and Corporate Responsibility 2006
Corporate Communications
Tel.
+49 89 4590-2809
Fax
+49 89 4590-2128
E-Mail corporate.communications@bshg.com