· 2020-03-19 · table of contents contents page 1. summary

Xella Group

Report October 7, 2013

TABLE OF CONTENTS

Contents Page

1. SUMMARY .............................................................................................................................................. 1

2. MANAGEMENT .................................................................................................................................... 10

3. PRINCIPAL SHAREHOLDERS ............................................................................................................ 13

4. OUR BUSINESS AND INDUSTRY ...................................................................................................... 15

5. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND

RESULTS OF OPERATIONS ................................................................................................................ 50

6. DESCRIPTION OF CERTAIN FINANCING ARRANGEMENTS ...................................................... 80

7. RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY ....................................................... 90

8. FORWARD-LOOKING STATEMENTS ............................................................................................. 106

9. INDUSTRY AND MARKET DATA.................................................................................................... 108

10. PRESENTATION OF FINANCIAL AND OTHER INFORMATION ................................................ 109

11. CERTAIN DEFINITIONS .................................................................................................................... 111

FINANCIAL INFORMATION ............................................................................................................................ F-1

1

1. SUMMARY

1.1 Overview

We are a leading European multi-brand manufacturer of wall-building materials and premium dry lining

products as well as a leading European lime producer. With our Ytong, Hebel, Multipor and Silka brands, we

are the largest producer in Europe of autoclaved aerated concrete (“AAC”) by capacity and calcium silicate units

(“CSU”) by number of production plants. We offer a broad range of wall-building material and dry lining

products for use in residential, industrial and commercial construction, as well as lime and limestone for a

variety of applications. We are strongly represented in established markets such as Germany, The Netherlands,

Belgium and France as well as in other markets, including many Eastern European countries that displayed

considerable growth in the past and are expected to return to growth in the mid- to long-term, and in selected

regions in Russia and China. As of June 30, 2013, we operated 99 production plants in 20 different countries,

sold our products in more than 30 countries with a sales presence on three continents and had 6,848 employees

(full-time equivalents). For the twelve-month period ended June 30, 2013, we generated total sales of

€1,256.8 million (with Western Europe, Central and Eastern Europe and Asia/Americas accounting for 75.7%,

20.3% and 4.0% of our total external sales, respectively) and Normalized EBITDA of €206.9 million.

Our business is organized in four business units:

• Building Materials. Our Building Materials business unit primarily focuses on the production and

sale of technically advanced, high-quality materials used for wall-building in new construction

projects as well as renovation and modernization projects. In addition to our standard AAC and CSU

products, our building material product portfolio is comprised primarily of mineral insulation boards

and pre-fabricated compound units made of AAC. Key features of our wall-building material products

include a high degree of thermal insulation, energy efficiency, load-bearing capacity, fire resistance

and sound insulation. Our products offer several advantages in the construction process, in particular,

versatility, ease of handling and dimensional accuracy. We market and sell most of our wall-building

material products under the Ytong, Hebel and Silka brands. In addition to the production and sale of

wall-building material products, we offer several add-on products, such as mortar, tools and

accessories, and provide our customers with a variety of consulting (e.g., planning advice, seminars

for architects, training in product handling and sharing of know-how for sustainable and energy

efficient building) and other services. For the twelve-month period ended June 30, 2013, our Building

Materials business unit generated external sales of €808.9 million (or 64.4% of our total sales) and

Normalized EBITDA of €112.2 million (or 54.2% of our total Normalized EBITDA).

• Dry Lining. Our dry lining products address high-end demand for premium dry lining materials and

are mainly used in applications for walls, flooring and ceilings with higher requirements for sound

insulation, fire protection, moisture resistance and load-bearing capacities, such as in schools,

hospitals, timber-frame construction and home improvement. We market and sell gypsum fiber boards

and cement-bonded boards under the Fermacell brand and fire protection boards under the Fermacell-

Aestuver brand. Additionally, we offer various products for healthier living, such as a newly

developed gypsum fiber board that reduces and neutralizes unhealthy substances and odors from the

ambient air by permanently bonding pollutants. In addition to our branded dry lining products, we

offer similar add-on products and consulting services to our Dry Lining customers as we offer to our

Building Materials customers. For the twelve-month period ended June 30, 2013, our Dry Lining

business unit generated external sales of €207.6 million (or 16.5% of our total sales) and Normalized

EBITDA of €29.0 million (or 14.0% of our total Normalized EBITDA).

• Lime. In our Lime business unit, we produce and sell high-quality lime and limestone products

primarily in Germany, the Czech Republic and Russia for diverse industrial applications (e.g., in the

steel, glass, building materials and chemicals industries) and environmental applications (e.g., flue gas

desulphurization and agriculture). We market and sell our lime products primarily under the Fels

brand. We also supply our Building Materials business unit with lime and mortar. For the twelve-

month period ended June 30, 2013, our Lime business unit generated external sales of €240.3 million

(or 19.1% of our total sales) and Normalized EBITDA of €66.0 million (or 31.9% of our total

Normalized EBITDA).

• Ecoloop. In our Ecoloop business unit, which is in its start-up phase, we develop and intend to market

and sell our Ecoloop technology, which transforms various kinds of waste into clean synthesis gas to

be used as a substitute for traditional combustibles or to generate electricity. Until December 31, 2012,

Ecoloop was included in our Lime business unit. The activities are consolidated in ecoloop GmbH, a

2

joint venture in which we hold a majority interest of 50% plus one share. Effective as of January 1,

2013, Ecoloop has been established as a separate segment. For the twelve-month period ended

June 30, 2013, our Ecoloop business unit generated a Normalized EBITDA of negative €0.1 million.

1.2 Corporate Structure and Financing Agreements

The following diagram depicts in simplified form our corporate and financing structure:

Senior Facilities Restricted Group

(1) Xella International Holdings S.à r.l. extended subordinated shareholder loans to Xella International S.A. in the

form of preferred equity certificates (“PECs”) in connection with the acquisition of the Xella Group in 2008.

(2) According to IFRS, Xefin Lux S.C.A. is included in the consolidation group of Xella International S.A.

1.3 Recent Developments

Based on preliminary management estimates, our operating performance, including sales and Normalized

EBITDA for the three-month period ended September 30, 2013 was negatively affected by a challenging

operating environment with the exception of Germany and Russia. The Netherlands in particular suffered from

both a weak domestic market environment and lower sales volumes due to a delay in a housing project in

Angola. In addition, we expect an increased level of start-up and ramp-up losses for our Ecoloop project and

projects in our Dry Lining business unit.

We estimate our sales for the three-month period ended September 30, 2013 to be in a range of €340 million to

€348 million. In addition, we estimate our Normalized EBITDA for the three-month period ended

September 30, 2013 to be in a range of €63 million to €67 million.

Financial statements or consolidated management accounts covering the three-month period ended

September 30, 2013 are not yet available and the above financial information is solely based on preliminary

information prepared by our management. Because this financial information is preliminary, the numbers

Vendor Loan

Note

50%

PAI partners Goldman Sachs

Capital Partners

Xella International

Holdings S.à r.l.

50%

Xella International

S.A.

(the “Company”)(1)

Senior Facility

Guarantors

Non-Senior Facility

Guarantors

Xefin Lux S.C.A.(2)

Senior Facility

Facility D

€300 million

Senior Secured

Notes due 2018

Senior Facilities

Agreement

3

presented are estimates and could change. This financial information is inherently subject to modification during

the preparation of our consolidated interim financial statements as of and for the nine-month period ended

September 30, 2013.

The preliminary financial data included under this heading “1. Summary—1.3 Recent Developments” has been

prepared by, and is the responsibility of, the management of Xella International Holdings S.à r.l.

PricewaterhouseCoopers, Société coopérative, Luxembourg, has not audited, reviewed, compiled or performed

any procedures with respect to the accompanying preliminary financial data. Accordingly,

PricewaterhouseCoopers, Société coopérative, Luxembourg does not express an opinion or any other form of

assurance with respect thereto.

In the same period for the three months ended September 30, 2012, we had reported sales of €344.3 million and

Normalized EBITDA of €72.7 million. The third quarter of 2012 included certain operating effects such as the

release of certain provisions connected to warranty cases, the reduction of provisions for customer bonuses

based on an adjustment of pricing systems in Germany finalized at the time as well as lower positive effects

from own work capitalized from investment projects, which effects we do not expect to repeat in the third

quarter of 2013.

1.4 Summary Financial and Operating Information

The following tables set forth summary selected historical consolidated information of Xella International

Holdings S.à r.l. as of and for the fiscal years ended December 31, 2010, 2011 and 2012 and for the six-month

periods ended June 30, 2013 and June 30, 2012 as well as for the twelve-month period ended June 30, 2013.

Names of line items in our consolidated income statement, consolidated statement of financial position and

consolidated statement of cash flows are used as in the consolidated financial statements of Xella International

Holdings S.à r.l. as of and for the fiscal year ended December 31, 2012. Xella International Holdings S.à r.l. is a

holding company with no operations of its own (its main assets consist of 94.5% of the shares in the Company

(the holding company for the Xella Operations Group) held directly and indirectly (as of June 30, 2013), certain

shareholder loans made to the Company and cash on hand). The consolidated financial information for Xella

International Holdings S.à r.l. may therefore not be fully comparable with consolidated financial information for

Xella International S.A.

You should read the information set forth below in conjunction with the sections “5. Management’s Discussion

and Analysis of Financial Condition and Results of Operations” and “10. Presentation of Financial and Other

Information—Financial Information” and the consolidated financial statements and the notes thereto included

elsewhere in this report. As a result of an improvement project, we reclassified certain of our spare parts from

inventories (current assets) to property, plant & equipment (non-current assets), depending on the estimated

useful lives of such spare parts. This change, in accordance with IAS 16, has been applied effective as of

January 1, 2013 and resulted in the reclassification of spare parts in an aggregate amount of €23.4 million as of

January 1, 2013. As a result of the reclassification, the depreciable amounts of these non-current spare parts are

allocated over their expected useful lives and recognized under depreciation & amortization expenses, while

other spare parts classified as current assets continue to be treated as inventories and generally are recognized

under other expenses as consumed. This change was adopted prospectively and is not reflected in the

consolidated financial information for fiscal years and interim periods prior to January 1, 2013. In the six-month

period ended June 30, 2013, non-current spare parts in an amount of €8.0 million were added to property,

plant & equipment and depreciation of €3.6 million for spare parts classified as non-current assets was

recognized under depreciation & amortization expenses. Effective as of January 1, 2013, Xella International

Holdings S.à r.l. has applied IAS 19 (revised), relating to employee benefits. Figures for the six-month period

ended June 30, 2012 have been adjusted retrospectively. Information for the twelve-month period ended

June 30, 2013 is unaudited and has been calculated by taking the results of operations for the six-month period

ended June 30, 2013 (for which IAS 19 (revised)) has been applied) and adding it to the difference between the

results of operations for the fiscal year ended December 31, 2012 (for which IAS 19 (revised) has not been

applied retrospectively) and the six-month period ended June 30, 2012 (for which IAS 19 (revised) has been

applied retrospectively).

4

Xella International Holdings S.à r.l.

Year ended December 31,

Six-Month Period

ended June 30(2),

Twelve-

Month

Period

ended

June 30(1),

2010 2011 2012 2012 2013 2013

(€ in millions)

(audited) (audited) (audited) (unaudited) (unaudited) (unaudited)

Consolidated Income Statement

Information: Sales .................................................................. 1,145.9 1,271.2 1,282.5 635.2 609.5 1,256.8

Changes in finished goods & work in progress ........................................................ 10.7 10.2 4.8 7.2 (3.9) (6.3)

Own work capitalized ........................................ 2.9 1.8 2.3 0.5 1.0 2.8 Total output ..................................................... 1,159.6 1,283.2 1,289.6 643.0 606.7 1,253.4

Materials expenses ............................................ (525.7) (593.0) (592.3) (295.2) (285.3) (582.3)

Gross profit ...................................................... 633.9 690.2 697.4 347.7 321.4 671.1

Other income ..................................................... 34.1 86.1 34.5 18.7 12.6 28.4

Total income .................................................... 668.0 776.3 731.9 366.5 334.0 699.5

Staff expenses ................................................... (284.5) (298.6) (306.4) (154.3) (156.4) (308.5) Other expenses .................................................. (181.8) (277.3) (218.2) (112.6) (88.2) (193.8)

EBITDA(8) ........................................................ 201.8 200.4 207.2 99.6 89.5 197.1

Depreciation & amortization expenses .............. (112.5) (107.4) (102.6) (50.7) (54.3) (106.2)

Impairment of goodwill ..................................... — — (8.8) — — (8.8)

EBIT(8) .............................................................. 89.3 93.0 95.8 48.9 35.3 82.2 Result from associates (at equity) ...................... 2.0 1.2 1.4 0.5 1.1 2.0 Result from other investments ................... 0.6 0.5 (1.5) 0.4 0.4 (1.5) Finance costs ............................................. (78.1) (94.5) (95.1) (45.5) (44.1) (93.7)

Other financial result ................................. (0.1) 0.3 4.8 2.7 (2.8) (0.7) Financial result ........................................ (75.6) (92.5) (90.4) (41.9) (45.4) (93.9)

Profit/loss before tax ............................... 13.7 0.6 5.4 7.0 (10.1) (11.7)

Current income taxes ................................. (22.6) (24.9) (22.1) (12.7) (8.5) (17.8) Deferred taxes ........................................... 9.0 30.0 7.9 (1.5) 2.9 12.3 Income taxes ............................................ (13.5) 5.1 (14.2) (14.2) (5.5) (5.5)

Net income/loss ........................................ 0.1 5.7 (8.8) (7.3) (15.6) (17.2)

Net income/loss attributable to

shareholders.......................................... (3.3) 1.5 (13.0) (9.3) (17.2) (20.9) Net income/loss attributable to non-

controlling interests .............................. 3.5 4.2 4.2 2.0 1.6 3.7

5


As of December 31, As of June 30,

2010 2011 2012 2013

(€ in millions)

(audited) (audited) (audited) (unaudited) Selected Consolidated Statement of Financial Position

Information:

Non-current assets ........................................................................................................... 1,792.7 1,842.8 1,818.7 1,803.2 thereof

Property, plant & equipment ........................................................................................ 1,130.6 1,123.2 1,116.3 1,105.2 Intangible assets ........................................................................................................... 591.9 597.4 594.4 587.7 Financial assets ............................................................................................................. 15.3 79.1 81.6 81.4

Current assets .................................................................................................................. 503.8 527.5 515.1 474.0 thereof

Inventories .................................................................................................................... 167.2 178.9 174.2 148.2 Trade and other receivables .......................................................................................... 128.9 146.1 139.0 194.4 Financial assets ............................................................................................................. 48.0 39.5 42.0 41.8 Cash and cash equivalents ............................................................................................ 142.1 148.6 147.3 77.8

Total assets ....................................................................................................................... 2,296.5 2,370.3 2,333.8 2,277.2

Non-current liabilities ..................................................................................................... 1,334.6 1,403.9 1,406.3 1,466.7

thereof Non-current financial liabilities .................................................................................... 963.2(4) 1,007.1(5) 1,029.9(6) 1,050.0(7) Deferred tax liabilities .................................................................................................. 189.6 150.0 129.7 123.8 Pension provisions ........................................................................................................ 124.6 126.5 127.7 174.7

Current liabilities ............................................................................................................ 399.9 433.8 438.3 400.5 thereof

Other provisions ........................................................................................................... 90.3 89.9 86.8 75.0 Trade and other accounts payable ................................................................................. 207.9 251.2 238.6 230.1

Shareholders’ equity ....................................................................................................... 535.3 503.7 458.5 380.2

Non-controlling interests................................................................................................. 26.7 29.0 30.7 29.8

Total equity and liabilities .............................................................................................. 2,296.5 2,370.3 2,333.8 2,277.2


Year ended

December 31,

Six-Month Period

ended June 30(2),

2010 2011 2012 2012 2013

(€ in millions)

(audited) (audited) (audited) (unaudited) (unaudited)

Consolidated Cash Flow Information:

Cash flow from operating

activities ............................................................ 135.2 176.1 147.4 (13.2) 1.9 Cash flow from investing

activities ............................................................ (42.6) (71.7) (72.5) (29.1) (18.1) Cash flow from financing

activities ............................................................ (106.1) (97.6) (77.2) (17.6) (52.7)

Cash and cash equivalents at the beginning of the

period ................................................................ 154.6 142.1 148.6 148.6 147.3 Net foreign exchange

difference .......................................................... 1.0 (0.2) 1.1 0.8 (0.6)

Cash and cash equivalents at the end of the period . 142.1 148.6 147.3 89.5 77.8

6


(unless indicated otherwise)

As of or for the Year

ended December 31,

As of or for the

Six-Month Period

ended June 30(2),

As of or for

Twelve-

Month

Period

ended

June 30,

2013(1) 2010 2011 2012 2012 2013

(€ in millions)

(unaudited,

unless

indicated

otherwise)

(unaudited,

unless

indicated

otherwise)

(unaudited,

unless

indicated

otherwise)

(unaudited) (unaudited) (unaudited)

Other Financial Information:

Normalized EBITDA(8)........................... 192.6* 207.7* 217.0* 101.9 91.8 206.9 Adjusted Free Cash Flow(9) .................... 116.7 127.7 95.7 (31.2) (15.0) 111.9

Capital expenditures(10) ........................... 59.1 86.4 91.4 33.6 29.5 87.3 Trade working capital(11)......................... 143.4 138.1 149.9 232.8 203.4 203.4 Net Financial Debt(12) ............................. 800.3 788.7 794.4 868.7 848.2 848.2

Net Financial Debt (Company)(13) .......... 588.0 604.7 589.4 674.5 632.8 632.8

* Audited.


Year ended

December 31,

Six-Month Period

ended June 30,(2)(3)

Twelve-

Month

Period

ended

June 30,

2013(1) 2010 2011 2012 2012 2013

(€ in millions)

(audited,

unless

indicated

otherwise)

(audited,

unless

indicated

otherwise)

(audited

unless

indicated

otherwise) (unaudited) (unaudited) (unaudited)

Consolidated Segment Income

Statement Information:

Building Materials

Sales ........................................................ 769.0 847.8 854.3 424.1 392.7 823.0

Normalized EBITDA(8) ............................ 97.0 115.4 119.7 56.8 49.3 112.2 Normalized EBITDA margin (in %)

(unaudited) ......................................... 12.6 13.6 14.0 13.4 12.5 13.6 Dry Lining

Sales ........................................................ 184.7 207.6 208.5 108.2 107.4 207.6 Normalized EBITDA(8) ............................ 29.1 34.1 34.6 18.5 12.9 29.0 Normalized EBITDA margin (in %)

(unaudited) ......................................... 15.8 16.4 16.6 17.1 12.0 14.0

Lime

Sales ........................................................ 239.5 267.9 272.3 129.5 135.6 278.4 Normalized EBITDA(8) ............................ 67.1 59.0 63.2 27.4 30.2 66.0 Normalized EBITDA margin (in %)

(unaudited) ......................................... 28.0 22.0 23.2 21.2 22.3 23.7 Ecoloop(3)

Sales ........................................................ — — — — 0.1 0.1 Normalized EBITDA(8) ............................ — — — (0.3) (0.4) (0.1) Normalized EBITDA margin (in %)

(unaudited) ......................................... — — — — (388.4) (103.2) Consolidation/Holding

Inter-segment sales(14) .............................. (47.2) (52.2) (52.7) (26.6) (26.3) (52.3)

Normalized EBITDA(8) ............................ (0.7) (0.8) (0.5) (0.6) (0.2) (0.2) Total

Consolidated sales ................................... 1,145.9 1,271.2 1,282.5 635.2 609.5 1,256.8 Consolidated Normalized

EBITDA(8) .......................................... 192.6 207.7 217.0 101.9 91.8 206.9 Normalized EBITDA margin (in %)

(unaudited) ......................................... 16.8 16.3 16.9 16.0 15.1 16.5

7

Xella International

Holdings S.à r.l.


2010 2011 2012

(unaudited)

Other Operating Data

Production Volumes

Building Materials AAC (in thousands cubic meters) ................................................................................................................ 6,817 7,244 6,978 CSU (in thousands cubic meters)................................................................................................................. 2,021 2,201 2,053

Dry Lining ....................................................................................................................................................... Fermacell (in thousands square meters) ....................................................................................................... 30,123 32,931 32,653 Aestuver (in thousands square meters) ........................................................................................................ 1,274 1,429 1,593

Lime................................................................................................................................................................. Lime Products (in thousands tons)......................................................................................................... 1,988 2,174 2,130 Limestone (in thousands tons)(15) ........................................................................................................... 2,849 3,267 3,015


2010 2011 2012

(unaudited)

Capacity Utilization Rates (in %)

Building Materials(16) ...................................................................................................................................... 67.2 70.5 68.4 AAC ............................................................................................................................................................ 71.5 74.9 72.4 CSU ............................................................................................................................................................. 56.0 59.2 57.6

Dry Lining(16)................................................................................................................................................... 110.5 120.5 119.5 Fermacell ..................................................................................................................................................... 110.0 119.5 118.0 Aestuver ...................................................................................................................................................... 127.4 149.4 165.0

Lime(16) ............................................................................................................................................................ 72.6 79.7 76.1 Germany ................................................................................................................................................ 72.3 79.2 76.5 Czech Republic ..................................................................................................................................... 71.4 80.7 73.4 Russia .................................................................................................................................................... 80.9 85.7 75.4

(1) Effective as of January 1, 2013, Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month period

ended June 30, 2012 have been adjusted retrospectively. Information for the twelve-month period ended June 30, 2013 is unaudited and has been calculated by taking the results of operations for the six-month period ended June 30, 2013 (for which IAS 19 (revised))

has been applied) and adding it to the difference between the results of operations for the fiscal year ended December 31, 2012 (for

which IAS 19 (revised) has not been applied retrospectively) and the six-month period ended June 30, 2012 (for which IAS 19 (revised) has been applied retrospectively).

(2) Effective as of January 1, 2013, Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month period

ended June 30, 2012 have been adjusted retrospectively.

(3) Consolidated segment information from the audited consolidated financial statements and the notes thereto of Xella International

Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011 and 2012 includes Ecoloop in our Lime business unit.

Effective as of January 1, 2013, Ecoloop has been established as a separate segment. See “4. Our Business and Industry—Ecoloop”. Figures for the six-month period ended June 30, 2012 have been adjusted retrospectively for income and expenses previously shown

in the Lime segment.

(4) Non-current financial liabilities as of December 31, 2010 include a total of €77.5 million in liabilities to shareholders, of which

€66.3 million is comprised of shareholder loans in the form of PECs extended to Xella International Holdings S.à r.l. in connection

with the Acquisition including accrued interest and interest on the CPECs recognized as dividends according to IAS 32. €11.2 million

relates to shareholders with non-controlling interests.

(5) Non-current financial liabilities as of December 31, 2011 include a total of €114.3 million in liabilities to shareholders, of which

€103.1 million is comprised of shareholder loans in the form of PECs extended to Xella International Holdings S.à r.l. in connection with the Acquisition including accrued interest and interest on the CPECs recognized as dividends according to IAS 32. €11.2 million


(6) Non-current financial liabilities as of December 31, 2012 include a total of €153.1 million in liabilities to shareholders, of which €142.1 million is comprised of shareholder loans in the form of PECs extended to Xella International Holdings S.à r.l. in connection

with the Acquisition including accrued interest and interest on the CPECs recognized as dividends according to IAS 32. €11.0 million


(7) Non-current financial liabilities as of June 30, 2013 include a total of €169.4 million in liabilities to shareholders, of which

€163.0 million was comprised of shareholder loans in the form of PECs extended to Xella International Holdings S.à r.l. in connection

with the Acquisition including accrued interest and interest on the CPECs recognized as dividends according to IAS 32. €6.4 million relates to shareholders with non-controlling interests.

(8) We present EBITDA, EBIT and Normalized EBITDA as further supplemental measures of our performance. Normalized EBITDA

represents EBITDA as adjusted for items that our management considers to be unusual or non-recurring due to their nature; for the fiscal years ended December 31, 2010, 2011 and 2012 and the six-month period ended June 30, 2013 such adjustments include

divestments and unusual asset disposals, revaluation of recultivation and other environmental provisions, losses due to restructuring

and severance, costs related to M&A activities, costs related to litigation, warranty claims relating to prior years, and other. Accordingly, this information has been disclosed in this report to facilitate the analysis of our operating performance. Management

8

considers Normalized EBITDA a relevant measure that aids in the understanding of EBITDA in a given period. Other companies may

calculate EBITDA, EBIT and Normalized EBITDA differently than we do. Normalized EBITDA (except for segment financial data) is not audited. EBITDA, EBIT and Normalized EBITDA are not measures of financial performance under IFRS and should not be

considered as measures of liquidity or alternatives to profit for the year or any other performance measures derived in accordance with

IFRS. These measures may also be defined differently than the corresponding terms under the Indenture. See “10. Presentation of Financial and Other Information—Non-IFRS Financial Measures”.

An unaudited reconciliation between Normalized EBITDA and EBITDA is as follows:


Year ended

December 31,

Six-Month Period

ended June 30(h),

Twelve-

Month

Period

ended

June 30,

2013(j) 2010 2011 2012 2012 2013

(€ in millions)

(unaudited,

unless

indicated

otherwise)

(unaudited,

unless

indicated

otherwise)

(unaudited,

unless

indicated

otherwise


EBITDA ............................................................. 201.8(i) 200.4(i) 207.2(i) 99.6 89.5 197.1

Adjustments Divestments and unusual asset disposals(a) ..... (2.1) (2.6) (1.5) (0.3) (0.5) (1.7)

Revaluation of recultivation and other

environmental provisions(b) ........................ (11.3) (0.3) — — — — Losses due to restructuring and severance(c) ... 4.1 2.7 4.3 0.6 2.0 5.7

Costs related to M&A activities(d) ................... 2.0 3.0 2.2 1.0 0.2 1.4

Costs related to litigation(e) ............................. 0.2 0.9 1.3 0.7 0.0 0.6 Warranty claims relating to prior years(f) ........ — 2.9 0.4 — 0.1 0.5

Other(g) ............................................................ (2.1) 0.7 3.1 0.3 0.5 3.3

Normalized EBITDA ......................................... 192.6(i) 207.7(i) 217.0(i) 101.9 91.8 206.9

(a) Divestments and unusual asset disposals mainly include the divesture of our operations in Chile in 2010, income from the sale

of properties in Dorsten, Rheinberg, Alzenau and Horrem (all located in Germany) in 2011, gains from the sale of a plant in

Rurka, Poland, as well as a property in Fretzdorf, Germany, in 2012 and gains in relation to the sale of property in Hockenheim, Germany, in the first half of 2013.

(b) In 2010, the recultivation provisions of our lime quarries were partially released as a result of updated expert calculations. In

2011, environmental provisions were released in connection with the sale of property in Dorsten, Germany.

(c) Losses due to restructuring and severance payments mainly relate to a plant closure in the United States in 2010 (not including

€3.5 million in start-up losses), a plant closure in the Czech Republic in 2012 as well as severance payments during the period

from January 1, 2010 to June 30, 2013.

(d) Costs related to M&A projects mainly include expenses for consultants in connection with actual or intended acquisition

projects.

(e) Costs related to litigation include expenses for law suits which are unusual and non-recurring in nature.

(f) Refers to warranty claims (net of insurance coverage) against a Dutch subsidiary.

(g) Refers to several unusual transactions, including certain transactions in connection with carbon dioxide emission certificates

and non-recurring expenses in connection with certain Swiss pension obligations.

(h) Effective as of January 1, 2013, Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month

period ended June 30, 2012 have been adjusted retrospectively.

(i) Audited.

(j) Effective as of January 1, 2013, Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month

period ended June 30, 2012 have been adjusted retrospectively. Information for the twelve-month period ended June 30, 2013 is

unaudited and has been calculated by taking the results of operations for the six-month period ended June 30, 2013 (for which IAS 19 (revised)) has been applied) and adding it to the difference between the results of operations for the fiscal year ended

December 31, 2012 (for which IAS 19 (revised) has not been applied retrospectively) and the six-month period ended June 30,

2012 (for which IAS 19 (revised) has been applied retrospectively).

(9) An unaudited reconciliation between Adjusted Free Cash Flow, Free Cash Flow, Operating Free Cash Flow and EBITDA is as

follows:


Year ended December 31, Six-Month Period ended

June 30,

2010 2011 2012 2012 2013

9

(€ in millions)

(unaudited,

unless indicated otherwise) (unaudited)

EBITDA ............................................................................................... 201.8(a) 200.4(a) 207.2(a) 99.6 89.5

Income and expenses from the disposal of non-current assets ............... (2.6) (2.8) (3.5) (1.0) (1.1)

Non-cash income and expenses ............................................................. (6.9) 0.9 (3.2) (1.4) (0.9)

Change in trade working capital ............................................................ (8.5) (0.6) (9.7) (94.3) (82.5)

Change in other working capital ............................................................ (21.6) 1.6 (22.5) (4.9) 1.4

Operating Free Cash Flow(b) ............................................................... 162.2 199.5 168.3 (2.0) 6.4

Cash flows from investing activities...................................................... (42.6) (71.7) (72.5) (29.1) (18.1) Free cash flow(c) ................................................................................... 119.6 127.8 95.8 (31.1) (11.7)

Acquisition of shares in subsidiaries without change of control(d) ......... (2.9) (0.1) (0.1) (0.1) (3.3) Adjusted Free Cash Flow(e) ................................................................. 116.7 127.7 95.7 (31.2) (15.0)

(a) Audited.

(b) Operating free cash flow means EBITDA minus/plus income and expenses from the disposal of non-current assets, minus/plus

non-cash income and expenses, plus/minus cash changes in trade and other working capital.

(c) Free Cash Flow means Operating Free Cash Flow less cash flow from investing activities.

(d) Represents amounts paid to acquire additional stakes in subsidiaries and amounts received from disposals of stakes that do not

result in a change of control.

(e) Adjusted Free Cash Flow means Free Cash Flow less cash spent for acquisitions of shares in subsidiaries without effecting a

change of control.

(10) Capital expenditures is not identical with cash flow from investing activities. See “5. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Capital Expenditures”.

(11) Trade working capital as shown on our consolidated statement of financial position does not correspond to the definition of trade

working capital in the audited consolidated statement of cash flows pursuant to IAS 7 that only includes changes in inventories, trade receivables and trade payables. See “5. Management’s Discussion and Analysis of Financial Condition and Results of Operations—

Liquidity and Capital Resources—Trade Working Capital”.

(12) We define Financial Debt as amounts outstanding under the Senior Secured Notes, the Senior Facilities Agreement and finance lease liabilities and the Vendor Loan Note. Financial Debt does not include our shareholder debt and certain other financial liabilities; see

note 11 to our audited consolidated financial statements as of and for the fiscal year ended December 31, 2012. Net Financial Debt is

calculated by deducting cash and cash equivalents from Financial Debt.

(13) We define Financial Debt (Company) as amounts outstanding under the Senior Secured Notes, the Senior Facilities Agreement and

finance lease liabilities. Financial Debt (Company) does not include our shareholder debt and certain other financial liabilities; see

note 11 to our audited consolidated financial statements as of and for the fiscal year ended December 31, 2012. Net Financial Debt (Company) is calculated by deducting cash and cash equivalents (except for €22.6 million of cash and cash equivalents held by Xella

International Holdings S.à r.l.) from Financial Debt (Company).

(14) Segment information eliminates effects of inter-segment sales, primarily in connection with lime supplied by the Lime business unit to the Building Materials business unit and certain building materials supplied by the Building Materials business unit to the Dry Lining

business unit.

(15) Includes production volumes sold as limestone and does not include limestone production for further lime production.

(16) Capacity utilization rates are based on standard capacity for the Building Materials and Dry Lining business units, which means

operation of plants for 24 hours per day for five days per week, as opposed to maximum capacity, which means operation of plants for

24 hours per day for seven days per week. Capacity utilization rate for our Lime business unit is based on operationally feasible maximum capacity taking into account production stops from regular maintenance work and the current product mix. Production

volumes, capacity utilization and capacity are stated and calculated only for plants producing our main products, i.e., AAC, CSU,

Multipor, gypsum fiber boards, cement-bonded boards, lime and limestone (production volumes only).

10

2. MANAGEMENT

2.1 Xella International Holdings S.à r.l.

Xella International Holdings S.à r.l. is a private limited liability company (société à responsabilité limitée)

incorporated under the laws of Luxembourg on May 26, 2008 and registered with the Luxembourg Trade and

Companies Register (Registre de Commerce et des Sociétés) under number B139489, and serves as the holding

company for our Group. It indirectly controls all consolidated Group companies. Xella International

Holdings S.à r.l. in turn is controlled by Goldman Sachs Capital Partners and PAI partners.

Xella International Holdings S.à r.l. is managed by a one-tier board structure consisting of a board of managers,

currently comprising four managers appointed by the shareholders of Xella International Holdings S.à r.l. The

table below sets out the names and ages of the members of the board of managers and the year of their

appointment. There is no time limitation on the terms of the managers.

Name Age Position Year first

appointed

Dr. Martin Hintze ........................................................................................................... 43 Director A 2008

Olivier de Vregille .......................................................................................................... 57 Director B 2008

David Richy .................................................................................................................... 34 Director B 2011

Marielle Stijger ............................................................................................................... 43 Director A 2012

Dr. Martin Hintze. Dr. Hintze was born in 1970 and is a member of the board of managers of Xella

International Holdings S.à r.l., which he joined in 2008. Dr. Hintze is a managing director in the Merchant

Banking Division of Goldman Sachs International in London. Dr. Hintze graduated from Technical University

(Technische Universität), Berlin in 1994 with a degree in business administration. He also received a Ph.D. in

economics from Technical University, Berlin, in 1998. From 1999 through 2000, Dr. Hintze worked at

Goldman, Sachs & Co. oHG in the Investment Banking Division and has worked for the Merchant Banking

Division since 2000 where he is currently a managing director. Dr. Hintze also serves on the supervisory boards

of KION GROUP AG and LEG Immobilien AG as well as the advisory committee of CEONA Holding Ltd.

Olivier de Vregille. Mr. de Vregille was born in 1955 and is a member of the board of managers of Xella

International Holdings S.à r.l., which he joined in 2008. Mr. de Vregille is a Partner and member of the

Investment Committee of PAI partners in Paris. He graduated from Ecole Polytechnique (X 1975), from

ENSAE (1978) and from Centre de Perfectionnement dans l’Administration des Affaires (CPA 1994). Mr. de

Vregille joined PAI partners in 1983. From 1983 to 1996, he was in charge of advisory services and investments

in the construction, transportation, security, engineering, environment and infrastructure sectors. Since 1996, he

has been specifically in charge of investments in the energy and construction sectors.

David Richy. Mr. Richy was born in 1979 and is a member of the board of managers of Xella International

Holdings S.à r.l. and is a member of the board of managers of Xella International S.A., which both he joined in

2011. Mr. Richy graduated from HEC-ULg (2001) and from a Master in Business Administration and Finance

program at HEC-ULg. Before Mr. Richy joined Xella International Holdings S.à r.l., he spent five years from

2005 to 2010 as manager specializing in the private equity industry in a corporate and trust services company in

Luxembourg and has four years of experience as external auditor at Ernst & Young Luxembourg from 2001 to

2005. Since November 2010, Mr. Richy has been serving as manager for PAI Partners S.à r.l., Luxembourg.

Mr. Richy also serves on the management board of Xella International S.A.

Marielle Stijger. Ms. Stijger was born in 1969 and is a member of the board of managers of Xella International

Holdings S.à r.l., which she joined in 2012. Ms. Stijger graduated from the Maastricht University in 1995 with a

degree in Law. Before Ms. Stijger joined Xella, she was Head of Legal at Whitehall Management Service B.V.

in Amsterdam, The Netherlands. Since June 2012, Ms. Stijger has been serving as general manager for GS Lux

Management Services S.à r.l., Luxembourg. Ms. Stijger also serves on the board of managers of Xella

International S.A.

2.2. Xella International S.A.

Xella International S.A. (formerly Xella International S.à r.l.) is a public limited liability company (société

anonyme) incorporated under the laws of Luxembourg on May 26, 2008 as a private limited liability company

(société à responsabilité limitée) and registered with the Luxembourg Trade and Companies Register (Registre

de Commerce et des Sociétés) under registration number B139488. It serves as a holding company for our

Group. It is controlled by Xella International Holdings S.à r.l., and it is the Facility D Borrower.

11

Xella International S.A. is managed by a one-tier board structure consisting of a board of directors, currently

comprising five directors appointed by the shareholders of the company pursuant to its articles of association.

The articles of association of Xella International S.A. provide that it may be represented in dealings with third

parties by the joint signature of one class A director and one class B director. Resolutions by the board of

directors may be passed with simple majority of the directors present or represented. The board of directors is

provided with the broadest powers to perform all acts in compliance with the corporate purpose. The table

below sets out the names and ages of the members of the board of directors and the year of their appointment.

There is no time limitation on the terms of the directors.


appointed

Marielle Stijger ............................................................................................................... 43 Director A 2012

David Richy .................................................................................................................... 34 Director A 2011

Jan Buck-Emden ............................................................................................................. 49 Director B 2008

Oliver Esper .................................................................................................................... 49 Director B 2008

Heiko Karschti ................................................................................................................ 46 Director B 2008

Boudewijn van den Brink ............................................................................................... 59 Director B 2012

Marielle Stijger. For biographical information see “—Xella International Holdings S.à r.l.”.

David Richy. For biographical information see “—Xella International Holdings S.à r.l.”.

Jan Buck-Emden. Mr. Buck-Emden was born in 1964 and is the Chief Executive Officer (CEO) of our Group.

Since joining our Group in 2001, he has held several management positions in our Group. Since July 2005,

Mr. Buck-Emden is a member of the management board of Xella International GmbH and was appointed

chairman of the management board and Chief Executive Officer in April 2007. Prior to joining Xella

International GmbH, Mr. Buck-Emden held various management positions with companies in the building

industry and serving as managing director for the calcium silicate business units in Germany at Heidelberger

Cement AG from 1998 to 2001. Mr. Buck-Emden also serves on the management boards of Xella International

GmbH, XI (BM) Holdings GmbH, XI (DL) Holdings GmbH, XI (RMAT) Holdings GmbH, XI (EC) Holdings

GmbH and Xella Baustoffe GmbH and on the supervisory boards of Xella Deutschland GmbH, Fels-

Werke GmbH, Xella Aircrete North America, Inc., Xella Thermopierre SA, Xella Danmark A/S, Xella Sverige

AB and Xella Nederland B.V.

Heiko Karschti. Mr. Karschti was born in 1967 and since December 2007 has been the Chief Financial Officer

(CFO) of our Group. During his years with our Group, he has held several management positions. Mr. Karschti

started his professional career at Haniel Group in 1994. Mr. Karschti holds a degree in business administration

(Diplom-Kaufmann) from the University of Lüneburg. Mr. Karschti also serves on the management boards of

Xella International GmbH, XI (BM) Holdings GmbH, XI (DL) Holdings GmbH, XI (RMAT) Holdings GmbH,

XI (EC) Holdings GmbH, Xella Baustoffe GmbH and Xella Finance GmbH and on the supervisory boards of

Xella Baustoffwerke Rhein-Ruhr GmbH, Xella Deutschland GmbH, Fels-Werke GmbH, Xella Danmark A/S,

Xella Sverige AB, Xella Nederland B.V. and Xella Thermopierre SA.

Oliver Esper. Mr. Esper was born in 1964 and is the Chief Technology Officer (CTO) of our Group. In his

function, Mr. Esper leads our Group’s technical areas and operations. Following his graduation from RWTH

Aachen (Diplom-Ingenieur), Mr. Esper embarked on an industry career which included several years with the

Rheinkalk limestone company. Since joining our Group in 2001, Mr. Esper has served in a number of

management positions overseeing production and technology at Xella Deutschland GmbH and Fels-Werke

GmbH. Mr. Esper also serves on the management boards of Xella International GmbH, XI (BM)

Holdings GmbH, XI (RMAT) Holdings GmbH and Xella Baustoffe GmbH and on the supervisory boards of

Xella Deutschland GmbH, Xella Thermopierre SA, Xella Danmark A/S, Xella Nederland B.V. and Fels-Werke

GmbH.

Boudewijn van den Brink. Mr. van den Brink was born in 1954 and since March 2012 has been the Chief

Operating Officer (COO) of our Group. He had already worked for Xella Group during the period July 2001 to

September 2004 as Managing Director of the former Haniel Baustoff-Industrie Kalksandstein GmbH. Mr van

den Brink holds a degree as engineer for ship building mechanics from H.T.S. Rotterdam, a degree in

international business from the University of Nyenrode, Breukelen and a degree in managing corporate

resources from IMD, Lausanne. Prior to joining Xella Group, Mr. van den Brink spent several years in

management positions with companies in the building industry. Mr van den Brink also serves on the

management boards of Xella International GmbH, Xella Baustoffe GmbH and Xella Hong Kong Limited and on

the supervisory boards of “DSZ” OOO (BSW) and “Fels Izvest” OOO and is chairman of the board of directors

of Shanghai Ytong Co., Ltd., Shandong Xella New Building Materials Co., Ltd. and of Xella Shanghai

12

Investment Consulting Co., Ltd. and is a member of the board of directors of Baoding Xella Xiangfeng Calcium

Silicate New Building Materials Co., Ltd., Changxing Ytong Co. Ltd. and Xella Building Material (Tianjin) Co.,

Ltd.

2.3 Xella International GmbH

Xella International GmbH is the main management holding company of our Group. Xella International GmbH is

managed by its management board consisting of four managing directors (Geschäftsführer) who are appointed

by shareholders’ resolutions.

The articles of association (Gesellschaftsvertrag) of Xella International GmbH provide that any two members of

the management board or one member of the management board together with a holder of a general power of

attorney (Prokura) may represent Xella International GmbH in dealings with third parties.

The following table shows the current members of the management board, including their age, the year in which

they were appointed and the end of their term:


appointed Year term expires

Jan Buck-Emden ...... 49 Chief Executive Officer (CEO) 2005 June 2014, with automatic renewal

for consecutive three-year terms

subject to termination upon twelve

months prior notice

Heiko Karschti ......... 46 Chief Financial Officer (CFO) 2007 December 2014, with automatic

renewal for consecutive three-year

terms subject to termination upon

twelve months prior notice

Oliver Esper ............. 49 Chief Technical Officer (CTO) 2008 No fixed term, subject to

termination upon twelve months

prior notice

Boudewijn van den

Brink ....................

59 Chief Operating Officer (COO) 2012

No fixed term, subject to

termination upon twelve months

prior notice

The management board of Xella International GmbH consists of the four directors which are also represented as

class B directors in the management board of Xella International S.A.

Messrs. Buck-Emden, Karschti, Esper and van den Brink have entered into service agreements with Xella

International GmbH. We believe that these service agreements provide for payments and benefits that are in line

with customary market practices. The compensation for each managing director consists of a fixed salary and

certain performance-related components. Upon resigning from our Group, two members of the management

board are entitled to a transitional payment.

2.4 Corporate Governance and Compliance

We have implemented a Group-wide “code of conduct”, which is part of the service agreements of our senior

management. The code of conducts includes, in particular, principles relating to the conduct vis-à-vis

employees, business partners and competitors.

13

3. PRINCIPAL SHAREHOLDERS

3.1 Xella International Holdings S.à r.l.

Xella International Holdings S.à r.l. (formerly, XI Holdings I S.à r.l. and GS Blocker 1 S.à r.l.) is a private

limited liability company (société à responsabilité limitée) organized under the laws of Luxembourg and

registered with the Luxembourg Trade and Companies Register (Registre de Commerce et des Sociétés) under

number B139489. Xella International Holdings S.à r.l. serves as the holding company for our Group and

indirectly controls all consolidated Group companies.

The following table sets out certain information with regard to the beneficial ownership of Xella International

Holdings S.à r.l. The shares rank equally for income and capital and each share has one vote.

Beneficial Owners Percentage of

Outstanding Shares

Goldman Sachs Capital Partners(1)

............................................................................................ 50

PAI partners(2)

............................................................................................................................ 50

Total .......................................................................................................................................... 100

(1) GS Capital Partners VI Fund L.P., a Cayman limited partnership, is represented by its general partner GSCP VI Advisors, LLC, GS

Capital Partners VI Offshore Fund, L.P., a Delaware limited partnership, is represented by its general partner GSCP VI Offshore Advisors, LLC, a Delaware limited liability company, GS Capital Partners VI Parallel, L.P., a Delaware limited partnership, is

represented by its general partner GS Advisors VI, LLC, a Delaware limited liability company, and GS Capital

Partners VI GmbH & Co. KG, a German limited partnership (Kommanditgesellschaft), is represented by its general partner (Komplementär) Goldman, Sachs Management GP GmbH, a German limited liability company, and its managing limited partner

(geschäftsführender Kommanditist) GS Advisors VI, LLC, a Delaware limited liability company.

(2) Each of PAI EUROPE V-1 FCPR, PAI EUROPE V-2 FCPR, PAI EUROPE V-3 FCPR and PAI EUROPE V-B FCPR is represented by PAI partners SAS as its management company.

Goldman Sachs Capital Partners is managed by MBD of Goldman Sachs and its subsidiaries. Since 1986, MBD

and its predecessor business areas have raised over $125 billion in capital (including leverage) to invest across a

number of geographies, industries and transaction types. MBD is the primary center for Goldman Sachs’ long-

term principal investing activity, and Goldman Sachs has operated this business as an integral part of the firm

for more than 25 years. With eight offices in six countries around the world, MBD is one of the largest

managers of private capital globally, offering deep expertise and long-standing relationships with companies,

investors, entrepreneurs and financial intermediaries around the globe.

PAI partners is a leading European private equity firm with offices in Paris, London, Luxembourg, Madrid,

Milan, Munich and Stockholm. PAI partners manages and advises dedicated buyout funds with combined

commitments in excess of around €7.5 billion. Since 1998, PAI partners has completed 45 leveraged buyout

transactions in nine European countries, representing more than €35 billion in transaction value. PAI partners

has a significant number of investments in the construction industry, and has successfully contributed to the

growth of a large number of leading players in this sector. Recent examples of PAI partners led leveraged

buyouts in the construction industry include Spie, Gerflor and Frans Bonhomme. PAI partners has also been a

long-term investor in Eiffage and Poliet, a group active in the manufacturing and distribution of building

materials that controlled Weber Broutin, Terreal, Point P and Lapeyre. PAI partners is characterized by its

industrial approach to ownership combined with strong sector expertise. PAI partners provides portfolio

companies with the financial and strategic support required to pursue their development and enhance their

strategic value.

3.2 Management Participation Program

As of June 30, 2013, XI Management Beteiligungs GmbH & Co. KG (“MPP KG”), a German limited

partnership (Kommanditgesellschaft) established within the framework of a management participation program,

owned a total of 10.2% of the shares in the Company and approximately 0.9% of the Company’s interest-

bearing preferred equity certificates series A (the “Company PECs Series A”). Of the 10.2% of the Company’s

shares owned by MPP KG, 4.7% were indirectly held by Xella International Holdings S.à r.l. as one of the

limited partners (Kommanditisten) of MPP KG, while the remaining 5.5% were indirectly held by other limited

partners who are executives and employees of the Company and family members of such executives and

employees (each, a “Management Participant” and collectively, the “Management Participants”). Xella

International Holdings S.à r.l. also holds all of the shares in XI MPP Verwaltungs GmbH, the sole general

partner (Komplementärin) of MPP KG (the “MPP GP”). If the relative share of limited partnership interests in

MPP KG held by the limited partners other than Xella International Holdings S.à r.l. increases, the share in the

Company held indirectly by Xella International Holdings S.à r.l. may decrease. The shares in Xella

14

International S.A. were acquired at market value and at the same price as Goldman Sachs Capital Partners and

PAI partners acquired their shares.

The management participation program is governed by a partnership agreement, documentation relating to

certain preferred equity certificates and a shareholders and co-investment agreement regarding the

implementation of a management partnership plan for the Group among Xella International Holdings S.à r.l.,

MPP KG, the MPP GP, the participants in the management participation program and the Company, dated

November 17, 2008 (the “Company’s Shareholders’ Agreement”). The Management Participation Program was

designed to better align the interests of employees and shareholders with those of the Group.

The Company’s Shareholders’ Agreement provides that the investment in the Company by the Management

Participants will exlusively be made through MPP KG. Xella International Holdings S.à r.l. may, however, in

certain circumstances repurchase partnership interest in MPP KG (such as in case of termination of employment

of a Management Participant in the Group, flotation of the Company or termination of MPP KG’s partnership

agreement). In addition, the Management Participants have certain put rights in corresponding events.

The Company’s Shareholders’ Agreement provides that as long as the Vendor Loan Note (including accrued

interest) has not been fully repaid, dividends will not be distributed and Company PECs Series A and the

Company’s interest-bearing preferred equity certificates series B (the “Company PECs Series B”, and together

with the Company PECs Series A, the “Company PECs”) and other Instruments (as defined in the Company’s

Shareholders’ Agreement) issued by the Company will not be repaid or redeemed, except that distributable

profits or proceeds of the Company may be used to redeem Company PECs held by Xella International

Holdings S.à r.l. as long as Xella International Holdings S.à r.l. receives net proceeds sufficient to satisfy the

Vendor Loan Note and Xella International Holdings S.à r.l. uses such net proceeds to repay the Vendor Loan

Note.

The Company’s Shareholders’ Agreement provides that as long as Goldman Sachs Capital Partners or PAI

partners directly or indirectly hold any equity or debt security of the Company, each of Goldman Sachs Capital

Partners and PAI partners has the right to appoint through Xella International Holdings S.à r.l. at least one

member of any management board or shareholders’ committee exercising supervisory rights over the

management of the Company.

The Management Participants have agreed to vote in accordance with Xella International Holdings S.à r.l.’s

proposals in relation to certain matters. Such matters include:

• changes or amendments to the articles of association;

• distribution of profits of the Company;

• redemption or repayment of Company PECs; and

• increase or reduction of the share capital or any other form of capital measures in the Company.

The Company’s Shareholders’ Agreement is governed by German law and provides for additional provisions

customary for similar agreements, including:

• the binding effect and priority of certain finance documents and other agreements applicable to Xella

International Holdings S.à r.l. and the Group;

• the rights and obligations of the shareholders, including a provision pursuant to which MPP KG may

exercise the voting rights of Company shares that are attributable to the Management Participants in a

uniform manner as instructed by the Management Participants; and

• certain competition restraints, liability and indemnification matters.

For further information on the Management Participation Program, see the consolidated financial statements of

Xella International Holdings S.à r.l. and the notes thereto included elsewhere in this report.

15

4. OUR BUSINESS AND INDUSTRY

4.1 Overview



are the largest producer in Europe of autoclaved aerated concrete (“AAC”) by capacity and calcium silicate units

(“CSU”) by number of production plants. We offer a broad range of wall-building material and dry lining

products for use in residential, industrial and commercial construction, as well as lime and limestone for a

variety of applications. We are strongly represented in established markets such as Germany, The Netherlands,

Belgium and France as well as in other markets, including many Eastern European countries that displayed

considerable growth in the past and are expected to return to growth in the mid- to long-term, and in selected

regions in Russia and China. As of June 30, 2013, we operated 99 production plants in 20 different countries,

sold our products in more than 30 countries with a sales presence on three continents and had 6,848 employees

(full-time equivalents). For the twelve-month period ended June 30, 2013, we generated total sales of

€1,256.8 million (with Western Europe, Central and Eastern Europe and Asia/Americas accounting for 75.7%,

20.3% and 4.0% of our total external sales, respectively) and Normalized EBITDA of €206.9 million.

Our business is organized in four business units:

• Building Materials. Our Building Materials business unit primarily focuses on the production and

sale of technically advanced, high-quality materials used for wall-building in new construction

projects as well as renovation and modernization projects. In addition to our standard AAC and CSU

products, our building material product portfolio is comprised primarily of mineral insulation boards

and pre-fabricated compound units made of AAC. Key features of our wall-building material products

include a high degree of thermal insulation, energy efficiency, load-bearing capacity, fire resistance

and sound insulation. Our products offer several advantages in the construction process, in particular,

versatility, ease of handling and dimensional accuracy. We market and sell most of our wall-building

material products under the Ytong, Hebel and Silka brands. In addition to the production and sale of

wall-building material products, we offer several add-on products, such as mortar, tools and

accessories, and provide our customers with a variety of consulting (e.g., planning advice, seminars

for architects, training in product handling and sharing of know-how for sustainable and energy

efficient building) and other services. For the twelve-month period ended June 30, 2013, our Building

Materials business unit generated external sales of €808.9 million (or 64.4% of our total sales) and

Normalized EBITDA of €112.2 million (or 54.2% of our total Normalized EBITDA).

• Dry Lining. Our dry lining products address high-end demand for premium dry lining materials and

are mainly used in applications for walls, flooring and ceilings with higher requirements for sound

insulation, fire protection, moisture resistance and load-bearing capacities, such as in schools,

hospitals, timber-frame construction and home improvement. We market and sell gypsum fiber boards

and cement-bonded boards under the Fermacell brand and fire protection boards under the Fermacell-

Aestuver brand. Additionally, we offer various products for healthier living, such as a newly

developed gypsum fiber board that reduces and neutralizes unhealthy substances and odors from the

ambient air by permanently bonding pollutants. In addition to our branded dry lining products, we

offer similar add-on products and consulting services to our Dry Lining customers as we offer to our

Building Materials customers. For the twelve-month period ended June 30, 2013, our Dry Lining

business unit generated external sales of €207.6 million (or 16.5% of our total sales) and Normalized

EBITDA of €29.0 million (or 14.0% of our total Normalized EBITDA).

• Lime. In our Lime business unit, we produce and sell high-quality lime and limestone products

primarily in Germany, the Czech Republic and Russia for diverse industrial applications (e.g., in the

steel, glass, building materials and chemicals industries) and environmental applications (e.g., flue gas

desulphurization and agriculture). We market and sell our lime products primarily under the Fels

brand. We also supply our Building Materials business unit with lime and mortar. For the twelve-

month period ended June 30, 2013, our Lime business unit generated external sales of €240.3 million

(or 19.1% of our total sales) and Normalized EBITDA of €66.0 million (or 31.9% of our total

Normalized EBITDA).

• Ecoloop. In our Ecoloop business unit, which is in its start-up phase, we develop and intend to market

and sell our Ecoloop technology, which transforms various kinds of waste into clean synthesis gas to

be used as a substitute for traditional combustibles or to generate electricity. Until December 31, 2012,

Ecoloop was included in our Lime business unit. The activities are consolidated in ecoloop GmbH, a

16

joint venture in which we hold a majority interest of 50% plus one share. Effective as of January 1,

2013, Ecoloop has been established as a separate segment. For the twelve-month period ended

June 30, 2013, our Ecoloop business unit generated a Normalized EBITDA of negative €0.1 million.

4.2 History

Our business has its origin in the construction activities of Haniel Group during the 1940s and 1950s, originally

focused on the building materials trading sector. Beginning in 1994, the Haniel Group implemented a portfolio

restructuring program and disposed of its non-core activities followed by a strategic initiative to establish a

stronger position in the market for wall-building materials, including several acquisitions of German CSU

manufacturers. In the course of the consolidation process in the German building materials market, the Haniel

Group acquired in 2002 the former Fels/Hebel group and the former Ytong group to complement and strengthen

its product portfolio of wall-building materials with the established Ytong and Hebel brands, increase the degree

of vertical integration and expand its international presence. In January 2003, we introduced the Xella brand.

Prior to the major acquisitions of Fels/Hebel and Ytong, the Haniel Group initiated a comprehensive

restructuring and integration program in 2001, which was completed in 2005 and resulted in the formation of

our current business structure comprising three of our four business units Building Materials, Dry Lining and

Lime. During the restructuring and integration program, we continued to expand our business activities on a

global basis, with a strong focus on Central and Eastern European countries as well as Asia. In our Building

Materials business unit, between 2004 and June 30, 2013 we acquired or established 27 plants, the majority of

which is located in Central and Eastern Europe, China and the Americas. In particular, in 2012 we acquired an

AAC plant in the Czech Republic and an unfinished Dry Lining plant in Orejo, Spain, which started operation in

May 2013. On January 1, 2013, we introduced our fourth business unit, Ecoloop.

In August 2008, Haniel sold our Group to Goldman Sachs Capital Partners and PAI partners, our current

shareholders.

4.3 Business Units

We manufacture and sell a broad range of wall-building materials and premium dry lining products for

residential, commercial and industrial new construction, renovation, remodeling and modernization projects.

Our building materials products primarily consist of AAC, CSU, mineral insulation boards and dry lining, such

as gypsum fiber boards and cement-bonded boards. We also produce and supply lime and limestone for various

industrial and environmental applications. Our lime products consist of high-quality lime and crushed limestone

of different granularity, quality, reactivity and chemical composition. In each of our business units, we also

provide a broad range of add-on products and value-added services, such as planning advice, customer training

sessions in product handling and joint product development with customers.

We market and sell our products under different brands, including AAC and CSU under the Ytong, Hebel,

Multipor and Silka brands, dry lining products under the Fermacell and Fermacell-Aestuver brands, and lime

and limestone products under the Fels brand. AAC, marketed and sold under the Ytong and Hebel brands,

constitutes our largest product group, contributing 48.2% to our total product sales (i.e., sales excluding service

sales, trading goods, transportation and inter-segment sales) in the twelve-month period ended June 30, 2013.

Silka CSU accounted for 16.7% of our total product sales in the twelve-month period ended June 30, 2013. Our

Fermacell and our Lime products accounted for 14.6% and 14.8% of our total product sales during the same

period, respectively.

We have divided our business into four business units: (i) Building Materials, (ii) Dry Lining, (iii) Lime and

(iv) Ecoloop. Our various brands are organized under the relevant business units. The following table shows our

total sales and Normalized EBITDA by business unit in the fiscal years ended 2010, 2011 and 2012, the six-

month periods ended June 30, 2012 and June 30, 2013, and for the twelve-month period ended June 30, 2013:


Year ended

December 31,

Six-Month Period

ended June 30,

Twelve-

Month

Period

ended

June 30,

2013 2010 2011 2012 2012 2013

(€ in thousands)

(audited) (audited) (audited) (unaudited) (unaudited) (unaudited)

17

Consolidated Segment

Income Statement

Information:

Building Materials

Sales .......................................................... 769.0 847.8 854.3 424.1 392.7 823.0 Normalized EBITDA ................................ 97.0 115.4 119.7 56.8 49.3 112.2

Dry Lining

Sales .......................................................... 184.7 207.6 208.5 108.2 107.4 207.6 Normalized EBITDA ................................ 29.1 34.1 34.6 18.5 12.9 29.0

Lime

Sales .......................................................... 239.5 267.9 272.3 129.5 135.6 278.4

Normalized EBITDA ................................ 67.1 59.0 63.2 27.4 30.2 66.0

Ecoloop*

Sales .......................................................... — — — — 0.1 0.1

Normalized EBITDA ................................ — — — (0.3) (0.4) (0.1)

Consolidation/Holding

Inter-segment sales .................................... (47.2) (52.2) (52.7) (26.6) (26.3) (52.3)

Normalized EBITDA ................................ (0.7) (0.8) (0.5) (0.6) (0.2) (0.2)

Total

Consolidated sales ..................................... 1,145.9 1,271.2 1,282.5 635.2 609.5 1,256.8

Consolidated Normalized

EBITDA ................................................ 192.6 207.7 217.0 101.9 91.8 206.9

* Consolidated segment information from the audited consolidated financial statements and the notes thereto of Xella International

Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011 and 2012 includes Ecoloop in our Lime business unit. Effective as of January 1, 2013, Ecoloop has been established as a separate segment. See “4. Our Business and Industry—Ecoloop”.

Figures for the six-month period ended June 30, 2012 have been adjusted retrospectively for income and expenses previously shown

in the Lime segment.

4.4 Building Materials

Product Offerings

In our Building Materials business unit, which is our largest business unit measured by sales and Normalized

EBITDA, we offer wall-building materials, such as AAC and CSU, as well as mineral insulation boards for

residential, commercial and industrial end-users. We also offer add-on products, such as mortar, tools and

accessories, consulting and other services, such as planning advice and calculations for customers, and training

in product handling and energy-efficient building. In particular, we closely cooperate with our customers in

developing tailor-made solutions that address the specific requirements of particular building projects. As a

means to avoid scrap and waste-depositing cost, we are recycling AAC granulate for new applications, such as

cat litter, oil-binding agents and floor-level bulk. Not all our products or services are offered in all countries

served.

Autoclaved Aerated Concrete

We offer most of our AAC building materials under the Ytong and Hebel brands. Ytong is our main brand for

AAC. We offer a broad range of Ytong products, such as various sizes of blocks, assembly components (roof

slabs, ceiling slabs and wall panels), lintels (door and window coverings) and cinder blocks (stairs).

Our Ytong wall-building materials are made from minerals and natural raw materials (sand, lime, cement,

gypsum and water), and an aerating agent. Based on a sand slurry mixed with cement, lime, anhydrite and

pulverized aluminum in accordance with precise formulas, the resulting mixture is poured in prepared moulds.

The aluminum powder reacts chemically so that the concrete foams, which causes the characteristic formation

of millions of tiny pores. The so-called cake is cut to required block dimensions and is treated in autoclaves with

saturated steam for eight to twelve hours. Through its distinct structure, Ytong achieves superior thermal

insulation, both protecting against cold in winter and against heat in summer, without any additional insulation

materials. We market AAC for its ability to reduce energy consumption for heating and cooling, and the related

carbon dioxide emissions in buildings. The AAC structure is also designed to give Ytong a high degree of

solidity at comparatively low weight, making Ytong particularly resistant to shocks and earthquakes, user-

friendly and improving the speed of construction. Ytong AAC is non-combustible in accordance with European

Commission Decision 94/611/EC and meets the criteria for class A1 fire protection classification in accordance

with EN 13501-1, the highest fire protection class for building materials in Europe. Constructions with Ytong

AAC offer up to three hours of protection against fire.

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The Ytong modular structure and the breadth of our product portfolio make Ytong well suited for a variety of

construction projects, from residential to non-residential new buildings, as well as for renovation, remodeling

and modernization projects. Historically, Ytong’s main application has been in new residential construction

projects, where builders particularly value its strong thermal insulation properties for monolithic exterior walls.

Furthermore, Ytong is used for interior walls in both residential and non-residential construction.

Especially in Germany, The Netherlands, Belgium and France (and to a lesser extent in other countries), we also

offer large AAC assembly components (panels) under the Hebel brand, which is targeted at large-scale

industrial end-users. Hebel is made using the same production method as Ytong and has the same product

characteristics (particularly high thermal insulation), except that Hebel components are large in size and have an

additional steel reinforcement to provide greater structural strength. Due to the large size of single components,

Hebel is designed to allow for fast and cost-efficient construction of large industrial buildings, such as

warehouses and distribution centers. Our Hebel products’ fire resistance characteristics are similar to those of

our Ytong products, and as a result, Hebel walls can be used for areas with high fire safety and explosion

protection requirements within industrial buildings. In Mexico and the United States, the Hebel brand is also

used for blocks and reinforced panels in residential and non-residential construction.

In the twelve-month period ended June 30, 2013, our AAC products generated product sales of €461 million,

which represented 44.4% of total product sales for Building Materials.

Calcium Silicate Units

We sell our CSU primarily under the Silka brand. CSU is produced by mixing sand, lime and water. When the

hydration reaction of water and lime occurs, the mixture is compressed on hydraulic presses to create the

required block dimension. The blocks are then treated in autoclaves with saturated steam for eight to twelve

hours. We offer our CSU in various sizes, from small and mid-sized blocks for hand installation, to large-sized

units, which can be moved by small cranes. Our CSU can be applied for diverse load-bearing functions and

construction formats and are used in a variety of construction sectors, including new residential and commercial

construction. Our CSUs are primarily used in new construction of multi-family houses and light commercial

buildings, as they allow developers to maximize floor space while at the same time building thin but load-

bearing and sound-insulating walls. Even slender walls of solid CSU can support very high loads compared to

other wall-building materials. Depending on their thickness, CSUs can bear between 40 and 910 tons of weight.

Furthermore, wall-building materials made of CSU have high heat-storing capacity and thereby contribute to a

more balanced and pleasant interior climate.

In most countries, we sell AAC and CSU as stand-alone products. Due to similar deformation characteristics

and dimensions, AAC and CSU may also be used for combined building solutions. A combination of both

products in residential buildings can achieve both high-quality thermal and sound insulation and high load-

bearing capacity. Due to our market presence with both AAC and CSU plants in The Netherlands, Germany and

Poland, our customers in these countries may also benefit from a simplified supply chain as both types of wall-

building materials can be sourced from one supplier.

In the twelve-month period ended June 30, 2013, our CSU generated product sales of €157 million, which

represented 15% of total product sales for Building Materials.

Mineral Insulation Board

We market and sell our mineral insulation board product offering under the Multipor brand. The Multipor board

is a thin, pressure-resistant, silicate insulating material made from lime, sand, water and cement, with the

addition of an aerating agent. Multipor board combines thermal insulation characteristics with stability, pressure

resistance and strong fire protection properties. Based on its material properties, Multipor board can be used for

applications in residential and non-residential new buildings, such as interior insulation, insulation of ceilings,

basements and garages, solid steep roofs and mounted, ventilated facades. Multipor board is especially suited to

adapt older buildings to new technical standards of thermal insulation in renovation projects and provides

additional thermal insulation against heat and cold to walls made of other building materials, such as clay brick

and aerated concrete. Our Multipor insulation products are specifically designed to protect against humidity

damage and qualify for the A1 fire resistance classification in Europe, for use in areas with high fire safety

requirements, such as roofs and basements.

In the twelve-month period ended June 30, 2013, our Multipor insulation products generated product sales of

€19 million, which represented 1.9% of total product sales for Building Materials.

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Customers

Our sales activities focus on decision makers and intermediaries. Therefore, our business in Building Materials

is frequently characterized by a two-stage sales model. While our sales and marketing activities are directed at

decision makers, such as architects, construction companies, developers and private builders, we usually do not

maintain contractual relationships with these decision makers. Instead, sales are primarily made through builder

merchants, as intermediaries, that also are our invoice recipients. Builder merchants account for the largest part

of our sales; they frequently organize in purchasing co-operations that provide marketing and billing services for

the individual builder merchants and negotiate annual framework contracts with us, including payment terms

and discounts. Two large co-operations in Europe have approximately 500 and 300 independent builder

merchants as members, respectively. Direct business with construction companies occurs less frequently,

typically, in the commercial and industrial construction sector (Hebel) and in emerging markets lacking

established builder merchant structures. In the twelve-month period ended June 30, 2013, our top five customers

(excluding co-operations) represented 6.7% of total external sales in our Building Materials business unit.

Logistics and Distribution

Depending on our customers’ requirements, building materials are either sold for pick up at our production

facilities or delivered directly to the respective construction site or to the builder merchant’s warehouse.

Our logistics management focuses on improvements in service and inventory levels along our supply chain, both

during the movement of goods from our suppliers and the movement of products to our customers. Delivery

times to the builder merchant’s warehouse or the respective customer’s construction site depend on the type of

product and final destination. The primary means of transportation are trucks, as we usually distribute our

products within a radius of 100 to 400 kilometers of our plants. To the extent required, in particular with

transportation over longer distances, we also transport our products by train or ship. Some of our plants, e.g.,

Burcht (Belgium), Vuren (The Netherlands) and Shanghai and Changxing (China) have their own direct river

access for cost efficient shipping connections. For transportation, we generally use third-party transportation and

logistics sub-contractors.

Sales and Marketing

Sales. We sell our building material products in more than 50 countries through 30 sales offices on three

continents. In the twelve-month period ended June 30, 2013, Western Europe, Central and Eastern Europe and

Asia/Americas represented 70.0%, 23.9% and 6.1% of our external sales in Building Materials, respectively. In

several European countries, our Ytong and Silka products are sold through a joint sales force which, we believe,

is essential in leveraging the broad recognition that our brands enjoy with many decision makers and

intermediaries. In Germany, Hebel is sold through a separate sales team for industrial customers. Our sales

representatives, which are mostly our own employees, negotiate prices with the customers primarily on the basis

of project-specific contracts and typically conduct billing either through builder merchants (indirect business) or

less frequently directly with end-customers (direct business). Our agents also engage in price negotiations with

builder merchants on the basis of annual framework contracts. The compensation of our sales force is partly

performance-based. As of June 30, 2013, we had 1,154 employees (full-time equivalents) in sales, distribution

and marketing.

Marketing. Our Building Materials sales and marketing strategy is designed to reach all decision makers

responsible for the use and purchase of building materials. We focus on project business and target decision

makers, such as builders, constructors, architects, developers, civil engineers and builder merchants, depending

on the particular markets. We aim to consult and collaborate with decision makers at an early phase of the

relevant building project. In the decision-making process for the choice of building materials, we believe that we

benefit from the broad recognition of our brands and their reputation for quality and superior material

characteristics, and our offering of customer-specific building solutions. We use several types of marketing

strategies, including trade fairs, seminars, advertisements and public relations. Training, brochures, technical

documentation and online activities (central and regional websites, social networks and apps) also play an

important role in our marketing activities. The majority of our marketing activities are developed specifically for

each market.

Another key element of our sales and marketing strategy is to safeguard and enhance our Ytong, Hebel,

Multipor and Silka brands by a combination of centralized initiatives and local measures. The brand positioning

of Ytong and Silka is focused on the values of simplicity, reliability and farsightedness, with an emphasis on

solutions for energy efficient building. The primary focus for our AAC product offering under the Ytong brand

is on single-family houses in the new residential construction sector, while our CSU product offering under the

Silka brand is primarily targeted at new construction of multi-family houses and light commercial buildings.

20

The Hebel brand, mainly targeted at the European industrial buildings sector, is positioned with the key

characteristics being economic efficiency, competence and fire protection. We track consumer and customer

preferences and potential interest in our product offerings through a standardized customer dialogue satisfaction

measurement system.

Production

As of June 30, 2013, our Building Materials business unit operated a total of 80 production plants in 19

countries (with 43 AAC (including Multipor) and 31 CSU production plants). We have a particularly dense

AAC and CSU production plant network in Western Europe with a total of 43 plants, and in the Central and

Eastern European countries with a total of 27 plants. We have also established three AAC plants in China and

one AAC plant in Mexico that also serves the southern United States.

In the twelve-month period ended June 30, 2013, the Western European production plants accounted for

approximately 54.8% of our total product output by volume, while our production plants in the Central and

Eastern European countries and Asia/Americas accounted for approximately 36.9% and 8.2%, respectively. In

the year ended December 31, 2012 the average utilization of our total production capacity was 68.4%, with our

plants in Western Europe, Central and Eastern Europe and Asia/Americas operating at 66.7%, 69.3% and 76.0%

of capacity, respectively.

We aim to enhance our operations through constant improvements in product quality and properties, delivery

performance and efficiency of our production processes. We aim to achieve cost efficiency primarily through

efficient raw material and energy management (including, for example, the use of different kinds of

combustibles), the optimization of our plant network and production processes, as well as implementation of

best practices and new technologies across our plant network. We have implemented a worldwide benchmarking

database with all relevant key performance indicators to identify fields for further optimization, and take action

to make necessary improvements. One of our advantages is our flexibility in adjusting production capacity to

changes in demand for our products by increasing or reducing the number of shifts and the use of temporary

staff in our production plants and making adjustments in the production process. Thus, we can more quickly

meet actual market demand and mitigate negative effects of low capacity utilization.

Procurement and Purchasing

As purchasing is of strategic importance for our competitive position, we have optimized our processes over the

last several years. In order to leverage the purchasing power and benefit from volume-based discounts,

purchases of important raw materials, such as lime and cement, energy supplies and logistics services are

centrally managed or centrally coordinated. For these strategic input factors, we follow a central purchasing

strategy, which is overseen by a price and action controlling system maintained by our central purchasing team

for all business units.

We aim to integrate the best available market, method and technology know-how to optimize our cost base and

improve our operational performance. To mitigate fluctuations of raw material prices, we enter into supply

agreements covering significant portions of our raw material requirements typically for periods between 12 and

36 months. We do not generally enter into financial derivative contracts.

Purchasing activities for certain areas, such as repair and maintenance, spare parts, local services, IT and

marketing are managed locally. Over the last two years, our focus has been to increase the transparency of our

procurement processes and to improve the exchange of know-how in order to further improve our cost structure

while satisfying local demands. This process has been accompanied by the development of the local purchasing

organizations by sharing best practices and improving know-how as well as establishing consistent purchasing

guidelines.

Competition

We face intense competition in the markets for our wall-building material products from larger scale global

manufacturers and regional and specialized competitors as well as with horizontally integrated suppliers of wall-

building materials. In the European markets for wall-building materials, our AAC and CSU products mainly

compete with clay brick, concrete block and pumice stone, but also with alternative wall-building materials,

such as wood, pre-cast concrete walling units and gypsum boards. Market shares for wall-building materials and

demand for AAC and CSU vary considerably by country and may be subject to strong regional variations due to

differences in traditions of construction methods and availability of raw materials. For example, we estimate that

in 2012 the market share of clay bricks in the wall-building materials market segment was approximately 11%

in The Netherlands, but reached more than 60% and 70% in the Czech Republic and Italy, respectively. Heavy

21

concrete blocks accounted for more than 60% of the market segment in France, but only approximately 10% in

Germany. CSU has strong market positions in The Netherlands (approximately 58%) or Germany

(approximately 33%), but is almost non-existent in several other European countries, such as France and Italy.

We estimate that AAC has high market shares in Romania (more than 50%) or Poland (more than 40%), but

significantly lower shares, e.g., in France or Italy (approximately 7% each). In the interior wall-building sector,

our AAC products also compete with dry-wall solutions. Large-size elements under the Hebel brand compete

with different cladding materials and other alternative wall-building materials for industrial and commercial

buildings.

In Building Materials, our major international competitors include Wienerberger, HeidelbergCement, CRH, and

H+H International. Wienerberger produces and sells clay bricks, which compete with our AAC and CSU

products. We also compete with certain divisions of both CRH (AAC and CSU) and HeidelbergCement (CSU)

in the Benelux countries, Poland and Germany. H+H International is a medium-size Danish producer of AAC

products with a focus on markets in Scandinavian countries, the United Kingdom, Germany, Poland and Russia.

In January 2011, the Company publicly confirmed its continued intention to make a cash offer for all shares in

H+H International which would be carried out through its subsidiary Xenia S.à r.l. See “—Legal and Regulatory

Proceedings—Antitrust”.

We believe that in the new residential construction sector which is the primary target of our AAC and CSU

products and mineral insulation boards, the most important competitive factors, in addition to price, include

(i) the offering of solutions addressing important trends in energy efficient and ecological construction based on

stand-alone or combined applications of AAC, CSU and mineral insulation boards, (ii) product quality and

innovation, (iii) the offering of customer-specific application services, (iv) a dense and comprehensive plant

network allowing us to shift production capacity flexibly and (v) strong brands recognized by decision makers

and intermediaries.

4.5 Dry Lining

Product Offerings

In our Dry Lining business unit, we offer premium dry lining products that are targeted at high-end markets in

residential, commercial and industrial new construction, renovation, remodeling and modernization projects,

mainly in Germany, Switzerland, France, The Netherlands, Austria, Denmark, Sweden and the United

Kingdom. We sell gypsum fiber boards and cement-bonded boards under our Fermacell brand and fire

protection boards under our Fermacell-Aestuver brand. We also offer add-on products and services to provide

customers with planning advice and training in product handling.

Gypsum fiber boards are made of gypsum and cellulose paper fibers, which are mixed with water and pressed

into stable boards, then dried and cut to size. Due to the addition of paper fiber to the gypsum mix in the

production process, gypsum fiber boards are more solid than plaster boards and are characterized by high

resistance to pressure and increased stability. Our Fermacell gypsum fiber boards are mainly used for interior

wall applications, flooring and ceiling. The product range includes complete systems for interior construction in

flooring and wall applications in the residential and non-residential sectors. Moreover, Fermacell gypsum fiber

board can be used as a load-bearing, fire or weatherproof board for external walls with timber sub-structures. As

a result, gypsum fiber board is used in residential and commercial new construction and renovation, remodeling

and modernization projects. Fermacell cement-bonded board can be used for all residential, office and industrial

wet areas for both new construction and renovation, remodeling and modernization projects. To meet

anticipated regulatory trends and customer requirements, we develop innovative and customer-specific solutions

for ecological and fire-resistant products and systems. The ecological features of Fermacell products have

increasingly become a key factor for the positioning of our Fermacell brand in the market. For example, under

our Fermacell greenline brand, we introduced a board which is coated on both sides with an active component

based on keratin. Through its material properties, our greenline boards actively absorb harmful substances, such

as formaldehyde, or unpleasant odors from the room air, in a natural process and convert these into safe

substances. Another innovation is the development of the A1 fire classification fire panel board, which complies

with the European regulation for fire protection.

In the twelve-month period ended June 30, 2013, our Fermacell products generated product sales of

€140.8 million, which represented 88.1% of total product sales for Dry Lining.

Fermacell-Aestuver fire protection board is cement-bonded and glass-fiber reinforced to achieve a high degree

of fire resistance. The board is enriched with hollow glass balls that do not absorb water, which makes the board

highly resistant to both fire and frost and the elements generally. In addition, the board is characterized by high

abrasion resistance, which creates a smooth and easily cleanable surface. Due to its product characteristics,

22

Fermacell-Aestuver fire protection board is often used in the construction of fire-resistant cable ducts and fire-

resistant doors. Other Fermacell-Aestuver cement-bonded boards are primarily used in tunnel projects that

require a board combining stability and resistance to the elements.

In the twelve-month period ended June 30, 2013, our Fermacell-Aestuver products generated product sales of

€10.3 million which represented 6.4% of total product sales for Dry Lining.

Customers

We market and sell our premium dry lining products primarily to end-users, timber-frame construction

companies, dry lining installers, original equipment manufacturers and producers of pre-fabricated houses. Sales

to the various target groups are primarily made through builder merchants and do-it-yourself retail chains. We

market and sell our Fermacell-Aestuver fire protection boards primarily to large-scale projects and original

equipment manufacturers. In the twelve-month period ended June 30, 2013, our 10 and 20 largest customers

(excluding co-operations) accounted for 7% and 12%, respectively, of our total Dry Lining sales by value.

Demand for gypsum fiber boards has historically been less cyclical than demand for AAC, CSU and other wall-

building materials, as gypsum fiber boards are also used in the less cyclical construction sectors of renovation,

remodeling and modernization.


Similar to the distribution system we maintain in Building Materials, we distribute our premium dry lining

products mostly through builder merchants and only to a lesser extent directly to original equipment

manufacturers and pre-fabricated house producers. Most of our dry lining products are delivered to the

warehouses of the relevant builder merchants. In the twelve-month period ended June 30, 2013, we estimate that

we distributed approximately 91% of our dry lining products sales by value through indirect sales and 9%

through direct sales.

Our supply chain management focuses on improvements in service and inventory levels along our supply chain.

In total, we operate 13 warehouses in Europe (including plant storage) with an aggregate capacity of

approximately 3.6 million square meters. Delivery times to builder merchants depend on the type of product and

final destination and can range from less than 24 hours to three days and, under certain circumstances, one

week. We transport our dry lining products primarily by truck and generally use third-party transportation and

logistics sub-contractors. Whenever possible we try to use intermodal transportation or rail, for example for

delivery from Germany to Italy and Sweden.

Sales and Marketing

Sales. We sell our dry lining products in more than 30 countries through 15 sales offices in Europe and one in

the Middle East. Our German sales force is organized in four regional sales offices and a separate dedicated

sales team for the do-it-yourself business. Our other sales offices are located in the Benelux countries, France,

the United Kingdom, Poland, Italy, the Czech Republic, Austria, Switzerland, Denmark, Sweden and the United

Arab Emirates. As of June 30, 2013, we had 229 employees (full-time equivalents) in sales and 56 in logistics

and services.

Sales activities in Dry Lining primarily focus on pre-sales to the various target groups comprising end-users,

timber-frame construction companies, dry lining installers, original equipment manufacturers and producers of

pre-fabricated houses. With our pre-sales activities, we aim to ensure that Fermacell products are included in

binding project specifications and to support our various target groups throughout relevant projects. The sales

activities of our agents, who conduct their sales activities mainly indirectly, also include price negotiations with

builder merchants on the basis of annual framework contracts. While the relevant builder merchants are

typically the recipients of our invoices in indirect sales activities, they are also often responsible for billing

matters for direct sales to end-customers.

Marketing. Our Dry Lining sales marketing strategy is designed to reach all decision makers responsible for the

use and purchases of wall-building materials in new residential and commercial construction and renovation,

remodeling and renovation projects. As a supplier for the high-end market in the European dry lining business,

Fermacell concentrates on specific market sectors in which the strengths of our Fermacell product offerings

matches the customers’ requirements. Important construction sectors for Fermacell include timber-frame

construction, flooring elements, end-user residential applications and customary dry lining at schools and

hospitals. Our sales force maintains strong relationships with key decision makers, such as developers and

23

architects, who determine building specifications and building material types, in order to promote Fermacell and

Fermacell-Aestuver products.

Another key element of our sales and marketing strategy is to safeguard and enhance our Fermacell and

Fermacell-Aestuver brands by advertising, press coverage and a strong focus on online marketing activities, as

well as independent and corporate events. We track consumer and customer preferences and potential interest in

our products through an external project data base that is backed by a dedicated call center.

Production

We operate five Dry Lining production plants, three of which are located in Germany, with one in The

Netherlands and one in Spain, and a separate paper treatment plant in Germany. Our plants in The Netherlands

and Spain and two of our German plants are dedicated Fermacell plants. Our plant in Calbe, Germany, is a plant

dedicated to the production of cement-bonded boards with three production lines. Based on the high demand for

cement-bonded boards we have increased the production capacity of the plant in Calbe during the course of

2012 and 2013 and started two-shift operation of the new line in April 2013.

In the twelve-month period ended June 30, 2013, the German plants accounted for approximately 72.3% of our

total product output by volume, while the Dutch plant accounted for approximately 27.3%. Our Spanish plant

started operation only in May 2013 and contributed 0.4% to the production output in the twelve-month period

ended June 30, 2013. In the fiscal year ended December 31, 2012, the average utilization of our total standard

production capacity was 119.5%, with our German plants operating at 124.0% of capacity and our Dutch plant

operating at 109.0% of capacity. The total capacity of all dry lining plants, including the new plant in Orejo,

Spain (which is intended to primarily serve markets outside of Spain, particularly France, the United Kingdom

and Scandinavian countries), that started production in May 2013, amounts to 55 million square meters

annually.

We aim to improve product quality and material properties, delivery performance and efficiency of the

manufacturing processes, and to introduce new and innovative products. We also aim to achieve cost efficiency

primarily through efficient raw materials management, high recycling rates and improvements in productivity at

our facilities.


The raw materials we use in the dry lining production include gypsum (including recycling gypsum from

combustion gas desulphurization plants (REA gypsum)), water, recycled paper and recycled production scrap.

We procure gypsum and recycled paper externally and store gypsum in silos on the respective production

plant’s premises, except for our plants in The Netherlands and Spain where we operate a calcination facility

ourselves. We secure the procurement of recycled paper for Dry Lining through our subsidiary Fels

Recycling GmbH and a significant volume of calcined gypsum through our subsidiary Fels-Werke GmbH. In

order to reduce our dependency on paper suppliers and paper prices, we are exploring the use of alternative fiber

in our Fermacell gypsum fiber boards.

Competition

We face intense competition in the market segments for our dry lining products from larger-scale global

manufacturers. With respect to gypsum board, large-scale manufacturers, such as Knauf, Saint Gobain

(primarily under local brands like Rigips, Placoplatre and Gyproc) and Siniat, which are the only producers of

gypsum boards combining a global network of production plants with local sales organizations, are our main

competitors in all market segments for dry lining systems. While these competitors primarily focus on the sale

of plasterboard, their product offerings also include gypsum fiber boards (Saint Gobain and Knauf) or special

plasterboards (all competitors), which directly compete with our Fermacell products.

The European gypsum board market segment is characterized by the predominant use of plasterboard. Of the

total market volume in Europe in 2012, we estimate that plasterboard products accounted for approximately

96%, leaving gypsum fiber boards (such as Fermacell) with an average share of approximately 4%. The use of

gypsum fiber boards generally varies by country between 1% and 30%. With respect to fire protection boards,

we market and sell our products under our Fermacell-Aestuver brand, which is in direct competition with the

Etex group’s products that are marketed under the Promat brand in Europe.

We believe that in the high-end market segment mainly targeted by our premium dry lining products, the most

important competitive factors, in addition to price, are a strong sales force focusing on both pre- and after-sales

24

activities, the performance of products and systems, a high degree of brand awareness and a focused premium

product strategy.

4.6 Lime

Product Offerings

In our Lime business unit, we offer high-quality lime and crushed limestone of different granularity and quality

for a large variety of industrial applications, including in the steel industry (pig iron, crude steel and secondary

metallurgy), chemical industry (calcium carbide, aluminum, neutralizations and sugar), building materials

industry (AAC, CSU and dry mortars), environmental applications (flue gas desulphurization, water and waste

water treatment) and agriculture (various uses). Lime also produces dry mortars and gypsum and supplies lime

and other products to Building Materials and Dry Lining. Sales to our other business units accounted for 13.7%

of Lime’s total sales during the twelve-month period ended June 30, 2013.

Our lime and limestone product portfolio covers the entire range of demand for industrial lime and limestone

applications (except for white filler). We focus on high-value added products such as lime, hydrated lime, burnt

dolomite and milled limestone. To a limited extent, we also provide crushed limestone of different granularity

and quality for use in road construction and civil works and offer dry mortar as well as calcinated gypsum. We

also offer customer-specific application services and, in close cooperation with our customers, develop highly

customized product solutions with distinct chemical properties tailored to the customers’ production processes.

We market and sell our lime products under our established Fels brand in Germany and increasingly in Russia

and under our well-known Vapenka Vitosov brand in the Czech Republic. As a result of its different end-

markets exposure, our Lime business unit’s performance is not as strongly correlated to development of

construction activities in general.

In the twelve-month period ended June 30, 2013, our lime and limestone products generated external product

sales of €162.2 million and €37.6 million, which represented 79.5% and 18.4% of total external product sales

for Lime, respectively.

Customers

In the twelve-month period ended June 30, 2013, our top five and top ten largest customers accounted for 35.3%

and 45.2% of our total Lime sales by value (excluding intra-Group sales), respectively.

Lime has a diverse customer base in Germany, the Czech Republic and Russia. Most of our industrial customers

are well positioned in their respective markets, with advanced production facilities and established products.

Among our new customers are power plants using combustibles from alternative sources instead of fossil fuels.


In general, we transport our Lime products by truck (approximately 59%) and by rail (approximately 41%). In

most cases, we serve our industrial customers on a “ddp” (delivered, duty paid) basis, while customers in road

construction are mainly being served on an “ex works” basis and are responsible for collecting their orders at

our production facilities.

Sales and Marketing

Sales. In the twelve-month period ended June 30, 2013, the total external sales in our Lime business unit

amounted to €240.3 million. Our external sales in Germany (including export), in the Czech Republic and in

Russia amounted to €195.0 million, €27.1 million and €18.3 million, respectively.

We sell our Lime products directly to end-users and, except for road construction activities, generally do not

engage builder merchants for sales and marketing purposes. In general, our product sales by value are generated

predominantly by direct sales and to a lesser degree through builder merchants. As of June 30, 2013, our sales

organization in Lime consisted of approximately 68 employees (full-time equivalents), of which 23 are directly

involved in sales activities and 45 in logistics and services as well as application and innovation technology. We

do not have external sales agents. Billing is conducted on a daily basis. Several large accounts, mainly in the

industrial sector, are invoiced on a weekly or monthly basis.

Marketing. The Lime business is characterized by the business-to-business nature of its operations. Thus, we do

not maintain a special marketing division in Lime. We rather aim to attract our customers and maintain long-

term relationships by advanced product quality, a high degree of security of supply, customer-specific

application services, innovation and personal contacts, all of which constitute key competitive factors in the lime

25

industry. We have an application and support team consisting of several engineers, who provide customer-

specific add-on services focused on solving operational problems and implementing innovative products and

solutions to generate added value. For example, such services include detailed advice on the selection and use of

lime products for laboratory-scale and industrial-scale process trials. In this respect, we are one of the leading

providers of application know-how in the lime industry in Germany and operate more than 35 test installations

and machinery, which we can make available to new and existing customers. Our application advice typically

covers the entire process from planning and organization to the evaluation of the relevant results of the trials.

Our research and development team is continuously improving the performance of our established products.

Moreover, our success in developing and inventing new products and solutions for our customers is documented

in the numerous patented innovations. Fels-Werke has filed 17 patents for lime products and applications since

2008.

Production

We operate nine lime production plants in Germany, one in the Czech Republic and one in Russia. In Germany,

five of our plants are located in the vicinity of our Lime headquarters in Goslar, one close to Berlin and one near

Regensburg. Our plant in the Czech Republic is located in Vitosov. Our plant in Russia is located in Tovarkovo.

Additionally, we operate four plants for mortar production, calcination and slag recycling with three plants in

Germany and one plant in the Czech Republic.

In the twelve-month period ended June 30, 2013, the German plants accounted for approximately 78.6% of our

total lime product output by volume, while the Czech plant accounted for approximately 12.7% and the Russian

plant for 8.7%, respectively. Production output amounted to 2.2 million tons of lime and 2.9 million tons of

limestone, respectively.

In the fiscal year ended December 31, 2012, the average utilization rate of our total production capacity for

burnt lime was 76.1%, with our German plants operating at 76.5% of capacity and our Czech and Russian plants

operating at 73.4% and 75.4% of capacity, respectively. For the fiscal year ended December 31, 2012, the total

capacity of all our Lime plants amounted to approximately 2.7 million tons of lime and 8.1 million tons of

limestone excavation.

We aim to optimize our production processes through improvements of product quality and properties, delivery

performance and efficiency of the production processes. We aim to achieve cost efficiency primarily through

efficient energy management and the optimization of production processes. We have developed a benchmarking

database with all relevant key performance indicators and identified areas for further optimization on a regular

basis. As energy cost accounted for 28.3% of sales in the twelve-month period ended June 30, 2013, we regard

energy-saving investments to be crucial to our profitability. We have made investments into new energy-

efficient kilns that have reduced our exposure to volatility in energy, oil and gas prices and have created more

flexibility for our Lime business unit with respect to the sources of energy applied. Additionally, since 2006, we

have used pulverized lignite as a source of energy in certain of our kilns. We have implemented a certified

integrated management system with the modules energy management system (DIN EN ISO 50001), quality

management system (DIN EN ISO 9001) as well as an environmental management system (DIN EN 14001) for

all German plants. Assuming constant annual production levels, we estimate that high-quality lime deposits in

our quarries will on average last for approximately 120 years.


The basic raw material we use in our lime production plants is limestone, which we mainly excavate from our

own quarries on site or nearby our production plants. In the twelve-month period ended June 30, 2013, we have

additionally procured limestone from third-party suppliers accounting for 11.1% of our produced lime. We

externally procure all other means of production, in particular, several types of energy sources for the lime

refinement process, as well as repair and maintenance materials. Among these, energy is the major input and

cost factor for our operations. It is sourced in the form of electricity, gas, oil, pulverized lignite (used in five of

our plants, partially sourced under long-term supply agreements) and hard coal from various suppliers in order

to maintain flexibility in the energy sources. In order to ensure optimal energy sourcing, we have established a

central energy management department approach which is responsible for all energy purchases of the Group.

This centralized approach enables us to bundle the market know-how and control the price development

centrally in order to achieve a highly competitive cost situation in all countries.

Competition

Although we estimate that the three major suppliers (Rheinkalk, the German subsidiary of Groupe Lhoist, our

subsidiary Fels-Werke and Schaefer Kalk) account for approximately 75% of annual German production, while

26

approximately 20 smaller producers account for the remainder, at a regional level, lime production in Germany

is fragmented. Geographically, Rheinkalk has a strong presence in the western part of Germany. Our subsidiary

Fels-Werke has a strong presence in the eastern part of Germany, but is also present in southern and northern

Germany. Schaefer Kalk holds a strong position in central Germany, featuring the highest quality levels of lime

that are available in Germany. Rheinkalk, Fels-Werke and Schaefer Kalk engage in research and development

activities to provide application support services to customers. Innovative and customized lime products are

primarily being offered by the three largest producers. As a consequence of high capital requirements for the

maintenance and modernization of production facilities and increased cost of environmental compliance, the

German market for lime products has already undergone a certain degree of consolidation, including closures of

several plants by Rheinkalk and Schaefer Kalk. On the other hand, some smaller producers are currently

building new kilns resulting in an increase of burning capacity. As average sales prices for unburnt products are

significantly lower than for burnt products, transportation cost and proximity to customers play a relatively

greater role for unburnt products. As most customers are not able to store larger quantities of lime and limestone

products, supply-chain management and logistical solutions are competitive factors. As a result of more actively

targeting customers for environmental applications, the environmental applications product segment for lime at

Fels-Werke, which is characterized by lower levels of cyclicality in demand, is approximately eight percentage

points larger than at our competitors.

4.7 Ecoloop

Product Offering

In our Ecoloop business unit, which was established as a separate business unit on January 1, 2013, we develop

and market our new synthesis gas technology. At our lime plant “Kaltes Tal”, a 32 MW Ecoloop plant has been

installed and is currently in the final commissioning and testing phase. In parallel to its finalization, we are

preparing to introduce the Ecoloop technology to potential customers. We intend to grant licences, supply

engineering and key components (such as gasifier, gas cleaning and control systems) to customers and provide

support during the commissioning phase of each Ecoloop plant. In addition, services around maintenance,

improvement and waste management will be supplied, however, we currently do not intend to sell or operate

Ecoloop plants as a general contractor. The installation of plants is intended to be performed by partners or

customers themselves. Ecoloop’s focus will be on developing additional applications starting from the “thermal

application” (consisting of a gasifier and a gas cleaning unit). With this technology, clean synthesis gas, capable

of replacing natural fuels (e.g., coal or natural gas), is produced with a thermal efficiency of more than 80%.

The gas can be used in thermal processes which need flame temperatures of up to 1,800°C. At current price

levels, the production costs of synthesis gas are generally significantly below the prices of fossil fuels

substituted. In addition, Ecoloop will also produce electricity in the “electrical application”. The “electrical

application” targets mid-sized cities and remote industry locations, since the performance size of annually

approximately 10 MW or 40,000 tons waste input is ideal for smaller to medium sized energy demands. We also

intend to increases the quality of Ecoloop’s two outputs, synthesis gas and lime-ash-mixture, to make synthesis

gas suitable as a chemical raw material or a fuel substitute.

Customers

At this early stage of technology marketing, we focus on customers that we consider to be technological opinion

leaders, such as governmental and scientific institutions as well as decision makers of target industries and

companies. Target sectors are the lime, cement, steel, chemical, paper, sugar and automotive industries as well

as the recycling industry and municipal authorities. Our current target customers are innovative companies or

institutions that are ready to invest in new sustainable technologies. The primary objective is to sell the first

external projects to customers that may make the project a success and suitable as a reference. Our geographic

focus is currently Europe.

Project Development

Successful development and sales of Ecoloop projects depends, in addition to the availability of the technology,

on the availability of technologically and economically attractive waste supplies of approximately 40,000 tons

per plant annually, on the availability and terms of financing for €20-35 million per project and on the future

development of energy prices. We tend to favor projects, where customers have comparatively high energy

costs, and who can finance the investment in Ecoloop through subsequent savings in energy costs. Also, we

favor projects in which waste availability is relatively stable, if, for example the industrial customer can use own

residues, for example, dry fraction from a mechanical biological waste treatment plant, chemical wastes and

recycling companies, or if partnerships with waste owners already exist in other areas (such as in the cement

industry), or if we can develop new partnerships and contribute to its waste management.

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Partnerships

Our business model focuses primarily on our core competencies in the Ecoloop segment, supplying engineering

services and key components to customers as well as providing support to customers during continuous

operation. In non-core areas, we are developing partnerships with other companies that are experienced in plant

realization and waste management. We are developing joint business models with engineering companies that

are well established in the field of waste to energy engineering, turnkey and contracting projects. Furthermore,

we intend to implement joint waste management models with market-leading waste companies in our target

markets.

Sales and Marketing

Sales. We are preparing for sales of the Ecoloop technology to our customers and have assembled a small sales

team. Sales activities generally include the presentation of the first Ecoloop plant at “Kaltes Tal”, presentation

of economic figures, identification of a specific customer location and technological and economic evaluation of

an Ecoloop project. Since this process requires customers to provide extensive funding, the ability to

successfully market Ecoloop technology depends on the proven performance of the “Kaltes Tal” plant.

Marketing. Our marketing and communication strategy is to position Ecoloop as the first technology provider

for industrial customers for gas-from-residue generation. This requires effective communication with

gasification experts, as well as the successful communication of Ecoloop’s characteristics and economics to

potential customers. For enlarging our network and our prominence in key industries, we maintain a website,

present our technologies at key European industry trade fairs and submit reports about Ecoloop to industry

journals.

Engineering and Key Component Supply

We will continue to gain experience from the first Ecoloop plant at “Kaltes Tal”. Starting from there, we intend

to consolidate the engineering and key component know-how for future plants, in particular, to develop

standardized basic and specific engineering packages as well as key supplier partnerships for the supply of key

components (such as gasifiers and gas cleaning systems). Furthermore, know-how of the installed control

system is planned to be developed to a core competence. For both mechanical and electrical engineering, we

plan to establish small teams, which will enable us to further develop marketable know-how and engineering

services while commissioning further plants.

Competition

The competitive environment for our new technology depends on the particular solution that we offer. The

thermal applications sector is an innovative segment since Ecoloop is the first ecological and economical gas

generation technology with varying waste input for industrial gas usage. We expect to primarily compete against

traditional technologies and, in particular, conventional fossil fuel. We believe there are currently few or no

alternatives in clean synthesis gas production from various kinds of waste other than Ecoloop which are as

economical and ecological for thermal applications and which focus on industrial customers. In particular, the

“Chinook” technology is currently used for large scale waste-to-electricity projects in cooperation with certain

municipal authorities and we believe any adaptations of this technology to compete with the Ecoloop technology

would need to rely on conventional and established technologies without the unique features of Ecoloop. Other

companies operating gasification solutions (such as Energos, Nippon Steel and Kobelco) cannot, in our

experience, use the gas as a fossil fuel substitute due to a lower gas quality compared to Ecoloop. In addition,

plasma gasification technology (e.g., used by Advanced Plasma Power), in our assessment, is not suitable for

efficient industrial applications.

In the electrical applications sector, Ecoloop enters into an existing and growing market in which we will

generally compete against all other electrical energy production technologies. The industry segment of waste-to-

electricity can be structured according to the technology’s electrical performances. Incineration technologies

(such as those used by Martin, Fisia Babcock and Hitachi Zosen) operate efficiently starting at minimum

electrical performances of approximately 20 MW. Currently, similar minimum electrical performance thresholds

apply for upcoming projects of alternative gasification technologies (such as Chinook). Smaller plants, such as

biogas plants, operate at lower scales of approximately 500 KW to 5 MW. Ecoloop, however, works efficiently

at approximately 10 MW and focuses on the mid-sized segment.

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4.8 Research and Development

We consider research and development to be among the key factors for the further development of our product

offerings and brands. Our research and development activities primarily aim at adding innovative functions and

applications to our products and optimizing the quality and complementary nature of our product portfolio and

application services, particularly by developing energy-efficient building solutions and by facilitating

installation processes.

We have centralized our research and development activities at our technology and research center near

Potsdam in Germany, which steers and coordinates research and product development across our business units.

Our technology and research center specializes in the fields of building physics, applications, products and

processes, as well as fundamental research, and has state-of-the-art equipment from full-scale test facilities to

indoor testing facilities and laboratories. The direct proximity to one of our AAC plants enables us to conduct

large-scale tests, if required. Approximately 35 highly qualified specialists are employed in our research and

development center. In addition, our Dry Lining, Lime and our Ecoloop business units maintain smaller research

and development teams for business unit specific aspects.

In order to accelerate our innovation processes, the Xella Innovation Circle, an international, interdisciplinary

and cross-hierarchical network of approximately 35 employees from 18 countries has been established to

facilitate the exchange of innovative ideas across our organization. For our Ecoloop project, for example, we

received the IKU (German Innovation Award for Climate and the Environment) and the Hugo Junkers

Innovation Award 2012.

Xella and Fraunhofer IBP (Fraunhofer-Gesellschaft zur Förderung der angewandten Forschung e.V.) entered

into an agreement for a strategic partnership for the five-year period from 2013 to 2017. This strategic

partnership aims at analyzing future trends of cities and at conducting research and development projects

focusing on AAC technologies. The cooperation enables us to further strengthen our reputation as an innovative

company and to further expand our AAC know-how.

4.9 Information Technology

Due to our decentralized group structure with four business units operating independently from each other, we

generally have a non-unified information technology system landscape. Main information technology solutions,

applications and know-how are, however, provided on a centralized basis, such as the operation of a global

consolidation and reporting system, a central customer-relationship management system, a global SAP-based

enterprise resource planning (“SAP ERP”) template, as well as certain other proprietary strategic information

technology solutions for production and logistics. In this regard, Building Materials as our largest business unit

provides certain information technology services to our other business units. The hosting of our central

information technology systems and our central information technology infrastructure is mainly outsourced to

external providers. We are currently working on the consolidation of four heterogeneous SAP ERP systems in

the Building Materials business unit into a common template and system. The project started in 2012 with the

definition of a business blueprint incorporating the best practices of the different countries and is intended to

lead to one central system based on standardized processes and reporting structures with successive roll-outs

into our companies by the end of 2015.

4.10 Intellectual Property

We currently own approximately 500 registered trademarks worldwide. These trademarks particularly relate to

our Ytong, Hebel, Multipor, Silka, Fermacell, Aestuver, Fels and Ecoloop brand names and logos, as well as

certain others trademarks (e.g., Siporex). Our most important trademarks are Ytong, Hebel, Silka and Fermacell.

We have licensed our Ytong and Hebel trademarks in some countries to third parties on an exclusive basis. We

own approximately 550 domains and approximately 370 registered (or in the process of registration) patents,

utility models and registered designs worldwide, approximately 120 of which are registered in Germany. We

actively use only a limited number of our patents and utility models in our production processes and product

offerings. Protection of process innovations and other technology is essential to our business. We rely upon

unpatented proprietary expertise, continuing technological process innovations and other trade secrets to

develop and maintain our competitive position.

We are not aware of any major legal proceedings that have been brought against us for infringement of a patent

or trademark or of any proceedings brought against any of our patents that could have a material adverse effect

on our business if we would not prevail in such proceedings. We have regularly taken action to assert our

intellectual property rights and we cooperate with local authorities against product piracy. We have not entered

29

into any licensing agreements regarding intellectual property rights (except for the Ytong and Hebel trademarks

in some countries), neither as licensor nor as licensee, that are material to our business.

4.11 Employees

The following table sets forth information on the number of our employees (full-time equivalents) by business

unit and function and excluding temporary employees as of December 31, 2010, 2011 and 2012 and as of

June 30, 2013.

As of December 31, As of

June 30,

2013 2010 2011 2012

Building Materials ................................................................................. 5,215 5,332 5,176 5,109

Production ............................................................................................ 3,501 3,608 3,425 3,367

Distribution and Marketing .................................................................. 1,095 1,110 1,128 1,154

Administration ..................................................................................... 620 613 624 588

Dry Lining .............................................................................................. 555 600 676 703

Production ............................................................................................ 296 327 378 384

Distribution and Marketing .................................................................. 228 242 258 285

Administration ..................................................................................... 32 31 40 35

Lime(1)

..................................................................................................... 976 1,014 1,017 1,025

Production ............................................................................................ 812 846 842 849

Distribution and Marketing .................................................................. 63 67 69 68

Administration ..................................................................................... 101 101 106 109

Ecoloop(1)

................................................................................................ — — — 10

Production ............................................................................................ — — — 5

Distribution and Marketing .................................................................. — — — 4

Administration ..................................................................................... — — — 1

Total ........................................................................................................ 6,747 6,946 6,869 6,848

Production ............................................................................................ 4,609 4,781 4,644 4,603

Distribution and Marketing .................................................................. 1,385 1,419 1,455 1,511

Administration ..................................................................................... 753 746 770 734

(1) Consolidated segment information from the audited consolidated financial statements and the notes thereto of Xella International

Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011 and 2012 includes Ecoloop in our Lime business unit. Effective as of January 1, 2013, Ecoloop has been established as a separate segment. See “4. Our Business and Industry—Ecoloop”.

We have not suffered any material work stoppages or strikes in recent years, and we consider relations with our

employees, works councils and unions to be satisfactory. We are subject to mandatory collective bargaining

agreements (Tarifverträge) with most of our employees in our German production facilities and strikes may

occur in Germany and elsewhere at any time. As German law prohibits asking employees whether they are

members of unions, we do not know how many of our employees are unionized. In general, our employees in

Germany fall within the scope of the German Dismissal Protection Act (Kündigungsschutzgesetz), which limits

our ability to terminate individual employment relationships unilaterally. We also comply with the German

Anti-Discrimination Act (Allgemeines Gleichbehandlungsgesetz) and comparable legislation in other countries

in which we operate.

We operate a number of company-sponsored supplementary long-term defined benefit pension arrangements.

These pension plans and individual pension commitments provide for the payment of old-age, long-term

disability and survivors’ benefits (spouses’ and orphans’ pensions). Subject to certain conditions, an employee’s

rights under those pension plans and individual pension commitments vest. In most cases, benefits payable are

determined on the basis of an employee’s length of service, earnings and position in our company. The largest

part of the pension provisions relate to German pension plans (92.1% as of June 30, 2013), with most of the

defined benefit plans currently closed for new entrants.

In addition, employees in Germany may participate in defined contribution schemes (Direktversicherung or

Pensionskasse) which are generally financed by employee contributions and partially supplemented by

employer subsidies (20% of employees’ contributions) that are mainly financed by corresponding savings in

employer contributions to the German social security system.

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4.12 Properties

As of June 30, 2013, we utilized a total of 135 properties for production-related purposes (mainly production

sites, lime quarries and sand pits). We had 66 properties located in Germany, eleven in The Netherlands, three in

France, 25 in Poland, four in the Czech Republic and four in Russia. In our Building Materials business unit, we

utilized a total of 115 production-related properties, six production-related properties in our Dry Lining business

unit and fourteen production-related properties in our Lime business unit. In addition, we possess approximately

52 other production-related properties, which are currently not in use by us, mainly closed plant sites or

properties leased to third parties. Most of the properties currently not in use by us belong to our Building

Materials business unit. We own most of the real estate that we possess and hold lease and hereditary building

rights under the local law of the relevant jurisdiction in which the real estate is located for the remainder. In

addition to production-related properties, we have a number of locations used for administrative, technical and

sales and distribution purposes, including our corporate headquarters in Duisburg, Germany. Many of the non-

production related facilities are leased.

4.13 Insurance

We have obtained liability, product liability, property, directors’ and officers’ and other insurance coverage, to

the extent we believe necessary, to operate our business. We believe our liability insurance is sufficient to meet

our needs in light of potential future litigation and claims asserted against us. For certain risks that we believe

are minor, we are self-insured and have, when deemed commercially reasonable, insurance policies with

deductibles. We regularly review our insurance program together with our insurance broker. We cannot

guarantee, however, that we will not incur losses beyond the limits or outside the coverage of our insurance

policies. In addition, longer interruptions of business in one or more of our plants can, even if insured, result in

loss of sales, profit, customers and market share.

4.14 Legal and Regulatory Proceedings

Litigation

We are party to various legal proceedings arising in the ordinary course of business. We are not currently

involved in any legal proceedings nor are we aware of any threatened claims against us which we expect to have

a material adverse effect on our financial position and results of operations.

We (in particular, Xella Deutschland GmbH and Xella International GmbH) are currently facing potential

warranty, product liability and damages claims by several house owners in connection with the delivery of

building materials by our legal predecessor from certain plants in Northrhine-Westphalia, Germany, between the

end of 1987 and 1996. The potential claims are based on the insufficient durability and water resistance of

calcium silicate units that had been produced in the relevant period applying an alternative production method,

which substituted another product for lime. As this resulted in inferior quality compared to the material

properties of high-quality calcium silicate units (such as our CSU), damages to the masonry of houses occurred

in several instances. A total of 23 legal proceedings for damages and 33 proceedings for the preservation of

evidence (selbständiges Beweisverfahren) have so far been initiated against us, as of June 30, 2013. While we

believe the legal situation is uncertain, we have renovated 219 houses as an accommodation and have made

commitments for the renovation of an additional 79 damaged buildings (partially already under renovation). It is

uncertain how many additional buildings may require renovation. Despite the fact that the press had already

reported on the issue for a number of years, it became the subject of further extensive press coverage and reports

at the end of 2011, which led to an increase in the number of reported cases at that time. Such new potential

cases led us to significantly increase the respective provisions in 2011 and to a lesser extent in 2012. As of

June 30, 2013, we had accrued provisions relating to the potential claims in a total amount of €70.2 million,

based on our estimate of the number of houses we may have to renovate. In the Share Purchase Agreement, our

former shareholder, Haniel, has agreed to hold us harmless for such claims. See “7. Risks Related to Our

Business and Our Industry—We may incur material cost as a result of warranty and product liability claims

which could adversely affect our profitability”.

Antitrust

In January 2011, Xella International S.A. publicly confirmed its continued intention to make a cash offer for all

shares in H+H International, one of our competitors in the wall-building materials industry, which would be

carried out through its subsidiary Xenia S.à r.l. This announcement followed an offer that Xella International

S.A. submitted earlier to the board of directors of H+H International regarding the proposed acquisition by

Xenia S.à r.l. of all outstanding shares in H+H International for cash and subject to certain conditions. The board

of directors of H+H International rejected this offer in November 2010, but we may continue to seek the

31

recommendation of the offer by the board of directors following receipt of necessary regulatory approvals. In

order to accelerate the process and to increase transaction certainty for a potential acquisition of H+H

International, we have made certain regulatory filings. Additionally, we have received consent from lenders

under the Senior Facilities Agreement to temporarily increase our leverage ratio and make up to two

acquisitions of companies, see “6. Description of Certain Financing Arrangements—Senior Facilities

Agreement”. Whether or not a decision to submit a tender offer will be made, any such tender offer would be

subject to certain prerequisites, including formal clearance of the proposed transaction by relevant authorities or

courts and the execution of financing documentation. If and when Xella International S.A. makes a tender offer,

such decision will be announced in accordance with Section 4(2) of the Danish Executive Order No. 221 of

March 10, 2010 on takeover bids.

In January 2011, we submitted to the European Commission a referral request concerning the potential

acquisition of H+H International A/S by Xenia S.à r.l., a wholly-owned subsidiary of Xella International

Holdings S.à r.l., pursuant to Article 4(4) of Council Regulation (EC) No 139/2004 of January 20, 2004 on the

control of concentrations between undertakings (EU Merger Regulation). The objective of the referral request

was to obtain a partial referral of the German aspects of the acquisition to the German Federal Cartel Office

(Bundeskartellamt). Following the European Commission’s referral decision dated March 1, 2011, and the filing

of a German merger notification on March 9, 2011, the German Federal Cartel Office prohibited the Germany-

related aspects of the potential acquisition. Our appeal against the German Federal Cartel Office’s decision was

dismissed by the Düsseldorf Court of Appeals (Oberlandesgericht) in September 2013. We have not yet been

served with a written version of the court decision and have not evaluated any potential further legal action

against the German Federal Cartel Office’s prohibition order. However, even if the prohibition order for

Germany were eventually lifted, further merger control filings and proceedings relating to other countries where

Xella and H+H International are active may be necessary. In addition, on March 18, 2011, we submitted a

merger notification to the Federal Antimonopoly Service of Russia to initiate a merger control proceeding with

regard to Xella’s and H+H International’s activities in Russia. In this respect we received a clearance decision

on June 2, 2011, which, given the passage of time, likely needs to be renewed as soon as the transaction is

further pursued.

4.15 Industry

Introduction

Our four business units reflect the markets in which we compete with our products.

• Building Materials includes the production and sale of high-quality materials for wall-building (AAC

and CSU), mostly under the Ytong, Hebel and Silka brands. We also offer thermal insulation materials

for internal and external walls, ceilings and roofs under the Multipor brand as well as add-on products,

such as mortar, tools and accessories, and a variety of consulting (e.g., planning advice, seminars,

training in product handling and sharing of know-how for sustainable and energy efficient building)

and other services.

• Dry Lining includes the production and sale of premium dry lining materials targeted at high-end

markets in residential and commercial construction. Our dry lining products are sold under the

Fermacell brand (gypsum fiber boards and cement-bonded boards) and the Fermacell Aestuver brand

(fire protection boards). In addition to our branded products, we offer similar add-on products and

services to our Dry Lining customers as we offer to our Building Materials customers.

• Lime includes the production and sale of high-quality lime and limestone products, mostly under the

Fels brand. Our lime and limestone products have diverse industrial applications (e.g., in the steel,

glass, building materials and chemicals industries) and environmental applications (e.g., flue gas

desulphurization, water treatment and agriculture).

• Ecoloop includes the development and intended marketing and sale of our Ecoloop technology, which

will efficiently transform various kinds of waste into clean synthesis gas to be used as a substitute for

traditional combustibles or to generate electricity by recycling waste materials. Until December 31,

2012, Ecoloop was included in our Lime business unit. Effective as of January 1, 2013, Ecoloop has

been established as a separate segment.

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Building Materials Industry

Market Size and Growth

For the 19 Euroconstruct countries (Austria, Belgium, the Czech Republic, Denmark, Finland, France,

Germany, Hungary, Ireland, Italy, The Netherlands, Norway, Poland, Portugal, Slovakia, Spain, Sweden,

Switzerland and the United Kingdom), the 2012 market volume for residential construction is estimated to have

been €596.9 billion, with €235.3 billion for new construction, while the market volume for non-residential

construction is estimated to have been €431.1 billion, with €226.8 billion for new construction (source:

Euroconstruct June 2013).

The development of the market for building materials is closely linked to the level of construction activities

which have historically shown a strong correlation with general economic growth. However, residential and

non-residential construction activities may decrease earlier in general economic downturns and may also

experience cyclical recoveries with some delay. Activity levels in the construction industry and demand for

building materials are influenced by various factors, such as GDP levels and growth rates, housing starts, long-

term interest rates, inflation, population growth, unemployment rates and consumer confidence. Demographic

developments, local building regulations and trends in the construction industry may also have a direct impact

on the building materials industry. In addition, government spending, stimulus packages and tax policies may

have certain stimulating or weakening effects on demand for construction, particularly in infrastructure projects.

The cyclical nature of the construction industry has been characterized by periods of growth that were followed

by stagnation or downturns. Historically, cycles in major geographic markets have not occurred in parallel as a

result of which manufacturers of building materials active in different geographic markets have, to a certain

degree, benefited from offsetting effects. In the global economic and financial crisis, however, construction

activities across all major geographic markets, except for China and other emerging countries, decreased at the

same time, albeit at different rates.

In the cyclical development of the construction industry, 2007 represented the end of an extended period of

growth that peaked in 2006, when construction in Europe grew faster than GDP (3.8% in construction compared

against 3.1% in GDP growth) (source: Euroconstruct, June 2010). Between 1991 and 2007, construction

increased considerably, by an average of 1.9% per year (source: Euroconstruct, December 2010) with residential

construction being the strongest sector. We believe that the best indicator of demand in terms of volume for our

wall-building materials, such as AAC and CSU, is the new residential construction sector, which has recently

been severely affected by strong declines in demand. From 2008 to 2010, the European market for new

residential construction declined by more than 28% (source: Euroconstruct, June 2013). The decline in

residential construction activities has been particularly significant in those countries that previously experienced

high levels of new residential construction activities, such as Spain, Ireland and the United Kingdom. Growth

and subsequent decline in the European markets for residential renovation, new commercial construction and

commercial renovation have historically been less cyclical.

Since 2010, the German new residential sector has been in a recovery phase. The euro crisis is seen to have a

positive impact on the building activities in Germany, as low interest rates and fears of inflation as well as rising

consumer confidence resulted in increased level of investments in tangible assets. Unlike in Germany, after a

temporary recovery in 2011, the new building sector in several other European countries came under pressure in

the course of 2012, due to the depressed macroeconomic environment in the euro zone, the tightening of public

budgets, the challenging labor market and decreases in consumer confidence. The Czech Republic and The

Netherlands were among the countries in which building activities decreased considerably. It is not believed that

the low level of building activities compared to prior years in many key markets, such as The Netherlands, can

continue. However, the timing and extent of any potential recovery is uncertain.

The graphs below show the development of new residential construction output in the 19 Euroconstruct

countries (measured in billions of euro with 2012 purchasing value and change in year-on-year growth rates).

33

New Residential Construction Volume 1993 to 2012

Residential construction output (in € billion) and growth rate year-on-year (in %)

Source: Euroconstruct, June 2013 (2012 numbers based on estimates).

Market Structure

Demand

AAC and CSU are mainly used for wall-building in residential, industrial and commercial construction. In

certain markets, AAC products are also used for ceilings and roofs. AAC and CSU are largely substitutable with

other building materials, particularly concrete, light concrete, clay bricks, steel, wood and plaster boards.

Typically, the choice of building materials used in construction activities varies by market and depends to a

considerable degree on regional and local building traditions, exterior climate and applicable technical and legal

construction requirements. In addition to specific requirements in the geographic markets, the choice of building

material also depends on design requirements, relative product price, transportation and construction cost and

brand and product awareness.

Distribution

Building materials in mature markets are predominantly sold through builder merchants and do-it-yourself retail

stores and, to a lesser degree and subject to differences by regional markets, through direct sales to customers.

Builder merchants are generally medium-sized companies, although several larger companies, such as Saint

Gobain (Raab Karcher), Wolseley, CRH and BayWa hold substantial market shares. Particularly in the German

market, many builder merchants have formed purchasing co-operations, such as Eurobaustoff, Hagebau and

Baustoffring, that provide marketing and billing services for the individual builder merchants and negotiate

annual framework contracts with manufacturers of building materials, including payment terms and discounts.

Direct business with end customers is predominant in emerging markets and for reinforced AAC panels used in

large-scale industrial construction projects.

Builder merchants generally perform several functions. With respect to logistics and warehousing, they are

responsible for managing inventories in various product categories and specific product ranges and shipping

products from their warehouses or the manufacturers’ warehouses to construction sites. Builder merchants also

provide display areas for building materials products and provide advice and technical assistance to their

customers. In addition, builder merchants invoice their end customers and thereby extend credit through

34

payment terms and assume the risk of their customers’ default. Physical deliveries to end customers are often

made directly from building materials manufacturers to construction sites, without building materials physically

going through builder merchants’ warehouses. Under these circumstances, the function of builder merchants is

often reduced to invoicing their end customers. The degree of involvement of builder merchants into sales

processes varies by region, manufacturer and product.

Sales activities of manufacturers of building materials are frequently characterized by a two-stage sales model

and focus on decision makers and intermediaries as the two main target groups. While sales and marketing

activities are primarily directed at the relevant decision makers, such as architects, developers, construction

companies, private builders and investors, manufacturers of building materials typically do not maintain

contractual relationships with these decision makers. Instead, sales are primarily made through builder

merchants as intermediaries. However, sales and marketing activities are targeted at decision makers to

influence bid invitations and the determination of building material types in project specifications. Direct

business with construction companies occurs less frequently, typically, in the commercial and industrial

construction sector and in emerging markets lacking established builder merchant structures. The graph below

shows the relationships between manufacturers of building materials, builder merchants, customers and various

groups of decision makers in mature markets (dotted lines indicating relationships between parties other than

with manufacturers).

Distribution of Building Material Products in Mature Markets

Supply

The wall-building materials industry is characterized by many regional manufacturers and a number of major

manufacturers with an international presence. This fragmented supplier structure reflects the regional nature of

the business due in large part to high transportation cost given the considerable weight to value ratio of CSU

and, to a lesser degree, AAC. Among the wall-building materials manufacturers with an international presence

and broad product portfolios, Wienerberger, CRH, H+H International, HeidelbergCement, Knauf Gips, Etex and

Saint Gobain are our main competitors. Wienerberger is one of the world’s largest manufacturers of clay bricks,

facade bricks, roof tiles and pipe systems focusing primarily on Europe and the United States. CRH offers a

broad product portfolio comprising AAC, CSU, concrete and clay bricks and is primarily active in Europe, the

United States and Asia. HeidelbergCement manufactures, among others, AAC, CSU, clay bricks and concrete

and has operations in Europe, the United States, Africa and Asia. H+H International operates only in Europe,

including Russia, and manufactures AAC products, whereas Saint Gobain and Knauf Gips both produce gypsum

boards that may, to a certain degree, also be used in wall-building applications. The product portfolio of Etex is

comprised primarily of gypsum boards. Moreover, we face regional competition from a larger number of

regional suppliers.

Builders/

Constructors

Investors/

Owners

Builder

Merchant Manufacturer

Architects

Developers

Create demand and influence supplier decisions through pre-sales

Create demand

Indirect business

Influence bid invitations and determination of building material type

Influence bid invitations and determination of building material type

35

Generally, competition in the wall-building materials industry is geographically limited as transportation cost

constitutes a significant part of overall product cost. Moreover, the requirements of local end-users in terms of

standard specifications and other technical features for building materials may differ by geographic market,

resulting in additional barriers to non-regional suppliers. However, imports of wall-building materials play a

growing role given harmonization of building regulations in Europe, such as under the Energy Performance of

Buildings Directive adopted in May 2010, the Energy Efficiency Directive, due for implementation at the

member state level in June 2014, and the Construction Products Regulation to be adopted by all member

countries of the CEN (Comité Européen de Normalisation) pursuant to the voluntary commitment to amend

national norms in the next several years. Due to the high cost associated with the transportation of wall-building

materials over long distances, the ability to maintain a dense network of production plants that serve local

markets tends to give companies with such a dense network of production plants a competitive advantage with

customers active in more than one region over manufacturers operating production facilities primarily at a

regional scale. This general description of the wall-building materials industry applies similarly to demand for

AAC and CSU. The AAC and CSU industry has historically been dominated by small and medium-sized,

privately held companies generally operating only a single or few plants, but has undergone a consolidation

process in the last several years, including the acquisitions by Hanson of Thermalite (2005), by LSR Group of

Aeroc Baltikum (2006) and by HeidelbergCement of Hanson (2007), as well as the acquisitions carried out by

us since 2000. Currently, the largest manufacturers of AAC by production capacity are Xella, H+H International

and Solbet (Poland and Baltic states). Xella is the largest international manufacturer of CSU by number of

plants. In Germany and Switzerland, HeidelbergCement also holds a significant share of the market. In The

Netherlands and Belgium, Calduran Kalkzandsteen (owned by CRH) is a significant competitor, while Polskie

Silikaty is an important regional competitor in Poland. Nevertheless, due to the considerable weight of CSU and,

to a lesser degree, AAC, transportation costs are high (relative to product sales prices). As a result, the industry

continues to be fragmented and a considerable number of small and medium-sized manufacturers exists that

primarily competes for local demand.

The production of AAC and CSU is capital intensive and characterized by a significant portion of fixed cost.

Therefore, capacity utilization rate for each plant is a competitive factor. In recent years, the high level of capital

investment initially required to establish operations, together with stagnant or declining demand, has resulted in

a limited number of new competitors entering our markets. Raw materials for manufacturing AAC and CSU

wall-building materials are generally available in all our markets. Typically, plants are located in close

proximity to suitable raw material supplies and demand for products, thus naturally limiting the number of

available first-class locations. An important component of cost is energy, which results in a high dependency of

the industry on energy prices, especially natural gas and, in certain countries, coal.

Key Industry Trends

In addition to a potential cyclical recovery in the residential, commercial and industrial construction sectors, the

wall-building materials industry is influenced by the following key trends:

Sustainability and Energy Efficiency Regulation

In light of high and increasing energy prices and commitments to reduce carbon dioxide emissions,

governments, the construction industry and building owners are increasingly focusing on the modernization of

existing buildings and improving the energy efficiency of new buildings. To that end, the reduction of energy

consumption and elimination of unnecessary emissions from buildings are among the main objectives of the

European Union’s Energy Performance of Buildings Directive (“EPBD”), which requires member states to

amend existing building regulations and to introduce energy certification schemes for buildings. The EPBD has

defined clear requirements relating to energy efficiency of new buildings from 2019 (public sector) and 2021

(private sector) onwards. Following the relevant implementation date, all new buildings must be “nearly zero

energy buildings”. In addition, European Directive 2012/27/EC on energy efficiency requires (subject to certain

exceptions) that 3% of the total floor area of public buildings owned by central governments must be renovated

to meet the energy efficiency requirement. Under the EPBD and enacting legislation at the member state level,

building materials producers will be under pressure to further develop and improve their products so that they

meet regulatory requirements in terms of thermal insulation, carbon dioxide emissions and reduction of waste.

In particular, AAC offers high thermal insulation and fire protection whereas CSU has high load-bearing

capacity, fire protection and sound protection properties. We expect that innovative wall-building materials,

such as AAC, may have an advantage over other building materials, such as clay bricks, concrete or wood, due

to their ability to reduce thermal conductivity without any additional insulation materials, such as polystyrene,

which is used in filled bricks. We expect the future market to have fewer competitors which are able to deliver

products for monolithic walls, although these competing products are also being improved to meet evolving

requirements.

36

Demographic Trends, Higher Quality Construction and Renovation Activities

In light of expected future economic developments and the aging of populations in many European countries,

many countries rely on immigration of skilled workers, which may stimulate the demand for new residential

construction. At the same time, the number of households is increasing, primarily attributed to a trend towards a

lower average number of persons per household, particularly in Western European countries. In order to

facilitate and expedite construction activities and economize on operating cost of buildings, flexible building

material solutions that combine ease of handling, pre-fabricated elements and superior product properties are

expected to play an increasing role. Similarly, in many Central and Eastern European countries, as a result of

historic substantial underinvestment the existing housing stock still requires considerable new construction as

well as renovation and modernization to meet the higher building standards prevailing in Western European

countries. Future GDP growth in many Central and Eastern European countries may therefore have a positive

impact on pent-up demand and the evolution of new construction as well as renovation and modernization

activities.

Importance of Emerging Markets and China for the Construction Industry

Demand for innovative building materials offering thermal insulation, sound protection and fire resistance in

many emerging markets is expected to grow in line with increasing regulatory requirements and higher living

standards. In particular, growth in the Chinese construction industry, despite regional differences in growth

rates, continues to be positively affected by large-scale infrastructure projects, ongoing urbanization and new

regulatory trends as well as increasing wealth. The Chinese government is increasingly implementing

regulations and measures to promote energy efficiency in the construction industry, resulting in higher demand

for fire resistant building materials offering thermal insulation properties. Moreover, the Chinese government is

increasingly seeking to restrict the production of clay bricks, in order to protect the agricultural use of land

where clay earth has been mined for brick production.

Dry Lining Industry


Compared to the market for wall-building materials, such as AAC and CSU, the market for dry lining products

is more focused on the application of non-load bearing constructions for walls, ceilings and flooring in the

interior design of buildings. The main products used for such dry lining constructions are plasterboards, gypsum

fiber boards and, more recently, cement-bonded boards. In the dry lining market, gypsum fiber boards are a

premium product for dry lining applications and target high-end markets in residential and commercial

construction.

Similar to the market for wall-building materials, the development of the market for dry lining products is

closely linked to the level of construction activities which have historically shown a strong correlation with

general economic growth. The main difference between the market for wall-building materials and the market

for dry lining products is the larger share of sales attributable in the latter to renovation, remodeling and

modernization activities in residential and non-residential construction, which has historically been less

susceptible to cyclicality than new construction.

Market Structure

Demand

While the specifications and demand for dry lining constructions vary by geographic market, the types of

constructions in which dry lining products are used are similar. Plasterboards are commodity products, albeit

offered in a variety of qualities. Cement-bonded boards are primarily used in wet areas, such as indoor

swimming pools, specific production facilities and for leisure applications. Gypsum fiber boards are a premium

product for interior construction in residential and non-residential sectors and can also be used as load-bearing,

fire- and weather-proof board in external walls with timber sub-structures.

New residential construction in Germany and many other geographic markets is traditionally characterized by

the use of solid wall-building materials. However, the importance of alternative building methods, such as

timber frame construction, has recently increased. For example, in Germany the share of newly constructed

residential buildings erected in timber frame construction increased from 12.5% in 2002 to 15.2% in 2012

(source: Statistisches Bundesamt 2013). In Sweden, the share of timber frame constructions in new built single

family homes reached 85% in 2012 (source: B+L Marktdaten GmbH). Fermacell is well established within the

timber frame industry, especially in Switzerland and Germany. In the European markets plasterboard is still

37

predominantly used in non-residential construction whereas its use in residential construction is to date mainly

limited to pre-fabricated housing, timber-frame housing and renovation and refurbishment activities.

Distribution

Distribution of dry lining products is similar to the distribution of building materials. Dry lining products are

mainly distributed through builder merchants or do-it-yourself retail stores. Additionally, direct deliveries occur

to original equipment manufacturers, such as producers of pre-fabricated wall-building elements, producers of

pre-fabricated houses and construction sites with special logistical requirements. The functions of the builder

merchants are similar to those in the building materials industry.

Supply

In 2012, total production capacity for gypsum board in Western Europe amounted to approximately 2.0 billion

square meters (source: Global Gypsum Directory 2013).

The leading European plasterboard producers are Saint Gobain (under the local brands Rigips, Placoplatre or

Gyproc), Knauf and Siniat (source: Global Gypsum Directory 2013). The European plasterboard industry has

been undergoing consolidation, including the acquisition by Saint Gobain of BPB (2005). In 2011, the European

gypsum activities of Lafarge were acquired by the Etex-Group, now operating as Siniat, which offers

plasterboards, fire protection boards and cement fiber boards.

Unlike CSU and, to a lesser degree, AAC, transportation cost for dry lining products are lower in relation to

product prices, so that transportation over longer distances is commercially feasible. As a result, the supplier

structure for dry lining products is less fragmented and competition is less regional in nature than in the wall-

building materials industry.

Key Industry Trends

In addition to the potential cyclical recovery in the residential, commercial and industrial construction sectors,

the dry lining industry is influenced by the following key trends.

Trends in Construction Industry

There are several trends in the construction industry that may favor the increased use of dry lining products. In

order to economize on time and cost in the construction process, there has been a shift towards the use of pre-

fabricated elements for residential and non-residential construction. At the same time, the construction industry

is seeking materials that provide greater sustainability, lower maintenance and energy cost, fire resistance,

durability, sound performance and environmental protection. Similar to trends in the market for building

materials in general, more stringent energy efficiency requirements in residential and commercial renovation,

remodeling and modernization activities are expected to lead to growing demand for dry lining products with

improved product characteristics. Similarly, increasingly higher standards for fire protection in residential and

non-residential construction in many markets may result in higher demand for fire protection and cement-

bonded boards.

Demographic Trends and Renovation

Population growth in many markets will likely result in increased demand for dry lining products. In addition,

dry lining applications are typically used for the interior design of non-residential buildings, such as schools and

hospitals. In many mature markets, aging building stock requires ongoing renovation, remodeling and

modernization activities in which dry lining products are used. Unlike new residential and non-residential

construction, renovation, remodeling and modernization activities in residential and non-residential construction

have historically been less susceptible to cyclicality than new construction.

Lime Industry


In the market for lime and limestone products, two major groups of products exist: burnt products (lime and

dolime) and unburnt products (limestone and dolomite). In both product groups, limestone (or dolomite) serves

as the base mineral and is excavated mainly from open-pit operations. Lime is obtained from the thermal

decomposition of limestone in lime kilns. Limestone is derived from the quarried material and physically

processed in beneficiation plants with no thermal or chemical treatment. In 2012, sales of burnt lime products in

Germany registered at the Bundesverband der Deutschen Kalkindustrie amounted to approximately

38

€468 million, or approximately 6.3 million tons, with an average price of approximately €74.5 per ton. Sales of

unburnt milled lime products in Germany were estimated at 6.9 million tons, whereas sales of other unburnt

products in Germany were estimated at approximately 10.7 million tons. Over the past decade, average sales of

burnt lime products in Germany amounted to approximately 6.5 million tons per year, with a minimum of

approximately 5.6 million tons in 2009 and a maximum of approximately 6.9 million tons in 2008. Sales prices

for burnt products increased from approximately €60 per ton in 2002 to approximately €74 per ton in 2012

(source: Bundesverband der Deutschen Kalkindustrie 2012). The overall lime market in Russia is estimated at

10 million tons including captive lime in steel works (source: USGS 2012 Mineral Studies). Key customers in

Russia are the steel and building construction industries, whereas applications for environmental purposes are

still underdeveloped. The main sales area in Russia for our Lime business is the region of and around Moscow.

The lime market in the Czech Republic is estimated at 1.0 million tons in 2012, with steel and building

construction as main customer groups (source: USGS 2012 Mineral Studies). However, both industries are

currently suffering from an economic crisis in the Czech Republic. Key market participants in the Czech

Republic are FELS, Lhoist (Beroun) and Lasselsberger (Stramberk).

Market Structure

Demand

Lime is used in a large variety of industrial applications (e.g., in the steel, glass, building materials and

chemicals industries) and environmental applications (e.g., flue gas desulphurization, water treatment and

agriculture). Milled limestone, which is part of the unburnt products group, possesses distinct chemical

properties and sells at comparatively higher prices and margins than ordinary crushed limestone. The German

lime market is a mature market with relatively constant volumes and prices.

Distribution

Distribution in the lime and limestone industry is characterized by direct sales to large-scale industrial end-

customers. Unlike in the building materials and dry lining markets, builder merchants do not play a significant

role in the market for lime and limestone products.

Supply

Lime producers typically focus on burnt products and to a lesser degree on milled limestone. At a regional level,

lime production in Germany is fragmented, although we estimate that the three major suppliers (Rheinkalk, the

German subsidiary of Groupe Lhoist, our subsidiary Fels-Werke and Schaefer Kalk) account for approximately

75% of annual German production, while approximately 20 smaller producers account for the remainder of

German sales.

Geographically, Rheinkalk has a strong presence in the western part of Germany. In the southwestern and

southeastern parts of Germany, imports from other Lhoist plants in France and the Czech Republic occur. Our

subsidiary Fels-Werke has a strong presence in the eastern part of Germany, but is also present in Southern and

Northern Germany. Fels-Werke exports to Poland, mainly as inter-company supplies to production plants of our

Building Materials business unit. Schaefer Kalk holds a strong position in central Germany, featuring the

highest quality levels of lime that are available in Germany. Rheinkalk, Fels-Werke and Schaefer Kalk engage

in research and development activities to provide application support services to customers. Innovative and

customized lime products are primarily being offered by the three largest producers, however, smaller producers

of lime also customize lime products, to the extent that they can, in order to meet customer requirements. As a

consequence of high capital requirements for the maintenance and modernization of production facilities and

increased cost of environmental compliance, the German market for lime products has already undergone a

certain degree of consolidation, including closures of several plants by Rheinkalk and Schaefer Kalk. On the

other hand, some smaller producers are currently building new kilns, which will result in an increase of burning

capacity. As average sales prices for unburnt products are significantly lower than for burnt products,

transportation cost and proximity to customers play a relatively greater role for unburnt products. As most

customers are not able to store larger quantities of lime and limestone products, suppliers are frequently

expected to provide logistical solutions and supply-chain management.

Key Industry Trends

Two major trends in the lime and limestone industry have occurred over the past several decades. Demand from

the building materials industry, including producers of AAC and CSU, decreased from approximately

2.8 million tons in 1995 to approximately 1.2 million tons in 2012 due to reduced levels of construction

activities. However, this decline has been partly offset by new lime applications in environmental settings, such

39

as flue gas desulphurization and water treatment. In 2012, the main sources of demand for burnt lime products

from domestic production were the steel industry (approximately 2.3 million tons, or 36% of total burnt lime

sales from domestic production), environmental applications (approximately 1.4 million tons, or 22%), the

construction industry (approximately 1.2 million tons, or 19%), the chemical and other industries

(approximately 0.7 million tons, or 11%) and export (approximately 0.7 million tons, or 11%). A cyclical

recovery in the steel industry and further environmental applications for lime products, particularly flue gas

desulphurization in waste incineration plants and water treatment may result in greater demand for lime

products. At the same time, industrial and environmental customers increasingly require higher quality lime

products and customer-specific application services. Additionally, innovative products with distinct chemical

properties, such as quick lime that reacts particularly fast, attract demand from existing and new applications.

The increasing share of renewable energy in the German electricity production has a great impact on the

utilization of fossil power plants, which leads to heavy fluctuation in demand from that end market.

Ecoloop

Market Size und Growth

The Ecoloop technology enables the transformation of different kinds of waste into clean synthesis gas, which

can be used in various industrial applications, such as for thermal industrial applications to substitute fossil fuels

or to generate electrical power on a decentralized basis for larger industrial sites. Synthesis gas may also be used

as a chemical raw material. The Ecoloop technology may be of particular interest to energy intense industries

(such as steel, cement and lime industries), as well as recycling intense industries (such as integrated waste

companies, municipal communities and the plastics and chemical industries). The market volume and size for

Ecoloop solutions depend upon the energy demand (such as for fossil fuels), the price development of these

energies as well as on the available volume and price development of waste for which Ecoloop has particular

processing capabilities (such as high chlorine content waste, phosphorus waste and heavy fractions). Although

these markets in general display growth trends due to major trends, such as resource efficiency, renewable

energy, sustainability and recycling, there may be significant regional differences.

Market Structure

Demand

Ecoloop’s innovative technology applications are expected to enable new solutions for energy intense and

recycling intense industries as well as municipal authorities, that intend to reduce energy costs, decrease

recycling cost, increase clean waste recycling and save natural resources, therefore we expect demand to

develop primarily in the lime, cement, steel, chemical, recycling, paper, sugar and automotive industries as well

as in the recycling industry and municipal authorities.

Distribution

The distribution of our new gas generation technology contemplates a business model in which we expect to

grant licenses against royalties, supply engineering and key components to customers and support customers

during continuous operation (e.g., in the field of maintenance and waste management), whereas the

responsibility for turnkey installations of plants will be performed by partners (engineering companies) or

customers themselves.

Supply

Ecoloop, which produces clean synthesis gas from various wastes, will compete against other energy production

technologies, such as fossil fuel combustion. The waste-to-electricity market is dominated by large-scale mass

burning, incineration solutions and small decentralized biogas plants. We consider Ecoloop’s potential key

market to be mid-sized cities or remote industry locations, since the performance size of approximately 10 MW

or 40,000 tons annual waste input is ideal for smaller to medium sized energy demand.

Key Industry Trends

The market potential of the Ecoloop applications primarily depends upon its degree of reliability and efficiency

and the ability to provide customers with clean and high quality gas. In general, potential customers will benefit

from high cost for substituted energy (such as high prices for coal and other combustibles) and low prices for

waste (such as gate fees paid to waste recycling providers for taking over and processing of wastes). In addition,

the availability of financing for projects and the stability of waste supply will be important to the market for

Ecoloop.

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4.16 Regulation

Overview

In all of the jurisdictions in which we operate we are subject to numerous laws, rules and regulations at national,

state and municipal levels, particularly building, environmental and occupational health and safety laws, rules

and regulations, as well as technical standards. At the European level, the regulatory environment of our

business includes several EU directives and regulations, which are either implemented in the individual member

states through national legislation or apply directly. As our business primarily comprises the operation of

production plants for AAC, CSU, gypsum fiber board, lime and limestone, laws, rules and regulations and

technical standards that affect our operations mostly relate to energy efficiency, environmental protection (in

particular, in relation to soil, ground and surface water contaminations and air emissions), recultivation,

reclamation and renaturation, as well as occupational health and safety.

For example, in Germany we are subject to a number of federal and state environmental laws and regulations

which include the German Federal Emissions Control Act (Bundes-Immissionsschutzgesetz) and related

ordinances, the German Water Resources Act (Wasserhaushaltsgesetz), the German Chemicals Act

(Chemikaliengesetz), the German Federal Soil Protection Act (Bundes-Bodenschutzgesetz), and the German

Closed Substance Cycle Waste Management Act (Kreislaufwirtschaftsgesetz). We must also comply with

numerous workplace safety and accident prevention statutes, such as the German Occupational Safety and

Health Act (Arbeitsschutzgesetz).

We expect that in almost all of the countries in which we do or intend to do business laws, rules and regulations,

including environmental laws and regulations, will over time become more comprehensive and stringent. We

further expect that many environmental laws and regulations will be harmonized at the EU level over the near-

to medium-term. Member states will, however, remain free to adopt laws and regulations that are more stringent

than those required by the European Union.

We are also required to obtain and maintain permits from governmental authorities for many of our operations.

As the regulatory framework applicable to us is subject to revision and continuous development, it is very

difficult to accurately predict the future cost of compliance with applicable regulatory requirements and

technical standards. Additional or more stringent laws, rules, regulations and technical standards could increase

our cost or limit our ability to continue our business operations in the same manner as we did in the past. See

“Risk Factors—Risks Related to Our Business and Our Industry—We are subject to numerous environmental,

building, health and safety regulations, technical standards and other regulations”.

Soil and Water

We are subject to several laws relating to the use and contamination of soil as well as ground and surface water

in the jurisdictions in which we operate.

In most of these jurisdictions, the use of water requires a permit and is strictly regulated to avoid any

contamination of ground or surface water, such as through the disposal of sewage or waste water and the

handling of potentially dangerous materials. For example, the discharge of any pollutant substances into the

surface water may be subject to a permit whereas the discharge of any such substances into the ground water

may generally be impermissible. Under German law, as well as in other European jurisdictions in which we

operate, water permits are generally granted for specific periods of time and must be renewed frequently. In

certain circumstances such water permits may be revoked without compensation. If a contamination of ground

or surface water occurs or is discovered, primarily the land owner or the party who caused such contamination

usually is subject to a comprehensive range of remediation obligations, which can be costly. Non-compliance

with such obligations may result in administrative fines.

We use considerable quantities of water in our production processes for AAC, CSU and gypsum fiber boards. In

our lime production processes, water is specifically used in the process of washing raw limestone and hydrating

quicklime. Even though we attempt to reduce the consumption of water by treating and reusing waste water,

large quantities of water are necessary in these production processes. Furthermore, large quantities of ground

water originating from mining operations in our lime quarries are discharged into surrounding surface waters.

For all these activities appropriate permits to use and discharge water must be obtained and maintained during

the operation of our plants and sites. Any such requirements, as well as the terms of the permits we hold,

materially affect our operations by restricting the discharge of pollutant substances and waste water exceeding

certain temperatures and certain maximum levels, including storm-water run-offs, directly or indirectly into

public waters. We have been, and will continue to be, required to incur significant capital expenditures and

41

operating cost in order to maintain and upgrade our production sites and facilities to comply with applicable

laws, regulations and permits, and to obtain and maintain all necessary permits.

In addition, under the German Federal Soil Protection Act (Bundes-Bodenschutzgesetz) and several regulations

promulgated thereunder, owners of land and operators of facilities are required to prevent any contamination of

the soil by taking necessary precautions. If any soil contamination (schädliche Bodenveränderung) has occurred,

or where pollution was caused in the past (Altlasten, “past-pollution”), owners of land, operators of facilities, the

party having caused the pollution or its universal successor (Gesamtrechtsnachfolger) and the previous owner if

such owner transferred title to the real property after March 1, 1999 and knew, or should have known, of the

contamination or past pollution, may be held responsible for investigation and remediation measures and cost

thereof. In certain cases, a party may even be held liable for the entire cost of remediation, irrespective of its

fault, the lawfulness of disposal or the actions of other parties. Non-compliance with the obligations under the

applicable laws and regulations may result in administrative fines or, in certain cases, criminal liability.

Our historical and current operations involve the use of hazardous substances and we operate or have operated

production plants that are or have been located on sites with a history of industrial use by third parties. Such

previous activities have resulted in soil and groundwater contamination at some of our current and former sites

or land adjacent to such sites. In some cases, we are responsible for further investigations, remediation and

clean-up actions, even though we may not have caused the contamination. Although we believe that we are in

compliance with our legal obligations at such sites, additional contaminations of soil and groundwater may be

discovered at these or other sites in the future. Such discovery of previously unknown contaminations, or the

imposition of new obligations to investigate or remediate soil or groundwater contaminations, at our facilities

could result in substantial unanticipated cost to us.

Emissions

In many countries, the emission of air pollutants, noise, odors and vibrations is governed by specific laws and

regulations. The operation of industrial facilities is typically subject to permits, and operators of these facilities

are required to prevent impermissible emissions. Operators of facilities are required to maintain all installations

in compliance with the respective permits in terms of the reduction of certain emissions and implementation of

safety measures. In some cases, a continuous improvement or retrofitting of installations to maintain facilities at

“state of the art” safety standards may be required. Compliance with these requirements is monitored by local

authorities and operators may be required to submit emission reports on a regular basis. Non-compliance with

maximum emission levels may result in administrative fines.

In January 2011, the European Directive 2010/75/EC on industrial emissions (“IED Directive”) came into force.

It sets out rules on the prevention and control of pollution from industrial activities and includes rules aimed at

reducing emissions into air, water and land, as well as preventing the generation of waste in order to achieve a

high level of overall environmental protection. As of January 2013, Germany must comply with the emissions

limits for certain industries. Under the IED Directive and its implementing law, inter alia, the mineral industry

(production of cement, lime and magnesium oxide), the chemical industry and the waste management have to

consider thresholds regarding various polluting substances, such as carbon monoxide and dust including fine

particulate matter. Furthermore, the IED Directive amended European Directive 2008/1/EC on Integrated

Pollution Prevention and Control (“IPPC Directive”) which aimed to define best available techniques (“BAT”)

as binding standards.

By way of amendments to the German Federal Emissions Control Act and the Federal Water Act, German

Closed Substance Cycle Waste Management Act, the IED Directive has recently been implemented in Germany,

resulting in thresholds, authorization requirements and supervisory obligations for new and existing facilities.

Although the IED Directive and its implementation provide transitional provisions, once a new industry

standard becomes binding, existing permits, which are not in compliance with such standard, will not be

grandfathered but will be adjusted with respect to the new (binding) standard. In 2013, the BAT conclusions

have been adapted and authorities must implement the new and stricter limits within four years. In order to meet

stricter requirements, in particular for dust, carbon monoxide, nitrogen oxide, sulfur monoxide and total organic

carbon. We may need to incur capital expenditures in order to improve our filter systems and firing processes.

All our production plants have in the past emitted and will continue to emit dust, odors, and hazardous and non-

hazardous substances into the air. In the majority of cases, we are in material compliance with applicable laws

and regulations. We may, however, be required to incur significant capital expenditures to upgrade production

plants by installing or improving technical equipment to comply with maximum emission levels that may

become applicable in the future. See “—Climate Change Law—Emission Trading Law in the European Union”.

42

Waste

In some jurisdictions, we are subject to statutory provisions regarding waste management. These provisions may

govern permissible methods of, and responsibility for, the generation, handling, possession, discharge and

recycling of waste depending, among other things, on the dangers posed by the waste. In particular, the

discharge of waste is often restricted to licensed facilities. For example, under the German Closed Substance

Cycle Waste Management Act, generators, owners, collectors and transporters of waste must demonstrate to the

competent authority and to other parties that they have properly disposed of hazardous waste (gefährliche

Abfälle) by proof of waste disposal (Entsorgungsnachweis). Documentation requirements include certain details

regarding the handling, type, amount and origin of hazardous waste. In many European jurisdictions, plants

must use licensed contractors for the disposal of hazardous or nonhazardous waste. Products such as AAC and

gypsum fiber boards are usually used over decades and afterwards recycled or disposed. Higher requirements

for regulated substances (especially for sulphates) may reduce the possibility for landfill disposals and may

result in higher cost for disposal. In addition, a “taking back” obligation may be introduced. Such obligations

could result in higher cost for products containing sulphates, such as AAC and Multipor.

We believe that we are in material compliance with applicable waste management laws and continuously

attempt to reduce waste at our sites.

Hazardous Substances

In many jurisdictions, the handling and storage of hazardous substances is governed by laws and regulations.

For example, in Germany, substances are rated by risk with different resulting requirements relating to storage

and handling in order to prevent accidents or injury and ensure a high degree of safety. Certain hazardous

substances must not be produced or used at all.

In addition, operators of facilities storing hazardous goods in larger quantities are required to comply with safety

standards set forth in Council Directive 96/82/EC on the control of major-accident hazards involving dangerous

substances (“Seveso II Directive”) and the respective national implementing law, such as the twelfth ordinance

under the German Federal Emissions Control Act (German Hazardous Incidents Ordinance, Störfall-

Verordnung). The provisions of the German Hazardous Incidents Ordinance are designed to prevent major

accidents involving dangerous substances (such as emissions, fires and larger explosions), and to limit

detrimental consequences in the event of an accident. The degree of additional safety requirements depends on

the amounts of various classes of hazardous substances stored in the relevant facility. The Seveso II Directive

will be amended and replaced by Directive 2012/18/EU (“Seveso III Directive”), which must be transposed into

national law by the member states by June 2015.

At our sites and facilities, we frequently handle and use hazardous substances. Explosive materials may be used

for blasting in connection with the extraction of raw materials in our lime quarries. Aluminum powder or paste

is used for the expansion of AAC (aeration). Other environmentally sensitive substances required for the

operation of our production plants, such as fuel, heating, mould or lubrication oil, are used and stored at our

sites. These substances are usually stored in underground or above-ground tanks. Such tanks must have special

protection equipment, such as adapted basins, level indicators, or other tools and measures to avoid uncontrolled

release of substances pursuant to local laws and regulations. Although we believe that our operations are in

material compliance with such requirements, findings of insufficient protection against spills and uncontrolled

release of substances could result in capital expenditures for technical improvements or maintenance to ensure

future compliance.

At some of our sites, asbestos has been used in the construction of buildings, e.g., for roof panels or for

insulation purposes. Currently, under most applicable environmental laws, the remediation of bound or

encapsulated asbestos is not required. If, however, a building is to be demolished or refurbished, precautions

may be necessary and the material must be properly disposed by licensed contractors.

Excavation of Raw Materials

In many jurisdictions, the excavation of raw materials is subject to special operating permits and, occasionally,

to mining rights. Such permits may be subject to stringent requirements to ensure an environmentally sound

excavation process in compliance with environmental laws. Permits typically require remediation, recultivation

and renaturation of the mining areas after excavation of raw materials, and operators are obliged to bear any cost

in connection with such reclaiming obligations. In Germany, recultivation and renaturation measures relating to

the specific mining activities must be laid down in a specific closure operating plan (Abschlussbetriebsplan) that

is subject to permission by the competent mining authorities. Moreover, in particular under German law, the

43

operator of quarries and the person entitled to mining rights may be held liable for all damage resulting from

mining operations.

Raw materials used in the production of quicklime, AAC and CSU are predominantly excavated from adjacent

quarries and pits by surface mining. Several of our quarries and pits are located in environmentally sensitive

areas and thus are subject to particularly stringent regulations governing mining activities and subsequent

remediation, recultivation and renaturation obligations. Expected cost for the closure of quarries and pits are

covered by provisions.

Health and Safety

We must comply with applicable laws and regulations to protect employees against occupational injuries in all

jurisdictions in which we operate. Under such laws and regulations, employers typically must establish the

conditions and the flow of work in a manner that effectively prevents dangers to employees. In particular,

employers must observe certain medical and hygienic standards and comply with certain occupational health

and safety requirements, such as permissible maximum levels for noise at the work place, the use of personal

protective equipment and requirements relating to maximum temperatures and air ventilation.

In order to comply with the applicable requirements, we regularly conduct trainings and medical examinations

and implement and monitor safety measures. If we detect any unsecure condition in one of our sites, local

management is authorized to act without further permission up to certain defined expenditure limits.

Regulation of Chemicals

The European Union requires control of the use of chemical products within the European Union, requiring all

affected industries to ensure and demonstrate the safe manufacture, use and disposal of chemicals. The REACH

Regulation (Regulation (EC) No. 1907/2006 on Registration, Evaluation, Authorization and Restriction of

Chemicals), which came into effect in 2007, requires the registration of all chemicals manufactured in, or

imported into, the European Union, in quantities of more than one ton per annum with the European Chemicals

Agency (“ECHA”). The import or manufacture of certain so-called highly hazardous chemicals must be

authorized by ECHA. The REACH Regulation requires formal documentation of the relevant data required for

hazard assessments for each substance registered as well as development of risk assessments for their registered

uses. Under certain circumstances, the performance of a chemical safety assessment (CSA) is mandatory and a

chemical safety report (CSR) assuring the safe use of the substance must be submitted. If there is no (pre-)

registration of the substance, it is impermissible to produce this chemical in the European Union or to import it

(i.e., “no data no market” principle). Therefore, registration is vital for the future use of any substance used in

technically important processes by manufacturers or importers. The data by importers or manufacturers is

collected in substance information exchange forums (SIEF), to allow a vital exchange among producers and

users of chemicals. Therefore, purchasers of registered chemicals must inform their sellers about the intended

use of the chemicals, as the importer or producer must add this information to its documentation.

Furthermore, the REACH Regulation contains prohibition rules on bringing substances to market that have been

identified as substances of very high concern. If necessary, raw materials or its manufactured substances will be

listed on the so-called candidate list or on Annex XIV to the REACH Regulation which may mean a full ban or

requirement for authorization, which may or may not be granted by the European Commission. In addition, the

REACH Regulation was accompanied by legislation providing for a comprehensive system on the classification,

labeling and packaging of substances and mixtures (CLP Regulation and related European legislation).

We produce considerable quantities of quicklime and lime hydrate that are subject to the REACH regulation.

We believe that we have fulfilled our obligations under the relevant SIEF of the ECHA together with all other

producers of burnt lime. Our registrations have been finalized on time and their completeness has been

confirmed by ECHA. None of our lime products is affected by substances of very high concern.

National regulations on chemicals may impose further obligations on producers, processors, and handlers of

chemical agents. We are subject to various notification and labeling requirements and have to comply with

certain safety obligations arising for example under the German Chemicals Act, which mainly reflects and

accompanies the REACH Regulation at the national level, but also establishes national requirements.

Technical Approvals for Construction Products

In many jurisdictions, the manufacture and sale of construction materials is subject to technical regulations and

approval requirements. Based on the former European Construction Products Directive and under the European

Construction Products Regulation, EU and EEA member states have enacted laws and regulations governing the

44

granting of European technical assessments (“ETAs”) for construction materials. Such laws and regulations may

provide for the establishment of national committees for the granting of European technical approvals and their

cooperation with other organizations at a national level. In addition to assessment mechanisms for construction

materials based on ETAs, other approval mechanisms may apply in individual EU and EEA jurisdictions. In

certain jurisdictions, additional technical approval requirements may need to be considered.

To establish that particular construction materials conform to the relevant technical approvals, in many

jurisdictions manufacturers must implement and document a factory production control system. Moreover,

applicable law may require an initial type testing of the construction product to be performed by an authorized

body. In addition, applicable law frequently requires that the competent organization maintains a continuous

surveillance, assessment and approval of the construction products. If construction materials that do not comply

with applicable regulations have been used in a building, applicable law in many jurisdictions may require such

buildings to be upgraded, reconstructed or even demolished.

Climate Change Law

General

In many regions in which we operate, a constantly developing body of law and regulatory requirements

addresses the challenges of global climate change. The primary objectives of climate change regulation are the

reduction of greenhouse gas emissions, higher efficiency in the use of energy from conventional sources and the

increasing use of energy from renewable sources. In the European Union, regulations attempt to both reduce

greenhouse gas emissions and to establish a mechanism for trading in carbon dioxide emission certificates.

Emission Trading Law in the European Union

In 2003, the European Parliament adopted the Emission Trading Directive 2003/87/EC which was transformed

into national law at the level of the European Union member states. In Germany, the directive has been

implemented by the German Greenhouse Gas Emission Trading Act (Treibhausgas-Emissionshandelsgesetz).

Through the introduction of a trading system for emission allowances, the EU intends to considerably reduce the

output of greenhouse gases. Industrial sites to which the EU Emission Trading System (“ETS”) applies receive a

certain number of allowances to emit greenhouse gases and must surrender one allowance for each ton of

greenhouse gases emitted. Sites that emit fewer tons of greenhouse gases than their allowances cover are

allowed to sell their excess allowances in the open market, whereas those that emit more are required to buy

additional allowances through the ETS. Participation in this system has been mandatory since 2005 for all

industries with high energy consumption levels, including the lime industry.

For the second trading period under the ETS (2008 through 2012), national allocation plans were implemented

in all EU member states and all of our lime plants received their respective emission allowances, at no cost, for

the years 2008 through 2012. The overall availability of emission allowances allocated free of charge during the

second trading period has been significantly reduced from those available during the first trading period (2005

through 2007).

The ETS has been further revised for the third trading period that began in January 2013. Under the revised

ETS, the EU-wide quantity of emission allowances allocated each year will be reduced by a linear factor of

1.74% annually as compared to the average annual total quantity of emission allowances issued in the EU

between 2008 and 2012.

In addition, from 2013 onwards, the full auctioning of emission allowances has been and will continue to be

introduced for the manufacturing sector. The quantities of emission allowances allocated free of charge will

generally be reduced from 80% in 2013 to 30% in 2020 and to 0% in 2027. As a result, affected companies

whose emissions exceed their emission allowances will have to purchase a significant, and steadily increasing,

share of emission allowances in auctions from 2013 onwards, which will result in substantial additional cost for

such companies. The amount of emission allowances for each plant will be determined, in part, by an adjusting

factor that will be based on the 10% most energy-efficient plants in the particular industry.

All lime plants with an installed production capacity of more than 50 tons of burnt lime per day must participate

in the ETS. Furthermore, all plants of the gypsum and construction materials industries are subject to the ETS if

their installed thermal capacity exceeds 20 MW. However, member states may allow plants with an installed

thermal capacity of less than 35 MW that emit less than 25,000 tons of carbon dioxide per year may elect to opt

out of the ETS. In this case, a linear reduction schedule applies or compensation payments must be made.

45

An exemption from the general auctioning mechanism will be available for certain energy-intensive industries

which are exposed to a significant risk of relocation of plants to countries with less stringent climate protection

laws (a phenomenon known as “carbon leakage”). Starting in 2010, the European Commission will determine

every five years which industries are threatened by carbon leakage. The designated industries will be allocated

emission allowances free of charge for the period determined. The quantity of emission allowances allocated for

free is determined based on certain benchmarks. These benchmarks are set in accordance with the most efficient

production methods in a particular industry. The next determination on the carbon leakage status by the

European Commission will be made in 2014 and apply from 2015 to 2019.

All lime plants of our Lime business unit operating in Germany and in the Czech Republic are subject to the

ETS since all of them have installed production capacities of more than 50 tons of burnt lime per day.

According to the findings of the European Commission, however, the application of the revised emission trading

scheme would result in an increase of production cost for lime by more than 30%. This is due to the fact that the

chemical processes in the burning of limestone necessarily involve the emission of carbon dioxide. A reduction

of carbon dioxide emissions at constant production levels is physically not possible. As a consequence, the lime

industry was among the designated industries identified by the European Commission in 2010 as being

threatened by carbon leakage. As a result, our lime plants in Germany and the Czech Republic will be subject to

the carbon leakage exemption through at least 2014, and should they meet the lime benchmark, will be allocated

emission allowances free of charge during that period.

There is no certainty that the lime industry will again be considered as being threatened by carbon leakage. If

the European Commission held that no such threat exists in 2015 or at the time of any later revision, the regular

emissions reduction scheme would also apply to our lime plants. The allocation free of charge would be reduced

from 80% in 2013 to 30% in 2020 on a linear basis. In this case, our lime business would be required to

participate in the auctioning system and purchase emission allowances in the amount required for production

purposes, which could result in material cost to us.

Our Building Materials business unit is currently not affected by the emission trading system as the thermal

capacity does not exceed 20 MW in any of the plants. However, in two of our plants (one in Italy and one in The

Netherlands), we may exceed the threshold when certain capacity limits are exceeded or production lines that

are currently not in operation will be reactivated. In our Dry Lining business unit, only the Fermacell plant in

Münchehof, Germany, and the new plant in Orejo, Spain, are affected and were required to purchase 20%

emission allowances in 2013. Based on our current expectations, they will be required in future auctions (70% in

2020 and 100% in 2027) to cover their carbon dioxide emissions. Currently, we are evaluating whether the

installation in Orejo can be reduced below 20 MW, which would then exclude this plant from ETS.

In November 2012, the European Commission published a draft amendment to ETA regime aiming at

postponing the auctioning of 900 million emission allowances from 2013 to 2015 to later in the third trading

period, which will end in 2020 (“Backloading”). The Backloading does not affect the overall volume of

allowances to be auctioned in the third trading period, but only the distribution of auction volumes over the

eight-year period. In July 2013, the European Parliament’s environment committee decided to support the

Backloading proposal of the European Commission. The ordinary legislative procedure, in particular the

adoption of the proposed amendment by both the European Parliament and European Council, is not finalized

yet. By Backloading, no sustained price increases in the EEA were effected.

Other Regulations

Our products, particularly our lime products, may be subject to regulations based on their particular application

or use. For example, when used for water treatment purposes, specific requirements may exist, such as

compliance with certain technical regulations relating to chemical impurities, permissible water insoluble

ingredients or the amount of heavy metals. When used as food additives, our products may be required to

comply with certain sector specific regulations, such as the European Regulation (EC) No 1333/2008 on food

additives. If our products are used in the production of animal feed, they may need to comply with certain

requirements depending on the manner in which the respective animal feed is produced, such as the concept of

HACCP (Hazard Analysis and Critical Control Points). Our products may also be used as biocides. In this case,

specific laws and regulations may apply requiring that the products must be tested and registered with

competent authorities. When our products are used for sewage sludge treatment prior to agricultural use, sector

specific legislation may have to be complied with in certain jurisdictions, such as the German Ordinance on

Fertilizers (DüngemittelVO).

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4.17 Our Strengths

We believe that the following strengths and, in particular, their combination, differentiate us from our

competitors and provide us with competitive advantages in the markets in which we operate:

High-quality and innovative product portfolio with advanced technical standards, supported by strong

brands.

Our product portfolio and customer solutions are characterized by high quality and superior material properties

addressing specific customer requirements. For example, key material properties of our AAC wall-building

material products include a significantly lower weight compared to ordinary concrete, as well as strong thermal

insulation and fire protection properties. Our CSU wall-building material products offer high load-bearing

capacity and sound insulation as well as strong heat-storing capacity designed to contribute to a balanced

interior climate. Our products address ongoing regulatory trends and developments in the building industry,

particularly in light of increasingly stringent energy efficiency requirements. We believe that several of our

product properties have set the standard for product development in the industry in terms of thermal insulation.

Throughout our business, our product portfolio enjoys an established reputation for product quality, advanced

technical standards and customer support through specific application services. With a strong combined sales

force, we market and sell the products in our Building Materials business unit under well-known brands that are

widely recognized to embody the key properties associated with our wall-building material products and which,

we believe, allow us to achieve premium pricing. In Germany, Ytong enjoys the highest brand recognition of all

major wall-building materials brands (Manufacts Marketing Research Study, February 2012). Similarly,

Fermacell and Hebel enjoy high brand recognition among construction industry professionals in the countries

where those products are being marketed. Our raw materials brands, Fels and Vapenka Vitosov, are well-known

in the lime industry in Germany, Russia and the Czech Republic.

Business model and product portfolio aligned with favorable long-term industry dynamics.

Our business model and product portfolio are aligned with strong global trends in the construction industry for

technically advanced and environmentally friendly building material products and processes. Customer demand

for such products is mainly attributed to new regulatory requirements in the building industry, especially in light

of energy efficiency requirements, and growing political and social awareness of the need to preserve energy. In

response to these regulatory developments, we have developed and offer, in addition to our established AAC

wall-building materials that have high natural thermal insulation capacities, a mineral insulation board under our

Multipor brand with a special combination of material characteristics (mineral composition, high compressive

strength and easy assembly) and good thermal protection and sound-absorbing features. Based on the product

characteristics, we have introduced a new compound product consisting of an AAC block with an internal

Multipor layer called “Ytong Energy+”, which we began selling in Scandinavia in 2011. Our product portfolio

also appeals to the increasing environmental awareness of our customers. Our AAC and CSU wall-building

materials which are produced mainly from mineral and natural raw materials, i.e., lime, cement, sand and water,

have received several green nature certificates, such as a cradle-to-cradle certificate for our Ytong Energy+

block. Moreover, increasing living standards in many countries in which we operate have resulted in increased

demand for advanced building solutions. Due to these factors, we believe that our technologically advanced

wall-building products may over time become more important than traditional wall-building materials, in

particular, wood, clay bricks and concrete blocks, that possess some but not all of the key characteristics of

AAC and CSU wall-building products, such as strong thermal insulation, energy efficiency, load-bearing

capacity, fire resistance, sound insulation, low weight and a higher degree of versatility. The demographic trends

in many countries in which we operate generally result in a growing number of households. Moreover, several

countries in which we are expanding our business are experiencing a population shift from rural to urban areas,

which also bears considerable potential for new residential construction and renovation in urban areas. In

addition, it is not believed that the low level of building activities compared to prior years in many key markets,

such as The Netherlands, can continue. However, the timing and extent of any potential recovery is uncertain.

Strongly represented in both established markets and growth regions.

In our Building Materials business unit, we are a leading producer of AAC and CSU. As the inventors of AAC,

our brand Ytong benefits from significant customer recognition. With our wall-building materials AAC and

CSU, we are strongly represented in established markets such as Germany, The Netherlands, Belgium and

France, as well as in other markets, including many Eastern European countries that displayed considerable

growth in the past and are expected to return to growth in the mid- to long-term, and in selected regions in

Russia and China. In particular, we hold significant positions in Poland, the Czech Republic and Slovakia, and

also operate wall-building materials production plants in other emerging markets in Central and Eastern Europe,

such as Hungary, Bulgaria, Romania, Serbia, Slovenia, Bosnia-Herzegovina and Russia. In addition to our

47

growing presence in Central and Eastern Europe, we have also entered the Asian wall-building materials market

by establishing operations in selected regions in China, where we currently operate three Building Materials

production plants. Our experience in greenfield expansions and integration processes following selective

acquisitions puts us in a favorable position to further benefit from expansion opportunities in emerging markets.

Our strong market positions are based on a stable and diversified customer portfolio and specific and customer-

tailored solutions with limited end customer concentration. In our Dry Lining business unit, we hold strong

market positions in Germany, Austria, The Netherlands, Belgium, France and Switzerland with respect to

gypsum fiber board and have realized growth in numerous other European markets. In our Lime business unit,

we are a leading producer of lime and limestone in Germany and the Czech Republic, with secured high-quality

mineral deposits expected to last for more than 120 years. With our newest lime plant in Russia, we have

established a presence in the Moscow area, one of the economic centers in Russia.

Product and geographic diversification within and across our four business units, reducing the negative

effects of cyclicality.

We believe that our geographic diversification and broad product range across and within our Building

Materials, Dry Lining and Lime business units make us less vulnerable to cyclicality in construction activities in

any single country and decreases in demand in any single product group. In the twelve-month period ended

June 30, 2013, we derived 75.7%, 20.3% and 4.0% of our total external sales from Western Europe, Central and

Eastern Europe and Asia/Americas, respectively, reflecting the geographic diversification of our business.

Among our four business units, our Lime business unit is relatively independent of cyclicality in the

construction industry due to its broad range of industrial and environmental applications. Our Lime business

unit also benefits from greater planning visibility through long-term contracts with key customers. Our currently

existing long-term customer contracts have an average term of approximately 9 years. For 2014 and 2015, the

secured volumes represent approximately 57% and 48% of our expected total lime and limestone production,

respectively. Additionally, our Dry Lining business unit has a strong position in the residential renovation,

remodeling and modernization sector which has historically been less susceptible to cyclicality than new

residential construction. Our dense network of 43 AAC and 31 CSU production plants is designed to provide us

with the flexibility to adjust capacity to meet customer demand, as our AAC and CSU wall-building materials

production does not require continuous throughput of a kiln or oven and can operate profitably even below full

capacity utilization. We intend for the Ecoloop technology to provide further diversification once it is actively

marketed, as it is in an industry not directly connected to the building industry.

Well-invested business in capital-intensive industries.

With investments of approximately €730 million in the years 2006 to 2012, including €480 million from 2008 to

2012, we benefit from a dense network of modern production plants. Based on our successful restructuring and

integration program, our balanced product portfolio and expansion in emerging markets, mainly with greenfield

projects, we believe that we are well positioned to take advantage of a potential cyclical recovery in the

residential, commercial and industrial construction sectors. In recent years, the high level of capital investment

initially required to establish operations in the building materials, dry lining and lime and limestone industries,

together with stagnant or declining demand, has resulted in a limited number of new competitors entering our

markets. Availability of first-class plant locations, with access to high-quality raw materials, energy and other

inputs and proximity to markets is naturally limited, and together with transportation cost and logistical

capabilities, constitute key factors for operating success in each of our markets. In addition, we operated at

68.4% (Building Materials), 119.5% (Dry Lining) and 76.1% (Lime) of capacity (Building Materials and Dry

Lining based on standard capacity, which means operation of plants for 24 hours per day for five days per week)

in the fiscal year ended December 31, 2012, resulting in efficient production processes and fixed cost

degression. Moreover, we benefit from economies of scale in our sales, procurement, distribution and general

administration activities.

Strong management team.

Our senior management team has almost 90 years of collective experience in the industries in which we are

active and a successful track record through the economic cycle. It has successfully implemented our

comprehensive restructuring and integration program following the major acquisitions of Fels/Hebel and Ytong,

thereby creating a leaner cost base and enhancing our growth opportunities and operational efficiency. Key

results achieved by our management team include a strong focus on the markets we operate in, a high degree of

flexibility in capacity to adjust to market demand and use of different sources of energy and raw materials,

improvements in the management of capital expenditures and working capital, our international expansion,

improvements to our network of production plants, the successful development and introduction of new

products to our markets, and further professionalization of our sales force using state-of-the art tools for

effective market penetration and customer retention. These achievements have translated into enhanced brand

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recognition, increased quality of product innovation and reduced time-to-market for new products, accelerated

penetration of markets and significant cost savings.

4.18 Our Strategy

We believe we have a strong business platform across our established business units. Our main strategic goal is

to further strengthen our business platform by focusing on the following principal strategies:

Continue product differentiation and innovation and develop additional products and services.

We intend to further expand and diversify our product portfolio across our business units, including the

development and offering of specific wall-building material solutions in response to increasing customer

demand for technically advanced and sophisticated products and solutions. In implementing this strategy, we

intend to continue to expand our product innovation and research and development efforts, particularly

addressing increasingly stringent regulatory requirements, heightened environmental awareness and growth

opportunities from increasing living standards in many countries. We intend to maintain our broad base of

customers across various industries and improve our logistical capabilities. We intend to apply and explore

advanced technologies, share expertise across our business units and maintain and promote research projects,

including in direct collaboration with certain of our customers. For example, we have developed Ecoloop to

provide a low cost natural gas substitute to our lime kilns. In 2013, we ran our first plastic waste gasification

tests and established our Ecoloop business as a separate business unit. We are actively marketing our new

Ecoloop technology to potential customers, in particular in energy intense industries, as we finalize the

commissioning of the first Ecoloop plant at “Kaltes Tal”. Our innovation strategy also includes the introduction

of new value-added application services and add-on products to complement our product portfolio, such as

consulting services and construction planning support, dry lining solutions and specialized tools and mortars

meeting highly customer-specific requirements. Our research and development center is focused on product

innovation as well as monitoring and improving the quality, technical standards and ease of use of our products,

ensuring compliance with existing regulatory requirements and addressing regulatory trends and developments,

especially in the area of energy efficiency and reduction of carbon dioxide emissions. In order to accelerate our

innovation processes, the Xella Innovation Circle, an international, interdisciplinary and cross-hierarchical

network of about 35 employees from 18 countries, has been established to facilitate the exchange of innovative

ideas across our organization.

Further improve our cost structure and cash flows.

We intend to further improve our cost structure and take advantage of economies of scale in our sales,

administration, procurement and production processes. Our strategy for existing businesses is to accomplish

continuous optimization and create growth potential through improvements of products, customer service and

the efficiency of our business processes. We aim to achieve cost efficiencies and increases in productivity

primarily through efficient energy sourcing, optimization of our plant network and production processes and the

use of self-developed new technologies, such as the recently introduced new mould oil concept with jet injectors

in our Building Materials business unit or the use of recycling gypsum in our Dry Lining plant in The

Netherlands. We also intend to continue to streamline the management of our supplier relationships, optimize

our procurement structure to further improve our cost base and to focus on working capital management and

capital expenditure planning to improve our operating cash flows. In order to decrease volatility in our operating

cash flows, we intend to continue the expansion of both our Dry Lining business unit that is less susceptible to

cyclicality compared to our Building Materials business unit and our Lime business unit that is relatively

independent of cyclical developments in the construction industry due to the broad range of industrial and

environmental applications for its products.

Selectively participate in consolidation and expand further internationally.

In line with our historic strategy, we intend to selectively participate in the consolidation of the building

materials industry and to continue our international expansion in all our business units. We intend to further

leverage our existing Building Materials business platform mainly in Central and Eastern European countries,

and continue the expansion of our business in Asia by further increasing our operations in China and

neighboring markets. In implementing this strategy, we are pursuing both organic growth and evaluating the

market for potential acquisitions of building materials production facilities and other companies. We may also

leverage our dense network of production plants to develop new markets through exports. To gain further

market share in regions where we plan to expand, we intend to continue to transfer know-how from our

established operations and utilize our experience gained through several successful greenfield investments and

acquisitions in the past several years. In our Dry Lining business unit, we aim to increase market penetration in

existing markets and to expand our market position in selected large mature dry lining markets, particularly in

49

France and the United Kingdom, to gradually reduce our Group’s dependence on new residential construction

stemming from our Building Materials business unit. Further, we expect increasing customer demand for

gypsum fiber as well as cement-bonded boards in established and emerging markets, such as the United Arab

Emirates, and thus intend to expand our sales force. To support this growth we are investing through this year a

total of €19.4 million on a gross basis excluding subsidies in a capacity expansion in our cement-bonded board

plant in Calbe, Germany. This plant went into operation in April 2013. In April 2012, we acquired the assets of

an unfinished gypsum fiber board plant in Spain for €14.5 million at a price which we believe to be significantly

below the cost of building a plant on our own. In the course of 2012 and the first quarter of 2013 we have

finished this plant and the plant started operations in May 2013. In our Lime business unit, we intend to continue

to examine opportunities for new reserves and mining rights as well as investment opportunities. In all of our

business units, entering into new markets or investing in or operating new businesses frequently involves longer

periods of start-up losses as it may take several years for greenfield operations (typically five to seven years) or

acquired plants or investments or operations in new businesses, subject to developments in the relevant markets,

to become profitable.

Strengthen and leverage our well regarded brands.

We aim to further strengthen the awareness of, and preference for, our Ytong, Hebel, Multipor, Silka and

Fermacell brands and their recognition for high-quality and technically-advanced wall-building materials and

dry lining products. Ytong is particularly well regarded in Germany and other European countries as well as

regionally in Russia and China, Silka in Germany, The Netherlands, Belgium and Poland, and Fermacell in the

major European dry lining markets. By leveraging on our established brand positions, our strong joint sales

force for Ytong and Silka branded products, and the sales force for our premium dry lining products, we intend

to increase sales and market shares in markets where we are active, and expand into new markets while

maintaining our ability to achieve premium prices for our branded product offerings. By targeting key decision

makers and intermediaries utilizing our established brands, we also intend to address selected new markets by

establishing greenfield operations, acquiring businesses and granting licenses.

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5. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The discussion and analysis below provides information that we believe is relevant to an assessment and

understanding of our historical consolidated financial condition and results of operations. You should read this

discussion in conjunction with our financial and operating information, consolidated financial statements and

related notes, and the other financial information included elsewhere in this report.

The consolidated financial statements and interim consolidated financial statements included in this report have

been prepared in accordance with the International Financial Reporting Standards, as adopted by the European

Union (“IFRS”). In this report, financial information has been derived from the audited consolidated financial

statements including the notes thereto of Xella International Holdings S.à r.l. as of and for the fiscal years

ended December 31, 2011 and 2012 and the unaudited interim consolidated financial statements including the

selected explanatory notes of Xella International Holdings S.à r.l. as of and for the six-month period ended

June 30, 2013. Xella International Holdings S.à r.l. is a holding company with no operations of its own (its main

assets consist of 94.5% of the shares in the Company (the holding company for the Xella Operations Group)

held directly and indirectly (as of June 30, 2013), certain shareholder loans made to the Company and cash on

hand). The consolidated financial information for Xella International Holdings S.à r.l. may therefore not be

fully comparable with consolidated financial information for Xella International S.A.

Consolidated segment information from the audited consolidated financial statements including the notes

thereto of Xella International Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011 and 2012

and the unaudited interim consolidated financial statements and the selected explanatory notes thereto of Xella

International Holdings S.à r.l. as of and for the six-month period ended June 30, 2013 eliminates effects of

inter-segment sales, primarily in connection with lime supplied by the Lime business unit to the Building

Materials business unit and certain building materials supplied by the Building Materials business unit to the

Dry Lining business unit. In this report, percentages relating to the portion of total sales and total Normalized

EBITDA attributable to each of the segments include effects from such inter-segment sales and do not include

any eliminations. As a result, percentages for sales and Normalized EBITDA by segment may add up to more

than 100%. In this report, amounts of external sales for each of our business units eliminate effects from inter-

segment sales. Consolidated segment information from the audited consolidated financial statements including

the notes thereto of Xella International Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011

and 2012 includes Ecoloop in our Lime business unit so that in particular expenses for research and

development in connection with the new Ecoloop technology were recorded in our Lime business unit. Effective

as of January 1, 2013, Ecoloop has been established as a separate segment. As a result of an improvement

project, we reclassified certain of our spare parts from inventories (current assets) to property,

plant & equipment (non-current assets), depending on the estimated useful lives of such spare parts. This

change, in accordance with IAS 16, has been applied effective as of January 1, 2013 and resulted in the

reclassification of spare parts in an aggregate amount of €23.4 million as of January 1, 2013. As a result of the

reclassification, the depreciable amounts of these non-current spare parts are allocated over their expected

useful lives and recognized under depreciation & amortization expenses, while other spare parts classified as

current assets continue to be treated as inventories and generally are recognized under other expenses as

consumed. This change was adopted prospectively and is not reflected in the consolidated financial information

for fiscal years and interim periods prior to January 1, 2013. In the six-month period ended June 30, 2013, non-

current spare parts in an amount of €8.0 million were added to property, plant & equipment and depreciation of

€3.6 million for spare parts classified as non-current assets was recognized under depreciation & amortization

expenses. Effective as of January 1, 2013, Xella International Holdings S.à r.l. has applied IAS 19 (revised),

relating to employee benefits. Figures for the six-month period ended June 30, 2012 have been adjusted

retrospectively. Information for the twelve-month period ended June 30, 2013 is unaudited and has been

calculated by taking the results of operations for the six-month period ended June 30, 2013 (for which IAS 19

(revised)) has been applied) and adding it to the difference between the results of operations for the fiscal year

ended December 31, 2012 (for which IAS 19 (revised) has not been applied retrospectively) and the six-month

period ended June 30, 2012 (for which IAS 19 (revised) has been applied retrospectively).

This section includes forward-looking statements. Such forward-looking statements are subject to risks,

uncertainties and other factors that could cause our actual results to differ materially from those expressed or

implied by such forward-looking statements. See “7. Risks Related to Our Business and Our Industry” and

“8. Forward-Looking Statements”.

5.1 Overview



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are the largest producer in Europe of AAC by capacity and CSU by number of production plants. We offer a

broad range of wall-building material and dry lining products for use in residential, industrial and commercial

construction, as well as lime and limestone for a variety of applications. We are strongly represented in

established markets such as Germany, The Netherlands, Belgium and France as well as in other markets,

including many Eastern European countries that displayed considerable growth in the past and are expected to

return to growth in the mid- to long-term, and in selected regions in Russia and China. As of June 30, 2013, we

operated 99 production plants in 20 different countries, sold our products in more than 30 countries with a sales

presence on three continents and had 6,848 employees (full-time equivalents). For the twelve-month period

ended June 30, 2013, we generated total sales of €1,256.8 million (with Western Europe, Central and Eastern

Europe and Asia/Americas accounting for 75.7%, 20.3% and 4.0% of our total external sales, respectively) and

Normalized EBITDA of €206.9 million.

For the twelve-month period ended June 30, 2013, our Building Materials business unit generated sales of

€823.0 million (or 65.5% of our total sales) and Normalized EBITDA of €112.2 million (or 54.2% of our total

Normalized EBITDA), while our Dry Lining business unit generated sales of €207.6 million (or 16.5% of our

total sales) and Normalized EBITDA of €29.0 million (or 14.0% of our total Normalized EBITDA, our Lime

business unit generated sales of €278.4 million (or 22.2% of our total sales) and Normalized EBITDA of

€66.0 million (or 31.9% of our total Normalized EBITDA) and our newly established Ecoloop business unit

generated sales of €0.1 million and Normalized EBITDA of negative €0.1 million.

5.2 Factors Affecting Our Results of Operations

Our results of operations are affected by the following factors, among others.

Market Trends, General Economic Conditions, Construction Activities and Competition

The building materials industry in any geographic market is dependent on the level of activity in the

construction sector of that geographic market. The construction industry is cyclical in nature and dependent on

the level of construction-related expenditures in the residential, industrial and commercial sectors, public

investments and public and private spending on infrastructure projects. The construction industry is particularly

sensitive to factors such as GDP growth, interest rates, cost and availability of mortgage financing for

residential, commercial and industrial construction, inflation as well as other macro-economic factors. Political

instability or changes in government policy may also affect the construction industry. Our Building Materials

business unit, particularly with respect to sales volumes for AAC and CSU, is to a large extent dependent on

developments in new residential construction activities, with new housing starts and building permits showing a

strong correlation with demand for our AAC and CSU products, and to a lesser degree, also on developments in

new non-residential construction. Our Dry Lining business unit has historically been less cyclical due to its

significant exposure to the more stable residential and commercial renovation markets. Due to its diversified

customer base with customers in various industries, long-term supply contracts and limited exposure to the more

cyclical construction industry, our Lime business unit has also historically been less exposed to cyclicality.

We have been affected by fluctuations in the economic conditions of the markets in which we manufacture and

sell our products. During the global financial and economic crisis since 2008 and the subsequent sovereign debt

and euro crisis, our business was particularly affected in Western Europe (including Germany), Central and

Eastern Europe, the Americas and, to a limited degree, China. Among our established business units, Building

Materials has been affected most significantly. While sales and Normalized EBITDA in our Building Materials

business unit decreased sharply from 2008 to 2009 and continued to decrease in 2010, sales and Normalized

EBITDA in our Dry Lining business unit remained stable throughout the global financial and economic crisis

and increased again in 2010. Sales in our Lime business unit declined in 2009 but increased again in 2010,

exceeding 2008 levels, while Normalized EBITDA constantly grew. According to the IMF, GDP in Germany

increased by 0.9% in 2012, following a growth of 3.1% in 2011, while the average GDP of all countries that

have adopted the euro as their common currency declined by 0.6% in 2012 after a growth of 1.4% in 2011.

Based on available market reports, total construction output in the 15 “Western Europe” Euroconstruct countries

(Austria, Belgium, Denmark, France, Finland, Germany, Ireland, Italy, The Netherlands, Norway, Portugal,

Spain, Sweden, Switzerland and the United Kingdom) is estimated to have declined by 5.4% in 2012, following

real spending at constant levels in 2011. The decline in 2012 was primarily attributable to a significant decline

in new residential and non-residential construction while in 2011 new residential construction considerably

increased and new non-residential construction decreased slightly (source: Euroconstruct June 2013). In 2011

the largest negative changes were recorded in Spain, Ireland and Portugal, where we did not have a presence or

were active only to a limited extent, as well as several Central and Eastern European countries in which we have

a significant presence, most notably Hungary and the Czech Republic. Beginning in 2012, several Western

European countries that had been more stable during the financial and economic crisis and the sovereign debt

52

and euro crisis have displayed significant weakness in the building materials markets, including the United

Kingdom, Switzerland and Sweden as well as The Netherlands, our largest market outside Germany.

Generally, competition in the building materials industry is geographically limited as transportation cost

constitutes a significant part of overall product cost. While we believe that historically a combination of brand

recognition among customers, customer-specific application services, innovative products from our research and

development and product quality has allowed us to achieve premium pricing, decreases in demand may result in

at least temporary excess capacity and increased competition by regional and other competitors. In 2010, we

experienced increased price competition in AAC and CSU building materials in several countries that resulted in

lower net average revenues and decreases in our margin. During the course of 2011 and 2012, we successfully

implemented price increases in certain markets. The reduced demand as a result of unfavorable weather

conditions in the first quarter of 2013 led to increased levels of price competition among our competitors to

compensate for lower demand in several markets, resulting in increased levels of competition with a negative

impact on our net average revenues and margins.

Seasonality and Weather Conditions

The construction industry, and therefore demand for building materials, is seasonal in nature and dependent on

weather conditions as periods of frost, snow or heavy rain negatively affect construction activities. Lower

demand for building materials occurs in periods of cold weather, and may be aggravated by particularly harsh

weather conditions such as those experienced in the winter of 2012/2013. These effects and other unfavorable

weather conditions, frequently lead to a volatile development of our quarterly financial results. Historically,

sales in the second and third quarters have been significantly higher than in the other quarters of the year,

particularly the first quarter. For example, large parts of Europe experienced extreme winter conditions in the

first and the fourth quarter of 2010 as well as in the first quarter of 2013, which resulted in stronger seasonal

effects than in previous years. Adverse weather conditions can materially adversely affect our business,

financial condition and results of operations if they occur with unusual intensity, during abnormal periods, or

last longer than usual in our major markets, especially during peak construction periods. While primarily our

Building Materials business unit is subject to strong seasonal effects, the same applies to a lesser degree to our

Dry Lining and Lime business units. Public holidays and vacation periods constitute an additional factor that

may exacerbate certain seasonality effects, as building projects or industrial production processes may

temporarily cease. Results of a single fiscal quarter might therefore not be a reliable basis for the expectations of

a full fiscal year and may not be comparable with the results in the other fiscal quarters in the same year or

previous years.

Prices of Raw Materials and Energy

Our most important products, AAC, CSU, mineral insulation board, gypsum fiber board, fire protection board,

cement-bonded board and lime and limestone are to a large extent commodity products. Therefore, our

profitability critically depends on operating cost and our ability to manage such operating cost. In addition to

operational efficiency, prices for input factors are the most important factors determining variable operating

cost. Prices for lime, cement, sand, gypsum and anhydrite, aluminum, paper and steel, which are the most

important raw materials for building materials and dry lining products, have in the past fluctuated significantly

and, together with other input factors, accounted for 17.1% of our sales in the twelve-month period ended

June 30, 2013. Our production processes require large quantities of energy from various sources. Our energy

cost, which mainly consists of cost for the supply of electricity, gas, coal, coke, diesel and other fuels incurred in

connection with the production of our products, also account for a high percentage of our cost basis. In the

twelve-month period ended June 30, 2013, our energy cost amounted to a total of €153.4 million, or 12.2% of

our total sales. Our energy cost is affected by various factors, including the availability of supplies of particular

forms of energy, energy prices and regulatory trends and decisions. In particular, prices for oil and gas have

been extremely volatile during the last six years with prices ranging between US$40 and more than US$140 per

barrel of oil. In addition, if we will be required to acquire additional emission certificates for carbon dioxide to

maintain our production at current levels or to meet additional demand, our total energy cost may increase

considerably in the third trading period of the EU Emission Trading System covering emissions in the calendar

years 2013 to 2020.

In order to manage risks from fluctuations in raw material prices, we enter into supply agreements covering

significant portions of our expected requirements for certain raw materials, such as cement, lime and, to a lesser

degree, sand, typically for periods between 12 and 36 months. Similarly, we attempt to mitigate risks of

fluctuating energy prices by entering into supply agreements for significant portions of our expected energy

requirements for periods typically between 24 and 36 months while maintaining the ability in several of our

production processes to use different types of combustibles. For 2013, we have covered a significant part of our

expected requirements for raw materials with supply contracts, particularly cement (89.8%), lime (92.8%) and

53

aluminum (83.9%) (subject to certain price adjustments), and 87.8% of our expected energy requirements

through existing supply agreements (subject to certain price adjustments).

For 2014 and 2015, we have already contracted 29.8% and 21.7%, respectively, of our expected requirements

for lime (subject to certain price adjustments) and 41.1% and 40.0%, respectively, of our expected energy

requirements by entering into supply agreements (subject to certain price adjustments). If raw material or energy

prices decline after we have entered into supply agreements for such raw material or energy supplies, we may

have to pay prices in excess of prevailing spot market prices, which may adversely impact our results of

operations. Because we enter into new supply agreements on a rolling basis, the average price that we pay under

those contracts generally reflects market trends on a trailing basis and we do not use financial derivatives to

hedge against such risks from fluctuating raw material and energy prices. See “7. Risks Related to Our Business

and Our Industry—Our business may be negatively affected by volatility in raw and other material prices, our

inability to retain or replace our key suppliers, unexpected supply shortages and disruptions of the supply

chain” and “—Increased energy cost or disruptions in energy supplies could have a material adverse effect on

our business, financial condition and results of operations”.

Ability to Increase Prices and Pass on Increased Cost

The primary factor affecting our margin, in addition to the structure of our cost base, the absolute level of cost

and our ability to manage our operating cost, are the prices that we can charge to our customers for our products.

Historically, we have generally been able to pass on price increases of raw materials, energy and other input

factors to our customers. Due to our high-quality portfolio of technologically advanced products and customer-

specific application services, our strong sales force focusing on construction projects and customer-specific

solutions, and the strength of our brands, we believe that we have in the past been able to achieve premium

prices. However, our ability to increase prices to pass on increased production cost may be limited by the level

of competition in relevant markets. Our competitors’ pricing policies may be influenced by, among other things,

general economic conditions and more specifically the conditions of the building industry, the number of

competitors and their production capacities, our competitors’ cost base and general business strategy. For

example, in the course of the global financial and economic crisis, the level of competition in the building

materials industry in many countries increased due to the decline of demand and temporary excess capacity. In

2011 and 2012, we successfully implemented price increases in our core markets in order to pass on increased

costs in raw materials, energy and other input factors to our customers and to compensate for negative effects of

increased price competition in 2010 when, in particular, our Building Materials business unit faced intensive

price competition and our margins declined despite optimization measures in our cost structure, strategic

purchasing initiatives and cost saving programs. For instance, due to the market environment, we decided to

delay price increases in Germany in the first half of 2013. There can be no assurance that any future price

increases will be accepted by our customers, that we will be able to pass on further increases in the cost of raw

materials, energy and other input factors in a sustainable manner or at all or that we will be able to maintain

premium prices for our products. To the extent that we implement price increases, our sales volumes and market

share may be adversely affected, at least temporarily, if competitors do not increase their prices or only do so

with delay.

Flexibility of Our Cost Structure

Our production cost includes cost of raw materials and other input factors, staff, energy, repairs and

maintenance of our production facilities and other fixed and variable cost. In our Building Materials business

unit, our most cyclical segment, approximately one-half of our cost within EBITDA in the fiscal year ended

December 31, 2012 was variable (comprised of, among others, costs of raw materials, energy, merchandise and

other input materials as well as transportation cost) and 31.3% related to personnel and maintenance. Similarly,

in our Dry Lining business unit, in 2012 nearly 59% of our cost within EBITDA was variable and 26.6% related

to personnel and maintenance, while more than 66% of cost within EBITDA in our Lime business unit was

variable, with 29.0% related to personnel and maintenance. Our production processes allow for flexible shift

systems and capacity adjustments to meet increased or decreased demand for our products. In connection with

the global financial and economic crisis, we reduced the number of employees in our Building Materials

business unit by more than 900 (full-time equivalents) between 2008 and 2010, mainly in our production

processes through a reduction of shifts and adjustments within shifts and reduced our expenses for repairs and

maintenance by €11.1 million between 2007 and 2010. With the beginning of a recovery of the economic

situation in 2011 in several countries, we selectively increased again our production capacities and our number

of employees. With the renewed deterioration of the market environment in some countries since 2012, we have

implemented certain additional measures, such as the permanent closure of a plant in the Czech Republic and

the temporary closure of a plant in Slovakia and a plant in The Netherlands. Our efforts to streamline our

delivery chain benefit from our dense network of production plants in several European countries. See “—

Normalized EBITDA”.

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Acquisitions, Greenfield Investments and Capital Expenditures

In connection with our geographic expansion strategy, between 2008 and 2010 we established new plants in

Romania (Ploesti), China (Tianjin), Bosnia-Herzegovina (Tuzla) and Russia (Tovarkovo). Since 2011, we have

acquired AAC plants in Italy (Pontenure, in which we previously held only a minority interest) and the Czech

Republic (Most), a CSU plant in Poland (Teodory) and an unfinished gypsum fiber board plant in Orejo, Spain,

which is primarily intended to serve markets outside of Spain, particularly France, the United Kingdom and

Scandinavia and started operations in May 2013. Additionally, we have increased our ownership percentage in

the CSU plant in Blatzheim, Germany, from 50% to 100%.

Operations in new markets or investments or operations in new businesses frequently have longer periods of

start-up losses as it may take several years for greenfield operations (typically five to seven years) or acquired

plants or investments or operations in new businesses, subject to developments in the relevant markets, to

become profitable. Start-up losses during the fiscal years ended December 31, 2010, 2011 and 2012 amounted to

€9.9 million, €3.2 million and €6.6 million, respectively. Start-up losses in the six-month period ended June 30,

2013 amounted to €5.7 million compared to €3.1 million in the corresponding period of 2012.

We expect capital expenditures in the fiscal year 2013 above the level that we had in 2010 and 2011 but below

the level of 2012, which was characterized by the acquisition of an AAC plant in the Czech Republic (Most), an

unfinished gypsum fiber board plant in Spain (Orejo) and the expansion of our cement-bonded boards plant in

Germany (Calbe). Going forward, we expect that capital expenditures for replacement and maintenance as well

as for optimization measures of our production facilities will in the medium-term increase to levels in line with

levels before the global financial and economic crisis. In line with our historic strategy, we intend to selectively

participate in the consolidation of the building materials industry and to continue our international expansion

across our business units, with a particular focus on our core Building Materials business unit. In implementing

this strategy, we are pursuing both organic growth and evaluating the market for potential acquisitions of

building materials production facilities and other companies. Between January 1, 2010 and June 30, 2013, we

have made capital expenditures in an aggregate amount of €17.5 million for our Ecoloop project in which we are

targeting the zero-emissions production of synthesis gas from waste to replace fossil fuels. Our first reactor is

currently in the commissioning phase at our Lime plant “Kaltes Tal”, Germany. Furthermore, the second phase

of the capacity increase in our cement-bonded boards plant in Calbe, Germany started its production in the

second quarter of 2013.

Increased capital expenditures for expansion, maintenance and optimization may be followed by an increase in

depreciation expense as machinery and buildings will be depreciated over their useful lives.

Currency Fluctuations

We conduct our business in approximately 20 currencies and prepare our consolidated financial statements in

euro. During the twelve-month period ended June 30, 2013, we generated 27.0% of our sales in currencies other

than the euro, mainly Czech koruna (5.3% of our total sales), Polish zloty (4.2% of our total sales), Swiss franc

(3.6% of our total sales) and Russian rouble (3.4% of our total sales), and we expect the percentage of our sales

generated in currencies other than the euro to increase in the future. As most of our purchases are conducted in

the same currency as we invoice our sales, we face only a limited transactional currency risk in our core

operations. Changes in foreign currency exchange rates can affect the value of our foreign assets, sales,

liabilities and cost when reported in euro and, therefore, our financial condition and results of operations. Based

on our sales denominated in Czech koruna, Polish zloty, Swiss franc and Russian rouble in the twelve-month

period ended June 30, 2013, a decrease of 1% in the euro to Czech koruna, Polish zloty, Swiss franc and

Russian rouble exchange rates would have resulted in a decrease in our consolidated sales of approximately

€0.7 million, €0.5 million, €0.5 million and €0.4 million, respectively. Therefore, if the euro appreciates, in

particular in relation to the Czech koruna, Polish zloty, Swiss Franc and Russian rouble, and our sales and

expenses denominated in foreign currencies remain the same, or, in some cases, even if our sales increase or our

expenses decrease, our revenues and profits in euro will decline. Risks arising mainly from inter-company

transactions, such as financing, dividend distributions and inter-company charges or purchases as well as third-

party foreign currency transactions, are to a certain extent managed by forward foreign exchange contracts. In

order to help manage our exchange rate risk, we enter into forward foreign exchange contracts that in general

cover parts of our expected net foreign currency exposure for the current budget year. As of June 30, 2013, we

also had financial liabilities denominated in Polish zloty in an amount of PLN346.4 million, which provides an

additional hedge against a depreciation of the Polish zloty against the euro. We manage the remaining net

exchange rate risk by partly hedging current receivables and future sales as well as sourcing in currencies other

than the functional currency of our foreign subsidiaries, and by partly hedging current receivables and future

sales with forward foreign exchange contracts. This policy has been established to enable our management to

plan future cash flows in functional currencies from anticipated foreign currency sales and related accounts

55

receivable more effectively. The hedge period for expected sales is generally up to one year. We may, however,

extend or shorten the hedge period at any time depending on expectations of the development of foreign

currency exchange rates and our assessment of the aggregate risk. While our hedging strategy enables us to

partly mitigate the effects on our cash flows of an appreciation of the value of the euro compared to the

respective functional currencies of our foreign subsidiaries over a period of up to one year, it does not enable us

to mitigate the risk of a long-term appreciation of the euro compared to the respective functional currencies of

our foreign subsidiaries. See also “—Quantitative and Qualitative Disclosures about Market Risk—Exchange

Rate Exposure and Currency Risk Hedging”.

Interest Rate Fluctuations

We have a significant amount of long-term debt and are exposed to interest rate risk from these debt

instruments. However, on March 31, 2013, all existing interest hedging transactions expired at their scheduled

maturities. To date, we have not entered into new interest rate hedging arrangements and may continue to leave

our variable interest rate exposure unhedged. An increase of variable interest rates by 100 basis points would

result in additional interest expenses of approximately €3.8 million annually.

5.3 Key Income Statement Items

Introduction to Nature of Expense Method

Our consolidated income statement is presented pursuant to the nature of expense method

(Gesamtkostenverfahren). The nature of expense method involves the determination of operating results by

comparing income and total expenses incurred during a period in connection with operating output. Since all

expenses for the entire period are shown on the expense side, the nature of expense method primarily involves

classification according to types of expenses, for example operating expenses are broken down according to

materials expenses, staff expenses, depreciation & amortization expenses, and other expenses. Total expenses

are compared with income expressed as total operating output, which includes not only sales but also a change

in finished goods and work in progress as well as certain assets produced during the period that are shown as

“own work capitalized”. Inventory of finished goods and work in progress are measured at cost of manufacture.

Any changes in inventory of finished goods and work in progress increase or decrease the total output of the

relevant period. In contrast, the cost-of-sales method (Umsatzkostenverfahren) is revenue-based. Revenue is

compared with expenses incurred through the production or purchasing of goods sold. The presentation of the

types of operating expenses is based on a secondary classification that distinguishes between the functional

areas of production, administration and sales. This approach does not take into account unsold goods. The

operating profit and net income/loss for the year are the same under both methods and are not affected by the

choice of method.

Sales and Total Output

Sales that result from our operating output are recognized as sales revenue when the risks of ownership have

passed to the buyer. Sales are primarily derived from trade sales and service sales to third parties. Revenue is

recognized on a net basis, i.e., amounts collected on behalf of third parties, such as sales taxes, goods and

services taxes and value added taxes are not included, whereas incidental services, such as packaging and

shipping cost, customs duties, freight out, transport insurance and advances, are included in revenue; rebates,

discounts, bonuses and reimbursements are deducted from sales. Changes in finished goods & work in progress

(including changes in finished good and unfinished goods resulting from the change in the quantities and values

of the inventories at the beginning and the end of the relevant period, write-downs on finished goods and write-

downs of raw materials and supplies and merchandise) and own work capitalized (expenses that are capitalized

as own work under non-current assets, such as internally constructed buildings and internally produced tools and

equipment) are added to, or subtracted from, sales to arrive at total output.

Materials Expenses

Materials expenses include expenses for raw materials, such as lime, cement, sand, gypsum and anhydrite,

aluminum, paper, steel, energy used in our production processes (electricity, gas, coal and coke, diesel and other

fuels), transportation expenses relating to the shipping of finished products, packaging materials (foil, pallets,

packaging tape, shock edges and sacks), auxiliary materials and supplies (form oil, lubricating oil, hydraulic oil,

and fat) as well as expenses for merchandise and services rendered to us.

56

Other Income

Other income includes operating income (including income from leasing, licenses and other operating income),

neutral income (such as profits from disposals of assets, reversals of impairments from prior periods, release of

negative goodwill, results from fair value adjustments (acquisitions of shares in subsidiaries without change of

control), reversals of impairments on assets held for sale and amortizations of government grants) and the total

result from disposals of affiliates and associates held at equity. Other income also includes income resulting

from higher potential receivables from our former shareholder, Haniel, in connection with hold-harmless

agreements resulting from the purchase of the Group by our current shareholders in 2008.

Staff Expenses

Staff expenses include wages and salaries, social security expenses, other employee benefits and pension

expenses in connection with defined benefit and defined contribution plans.

Other Expenses

Other expenses include energy expenses for non-production activities, repairs and maintenance expenses,

expenses for advertising and marketing, insurance premiums, commissions paid to third parties, travel expenses,

fees for consulting and audit services, telecommunication expenses, expenses for information technology

service providers, expenses for temporary workers, operating lease expenses, non-income taxes, impairments of

receivables and other operating and administrative expenses (including expenses for recultivation of land for

exploitation, waste disposal, office supplies and pending legal proceedings). Additionally, other expenses

include additions to warranty provisions. Some of these other expenses are covered by a receivable against

Haniel in connection with the Acquisition.

EBITDA

EBITDA is the total balance of total income (total output less materials expenses and plus other income), staff

expenses and other expenses before depreciation, amortization and impairment expenses, financial result and

income taxes.

Depreciation & Amortization Expenses

Depreciation & amortization expenses include expenses related to the depreciation of buildings, land for

exploitation (lime quarries and sand pits), plants, machinery, vehicles and equipment as well as to the

amortization of development expenses previously capitalized and impairments of goodwill, brands and other

intangible and tangible assets.

Financial Result

Financial result is the balance of the result from investments in associates (at equity), results from other

investments, finance cost and other financial result. Finance cost specifically include interest expenses for our

existing indebtedness, interest expenses for finance lease liabilities, interest expenses for net pension provisions

and other non-current provisions and fees for financial activities (transaction and commission expenditures).

Income Taxes

Income taxes are the balance of current income taxes and deferred taxes. Current income taxes include income

taxes that arose during the current year and previous years, results from tax allocations and current taxes on the

sale of discontinued operations. Deferred taxes are the balance from changes of deferred tax liabilities and

deferred tax assets which are represented in the consolidated income statement. The tax expenses shown for our

Group are the total of the taxes that arise for the legal entities in the various jurisdictions in which we operate.

Thus, income taxes may vary from period to period depending on shifts in taxable income by legal entity,

country-specific changes in tax legislation, the availability of tax loss carry-forwards in particular jurisdictions

and the specific contribution of each legal entity on a consolidated basis.

5.4 Segment Reporting

Our Group’s four business units correspond to our reporting segments under IFRS. In accordance with IFRS 8,

we have identified four reportable segments (Building Materials, Dry Lining, Lime and Ecoloop (from

January 1, 2013)), which are largely separately organized and managed according to the products sold and

services provided, the trademarks, the production processes, the sales channels and the customer profiles.

Consolidated segment information from the audited consolidated financial statements including the notes thereto

57

of Xella International Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011 and 2012 and the

unaudited interim consolidated financial statements and the selected explanatory notes thereto of Xella

International Holdings S.à r.l. as of and for the six-month period ended June 30, 2013 eliminates effects of inter-

segment sales, primarily in connection with lime supplied by the Lime business unit to the Building Materials

business unit and certain building materials supplied by the Building Materials business unit to the Dry Lining

business unit. However, the percentages relating to the portion of total sales and total Normalized EBITDA

attributable to each of the segments include effects from such inter-segment sales and do not include any such

elimination. As a result, percentages for sales and Normalized EBITDA by segment may add up to more than

100%.

5.5 Results of Operations

Six Months Ended June 30, 2013 compared to Six Months Ended June 30, 2012

The following table sets out certain information with respect to our income statement in absolute terms and

expressed as a percentage of total sales for each of the six-month periods ended June 30, 2012 and June 30,

2013, respectively.


Six-Month Period ended June 30(1),

2012 2013

(€ in millions)

(unaudited)

(% of total

sales)(2)

(unaudited) (€ in millions)

(unaudited)

(% of total

sales)(2)

(unaudited)


Information:

Sales ................................................................ 635.2 100.0 609.5 100.0

Changes in finished goods & work in

progress ....................................................... 7.2 1.1 (3.9) (0.6)

Own work capitalized ..................................... 0.5 0.1 1.0 0.2

Total Output .................................................. 643.0 101.2 606.7 99.5

Materials expenses .......................................... (295.2) (46.5) (285.3) (46.8)

Gross profit ................................................... 347.7 54.7 321.4 52.7

Other income .................................................. 18.7 2.9 12.6 2.1

Total income .................................................. 366.5 57.7 334.0 54.8

Staff expenses ................................................. (154.3) (24.3) (156.4) (25.7)

Other expenses ................................................ (112.6) (17.7) (88.2) (14.5)

EBITDA ......................................................... 99.6 15.7 89.5 14.7

Depreciation & amortization expenses ........... (50.7) (8.0) (54.3) (8.9)

EBIT .............................................................. 48.9 7.7 35.3 5.8

Financial result ............................................. (41.9) (6.6) (45.4) (7.4)

Profit/loss before tax ..................................... 7.0 1.1 (10.1) (1.7)

Income taxes .................................................. (14.2) (2.2) (5.5) (0.9)

Net income/loss .............................................. (7.3) (1.1) (15.6) (2.6)

(1) Effective as of January 1, 2013 Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month period ended June 30, 2012 have been adjusted retrospectively.

(2) Under the nature of expense method (Gesamtkostenverfahren), total output may, depending on changes in finished goods & work in

progress as well as own work capitalized, exceed sales or fall short of sales. To provide a coherent picture of the relative importance of income and expense items in line with our operating performance, as discussed in this report, percentages for all line items relate to

sales and not total output.

Sales

The following table sets out our sales by segment:


Six-Month Period ended June 30(1),

2012 2013

58

(€ in millions)(2)

(unaudited) (% of total sales

or total

Normalized

EBITDA)(2)

(unaudited)

(€ in millions)

(unaudited) (% of total sales

or total

Normalized

EBITDA)(3)

(unaudited)

Consolidated Segment Income Statement

Information:

Building Materials

Sales ................................................................ 424.1 66.8 392.7 64.4

Normalized EBITDA ...................................... 56.8 55.7 49.3 53.7

Dry Lining

Sales ................................................................ 108.2 17.0 107.4 17.6


Lime

Sales ................................................................ 129.5 20.4 135.6 22.2


Ecoloop(4)

Sales ................................................................ — — 0.1 0.0

Normalized EBITDA ...................................... (0.3) (0.3) (0.4) (0.4)


Inter-segment sales ......................................... (26.6) (4.2) (26.3) (4.3)

Normalized EBITDA ...................................... (0.6) (0.6) (0.2) (0.2)

Total

Consolidated sales .......................................... 635.2 100.0 609.5 100.0


(1) Effective as of January 1, 2013 Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month period


(2) Effective as of January 1, 2013, Ecoloop has been established as a separate segment. Figures for the six-month period ended June 30, 2012 have been adjusted retrospectively for income and expenses previously shown in the lime segment.




(4) Consolidated segment information from the audited consolidated financial statements and the notes thereto of Xella International Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011 and 2012 includes Ecoloop in our Lime business unit.

Effective as of January 1, 2013, Ecoloop has been established as a separate segment. See “4. Our Business and Industry—Ecoloop”.

Figures for the six-month period ended June 30, 2012 have been adjusted retrospectively for income and expenses previously shown in the Lime segment.

59

Our sales by geographic regions are as follows:


Six-Month Period ended June 30,

2012 2013

(€ in millions)

(unaudited) (% of total sales)



(unaudited)

Sales by Geographic Region(1):

Germany ............................................................. 273.7 43.1 284.4 46.7

The Netherlands .................................................. 73.7 11.6 52.9 8.7

France ................................................................. 41.4 6.5 36.3 6.0

Czech Republic ................................................... 35.4 5.6 30.6 5.0

Belgium .............................................................. 32.0 5.0 31.8 5.2

Poland ................................................................. 28.9 4.5 24.7 4.1

Switzerland ......................................................... 23.1 3.6 22.8 3.7

Other countries ................................................... 87.3 13.7 83.8 13.7

Europe ............................................................... 595.5 93.8 567.2 93.1

China .................................................................. 20.0 3.1 17.0 2.8

Russia ................................................................. 13.6 2.1 19.7 3.2

Other ................................................................... 6.1 1.0 5.6 0.9

Non-European/Emerging Markets .................. 39.7 6.3 42.3 6.9

Total ................................................................... 635.2 100.0 609.5 100.0

(1) Allocation of sales according to domicile of invoicing units in Building Materials and Lime business units. In the Dry Lining business

unit allocation has been made according to the country in which sales have been generated.

Sales decreased by €25.7 million, or 4.0%, from €635.2 million in the first half of 2012 to €609.5 million in the

corresponding period of 2013. The decline in sales was mainly attributable to the unfavorable weather

conditions in most of the countries in which we operate during the first quarter of 2013 as well as the generally

weaker market environment. An increase in sales in the second quarter of 2013 only partly offset reduced levels

of business activities in the first quarter of 2013.

Sales in our Building Materials business unit in the first half of 2013 suffered considerably from lower sales

volumes particularly in the first quarter of 2013 as a result of the harsh weather conditions in most of our core

markets. Further negative impacts resulted from lower realized net average revenues due to increased price

competition and delayed deliveries to our Angolan housing project. Since the end of 2011, prefabricated

building blocks have been shipped from The Netherlands to Angola where up to 15,000 houses and apartments

are planned to be built using a modular system. The combination of these effects led to declined sales in our

Building Materials business unit in the first half of 2013 by €31.4 million, or 7.4%, compared to the

corresponding period of 2012.

Our Dry Lining business unit sales remained almost stable at a decrease of €0.8 million, or 0.7%, compared to

the corresponding period of 2012. Decreases, particularly in the Benelux countries and the Czech Republic were

mostly compensated for by increases in Germany and Switzerland. Overall, we were facing a difficult market

environment in many countries and globally suffered from the harsh weather conditions in the first quarter of

2013.

Sales in our Lime business unit increased by €6.1 million, or 4.7%, from €129.5 million in the first half of 2012

to €135.6 million in the corresponding period in 2013. The increase was mainly driven by a higher demand from

the civil engineering sector in Germany and higher demand from the building materials and industrial sector in

Russia. The ongoing strong contribution from Russia was attributable to higher production volumes following

the commissioning of a fourth kiln and higher net average revenues.

Materials Expenses

Materials expenses decreased by €9.9 million, or 3.4%, from €295.2 million in the first half of 2012 to

€285.3 million in the first half of 2013. This decrease was mainly a result of adapted production output

following the decline in sales volumes which was partly offset by increased specific production cost,

particularly for energy.

60

Gross Profit Margin

In the first half of 2013, we faced higher market prices for most of our production’s input factors, in particular

for energy and lime. Together with country and product mix effects this led to a lower gross profit margin

compared to the corresponding period of 2012. The gross profit margin decreased by 2.0 percentage points to

52.7%.

Other Income

Other income decreased by €6.1 million, or 32.6%, from €18.7 million in the first half of 2012 to €12.6 million

in the first half of 2013. The decrease mainly resulted from decreased income from adjustments to the receivable

against the former shareholder, Haniel, Duisburg, recognized in 2012 as a counterpart to respective expenses.

This receivable represents a number of potential claims against Haniel which were agreed on by the buyer and

seller in connection with the Acquisition. They relate to hold-harmless agreements for certain tax obligations,

warranty and other risks. The decrease was partially offset by income from a carbon dioxide swap transaction in

the first quarter of 2012.

Staff Expenses

Staff expenses increased slightly by €2.1 million, or 1.4%, from €154.3 million in the first half of 2012 to

€156.4 million in the first half of 2013. The increase was mainly a result of general tariff increases as well as a

higher employee headcount in our Dry Lining business unit related in particular to new plants and expansion

projects.

Other Expenses

Other expenses declined by €24.4 million, or 21.7%, from €112.6 million in the first half of 2012 to

€88.2 million in the first half of 2013. €8.6 million of the decline was related to repairs and maintenance

expenses which were reduced due to strict cost-cutting measures as well as to the reclassification of certain of

our spare parts from inventories (current assets) to property, plant & equipment (non-current assets) starting

from January 1, 2013. Other expenses also include expenses which are covered by a receivable against Haniel,

Duisburg (corresponding to a decrease of income in other income). The decrease of such expenses relating to

warranty claims amounted to €7.5 million in the first half of 2013 compared to the corresponding period in

2012.

EBITDA

Our EBITDA decreased by €10.1 million, or 10.1%, from €99.6 million in the first half of 2012 to €89.5 million

in the corresponding period of 2013. Our EBITDA margin decreased from 15.7% in the first half of 2012 to

14.7% in the first half of 2013. The decline in total sales could not be compensated by certain counter-measures,

such as adapted production output, savings in other expenses and general cost-containment measures.


Depreciation & amortization expenses increased by €3.6 million, or 7.1%, from € 50.7million in the first half of

2012 compared to €54.3 million in the corresponding period of 2013. This increase in depreciation and

amortization expenses was related to the reclassification of certain of our spare parts from inventories (current

assets) to property, plant & equipment (non-current assets) starting from January 1, 2013.

Financial Result

The financial result decreased by €3.5 million, or 8.4%, from negative €41.9 million in the first half of 2012 to

negative €45.4 million in the first half of 2013. This decrease mainly related to higher foreign exchange

transaction losses.

Income Taxes

Income tax expenses decreased by €8.7 million, or 61.3%, from €14.2 million in the first half of 2012 to

€5.5 million in the first half of 2013. The decline was driven by a decrease of current tax expenses by

€4.2 million following a decreased tax base as well as by a switch from deferred tax expenses of €1.5 million in

the first half of 2012 to deferred tax income of €2.9 million in the first half of 2013 mainly due to the

development of deferred tax assets on tax loss carry-forwards.

61

2012 compared to 2011

The following table sets out certain information with respect to our income statement in absolute terms and

expressed as a percentage of total sales for each of the fiscal years ended December 31, 2011 and December 31,

2012, respectively.


Fiscal Years ended December 31,

2011 2012

(€ in millions)

(audited) (% of total

sales)(1)

(unaudited)

(€ in millions)

(audited) (% of total

sales)(1)

(unaudited)


Information:

Sales ................................................................ 1,271.2 100.0 1,282.5 100.0


progress ....................................................... 10.2 0.8 4.8 0.4

Own work capitalized ..................................... 1.8 0.1 2.3 0.2

Total output ................................................... 1,283.2 100.9 1,289.6 100.6

Materials expenses .......................................... (593.0) (46.6) (592.3) (46.2)

Gross profit ................................................... 690.2 54.3 697.4 54.4

Other income .................................................. 86.1 6.8 34.5 2.7

Total income .................................................. 776.3 61.1 731.9 57.1

Staff expenses ................................................. (298.6) (23.5) (306.4) (23.9)

Other expenses ................................................ (277.3) (21.8) (218.2) (17.0)

EBITDA ......................................................... 200.4 15.8 207.2 16.2

Depreciation & amortization expenses ........... (107.4) (8.4) (102.6) (8.0)

Impairment of goodwill .................................. — — (8.8) (0.7)

EBIT .............................................................. 93.0 7.3 95.8 7.5

Financial result ............................................. (92.5) (7.3) (90.4) (7.0)

Profit/loss before tax ..................................... 0.6 0.0 5.4 0.4

Income taxes .................................................. 5.1 0.4 (14.2) (1.1)

Net income/loss .............................................. 5.7 0.4 (8.8) (0.7)


progress as well as own work capitalized, exceed sales or fall short of sales. To provide a coherent picture of the relative importance

of income and expense items in line with our operating performance, as discussed in this report, percentages for all line items relate to sales and not total output.

62

Sales




2011 2012

(€ in millions)

(audited) (% of total sales

or total

Normalized

EBITDA)(1)

(unaudited)

(€ in millions)

(audited) (% of total sales

or total

Normalized

EBITDA)(1)

(unaudited)


Information(2)

:

Building Materials

Sales ............................................................ 847.8 66.7 854.3 66.6

Normalized EBITDA .................................. 115.4 55.6 119.7 55.2

Dry Lining

Sales ............................................................ 207.6 16.3 208.5 16.3


Lime

Sales ............................................................ 267.9 21.1 272.3 21.2



Inter-segment sales ..................................... (52.2) (4.1) (52.7) (4.1)

Normalized EBITDA .................................. (0.8) (0.4) (0.5) (0.2)

Total

Consolidated sales ...................................... 1,271.2 100.0 1,282.5 100.0


(1) Under the nature of expense method (Gesamtkostenverfahren), total output may, depending on changes in finished goods & work in progress as well as own work capitalized, exceed sales or fall short of sales. To provide a coherent picture of the relative importance

of income and expense items in line with our operating performance, as discussed in this report, percentages for all line items relate to


(2) The Ecoloop segment is not included as a separate segment prior to January 1, 2013.

63




2011 2012

(€ in millions)

(unaudited,

unless indicated

otherwise) (% of total sales)

(unaudited)

(€ in millions)

(unaudited,

unless indicated


(unaudited)

Sales by Geographic Region:(1)

Germany(2)

...................................................... 558.6 43.9 571.4 44.6

The Netherlands(2)

........................................... 142.3 11.2 138.6 10.8

France(2)

.......................................................... 82.6 6.5 74.4 5.8

Czech Republic(2)

............................................ 78.4 6.2 71.3 5.6

Belgium(2)

....................................................... 64.3 5.1 61.8 4.8

Poland(2)

.......................................................... 62.3 4.9 56.6 4.4

Switzerland ..................................................... 44.8 3.5 45.9 3.6

Other countries ............................................... 156.6 12.3 171.2 13.3

Europe ........................................................... 1,189.9 93.6 1,191.2 92.9

China .............................................................. 45.6 3.6 41.5 3.2

Russia ............................................................. 22.7 1.8 36.2 2.8

Other ............................................................... 13.0 1.0 13.6 1.1

Non-European/Emerging Markets .............. 81.3 6.4 91.3 7.1

Total ............................................................... 1,271.2 100.0 1,282.5 100.0

(1) Allocation of sales in the Building Materials and Lime business units is made according to the domicile of invoicing units. Since

January 1, 2012 the presentation of sales by geographic regions in the Dry Lining business unit has been allocated based on the

country in which sales have been generated. In prior years it had been calculated based on the domicile of invoicing units. The figures

for the period ended December 31, 2011 has been adjusted correspondingly. Therefore, the presentation of the period ended

December 31, 2011 differs from the note 27 to our audited consolidated financial statements as of and for the fiscal year ended

December 31, 2011.

(2) Audited; figures for the sales by geographic regions for the fiscal year ended December 31, 2011 have been derived from the

comparative figures in the audited consolidated financial statements as of and for the fiscal year 2012.

Total sales increased by €11.3 million, or 0.9%, from €1,271.2 million in 2011 to €1,282.5 million in 2012 with

positive contributions from all our then existing business units.

Sales in our Building Materials business unit increased by €6.5 million, or 0.8%, from €847.8 million in 2011 to

€854.3 million in 2012. The increase was primarily attributable to higher net average revenues, which more than

offset for slightly weaker sales volumes. Sales in Germany and Russia (greater sales volumes at higher prices)

and Italy (as a result of the acquisition of an AAC plant in September 2011) increased and more than offset

market-induced lower sales in other markets. The net average revenues benefited from price increases, including

in Germany, Russia and China, in the second half of 2011 and during the course of 2012. Sales in our Dry

Lining business unit increased by €0.9 million, or 0.4%, from €207.6 million in 2011 to €208.5 million in 2012.

This positive development was attributable to increased sales volumes of cement-bonded board products and

favorable developments of net average revenues in general. These positive developments more than offset lower

sales volumes of gypsum fiber board products, with lower sales volume especially in Germany and the Benelux

countries. Sales in our Lime business unit increased by €4.4 million, or 1.6%, from €267.9 million in 2011 to

€272.3 million in 2012, as higher net average revenues overcompensated for lower sales volumes. Increased

sales from our lime operations in Russia and a stable development in Germany offset lower sales in the Czech

Republic. Sales volumes were negatively impacted by reduced activities in civil engineering, after a strong

business in 2011.

Materials Expenses

Materials expenses remained stable at €592.3 million in 2012 compared to €593.0 million in 2011. The decline

from lower production volumes, in line with lower sales volumes, was partly offset by higher prices for input

factors (in particular, for energy, lime and packaging materials), which caused an increase of specific production

cost in the Building Materials and Lime business units.

64

Gross Profit Margin

The gross profit margin was stable at 54.3% in 2011 and 54.4% in 2012, as we managed to pass on higher

specific production costs to customers in our core markets.

Other Income

Other income decreased by €51.6 million, or 59.9%, from €86.1 million in 2011 to €34.5 million in 2012,

mainly as a result of decreased income from adjustments to the receivable against our former shareholder,

Haniel, in the amount of €10.2 million compared to €58.0 million in 2011. This receivable represents a number

of potential claims of our current shareholders against Haniel in connection with the Acquisition, which mainly

related to hold-harmless agreements for certain tax obligations, warranty obligations and other risks. The sale of

carbon dioxide emission certificates in 2012 also had a positive effect on other income.

Staff Expenses

Staff expenses increased by €7.8 million, or 2.6%, from €298.6 million in 2011 to €306.4 million in 2012. This

increase was primarily attributed to a higher number of employees (73 employees (full-time equivalents) on

average, partly related to the new gypsum fiber board plant in Spain) and expansion projects as well as increases

in salaries and wages under certain collective bargaining agreements.

Other Expenses

Other expenses decreased by €59.1 million, or 21.3%, from €277.3 million in 2011 to €218.2 million in 2012.

This decrease was mainly attributable to higher warranty expenses in 2011 covered by a receivable against

Haniel in connection with the Acquisition (corresponding to a decrease of other income in 2012 compared to

2011). Moreover, other expenses were impacted by increased expenses for legal and consulting fees (especially

related to new projects) as well as higher labor leasing expenses incurred in connection with the export project

in Angola.

EBITDA

Our EBITDA increased by €6.8 million, or 3.4%, from €200.4 million in 2011 to €207.2 million in 2012. Our

EBITDA margin improved from 15.8% in 2011 to 16.2% in 2012.


Depreciation & amortization expenses decreased by €4.8 million, or 4.5%, from €107.4 million in 2011 to

€102.6 million in 2012.

Impairment of Goodwill

In light of the outlook for the economy and the related business environment for certain markets in Southeastern

Europe, the annual impairment test of goodwill resulted in an impairment loss of €8.8 million in our Building

Materials business unit in 2012.

Financial Result

The financial result increased by €2.1 million, or 2.3%, from negative €92.5 million in 2011 to negative

€90.4 million in 2012. This increase was primarily due to the issuance of the Senior Secured Notes and the

associated refinancing of term loans in the second quarter of 2011. In accordance with IAS 39 costs directly

attributable to the Senior Secured Notes were offset against the respective liability and are amortized over the

Senior Secured Notes’ term whereas costs that were not directly attributable to the Senior Secured Notes were

recognized as expenses in 2011. The repayment of term loans in an amount of €250.0 million resulted in the

premature amortization of financing fees attributable to the Senior Secured Notes in the amount of €8.9 million

in 2011. The total amount of costs which were not directly attributable to the Senior Secured Notes and were

included in the financial result 2011 amounted to €1.6 million. In 2012, this effect was partly offset by the

higher interest rate of the Senior Secured Notes compared to the interest rate on the term loans as well as higher

interest expenses related to the decreased interest rate for discounting of non-current provisions relating to

recultivation obligations and pensions.

65

Income Taxes

Income tax expenses increased by €19.3 million from €5.1 million tax income in 2011 to tax expenses of

€14.2 million in 2012. Current tax expenses decreased by €2.8 million in 2012 while deferred tax income

decreased by €22.1 million in 2012 mainly due to the development of deferred taxes on tax loss carry-forwards.

2011 compared to 2010



2010 2011

(€ in millions)

(audited) (% of total sales)(1)


(audited) (% of total sales)(1)

(unaudited)


Information:

Sales .................................................................... 1,145.9 100.0 1,271.2 100.0


progress ........................................................... 10.7 0.9 10.2 0.8

Own work capitalized ......................................... 2.9 0.3 1.8 0.1

Total output ....................................................... 1,159.6 101.2 1,283.2 100.9

Materials expenses .............................................. (525.7) (45.9) (593.0) (46.6)

Gross profit ....................................................... 633.9 55.3 690.2 54.3

Other income ...................................................... 34.1 3.0 86.1 6.8

Total income ...................................................... 668.0 58.3 776.3 61.1

Staff expenses ..................................................... (284.5) (24.8) (298.6) (23.5)

Other expenses .................................................... (181.8) (15.9) (277.3) (21.8)

EBITDA ............................................................. 201.8 17.6 200.4 15.8

Depreciation & amortization expenses ............... (112.5) (9.8) (107.4) (8.4)

EBIT .................................................................. 89.3 7.8 93.0 7.3

Financial result ................................................. (75.6) (6.6) (92.5) (7.3)

Profit/loss before tax ......................................... 13.7 1.2 0.6 0.0

Income taxes ...................................................... (13.5) (1.2) 5.1 0.4

Net income/loss .................................................. 0.1 0.0 5.7 0.4

(1) Under the nature of expense method (Gesamtkostenverfahren), total output may, depending on changes in finished goods & work in progress as well as own work capitalized, exceed sales or fall short of sales. To provide a coherent picture of the relative importance

of income and expense items in line with our operating performance, as discussed in this report, percentages for all line items relate to


Sales




2010 2011

(€ in millions)

(audited)

(% of total

sales

or total

Normalized

EBITDA)(1)


(audited)

(% of total

sales

or total

Normalized

EBITDA)(1)

(unaudited)


Information(2)

:

Building Materials

Sales .............................................................. 769.0 67.1 847.8 66.7

Normalized EBITDA .................................... 97.0 50.4 115.4 55.6

Dry Lining

Sales .............................................................. 184.7 16.1 207.6 16.3


Lime

Sales .............................................................. 239.5 20.9 267.9 21.1

66



Inter-segment sales ....................................... (47.2) 4.1 (52.2) 4.1

Normalized EBITDA .................................... (0.7) 0.4 (0.8) 0.4

Total

Consolidated sales ........................................ 1,145.9 100.0 1,271.2 100.0





(2) The Ecoloop segment is not included as a separate segment prior to January 1, 2013.




2010 2011

(€ in millions)


(unaudited)

(€ in millions)

(unaudited, unless

indicated


(unaudited)

Sales by Geographic Region:(1)

Germany ......................................................... 497.2 43.4 558.6(2)

43.9

The Netherlands .............................................. 134.7 11.8 142.3(2)

11.2

France ............................................................. 77.8 6.8 82.6(2)

6.5

Czech Republic ............................................... 79.6 6.9 78.4(2)

6.2

Belgium .......................................................... 53.8 4.7 64.3(2)

5.1

Poland ............................................................. 56.5 4.9 62.3(2)

4.9

Switzerland ..................................................... 39.7 3.5 44.8 3.5

Other countries ............................................... 146.8 12.8 156.6 12.3

Europe ........................................................... 1,086.1 94.8 1,189.9 93.6

China .............................................................. 33.9 3.0 45.6 3.6

Russia ............................................................. 15.5 1.3 22.7 1.8

Other ............................................................... 10.4 0.9 13.0 1.0

Non-European/Emerging Markets .............. 59.8 5.2 81.3 6.4

Total ............................................................... 1,145.9 100.0 1,271.2 100.0

(1) Allocation of sales in the Building Materials and Lime business units is made according to the domicile of invoicing units. Since

January 1, 2012 the presentation of sales by geographic regions in the Dry Lining business unit has been allocated based on the country in which sales have been generated. In prior years it had been calculated based on the domicile of invoicing units. The figures

for the period ended December 31, 2010 and for the period ended December 31, 2011, have been adjusted correspondingly. Therefore,

the presentation of the period ended December 31, 2010 and the period ended December 31, 2011, differs from the note 27 to our audited consolidated financial statements as of and for the fiscal year ended December 31, 2011.

(2) Audited; figures for the sales by geographic regions for the fiscal year ended December 31, 2011 have been derived from the

comparative figures in the audited consolidated financial statements as of and for the fiscal year 2012.

Total sales increased by €125.3 million, or 10.9%, from €1,145.9 million in 2010 to €1,271.2 million in 2011. In

all our business units, a double digit sales growth was achieved resulting from higher sales volumes as well as

increased net average revenues. Sales in our Building Materials business unit increased by €78.8 million, or

10.2%, from €769.0 million in 2010 compared to €847.8 million in 2011. This increase was primarily

attributable to higher sales volumes as a result of a positive market development supported by mild weather

conditions in the first and last quarter of 2011 as well as pent-up effects from 2010. Especially in Germany, The

Netherlands, Belgium, Poland, Russia and China sales volumes increased significantly compared to 2010. After

a decline in the second half of 2010, net average revenues increased in 2011, but varied across the different

market areas. Sales in our Dry Lining business unit increased by €22.9 million, or 12.4%, from €184.7 million

in 2010 to €207.6 million in 2011. This positive development was attributable to increased sales volumes of

gypsum fiber board and cement-bonded board products. Especially in Germany, Denmark, France and

Switzerland sales volumes exceeded the level of 2010 significantly. In total, net average revenues in 2011

slightly increased compared to 2010. Sales in our Lime business unit increased by €28.4 million, or 11.9%, from

€239.5 million in 2010 to €267.9 million in 2011, resulting from higher sales volumes as well as increased net

67

average revenues. Sales volumes for both lime and limestone benefited especially from the continuing

revitalization of the industrial market which commenced in 2010. In addition, the positive market development

in the building materials sector as well as the introduction of innovative lime products for environmental

applications in 2011 contributed to the growth. The continued expansion of our new lime plant in Russia and

increased net average revenues for lime also contributed to the increase in sales.

Materials Expenses

Materials expenses increased by €67.3 million, or 12.8%, from €525.7 million in 2010 to €593.0 million in

2011. This increase was mainly attributable to higher sales volumes, and thus, higher production volumes in all

our business units. In addition, we also faced higher prices for input factors (in particular, for energy, lime and

paper), which caused an increase of specific production cost in all then existing business units.

Gross Profit Margin

The gross profit margin declined by 1.0 percentage point from 55.3% in 2010 to 54.3% in 2011, primarily due to

increased prices for most of the production input factors. Especially in the first quarter of 2011, we were not

able to fully pass on higher specific production cost to our customers as net average revenues were negatively

affected by price reductions in the second half of 2010. However, during the course of 2011, we successfully

managed to implement price increases in certain markets, such as in Germany, and subsequently achieved a

stable gross profit margin for the remainder of 2011.

Other Income

Other income increased by €52.0 million, or 153%, from €34.1 million in 2010 to €86.1 million in 2011, mainly

resulting from income from adjustments to the receivable against our former shareholder, Haniel. This

receivable represents a number of potential claims of our current shareholders against Haniel in connection with

the Acquisition, which mainly related to hold-harmless agreements for certain tax obligations, warranty

obligations and other risks. Conversely, other income in 2010 was positively influenced by the sale of carbon

dioxide emission certificates.

Staff Expenses

Staff expenses increased by €14.1 million, or 5.0%, from €284.5 million in 2010 to €298.6 million in 2011. This

increase was primarily attributable to higher sales and production volumes. In this regard, the average number of

employees (full-time equivalents) increased by 199, or 2.9%, from 6,747 in 2010 to 6,946 in 2011.

Other Expenses

Other expenses increased by €95.5 million, or 52.5%, from €181.8 million in 2010 to €277.3 million in 2011.

The increase in other expenses was mainly attributable to an increase of warranty provisions which are covered

by a receivable against Haniel (corresponding to an increase of other income). In addition, our increased sales

and production volumes, which caused, among others, higher repairs and maintenance expenses as well as

increased cost of temporary workers, also contributed to an increase in other expenses.

EBITDA

Our EBITDA decreased slightly by €1.3 million, or 0.6%, from €201.8 million in 2010 to €200.4 million in

2011. Our EBITDA margin declined from 17.6% in 2010 to 15.8% in 2011. Whereas EBITDA in our Building

Materials and Dry Lining business units increased in 2011, EBITDA in our Lime business unit decreased as

compared to the prior year’s EBITDA, which had been positively influenced by sales of carbon dioxide

emission certificates in 2010.


Depreciation & amortization expenses decreased slightly by €5.1 million, or 4.5%, from €112.5 million in 2010

to €107.4 million in 2011.

Financial Result

The financial result decreased by €16.9 million, or 22.4%, from negative €75.6 million in 2010 to negative

€92.5 million in 2011. This decrease was primarily due to the issuance of the Senior Secured Notes and the

associated refinancing of term loans in the second quarter of 2011. In accordance with IAS 39 costs directly

attributable to the Senior Secured Notes were offset against the respective liability and are amortized over the

68

Senior Secured Notes’ term whereas costs that were not directly attributable to the Senior Secured Notes were

recognized as expenses in 2011. The repayment of term loans in an amount of €250.0 million resulted in the

premature amortization of financing fees attributable to the Senior Secured Notes in the amount of €8.9 million

in 2011. The total amount of costs which were not directly attributable to the Senior Secured Notes and were

included in the financial result 2011 amounted to €1.6 million.

Income Taxes

Income tax expenses decreased by €18.6 million from expenses of €13.5 million in 2010 to income of

€5.1 million in 2011. Current tax expenses increased by €2.3 million while deferred tax income increased in the

amount of €20.9 million mainly due to higher tax loss carry-forwards resulting from a positive development of

tax-exempt income in Germany.

5.6 Normalized EBITDA

Our Normalized EBITDA for the twelve-month period ended June 30, 2013 was €206.9 million. Our

Normalized EBITDA decreased by €10.1 million, or 9.9%, from €101.9 million in the six-month period ended

June 30, 2012 to €91.8 million in the six-month period ended June 30, 2013. Our Normalized EBITDA

increased by €9.3 million, or 4.5%, from €207.7 million in 2011 to €217.0 million in 2012. In 2011, our

Normalized EBITDA increased by €15.1 million, or 7.8%, from €192.6 million in 2010 to €207.7 million.

We present EBITDA, EBIT and Normalized EBITDA as further supplemental measures of our performance.

Normalized EBITDA represents EBITDA as adjusted for items that our management considers to be unusual or

non-recurring due to their nature; for the fiscal years ended December 31, 2010, 2011 and 2012 and the six-

month period ended June 30, 2013 such adjustments include divestments and unusual asset disposals,

revaluation of recultivation and other environmental provisions, losses due to restructuring and severance, costs

related to M&A activities, costs related to litigation, warranty claims relating to prior years, and other.

Accordingly, this information has been disclosed in this report to facilitate the analysis of our operating

performance. Management considers Normalized EBITDA a relevant measure that aids in the understanding of

EBITDA in a given period. Other companies may calculate EBITDA, EBIT and Normalized EBITDA

differently than we do. Normalized EBITDA (except for segment financial data) is not audited. EBITDA, EBIT

and Normalized EBITDA are not measures of financial performance under IFRS and should not be considered

as measures of liquidity or alternatives to profit for the year or any other performance measures derived in

accordance with IFRS. These measures may also be defined differently than the corresponding terms under the

Indenture. See “10. Presentation of Financial and Other Information—Non-IFRS Financial Measures”.

69

An unaudited reconciliation between Normalized EBITDA and EBITDA is as follows:


Year ended

December 31,

Six-Month Period

ended June 30(h),

Twelve-

Month

Period

ended

June 30(j),

2010 2011 2012 2012 2013 2013

(€ in millions)

(unaudited,

unless

indicated

otherwise)

(unaudited,

unless

indicated

otherwise)

(unaudited,

unless

indicated

otherwise)


EBITDA ........................................................ 201.8(i) 200.4(i) 207.2(i) 99.6 89.5 197.1

Adjustments

Divestments and unusual

asset disposals(a) .................................... (2.1) (2.6) (1.5) (0.3) (0.5) (1.7)

Revaluation of recultivation

and other environmental

provisions(b) ........................................... (11.3) (0.3) — — — —

Losses due to restructuring

and severance (c) .................................... 4.1 2.7 4.3 0.6 2.0 5.7

Costs related to M&A

activities(d) ............................................. 2.0 3.0 2.2 1.0 0.2 1.4

Costs related to litigation(e) ........................ 0.2 0.9 1.3 0.7 — 0.6

Warranty claims relating to

prior years(f)........................................... — 2.9 0.4 — 0.1 0.5 Other(g)....................................................... (2.1) 0.7 3.1 0.3 0.5 3.3

Normalized EBITDA ................................... 192.6(i) 207.7(i) 217.0(i) 101.9 91.8 206.9

(a) Divestments and unusual asset disposals mainly include the divesture of our operations in Chile in 2010, income from the sale of properties in Dorsten, Rheinberg, Alzenau and Horrem (all located in Germany) in 2011, gains from the sale of a plant in Rurka,

Poland, as well as a property in Fretzdorf, Germany, in 2012 and gains in relation to the sale of property in Hockenheim, Germany, in

the first half of 2013.

(b) In 2010, the recultivation provisions of our lime quarries were partially released as a result of updated expert calculations. In 2011,

environmental provisions were released in connection with the sale of property in Dorsten, Germany.

(c) Losses due to restructuring and severance payments mainly relate to a plant closure in the United States in 2010 (not including €3.5 million in start-up losses), a plant closure in the Czech Republic in 2012 as well as severance payments during the period from

January 1, 2010 to June 30, 2013.

(d) Costs related to M&A projects mainly include expenses for consultants in connection with actual or intended acquisition projects.

(e) Costs related to litigation include expenses for law suits which are unusual and non-recurring in nature.

(f) Refers to warranty claims (net of insurance coverage) against a Dutch subsidiary.

(g) Refers to several unusual transactions, including certain transactions in connection with carbon dioxide emission certificates and non-recurring expenses in connection with certain Swiss pension obligations.

(h) Effective as of January 1, 2013 Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month period


(i) Audited.

(j) Effective as of January 1, 2013, Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month period

ended June 30, 2012 have been adjusted retrospectively. Information for the twelve-month period ended June 30, 2013 is unaudited and has been calculated by taking the results of operations for the six-month period ended June 30, 2013 (for which IAS 19 (revised))

has been applied) and adding it to the difference between the results of operations for the fiscal year ended December 31, 2012 (for

which IAS 19 (revised) has not been applied retrospectively) and the six-month period ended June 30, 2012 (for which IAS 19 (revised) has been applied retrospectively).

5.7 Liquidity and Capital Resources

Our principal sources of funds have been cash generated from our operating activities and borrowings under the

Senior Facilities Agreement. Our principal uses of cash are to fund capital expenditures, working capital and

debt service obligations.

70


Year ended

December 31,

Six-Month Period

ended June 30(1),

2010 2011 2012 2012 2013

(€ in millions)

(audited) (audited) (audited) (unaudited) (unaudited)

Cash flow from operating

activities ..................................... 135.2 176.1 147.4 (13.2) 1.9

Cash flow from investing activities (42.6) (71.7) (72.5) (29.1) (18.1)

Cash flow from financing

activities ..................................... (106.1) (97.6) (77.2) (17.6) (52.7)

Cash and cash equivalents at the

beginning of the period ............... 154.6 142.1 148.6 148.6 147.3

Net foreign exchange

difference .................................... 1.0 (0.2) 1.1 0.8 (0.6)

Cash and cash equivalents at the

end of the period ......................... 142.1 148.6 147.3 89.5 77.8

(1) Effective as of January 1, 2013 Xella International Holdings S.à r.l. has applied IAS 19 (revised). Figures for the six-month period


Six-Month Period ended June 30, 2013 compared to Six-Month Period ended June 30, 2012

Cash Flows from Operating Activities

In the first half of 2013, cash generated by operating activities totaled €1.9 million, as compared to cash used of

€13.2 million in the first half of 2012. This increase of €15.1 million was mainly attributable to the

€11.8 million improvement in the change in trade working capital partly related to a reclassification of spare

parts from inventories to property, plant & equipment and therefore shown in cash flows from investing

activities as well as the improvement of the change in other working capital by €6.3 million in the first half of

2013 and the reduction in income taxes paid. These increases were only partly offset by a €10.1 million decrease

in EBITDA in the first half of 2013.

Cash Flows from Investing Activities

In the first half of 2013, cash used by investing activities totaled €18.1 million, as compared to €29.1 million in

the corresponding period of 2012, mainly due to a decrease in net investments in property, plant & equipment

which was partly offset by higher investments due to the reclassification of spare parts.

Cash Flows from Financing Activities

In the first half of 2013, cash used by financing activities totaled €52.7 million, as compared to €17.6 million in

the first half of 2012. The increase by €35.1 million was mainly due to an increase in net repayments of

financial liabilities by €33.2 million in the first half of 2013, as compared to the first half of 2012.

Fiscal Year ended December 31, 2012 compared to Fiscal Year ended December 31, 2011


In 2012, cash generated by operating activities totaled €147.4 million, as compared to €176.1 million of cash

generated by operating activities in 2011. This decrease of €28.7 million, or 16.3%, was mainly attributable to

the negative change in trade and other working capital. While EBITDA increased by €6.8 million in 2012, cash

received from changes in trade payables (€26.8 million) in 2011 changed to cash paid (€7.3 million) in 2012

mainly as a result of a higher part of capital expenditures shortly before year-end 2011. This effect was

primarily attributable to amounts invoiced in 2011 but paid in 2012. Cash paid for changes in inventories in

2012 was reduced by €7.5 million as compared to 2011 mainly due to lower production output, and 2011 cash

paid for changes in trade accounts receivable (€14.5 million) changed to cash received (€3.1 million) in 2012.

Changes in other working capital mostly related to non-current provisions and other current liabilities.


In 2012, cash used by investing activities totaled €72.5 million, a slight increase from €71.7 million in 2011.

The amount used in 2012 included spending for the acquisition of an AAC plant in the Czech Republic and a

Dry Lining plant in Spain as well as further capacity expansion measures in our Dry Lining business unit. In

2011, the amount included the acquisition of a CSU plant in Poland and an AAC plant in Italy, both in the

71

Building Materials business unit. In addition, the 2011 amount included expenditures for the Ecoloop project,

further expansion measures in the Russian lime market with our plant in Tovarkovo, and capacity expansion

measures in the Dry Lining business unit.


In 2012, cash used by financing activities totaled €77.2 million, as compared to €97.6 million in 2011. The

decrease of €20.4 million was primarily due to a reduction of net repayments of €13.3 million and of interest

payments including financing fees in an amount of €7.5 million. In 2012, financial liabilities in the amount of

€26.5 million were repaid as compared to €380.3 million repaid in 2011, including €250.0 million under the

Senior Facilities Agreement and €50.0 million of the Vendor Loan Note granted by Franz Haniel & Cie GmbH,

refinanced by the €300.0 million proceeds of the Senior Secured Notes and a €40.0 million drawdown under the

Capex/Acquisition Facility under the Senior Facilities Agreement in 2011.

Fiscal Year ended December 31, 2011 compared to Fiscal Year ended December 31, 2010


In 2011, cash generated by operating activities totaled €176.1 million, as compared to €135.2 million of cash

generated by operating activities in 2010. Positive cash flows from operating activities in 2011 were mainly a

result of the improved performance of our business in the second and third quarter. The increase in cash

generated by operating activities of €40.9 million was mainly attributable to a positive change in working capital

and taxes paid, although EBITDA slightly decreased.


In 2011, cash used by investing activities totaled €71.7 million, as compared to €42.6 million in 2010. The

increase resulted mainly from spending for the acquisition of a CSU plant in Poland and an AAC plant in Italy,

both in the Building Materials business unit. In addition, expenses for the Ecoloop project, for further expansion

in the Russian market in connection with our lime plant in Tovarkovo in the Lime business unit and for capacity

expansion measures in the Dry Lining business unit attributed to the increase.


In 2011, cash used by financing activities totaled €97.6 million, as compared to €106.1 million in 2010. The

decrease of net repayments in an amount of €20.2 million was mainly due to the drawdown of €40.0 million

under our Capex/Acquisition Facility under the Senior Facilities Agreement in the third quarter of 2011. The

€300.0 million proceeds of the Senior Secured Notes issue were used to repay an aggregate amount of

€250.0 million under the Senior Facilities Agreement and €50.0 million of the Vendor Loan Note granted by

Franz Haniel & Cie GmbH. Total 2011 repayments were €380.3 million as compared to €66.1 million in 2010.

Major Financing Arrangements

We are highly leveraged and we may undertake acquisitions and investments in the future which may increase

our leverage and level of indebtedness.

We believe that our cash flows from operating activities and borrowings under the Senior Facilities Agreement

will be sufficient to fund our working capital requirements, anticipated capital expenditures and debt service

requirements as they become due. We cannot, however, assure you that our business will generate sufficient

cash flows from operating activities, that the currently anticipated sales development, cost savings and operating

improvements will be realized, or that future borrowings will be available under the Senior Facilities Agreement

in an amount sufficient to enable us to service our indebtedness or to fund our other liquidity needs.

Trade Working Capital

To finance our working capital requirements, we have available a revolving credit facility under the Senior

Facilities Agreement, which is available for general corporate purposes. As of June 30, 2013, we had

€44.9 million available for borrowings under our revolving credit facility and an additional €9.0 million under

ancillary facilities (€11.1 million were utilized for guarantees and a further €10.0 million of fronted ancillary

facilities were available to be utilized by the Company on short notice (such fronted ancillary facilities were not

available for cash drawings under our revolving credit facility)).

72

Our working capital generally mirrors developments in our operating business and certain seasonal patterns may

therefore cause material fluctuations in our working capital. See “—Factors Affecting Our Results of

Operations—Seasonality and Weather Conditions”.

We monitor and constantly attempt to optimize the level of working capital. We have established a Group-wide

reporting system for the management of our trade payables. As a key performance indicator, we use a weighted

ratio that takes into account payment days and payment discounts at the same time.

The level of our inventories is primarily affected by the level we deem necessary to cover expected sales and

ensure prompt delivery to our customers. In managing inventory levels we also take into consideration certain

production processes, such as efficiency optimizations and plant standstills during vacation periods or for

scheduled maintenance work. Strategic purchases of larger quantities of raw materials, such as before previously

announced price increases by our suppliers become effective, may temporarily increase inventory levels.

Inventories are also affected by carbon dioxide emission certificates resulting from carbon dioxide emission

certificate transactions. For these reasons, the development of inventory levels does not necessarily mirror sales

development to the same degree as trade payables and, particularly, trade accounts receivable.

Trade accounts receivable generally develop in line with the development of sales on a trailing basis. Since the

financial and economic crises and the sovereign debt and euro crisis, however, in several markets we

experienced a trend towards longer payment days. We monitor on a Group-wide basis the terms of trade with

our customers, with the main focus on generating sales with acceptable payment conditions, which also depend

on country-specific patterns in the behavior of our customers that we may need to accommodate.

The following information is a summary of our historical unaudited trade working capital as shown on the

consolidated statement of financial position of Xella International Holdings S.à r.l. for the years ended

December 31, 2010, 2011 and 2012 and for the six-month periods ended June 30, 2012 and June 30, 2013.

Trade working capital as shown on our consolidated statement of financial position does not correspond to the

definition of trade working capital in the audited consolidated statement of cash flows pursuant to IAS 7 that

only includes changes in inventories, trade receivables and trade payables. Our trade accounts receivable include

customers’ credit balances offset against trade receivables and short-term portions of non-current trade

receivables. Trade liabilities comprise trade payables, short-term portions of non-current trade liabilities,

suppliers’ debit balances and invoices not yet received.


As of December 31, As of June 30,

2010 2011 2012 2012 2013

(€ in millions)

(unaudited)

Inventories (without carbon dioxide emission

certificates) ............................................................................. 150.0 165.0 173.7 177.7 148.2

Trade accounts receivable.................................................. 100.2 113.9 109.9 167.9 173.1

Trade liabilities .................................................................. (106.7) (140.9) (133.8) (112.8) (117.9)

Trade working capital ..................................................... 143.4 138.1 149.9 232.8 203.4

June 30, 2013 compared to June 30, 2012. Inventories decreased in the first six month of 2013 mainly due to

the reclassification of spare parts from inventories to property, plant & equipment. Another reason was lower

finished goods due to lower production volumes at the beginning of the year in our Building Materials business

unit. Trade accounts receivable and trade liabilities increased in 2013 due to increased business volumes in the

second quarter of 2013 compared to prior year due to the unusually harsh winter in the first quarter of 2013.

December 31, 2012 compared to December 31, 2011. Compared to December 31, 2011, inventories increased

as of December 31, 2012 mainly based on the preparation of maintenance production stops in our Dry Lining

business unit scheduled for the beginning of 2013. Additional effects relate to higher inventories due to an

expanded product portfolio, the addition of finished goods of the AAC plant acquired in the Czech Republic,

and a higher valuation of inventories as a result of higher prices. Trade accounts receivable and trade liabilities

decreased as of December 31, 2012 compared to December 31, 2011, mainly because of lower business volumes

at the end of 2012.

December 31, 2011 compared to December 31, 2010. Inventories increased mainly due to the build-up of

finished products in the Building Materials business unit, bringing stocks back to a regular operational level

during the course of 2011. In addition, new business activities developed in Italy and in connection with the

Angolan project executed in The Netherlands. In line with the increased business activities, trade accounts

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receivable and trade liabilities increased in 2011 compared to 2010. Besides higher purchasing activities, trade

liabilities were also attributed to increased liabilities related to capital expenditure during the year 2011.

Capital Expenditures

We finance our capital expenditures in property, plant & equipment primarily from cash flows from operations,

except for certain capital expenditures, which we partly finance with bank loans and, at least historically, certain

government subsidies.

The following unaudited table is a summary of our historical capital expenditures for the fiscal years ended

December 31, 2010, 2011 and 2012 as well as for the six-month periods ended June 30, 2012 and June 30, 2013:



Six-month period

ended June 30,

2010 2011 2012 2012 2013

(€ in millions)

Optimization(1)

............................................................................................. 8.5 10.4 6.5 1.8 2.9

Replacement and Others(2)

........................................................................... 31.3 41.4 41.4 13.5 14.9

Expansion(3)

................................................................................................. 19.4 34.6 43.5 18.3 11.8

Total ............................................................................................................ 59.1 86.4 91.4 33.6 29.5

(1) Optimization includes optimization investments made in existing plants for purposes of capacity increases, rationalization and

production capability for new products or quality improvements.

(2) Replacement and others includes replacement investments necessary to maintain production (except for optimization investments) and

other investments required by health, safety or environmental laws and regulations as well as investments in information technology,

administration and distribution.

(3) Expansion includes construction of new facilities and new product lines, material modernizations of plants, acquisitions and post-

acquisition capital expenditures.

Capital expenditures shown in the preceding table are not identical with cash flows from investing activities as

shown under “—Liquidity and Capital Resources”. The main differences are the following: (i) capital

expenditures as shown does not include cash received from disposals and from interest and investment income;

(ii) loans and financial receivables are not taken into account; (iii) cash received from government grants is not

offset against cash paid for corresponding investing activities; and (iv) timing differences from purchase price

payables are not reflected. Capital expenditures as shown include payments made for the acquisition of shares in

subsidiaries without effecting a change of control, which pursuant to IAS 7 are presented in cash flow from

financing activities rather than cash flow from investment activities in the fiscal years ended December 31,

2010, 2011 and 2012 as well as for the six-month periods ended June 30, 2012 and June 30, 2013.

In the six-month period ended June 30, 2013, our major expansion project was the increase of our ownership

percentage in the CSU plant in Blatzheim, Germany, from 50% to 100% (€6.6 million). In our Dry Lining

business unit, important expansion projects in the first half of 2013 included the preparation of commissioning

of our gypsum fiber plant in Orejo, Spain (€2.7 million, excluding accrued interest) and the expansion of our

cement-bonded boards plant in Calbe, Germany (€2.0 million, excluding certain public subsidies and accrued

interest).

The most important expansion projects in 2012 have been the acquisition of an AAC plant in the Czech

Republic (€14.8 million) and an unfinished gypsum fiber board plant in Spain (€14.5 million) where we

incurred additional capital expenditures for expansion related to the preparation of the production start

(€3.9 million). Furthermore, we invested €6.6 million to increase capacity at our cement-bonded boards plant in

Calbe, Germany. In our Lime business unit, we continued the Ecoloop project (€2.7 million) as well as the

expansion in the Russian plant in Tovarkovo (€0.8 million). Selected optimization projects were also

implemented in 2012. However, investments in optimization projects decreased compared to 2011.

While we believe that our plants are generally in good condition and adequate for our existing needs, we will

continue to invest in our production facilities in order to improve productivity, product quality and energy

efficiency as well as to expand capacity to meet expected demand for our existing and potential new products.

As a supplier of premium products, maintenance and replacement measures in our plants are essential to

continuously provide the required product quality. We have increased capital expenditures over the last three

years. For 2013, and excluding any potential acquisitions, we expect total capital expenditure of €91.1 million

(with €29.5 million spent in the six-month period ended June 30, 2013), which includes €16.9 million for

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expansion projects. Going forward, we expect that capital expenditures for replacement and maintenance as well

as for optimization measures of our production facilities will in the medium-term increase to levels in line with

levels before the global financial and economic crisis. We also intend to pursue potential acquisitions as part of

our strategy of selectively participating in the consolidation of the building materials industry and to continue

our international expansion. Subject to the further development of markets and economies in general and our

business in particular, and not taking into account any acquisitions, we expect that capital expenditures in 2014

will remain close to the level of 2013. See “—Factors Affecting Our Results of Operations—Acquisitions,

Greenfield Investments and Capital Expenditures”.

Investment of Surplus Cash

Due to the decentralized nature of our business, cash within our Group is generally kept and invested by each

local entity. Cash requirements of our subsidiaries in various jurisdictions may thus be met mostly at a local

level. Our subsidiaries are, however, required to transfer excess amounts of cash to their respective parent

company and ultimately to Xella International GmbH where it will be invested in over-night funds or fixed-term

deposits mainly at our lender banks under the Senior Facilities Agreement. Our treasury department monitors

the cash balances of our subsidiaries on a monthly basis.

Group Cash Management

To manage liquidity within our Group, Xella International GmbH maintains intra-Group clearing accounts for

most of our subsidiaries. These intra-Group clearing accounts facilitate the settlement of intra-Group receivables

and liabilities without utilizing banks. In addition, we have implemented a cash pooling system in the form of

zero balancing with several banks in Germany for most of our German subsidiaries and in France for our French

entities. We have introduced our cash management systems, including our cash pooling system, to provide our

management with key information on our liquidity, to optimize our Group’s surplus liquidity and to realize

interest savings by pooling and subsequently allocating liquidity to those entities requiring cash. Cash pooling

accounts of our subsidiaries are consolidated on a regular basis and automatically transferred to the master

account.

Cash requirements at our subsidiaries not participating in the cash pooling system are generally met through

inter-company loans with the holding company of the respective subsidiary. In addition, Xella

International GmbH and Xella Finance GmbH may act as lenders in such inter-company financings.

5.8 Research and Development

We consider research and development to be among the key factors for the further development of our product

offerings and brands. Our research and development activities primarily aim at continuously adding innovative

functions and applications to our products and optimizing the quality and complementary nature of our product

portfolio and application services, particularly by developing energy-efficient building solutions and by

facilitating installation processes. We have centralized our research and development activities at our

technology and research center near Potsdam, Germany, which steers and coordinates research and product

development across our business units. Our technology and research center specializes in the fields of

construction physics, applications, products and processes as well as fundamental research, and has state-of-the-

art equipment from full-scale test facilities to indoor testing facilities and laboratories. The direct proximity to

one of our AAC plants to our technology and research center enables us to conduct large-scale tests, if required.

Approximately 35 highly qualified specialists are employed in our research and development center. In addition,

our Dry Lining and Lime business units maintain smaller research and development teams for business unit

specific aspects. One of our main research and development projects is our Ecoloop business unit, focusing on

the zero-emissions production of fuel gas from waste in a synthesis gas plant. In order to accelerate our

innovation processes, the Xella Innovation Circle, an international, interdisciplinary and cross-hierarchical

network of about 35 employees from 18 countries has been established to facilitate the exchange of innovative

ideas across our organization.

In the fiscal year ended December 31, 2012, research and development expenses including staff and other

expenses amounted to €4.0 million (€3.7 million in 2011 and €3.8 million in 2010).

5.9 Contractual Obligations

Financing Arrangements

As of June 30, 2013, the third-party financing arrangements of Xella International Holdings S.à r.l. and Xella

International Holdings S.à r.l.’s subsidiaries would have been as follows:

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Payments due by Period

0-1 years 1-5 years More than

5 years Total

(€ in millions)

Senior Facilities Agreement

(Facilities A, B and C and Capex/Acquisition Facility)(1)

................... 41.1 338.5 — 379.6

Facility D Loan(1)(2)

.................................................................................. — 300.0 — 300.0

Finance lease liabilities ............................................................................ 1.6 6.2 0.6 8.4

Total ........................................................................................................ 42.7 644.7 0.6 688.1

(1) Amounts refer to principal amounts which will be amended upon execution of the Senior Facilities Amendment and Restatement Agreement which the Company and certain of its subsidiaries intend to enter into by December 20, 2013. See “6. Description of

Certain Financing Arrangements—Senior Facilities Agreement”.

(2) Facility D Loan funded by Xefin Lux S.C.A. with the proceeds from the issuance of the Senior Secured Notes.

Other Contractual Obligations

In addition, we have other contractual obligations incurred in the ordinary course of business, such as purchase

commitments for production and non-production materials, including supplies, services, hedging contracts and

capital expenditures. See “—Quantitative and Qualitative Disclosures about Market Risk”. As of June 30, 2013,

our other contractual obligations were as follows (unaudited):

Payments due by Period

0-1 years 1-5 years 5 years Total

(€ in millions)

Purchase obligations for property, plant & equipment ............................ 4.6 — — 4.6

Operating leases ....................................................................................... 9.8 17.3 26.5 53.6

Total ........................................................................................................ 14.4 17.3 26.5 58.2

Pension Obligations

In addition to the obligations shown in the table above, we have significant pension obligations. We operate

both funded and unfunded defined benefit pension schemes for beneficiaries under arrangements that have been

established in the various countries in which we offer employee pension benefits. As of December 31, 2012, we

had total pension obligations of €289.3 million, of which €177.0 million (61.2%) were unfunded. Our defined

benefit obligations are based on certain actuarial assumptions that can vary by country, including discount rates,

life expectancies and rates of increase in compensation levels. To the extent that the funded plans are not fully

funded, the difference has been provisioned for.

Following the amendment of IAS 19 (Employee Benefits), the corridor approach was eliminated and IAS 19

now mandates recognition of all remeasurements directly in other comprehensive income (within equity) as they

occur. Furthermore, all past service cost are to be recognized immediately. In addition, the current approach

used to assess interest cost and expected return on plan assets will be replaced by compulsory application of a

uniform, market-based discount rate to both the defined benefit liability as well as any corresponding plan asset

(net interest approach). We have applied IAS 19 (revised) for 2013, with corresponding retrospective

application for 2012. The retrospective application has resulted in the effects on the opening balances as of

January 1, 2012 described below under the heading “—Critical Accounting Policies and Estimates—Pension

Obligations and Other Employee Benefits”.

If actual results, especially discount rates or life expectancies were to differ from our assumptions, our pension

obligations could be higher than expected and we could incur remeasurements (gains or losses). Changes in all

assumptions or under-performance of plan assets could also adversely affect our financial condition and results

of operations. Differences between the discount rate and actual returns on plan assets can require us to record

additional remeasurements. Future declines in the value of plan assets or lower-than-expected returns may

require us to make additional current cash payments to pension plans or non-cash charges to other

comprehensive income.

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Environmental Obligations

As of June 30, 2013, we had provisions for recultivation and other environmental obligations that amounted to

€38.0 million. Provisions for environmental obligations primarily relate to recultivation obligations to cover the

cost of recultivating lime quarries and sand pits to environmentally acceptable conditions once exploitation has

been finished. The provision is created in installments over the prospective operating life of the respective

quarry or pit in keeping with the scope of the quarry’s or pit’s annual output. The provision is measured on the

basis of the estimated cost for recultivating the sites on the basis of the actual output to date in relation to the

total estimated resources at the site.

5.10 Quantitative and Qualitative Disclosures about Market Risk

Raw Material and Energy Hedging

Raw materials, such as aluminum, gypsum, anhydrite, lime, paper, sand, steel and cement, and energy used in

our production processes (electricity, gas, coal and coke, diesel and other fuels) represent a significant portion of

our materials expenses. See “—Factors Affecting Our Results of Operations—Prices of Raw Materials and

Energy”. We generally manage risks from fluctuating raw material prices by entering into supply agreements

covering significant portions of our expected raw material requirements typically for periods between 12 and

36 months. Similarly, we manage risks in connection with fluctuating energy prices by entering into supply

agreements for significant portions of our expected energy requirements for periods typically between 24 and

36 months and by maintaining the ability in several of our production processes to use different types of

combustibles. Generally, we do not use financial derivatives to hedge against risks from fluctuating raw material

and energy prices.

Interest Rate Fluctuations

We have a significant amount of long-term debt and are exposed to interest rate risk from these debt

instruments. However, on March 31, 2013, all existing interest hedging transactions expired at their scheduled

maturities. To date, we have not entered into new interest rate hedging arrangements and may continue to leave

our variable interest rate exposure unhedged. An increase of variable interest rates by 100 basis points would

result in additional interest expenses of approximately €3.8 million annually.

Exchange Rate Exposure and Currency Risk Hedging

We conduct our business in approximately 20 currencies and prepare our consolidated financial statements in

euro. During the twelve-month period ended June 30, 2013, we generated 27.0% of our sales in currencies other

than the euro, mainly Czech koruna (5.3% of our total sales), Polish zloty (4.2% of our total sales), Swiss franc

(3.6% of our total sales) and Russian rouble (3.4% of our total sales), and we expect the percentage of our sales

generated in currencies other than the euro to increase in the future. Due to local production, our costs are to a

large degree denominated in the same currencies as our income. As a result, we face only limited transaction

risk from operating activities. We are, however, exposed to currency translation risks when converting the

financial statements of subsidiaries in non-euro countries into euro. In addition, our financing is primarily in

euro. An appreciation of the euro relative to other currencies decreases the euro value of the contribution to our

consolidated results and financial condition of subsidiaries that maintain their financial accounts in other

currencies. Exchange rates between the euro and these currencies, particularly the Czech koruna, the Polish

zloty, the Swiss franc and the Russian rouble, have fluctuated significantly in recent years and may continue to

do so in the future. Based on our sales denominated in Czech koruna, Polish zloty, Swiss franc and Russian

rouble in the twelve-month period ended June 30, 2013, a decrease in the euro to Czech koruna, Polish zloty,

Swiss franc and Russian rouble exchange rates of 1% would have resulted in a decrease in our consolidated

sales of approximately €0.7 million, €0.5 million, €0.5 million and €0.4 million, respectively. Therefore, if the

euro appreciates, in particular in relation to the Czech koruna, Polish zloty, Swiss franc and Russian rouble, and

our sales and expenses denominated in foreign currencies remain the same, or, in some cases, even if our sales

increase or our expenses decrease, our revenues and profits in euro will decline.

Net currency exposure from sales denominated in foreign currencies arises only to the extent that we do not

incur corresponding expenses in the same foreign currencies. Such net currency exposure may occur in relation

to countries in which we do not operate production facilities and therefore need to source our goods from other,

typically neighboring, countries with other functional currencies, or in relation to countries in which we operate

production facilities but need to source certain raw materials and components in a currency other than the

functional currency of the respective country. In order to reduce our net exposure from foreign currency

exchange fluctuations, we purchase and will continue to purchase certain materials and components to a large

extent in local currencies of the respective operating companies. Despite such purchases in local currencies,

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there are certain raw materials and components that need to be sourced in currencies other than the local

currency, particularly in euro. Accordingly, the risk from foreign currency exposure related to sales

denominated in foreign currency can only partly be offset by foreign currency denominated expenditures

incurred in local currency at the level of our foreign subsidiaries.

We manage the remaining net exchange rate risk by partly hedging current receivables and future sales as well

as sourcing in currencies other than the functional currency of our foreign subsidiaries, and by partly hedging

current receivables and future sales with forward foreign exchange contracts. This policy has been established to

enable our management to plan future cash flows in functional currencies from anticipated foreign currency

sales and related accounts receivable more effectively. The hedge period for expected sales is generally up to

one year. We may, however, extend or shorten the hedge period at any time depending on expectations of the

development of foreign currency exchange rates and our assessment of the aggregate risk. While our hedging

strategy enables us to partly mitigate the effects on our cash flows of an appreciation of the value of the euro

compared to the respective functional currencies of our foreign subsidiaries over a period of up to one year, it

does not enable us to mitigate the risk of a long-term appreciation of the euro compared to the respective

functional currencies of our foreign subsidiaries. See “7. Risks Related to Our Business and Our Industry—

Currency rate and interest rate fluctuations might adversely affect our financial position and results of

operations”.

5.11 Recently Adopted Accounting Pronouncements

The following standards and interpretations (in some cases revised or amended) issued by the International

Accounting Standards Board (“IASB”) and the International Financial Reporting Interpretations Committee

(“IFRIC”) were mandatory for the first time as of the fiscal year ended December 31, 2013. Where considered

relevant for an understanding of the potential future impact of these new rules, additional guidance is being

provided at the bottom of this table.

The following standards and interpretations were applicable in the fiscal year 2013:

• Amendment to IFRS 1 (Severe Hyperinflation and Removal of Fixed Dates for first-time Adopters) by

the European Union as of January 1, 2013;

• Amendment to IAS 12 (Deferred Tax: Recovery of Underlying Assets) by the European Union as of

January 1, 2013;

• IFRS 13 (Fair Value Measurement) by the European Union as of January 1, 2013;

• Amendment to IAS 1 (Presentations of Items of Other Comprehensive Income) by the European

Union as of July 1, 2012;

• IFRIC 20 (Stripping Costs in the Production Phase of a Surface Mine) by the European Union as of

January 1, 2013;

• Amendments to IAS 19 (Employee Benefits) by the EU as of January 1, 2013;

• Improvements to IFRS 2009-2011 Cycle by the EU as of January 1, 2013;

• IFRS 1 - permit the repeated application of IFRS 1, borrowing costs on certain qualifying assets;

• IAS 1 - clarification of the requirements for comparative information;

• IAS 16 - classification of servicing equipment;

• IAS 32 - clarify that tax effect of a distribution to holders of equity instruments should be accounted

for in accordance with IAS 12 Income Taxes;

• IAS 34 - clarify interim reporting of segment information for total assets in order to enhance

consistency with the requirements in IFRS 8 Operating Segments; and

• Amendment to IFRS 7 (Disclosures - Offsetting Financial assets and Financial liabilities) by the EU

as of January 1, 2013.

IFRS 13 (Fair Value Measurement) aims to improve consistency and reduce complexity by providing a precise

definition of fair value and a single source of fair value measurement with additional disclosure requirements for

use across various effective IFRSs. Fair value is defined as the price that would be received to sell an asset or

paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit

price). The fair value of a liability therefore reflects non-performance risk. The requirements, now largely

aligned between IFRS and U.S. GAAP, do not mandate or extend the use of fair value accounting but provide

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guidance on how to apply fair value measurements where already required or permitted by other standards. The

Group expects no significant impact on its net assets, financial position and results of operations.

IAS 19 (Employee Benefits) was amended in June 2011. IAS 19 eliminates the so-called corridor approach

mandates recognition of all actuarial gains and losses directly in other comprehensive income as they occur.

Furthermore, all past service costs are to be recognized immediately. Besides, the current approach to assess

interest cost and expected return on plan assets will be replaced by compulsory application of a uniform,

market-based discount rate to both the defined benefit liability and any corresponding plan asset (net interest

approach). We have applied IAS 19 (revised) for 2013, with corresponding retrospective application for 2012.

The retrospective application has resulted in the following effects for the opening balances as of January 1,

2012: equity decreased by €13.0 million resulting from the increase of the pension provisions of €14.3 million in

the first half of 2012 and related deferred tax effects. During the first half-year of 2012 remeasurements of

€21.7 million were posted to equity (other comprehensive income) primarily as a result of the decrease of

interest rates in that period. In addition, the result from income taxes decreased by €4.6 million due to deferred

tax effects while the financial result improved by €0.4 million due to lower net interest expenses as a

consequence of the net interest approach. Overall, equity decreased by €25.9 million during the first half-year of

2012 due to the retrospective adjustment.

In 2012, the Group did not opt for voluntary early adoption of either of the aforementioned IFRS

pronouncements. Adoption of any of the aforementioned IFRS pronouncements is subject to prior endorsement

by the European Parliament.

In the future, the adoption of new or revised standards or interpretations relating to the presentation of net assets,

our financial position or results of operation may have a material effect on our future consolidated financial

statements. For example, new standards relating to the accounting for leases may result in significant shifts

between “other expenses”, “depreciation & amortization expenses” and “financial result” in our consolidated

income statement as well as between “fixed assets” and “financial liabilities” in our consolidated statement of

financial position.

5.12 Critical Accounting Policies and Estimates

Estimates

Our consolidated financial statements and condensed interim consolidated financial statements have been

prepared in accordance with IFRS and IAS 34, respectively. The preparation of financial statements in

accordance with IFRS requires the use of estimates and assumptions that affect the reported amounts of assets

and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the

reported amounts of sales, income and expenses during the relevant period. Although these estimates and

assumptions are based on management’s best knowledge of current events and circumstances, the actual results

ultimately may differ from those estimates and assumptions. We evaluate such estimates and assumptions on an

ongoing basis based upon historical results and experience, in consultation with experts and using other methods

we consider reasonable in the particular circumstances, as well as our forecasts regarding future changes.

Estimates and assumptions are particularly necessary for the measurement of property, plant & equipment, lime

quarries and intangible assets, such as trademarks and goodwill, and non-current carbon dioxide emission

certificates as well as for the measurement of deferred taxes and warranty provisions. Interim consolidated

financial statements generally require a greater use of estimates than annual consolidated financial statements,

for example in connection with pension provisions.

Trademark and Goodwill

Following the acquisition of our Group in 2008 by our current shareholders, we identified certain brands with

indefinite lives and recorded as goodwill the difference between the purchase price and net assets acquired

measured at fair value. In subsequent periods, we test brands and goodwill for impairment on an annual basis or

whenever events or changes in circumstances indicate that brands or goodwill might be impaired. An

impairment charge is recognized if the carrying amounts of brands or goodwill exceed their fair values. The

future cash flows used to determine the fair values of brand and goodwill are based on current business

expectations and discount rates. Changes in future projected cash flows and discount rates applied may lead to

impairment charges in future periods.

Deferred Taxes

Deferred tax assets and liabilities under IFRS are recognized for temporary differences between the carrying

amounts in the consolidated statement of financial position and the tax base of respective assets and liabilities as

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well as on tax loss carry-forward. We have recorded significant deferred tax assets and liabilities, which are

expected to affect operating results over future periods. Significant assumptions may include the probability of

sufficient future taxable income being available to realize deferred tax assets recognized. If actual tax laws that

would impose restrictions on the realization of the deferred tax assets should occur or there would not be

sufficient taxable income available in the future, an adjustment to the recorded amount of deferred tax assets

would affect operating results.

Pension Obligations and Other Employee Benefits

Provisions for pensions relate to obligations to employees. Liabilities for defined benefit plans are measured

using the projected unit credit method, which involves various assumptions by management that affect the

amount of the provision. This method involves considering biometric parameters and long-term interest rates as

well as the latest assumptions on future salary and benefit increases. Plan assets established to cover the pension

obligations are deducted from pension provisions. Actuarial gains and losses are not posted to income until they

lie outside a corridor of 10% of the higher of the present value of the pension obligation and the plan assets

(corridor method). This approach was used until the end of the fiscal year ended December 31, 2011. Following

the amendment of IAS 19 (Employee Benefits), the corridor approach was eliminated and IAS 19 now mandates

recognition of all remeasurements directly in other comprehensive income (within equity) as they occur.

Furthermore, all past service cost are to be recognized immediately. In addition, the current approach to assess

interest cost and expected return on plan assets will be replaced by compulsory application of a uniform,

market-based discount rate to both the defined benefit liability as well as any corresponding plan asset (net

interest approach). We have applied IAS 19 (revised) for 2013, with corresponding retrospective application for

2012.

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6. DESCRIPTION OF CERTAIN FINANCING ARRANGEMENTS

The following contains a summary of the material terms of certain financing arrangements to which the

Company and certain of its subsidiaries are a party. The following summaries are not complete and are subject

to the full text of the documents described below.

6.1 Senior Facilities Agreement

General

Pursuant to the Senior Facilities Agreement dated August 27, 2008, as last amended and restated on

December 13, 2012 and as to be further amended and restated pursuant to the Senior Facilities Amendment and

Restatement Agreement among, inter alios, (i) the Company, (ii) certain subsidiaries of the Company as

borrowers and together with the Company as guarantors (collectively, the “Senior Facility Guarantors”),

(iii) UniCredit Bank AG (formerly Bayerische Hypo- und Vereinsbank AG), BNP Paribas S.A.-Niederlassung

Frankfurt am Main, Crédit Agricole Corporate and Investment Bank Deutschland, Niederlassung einer

französischen société anonyme (formerly Calyon Deutschland, Niederlassung einer französischen société

anonyme), Landesbank Baden-Württemberg and The Royal Bank of Scotland plc, Frankfurt Branch, as

mandated lead arrangers, (iv) UniCredit Bank AG, London Branch (formerly Bayerische Hypo- und

Vereinsbank AG, London Branch), BNP Paribas S.A.-Niederlassung Frankfurt am Main, Crédit Agricole

Corporate and Investment Bank Deutschland, Niederlassung einer französischen société anonyme (formerly

Calyon Deutschland, Niederlassung einer französischen société anonyme), Landesbank Baden-Württemberg and

The Royal Bank of Scotland plc, Frankfurt Branch, as underwriters, (v) UniCredit Bank AG, London Branch

(formerly Bayerische Hypo- und Vereinsbank AG, London Branch), as agent, security agent and issuing bank,

(vi) UniCredit Bank AG (formerly Bayerische Hypo- und Vereinsbank AG), BNP Paribas S.A.-Niederlassung


französischen société anonyme (formerly Calyon Deutschland, Niederlassung einer französischen société

anonyme), Landesbank Baden-Württemberg and The Royal Bank of Scotland plc, Frankfurt Branch, as

bookrunners, and (vii) as from June 1, 2011 Xefin Lux S.C.A. as Facility D lender, certain funds were made

available to the Company and its subsidiaries in connection with, inter alia, the funding of the Acquisition and

certain refinancing transactions. Subject to the conditions under the Senior Facilities Agreement, subsidiaries of

the Company may accede as additional borrowers and additional guarantors to the Senior Facilities Agreement.

The existing facilities under the Senior Facilities Agreement consist of:

• a euro term loan facility in an original aggregate amount of €270.0 million (“Facility A”) (as of

June 30, 2013 outstanding €92.4 million (Tranche A1), PLN69.4 million (Tranche A2) and

€33.8 million (Deferred Tranche A));

• a euro term loan facility in an original aggregate amount of €275.0 million (“Facility B”) (as of

June 30, 2013 outstanding €91.0 million (Tranche B1) and PLN138.5 million (Tranche B2));

• a euro term loan facility in an original aggregate amount of €275.0 million (“Facility C” and together

with Facility A and Facility B, the “Original Facilities”) (as of June 30, 2013 outstanding

€56.0 million (Tranche C1) and PLN138.5 million (Tranche C2));

• a euro term loan facility in an aggregate amount of €300.0 million (“Facility D”) (as of June 30, 2013

outstanding €300.0 million);

• a multi-currency term loan facility in an original aggregate amount of €75.0 million

(“Capex/Acquisition Facility” and, together with Facility A, Facility B, Facility C and Facility D, the

“Term Facilities”) in two tranches in an amount of €23.8 million (“Capex/Acquisition Tranche 1”)

and €6.2 million (“Deferred Capex/Acquisition Tranche”) (as of June 30, 2013 outstanding

€20.3 million Capex/Acquisition Tranche 1 and €6.2 million Deferred Capex/Acquisition Tranche);

and

• a multi-currency revolving credit facility in an amount of up to €75.0 million (the “Revolving Facility”

and, together with the Term Facilities, the “Senior Facilities”) (as of June 30, 2013, €44.9 million

(Revolving Facility) and €9.0 million (ancillary facilities) were available; €11.1 million were utilized

for guarantees and a further €10.0 million of fronted ancillary facilities were available to be utilized by

the Company on short notice (such fronted ancillary facilities were not available for cash drawings

under the Revolving Facility)).

A borrower or its affiliate may request an ancillary facility under the Revolving Facility in the form of

(i) overdraft facilities, (ii) short-term loan facilities, (iii) performance bond, guarantee, bonding or documentary

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or standby letter of credit facilities, (iv) derivative or foreign exchange facilities or (v) other facilities or

accommodation as may be required in connection with the business of the Company and its subsidiaries on the

terms agreed between the relevant lender and relevant borrower or its affiliate.

Limitations on Use of Proceeds

The amounts borrowed under the Original Facilities were permitted to be used directly or indirectly for, inter

alia, the funding of the Acquisition, the financing costs and expenses relating thereto, the refinancing of existing

debt, and to a certain extent funding the business of our Group. All amounts borrowed under Facility D were

permitted to be used to make an amount of €50.0 million available to Xella International Holdings S.à r.l. to be

used to partially prepay or redeem indebtedness under the Vendor Loan Note and towards prepayment of certain

utilizations under Facility B and Facility C. All amounts borrowed under the Capex/Acquisition Facility were

permitted to be used for, inter alia, the financing or refinancing of capital expenditures, restructuring fees, costs

and expenses, and for permitted joint ventures and permitted acquisitions. Any amounts drawn under the

Revolving Facility are permitted to be used for working capital and other general corporate purposes of the

Company and its subsidiaries.

Conditions to Borrowings

None of the Term Facilities is available for additional drawings. Drawdowns under the Revolving Facility are

subject to conditions precedent that, among other things, on the date the drawdown is requested and on the

drawdown date, (i) no default is continuing or would occur as a result of that utilization, or in the case of

rollover loans under the Revolving Facility, the agent under the Senior Facilities Agreement has not accelerated

the loans under the Revolving Facility, and (ii) certain representations and warranties are true and correct in all

material respects.

Repayments

Principal amounts outstanding under Facility A and under the Capex/Acquisition Facility must be repaid in

semi-annual installments until the seventh anniversary of the date on which the Acquisition closed, being

August 29, 2008 (the “Acquisition Closing Date”). Certain principal amounts under Facility B and Facility C

have previously been repaid by the Company in an aggregate amount of €285,000,000, €250,000,000 of which

was repaid from the proceeds of the Facility D Loan. Principal amounts outstanding under Facility B or

Facility C must be repaid in full on the eighth and ninth anniversary of the Acquisition Closing Date,

respectively. Loans drawn under Facility D must be repaid in full on June 1, 2018. No borrower under the Term

Facilities may re-borrow any part that has been repaid. The borrowers under the Revolving Facility are

permitted to make up to a specified number of drawdowns under the Revolving Facility, which may be made for

terms of, at the borrower’s election, one, two, three or six months or, with the consent of the agent under the

Senior Facilities Agreement, such other term as agreed with the Company, but not beyond the final maturity

date of the Revolving Facility. Drawdowns under the Revolving Facility must be repaid at the end of the

relevant interest period for each drawdown and be repaid in full (and all Revolving Facility commitments

cancelled) on the seventh anniversary of the Acquisition Closing Date.

Interest Rates

The annual interest rate on each loan (other than a Facility D Loan) under the Senior Facilities Agreement for

each interest period is the aggregate of the applicable (i) margin, (ii) LIBOR or in relation to any loan in euro,

EURIBOR, or in relation to loans in polish zloty, WIBOR and (iii) any mandatory costs. Interest accrues daily

from and including the first day of an interest period and is payable on the last day of each interest period

(unless the interest period is longer than six months, in which case interest is payable on the dates falling at six

monthly intervals after the first day of the interest period).

The margin in relation to Tranche A1, Tranche A2, the Capex/Acquisition Tranche 1 and the Revolving Facility

is 3.00% per annum, in relation to Facility B, Deferred Tranche A and the Deferred Capex/Acquisition Tranche

is 3.75% per annum, and in relation to Facility C 4.25% per annum. The applicable margin is subject to

adjustment from time to time based on specified leverage ratios (as defined in the Senior Facilities Agreement,

calculated on the basis of net debt to EBITDA (on the basis set out under “—Financial Covenants” below)), as

follows:

Margin

(% per annum) Margin

(% per annum)

Margin

(% per annum)

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Leverage Ratio (as defined in the Senior Facilities Agreement)

Tranche A1 /

Tranche A2 /

Capex/Acquisitio

n Tranche 1 /

Revolving

Facility

Deferred

Tranche A /

Deferred

Capex/Acquisitio

n Tranche Facility B

Greater than 2.75:1 ................................................................................................................. 3.00 3.75 3.75

Greater than 2.50:1 but less than or equal to 2.75:1 ............................................................... 2.75 3.50 3.50

Greater than 2.25:1 but less than or equal to 2.50:1 ............................................................... 2.50 3.25 3.25

Less than or equal to 2.25:1 .................................................................................................... 2.25 3.00 3.25

With respect to any available but undrawn amounts under the Revolving Facility, the Company is obligated to

pay a commitment fee in the base currency on such undrawn amounts of 1.00% per annum.

The interest rate relating to each Facility D Loan must be the applicable interest rate to the Senior Secured Notes

that funded the Facility D Loan plus any additional de minimis margin required under applicable law or

regulation in order to obtain or maintain a tax exempt status of a Facility D lender. In the case of the outstanding

Facility D Loan, the applicable interest rate as at the date hereof is 8.00% per annum.

Guarantor Coverage

Subject to certain security principles as described below, the Company and certain of its subsidiaries are

borrowers, guarantors and security providers of the obligations of each obligor under the Senior Facilities

Agreement and related finance documents. The Company must ensure, subject to the security principles

described below, that guarantors (excluding for the purpose of the EBITDA calculation and to the extent only

that its EBITDA is less than zero, Xella Baustoffe GmbH) represent at least 85% of EBITDA of the Group and

75% of consolidated gross assets of the Group (in each case tested annually, as evidenced in the most recent

annual or quarterly financial statements). The guarantors under the Senior Facilities Agreement have provided

security over certain of their respective assets, subject to agreed security principles as described in more detail

below. Such assets include but are not limited to:

• all present and future capital stock of the guarantors (other than Xella Baustoffe GmbH);

• certain bank accounts of the guarantors;

• certain inter-company and other receivables held by certain of the guarantors; and

• real property owned by certain of the guarantors.

Under the terms of the Intercreditor Agreement (as defined below), the proceeds of any enforcement of the

security interests will be applied in repayment of the Senior Facilities and certain hedging obligations prior to

being applied in repayment of other indebtedness.

Security Principles

The security principles limit the obligation to provide security and guarantees under the Senior Facilities

Agreement based on certain legal and practical difficulties in obtaining effective security or guarantees from

relevant companies in jurisdictions in which the company operates, and include, among others:

• general statutory limitations, financial assistance, corporate benefit, fraudulent preference, “thin

capitalization” rules, retention of title claims and similar principles may limit the ability of a member

of the Group to provide a guarantee or security or may require that the guarantee be limited by an

amount or otherwise;

• the applicable cost which shall not be disproportionate to the benefit to the lenders of obtaining such

security;

• any assets subject to third-party arrangements which may prevent security being granted over those

assets will be excluded from any relevant security document (so long as the relevant company

providing security is required in certain circumstances to use reasonable endeavors to obtain such

consent);

• the Company and its subsidiaries will not be required to provide guarantees or enter into security

documents if:

• it is not within the legal capacity of the relevant entity to do so;

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• if the same would conflict with the fiduciary duties of the directors (or other officers) of the relevant

entity; or

• to do so would contravene any applicable legal prohibition or have the potential to result in a

material risk of personal or criminal liability on the part of any director (or other officer) of the

relevant entity provided that the relevant entity shall use reasonable endeavors to overcome any

such obstacle; and

• the giving of a guarantee or the granting, creation or perfection of security will not be required if it

would restrict the ability of the relevant obligor to conduct its operations and business in the ordinary

course as otherwise permitted by the finance documents.

No perfection action will be required if it could or is reasonably likely to have a material adverse effect on the

commercial relationship of the relevant obligor or on its ability to conduct its operations and business in the

ordinary course as otherwise permitted by the finance documents.

The security principles also set forth certain details regarding the provisions applicable to the guarantees and

security. In the case of guarantees, this includes matters relating to the extent of the guarantee, the governing

law and the applicability of corporate benefit restrictions. In the case of security, this includes matters relating to

the time of enforcement, third-party notification requirements and restrictions, powers of attorney and the scope

of the obligations to be included under the security documentation.

Mandatory Prepayment

The Senior Facilities Agreement includes mandatory prepayment provisions which, upon the occurrence of

certain events, require the Company or any other borrower under the Senior Facilities Agreement to make

prepayments and cancellations of the Senior Facilities (other than Facility D). In particular, but without

limitation, the Company or any other borrower under the Senior Facilities Agreement is required to (i) prepay

all amounts outstanding under the Senior Facilities (other than Facility D) promptly upon the occurrence of a

change of control or a sale of substantially all of the business and assets of the Group (ii) prepay any lender

(other than the Facility D lender), ancillary lender or issuing bank who has informed the agent that it can no

longer lawfully perform its obligations under the Senior Facilities Agreement and (iii) make prepayments of the

Senior Facilities (other than Facility D) out of, among others, net sale proceeds, proceeds of insurance claims,

recovery claims in respect of the Acquisition, and, for each fiscal year, a percentage of excess cash flow (which

percentage decreases as the leverage ratio decreases).

None of such mandatory prepayment provisions apply to Facility D. If any amount of the Senior Secured Notes

becomes repayable, prepayable or subject to repurchase or redemption prior to its originally scheduled maturity

under the Senior Secured Notes (other than by reason of acceleration of any Senior Secured Notes), an

equivalent amount of loans under Facility D with the same scheduled maturity as the Senior Secured Notes must

at the same time be prepaid by the Company under the Senior Facilities Agreement, provided that, in the case of

an optional redemption, such mandatory prepayment is limited to optional redemption of the Senior Secured

Notes (i) out of the proceeds of one or more equity offerings up to a maximum of 40% of the aggregate principal

amount of the Senior Secured Notes, (ii) where the amount paid in optional redemption of the Senior Secured

Notes is made pro rata to a voluntary prepayment of terms loans (other than loans under Facility D) under the

Senior Facilities Agreement) or (iii) where payments under the Senior Secured Notes become subject to

withholding tax (or increased withholding tax) due to a change in laws.

Undertakings

The Senior Facilities Agreement contains certain negative undertakings that, subject to certain customary and

other agreed exceptions, limit the Company’s ability to, among others:

• make any substantial changes to the general nature of the Company’s business, taken as a whole;

• make any amendments to the Company constitutional documents;

• carry on any material business on the level of the Company;

• make any disposals of all or any part of our assets;

• enter into acquisitions of shares or assets;

• form or enter into or acquire any joint venture;

• reorganize, amalgamate, merge or consolidate into any other person;

84

• incur or permit to subsist any financial indebtedness (other than permitted indebtedness);

• grant or make available any guarantee of financial indebtedness;

• create security;

• make any loans or grant any credit to or for the benefit of any other person;

• enter into any material agreement or arrangement with other members of the Group or any direct or

indirect investors in the Company or any of their respective affiliates other than on an arms’-length

basis;

• issue any shares, or make any distribution or pay any dividend, return on capital, repayment of capital

contributions or other distributions in respect of the shares of the Company or any of its affiliates; and

• optionally repay, prepay, repurchase or redeem any amount under the Notes and any additional notes

(other than as specified above under “—Mandatory Prepayment”).

The Senior Facilities Agreement in particular prohibits any distributions on the capital of or payments on

indebtedness owed by the Company (or any of its subsidiaries) to Xella International Holdings S.à r.l. unless

such payment is explicitly permitted pursuant to the Senior Facilities Agreement. Apart from the payment of

certain fees and the reimbursement of certain costs incurred by Xella International Holdings S.à r.l., the

Company (and its subsidiaries) may make payments to Xella International Holdings S.à r.l. only from “retained

cash” and if the leverage ratio (as defined in the Senior Facilities Agreement, calculated on the basis of net debt

to EBITDA (on the basis set out under “—Financial Covenants” below)) (after giving pro forma effect to such

payment) is less than 1.75:1.0. “Retained cash” comprises, inter alia, proceeds from certain further equity

investments in the Company, excess cash flow, certain disposal proceeds or the proceeds from an initial public

offering of the shares of the Company (or any of its subsidiaries), in each case to the extent not required to be

used for prepayments under the Senior Facilities Agreement or spent otherwise.

In respect of the negative undertakings relating to acquisitions of shares or assets, the agreed exceptions under

the Senior Facilities Agreement cover (i) any acquisition of shares in any member of the Group and any

acquisition of a controlling stake in a joint venture which is permitted under the Senior Facilities Agreement;

(ii) any acquisition that Xella International GmbH or any of its subsidiaries was legally committed to make

pursuant to arrangements existing at the Acquisition Closing Date; and (iii) any other acquisition where the

target is a business that is, taken as a whole, the same as or similar, complementary or related to the business of

the Group and the acquisition is the acquisition of either the material assets of that business or a controlling

stake in the entity that carries on (or owns) that business and where certain other conditions (as specified in the

Senior Facilities Agreement) are complied with, including certain look-forward financial covenant compliance

tests and, in relation to certain acquisitions, the provision of legal due diligence reports. In addition, the Group is

permitted to undertake certain pre-approved acquisitions by raising additional financial indebtedness to fund not

more than two acquisitions, each with a consideration of more than €75 million, provided that the ratio of net

debt to EBITDA of the Group (pro forma to take account of the incurrence of such financial indebtedness and

the use of the proceeds thereof) does not exceed 3.35:1 and certain other conditions are satisfied.

The Senior Facilities Agreement also requires each Senior Facility Guarantor to observe certain affirmative

undertakings subject to materiality and other customary and agreed exceptions. Such undertakings relate to,

among others, (i) maintenance of relevant authorizations, (ii) the compliance with relevant laws, including

environmental laws, (iii) payment of taxes, (iv) preservation of fixed assets, (v) access to the books, accounts

and records of the Company and its subsidiaries while an event of default is continuing, (vi) maintenance of

insurances, (vii) pari passu ranking, (viii) maintenance of intellectual property (ix) pensions, (x) provision of

certain information, such as annual financial statements, quarterly accounts and monthly management

statements, (xi) provision of compliance certificates, (xii) provision of annual budgets, (ix) information required

for “know your customer” checks, and (xii) certain other information (including material litigation, arbitration

and notice of default).

Financial Covenants

The Senior Facilities Agreement contains certain financial covenants which require the Company to, among

others:

• maintain a minimum ratio of EBITDA to Net Cash Interest (which shall be not less than 3.70:1.00);

• maintain a ratio of cash flow to total debt service of 1.0:1.0 at all times;

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• maintain a maximum ratio of net debt to EBITDA (which shall be not more than 3.13:1.00 as of

September 30, 2013, 3.00:1.00 as of December 31, 2013, 3.28:1.00 as of March 31, 2014, 3.22:1.00 as

of June 30, 2014, 2.88:1.00 as of September 30, 2014, 2.71:1.00 as of December 31, 2014, 2.94:1.00

as of March 31, 2015, 2.79 as of June 30, 2015, 2.70:1.00 as of September 2015 and 2.50:1.00

thereafter); and

• not exceed certain annual capital expenditure levels.

References to EBITDA and Net Cash Interest for the purposes of the description of the Senior Facilities

Agreement mean EBITDA and Net Cash Interest as defined in the Senior Facilities Agreement. Such definition

of EBITDA includes certain normalizations and other adjustments such as pro forma adjustments for permitted

acquisitions.

Events of Default

The Senior Facilities Agreement contains customary events of default, including (i) the non-payment of amounts

payable under the Senior Facilities Agreement or any finance document relating thereto, (ii) inaccuracy of any

representation, warranty or statement when made or repeated, (iii) failure to comply with financial covenants,

(iv) breach of any other obligation under the finance documents, (v) cross-default, including non-payment

under, and acceleration of, the Senior Secured Notes and the occurrence of an event of default under the

Covenant Agreement, (vi) insolvency of the Company or any of its material subsidiaries, (vii) unlawfulness of

the finance documents, (viii) cessation of business, (ix) commencement of certain litigation (x) breach of the

Intercreditor Agreement, and (xi) material adverse change. Any such event of default would permit the lenders

under the Senior Facilities Agreement (other than the Facility D lender) to accelerate all obligations outstanding

under the Senior Facilities Agreement, cancel their commitments thereunder and declare that amounts

outstanding under the Senior Facilities Agreement are payable on demand. The rights of the Senior Secured

Notes Issuer as lender under Facility D to accelerate amounts outstanding under Facility D are subject to the

voting restrictions applying to the Facility D lender set out in the Senior Facilities Agreement. In the event that

amounts due under the Senior Secured Notes are accelerated, there is non-payment of amounts due under the

Senior Secured Notes, or there is an event of default under the Covenant Agreement, the Senior Facilities

Agreement provides that the agent under the Senior Facilities Agreement must, if so instructed by the Senior

Secured Notes Issuer as Facility D lender, declare that all or any part of any amount outstanding under

Facility D are immediately due and payable and payable on demand by the Company.

Specifics of Facility D

The Senior Secured Notes Issuer, as lender under Facility D, is not entitled to rely or benefit from the provisions

relating to representations, information undertakings, financial covenants, general undertakings or events of

default, except for certain acceleration rights as described in the preceding paragraph. Furthermore, certain

restrictions relating to voting rights of the Facility D lender exist.

Consent Request

On September 4, 2013, the Company submitted a consent request letter (the “Consent Request Letter”) to the

lenders under the Senior Facilities Agreement in order to request their consent to certain amendments to the

maturity of the existing commitments under the Revolving Facility, and to reduce certain commitments under

Capex/Acquisition Tranche 1, the Deferred Capex/Acquisition Tranche, Tranche A1 and the Deferred

Tranche A (the “Capex/Facility A Tranches”) by up to €70,000,000 in aggregate in respect of the repayment

installments due during 2015 (the “Capex/Facility A 2015 Installment Commitments”). The Company

proposed to convert such commitments into new commitments under certain new facilities with amended

maturity dates and margins.

The Company has received the requisite level of consents in order to implement the amendments contemplated

by the Consent Request, in particular:

• the consent of lenders whose commitments aggregate more than 85% of the total commitments under

the Senior Facilities Agreement to (a) the establishment of a new revolving facility (“Revolving

Facility A”) under which those converted Revolving Facility commitments will be provided, and (b)

the establishment of a new combined facility (the “Combined Facility”) under which those converted

Capex/Facility A 2015 Installment Commitments will be provided;

• the consent of certain lenders under the Revolving Facility that have agreed to offer to convert either

the full amount, or a specified portion, of their Revolving Facility commitments into commitments

under Revolving Facility A; and

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• the consent of certain lenders under Capex/Acquisition Tranche 1, the Deferred Capex/Acquisition

Tranche, Tranche A1 and the Deferred Tranche A (as applicable) that have agreed to offer to convert

(i) the full amount, (ii) their pro rata portion or (iii) such other specified portion, of their

Capex/Facility A 2015 Installment Commitments into commitments under the Combined Facility.

The Company has received (i) offers from the lenders under the Revolving Facility to convert less than

€75.0 million in aggregate of their Revolving Facility commitments into Revolving Facility A commitments and

(ii) offers from the lenders under the Capex/Facility A Tranches to convert at least €70.0 million in aggregate of

their Capex/Facility A 2015 Installment Commitments into Combined Facility commitments.

As a result, the Company intends to utilize certain additional commitments from other willing lenders to ensure

that the total commitments provided under Revolving Facility A will be €75.0 million, as a result of which such

additional commitments will be deemed to be used to replace and cancel all non-converted Revolving Facility

commitments in full on the Effective Date (as defined below).

In consideration for agreeing to the terms of the amendments contemplated by the Consent Request Letter, the

Company has agreed to pay certain consent fees to those lenders (i) that consent to the terms of the Consent

Request Letter and/or (ii) that offer to convert their relevant commitments as set out in the Consent Request

Letter.

Expected Changes to the Senior Facilities Agreement upon Consummation of the Senior Facilities

Amendment and Restatement Agreement

Following receipt of the necessary consents to the amendments set out in the Consent Request Letter, the

Company, certain subsidiaries of the Company, the Agent and those lenders providing commitments under

Revolving Facility A and/or the Combined Facility shall, among others, enter into the Senior Facilities

Amendment and Restatement Agreement. The amendments to the Senior Facilities Agreement shall become

effective on the date that the Agent confirms that the necessary conditions precedent have been satisfied (the

“Effective Date”), and such date shall be no later than December 20, 2013 (or such later time as may be agreed

between the Company and the Agent (acting on the instruction of the majority lenders) from time to time).

There can be no assurance that the conditions precedent will be satisfied on or prior to December 20, 2013 or at

all. If the conditions precedent are not satisfied on or before such date, and the Company and the Agent do not

agree to such later date, the amendments described herein will not become effective.

Following the Effective Date, the principal terms of the Senior Facilities Agreement will remain in full force

and effect, subject to the implementation of the amendments set out in the Senior Facilities Amendment and

Restatement Agreement as summarized below.

Facilities

Following the Effective Date:

(a) Each lender under the Revolving Facility that has agreed to convert its commitments under the Revolving

Facility into commitments under Revolving Facility A shall be deemed to have advanced funds under

Revolving Facility A in an amount equal to its converted participation in the Revolving Facility on a

cashless basis. Any additional commitments under Revolving Facility A provided by new lenders (or by

existing lenders in excess of their commitments under the Revolving Facility) shall also come into effect.

As a result of which the Revolving Facility shall be replaced with Revolving Facility A, a multi-currency

revolving credit facility in an amount of up to €75.0 million, on the same terms and conditions of the

Revolving Facility, subject to the provisions set out below under the headings “—Repayment”, “—

Interest”, and “—Guarantees and Security”. Further, all ancillary facilities, fronted ancillary facilities,

letters of credit and bank guarantees provided by lenders under the Revolving Facility shall be made

available on the same terms under Revolving Facility A to the extent that the relevant lender has converted

its commitments thereunder.

(b) Each lender under the Capex/Acquisition Facility and/or Facility A that has agreed to convert its

Capex/Facility A 2015 Installment Commitments into commitments under the Combined Facility shall be

deemed to have advanced funds under the Combined Facility in an amount equal to its converted

Capex/Facility A 2015 Installment Commitments on a cashless basis, with such funds being deemed

simultaneously to have been applied in repayment of principal amounts owed to that lender under each

relevant tranche. Any additional commitments under the Combined Facility provided by new lenders (or

by existing lenders in excess of their Capex/Facility A 2015 Installment Commitments) under the

Combined Facility shall also be deemed to have been applied in repayment of those Capex/Facility A 2015

Installment Commitments that have not been converted. Following which, a euro term loan facility will

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have been made available in an aggregate amount of up to €70.0 million and the outstanding commitments

under Capex/Acquisition Tranche 1, the Deferred Capex/Acquisition Tranche, Tranche A1 and Deferred

Tranche A will be reduced to the extent that those commitments have been so converted into commitments

under the Combined Facility.

Repayment

Drawdowns under Revolving Facility A must be repaid at the end of the relevant interest period for each

drawdown and repaid in full (and all commitments under Revolving Facility A cancelled) on June 30, 2017.

Principal amounts outstanding under the Combined Facility must be repaid on August 29, 2016 by way of a

single bullet repayment.

Interest

The interest rate on each loan under Revolving Facility A and the Combined Facility under the Senior Facilities

Agreement shall be calculated on the same basis as set out in “Senior Facilities Agreement – Interest Rates”

except that the margin in relation to Revolving Facility A and the Combined Facility will be 3.75% per annum,

subject to adjustment from time to time based on specified leverage ratios, as follows:

Margin

(% per

annum)

Leverage Ratio (as defined in the Senior Facilities Agreement

Revolving Facility A

/ Combined

Facility

Greater than 2.75:1 ................................................................................................................. 3.75

Greater than 2.50:1 but less than or equal to 2.75:1 ............................................................... 3.50

Greater than 2.25:1 but less than or equal to 2.50:1 ............................................................... 3.25

Less than or equal to 2.25:1.................................................................................................... 3.00

With respect to any available but undrawn amounts under Revolving Facility A, the Company is obligated to

pay a commitment fee in the base currency on such undrawn amounts of 1.20% per annum.

Guarantees and Security

The Company and certain of its subsidiaries will provide customary guarantee and security confirmations and/or

amendments (including the re-taking of supplemental security where relevant) in respect of the amendments

contemplated by the Senior Facilities Amendment and Restatement Agreement. Further, the guarantor coverage

test under the Senior Facilities Agreement shall be amended such that any subsidiary of the Company having

EBITDA (as defined in the Senior Facilities Agreement) of less than zero shall be deemed to have an EBITDA

of zero.

6.2 Intercreditor Agreement

On August 27, 2008 (as amended and restated pursuant to an amendment deed dated May 26, 2011) the

Company, Xella International Holdings S.à r.l. and certain other obligors entered into an intercreditor agreement

(the “Intercreditor Agreement”) as original obligors with, inter alios, UniCredit Bank AG, London Branch

(formerly Bayerische Hypo- und Vereinsbank AG, London Branch), as agent and security agent, the lenders

under the Senior Facilities Agreement, certain hedging banks and certain inter-company lenders and borrowers

to establish relative rights of certain of the creditors of the Xella Operations Group.

The Intercreditor Agreement sets out, among others:

• the ranking of certain debts of the Xella Operations Group;

• the ranking of transaction security granted by the Company and its subsidiaries;

• turnover provisions;

• terms pursuant to which indebtedness will be subordinated upon the occurrence of certain insolvency

events;

• certain provisions with respect to enforcement action; and

• when security and guarantees will be released to permit a sale of assets subject to the transaction

security.

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The following briefly summarizes certain provisions of the Intercreditor Agreement.

Ranking and Priority

The Intercreditor Agreement subordinates intra- Xella Operations Group debt and debt owed to shareholders of

the Company (the “Subordinated Debt”) to the debt incurred pursuant to the Senior Facilities Agreement (the

“Senior Debt”) and hedging debt. The Senior Debt and hedging debt rank pari passu in right and payment and

without any preference between them. The Intercreditor Agreement does not purport to rank the Subordinated

Debts as between themselves.

Collateral

The lenders under the Senior Facilities Agreement and the hedging banks benefit from a common guarantee and

security package. The guarantees and security granted to the holders of the Senior Debt and hedging debt and

the proceeds of its enforcement also rank pari passu in right and payment and without any preference between

them. Subordinated Debt is and must remain unsecured and may not be guaranteed, subject to certain

exceptions.

Permitted Payments

No member of the Xella Operations Group may make payments or distributions or exercise rights of set-off in

respect of Subordinated Debt unless permitted pursuant to the Senior Facilities Agreement and no declared

default is continuing. There are also restrictions on payments to hedging banks except for certain specified

permitted payments. Failure to comply with these restrictions would cause an event of default under the Senior

Facilities Agreement (subject to applicable grace periods).

Turnover

Subject to certain exclusions, if the lenders under the Senior Facilities Agreement or the hedging banks receive

or recover any amount after a declared default or an insolvency event (including by way of set-off) otherwise

than in accordance with the payment waterfall described under “—Application of Proceeds” below, such person

must hold that amount on trust for the security agent and promptly pay that amount to the security agent for

application in accordance with the Intercreditor Agreement.

Enforcement

The security agent must act in relation to enforcement and the transaction security documents in accordance

with the instructions of the majority lenders under the Senior Facilities Agreement. The voting rights of the

Facility D lender are subject to the restrictions set out under the Senior Secured Notes Indenture.

Application of Proceeds

All amounts received pursuant to the turnover provisions described under “—Turnover” above, all proceeds of

enforcement of the transaction security, all recoveries received or turned over to the security agent under

guarantees of debt, and all other amounts paid to the security agent under the Intercreditor Agreement must be

applied as follows:

• first in payment of fees, costs and expenses of the security agent and any advisor, receiver, delegate,

attorney or agent in connection with the Intercreditor Agreement or transaction security documents;

• second pro rata and pari passu in payment of costs and expenses of the lenders under the Senior

Facilities Agreement and hedging banks in connection with the enforcement of the transaction security

documents;

• third pro rata and pari passu to the agent under the Senior Facilities Agreement for application

towards the Senior Debt and the hedging banks for application towards the hedging debt; and

• fourth in payment to the relevant member of the Xella Operations Group or other person entitled

thereto.

Release of Guarantees and Security

If a member of the Xella Operations Group disposes of an asset in accordance with the Senior Facilities

Agreement, the security agent is authorized to release any transaction security granted over such asset (and, if

such asset comprises shares in an obligor or holding company of an obligor, to release (a) that obligor and each

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of its subsidiaries from any liabilities it may have as guarantor under the Senior Facilities Agreement and other

finance documents and (b) any transaction security granted over the assets of that obligor and any shares in or

assets of any subsidiary of that obligor).

Amendments

Subject to certain exceptions, the Intercreditor Agreement may be amended with the consent of the majority

lenders under the Senior Facilities Agreement (representing 66 ⅔% or more of the total commitments) and, if

such amendment would materially and adversely affect the rights or impose or vary any obligation of the

hedging banks, with the consent of the hedging banks. The voting rights of the Facility D lender are subject to

the certain restrictions.

6.3 Letters of Credit

Certain of the Company’s subsidiaries have entered into inter-company credit facilities, evidenced by letters of

credit (“LOCs”). Such LOCs have in particular been provided by (i) Xella International GmbH to Xella

Slovensko spol. S.r.o. in an amount of €16.8 million, (ii) Xella Baustoffe GmbH to Xella Mexicana SA de CV

in an amount of MXN100.0 million, (iii) Xella International GmbH to Xella Kosova L.l.c. in an amount of

€12.25 million, (iv) Xella Baustoffe GmbH to Xella CZ s.r.o. in an amount of CZK242.11 million, (v) Xella

International GmbH to Xella CZ s.r.o. in an amount of CZK190.0 million and (vi) Xella Baustoffe GmbH to

Xella Bulgaria EOOD in an amount of €6.466 million. The LOCs usually help fulfill ongoing payment

obligations of the local subsidiaries.

In general, most of the guarantees issued by and on behalf of the Company’s subsidiaries are to secure

recultivation obligations resulting from excavation of lime quarries and sand pits. In addition, guarantees have

been issued for the fulfilment of certain contractual obligations, such as rental payments or for warranties. Those

guarantees have been issued mainly through one of our principal banks and some have been provided by

subsidiaries in the form of corporate guarantees.

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7. RISKS RELATED TO OUR BUSINESS AND OUR INDUSTRY

Difficult conditions in the general economy and the global financial markets may materially adversely affect

our business, financial condition and results of operations.

Our results of operations are materially affected by conditions in the general economy and the global financial

markets. Since 2008, the stress and disruptions experienced by global financial markets increasingly affected

other sectors of the economy resulting in a global economic downturn. In particular, the construction industry in

the markets in which we manufacture and sell our products has been adversely affected by the global economic

downturn. 2012 was characterized by a heterogeneous volume development in our key European building

materials markets. While volumes in some countries, such as The Netherlands, the Czech Republic, France,

Poland and China, declined further (in some cases, considerably), some markets, such as Russia and Italy,

experienced higher sales volumes than in 2011. Our Building Materials business unit, which is our largest

business unit by sales and Normalized EBITDA, is particularly dependent on developments in new residential

construction activities that have historically and in the global financial and economic crisis been more

susceptible to cyclicality than renovation, remodeling and modernization activities, which play a relatively

greater role in our Dry Lining business unit.

We currently operate plants in 20 countries, and sell our products in more than 30 countries, and some markets

and regions account for a significant portion of our total sales and EBITDA. If our key geographic markets, in

particular Germany, The Netherlands, the Czech Republic, Belgium, Poland and France, were to experience a

reoccurrence, continuation or further worsening of the difficult economic conditions, the level of construction

activity can be expected to decline, which will likely result in reduced demand for our products and adversely

affect our ability to pass on price increases to our customers to offset increased costs, particularly in raw

material and energy prices. Further, while the regions in which we operate have been affected differently by the

global economic downturn, there can be no assurance that any weakening in economic growth will not affect the

construction market globally or that negative economic conditions in one or more regions will not affect the

construction markets in other regions. As a result, our business, financial condition and results of operations will

be materially adversely affected by a continued or further downturn in construction activities on a global scale

or in significant markets in which we operate.

The construction industry is cyclical in nature and subject to seasonality.

The building materials industry in any geographic market is dependent on the level of activity in the

construction sector of that geographic market. The construction industry tends to be cyclical and is dependent on

the level of construction-related expenditures in the residential, industrial and commercial sectors, public

investments and public and private spending on infrastructure projects. The construction industry is particularly

sensitive to factors such as GDP growth, interest rates and cost of mortgage financing for residential,

commercial and industrial construction, inflation, consumer confidence as well as other macroeconomic factors.

Political instability or changes in government policy may also negatively affect the construction industry,

particularly those markets with higher exposure to civil engineering and infrastructure spending. Moreover,

demand in the construction industry may be affected by demographic trends, such as aging and declining

populations in many mature markets, such as Germany, changes in the average number of persons living in one

household or migration trends. Our Building Materials business unit, which is our largest business unit by sales

and Normalized EBITDA, is more susceptible to cyclicality in the construction industry than our Dry Lining

business unit that has a higher percentage of sales in connection with renovation, remodeling and modernization

activities.

Moreover, the construction industry is dependent on weather conditions and is subject to seasonality. Lower

demand for building materials occurs in periods of cold weather, and may be aggravated by particularly harsh

weather conditions such as those experienced in the winter of 2012/2013. These effects and other unfavorable

weather conditions, frequently lead to a volatile development of our quarterly financial results. Historically,

sales in the second and third quarters have been significantly higher than in the other quarters of the year,

particularly the first quarter. Our Building Materials business unit is subject to strong seasonal effects; the same

applies to a lesser degree to our Dry Lining and Lime business units. Results of a single fiscal quarter might

therefore not be a reliable basis for the expectations of a full fiscal year and may not be comparable with the

results in the other fiscal quarters. Seasonality effects may also increase our working capital requirements.

Adverse weather conditions can materially adversely affect our business, financial condition and results of

operations if they occur with unusual intensity, during abnormal periods, or last longer than usual in our major

markets, especially during peak construction periods.

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We operate in highly competitive industries and our results may be adversely affected by competition.

Competition in the building materials industry, and more specifically, the markets for the products we produce

and sell in our Building Materials and Dry Lining business units and, to a lesser degree, in our Lime business

unit, is intense. We will also be exposed to competition in the gas generation technology industry in connection

with our new Ecoloop business unit. Competition is based on many factors, including brand recognition and

customer loyalty, product quality and reliability, breadth of product range, product design and innovation,

manufacturing capabilities, distribution channels, scope and quality of services, and price. Further, the markets

for our products, especially the markets for lime and wall-building materials, are characterized by many regional

manufacturers and a number of major manufacturers with an international presence. Competitive factors include

the number of competitors in a certain market, their degree of vertical integration and pricing policies, the

development of demand and capacity as well as the access to and cost of raw materials and other inputs. Prices

are subject to changes in response to relatively minor fluctuations in supply and demand, general economic

conditions, and other market conditions beyond our control. In 2010, for example, we and one of our

competitors were engaged in intense price competition for market share in Germany and certain markets in

Scandinavia and Central and Eastern Europe. Any significant decline in terms of volume, margin or price could

have material adverse effects on our business, financial condition and results of operations.

In addition, the foregoing factors are often subject to varying developments in the regions and countries in

which we operate. Individual regional and local competitive factors could in the future deteriorate and result in

further significantly intensified competition in such regions or countries. For example, competitors may expand

their capacities or enter or expand in markets in other regions or, in connection with our Ecoloop technology,

competitors may develop more efficient technologies or other technologies may be preferred by customers. The

consequences of such changes or of other possible changes in the competitive environment could have material

adverse effects on our competitive position, business, financial condition and results of operations. Competitors

could also further improve the functionality or performance of their products and production processes leading

to additional competitive pressure on prices for our products and services and potential decreases of sales

volumes and market share.

In order to maintain or reinforce our competitive position, we rely on continuous investments in product

development, production processes, brands, services and distribution network. Our four business units are active

in industries that are capital intensive and require continuous capital expenditures in maintenance and

optimization of our existing production facilities. Beginning with the global economic and financial crisis, we

have temporarily reduced our investments in the marketing of our products and the maintenance and

optimization of our production facilities. In the future, we may need to increase our marketing and capital

expenditures to levels before the global economic and financial crisis and may not have adequate resources to

make investments and may not have sufficient access to qualified personnel in order to continue to successfully

compete in the marketplace. Our competitors may have greater financial and personnel resources or know-how,

may react more quickly to the changing needs and requirements of customers or better succeed in marketing

their products than we do. Each of these factors could lead to a loss of market share and have material adverse

effects on our business, financial condition and results of operations.

A significant decrease in demand or an increase of production capacities might lead to overcapacity, a

reduction of the utilization rates of our production plants and increased competition.

It is important for us to strike the right balance between our production capacity and the demand for our

products in each of our production plants and in each of the markets in which we are active. In this regard, our

capacity management is aimed at flexibly adjusting our production volumes in response to changing levels of

demand, particularly in cyclical and seasonal peaks and downturns, by reducing or increasing the number of

production shifts which can range between one and four. Moreover, we have additional flexibility in countries

where we operate more than one plant. Within certain distances, we are able to efficiently dispatch products

from our plants into regions with higher demand. A significant decrease in demand, such as due to a cyclical

weakness of the construction industry, and delays in the capacity adjustment process may result in overcapacity

and a reduction in the utilization rates of our plants in the respective geographic regions. Decreases in demand

and increases in production capacity that result in overcapacity may also lead to increased price competition.

Should we in such a situation not succeed in reducing overcapacity at reasonable cost, for example by temporary

or permanent plant closures, thereby lowering our cost base and helping to minimize the excess supply, we may

face a further decline in profitability, cash flows and results of operations. Even if we successfully reduce our

capacity, such reduction may lead to significant extraordinary cost, particularly in connection with plant

closures or other restructuring measures. In addition, the pricing and production policies of competitors are

unpredictable and could frustrate our efforts. Moreover, declining prices in a market situation with significant

oversupply may also affect neighboring regions, thereby causing further declines in sales, cash flows and results

of operations. There is also a risk that we could establish or acquire additional production capacities which

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cannot be appropriately used, for example as a result of an inaccurate evaluation of market developments. Any

failure to adequately utilize our production capacities could lead to extraordinary depreciation on production

equipment and significant impairment charges on goodwill and have negative consequences for our profitability

due to our relatively high level of fixed cost. If one or more of the aforementioned risks materializes, this could

have material adverse effects on our business, financial condition and results of operations.

Our products and technologies compete with a variety of different products and technologies, many of which

we do not produce and, as a result, we may lose market shares to such alternative products or technologies.

Our wall-building materials products compete with several other types of building materials, notably other

masonry building materials but also other alternative building materials that we do not produce. Other types of

wall-building materials may be or become more popular or may be perceived as having superior characteristics

in terms of environmental protection, thermal insulation, load-bearing capacity, durability, fire protection,

safety, appearance, price or other respects. The degree of substitution by other types of building materials may

vary by region and from time to time and may also be attributed to local building and construction traditions,

preferences and regulatory requirements. If the environmental, energy or other characteristics of other products

improve, any competitive advantage our building materials products enjoy may diminish. Any significant

replacement of any of our specific products by other types of products which we do not produce may adversely

impact our business, financial condition and results of operations. Our Ecoloop technology competes with

various technologies in the “thermal applications” sector and the “electrical application” sector which may be

more efficient or may attract more customers than the technology we offer. Any significant replacement of the

technology we offer by other technologies which we do not provide may adversely impact our business,

financial condition and results of operations.

Interruptions in operations at our facilities could have a material adverse effect on our business, financial

condition and results of operations.

We operate a total of 99 production plants in 20 countries plus additional industrial facilities, such as lime

quarries, sand pits and stock grounds, and our results of operations are dependent on the continued operation of

our production facilities and the ability to complete construction and maintenance projects on schedule. Our

production processes and technologies are complex as they need to be adapted to variations in the properties of

certain raw materials and use combustibles and other dangerous materials, such as pulverized aluminum and

pulverized lignite. Significant interruptions in operations at our production plants or other facilities, for example,

due to explosions, fires or other accidents, may significantly reduce the productivity and profitability of a

particular production or other facility, or our business as a whole, during and after such interruptions. Although

we hold several types of insurance policies (including insurance against fire and business interruptions), our

insurance coverage may be inadequate. Furthermore, our insurance coverage may not continue to be available

on commercially reasonable terms and our insurance carriers may not have sufficient funds to cover all potential

claims.

Our business may be negatively affected by volatility in raw and other material prices, our inability to retain

or replace our key suppliers, unexpected supply shortages and disruptions of the supply chain.

The cost and availability of raw material and other supplies are critical to our operations. Our profit margins are

largely a function of the relationship between the prices that we are able to charge for our products and the cost

of the raw materials and other inputs we require to produce these products. The raw materials and other inputs

we depend on include lime, limestone, cement, sand, aluminum, paper, steel, energy, gypsum and other

materials, such as grinding balls, form oil, rust protection, palettes and foil, as well as certain kinds of waste for

the Ecoloop reactor. In the twelve-month period ended June 30, 2013, the cost of these raw materials and other

inputs (excluding energy cost) amounted to a total of €215.2 million, or 17.1%, of our sales. The prices of the

raw materials that we use generally tend to be cyclical and highly volatile. Supply costs represent a substantial

portion of our operating expenses. The availability and prices of raw materials and other supplies are influenced

by factors that we cannot control, such as market conditions, general global economic prospects, production

capacity in the relevant markets, production constraints on the part of our suppliers, infrastructure failures,

regulations, including carbon dioxide emission regulations applicable to our suppliers and the amounts of

emission allowances available to them, and other factors. Although we aim to mitigate risks from fluctuating

raw material prices by entering into supply agreements covering significant portions of our expected raw

material requirements typically for periods between 12 and 36 months, these measures may turn out to be

inadequate.

Furthermore, interruptions of our operations resulting from supply shortages of certain raw materials or other

inputs can significantly affect our profitability. If any of our suppliers is subject to a major disruption in its

production or is unable to meet its obligations under our existing supply agreements, we may be forced to pay

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higher prices to obtain the necessary raw and other materials from other sources. We purchase certain raw

materials, such as aluminum, from a limited number of suppliers, and we may not be able to find acceptable

alternative sources or adapt our production processes sufficiently to differing qualities of raw materials and the

process of locating and securing such alternative sources might be disruptive to our business. Any extended

unavailability of a necessary raw material or other input could cause us to cease manufacturing one or more of

our products for a certain period of time.

While we attempt to match price increases of raw materials and other inputs with corresponding product price

increases, our ability to pass on increases in the cost of raw materials to our customers is, to a large extent,

dependent upon our contractual relationships and market conditions, and we may not be able to raise product

prices immediately or at all, and we may not succeed in passing on the entire cost increase to our customers. Our

ability to pass on price increases of raw materials and other inputs may also be affected by a temporary decline

in demand for our products in the markets in which we are active and increased price competition for market

share. For instance, due to the market environment, we decided to delay price increases in Germany in the first

half of 2013. Sales in our Building Materials and Dry Lining business units are primarily made through builder

merchants as intermediaries. Builder merchants frequently organize in purchasing co-operations that provide

marketing and billing services for the individual builder merchants and negotiate annual framework contracts

with us, including payment terms and discounts. While our top five customers (excluding co-operations)

represented 6.7% of total external sales in our Building Materials business unit for the twelve-month period

ended June 30, 2013, the purchasing power of co-operations may impair our ability to pass on increases in the

cost of raw materials. Any inability or delay in passing on increases in raw materials cost to our customers

would have a negative effect on our cash flows, which could materially adversely affect our business, financial

condition and results of operations. For the operation of our Ecoloop reactor, we depend on constant access to

recyclable materials in order to use the Ecoloop technology efficiently. Conversely, the expected economic

benefits of our Ecoloop technology depend on high fossil fuel prices. Any disruption in supply of these

recyclable materials or a decrease in fossil fuel prices as a result of decreased demand or increased supplies (for

example, due to the availability of new reserves or new production methods) would have a negative effect on the

efficiency of the Ecoloop technology and its successful marketing, which could materially adversely affect our

business, financial condition and results of operations.

Increased energy cost or disruptions in energy supplies could have a material adverse effect on our business,


Our business is dependent on the steady supply of significant amounts of energy in various forms, such as

electricity, gas, coal, pulverized lignite and diesel, at commercially reasonable terms. In particular, the operation

of our autoclaves in the production process of our Building Materials business unit and the heating of our lime

kilns in our Lime business unit require considerable amounts of energy. Our energy cost, which mainly consists

of cost for the supply of electricity, gas, coal and diesel incurred in connection with the production of our

products, accounts for a high percentage of our cost basis. In the twelve-month period ended June 30, 2013, our

energy cost amounted to a total of €153.4 million, or 12.2%, of our sales. Energy cost is affected by various

factors, including the availability of supplies of particular sources of energy, energy prices and regulatory

decisions. In particular, prices for oil, gas and electricity have been extremely volatile during the last six years.

For example, oil prices were ranging between US$40 and more than US$140 per barrel. Such volatility may

increase as a result of current political instability, such as the unrest currently occurring in several countries in

the Middle East and North Africa or the promoted growth of renewable energy sources especially in Germany

(Energiewende) and Europe. Although we attempt to mitigate risks of fluctuating energy prices by entering into

supply agreements for significant portions of our expected energy requirements with periods typically between

24 and 36 months and having the ability in several of our production processes to use different types of

combustibles, these measures may turn out to be inadequate. Also, the suppliers under these agreements may

default on their obligations. Any significant increase in market prices, transportation cost, grid fees or taxes

(including reduction of tax benefits) associated with the supply of energy would increase our operating cost and,

thus, may negatively affect our results of operations if we are not able to pass the increased cost fully and

without delay on to our customers. Our ability to pass on energy price increases may also be affected by a

decline in demand for our products in the markets in which we are active and increased price competition for

market share. Any inability or delay in passing on increases in energy cost to our customers or any interruption

or shortage of energy supply may negatively impact our business, financial condition and results of operations.

The availability of and any significant increase in the cost of transportation represent a significant risk for

our business.

Transportation plays an important part in our supply chain as we ship our products, mainly by truck and to a

lesser extent by rail or ship, to our customers. Further, most of the raw materials need to be transported to our

production facilities. Any material disruption in or lack of availability of transportation or significant increases

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in fuel or energy prices, road tolls or demand-driven market prices resulting in higher transportation cost, could

have a material adverse effect on our business and our financial condition and results of operations. In addition,

increased costs relating to emissions control requirements that have been or may be imposed in the future,

particularly due to climate change-related legislation, may also lead to such effects. In the twelve-month period

ended June 30, 2013, our transportation cost, which include freight for deliveries from our plants or other stocks

to customers as well as intra-group transfers of finished products but exclude transportation cost arising from

purchases of raw materials and other inputs, amounted to a total of €148.1 million, or 11.8%, of our sales.

We generally rely upon third-party service providers for the transportation of our products to customers. Our

ability to service our customers at commercially reasonable cost depends, in many cases, upon our ability to

negotiate commercially reasonable terms with carriers, including railroads and trucking and barge companies.

To the extent that third-party carriers increase their rates, including to reflect higher labor, maintenance, fuel or

other cost they may incur, we may be forced to pay such increased rates sooner than we are able to pass on such

increases to our customers, if at all. Any material increases in our transportation cost that we are unable to pass

on to customers fully and in a timely manner could adversely affect our business, results of operations, financial

condition and prospects.

We may not be able to successfully manage future growth, including by way of potential acquisitions which

may expose us to additional risks.

Over the past decade, we have expanded our business through organic growth and acquisitions, in particular in

Central and Eastern and Southern Europe, China and the Americas, and we intend to selectively participate in

the consolidation of the building materials industry and to continue our international expansion in all our

business units, with a particular focus on our core Building Materials business unit. In implementing this

strategy, we are pursuing both organic growth and evaluating the market for potential acquisitions of building

materials production facilities and other companies. Our growth has placed and will continue to place a strain on

our management systems, infrastructure and resources. Our ability to manage this planned growth and integrate

operations, technologies, products and personnel depends on our administrative, financial and operational

controls, our ability to create the infrastructure necessary to exploit market opportunities for our products and

our financial capabilities. We may also reach limits under applicable antitrust merger control laws when

attempting to further grow through acquisitions in certain markets. In order to compete effectively and to grow

our business profitably, we will need to maintain our financial and management controls, reporting systems and

procedures, implement new systems as necessary, attract and retain adequate management personnel, and hire a

qualified workforce that we can train and manage. Acquisitions pose additional risks, including that we may pay

too much to acquire a business, assume unexpected liabilities in connection with the acquisition, lose customers

or employees following the acquisition and be unable to successfully integrate the acquired business with our

existing business. Moreover, our plans to acquire additional businesses in the future are subject to the

availability of suitable opportunities. Our competitors may also follow similar acquisition strategies and may

have greater financial resources available for investments or may have the capacity to accept less favorable

terms than we can accept which may prevent us from acquiring the businesses that we target and reduce the

number of potential acquisition targets. If we establish new production plants as greenfield operations or invest

in or operate new businesses, we may initially incur start-up losses due to lower levels of capacity utilization

and ramp-up and training cost and face additional challenges in entering new markets, including locating and

securing suitable plant sites. Start-up losses for production plants in new markets typically are incurred for the

first five to seven years of operation. Furthermore, we expect that as we continue to introduce new products in

our markets, we will be required to manage an increasing number of relationships with various customers and

other third parties. In order to grow our Ecoloop business unit, we must successfully finish the ramp-up phase of

our own plant and in the future commission reference plants for our first customers, which involves obtaining

required permissions from public authorities. To acquire customer orders, we need to successfully communicate

the characteristics and economics of the Ecoloop technology to potential customers, including its benefits when

compared with established waste incineration technologies. The failure or delay of our management in

responding to these challenges could have a material adverse effect on our business, financial condition and

results of operations.

We may need to write down goodwill and brands, which would adversely affect our financial results.

As of June 30, 2013, 25.8% of our total group assets were intangible assets, with 14.9% and 10.0% of our total

group assets corresponding to goodwill and brands, respectively. Goodwill is recognized as an intangible asset

and is subject to an impairment test, at least annually or upon the occurrence of significant events or changes in

circumstances that indicate an impairment has occurred. In the fiscal year ended December 31, 2012, we

recognized goodwill or brand impairment losses amounting to €8.8 million. An adverse development in our

business activities may require us to recognize additional significant impairment charges and write-off all or a

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substantial part of the carrying amount of our goodwill and brands. A write-off of all or a part of our goodwill

and brands would adversely affect our financial results.

We believe that our brands are important to our ongoing success, and damage to our brands could harm our

business results and reputation.

During the twelve-month period ended June 30, 2013, we generated 95.2% of our product sales (i.e., sales

excluding service sales, trading goods, transportation and inter-segment sales) from products marketed mainly

under the Ytong, Hebel, Multipor, Silka, Fermacell and Fels/Vapenka Vitosov brands. We believe that the brand

awareness, preference and loyalty that some professional and end-user customers exhibit for these brands in

many markets in which we operate are an important competitive advantage. The maintenance and protection of

our Ytong, Hebel, Multipor, Silka, Fermacell and Fels brands are therefore important for our future success. If

we are unable to protect and promote our brands effectively, our brands might not continue to be recognized by

our relevant customer groups for their high quality and advanced technical standards. This could have a material

adverse effect on our reputation, business, financial condition and results of operations.

Any threat to, or impairment of, our intellectual property rights could cause us to incur cost to defend these

rights.

As a company that manufactures and markets branded products, we rely on trademark protection to protect our

brands and currently own approximately 500 registered trademarks worldwide. We also have obtained and

applied for patents for certain of our technologies, including approximately 370 registered (or in the process of

registration) patents, utility models and registered designs worldwide. These protections may not adequately

safeguard our intellectual property and we may incur significant cost to defend our intellectual property rights,

which may adversely affect our results of operations. There is a risk that third parties, including our current

competitors, will infringe on our intellectual property rights, in which case we would have to defend these

rights. There is also a risk that third parties, including our current competitors, will claim that our products

infringe on their intellectual property rights. These third parties may bring infringement claims against us or our

customers, which may adversely affect our results of operation, our customer relationships and our reputation.

Currency rate and interest rate fluctuations might adversely affect our financial position and results of

operations.

Due to our international business activities, we are exposed to a variety of financial risks. In particular, these

include risks related to changes in foreign currency exchange rates and interest rates. Although we enter from

time to time into derivatives transactions to hedge against interest rate and currency risks, we may misjudge the

extent to which such hedges are required and, accordingly, be required to pay rates exceeding the prevailing

market price under our hedging agreements to effect certain transactions.

Interest rate risks exist as a result of potential changes in the market interest rate and might lead to a change in

fair value in the case of fixed interest-bearing financial instruments, and to fluctuations in interest payments in

the case of variable interest-bearing financial instruments. Our interest risks arise primarily from short-term

deposits and draw-downs on cash loan facilities. As of June 30, 2013, approximately €379.6 million of our

third-party indebtedness would have had a floating interest rate. With regard to variable interest-bearing

financial instruments, changes in market rates have an impact on our interest expense. However, on March 31,

2013, all existing interest hedging transactions expired at their scheduled maturities. To date, we have not

entered into new interest rate hedging arrangements and may continue to leave our variable interest rate

exposure unhedged. An increase of variable interest rates by 100 basis points would result in additional interest

expenses of approximately €3.8 million per annum. See “5. Management’s Discussion and Analysis of

Financial Condition and Results of Operations—Quantitative and Qualitative Disclosures about Market Risk—

Exchange Rate Exposure and Currency Risk Hedging”.

Our functional and reporting currency is the euro. Currency risk arises through fluctuations of the exchange rate

of the currencies of countries that are not part of the European Monetary Union and their impact on our results

of operations and statements of financial position as we translate the financial results from our subsidiaries in

those countries to the euro. We also face transactional currency exchange rate risks if income generated in one

currency is accompanied by cost in another currency. Net currency exposure from sales denominated in foreign

currencies arises to the extent that we do not incur corresponding expenses in the same foreign currencies.

The principal currencies we transact in (other than the euro) are Czech koruna, Polish zloty, Swiss franc and

Russian rouble. We attempt to absorb short and medium-term exchange rate fluctuations through hedging

transactions by entering into currency forward purchase agreements covering our expected exposure to currency

exchange rate risks for up to one year and require our subsidiaries to follow standardized group procedures and

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guidelines. Such currency forward purchase agreements in general cover parts of our expected net foreign

currency exposure in a fiscal year. Furthermore, currency exchange rate risks exist in connection with inter-

company financing activities between Group companies with different functional currencies. Exchange rate

risks related to such inter-company financings are generally also hedged by entering into currency forward

purchase agreements covering the outstanding principal amount of such inter-company loans (including interest

due at maturity). As of June 30, 2013, for such purposes we had outstanding currency forward agreements

amounting in total to €94.8 million. As of June 30, 2013, we also had financial liabilities denominated in Polish

zloty in an amount of PLN346.4 million, which provides an additional hedge against a depreciation of the Polish

zloty against the euro. We manage the remaining net exchange rate risk by partly hedging current receivables

and future sales as well as sourcing in currencies other than the functional currency of our foreign subsidiaries,

and by partly hedging current receivables and future sales with forward foreign exchange contracts. However,

these hedging transactions may prove to be insufficient. In the context of such transactions, we are also exposed

to the risk of the insolvency of the relevant counterparty. Furthermore, it is impossible to hedge completely

against exchange rate fluctuations. The business activities of our foreign competitors could be favored by

exchange rate advantages, meaning that we may lose customers and suffer a decline in sales. As the foreign

exchange markets are characterized by high volatility, exchange rate fluctuations could in the future have a

material adverse effect on our net assets, financial position and results of operations. Should we be unable to

structure our earnings capacity more independently of exchange rate fluctuations, this could have negative

effects on our sales and results of operations.

We have obligations to our employees relating to retirement and other obligations, the calculations of which

are based on a number of assumptions, including discount rates, life expectancies and rates of return on plan

assets, which may differ from actual rates in the future.

We operate both funded and unfunded defined-benefit pension schemes for beneficiaries under arrangements

that have been established in the various countries in which we offer employee pension benefits. As of

December 31, 2012, we had total pension obligations of €289.3 million, of which €177.0 million (61.2%) were

unfunded. Our defined benefit obligations are based on certain actuarial assumptions that can vary by country,

including discount rates, life expectancies, long-term rates of return on invested plan assets and rates of increase

in compensation levels. To the extent that the funded plans are not fully funded, the difference has been

provided for. If actual results, especially discount rates, life expectancies or rates of return on plan assets were to

differ from our assumptions, our pension obligations could be higher than expected and we could incur actuarial

remeasurements. Changes in all assumptions or under-performance of plan assets could also adversely affect our

financial condition and results of operations. In the fiscal years ended December 31, 2010, 2011 and 2012,

actuarial gains and losses were not posted to income until they lie outside a corridor of 10% of the higher

present value of the pension obligation and the plan assets (corridor approach). Any amount above such corridor

was amortized over the average remaining period of service of the workforce. In contrast, for 2013, Xella has

applied the revised International Accounting Standard (IAS 19), with corresponding retrospective application

for 2012. IAS 19 (revised) eliminates the corridor approach and requires recognition of all actuarial gains and

losses directly in a separate item within equity called other comprehensive income as they occur. In addition,

under IAS 19 (revised), the approach to assess interest cost and expected return on plan assets is replaced by

compulsory application of a uniform, market-based discount rate to both the defined benefit liability and any

corresponding plan asset (net interest approach). If invested pension plan assets perform negatively or below

assumptions we would incur actuarial losses and we could have to revise our assumptions. Future declines in the

value of plan assets or lower-than-expected returns may require us to make additional current cash payments to

pension plans. Significantly increased contribution obligations could have adverse effects on our financial

condition and results of operations. Moreover, local funding rules might require additional contributions to

avoid underfunding. The major part of the plan assets lies with one of the world’s largest providers of life

insurance, pensions and long-term savings. An insolvency of this provider could have a negative impact on our

financial condition and results of operations. In the fiscal years ended December 31, 2010, 2011 and 2012,

pension cost (expenses) amounted to €10.6 million, €11.5 million and €10.3 million, respectively, while pension

payments and fund allocations amounted to €14.1 million, €10.6 million and €11.1 million, respectively.

Pension expenses for 2012 were reduced from €10.3 million to €9.4 million due to the retrospective application

of IAS 19 (revised).

We are dependent on qualified personnel in key positions and employees having special technical knowledge.

Qualified and motivated personnel is one of the key factors for the further development of our business, in

particular our further technological development and geographic expansion. There is a risk that we may not be

able to attract key personnel to fill vacancies or that we fail to retain key employees. Personnel shortages and the

loss of key employees could negatively influence our further business development. In addition, there are risks

related to our dependence on individual persons in key positions, particularly at the level of the managing board

as well as in the areas of development, distribution, service, production, finance and marketing. The loss of

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management personnel or employees in key positions would lead to a loss of know-how, or under certain

circumstances, to the passing on of this know-how to our competitors. If one or more of these risks materialize,

this could adversely affect our business, financial condition and results of operations.

Our business may be affected by the default of counterparties in respect of money owed to us.

In the ordinary course of our business, we are often owed significant amounts of money by numerous

counterparties. In addition, we often hold significant cash balances on deposit with financial institutions or

invested on a short-term basis. These contractual arrangements, deposits and other financial instruments give

rise to credit risk on amounts due from such counterparties. During the financial crisis and the economic

downturn, we were increasingly exposed to the default of counterparties, including financial institutions and

customers with bad debts. If the economic conditions do not improve or continue to worsen, this could have a

material adverse effect on our financial condition and results of operations.

We depend on efficient and uninterrupted operations of our information and communication technology.

The operation of our production facilities as well as our sales and service activities depend on the efficient and

uninterrupted operation of complex and sophisticated computer, telecommunication and data processing

systems. Computer and data processing systems and related infrastructure (data center, hardware and wide and

local area networks) are generally exposed to the risk of disturbances, damage, electricity failures, computer

viruses, fire, other disasters, hacker attacks and similar events. Disruptions to operations or interruptions in

operations involving the systems may occur in the future and have occurred in individual cases in the past.

Although administration and production networks are separated, an interruption in the operations of computer or

data processing systems could adversely affect our ability to efficiently maintain our production processes and

to ensure adequate controls. Disruptions to or interruptions in operations could lead to production downtime

which, in turn, could result in lost sales. Information and communication technology-related risks are

particularly relevant since our information technology landscape is partly decentralized and influenced by a

history of acquisitions of businesses which operated proprietary information technology systems. In addition,

some of the software used by us is end user-developed by local personnel. As a consequence, the different

platforms in use for key processes may lead to inefficiencies, such as problems with interoperability,

malfunctions and higher cost. Further, our standard groupwide information technology systems may be

disturbed, damaged or disrupted. If one or more of these risks materializes, this could materially adversely affect


Our risk management and internal controls may not prevent or detect violations of law.

Our existing compliance processes and controls may not be sufficient in order to prevent or detect inadequate

practices, fraud and violations of law by our intermediaries, sales agents and employees. In certain business

transactions, we cooperate with intermediaries or sales agents whose activities we are not able to control,

especially in connection with promoting business in certain countries and in connection with mergers and

acquisitions. We pay the intermediaries customary commissions. We also cooperate with consultants in relation

to the expansion of our business activities, such as in certain Asian markets.

In the case that any intermediaries, consultants, sales agents or employees with whom we cooperate receive or

grant inappropriate benefits or generally use corrupt, fraudulent or other unfair business practices, we could be

confronted with legal sanctions, penalties and loss of orders and harm to our reputation. Especially given our

global alignment, complex group structure, size and the extent of our cooperation with intermediaries,

consultants and sales agents, our internal controls and procedures, policies and our risk management may not be

adequate, which could have a material negative impact on our reputation, business activities, financial position

and results of operations.

We are exposed to local business risks in many different countries.

Our growth strategy involves expanding outside of our core European markets, in particular into further Central

and Eastern European and Asian countries, and a significant portion of our current operations is conducted and

located outside of Germany. Further, we believe that sales generated outside of Germany in particular and, more

generally, outside of the European Union, will increasingly account for a material portion of our total sales in

the foreseeable future. Accordingly, our business is subject to risks resulting from differing legal, political,

social and regulatory requirements and economic conditions and unforeseeable developments in a variety of

jurisdictions, including in emerging markets. These risks include, among other things:

• political instability;

• social instability and frequency of crimes and corrupt practices;

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• differing economic cycles and adverse economic conditions;

• disruption of our operations, e.g., by strikes or governmental action;

• unexpected changes in the regulatory environment;

• varying tax regimes, including with respect to the imposition of withholding taxes on remittances and

other payments by our joint ventures or partnerships;

• fluctuations in currency exchange rates;

• inability to collect payments or seek recourse under or comply with ambiguous or vague commercial

or other laws;

• changes in distribution and supply chains;

• varying degrees of concentration among suppliers and customers as well as co-operations;

• insufficient protection against product piracy and other violations of our intellectual property rights;

• foreign exchange controls and restrictions on repatriation of funds; and

• difficulties in attracting and retaining qualified management and employees, or further rationalizing

our work force.

Our expansion into markets outside of our core European markets requires us to respond to rapid changes in

market conditions in these countries. Our overall success as a global business depends to a considerable extent

on our ability to anticipate and effectively manage differing legal, political, social and regulatory requirements

and economic conditions and unforeseeable developments. We may not continue to succeed in developing and

implementing policies and strategies which will be effective in each location where we do business or may do

business in the future.

If the European Monetary Union ceases to exist or one or more countries leave the European Monetary

Union, our business, financial condition and results of operations may be materially adversely affected.

Recent economic events affecting the European economies, including the sovereign debt and other economic

crises in Cyprus, Greece, Ireland, Italy, Portugal, Slovenia and Spain, have raised a number of questions

regarding the overall stability of the European Monetary Union. Despite measures taken by countries in the

European Monetary Union and the European Central Bank to alleviate credit risk, concerns persist with respect

to the ability of certain European Monetary Union countries to meet future financial obligations, the overall

stability of the euro and the suitability of the euro as a single currency given the diverse economic and political

circumstances in individual euro member states. The economic outlook is adversely affected by the risk that one

or more European Monetary Union countries could come under increasing pressure to leave the European

Monetary Union, or that the euro could cease to be the single currency of the European Monetary Union. The

legal and contractual consequences of such a development for the business of the Group and for holders of the

Notes would be determined by applicable laws in effect at such time. Any of these developments, or a

perception that any of these developments may be likely to occur, could have a material adverse effect on the

economic development of the affected countries or lead to economic recession or depression that could

jeopardize the stability of financial markets or the overall financial and monetary system. This, in turn, may

have a material adverse effect on our business, financial condition and results of operations.

We are exposed to risks in connection with joint ventures and other associated companies.

We conduct certain of our business operations through joint ventures and associated companies in which we

hold an interest, some of which are minority interests. In the twelve-month period ended June 30, 2013, we had

consolidated sales of €65.0 million from subsidiaries in which we hold more than 50% but less than 99.5% of

the shares. We may in the future also enter into further joint ventures or acquire participations in associated

companies. Some joint ventures or participations constitute financial investments, and we have only limited

influence on the business success of the companies concerned. With respect to other joint ventures, such as joint

ventures in Germany, Bosnia-Herzegovina and Russia, our ability to fully exploit the strategic potential in

markets in which we operate through joint ventures or associated companies would be impaired if we were

unable to agree with our joint venture partners or joint shareholders on a strategy and its implementation. The

interests of our joint venture partners or joint shareholders could generally conflict with our interests or the

interests of the holders of the Notes. Minority shareholders in certain joint ventures and associated companies

may also have approval or other rights under applicable corporate law or the applicable joint venture or

shareholder agreements or other organizational documents. The interests of these minority shareholders may

differ from our economic interests and prevent us from pursuing our preferred business strategies with the

relevant subsidiary. Our ability to implement organizational measures and pursue our preferred financial

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policies (in particular, dividend policies, capital expenditure plans and allocation of company assets) may also

be impeded. Further, in certain operating companies we hold a significant, but not a controlling interest. For

certain material decisions we may not be able to influence the decision making or may need to obtain the

consent of other shareholders. Such limitations could constrain our ability to pursue our corporate and economic

objectives in the future and, thus, could have a material adverse effect on our business, financial condition and

results of operations. In addition, our joint venture partners or joint shareholders could under certain conditions

terminate contractual relationships, exercise option rights to acquire or sell interests in our joint ventures

(especially through the exercise of “deadlock” provisions to the extent contained in the underlying joint venture

or shareholder agreement) or otherwise influence the day-to-day business of our joint ventures or other

associated companies. When a joint venture is dissolved or terminated, we may be required to make payments to

our partners in such joint venture. Furthermore, we could be subject to fiduciary or contractual obligations to our

joint venture partners or joint shareholders, which could prevent or impede our ability to unilaterally expand in a

business area in which such a joint venture or associated company operates. We also need to carry out any joint

venture activity and any other cooperation in compliance with applicable antitrust laws which may limit the

scope of such joint venture activity or cooperation. Each of these factors may have a material adverse effect on


We currently hold a majority interest in a Russian company operating a lime plant and a minority share in a

Russian company operating a limestone quarry, which in the past supplied, among others, the operating

company with limestone, in the form of a joint venture. Total sales of our Lime business in Russia during the

twelve-month period ended June 30, 2013 amounted to €20.4 million. Currently, a variety of disputes among the

joint venture parties exist about raw material supply, transfer of shares in the lime plant company and other

related issues. We successfully filed a suit against our joint venture partner to disclose the joint venture’s

documents and information for an independent audit. The court of first instance granted our claim to provide

access to these documents and information to a certified auditor. We intend to dissolve the Russian joint venture

and, if necessary, continue to or increasingly use other raw material suppliers for our lime plant. However, the

disputes with our joint venture partners may further intensify, which may eventually result in further financial

losses. In addition, the operation of our lime plant might be interrupted.

In addition, benefits we anticipate in certain joint ventures may not materialize and we may incur additional

costs or other disadvantages in connection with such joint ventures, which may have a material adverse effect on

our reputation, business, financial condition and results of operations.

We currently hold a majority interest of 50% plus one share in ecoloop GmbH, a joint venture with the inventors

of the Ecoloop technology who also serve as managing directors (Geschäftsführer) of ecoloop GmbH. The

success of our Ecoloop business unit critically depends on its ability to further improve the efficiency of the

Ecoloop technology which depends on the know-how of our joint venture partners. If we experience difficulties

or frictions within our Ecoloop partnership, it may have material adverse effects on the success of Ecoloop, the

management of the joint venture company, the further development of the Ecoloop technology, our business,


We may incur material cost as a result of warranty and product liability claims which could adversely affect

our profitability.

Our products are subject to express and implied warranties. Because of the long useful life of certain of our

products, it is possible that latent defects might not appear for several years. For example, we (in particular,

Xella Deutschland GmbH and Xella International GmbH) are currently facing potential warranty, product

liability and damages claims by several house owners in connection with the delivery of building materials by

our legal predecessor from certain plants in Northrhine-Westphalia, Germany, between the end of 1987 and

1996. The potential claims are based on the insufficient durability and water resistance of calcium silicate units

that had been produced in the relevant period applying an alternative production method, which substituted

another product for lime. As this resulted in inferior quality compared to the material properties of high-quality

calcium silicate units (such as our CSU), damages to the masonry of houses occurred in several instances. A

total of 23 legal proceedings for damages and 33 proceedings for the preservation of evidence (selbständiges

Beweisverfahren) have so far been initiated against us, as of June 30, 2013. While we believe the legal situation

is uncertain, we have renovated 219 houses as an accommodation and have made commitments for the

renovation of an additional 79 damaged buildings (partially already under renovation). It is uncertain how many

additional buildings may require renovation. Despite the fact that the press had already reported on the issue for

a number of years, it became the subject of further extensive press coverage and reports at the end of 2011,

which led to an increase in the number of reported cases at that time. Such new potential cases led us to

significantly increase the respective provisions in 2011 and to a lesser extent in 2012. As of June 30, 2013, we

had accrued provisions relating to the potential claims in a total amount of €70.2 million, based on our estimate

of the number of houses we may have to renovate. In the Share Purchase Agreement, our former shareholder,

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Haniel, has agreed to hold us harmless for such claims. See “4. Our Business and Industry—Legal and

Regulatory Proceedings—Litigation”.

Since 2011, we have been conducting extensive investigation measures with regard to a product liability case

involving reinforced AAC panels that show crack-formation. The production of these reinforced panels started

in the 1970s in The Netherlands and such reinforced panels were also delivered to Germany, the Benelux

countries and France. The oldest known damaged panel was produced in 1991. However, we expect that we will

not be exposed to claims or that such claims are now mostly time-barred, even though we have assisted

individual customers in the repair of affected panels and expect to consider accommodating other customers on

a voluntary basis in the future. We have established a provision to cover future expenditures for remedial

measures in connection with such damaged panels. However, if customers complain in connection with damage

that they have suffered, our reputation may be harmed. In addition, due to the lapse of time, documentation to

identify potentially affected customers might not be available so that we could be required to issue a public

warning.

Additionally, the load-bearing capacity of AAC in general mainly depends on tobermorite, a crystalline calcium

silicate hydrate phase. Under wet conditions, certain non-crystalline calcium silicate hydrate phases in AAC

may chemically react with carbon dioxide in the surrounding air, which may result in cracks, decrease of

compressive strength and significant increase in dry density. In particular, reinforced AAC panels and

components may deform over time. This so-called carbonization process may be prevented by higher

concentrations of tobermorite through the addition of sulfate as a catalyst in the crystallization process and

longer autoclaving times. However, in the 1970s AAC and reinforced AAC panels were produced industry-wide

without using sulfate as a catalyst. There are presently no legal proceedings for damages and to our knowledge

no structural danger to buildings exists.

We may not be successful in maintaining or reducing the historical level of warranty claims and claims in

connection with the supply of our products may increase significantly. Additionally, defects in our products may

result in product liability claims, product recalls, adverse customer reactions and negative publicity about us or

our products. Product failures, in particular of building materials produced by us or our predecessors or acquired

businesses, could result in substantial harm to people or property. While we hold insurance for product liability

risks or have contractual arrangements to hold us harmless against such claims, such insurance and contractual

arrangements may not adequately cover any such matter, insurance coverage may not continue to be available

on commercially reasonable terms or the insurance carrier or the contractual partner may not have sufficient

funds to cover all claims, if any. Defects may also require expensive modifications to our products and may

adversely affect our reputation. If any of these events occur, our reputation, business, financial condition and

results of operations could be materially adversely affected, even if we are not legally liable for particular

claims.

In our Ecoloop business unit, we may have failed to identify or detect material risks in the Ecoloop technology

which may also require expensive modifications to the Ecoloop technology and installed plants or require us to

abandon the Ecoloop project and may adversely affect our reputation, business, financial condition and results

of operations.

Our insurance coverage may not be adequate to cover all the risks we may face and if we were no longer

covered by our existing insurance, it may be difficult to obtain replacement insurance on acceptable terms or

at all.

Due to the nature of the building materials, dry lining and lime industries, companies and their operations are

generally difficult and expensive to insure. Our production plants, equipment and other assets are insured for

property damage and business interruption risks, and our business as a whole is insured for products liability

risks. We believe that these insurance policies are generally in accordance with customary industry practices,

including deductibles and limits of cover, but we cannot be fully insured against all potential hazards incident to

our business, including losses resulting from risks of war or terrorist acts, certain natural hazards (such as

earthquakes), environmental damages or all potential losses, including damage to our reputation. If we were to

incur a significant liability for which we were not fully insured, or if premiums and deductibles for certain

insurance policies were to increase substantially as a result of any incidents for which we are insured, our

business, financial condition and results of operations could be materially adversely affected.

We are subject to risks from legal proceedings.

We are involved in litigation in the ordinary course of business and could become involved in additional legal

and arbitration disputes in the future which may involve substantial claims for damages or other payments,

including damages claims by customers in connection with past or future violations of antitrust laws or

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compensation owed to former minority shareholders in connection with squeeze-out proceedings. The outcome

of currently pending or potential future proceedings is difficult to predict with any certainty. In the event of a

negative outcome of any material legal or arbitration proceeding, whether based on a judgment, award or a

settlement, we could be obligated to make substantial payments. In addition, the cost related to litigation and

arbitration proceedings may be significant. In September 2011, we bought an AAC plant in Pontenure, Italy,

including assets and finished goods. The seller subsequently filed for bankruptcy. We are claiming a

considerable indemnity amount for damaged autoclaves and other issues and are withholding parts of the

purchase price. If we are not successful in asserting our indemnity claims, we may be forced to pay out the

withheld purchase price. Conversely, the administrator may challenge the fair market value of the purchase price

and ultimately the purchase of the plant, which could result in additional payments to cover any difference

between the fair market value and the actual purchase price. If any of these risks materializes, our business,

financial condition and results of operations could be materially adversely affected.

We are subject to certain competition and antitrust laws.

Our business is subject to applicable competition and antitrust laws, rules and regulations. In general, these laws

are designed to preserve free and open competition in the marketplace in order to enhance competitiveness and

economic efficiency. While we believe we are generally in compliance with all applicable competition and

antitrust laws, rules and regulations we may become subject to investigations and proceedings by national and

supranational competition and antitrust authorities for alleged infringements of competition or antitrust laws.

This may result in fines or other forms of liability, which could have a material adverse effect on our reputation,

business, financial condition and results of operations. As a result of heightened scrutiny or changes in

regulatory policies by competition authorities we could be required or decide to dissolve certain joint venture

companies, particularly in the CSU market segment. Depending on our current shareholdings in such joint

venture companies and negotiations with other shareholders, we could be required to purchase shares currently

held by minority shareholders, acquire individual plants currently operated by the joint venture companies or

pay or receive financial compensation to leave such joint venture companies based on valuations that are

inherently uncertain. Depending on the particular facts and circumstances, we could become subject to certain

limitations on future acquisitions and certain business practices if we were found to have obtained a dominant

position in certain markets.

We are subject to numerous environmental, building, health and safety regulations, technical standards and

other regulations.

We are subject to a number of European Union, national, state and municipal environmental, building and

occupational health and safety laws, rules and regulations and technical standards relating to the protection of

the environment and natural resources, including those governing air emissions, energy performance of

buildings, hazardous substances and waste, water discharges, transportation, remediation of contamination and

workplace health and safety. Several of the regulatory requirements that apply to our business operations have in

the recent past become more stringent, and we expect some of them to become even more stringent in the future.

For example, several product features of our Building Materials products (such as thermal insulation) address

increasing energy performance requirements for buildings. In May 2010, the European Parliament and the

Council adopted Directive 2010/31/EU on the energy performance of buildings which aims at extending the

scope of Directive 2002/91/EC by setting and strengthening a legal framework to revise the national building

codes and by launching a policy of increasing the number of highly energy-efficient buildings by 2020. For

further information about the various laws, rules and regulations as well as technical standards applicable to our

business operations, see “4. Our Business and Industry—4.16 Regulation”.

Compliance with environmental, health and safety laws and regulations as well as technical standards applicable

to our business operations entails and is expected to continue to require considerable capital expenditures and

other cost. In addition, any violation of or liability under these laws and regulations, such as future

contaminations of air, surface water, groundwater, sediments or soil, could result in substantial penalties and

remediation cost, temporary or permanent shutdowns of certain of our production facilities, temporary or

permanent prohibitions on the marketing and sale of certain products, third-party claims and negative publicity.

Any of these factors could have a material adverse effect on our business, financial condition and results of

operations. See “—Obligations resulting from environmental conditions at our current and former production

and other sites could have a material adverse effect on our business, financial condition and results of

operations”.

We are also required to obtain and maintain permits from governmental authorities for many of our operations.

These permits are subject to modification, renewal and revocation by governmental authorities. For example, in

January 2011, the European Directive 2010/75/EC on industrial emissions (“IED Directive”) came into force

which sets out rules on the prevention and control of pollution from industrial activities and includes rules aimed

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at reducing emissions into air, water and land, as well as preventing the generation of waste in order to achieve a

high level of overall environmental protection. Since January 2013, Germany has been required to comply with

the emissions limits for certain industries. Although the IED Directive and its implementation provide

transitional provisions, once a new industry standard becomes binding, existing permits, which are not in

compliance with such standard, will not be grandfathered but will be adjusted with respect to the new (binding)

standard. We have in the past incurred, and will in the future incur, significant cost for capital and operating

expenditures to obtain and maintain necessary permits. However, we cannot ensure that we will also in the

future be able to obtain and finance all permits which we require for our business operations. Any such failure

or any violation of the terms and conditions of such permits or revocation of existing permits could have a

material adverse effect on our business, financial condition and results of operations.

In addition, the disposal of waste is often restricted to licensed facilities or, for example in Germany, generators,

owners, collectors and transporters of waste must demonstrate to the competent authority and to other parties

that they have properly disposed of hazardous waste by proof of waste disposal. Requirements for regulated

substances (especially for sulphates included, e.g., in AAC and Multipor) may reduce the possibility for landfill

disposals and may result in higher costs of disposal. In addition, we cannot exclude for the future that a “taking

back” obligation may be introduced which may result in higher cost for disposal of products containing

sulphates.

At our production facilities and mainly at construction sites, quartz and tobermorite (contained, in particular, in

AAC, Multipor and CSU) are released in the form of dust which is considered to be carcinogenic. Future limits

on the use of crystalline silica may result in additional costs in the production process and more complex

handling procedures at construction sites due to more extensive workplace safety requirements. In addition,

some of the tobermorite crystals (contained in AAC, Multipor and CSU) may be classified as mineral fibers

according to the definition of the World Health Organisation. Such classification could damage the public image

of the materials and further complicate handling at construction sites due to more extensive requirements for

worker safety requirements, which may increase costs. Consumer concern about quartz dust or mineral fiber

included in certain products or released during production process, construction or use of certain products may

negatively affect the reputation of our AAC, Multipor and CSU products.

We also received certain subsidies in connection with certain of our projects, such as research and development

or expansion of existing plants. If these projects may not be continued or if the relevant authority concludes that

subsidies have not used for the appropriate purpose, we may be required to repay any subsidies paid to us, which

would have a material adverse effect on our business, financial condition and results of operations.

Regulations regarding carbon dioxide emissions could have a material adverse effect on our business,


We operate a total of 99 production plants plus other industrial facilities. Our operations result in the release of

substantial quantities of carbon dioxide, in particular in the lime production process. The emission of carbon

dioxide is subject to a constantly developing body of laws and regulatory requirements addressing the

challenges of global climate change by reducing greenhouse gas emissions, promoting higher efficiency in the

use of energy from conventional sources and increasing the use of energy from renewable sources. In the

European Union, regulations attempt to both reduce greenhouse gas emissions and to establish a mechanism for

trading in carbon dioxide emission allowances. For the carbon dioxide emission allowances trading period

which commenced in 2013, the quantity of emission allowances allocated each year under the EU Emission

Trading System (“ETS”) was reduced by a linear factor of 1.74% annually as compared to the average annual

total quantity of emission allowances issued in the European Union in previous years. In addition, since January

2013, a full auctioning of emission allowances has been gradually introduced for the manufacturing sector by

reducing the allocation of emission allowances free of charge from 80% in 2013 to 30% in 2020 and to 0% in

2027. As a result, we will need to purchase a significant, and steadily increasing, share of emission allowances

in auctions in the future, which will result in substantial additional cost. The impact of these requirements will

be aggravated by a mechanism in the allocation of emission allowances that implements a benchmark system

with a specific adjusting factor, for each of the years from 2013 to 2020, which has been set at an average of

0.8841, for each year, in the determination of the amount of emission allowances for each plant. An exemption

from the general auctioning mechanism will be available for certain energy-intensive industries which are

exposed to a significant risk of relocation of plants to countries with less stringent climate protection laws, a

phenomenon known as “carbon leakage”. Although all of our Lime plants in Germany and the Czech Republic

are subject to the ETS, they benefit from the current carbon leakage exemption and have therefore initially been

allocated emission allowances free of charge. The European Commission will determine every five years which

industries are threatened by carbon leakage. Thus, there is no certainty that the lime industry will again be

considered as being threatened by carbon leakage. If the European Commission concludes that no such threat

exists in 2015 or at the time of any later determination, the regular emissions reduction scheme would also apply

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to our Lime plants and we would be required to purchase emission allowances in the amount required for our

production purposes. According to the previous estimates by the European Commission, the application of the

revised emission trading scheme would result in an increase of production cost for lime by more than 30%. See

“4. Our Business and Industry—4.16 Regulation—Climate Change Law”.

Our Building Materials business unit is currently not affected by the ETS as the thermal capacity does not

exceed 20 MW in any of its plants. However, two plants (one in Italy and one in The Netherlands) may exceed

the threshold when certain capacity limits are exceeded or production lines that are currently not in operation are

reactivated. In our Dry Lining business unit, only our Fermacell plant in Münchehof, Germany and our new

plant in Orejo, Spain, are affected and were required to purchase 20% emission allowances in 2013 and will,

based on our current expectations, be required to cover their carbon dioxide emissions in future auctions (70%

in 2020 and 100% in 2027). Compliance with existing, new or proposed regulations governing such emissions

might lead to a need to reduce carbon dioxide emissions, to purchase rights to emit carbon dioxide from third

parties, or to make other changes to our business, all of which could result in significant additional cost or could

reduce demand for our products. In addition, we require large quantities of energy in various forms for our

production processes. Existing, new and proposed regulations relating to the emission of carbon dioxide by our

energy suppliers could result in materially increased energy cost for our operations and we may be unable to

pass on these increased energy cost to our customers, which could have a material adverse effect on our

business, financial condition and results of operations. See “—Increased energy cost or disruptions in energy

supplies could have a material adverse effect on our business, financial condition and results of operations”.

Obligations resulting from environmental conditions at our current and former production and other sites

could have a material adverse effect on our business, financial condition and results of operations.

Many of our current and former facilities and properties have long histories of industrial operations, some of

which were of a different nature than our current operations. In addition, we have responsibility for a large

number of sites relating to companies we acquired, owned or operated in the past that had businesses and

operations unrelated to those presently carried out by us. On many of these sites, now or in the past, waste and

hazardous substances have been used, stored or released in significant quantities. Contaminants have been

detected at some of these sites. Although our remedial responsibilities at these sites have not been material to

date, the ultimate cost of remediation is difficult to accurately predict, and we could incur significant additional

cost as a result of the discovery of additional contaminations or the imposition of additional remediation

obligations at these or other sites in the future, including related governmental fines or other sanctions and

claims for property damages or personal injury. In addition, with respect to plants and sites that we have

acquired in the past, we may have failed to properly identify and assess potential risks in this regard. In such a

case, we might not succeed in claiming damages or indemnification against the relevant seller. Furthermore,

there is only limited insurance coverage for financial liabilities arising from soil, water and other forms of

contamination. Any of these risks could have a material adverse effect on our business, financial condition and

results of operations. For example, we are liable for the contamination of a property sold by us in the past. As

the maximum amount of the claim is limited by the underlying contract and subject to a contractual

indemnification claim against a third party, we believe that our total exposure under the claim will not exceed

€2.0 million. We could incur additional cost, however, if the third party is unwilling or unable to meet its

indemnification obligation.

We are subject to significant reclamation and recultivation obligations in connection with lime quarries and

sand pits.

We operate several quarries and pits in which we excavate limestone and sand. With these operations, certain

reclamation, recultivation and occasionally renaturation obligations arise, which may lead to cash outflows upon

complete or partial closure of a quarry or pit. As of June 30, 2013, we had made provisions for any such

measures in a total amount of €38.0 million. However, the estimated provisions resulting from reclamation,

recultivation and renaturation obligations could change and the amount of cost not covered by provisions could

increase if the assumptions underlying our estimates are inaccurate, actual cost differ from our assumptions or

the underlying facts or governmental requirements change. This could require us to spend greater amounts than

anticipated and could have a material adverse effect on our business, financial condition and results of

operations. See “4. Our Business and Industry—4.16 Regulation—Excavation of Raw Materials”.

In addition, in many jurisdictions we are required to secure certain of our reclamation and closure obligations

for our quarries and pits primarily through the use of financial assurance mechanisms, such as bonds and bank

guarantees. In the event of a material adverse change in our financial condition, or in response to an economic

downturn or volatility in the financial markets, financial assurance providers may have the right and could

decide not to issue or renew the financial assurances, to demand additional collateral upon renewal, or to require

us to obtain a discharge of the financial assurance provider’s liability under the financial assurances or to

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provide cash or letters of credit equal to 100% of the amount of the outstanding financial assurances. A failure

to maintain or renew, or our inability to acquire or provide a suitable alternative for, any such financial

assurances and any exercise of rights the financial assurance providers have to require us to discharge the related

liability or to provide additional collateral would have a material adverse effect on our business, financial


The adoption of new or revised International Financial Reporting Standards may have material effects on

our future consolidated financial statements.

The International Financial Reporting Standards (IFRS) comprise IFRS issued by the International Accounting

Standards Board, the International Accounting Standards (IAS) as well as the interpretations of the International

Financial Reporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC). Our

consolidated financial statements and interim consolidated financial statements included elsewhere in this report

comply with the IFRS as adopted by the European Union as of the date of such financial statements. In the

future, the adoption of new or revised standards or interpretations relating to the presentation of net assets, our

financial position or results of operation may have a material effect on our future consolidated financial

statements. For example, new standards relating to the accounting for leases may result in significant shifts

between “other expenses”, “depreciation & amortization expenses” and “financial result” in our consolidated

income statement as well as between “fixed assets” and “financial liabilities” in our consolidated statement of

financial position.

Pending and future tax audits within our Group and changes in fiscal regulations could lead to additional

tax liabilities.

Xella International Holdings S.à r.l. and its subsidiaries are subject to routine tax audits by the respective local

tax authorities. Xella International Holdings S.à r.l. as well as its German subsidiaries are currently subject to a

tax audit by the German tax authorities covering corporate income tax, trade tax, real estate transaction tax,

VAT and certain investment subsidies for the assessment periods 2006 through 2009. As the tax audit has not

yet been finalized, we cannot exclude that actual tax payment obligations arising from the tax audit may exceed

the amount reflected in our financial statements. In the Share Purchase Agreement, our former shareholder,

Haniel, has agreed to hold us harmless for certain tax obligations, warranty obligations and other risks for

periods up to and including March 2008.

Future tax audits in Germany or other jurisdictions may result in additional tax and interest payments which

would negatively affect our financial condition and results of operations. Changes in fiscal regulations or the

interpretation of tax laws by the courts or the tax authorities in Germany or foreign jurisdictions in which we are

conducting our business may also have adverse consequences for us.

Due to restrictions on the deduction of interest expenses or forfeiture of interest carry-forwards under

German law, we may be unable to fully deduct interest expenses on our financial liabilities.

A certain amount of our Group’s annual financing expenses (interest payments) is not deductible under the

German interest barrier rules (Zinsschranke). Subject to certain prerequisites, the German interest barrier rules

impose certain restrictions on the deductibility of interest for tax purposes. The German interest barrier rules

generally provide for a limitation on the deduction of net interest expenses exceeding 30% of tax-adjusted

EBITDA. For purposes of the interest barrier rules, all businesses belonging to the same fiscal unity

(Organschaft) for corporate income and trade tax purposes are treated as one single business. Any non-

deductible amount exceeding the threshold of 30% is carried forward and may be, again subject to the interest

barrier rules, deductible in future fiscal years. An interest carry-forward may be forfeited in part or in full in

connection with certain measures, such as a change of the ownership structure. The restriction of the

deductibility of interest expenses for tax purposes may have adverse consequences for our financial condition

and results of operations.

Restrictions of the utilization of our tax loss carry-forwards may have an adverse effect on our financial


Certain of our German subsidiaries have considerable tax loss carry-forwards which have partially been

capitalized as deferred tax assets in the consolidated financial statements for the fiscal year ending on

December 31, 2012. The use of such existing tax loss carry-forwards and ongoing losses for German corporate

income and trade tax purposes may be forfeited in case of a direct or indirect transfer of shares, subject to

certain limited exceptions. Such restriction, applying to both corporate income and trade tax, depends on the

percentage of share capital or voting rights transferred within a five-year period to one acquirer or person(s)

closely related to the acquirer or a group of acquirers with a common interest. If more than 25% of the share

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capital or voting rights are transferred to such an acquirer, tax loss carry-forwards and current losses will be

forfeited on a pro rata basis while a transfer of more than 50% will result in total forfeiture. To the extent that

the utilization of tax losses is restricted, they cannot be set-off against future tax profits which would result in

increased future tax burdens. In addition, any such restriction may require a write-down of the deferred tax

assets in our consolidated financial statements. This would negatively impact our financial condition and results

of operations.

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8. FORWARD-LOOKING STATEMENTS

This report includes forward-looking statements within the meaning of the securities laws of applicable

jurisdictions. These forward-looking statements include, but are not limited to, all statements other than

statements of historical facts contained in this report, including, without limitation, those regarding

• our strategy, outlook and growth prospects, including our operational and financial targets;

• the economic outlook in general and, in particular, economic conditions in the Western European,

Central and Eastern European, North American and Asian markets;

• the competitive environment in which we operate;

• the expected growth of the markets in which we operate;

• growth in demand for our products, increases in the penetration of our products into their respective

markets, substitution of, or by, other building materials, or similar measures;

• our expansion plans, including planned expansion into and growth in mature and emerging markets

and potential acquisitions;

• our ability to obtain necessary regulatory approvals for our newly developed products; and

• our ability to develop, market and launch attractive new products and services.

In some cases, you can identify forward-looking statements by terminology such as “aim”, “anticipate”,

“believe”, “continue”, “could”, “estimate”, “expect”, “forecast”, “intend”, “may”, “plan”, “potential”, “predict”,

“project”, “should”, or “will” or the negative of such terms or other comparable terminology. The forward-

looking statements used herein are based on a number of assumptions and estimates and are subject to known

and unknown risks, uncertainties and other factors that may or may not occur in the future. As such, we caution

you that forward-looking statements are not guarantees of future performance and that our actual results of

operations, including our financial condition and liquidity and the development of the industry in which we

operate, may differ materially from those expressed or implied by our forward-looking statements. Important

risks, uncertainties and other factors that could cause these differences include those listed under the captions

“4. Our Business and Industry”, “5. Management’s Discussion and Analysis of Financial Condition and Results

of Operations”and “7. Risks Related to Our Business and Our Industry” and relate to, among others:

• global or regional economic conditions in the markets in which we produce or sell our products;

• the success of our principal product offerings;

• acceptance of our products by decision makers in the construction industry;

• changes in currency exchange rates;

• loss of key suppliers or change in the availability or cost of raw materials or components used in our

products;

• natural or man-made disasters affecting our manufacturing facilities;

• inadequate protection of our intellectual property rights;

• changes to or enforcement of governmental and environmental regulations and health and safety

requirements applicable to our operations and products;

• our ability to expand our business, complete acquisitions and successfully integrate acquired

businesses;

• actions taken by legislators and regulatory authorities with respect to requirements in terms of energy

efficiency or carbon dioxide emissions;

• litigation we may be involved in from time to time; and

• our level of indebtedness and capital structure and the terms of the Notes and our other financing

instruments.

We urge you to read the sections of this report entitled “4. Our Business and Industry”, “5. Management’s

Discussion and Analysis of Financial Condition and Results of Operations”and “7. Risks Related to Our

Business and Our Industry” for a more complete discussion of the factors that could affect our future

performance and the markets in which we operate. The forward-looking statements herein speak only as of the

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date on which the statements were made. We undertake no obligation, and do not intend, to update or revise any

forward-looking statement, whether as a result of new information, future events or developments or otherwise.

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9. INDUSTRY AND MARKET DATA

We operate in certain segments of the building materials sector for which it is difficult to obtain precise industry

and market information. Market data and certain economic and industry data and forecasts used, and statements

regarding our position in the industry made, in this report were estimated or derived based upon assumptions we

deem reasonable, from internal estimates and surveys, market research, government and other publicly available

information, reports prepared by consultants and independent industry publications. These include information

published by B&L Marktdaten GmbH, Bundesverband der Deutschen Kalkindustrie (2012), Euroconstruct (June

2010, December 2010, June 2013), Global Gypsum Directory 2013 and USGS 2012 Mineral Studies as well as

research performed exclusively for our Group. While we believe these statements to be reliable, they have not

been independently verified, and we do not make any representation or warranty as to the accuracy or

completeness of such information set forth in this report. Additionally, industry publications and such reports

generally state that the information contained therein has been obtained from sources believed to be reliable, but

that the accuracy and completeness of such information is not guaranteed and in some instances state that they

do not assume liability for such information. We cannot therefore assure you of the accuracy and completeness

of such information as we have not independently verified such information.

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10. PRESENTATION OF FINANCIAL AND OTHER INFORMATION

Financial Information

The consolidated financial statements and interim consolidated financial statements included in this report have

been prepared in accordance with the International Financial Reporting Standards, as adopted by the European

Union (“IFRS”). In this report, financial information has been derived from the audited consolidated financial

statements including the notes thereto of Xella International Holdings S.à r.l. as of and for the fiscal years ended

December 31, 2011 and 2012 and the unaudited interim consolidated financial statements including the selected

explanatory notes of Xella International Holdings S.à r.l. as of and for the six-month period ended June 30,

2013. Xella International Holdings S.à r.l. is a holding company with no operations of its own (its main assets

consist of 94.5% of the shares in the Company (the holding company for the Xella Operations Group) held

directly and indirectly (as of June 30, 2013), certain shareholder loans made to the Company and cash on hand).

The consolidated financial information for Xella International Holdings S.à r.l. may therefore not be fully

comparable with consolidated financial information for Xella International S.A.

Consolidated segment information from the audited consolidated financial statements including the notes thereto

of Xella International Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011 and 2012 and the

unaudited interim consolidated financial statements and the selected explanatory notes thereto of Xella

International Holdings S.à r.l. as of and for the six-month period ended June 30, 2013 eliminates effects of inter-

segment sales, primarily in connection with lime supplied by the Lime business unit to the Building Materials

business unit and certain building materials supplied by the Building Materials business unit to the Dry Lining

business unit. In this report, percentages relating to the portion of total sales and total Normalized EBITDA

attributable to each of the segments include effects from such inter-segment sales and do not include any

eliminations. As a result, percentages for sales and Normalized EBITDA by segment may add up to more than

100%. In this report, amounts of external sales for each of our business units eliminate effects from inter-

segment sales. Consolidated segment information from the audited consolidated financial statements including

the notes thereto of Xella International Holdings S.à r.l. as of and for the fiscal years ended December 31, 2011

and 2012 includes Ecoloop in our Lime business unit so that in particular expenses for research and

development in connection with the new Ecoloop technology were recorded in our Lime business unit. Effective

as of January 1, 2013, Ecoloop has been established as a separate segment. As a result of an improvement

project, we reclassified certain of our spare parts from inventories (current assets) to property,

plant & equipment (non-current assets), depending on the estimated useful lives of such spare parts. This

change, in accordance with IAS 16, has been applied effective as of January 1, 2013 and resulted in the

reclassification of spare parts in an aggregate amount of €23.4 million as of January 1, 2013. As a result of the

reclassification, the depreciable amounts of these non-current spare parts are allocated over their expected useful

lives and recognized under depreciation & amortization expenses, while other spare parts classified as current

assets continue to be treated as inventories and generally are recognized under other expenses as consumed. This

change was adopted prospectively and is not reflected in the consolidated financial information for fiscal years

and interim periods prior to January 1, 2013. In the six-month period ended June 30, 2013, non-current spare

parts in an amount of €8.0 million were added to property, plant & equipment and depreciation of €3.6 million

for spare parts classified as non-current assets was recognized under depreciation & amortization expenses.

Effective as of January 1, 2013, Xella International Holdings S.à r.l. has applied IAS 19 (revised), relating to

employee benefits. Figures for the six-month period ended June 30, 2012 have been adjusted retrospectively.

Information for the twelve-month period ended June 30, 2013 is unaudited and has been calculated by taking the

results of operations for the six-month period ended June 30, 2013 (for which IAS 19 (revised)) has been

applied) and adding it to the difference between the results of operations for the fiscal year ended December 31,

2012 (for which IAS 19 (revised) has not been applied retrospectively) and the six-month period ended June 30,

2012 (for which IAS 19 (revised) has been applied retrospectively).

Non-IFRS Financial Measures

This report contains non-IFRS measures and ratios, including EBITDA, EBIT, Normalized EBITDA,

Normalized EBITDA margin, Operating Free Cash Flow, Adjusted Free Cash Flow, working capital, net debt

and leverage and coverage ratios, that are not required by, or presented in accordance with, IFRS. We present

non-IFRS measures because we believe that they and similar measures are widely used by certain investors,

securities analysts and other interested parties as supplemental measures of performance and liquidity. The non-

IFRS measures may not be comparable to other similarly titled measures of other companies and have

limitations as analytical tools and should not be considered in isolation or as a substitute for analysis of our

operating results as reported under IFRS. Non-IFRS measures and ratios, such as EBITDA, EBIT, Normalized

EBITDA, Normalized EBITDA margin, Operating Free Cash Flow, Adjusted Free Cash Flow, working capital,

net debt and leverage and coverage ratios are not measurements of our performance or liquidity under IFRS and

should not be considered as alternatives to operating profit or profit for the year or any other performance

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measures derived in accordance with IFRS or any other generally accepted accounting principles or as

alternatives to cash flows from operating, investing or financing activities. See “—Financial Information”.

Certain numerical figures set out in this report, including financial data presented in millions or thousands and

percentages describing market shares, have been subject to rounding adjustments and, as a result, the totals of

the data in this report may vary slightly from the actual arithmetic totals of such information. Percentages and

amounts reflecting changes over time periods relating to financial and other data set forth in “5. Management’s

Discussion and Analysis of Financial Condition and Results of Operations” are calculated using the numerical

data in the consolidated financial statements of Xella International Holdings S.à r.l. or the tabular presentation of

other data (subject to rounding) contained in this report, as applicable, and not using the numerical data in the

narrative description thereof. The non-IFRS measures we present may also be defined differently than the

corresponding terms under the Indenture. Some of the limitations of these non-IFRS measures are:

• they do not reflect our cash expenditures or future requirements for capital expenditures or contractual

commitments;

• they do not reflect changes in, or cash requirements for, our working capital needs;

• they do not reflect the significant interest expense, or the cash requirements necessary, to service

interest or principal payments on our debt;

• although depreciation & amortization are non-cash charges, the assets being depreciated and

amortized will often need to be replaced in the future and EBITDA does not reflect any cash

requirements that would be required for such replacements; and

• some of the exceptional items that we eliminate in calculating Normalized EBITDA reflect cash

payments that were made, or will in the future be made.

Operating Data

Except as otherwise indicated, in this report the amounts or percentages, as the case may be, of our production

volumes, capacity utilization rates, the number of our employees and the proportion of fixed and variable cost in

our business units are based on management estimates and are unaudited. Actual amounts and percentages may

differ from the amounts and percentages presented based on such management estimates. Capacity utilization

rates for our Building Materials and Dry Lining business units are based on standard capacity, which means

operation of plants for 24 hours per day for five days per week, as opposed to maximum capacity, which means

operation of plants for 24 hours per day for seven days per week. As a result, capacity utilization rates may

exceed 100%. Capacity utilization rate for our Lime business unit is based on operationally feasible maximum

capacity taking into account production stops from regular maintenance work and the current product mix.

Production volumes, capacity utilization and capacity are stated and calculated only for plants producing our

main products: autoclaved aerated concrete (“AAC”), calcium silicate units (“CSU”), mineral insulation board

(“Multipor”), gypsum fiber boards, cement-bonded boards, lime and limestone (production volumes only).

Capital expenditures presented under “1. Summary—1.4 Summary Financial and Operating Information” and

discussed under “5. Management’s Discussion and Analysis of Financial Condition and Results of Operations—

Liquidity and Capital Resources—Capital Expenditures” are not identical with cash flows from investing

activities as shown under “—Liquidity and Capital Resources”. The main differences are the following: on the

one hand, (i) capital expenditures as shown do not include cash received from disposals and from interest and

investment income; (ii) loans and financial receivables are not taken into account; (iii) cash received from

government grants is not offset against cash paid for corresponding investing activities; and (iv) timing

differences from purchase price payables are not reflected. On the other hand, capital expenditures as shown

include payments made for the acquisition of shares in subsidiaries without effecting a change of control, which

pursuant to IAS 7 are included as financing activities in the fiscal years ended December 31, 2010, 2011 and

2012.

Currency Presentation

In this report, all references to “ euro,” “EUR” and “€” are to the single currency of the member states of the

European Union participating in the third stage of economic and monetary union pursuant to the Treaty on the

Functioning of the European Union, as amended or supplemented from time to time; all references to “zloty” or

“PLN” are to Polish zloty, the lawful currency of Poland; all references to “koruna” or “CZK” are to Czech

koruna, the lawful currency of the Czech Republic; all references to “franc” or “CHF” are to Swiss franc, the

lawful currency of Switzerland; all references to “rouble” or “RUB” are to Russian rouble, the lawful currency

of Russia; all references to “peso” or “MXN” are to Mexican peso, the lawful currency of Mexico; and all

references to “U.S. dollars,” “USD” and “$” are to the lawful currency of the United States of America.

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11. CERTAIN DEFINITIONS

Unless otherwise specified or the context requires otherwise in this report:

• “Acquisition” means the acquisition of Xella International GmbH and other companies of our Group

by Xella International S.à r.l. pursuant to the Share Purchase Agreement and effective as of August 30,

2008.

• “Adjusted Free Cash Flow” means Free Cash Flow less cash spent for acquisitions of shares in

subsidiaries without effecting a change of control.

• “Building Materials” means our Building Materials business unit.

• “Capex/Acquisition Facility” means the originally €75 million acquisition and capital expenditure

credit facility made available under the Senior Facilities Agreement.

• “Central and Eastern Europe” means Albania, Austria, Belarus, Bosnia-Herzegovina, Bulgaria,

Croatia, the Czech Republic, Estonia, Hungary, Kosovo, Latvia, Lithuania, Macedonia, Moldova,

Montenegro, Poland, Romania, the European part of Russia, Serbia, Slovakia, Slovenia and the

Ukraine.

• “Company” means Xella International S.A. or Xella International S.A. and its subsidiaries (which do

not guarantee the Notes), as the case may be.

• “Conversion and Loan Agreement” means the conversion and loan agreement that the Xella HoldCo

Finance S.A. and Xella International Holdings S.à r.l. will enter into immediately following the

acquisition of the Vendor Loan Note in order to convert the Vendor Loan Note into a loan in an

amount equal to the then outstanding aggregate principal amount (including accrued interest) under

the Vendor Loan Note.

• “Covenant Agreement” means the covenant agreement dated June 1, 2011, among, inter alios, the

Senior Secured Notes Issuer, the Company, the guarantors under the Senior Facilities Agreement and

the trustee under the Senior Secured Notes Indenture, whereby each of the Company and the

guarantors under the Senior Facilities Agreement agreed to be bound by certain covenants that benefit

the Facility D1 Tranche of the Senior Facilities Agreement.

• “CPECs” means the series of unsecured registered interest-bearing convertible preferred equity

certificates issued by Xella International Holdings S.à r.l. on August 28, 2008.

• “Dry Lining” means our Dry Lining business unit.

• “EBITDA” means earnings before interest, taxes, depreciation, amortization, results from associates

and other investments and other financial results.

• “Ecoloop” means our business which has been established as a separate business unit since January 1,

2013, organized under ecoloop GmbH, a joint venture between Conera Process Solution GmbH (a

holding company of the initial inventors of the Ecoloop technology, Leonhard Baumann and Roland

Möller, who also serve as managing directors (Geschäftsführer) of ecoloop GmbH) and

XI (EC) Holdings GmbH in which our subsidiary XI (EC) Holdings GmbH holds a majority interest

of 50% plus one share.

• “Europe” means Western Europe and Central and Eastern Europe, unless otherwise indicated.

• “Facility A” means the term loan Facility A under the Senior Facilities Agreement.

• “Facility B” means the term loan Facility B under the Senior Facilities Agreement.

• “Facility C” means the term loan Facility C under the Senior Facilities Agreement.

• “Facility D” means Facility D under the Senior Facilities Agreement.

• “Facility D Loan” means the term loan that the Senior Secured Notes Issuer funded to the Company

under the Facility D Tranche.

• “Facility D Tranche” means that tranche under Facility D.

• “Free Cash Flow” means Operating Free Cash Flow less cash flow from investing activities.

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• “Goldman Sachs Capital Partners” collectively refers to GS Capital Partners VI Fund, L.P., GS

Capital Partners VI Offshore Fund, L.P., GS Capital Partners VI Parallel, L.P. and GS Capital Partners

VI GmbH & Co. KG.

• “Haniel” means Franz Haniel & Cie. GmbH.

• “Haniel Group” means Franz Haniel & Cie. GmbH and its subsidiaries.

• “IFRS” means the International Financial Reporting Standards of the International Accounting

Standards Board, as adopted by the European Union.

• “Lime” means our Lime business unit.

• “MPP KG” means XI Management Beteiligungs GmbH & Co. KG, a German limited partnership

(Kommanditgesellschaft), incorporated under the laws of Germany with registered offices at

Düsseldorfer Landstraße 395, 47259 Duisburg, Germany and registered with the commercial register

(Handelsregister) of the local court (Amtsgericht) of Duisburg under registration number HRA 10401,

established within the framework of a management participation program of the Company which

owned as of June 30, 2013 a total of 10.2% of the shares in the Company.

• “net average revenues” means the net product sales in relation to the quantity of products sold, where

quantity is measured in cubic meters (for AAC, CSU and Multipor), square meters (for gypsum fiber

boards and cement-bonded boards) or tons (for lime and limestone).

• “Normalized EBITDA” means EBITDA, as adjusted for items that our management considers to be

unusual or non-recurring due to their nature; for the fiscal years ended December 31, 2010, 2011 and

2012 and the six-month period ended June 30, 2013 such adjustments include divestments and unusual

asset disposals, revaluation of recultivation and other environmental provisions, losses due to

restructuring and severance, costs related to M&A activities, costs related to litigation, warranty

claims relating to prior years, and other.

• “Operating Free Cash Flow” means EBITDA minus/plus income and expenses from the disposal of

non-current assets, plus/minus non-cash income and expenses, plus/minus cash changes in trade and

other working capital.

• “Original Revolving Facility” means the multi-currency revolving credit facility in an amount of

€75 million, which the Company intends to cancel and replace with Revolving Facility A in

accordance with the terms of the Senior Facilities Amendment and Restatement Agreement which the

Company and certain of its subsidiaries intend to enter into by December 20, 2013.

• “PAI partners” collectively refers to PAI EUROPE V-1 FCPR, PAI EUROPE V-2 FCPR, PAI

EUROPE V-3 FCPR and PAI EUROPE V-B FCPR.

• “PECs” means the two series of unsecured interest bearing preferred equity certificates issued by

Xella International Holdings S.à r.l. on August 28, 2008.

• “plant” means each of our production facilities for wall-building materials, dry lining products and

lime including certain add-on and pre-products with multiple production facilities for different

products in one location counting as multiple plants.

• “Revolving Facility A” means the multi-currency revolving credit facility in an amount of €75 million,

which we anticipate will be made available to our Group under the Senior Facilities Agreement and

which will replace the Original Revolving Facility upon the Effective Date (as defined below) of the

Senior Facilities Amendment and Restatement Agreement which the Company and certain of its

subsidiaries intend to enter into by December 20, 2013.

• “Senior Facilities” means the senior facilities which have been made available to our Group under the

Senior Facilities Agreement.

• “Senior Facilities Agreement” means the secured credit facilities agreement dated August 27, 2008 (as

amended and restated on October 10, 2008 and as amended on November 24, 2008, February 5, 2009

and February 8, 2010, as amended and restated on May 26, 2011, as amended and restated on

December 13, 2012 and which the Company intends to further amend and restate pursuant to the

Senior Facilities Amendment and Restatement Agreement among, inter alios, (i) the Company,

(ii) certain subsidiaries of the Company as borrowers and together with the Company as guarantors,

(iii) UniCredit Bank AG (formerly Bayerische Hypo- und Vereinsbank AG), BNP Paribas S.A.-

Niederlassung Frankfurt am Main, Crédit Agricole Corporate and Investment Bank Deutschland,

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Niederlassung einer französischen société anonyme (formerly Calyon Deutschland, Niederlassung

einer französischen société anonyme), Landesbank Baden-Württemberg and The Royal Bank of

Scotland plc, Frankfurt Branch, as mandated lead arrangers, (iv) UniCredit Bank AG, London Branch

(formerly Bayerische Hypo- und Vereinsbank AG, London Branch), BNP Paribas S.A.-Niederlassung


französischen société anonyme (formerly Calyon Deutschland, Niederlassung einer französischen

société anonyme), Landesbank Baden-Württemberg and The Royal Bank of Scotland plc, Frankfurt

Branch, as underwriters, (v) UniCredit Bank AG, London Branch (formerly Bayerische Hypo- und

Vereinsbank AG, London Branch), as agent, security agent and issuing bank, (vi) UniCredit Bank AG

(formerly Bayerische Hypo- und Vereinsbank AG), BNP Paribas S.A.-Niederlassung Frankfurt am

Main, Crédit Agricole Corporate and Investment Bank Deutschland, Niederlassung einer

französischen société anonyme (formerly Calyon Deutschland, Niederlassung einer französischen

société anonyme), Landesbank Baden-Württemberg and The Royal Bank of Scotland plc, Frankfurt

Branch, as bookrunners, and (vii) as from June 1, 2011 Xefin Lux S.C.A. as Facility D lender, certain

funds were made available to the Company and its subsidiaries in connection with, inter alia, the

funding of the Acquisition and certain refinancing transactions.

• “Senior Facilities Amendment and Restatement Agreement” means the amendment and restatement

agreement which the Company and certain of its subsidiaries intend to enter into by December 20,

2013 among, inter alios, the Company and UniCredit Bank AG, London Branch as agent and security

agent in relation to the Senior Facilities Agreement.

• “Senior Facility Guarantors” means the Company and certain of its subsidiaries as guarantors under

the Senior Facilities Agreement.

• “Senior Secured Notes” means the 8% senior secured notes due 2018 issued by Xefin Lux S.C.A. on

June 1, 2011 in an aggregate principal amount of €300 million pursuant to the Senior Secured Notes

Indenture.

• “Senior Secured Notes Indenture” means the indenture governing the Senior Secured Notes between,

inter alios, Xefin Lux S.C.A. as issuer, Deutsche Trustee Company Limited as trustee, Deutsche Bank

AG, London Branch as notes security agent, principal paying agent and transfer agent and Deutsche

Bank Luxembourg S.A. as paying agent, registrar and Luxembourg transfer agent dated June 1, 2011.

• “Senior Secured Notes Issuer” means Xefin Lux S.C.A. as issuer of the Senior Secured Notes.

• “Share Purchase Agreement” means the share purchase agreement dated July 8, 2008, as amended on

July 10, 2008, pursuant to which Xella International S.à r.l. acquired Xella International GmbH and

other companies of our Group from Haniel.

• “tons” means metric tons.

• “Vendor Loan Note” means the unsecured registered instruments issued on August 29, 2008 and

November 4, 2008 by Xella International Holdings S.à r.l. in an aggregate principal amount of €200

million that have been registered on behalf of Franz Haniel & Cie. GmbH, as amended on May 14,

2011, which shall be transferred to Xella HoldCo Finance S.A. pursuant to the Vendor Loan Note

Purchase Agreement, and, following such transfer, means the replacement loan made pursuant to the

terms of the Conversion and Loan Agreement.

• “Vendor Loan Note Purchase Agreement” means the sale and purchase agreement regarding the

Vendor Loan Note between Haniel as seller, Xella International Holdings S.à r.l. and Xella HoldCo

Finance S.A., as purchaser, dated August 13, 2013.

• “Western Europe” means Andorra, Belgium, Cyprus, Denmark, France, Finland, Germany, Greece,

Iceland, Ireland, Italy, Liechtenstein, Luxembourg, Malta, Monaco, The Netherlands, Norway,

Portugal, San Marino, Spain, Sweden, Switzerland, United Kingdom and the Vatican.

• “Xella Operations Group” means the Company and its subsidiaries.

In this report, the terms “Group”, “we”, “us” and “our” refer collectively to Xella International Holdings S.à r.l.

and its direct and indirect subsidiaries.

Information contained on any website named in this report is not incorporated by reference in this report and is

not part of this report.

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FINANCIAL INFORMATION

Page

Xella International Holdings S.a r.l. Unaudited IFRS Condensed Consolidated InterimFinancial Statements as of and for the six-month period ended June 30, 2013Condensed Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4Condensed Consolidated Statement of Income—by nature of expense . . . . . . . . . . . . . . . . . F-5Condensed Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . F-6Condensed Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . F-7Condensed Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8Selected Notes to the Condensed Consolidated Interim Financial Statements . . . . . . . . . . . . F-9

Xella International Holdings S.a r.l. Audited IFRS Consolidated Financial Statements 2012Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-20Consolidated Statement of Income—by nature of expense . . . . . . . . . . . . . . . . . . . . . . . . . . F-21Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-23Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25Audit Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-75

Xella International Holdings S.a r.l. Audited IFRS Consolidated Financial Statements 2011Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-79Consolidated Statement of Income—by nature of expense . . . . . . . . . . . . . . . . . . . . . . . . . . F-80Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-81Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-82Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-83Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-84Audit Report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-132

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Xella International Holdings S.a r.l.

IFRS Consolidated Interim Financial Statements

as of June 30, 2013

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Table of contents

Condensed Consolidated Interim Financial Statements

Condensed Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4

Condensed Statement of Income—by nature of expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5

Condensed Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . F-6

Condensed Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7

Condensed Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-8

Selected Notes to the Condensed Consolidated Interim Financial Statements to June 30, 2013

Basis of Preparation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-9

Scope of Consolidation and Business Combinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10

Seasonality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

Notes to the Condensed Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

Notes to the Condensed Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

Notes to the Condensed Statements of Comprehensive Income and of Changes in Equity . . . . . F-11

Notes to the Condensed Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11

Notes to Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12

Disclosures on Financial Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13

Related Party Relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-16

Contingent Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17

Significant Events After the Balance Sheet Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-17

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Condensed Statement of Financial Position

Assets June 30, 2013 Dec. 31, 2012*

kE kE

Property, plant & equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,105,219 1,116,300Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 587,678 594,436Investments in associates (at equity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,330 15,753Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,430 81,471Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,269 2,397Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,079 1,079Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,160 14,872

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,803,165 1,826,308

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,180 174,243Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194,404 139,031Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,689 9,367Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41,782 42,002Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,796 147,343Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,148 3,079

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 473,999 515,065

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,277,164 2,341,373

Equity and Liabilities June 30, 2013 Dec. 31, 2012*

kE kE

Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 380,187 409,373Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,801 30,330

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,988 439,703

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,050,031 1,029,890Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123,785 130,188Pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,692 184,185Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105,099 105,788Trade and other accounts payable (non-current) . . . . . . . . . . . . . . . . . . . . 6,432 6,631Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,659 6,641

Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,466,698 1,463,323

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,717 99,589Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,499 13,251Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,034 86,847Trade and other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 230,094 238,620Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 41

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 400,478 438,348

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,277,164 2,341,373

* Previous year’s figures have been adjusted retrospectively due to application of IAS 19 (revised),see explanations in ‘‘Basis of Preparation’’.

The accompanying selected notes are an integral part of these condensedconsolidated financial statements.

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Condensed Statement of Income—by nature of expense

Jan. 1st– Jan. 1st–Apr. 1st– Apr. 1st– June 30, June 30,

Consolidated Statement of Income Jun. 30, 2013 Jun. 30, 2012* 2013 2012*

kE kE kE kE

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 352,016 347,197 609,544 635,204Change in finished goods & work in progress . . . . . . (11,257) (211) (3,865) 7,228Own work capitalised . . . . . . . . . . . . . . . . . . . . . . . . 435 282 1,013 536

Total output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 341,194 347,268 606,692 642,968

Materials expenses . . . . . . . . . . . . . . . . . . . . . . . . . . (157,994) (157,026) (285,262) (295,235)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 183,200 190,242 321,430 347,732

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,139 8,846 12,614 18,732

Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,339 199,088 334,044 366,464

Staff expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,066) (76,263) (156,356) (154,276)Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39,959) (54,631) (88,155) (112,605)

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74,314 68,194 89,533 99,583

Depreciation & amortisation expenses . . . . . . . . . . . . (28,998) (25,543) (54,256) (50,730)

EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,316 42,651 35,277 48,855

Result from associates (at equity) . . . . . . . . . . . . . . . 984 534 1,142 534Result from other investments . . . . . . . . . . . . . . . . . 375 56 385 426Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,429) (24,583) (44,085) (45,515)Other financial result . . . . . . . . . . . . . . . . . . . . . . . . (3,506) 556 (2,818) 2,652

Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,576) (23,437) (45,376) (41,903)

Profit/ loss before tax . . . . . . . . . . . . . . . . . . . . . . . . 20,740 19,214 (10,099) 6,950

Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . (6,306) (9,678) (8,471) (12,709)Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,127 (1,614) 2,929 (1,503)

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,179) (11,292) (5,542) (14,212)

Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,561 7,922 (15,641) (7,262)

Net income/ loss attributable to shareholders . . . . . . . 14,676 6,809 (17,229) (9,307)Net income/ loss attributable to non-controlling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 885 1,113 1,588 2,045



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Condensed Consolidated Statement of Comprehensive Income

Apr. 1st– Apr. 1st– Jan. 1st– Jan. 1st–Jun. 30, Jun. 30, June 30, June 30,

Consolidated Statement of Comprehensive Income 2013 2012* 2013 2012*

kE kE kE kE

Net income / loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,561 7,922 (15,641) (7,262)Other comprehensive income with subsequent relassification to

the income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 831 (1,470) (80) 1,845Income taxes on items in other comprehensive income . . . . . . .Other comprehensive income without subsequent relassification

to the income statement . . . . . . . . . . . . . . . . . . . . . . . . . . . .Remeasurement from defined benefit liability . . . . . . . . . . . . . . 12,837 (10,531) 9,021 (30,694)Income taxes on items in other comprehensive income . . . . . . . (3,606) 2,984 (2,544) 8,804Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . 10,062 (9,017) 6,397 (20,045)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . 25,623 (1,095) (9,244) (27,307)

Total comprehensive income attributable to shareholders . . . . . . 24,747 (1,914) (10,655) (29,314)Total comprehensive income attributable to non-controlling

interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 876 819 1,411 2,007



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F-7

Condensed Consolidated Statement of Changes in Equity

Other comprehensive income

Convertible Hedge of netPreferred Available- investment Remeasurement Non-

Consolidated Statement of Changes in Equity for the period Subscribed Capital Equity for-sale in foreign defined benefit Translation Revaluation Retained Shareholder’s controlling TotalJan 1st–June 30, 2013 capital reserves Certificates investments operations liability reserves reserves earnings equity interests equity

kE kE kE kE kE kE kE kE kE kE kEAs of January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 8,544 11,227 (188,839) 458,451 30,652 489,103Adjustments IAS 19 (revised) . . . . . . . . . . . . . . . . . . . . . . . . . (39,642) (39,642) (9,436) (49,078) (322) (49,400)As of January 1st adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 (39,642) 8,544 (28,415) (198,275) 409,373 30,330 439,703Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,406) (16,406) (2,295) (18,701)Additions / disposals ConsGroupSubsequent Acquisition with existing control . . . . . . . . . . . . . . . . . (2,125) (2,125) (20) (2,145)Capital increase/ decrease . . . . . . . . . . . . . . . . . . . . . . . . . . . 375 375

Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 159 159 159 (239) (80)Addition to/ release of OCI (not affecting consolidated income

statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,415 6,415 6,415 62 6,477Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,229) (17,229) 1,588 (15,641)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . 6,415 159 6,574 (17,229) (10,655) 1,411 (9,244)

Book value as at June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 (33,227) 8,703 (21,841) (234,035) 380,187 29,801 409,988

Other comprehensive income

Convertible Hedge of netPreferred Available- investment Remeasurement Non-

Consolidated Statement of Changes in Equity for the period Subscribed Capital Equity for-sale in foreign defined benefit Translation Revaluation Retained Shareholder’s controlling TotalJan 1st–June 30, 2012 capital reserves Certificates investments operations liability reserves reserves earnings equity interests equity

kE kE kE kE kE kE kE kE kE kE kEAs of January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 7,916 10,599 (142,960) 503,702 28,994 532,696Adjustments IAS 19 (revised) . . . . . . . . . . . . . . . . . . . . . . . . . (9,037) (9,037) (3,949) (12,986) (60) (13,046)As of January 1st adjusted . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 (9,037) 7,916 1,562 (146,909) 490,716 28,934 519,650Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,406) (16,406) (2,261) (18,667)Additions / disposals ConsGroupSubsequent Acquisition with existing control . . . . . . . . . . . . . . . . . (62) (62) (62)Capital increase/ decrease

Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,688 1,688 1,688 157 1,845Addition to/ release of OCI* (not affecting consolidated income

statement) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,695) (21,695) (21,695) (195) (21,890)Net income/ loss* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,307) (9,307) 2,045 (7,262)

Total comprehensive income* . . . . . . . . . . . . . . . . . . . . . . . . . (21,695) 1,688 (20,007) (9,307) (29,314) 2,007 (27,307)

Book value as at June 30, 2012* . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 (30,732) 9,604 (18,445) (172,684) 444,934 28,680 473,614

* Previous year’s figures have been adjusted retrospectively due to application of IAS 19 (revised), see explanations in ‘‘Basis of Preparation’’.

The accompanying selected notes are an integral part of these condensed consolidated financial statements.

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Condensed Consolidated Statement of Cash Flows

Jan. 1st– Jan. 1st–June 30, June 30,

Consolidated Statement of Cash Flows 2013 2012*

kE kENet loss for the period including non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,641) (7,262)

Depreciation, amortization and impairment of property, plant and equipment as well as ofintangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54,256 50,730

Income and expenses from changes in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,929) 1,503Income and expenses from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,471 12,709Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,376 41,903

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,533 99,583

Changes in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,342 (11,065)Changes in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (62,711) (52,877)Changes in trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,115) (30,365)

Change of trade working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,484) (94,307)

Changes in pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,956) (4,360)Changes in other non-current provisions and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,465) (2,351)Changes in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,761 813Changes in current provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,710) (9,375)Changes in other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,788 10,387

Change in other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,418 (4,886)

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,597) (11,136)Non-cash income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (891) (1,427)Income and expenses from the disposal of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . (1,106) (997)

Cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,873 (13,170)

Cash paid for investments in property, plant and equipment and intangible assets . . . . . . . . . . . . (22,996) (34,981)Cash received from the disposal of property, plant and equipment and intangible assets . . . . . . . . 1,577 1,445Cash paid for the acquisition of consolidated entities and other business units . . . . . . . . . . . . . . . (85) (4)Cash received from the disposal of consolidated entities and other business units . . . . . . . . . . . . . (11)Cash paid for additions to investments in associated entities at equity and other financial assets . . . (190) (320)Cash received from disposals of investments in associated entities at equity and other financial

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,786 3,392Cash received from interest and investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 817 1,398

Cash flow from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18,102) (29,070)

Cash received from equity contributions from non-controlling interests . . . . . . . . . . . . . . . . . . . 105Payments made to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,295) (2,261)Payments made for the acquisition of shares in subsidiaries without change of control . . . . . . . . . . (3,305) (62)Cash received from the issue of non-current financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . 86 84Cash received from the issue of current financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,401 12,653Cash paid for the scheduled repayment of financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (800) (767)Cash paid for interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,547) (22,896)Cash paid for the unscheduled repayment of financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . (26,345) (4,395)Cash paid / received for derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) (3)

Cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,710) (17,647)

Cash and cash equivalents at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,343 148,647

Net change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68,939) (59,887)Net foreign exchange difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (608) 780

Cash and cash equivalents at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77,796 89,540

* Previous year’s figures have been adjusted retrospectively due to application of IAS 19 (revised), see explanations in‘‘Basis of Preparation’’.


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Selected Notes to the Condensed Consolidated Interim Financial Statements to June 30, 2013

Basis of Preparation

The condensed IFRS interim consolidated financial statements of Xella International Holdings S.a r.l.,Luxembourg, as of June 30, 2013 were prepared in accordance with the International FinancialReporting Standards (IFRSs) applicable to interim financial reporting as adopted by the EU.

Excepting the amendments and revisions described below, the accounting and valuation principlesapplied in preparing the condensed consolidated interim financial statements correspond to thoseapplied to the annual consolidated financial statements as of December 31, 2012, paying due regard toIAS 34 (Interim Financial Reporting). For further information on the individual applied accounting andvaluation principles, we refer to the consolidated financial statements of Xella International HoldingsS.a r.l. as of December 31, 2012.

The following standards and interpretations (in some cases revised or amended) issued by theInternational Accounting Standards Board (IASB) and the International Financial ReportingInterpretations Committee (IFRIC) were mandatory for the first time as of the financial year 2013:

• Amendment to IFRS 1, Severe Hyperinflation and Removal of Fixed Dates for first-time Adopters

• Amendment to IAS 12, Deferred Tax: Recovery of Underlying Assets by the EU as of January 1,2013

• IFRS 13, Fair Value Measurement by the EU as of January 1, 2013

• Amendment to IAS 1, Presentations of Items of Other Comprehensive Income by the EU as ofJuly 1, 2012

• IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine by the EU as of January 1,2013

• Amendments to IAS 19 Employee Benefits by the EU as of January 1, 2013

• Improvements to IFRS 2009-2011 Cycle by the EU as of January 1, 2013

• IFRS 1—Permit the repeated application of IFRS 1, borrowing costs on certain qualifyingassets

• IAS 1—Clarification of the requirements for comparative information

• IAS 16—Classification of servicing equipment

• IAS 32—Clarify that tax effect of a distribution to holders of equity instruments should beaccounted for in accordance with IAS 12 Income Taxes

• IAS 34—Clarify interim reporting of segment information for total assets in order toenhance consistency with the requirements in IFRS 8 Operating Segments

• Amendment to IFRS 7, Disclosures—Offsetting Financial assets and Financial liabilities by the EUas of January 1, 2013

IAS 19, Employee benefits, was amended in June 2011 and endorsed by the EU in June 2012. IAS 19eliminates the so-called corridor approach and mandates recognition of all actuarial gains and lossesdirectly in Other Comprehensive Income (OCI) as they occur. Furthermore, all past service costs are tobe recognized immediately. Besides, the approach to assess interest cost and expected return on planassets is replaced by compulsory application of a uniform, market-based discount rate to both thedefined benefit liability and any corresponding plan asset (‘net interest approach’). Xella applies therevised IAS 19 since 2013, with corresponding retrospective application for 2012. The retrospectiveapplication has resulted in the following effects for the opening balances as at January 1, 2012: equitydecreased by 13,046 kA resulting from the increase of the pension provisions of 14,322 kA and relateddeferred tax effects. During the first half-year of 2012 remeasurements of 21,695 kA were posted toOCI manly as a result of the decrease of interest rates in that period. Furthermore, the result fromincome taxes decreased by 4,596 kA due to deferred tax effects while the financial result improved by397 kA due to lower net interest expenses as a consequence of the net interest approach. Overall,equity decreased by 25,912 kA during the first half-year of 2012 due to the retrospective adjustment.

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The first-time application of other revised or new standards adopted by the Commission of theEuropean Union does not have any material impact on the presentation of Xella’s net assets, financialposition and results of operations in the reporting period. No use has been made of the option toadopt standards prematurely.

The condensed consolidated interim financial statements have been prepared in Euro (A) and thefigures are generally stated in thousand Euros (kA). For calculatory reasons, some of the tables mayinclude rounding differences of up to one unit.

Our consolidated financial statements and condensed interim consolidated financial statements havebeen prepared in accordance with IFRS respectively IAS 34. The preparation of financial statements inaccordance with IFRS requires the use of estimates and assumptions that affect the reported amountsof assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of sales, income and expenses during the relevant period.Although these estimates and assumptions are based on management’s best knowledge of currentevents and circumstances, the actual results ultimately may differ from those estimates andassumptions. We evaluate such estimates and assumptions on an ongoing basis based upon historicalresults and experience, in consultation with experts and using other methods we consider reasonable inthe particular circumstances, as well as our forecasts regarding future changes. Estimates andassumptions are particularly necessary for the measurement of property, plant and equipment, limequarries and intangible assets, such as trademarks, goodwill and non-current CO2-certificates as well asfor the measurement of deferred taxes and warranty provisions.

As the result of an improvement project Xella reclassified a part of the spare parts from inventories(current assets) to property, plant & equipment (non-current assets) depending on estimated usefullives (IAS 16). Xella applied this change prospectively from January 1st 2013 onwards taking intoaccount the large data volume in this accounting area. The total amount of spare parts reclassified asof 1st of January 2013 was 23,445 kA. In the first half of 2013 depreciation (3,621 kA) and additions tospare parts (8,025 kA) were shown under property, plant & equipment.

Purchase price allocations are an integral part for the accounting of business combinations inaccordance with IFRS which require significant management judgment and the use of estimates.Beyond the determination of fair values and useful lives for property, plant and equipment, themeasurement of provisions for pensions, other provisions and an indemnification receivable against theformer shareholder, particularly the measurement of intangible assets and deferred taxes required asubstantial degree of management estimates and assumptions.

Upon the acquisition of the Xella Group in 2008, certain brands with indefinite lives were identifiedand the difference between the purchase price and net assets acquired measured at fair value wasrecorded as goodwill. In subsequent periods, brands and goodwill are tested for impairment on anannual basis or whenever events or changes in circumstances indicate that brands or goodwill might beimpaired. An impairment charge is recognized if the carrying amounts of brands or goodwill exceedtheir fair values. The future cash flows used to determine the fair values of brand and goodwill arebased on current business expectations and discount rates. Changes in future projected cash flows anddiscount rates applied may lead to impairment charges in future periods.

Deferred tax assets and liabilities under IFRS are recognized for temporary differences between thecarrying amounts in the Condensed Consolidated Statement of Financial Position and the tax base ofrespective assets and liabilities as well as on tax loss carry-forward. Significant assumptions may includethe probability of sufficient future taxable income being available to realize deferred tax assetsrecognized. If actual tax laws that would impose restrictions on the realization of the deferred tax assetsshould occur or there would not be sufficient taxable income available in the future, an adjustment tothe recorded amount of deferred tax assets would affect operating results.

Interim consolidated financial statements generally requires a greater use of estimates than annualconsolidated financial statements, e.g. in connection with pension provisions.

Scope of Consolidation and Business Combinations

No major changes in the composition of the Xella Group occurred in the first half-year of 2013. XellaHong Kong Ltd. and XI (EC) Holdings GmbH, Duisburg, were founded. Xella Ukraina TOV ulikvidacii, Odessa, has gone into liquidation and has ceased to exist. The impact on financial position,net income and cash flows was insignificant.

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Seasonality

The sales volumes recorded by Xella during the first and last months of the calendar year are lowerthan at mid-year due to the negative impact of the weather on construction activities. As an effect theresults of the first and the forth quarters of the year generally lie below the results of the second andthird quarters.

Notes to the Condensed Statement of Financial Position

Compared to December 31, 2012 total Group assets decreased by 64,209 kA. Non-current assetsdecreased by 23,143 kA, mainly resulting from scheduled depreciation of property, plant and equipment.

Current assets decreased by 41,066 kA predominantly due to lower cash and cash equivalents and lowerinventories partly opposed by higher trade receivables. There are seasonal reasons for the increase oftrade receivables. The decrease in cash and cash equivalents resulted from repayments of financial debtas well as from seasonal effects. The decrease of inventories mainly resulted from a reclassification ofnon-current spare parts to property, plant & equipment.

Non-current and current financial liabilities increased by 1,269 kA. The increase in accrued interest anddividends from Convertible Preferred Equity Certificates (CPECs) recognized as equity instruments waspartly offset by repayments. Financial liabilities contain bank liabilities of 370,935 kA including financingfees which are offset against the respective liabilities and measured at amortized cost using the effectiveinterest rate method.

Bond debt including financing fees which are offset against the respective liabilities and measured atamortized cost using the effective interest rate method and excluding accrued interest amounted to290,319 kA is also part of the Financial liabilities.

Compared to December 31, 2012 total equity decreased by 29,715 kA, mainly resulting from a net lossin the amount of 15,641 kA.

Notes to the Condensed Statement of Income

Sales decreased by 4% to 609,544 kA in comparison to the first half-year of 2012. The sales deviation wasmainly attributable to the harsh weather conditions in most of our operation countries in the first quarterof 2013 as well as generally weaker market surroundings. The positive sales deviation in the secondquarter of 2013 could only partly offset missing business activities in the first quarter of the year.

Other expenses declined by 24,450 kA from 112,605 kA in the first half of 2012 to 88,155 kA in the firsthalf of 2013. This decline was related to repair and maintenance expenses which were reduced due tostrict cost-cutting measures as well as to effects resulting from the reclassification of certain spare partsto property, plant and equipment as of January 01, 2013.

In the first six months of 2013 EBITDA totaled 89,533 kA, which is 10,050 kA less than the 99,583 kArecorded in the first half-year of 2012.

The Net Loss amounted to 15,641 kA, compared with a loss of 7,262 kA in the first half-year of 2012.

Notes to the Condensed Statements of Comprehensive Income and of Changes in Equity

Subscribed capital amounts to 13 kA and was paid in cash.

The translation reserve reports the differences arising from translating assets and liabilities respectivelyincome and expenses at different exchange rates carried by Group companies whose functional currencyis not Euro. In the first half-year of 2013 positive currency adjustments on equity especially related toChina amounting to 1,012 kA, Poland amounting to 3,255 kA and Mexico amounting to 95 kA. Negativecurrency adjustments related to the Czech Republic amounting to 3,759 kA, Hungary amounting to222 kA, the United States of America amounting to 89 kA and others amounting to 372 kA.

Notes to the Condensed Statement of Cash Flows

In accordance with IAS 7, the statement of cash flows shows the movements in the Xella Group’s cashand cash equivalents in the course of the reporting period in the form of cash inflows and outflows.The cash flows are classified according to their source and application, namely operating, investing andfinancing activities.

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The cash flows are determined indirectly on the basis of the net loss for the reporting period correctedfor all material non-cash income and expenditure plus other cash components.

Cash flow from operating activities increased by 15,043 kA to a cash flow of 1,873 kA which mainlyresulted from improved trade working capital. This increase was mainly attributable to a 10,050 kAdecrease in EBITDA in the first half of 2013 overcompensated by the 11,823 kA improvement in tradeworking capital. Both were influenced by certain spare parts shown as additions to property, plant &equipment rather than to inventories as of January 01, 2013. This change was adopted prospectivelyand is not reflected in the consolidated financial information for fiscal years and interim periods priorto January 01, 2013. Furthermore, other working capital improved by 6,304 kA in the first half of 2013,and income taxes paid were reduced by 6,539 kA. Compared to the first half-year of 2012 the negativecash flow from investing activities decreased by 10,968 kA to a negative cash flow of 18,102 kA althougha part of the spare parts are recognized under plant and equipment as of January 01, 2013. Thenegative cash flow from financing activities increased by 35,063 kA to 52,710 kA in this period mainlydue to the change from a net drawdown of 7,575 kA in the prior period to net repayments by33,233 kA. Financing activities in the first half of 2013 further contain an acquisition of shares of3,305 kA, mainly due to the acquisition of the residual shares in a subsidiary without change of control.

Notes to Segment Reporting

IFRS 8 requires the management approach for segment reporting. Accordingly, the operating segmentinformation is reported based on the internal organization and management structure, which is theinternal financial reporting to the chief operating decision makers, and is represented by theManagement Board of Xella.

Xella identified four reportable segments (Building Materials, Lime, Dry Lining, Ecoloop), which areseparately organized and managed according to the products sold and services provided, thetrademarks, the production processes, the sales channels and the customer profiles.

Since 2013 Ecoloop has been a new segment in the Xella Group. The innovative Ecoloop processallows carbon-bearing carriers, such as biomass or plastic, to be converted into high grade synthetic gas.This method will allow energy-intensive industries to reduce their reliance on fossil fuels and thusimprove the carbon footprint over the long term.

Xella assesses the performance of the operating segments based on a measure of normalized earningsbefore interest, income taxes, depreciation, amortization and impairment losses (Normalized EBITDA).This measurement basis excludes the effects of unusual or non-recurring income and expenses.

The segment information for the reportable segments is as follows:

BUBuilding BU BU

Segment information—Jan. 1st–June 30, 2013* Materials BU Lime Dry Lining Ecoloop Holding Consolidation Total

kE kE kE kE kE kE kESales from external customers and associates . . . . 385,584 116,597 107,363 609,544Inter-segment sales . . . . . . . . . . . . . . . . . . . . 7,155 19,028 4 95 (26,282)Segment sales . . . . . . . . . . . . . . . . . . . . . . . . 392,739 135,625 107,367 95 (26,282) 609,544Material income / expense items from Inventory

write-down . . . . . . . . . . . . . . . . . . . . . . . . (405) (405)Impairment of property, plant & equipment* . . (170) (170)Profit / loss (�) from disposal of property,

plant & equipment* . . . . . . . . . . . . . . . . . 448 192 15 655Reversals of provisions* . . . . . . . . . . . . . . . . 2,663 187 457 3,307

Normalized EBITDA . . . . . . . . . . . . . . . . . . . 49,282 30,218 12,896 (369) (213) 91,814

(*) after normalization

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BUSegment information—Jan. 1st–June 30, Building BU BU2012* Materials BU Lime** Dry Lining Ecoloop** Holding Consolidation Total

kE kE kE kE kE kE kESales from external customers and associates . 417,131 109,848 108,225 635,204Inter-segment sales . . . . . . . . . . . . . . . . . . 6,934 19,681 13 (26,628)Segment sales . . . . . . . . . . . . . . . . . . . . . 424,065 129,529 108,238 (26,628) 635,204Material income / expense items from

Inventory write-down . . . . . . . . . . . . . . . (118) (118)Impairment of property, plant &

equipment* . . . . . . . . . . . . . . . . . . .Profit / loss (�) from disposal of property,

plant & equipment* . . . . . . . . . . . . . . 416 250 16 682Reversals of provisions* . . . . . . . . . . . . . 3,873 105 448 4,426

Normalized EBITDA . . . . . . . . . . . . . . . . 56,769 27,437 18,496 (271) (560) 101,871


(**) figures have been adjusted retrospectively due to the new business unit Ecoloop

In the first half of 2013 total segment sales decreased by 25,660 kA to 609,544 kA compared to prioryear. The positive development of BU Lime sales and the stable development of the BU Dry Liningsales could not compensate lower segment sales of the BU Building Materials mainly resulting from astrong impact of adverse weather conditions in the first quarter 2013. Normalized EBITDA of theXella Group decreased by 10,057 kA to 91,814 kA. EBITDA of the Dry Lining segment was negativelyaffected by start-up costs incurred in relation to expansion projects. The negative EBITDA of Ecoloopmainly resulted from expenses to build up the business.

Loss before tax for the reporting period was derived as follows:

Jan. 1st– Jan. 1st–Reconciliation from Normalized EBITDA June 30, June 30,to profit / loss before tax 2013 2012*

kE kE

Normalized EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91,814 101,871Normalizations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,281) (2,288)EBITDA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89,533 99,583Depreciation, amortization and impairment of property, plant and equipment and

intangible assets (excluding goodwill) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (54,256) (50,730)Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (45,376) (41,903)Profit / loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,099) 6,950


Disclosures on Financial Instruments

Xella has applied IFRS 13 ‘‘Fair Value Measurement’’ prospectively for the current fiscal year sinceJanuary 1, 2013. The intra-period application of the standard, in connection with IAS 34, results in thefollowing additional disclosures containing information on financial instruments previously onlyreported in the annual financial statements.

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The following table shows the carrying amounts and fair values of the Group’s financial instruments.

Financial assets No IAS 39Reconciliation of financial Book value as at fair value Financial Available- category/ IFRS 7assets to IAS 39 categories / at June 30, through profit assets held for Loans and for-sale Outside the valuationIFRS 7 valuation levels 2013 and loss trading receivables investments scope of IFRS 7 Fair value level

kE kE kE kE kE kELoans . . . . . . . . . . . . . . 3,258 3,258 3,258 n.a.Other investments . . . . . . . 15,929 9 15,920 15,929 VL 1Other financial assets

(non-current) . . . . . . . . . 62,243 62,243 62,243 n.a.

Financial assets (non-current) 81,430 9 3,258 15,920 62,243 81,430

Trade and other receivables(non-current) . . . . . . . . . 2,269 2,269 2,269

Trade receivables (current) . . 174,920 174,920 174,920 n.a.Receivables from construction

contracts . . . . . . . . . . . 553 553 553 n.a.Other receivables (current) . . 18,931 9,363 9,568 18,931 na.

Trade and other receivables(current) . . . . . . . . . . . 194,404 184,836 9,568 194,404

Derivatives . . . . . . . . . . . 1,780 1,780 1,780 VL 2Receivables from associates

(at equity) (current) . . . . . 415 415 415 n.a.Receivables from shareholders

(current) . . . . . . . . . . . 818 818 818 n.a.Other financial assets

(current) . . . . . . . . . . . 38,769 38,769 38,769 n.a.

Financial assets (current) . . . 41,782 1,780 40,002 41,782

Cash and cash equivalents . . 77,796 77,796 77,796 n.a.

Financial assets No IAS 39Reconciliation of financial Book value as at fair value Financial Available- category/ IFRS 7assets to IAS 39 categories / at Dec. 31, through profit assets held for Loans and for-sale Outside the valuationIFRS 7 valuation levels 2012 and loss trading receivables investments scope of IFRS 7 Fair value level

kE kE kE kE kE kELoans . . . . . . . . . . . . . . 3,011 3,011 3,011 n.a.Other investments . . . . . . . 15,945 9 15,936 15,945 VL 1Other financial assets

(non-current) . . . . . . . . . 62,515 62,515 62,515 n.a.

Financial assets (non-current) 81,471 9 3,011 15,936 62,515 81,471

Trade and other receivables(non-current) . . . . . . . . . 2,397 2,397 2,397

Trade receivables (current) . . 112,611 112,611 112,611 n.a.Receivables from construction

contracts . . . . . . . . . . . 548 548 548 n.a.Other receivables (current) . . 25,872 10,204 15,668 25,872 na.

Trade and other receivables(current) . . . . . . . . . . . 139,031 123,363 15,668 139,031

Derivatives . . . . . . . . . . . 185 185 185 VL 2Receivables from associates

(at equity) (current) . . . . . 447 447 447 n.a.Receivables from shareholders

(current) . . . . . . . . . . . 887 887 887 n.a.Other financial assets

(current) . . . . . . . . . . . 40,483 40,483 40,483 n.a.

Financial assets (current) . . . 42,002 185 41,817 42,002

Cash and cash equivalents . . 147,343 147,343 147,343 n.a.

The fair value of financial instruments traded on an active market is based on the market price onbalance sheet date. As at June 30, 2013 other investments include investments valued at stock marketprices of 1,126 kA (IFRS 7 valuation level 1). Moreover, other investments include shares inpartnerships and corporations for which no active market exists. As future cash flows cannot beestimated reliably no market value can be calculated using valuation models. The interest in suchcompanies is therefore recognized at cost.

The above listed derivatives are valued on the basis of observable market data such as interest ratesand foreign exchange rates (IFRS 7 valuation level 2).

Financial Assets that are measured at fair value on a recurring basis are only the above listed availablefor sale investments of 1,126 kA on valuation level 1 and the derivates (financial assets held for trading)of 1,780 kA on valuation level 2. The remaining financial assets are valued at cost. No transfers betweenhierarchy levels took place in the first half of 2013.

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Due to their short terms, the fair value of current trade and other receivables and current financialassets correspond to their carrying amounts.

No IAS 39Financial category/

Book value as liabilities Other Outside IFRS 7Reconciliation of financial liabilities to at June 30, held for financial the scope valuationIAS 39 categories / IFRS 7 valuation levels 2013 trading liabilities of IFRS 7 Fair value level

kE kE kE kE kE

Bank liabilities (non-current) . . . . 350,019 350,019 350,019 n.a.Bond liabilities (non-current) . . . . 290,319 290,319 399,918 n.a.Finance lease liabilities

(non-current) . . . . . . . . . . . . . . 6,795 6,795 7,949 n.a.Liabilities to shareholders

(non-current) . . . . . . . . . . . . . . 169,357 169,357 194,105 n.a.Other financial liabilities

(non-current) . . . . . . . . . . . . . . 233,541 233,541 344,389 n.a.

Financial liabilities (non-current) . 1,050,031 1,043,236 6,795 1,296,379

Trade and other liabilities(non-current) . . . . . . . . . . . . . . 6,432 6,432 6,432 n.a.

Trade liabilities (current) . . . . . . . 75,141 75,141 75,141 n.a.Advance payments by customers . . 4,226 4,226 4,226 n.a.Liabilities from construction

contracts . . . . . . . . . . . . . . . . . 2,145 2,145 2,145 n.a.Other liabilities (current) . . . . . . . 45,195 8,634 36,560 45,195 n.a.

Trade and other liabilities(current) . . . . . . . . . . . . . . . . . 126,707 83,775 42,931 126,707

Bank liabilities (current) . . . . . . . . 20,916 20,916 20,916 n.a.Finance lease liabilities (current) . 1,567 1,567 1,567 n.a.Liabilities to investments (current) 85 85 85 n.a.Liabilities to shareholders

(current) . . . . . . . . . . . . . . . . . 44,016 44,016 49,303 n.a.Derivatives . . . . . . . . . . . . . . . . . 721 718 3 721 VL 2Other financial liabilities (current) 13,412 13,412 17,473 n.a.

Financial liabilities (current) . . . . 80,717 718 78,429 1,570 90,065

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Book value as liabilities Other Outside IFRS 7Reconciliation of financial liabilities to at Dec. 31, held for financial the scope valuationIAS 39 categories / IFRS 7 valuation levels 2012 trading liabilities of IFRS 7 Fair value level

kE kE kE kE kE

Bank liabilities (non-current) . . . . 356,139 356,139 356,139 n.a.Bond liabilities (non-current) . . . . 289,590 289,590 416,350 n.a.Finance lease liabilities

(non-current) . . . . . . . . . . . . . . 7,551 7,551 8,715 n.a.Liabilities to shareholders

(non-current) . . . . . . . . . . . . . . 153,058 153,058 184,050 n.a.Other financial liabilities

(non-current) . . . . . . . . . . . . . . 223,552 223,552 349,255 n.a.

Financial liabilities (non-current) . 1,029,890 1,022,339 7,551 1,314,509

Trade and other liabilities(non-current) . . . . . . . . . . . . . . 6,631 6,631 6,631 n.a.

Trade liabilities (current) . . . . . . . 96,697 96,697 96,697 n.a.Advance payments by customers . . 2,702 2,702 2,702 n.a.Liabilities from construction

contracts . . . . . . . . . . . . . . . . . 2,239 2,239 2,239 n.a.Other liabilities (current) . . . . . . . 34,863 9,201 25,661 34,863 n.a.

Trade and other liabilities(current) . . . . . . . . . . . . . . . . . 136,501 105,898 30,602 136,501

Bank liabilities (current) . . . . . . . . 38,123 38,123 38,123 n.a.Finance lease liabilities (current) . 1,560 1,560 1,560 n.a.Liabilities to investments (current) 85 85 85 n.a.Liabilities to shareholders

(current) . . . . . . . . . . . . . . . . . 42,005 42,005 49,454 n.a.Derivatives . . . . . . . . . . . . . . . . . 1,405 1,405 1,405 VL 2Other financial liabilities (current) 16,411 16,411 20,983 n.a.

Financial liabilities (current) . . . . 99,589 1,405 96,624 1,560 111,610

The fair values of the non-current financial liabilities are generally determined by discounting futurecontractually agreed cash flows at the current market rate. The fair value for non-current liabilities toshareholders stated above has been calculated based on the assumption that full repayment will occuron December 31, 2015 (i.e. diverging from the contractually agreed maturity date which isDecember 31, 2058). The fair value based on contractually agreed maturity date would be 949,471 kAinstead of 194,105 kA.

Bond liabilities and liabilities to shareholders are accounted for at amortized cost. For both financialinstruments the deviation between book value and fair value is based on the contractually agreed fixedinterest rate which is fixed on a higher level than the corresponding actual market interest rate as perJune 2013.

Due to their short terms, the fair value of current trade and other liabilities and current financialliabilities correspond to their carrying amounts.

The above listed derivatives are valued on the basis of observable market data such as interest ratesand foreign exchange rates. These financial liabilities held for trading of 718 kA are measured at fairvalue on a recurring basis (valuation level 2).

Related Party Relationships

The Xella Group reports CPECs extended to Xella International Holdings S.a r.l. by shareholders(various funds of PAI Partners and Goldman Sachs Capital Partners) within equity according to IAS 32unchanged to December 31, 2012 of 552,600 kA. Interest for the CPECs of 16,406 kA were shown asdividends. Compared to December 31, 2012, liabilities to the funds of PAI Partners and Goldman SachsCapital Partners, also including Preferred Equity Certificates (PECs), increased by 21,671 kA from183,440 kA to 205,111 kA.

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There were no other significant changes at June 30, 2013 to the related party disclosures reported inthe consolidated financial statements as of December 31, 2012.

Contingent Liabilities

Compared with December 31, 2012, the contingent liabilities in the Group have not changed materially.

Significant Events After the Balance Sheet Date

There are no significant events subsequent to balance sheet date that would have had a significantimpact on the net assets, financial position and results of operations of the Group.

Luxembourg, September 19, 2013

The Management Board

Martin Hintze Olivier de Vregille

Marielle Stijger David Richy

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IFRS Consolidated Financial Statements of


for 2012

12, Rue Guillaume SchneiderL-2522 Luxembourg, Grand Duchy of LuxembourgR.C.S. Luxembourg: B 139.489Share Capital: 12,500 A

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Table of contents

Consolidated Financial Statements 2012

Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-20Consolidated Statement of Income—by nature of expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-21Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-22Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-23Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-24

Notes to the Consolidated Financial Statements 2012

A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-25B. Notes to the Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . F-35

1. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-35 2. Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-36 3. Investments in Associates (At Equity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-37 4. Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-38 5. Deferred Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-39 6. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-41 7. Trade and Other Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-41 8. Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-42 9. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4310. Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4411. Pension Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4712. Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5013. Deferred Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5114. Trade and Other Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-52

C. Notes to the Consolidated Statement of Income—By Nature of Expense . . . . . . . . . . . . . . . . F-5215. Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5216. Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5317. Staff Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5318. Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5419. Result from Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5520. Finance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5521. Other Financial Result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5522. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-56

D. Other Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5623. Financial Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5624. Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6225. Corporate Acquisitions and Divestments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6326. Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6427. Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6528. Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6729. List of shareholdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6930. Auditors’ Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-7431. Significant Events After the End of the Financial Year . . . . . . . . . . . . . . . . . . . . . . . . . . F-74

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Consolidated Statement of Financial Position

Assets Note Dec. 31, 2012 Dec. 31, 2011

kE kE

Property, plant & equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 1,116,300 1,123,206Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 594,436 597,440Investments in associates (at equity) . . . . . . . . . . . . . . . . . . . . . . . . . (3) 15,753 21,780Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) 81,581 79,077Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,397 0Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,079 1,197Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 7,179 20,118

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,818,725 1,842,818

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) 174,243 178,927Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) 139,031 146,080Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,367 11,351Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) 42,002 39,470Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) 147,343 148,646Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,079 3,055

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515,065 527,529

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,333,790 2,370,347

Equity and Liabilities Note Dec. 31, 2012 Dec. 31, 2011

kE kE

Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 458,451 503,702Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,652 28,994

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 489,103 532,696

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) 1,029,890 1,007,061Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 129,710 150,038Pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 127,679 126,482Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) 105,788 107,842Trade and other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 6,631 6,732Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) 6,641 5,696

Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,406,339 1,403,851

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) 99,589 78,219Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,251 14,325Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) 86,847 89,856Trade and other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 238,621 251,248Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40 152

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 438,348 433,800

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,333,790 2,370,347

The accompanying notes are an integral part of these Consolidated Financial Statements.

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Consolidated Statement of Income—By Nature of Expense

Jan. 1st– Jan. 1st–Consolidated Statement of Income Note Dec. 31, 2012 Dec. 31, 2011

kE kE

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) 1,282,501 1,271,199Change in finished goods & work in progress . . . . . . . . . . . . . . . . . . . 4,803 10,226Own work capitalised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,327 1,771

Total output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,289,631 1,283,196

Materials expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (592,279) (593,000)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697,352 690,196

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) 34,530 86,139

Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 731,882 776,335

Staff expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) (306,449) (298,617)Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (218,242) (277,269)

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,191 200,449

Depreciation & amortization expenses . . . . . . . . . . . . . . . . . . . . . . . . (102,647) (107,404)Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,791)

EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95,753 93,045

Result from associates (at equity) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,390 1,233Result from other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19) (1,490) 502Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20) (95,085) (94,509)Other financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21) 4,800 284

Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,385) (92,490)

Profit/ loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,368 555

Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,087) (24,860)Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,903 29,958

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22) (14,184) 5,098

Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,816) 5,653

Net income/ loss attributable to shareholders . . . . . . . . . . . . . . . . . . . (12,986) 1,478Net income/ loss attributable to non-controlling interests . . . . . . . . . . 4,170 4,175


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Consolidated Statement of Comprehensive Income

Jan. 1st– Jan. 1st–Consolidated Statement of Comprehensive Income Dec. 31, 2012 Dec. 31, 2011

kE kE

Net income / loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,816) 5,653Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884 (33)Change of available-for-sale investments* . . . . . . . . . . . . . . . . . . . . . . . . . . 1Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 884 (32)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,932) 5,621

Total comprehensive income attributable to shareholders . . . . . . . . . . . . . . . (12,358) 1,509Total comprehensive income attributable to non-controlling interests . . . . . . 4,426 4,112

* Recognition of deferred taxes and/ or reclassifications to net income/ loss: 0 kA


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Consolidated Statement of Changes in Equity

Revaluation reserves

Hedge ofConvertible Available- net investmentPreferred for-sale in foreign Non-

Subscribed Capital Equity investments operations Translation Revaluation Retained Shareholder’s controlling TotalConsolidated Statement of Changes in Equity 2012 capital reserves Certificates (OCI) (OCI) reserves reserves earnings equity interests equity

kE kE kE kE kE kE kE kE kE kEAs of January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 7,916 10,599 (142,960) 503,702 28,994 532,696Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,810) (32,810) (2,775) (35,585)Additions / disposals ConsGroup . . . . . . . . . . . . . . . . . . .Subsequent Acquisition with existing control . . . . . . . . . . . (83) (83) 7 (76)Capital increase/ decrease

Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 628 628 628 256 884Addition to/ release of OCI (not affecting consolidated

income statement) . . . . . . . . . . . . . . . . . . . . . . . . .Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,986) (12,986) 4,170 (8,816)

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . 628 628 (12,986) (12,358) 4,426 (7,932)

Book value as at December 31 . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (5) 2,688 8,544 11,227 (188,839) 458,451 30,652 489,103




kE kE kE kE kE kE kE kE kE kEAs of January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (6) 2,688 7,886 10,568 (111,320) 535,311 26,732 562,043Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,810) (32,810) (2,089) (34,899)Additions / disposals ConsGroup . . . . . . . . . . . . . . . . . . . 239 239Subsequent Acquisition with existing control . . . . . . . . . . . (308) (308) (308)Capital increase/ decrease

Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 30 30 30 (63) (33)Addition to/ release of OCI (not affecting consolidated

income statement) . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 1Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,478 1,478 4,175 5,653

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . 1 30 31 1,478 1,509 4,112 5,621


The accompanying notes are an integral part of these Consolidated Financial Statements.Please refer to note 25 for information about corporate acquisitions and divestments in the year under review.

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Consolidated Statement of Cash Flows

Jan. 1st– Jan. 1st–Dec. 31, Dec. 31,

Consolidated Statement of Cash Flows 2012 2011

kE kENet loss for the period including non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,816) 5,653

Depreciation, amortization and impairment of property, plant and equipment as well as of intangibleassets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111,438 107,404

Income and expenses from changes in deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,903) (29,958)Income and expenses from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,087 24,860Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,385 92,490

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,191 200,449

Changes in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,425) (12,924)Changes in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,076 (14,450)Changes in trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,340) 26,787

Change of trade working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,689) (587)

Changes in pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,864) (6,435)Changes in other non-current provisions and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15,244) 2,078Changes in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,140 (3,366)Changes in current provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,771 750Changes in other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,257) 8,562

Change in other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,454) 1,589

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,018) (23,450)Non-cash income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,158) 909Income and expenses from the disposal of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,522) (2,842)

Cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,350 176,068

Cash paid for investments in property, plant and equipment and intangible assets . . . . . . . . . . . . . . . (74,769) (74,830)Cash received from the disposal of property, plant and equipment and intangible assets . . . . . . . . . . . 4,677 4,411Cash received from the disposal of property, plant and equipment held-for-sale . . . . . . . . . . . . . . . .Cash paid for the acquisition of consolidated entities and other business units . . . . . . . . . . . . . . . . . (14,745) (10,026)Cash received from the disposal of consolidated entities and other business units . . . . . . . . . . . . . . .Cash paid for additions to investments in associated entities at equity and other financial assets . . . . . . (479) (863)Cash received from disposals of investments in associated entities at equity and other financial assets . . . 9,190 6,808Cash received from interest and investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,621 2,829

Cash flow from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (72,505) (71,671)

Cash received from equity contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Payments made to non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,775) (2,089)Payments made for the acquisition of shares in subsidiaries without change of control . . . . . . . . . . . . (75) (98)Cash received from the issue of non-current financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 828 341,605Cash received from the issue of current financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 852 579Cash paid for the scheduled repayment of financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,514) (17,069)Cash paid for interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,501) (56,968)Cash paid for the unscheduled repayment of financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,021) (363,258)Cash paid / received for derivative financial instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) (314)

Cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,219) (97,612)

Cash and cash equivalents at the beginning of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,646 142,099

Net change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,374) 6,785Net foreign exchange difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,071 (238)

Cash and cash equivalents at the end of the period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,343 148,646


Please see note 26 for more information on the Statement of Cash Flows.

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Notes to the 2012 Consolidated Financial Statements

A. Background

Xella International Holdings S.a r.l., which has its registered office at 12, Rue Guillaume Schneider,L-2522 Luxembourg, Grand Duchy of Luxembourg, holds Xella Group which is a leading player in theEuropean market for building materials. It manufactures and markets building materials and supplieslime under the umbrella of Xella (Ytong, Silka, Hebel, Multipor, Fermacell and Fels trademarks).

The company shall have as its business purpose the holding of participations in Luxembourg andforeign countries, the acquisition by purchase, subscription or in any other manner as well as thetransfer by sale, exchange or otherwise of stock, bonds, debentures, notes and other securities of anykind, the possession, the administration, the development and the management of its portfolio.

The financial year of the Xella Group commenced on January 1, 2012 and ended on December 31,2012.

These Consolidated Financial Statements have been prepared in accordance with InternationalFinancial Reporting Standards as adopted by the European Union and in accordance with theLuxembourg Law of December 19, 2002, as amended.

The Consolidated Financial Statements have been prepared in euro (A) and the figures are generallystated in thousand euros (kA). For calculatory reasons, some of the tables may include roundingdifferences of up to one unit. For additional clarity, a number of items have been summarized both inthe Consolidated Statement of Financial Position and in the Consolidated Statement of Income. Theseare discussed in detail in the notes to the Financial Statements. The items in the ConsolidatedStatement of Financial Position have been classified as current or non-current items in line with IAS 1.The Statement of Income has been prepared using the nature of expense method.

Since 2012 reporting structures for other provisions have been adjusted in order to better reflect theGroup’s legal and constructive obligations. In the statement of other provisions certain positions wereadded (e.g. CO2-certificates), others were not shown anymore due to materiality (e.g. provisions forreturn pallets).

The Consolidated Financial Statements were authorized for issue by the board of directors atMarch 20, 2013 and were signed on its behalf.

Consolidation Principles

Subsidiaries over which Xella International Holdings S.a r.l., Luxembourg, has either direct or indirectcontrol as defined by IAS 27 have been fully consolidated in the Consolidated Financial Statements.Associates are valued using the equity method pursuant to IAS 28. Other equity investments arerecognized at fair value in accordance with IAS 39 or, if no market value is available and fair valuecannot be reliably determined, at acquisition cost.

All consolidated companies have the same reporting date as the balance sheet reporting date of theConsolidated Financial Statements of December 31, 2012. The Financial Statements of Luxembourgish,German and other foreign subsidiaries included in the Consolidated Financial Statements have all beenprepared using uniform accounting policies.

Business combinations are recognized using the purchase method and measured at their acquisition-date with fair values (IFRS 3). That portion of the purchase price which is made in anticipation ofexpected future economic benefits from the acquisition and cannot be allocated to defined oridentifiable assets in the course of purchase price allocation is reported as goodwill under intangibleassets. Three immaterial subsidiaries were not consolidated (PY: two).

Pursuant to IFRS 3, goodwill is not amortized. Rather, the cash-generating unit (CGU) to whichgoodwill has been allocated is tested for impairment annually or during the year if there is indication ofan impairment. If impaired book value of goodwill is written down to net recoverable amount whichcorresponds to the higher of value in use or net realizable value. In principle, any impairments ofgoodwill are posted through profit or loss. A cash-generating unit is the smallest identifiable group ofassets that generates cash inflows that are largely independent of the cash inflows from other assets orgroup of assets.

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IAS 27 and IFRS 3 prescribe the mandatory application of the economic entity approach foraccounting transactions involving acquisitions and disposals of shares resulting in a controlling interestbeing obtained or retained. Non-controlling transactions are viewed as transactions with shareholdersand recognized in equity. Disposals of shares which result in the loss of a controlling interest arereported as a gain or loss on disposal in the Statement of Income.

If an interest is still held after the disposal of the controlling interest, the remaining investment ismeasured at fair value. The difference between the former carrying amount of the remaininginvestment and its fair value is recognized in income as a gain or loss on disposal and presentedseparately with the fair value of the remaining investment. Parents acquiring an additional stake in asubsidiary resulting in control being obtained (‘‘step acquisition’’) must remeasure the initially heldinterest at fair value with differences to book value recognized in the Consolidated Statement ofIncome.

Intercompany profits and losses, sales, income and expenses as well as all receivables and liabilitiesbetween consolidated companies are offset against each other. Intercompany profits contained innon-current assets and inventories originating from intercompany deliveries are eliminated unless theyare immaterial.

Consolidated Entities and Changes in the Consolidated Group

The changes in the number of consolidated entities were as follows:

Consolidated entities and changes in the consolidated group 2012 2011

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 98Addition from the acquisition of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2Addition from formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 3Disposal from sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Disposal from merger and liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)

As at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105 102

Foreign Currency Translation

The presentation currency of Xella International Holdings S.a r.l., Luxembourg, is the euro. Currencytranslation of subsidiaries reporting in a country with a currency other than euro is performed inaccordance with IAS 21 using the functional currency method. Due to the fact that all subsidiariesoperate financially, economically and also organizationally in their primary economic environment, theirrespective local currency is their functional currency. Transactions in foreign currency in the separatefinancial statements are translated to the functional currency at the spot rate prevailing on thetransaction date. Gains and losses from the settlement of such business transactions and from thetranslation of monetary assets and liabilities are recognized in the Statement of Income. The assets andliabilities reported in the financial statements of companies based in a country which does not have theeuro as currency are translated at the closing rate, whereas the line items in the Statement of Incomeare translated at the annual average exchange rate for the period. Goodwill arising from purchaseaccounting and any hidden reserves and liabilities uncovered in the course of applying the purchasemethod are allocated to the acquired entity and translated using the closing rate.

Any foreign exchange differences are posted to other comprehensive income without affecting earnings.Such differences arise when the assets and liabilities of Group entities whose functional currency is notthe euro are translated to the presentation currency and the exchange rate differs from the one appliedin the prior year. They also arise when the Statement of Income and the Statement of FinancialPosition are translated and the average exchange rate differs from the closing rate.

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The relevant exchange rates for non-euro countries (1 A = x local currency) are:

Closing rate Average rate

Country Dec. 31, 2012 Dec. 31, 2011 2012 2011

Bosnia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9558 1.9558 1.9558 1.9558Bulgaria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9558 1.9558 1.9558 1.9558China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.2207 8.1588 8.1014 8.9867Croatia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5575 7.5370 7.5214 7.4383Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.1510 25.7870 25.1445 24.5767Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4610 7.4342 7.4437 7.4507Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 292.3000 314.5800 289.0031 278.4548Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17.1845 18.0512 16.8935 17.2476Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.3483 7.7540 7.4732 7.7929Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.0740 4.4580 4.1825 4.1087Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4445 4.3233 4.4578 4.2372Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40.3295 41.7650 39.9115 40.8515Serbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112.3000 106.9200 112.8520 101.8362Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.5820 8.9120 8.6989 9.0283Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2072 1.2156 1.2053 1.2301USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3194 1.2939 1.2839 1.3908Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.6700 10.3730 10.3805 11.1000

Accounting Policies

The Consolidated Financial Statements are prepared in accordance with the historical cost conventionwith the exception of certain financial assets, financial liabilities and derivative financial instruments,which are measured at fair value.

Property, plant and equipment is measured at acquisition or production cost less depreciation and anyimpairment losses. If the reasons for an impairment no longer apply in future, the assets are written upaccordingly. In addition to direct costs, the cost of internally constructed property, plant and equipmentincludes an appropriate portion of overheads that can be directly allocated to the production of theasset. Borrowing costs that are directly attributable to the construction or production of a qualifyingasset are recognized by the Xella Group as part of the cost of that asset. This practice is alsoapplicable for intangible assets.

Property, plant and equipment are depreciated over their economic life using the straight-line method.Depreciation is based on the following useful lives:

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 to 50 years

Plant and machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 to 25 years

Vehicles and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 15 years

The criteria of IAS 17 for classification as finance lease are met where the Group bears the significantopportunities and risks incidental to ownership within the framework of a lease transaction, and istherefore deemed to have economic title to the asset. In these cases, the respective property, plant andequipment is recognized at fair value or the lower net present value of the minimum lease paymentsand depreciated over the economic life of the asset or over the shorter term of the lease respectively,using the straight-line method. A lease liability in the amount of the resulting net present value offuture minimum lease payments is recognized under current and non-current financial liabilitiesrespectively. Buildings and plant and machinery acquired under finance leases generally have customarypurchase options attached for the end of the lease. The leases are all based on market interest rates atthe time the leases were entered into.

In addition to the finance leases, the Group entered into rental agreements under which the economictitle to the assets remains with the lessor (operating leases). The payments on these leases are postedto profit and loss. Depending on the type of assets, the leases contain the customary rental conditionsand right of first refusal.

Intangible assets purchased for a consideration are recognized at cost less straight-line amortizationand any impairment losses. Intangible assets are amortized over the contractual term or the estimated

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useful life of the asset. Licenses and similar rights are amortized over two to ten years. Xella is notplanning to cease use of the trademarks reported in the Consolidated Statement of Financial Position.Moreover, there is no indication that the useful life of the trademarks is finite. The trademarksreported in the Consolidated Statement of Financial Position therefore have an indefinite useful life.This also applies for the non-current CO2-certificates. All other useful lives are finite. Internallygenerated intangible assets from which future benefits are likely to flow to the Group and whose costcan be reliably measured are recognized at the cost of production. Internally generated intangible assetsare amortized over two to ten years. The cost of production includes all costs directly allocable todevelopment as well as an appropriate portion of allocable overheads.

Research costs are expensed as incurred and not capitalized. Development costs are capitalized, if thecriteria of IAS 38 are met.

Goodwill, trademarks and non-current CO2-certificates with an indefinite useful life are subject to animpairment test (impairment-only approach). The recoverability of the goodwill recognized in theStatement of Financial Position is reviewed once every reporting period on the basis of cash-generatingunit pursuant to IAS 36 (or during the year if there is an indication of an impairment). Within theframework of the impairment tests, the carrying amounts of the individual or groups of cash-generatingunits are compared to the recoverable amount which is defined as the higher of fair value less costs tosell and value in use. The fair value reflects the best possible estimate of the amount that anindependent third party would pay to acquire the cash-generating units on the balance sheet date. Thecosts incurred to make such a sale are deducted from this amount. In each of the CGU of the XellaGroup, the recoverable amount is generally based on its value in use.

The value in use for each cash-generating unit is determined by discounting future estimated cash flowswhich are derived from a detailed plan (usually of five years) and a subsequent terminal value. Thedetailed plan, approved by management, is based on historical developments as well as on futuremarket estimations. The management key assumptions are generally consistent with externalinformation sources. In the detailed plan the key assumptions for each CGU include e.g. expectedselling and procurement prices, investments and market growth rates. The detailed plan is based oneconomic assumptions derived from external sources, e.g. external market studies, as well as frominternal assumptions.

The terminal value considers an average growth rate of 2% p.a. (PY: 2% p.a.). The resulting cash flowsare then discounted using the weighted average cost of capital determined for the respectivecash-generating unit. The weighted average cost of capital before tax used in each CGU of the XellaGroup is as follows:

Weighted average cost of capital before taxes 2012 2011

in % in %

Building Materials Business UnitCGU North West Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.0 8.9CGU Middle West Europe/Scandinavia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.7 9.4CGU South West Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 8.9CGU South East Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.1 11.0CGU Central East Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.5 9.7CGU North East Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9 10.0CGU Alpe Adria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11.8 10.2CGU Emerging Markets and Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.9 11.2

CGU Dry Lining . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.1 9.0

CGU Lime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.2 9.1

If the recoverable amount of the cash-generating unit or group of cash-generating units is less than thecarrying amount an impairment loss is recognized on goodwill and, if necessary, of the remaining assetsas well.

Scenarios relating to key assumptions were analyzed during the financial year with respect to the CGUswhich were on significance due to their operating performance, low excess of value in use over thecarrying amounts in prior impairment tests, when indicated, or the amount of goodwill allocated tothem. No hypothetical need for an impairment loss resulted from this analysis.

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MERRILL CORPORATION GNEWBUR// 6-OCT-13 17:00 DISK132:[13ZCO3.13ZCO75803]GQ75803A.;3 mrll_1111.fmt Free: 105D*/300D Foot: 0D/ 0D VJ RSeq: 1 Clr: 0 DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;114

Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: GQ75803A.;3 v6.8

At balance sheet date the following goodwill and trademarks existed in the cash-generating units:

Goodwill Trademarks

Selected intangible assets Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2011

kE kE kE kE

Building Materials Business UnitCGU North West Europe . . . . . . . . . . . . . . . . . . 91,500 91,500 39,000 39,000CGU Middle West Europe/Scandinavia . . . . . . . . 42,798 42,788 58,400 58,400CGU South West Europe . . . . . . . . . . . . . . . . . . 19,399 19,399 20,700 20,700CGU South East Europe . . . . . . . . . . . . . . . . . . 8,556 19,597 18,209CGU Central East Europe . . . . . . . . . . . . . . . . . 72,472 64,173 27,537 26,858CGU North East Europe . . . . . . . . . . . . . . . . . . 5,398 5,061 26,319 24,052CGU Alpe Adria . . . . . . . . . . . . . . . . . . . . . . . . 302 320 14,700 14,700CGU Emerging Markets and Others . . . . . . . . . . 1,488 1,524 10,785 10,856

CGU Dry Lining . . . . . . . . . . . . . . . . . . . . . . . . 40,670 40,667 12,700 12,700

CGU Lime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,951 66,667

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,978 340,655 229,738 225,475

Associates are valued using the equity method pursuant to IAS 28. Beginning with the historical cost atthe time of acquisition of the shares, the respective carrying amount of the investment is increased ordecreased by any changes in the attributable equity of the investment, regardless of their impact onprofit or loss. The goodwill included in the carrying amounts of the investments, determined inaccordance with the policies applying to fully consolidated subsidiaries, is not subject to amortization.An impairment test is carried out if there is any indication that the total carrying amount of theinvestment has to be impaired.

In addition to loans, financial assets consist of investments in associates and securities. The financialassets further include potential claims against Xella’s former shareholder Haniel which were agreed onby the buyer and seller during the sale of the Xella Group. The potential claims against Haniel relateto hold-harmless agreements.

Upon initial recognition, loans are recognized at fair value plus the incidental costs of the transactionand subsequently at amortized cost by applying the effective interest rate method.

Pursuant to IAS 39, investments and securities are categorized as those that are available for sale,those that are valued at fair value through profit or loss and those that are held to maturity. Therelevant category is determined upon acquisition and reviewed on each balance sheet date. Purchasesand sales of investments and securities in all categories of financial assets are recognized on theirsettlement date.

Financial assets in the category available for sale are initially measured at fair value plus transactioncosts and subsequently at their respective fair value on balance sheet date. The resulting unrealizedgains and losses are recorded directly in equity taking deferred taxes into account. If there is no listedmarket price and fair value cannot be reliably determined, the assets are recognized at cost. If thereare indications of an impairment, they are written down through profit or loss. If the reasons for animpairment no longer exist, the asset is written up to fair value. For equity instruments, the adjustmentis posted to other comprehensive income without affecting earnings. For debt instruments, theadjustment is posted to profit or loss, provided the criteria in IAS 39 are met. When the asset is sold,the adjustments previously recorded in equity are released to profit or loss.

Financial assets in the category of fair value through profit or loss are valued using the mark-to-marketmethod on balance sheet date. Any transaction costs are charged to profit and loss when posted.Fluctuations in fair value are recognized directly in the Statement of Income.

Financial assets in the held to maturity category are initially measured at fair value plus transactioncosts and subsequently at amortized costs on balance sheet date using the effective interest ratemethod. If there are objective indications of an impairment, the assets are written down to their lowerpresent value on the basis of the original effective interest rate.

The following cash and cash equivalents are recorded in the Consolidated Statement of FinancialPosition: cash on hand, checks, bank deposits and funds in transit.

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Inventories are recognized at cost. In addition to materials and direct production costs, production-related portions of the necessary materials and production overheads as well as the depreciationexpense attributable to property, plant and equipment is included. If historical cost is higher on closingdate than net realizable value, inventories are written down to the latter. Depending on thecircumstances of the industry, different cost methods are applied to measure the consumption ofinventories. The weighted average method is most commonly used by the Xella Group.

CO2 emission certificates which are purchased as well as allowances allocated free of charge are bothstated at cost. A provision is recognized to cover the obligation to deliver CO2 emission allowances tothe respective authorities; this provision is measured at the carrying amount of the CO2 allowancescapitalized for this purpose. If a portion of the obligation is not covered with the available allowances,the provision for this portion is measured using the market price of the emission allowances on thebalance sheet date.

Trade receivables, receivables from investments and other assets that qualify as loans and receivablesare measured at fair value upon initial recognition and thereafter measured at amortized cost.Appropriate allowances are established for any existing risks.

Long-term construction contracts are measured in accordance with the percentage-of-completionmethod. This involves recognizing sales and expenses associated with long-term construction contractson the basis of the degree to which the contract has been completed. The degree of completion ismeasured as the ratio of the costs already incurred by the balance sheet date in proportion to the totalestimated costs of the contract (cost to cost method). If the result of a long-term construction contractcannot be determined reliably, sales are only recognized at the amount of the contract costs incurred(‘‘zero profit method’’). Losses on customer-specific long-term construction contracts are postedimmediately in the period in which the loss becomes apparent regardless of the percentage ofcompletion. Borrowing costs that are directly attributable to the production of a qualifying asset arerecognized as part of the cost of that asset by the Xella Group.

Tax receivables and tax liabilities are measured at the amount expected to be received or paid to thetax authorities. Long-term tax receivables are recognized at net present value.

Derivative financial instruments such as forward contracts, options and swaps are used solely to hedgeforeign currency exposure and interest exposure.

Financial instruments are accounted for as of the settlement date for both sales and purchases.Pursuant to IAS 39, all derivative financial instruments are accounted for at fair value irrespective ofthe purpose or intention for which they were concluded. Changes in the fair value of the derivativefinancial instruments for which hedge accounting is used are either disclosed in net interest (fair valuehedge) or, in the case of a cash flow hedge or net investment hedge, in equity under othercomprehensive income, taking deferred taxes into account.

Derivatives are currently solely used in order to hedge against future cash flow risks originating fromexisting underlying or planned transactions. None of the existing derivative transactions are accountedfor under IFRS hedge accounting. All changes in the market value of derivative financial instrumentsare posted immediately in full to profit or loss.

Non-current assets and groups of assets are categorized as held for sale when the carrying amount ofan operation will be recovered principally through a sales transaction and not through continuing use.This condition is deemed to have been fulfilled if sale is highly probable, the asset or disposal group isavailable for immediate sale and it is expected that sale will occur within one year of allocation to thecategory. Assets and disposal groups which are classified as held for sale are no longer written offsystematically but are carried at the lower of carrying amount and fair value less the costs to sell. Theassets and disposal groups categorized as held for sale and their related liabilities (disposal groups) arereported in the Consolidated Statement of Financial Position separately from other assets andliabilities, each in a separate item under current items. If the disposal group is a significant operation,the result of the discontinued operation is reported separately in the Statement of Income. The resultof such discontinued operations consists of the result of the valuation mentioned above, the currentresult of the operation and the gain or loss upon sale. The Statement of Income from the prior year isadjusted accordingly. The main groups of assets and liabilities that are classified as held for sale andthe result from discontinued operations are explained separately in the notes if the criteria are met.

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Deferred tax assets and deferred tax liabilities are recognized for all temporary differences between thetax base of the individual entities in the Group and the IFRS Consolidated Statement of FinancialPosition—with the exception of goodwill that cannot be recognized for tax purposes—and for unusedtax losses. Deferred tax assets were only recognized for the unused tax losses to the extent that theirutilization is sufficiently certain. Deferred taxes are determined on the basis of the tax rates which,under the current legislation, will apply in future. Deferred taxes are netted in accordance with IAS 12.

Provisions for pensions and similar obligations are determined using the actuarial projected unit creditmethod in accordance with IAS 19. This method involves considering the biometric parameters and therespective long-term interest rates on the capital markets as well as the latest assumptions on futuresalary and pension increases. Plan assets established to cover the pension obligations are deducted frompension provisions. Actuarial gains and losses are not posted to profit and loss until they lie outside acorridor of 10% of the higher of the present value of the pension obligation and the plan assets(corridor method). Any amount above this corridor is amortized over the average remaining period ofservice of the workforce. The interest portion contained in the pension expense and the expectedincome from the plan assets are reported under financial expenditure.

With the exception of the other employee-related provisions calculated in accordance with IAS 19, allother provisions are recognized in accordance with IAS 37 where there is a legal or constructiveobligation to a third party based on a past event. The flow of economic benefits required to settle theobligation must be probable and reliably measurable. Significant provisions with a residual term ofmore than one year are discounted at market interest rates which reflect the risk and period until theobligation is met.

With the exception of derivative financial instruments, liabilities are initially recognized at fair valueless transaction costs and subsequently measured at amortized cost using the effective interest ratemethod. Changes in contractual stipulations regarding repayments, considerations, and interest rateslead to a recalculation of the carrying amount. The restated carrying amount is equal to the presentvalue computed at the original effective interest rate. The respective present value changes arerecognized in profit or loss as income or expense. There are no liabilities held for trading according toIAS 39 except for the market value of derivative financial instruments. Liabilities from finance leasesare measured at the net present value of the future minimum lease payments using the interest rateimplicit in the lease and taking account of any repayments made in the meantime.

Foreign currency liabilities are translated using the closing rate.

Sales comprise the proceeds from the sale of goods and services, less discounts and rebates. Sales arerecognized upon the transfer of risk to the customer unless they are recognized using the percentage ofcompletion method or zero-profit method under IAS 11. Other income is recorded if it is likely therewill be a flow of economic resources to the entity and this amount can be reliably determined.

Pursuant to IAS 20, government grants are only recognized at their fair value if there is reasonableassurance that the conditions attached to them will be met and they will be collected. Grants to coverexpenses are posted through profit or loss and offset in the period in which the expenses are incurredfor which the grants were made. Investment grants relating to property, plant and equipment arededucted from the acquisition cost of the corresponding assets. Government tax grants are shown asnon-current deferred income and are credited to the Statement of Income on a straight-line basis overthe expected useful lives of the related assets.

The preparation of financial statements in accordance with IFRS requires the use of estimates andassumptions that affect the reported amounts of assets and liabilities, the disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of sales, incomeand expenses during the relevant period. Although these estimates and assumptions are based onmanagement’s best knowledge of current events and circumstances, the actual results ultimately maydiffer from those estimates and assumptions. We evaluate such estimates and assumptions on anongoing basis based upon historical results and experience, in consultation with experts and using othermethods we consider reasonable in the particular circumstances, as well as our forecasts regardingfuture changes. Estimates and assumptions are particularly necessary for the measurement of property,plant and equipment, lime quarries and intangible assets, such as trademarks, goodwill and non-currentCO2-certificates as well as for the measurement of deferred taxes and warranty provisions.

Purchase price allocations are an integral part for the accounting of business combinations inaccordance with IFRS which require significant management judgment and the use of estimates.

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Beyond the determination of fair values and useful lives for property, plant and equipment, themeasurement of provisions for pensions, other provisions and an indemnification receivable against theformer shareholder, particularly the measurement of intangible assets and deferred taxes require asubstantial degree of management estimates and assumptions.

Upon the acquisition of the Xella Group in 2008, certain brands were identified with indefinite livesand the difference between the purchase price and net assets acquired measured at fair value wasrecorded as goodwill. In subsequent periods, brands and goodwill are tested for impairment on anannual basis or whenever events or changes in circumstances indicate that brands or goodwill might beimpaired. An impairment charge is recognized if the carrying amounts of brands or goodwill exceedtheir fair values. The future cash flows used to determine the fair values of brand and goodwill arebased on current business expectations and discount rates. Changes in future projected cash flows anddiscount rates applied may lead to impairment charges in future periods.

Deferred tax assets and liabilities under IFRS are recognized for temporary differences between thecarrying amounts in the consolidated balance sheet and the tax base of respective assets and liabilitiesas well as on tax loss carry-forward. Significant assumptions may include the probability of sufficientfuture taxable income being available to realize deferred tax assets recognized. If actual tax laws thatwould impose restrictions on the realization of the deferred tax assets should occur or there would notbe sufficient taxable income available in the future, an adjustment to the recorded amount of deferredtax assets would affect operating results.

Shares in assets and liabilities whose residual terms are less than one year are reported under currentassets on principle.

New International Financial Reporting Standards and Interpretations

Application of issued and effective IFRS and IFRIC in FY 2012

These consolidated financial statements have been prepared in accordance with International FinancialReporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) andaccompanying interpretations issued by the International Financial Reporting InterpretationsCommittee (IFRIS-IC). The following pronouncement has been adopted by the group to the extentthat it has been endorsed in the European Union (EU) and it is mandatorily effective for periodsbeginning on or after January 1, 2012:

• Amendment to IFRS 7, Disclosures—Transfer of Financial Assets by the EU as of July 1, 2011

The pronouncement had no material impact on the Group‘s financial position, cash flows or results ofoperation.

Issued, but not yet effective IFRS and IFRIC

The following table summarizes all issued new IFRS pronouncements until these annual consolidatedfinancial statements have been authorized for issue, though irrespective of their date of mandatory oroptional initial application. Where considered relevant for an understanding of the potential futureimpact of these new rules, additional guidance is being provided at the bottom of this table.

Application in FY 2013

• Amendment to IFRS 1, Severe Hyperinflation and Removal of Fixed Dates for first-time Adoptersby the EU as of January 1, 2013

• Amendment to IAS 12, Deferred Tax: Recovery of Underlying Assets by the EU as of January 1,2013

• IFRS 13, Fair Value Measurement by the EU as of January 1, 2013

• Amendment to IAS 1, Presentations of Items of Other Comprehensive Income by the EU as ofJuly 1, 2012

• IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine by the EU as of January 1,2013

• Amendments to IAS 19 Employee Benefits by the EU as of January 1, 2013

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• Improvements to IFRS 2009-2011 Cycle by the EU as of January 1, 2013

• IFRS 1—Permit the repeated application of IFRS 1, borrowing costs on certain qualifyingassets

• IAS 1—Clarification of the requirements for comparative information

• IAS 16—Classification of servicing equipment

• IAS 32—Clarify that tax effect of a distribution to holders of equity instruments should beaccounted for in accordance with IAS 12 Income Taxes

• IAS 34—Clarify interim reporting of segment information for total assets in order toenhance consistency with the requirements in IFRS 8 Operating Segments

• Amendment to IFRS 7, Disclosures—Offsetting Financial assets and Financial liabilities by the EUas of January 1, 2013

Application in FY 2014 or later

• IFRS 10, Consolidated Financial Statements by the EU as of January 1, 2014

• IFRS 11, Joint Arrangements by the EU as of January 1, 2014

• IFRS 12, Disclosure of Interests in Other Entities by the EU as of January 1, 2014

• Revision of IAS 27, Separate Financial Statements by the EU as of January 1, 2014

• Revision of IAS 28, Investments in Associates and Joint Ventures by the EU as of January 1, 2014

• Amendments to IFRS 10, IFRS 12 and IAS 27, Investment Entities by the EU as of January 1, 2014

• Amendment to IAS 32, Offsetting Financial assets and Financial liabilities by the EU as ofJanuary 1, 2014

• IFRS 9, Financial Instruments: Classification and Measurement: Financial Assets by the EU as ofJanuary 1, 2015

• IFRS 9, Financial Instruments: Classification and Measurement: Financial Liabilities by the EU as ofJanuary 1, 2015

• Amendments to IFRS 9 and IFRS 7, Mandatory Effective Date and Transitional DisclosureRequirements by the EU as of January 1, 2015

IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financialassets and financial liabilities. IFRS 9 has been issued in two parts yet, and once a third part with anamended set of hedge accounting rules has been issued, these new requirements will replace theexisting IAS 39 in its entirety. IFRS 9 (part I) requires financial assets to be classified into twomeasurement categories—those measured as at fair value and those measured at amortized cost. Thedetermination is made at initial recognition and depends on the entity’s business model for managingits financial instruments and the contractual cash flow characteristics of the instrument. For financialliabilities, IFRS 9 (part II) retains most of the existing IAS 39 requirements. The main change is that,in cases where the so-called fair value option is taken for financial liabilities, the part of a fair valuechange due to an entity’s own credit risk is recorded in Other Comprehensive Income (OCI) ratherthan in the income statement, unless this creates a so-called accounting mismatch. The Group is yet toassess IFRS 9’s full impact. IFRS 9 (parts I, II and III yet to be issued) are expected not to be appliedbefore 2015, with corresponding retrospective application and additional transitional rules not before2014 year ends.

IFRS 10, Consolidated Financial Statements, builds on existing principles by identifying the concept ofcontrol as the determining factor in whether an entity should be included within the consolidatedfinancial statements of the parent company. The standard provides additional guidance to assist in thedetermination of control where this is difficult to assess, inter alia by providing detailed prescriptiveguidance on substantial rights. IFRS 10 supersedes the existing IAS 27 and SIC-12 requirements forconsolidation, though without significantly changing the overall rational. The Group is yet to assessIFRS 10’s full impact and will adopt IFRS 10 in 2014 under consideration of accompanying transitionalrequirements for 2013.

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IFRS 11, Joint Arrangements, sets out requirements for the classification and accounting of jointventures and joint operations by introducing new criteria. IFRS 11 supersedes IAS 31 based on whichapplication of the proportionate consolidation of legal entity joint ventures will no longer be permitted.However, classification of certain arrangements as joint operations may lead to the recognition of rightsand obligations and corresponding income and expenses in the consolidated financial statements of theventure. The Group is yet to assess IFRS 11’s full impact and will adopt IFRS 11 in 2014, withcorresponding retrospective application in 2013.

IFRS 12, Disclosures of Interests in other Entities, includes disclosure requirements for all forms ofinterests in other entities, including joint arrangements, associates, special purpose entities and otheroff balance sheet vehicles. The Group is yet to assess IFRS 12’s full impact and will adopt IFRS 12 in2014, with corresponding retrospective application in 2013.

IFRS 13, Fair Value Measurement, aims to improve consistency and reduce complexity by providing aprecise definition of fair value and a single source of fair value measurement with additional disclosurerequirements for use across various effective IFRSs. The requirements, now largely aligned betweenIFRS and US GAAP, do not mandate or extend the use of fair value accounting but provide guidanceon how to apply fair value measurement where already required or permitted by other standards. TheGroup expects no significant impact on its net assets, financial position and results of operations.

IAS 19, Employee benefits, was amended in June 2011 as a result of a long series of discussion. IAS 19eliminates the so-called corridor approach mandates recognition of all actuarial gains and losses directlyin OCI as they occur. Furthermore, all past service costs are to be recognized immediately. Besides, thecurrent approach to assess interest cost and expected return on plan assets will be replaced bycompulsory application of a uniform, market-based discount rate to both the defined benefit liabilityand any corresponding plan asset (‘net interest approach’). The revised IAS 19 will be applied in 2013,with corresponding retrospective application in 2012. Based on preliminary calculations theretrospective application will result in a decrease of equity as of January 1, 2013, of approximately50 mA resulting from the increase of the pension provisions and related deferred taxes. In 2013 the newstandard is expected to increase the volatility of equity. In 2013 the actual development will mainlydepend on interest rates as well as on other actuarial assumptions. For the funded pension plans, thedevelopment of the pension provisions will further depend on the performance of the plan assets.Based on the information available, the effects of the application of the net interest approach as well aschanges in the treatment of past service costs are not expected to have a significant influence on thefinancial statements of 2013.

In 2012, the Group did not opt for voluntary early adoption of either of the aforementioned IFRSpronouncements. Adoption of any of the aforementioned IFRS pronouncements is subject to priorendorsement by the European Parliament.

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Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: GR75803A.;3 v6.8

B. Notes to the Consolidated Statement of Financial Position

1. Property, Plant and Equipment

Property, plant and equipment developed as follows:

Assets under Property,Land & Land for Plant & Vehicles & construction & plant &

Statement of Property, Plant and Equipment 2012 buildings exploitation machinery equipment prepayments equipment

kE kE kE kE kE kE

As at January 1st . . . . . . . . . . . . . . . . . 410,883 223,108 698,794 37,896 60,730 1,431,411Currency adjustment . . . . . . . . . . . . . . . 2,587 4,119 333 803 7,842Addition . . . . . . . . . . . . . . . . . . . . . . . . 8,406 23,189 4,470 40,391 76,456Disposal . . . . . . . . . . . . . . . . . . . . . . . . (1,095) (149) (1,139) (1,734) (321) (4,438)Acquisitions of businesses . . . . . . . . . . . 6,245 8 6,253Transfer . . . . . . . . . . . . . . . . . . . . . . . . 20,526 587 30,623 1,153 (52,592) 297

Accumulated costs as at December 31 . . 441,307 223,546 761,831 42,118 49,019 1,517,821

As at January 1st . . . . . . . . . . . . . . . . . (58,000) (6,508) (226,497) (16,204) (996) (308,205)Currency adjustment . . . . . . . . . . . . . . . (428) (1,406) (107) (10) (1,951)Depreciation/ Amortisation . . . . . . . . . . (16,087) (2,029) (69,653) (6,546) 0 (94,315)Impairment . . . . . . . . . . . . . . . . . . . . . (20) (249) (141) (410)Reversal of impairment . . . . . . . . . . . . . 6 32 38Disposal . . . . . . . . . . . . . . . . . . . . . . . . 481 107 950 1,518 267 3,322Acquisitions/ Divestures of businesses . . .Additions from/ disposals to affiliates . . .Transfer . . . . . . . . . . . . . . . . . . . . . . . . 193 (193)

Accumulated depreciation as atDecember 31 . . . . . . . . . . . . . . . . . . . (74,048) (8,679) (296,522) (21,532) (739) (401,521)

Net book value as at January 1st . . . . . . 352,883 216,600 472,297 21,692 59,734 1,123,206

Net book value as at December 31 . . . . . 367,259 214,867 465,309 20,585 48,280 1,116,300

Thereof finance lease assets: . . . . . . . . . 3,795 2,490 162 6,447

Assets under Property,Land & Land for Plant & Vehicles & construction & plant &

Statement of Property, Plant and Equipment 2011 buildings exploitation machinery equipment prepayments equipment

kE kE kE kE kE kE

As at January 1st . . . . . . . . . . . . . . . . . 394,823 223,263 661,068 33,465 37,537 1,350,156Currency adjustment . . . . . . . . . . . . . . . (2,248) (4,099) (314) (438) (7,099)Addition . . . . . . . . . . . . . . . . . . . . . . . . 3,954 353 12,624 5,990 42,935 65,856Disposal . . . . . . . . . . . . . . . . . . . . . . . . (2,955) (508) (2,641) (2,851) (150) (9,105)Acquisitions of businesses . . . . . . . . . . . 13,939 17,497 300 14 31,750Transfer . . . . . . . . . . . . . . . . . . . . . . . . 3,370 14,345 1,306 (19,168) (147)

Accumulated costs as at December 31 . . 410,883 223,108 698,794 37,896 60,730 1,431,411

As at January 1st . . . . . . . . . . . . . . . . . (40,325) (5,478) (160,906) (12,440) (373) (219,522)Currency adjustment . . . . . . . . . . . . . . . 424 1 1,710 163 4 2,302Depreciation/ Amortisation . . . . . . . . . . (15,869) (2,002) (68,863) (6,557) (93,291)Impairment . . . . . . . . . . . . . . . . . . . . . (3,313) (321) (1,477) (75) (246) (5,432)Reversal of impairment . . . . . . . . . . . . . 48 1,273 62 1,383Disposal . . . . . . . . . . . . . . . . . . . . . . . . 1,033 19 2,543 2,705 55 6,355Transfer . . . . . . . . . . . . . . . . . . . . . . . . 2 434 (436)

Accumulated depreciation as atDecember 31 . . . . . . . . . . . . . . . . . . . (58,000) (6,508) (226,497) (16,204) (996) (308,205)

Net book value as at January 1st . . . . . . 354,498 217,785 500,162 21,025 37,164 1,130,634

Net book value as at December 31 . . . . . 352,883 216,600 472,297 21,692 59,734 1,123,206

Thereof finance lease assets: . . . . . . . . . 4,059 3,243 101 7,403

In 2012 there were no relevant additions or disposals due to finance leases. The accumulateddepreciation on assets recognized under finance leases amounts to 5,099 kA (PY: 4,462 kA).

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The carrying amount of property, plant and equipment used to secure the financial liabilities of theGroup amounts to 426,613 kA (PY: 439,555 kA).

The purchase obligations for property, plant and equipment amount to 8,167 kA (PY: 16,926 kA). Thereduction mainly refers to the Business Units Lime and Dry Lining.

Substantial additions to property, plant and equipment mainly result from assets under construction andprepayments, particularly relating to Fermacell Spain, S.L.U. (15,327 kA) as well as to the extension ofcapacity of the cement-bonded boards production in Calbe (Business Unit Dry Lining) (6,891 kA). Thetotal carrying amounts shown in assets under construction and prepayments as at December 31, 2012for Fermacell Spain, S.L.U. amounted to 15,125 kA and for the extension of capacity of the cement-bonded board production in Calbe amounted to 11,857 kA.

Besides, the acquisition of H+H Ceska republica s.r.o., Most/ Czech Republic (now Hebel CZ s.r.o.)led to an increase of property, plant and equipment in the amount of 6,253 kA.

All impairment charges are shown as depreciation/ amortization expenses in the ConsolidatedStatement of Income.

Assets for which impairment losses have been recognized have been written down to their fair valuesless costs to sell which have been determined based on market values. In 2012 impairment losses aresolely attributable to the Business Unit Building Materials and mainly relate to not usablecontaminated sand in Germany.

2. Intangible Assets

Intangible assets developed as follows:

Other PrepaymentsStatement of Intangible Customer lists/ Development Software intangible on intangible IntangibleAssets 2012 Goodwill contracts expenses Trademarks licences assets assets assets

kE kE kE kE kE kE kE kEAs at January 1st . . . . 340,655 14,367 1,601 225,475 31,749 10,461 1,220 625,528Currency adjustment . 1,908 338 2 4,263 152 7 1 6,671Addition . . . . . . . . . . 1,299 63 894 2,256Disposal . . . . . . . . . . 0 (31) (31)Acquisitions of

businesses . . . . . . . 7,170 660 130 7,960Transfer . . . . . . . . . . 32 426 (3,126) (280) (2,948)

Accumulated costs asat December 31 . . . 349,733 15,365 1,635 229,738 33,725 7,405 1,835 639,436

As at January 1st . . . . (5,895) (137) (21,662) (319) (75) (28,088)Currency adjustment . 36 (213) (2) (110) (5) (294)Depreciation/

Amortisation . . . . . (1,264) (297) (6,218) (143) (7,922)Impairment . . . . . . . . (8,791) (8,791)Disposal . . . . . . . . . . 0 30 30Transfer . . . . . . . . . . (683) 685 63 65

Accumulateddepreciation as atDecember 31 . . . . . (8,755) (7,372) (1,119) (27,275) (404) (75) (45,000)

Net book value as atJanuary 1st . . . . . . 340,655 8,472 1,464 225,475 10,087 10,142 1,145 597,440

Net book value as atDecember 31 . . . . . 340,978 7,993 516 229,738 6,450 7,001 1,760 594,436

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Other PrepaymentsStatement of Intangible Customer lists/ Development Software intangible on intangible IntangibleAssets 2011 Goodwill contracts expenses Trademarks licences assets assets assets

kE kE kE kE kE kE kE kEAs at January 1st . . . . 332,768 14,833 1,599 230,956 29,884 897 994 611,931Currency adjustment . (2,214) (466) 2 (5,481) (181) (5) (1) (8,346)Addition . . . . . . . . . . 1,550 6,763 661 8,974Disposal . . . . . . . . . . (79) (1) (80)Acquisitions of

businesses . . . . . . . 10,101 2,801 12,902Transfer . . . . . . . . . . 575 6 (434) 147

Accumulated costs asat December 31 . . . 340,655 14,367 1,601 225,475 31,749 10,461 1,220 625,528

As at January 1st . . . . (4,393) (82) (15,362) (158) (19,995)Currency adjustment . 339 (1) 168 2 508Depreciation/

Amortisation . . . . . (1,841) (54) (6,547) (163) (8,605)Impairment . . . . . . . . (75) (75)Disposal . . . . . . . . . . 79 79

Accumulateddepreciation as atDecember 31 . . . . . (5,895) (137) (21,662) (319) (75) (28,088)

Net book value as atJanuary 1st . . . . . . 332,767 10,440 1,518 230,955 14,522 739 995 591,936

Net book value as atDecember 31 . . . . . 340,655 8,472 1,464 225,475 10,087 10,142 1,145 597,440

In 2012 the substantial part of the additions to goodwill (7,166 kA) refers to the acquisition of H+HCeska republica s.r.o., Most / Czech Republic.

In 2012 the addition to prepayments on intangible assets mainly results from a project to standardizethe ERP systems and processes in the Building Materials Business Unit.

A transfer from other intangible assets to Trade and Other Receivables refers to claims in connectionwith a local sand supply and led to a decrease of the intangible assets in the amount of 2,585 kA.

As in the prior year, there were no purchase obligations for intangible assets.

Intangible assets that serve as collateral for certain financial liabilities of the Group amounted to68,355 kA (PY: 66,915 kA).

The weak market development in South East Europe led to a goodwill impairment loss in therespective cash generating unit (CGU) which is part of the Building Materials segment. The goodwillshown in this CGU (8,791 kA) was completely impaired. The determination of the recoverable amountin this CGU was derived from the value in use based on a discount rate of 11.1%.

3. Investments in Associates (At Equity)

Investments in associates (at equity) 2012 2011

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,780 26,749Impairments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (857) 0Proportional share of net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,248 1,233Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,186) (984)Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,218)Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,232)

Net book value as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,753 21,780

The proportional income of Shandong Xella Gather Calcium Silicate New Building Materials Co., Ltd.,Tengzhou /China was recognized and immediately impaired as Xella does not expect dividends to berealizable in the foreseeable future. The transfers contain the reclassification of the Russian investment‘‘DSZ’’ OOO (BSW), Tovarkovo /Russia to available-for-sale investments (non-current financial assets)due to a lack of significant influence.

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Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: GS75803A.;3 v6.8

The following entities are valued using the equity method pursuant to IAS 28. The carrying amounts oftheir assets, liabilities, sales and net results are as follows:

Dec. 31, 2012

Name of investment Book value Assets Liabilities Sales Net result

kE kE kE kE kE

Turk Ytong Sanayi A.S., Istanbul, Turkey(1) . . . . . . . 8,284 44,723 14,167 49,097 4,580Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,

Ruckersdorf, Germany(1) . . . . . . . . . . . . . . . . . . . 3,749 3,478 2,040 4,889 827Kalksandsteinwerk Wendeburg, Radmacher

GmbH & Co. KG, Wendeburg, Germany(1) . . . . . 3,719 9,240 2,466 11,742 377Shandong Xella Gather Calcium Silicate New

Building Materials Co., Ltd., Tengzhou, China(1) . . 0 15,829 8,521 9,581 869

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,753

Dec. 31, 2011

Name of investment Book value Assets Liabilities Sales Net result

kE kE kE kE kE

Turk Ytong Sanayi A.S., Istanbul, Turkey(2) . . . . . . . 8,284 45,750 12,124 42,755 4,439‘‘DSZ’’ OOO (BSW), Tovarkovo, Russia(2) . . . . . . . . 6,028 12,031 1,915 18,574 954Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,

Ruckersdorf, Germany(2) . . . . . . . . . . . . . . . . . . . 3,749 3,632 1,376 4,440 656Kalksandsteinwerk Wendeburg, Radmacher

GmbH & Co. KG, Wendeburg, Germany(2) . . . . . 3,719 9,051 2,091 9,464 (802)Shandong Xella Gather Calcium Silicate New

Building Materials Co., Ltd., Tengzhou, China(2) . . 0 13,549 7,210 7,684 1,084

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,780

(1) Financial statement Dec. 31, 2011

(2) Financial statement Dec. 31, 2010

Please consider that the figures in the table above are the companies’ numbers (not Xella’s share).

4. Financial Assets

Financial assets (non-current) Dec. 31, 2012 Dec. 31, 2011

kE kE

Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,011 3,086Net pension assets (non-current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,945 12,302Claims against former shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,515 63,689

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,581 79,077

Non-current financial assets include the non-current part of a receivable carried by XI (BM)Holdings GmbH, Duisburg / Germany against the former shareholder, Franz Haniel & Cie. GmbH,Duisburg / Germany of 62,515 kA (PY: 63,689 kA). This receivable comprising a non-current and acurrent portion represents a number of claims against Haniel which were agreed on by the buyer andseller during the sale of the Xella Group. They relate to hold-harmless agreements for certain taxobligations, warranty obligations and other risks. Regarding the receivables attributable to new warrantyclaims for possibly damaged buildings please refer to note 12.

Besides the non-current portion of the receivable from Franz Haniel & Cie. GmbH the non-currentfinancial assets mainly consist of shares in entities where no significant influence is exercised. Theseassets are classified as available-for-sale financial assets 15,923 kA (PY: 12,281 kA). They primarilyconsist of shares in Baustoffwerke Munster-Osnabruck GmbH & Co. KG, Osnabruck / Germany in theamount of 7,400 kA (PY: 7,400 kA) and in Anker Kalkzandsteenfabriek B.V., Kloosterhaar / Netherlandsin the amount of 2,030 kA (PY: 2,030 kA). In both cases legal requirements prevent a significantinfluence. The Russian investment ‘‘DSZ’’ OOO (BSW), Tovarkovo was reclassified from investment inassociates (at equity) to available-for-sale investments due to a lack of significant influence. The

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transferred book value amounted to 6,232 kA. In the course of the reclassification the Russianinvestment was measured at fair value (3,547 kA) according to IAS 28.

The current financial assets are as follows:

Financial assets (current) Dec. 31, 2012 Dec. 31, 2011

kE kE

Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 2,421Receivables from associates (at equity) (current) . . . . . . . . . . . . . . . . . . . . . 447 1,021Receivables from shareholders (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . 887 1,168Claims against former shareholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,013 32,418Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,470 2,442

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,002 39,470

The decrease of derivatives especially relates to FX forwards (2,234 kA). In the prior year there was anincrease of 1,758 kA related to FX forwards.

Receivables from associates especially refer to receivables from unpaid dividends. The decrease mainlyderives from a reduction of receivables from Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,Ruckersdorf.

Receivables from shareholders are from the shareholders of Xella International Holdings S.a r.l.,Luxembourg (13 kA, PY: 12 kA) and from shareholders with a non-controlling interest of XellaBaustoffwerke Rhein-Ruhr GmbH, Duisburg / Germany, as well as of Kalksandsteinwerke Thorl &Meyer GmbH & Co. KG, Seevetal and Xella Kalksandsteinwerk Griedel GmbH & Co KG, Butzbach-Griedel (874 kA, PY: 1,156 kA).

The increase of claims against former shareholder refer to higher potential receivables from FranzHaniel & Cie. GmbH of 39,013 kA (PY: 32,417 kA).

The allowance on financial assets can be summarized as follows:

Allowance on financial assets 2012 2011

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (888) (895)Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Book value as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (888) (888)

The financial assets that serve as collateral for certain financial liabilities of the Group amount to2,055 kA (PY: 2,155 kA).

5. Deferred Taxes

Deferred taxes are calculated at the respective local tax rates. Deferred taxes recognized on temporarydifferences arising from consolidation entries are calculated using the Group’s tax rate of 29.4%(PY: 29.0%).

The changes to the tax rates enacted at the balance sheet date have already been considered. Theincome tax rates in the individual countries range between 10.0% and 37.9%.

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The following table shows the deferred tax assets and liabilities derived from recognition andmeasurement differences of individual IFRS versus tax balance sheet items and from tax losses carriedforward:

Dec. 31, 2012 Dec. 31, 2011

Deferred taxes Tax assets Tax liabilities Tax assets Tax liabilities

kE kE kE kE

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 2,421 179,738 3,246 186,562

Property, plant & equipment . . . . . . . . . . . . . . . . . . . 2,331 134,219 2,565 138,190Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35 44,987 21 47,671Investments in associates (at equity) . . . . . . . . . . . . . . 8 28Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 344 515Trade and other receivables . . . . . . . . . . . . . . . . . . . . 188 660 158

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,268 3,153 1,825 5,194

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,494 845 241 2,245Trade and other receivables . . . . . . . . . . . . . . . . . . . . 1,442 1,703 1,274 1,182Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 275 605 153 1,473Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 57 157 294

Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 21,477 6,587 9,294 8,053

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 610 5,386 734 5,232Pension provisions and other provisions . . . . . . . . . . . 20,770 1,076 8,560 2,761Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 125 60

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,504 273 11,636 76

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,965 6 3,718 2Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,996 264 7,156 39Trade and other accounts payable . . . . . . . . . . . . . . . . 543 762 18Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 17

Deferred tax assets on losses carried forward . . . . . . . 31,550 43,964

Offsetting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (60,041) (60,041) (49,847) (49,847)

Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,179 129,710 20,118 150,038

Of these totals, deferred tax assets of 13,337 kA (PY: 16,064 kA) and deferred tax liabilities of 19,193 kA(PY: 22,048 kA) are likely to be realized within one year.

The relatively high deferred tax liabilities in comparison to deferred tax assets are generally due to fairvalue adjustments of non-current assets associated with the acquisition of the Xella Group onAugust 30, 2008.

Deferred tax assets on temporary differences were written down by allowances of 3,387 kA(PY: 4,671 kA).

In the financial year 2012 deferred taxes of 7,490 kA (PY: 6,740 kA) were recognized for seven(PY: nine) loss-making entities. However, due to planned or ongoing restructuring, these unused taxlosses are expected to be utilized.

The Group also carries unused tax losses for which no deferred tax assets were recognized as it is nothighly probable, from today’s perspective, that they will be realized.

Expiry date

Dec. 31, 2012 < 5 years 5–10 years 10–20 years unlimited Total

kE kE kE kE kE

Tax losses carried forward . . . . . . . . . . . . . . . . . 24,707 22,856 31,716 85,216 164,495Interest capping rule . . . . . . . . . . . . . . . . . . . . . 192,798 192,798

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Expiry date


kE kE kE kE kE


No deferred tax liabilities are recognized for profits retained by subsidiaries and other comprehensiveincome from hedges of a net investment. Tax liabilities of 2,222 kA (PY: 2,670 kA) would arise in theevent of future profit distributions or a sale of the investment.

6. Inventories

Inventories Dec. 31, 2012 Dec. 31, 2011

kE kE

Raw materials & supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62,247 73,884Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,126 1,157Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99,407 92,729Merchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,612 9,333Prepayments on inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 851 1,824

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,243 178,927

The allowances recognized on inventories developed as follows:

Allowance on Inventories 2012 2011

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,572) (2,800)Currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23) 32Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,012) (1,688)Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289 133Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 713 751

Book value as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,605) (3,572)

Raw materials and supplies include CO2 emission certificates. The costs for these certificates areconsidered part of the production costs. As of December 31, 2012, CO2 emission certificates amountsto 515 kA (PY: 13,882 kA). The decrease resulted from lower market valuation to the net realizablevalue.

Raw materials and supplies include spare and replacement parts of 28,686 kA (PY: 26,297 kA).

The increase of finished goods is mainly related to preparation of maintenance production stops atBU Dry Lining, higher valuation of inventories in general due to higher prices, expanded productportfolio and acquired finished goods of the plant in Most, Czech Republic.

Additions to allowances on inventories include additions from Xella Thermopierre S.A. (418 kA) as wellas allowances from other entities.

At the balance sheet date, inventories of 23,152 kA (PY: 23,680 kA) were assigned as collateral forcertain financial liabilities.

7. Trade and Other Receivables

The balance of current trade and other receivables as at December 31, 2012 is shown in the followingtable:

Trade and other receivables Dec. 31, 2012 Dec. 31, 2011

kE kE

Trade receivables (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,611 116,567Receivables from construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 548 1,306Other receivables (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,872 28,207

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 139,031 146,080

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MERRILL CORPORATION GNEWBUR// 6-OCT-13 17:00 DISK132:[13ZCO3.13ZCO75803]GT75803A.;3 mrll_1111.fmt Free: 70D*/180D Foot: 0D/ 0D VJ RSeq: 1 Clr: 0 DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;114

Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: GT75803A.;3 v6.8

Trade and other receivables of 57,778 kA (PY: 65,610 kA) were assigned as collateral for certainfinancial liabilities of the Group.

In the Business Unit Building Materials the current trade receivables decreased by 6,221 kA comparedto prior year. On the other hand the trade receivables slightly increased in the Business Units Limeand Dry Lining.

The receivables from construction contracts refer to construction services in the Netherlands and areon a lower level compared with December 31, 2011.

Other receivables include VAT reimbursement claims in the amount of 8,331 kA (PY: 7,289 kA) andmineral oil and energy tax reimbursement claims in the amount of 5,233 kA (PY: 6,888 kA).

Allowances on current trade and other receivables developed as follows over the period:

Allowance on trade and other receivables 2012 2011

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,490) (6,628)Currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (63)Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,934) (2,837)Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 549 954Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 708 1,084


The bad debt allowances contain specific valuation allowances and portfolio-based allowances forspecific categories of receivables. As soon as a receivable becomes uncollectable, the allowance accountis utilized to write it off. Subsequent collections of bad debts are posted to profit or loss.

Additions to allowances include new allowances mainly recognized in Italy and in the Czech Republic.

Releases of allowances refer reversals, in particular in the Netherlands, China and Belgium.

Additions to allowances are reported under other operating and administrative expenses (see note 18).The releases of allowances are posted to other operating income (see note 16). The aging structure oftrade receivables at the balance sheet date is presented below:

ReceivablesReceivables notreduced by reduced by

Total book value of allowances allowances Receivables not reduced by allowances but overduetrade receivables (overdue and andas at Dec. 31, 2012 not overdue) not overdue Total 0–3 months 3–6 months 6–12 months >12 months

kE kE kE kE kE kE kE kE

112,611 3,140 92,305 17,165 14,201 1,147 419 1,398

ReceivablesReceivables notreduced by reduced by

Total book value of allowances allowances Receivables not reduced by allowances but overduetrade receivables (overdue and andas at Dec. 31, 2011 not overdue) not overdue Total 0–3 months 3–6 months 6–12 months >12 months


116,567 9,022 91,503 16,042 12,621 973 432 2,017

With regard to trade receivables not written down but overdue, there is no indication that therespective debtors will not be able to meet their payment obligations.

8. Cash and Cash Equivalents

The following table shows the composition of cash and cash equivalents:

Cash and cash equivalents Dec. 31, 2012 Dec. 31, 2011

kE kE

Cash in hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 196 220Bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,147 148,426

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147,343 148,646

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Cash and cash equivalents comprised cash in hand and bank balances with a short maturity.

At the balance sheet date, cash and cash equivalents of 88,603 kA (PY: 95,689 kA) were assigned ascollateral for certain financial liabilities. Nevertheless, these pledged cash balances are not restrictedand available for operational purposes of the respective Xella Group companies. Only an amount of1,429 kA was restricted for the use of the Group (PY: 2,818 kA).

In addition to the above mentioned cash balances as at December 31, 2012 the Xella Group hascommitted and unutilized credit facilities from a bank syndicate amounting to 53,870 kA(PY: 62,116 kA).

9. Equity

The subscribed capital was paid cash and consists of 1,250,000 shares with a nominal value of 0.01 Aeach.

The translation reserve reports the differences arising from translating assets and liabilities carried byGroup companies whose functional currency is not euro. In 2012 positive currency adjustments of theequity related in particular to Hungary amounting to 2,109 kA, The Czech Republic amounting to2,912 kA and Mexico amounting to 398 kA. Negative currency adjustments related to Poland amountingto 4,141 kA, China amounting to 322 kA and other countries amounting to 72 kA each led to a reducedGroup equity.

The Convertible Preferred Equity Certificates (CPECs) are classified as compound financialinstruments as they comprise both a liability and an equity component (IAS 32.28). On initialrecognition the full amount of CPECs has been recognized in equity. The interest accrued since then isshown as dividends each year and recognized as liability in the statement of financial position. TheCPEC holders may, at their discretion, convert their instruments into equity at the company untilDecember 31, 2015. The CPECs have been classified by an amount of 552,600 kA as shareholders’equity.

Capital reserves include the premium paid by shareholders for share issues and other additional paid-incapital.

The reserves also include changes in the fair value of available-for-sale financial assets (securities) andderivative financial instruments.

As at December 31, 2012 an amount of 2,688 kA (PY: 2,688 kA) has been posted to OCI related to anet investment hedge which has been terminated in 2009.

Capital Management

Efficient capital structure management is one of the Xella Group’s priority objectives, whereby thecomposition of this structure is closely linked with the capital-intensive nature of the Building Materialsbusiness.

Within the framework of the sale of the Xella Group in 2008, a Secured Facility Agreement (SFA) wasentered into by the Xella International S.A. Group and a syndicate of banks to finance the transaction.

The SFA includes financial covenants (such as the ratio of EBITDA to Net Cash Interest, Cash Flow toTotal Debt Service, Net Debt to EBITDA as well as the amount of capital expenditures) which theXella International S.A. Group is obliged to comply with. No equity-based financial covenants areincluded in the SFA.

The liabilities in the Consolidated Statement of Financial Position related to the SFA amounted to394,208 kA (PY: 408,880 kA) as at December 31, 2012.

In 2011 the Xella Group has drawn an additional loan under the existing SFA (Facility D Loan). Thisloan has been funded from the issuance of Senior Secured Notes in the amount of 300,000 kA, issuedby a special purpose entity, Xefin Lux S.C.A..

According to the bond indenture and the respective covenant agreement the XellaInternational S.A. Group is obliged to fulfill certain covenants. The covenants under the bondindenture are defined as so called incurrence based covenants. The compliance with such covenantsneeds to be proven in case of the occurrence of certain defined events, whereas the financial covenantsunder the SFA are defined as maintenance covenants. Compliance with these maintenance covenants

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must be reviewed at the end of every quarter by means of defined tests and confirmation of complianceprovided to the banks.

The financial crisis has led the company to place a special focus on the maintenance and consolidationof an appropriate equity base and compliance with the covenants. KPI for financial performance isNormalized EBITDA. Xella’s management has maintained its strong focus on cost and capitalexpenditure management.

As in prior years, in 2012 all covenant tests confirmed compliance with the financial covenants.

From the SFA syndicate’s as well as from the bond investor’s point of view, the shareholder loansgranted by Xella International Holdings S.a r.l., Luxembourg, to Xella International S.A., Luxembourg,are subordinated in relation to the SFA and bond debt and therefore treated as equity substitutes bythe banks involved in the SFA.

10. Financial Liabilities

Financial liabilities include derivatives of 1,405 kA (PY: 1,366 kA). The change of derivatives is entirelydue to fair value changes related to interest rate and FX rate changes.

The underlying FX forwards and interest caps are recognized at Xella International GmbH, Duisburg /Germany for itself and for other subsidiaries.

The various categories and terms of current and non-current financial liabilities are shown in thefollowing table:

Dec. 31, 2012

Maturity

Financial liabilities (without derivatives) Book value 0–1 year 1–5 years >5 years

kE kE kE kE

Bank liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 394,262 38,123 356,139Bond liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,590 289,590Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,111 1,560 6,899 652Liabilities to investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 85Liabilities to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 195,063 42,005 950 152,108Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 239,963 16,412 2,343 221,208

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,128,074 98,185 366,331 663,558

Dec. 31, 2011

Maturity

Financial liabilities (without derivatives) Book value 0–1 year 1–5 years >5 years

kE kE kE kE

Bank liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,394 18,865 303,750 86,779Bond liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,096 288,096Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,531 1,555 6,351 2,625Liabilities to investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 87Liabilities to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,806 39,470 114,336Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,000 16,875 986 204,139

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,083,914 76,852 311,087 695,975

Bank liabilities mainly consist of loans in the amount of 394,208 kA (PY: 408,878 kA) which wereincurred in the course of the sale of the Xella Group. Bond liabilities amounted to 289,590 kA(PY: 288,096). The combined SFA / Bond liabilities decreased by 13,176 kA. The SFA liabilities contain30,000 kA (PY: 35,000 kA) drawn under the Capex / Acquisition Facility. Repayments on SFA liabilitiesamounted to 21,289 kA. This reduction is partly compensated by currency translation effects of 7,700 kAand by the net release of the accrued borrowing costs in the amount of 172 kA.

The maturity of the financial liabilities shown above is based on the maturity date of the underlyingcredit facilities.

There is one significant finance lease of non-current assets of the Europor aerated concrete facility(lease liability of 7,146 kA (PY: 8,392 kA)) expiring on December 31, 2017.

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MERRILL CORPORATION GNEWBUR// 6-OCT-13 17:00 DISK132:[13ZCO3.13ZCO75803]GU75803A.;3 mrll_1111.fmt Free: 3290D*/4255D Foot: 0D/ 0D VJ RSeq: 1 Clr: 0 DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;114

Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: GU75803A.;3 v6.8

The future minimum lease payments due to finance leases and their net present values are summarizedin the following table:

Dec. 31, 2012

Maturity

Present value of future minimum lease payments Total 0–1 year 1–5 years > 5 years

kE kE kE kE

Minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,509 1,961 7,832 716Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,398) (402) (933) (63)

Present value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,111 1,559 6,899 653

Dec. 31, 2011

Maturity


kE kE kE kE

Minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,366 1,992 7,587 2,787Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,835) (437) (1,236) (162)

Present value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,531 1,555 6,351 2,625

Liabilities to shareholders consist of shareholder loans of 183,434 kA (PY: 142,061 kA) granted byPAI Partners and Goldman Sachs Capital Partners to Xella International Holdings S.a r.l., Luxembourg,within the framework of the acquisition of the Xella Group. The shareholder loans are subordinated inrelation to the bond liabilities as well as to the SFA loans. The increase results from dividends inconnection with the CPECs (which are classified as equity) in the amount of 32,810 kA as well asaccumulated interest on the shareholder loans in the amount of 8,564 kA.

Liabilities to shareholders also include the portion of equity attributable to certain minorityshareholders which are classified as liabilities in accordance with IAS 32 in the amount of 10,113 kA(PY: 10,219 kA).

Other financial liabilities are mainly related to the Vendor Loan from Franz Haniel & Cie. GmbHamounting of 227,891 kA (PY: 208,636 kA).

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The following table contains an analysis of all financial liabilities on the basis of the respective interesthedges.

Weighted averageFixed Book value as Type interest rate on the

interest at Dec. 31, 2012 of basis of carryingFinancial liabilities (without derivatives) period in kE interest amount in %

0–1 year 44,642 fixed 5.9841,026 floating 2.26

1–5 years 10,192 fixed 4.98276,117 floating 3.51

> 5 years 670,241 fixed 7.88floating

EUR liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,042,218

thereof covered by interest hedges . . . . . . . . . . . . . . 337,4260–1 year fixed

5,704 floating1–5 years fixed

80,022 floating> 5 years fixed

floating

PLN liabilties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85,726

thereof covered by interest hedges . . . . . . . . . . . . . .0–1 year fixed

52 floating 8.001–5 years fixed

floating> 5 years 78 fixed 5.50

floating

Other foreign currency liabilities . . . . . . . . . . . . . . . 130

thereof covered by interest hedges . . . . . . . . . . . . . .

Total financial liabilities (without derivatives) . . . . . 1,128,074

Carrying amount of fixed interest financial liabilities . 725,153

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interest at Dec. 31, 2011 of basis of carryingFinancial liabilities (without derivatives) period in kE interest amount in %



> 5 years 609,117 fixed 7.9555,876 floating 5.33

EUR liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,002,058

thereof covered by interest hedges . . . . . . . . . . . . . . 337,4260–1 year 3,139 floating 7.521–5 years 47,679 floating 7.99> 5 years 30,902 floating 9.02

PLN liabilties . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81,720

thereof covered by interest hedges . . . . . . . . . . . . . .0–1 year 59 floating 8.00

> 5 years 79 fixed 5.50

Other foreign currency liabilities . . . . . . . . . . . . . . . 137

thereof covered by interest hedges . . . . . . . . . . . . . .

Total financial liabilities (without derivatives) . . . . . 1,083,914

Carrying amount of fixed interest financial liabilities . 664,710

The carrying amounts of the floating rate financial liabilities generally correspond to their respectivefair values. The carrying amounts of fixed-interest financial liabilities relate to market value of1,027,039 kA (PY: 939,463 kA).

The bank liabilities are secured by liens of 666,556 kA (PY: 693,605 kA) in connection with the SFA.The bond investors also indirectly benefit from the SFA security package. For further information ofthe pledged assets please refer to the notes to the different asset categories. The carrying amounts ofinvestments in affiliates as well as intercompany receivables as shown in the single entity financialstatements are not considered in the determination of pledged assets, although they are also pledged ascollateral. Following the concept of the economic entity (IAS 27.4) intercompany assets wereeliminated.

11. Pension Provisions

Pension provisions are recognized to cover the obligations from current benefits and benefit plans forold age, disability and surviving dependants’ pensions. The Group’s benefits vary according to theprevailing local legal, tax and economic conditions in the respective country. The post-employmentbenefits of the Xella Group include both defined contribution plans and defined benefit plans. Otherthan the required premiums and contributions, defined contribution plans do not lead to any furthercommitment. The contributions are reported under staff expenses and amounted to 1,173 kA (PY: 2,810kA) in 2012.

Pension provisions for defined benefit plans are calculated on the basis of actuarial principles using theprojected unit credit method. The following parameters were applied for the German companies, whichaccount for the majority of the pension provisions:

Actuarial assumptions (German companies) Dec. 31, 2012 Dec. 31, 2011

% %

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 4.8Rate of pension progression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 1.9Rate of salary-/ career increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 2.5

For the non-German companies, these assumptions vary from country to country and have thefollowing range:

• 1.8% to 7.8% (PY: 3.6% to 7.8%) for the discount rate,

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• 1.9% to 4.5% (PY: 2.0% to 4.5%) for the salary trend,

• 1.0% to 4.5% (PY: 1.0% to 4.5%) for the pension trend.

Net pension provisions developed as follows:

Development of provision (DBL) 2012 2011

kE kE

DBL as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 126,482 124,576Addition (�)/ disposal (�) Consolidation Group . . . . . . . . . . . . . . . . . . . . . . . . . 435Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 (103)Transfer from current staff provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 580

Total neutral entries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 836 912

Current service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,007 3,565Amortisation of actuarial gains (�)/ losses (+) . . . . . . . . . . . . . . . . . . . . . . . . . . . 214 563Amortisation of past service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11)Effects of curtailments/ settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (312)Effects from changes in asset ceiling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (143) 245

Staff expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,067 4,061

Gross interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,468 10,550Expected return on plan assets for the reporting period . . . . . . . . . . . . . . . . . . . . (3,244) (3,130)

Interest costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,224 7,420

Pension payments and fund allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,065) (10,567)Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,135 80

DBL as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127,679 126,482

The pension costs consist of the following components:

Composition of pension costs 2012 2011

kE kE

Staff expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,067 4,061Gross interest costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,468 10,550Expected return on plan assets for the reporting period . . . . . . . . . . . . . . . . . . . . . . (3,244) (3,130)

Pension costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,291 11,481

The defined benefit obligation developed as follows:

Development of obligation (DBO) 2012 2011

kE kE

DBO as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,490 211,335Addition (+)/ disposal (�) Consolidation Group . . . . . . . . . . . . . . . . . . . . . . . . . 435Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44 (103)Transfer from current staff provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 792 580


Experience adjustments of DBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,458 (7,733)Effects from changes in actuarial assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61,609 821

Total actuarial gains (�)/ losses (+) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63,067 (6,913)

Current service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,007 3,565Effects of curtailments/ settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (312)Gross interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,468 10,550Employee contributions to DBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,493 1,058Current payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,680) (10,628)Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,591 7,922

DBO as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,272 217,490

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In 2012 the increase in the defined benefit obligation is mainly due to actuarial losses which result to alarge part from decreasing interest rates during the financial year.

In 2011 and 2012 ‘‘other changes’’ to the defined benefit obligation mainly relate to the reclassificationof defined contribution plans to defined benefit plans.

The net pension provisions have been derived as follows:

Reconciliation of DBO to DBL 2012 2011

kE kE

DBO, unfunded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,040 138,487DBO, funded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112,232 79,003

DBO as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 289,272 217,490

Effects from asset ceiling as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463 218Effects from changes in asset ceiling as at December 31 . . . . . . . . . . . . . . . . . . . . (381) 245

Total effects from asset ceiling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82 463

Fair value of plan assets as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . (104,728) (82,803)Accumulated actuarial gains (+)/ losses (�) . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,057) (8,668)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 110


The development and the composition (portfolio) of the plan assets have been derived as follows:

Development of plan assets 2012 2011

kE kE

Fair value of plan assets as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,803 65,087Experience adjustments of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,409 5,529Expected return on plan assets for the reporting period . . . . . . . . . . . . . . . . . . . . . 3,244 3,130Employee contribution to plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,493 1,058Employer contribution to plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,729 2,232Payments out of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,345) (2,293)Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,395 8,060

Fair value of plan assets as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104,728 82,803

Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,524 11,684Fixed-income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75,353 52,940Other components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,851 18,179


In 2011 and 2012 ‘‘other changes’’ to plan assets mainly result from the reclassification of definedcontribution plans to defined benefit plans.

The plan assets do not contain any financial instruments issued by the Xella Group or assets used bythe Group.

The plan assets and the status of the financing of the pensions developed as follows:

Funded status Dec. 31, 2012 Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008

kE kE kE kE kE

DBO, unfunded . . . . . . . . . . . . . . . 177,040 138,487 141,255 133,953 125,391DBO, funded . . . . . . . . . . . . . . . . . 112,232 79,003 70,080 65,023 75,545Fair value of plan assets . . . . . . . . . (104,728) (82,803) (65,087) (58,526) (66,520)

Funded status excl. asset ceiling . . . 184,544 134,687 146,248 140,450 134,416

Effects from asset ceiling . . . . . . . . . 82 463 3,129

Funded status incl. asset ceiling . . . 184,626 135,151 146,248 140,450 137,545

The calculation of the fair value of plan assets as of balance sheet date is reflected in the expectedreturn on plan assets. The expected return on plan assets is based on the expected average returns

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from the investment categories in the past and those expected in future, which are compared to theexpectations of external sources.

Expected rate of return on plan assets 2012 2011

% %

Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0 6.0Fixed-income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 3.0Other components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.2 3.8

Other disclosures for plan assets 2012 2011

kE kE

Expected employer contribution to plan assets (expected for the following year) . . . . . . 3,127 2,674

The following table compares the expected and the actual return on plan assets and shows theexperience adjustments on DBO and plan assets:

Return on plan assets and experience adjustments 2012 2011 2010 2009 2008*

kE kE kE kE

Actual return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . 17,653 8,671 2,782 2,777 1,564Expected Return on Plan Assets . . . . . . . . . . . . . . . . . . . . . 3,244 3,130 2,835 2,774 1,272Experience adjustments on Plan Assets . . . . . . . . . . . . . . . . 14,409 5,529 (53) 3 292Experience adjustments on DBO . . . . . . . . . . . . . . . . . . . . 1,458 (7,733) (2,733) (1,185)

* 4 months included

The actual return from plan assets can diverge from the expected return on plan assets if the capitalmarkets do not develop as expected.

12. Other Provisions

Other provisions developed as follows:

Book value asStatement of As of Currency Acquisitions at Dec. 31,Provisions 2012 January 1st adjustment of businesses Discount effect Addition Transfer Release Utilization 2012

kE kE kE kE kE kE kE kE kEStaff . . . . . . . . . . . 35,303 108 143 22,560 (792) (3,913) (20,171) 33,238Environment . . . . . . 27,343 60 5,665 2,048 (1,551) (575) (984) 32,006Warranty . . . . . . . . 90,260 2 15 3,999 10,692 (2,492) (7,582) 94,894Restructuring . . . . . . 3,944 (1) 799 (567) (554) 3,621CO2—Certificate . . . 13,882 16 (13,387) 511Other . . . . . . . . . . 26,966 46 617 113 2,942 1,551 (1,816) (2,054) 28,365

Total other provisions 197,698 231 632 9,920 39,041 (792) (9,363) (44,732) 192,635

Book value asStatement of As of Currency Acquisitions at Dec. 31,Provisions 2011 January 1st adjustment of businesses Discount effect Addition Transfer Release Utilization 2011

kE kE kE kE kE kE kE kE kEStaff . . . . . . . . . . . 33,493 (180) 105 36 23,889 (730) (2,850) (18,460) 35,303Environment . . . . . . 26,306 (92) 1,715 1,129 1,931 (2,050) (1,596) 27,343Warranty . . . . . . . . 27,299 (2) 68,735 (1,468) (4,304) 90,260Restructuring . . . . . . 4,196 (3) 575 150 (303) (671) 3,944CO2—Certificate . . . 17,224 (31) 661 (3,972) 13,882Other . . . . . . . . . . 25,874 (50) 108 4,574 (1,407) (2,133) 26,966

Total other provisions 134,392 (358) 1,820 1,273 100,365 (580) (8,078) (31,136) 197,698

Since 2012 reporting structures for other provisions have been adjusted in order to reflect the Group’slegal and constructive obligations better.

Staff provisions particularly include obligations for jubilee benefits and the early retirement scheme.Besides, the staff provisions include bonuses and obligations from social (redundancy) plans andseverance payments.

Provisions for environmental obligations relate to recultivation and restoration obligations to cover thecost of restoring quarries to an environmentally acceptable condition once exploitation is finished. Theprovision is created in installments over the prospective operating life of the respective quarry inkeeping with the scope of the quarry’s annual output. The provision is measured on the basis of theestimated costs for removing the conveying equipment and recultivating the sites on the basis of the

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actual output to date in relation to the total estimated resources at the site. The increase of theenvironmental provisions mainly results from discounting effects due to a decrease of interest rates.In principle, warranty provisions include provisions to remedy possible damages to buildings wherethere is a legal, contractual or constructive obligation.Xella is currently facing potential warranty, product liability and damage claims by several buildingowners in connection with the delivery of building materials by former Haniel Baustoffwerke fromthree plants in North Rhine-Westphalia, Germany, between end of 1987 and the beginning of 1996,which have been closed down in the meantime. Calcium silicate units had been produced in therelevant period applying an alternative production method, which substituted another product for lime.Although the relevant calcium silicate units displayed the required compressive strength immediatelyafter production, over the years some of the calcium silicate units lost their compressive strength afterbeing exposed to permanent moisture with cracks resulting in the finished masonry.The Xella successor companies do not perceive a general liability to pay damages. Nevertheless, takingaccount of the situation of each specific case, Xella generally agreed to absorb the actual costs of thedamages in the structure of the buildings. On balance sheet date, the (constructive) provision amountedto 72,370 kA (PY: 67,468 A). The increase resulted from a higher number of cases communicated to usand discounting effects due to the decrease of interest rates.Court cases were brought against Xella in which building owners sought damages also in addition tothe cost of repairs for the alleged fall in the resale value of their buildings. These cases are stillpending.In the course of selling the Xella Group in 2008, the vendor, Haniel agreed to hold the Xella Groupharmless for all costs, expenses and liabilities directly related to these cases. Please refer to note 4. Dueto the fact that Haniel is liable under the purchase agreement for any losses, Haniel and Xella haveagreed that Haniel will be solely responsible within the internal relation for processing all potentialclaims in future.Warranty provisions also include a provision recognized at Fels-Werke GmbH, Goslar / Germany due toa potential contamination of a French gravel pit which was sold in 2004. The provision amounts to12,559 kA (PY: 12,634 kA) and is also partly covered by hold-harmless agreements with Haniel.The restructuring provisions cover all estimated costs for restructuring selected entities and industrieson the basis of restructuring plans. Expenses for the closure of business locations over the past years(IAS 37.70 (b)) are considered first and foremost by recording impairment losses on the assetsconcerned.The provisons for CO2 certificates decreased by 13,387 kA due to lower market prices for the so-calledCertified Emission Reductions (CER) at the balance sheet date.Other provisions include tax risks relating to a past acquisition in the amount of 10,719 kA(PY: 10,719 kA) which are covered by hold-harmless agreements with Haniel.As there have been transfers from staff provisions to pension provisions, transfers do not add up tozero.According to current information the expected utilization of the provisions can be summarized asfollows:

Book valueas at MaturityDec. 31,

Other provisions 2012 0–1 year 1–5 years >5 years

Staff . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33,238 25,298 4,172 3,768Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,006 1,008 5,678 25,320Warranty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,894 34,524 60,370Restructuring . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,621 3,621Co2—Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 511 511Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,365 21,885 6,093 387Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192,635 86,847 76,313 29,475

Warranty provisions in this table represent possible future cash outflows that would partly lead to cashinflows for Xella because certain risks are covered by the hold-harmless agreement with Haniel.

13. Deferred IncomeNon-current deferred income in the amount of 6,641 kA (PY: 5,696 kA) mainly includes government taxgrants related to the purchase of property, plant and equipment. In order to fulfill all the conditionsattached to grants there is usually a binding period during which the assets need to remain part of theentity’s property, plant and equipment. For any grant shown as deferred income there is no indicationthat any conditions attached to the grants will not be fulfilled.

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14. Trade and Other Accounts Payable

Dec. 31, Dec. 31,Trade and other accounts payable (current) 2012 2011

kE kE

Trade liabilities (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96,697 103,279Accrued expenses for invoices not yet received . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,539 39,253Customers with credit balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,690 2,633

Subtotal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 137,926 145,165

Advance payments by customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,702 5,040Liabilities from construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,239 3,072Accrued expenses for customer bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,631 45,213Accrued expenses for overtime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,535 3,645Accrued expenses for holidays not yet taken . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,988 7,855Accrued audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,798 1,853Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,474 3,426Sundry liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,328 35,979

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 238,621 251,248

The decrease of trade liabilities at cut-off date was mainly attributable to higher capital expenditure atthe end of the financial year 2011. The reduction of advance payments by customers on the cut-off datewas primarily due to less payments in advance for a project of our Dutch subsidiary in Africa.

Sundry liabilities include, among others, tax liabilities in the amount of 11,628 kA (PY: 11,479 kA),social security liabilities amounting to 6,225 kA (PY: 7,313 kA), VAT liabilities in the amount of2,973 kA (PY: 2,131 kA) and payroll liabilities in the amount of 3,263 kA (PY: 3,231 kA).

Non-current trade and other liabilities of 6,445 kA (PY: 6,732 kA) are in connection with themanagement participation program.

C. Notes to the Consolidated Statement of Income—By Nature of Expense

The Statement of Income has been prepared using the nature of expense method.

15. Sales

The composition of sales (trade and service sales) is shown in the following table:


Sales 2012 2011

kE kE

Trade sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,242,587 1,222,161Service sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,914 49,038Other sales

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,282,501 1,271,199

All three Business Units increased sales compared to prior year. The Building Materials Business Unitwas able to implement price increases in several core markets in order to compensate lower salesvolumes affected by weaker market demand in certain countries. The sales development of the DryLining and the Lime Business Unit was also supported by a positive sales price development.

Please refer to note 27 for the allocation of sales to segments.

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16. Other Income


Other income 2012 2011

kE kE

Rental and similar income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,159 1,966Income from disposal of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,827 3,386Income from refund of electricity and mineral oil tax . . . . . . . . . . . . . . . . . . . . . . . 617 346Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,927 80,441

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,530 86,139

The decrease of other income results from lower other operating income. This relates to lower increaseof the receivables in the amount of 10,150 kA (PY: 58,014 kA) carried by XI (BM) Holdings GmbH,Duisburg / Germany against the former shareholder, Franz Haniel & Cie. GmbH, Duisburg / Germany.This receivable represents mainly a number of potential claims against Haniel which were agreed on bythe buyer and seller during the sale of the Xella Group. They relate to hold-harmless agreements forcertain tax obligations, warranty obligations and other risks. Please refer to note 4.

17. Staff Expenses


Staff expenses 2012 2011

kE kE

Wages & salaries (w/o release of staff provisions) . . . . . . . . . . . . . . . . . . . . . . . . (248,588) (239,437)Social security expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,502) (49,176)Other employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,032) (5,984)Pension expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,240) (6,871)Release of staff provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,913 2,851

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (306,449) (298,617)

Pension expenses include pension expenses for defined benefit plans of 3,067 kA (PY: 4,061 kA)(see note 11).

With respect to the release of staff provisions please refer to note 12.

At the balance sheet date the Group had 7,306 employees (headcount) (PY: 7,297).

The Group employed 6,869 full time equivalents (PY: 6,946) broken down by category as follows:production 4,644 (PY: 4,781), sales 1,445 (PY: 1,419) and administration 770 (PY: 746).

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18. Other Expenses

The composition of other expenses is shown in the following table:


Other expenses 2012 2011

kE kE

Other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,214) (6,719)Impairment of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,951) (2,837)Loss from disposal of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (305) (544)Legal and consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,519) (12,042)Repairs & maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (46,603) (51,615)Advertising & marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21,724) (22,812)Labour leasing & freelancer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,997) (12,500)Result from foreign exchange transactions (operating activ) . . . . . . . . . . . . . . . . 71 54Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,936) (4,747)Travelling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,552) (10,851)Data and telecommunication expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,745) (3,551)Expenses for IT service providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,607) (9,223)Expenses for human resource development and recruitment . . . . . . . . . . . . . . . . (3,983) (3,931)Material testing, examination & monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,628) (3,716)Waste disposal expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,112) (2,234)Cleaning expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,451) (3,991)Additions to warranty provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,692) (68,735)Other operating and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,294) (57,275)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (218,242) (277,269)

The Group’s other expenses positions are partly related to our business activities. For example,repairs & maintenance decreased following the lower production and sales volume compared to prioryear.

Another reason for the decrease of other expenses is the development of the warranty provisions.Additions to warranty provisions are mainly attributable to new warranty claims for damaged buildings7.741 kA (PY: 61,042 kA). Please refer to note 12. This amount is covered by a receivable against FranzHaniel & Cie. GmbH, Duisburg/ Germany (corresponding increase of income in Other Income).

Other taxes include, among others, real estate tax and car tax.

Impairments of receivables include impairments of trade and other receivables of 2,934 kA(PY: 2,837 kA). Please refer to note 7.

Other operating and administrative expenses comprise many different items, such as energy expenses(non-production), audit fees, charges and contributions, commissions and expenses for office supplies.

According to current information, the expected future minimum payments for operating leases in thecoming years amount to:

Maturity

2012 2011

Total 0–1 year 1–5 years > 5 years Total 0–1 year 1–5 years > 5 years


Total future mimium leasepayments . . . . . . . . . . . . . . . . . . 56,106 10,550 17,860 27,696 57,878 10,506 17,702 29,670

The operating leases relate primarily to real estate (plants as well as the Axel-Erikson office building inDuisburg / Germany), vehicles and other leasing expenses, e.g. fork lifts.

Centralized in Xella Technologie- und Forschungsgesellschaft mbH, Emstal / Germany, the Group’sexpenses for research and development amounted to 3,965 kA (PY: 3,688 kA). Staff expenses in theamount of 2,496 kA were included (PY: 2,221 kA), whereas depreciation is excluded.

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19. Result from Other Investments


Result from other investments 2012 2011

kE kE

Income from available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,202 780Expenses from available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51)Impairment of available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,692) (227)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,490) 502

Income from available-for-sale investments in the amount of 1,202 kA (PY: 780 kA) mainly pertains todividends from investments accounted for at cost. The impairment of the available-for-sale investmentsmainly refers to the Russian investment ‘‘DSZ’’ OOO (BSW), Tovarkovo which was reclassified frominvestment in associates (at equity) to available-for-sale investments due to a lack of significantinfluence. In the course of the reclassification the Russian investment was measured at fair valueaccording to IAS 28.

20. Finance Costs


Finance Costs 2012 2011

kE kE

Interest expenses (third parties) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (52,133) (68,399)Interest expenses for debentures & other bonds . . . . . . . . . . . . . . . . . . . . . . . . . . (24,000) (14,000)Interest expenses for net pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,224) (7,420)Interest expenses for other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,920) (1,273)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,808) (3,417)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (95,085) (94,509)

During the period borrowing costs in the amount of 837 kA (PY: 619 kA) were capitalized whichreduced interest expenses (third parties). Due to the fact that no direct financing is allocable to theinvestments, the respective interest rates derived from the Group’s average borrowing interest rate ofthe current period; this rate amounts to 6.4% for fiscal year 2012 (PY: 6.5%).

Interest expenses (third parties) are mainly related to interest on bank liabilities which were taken outin the course of the sale of the Xella Group as well as interest pertaining to the accumulation ofaccrued interest for the shareholder loans. Interest expenses for debentures and other bonds relate toSenior Secured Notes issued on June 1, 2011. For these effects please refer to note 10.

Please refer to the explanations in notes 11 and 12 with regard to interest expenses for pension andother provisions.

21. Other Financial Result


Other financial result 2012 2011

kE kE

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,924 2,088Result from non-hedge derivatives (financial activities) . . . . . . . . . . . . . . . . . . . . . . (2,290) 835Profit from foreign exchange transactions (financial activities) . . . . . . . . . . . . . . . . 10,458 11,098Loss from foreign exchange transactions (financial activities) . . . . . . . . . . . . . . . . . (9,291) (13,737)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,999

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,800 284

The result from non-hedge derivatives mainly relates to fair value changes of currency and interestinstruments.

In 2012, the financial income shown in ‘‘Others’’ result from a decrease in interest rates in connectionwith the discounting of non-current receivables.

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MERRILL CORPORATION GNEWBUR// 6-OCT-13 17:00 DISK132:[13ZCO3.13ZCO75803]GX75803A.;3 mrll_1111.fmt Free: 65D*/120D Foot: 0D/ 0D VJ RSeq: 1 Clr: 0 DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;114

Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: GX75803A.;3 v6.8

22. Income Taxes

In 2012 deferred tax assets of 12,981 kA on unused tax losses were released, while in the prior year atotal of 20,176 kA were set up. In 2012 no impairments (PY: 942 kA) on deferred tax assets were postedand prior impairments were reversed in the amount of 1,515 kA (PY: 1,762 kA).

The expected tax rate for the Xella Group is 29.4% (PY: 29.0%).

The reported current tax burden is reconciled to the imputed tax burden based on a tax rate of 29.4%(PY: 29.0%) in the table below:


Tax rate reconciliation 2012 2011

kE kE

Profit/ loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,368 555

Expected income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,578) (161)

Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 553 (631)Tax effect from non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,505) (2,526)Tax effect from tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,485 18,879Addition to/ release of allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,515 738Effects from tax rate and tax law changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 697 2,006Deferred tax asset not recognized on taxable loss of the current year . . . . . . . . . . . (9,671) (6,515)Effects resulting from the use of loss carryforwards previously not recognized as tax

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 862Taxes for prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,138) 457Tax effect from interest capping rules including effects from interest deduction

carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,433) (13,441)Special tax effects Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (305) (942)Special tax effects other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (117) (222)Other tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,233 6,594

Reported income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,184) 5,098

Group income tax rate for the reporting year (%) . . . . . . . . . . . . . . . . . . . . . . . . . 29.40 29.00

The increase of the reported income taxes mainly derives from the negative development of tax-exemptincome in Germany (Building Materials segment).

Income taxes include corporate income tax, the solidarity surcharge and trade tax, to the extent thatGerman companies are required to pay them.

Other tax effects are primarily due to the classification of CPEC interest to dividends. For comparisonreasons, the numbers of prior year were reclassified accordingly.

D. Other Notes to the Consolidated Financial Statements

23. Financial Risk Management

In the course of its operating activities, the Xella Group is exposed to financial risks. These chieflyrelate to liquidity risks, credit risks, risks from changes of interest rates and exchange rates as well asother market risks such as price movements on the commodity markets. The goal of financial riskmanagement is to reduce financial risks.

The management sets the general guidelines for financial risk management and determines the generalprocedure for hedging against financial risks. The Xella Group has its own treasury department which,after identifying, analyzing and assessing the financial risks, takes action to avoid or mitigate such risks.It advises subsidiaries and, in addition to its own hedging activities, also enters into hedge relationshipsfor the subsidiaries.

Liquidity Risk

Liquidity risk is understood as the risk of the Xella Group not being in the position to meet its ongoingpayment obligations at any time. The liquidity risk is managed by means of centralized financialplanning which provides the required funding for operations and capital expenditures. Within the

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framework of the acquisition of the Xella Group, the owners agreed on a Secured Facility Agreementwith a large number of banks to secure fixed financing. The credit lines under the agreement haveterms of up to 2017. The repayment obligations from these lines of credit are moderate in scope. Forexample, only 40,187 kA (PY: 41,352 kA) is scheduled for 2013. In addition, the high amount of unusedcredit lines as well as the available cash secures adequate financing to fund operating business andother investments.

Credit Risk

Credit risk is understood as the risk that a debtor of the Xella Group is not in the position to meet itspayment obligations. Xella is exposed to credit risks from both its operating business, from the use offinancial instruments and from deposited cash.

Based on the Group’s internal assessment of the risks, loans to associates and other loans (in thecurrent year mainly consisting of the non-current portion of the indemnity receivable from FranzHaniel & Cie. GmbH, Duisburg / Germany) of 63,126 kA (PY: 64,283 kA) are exposed to a low level ofcredit risk.

The diversification of the Xella Group and the number of existing customers with low individualreceivables results in no concentration of credit risks associated with trade receivables and similarreceivables. For this reason, the Group considers credit risk exposure to be immaterial. At worst casethe maximum credit risk from such receivables amounts to total receivables less existing trade creditinsurances:

The credit risk associated with derivative financial instruments does not exceed the fair value of thepositive market values of the derivatives entered into. Due to the fact that derivative financialinstruments are only entered into with banks with solid credit ratings, these risks are low. There are noidentifiable concentrations of credit risk from business relationships with single debtors or groups ofdebtors.

Interest Risk

Interest risks are understood as the negative impact of fluctuating interest rates on the net profit of theGroup. Derivative financial instruments are used to limit the interest risk. At present these consistsolely of interest caps. The decision on whether to use derivative financial instruments is based on theprojected debt and the expected interest rates. The interest hedging strategy is reviewed at regularintervals and new targets are defined. As at December 31, 2012 interest rate hedges in form of interestrate caps with a cap strike rate of 3,50% existed for a nominal value of 400,000 kA (PY: 400,000 kA).The Facility D Loan funded from the Senior Secured Notes issued in 2011 has a fixed interest rate of8% which reduces the interest risk, additionally.

The interest sensitivity analysis presented below shows the hypothetical effects which a change in themarket interest rate at the balance sheet date would have had on the pre-tax profit and on equity. It isassumed here that the exposure at the balance sheet date is representative of the year as a whole andthat the assumed change in the market interest rate at the balance sheet date was possible.

Hypothetical increases/decreases of one percentage point in the market interest rate would have hadthe following impact on the profit/loss before tax and on equity:

Effect of change in interest rate 2012

Increase Decrease

Profit/ loss Profit/ lossbefore tax Equity before tax Equity

kE kE kE kE

(3,906) (2,757) 3,906 2,757


Increase Decrease


kE kE kE kE

(4,866) (3,455) 4,866 3,455

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Currency Risk

Currency risks arise from investing and financing activities conducted in foreign currency as well asfrom operating activities due to the purchase and sale of merchandise in foreign currency. In general,forward exchange contracts and currency options are used to hedge against currency risks.

Foreign exchange exposure is mainly secured by micro-hedges. This involves a direct hedge of theunderlying transaction by means of a foreign exchange derivative, generally a forward exchangecontract. In addition, currency derivatives are used to hedge forward transactions in foreign currency.This involves selecting the currency derivative (or a combination of several derivatives) which bestreflects the likelihood of occurrence and timing of the forward transaction.

The sensitivity analysis of foreign exchange exposure shows the theoretical impact of a change in thekey exchange rates for the Xella Group on the pre-tax result and equity. This foreign exchangesensitivity analysis is based on the primary and derivative financial instruments on the balance sheetdate. It is assumed that the exchange rates on the balance sheet date change by the percentage stated.Movements over time and the changes in other market parameters observed in reality are notconsidered in this analysis.

Hypothetical increases/decreases of 10% in the relevant exchange rates at Xella (CZK, PLN and RUB)would have had the following impact on the profit/loss before tax and on equity:

Effect of changes in exchange rates 2012

Increase Decrease

Profit/ loss Profit/ lossCurrency before tax Equity before tax Equity

kE kE kE kE

CZK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,517) (1,213) 1,854 1,483PLN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,311 1,062 (2,367) (1,918)RUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,627 2,102 (3,211) (2,569)


Increase Decrease


kE kE kE kE

CZK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,137) (910) 1,390 1,112PLN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,199 1,781 (2,688) (2,177)RUB . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,020 1,616 (2,468) (1,975)

Other Market Risks

Other market risks relate to the risk of price fluctuations in the commodities markets which are partlysecured against by means of long-term supply agreements.

Derivative Financial Instruments

A breakdown of derivative financial instruments in accordance with the hedge strategy pursued byXella is provided below:

Dec. 31, Dec. 31,2012 2011

Derivative financial instruments Fair value Fair value

kE kE

Interest instruments with a positive market value . . . . . . . . . . . . . . . . . . . . . . . . 2Currency instruments with a positive market value . . . . . . . . . . . . . . . . . . . . . . . 185 2,419

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185 2,421

Currency instruments with a negative market value . . . . . . . . . . . . . . . . . . . . . . . 1,405 1,366

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,405 1,366

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The next table shows the contractually agreed, undiscounted debt service payments due on the primaryfinancial liabilities and derivative financial assets and liabilities over time:

2023 andDebt service payments* 2013 2014 2015–2017 2018–2022 thereafter

kE kE kE kE kE

Bank liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,489) (58,414) (347,768)Bond liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,000) (24,000) (72,000) (312,000)Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . (1,943) (1,856) (5,866) (813)Liabilities to investments . . . . . . . . . . . . . . . . . . . (85)Liabilities to shareholders . . . . . . . . . . . . . . . . . . . (827) (220,692) (18,746)Other financial liabilities . . . . . . . . . . . . . . . . . . . . (10,370) (299,809) (78)Financial liabilities (without derivatives) . . . . . . . . (95,715) (84,270) (946,135) (331,637)

Derivative financial assets . . . . . . . . . . . . . . . . . . . (20,158)20,327

Derivative financial liabilities . . . . . . . . . . . . . . . . (72,370)69,740

Derivative financial instruments . . . . . . . . . . . . . . (2,460)

* (�) payments made/ (+) payments received

Cash flows related to liabilities to shareholders taken in relation to the sale of the Xella Group in 2008have been calculated based on the assumption that full repayment will occur on December 31, 2015(i.e. diverging from the contractually agreed maturity date which is December 31, 2058). Thecontractually agreed cash flows on these shareholder loans would be 2,789,273 kA in 2058 (instead of219,742 kA in 2015).

On call liabilities have been allocated to the earliest possible period in the table.

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Reconciliation of Financial Instruments to IAS 39 Categories / IFRS 7 Valuations Levels—Assets

Reconciliation offinancial assets Financial assets No IAS 39to IAS 39 categories / Book value as at fair value Financial Available-for- category/IFRS 7 valuation at Dec. 31, through profit assets held for Loans and sale Outside the IFRS 7levels 2012 and loss trading receivables investments scope of IFRS 7 Fair value valuation level

kE kE kE kE kE kELoans . . . . . . . . . 3,011 3,011 3,011 n.a.Net pension assets

(non-current) . . . 110 110 110 n.a.Other investments . . 15,945 9 15,936 15,945 VL 1, VL 3Other financial assets

(non-current) . . . 62,515 62,515 62,515 n.a.

Financial assets(non-current) . . . 81,581 9 3,011 78,451 110 81,581

Trade and otherreceivables(non-current) . . . 2,397 2,397 2,397

Trade receivables(current) . . . . . . 112,611 112,611 112,611 n.a.

Receivables fromconstructioncontracts . . . . . . 548 548 548 n.a.

Other receivables(current) . . . . . . 25,872 10,204 15,668 25,872 na.

Trade and otherreceivables(current) . . . . . . 139,031 123,363 15,668 139,031

Derivatives . . . . . . 185 185 185 VL 2Receivables from

associates (atequity) (current) . . 447 447 447 n.a.

Receivables fromshareholders(current) . . . . . . 887 887 887 n.a.

Other financial assets(current) . . . . . . 40,483 40,483 40,483 n.a.

Financial assets(current) . . . . . . 42,002 185 41,817 42,002

Cash and cashequivalents . . . . . 147,343 147,343 147,343 n.a.

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Reconciliation offinancial assets Financial assets No IAS 39to IAS 39 categories / Book value as at fair value Financial Available-for- category/IFRS 7 valuation at Dec. 31, through profit assets held for Loans and sale Outside the IFRS 7levels 2011 and loss trading receivables investments scope of IFRS 7 Fair value valuation level

kE kE kE kE kE kELoans . . . . . . . . . 66,775 66,775 66,775 n.a.Other investments . . 12,302 9 12,293 12,302 VL 1, VL 3

Financial assets(non-current) . . . 79,064 9 66,775 12,293 79,077

Trade and otherreceivables(non-current)

Trade receivables(current) . . . . . . 116,567 116,567 116,567 n.a.

Receivables fromconstructioncontracts . . . . . . 1,306 1,306 1,306 n.a.

Other receivables(current) . . . . . . 28,207 12,292 15,915 28,207 n.a.

Trade and otherreceivables(current) . . . . . . 146,080 130,165 15,915 146,080

Derivatives . . . . . . 2,421 2,421 2,421 VL 2Receivables from

associates (atequity) (current) . . 1,021 1,021 1,021 n.a.

Receivables fromshareholders(current) . . . . . . 1,168 1,168 1,168 n.a.

Other financial assets(current) . . . . . . 34,860 34,860 34,860 n.a.

Financial assets(current) . . . . . . 39,470 2,421 37,049 39,470

Cash and cashequivalents . . . . . 148,646 148,646 148,646 n.a.

The fair value of financial instruments traded on an active market is based on the market price onbalance sheet date. As at December 31, 2012 other investments include investments valued at stockmarket prices of 1,126 kA (PY: 1,048 kA) (IFRS 7 valuation level 1).

The above listed derivatives are valued on the basis of observable market data such as interest ratesand foreign exchange rates (level 2 of the IFRS 7 valuation categories).

The fair value of financial instruments that are not based on observable market data (unobservableinputs) is determined with the aid of valuation techniques, primarily the discounted cash flow method(IFRS 7 valuation level 3).

Reconciliation of Financial Instruments to IAS 39 Categories / IFRS 7 Valuations Levels—Liabilities


Book value liabilities Other Outside IFRS 7Reconciliation of financial liabilities as at Dec. 31, held for financial the scope valuationto IAS 39 categories / IFRS 7 valuation levels 2012 trading liabilities of IFRS 7 Fair value level

kE kE kE kE kEBank liabilities (non-current) . . . . . . . . . . . . 356,139 356,139 356,139 n.a.Bond liabilities (non-current) . . . . . . . . . . . . 289,590 289,590 416,350 n.a.Finance lease liabilities (non-current) . . . . . . . 7,551 7,551 8,715 n.a.Liabilities to shareholders (non-current) . . . . . 153,058 153,058 184,050 n.a.Other financial liabilities (non-current) . . . . . . 223,552 223,552 349,255 n.a.

Financial liabilities (non-current) . . . . . . . . . 1,029,890 1,022,339 7,551 1,314,509

Trade and other liabilities (non-current) . . . . 6,631 6,631 6,631 n.a.

Trade liabilities (current) . . . . . . . . . . . . . . 96,697 96,697 96,697 n.a.Advance payments by customers . . . . . . . . . . 2,702 2,702 2,702 n.a.Liabilities from construction contracts . . . . . . 2,239 2,239 2,239 n.a.Other liabilities (current) . . . . . . . . . . . . . . 34,863 9,201 25,661 34,863 n.a.

Trade and other liabilities (current) . . . . . . . 136,501 105,898 30,602 136,501

Bank liabilities (current) . . . . . . . . . . . . . . . 38,123 38,123 38,123 n.a.Finance lease liabilities (current) . . . . . . . . . 1,560 1,560 1,560 n.a.Liabilities to investments (current) . . . . . . . . 85 85 85 n.a.Liabilities to shareholders (current) . . . . . . . . 42,005 42,005 49,454 n.a.Derivatives . . . . . . . . . . . . . . . . . . . . . . . 1,405 1,405 1,405 VL 2Other financial liabilities (current) . . . . . . . . 16,411 16,411 20,984 n.a.

Financial liabilities (current) . . . . . . . . . . . . 99,589 1,405 96,624 1,560 111,610

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Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: GY75803A.;3 v6.8


Book value liabilities Other Outside IFRS 7Reconciliation of financial liabilities as at Dec. 31, held for financial the scope valuationto IAS 39 categories / IFRS 7 valuation levels 2011 trading liabilities of IFRS 7 Fair value level

kE kE kE kE kEBank liabilities (non-current) . . . . . . . . . . . . 390,529 390,529 390,529 n.a.Bond liabilities (non-current) . . . . . . . . . . . . 288,096 288,096 411,575 n.a.Finance lease liabilities (non-current) . . . . . . . 8,976 8,976 10,090 n.a.Liabilities to shareholders (non-current) . . . . . 114,336 114,336 137,991 n.a.Other financial liabilities (non-current) . . . . . . 205,124 205,124 321,857 n.a.

Financial liabilities (non-current) . . . . . . . . . 1,007,061 998,085 8,976 1,272,042

Trade and other liabilities (non-current)Trade liabilities (current) . . . . . . . . . . . . . . 103,279 103,279 103,279 n.a.Advance payments by customers . . . . . . . . . . 5,040 5,040 5,040 n.a.Liabilities from construction contracts . . . . . . 3,072 3,072 3,072 n.a.Other liabilities (current) . . . . . . . . . . . . . . 34,197 9,606 24,591 34,197 n.a.


Bank liabilities (current) . . . . . . . . . . . . . . . 18,865 18,865 18,865 n.a.Finance lease liabilities (current) . . . . . . . . . 1,555 1,555 1,555 n.a.Liabilities to investments (current) . . . . . . . . 87 87 87 n.a.Liabilities to shareholders (current) . . . . . . . . 39,470 39,470 47,013 n.a.Derivatives . . . . . . . . . . . . . . . . . . . . . . . 1,366 1,366 1,366 VL 2Other financial liabilities (current) . . . . . . . . 16,876 16,876 21,076 n.a.


The fair values of the non-current financial liabilities are generally determined by discounting futurecontractually agreed cash flows at the current market rate. The fair value for non-current liabilities toshareholders stated above has been calculated based on the assumption that full repayment will occuron December 31, 2015 (i.e. diverging from the contractually agreed maturity date which isDecember 31, 2058). The fair value based on contractually agreed maturity date would be 965,997 kAinstead of 216,705 kA. Bond liabilities and liabilities to shareholders are accounted for at amortizedcost. For both financial instruments the deviation between book value and fair value is based on thecontractually agreed fixed interest rate which is fixed on a higher level than the corresponding actualmarket interest rate as per year-end 2012.


The net result of IAS 39 categories breaks down as follows:

Jan. 1st–Dec. 31, Jan. 1st–Dec. 31,Net result of IAS 39 categories 2012 2011

kE kE

Result from financial assets held-for-trading . . . . . . . . . . . . . . . . . . . . (2,289) 835Result from available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . (1,490) 502Result from loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . (247) 391Result from other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . (73,612) (89,073)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (77,638) (87,345)

The net result of the above categories under IAS 39 is distributed among the following line items ofthe Statement of Income: other income, other expenses, result from other investments, financialexpenditure, other financial result. Result from other financial liabilities mainly consists of interestexpenses to third parties of 52,133 kA (PY: 68,399 kA) and interest expenses on bond liabilities of24,000 kA (PY: 14,000 kA).

24. Contingencies

As far as exact figures can be estimated, as at December 31, 2012 there are contingent liabilities of4,100 kA (PY: 4,040 kA) and contingent assets of 3,540 kA (PY: 3,540 kA).

Because of the long useful life of certain of the products, it is possible that latent defects might notappear for several years. In isolated cases this may lead to obligations which cannot be estimated atpresent in terms of amount or their impact on the net assets, financial position and results of earnings.

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Xella is currently facing potential warranty, product liability and damage claims by several buildingowners in connection with the delivery of building materials by former Haniel Baustoffwerke fromthree plants in North Rhine-Westphalia, Germany, between end of 1987 and the beginning of 1996.Calcium silicate units had been produced in the relevant period applying an alternative productionmethod, which substituted another product for lime. Although the relevant calcium silicate unitsdisplayed the required compressive strength immediately after production, over the years some of thecalcium silicate units lost their compressive strength after being exposed to permanent moisture withcracks resulting in the finished masonry.

All identifiable risks are covered by appropriate provisions such as the (constructive) provisions forpossible building damages (see note 12) in connection with the delivery of these calcium silicate units.In this special case, payments exceeded the provision may (according to the SPA) be claimed back byXI (BM) Holdings GmbH, Duisburg / Germany from Franz Haniel & Cie. GmbH, Duisburg / Germanyas it is covered by respective hold-harmless agreements (see note 4).

Contingent liabilities also include an amount of 3,540 kA (PY: 3,540 kA) due to the contamination of aFrench gravel pit. In this context a provision has also been recognized in the Consolidated Statement ofFinancial Position. The exceeded maximum risk is presented as contingent liability. XI (BM)Holdings GmbH, Duisburg / Germany, holds contingent assets in the same amount relating to thecontingent liability for the French gravel pit. If the amount is paid by Fels-Werke GmbH, Goslar /Germany the money may be claimed back by XI (BM) Holdings GmbH, Duisburg / Germany as it iscovered by respective hold-harmless agreements with Haniel. For further details please also refer tonote 4.

25. Corporate Acquisitions and Divestments

In the reporting period, the Xella Group’s Building Materials segment acquired control of H+H Ceskarepublica s.r.o., Most / Czech Republic (today Hebel CZ s.r.o.), 100.0%, October 31, 2012, and the DryLining segment of Fermacell S.L.U., Cantabria / Spain (100.0%, April 25, 2012).

The following assets and liabilities were acquired in connection with business combinations in thefinancial year 2012.

CarryingAssets and liabilities acquired in connection with business combinations amount Revaluation Fair value

kE kE kE

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,049 (11,793) 6,256Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 656 790

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,183 (11,137) 7,046

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,485 (16) 1,469Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 783 0 783Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 357 357Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34 34

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,659 (5) 2,654

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,842 (11,142) 9,700

Non-current liabilitiesFinancial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,562 7,562Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 11Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 618 632Trade and other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 714 297 1,011

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,279 926 9,205

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,279 926 9,205

Trade and other receivables acquired amounted to 783 kA and were reduced by bad debt allowances of13 kA. As at the acquisition date, the bad debt amount was not expected to be recovered. Nocontingent liabilities were provided for in the course of first consolidation. The acquired entities areinitially consolidated on the basis of provisional figures. If applicable, the final figures will be restated

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within one year in compliance with IFRS 3.45 et seq. No changes were made in respect of acquisitionsmade in 2011.

Since initial consolidation the stand-alone contribution of the acquired entities was 626 kA in sales and732 kA in losses. Had the entities been consolidated as at January 01, 2012 the acquired companieswould have contributed sales of 7,261 kA and net loss after taxes of 7,189 kA during the reportingperiod. In this calculation, synergies are not included.

The decisions to acquire the above companies were based on market and growth opportunities, generalstrengthening of the market position, and synergy effects.

Total acquisition costs were 15,102 kA of which 15,002 kA was paid in cash. An amount of 100 kA hasnot yet been paid.

In total, these acquisitions resulted in additions to goodwill of 7,170 kA based on synergy effects, astrengthening of the market position and growth opportunities.

In addition to the aforementioned acquisitions the Group’s Building Materials segment acquiredadditional shares in Siporex dd, Tuzla, Bosnia-Herzegovina increase from an 93.32% to 93.95%,Cegielnie Bydgoskie S.A., Warsaw / Poland from 99.11% to 99.48%, and Xella Teodory S.A., Warsaw /Poland from 93.70% to 100.0% holding by means of transactions not leading to changes of control. Thepurchase price of 75 kA was paid in cash for shares held by owners of non-controlling interest in theamount of (7) kA and allocated to profit reserves.

26. Consolidated Statement of Cash Flows

The Consolidated Statement of Cash Flows pursuant to IAS 7 presents the changes in cash and cashequivalents of the Group in the course of the reporting period due to cash inflows and cash outflows. Itis classified by cash flows from operating, investing, and financing activities.

The cash flows from operating activities are derived using the indirect method from the consolidatednet profit or loss for the year. Cash Flows from investing and financing activities are determined usingthe direct method.

The balance of cash and cash equivalents reported on balance sheet date is the sum of cash in handand bank balances with a short maturity and checks.

Changes of trade working capital and changes in other working capital are largely included in the notesto the Consolidated Statement of Financial Position and to the Statement of Income. Foreign exchangeeffects, non-cash changes of CO2 certificates, interest components of pension liabilities and other non-current provisions as well as other non-cash effects are eliminated. Also eliminated are the non-casheffects of the changes of non-current and current receivables from the indemnity by Franz Haniel &Cie. GmbH, Duisburg / Germany, and of the provisions related thereto.

The cash flow from operating activities contained taxes paid on income of 21,018 kA (PY: 23,450 kA).

Non-cash investments in non-current property, plant and equipment in the form of finance leasesamounted to 151 kA (PY: 0 kA).

In the year under review, cash flow from investing activities included the acquisition of one company inthe Czech Building Materials segment and one company in the Spanish Dry lining segment. For detailsreference is made to note 25. Cash compensation for the business combinations was 15,102 kA whileacquired cash amounted to 357 kA.

The acquisition of additional shares in consolidated subsidiaries without change of control is shownunder financing activities as stipulated by IAS 7 revised 2008.

In the previous year, cash flows from investing activities included the acquisition of a Polish andan Italian company, both in the Building Materials segment. Cash compensation for the businesscombinations was 10,074 kA while acquired cash amounted to 15 kA. An amount of 2,000 kA was stillunpaid as at December 31, 2012. Xefin Lux S.C.A., Luxembourg, was consolidated as a special purposeentity for the first time in the prior year and contributed 31 kA in acquired cash.

Additions to other non-current and current financial assets (479 kA, PY: 863 kA), mainly loans, alsocontained additions to available-for-sale investments (20 kA, PY: 109 kA).

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Disposals of other non-current and current financial assets (9,190 kA, PY: 6,808 kA) mainly related tothe repayment of various loans and other financial receivables as well as dividends received fromassociated companies at equity in the amount of 1,186 kA (PY: 984 kA).

The cash flow from investing activities contains interest received of 1,837 kA (PY: 2,049 kA) anddividends received of 1,785 kA (PY: 780 kA).

Cash paid and received from financing activities in the reporting year does not include capitalcontributions (PY: 0 kA). Payments made to non-controlling interests comprise dividends ofcorporations (2,775 kA, PY: 2,089 kA).

Acquisitions of additional shares in a Bosnian and two Polish Building Materials companies were paidin cash (75 kA). In the previous year, the cash purchase prices of acquisitions of additional shares incompanies already consolidated in the Building Materials segment totaled 98 kA.

Cash interest payments amounted to 49,501 kA (PY: 56,968 kA) including financing fees (4,809 kA,PY: 13,846 kA). 837 kA was capitalized as part of capital expenditure (PY: 619 kA). Currently, the XellaGroup is not required to pay accrued interest on shareholder loans under the Shareholder LoanAgreements.

In the prior year, Xella completed the offering of 300,000 kA aggregate principal amount of 8% SeniorSecured Notes due 2018 in a private placement to qualified institutional buyers. The gross proceeds ofthe offering of the Senior Secured Notes were used to refinance an aggregate principal amount of250,000 kA under the existing Senior Facilities Agreement and 50,000 kA of the existing Vendor Loan.Further, Acquisition Facilities of 40,000 kA were drawn in the prior year under the Senior FacilitiesAgreement 5,000 kA of which were repaid during the same period.

Unscheduled repayments of financial debt in total amounted to 24,021 kA (PY: 357,224 kA) includingminority shares in the profit distribution of limited partnerships of 224 kA (PY: 0 kA) in accordancewith IAS 32.

27. Segment Reporting

As at December 31, 2009, Xella adopted IFRS 8 ‘‘Operating Segments’’. According to IFRS 8 Xellaapplies the management approach for segment reporting. Accordingly, the operating segmentinformation is reported based on the internal organization and management structure, which is theinternal financial reporting to the Chief Operating Decision Makers, and is represented by theManagement Board of Xella.

Xella identified three reportable segments (Building Materials, Lime, Dry Lining), which are separatelyorganized and managed according to the products sold and services provided, the trademarks, theproduction processes, the sales channels and the customer profiles. The segment directors, responsiblefor the segment operating result, report directly to the chief decision makers of Xella.

Xella mainly produces and markets building materials (calcium silicate units, autoclaved aeratedconcrete and mineral insulation), gypsum fiber boards and cement-bonded boards as well as lime. Theproduct trademarks in the Building Materials segment are Silka, Ytong, Hebel and Multipor, for theDry Lining segment Fermacell and Fels in the Lime segment.

The Holding segment mainly contains the Group holding company Xella International Holding S.a r.l.,Luxembourg, which is responsible for strategic management decisions with respect to the segments. Inaddition the Holding segment includes Xefin Lux S.C.A., Luxembourg, a special purpose financingentity established for the primary purpose of facilitating the offering of Senior Secured Notes.

Xella assesses the performance of the operating segments based on a measure of normalized earningsbefore interest, income taxes, depreciation, amortization and impairment losses (Normalized EBITDA).This measurement basis excludes the effects of unusual or non-recurring income and expenses,e.g. material restructuring costs or expenses for attempted acquisitions or divestments.

The inter-segment transactions are concluded at arm’s length. The sales from external parties reportedto the Management Board of Xella are measured in a manner consistent with that in the Statement ofIncome.

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Segment information— BuildingJan. 1st–Dec. 31, 2012 Materials BU Lime BU Dry Lining BU Holding Consolidation Total

kE kE kE kE kE kE

Sales from external customersand associates . . . . . . . . . . 840,441 233,600 208,460 0 1,282,501

Inter-segment sales . . . . . . . . 13,897 38,741 18 0 (52,656) 0Segment sales . . . . . . . . . . . . 854,338 272,341 208,478 0 (52,656) 1,282,501Material income / expense

items from Inventorywrite-down* . . . . . . . . . . . . (494) (12) (20) 0 0 (526)Impairment of property,

plant & equipment* . . . . (410) 0 0 0 0 (410)Profit / loss (�) from

disposal of property,plant & equipment* . . . . 1,382 471 14 0 0 1,867

Reversals of provisions* . . . 6,419 290 557 0 0 7,266EBITDA* . . . . . . . . . . . . . 119,676 63,243 34,605 (523) 0 217,001


Segment information— BuildingJan. 1st–Dec. 31, 2011 Materials BU Lime BU Dry Lining BU Holding Consolidation Total

kE kE kE kE kE kE

Sales from external customersand associates . . . . . . . . . . 835,436 228,125 207,638 0 0 1,271,199

Inter-segment sales . . . . . . . . 12,350 39,814 11 0 (52,175) 0Segment sales . . . . . . . . . . . . 847,786 267,939 207,649 0 (52,175) 1,271,199Material income / expense

items from Inventorywrite-down* . . . . . . . . . . . . (860) (13) (6) 0 0 (879)Impairment of property,

plant & equipment* . . . . (5,433) 0 0 0 0 (5,433)Profit / loss (�) from

disposal of property,plant & equipment* . . . . 698 166 (4) 0 0 860

Reversals of provisions* . . . 5,026 230 697 0 0 5,953EBITDA* . . . . . . . . . . . . . 115,363 59,035 34,072 (772) 0 207,698


Material non-cash items are explained in note 26.

Profit/loss before tax was derived as follows:

Jan. 1st–Dec. 31, Jan. 1st–Dec. 31,Reconciliation from Normalized EBITDA to Profit / Loss before tax 2012 2011

kE kE

Normalized EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,001 207,698Normalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,810) (7,249)

EBITDA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,191 200,449

Depreciation, amortisation and impairment of property, plant andequipment and intangible assets (excluding goodwill) . . . . . . . . . . . . (102,647) (107,404)

Impairment of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,791) 0Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (90,385) (92,490)

Profit / Loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,368 555

In the year under review normalizations mainly included restructuring and severance costs of 4,058 kA(PY: 2,719 kA) and costs related to M&A activities of 1,802 kA (PY: 2,980 kA).

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In 2012 sales from external customers can be divided up in the following product categories: calciumsilicate units 161,550 kA (PY: 167,453 kA), autoclaved aerated concrete 501,085 kA (PY: 483,394 kA),gypsum fibre boards 139,035 kA (PY: 138,139 kA), cement-bonded boards 22,309 kA (PY: 20,365 kA),burned lime products 156,586 kA (PY: 150,256 kA), limestone 16,728 kA (PY: 17,835 kA), limestonepowder 20,637 kA (PY: 19,616 kA), services 147,680 kA (PY: 148,664 kA) and others 116,891 kA(PY: 125,477 kA).

Selected financial information by geographic regions is as follows:

Sales to external customersNon-current assets and associates

Dec. 31, Dec. 31, Jan. 1st–Dec. 31, Jan. 1st–Dec. 31,Selected financial information by geographic regions 2012 2011 2012 2011

kE kE kE kE

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . 879,916 903,032 571,411 558,561Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . 190,830 194,474 138,578 142,253Belgium . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,648 44,569 61,841 64,302Czech Republic . . . . . . . . . . . . . . . . . . . . . . . 136,608 124,558 71,278 78,356France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,295 52,014 74,447 82,627Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70,862 67,223 56,561 62,282Other countries . . . . . . . . . . . . . . . . . . . . . . . 358,807 357,753 308,385 282,818

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,729,966 1,743,623 1,282,501 1,271,199

Non-current assets include intangible assets, property plant and equipment, investments in associatesand the non-current portion of other assets. In the Business Units Building Materials and Lime saleswere allocated according to domicile of the invoicing unit. At the Business Unit Dry Lining longertransportation distances are possible, therefore we have allocated the sales according to the domicile ofthe customer since 2012.

Due to the structure of the customer base and the diversity of Xella’s business activities, there was noconcentration of risk relating to one single customer, region or segment in the years reported.

28. Related Parties

Selected managers of Xella International S.A., Luxembourg, and other employees and their close familymembers have acquired shares in Xella International S.A., Luxembourg, via XI ManagementBeteiligungs GmbH & Co KG, Duisburg / Germany within the framework of the managementparticipation program. The shares were acquired at market value.

The management participation plan is governed in the ‘‘Shareholders and Co-Investment Agreementregarding the Implementation of Management Partnership Plan for the Xella Group’’ that wasconcluded between Xella International Holdings S.a r.l., Luxembourg, XI ManagementBeteiligungs GmbH & Co. KG, Duisburg / Germany, XI MPP Verwaltungs GmbH, Duisburg /Germany, the participants of the program and Xella International S.A., Luxembourg, and notarized onNovember 17, 2008. Within the framework of the management participation program, Goldman SachsCapital Partners and PAI partners offered the participants listed above the chance to participate in theXella Group. This investment leads to a far-reaching harmonization of the interests of employees andthe investors. In principle, the shares can be acquired subject to the same terms and conditions underwhich the shareholders acquired the shares. That is the main reason why managers’ vehicle,XI Management Beteiligungs GmbH & Co. KG, Duisburg / Germany, has been consolidated as aSpecial Purpose Entity in accordance with IAS 27.12 / SIC 12 in the IFRS Consolidated FinancialStatements of Xella International Holdings S.a r.l., Luxembourg.

Notwithstanding other provisions in the articles of incorporation and bylaws, Xella InternationalHoldings S.a r.l., Luxembourg, has the right (call option) to demand that any participants who leavesan entity in the Xella Group prior to a defined ‘‘exit event’’, sells and transfers all indirectly held sharesto Xella International Holdings S.a r.l., Luxembourg. If this option is exercised, the leaver is entitled toa compensation payment which, depending on the reason for his termination of employment, can varyin relation to the amount paid (purchase price as of grant date) and the current market value of theshares In special cases (good leaver events) there are also put options for the participants against theXella International Holdings S.a r.l. In case of all ‘‘leaver events’’, Xella International Holdings S.a r.lis obliged to settle the obligation of the participant terminating his employment.

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In the case of an ‘‘exit’’ event determined as a sale or a floatation, the compensation for the sharesheld by the participants depends on their current market value, whereby the participant can generallysell the shares held directly to the market. This means that the program, together with the ‘‘leaver’’ and‘‘exit’’ events, is accounted for as a cash-settled share-based payment transaction (leaver events) resp. incase of floatation or based on the drag-along right in case of a share deal or in case of a asset deal asan equity-settled share-based payment transaction in accordance with IFRS 2.

Other related parties of the Xella Group are its associates and non-consolidated subsidiaries. As atDecember 31, 2012 current receivables from associates amounted to 447 kA (PY: 1,021 kA) (see note 4).This related primarily to unpaid dividends of Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,Ruckersdorf / Germany (439 kA).

All business relations with non-consolidated entities and associates are transacted at arm’s length.

Other related parties of the Xella Group are the non-controlling interests of consolidated subsidiaries.As at December 31, 2012 the Group carried current receivables from non-controlling interests of874 kA (PY: 1,156 kA) (see note 4).

Liabilities to non-controlling interests (see note 10) included liabilities of 11,689 kA (PY: 11,739 kA) (ofwhich 10,998 kA (PY: 11,222 kA) were non-current). Liabilities of 6,445 kA (PY: 6,732 kA) are inconnection with the management participation program (please refer to note 14).

Furthermore, with regard to various contracts that were made on or close to August 28, 2008, the XellaGroup reports CPEC shown as Treasury Shares within equity according to IAS 32 (see note B. 9) of552,600 kA (PY: 552,600 kA) and liabilities to PAI Partners and Goldman Sachs Capital Partners of183,440 kA (PY: 142,061 kA). Interest for the CPEC shown as dividends of 32,811 kA as well as interestof 8,564 kA on the interest-bearing portion of these liabilities incurred in the reporting period wasreported under current liabilities. Liabilities against Goldman Sachs International, London / GreatBritain and PAI partners SAS, Paris / France mainly refer to Monitoring Service Agreements in thetotal amount of 2,600 kA (PY: 2,000 kA) for the period August 29, 2008 to December 31, 2012 and wereshown in the Consolidated Statement of Financial Position as trade liabilities.

All transactions with shareholders and non-controlling interests are made at arm’s length.

Otherwise, no transactions requiring disclosure were conducted by the Xella Group with members ofthe management or with entities in whose executive or supervisory board any such persons arerepresented. The same applies for members of these persons’ close families.

Persons in key positions at Xella International Holdings S.a r.l., Luxembourg, are the members of theManagement Boards of Xella International Holdings S.a r.l., Luxembourg, and Xella International S.A.,Luxembourg. The remuneration paid to this group of persons in the current year amounted to 2,636 kA(PY: 1,841 kA). Of this total amount, 2,554 kA (PY: 1,764 kA) was attributable to benefits falling due inthe short-term, 82 kA (PY: 78 kA) to post-retirement benefits and 0 kA (PY: 0 kA) to benefits onaccount of a termination of the employment relationship. The present benefit obligation of this groupof persons amounted to 2,624 kA (1,425 kA) as of balance sheet date. The current service cost ofpensions, added to pension provisions, for members of the management amounted to 82 A (PY: 78 kA)in the reporting period.

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29. List of shareholdings

Fully consolidated Group companies

Equity in Net result Parent ShareholdingsNo. Name and domicile of the company kE(1) in kE(1) company in %

HoldingLuxembourgHLU0100 Xella International Holdings S.a r.l. . . . . 619,474 30,004HLU0200 Xella International S.A., Luxembourg . . . 96,015 (772) HLU0100 89.84

HDE0300 10.16HLU0400 Xefin Lux S.C.A., Luxembourg . . . . . . . . 52 21GermanyHDE0300 XI Management Beteiligungs

GmbH & Co. KG, Duisburg . . . . . . . . 9,624 (141) HLU0100 43.60HDE0301 XI MPP Verwaltungs GmbH, Duisburg . . 11 (4) HLU0100 100.00

Building Materials BUGermanyHDE0025 YTONG Bausatzhaus GmbH, Duisburg . . 3,947 (3) HDE0561 100.00HDE0057 Kalksandsteinwerke Thorl & Meyer

GmbH, Munster . . . . . . . . . . . . . . . . . 70 5 HDE0561 50.00HDE0058 Kalksandsteinwerke Thorl & Meyer

GmbH & Co. KG, Seevetal . . . . . . . . . 1,669 127 HDE0561 59.00HDE0500 XI (BM) Holdings GmbH, Duisburg . . . . 215,215 201,160 HLU0200 100.00HDE0501 Xella International GmbH, Duisburg . . . . 162,066 (3) HDE0500 100.00HDE0510 Xella Baustoffwerke Rhein-Ruhr GmbH,

Duisburg . . . . . . . . . . . . . . . . . . . . . . 20,855 2,718 HDE0561 61.50HDE0519 Kalksandsteinwerk Griedel

Verwaltungsgesellschaft mbH,Butzbach-Griedel . . . . . . . . . . . . . . . . 60 2 HDE0561 51.00

HDE0520 Xella Kalksandsteinwerk GriedelGmbH & Co. KG, Butzbach-Griedel . . 6,330 (156) HDE0561 51.00

HDE0530 Xella Finance GmbH, Duisburg . . . . . . . 26 (3) HDE0501 100.00HDE0561 Xella Deutschland GmbH, Duisburg . . . . 151,168 (3) HDE0564 100.00HDE0563 KS-INVEST Unternehmensbeteiligungs-

und Vermogensverwaltungs GmbH,Duisburg . . . . . . . . . . . . . . . . . . . . . . 312 (55) HDE0561 100.00

HDE0564 Xella Baustoffe GmbH, Duisburg . . . . . . 942,636 (3) HDE0501 100.00HDE0569 Xella Merchandising GmbH, Duisburg . . 24 (3) HDE0564 100.00HDE0593 KS Baustoffwerke Blatzheim

Verwaltungsgesellschaft mitbeschrankter Haftung, Kerpen . . . . . . . 44 2 HDE0510 50.00

HDE0594 KS Baustoffwerke BlatzheimGmbH & Co. KG, Kerpen . . . . . . . . . 7,896 704 HDE0510 50.00

HDE0681 XSBB Verwaltungsgesellschaft mbH,Duisburg . . . . . . . . . . . . . . . . . . . . . . 30 1 HDE0501 51.00

HDE0682 XSBB Immobilien- undHandelsgesellschaft mbH & Co. KG,Duisburg . . . . . . . . . . . . . . . . . . . . . . 3,870 35 HDE0501 51.00

HDE0769 SILIKALZIT Marketing GmbH, Munich . 103 (3) HDE0564 100.00HDE0771 Porenbetonwerk EUROPOR GmbH,

Boxberg . . . . . . . . . . . . . . . . . . . . . . . 553 33 HDE0774 51.00HDE0773 Xella Technologie- und

Forschungsgesellschaft mbH, Emstal . . 2,106 (3) HDE0501 100.00HDE0774 Xella Aircrete Systems GmbH, Duisburg . 541 (3) HDE0564 100.00

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Outside GermanyHAT0035 Xella Porenbeton Osterreich GmbH,

Loosdorf, Austria . . . . . . . . . . . . . . . . 2,553 184 HAT0037 85.00HAT0037 Xella Baustoffe Alpe-Adria Holding

GmbH, Loosdorf, Austria . . . . . . . . . . 9,390 155 HDE0564 100.00HBA0338 Xella BH doo, Tuzla, Bosnia-Herzegovina 8,207 (715) HAT0037 76.00HBA0339 Siporex dd, Tuzla, Bosnia-Herzegovina . . (5,126) (473) HBA0338 93.95HBE0030 XELLA BELGIE N.V., Zwijndrecht,

Belgium . . . . . . . . . . . . . . . . . . . . . . . 11,346 4,260 HNL0598 79.64HNL0540 20.28HNL0545 0.07HNL0029 0.01

HBG0042 XELLA Bulgaria EOOD, Sofia, Bulgaria . 17,511 (2,874) HDE0564 100.00HCH0036 Xella Porenbeton Schweiz AG, Zurich,

Switzerland . . . . . . . . . . . . . . . . . . . . . 1,070 692 HDE0564 100.00HCN0345 Shanghai Ytong Co., Ltd., Shanghai,

China . . . . . . . . . . . . . . . . . . . . . . . . . 16,232 750 HDE0564 79.00HCN0402 Changxing Ytong Co. Ltd., Changxing,

China . . . . . . . . . . . . . . . . . . . . . . . . . 8,945 707 HDE0564 100.00HCN0403 Xella Building Materials (Tianjin)

Co., Ltd., Tianjin, China . . . . . . . . . . . 8,190 313 HDE0564 100.00HCN0405 Xella Shanghai Investment

Consulting Co., Ltd., Shanghai, China . 1,265 (49) HDE0564 100.00HCN0555 Baoding Xella Xiangfeng Calcium Silicate

New Building Materials Co., Ltd.,Baoding, China . . . . . . . . . . . . . . . . . . (868) (479) HDE0564 100.00

HCZ0034 Xella CZ, s.r.o., Hrusovany u Brna,Czech Republic . . . . . . . . . . . . . . . . . . 11,411 7,159 HDE0564 100.00

HCZ0055 Hebel CZ s.r.o., Most, Czech Republic,Czech Republic . . . . . . . . . . . . . . . . . . 10,867 (1,638) HCZ0034 100.00

HDK0082 Xella Danmark A/S, Løsning, Denmark . . (163) (2,382) HDE0564 100.00HES0041 Xella Espana Hormigon Celular S.A., El

Prat de Llobregat, Spain . . . . . . . . . . . 161 (25) HDE0564 100.00HFR0772 Xella Thermopierre S.A., Saint Savin,

France . . . . . . . . . . . . . . . . . . . . . . . . 13,886 2,741 HDE0564 99.99HHR0032 XELLA POROBETON Hrvatska, d.o.o.,

Zagreb, Croatia . . . . . . . . . . . . . . . . . (2,147) (3) HAT0037 100.00HHR0332 Ytong porobeton d.o.o., Zagreb, Croatia . (68) (71) HDE0564 100.00HHU0031 Xella Magyarorszag KFt., Budapest,

Hungary . . . . . . . . . . . . . . . . . . . . . . . 4,534 (1,448) HDE0564 100.00HIT0038 Ytong s.r.l. in liquidazione, Bologna, Italy (225) 5 HDE0564 100.00HIT0039 Xella Italia s.r.l., Grassobbio, Italy . . . . . . 590 350 HDE0564 100.00HIT0053 Xella Pontenure s.r.l., Pontenure, Italy . . . 6,171 (2,851) HDE0564 100.00HMX0791 Xella Mexicana SA de CV, Nuevo Leon,

Mexico . . . . . . . . . . . . . . . . . . . . . . . . 4,885 (1,311) HDE0564 99.99HDE0501 0.01

HMX0795 Xella Servicios SA de CV, Nuevo Leon,Mexico . . . . . . . . . . . . . . . . . . . . . . . . 213 (108) HDE0564 98.00

HDE0501 2.00HNL0029 Xella Cellenbeton Nederland B.V., Vuren,

the Netherlands . . . . . . . . . . . . . . . . . 26,617 9,336 HNL0595 100.00

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HNL0503 Van Herwaarden Beheer B.V., Hillegom,the Netherlands . . . . . . . . . . . . . . . . . 32,699 1,610 HNL0596 66.67

— B.V. Exploitatie MaatschappijOosterduinen, Hillegom, theNetherlands . . . . . . . . . . . . . . . . . . . . (2) (2) HNL0503 100.00

— B.V. Exploitatie Maatschappij Reticulum,Hillegom, the Netherlands . . . . . . . . . . (2) (2) HNL0503 100.00

— B.V. Exploitatie Maatschappij Zilkvaart,Hillegom, the Netherlands . . . . . . . . . . (2) (2) HNL0503 100.00

— B.V. Maatschappij tot Exploitatie vanGronden ‘‘Veenenburg Elsbroek’’,Hillegom, the Netherlands . . . . . . . . . . (2) (2) HNL0503 100.00

— Xella Kalkzandsteenfabriek VanHerwaarden B.V., Hillegom, theNetherlands . . . . . . . . . . . . . . . . . . . . (2) (2) HNL0503 100.00

— Zandexploitatie Hillegom B.V., Hillegom,the Netherlands . . . . . . . . . . . . . . . . . (2) (2) HNL0503 100.00

HNL0540 Van den Brink Group B.V.,Koningsbosch, the Netherlands . . . . . . 3,900 913 HNL0595 100.00

HNL0542 Xella KalkzandsteenfabriekHoogdonk B.V., Liessel, theNetherlands . . . . . . . . . . . . . . . . . . . . 5,616 2,005 HNL0596 100.00

HNL0543 Xella KalkzandsteenfabriekRijsbergen B.V., Huizen, theNetherlands . . . . . . . . . . . . . . . . . . . . 6,349 2,647 HNL0596 100.00

HNL0545 Befin Nederland B.V., Koningsbosch, theNetherlands . . . . . . . . . . . . . . . . . . . . 1,442 9 HNL0540 100.00

HNL0590 Xella Kalkzandsteen Verkoop B.V.,Vuren, the Netherlands . . . . . . . . . . . . 797 151 HNL0596 100.00

HNL0595 Xella Nederland B.V., Koningsbosch, theNetherlands . . . . . . . . . . . . . . . . . . . . 101,303 23,355 HNL0598 100.00

HNL0596 Xella Kalkzandsteen B.V., Koningsbosch,the Netherlands . . . . . . . . . . . . . . . . . 41,440 11,876 HNL0595 100.00

HNL0597 Xella Kalkzandsteenfabriek DeHazelaar B.V., Koningsbosch, theNetherlands . . . . . . . . . . . . . . . . . . . . 16,412 6,333 HNL0596 100.00

HNL0598 Xella Bouwmaterialen Holding B.V.,Koningsbosch, the Netherlands . . . . . . 91,535 19,301 HNL0600 100.00

HNL0599 Fluidbed B.V., Koningsbosch, theNetherlands . . . . . . . . . . . . . . . . . . . . (33) 0 HNL0540 100.00

HNL0600 XI Dutch Holdings B.V., Koningsbosch,the Netherlands . . . . . . . . . . . . . . . . . 26,549 706 HDE0500 100.00

HNL0754 Hebel Nederland B.V., Vuren, theNetherlands . . . . . . . . . . . . . . . . . . . . 2,470 51 HNL0595 100.00

HNL0755 Hebel Cellenbeton B.V., Vuren, theNetherlands . . . . . . . . . . . . . . . . . . . . (2) (2) HNL0754 100.00

HNO0088 Xella Norge A/S, Drammen, Norway . . . . 67 (104) HDE0564 100.00HPL0081 Xella VdB Zebrzydowa Sp. z o.o. w

likwidacji, Warsaw, Poland . . . . . . . . . . 13 (28) HPL0602 100.00HPL0098 Cegielnie Bydgoskie S.A., Warsaw, Poland 3,295 171 HPL0602 99.41HPL0342 Xella Radom Sp. z o.o., Warsaw, Poland . 903 (11) HPL0602 99.96HPL0602 Xella Polska Sp. z o.o., Warsaw, Poland . . 29,177 (13,270) HDE0500 100.00HPL0796 Xella Teodory S.A., Warsaw, Poland . . . . (52) (287) HPL0602 100.00HPT0040 Ytong Iberica—Materiais de Construcao,

Unipessoal, LDA, Porto, Portugal . . . . 45 (8) HDE0564 100.00

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HRO0047 XELLA RO S.R.L., Bucharest, Romania . 11,010 (4,338) HDE0564 99.99HHU0031 0.01

HRU0343 ZAO ‘‘Xella-Aeroblock-ZentrumMozhaisk’’, Moscow, Russia . . . . . . . . . 3,901 1,005 HDE0564 100.00

HSE0092 Xella Sverige AB, Malmo, Sweden . . . . . (331) (476) HDE0564 100.00HSI0044 XELLA porobeton SI, d.o.o., Kisovec,

Slovenia . . . . . . . . . . . . . . . . . . . . . . . 3,136 (899) HAT0037 99.77HSK0758 Xella Slovensko, spol. s.r.o., Sastın-Staze,

Slovakia . . . . . . . . . . . . . . . . . . . . . . . 4,174 1,602 HDE0564 100.00HUA0331 Xella Ukraina TOV u likvidaciı, Odessa,

the Urkraine . . . . . . . . . . . . . . . . . . . (175) (2) HDE0564 65.00HPL0602 35.00

HUS0792 Xella AAC Texas, Inc., Cibolo, U.S.A. . . (1,156) (1) HMX0791 100.00HUS0793 Xella Aircrete North America, Inc.,

Atlanta, U.S.A. . . . . . . . . . . . . . . . . . (8,608) (581) HDE0564 100.00HYU0045 Xella Srbija d.o.o., Vreoci, Serbia . . . . . . 0 (1,035) HAT0037 100.00HYU0336 Xella Kosova L.L.C., Lipjan, Kosovo . . . . (8,210) (5,296) HAT0037 100.00

Lime BUGermanyHDE0700 XI (RMAT) Holdings GmbH, Duisburg . 10,589 137 HLU0200 100.00HDE0701 Fels-Werke GmbH, Goslar . . . . . . . . . . . 142,925 (4) HDE0700 100.00HDE0703 Kalkwerke Meister GmbH, Großenluder . 385 (4) HDE0701 100.00HDE0705 Fels Netz GmbH, Elbingerode . . . . . . . . 601 (4) HDE0701 100.00HDE0710 Fels International GmbH, Goslar . . . . . . 57 (4) HDE0701 100.00HDE0715 Ecoloop GmbH, Goslar . . . . . . . . . . . . . (673) 413 HDE0701 50.00Outside GermanyHCZ0708 VAPENKA—VITOSOV, s.r.o., Zabreh,

Czech Republic . . . . . . . . . . . . . . . . . . 30 8 HDE0701 75.00HFR0549 SNC Parc 3, Bartenheim, France . . . . . . . 205 47 HDE0701 99.00

HDE0703 1.00HPL0709 Fels Sp. z o.o., Warsaw, Poland . . . . . . . . 1 0 HDE0701 99.00

HDE0703 1.00HRU0711 OOO ‘‘Fels Izvest’’, Tovarkovo, Russia . . . 6,474 2,775 HDE0710 99.99

Dry Lining BUGermanyHDE0704 FELS RECYCLING GmbH, Wolfsburg . . 1,437 498 HDE0729 51.00HDE0720 XI (DL) Holdings GmbH, Duisburg . . . . 21,429 8,059 HLU0200 100.00HDE0729 Fermacell GmbH, Duisburg . . . . . . . . . . 50,096 (5) HDE0720 100.00Outside GermanyHES0730 Fermacell Spain, S.L.U., Spain . . . . . . . . 3 0 HDE0729 100.00HFR0731 Fermacell SAS, Rueil-Malmaison, France . 50 0 HFR0549 100.00HNL0726 Fermacell B.V., Nijmegen, the

Netherlands . . . . . . . . . . . . . . . . . . . . 13,734 3,734 HDE0729 100.00

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Investments with shareholdings exceeding 20%

Equity Net result Parent ShareholdingsNo. Name and domicile of the company in kE(3) in kE(3) company in %

Building Materials BUGermanyXDE058A Baumaterial Recyclinggesellschaft mbH,

Seevetal . . . . . . . . . . . . . . . . . . . . . . . . 266 53 HDE0058 50.00XDE561A Kalksandsteinwerk Ruckersdorf

GmbH & Co. KG, Ruckersdorf . . . . . . . 1,437 827 HDE0561 50.00XDE561E Geschaftsfuhrungsgesellschaft Mortel-

Union mbH i.L., Wedemark-Mellendorf 37 3 HDE0561 47.60XDE561F Mortel-Union GmbH & Co. KG i.L.,

Wedemark-Mellendorf . . . . . . . . . . . . . 88 262 HDE0561 47.57XDE561J Baustoffwerke Munster-Osnabruck

GmbH & Co. KG, Osnabruck . . . . . . . . 15,959 4,210 HDE0561 15.15HDE0564 8.98

XDE561H Nord-KS GmbH + Co. KG i.L.,Kaltenkirchen . . . . . . . . . . . . . . . . . . . 741 26 HDE0561 50.00

XDE563A Kalksandsteinwerk Wendeburg,Radmacher GmbH & Co. KG,Wendeburg . . . . . . . . . . . . . . . . . . . . . 6,773 377 HDE0563 28.00

Outside GermanyXCN0406 Shandong Xella New Building Materials

Co., Ltd., Tengzhou, China . . . . . . . . . . 7,308 869 HDE0564 40.00XDE564C Turk Ytong Sanayi A.S., Istanbul, Turkey . 30,556 4,580 HDE0564 25.41XNL503A Cooperatieve Verkoop-en

Produktievereniging VanKalkzandsteenproducenten (CVK) U.A.in liquidatie, Hilversum, theNetherlands . . . . . . . . . . . . . . . . . . . . . 108 �28 HNL0503 11.50

HNL0597 18.50HNL0542 7.00HNL0590 7.00HNL0543 6.00XNL596A 11.50

XNL596A Anker Kalkzandsteenfabriek B.V.,Kloosterhaar, the Netherlands . . . . . . . . 27,273 276 HNL0596 33.33

Lime BUGermanyXDE701A Kalksandsteinwerk Winsen/Aller

Dr. Hubrig GmbH & Co. KG, Winsen/Aller . . . . . . . . . . . . . . . . . . . . . . . . . . (41) (1) HDE0701 50.00

XDE701B Dr. Hubrig GmbH, Winsen / Aller . . . . . . 0 0 HDE0701 35.40HDE701A 29.00

Outside GermanyXDE710A OOO ‘‘DSZ’’ (BSW), Tovarkovo, Russia . . 10,883 783 HDE0710 25.10

Non consolidated companies

Equity Net result Parent ShareholdingsNo. Name and domicile of the company in kE(3) in kE(3) company in %

GermanyHDE0740 XI (EC) Holdings GmbH, Duisburg . . . . . 13 0 HLU0200 100.00Outside GermanyXDE564A Siporex, S.A., Barcelona, Spain . . . . . . . . 0 0 HDE0564 100.00XFR772A EURL Construction, Saint Savin, France . 9 0 HFR0772 100.00

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Application of Art § 264b of German Commercial Code (HGB)

No German Exempt subsidiaries

HDE0300 . XI Management Beteiligungs GmbH &Co. KG, Duisburg . . . . . . . . . . . . . . . .

HDE0058 . Kalksandsteinwerke Thorl & MeyerGmbH & Co. KG, Seevetal . . . . . . . . .

HDE0520 . Xella Kalksandsteinwerk GriedelGmbH & Co KG, Butzbach-Griedel . .

HDE0594 . KS Baustoffwerke Blatzheim GmbH &Co. KG, Kerpen . . . . . . . . . . . . . . . . .

HDE0682 . XSBB Immobilien- undHandelsgesellschaft mbH & Co. KG,Duisburg . . . . . . . . . . . . . . . . . . . . . .

(1) According to last available local GAAP year end financial statements (mainly December 31, 2011)

(2) Fully consolidated within the preparation of financial statements of the respective holding

(3) Profit and loss transfer agreement with HDE0500—XI (BM) Holdings GmbH, Duisburg

(4) Profit and loss transfer agreement with HDE0700—XI (RMAT) Holdings GmbH, Duisburg

(5) Profit and loss transfer agreement with HDE0720—XI (DL) Holdings GmbH, Duisburg

30. Auditors’ Fees

The fees to PricewaterhouseCoopers AG, Germany and PricewaterhouseCoopers Societe cooperative,Luxembourg, in relation to services rendered to the Xella Group amounted to 1,105 kA in the fiscalyear 2012 (PY: 2,594 kA). This total fee comprises services in connection with auditing financialstatements in the amount of 1,087 kA (PY: 1,377 kA). Audit related fees amounted to 18 kA(PY: 1,206 kA), other certification services to 38 kA (PY: 9 kA), and other services to 14 (PY: 2 kA). Inthe reporting year as well as in 2011 the auditors of the Consolidated Financial Statements performedno tax consulting services.

31. Significant Events After the End of the Financial Year

In the course of the optimization of plant capacities in the Central East European market area of theBuilding Materials Business Unit, Xella plans a temporary shut-down of the production in theSlowakian plant of Sastin. This measure is expected to increase productivity in this market area in spiteof restructuring expenses and potential impairments. Restarting production will depend on the marketdevelopment in Central East Europe.

There were no other events subsequent to balance sheet date that would have had a significant impacton the net assets, financial position and results of operations of the Group.

Luxembourg, March 20, 2013



Marielle Stijger David Richy

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20SEP201314564014

20SEP201314581407

Audit report

To the Partners ofXella International Holdings S.a r.l.

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Xella International HoldingsS.a r.1. as at 31 December 2012, which comprise the consolidated statement of financial position as at31 December 2012, and the consolidated statement of income—by nature of expense, the consolidatedstatement of comprehensive income, consolidated statement of changes in equity and consolidatedstatement of cash flows for the year then ended and a summary of significant accounting policies andother explanatory information.

Board of Managers’ responsibility for the consolidated financial statements

The Board of Managers is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with International Financial Reporting Standards as adopted by theEuropean Union, and for such internal control as the Board of Managers determines is necessary toenable the preparation of consolidated financial statements that are free from material misstatement,whether due to fraud or error.

Responsibility of the ‘‘Reviseur d’entreprises agree’’

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing as adopted forLuxembourg by the ‘‘Commission de Surveillance du Secteur Financier’’. Those standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe consolidated financial statements. The procedures selected depend on the judgment of the‘‘Reviseur d’entreprises agree’’ including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those risk assessments, the‘‘Reviseur d’entreprises agree’’ considers internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the Board of Managers, as wellas evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidatedfinancial position of Xella International Holdings S.a r.l. as of 31 December 2012, and of itsconsolidated financial performance and its consolidated cash flows for the year then ended inaccordance with International Financial Reporting Standards as adopted by the European Union.

PricewaterhouseCoopers, Société coopérative, 400 Route d’Esch, B.P. 1443, L-1014 LuxembourgT: +352 494848 1, F: +352 494848 2900, www.pwc.lu

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°10028256)R.C.S. Luxembourg B 65 477 - TVA LU25482518

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Report on other legal and regulatory requirements

The consolidated management report, which is the responsibility of the Board of Managers, isconsistent with the consolidated financial statements.

PricewaterhouseCoopers, Societe cooperative Luxembourg, 20 March 2013Represented by

Alain Maechling

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IFRS Consolidated Financial Statements of


for 2011

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Table of contents

Pages

Consolidated Financial Statements 2011

Consolidated Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-79Consolidated Statement of Income—by nature of expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-80Consolidated Statement of Comprehensive Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-81Consolidated Statement of Changes in Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-82Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-83


A. Background . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-84

B. Notes to the Statement of Financial Position . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-931. Property, Plant and Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-932. Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-953. Investments in Associates (At Equity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-964. Financial Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-975. Deferred Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-986. Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-997. Trade and Other Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1008. Cash and Cash Equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1019. Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10110. Financial Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10211. Pension Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10512. Other Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-10813. Deferred Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11014. Trade and Other Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-111

C. Notes to the Statement of Income—by nature of expense . . . . . . . . . . . . . . . . . . . . . . . . . F-11115. Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11116. Other Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11217. Staff Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11218. Other Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11319. Result from Other Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11420. Finance Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11421. Other Financial Result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11422. Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-115

D. Other Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11523. Financial Risk Management . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-11524. Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12125. Corporate Acquisitions and Divestments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12226. Consolidated Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12327. Segment Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12428. Related Parties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12629. List of Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-12730. Auditors’ Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-13031. Significant Events After the End of the Financial Year . . . . . . . . . . . . . . . . . . . . . . . . F-131

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Consolidated Statement of Financial Position

Assets Note Dec. 31, 2011 Dec. 31, 2010

kE kE

Property, plant & equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) 1,123,206 1,130,634Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) 597,440 591,936Investments in associates (at equity) . . . . . . . . . . . . . . . . . . . . . . . . . (3) 21,780 26,749Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) 79,077 15,339Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0 182Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,197 1,323Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 20,118 26,519

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,842,818 1,792,682

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) 178,927 167,239Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) 146,080 128,934Tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,351 14,335Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) 39,470 47,947Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) 148,646 142,099Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,055 3,274

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 527,529 503,828

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,370,347 2,296,510

Equity and Liabilities Note Dec. 31, 2011 Dec. 31, 2010

kE kE

Shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 503,702 535,311Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,994 26,732

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) 532,696 562,043

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) 1,007,061 963,212Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) 150,038 189,550Pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11) 126,482 124,576Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) 107,842 44,120Trade and other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 6,732 6,739Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13) 5,696 6,396

Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,403,851 1,334,593

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) 78,219 85,808Tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,325 15,840Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12) 89,856 90,272Trade and other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . (14) 251,248 207,941Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 13

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 433,800 399,874

Total equity and liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,370,347 2,296,510


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Consolidated Statement of Income—by nature of expense

Jan. 1st– Jan. 1st–Consolidated Statement of Income Note Dec. 31, 2011 Dec. 31, 2010

kE kE

Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (15) 1,271,199 1,145,909Change in finished goods & work in progress . . . . . . . . . . . . . . . . . . 10,226 10,721Own work capitalised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,771 2,938

Total output . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,283,196 1,159,568

Materials expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (593,000) (525,666)

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 690,196 633,902

Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) 86,139 34,081

Total income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 776,335 667,983

Staff expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17) (298,617) (284,453)Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (18) (277,269) (181,763)

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,449 201,767

Depreciation & amortisation expenses . . . . . . . . . . . . . . . . . . . . . . . . (107,404) (112,471)

EBIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93,045 89,296

Result from associates (at equity) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,233 2,002Result from other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (19) 502 558Finance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (20) (94,509) (78,136)Other financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (21) 284 (56)

Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92,490) (75,632)

Profit/ loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 13,664

Current income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,860) (22,574)Deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,958 9,029

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22) 5,098 (13,545)

Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,653 119

Net income/ loss attributable to shareholders . . . . . . . . . . . . . . . . . . . 1,478 (3,344)Net income/ loss attributable to non-controlling interests . . . . . . . . . . 4,175 3,463


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Consolidated Statement of Comprehensive Income

Jan. 1st– Jan. 1st–Consolidated Statement of Comprehensive Income Note Dec. 31, 2011 Dec. 31, 2010

kE kE

Net income / loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,653 119Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) (33) 9,610Change of available-for-sale investments* . . . . . . . . . . . . . . . . . . . . . (9) 1 15Change of hedge of net investment in foreign operations* . . . . . . . . . (9)Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32) 9,625

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,621 9,744

Total comprehensive income attributable to shareholders . . . . . . . . . . 1,509 5,412Total comprehensive income attributable to non-controlling interests . . 4,112 4,332

* Recognition of deferred taxes and/ or reclassifications to net income/ loss: 0 kA


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Consolidated Statement of Changes in Equity




kE kE kE kE kE kE kE kE kE kEAs of January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 83,450 552,600 (6) 2,688 7,886 10,568 (111,320) 535,311 26,732 562,043Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,810) (32,810) (2,089) (34,899)Additions / disposals ConsGroup . . . . . . . . . . . . . . . . . . . 239 239Transactions with owners not resulting in gain / loss of control (308) (308) (308)Capital increase/ decrease

Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 30 30 30 (63) (33)Addition to/ release of OCI (not affecting consolidated

income statement) . . . . . . . . . . . . . . . . . . . . . . . . . 1 1 1 1Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,478 1,478 4,175 5,653

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . 1 30 31 1,478 1,509 4,112 5,621




Subscribed Capital Equity investments operations Translation Revaluation Retained Shareholders’ controlling TotalConsolidated Statement of Changes in Equity 2010 capital reserves Certificates (OCI) (OCI) reserves reserves earnings equity interests equity

kE kE kE kE kE kE kE kE kE kEAs of January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 82,450 552,600 (19) 2,688 (857) 1,812 (69,022) 567,853 20,424 588,277Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (32,811) (32,811) (1,158) (33,969)Transactions with owners not resulting in gain / loss of control (6,143) (6,143) 3,134 (3,009)Capital increase/ decrease . . . . . . . . . . . . . . . . . . . . . . . 1,000 1,000 1,000

Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . 8,743 8,743 8,743 867 9,610Addition to/ release of OCI (not affecting consolidated

income statement) . . . . . . . . . . . . . . . . . . . . . . . . . 13 13 13 2 15Net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,344) (3,344) 3,463 119

Total comprehensive income . . . . . . . . . . . . . . . . . . . . . . 13 8,743 8,756 (3,344) 5,412 4,332 9,744



Please refer to note 25 for information about corporate acquisitions and divestments in the year under review.

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Consolidated Statement of Cash Flows


Consolidated Statement of Cash Flows 2011 2010

kE kE

Net income for the year including non-controlling interests . . . . . . . . . . . . . . . . 5,653 119Depreciation and amortization of property, plant and equipment and intangible

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,404 112,471Income and expenses from changes in deferred taxes . . . . . . . . . . . . . . . . . . . . . (29,958) (9,029)Income and expenses from income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,860 22,574Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,490 75,632

EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,449 201,767

Changes in inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,924) (13,643)Changes in trade receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,450) 5,087Changes in trade payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,787 24

Change of trade working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (587) (8,532)

Changes in pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,435) (11,053)Changes in other non-current provisions and liabilities . . . . . . . . . . . . . . . . . . . . 2,078 (15,748)Changes in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,366) 5,369Changes in current provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 750 (4,806)Changes in other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,562 4,594

Change in other working capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,589 (21,644)

Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (23,450) (26,914)Non-cash income and expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 909 (6,880)Income and expenses from the disposal of non-current assets . . . . . . . . . . . . . . . (2,842) (2,572)

Cash flow from operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 176,068 135,225

Cash paid for investments in property, plant and equipment and intangible assets (74,830) (50,153)Cash received from the disposal of property, plant and eqipment and intangible

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,411 3,949Cash received from the disposal of property, plant and eqipment held-for-sale . . . 189Cash paid for the acquisition of consolidated entities and other business units . . . (10,026) (6,231)Cash received from the disposal of consolidated entities and other business units . 2,528Cash paid for additions to investments in associated entities at equity and other

financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (863) (682)Cash received from disposals of investments in associated entities at equity and

other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,808 5,955Cash received from interest and investment income . . . . . . . . . . . . . . . . . . . . . . 2,829 1,854

Cash flow from investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (71,671) (42,591)

Payments made to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,089) (752)Payments made for the acquisition of shares in subsidiaries without change of

control . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (98) (2,912)Cash received from the issue of non-current financial liabilities . . . . . . . . . . . . . . 341,605Cash received from the issue of current financial liabilities . . . . . . . . . . . . . . . . . 579 7,775Cash paid for the scheduled repayment of financial liabilities . . . . . . . . . . . . . . . (17,069) (8,214)Cash paid for interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (56,968) (42,485)Cash paid for the unscheduled repayment of financial liabilities . . . . . . . . . . . . . (363,258) (57,902)Cash paid / received for derivative financial instruments . . . . . . . . . . . . . . . . . . . (314) (1,644)

Cash flow from financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (97,612) (106,134)

Cash and cash equivalents at the beginning of the period . . . . . . . . . . . . . . . . . . 142,099 154,597

Net change in cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,785 (13,500)Net foreign exchange difference . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (238) 1,002

Cash and cash equivalents at the end of the period . . . . . . . . . . . . . . . . . . . . . . 148,646 142,099


Please see note 26 for more information on the Statement of Cash Flows.

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A. Background

Xella International Holdings S.a r.l., which has its registered office at 12, Rue Guillaume Schneider,L-2522 Luxembourg, Grand Duchy of Luxembourg, holds Xella Group which is a leading player in theEuropean market for building materials. It manufactures and markets building materials and supplieslime under the umbrella of Xella (Ytong, Silka, Hebel, Fermacell and Fels trademarks).

Business purpose of the company is to hold participations in Luxembourg and foreign countries, theacquisition by purchase, subscription or in any other manner as well as the transfer by sale, exchange orotherwise of stock, bonds, debentures, notes and other securities of any kind, the possession, theadministration, the development and the management of its portfolio.

The financial year of the Xella Group commenced on January 1, 2011 and ended on December 31,2011.

These Consolidated Financial Statements have been prepared in accordance with InternationalFinancial Reporting Standards as adopted by the European Union and in accordance with theLuxembourg Law of December 19, 2002, as amended.

The Consolidated Financial Statements have been prepared in euro (A) and the figures are generallystated in thousand euro (kA). For calculatory reasons, some of the tables may include roundingdifferences of up to one unit. For additional clarity, a number of items have been summarized both inthe Consolidated Statement of Financial Position and in the Consolidated Statement of Income. Theseare discussed in detail in the notes to the Financial Statements. The items in the ConsolidatedStatement of Financial Position have been classified as current or non-current items in line with IAS 1.The Statement of Income has been prepared using the nature of expense method.

Reporting structures were adjusted in the non-current provision. A new account ‘‘warranty provisions’’was added resulting from the increase of these provisions in financial year 2011. The accounts ‘‘otherprovisions’’ (current and non-current) have been renamed ‘‘other short-term provisions’’ resp. ‘‘otherlong term provisions’’.

The Consolidated Financial Statements were authorized for issue by the board of directors atMarch 27, 2012 and were signed on its behalf.

Consolidation Principles

Subsidiaries over which Xella International Holdings S.a r.l., Luxembourg, has either direct or indirectcontrol as defined by IAS 27 have been fully consolidated in the Consolidated Financial Statements.Associates are valued using the equity method pursuant to IAS 28. Other equity investments arerecognized at fair value in accordance with IAS 39 or, if no market value is available and fair valuecannot be reliably determined, at acquisition cost.

All consolidated companies have the same reporting date as the balance sheet reporting date of theConsolidated Financial Statements of December 31, 2011. The Financial Statements of Luxembourgish,German and other foreign subsidiaries included in the Consolidated Financial Statements have all beenprepared using uniform accounting policies. As in the previous year, two immaterial subsidiaries werenot consolidated.

Business combinations are recognized using the purchase method and measured at theiracquisition-date fair values (IFRS 3). That portion of the purchase price which is made in anticipationof expected future economic benefits from the acquisition and cannot be allocated to defined oridentifiable assets in the course of purchase price allocation is reported as goodwill under intangibleassets.

Pursuant to IFRS 3, goodwill is not amortized. Rather, goodwill is tested for impairment annually orduring the year if there is indication of an impairment. If impaired book value of goodwill is writtendown to net recoverable amount which corresponds to the higher of value in use or net realizablevalue. In principle, any impairments of goodwill are posted through profit or loss.

IAS 27 and IFRS 3 prescribe the mandatory application of the economic entity approach foraccounting transactions involving acquisitions and disposals of shares resulting in a controlling interestbeing obtained or retained. Non-controlling transactions are viewed as transactions with shareholders

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and recognized in equity. Disposals of shares which result in the loss of a controlling interest arereported as a gain or loss on disposal in the Statement of Income.

If an interest is still held after the disposal of the controlling interest, the remaining investment ismeasured at fair value. The difference between the former carrying amount of the remaininginvestment and its fair value is recognized in income as a gain or loss on disposal and presentedseparately with the fair value of the remaining investment. Parents acquiring an additional stake in asubsidiary resulting in control being obtained (‘‘step acquisition’’) must remeasure the initially heldinterest at fair value with differences to book value recognized in the Consolidated Statement ofIncome.

Intercompany profits and losses, sales, income and expenses as well as all receivables and liabilitiesbetween consolidated companies are offset against each other. Intercompany profits contained innon-current assets and inventories originating from intercompany deliveries are eliminated unless theyare immaterial.

Consolidated Entities and Changes in the Consolidated Group

The changes in the number of consolidated entities were as follows:

Consolidated entities and changes in the consolidated group 2011 2010

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98 102Addition from the acquisition of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2Addition from formation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3Disposal from sale of shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1)Disposal from merger and liquidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1) (5)

As at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102 98

Foreign Currency Translation

The presentation currency of Xella International Holdings S.a r.l., Luxembourg, is the euro. Currencytranslation of subsidiaries reporting in a country with a currency other than euro is performed inaccordance with IAS 21 using the functional currency method. Due to the fact that all subsidiariesoperate financially, economically and also organizationally in their primary economic environment, theirrespective local currency is their functional currency. Transactions in foreign currency in the separatefinancial statements are translated to the functional currency at the spot rate prevailing on thetransaction date. Gains and losses from the settlement of such business transactions and from thetranslation of monetary assets and liabilities are recognized in the Statement of Income. The assets andliabilities reported in the financial statements of companies based in a country which does not have theeuro as currency are translated at the closing rate, whereas the line items in the Statement of Incomeare translated at the annual average exchange rate for the period. Goodwill arising from purchaseaccounting and any hidden reserves and liabilities uncovered in the course of applying the purchasemethod are allocated to the acquired entity and translated using the closing rate.

Any foreign exchange differences are posted to other comprehensive income without affecting earnings.Such differences arise when the assets and liabilities of Group entities, whose functional currency is notthe euro, are translated to the presentation currency and the exchange rate differs from the oneapplied in the prior year. They also arise when the Statement of Income and the Statement ofFinancial Position are translated and the average exchange rate differs from the closing rate.

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The relevant exchange rates for non-euro countries (1 A = x local currency) are:

Closing rate Average rate

Country Dec. 31, 2011 Dec. 31, 2010 2011 2010

Bosnia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9558 1.9558 1.9558 1.9558Bulgaria . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9558 1.9558 1.9558 1.9558China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1588 8.8220 8.9867 8.9537Croatia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.5370 7.3830 7.4383 7.2886Czech Republic . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.7870 25.0610 24.5767 25.2726Denmark . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.4342 7.4535 7.4507 7.4473Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 314.5800 277.9500 278.4548 275.3186Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18.0512 16.5475 17.2476 16.7054Norway . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.7540 7.8000 7.7929 8.0025Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4580 3.9750 4.1087 3.9931Romania . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3233 4.2620 4.2372 4.2108Russia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41.7650 40.8200 40.8515 40.2038Serbia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 106.9200 105.9270 101.8362 102.7591Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.9120 8.9655 9.0283 9.5272Switzerland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2156 1.2504 1.2301 1.3774USA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2939 1.3362 1.3908 1.3230Ukraine . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10.3730 10.6510 11.1000 10.5165

Accounting Policies

The Consolidated Financial Statements are prepared in accordance with the historical cost conventionwith the exception of financial assets, financial liabilities and derivative financial instruments, which aremeasured at fair value.

Property, plant and equipment is measured at acquisition or production cost less depreciation and anyimpairment losses. If the reasons for an impairment no longer apply in future, the assets are written upaccordingly. In addition to direct costs, the cost of internally constructed property, plant and equipmentincludes an appropriate portion of overheads that can be directly allocated to the production of theasset. Borrowing costs that are directly attributable to the construction or production of a qualifyingasset are recognized by the Xella Group as part of the cost of that asset. This practice is alsoapplicable for intangible assets.

Property, plant and equipment are depreciated over their economic life using the straight-line method.Depreciation is based on the following useful lives:

Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 to 50 yearsPlant and machinery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 to 25 yearsVehicles and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 to 15 years

The criteria of IAS 17 for classification as finance lease are met where the Group bears the significantopportunities and risks incidental to ownership within the framework of a lease transaction, and istherefore deemed to have economic title to the asset. In these cases, the respective property, plant andequipment is recognized at fair value or the lower net present value of the minimum lease paymentsand depreciated over the economic life of the asset or over the shorter term of the lease respectively,using the straight-line method. The resulting net present value of future minimum lease payments isrecognized under current and non-current financial liabilities respectively. Buildings and plant andmachinery acquired under finance leases generally have customary purchase options attached for theend of the lease. The leases are all based on market interest rates at the time the leases were enteredinto.

In addition to the finance leases, the Group entered into rental agreements under which the economictitle to the assets remains with the lessor (operating leases). The payments on these leases are postedto profit and loss. Depending on the type of assets, the leases contain the customary rental conditionsand right of first refusal.

Intangible assets purchased for a consideration are recognized at cost less straight-line amortizationand any impairment losses. Intangible assets are amortized over the contractual term or the estimateduseful life of the asset. Licenses and similar rights are amortized over two to ten years. Xella is not

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planning to cease use of the trademarks reported in the Consolidated Statement of Financial Position.Moreover, there is no indication that the useful life of the trademarks is finite. The trademarksreported in the Consolidated Statement of Financial Position therefore have an indefinite useful life.This also applies for the non-current CO2-certificates. All other useful lives are finite. Internallygenerated intangible assets from which future benefits are likely to flow to the Group and whose costcan be reliably measured are recognized at the cost of production. Internally generated intangible assetsare amortized over two to ten years. The cost of production includes all costs directly allocable todevelopment as well as an appropriate portion of allocable overheads.

Research costs are expensed as incurred and not capitalized. Development costs are capitalized, if thecriteria of IAS 38 are met.

Goodwill, trademarks and non-current CO2-certificates with an indefinite useful life are subject to animpairment test (impairment-only approach). The recoverability of the goodwill recognized in theStatement of Financial Position is reviewed once every reporting period on the basis of cash-generatingunit pursuant to IAS 36 (or during the year if there is an indication of an impairment). Within theframework of the impairment tests, the carrying amounts of the individual or groups of cash-generatingunits are compared to the recoverable amount which is defined as the higher of fair value less costs tosell and value in use. The fair value reflects the best possible estimate of the amount that anindependent third party would pay to acquire the cash-generating units on the balance sheet date. Thecosts incurred to make such a sale are deducted from this amount. Value in use is based on thedetailed plan of the cash flows from the cash-generating unit. Value in use includes any necessaryreplacement investment or maintenance for a period of five years plus the terminal value of thecash-generating unit for the period after the detailed plan. The detailed plan is based on the financialplan approved by management which generally comprises a planning horizon of five years and is usedfor internal purposes. The detailed plan is based on past developments and expectations of futuremarket developments. The terminal value considers a growth rate of 2% p.a. (PY: 2% p.a.) Theresulting cash flows are then discounted using the weighted costs of capital determined for therespective cash-generating unit to arrive at the recoverable amount of the cash-generating unit. Theweighted average costs of capital used in the Xella Group are between 7.0% and 10.2% (PY: 6.8% and10.7%). If the recoverable amount of the cash-generating unit or group of cash-generating units is lessthan the carrying amount an impairment loss is recognized on goodwill and, if necessary, of theremaining assets as well.

Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation ismade to those cash-generating units or groups of cash-generating units that are expected to benefitfrom the business combination in which the goodwill arose identified according to operating segment.

Possible changes in the major assumptions on which the calculation of recoverable amount is basedhave not led to the recoverable amount of the cash-generating units falling below their carryingamount.

At balance sheet date the following goodwill and trademarks existed in the cash-generating units:

Goodwill Trademarks

Selected intangible assets Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2011 Dec. 31, 2010

kE kE kE kE

Building Materials Business UnitCGU North West Europe . . . . . . . . . . . . . . . . . . 91,500 91,500 39,000 39,000CGU Middle West Europe/Scandinavia . . . . . . . . 42,788 42,749 58,400 61,102CGU South West Europe . . . . . . . . . . . . . . . . . . 19,399 10,167 20,700 20,700CGU South East Europe . . . . . . . . . . . . . . . . . . 8,556 9,035 18,209 20,609CGU Central East Europe . . . . . . . . . . . . . . . . . 64,173 65,470 26,858 27,636CGU North East Europe . . . . . . . . . . . . . . . . . . 5,061 4,521 24,052 26,975CGU Alpe Adria . . . . . . . . . . . . . . . . . . . . . . . . 320 324 14,700 14,700CGU Emerging Markets and Others . . . . . . . . . . 1,524 1,342 10,856 7,533

CGU Dry Lining . . . . . . . . . . . . . . . . . . . . . . . . 40,667 40,667 12,700 12,700

CGU Lime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66,667 66,992

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 340,655 332,767 225,475 230,955

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MERRILL CORPORATION GNEWBUR// 6-OCT-13 17:00 DISK132:[13ZCO3.13ZCO75803]HP75803A.;3 mrll_1111.fmt Free: 80D*/120D Foot: 0D/ 0D VJ RSeq: 1 Clr: 0 DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;114

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Associates are valued using the equity method pursuant to IAS 28. Beginning with the historical cost atthe time of acquisition of the shares, the respective carrying amount of the investment is increased ordecreased by any changes in the equity of the investment, regardless of their impact on profit or loss,that are attributable to shares of Xella International Holdings S.a r.l., Luxembourg, in the associate.The goodwill included in the carrying amounts of the investments, determined in accordance with thepolicies applying to fully consolidated subsidiaries, is not subject to amortization. An impairment test iscarried out if there is any indication that the total carrying amount of the investment has to beimpaired.

In addition to loans, financial assets consist primarily of investments in associates and securities as wellas potential claims against Xella’s former shareholder Haniel which were agreed on by the buyer andseller during the sale of the Xella Group. They relate to hold-harmless agreements.

Upon initial recognition, loans are recognized at fair value plus the incidental costs of the transactionand subsequently at amortized cost by applying the effective interest rate method.

Pursuant to IAS 39, investments and securities are categorized as those that are available for sale,those that are valued at fair value through profit or loss and those that are held to maturity. Therelevant category is determined upon acquisition and reviewed on each balance sheet date. Purchasesand sales of investments and securities in all categories of financial assets are recognized on theirsettlement date.

Financial assets in the category available for sale are initially measured at fair value plus transactioncosts and subsequently at their respective fair value on balance sheet date. The resulting unrealizedgains and losses are recorded directly in equity taking deferred taxes into account. If there is no listedmarket price and fair value cannot be reliably determined, the assets are recognized at cost. If thereare indications of an impairment, they are written down through profit or loss. If the reasons for animpairment no longer exist, the asset is written up to fair value. For equity instruments, the adjustmentis posted to other comprehensive income without affecting earnings. For debt instruments, theadjustment is posted to profit or loss, provided the criteria in IAS 39 are met. When the asset is sold,the adjustments previously recorded in equity are released to profit or loss.

Financial assets in the category of fair value through profit or loss are valued using the mark-to-marketmethod on balance sheet date. Any transaction costs are charged to profit and loss when posted.Fluctuations in fair value are recognized directly in the Statement of Income.

Financial assets in the held to maturity category are initially measured at fair value plus transactioncosts and subsequently at amortized costs on balance sheet date using the effective interest ratemethod. If there are objective indications of an impairment, the assets are written down to their lowerpresent value on the basis of the original effective interest rate.

The following cash and cash equivalents are recorded in the Consolidated Statement of FinancialPosition: cash on hand, checks, bank deposits and funds in transit.

Inventories are recognized at cost. In addition to materials and direct production costs, production-related portions of the necessary materials and production overheads as well as the depreciationexpense attributable to property, plant and equipment is included. If historical cost is higher on closingdate than net realizable value, inventories are written down to the latter. Depending on thecircumstances of the industry, different cost methods are applied to measure the consumption ofinventories. The weighted average method is most commonly used by the Xella Group.

CO2 emission certificates which are purchased as well as allowances allocated free of charge are bothstated at cost. A provision is recognized to cover the obligation to deliver CO2 emission allowances tothe respective authorities; this provision is measured at the carrying amount of the CO2 allowancescapitalized for this purpose. If a portion of the obligation is not covered with the available allowances,the provision for this portion is measured using the market price of the emission allowances on thebalance sheet date.

Trade receivables, receivables from investments and other assets that qualify as loans and receivablesare measured at fair value upon initial recognition and thereafter measured at amortized cost.Appropriate allowances are established for any existing risks.

Long-term construction contracts are measured in accordance with the percentage-of-completionmethod. This involves recognizing sales and expenses associated with long-term construction contracts

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on the basis of the degree to which the contract has been completed. The degree of completion ismeasured as the ratio of the costs already incurred by the balance sheet date in proportion to the totalestimated costs of the contract (cost to cost method). If the result of a long-term construction contractcannot be determined reliably, sales are only recognized at the amount of the contract costs incurred(‘‘zero profit method’’). Losses on customer-specific long-term construction contracts are postedimmediately in the period in which the loss becomes apparent regardless of the percentage ofcompletion. Borrowing costs that are directly attributable to the production of a qualifying asset arerecognized as part of the cost of that asset by the Xella Group.

Tax receivables and tax liabilities are measured at the amount expected to be received or paid to thetax authorities. Long-term tax receivables are recognized at net present value.

Derivative financial instruments such as forward contracts, options and swaps are used solely to hedgeforeign currency exposure, interest exposure and the risks of price fluctuations inherent in theoperating business.

Financial instruments are accounted for as of the settlement date for both sales and purchases.Pursuant to IAS 39, all derivative financial instruments are accounted for at fair value irrespective ofthe purpose or intention for which they were concluded. Changes in the fair value of the derivativefinancial instruments for which hedge accounting is used are either disclosed in net interest (fair valuehedge) or, in the case of a cash flow hedge or net investment hedge, in equity under othercomprehensive income, taking deferred taxes into account.

Derivatives are currently solely used in order to hedge against future cash flow risks originating fromexisting underlying or planned transactions. None of the existing derivative transactions are accountedfor under IFRS hedge accounting. All changes in the market value of derivative financial instrumentsare posted immediately in full to profit or loss.

Non-current assets and groups of assets are categorized as held for sale when the carrying amount ofan operation will be recovered principally through a sales transaction and not through continuing use.This condition is deemed to have been fulfilled if sale is highly probable, the asset or disposal group isavailable for immediate sale and it is expected that sale will occur within one year of allocation to thecategory. Assets and disposal groups which are classified as held for sale are no longer written offsystematically but are carried at the lower of carrying amount and fair value less the costs to sell. Theassets and disposal groups categorized as held for sale and their related liabilities (disposal groups) arereported in the Consolidated Statement of Financial Position separately from other assets andliabilities, each in a separate item under current items. If the disposal group is a significant operation,the result of the discontinued operation must be reported separately in the Statement of Income. Theresult of such discontinued operations consists of the result of the valuation mentioned above, thecurrent result of the operation and the gain or loss upon sale. The Statement of Income from the prioryear is adjusted accordingly. The main groups of assets and liabilities that are classified as held for saleand the result from discontinued operations must be explained separately in the notes if the criteria aremet.

Deferred tax assets and deferred tax liabilities are recognized for all temporary differences between thetax base of the individual entities in the Group and the IFRS Consolidated Statement of FinancialPosition—with the exception of goodwill that cannot be recognized for tax purposes—and for unusedtax losses. Deferred tax assets were only recognized for the unused tax losses to the extent that theirutilization is sufficiently certain. Deferred taxes are determined on the basis of the tax rates which,under the current legislation, will apply in future. Deferred taxes are netted in accordance with IAS 12.

Provisions for pensions and similar obligations are determined using the actuarial projected unit creditmethod in accordance with IAS 19. This method involves considering the biometric parameters and therespective long-term interest rates on the capital markets as well as the latest assumptions on futuresalary and pension increases. Plan assets established to cover the pension obligations are deducted frompension provisions. Actuarial gains and losses are not posted to profit and loss until they lie outside acorridor of 10% of the higher of the present value of the pension obligation and the plan assets(corridor method). Any amount above this corridor is amortized over the average remaining period ofservice of the workforce. The interest portion contained in the pension expense and the expectedincome from the plan assets are reported under financial expenditure.

With the exception of the other employee-related provisions calculated in accordance with IAS 19, allother provisions are recognized in accordance with IAS 37 where there is a legal or constructive

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obligation to a third party based on a past event. The flow of economic benefits required to settle theobligation must be probable and reliably measurable. Significant provisions with a residual term ofmore than one year are discounted at market interest rates which reflect the risk and period until theobligation is met.

With the exception of derivative financial instruments, liabilities are initially recognized at fair valueless transaction costs and subsequently measured at amortized cost using the effective interest ratemethod. Changes in contractual stipulations regarding repayments, considerations, and interest rateslead to a recalculation of the carrying amount. The restated carrying amount is equal to the presentvalue computed at the original effective interest rate. The respective present value changes arerecognized in profit or loss as income or expense. There are no liabilities that serve trading purposes.Liabilities from finance leases are measured at the net present value of the future minimum leasepayments using the interest rate implicit in the lease and taking account of any repayments made in themeantime.

Foreign currency liabilities are translated using the closing rate.

The preparation of financial statements in accordance with IFRS requires the use of estimates andassumptions that affect the reported amounts of assets and liabilities, the disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of sales, incomeand expenses during the relevant period. Although these estimates and assumptions are based onmanagement’s best knowledge of current events and circumstances, the actual results ultimately maydiffer from those estimates and assumptions. Such estimates and assumptions are evaluated on anongoing basis based upon historical results and experience, in consultation with experts and using othermethods. The board of managers considers particular circumstances, as well as forecasts regardingfuture changes. Estimates and assumptions are particularly necessary for the measurement of property,plant and equipment, lime quarries and intangible assets, such as trademarks and goodwill as well asfor the measurement of deferred taxes and warranty provisions.

Purchase price allocations are an integral part for the accounting of business combinations inaccordance with IFRS which require significant management judgment and the use of estimates.Beyond the determination of fair values and useful lives for property, plant and equipment, themeasurement of provisions for pensions, other provisions and an indemnification receivable against theformer shareholder, particularly the measurement of intangible assets and deferred taxes require asubstantial degree of management estimates and assumptions.

Upon the acquisition of the Xella Group in 2008, certain brands were identified with indefinite livesand the difference between the purchase price and net assets acquired measured at fair value wasrecorded as goodwill. In subsequent periods, brands and goodwill are tested for impairment on anannual basis or whenever events or changes in circumstances indicate that brands or goodwill might beimpaired. An impairment charge is recognized if the carrying amounts of brands or goodwill exceedtheir fair values. The future cash flows used to determine the fair values of brand and goodwill arebased on current business expectations and discount rates. Changes in future projected cash flows anddiscount rates applied may lead to impairment charges in future periods.

Deferred tax assets and liabilities under IFRS are recognized for temporary differences between thecarrying amounts in the consolidated balance sheet and the tax base of respective assets and liabilitiesas well as on tax loss carry-forward. Significant assumptions may include the probability of sufficientfuture taxable income being available to realize deferred tax assets recognized. If actual tax laws thatwould impose restrictions on the realization of the deferred tax assets should occur or there would notbe sufficient taxable income available in the future, an adjustment to the recorded amount of deferredtax assets would affect operating results.

Shares in assets and liabilities whose residual terms are less than one year are reported under currentassets on principle.

Sales comprise the proceeds from the sale of goods and services, less discounts and rebates. Sales arerecognized upon the transfer of risk to the customer unless they are recognized using the percentage ofcompletion method or zero-profit method under IAS 11. Other income is recorded if it is likely therewill be a flow of economic resources to the entity and this amount can be reliably determined.

Pursuant to IAS 20, government grants are only recognized at their fair value if there is reasonableassurance that the conditions attached to them will be met and they will be collected. Grants to cover

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expenses are posted through profit or loss and offset in the period in which the expenses are incurredfor which the grants were made. Investment grants relating to property, plant and equipment arededucted from the acquisition cost of the corresponding assets. Government tax grants are shown asnon-current deferred income and are credited to the Statement of Income on a straight-line basis overthe expected useful lives of the related assets.

New International Financial Reporting Standards and Interpretations

The Consolidated Financial Statements have been prepared in accordance with IFRS as endorsed bythe EU. The IFRS comprise the IFRS issued by the International Accounting Standards Board, theInternational Accounting Standards (IAS) as well as the interpretations of the International FinancialReporting Interpretations Committee (IFRIC) and the Standing Interpretations Committee (SIC). Theaccounting policies applied comply with all the standards and interpretations endorsed by the EU as ofDecember 31, 2011 and mandatorily effective for periods beginning on or after January 01, 2011:

Application of issued and effective IFRS and IFRIC in 2011

IFRS pronouncement

Amendment of IAS 32, Financial Instruments: Classification of Rights Issues by the EU as ofFebruary 22, 2012

Amendment of IFRS 1, Limited Exemptions from Comparative IFRS 7 Disclosures for First-timeAdopters by the EU as of July 1, 2010

Amendment of IAS 24, Related party disclosure by the EU as of January 1, 2011

IFRIC 19, Extinguishing Financial Liabilities with Equity Instruments by the EU as of July 1, 2010

Amendment of IFRIC 14: Prepayments of a Minimum Funding Requirement by the EU as ofJanuary 1, 2011

Annual Improvements to IFRS (May 2010): by the EU as of January 1, 2011

IFRS 1—First-time Adoption of IFRS

IFRS 3—Business Combinations

IFRS 7—Financial Instruments: Disclosures (amendments to the credit risk disclosures)

IAS 1—Presentation of Financial Statements (amendment relating to the statement of changes inequity and the disclosures of other comprehensive income)

IAS 34—Interim Financial Reporting

IFRIC 13 Customer Loyalty Programs

Transition requirements for amendments arising as a result of IAS 27 Consolidated and SeparateFinancial Statements

The amended IAS 24 provides further clarification of the definition of related parties and thedisclosures required by companies which are government-related. Secondly, the new IAS 24 includesany subsidiary undertakings held by the reporting entity’s joint ventures and associates in the definitionof reportable related parties. Neither of the other aforementioned IFRS pronouncements had materialimpact on the Group’s financial position, cash flows or results of operation.

Issued, but not yet effective IFRS and IFRIC

The following table summarizes all issued new IFRS pronouncements until these annual consolidatedfinancial statements have been authorized for issue, irrespective of their date of mandatory or optionalinitial application. Where considered relevant for an understanding of the potential future impact ofthese new rules, guidance is being provided at the bottom of this table.

IFRS pronouncement

Application in FY 2012

Amendment of IFRS 7, Disclosures—Transfer of Financial Assets by the EU as of July 1, 2011

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Amendment of IFRS 1, Severe Hyperinflation and Removal of Fixed Dates for First-time Adopters bythe EU as of July 1, 2011

Amendment of IAS 12, Deferred Tax: Recovery of Underlying Assets by the EU as of July 1, 2012

Application in FY 2013 or later

IFRS 9, Financial Instruments: Classification and Measurement: Financial Assets by the EU as ofJanuary 1, 2015

IFRS 9, Financial Instruments: Classification and Measurement: Financial Liabilities by the EU as ofJanuary 1, 2015

IFRS 10, Consolidated Financial Statements by the EU as of January 1, 2013

IFRS 11, Joint Arrangements by the EU as of January 1, 2013

IFRS 12, Disclosure of Interests in Other Entities by the EU as of January 1, 2013

IFRS 13, Fair Value Measurement by the EU as of January 1, 2013

Revision of IAS 27, Separate Financial Statements by the EU as of January 1, 2013

Revision of IAS 28, Investments in Associates and Joint Ventures by the EU as of January 1, 2013

Amendment of IAS 1, Presentations of Items of Other Comprehensive Income by the EU as of July 1,2012

Amendments of IAS 19 Employee Benefits by the EU as of January 1, 2013

IFRIC 20, Stripping Costs in the Production Phase of a Surface Mine by the EU as of January 1, 2013

Amendments of IFRS 9 and IFRS 7, Mandatory Effective Date and Transitional DisclosureRequirements by the EU as of January 1, 2015

Amendment of IAS 32 and IFRS 7, Disclosures—Offsetting Financial assets and Financial liabilities bythe EU as of January 1, 2013

IFRS 9, Financial instruments, addresses the classification, measurement and recognition of financialassets and financial liabilities. IFRS 9 has been issued in two parts yet, and once a third part with anamended set of hedge accounting rules has been issued, these new requirements will replace theexisting IAS 39 in its entirety. IFRS 9 (part I) requires financial assets to be classified into twomeasurement categories—those measured as at fair value and those measured at amortized cost. Thedetermination is made at initial recognition and depends on the entity’s business model for managingits financial instruments and the contractual cash flow characteristics of the instrument. For financialliabilities, IFRS 9 (part II) retains most of the existing IAS 39 requirements. The main change is that,in cases where the so-called fair value option is taken for financial liabilities, the part of a fair valuechange due to an entity’s own credit risk is recorded in Other Comprehensive Income (OCI) ratherthan in the income statement, unless this creates a so-called accounting mismatch. The Group is yet toassess IFRS 9’s full impact. IFRS 9 (parts I, II and III yet to be issued) are expected not to be appliedbefore 2015, with corresponding retrospective application and additional transitional rules not before2014 year ends.

IFRS 10, Consolidated Financial Statements, builds on existing principles by identifying the concept ofcontrol as the determining factor in whether an entity should be included within the consolidatedfinancial statements of the parent company. The standard provides additional guidance to assist in thedetermination of control where this is difficult to assess, inter alia by providing detailed prescriptiveguidance on substantial rights. IFRS 10 supersedes the existing IAS 27 and SIC-12 requirements forconsolidation, though without significantly changing the overall rational. The Group is yet to assessIFRS 10’s full impact and will adopt IFRS 10 in 2013 under consideration of accompanying transitionalrequirements for 2012.

IFRS 11, Joint Arrangements, sets out requirements for the classification and accounting of jointventures and joint operations by introducing new criteria. IFRS 11 supersedes IAS 31 based on whichapplication of the proportionate consolidation of legal entity joint ventures will no longer be permitted.However, classification of certain arrangements as joint operations may lead to the recognition of rightsand obligations and corresponding income and expenses in the consolidated financial statements of the

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venture. The Group is yet to assess IFRS 11’s full impact and will adopt IFRS 11 in 2013, withcorresponding retrospective application in 2012.

IFRS 12, Disclosures of Interests in other Entities, includes disclosure requirements for all forms ofinterests in other entities, including joint arrangements, associates, special purpose entities and otheroff balance sheet vehicles. The Group is yet to assess IFRS 12’s full impact and will adopt IFRS 12 in2013, with corresponding retrospective application in 2012.

IFRS 13, Fair Value Measurement, aims to improve consistency and reduce complexity by providing aprecise definition of fair value and a single source of fair value measurement with additional disclosurerequirements for use across various effective IFRS. The requirements, now largely aligned betweenIFRS and US GAAP, do not mandate or extend the use of fair value accounting but provide guidanceon how to apply fair value measurement where already required or permitted by other standards. TheGroup is yet to assess IFRS 13’s full impact and will adopt IFRS 13 in 2013, with correspondingretrospective application in 2012.

IAS 19, Employee benefits, was amended in June 2011 as a result of a long series of discussion. IAS 19eliminates the so-called corridor approach mandates recognition of all actuarial gains and losses directlyin OCI as they occur. Furthermore, all past service costs are to be recognized immediately. Besides, thecurrent approach to assess interest cost and expected return on plan assets will be replaced bycompulsory application of a uniform, market-based discount rate to both the defined benefit liabilityand any corresponding plan asset (‘net interest approach’). The new standard is expected to increasevolatility in equity. The revised IAS 19 is expected to be applied in 2013, with correspondingretrospective application in 2012.

In 2011, the Group did not opt for voluntary early adoption of either of the aforementioned IFRSpronouncements. Adoption of any of the aforementioned IFRS pronouncements is subject to priorendorsement by the European Parliament.

B. Notes to the Statement of Financial Position

1. Property, Plant and Equipment

Property, plant and equipment developed as follows:

Assets under Property,Statement of Property, Plant and Land & Land for Plant & Vehicles & construction & plant &Equipment 2011 buildings exploitation machinery equipment prepayments equipment

kE kE kE kE kE kE

As at January 1st . . . . . . . . . . . 394,823 223,263 661,068 33,465 37,537 1,350,156Currency adjustment . . . . . . . . . (2,248) (4,099) (314) (438) (7,099)Addition . . . . . . . . . . . . . . . . . . 3,954 353 12,624 5,990 42,935 65,856Disposal . . . . . . . . . . . . . . . . . . (2,955) (508) (2,641) (2,851) (150) (9,105)Additions/ disposals ConsGroup . 13,939 17,497 300 14 31,750Transfer . . . . . . . . . . . . . . . . . . 3,370 14,345 1,306 (19,168) (147)

Accumulated costs as atDecember 31 . . . . . . . . . . . . . 410,883 223,108 698,794 37,896 60,730 1,431,411

As at January 1st . . . . . . . . . . . (40,325) (5,478) (160,906) (12,440) (373) (219,522)Currency adjustment . . . . . . . . . 424 1 1,710 163 4 2,302Depreciation/ Amortisation . . . . (15,869) (2,002) (68,863) (6,557) (93,291)Impairment . . . . . . . . . . . . . . . (3,313) (321) (1,477) (75) (246) (5,432)Reversal of impairment . . . . . . . 48 1,273 62 1,383Disposal . . . . . . . . . . . . . . . . . . 1,033 19 2,543 2,705 55 6,355Transfer . . . . . . . . . . . . . . . . . . 2 434 (436)

Accumulated depreciation as atDecember 31 . . . . . . . . . . . . . (58,000) (6,508) (226,497) (16,204) (996) (308,205)

Net book value as at January 1st 354,498 217,785 500,162 21,025 37,164 1,130,634

Net book value as atDecember 31 . . . . . . . . . . . . . 352,883 216,600 472,297 21,692 59,734 1,123,206

Thereof finance lease assets: . . . 4,059 3,243 101 7,403

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Assets under Property,Statement of Property, Plant and Land & Land for Plant & Vehicles & construction & plant &Equipment 2010 buildings exploitation machinery equipment prepayments equipment

kE kE kE kE kE kE

As at January 1st . . . . . . . . . . . 381,466 222,631 624,921 30,511 27,681 1,287,210Currency adjustment . . . . . . . . . 5,827 2 7,289 417 463 13,998Addition . . . . . . . . . . . . . . . . . . 1,772 15,519 4,321 26,391 48,003Disposal . . . . . . . . . . . . . . . . . . (1,501) (209) (933) (2,020) (12) (4,675)Additions/ disposals ConsGroup . 4,804 623 498 (89) 5,836Transfer . . . . . . . . . . . . . . . . . . 2,455 216 13,774 325 (16,986) (216)

Accumulated costs as atDecember 31 . . . . . . . . . . . . . 394,823 223,263 661,068 33,465 37,537 1,350,156

As at January 1st . . . . . . . . . . . (20,577) (1,946) (91,024) (7,355) (266) (121,168)Currency adjustment . . . . . . . . . (255) (721) (101) 3 (1,074)Depreciation/ Amortisation . . . . (15,722) (1,728) (70,892) (6,625) (94,967)Impairment . . . . . . . . . . . . . . . (4,693) (1,619) (2,112) (244) (100) (8,768)Reversal of impairment . . . . . . . 170 16 (1) 185Disposal . . . . . . . . . . . . . . . . . . 251 9 781 1,668 2,709Additions/ disposals ConsGroup . 480 2,943 138 3,561Transfer . . . . . . . . . . . . . . . . . . 191 (194) (51) 63 (9)

Accumulated depreciation as atDecember 31 . . . . . . . . . . . . . (40,325) (5,478) (160,906) (12,440) (373) (219,522)

Net book value as at January 1st 360,890 220,686 533,896 23,156 27,413 1,166,041

Net book value as atDecember 31 . . . . . . . . . . . . . 354,498 217,785 500,162 21,025 37,164 1,130,634

Thereof finance lease assets: . . . 4,323 4,127 162 8,612

In 2011 there were no relevant additions or disposals due to finance leases. The accumulateddepreciation on assets recognized under finance leases amounts to 4,462 kA (PY: 3,248 kA).

The carrying amount of property, plant and equipment used to secure the financial liabilities of theGroup amounts to 439,555 kA (PY: 488,984 kA).

The purchase obligations for property, plant and equipment amount to 16,926 kA (PY: 9,349 kA). Thisincrease results from the extension of capacity of cement-bonded boards in Calbe at Fermacell GmbH,Duisburg / Germany.

Substantial additions to property, plant and equipment mainly result from assets under construction andprepayments, particularly relating to a reactor targeting the production of synthesis gas from waste(Ecoloop) and the extension of capacity of cement bounded boards.

Furthermore the acquisition of Xella Pontenure S.r.l., Pontenure / Italy led to an increase of property,plant and equipment in the amount of 30,501 kA.

The net disposals of property, plant and equipment amounting to 2,750 kA (PY: 1,967 kA) mainly relate tothe sale of a property in Groß-Gerau at XSBB Immobilien- und Handelsgesellschaft mbH & Co. KG,Duisburg / Germany.

All impairment charges are shown as depreciation / amortization expenses in the ConsolidatedStatement of Income.

Assets for which impairment losses have been recognized have been written down to their fair valuesless costs to sell which have been determined based on market values. Impairment losses relate mainlyto Xella Kosova L.L.C., Lipjan / Kosovo, (Building Materials segment) due to a negative marketdevelopment. In this regard, impairment losses of 2,315 kA were recognized on land and buildings,321 kA on land for exploitation, 1,230 kA on plant and machinery and 59 kA on vehicles and equipment.

Reversals on impairment mainly result from a better access to lime reserves in Saal / Germany (1,273 kA).These refer to the Lime segment.

The most significant items reported as assets under construction and prepayments as at December 31,2011 are the ‘‘Ecoloop project’’ at the Lime Business Unit amounting to 14,730 kA and the further

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expansion of the Fels Izvest OOO facility in Tovarkovo / Russia in the amount of 12,635 kA(PY: 12,705kA).

2. Intangible Assets

Intangible assets developed as follows:

PrepaymentsCustomer Other on

Statement of Intangible lists/ Development Software Other intangible intangible IntangibleAssets 2011 Goodwill contracts expenses Trademarks licences licences assets assets assets

kE kE kE kE kE kE kE kE kEAs at January 1st . . . . . . 332,768 14,833 1,599 230,956 29,884 897 994 611,931Currency adjustment . . . . (2,214) (466) 2 (5,481) (181) (5) (1) (8,346)Addition . . . . . . . . . . . . 1,550 6,763 661 8,974Disposal . . . . . . . . . . . . (79) (1) (80)Additions/ disposals

ConsGroup . . . . . . . . . 10,101 2,801 12,902Transfer . . . . . . . . . . . . 575 6 (434) 147

Accumulated costs as atDecember 31 . . . . . . . . 340,655 14,367 1,601 225,475 31,749 10,461 1,220 625,528

As at January 1st . . . . . . (4,393) (82) (15,362) (158) (19,995)Currency adjustment . . . . 339 (1) 168 2 508Depreciation/ Amortisation (1,841) (54) (6,547) (163) (8,605)Impairment . . . . . . . . . . (75) (75)Disposal . . . . . . . . . . . . 79 79

Accumulated depreciationas at December 31 . . . . (5,895) (137) (21,662) (319) (75) (28,088)

Net book value as atJanuary 1st . . . . . . . . . 332,767 10,440 1,518 230,955 14,522 739 995 591,936

Net book value as atDecember 31 . . . . . . . . 340,655 8,472 1,464 225,475 10,087 10,142 1,145 597,440

PrepaymentsCustomer Other on

Statement of Intangible lists/ Development Software Other intangible intangible IntangibleAssets 2010 Goodwill contracts expenses Trademarks licences licences assets assets assets

kE kE kE kE kE kE kE kE kEAs at January 1st . . . . . . 325,775 14,487 1,594 228,433 28,108 5 764 169 599,335Currency adjustment . . . . 3,349 346 6 2,522 163 10 2 6,398Addition . . . . . . . . . . . . 1,454 195 935 2,584Disposal . . . . . . . . . . . . (131) (4) (135)Additions/ disposals

ConsGroup . . . . . . . . . 3,642 (8) (1) (100) 3,533Transfer . . . . . . . . . . . . 298 29 (111) 216

Accumulated costs as atDecember 31 . . . . . . . . 332,768 14,833 1,599 230,956 29,884 897 994 611,931

As at January 1st . . . . . . (2,369) (26) (8,848) (5) (163) (11,411)Currency adjustment . . . . (34) (2) (52) (4) (92)Depreciation/ Amortisation (1,990) (54) (6,591) (21) (8,656)Impairment . . . . . . . . . . (10) (70) (80)Disposal . . . . . . . . . . . . 131 4 135Additions/ disposals

ConsGroup . . . . . . . . . 8 1 100 109

Accumulated depreciationas at December 31 . . . . (4,393) (82) (15,362) (158) (19,995)

Net book value as atJanuary 1st . . . . . . . . . 325,775 12,119 1,568 228,432 19,259 599 170 587,922

Net book value as atDecember 31 . . . . . . . . 332,767 10,440 1,518 230,955 14,522 739 995 591,936

The substantial addition to goodwill (9,232 kA) in 2011 results from the acquisition of XellaPontenure S.r.l., Pontenure / Italy.

Development expenses mainly include two projects in connection with the implementation of ITsystems.

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In 2011 the addition to other intangible assets mainly results from the recognition of CO2 emissioncertificates in the amount of 6,733 kA. The addition due to first time consolidation (‘‘ConsGroup’’)refers to the acquisition of Xella Pontenure S.r.l., Pontenure / Italy.

As in the prior year, there were no purchase obligations for intangible assets.

Impairment losses relate to Xella Kosova L.L.C., Lipjan / Kosovo.

Intangible assets that serve as collateral for the liabilities of the Group amounted to 66,915 kA(PY: 71,409 kA).

The goodwill impairment test performed during the year 2011 did not lead to any impairment losses atthe level of the Cash Generating Units. For more information on the impairment test please see thecomments under ‘‘Accounting Policies’’.

3. Investments in Associates (At Equity)

Investments in associates (at equity) 2011 2010

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,749 27,985Proportional share of net income/ loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,233 2,002Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (984) (1,224)Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,218) (2,014)

Net book value as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,780 26,749

The following entities are consolidated using the equity method. The carrying amounts of their assets,liabilities, sales and net results are as follows:

Dec. 31, 2011

Name of investment Book value Assets Liabilities Sales Net result Ref.

kE kE kE kE kETurk Ytong Sanayi A.S., Istanbul, Turkey . . . . . 8,284 45,750 12,124 42,755 4,439 (1)

‘‘DSZ’’ OOO (BSW), Tovarkovo, Russia . . . . . . 6,028 12,031 1,915 18,574 954 (1)

Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,Ruckersdorf, Germany . . . . . . . . . . . . . . . . . . 3,749 3,632 1,376 4,440 656 (1)

Kalksandsteinwerk Wendeburg, RadmacherGmbH & Co. KG, Wendeburg, Germany . . . 3,719 9,741 2,447 9,397 126 (2)

Shandong Xella Gather Calcium Silicate NewBuilding Materials Co., Ltd., Tengzhou,China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,477 4,697 4,534 (382) (2)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,780

Dec. 31, 2010

Name of investment Book value Assets Liabilities Sales Net result Ref.

kE kE kE kE kETurk Ytong Sanayi A.S., Istanbul, Turkey . . . . . 8,284 39,971 8,753 32,377 1,994 (2)

RDB Hebel S.p.A., Pontenure, Italy . . . . . . . . . 5,217 62,445 52,579 36,847 1,644 (2)

‘‘DSZ’’ OOO (BSW), Tovarkovo, Russia . . . . . . 5,779 12,326 2,951 21,510 2,888 (2)

Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,Ruckersdorf, Germany . . . . . . . . . . . . . . . . . . 3,749 3,931 1,546 4,573 680 (2)

Kalksandsteinwerk Wendeburg, RadmacherGmbH & Co. KG, Wendeburg, Germany . . . 3,719 9,741 2,447 9,397 126 (2)

Shandong Xella Gather Calcium Silicate NewBuilding Materials Co., Ltd., Tengzhou,China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,477 4,697 4,534 (382) (2)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,749

(1) Last available financial statement Dec. 31, 2010

(2) Last available financial statement Dec. 31, 2009

Please consider that the figures in the table above are the companies’ numbers (not Xella’s portion).

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Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: HR75803A.;3 v6.8

4. Financial Assets

Non-current financial assets include the non-current part of a receivable carried by XI (BM)Holdings GmbH, Duisburg / Germany against the former shareholder, Franz Haniel & Cie. GmbH,Duisburg / Germany of 63,689 kA (PY: 0 kA). This receivable comprising a non-current and a currentportion represents a number of claims against Haniel which were agreed on by the buyer and sellerduring the sale of the Xella Group. They relate to hold-harmless agreements for certain tax obligations,warranty obligations and other risks. The increase of the non-current portion of this receivable ismainly attributable to new warranty claims for possibly damaged buildings (61,042 kA). Please also referto note 12.

Besides the non-current portion of the receivable from Franz Haniel & Cie GmbH the non-currentfinancial assets mainly consist of shares in entities where no significant influence is exercised. Theseassets are classified as available-for-sale financial assets 12,281 kA (PY: 12,442 kA). They primarilyconsist of shares in Baustoffwerke Munster-Osnabruck GmbH & Co. KG, Osnabruck / Germany in theamount of 7,400 kA (PY: 7,400 kA) and in Anker Kalkzandsteenfabriek B.V., Kloosterhaar / Netherlandsin the amount of 2,030 kA (PY: 2,030 kA). In both cases legal requirements prevent a significantinfluence.

The current financial assets are as follows:

Financial assets Dec. 31, 2011 Dec. 31, 2010

kE kE

Bank balances (with no short maturity) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 262Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,421 1,201Receivables from associates (at equity) (current) . . . . . . . . . . . . . . . . . . . . . 1,021 984Receivables from other investments (current) . . . . . . . . . . . . . . . . . . . . . . . 36Receivables from shareholders (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,168 1,100Other financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,860 44,364

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,470 47,947

The increase of derivatives especially relates to FX forwards (1,758 kA, PY: 224 kA).

Receivables from associates especially refer to receivables from unpaid dividends. The increase mainlyderives from Kalksandsteinwerk Ruckersdorf GmbH & Co. KG, Ruckersdorf.

Receivables from shareholders are from the shareholders of Xella International Holdings S.a r.l.,Luxembourg (12 kA, PY: 12 kA) and from shareholders with a non-controlling interest of XellaBaustoffwerke Rhein-Ruhr GmbH, Duisburg / Germany, as well as of Kalksandsteinwerke Thorl &Meyer GmbH & Co. KG, Seevetal and Xella Kalksandsteinwerk Griedel GmbH & Co KG, Butzbach-Griedel (1,156 kA, PY: 1,088 kA).

Other current financial assets especially refer to the current portion of the receivable from FranzHaniel & Cie GmbH of 32,417 kA (PY: 43,133 kA).

The allowance on financial assets can be summarized as follows:

Allowance on financial assets 2011 2010

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (895) (888)Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

Book value as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (888) (895)

The financial assets that serve as collateral for the liabilities of the Group amount to 2,155 kA(PY: 2,155 kA).

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5. Deferred Taxes

Deferred taxes are calculated at the respective local tax rates. Deferred taxes recognized on temporarydifferences arising from consolidation entries are calculated using the Group’s tax rate of 29.0%(PY: 29.0%).

The changes to the tax rates enacted at the balance sheet date have already been considered. Theincome tax rates in the individual countries range between 10.0% and 37.9%.

The following table shows the deferred tax assets and liabilities derived from recognition andmeasurement differences of individual IFRS versus tax balance sheet items and from tax losses carriedforward:

Dec. 31, 2011 Dec. 31, 2010

Deferred taxes Tax assets Tax liabilities Tax assets Tax liabilities

kE kE kE kE

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . 3,246 186,562 2,465 196,246

Property, plant & equipment . . . . . . . . . . . . . . . . . . . 2,565 138,190 1,812 148,559Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 47,671 625 47,232Investments in associates (at equity) . . . . . . . . . . . . . . 28 4 24Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 515 24 274Trade and other receivables . . . . . . . . . . . . . . . . . . . . 660 158 157

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,825 5,194 1,578 5,020

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 241 2,245 209 1,022Trade and other receivables . . . . . . . . . . . . . . . . . . . . 1,274 1,182 708 187Financial assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 1,473 51 3,811Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 157 294 610

Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . 9,294 8,053 8,064 5,416

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 734 5,232 627 4,436Pension provisions and other provisions . . . . . . . . . . . 8,560 2,761 7,287 964Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 150 16

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,636 76 7,287 145

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,718 2 3,742 56Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,156 39 3,534 39Trade and other accounts payable . . . . . . . . . . . . . . . . 762 18Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 11 50Deferred tax assets on losses carried forward . . . . . . . 43,964 24,402

Offsetting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,847) (49,847) (17,277) (17,277)

Book value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,118 150,038 26,519 189,550

Of these totals, deferred tax assets of 16,064 kA (PY: 13,678 kA) and deferred tax liabilities of 22,048 kA(PY: 24,545 kA) are likely to be realized within one year.

The relatively high deferred tax liabilities in comparison to deferred tax assets are generally due to fairvalue adjustments of non-current assets associated with the acquisition of the Xella Group onAugust 30, 2008.

Deferred tax assets on temporary differences were written down by allowances of 4,671 kA (PY: 5,757 kA).

In the financial year 2011 deferred taxes of 6,740 kA (PY: 1,372 kA) were recognized for nineloss-making entities. However, due to planned or ongoing restructuring, these unused tax losses areexpected to be utilized.

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The Group also carries unused tax losses for which no deferred tax assets were recognized as it is nothighly probable, from today’s perspective, that they will be realized.

Expiry date


kE kE kE kE kE

Tax losses carried forward . . . . . . . . . . . . . . . . 16,081 16,653 29,366 33,524 95,624Interest capping rule . . . . . . . . . . . . . . . . . . . . 143,915 143,915

Expiry date


kE kE kE kE kE


No deferred tax liabilities are recognized for profits retained by subsidiaries and other comprehensiveincome from hedges of a net investment. Tax liabilities of 2,670 kA (PY: 1,750 kA) would arise in theevent of future profit distributions or a sale of the investment.

6. Inventories

Inventories Dec. 31, 2011 Dec. 31, 2010

kE kE

Raw materials & supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73,884 73,248Work in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,157 1,158Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92,729 82,996Merchandise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,333 8,924Prepayments on inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,824 913

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178,927 167,239

The allowances recognized on inventories developed as follows:

Allowance on Inventories 2011 2010

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,800) (3,688)Currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 (65)Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,309) (1,245)Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 1,961Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 751 223Transfers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14


Raw materials and supplies include CO2 emission certificates. The costs for these certificates areconsidered part of the production costs. As of December 31, 2011, CO2 emission certificates amountsto 13,882 kA (PY: 17,224 kA).

The remaining raw materials und supplies slightly increased. Raw materials and supplies include spareand replacement parts of 26,297 kA (PY: 25,184 kA).

The increase of finished goods is mainly related to the German Building Materials business, especiallyto new business activities in Italy and in connection with an African project executed in theNetherlands.

Additions to allowances on inventories include additions from Xella Thermopierre S.A., Saint Savin(567 kA) as well as smaller allowances from other entities.

The main deviation in releases of allowances was linked to Xella Building Materials Co., Ltd., Tianjin(545 kA), as older finished goods have been sold.

At the balance sheet date, inventories of 23,680 kA (PY: 23,004 kA) were assigned as collateral forliabilities.

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7. Trade and Other Receivables

The balance of current trade and other receivables as at December 31, 2011 is shown in the followingtable:

Trade and other receivables Dec. 31, 2011 Dec. 31, 2010

kE kE

Trade receivables (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116,567 103,465Receivables from construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,306 1,342Other receivables (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,207 24,127

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146,080 128,934

Trade and other receivables of 65,610 kA (PY: 52,559 kA) were assigned as collateral for the liabilitiesof the Group.

The increase of trade receivables is primarily due to the positive development of sales within the XellaGroup.

The receivables from construction contracts refer to construction services in the Netherlands.

Other receivables include VAT reimbursement claims in the amount of 7,289 kA (PY: 7,748 kA) andmineral oil and energy tax reimbursement claims in the amount of 6,888 kA (PY: 5,664 kA).

Allowances on current trade and other receivables developed as follows over the period:

Allowance on trade and other receivables 2011 2010

kE kE

As at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,628) (5,040)Currency adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (63) (59)Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,837) (3,473)Utilization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 954 1,154Releases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,084 790


The bad debt allowances contain specific valuation allowances and portfolio-based allowances forspecific categories of receivables. As soon as a receivable becomes uncollectable, the allowance accountis utilized to write it off. Subsequent collections of bad debts are posted to profit or loss.

Additions to allowances include new allowances recognized in the Netherlands, in Italy and in theCzech Republic.

Releases of allowances refer reversals, in particular in the Netherlands and Belgium.

Additions to allowances are reported under other operating and administrative expenses (see note 18).The releases of allowances are posted to other operating income (see note 16). The aging structure oftrade receivables at the balance sheet date is presented below:

TradeTotal book value Trade receivables Trade receivables not written down but overdueof trade receivables not writtenreceivables as at written down and 0–3 3–6 6–12 >12

Dec. 31, 2011 down not overdue Total months months months months


116,567 9,022 91,503 16,042 12,621 973 432 2,017

TradeTotal book value Trade receivables Trade receivables not written down but overdueof trade receivables not writtenreceivables as at written down and 0–3 3–6 6–12 >12

Dec. 31, 2010 down not overdue Total months months months months


103,465 3,444 83,724 16,298 14,226 1,457 278 337

With regard to trade receivables not written down but overdue, there is no indication that therespective debtors will not be able to meet their payment obligations.

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8. Cash and Cash Equivalents

The following table shows the composition of cash and cash equivalents:

Cash and cash equivalents Dec. 31, 2011 Dec. 31, 2010

kE kE

Cash in hand . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 187Bank balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,426 141,912

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148,646 142,099

Cash and cash equivalents comprised cash in hand and bank balances with a short maturity.

At the balance sheet date, cash and cash equivalents of 95,689 kA (PY: 89,441 kA) were assigned ascollateral for liabilities. Nevertheless, these pledged cash balances are not restricted and available foroperational purposes of the respective Xella Group companies. Only an amount of 2,818 kA wasrestricted for the use of the Group.

In addition to the above mentioned cash balances as at December 31, 2011 the Xella Group hascommitted and unutilized credit facilities from a bank syndicate amounting to 62,116 kA.

9. Equity

Subscribed capital amounts to 12,500 A and was paid in cash. The capital stock consists of 1,250,000shares with a nominal value of 0.01 A each.

The translation reserve reports the differences arising from translating assets and liabilities carried byGroup companies whose functional currency is not euro. In 2011 positive currency adjustments of theshareholders’ equity related in particular to Hungary amounting to 3,572 kA, Czech Republic amountingto 3,030 kA and Mexico amounting to 725 kA. Negative currency adjustments related to Polandamounting to 4,835 kA and China amounting to 2,868 kA each led to a reduced shareholders’ equity.

The CPEC are classified as compound financial instruments as they comprise both a liability and anequity component (IAS 32.28). The CPEC holders may, at their discretion, convert their instrumentsinto equity at the company until December 31, 2015. The CPEC have been classified by an amount of552,600 kA as shareholders’ equity.

Capital reserves include the premium paid by shareholders for share issues and other additional paid-incapital.

The reserves also include changes in the fair value of available-for-sale financial assets (securities) andderivative financial instruments.

As at December 31, 2011 an amount of 2,688 kA (PY: 2,688 kA) has been posted to OCI related to anet investment hedge which has been terminated in 2009.

Capital Management

Efficient capital structure management is one of the Xella Group’s priority objectives, whereby thecomposition of this structure is closely linked with the capital-intensive nature of the Building Materialsbusiness.

Within the framework of the sale of the Xella Group in 2008, a Secured Facility Agreement (SFA) wasentered into by Xella International S.A. subgroup and a syndicate of banks to finance the transaction.

The SFA includes financial covenants (such as the ratio of EBITDA to Net Cash Interest, Cash Flow toTotal Debt Service, Net Debt to EBITDA as well as the amount of capital expenditures) which theXella Group is obliged to comply with. No equity-based financial covenants are included in the SFA.

On June 1, 2011 the Xella Group has drawn an additional loan under the existing SFA (Facility DLoan). This loan has been funded from the issuance of Senior Secured Notes in the amount of300,000 kA, issued by a special purpose entity, Xefin Lux S.C.A.. The Facility D Loan / Bond proceedswere used to fund a prepayment of Term Loan B and Term Loan C amounting to 125,000 kA, each.The remaining 50,000 kA from the Bond proceeds plus 6,034 kA from existing cash balances of XellaInternational S.a r.l. have been used to partly repay the existing Vendor Loan granted by Franz

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Haniel & Cie. GmbH, Duisburg / Germany. The liabilities in the Consolidated Statement of FinancialPosition related to the SFA amounted to 408,880 kA (PY: 663,397 kA) as at December 31, 2011.

According to the bond indenture and the respective covenant agreement the Xella International S.A.subgroup is obliged to fulfill certain covenants. The covenants under the bond indenture are defined asso called incurrence based covenants. The compliance with such covenants needs to be proven in caseof the occurrence of certain defined events, whereas the financial covenants under the SFA are definedas maintenance covenants. Compliance with these maintenance covenants must be reviewed at the endof every quarter by means of defined tests and confirmation of compliance provided to the banks.

The financial crisis has led the company to place a special focus on the maintenance and consolidationof an appropriate equity base and compliance with the covenants. Due to restrictive arrangements inthe SFA, Xella adapted its financial targets to the financial covenants. KPI for financial performance isNormalized EBITDA. Xella’s management has maintained its strong focus on cost management andprudent capital expenditure.

As in prior years, in 2011 all covenant tests confirmed compliance with the financial covenants asdefined by the SFA.

From the SFA syndicate’s as well as from the bond investor’s point of view, the shareholder loansgranted by Xella International Holdings S.a r.l., Luxembourg, are subordinated in relation to the SFAand bond debt and therefore treated as equity substitutes by the banks involved in the SFA.

10. Financial Liabilities

Financial liabilities include derivatives of 1,366 kA (PY: 1,295 kA). The change of derivatives is entirelydue to fair value changes related to interest rate and FX rate changes.

The underlying FX forwards and interest caps are recognized at Xella International GmbH, Duisburg /Germany for itself and for other subsidiaries.

The various categories and terms of current and non-current financial liabilities are shown in thefollowing table:

Dec. 31, 2011

MaturityFinancial liabilities(without derivatives) Book value 0–1 year 1–5 years >5 years

kE kE kE kE

Bank liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 409,394 18,865 303,750 86,779Bond liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 288,096 288,096Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,531 1,555 6,351 2,625Liabilities to investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 87Liabilities to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 153,806 39,470 114,336Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 222,000 16,875 986 204,139

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,083,914 76,852 311,087 695,975

Dec. 31, 2010

MaturityFinancial liabilities(without derivatives) Book value 0–1 year 1–5 years >5 years

kE kE kE kE

Bank liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 664,734 29,330 181,821 453,583Finance lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,275 1,847 6,081 4,347Liabilities to investments . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 88 40Liabilities to shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . 114,884 37,401 77,483Other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 255,704 15,848 1,955 237,901

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,047,725 84,514 189,897 773,314

Bank liabilities mainly consist of loans in the amount of 408,878 kA (PY: 663,397 kA) which wereincurred in the course of the sale of the Xella Group. Bond liabilities amounted to 288,096 kA. Thecombined SFA / Bond liabilities increased by 33,578 kA. The SFA liabilities contain 35,000 kA drawnunder the Capex / Acquisition Facility which has been utilized in 2011 for the first time. Repayments on

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SFA liabilities amounted to 296,148 kA whereof 250,000 kA were related to the issue of the Bonds. Anadditional reduction of SFA liabilities is related to currency translation effects of 10,646 kA. Thisreduction is partly compensated by the release of the accrued borrowing costs in the amount of12,275 kA related to the repayments of 250,000 kA.

The maturity of the financial liabilities shown above is based on the maturity date of the underlyingcredit facilities.

There is only one significant finance lease of non-current assets of the Europor aerated concrete facility(lease liability of 8,392 kA (PY: 9,634 kA)) expiring on December 31, 2017.

The future minimum lease payments due to finance leases and their net present values are summarizedin the following table:

Dec. 31, 2011

Maturity


kE kE kE kE


Present value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,531 1,555 6,351 2,625

Dec. 31, 2010

Maturity


kE kE kE kE


Present value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12,275 1,847 6,081 4,347

Liabilities to shareholders consist of shareholder loans of 142,061 kA (PY: 103,114 kA) granted by PAIpartners and Goldman Sachs Capital Partners to Xella International Holdings S.a r.l., Luxembourg,within the framework of the acquisition of the Xella Group. The shareholder loans are subordinated inrelation to the bond liabilities as well as to the bank loans granted in connection with the sale of theXella Group in 2008. The increase results from dividends due in connection with the CPEC (which areclassified as equity) in the amount of 32,810 kA as well as accumulated interest of the shareholder loansin the amount of 6,138 kA.

Liabilities to shareholders also include the portion of equity attributable to certain minorityshareholders which are classified as liabilities in accordance with IAS 32 in the amount of 10,219 kA(PY: 10,184 kA).

Other financial liabilities are mainly related to the Vendor Loan from Franz Haniel & Cie. GmbH inthe context of the acquisition of 208,636 kA (PY: 245,097 kA). In 2011, the Vendor Loan has beenpartially repaid in the amount of 56,034 kA funded from Bond proceeds (50,000 kA) and existing cashon hand (6,034 kA).

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The following table contains an analysis of all financial liabilities on the basis of the respective interesthedges.


Financial liabilities interest at Dec. 31, 2011 of basis of carrying(without derivatives) period in kE interest amount in %




EUR liabilities . . . . . . . . . . . . . . . . . . . . . . . . 1,002,058

thereof covered by interest hedges . . . . . . . . . . 337,4260–1 year 3,139 floating 7.521–5 years 47,679 floating 7.99> 5 years 30,902 floating 9.02

PLN liabilties . . . . . . . . . . . . . . . . . . . . . . . . 81,720

thereof covered by interest hedges . . . . . . . . . .0–1 year 59 floating 8.00> 5 years 79 fixed 5.50

Other foreign currency liabilities . . . . . . . . . . . 137

thereof covered by interest hedges . . . . . . . . . .Total financial liabilities (without derivatives) . 1,083,914

Carrying amount of fixed interest financialliabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 664,710


Financial liabilities interest at Dec. 31, 2010 of basis of carrying(without derivatives) period in kE interest amount in %




EUR liabilities . . . . . . . . . . . . . . . . . . . . . . . . 950,901

thereof covered by interest hedges . . . . . . . . . . 575,6480–1 year 3,217 floating 6.651–5 years 22,740 floating 7.40> 5 years 69,132 floating 7.90

PLN liabilties . . . . . . . . . . . . . . . . . . . . . . . . 95,089

thereof covered by interest hedges . . . . . . . . . .0–1 year 1,735 floating 5.33

Other foreign currency liabilities . . . . . . . . . . . 1,735

thereof covered by interest hedges . . . . . . . . . .Total financial liabilities (without derivatives) . 1,047,725

Carrying amount of fixed interest financialliabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 375,253

The carrying amounts of the floating rate financial liabilities generally correspond to their respectivefair values. The carrying amounts of fixed-interest financial liabilities relate to market value of939,463 kA (PY: 576,266 kA). This market value is based on the assumption that liabilities toshareholder will be repaid with effect of December 31, 2015. Based on the contractually agreedmaturity date December 31, 2058 the market value of all fixed-interest financial liabilities would be1,558,393 kA.

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Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: HT75803A.;3 v6.8

The bank liabilities are secured by liens of 693,605 kA (PY: 727,553 kA) in connection with the SFA.The bond investors also indirectly benefit from the SFA security package. For further information ofthe pledged assets please refer to the notes to the different asset categories. The carrying amounts ofinvestments in affiliates as well as intercompany receivables as shown in the single entity financialstatements are not considered in the determination of pledged assets, although they are also pledged ascollateral. Following the concept of the economic entity (IAS 27.4) intercompany assets wereeliminated.

11. Pension Provisions

Pension provisions are recognized to cover the obligations from current benefits and benefit plans forold age, disability and surviving dependants’ pensions. The Group’s benefits vary according to theprevailing local legal, tax and economic conditions in the respective country. The post-employmentbenefits of the Xella Group include both defined contribution plans and defined benefit plans. Otherthan the required premiums and contributions, defined contribution plans do not lead to any furthercommitment. The contributions are reported under staff expenses and amounted to 2,810 kA(PY: 3,155 kA) in 2011.

Pension provisions for defined benefit plans are calculated on the basis of actuarial principles using theprojected unit credit method. The following parameters were applied for the German companies, whichaccount for the majority of the pension provisions:

Actuarial assumptions (German companies) Dec. 31, 2011 Dec. 31, 2010

% %

Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.8 4.9Rate of pension progression . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.9 1.9Rate of salary-/ career increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 2.5

For the non-German companies, these assumptions vary from country to country and have thefollowing range:

• 3.6% to 7.8% (PY: 4.1% to 7.8%) for the discount rate,

• 2.0% to 4.5% (PY: 2.0% to 4.5%) for the salary trend,

• 1.0% to 4.5% (PY: 1.0% to 3.5%) for the pension trend.

Net pension provisions developed as follows:

Development of provision (DBL) 2011 2010

kE kE

DBL as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 124,576 127,394

Addition (+)/ disposal (�) Consolidation Group . . . . . . . . . . . . . . . . . . . . . . . . . 435Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (103) 136Transfer from current staff provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 611


Current service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,565 2,793Amortisation of actuarial gains (�)/ losses (+) . . . . . . . . . . . . . . . . . . . . . . . . . . . 563 277Amortisation of past service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7)Effects of curtailments/ settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (312)Effects from changes in asset ceiling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 245

Staff expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,061 3,063

Gross interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,550 10,322Expected return on plan assets for the reporting period . . . . . . . . . . . . . . . . . . . . (3,130) (2,835)

Interest costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,420 7,488

Pension payments and fund allocation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,567) (14,116)Difference employee contribution DBO and plan assets . . . . . . . . . . . . . . . . . . . .Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80


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The pension costs consist of the following components:

Composition of pension costs 2011 2010

kE kE

Staff expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,061 3,063Gross interest costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,550 10,322Expected return on plan assets for the reporting period . . . . . . . . . . . . . . . . . . . . . . (3,130) (2,835)

Pension costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,481 10,550

The defined benefit obligation developed as follows:

Development of obligation (DBO) 2011 2010

kE kE

DBO as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 211,335 198,977

Addition (+)/ disposal (�) Consolidation Group . . . . . . . . . . . . . . . . . . . . . . . . . 435Currency adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (103) 136Transfer from current staff provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 580 611


Experience adjustments of DBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,733) (2,733)Effects from changes in actuarial assumptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 821 11,548

Total actuarial gains (�)/ losses (+) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,913) 8,815

Current service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,565 2,793Effects of curtailments/ settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (312)Gross interest expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,550 10,322Employee contributions to DBO . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058 785Current payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,628) (10,729)Past service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Other changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,922 (375)


The increase of ‘‘Other changes’’ to the DBO mainly results from the reclassification of a definedcontribution plan to a defined benefit plan in 2011.

The net pension provisions have been derived as follows:

Reconciliation of DBO to DBL 2011 2010

kE kE

DBO, unfunded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138,487 141,255DBO, funded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,003 70,080


Effects from asset ceiling as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 218Effects from changes in asset ceiling as at December 31 . . . . . . . . . . . . . . . . . . . . 245

Total effects from asset ceiling . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 463

Fair value of plan assets as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (82,803) (65,087)Other amounts recognised in the statement of financial positionAccumulated actuarial gains (+)/ losses (�) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8,668) (21,672)Past service costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


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The development and the composition (portfolio) of the plan assets have been derived as follows:

Development of plan assets 2011 2010

kE kE

Fair value of plan assets as at January 1st . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,087 58,526

Experience adjustments of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,529 (53)Expected return on plan assets for the reporting period . . . . . . . . . . . . . . . . . . . . . . 3,130 2,835Employee contribution to plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,058 785Employer contribution to plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,232 5,524Payments out of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,293) (2,137)Effects of curtailments/ settlementsOther changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,060 (393)Fair value of plan assets as at December 31 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82,803 65,087

Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,684 11,626Fixed-income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,940 44,027Real estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .Other components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,179 9,433


The increase of ‘‘Other changes’’ to plan assets mainly results from the reclassification of a definedcontribution plan to a defined benefit plan in 2011.

The plan assets do not contain any financial instruments issued by the Xella Group or assets used bythe Group.

The plan assets and the status of the financing of the pensions developed as follows:

Funded status Dec. 31, 2011 Dec. 31, 2010 Dec. 31, 2009 Dec. 31, 2008

kE kE kE kE

DBO, unfunded . . . . . . . . . . . . . . . . . . . . . . . . . 138,487 141,255 133,953 125,391DBO, funded . . . . . . . . . . . . . . . . . . . . . . . . . . . 79,003 70,080 65,023 75,545Fair value of plan assets . . . . . . . . . . . . . . . . . . . (82,803) (65,087) (58,526) (66,520)Funded status excl. asset ceiling . . . . . . . . . . . . . 134,687 146,248 140,450 134,416

Effects from asset ceiling . . . . . . . . . . . . . . . . . . 463 3,129Funded status incl. asset ceiling . . . . . . . . . . . . . 135,151 146,248 140,450 137,545

The calculation of the fair value of plan assets as of balance sheet date is reflected in the expectedreturn on plan assets. The expected return on plan assets is based on the expected average returnsfrom the investment categories in the past and those expected in future, which are compared to theexpectations of external sources.

Expected rate of return on plan assets 2011 2010

% %

Equity instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.0 6.5Fixed-income securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.0 4.0Other components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.8 4.5

Other disclosures for plan assets 2011 2010

kE kE

Expected employer contribution to plan assets (expected for the following year) . . . . . . 2,674 2,261

The following table compares the expected and the actual return on plan assets and shows theexperience adjustments on DBO and plan assets:

Return on plan assets and experience adjustments 2011 2010 2009 2008*

kE kE kE kE

Actual return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,671 2,782 2,777 1,564Expected Return on Plan Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,130 2,835 2,774 1,272Experience adjustments on Plan Assets . . . . . . . . . . . . . . . . . . . . . . 5,529 (53) 3 292Experience adjustments on DBO . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,733) (2,733) (1,185)

* 4 months included

The actual return from plan assets can diverge from the expected return on plan assets if the capitalmarkets do not develop as expected.

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12. Other Provisions

Other provisions developed as follows:

Book valueAdditions/ as at

Statement of As of Currency disposals Discount Release Dec. 31,Provisions 2011 January 1st adjustment ConsGroup effect Addition Transfer (p&l) Utilisation 2011

kE kE kE kE kE kE kE kE kEStaff provisions . . . . . . . 12,929 (36) 105 36 3,518 580 (728) (3,459) 12,945Provisions for

environmentalobligations . . . . . . . . . 22,229 (82) 1,715 1,042 1,584 (512) (548) (1,109) 24,319

Provisions for vacating &demolition . . . . . . . . . 2,411 (1) 87 176 512 (427) (339) 2,419

Warranty provisions(non-current) . . . . . . . 61,545 61,545

Other long termprovisions . . . . . . . . . 6,551 108 12 (45) (12) 6,614

Other provisions(non-current) . . . . . . . 44,120 (119) 1,820 1,273 66,835 535 (1,715) (4,907) 107,842

Staff provisions . . . . . . . 20,564 (144) 20,371 (1,310) (2,122) (15,001) 22,358Provisions for pending

legal suits . . . . . . . . . 3,638 (13) 1,320 (718) (776) 3,451Warranty provisions

(current) . . . . . . . . . . 27,299 (2) 7,190 (1,468) (4,304) 28,715Restructuring provisions . . 4,196 (3) 575 150 (303) (671) 3,944Provisions for onerous

contracts . . . . . . . . . . 947 1 61 (114) (79) 816Provisions for return

pallets . . . . . . . . . . . . 3,124 (38) 2,976 (563) (1,186) 4,313Provisions for production

waste disposal . . . . . . . 1,666 (9) 171 (1,075) (148) 605Other short term

provisions . . . . . . . . . 28,838 (31) 866 45 (4,064) 25,654

Other provisions(current) . . . . . . . . . . 90,272 (239) 33,530 (1,115) (6,363) (26,229) 89,856

Total other provisions . . . 134,392 (358) 1,820 1,273 100,365 (580) (8,078) (31,136) 197,698

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Book valueAdditions/ as at

Statement of Provisions As of Currency disposals Discount Release Dec. 31,2010 January 1st adjustment ConsGroup effect Addition Transfer (p&l) Utilisation 2010

kE kE kE kE kE kE kE kE kEStaff provisions . . . . . . . 13,541 5 250 3,513 (453) (3,927) 12,929Provisions for

environmentalobligations . . . . . . . . . 31,574 31 18 517 1,565 (10,743) (733) 22,229

Provisions for vacating &demolition . . . . . . . . . 4,389 263 (483) 491 750 (2,868) (131) 2,411

Other long termprovisions* . . . . . . . . . 8,314 104 (1,595) (272) 6,551

Other provisions(non-current) . . . . . . . 57,818 36 531 138 5,569 750 (15,659) (5,063) 44,120

Staff provisions . . . . . . . 22,275 71 (329) 17,937 (611) (2,218) (16,561) 20,564Provisions for pending

legal suits . . . . . . . . . 3,834 (23) 660 (258) (575) 3,638Warranty provisions . . . . 26,935 9 49 6,378 (2,784) (3,288) 27,299Restructuring provisions . 6,988 7 (291) 822 (750) (789) (1,791) 4,196Provisions for onerous

contracts . . . . . . . . . . 1,182 4 63 (105) (197) 947Provisions for return

pallets . . . . . . . . . . . . 3,042 37 7 1,604 (623) (943) 3,124Provisions for production

waste disposal . . . . . . . 1,439 (2) 319 (90) 1,666Other short term

provisions . . . . . . . . . 28,259 (52) 2,941 (1,259) (1,051) 28,838

Other provisions(current) . . . . . . . . . . 93,954 51 (564) 30,724 (1,361) (8,126) (24,406) 90,272

Total other provisions . . . 151,772 87 (33) 138 36,293 (611) (23,785) (29,469) 134,392

Non-current staff provisions particularly include obligations for jubilee benefits and the early retirementscheme. The current staff provisions include bonuses and obligations from social (redundancy) plansand severance payments.

Provisions for environmental obligations relate to recultivation and restoration obligations to cover thecost of restoring quarries to an environmentally acceptable condition once exploitation is finished. Theprovision is created in installments over the prospective operating life of the respective quarry inkeeping with the scope of the quarry’s annual output. The provision is measured on the basis of theestimated costs for removing the conveying equipment and recultivating the sites on the basis of theactual output to date in relation to the total estimated resources at the site.

Warranty provisions include provisions to remedy possible damages to buildings where there is a legal,contractual or constructive obligation. From the end of 1987 to the beginning of 1996 former HanielBaustoffwerke produced calcium silicate units at the plants in Issum, Ratingen, and Kalscheuren (NorthRhine-Westfalia). In primarily small format CSU the quicklime was partially or totally replaced by arecycled product. The recycled product referred to was sourced from the slurry left from scrubbingsulfur dioxide from the flue gas of power plants. The calcium silicate units were tested using thecustomary technical processes of the day and passed all the inspections. Although they displayed therequired compressive strength after production, over the years some of the calcium silicate units losttheir compressive strength after being exposed to permanent moisture with cracks resulting in thefinished masonry. The plants named above were closed down in the second half of the nineties onaccount of the general decline in the construction industry.

When the damage first became apparent independent expert reports were commissioned. These reportsconfirmed that there was no danger for the inhabitants of buildings that had been constructed from thefaulty bricks. The reports ruled out the sudden collapse of such buildings.

The Xella successor companies do not perceive a general liability to pay damages. Nevertheless, takingaccount of the situation of each specific case, Xella generally agreed to absorb the costs of the damage.

In 2011 two court cases were brought against Xella in which building owners sought damages inaddition to the cost of repairs for the alleged fall in the resale value of their buildings. These caseswere reported extensively in the media. Xella is aware that other building owners lodged cases against

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Xella before the end of 2011. Most of these cases are independent proceedings to clarify the evidencewith the courts (Beweisverfahren) and declaratory proceedings (Feststellungsverfahren).

Despite the fact, that the press had already reported about the production of calcium silicate units fromslurry from scrubbers for a number of years, they were the subject of extensive press coverage and thelatest reports and a joint declaration released by Xella and Haniel at the end of 2011 led to a rise inthe number of reported cases. This rise led Xella to increase the provision for non-contractualpayments for the cases communicated to the company to 67,468 A. Thereof 61,545 A are classified asnon-current and 5,923 A as current provisions. The higher number of cases lodged in the meantime hasnot changed the assessment that there is, in fact, no general liability to pay damages in these cases.

In the course of selling the Xella Group in 2008, the vendor, Haniel agreed to hold the Xella Groupharmless for all costs, expenses and liabilities directly related to these cases. Please refer to note 4. Dueto the fact that Haniel is liable under the purchase agreement for any losses, Haniel and Xella haveagreed that Haniel will be solely responsible for processing all potential claims in future.

Current warranty provisions also include a provision recognized at Fels-Werke GmbH, Goslar /Germany due to the contamination of a French gravel pit which was sold in 2004. The provisionamounts to 12,634 kA (PY: 12,634 kA) and is also partly covered by hold-harmless agreements withHaniel.

Additionally, we expect claims by building owners in connection with certain panels which had beenproduced in a Dutch plant until 2006. Problems with the reinforcement could arise if these panels areexposed to temperature fluctuations to a certain extent. Under certain circumstances this can lead tocracks in the panels. The amount recognized as current warranty provision (4,377 kA) is the bestestimate of costs to settle potential legal or constructive obligations. This amount is not netted againstthe partial insurance coverage.

The restructuring provisions cover all estimated costs for restructuring selected entities and industrieson the basis of restructuring plans. Expenses for the closure of business locations over the past years(IAS 37.70 (b)) are considered first and foremost by recording impairment losses on the assetsconcerned.

Other short term provisions include a provision for CO2 certificates in the amount of 13,882 kA(PY: 17,224 kA) recognized at Fels-Werke GmbH, Goslar/ Germany. The decrease mainly relates tolower market prices of CO2 certificates at the balance sheet date.

The other short term provisions also include tax risks relating to a past acquisition in the amount of10,719 kA (PY: 10,719 kA) covered by hold-harmless agreements with Haniel.

As there have been transfers from current staff provisions to pension provisions, transfers do not addup to zero.

According to current information the expected utilization of the other non-current provisions can besummarized as follows:

Book valueas at MaturityDec. 31,

Other provisions (non-current) 2011 0–1 year 1–5 years >5 years

Staff provisions (non-current) . . . . . . . . . . . . . . . . . . . . . . . . 12,945 3,631 5,707 3,607Provisions for environmental obligations . . . . . . . . . . . . . . . . 24,319 1,395 4,144 18,780Provisions for vacating & demolition . . . . . . . . . . . . . . . . . . . 2,419 350 1,432 637Warranty provisions (non-current) . . . . . . . . . . . . . . . . . . . . . 61,545 61,545Other long term provisions . . . . . . . . . . . . . . . . . . . . . . . . . . 6,614 128 6,111 375

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107,842 5,504 78,939 23,399

Warranty provisions in this table represent possible future cash outflows that would partly lead to cashinflows for Xella because certain risks are covered by the hold-harmless agreement with Haniel.

13. Deferred Income

Deferred income in the amount of 5,696 kA (PY: 6,396 kA) mainly includes government tax grantsrelated to the purchase of property, plant and equipment. In order to fulfill all the conditions attached

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to grants there is usually a binding period during which the assets need to remain part of the entity’sproperty, plant and equipment. For any grant shown as deferred income there is no indication that anyconditions attached to the grants will not be fulfilled.

14. Trade and Other Accounts Payable

Non-current trade and other liabilities of 6,732 kA (PY: 6,739 kA) are in connection with themanagement participation program.

The composition of the current trade and other accounts payable is shown in the following table:

Trade and other accounts payable (current) Dec. 31, 2011 Dec. 31, 2010

kE kE

Trade liabilities (current) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103,279 73,410Accrued expenses for invoices not yet received . . . . . . . . . . . . . . . . . . . . . . 39,253 34,647Customers with credit balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,633 3,298

Subtotal: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 145,165 111,355

Advance payments by customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,040 2,430Liabilities from construction contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,072 7,212Accrued expenses for customer bonuses . . . . . . . . . . . . . . . . . . . . . . . . . . . 45,213 38,298Accrued expenses for overtime . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,645 3,072Accrued expenses for holidays not yet taken . . . . . . . . . . . . . . . . . . . . . . . . 7,855 7,214Accrued audit fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,853 1,837Interest payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,426 836Sundry liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,979 35,687

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 251,248 207,941

The increase in trade liabilities and accrued expenses for invoices not yet received on the cut-off datewas mainly driven by higher liabilities related to capital expenditure as well as in general higherpurchasing activities, following increased business.

Sundry liabilities include other tax liabilities in the amount of 11,479 kA (PY: 12,363 kA), social securityliabilities amounting to 7,313 kA (PY: 7,054 kA), VAT liabilities in the amount of 2,131 kA(PY: 2,807 kA) and payroll liabilities in the amount of 3,231 kA (PY: 2,386 kA).

C. Notes to the Statement of Income—by nature of expense

The Statement of Income has been prepared using the nature of expense method.

15. Sales

The composition of sales (trade and service sales) is shown in the following table:


Sales 2011 2010

kE kE

Trade sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,222,161 1,096,734Service sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,038 49,175Other sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,271,199 1,145,909

Sales increased significantly compared to prior year. In the Building Materials Business Unit Xella wasable to implement price increases in its core markets. Higher demand led to significant growth in salesespecially in Germany, other Western European countries, Poland, Russia and China. In the Dry LiningBusiness Unit there was also a positive development in all core markets with a growing share of salesoutside of Germany. In particular, the cement bonded boards business developed very positive in thereporting year. The Lime Business Unit showed a strong performance in 2011 with sales volumes on avery high level compared to prior years.

Please refer to note 27 for the allocation of sales to segments.

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16. Other Income


Other income 2011 2010

kE kE

Rental and similar income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,966 2,113Income from disposal of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,386 3,727Income from refund of electricity and mineral oil tax . . . . . . . . . . . . . . . . . . . . . . . 346 79Other operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80,441 28,162

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86,139 34,081

The increase of other income results from higher other operating income. This relates to the increaseof the receivable in the amount of 58,014 kA (PY: 1,518 kA) carried by XI (BM) Holdings GmbH,Duisburg / Germany against the former shareholder, Franz Haniel & Cie. GmbH, Duisburg / Germany.This receivable represents a number of potential claims against Haniel which were agreed on by thebuyer and seller during the sale of the Xella Group. They relate to hold-harmless agreements forcertain tax obligations, warranty obligations and other risks. Please refer to note 4.

17. Staff Expenses


Staff expenses 2011 2010

kE kE

Wages & salaries (w/o release of staff provisions) . . . . . . . . . . . . . . . . . . . . . . . . (239,437) (229,095)Social security expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (49,176) (46,799)Other employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5,984) (5,012)Pension expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,871) (6,218)Release of staff provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,851 2,671

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (298,617) (284,453)

Pension expenses include pension expenses for defined benefit plans of 4,061 kA (PY: 3,063 kA) (seenote 11).

With respect to the release of staff provisions please refer to note 12.

At the balance sheet date the Group had 7,297 employees (headcount) (PY: 7,107).

The Group employed 6,946 full time persons (PY: 6,747) broken down by category as follows:production 4,781 (PY: 4,609), sales 1,419 (PY: 1,385) and administration 746 (PY: 753).

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18. Other Expenses

The composition of other expenses is shown in the following table:


Other expenses 2011 2010

kE kE

Other taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,719) (6,744)Impairment of receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,837) (3,480)Loss from disposal of non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (544) (1,156)Legal and consulting fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,042) (12,173)Repairs & maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51,615) (46,439)Advertising & marketing expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,812) (21,058)Labour leasing & freelancer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,500) (8,627)Result from foreign exchange transactions (operating activ) . . . . . . . . . . . . . . . . 54 249Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,747) (5,487)Travelling expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10,851) (10,122)Data and telecommunication expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,551) (3,685)Expenses for IT service providers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9,223) (8,466)Expenses for human resource development and recruitment . . . . . . . . . . . . . . . . (3,931) (2,695)Material testing, examination & monitoring . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,716) (3,016)Waste disposal expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,234) (2,077)Cleaning expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,991) (3,616)Additions to warranty provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68,735) (6,143)Other operating and administrative expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,275) (37,028)Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (277,269) (181,763)

Many of Xella’s other expenses positions are in general related to its business activities (for examplerepairs & maintenance as well as labour leasing). Therefore expenses increased compared to prior year,as sales volume increased.

Other taxes include real estate tax, car tax etc.

Impairments of receivables include impairments of trade and other receivables of 2,837 kA(PY: 3,473 kA). Please refer to note 7.

The losses from disposals of non-current assets relate mainly to the loss from disposal of intangibleassets (418 kA).

Additions to warranty provisions are mainly attributable to new warranty claims for damaged buildings(61,042 kA / PY: 3,863 kA). Please refer to note 12. This amount is covered by a receivable againstFranz Haniel & Cie. GmbH, Duisburg / Germany (corresponding increase of income in Other Income).

Other operating and administrative expenses comprise many different items, such as energy expenses(non-production), audit fees, charges and contributions, commissions and expenses for office supplies.The increase of other operating and administrative expenses mainly relates to a higher release ofprovisions for recultivation at the Lime segment in 2010 comparing to 2011. These provisions areincluded in the provisions for environmental obligations (see note 12).

According to current information, the expected future minimum payments for operating leases in thecoming years amount to:

Maturity

2011 2010

Total 0–1 year 1–5 years > 5 years Total 0–1 year 1–5 years > 5 years


Total future mimiumlease payments . . . . . . 57,878 10,506 17,702 29,670 56,692 10,028 16,158 30,506

The operating leases relate primarily to real estate (plants as well as the central office building inDuisburg-Huckingen / Germany), vehicles and other leasing expenses e.g. fork lifts.

Centralized in Xella Technologie- und Forschungsgesellschaft mbH, Duisburg / Germany, Xella’sexpenses for research and development amounted to 3,688 k (PY: 3,796 kA). Staff expenses in theamount of 2,221 kA were included (PY: 2,415 kA), whereas depreciation is excluded.

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19. Result from Other Investments


Result from other investments 2011 2010

kE kE

Income from available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 780 567Expenses from available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51)Impairment of available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (227) (9)Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 558

Income from available-for-sale investments in the amount of 780 kA (PY: 567 kA) mainly pertains todividends from investments accounted for at cost. The biggest portion relates to BaustoffwerkeMunster-Osnabruck GmbH & Co. KG, Osnabruck / Germany, which distributed a dividend of 623 kA(PY: 482) kA. The impairment of (227 kA) relates to a Greek investment.

20. Finance Costs


Finance Costs 2011 2010

kE kE

Interest expenses (third parties) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (68,399) (61,752)Interest expenses for debentures & other bonds . . . . . . . . . . . . . . . . . . . . . . . . . . (14,000)Interest expenses for net pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,420) (7,488)Interest expenses for other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,273) (1,467)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,417) (7,429)Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (94,509) (78,136)

Interest expenses (third parties) are mainly related to interest on bank liabilities which were taken outin the course of the sale of the Xella Group as well as interest pertaining to the accumulation ofaccrued interest for the shareholder loans. For both effects please refer to not 11 for further details.

Please refer to the explanations in notes 11 and 12 with regard to interest expenses for pension andother provisions.

21. Other Financial Result


Other financial result 2011 2010

kE kE

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,088 1,119Result from non-hedge derivatives (financial activities) . . . . . . . . . . . . . . . . . . . . . . 835 (134)Profit from foreign exchange transactions (financial activities) . . . . . . . . . . . . . . . . 11,098 8,487Loss from foreign exchange transactions (financial activities) . . . . . . . . . . . . . . . . . (13,737) (10,856)Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,328Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 284 (56)

The result from non-hedge derivatives mainly relates to fair value changes of currency and interestinstruments.

In 2010 other financial income was due to an increase in interest rates for non-current provisions.

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22. Income Taxes

In 2011 deferred tax assets of 20,176 kA (PY: 3,619 kA) were recognized on unused tax losses with aneffect on income. Impairments of 942 kA (PY: 2,805 kA) were recorded on deferred tax assets in 2011while prior impairments in the amount of 1,762 kA (PY: 397 kA) were reversed.

The expected tax rate for the Xella Group is 29.0% (PY: 29.0%).

The reported current tax burden is reconciled to the imputed tax burden based on a tax rate of 29.0%(PY: 29.0%) in the table below:


Tax rate reconciliation 2011 2010

kE kE

Profit/ loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 13,664

Expected income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (161) (3,963)

Foreign tax rate differential . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,546 8,392Tax effect from non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,526) (3,353)Tax effect from tax-exempt income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,879 1,832Addition to/ release of allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 738 (2,409)Effects from tax rate and tax law changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,006 1,291Deferred tax asset not recognized on taxable loss of the current year . . . . . . . . . . . (6,515) (6,142)Effects resulting from the use of loss carryforwards previously not recognized as tax

assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 862 666Taxes for prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 457 2,595Tax effect from interest capping rules including effects from interest deduction

carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (13,441) (9,899)Special tax effects Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (942) (1,813)Special tax effects other countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (222)Other tax effects . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,583) (742)

Reported income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,098 (13,545)

Group income tax rate for the reporting year (%) . . . . . . . . . . . . . . . . . . . . . . . . . 29.00 29.00

The decrease of the reported income taxes mainly derives from the positive development of tax-exemptincome in the German Building Materials segment.

Income taxes include corporate income tax, the solidarity surcharge and trade tax, to the extent thatGerman companies are required to pay them.

D. Other Notes to the Consolidated Financial Statements

23. Financial Risk Management

In the course of its operating activities, the Xella Group is exposed to financial risks. These chieflyrelate to liquidity risks, credit risks, risks from changes of interest rates and exchange rates as well asother market risks such as price movements on the commodity markets. The goal of financial riskmanagement is to reduce financial risks.

The management sets the general guidelines for financial risk management and determines the generalprocedure for hedging against financial risks. The Xella Group has its own treasury department which,after identifying, analyzing and assessing the financial risks, takes action to avoid or mitigate such risks.It advises subsidiaries and, in addition to its own hedging activities, also enters into hedge relationshipsfor the subsidiaries.

Liquidity Risk

Liquidity risk is understood as the risk of the Xella Group not being in the position to meet its ongoingpayment obligations at any time. The liquidity risk is managed by means of centralized financialplanning which provides the required funding for operations and capital expenditures. Within theframework of the acquisition of the Xella Group, the owners agreed on a Secured Facility Agreementwith a large number of banks to secure fixed financing. The credit lines under the agreement haveterms of up to 2017. The repayment obligations from these lines of credit are moderate in scope. For

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example, only 41,352 kA (PY: 29,147 kA) was scheduled for 2012. On December 30, 2011 an amount of20,408 kA of this repayments due in 2012 have already been prepaid. The outstanding repaymentobligation on SFA debt has therefore been reduced to 20,944 kA. In addition, the high amount ofunused credit lines as well as the available cash secures adequate financing to fund operating businessand other investments.

Credit Risk

Credit risk is understood as the risk that a debtor of the Xella Group is not in the position to meet itspayment obligations. Xella is exposed to credit risks from both its operating business, from the use offinancial instruments and from deposited cash.

Based on the Group’s internal assessment of the risks, loans to associates and other loans (in thecurrent year mainly consisting of the non-current portion of the indemnity receivable from FranzHaniel & Cie. GmbH, Duisburg / Germany) of 64,283 kA (PY: 3,901 kA) are exposed to a low level ofcredit risk.

The diversification of the Xella Group and the number of existing customers with low individualreceivables results in no concentration of credit risks associated with trade receivables and similarreceivables. For this reason, the Group considers credit risk exposure to be immaterial. At worst casethe maximum credit risk from such receivables amounts to total receivables less existing trade creditinsurances:

The credit risk associated with derivative financial instruments does not exceed the fair value of thepositive market values of the derivatives entered into. Due to the fact that derivative financialinstruments are only entered into with banks with solid credit ratings, these risks are low. There are noidentifiable concentrations of credit risk from business relationships with single debtors or groups ofdebtors.

Interest Risk

Interest risks are understood as the negative impact of fluctuating interest rates on the net profit of theGroup. Derivative financial instruments are used to limit the interest risk. At present these consistsolely of interest caps. The decision on whether to use derivative financial instruments is based on theprojected debt and the expected interest rates. The interest hedging strategy is reviewed at regularintervals and new targets are defined. As at December 31, 2011 interest rate hedges in form of interestrate caps with a cap strike rate of 3,50% existed for a nominal value of 400,000 kA (PY: 1,000,000 kA).The Facility D Loan funded from the Senior Secured Notes issued in 2011 has a fixed interest rate of8% which reduces the interest risk, additionally.

The interest sensitivity analysis presented below shows the hypothetical effects which a change in themarket interest rate at the balance sheet date would have had on the pre-tax profit and on equity. It isassumed here that the exposure at the balance sheet date is representative of the year as a whole andthat the assumed change in the market interest rate at the balance sheet date was possible.

Hypothetical increases/decreases of one percentage point in the market interest rate would have hadthe following impact on the profit/loss before tax and on equity:


Increase Decrease


kE kE kE kE

(4,866) (3,455) 4,866 3,455


Increase Decrease


kE kE kE kE

(6,551) (4,651) 6,551 4,651

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Currency Risk

Currency risks arise from investing and financing activities conducted in foreign currency as well asfrom operating activities due to the purchase and sale of merchandise in foreign currency. Forwardexchange contracts and currency options are used to hedge against currency risks.

Foreign exchange exposure is mainly secured by micro-hedges. This involves a direct hedge of theunderlying transaction by means of a foreign exchange derivative, generally a forward exchangecontract. In addition, currency derivatives are used to hedge forward transactions in foreign currency.This involves selecting the currency derivative (or a combination of several derivatives) which bestreflects the likelihood of occurrence and timing of the forward transaction.

The sensitivity analysis of foreign exchange exposure shows the theoretical impact of a change in thekey exchange rates for the Xella Group on the pre-tax result and equity. This foreign exchangesensitivity analysis is based on the primary and derivative financial instruments on the balance sheetdate. It is assumed that the exchange rates on the balance sheet date change by the percentage stated.Movements over time and the changes in other market parameters observed in reality are notconsidered in this analysis.

Hypothetical increases/decreases of 10% in the relevant exchange rates at Xella (CZK, HUF, and PLN)would have had the following impact on the profit/loss before tax and on equity:


Increase Decrease


kE kE kE kE

CZK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,137) (910) 1,390 1,112HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 670 536 (819) (655)PLN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,199 1,781 (2,688) (2,177)


Increase Decrease


kE kE kE kE

CZK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,526) (1,236) 1,865 1,510HUF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 951 770 1,162 (941)PLN . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,955 1,583 (2,389) (1,935)

Other Market Risks

Other market risks relate to the risk of price fluctuations in the commodities markets which are partlysecured against by means of long-term supply agreements.

Derivative Financial Instruments

A breakdown of derivative financial instruments in accordance with the hedge strategy pursued byXella is provided below:

Dec. 31, Dec. 31,2011 2010

Derivative financial instruments Fair value Fair value

kE kE

Interest instruments with a positive market value . . . . . . . . . . . . . . . . . . . . . . . . 2 540Currency instruments with a positive market value . . . . . . . . . . . . . . . . . . . . . . . 2,419 661

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,421 1,201

Currency instruments with a negative market value . . . . . . . . . . . . . . . . . . . . . . . 1,366 1,295

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,366 1,295

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The next table shows the contractually agreed, undiscounted debt service payments due on the primaryfinancial liabilities and derivative financial assets and liabilities over time:

2022 andDebt service payments* 2012 2013 2014–2016 2017–2021 thereafter

kE kE kE kE kE

Bank liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (45,050) (79,545) (296,659) (91,142)Bond liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . (24,000) (24,000) (72,000) (336,000)Finance lease liabilities . . . . . . . . . . . . . . . . . . . . (1,994) (1,918) (5,494) (2,934)Liabilities to investments . . . . . . . . . . . . . . . . . . . (87)Liabilities to shareholders . . . . . . . . . . . . . . . . . . (517) (179,949) (20,097)Other financial liabilities . . . . . . . . . . . . . . . . . . . (11,534) (1,750) (377,241)

Financial liabilities (without derivatives) . . . . . . . (83,183) (107,213) (554,102) (827,414)

Derivative financial assets . . . . . . . . . . . . . . . . . . (49,970)52,122

Derivative financial liabilities . . . . . . . . . . . . . . . . (69,757)64,607

Derivative financial instruments . . . . . . . . . . . . . (2,998)

* (�) payments made/ (+) payments received

Cash flows related to liabilities to shareholders taken in connection with the sale of the Xella Group in2008 have been calculated based on the assumption that full repayment will occur on December 31,2015 (i.e. diverging from the contractually agreed maturity date which is December 31, 2058). Thecontractually agreed cash flows on the shareholder loans would be 2,284,170 kA in 2058 (instead of179,949 kA in 2015).

On call liabilities have been allocated to the earliest possible period in the table.

Reconciliation of Financial Instruments to IAS 39 Categories—Assets

Financialassets at No IAS 39fair value category/

Book value as through Financial Available- Outside theReconciliation of financial assets to at Dec. 31, profit assets held Loans and for-sale scope of FairIAS 39 categories 2011 and loss for trading receivables investments IFRS 7 value

kE kE kE kE kE kELoans . . . . . . . . . . . . . . . . . . . . . 66,775 66,775 66,775Other investments . . . . . . . . . . . . 12,302 9 12,293 12,302

Financial assets (non-current) . . . . 79,077 9 66,775 12,293 79,077

Trade and other receivables(non-current)

Trade receivables (current) . . . . . . . 116,567 116,567 116,567Receivables from construction

contracts . . . . . . . . . . . . . . . . . 1,306 1,306 1,306Other receivables (current) . . . . . . 28,207 12,292 15,915 28,207

Trade and other receivables(current) . . . . . . . . . . . . . . . . . 146,080 130,165 15,915 146,080

Derivatives . . . . . . . . . . . . . . . . . 2,421 2,421 2,421Receivables from associates (at

equity) (current) . . . . . . . . . . . . 1,021 1,021 1,021Receivables from shareholders

(current) . . . . . . . . . . . . . . . . . 1,168 1,168 1,168Other financial assets (current) . . . . 34,860 34,860 34,860

Financial assets (current) . . . . . . . 39,470 2,421 37,049 39,470

Cash and cash equivalents . . . . . . . 148,646 148,646 148,646

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Financialassets at No IAS 39fair value category/

Book value as through Financial Available- Outside theReconciliation of financial assets to at Dec. 31, profit assets held Loans and for-sale scope of FairIAS 39 categories 2010 and loss for trading receivables investments IFRS 7 value

kE kE kE kE kE kELoans . . . . . . . . . . . . . . . . . . . . . 2,875 2,875 2,875Other investments . . . . . . . . . . . . 12,464 9 12,455 12,464

Financial assets (non-current) . . . . 15,339 9 2,875 12,455 15,339

Trade and other receivables(non-current) . . . . . . . . . . . . . . 182 182 182

Trade receivables (current) . . . . . . . 103,465 103,465 103,465Receivables from construction

contracts . . . . . . . . . . . . . . . . . 1,342 1,342 1,342Other receivables (current) . . . . . . 24,127 9,736 14,391 24,127

Trade and other receivables(current) . . . . . . . . . . . . . . . . . 128,934 114,543 14,391 128,934

Bank balances with no shortmaturity . . . . . . . . . . . . . . . . . . 262 262 262

Derivatives . . . . . . . . . . . . . . . . . 1,201 1,201 1,201Receivables from associates (at

equity) (current) . . . . . . . . . . . . 984 984 984Receivables from other investments

(current) . . . . . . . . . . . . . . . . . 36 36 36Receivables from shareholders

(current) . . . . . . . . . . . . . . . . . 1,100 1,100 1,100Other financial assets (current) . . . . 44,364 44,364 44,364

Financial assets (current) . . . . . . . 47,947 1,201 46,746 47,947

Cash and cash equivalents . . . . . . . 142,099 142,099 142,099

The fair value of financial instruments traded on an active market is based on the market price onbalance sheet date. As at December 31, 2011 other investments include investments valued at stockmarket prices of 1,048 kA (PY: 1,084 kA) (IFRS 7 valuation level 1).

The above listed derivatives are valued on the basis of observable market data such as interest ratesand foreign exchange rates (level 2 of the IFRS 7 valuation categories).

The fair value of financial instruments that are not based on observable market data (unobservableinputs) is determined with the aid of valuation techniques, primarily the discounted cash flow method(IFRS 7 valuation level 3).

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Reconciliation of Financial Instruments to IAS 39 Categories—Liabilities


Book value as liabilties Other Outside theat Dec. 31, held for financial scope of Fair

Reconciliation of financial liabilities to IAS 39 categories 2011 trading liabilities IFRS 7 value

kE kE kE kE kE

Bank liabilities (non-current) . . . . . . . . . . . . 390,529 390,529 390,529Bond liabilities (non-current) . . . . . . . . . . . . 288,096 288,096 411,575Finance lease liabilities (non-current) . . . . . . 8,976 8,976 10,090Liabilities to shareholders (non-current) . . . . 114,336 114,336 137,991Other financial liabilities (non-current) . . . . . 205,124 205,124 321,857

Financial liabilities (non-current) . . . . . . . . . 1,007,061 998,085 8,976 1,272,042

Trade and other liabilities (non-current) . . . . 6,732 6,732 6,732

Trade liabilities (current) . . . . . . . . . . . . . . . 103,279 103,279 103,279Advance payments by customers . . . . . . . . . . 5,040 5,040 5,040Liabilities from construction contracts . . . . . . 3,072 3,072 3,072Other liabilities (current) . . . . . . . . . . . . . . . 34,197 9,606 24,591 34,197


Bank liabilities (current) . . . . . . . . . . . . . . . 18,865 18,865 18,865Finance lease liabilities (current) . . . . . . . . . 1,555 1,555 1,555Liabilities to investments (current) . . . . . . . . 87 87 87Liabilities to shareholders (current) . . . . . . . 39,470 39,470 47,013Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . 1,366 1,366 1,366Other financial liabilities (current) . . . . . . . . 16,876 16,876 21,076



Book value as liabilties Other Outside theat Dec. 31, held for financial scope of Fair

Reconciliation of financial liabilities to IAS 39 categories 2010 trading liabilities IFRS 7 value

kE kE kE kE kE

Bank liabilities (non-current) . . . . . . . . . . . . 635,404 635,404 656,106Finance lease liabilities (non-current) . . . . . . 10,428 10,428 11,172Liabilities to investments (non-current) . . . . . 40 40 40Liabilities to shareholders (non-current) . . . . 77,483 77,483 91,976Other financial liabilities (non-current) . . . . . 239,857 239,857 412,827

Financial liabilities (non-current) . . . . . . . . . 963,212 952,784 10,428 1,172,121

Trade and other liabilities (non-current) . . . . 6,739 6,739 6,739

Trade liabilities (current) . . . . . . . . . . . . . . . 73,411 73,411 73,411Advance payments by customers . . . . . . . . . . 2,430 2,430 2,430Liabilities from construction contracts . . . . . . 7,212 7,212 7,212Other liabilities (current) . . . . . . . . . . . . . . . 34,933 9,918 25,015 34,933


Bank liabilities (current) . . . . . . . . . . . . . . . 29,330 29,330 30,286Finance lease liabilities (current) . . . . . . . . . 1,847 1,847 1,979Liabilities to investments (current) . . . . . . . . 88 88 88Liabilities to shareholders (current) . . . . . . . 37,401 37,401 44,397Derivatives . . . . . . . . . . . . . . . . . . . . . . . . . 1,295 1,295 1,295Other financial liabilities (current) . . . . . . . . 15,847 15,847 21,727


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The fair values of the non-current financial liabilities are generally determined by discounting futurecontractually agreed cash flows at the current market rate. The fair value for liabilities to shareholdersstated above has been calculated based on the assumption that full repayment will occur onDecember 31, 2015 (i.e. diverging from the contractually agreed maturity date which is December 31,2058). The fair value based on contractually agreed maturity date would be 713,270 kA instead of185,004 kA.


The net result of IAS 39 categories breaks down as follows:


Net result of IAS 39 categories 2011 2010

kE kE

Result from financial assets held-for-trading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 835 (134)Result from available-for-sale investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 502 558Result from loans and receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 391 (1,322)Result from other financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (89,073) (70,221)

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (87,345) (71,119)

The net result of the above categories under IAS 39 is distributed among the following line items ofthe Statement of Income: other income, other expenses, result from other investments, financialexpenditure, other financial result. Result from other financial liabilities mainly consists of interestexpenses to third parties of 56,232 kA (PY: 58,829 kA), interest expenses on bond liabilities of 14,000 kA(PY: 0 kA) and 12,786 kA (PY: 2,923 kA) amortization of financing fees incurred in connection with theSFA financing in 2008.

24. Contingencies

As far as exact figures can be estimated, as at December 31, 2011 there are contingent liabilities of4,040 kA (PY: 4,345 kA) and contingent assets of 3,540 kA (PY: 4,148 kA).

Because of the long useful life of certain of the products, it is possible that latent defects might notappear for several years. In isolated cases this may lead to obligations which cannot be estimated atpresent in terms of amount or their impact on the net assets, financial position and results of earnings.

Xella is currently facing potential warranty, product liability and damage claims by several buildingowners in connection with the delivery of building materials by former Haniel Baustoffwerke fromcertain plants in North Rhine-Westphalia, Germany, between end of 1987 and the beginning of 1996.Calcium silicate units had been produced in the relevant period applying an alternative productionmethod, which substituted another product for lime. Although the relevant calcium silicate unitsdisplayed the required compressive strength immediately after production, over the years some of thecalcium silicate units lost their compressive strength after being exposed to permanent moisture withcracks resulting in the finished masonry.

All identifiable risks are covered by appropriate provisions such as the (constructive) provisions forpossible building damages (see note 12) in connection with the delivery of these calcium silicate unitswhich had been produced in the relevant period applying an alternative production method, whichsubstituted another product for lime. In this special case, payments exceeded the provision may(according to the SPA) be claimed back by XI (BM) Holdings GmbH, Duisburg / Germany from FranzHaniel & Cie. GmbH, Duisburg / Germany as it is covered by respective hold-harmless agreements (seenote 4)

Contingent liabilities include an amount of 3,540 kA (PY: 3,540 kA) due to the contamination of aFrench gravel pit. In this context a provision has also been recognized in the Consolidated Statement ofFinancial Position. The exceeded maximum risk is presented as contingent liability. XI (BM)Holdings GmbH, Duisburg/ Germany, holds contingent assets in the same amount relating to thecontingent liability for the French gravel pit. If the amount is paid by Fels-Werke GmbH, Goslar /Germany the money may be claimed back by XI (BM) Holdings GmbH, Duisburg / Germany as it iscovered by respective hold-harmless agreements with Haniel. For further details please also refer tonote 4.

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25. Corporate Acquisitions and Divestments

In the reporting period, the Xella Group’s Building Materials segment acquired control of thecompanies Xella Pontenure s.r.l., Pontenure / Italy (100.0%, September 30, 2011) and XellaTeodory S.A., Warsaw / Poland (93.7%, March 02, 2011).

The following assets and liabilities were acquired in connection with business combinations in thefinancial year 2011.

CarryingAssets and liabilities acquired in connection with business combinations amount Revaluation Fair value

kE kE kE

Property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34,502 (2,751) 31,751Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,680 (880) 2,800Deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,383 965 2,348

Non-current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39,565 (2,666) 36,899

Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 1,043 1,138Trade and other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 619 299 918Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 15Deferred expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 8

Current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 737 1,342 2,079

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,302 (1,324) 38,978

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,921 (6,926) 16,995Pension provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 532 (97) 435Other provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,820 1,820

Non-current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,273 (7,023) 19,250

Financial liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 354 6,926 7,280Trade and other accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 827 4,372 5,199Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59 59

Current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,240 11,298 12,538

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,513 4,275 31,788

Trade and other receivables as well as current financial assets acquired amounted to 1,068 kA and werereduced by bad debt allowances of 168 kA. As at the acquisition date, the bad debt amount was notexpected to be recovered. No contingent liabilities were provided for in the course of firstconsolidation. The acquired entities are initially consolidated on the basis of provisional figures. Ifapplicable, the final figures will be restated within one year in compliance with IFRS 3.45 et seq. Nochanges were made in respect of acquisitions made in 2010.

Since initial consolidation the stand-alone contribution of the acquired entities was 3,375 kA in salesand 1,215 kA in losses. Had the entities been consolidated as at January 01, 2011 the acquiredcompanies would have contributed sales of 19,586 kA and net loss after taxes of 142 kA during thereporting period.

The decisions to acquire the above companies were based on market and growth opportunities, generalstrengthening of the market position, and synergy effects.

Total acquisition costs were 17,388 kA of which 10,074 kA was paid in cash. An amount of 2,000 kA hasnot yet been paid.

The shareholding in Xella Pontenure s.r.l., Pontenure / Italy, in which Xella had already held anindirect 44% share were increased to 100% now directly held. Part of the acquisition costs thereforeconsisted of the investment already existing in the previous year. The fair value of the shares alreadyheld prior to first consolidation was close to the carrying amount.

In total, these acquisitions resulted in additions to goodwill of 10,101 kA based on synergy effects, astrengthening of the market position and growth opportunities.

In addition to the aforementioned acquisitions the Group acquired additional shares in Siporex dd,Tuzla, Bosnia-Herzegovina (also Building Materials segment—increase from an 88.51% to 93,32%

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holding) by means of transactions not leading to changes of control. The purchase price of 98 kA waspaid in cash for shares held by owners of non-controlling interest in the amount of (210) kA. Thedifference was allocated to profit reserves applying IAS 27 revised 2008.

26. Consolidated Statement of Cash Flows

The Consolidated Statement of Cash Flows pursuant to IAS 7 presents the changes in cash and cashequivalents at Xella International Holdings S.a r.l., Luxembourg, in the course of the reporting perioddue to cash inflows and cash outflows. It is classified by cash flows from operating, investing, andfinancing activities.

The cash flows are derived using the indirect method from the consolidated net profit or loss for theyear.

The balance of cash and cash equivalents reported on balance sheet date is the sum of cash in hand andbank balances with a short maturity and checks.

Changes of trade working capital and changes in other working capital are largely included in the notes tothe Consolidated Statement of Financial Position and to the Statement of Income. Foreign exchangeeffects, non-cash changes of CO2 certificates, interest components of pension liabilities and othernon-current provisions as well as other non-cash effects are eliminated. Also eliminated are thenon-cash effects of the changes of non-current and current receivables from the indemnity by FranzHaniel & Cie GmbH, Duisburg / Germany, and of the provisions related thereto.

The cash flow from operating activities contained taxes paid on income of 23,450 kA (PY: 26,914 kA).

Non-cash investments in non-current property, plant and equipment in the form of finance leases did notoccur in the reporting year (PY: 0 kA).

In the year under review, cash flows from investing activities included the acquisition of two companiesin the Polish and Italian Building Materials segment. Cash compensation for the business combinationswas 10,074 kA while acquired cash amounted to 15 kA. Xefin Lux S.C.A., Luxembourg, wasconsolidated as a special purpose entity for the first time without being held by the Group andcontributed 31 kA in acquired cash.

The acquisition of additional shares in consolidated subsidiaries without change of control is shownunder financing activities as stipulated by IAS 7 revised 2008.

In the prior year, one company in the German Building Materials segment and one in the Limesegment were acquired. Cash compensation for the business combinations was 5,615 kA while acquiredcash amounted to 34 kA. A payment of 650 kA still outstanding at 2009 balance sheet date was effectedfor a previous business combination in the prior year. One Chilean Building Materials unit was sold fora cash consideration of 2,644 kA. The cash disposed of in the course of such sale was 116 kA.

Additions to other non-current and current financial assets (863 kA, PY: 682 kA), mainly loans, alsocontained additions to available-for-sale investments (109 kA, PY: 10 kA).

Disposals of other non-current and current financial assets (6,808 kA, PY: 5,955 kA) mainly related tothe repayment of various loans and other financial receivables as well as dividends received fromassociated companies at equity in the amount of 984 kA (PY: 1,223 kA).

The cash flow from investing activities contains interest received of 2,049 kA (PY: 826 kA) anddividends received of 780 kA (PY: 972 kA).

Cash paid and received from financing activities in the reporting year does not include capitalcontributions (PY: 0 kA). Payments made to non-controlling interests comprise dividends ofcorporations (2,089 kA, PY: 752 kA).

Acquisitions of additional shares in a Bosnian Building Materials company were paid in cash (98 kA).In the previous year, the cash purchase prices for the remaining shares in a Russian and a GermanBuilding Materials company as well as for other acquisitions of additional shares in companies alreadyconsolidated in the Building Materials segment totaled 2,912 kA.

Cash interest payments amounted to 56,968 kA (PY: 42,485 kA) including financing fees (13,846 kA,PY: 0 kA). 619 Ak was capitalized as part of capital expenditure (PY: 0 kA). The Xella Group is notrequired to pay accrued interest on shareholders’ loans under the Shareholder Loan Agreements.

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On June 1, 2011 Xella successfully completed the offering of 300,000 kA aggregate principal amount of8% Senior Secured Notes due 2018 in a private placement to qualified institutional buyers. The grossproceeds of the offering of the Senior Secured Notes were used to refinance an aggregate principalamount of 250,000 kA under the existing Senior Facilities Agreement and 50,000 kA of the existingVendor Loan Note granted by Franz Haniel & Cie GmbH, Duisburg / Germany.

Acquisition Facilities of 40,000 kA were drawn under the Senior Facilities Agreement 5,000 kA of whichwere repaid during the reporting period. No additional shareholder loans were granted in the yearunder review (PY: 0 kA).

Unscheduled repayments of financial debt in total amounted to 357,224 kA (PY: 57,902 kA) includingno minority shares in the profit distribution of limited partnerships (PY: 148 kA) in accordance withIAS 32.

27. Segment Reporting

As at December 31, 2009, Xella adopted IFRS 8 ‘‘Operating Segments’’. IFRS 8 requires themanagement approach for segment reporting. Accordingly, the operating segment information is reportedbased on the internal organization and management structure, which is the internal financial reporting tothe chief operating decision makers, and is represented by the Management Board of Xella.

Xella identified three reportable segments (Building Materials, Lime, Dry Lining), which are separatelyorganized and managed according to the products sold and services provided, the trademarks, theproduction processes, the sales channels and the customer profiles. The segment managers, responsiblefor the segment operating result, report directly to the chief operating decision makers of Xella.

Xella mainly produces and markets building materials (CSU, AAC and mineral insulation), gypsum fiberboards and cement-bonded boards, and lime. The product trademarks in the Building Materials segmentare Silka, Ytong and Hebel, for the Dry Lining segment Fermacell and Fels in the Lime segment.

The Holding segment mainly contains the Group holding companies Xella International HoldingsS.a r.l., Luxembourg, and Xella International S.A., Luxembourg, which are responsible for strategicmanagement decisions with respect to the segments and for the governance of Xella. In addition theHolding segment includes Xefin Lux S.C.A., Luxembourg, a special purpose financing entity establishedfor the primary purpose of facilitating the offering of Senior Secured Notes as well as the XIManagement Beteiligungs GmbH & Co. KG, Duisburg / Germany. The consolidation column containsthe elimination of inter-segment transactions.

Xella assesses the performance of the operating segments based on a measure of normalized earningsbefore interest, income taxes, depreciation, amortization and impairment losses (Normalized EBITDA).This measurement basis excludes the effects of unusual or non-recurring income and expenses,e.g. material restructuring costs or expenses for attempted acquisitions or divestments.

The inter-segment transactions are concluded at arm’s length. The sales from external parties reportedto the Management Board of Xella are measured in a manner consistent with that in the Statement ofIncome.


BuildingSegment information—Jan. 1st–Dec. 31, 2011 Materials BU Lime BU Dry Lining BU Holding Consolidation Total

kE kE kE kE kE kE

Sales from external customers andassociates . . . . . . . . . . . . . . . . . . . . 835,436 228,125 207,638 0 0 1,271,199

Inter-segment sales . . . . . . . . . . . . . . 12,350 39,814 11 0 (52,175) 0Segment sales . . . . . . . . . . . . . . . . . . 847,786 267,939 207,649 0 (52,175) 1,271,199Material income / expense items from

Inventory write-down* . . . . . . . . . . (860) (13) (6) 0 0 (879)Impairment of property, plant &

equipment* . . . . . . . . . . . . . . . . . (5,433) 0 0 0 0 (5,433)Profit / loss (�) from disposal of

property, plant & equipment* . . . 698 166 (4) 0 0 860Reversals of provisions* . . . . . . . . . 5,026 230 697 0 0 5,953EBITDA* . . . . . . . . . . . . . . . . . . . 115,363 59,035 34,072 (772) 0 207,698


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BuildingSegment information—Jan. 1st–Dec. 31, 2010 Materials BU Lime BU Dry Lining BU Holding Consolidation Total

kE kE kE kE kE kE

Sales from external customers andassociates . . . . . . . . . . . . . . . . . . . . 756,833 204,433 184,643 0 0 1,145,909

Inter-segment sales . . . . . . . . . . . . . . 12,132 35,076 17 0 (47,225) 0Segment sales . . . . . . . . . . . . . . . . . . 768,965 239,509 184,660 0 (47,225) 1,145,909Material income / expense items from

Inventory write-down* . . . . . . . . . . (174) (4) (12) 0 0 (190)Impairment of property, plant &

equipment* . . . . . . . . . . . . . . . . . (6,790) (1,977) 0 0 0 (8,767)Profit / loss (�) from disposal of

property, plant & equipment* . . . 210 329 8 0 0 547Reversals of provisions* . . . . . . . . . 6,019 375 647 0 0 7,041EBITDA* . . . . . . . . . . . . . . . . . . . 97,012 67,100 29,142 (675) 0 192,579

*) after normalization

Material non-cash items are explained in note 26.

Profit/loss before tax was derived as follows:


Reconciliation from Normalized EBITDA to Profit / Loss before tax 2011 2010

kE kE

Normalized EBITDA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 207,698 192,579Normalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,249) 9,188

EBITDA Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,449 201,767

Depreciation, amortisation and impairment of property, plant and equipment andintangible assets (excluding goodwill) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (107,404) (112,471)

Financial result . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (92,490) (75,632)

Profit / Loss before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 555 13,664

Normalizations in the year under review mainly included additions to provisions due to warranty claims(2,875 kA net of insurance coverage) at Xella Cellenbeton Nederland B.V., Vuren / Netherlands, areduction of receivables from Franz Haniel & Cie. GmbH, Duisburg / Germany (3,465 kA) at XI (BM)Holdings GmbH, Duisburg / Germany, restructuring and severance costs (2,719 kA) mainly at Germanaffiliates, income from the sale of property (2,579 kA) at various German entities, and income from therelease of a provision from a legal suit (1,200 kA) at Xella Deutschland GmbH, Duisburg / Germany.

2010 normalisations essentially referred to income from valuation updates of recultivation provisions(10,278 kA), the increase of a vacating provision (450 kA) and the profit from a CO2 swap (1,060 kA) atFels-Werke GmbH, Goslar / Germany, the profit from the sale of Xella Chile S.A., Santiago de Chile /Chile (2,010 kA), the release of a provision for the restoration of a bridge at Van HerwaardenBeheer B.V., Hillegom / Netherlands (1,500 kA), closing expenses for Xella Aircrete NorthAmerica, Inc., Adel GA / USA (1,572 kA), restructuring costs at Xella Thermopierre S.A:, St. Savin /France (742 kA) and Xella Deutschland GmbH, Duisburg / Germany (474 kA).

In 2011 sales from external customers can be divided up in the following product categories: Calciumsilicate blocks 167,453 kA (PY: 148,031 kA), Autoclaved Aerated Concrete 483,394 kA (PY: 439,370 kA),Fermacell 138,139 kA (PY: 119,549 kA), Aestuver 20,365 kA (PY: 15,471 kA), Lime Products 150,256 kA(PY: 134,947 kA), Limestone 17,835 kA (PY: 15,152 kA), Limestone Powder 19,616 kA (PY: 18,378 kA),Services 148,664 kA (PY: 161,322 kA) and Others 125,477 kA (PY: 93,689 kA).

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Selected financial information by geographic regions is as follows:

Selected financial information bygeographic regions Non-current assets Sales to external customers and associates

Dec. 31, 2011 Dec. 31, 2010 Jan. 1st–Dec. 31, 2011 Jan. 1st–Dec. 31, 2010

kE kE kE kE

Germany . . . . . . . . . . . . . . . . . . . . 903,032 912,503 653,810 576,792Netherlands . . . . . . . . . . . . . . . . . 194,474 199,593 139,890 133,242Belgium . . . . . . . . . . . . . . . . . . . . 44,569 46,688 64,303 53,805Czech Republic . . . . . . . . . . . . . . . 124,558 133,907 73,261 75,856France . . . . . . . . . . . . . . . . . . . . . 52,014 53,751 62,903 60,040Poland . . . . . . . . . . . . . . . . . . . . . 67,223 74,228 59,612 53,414Other countries . . . . . . . . . . . . . . . 357,753 330,154 217,420 192,760

Total . . . . . . . . . . . . . . . . . . . . . . . 1,743,623 1,750,824 1,271,199 1,145,909

Non-current assets include intangible assets, property plant and equipment, investments in associatesand the non-current portion of other assets.

Due to the structure of the customer base and the diversity of Xella’s business activities, there was noconcentration of risk relating to one single customer, region or segment in the years reported.

28. Related Parties

Selected managers of Xella International S.A., Luxembourg, and other employees and their close familymembers have acquired shares in Xella International S.A., Luxembourg, via XI ManagementBeteiligungs GmbH & Co KG, Duisburg / Germany within the framework of the managementparticipation program. The shares were acquired at market value.

The management participation plan is governed in the ‘‘Shareholders and Co-Investment Agreementregarding the Implementation of Management Partnership Plan for the Xella Group’’ that was concludedbetween Xella International Holdings S.a r.l., Luxembourg, XI Management Beteiligungs GmbH & Co.KG, Duisburg / Germany, XI MPP Verwaltungs GmbH, Duisburg / Germany, the participants of theprogram and Xella International S.A., Luxembourg, and notarized on November 17, 2008. Within theframework of the management participation program, Goldman Sachs Capital Partners and PAI partnersoffered the participants listed above the chance to participate in the Xella Group. This investment leadsto a far-reaching harmonization of the interests of employees and the investors. In principle, the sharescan be acquired subject to the same terms and conditions under which the shareholders acquired theshares. That is the main reason why managers’ vehicle, XI Management Beteiligungs GmbH & Co. KG,Duisburg / Germany, has been consolidated as a Special Purpose Entity in accordance with IAS 27.12 /SIC 12 in the IFRS Consolidated Financial Statements of Xella International Holdings S.a r.l.,Luxembourg.

Notwithstanding other provisions in the articles of incorporation and bylaws, Xella International HoldingsS.a r.l., Luxembourg, has the right (call option) to demand that any participants who leaves an entity inthe Xella Group prior to a defined ‘‘exit event’’, sells and transfers all indirectly held shares to XellaInternational Holdings S.a r.l., Luxembourg. If this option is exercised, the leaver is entitled to acompensation payment which, depending on the reason for his termination of employment, can vary inrelation to the amount paid (purchase price as of grant date) and the current market value of the sharesIn special cases (good leaver events) there are also put options for the participants against the XellaInternational Holdings S.a r.l. In case of all ‘‘leaver events’’, Xella International Holdings S.a r.l is obligedto settle the obligation of the participant terminating his employment.

In the case of an ‘‘exit’’ event determined as a sale or a floatation, the compensation for the shares heldby the participants depends on their current market value, whereby the participant can generally sell theshares held directly to the market. This means that the program, together with the ‘‘leaver’’ and ‘‘exit’’events, is accounted for as a cash-settled share-based payment transaction (leaver events) resp. in case offloatation or based on the drag-along right in case of a share deal or in case of a asset deal as an equity-settled share-based payment transaction in accordance with IFRS 2.

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Other related parties of the Xella Group are its associates and non-consolidated subsidiaries. As atDecember 31, 2011 current receivables from associates amounted to 1,021 kA (PY: 984 kA) (see note 4).This relates primarily to unpaid dividends of Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,Ruckersdorf / Germany (472 kA) and ‘‘DSZ’’ OOO (BSW), Tovarkovo / Russia (549 kA).

All business relations with non-consolidated entities and associates are transacted at arm’s length.

Other related parties of the Xella Group are the non-controlling interests of consolidated subsidiaries.As at December 31, 2011 the Group carried current receivables from non-controlling interests of 1,156kA (PY: 1,088 kA) (see note 4).

Liabilities to non-controlling interests (see note 10) include liabilities of 11,739 kA (PY: 11,767 kA) (ofwhich 11,222 kA (PY: 11,134 kA) were non-current). Liabilities of 6,732 kA (PY: 6,739 kA) are inconnection with the management participation program (please refer to note 14).

Furthermore, with regard to various contracts that were made on or close to August 28, 2008, the XellaGroup reports CPEC shown as Treasury Shares within equity according to IAS 32 (see note B. 9) of552,600 kA (PY: 552,600 kA) and liabilities to PAI Partners and Goldman Sachs Capital Partners of142,061 kA (PY: 103,114 kA). Interest for the CPEC shown as dividends of 32,811 kA as well as interestof 6,137 kA on the interest-bearing portion of these liabilities incurred in the reporting period wasreported under current liabilities. Liabilities against Goldman Sachs International, London / GreatBritain and PAI partners SAS, Paris / France mainly refer to Monitoring Service Agreements in thetotal amount of 2,000 kA (PY: 1,400 kA) for the period August 29, 2008 to December 31, 2011 and wereshown in the Consolidated Statement of Financial Position as trade liabilities.

All transactions with shareholders and non-controlling interests are made at arm’s length.

Otherwise, no transactions requiring disclosure were conducted by the Xella Group with members ofthe management or with entities in whose executive or supervisory board any such persons arerepresented. The same applies for members of these persons’ close families.

Persons in key positions at Xella International Holdings S.a r.l., Luxembourg, and XellaInternational S.A., Luxembourg, are the members of the Management Boards. The remuneration paidto this group of persons in the current year amounted to 1,841 kA (PY: 2,695 kA). Of this total amount,1,764 kA (PY: 2,626 kA) was attributable to benefits falling due in the short-term and 78 kA (PY: 69 kA)to post-retirement benefits. The present benefit obligation of this group of persons amounts to 1,425 kA(1,270 kA) as of balance sheet date. The current service cost of pensions, added to pension provisions,for members of the management amounted to 78 kA (PY: 69 kA) in the reporting period.

29. List of Companies

Investments in affiliates (consolidated)

Equity Net result Shares inCountry Name and domicile of the investment in kE(1) in kE(1) Held by capital %

HoldingOutside Germany

LU HLU0100 Xella International Holdings S.a r.l., Luxembourg . . . . . . . . . 622,281 28,381LU HLU0200 Xella International S.A., Luxembourg . . . . . . . . . . . . . . . . . 96,386 (401) HLU0100 89.8400

HDE0300 10.1600LU HLU0400 Xefin Lux S.C.A., Luxembourg . . . . . . . . . . . . . . . . . . . . . 66 37

GermanyDE HDE0300 XI Management Beteiligungs GmbH & Co. KG, Duisburg . . . 9,765 (124) HLU0100 39.0700DE HDE0301 XI MPP Verwaltungs GmbH, Duisburg . . . . . . . . . . . . . . . . 11 (4) HLU0100 100.0000

Building Materials BUGermany

DE HDE0025 YTONG Bausatzhaus GmbH, Duisburg . . . . . . . . . . . . . . . 3,956 200 HDE0561 100.0000DE HDE0057 Kalksandsteinwerke Thorl & Meyer GmbH, Munster . . . . . . . 70 5 HDE0561 50.0000DE HDE0058 Kalksandsteinwerke Thorl & Meyer GmbH & Co. KG, Seevetal 1,669 125 HDE0561 59.0000DE HDE0500 XI (BM) Holdings GmbH, Duisburg . . . . . . . . . . . . . . . . . 309,694 273,827 HLU0200 100.0000DE HDE0501 Xella International GmbH, Duisburg . . . . . . . . . . . . . . . . . 158,194 244,864 HDE0500 100.0000DE HDE0510 Xella Baustoffwerke Rhein-Ruhr GmbH, Duisburg . . . . . . . . 35,834 4,055 HDE0561 61.5000DE HDE0519 Kalksandsteinwerk Griedel Verwaltungsgesellschaft mbH,

Butzbach-Griedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60 (1) HDE0561 51.0000DE HDE0520 Xella Kalksandsteinwerk Griedel GmbH & Co KG, Butzbach-

Griedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,113 35 HDE0561 51.0000DE HDE0530 Xella Finance GmbH, Duisburg . . . . . . . . . . . . . . . . . . . . (98) (2,714) HDE0501 100.0000DE HDE0561 Xella Deutschland GmbH, Duisburg . . . . . . . . . . . . . . . . . 223,042 (40,230) HDE0564 100.0000

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DE HDE0563 KS-INVEST Unternehmensbeteiligungs- undVermogensverwaltungs GmbH, Duisburg . . . . . . . . . . . . . 312 (55) HDE0561 100.0000

DE HDE0564 Xella Baustoffe GmbH, Duisburg . . . . . . . . . . . . . . . . . . . 653,868 (31,358) HDE0501 100.0000DE HDE0569 Xella Merchandising GmbH, Duisburg . . . . . . . . . . . . . . . . 24 (213) HDE0564 100.0000DE HDE0593 KS Baustoffwerke Blatzheim Verwaltungsgesellschaft mit

beschrankter Haftung, Kerpen . . . . . . . . . . . . . . . . . . . . 44 2 HDE0510 50.0000DE HDE0594 KS Baustoffwerke Blatzheim GmbH & Co. KG, Kerpen . . . . . 8,817 766 HDE0510 50.0000DE HDE0681 XSBB Verwaltungsgesellschaft mbH, Duisburg . . . . . . . . . . . 30 1 HDE0501 51.0000DE HDE0682 XSBB Immobilien- und Handelsgesellschaft mbH & Co. KG,

Duisburg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,948 (555) HDE0501 51.0000DE HDE0769 SILIKALZIT Marketing GmbH, Munich . . . . . . . . . . . . . . . 103 2,007 HDE0564 100.0000DE HDE0771 Porenbetonwerk EUROPOR GmbH, Boxberg . . . . . . . . . . . 3,792 333 HDE0774 51.0000DE HDE0773 Xella Technologie- und Forschungsgesellschaft mbH, Emstal . . 2,370 878 HDE0501 100.0000DE HDE0774 Xella Aircrete Systems GmbH, Duisburg . . . . . . . . . . . . . . . 11,340 (2,598) HDE0564 100.0000

Outside GermanyAT HAT0035 Xella Porenbeton Osterreich GmbH, Loosdorf . . . . . . . . . . . 3,840 210 HAT0037 85.0000AT HAT0037 Xella Baustoffe Alpe-Adria Holding GmbH, Loosdorf . . . . . . 20,428 91 HDE0564 100.0000BA HBA0338 Xella BH doo, Tuzla . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,201 (850) HAT0037 76.0000BA HBA0339 Siporex dd, Tuzla . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,958) (118) HBA0338 93.3200BE HBE0030 XELLA BELGIE N.V., Zwijndrecht . . . . . . . . . . . . . . . . . . 17,849 3,810 HNL0598 79.6400

HNL0540 20.2800HNL0545 0.0800

BG HBG0042 XELLA Bulgaria EOOD, Sofia . . . . . . . . . . . . . . . . . . . . . 16,921 (2,912) HDE0564 100.0000CH HCH0036 Xella Porenbeton Schweiz AG, Zurich . . . . . . . . . . . . . . . . 1,740 1,284 HDE0564 100.0000CN HCN0345 Shanghai Ytong Co., Ltd., Shanghai . . . . . . . . . . . . . . . . . . 15,561 952 HDE0564 79.0000CN HCN0402 Changxing Ytong Co. Ltd., Changxing . . . . . . . . . . . . . . . . 9,356 727 HDE0564 100.0000CN HCN0403 Xella Building Materials (Tianjin) Co., Ltd., Tianjin . . . . . . . . 14,301 313 HDE0564 100.0000CN HCN0405 Xella Shanghai Investment Consulting Co., Ltd., Shanghai . . . . 1,265 49 HDE0564 100.0000CN HCN0555 Baoding Xella Xiangfeng Calcium Silicate New Building

Materials Co., Ltd., Baoding . . . . . . . . . . . . . . . . . . . . . (868) (479) HDE0564 100.0000CZ HCZ0034 Xella CZ, s.r.o., Hrusovany u Brna . . . . . . . . . . . . . . . . . . 34,638 6,022 HDE0564 100.0000DK HDK0082 Xella Danmark A/S, Løsning . . . . . . . . . . . . . . . . . . . . . . 2,309 (2,211) HDE0564 100.0000ES HES0041 Xella Espana Hormigon Celular S.A., El Prat de Llobregat . . . 161 (25) HDE0564 100.0000FR HFR0772 Xella Thermopierre S.A., Saint Savin . . . . . . . . . . . . . . . . . 35,344 2,427 HDE0564 99.9994HR HHR0032 XELLA POROBETON Hrvatska, d.o.o., Zagreb . . . . . . . . . . 1,578 199 HAT0037 100.0000HR HHR0332 Ytong porobeton d.o.o., Zagreb . . . . . . . . . . . . . . . . . . . . (60) (63) HDE0564 100.0000HU HHU0031 Xella Magyarorszag Epıtoanyagipari KFt., Budapest . . . . . . . . 24,364 697 HDE0564 100.0000IT HIT0038 Ytong s.r.l. in liquidazione, Bologna . . . . . . . . . . . . . . . . . . (227) 2 HDE0564 100.0000IT HIT0039 Xella Italia s.r.l., Grassobbio . . . . . . . . . . . . . . . . . . . . . . . 656 420 HDE0564 100.0000IT HIT0053 Xella Pontenure s.r.l., Pontenure . . . . . . . . . . . . . . . . . . . . 6,026 (1,079) HDE0564 100.0000

MX HMX0791 Xella Mexicana SA de CV, Nuevo Leon . . . . . . . . . . . . . . . 8,026 (1,474) HDE0564 99.9999HDE0501 0.0001

MX HMX0795 Xella Servicios SA de CV, Nuevo Leon . . . . . . . . . . . . . . . . 215 (8) HDE0564 98.0000HDE0501 2.0000

NL HNL0029 Xella Cellenbeton Nederland B.V., Vuren . . . . . . . . . . . . . . 36,677 8,012 HNL0595 100.0000NL HNL0503 Van Herwaarden Beheer B.V., Hillegom . . . . . . . . . . . . . . . 33,933 1,659 HNL0596 66.6700NL — B.V. Exploitatie Maatschappij Oosterduinen, Hillegom . . . . . . (2) (2) HNL0503 100.0000NL — B.V. Exploitatie Maatschappij Reticulum, Hillegom . . . . . . . . (2) (2) HNL0503 100.0000NL — B.V. Exploitatie Maatschappij Zilkvaart, Hillegom . . . . . . . . . (2) (2) HNL0503 100.0000NL — B.V. Maatschappij tot Exploitatie van Gronden ‘‘Veenenburg

Elsbroek’’, Hillegom . . . . . . . . . . . . . . . . . . . . . . . . . . (2) (2) HNL0503 100.0000NL — Xella Kalkzandsteenfabriek Van Herwaarden B.V., Hillegom . . (2) (2) HNL0503 100.0000NL — Zandexploitatie Hillegom B.V., Hillegom . . . . . . . . . . . . . . . (2) (2) HNL0503 100.0000NL HNL0540 Van den Brink Group B.V., Koningsbosch . . . . . . . . . . . . . . 5,299 616 HNL0595 100.0000NL HNL0542 Xella Kalkzandsteenfabriek Hoogdonk B.V., Liessel . . . . . . . . 6,191 1,646 HNL0596 100.0000NL HNL0543 Xella Kalkzandsteenfabriek Rijsbergen B.V., Huizen . . . . . . . . 6,379 2,600 HNL0596 100.0000NL HNL0545 Befin Nederland B.V., Koningsbosch . . . . . . . . . . . . . . . . . . 1,442 9 HNL0540 100.0000NL HNL0590 Xella Kalkzandsteen Verkoop B.V., Vuren . . . . . . . . . . . . . . 275 (12) HNL0596 100.0000NL HNL0595 Xella Nederland B.V., Koningsbosch . . . . . . . . . . . . . . . . . . 161,969 1,406 HNL0598 100.0000NL HNL0596 Xella Kalkzandsteen B.V., Koningsbosch . . . . . . . . . . . . . . . 9,368 (336) HNL0595 100.0000NL HNL0597 Xella Kalkzandsteenfabriek De Hazelaar B.V., Koningsbosch . . 20,816 6,237 HNL0596 100.0000NL HNL0598 Xella Bouwmaterialen Holding B.V., Koningsbosch . . . . . . . . 81,063 (202) HNL0600 100.0000NL HNL0599 Fluidbed B.V., Koningsbosch . . . . . . . . . . . . . . . . . . . . . . (33) (2) HNL0540 100.0000NL HNL0600 XI Dutch Holdings B.V., Koningsbosch . . . . . . . . . . . . . . . . 79,918 (10,525) HDE0500 100.0000NL HNL0754 Hebel Nederland B.V., Vuren . . . . . . . . . . . . . . . . . . . . . . 2,453 51 HNL0595 100.0000NL HNL0755 Hebel Cellenbeton B.V., Vuren . . . . . . . . . . . . . . . . . . . . . (2) (2) HNL0754 100.0000NO HNO0088 Xella Norge A/S, Solbergelva . . . . . . . . . . . . . . . . . . . . . . 327 122 HDE0564 100.0000PL HPL0081 Xella VdB Zebrzydowa Sp. z o.o. w likwidacji, Warsaw . . . . . . (36) (1) HPL0602 100.0000PL HPL0098 Cegielnie Bydgoskie S.A., Warsaw . . . . . . . . . . . . . . . . . . . 3,229 197 HPL0602 99.1100PL HPL0342 Xella Radom Sp. z o.o., Warsaw . . . . . . . . . . . . . . . . . . . . 958 (12) HPL0602 99.9600PL HPL0602 Xella Polska Sp. z o.o., Warsaw . . . . . . . . . . . . . . . . . . . . . 42,581 (7,774) HDE0500 100.0000PL HPL0796 Xella Teodory S.A., Warsaw . . . . . . . . . . . . . . . . . . . . . . . (49) (136) HPL0602 93.7000PT HPT0040 Ytong Iberica—Materiais de Construcao LDA, Porto . . . . . . . 45 (8) HDE0564 100.0000RO HRO0047 XELLA RO S.R.L., Bucharest . . . . . . . . . . . . . . . . . . . . . 10,695 (4,555) HDE0564 99.9999

HHU0031 0.0001RU HRU0343 ZAO ‘‘Xella-Aeroblock-Zentrum Mozhaisk’’, Moscow . . . . . . . 534 2,632 HDE0564 100.0000

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SE HSE0092 Xella Sverige AB, Malmo . . . . . . . . . . . . . . . . . . . . . . . . (265) (411) HDE0564 100.0000SI HSI0044 XELLA porobeton SI, d.o.o., Kisovec . . . . . . . . . . . . . . . . . 3,025 (907) HAT0037 99.7740SK HSK0758 Xella Slovensko, spol. s.r.o., Sastın-Straze . . . . . . . . . . . . . . 6,208 573 HDE0564 100.0000UA HUA0331 Xella Ukraina TOV, Odessa . . . . . . . . . . . . . . . . . . . . . . . (177) 31 HDE0564 99.0000

HPL0602 1.0000US HUS0792 Xella AAC Texas, Inc., Cibolo . . . . . . . . . . . . . . . . . . . . . (1,156) (1) HMX0791 100.0000US HUS0793 Xella Aircrete North America, Inc., Atlanta . . . . . . . . . . . . . (8,608) (581) HDE0564 100.0000RS HYU0045 Xella Srbija d.o.o., Vreoci . . . . . . . . . . . . . . . . . . . . . . . . 1,085 (1,225) HAT0037 100.0000YU HYU0336 Xella Kosova L.L.C., Lipjan . . . . . . . . . . . . . . . . . . . . . . . (8,210) (5,296) HAT0037 100.0000

Lime BUGermany

DE HDE0700 XI (RMAT) Holdings GmbH, Duisburg . . . . . . . . . . . . . . . 16,858 735 HLU0200 100.0000DE HDE0701 Fels-Werke GmbH, Goslar . . . . . . . . . . . . . . . . . . . . . . . . 202,788 18,226 HDE0700 100.0000DE HDE0703 Kalkwerke Meister GmbH, Großenluder . . . . . . . . . . . . . . . 608 (273) HDE0701 100.0000DE HDE0705 Fels Netz GmbH, Elbingerode . . . . . . . . . . . . . . . . . . . . . 909 (138) HDE0701 100.0000DE HDE0710 Fels International GmbH, Goslar . . . . . . . . . . . . . . . . . . . . 2,410 (6,989) HDE0701 100.0000DE HDE0715 Ecoloop GmbH, Goslar . . . . . . . . . . . . . . . . . . . . . . . . . . (463) (203) HDE0701 50.0010

Outside GermanyCZ HCZ0708 VAPENKA—VITOSOV, s.r.o., Zabreh . . . . . . . . . . . . . . . . 33,428 5,795 HDE0701 75.0000FR HFR0549 SNC Parc 3, Bartenheim . . . . . . . . . . . . . . . . . . . . . . . . . 205 47 HDE0701 99.0000

HDE0703 1.0000PL HPL0709 Fels Sp. z o.o., Warsaw . . . . . . . . . . . . . . . . . . . . . . . . . . 1 0 HDE0701 99.0000

HDE0703 1.0000RU HRU0711 ‘‘Fels Izvest’’ OOO, Tovarkovo . . . . . . . . . . . . . . . . . . . . . 302 760 HDE0710 99.9990

Dry Lining BUGermany

DE HDE0704 FELS RECYCLING GmbH, Wolfsburg . . . . . . . . . . . . . . . 2,131 452 HDE0729 51.0000DE HDE0720 XI (DL) Holdings GmbH, Duisburg . . . . . . . . . . . . . . . . . . 24,352 8,380 HLU0200 100.0000DE HDE0729 Fermacell GmbH, Duisburg . . . . . . . . . . . . . . . . . . . . . . . 77,295 18,880 HDE0720 100.0000

Outside GermanyNL HNL0726 Fermacell B.V., Niftrik . . . . . . . . . . . . . . . . . . . . . . . . . . 21,559 3,334 HDE0729 100.0000

Investments (non-consolidated) with shares in capital exceeding 20%

Equity in Net result Shares inCountry Name and domicile of the investment kE(3) in kE(3) Held by capital %

Building Materials BUGermany

DE XDE058A Baumaterial Recyclinggesellschaft mbH, Seevetal . . . . . . . . 297 56 HDE0058 50.0000DE XDE561A Kalksandsteinwerk Ruckersdorf GmbH & Co. KG,

Ruckersdorf . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,256 656 HDE0561 50.0000DE XDE561E Geschaftsfuhrungsgesellschaft Mortel-Union mbH,

Wedemark-Mellendorf . . . . . . . . . . . . . . . . . . . . . . . . 34 2 HDE0561 47.6000DE XDE561F Mortel-Union GmbH & Co. KG, Wedemark-Mellendorf . . . 307 285 HDE0561 47.5700DE XDE561H Nord-KS GmbH + Co. KG i.L., Kaltenkirchen . . . . . . . . . 741 26 HDE0561 50.0000DE XDE561J Baustoffwerke Munster-Osnabruck GmbH & Co. KG,

Osnabruck . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,987 1,695 HDE0561 15.1500HDE0564 8.9800

DE XDE563A Kalksandsteinwerk Wendeburg, Radmacher GmbH & Co.KG, Wendeburg . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,294 126 HDE0563 28.0000

Outside GermanyCN XCN0406 Shandong Xella Gather Calcium Silicate New

Build.Mat. Co., Ltd., Tengzhou, China . . . . . . . . . . . . . . 4,780 (382) HDE0564 40.0000TR XDE564C Turk Ytong Sanayi A.S., Istanbul, Turkey . . . . . . . . . . . . . 33,626 4,439 HDE0564 25.4100NL XNL503A Cooperatieve Verkoop-en Produktievereniging Van

Kalkzandsteenproducenten (CVK) U.A. in liquidatie,Hilversum . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 0 HNL0503 11.5000

HNL0597 18.5000HNL0542 7.0000HNL0590 7.0000HNL0543 6.0000XNL596A 11.5000

NL XNL596A Anker Kalkzandsteenfabriek B.V., Kloosterhaar . . . . . . . . . 29,653 8,975 HNL0596 33.3300Lime BU

GermanyDE XDE701A Kalksandsteinwerk Winsen/Aller Dr. Hubrig GmbH & Co.

KG, Winsen/Aller . . . . . . . . . . . . . . . . . . . . . . . . . . . (40) (2) HDE0701 50.0000DE XDE701B Dr. Hubrig GmbH, Winsen / Aller . . . . . . . . . . . . . . . . . 0 0 HDE0701 35.4000

HDE701A 29.0000Outside Germany

RU XDE710A ‘‘DSZ’’ OOO (BSW), Tovarkovo, Russia . . . . . . . . . . . . . . 10,116 954 HDE0710 25.1000

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Investments in affiliates (non-consolidated)

Equity in Net result Shares inCountry Name and domicile of the investment kE(3) in kE(3) Held by capital %

ES XDE564A Siporex, S.A., Barcelona . . . . . . . . . . . . . . . . . . . . . . . . 0 0 HDE0564 100.0000FR XFR772A EURL Construction, Saint Savin . . . . . . . . . . . . . . . . . . . 9 0 HFR0772 100.0000LU XLU100A Xenia S.a r.l., Luxembourg . . . . . . . . . . . . . . . . . . . . . . . (5) (5) HLU0100 100.0000

Disclosure to affiliates (consolidated) according to § 264b HGB and § 314 (1) No. 9 HGB

Country Name and domicile of the investment

DE HDE0300 XI Management Beteiligungs GmbH & Co. KG, Duisburg . . .DE HDE0058 Kalksandsteinwerke Thorl & Meyer GmbH & Co. KG,

Seevetal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE HDE0520 Xella Kalksandsteinwerk Griedel GmbH & Co KG, Butzbach-

Griedel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE HDE0594 KS Baustoffwerke Blatzheim GmbH & Co. KG, Kerpen . . . .DE HDE0682 XSBB Immobilien- und Handelsgesellschaft mbH & Co. KG,

Duisburg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1) IFRS figures 31/12/2011 including PPA push-downs

(2) Fully consolidated within the preparation of financial statements of the respective holding

(3) Last available financial statement

Abbreviations:AT AustriaBA Bosnia-HerzegovinaBE BelgiumBG BulgariaCH SwitzerlandCN ChinaCZ Czech RepublicDE GermanyDK DenmarkES SpainFR FranceHR CroatiaHU HungaryIT ItalyLU LuxembourgMX MexicoNL NetherlandsNO NorwayPL PolandPT PortugalRO RomaniaRS SerbiaRU RussiaSE SwedenSI SloveniaSK SlovakiaTR TurkeyUA UkraineUS USAYU Serbia and Kosovo

30. Auditors’ Fees

The fees paid to PricewaterhouseCoopers Germany and Luxembourg in relation to services rendered tothe Xella Group amounted to 2,594 kA.

This fee comprises services in connection with auditing financial statements in the amount of 1,377 kA,audit related fees of 1,206 kA (including fees in connection with the bond) and other certificationservices in the amount of 9 kA as well as other services in the amount of 2 kA.

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Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: JE75803A.;3 v6.8

31. Significant Events After the End of the Financial Year

There were no events subsequent to balance sheet date that would have had a significant impact on thenet assets, financial position and results of operations of the Group.

Luxembourg, 27 March 2012



Nicole Gotz David Richy

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Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: JG75803A.;3 v6.8

20SEP201314564014

20SEP201314581981

Audit report

To the Partners ofXella International Holdings S.a r.l.

Report on the consolidated financial statements

We have audited the accompanying consolidated financial statements of Xella International HoldingsS.a r.l. as at 31 December 2011, which comprise the consolidated statement of financial position as at31 December 2011, and the consolidated statement of income—by nature of expense, the consolidatedstatement of comprehensive income, consolidated statement of changes in equity and consolidatedstatement of cash flows for the year then ended and a summary of significant accounting policies andother explanatory information.

Board of Managers’ responsibility for the consolidated financial statements

The Board of Managers is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with International Consolidated financial Reporting Standards asadopted by the European Union, and for such internal control as the Board of Managers determines isnecessary to enable the preparation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.

Responsibility of the ‘‘Reviseur d’entreprises agree’’

Our responsibility is to express an opinion on these consolidated financial statements based on ouraudit. We conducted our audit in accordance with International Standards on Auditing as adopted forLuxembourg by the ‘‘Commission de Surveillance du Secteur Financier’’. Those standards require thatwe comply with ethical requirements and plan and perform the audit to obtain reasonable assurancewhether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe consolidated financial statements. The procedures selected depend on the judgment of the‘‘Reviseur d’entreprises agree’’ including the assessment of the risks of material misstatement of theconsolidated financial statements, whether due to fraud or error. In making those risk assessments, the‘‘Reviseur d’entreprises agree’’ considers internal control relevant to the entity’s preparation and fairpresentation of the consolidated financial statements in order to design audit procedures that areappropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivenessof the entity’s internal control. An audit also includes evaluating the appropriateness of accountingpolicies used and the reasonableness of accounting estimates made by the Board of Managers, as wellas evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinion

In our opinion, the consolidated financial statements give a true and fair view of the consolidatedfinancial position of Xella International Holdings S.a r.l. as of 31 December 2011, and of itsconsolidated financial performance and its consolidated cash flows for the year then ended inaccordance with International Consolidated financial Reporting Standards as adopted by the EuropeanUnion.

PricewaterhouseCoopers S.à r.l., 400 Route d’Esch, B.P. 1443, L-1014 LuxembourgT: +352 494848 1, F: +352 494848 2900, www.pwc.lu

Cabinet de révision agréé. Expert-comptable (autorisation gouvernementale n°00123693)R.C.S. Luxembourg B 65 477 - Capital social EUR 516 950 - TVA LU17564447

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MERRILL CORPORATION GNEWBUR// 6-OCT-13 17:00 DISK132:[13ZCO3.13ZCO75803]JG75803A.;3 mrll_1111.fmt Free: 5900DM/0D Foot: 0D/ 0D VJ RSeq: 2 Clr: 0 DISK024:[PAGER.PSTYLES]UNIVERSAL.BST;114

Peter II High Yield Proj: P21058LON13 Job: 13ZCO75803 (13-21058-3) Color1: Warm Red U Color30: Warm Red UPage Dim: 8.250� X 11.750� Copy Dim: 38. X 62. File: JG75803A.;3 v6.8

Report on other legal and regulatory requirements

The consolidated management report, which is the responsibility of the Board of Managers, isconsistent with the consolidated financial statements.

PricewaterhouseCoopers S.a r.l. Luxembourg, 30 March 2012Represented by

Alain Maechling

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