annual financial statements as of december 2017 and ......at a glance € million 2017 2016 change...

Annual Financial Statements as of December 2017 and Management Report for the fiscal year 2017

RENK Aktiengesellschaft

At a glance

€ million 2017 2016 Change in %

Order intake 434 486 (10.6)

Sales revenue 469 496 (5.3)

Order backlog1) 748 799 (6.3)

Headcount 2,235 2,205 +1.4

Change in

€ million

Operating profit 60 67 (7)

Profit before taxes 61 65 (4)

Profit after tax 43 44 (1)

Earnings per share in € 6.30 6.50 –

Dividend distribution per share in € 2.20 2.20 –

Operating return on sales in % 12.8 13.5 –

Capital expenditures2) 19 25 (6)

Depreciation and amortization on noncurrent assets 19 19 –

Internally financed R&D expenditures 14 11 +3

Cash flows from operating activities 25 57 (32)

Cash flows from current investing activities (24) (25) +1

Net cash flow 1 32 (31)

Cash and cash equivalents1) 199 214 (15)

Total equity1) 422 390 +32

1) As of December 31, 2017, as against December 31, 2016 2) For property, plant and equipment and intangible assets

Financial reporting dates at www.renk.eu

RENK – a company of MAN Group

RENK Group Annual Report 2017 1

Content Page Supervisory Board 2 The Executive Board 3 Report of the Supervisory Board 4 RENK Stock 10

Corporate Governance Statement in accordance with section 289f HGB and section 315d HGB for fiscal year 2017 12 Management Report of the RENK Group for the Fiscal Year from January 1 to Decem-ber 31, 2017 23 Business activities and management of the RENK Group 25 RENK AG – Business focus 25 Internal management system and value management 26 Business performance and economic situation of the RENK Group 29 Economic environment 29 Summary by the Executive Board 29 Forecast variance analysis 32 Results of operations 35 Income statement 40 Financial position of the RENK Group 42 Cash flow – development of cash and cash equivalents and term deposits 42 Net assets 44 Capital information/disclosures in accordance with section 315a(1) HGB 47 Closing statement by the Executive Board on the dependent company report in accordance with section 312 AktG 48 Research and development 50 Capital expenditures and environmental management 51 Employees 53 The segments 57 Report on risks and opportunities 70 Remuneration report for fiscal year 2017 80 Forecast 90 RENK AG Consolidated Financial Statements for the Fiscal Year from January 1 to Decem-ber 31, 2017 95 Consolidated Income Statement 96

Reconciliation to Total Comprehensive Income for the Period 96

Consolidated Statement of Financial Position 97

Consolidated Statement of Changes in Equity 98

Consolidated Statement of Cash Flows 99

Notes to the Consolidated Financial Statements 100

Principles of Financial Reporting 100

Notes to the Consolidated Income Statement 120

Notes to the Consolidated Statement of Financial Position 127

Other disclosures 141

Events after the end of the reporting period 165

Members of the Supervisory Board and the Executive Board and their mandates 166

Responsibility statement 173

Audit Report for the consolidated financial statements of RENK AG 174

Six-year Overview 182

2

Supervisory Board

Dr. Ingrun-Ulla Bartölke Wolfsburg

Chairwoman of the Supervisory Board

Head of Group Accounting and

External Reporting at Volkswagen

Aktiengesellschaft

Roberto Armellini*) Augsburg

Deputy Chairman of the

Supervisory Board

Managing Director IG Metall Augsburg

Michael Behrendt Hamburg, Germany

Chairman of the Supervisory Board of

Hapag-Lloyd AG

Hardy Brennecke Wolfenbüttel

Head of the Executive Office for the

Commercial Vehicles division of

Volkswagen Aktiengesellschaft

Secretary General of Volkswagen

Truck & Bus GmbH

Joachim Drees Stuttgart

Managing Director of

Volkswagen Truck & Bus GmbH

Chairman of the Executive Board of MAN

SE

Chairman of the Executive Board of

MAN Truck & Bus Aktiengesellschaft

Dipl.-Ing. (FH) Rainer Handschuh*) Augsburg

Chairman of the Group Works Council of

RENK AG

Chairman of the Works Council of RENK

AG, Augsburg plant and RENK Test System

GmbH

Christiane Hesse Wunstorf

Member of the Board of Management

(Human Resources and Organization) of

Volkswagen Financial Services Aktien-

gesellschaft

Dipl.-Ing. (FH) Frank Hoffmann*) Augsburg

Head of Vehicle Transmissions at RENK

AG, Augsburg

Thorsten Jablonski Ilsede

Head of Transmissions

Head of Kassel site for Volkswagen

Aktiengesellschaft

Herbert Surmann*) Rheine

Chairman of the Works Council RENK AG,

Rheine plant

Walter Vogt*) Eltville

Labor union secretary at IG Metall

Executive Board, Frankfurt/Main

Ingo Weidner*) Hanover

Deputy Chairman of the Works Council of

RENK AG, Hanover plant

As of February 8, 2018 *) elected by employees


The Executive Board

Dipl.-Ing. (FH) Florian Hofbauer Dipl.-Kfm. (Univ.) Christian Hammel

Landsberg Munich

Spokesperson

Engineering and Sales Administration and Production

4

Report of the Supervisory Board

Ladies and Gentlemen,

In fiscal year 2017, the Supervisory Board at-

tended to the situation and development of

the company in depth and on an ongoing ba-

sis. It regularly and comprehensively per-

formed its duties in accordance with the law,

the Articles of Association and its Rules of

Procedure. We advised the Executive Board

on its management of the company and

monitored its activities.

The Executive Board informed the Supervi-

sory Board regularly and promptly by de-

tailed written and oral reports about business

performance, relevant business events and

the development of the results of operations,

net assets and financial position. In addition,

the reporting to the Supervisory Board com-

prised corporate planning including develop-

ments deviating from it and their causes, the

strategic focus of the company, the risk posi-

tion and the content and structure of the risk

management system. In the context of its

monitoring duties, the Supervisory Board as-

sured itself that the Executive Board has in-

stalled an effective compliance system for the

RENK Group and was informed of activities

undertaken in this field.

The Supervisory Board was involved in an ad-

visory capacity in all questions and decisions

of material importance to the company. Fur-

thermore, I consulted with the members of

the Executive Board in regular discussions

outside the Supervisory Board meetings on

matters and issues relevant to the company,

including business development and strate-

gic projects.

The Supervisory Board held four meetings in

fiscal year 2017; the average attendance rate

was 97.92%. One resolution of the Supervisory

Board was adopted by way of circulation.

In fiscal year 2017, no members of the Super-

visory Board participated in only half or less

than half of the meetings of the Supervisory

Board and the committees to which they be-

long.

Work of the committees The Supervisory Board has formed three joint

committees, each consisting of two share-

holder representatives and two employee rep-

resentatives - the Audit Committee, the Exec-

utive Personnel Committee and the Media-

tion Committee in accordance with section

27(3) of the Mitbestimmungsgesetz (MitbestG

– German Codetermination Act). There is also

the Nomination Committee that consists ex-

clusively of shareholders.

The Audit Committee met four times in fiscal

year 2017. It dealt in depth with issues of ac-

counting and the annual financial statements

of RENK AG, the consolidated financial state-

ments, the management reports, the depend-

ent company report and the audit reports of

the auditor. In addition, the Audit Committee

discussed with the Executive Board the half-

yearly report for 2017 prior to its publication.

Other issues handled by the Audit Committee

were the discussion of the audit engagement

for the audit of the annual and consolidated

financial statements for 2017, the audit focus

and the discussion of and decision on the se-

lection procedure for the audit from fiscal

year 2020. Moreover, the Audit Committee

dealt with the monitoring of the accounting

process, the effectiveness of the internal con-

trol system and the internal risk manage-

ment system. The Audit Committee also dis-

cussed the internal audit system and compli-

ance issues. Furthermore, the Audit Commit-

tee discussed the implementation of CSR re-

porting and the efficiency and effectiveness

of its work. The topics of the last meeting of

the Audit Committee were the annual review


of its guiding principles for auditor network

services, the new audit reports and opinions

and the new accounting standards effective

from 2018.

The Executive Personnel Committee met four

times in the year under review. In particular,

its tasks included preparing resolutions of

the Supervisory Board on the remuneration

of the Executive Board and the diversity con-

cept for the Executive Board of RENK AG.

The Mediation Committee did not have to be

convened in fiscal year 2017. The Nomination

Committee met once in the year under re-

view.

Issues in the Supervisory Board Regular topics of discussion in the Supervi-

sory Board included the business perfor-

mance of the RENK Group and strategic is-

sues. Furthermore, the work of the commi-

ttees was reported on at the meetings of the

Supervisory Board.

On March 6, 2017 the Supervisory Board

mainly dealt with the 2016 consolidated fi-

nancial statements and the 2016 annual fi-

nancial statements of RENK AG, the respec-

tive management reports and the dependent

company report; the auditor also submitted

the audit reports and reported on the key

findings of the audits. Further topics of this

meeting included the coordination of the

agenda and proposed resolutions for the 2017

Annual General Meeting.

Furthermore, the Supervisory Board ap-

proved the figures for the variable remunera-

tion of members of the Executive Board for

fiscal year 2016 presented at this meeting and

resolved to adjust the basic remuneration for

Mr. Hofbauer.

There was another meeting of the Supervi-

sory Board before the Annual General Mee-

ting on April 26, 2017. Among other things,

this meeting adopted the resolution to issue

the audit engagement to Pricewaterhouse-

Coopers GmbH Wirtschaftsprüfungsgesell-

schaft (PwC) – subject to the Annual General

Meeting selecting PwC as the auditor. More-

over, the Supervisory Board discussed the re-

muneration of the Executive Board at this

meeting.

The focus of the meeting on Septem-

ber 21, 2017 was the strategy of the RENK

Group. The Supervisory Board also updated

its Rules of Procedure at this meeting.

At the meeting on December 5, 2017, the Su-

pervisory Board confirmed the objectives for

its composition and resolved a skills profile

for the Supervisory Board. It also discussed

and resolved a diversity concept for the Su-

pervisory Board and the Executive Board at

this meeting. Another key topic of this mee-

ting was the implementation of the German

Corporate Governance Code and the renewal

of the declaration of conformity.

Corporate governance and the Declaration of Conformity The application of the German Corporate

Governance Code in the RENK Group was the

subject of the Supervisory Board meeting on

December 5, 2017. Following this meeting the

Supervisory Board and the Executive Board

issued the annual declaration on the recom-

mendations of the Code in accordance with

section 161 of the Aktiengesetz (AktG – Ger-

man Stock Corporation Act). This Declaration

of Conformity has been published on RENK

AG’s website.

There were no reports of conflicts of interest

among members of the Supervisory Board

within the meaning of item 5.5 of the German

Corporate Governance Code in the year under

review.

Further information on corporate govern-

ance at RENK can be found in the corporate

governance report.

6

Audit of the 2017 annual and consolidated financial statements and the dependent company report The annual financial statements and Manage-

ment Report of RENK AG, and the consoli-

dated financial statements and the Group

management report, for the fiscal year from

January 1 until December 31, 2017 were

audited by the auditor elected by the Annual

General Meeting on April 26, 2017, Pricewater-

houseCoopers GmbH Wirtschaftsprüfungs-

gesellschaft, Munich. Each was issued with an

unqualified audit opinion. The Supervisory

Board defined the regularity of accounting

for development services as an area of em-

phasis of the audit. The auditor also assessed

the internal control system and the risk ma-

nagement system, concluding that the Execu-

tive Board has taken the measures required in

accordance with section 91(2) AktG to ensure

early detection of any risks that could jeo-

pardize the going concern of the company.

In accordance with section 312 AktG, the Ex-

ecutive Board prepared a report on relations

with affiliated companies (dependent com-

pany report) for fiscal year 2017. The auditor

examined the dependent company report

and issued the following opinion:

“Based on our audit and assessment, which

we have carried out in accordance with pro-

fessional standards, we hereby confirm that

1. the factual statements made in the report

are correct,

2. the company’s compensation with respect

to the transactions listed in the report was

not inappropriately high.”

The Supervisory Board endorsed the results

of the audit of the dependent company re-

port performed by the auditor.

The members of the Audit Committee and

the Supervisory Board members received the

annual financial statement documents in-

cluding the dependent company report and

the audit reports of the auditor in time for

the meetings of those bodies on Febru-

ary 26, 2018. The auditor reported in detail at

both meetings on the main results of his

audits and was available to provide additional

information.

Taking into account the audit reports of the

auditor, the conversation with him and its

own findings, the Audit Committee prepared

the documents for our own audit of the con-

solidated financial statements, the annual fi-

nancial statements of RENK AG, the manage-

ment reports for the RENK AG and the RENK

Group and the dependent company report,

and reported on them at the Supervisory

Board meeting on February 26, 2018. It then

recommended that we approve the annual fi-

nancial statements.

In the knowledge of and taking into account

the report of the Audit Committee and the

auditor’s report, and in talks and discussions

with him, we subjected the documents to a

detailed examination. The final audit of the

annual financial statements of RENK AG, the

consolidated financial statements and the

management reports did not give rise to any

objections. We came to the conclusion that

they are correct and that the assessments of

the Executive Board on the situation of the

company and the Group as presented in the

management reports are consistent with the

assessments of the Supervisory Board. At our

meeting on February 26, 2018 we therefore

endorsed the results of the audit by the audi-

tor and approved the annual financial state-

ments and the consolidated financial state-

ments prepared by the Executive Board. The

annual financial statements were thereby

adopted.

We examined the proposal for the appropria-

tion of profits by the Executive Board, taking

into account the interests of the company

and its shareholders in particular, and en-

dorsed the proposal.


According to the final results of our audit,

there are no objections to the declaration by

the Executive Board at the end of the depen-

dent company report.

Personnel changes in the Supervisory Board Dr. Jeske and Dr. Pachta-Reyhofen had re-

signed as members of the company’s Supervi-

sory Board effective from the end of the An-

nual General Meeting on April 26, 2017. Mr.

Hardy Brennecke and Mr. Joachim Drees were

elected to the Supervisory Board as their suc-

cessors by the Annual General Meeting on

April 26, 2017. Furthermore, Ms. Christiane

Hesse and Mr. Thorsten Jablonski, who had

been appointed to the Supervisory Board of

RENK AG by MAN SE, were confirmed by the

Annual General Meeting on April 26, 2017.

Our thanks We would like to thank the members of the

Executive Board and the employees of the

RENK Group for their hard work and dedica-

tion. We thank the employee representatives

for their objective and constructive coopera-

tion in the interests of our company.

On behalf of the Supervisory Board

Augsburg, February 26, 2018

Dr. Ingrun-Ulla Bartölke


10

RENK Stock

Stock market environment 2017 2017 was defined by a volatile upswing on the

international stock markets. The DAX, Ger-

many’s benchmark index, was also higher

than at the end of 2016.

Promising economic developments in key in-

dustrial nations, the improved situation on

the US labor market, the results of the elec-

tions in the Netherlands and France and the

proposed US tax reform, which provides relief

for corporations, had a positive impact.

At times prices were hit by uncertainty re-

garding the economic policy of the new US

government, the election results in Europe,

the monetary policy of both the US Federal

Reserve and the European Central Bank, the

strong euro and international crises.

Performance of RENK shares In this volatile stock market environment

with strong economic and political influ-

ences, RENK’s shares developed very posi-

tively over the course of the reporting period.

Starting at a closing price of € 101.15 at the

end of 2016, the share price climbed to

€ 113.01 by the end of 2017, up by € 11.86 or

11.7% on the figure for the previous year. Ta-

king into account the distribution, this meant

a total return for RENK shareholders of 14.26%

in 2017.

Furthermore, looking back over five years,

RENK’s shares (not including dividends) have

risen by an average of 9.2%.

The Executive Board and the Supervisory

Board will be proposing the distribution of a

dividend – as for the previous year – of € 2.20

for fiscal year 2017 at this year’s Annual Ge-

neral Meeting. This corresponds to a dividend

yield based on the closing price for 2017 of

around 1.9%.


Key performance indicators for RENK shares

in € 2017 2016

Earnings per share 6.30 6.50

Cash dividend per share 2.20 2.20

Market capitalization1) in € million 791 708

Closing price2) 113.01 101.15

High2) 123.85 104.45

Low2) 95.85 92.55

Price-earnings ratio 17.94 15.51

Dividend yield on shares3) in % 1.9 2.2

Total return on shares4) in % 14.3 (1.4)

Number of shares outstanding 6,800,097 6,800,097

1) Based on 7 million shares 2) Daily closing price on Frankfurt stock exchange 3) Cash dividend based on closing price for the year 4) On reinvestment of cash dividend at end of month following Annual General Meeting

12

Corporate Governance Statement in accordance with section 289f HGB and section 315d HGB for fiscal year 20171)

At RENK, the management and control of the

company and the Group are geared towards

ensuring sustainable value added and an ap-

propriate result in accordance with the prin-

ciples of the social market economy.

Corporate governance is defined by the appli-

cable laws, in particular company law, the Ar-

ticles of Association and internal regulations,

and by national and international standards

of good and responsible management. The

German Corporate Governance Code (Code)

provides conduct recommendations and su-

ggestions for corporate governance as ap-

plied in the RENK Group in line with acknow-

ledged standards.

(a) Corporate Governance at RENK2)


Board of RENK have dealt extensively with

the corporate governance system and compli-

ance with the recommendations and sugges-

tions of the Code. They are aware that good

and transparent corporate governance, con-

sistent with both national and international

standards, is essential for the responsible and

long-term management of a company.

Declaration of conformity On December 5, 2017, the Executive Board and

the Supervisory Board issued the declaration

of compliance reproduced below in accor-

dance with section 161 of the German Stock

Corporation Act (AktG):

“The Executive Board and the Supervisory

Board of RENK AG declare that the reco-

mmendations of the Government Commis-

sion on the German Corporate Governance

Code as amended on February 7, 2017 promul-

gated by the Federal Ministry of Justice on

April 24, 2017 in the official section of the

Bundesanzeiger (the Federal Gazette) are

complied with effective immediately, with the

exception of items 4.2.3(2) sentence 3 (for-

ward-looking variable remuneration), 5.4.1(6)

to (8) (disclosure of proposals of candidates

for election) and 7.1.1 sentence 2 (intra-year fi-

nancial information).

1.) The recommendation of item 4.2.3(2)

sentence 3 is not complied with in that

the assessment base for variable remu-

neration components is not essentially

forward-looking. The current remunera-

tion system is based on the recommen-

dation found in the version of the Code

dated May 5, 2015. As the Supervisory

Board considers a long-term assessment

basis that is essentially forward-looking

to be appropriate, an adjustment of the

remuneration system in line with the

recommendations of the current version

of the Code is being prepared but has not

yet been completed or implemented.

1) The Corporate Governance Statement in accordance with section 289f HGB and section 315d HGB is part of the Group management

report not included in the audit. 2) Also “Corporate Governance Report” of the Executive Board and the Supervisory Board in accordance with item 3.10 of the German

Corporate Governance Code as amended February 7, 2017


2.) Regarding the recommendation in items

5.4.1(6) to (8) of the Code on the disclo-

sure of certain circumstances of nomina-

tions by the Supervisory Board to the An-

nual General Meeting, the requirements

of the Code are unspecific and unclear in

their application. A departure from the

Code as regards this matter has thus

been declared as a precaution. Regardless

of this, the Supervisory Board will en-

deavor to comply with the requirements

of items 5.4.1(6) to (8) of the Code.

3.) The recommendation of item 7.1.1 sen-

tence 2 (intra-year financial information)

is not complied with as the Executive

Board and Supervisory Board of RENK AG

consider an obligation to release quar-

terly publications in addition to the sta-

tutory requirement of the Wertpapier-

handelsgesetz (WpHG – German Securi-

ties Trading Act) to be unnecessary.


Board of RENK AG further declare that the

recommendations of the Government Co-

mmission on the German Corporate Gover-

nance Code as amended on May 5, 2015 pro-

mulgated by the Federal Ministry of Justice

on June 12, 2015 in the official section of the

Bundesanzeiger were complied with in the

period December 2016 to April 24, 2017, with

the exception of items 5.4.1(5) to (7) (disclo-

sure of proposals of candidates for election;

items 5.4.1(6) to (8) in the February 7, 2017 ver-

sion of the Code). The reasons for the excep-

tion are explained above.

From April 24, 2017 until the time that this

declaration of conformity was issued, the re-

commendations of the Government Commi-

ssion on the German Corporate Governance

Code as amended on February 7, 2017 promul-

gated by the Federal Ministry of Justice on

April 24, 2017 in the official section of the

Bundesanzeiger (the Federal Gazette) were

complied with, with the exception of items

4.2.3(2) sentence 3 (forward-looking variable

remuneration), 5.4.1(2) sentence 1 and (4) sen-

tence 1 (preparation of a skills profile and ef-

forts to adhere to it), 5.4.1(5) (résumés for all

Supervisory Board members), 5.4.1(6) to (8)

(disclosure of proposals of candidates for

election) and 7.1.1 sentence 2 (intra-year finan-

cial information). The reasons for the depar-

tures from items 4.2.3(2) sentence 3, 5.4.1(6) to

(8) and 7.1.1 sentence 2 are explained above.

The new recommendations of item 5.4.1(2), (4)

and (5) added effective from April 24, 2017 –

which relate to the composition of the Super-

visory Board and the preparation of a skills

profile for the body as a whole, striving to ad-

here to the skills profile for the body as a

whole and publishing résumés for all Supervi-

sory Board members supplemented by over-

views of their main activities in addition to

their Supervisory Board appointment on the

company’s website – have been complied

with since December 5, 2017 when this was

discussed accordingly and resolved by the Su-

pervisory Board.”

14

Annual General Meeting The Annual General Meeting is the forum for

shareholders of RENK AG to exercise their

voting rights, to obtain information and to

engage in a dialog with the Executive Board

and the Supervisory Board.

RENK AG’s Annual General Meeting is orga-

nized and held with the goal of providing all

shareholders with information quickly, com-

prehensively and effectively both before and

during the Annual General Meeting. The invi-

tation to the Annual General Meeting is pub-

lished in the Bundesanzeiger (the Federal Ga-

zette) and is made accessible to shareholders

and all other interest parties on RENK’s web-

site, together with all reports and submi-

ssions for the Annual General Meeting.

To make it easier for shareholders to exercise

their rights in person and to facilitate voting

representatives, in addition to the option of

authorizing a bank, shareholder associations

or other persons, there is the possibility of

authorizing a RENK employee as a voting rep-

resentative.

Cooperation between the Executive Board and the Supervisory Board In accordance with German stock corporation

law, RENK AG has a dual management struc-

ture with an Executive Board and Supervisory

Board. Both governing bodies work together

closely for the good of the company and

strive to sustainably increase the value of the

company for the shareholders.

The Executive Board performs management

and operational functions on its own respon-

sibility, the Supervisory Board performs mo-

nitoring and consulting functions. Both the

Executive Board and the Supervisory Board

work on the basis of the applicable legal regu-

lations and their respective Rules of Proce-

dure. The Executive Board informs the Super-

visory Board promptly and comprehensively

on strategy, planning, business development

and the risk position. Transactions and

measures that require the approval of the Su-

pervisory Board are presented to it in time.

The Executive Board also informs the Chair-

man of the Supervisory Board immediately of

extraordinary events.

The Executive Board The Executive Board is the management body

of RENK AG and has two members as of De-

cember 31, 2017. The members of the Execu-

tive Board conduct all the company’s busi-

ness with joint responsibility. The Executive

Board is appointed by the Supervisory Board.

The Executive Board’s work is governed by its

Rules of Procedure.

The Executive Board determines the business

objectives for the entire RENK Group. It en-

sures compliance with legal provisions, offi-

cial regulations and internal company poli-

cies. The Executive Board also ensures open

and transparent corporate communications.

The risk management system assists the Ex-

ecutive Board in recognizing business and fi-

nancial risks and taking appropriate

measures to reduce risks.

In accordance with the specifications of the

German Stock Corporation Act and item 4.3.4

of the Code, Executive Board members only

can perform sideline activities with the prior

consent of the Supervisory Board. The Execu-

tive Board members are further required to

disclose conflicts of interest to the Supervi-

sory Board and the other members of the Ex-

ecutive Board without delay. Executive Board

members did not report any conflicts of in-

terest in the year under review. In addition,

companies of the RENK Group did not per-

form any transactions with members of the

Executive Board or their related parties in the

year under review.


Supervisory Board The Supervisory Board, consisting of an equal

number of employee and shareholder repre-

sentatives, is the monitoring and consulting

body of RENK AG.

In accordance with section 96(1) alt. 1 and sec-

tion 101 AktG in conjunction with section 1(1)

and section 7(1) sentence 1 no. 1 of the Mitbe-

stimmungsgesetz (MitbestG – German Codeter-

mination Act), the Supervisory Board consists

of twelve members. Six of these are shareholder

representatives elected by the Annual General

Meeting and six are employee representatives

elected in line with the German Codetermina-

tion Act. Since January 1, 2016, the statutory

minimum share of 30% women and men must

also be taken into account in new elections to

fill single or multiple Supervisory Board seats.

For information on the composition of the Su-

pervisory Board and the Supervisory Board

committees formed plus further details of the

changes occurred in the year under review,

please see the report of the Supervisory Board

and the notes to the consolidated financial

statements.

In light of the purpose of the company, its size

and the share of its international activities, the

Supervisory Board of RENK AG is endeavoring

to achieve a composition for the Supervisory

Board that takes the following elements into

account:

At least one seat on the Supervisory Board for

persons who especially embody the criterion

of internationality.

At least one Supervisory Board member

elected by the shareholders who has no po-

tential conflicts of interest and are indepen-

dent within the meaning of item 5.4.2 of the

Code.

Generally no persons should be considered

for election who have reached the age of 70

by the time of the election or who have al-

ready been a member of the Supervisory

Board of the company for more than 20 years.

All these criteria are met or are complied with.

Mr. Michael Behrendt is considered an inde-

pendent member of the Supervisory Board as

defined by the Code.

Furthermore, the Supervisory Board resolved a

skills profile for its composition in accordance

with item 5.4.1 of the Code in December 2017. In

line with this, the Supervisory Board of RENK

AG as a whole should have the following skills

and expertise:

In-depth knowledge and experience from the

company itself.

Management or monitoring experience at

other medium-sized or large enterprises.

Experience in key areas for the RENK Group,

such as mechanical engineering and infor-

mation technology.

Expertise in the field of finance.

All these criteria are met or are complied with.

Supervisory Board members did not report any

conflicts of interest in the year under review.

The appointments of Supervisory Board mem-

bers in bodies of other companies are shown in

the notes to the consolidated financial state-

ments.

Remuneration system of the Executive Board and the Supervisory Board For details of the remuneration system for the

Executive Board and the Supervisory Board,

please see the remuneration report in the ma-

nagement report.

Compliance report 2017 In fiscal year 2017 RENK systematically imple-

mented and continued to develop the compli-

ance program covering the combating of co-

rruption, antitrust law, data privacy and money

laundering.

16

RENK has established compliance as an integral

part of its corporate culture. The compliance

management system is coordinated, taught and

constantly refined by the compliance officer on

the basis of the MAN SE compliance program.

He reports directly to the RENK AG Executive

Board and functionally to the Audit Committee

of the Supervisory Board.

The compliance officer is assisted by a deputy

and two other employees in the area of revie-

wing business partners. The Rheine and Hano-

ver plants are also assisted by “compliance

champions” – managers who are not full-time

compliance employees but who assume special

responsibility for compliance at their sites.

Furthermore, the compliance officer can use

the resources of MAN’s corporate compliance

office. In particular, training and information

materials and e-learning courses are managed

from here. Policies are adapted to RENK’s struc-

ture and business model.

The compliance organization and the introduc-

tion of new compliance measures were closely

coordinated with the Executive Board and plant

management teams on the basis of identified

risks. The Risk and Compliance Board, which

meets quarterly, is informed of the progress in

measures and coordinates the next steps as

necessary.

Ethical principles of conduct and compliance

requirements for RENK are established in the

Code of Conduct. Rules substantiating the Code

of Conduct are contained in the following com-

pliance policies:

policy on the handling of gifts, hospitality

and invitations,

policy on the involvement of business part-

ners,

policy on the handling of donations and

sponsorship activities,

policy on compliance with antitrust provi-

sions,

policy on the fight against terrorism, corrup-

tion and money laundering.

policy on the handling of personal data.

In addition to the Code of Conduct for Employ-

ees, RENK has issued a Code of Conduct for Sup-

pliers and Business Partners that defines cer-

tain minimum ethical standards that RENK’s

suppliers and sales support business partners

must agree to comply with.

The integrity of business partners is checked as

a mandatory requirement and they are subject

to an approval process.

In the induction phase after joining the com-

pany, the Compliance Officer introduces new

employees to the compliance organization,

compliance processes and compliance tools,

and takes the opportunity to discuss the com-

pany’s expectations of employees.

In addition, in line with their risk classification,

employees also receive compliance awareness

training in classroom sessions and e-learning.

As per the policy on the involvement of busi-

ness partners, the integrity of sales support

business partners is checked as a mandatory re-

quirement and they are subject to an approval

process. The integrity checks conducted in the

reporting period and the scheduled follow-up

inspections did not lead to any objections.

The electronic monitoring system, also known

as the continuous controls monitoring system

(CCMS), for the early identification of possible

compliance risks and policy violations in pur-

chasing and payment processes, was still ru-

nning at all RENK sites in Germany in the re-

porting period. CCMS reporting consists of vari-

ous check files. Changes in the extent of control

and control irregularities are evaluated on a

monthly basis and assessed in a meeting with

the Head of IT, Head of Finance and the Compli-

ance Officer, and finally reported to the RENK

Risk and Compliance Board.


The compliance officer and the compliance

help desk, which can be used by all employees

for matters concerning compliance, received 28

inquiries for the RENK Group and 26 for RENK

AG in the reporting period (compliance officer

(25 and 23), MAN compliance helpdesk (3)).

These were answered by the compliance officer

and documented.

No compliance violations were identified in the

reporting period.

MAN’s “Speak up!” whistleblower portal helps

to detect and avoid dangerous risks. Through

“Speak up!”, tips concerning severe compliance

violations, particularly in the area of white co-

llar crime (such as corruption), antitrust law

and privacy, are received and processed.

RENK employees and third parties therefore

have another way to provide tips on compli-

ance violations – confidentially, internationally

and at any time – other than contacting the

compliance officer directly. Compliance viola-

tions are not tolerated at RENK under any cir-

cumstances. Information on possible violations

is examined in detail, violations are stopped

and sanctioned as far as labor law allows. Fur-

thermore, the findings from investigating com-

pliance violations are used for the continuous

improvement of the compliance system. No tip-

offs of compliance violations were received

through the whistleblower portal in the year

under review.

MAN Corporate Audit conducted an audit of

the compliance management system and the

business partner process from July 10 to

July 28, 2017.

The objective of the audit was to determine

whether:

there is an effective compliance management

system;

internal rules, policies and instructions are

adhered to;

the handling of business partners is in order.

The results found that the processes were es-

sentially in order and that there were no hu-

man errors.

Transparency RENK publishes a financial diary with all the

important dates for shareholders on the web-

site www.renk.eu under the “Investor Relations”.

Furthermore, this website also provides all

other important information that can be ac-

cessed by shareholders and interested mem-

bers of the public, thereby allowing the simul-

taneous and comprehensive communication of

relevant information. This includes annual re-

ports and half-yearly reports, press releases and

invitations to and agendas for the Annual Ge-

neral Meeting including the other documenta-

tion that must be published in connection with

the Annual General Meeting

Furthermore, such information that must be

disclosed immediately in accordance with capi-

tal market disclosure obligations is also pub-

lished on the www.renk.eu homepage under

“Investor Relations”. In particular, examples of

such information are:

In accordance with Article 19 of Regulation

(EU) No 596/2014 of the European Parliament

and of the Council of 16 April 2014 on Market

Abuse (Market Abuse Regulation), persons

who perform management duties and their

related parties must report to the issuer and

the Bundesanstalt für Finanzdienstleistungs-

aufsicht (BaFin – German Federal Financial

Supervisory Authority) the purchase and sale

of RENK shares and financial instruments

that reference RENK shares. No transactions

were reported in fiscal year 2017.

In accordance with Article 17 of the Market

Abuse Regulation, issuers are required to dis-

close inside information that relates to them

directly without delay.

In accordance with section 40 WpHG, Ger-

man issuers must immediately publish notifi-

cations that they receive of shares of voting

rights in the company being exceeded or

fallen below.

18

Accounting and audit of the financial statements The annual consolidated financial statements

of the RENK Group are prepared by the Execu-

tive Board based on the International Financial

Reporting Standards (IFRS), as adopted in the

European Union, and the single-entity financial

statements of RENK AG in accordance with the

German Commercial Code (HGB) and the Ger-

man Stock Corporation Act (AktG). The consoli-

dated financial statements of the RENK Group

and RENK AG are audited by the auditor and

the Supervisory Board.

In line with the recommendation in item 7.1.2

sentence 2 of the Code, the half-yearly report is

discussed at RENK by the Executive Board with

the Audit Committee prior to its publication.

The publication deadlines for the consolidated

financial statements and the half-yearly report

stipulated in item 7.1.2 sentence 4 of the Code

are complied with.

The Audit Committee of the Supervisory Board

proposes an auditor to be elected for the com-

pany to the Supervisory Board. The Annual

General Meeting appointed Pricewaterhouse-

Coopers GmbH Wirtschaftsprüfungsgesell-

schaft as the auditor for fiscal year 2017 on

April 26, 2017. The auditor provided the Supervi-

sory Board with a statement regarding its inde-

pendence, which serves as proof of the auditor’s

independence. In addition to granting the audit

engagement and agreeing the fee, the Supervi-

sory Board arranged the immediate reporting

by the auditor to the Supervisory Board in the

event of findings or events of material im-

portance in the performance of the audit of the

financial statements and of the discovery of in-

accuracies in the declaration of conformity is-

sued in accordance with section 161 AktG.

(b) Other corporate governance practices

RENK AG is the managing parent company of

the RENK Group. In addition to monitoring its

operating activities, it also defines the develop-

ment of the overall strategy and structure of

the RENK Group.

RENK’s reputation, the trust of our customers,

investors, employees and public opinion are

crucially dependent on the proper conduct of

all the employees of our Group.

RENK has therefore adopted the MAN Group’s

Code of Conduct in full as a binding standard

for day-to-day work. A key objective of the Code

of Conduct is to eliminate advantages granted

and accepted as a means of achieving business

goals. RENK’s standing among the competition

is owed solely to the quality and specific cus-

tomer benefits of its products and services. This

is made clear to our employees in part by trai-

ning, but above all by exemplary conduct of

management. Furthermore, the requirements

of the Code of Conduct are defined in greater

detail in policies.

The appreciation of our employees – regardless

of nationality, culture, religion, sex and age – is

a central concern for RENK’s management. We

treat our employees fairly and openly and with

understanding and tolerance. And we expect

precisely this attitude from our employees in

their dealings with their colleagues, business

partners and third parties. Our social responsi-

bility also includes various preventive

measures for occupational safety and organiza-

tion that provide our employees with the best

possible protection and a positive working en-

vironment. We expect our employees to display

entrepreneurship. In return, we allow our em-

ployees to share in the company’s success.

Another key aspect of RENK’s corporate gover-

nance is responsibility towards investors, which

is quantified by appropriate target returns. The

continuous pursuit of these goals requires that

we strengthen our market position specifically

in our core business. The external growth stra-

tegies that can be used for this, such as coope-

rations, joint ventures, business acquisitions

and the establishment of global distribution of-

fices, are reviewed continuously together with

the possibilities for internal growth and imple-

mented specifically in the context of financial

opportunities.


(c) Working methods and composition of the Executive Board, the Supervisory Board and its committees

The composition of the Executive Board, the

Supervisory Board and the Supervisory Board

committees is presented in the notes to the an-

nual financial statements. The Executive Board

has no committees.

Please see under (a) for information on the

working methods of the Executive Board and

the Supervisory Board.

Working methods of the Supervisory Board committees The Supervisory Board has formed three joint

committees, each consisting of two shareholder

representatives and two employee representa-

tives - the Audit Committee, the Executive Per-

sonnel Committee and the Mediation Commi-

ttee in accordance with section 27(3) of the Mit-

bestimmungsgesetz (MitbestG – German Code-

termination Act). There is also the Nomination

Committee that consists of two shareholder

representatives. The main role of the commi-

ttees is to prepare the resolutions by the full

Supervisory Board. In individual cases, deci-

sion-making powers and responsibilities of the

Supervisory Board are transferred to the

commi-ttees.

The role of the Nomination Committee is to

identify candidates for Supervisory Board ap-

pointments who best meet the selection crite-

ria, taking into account the statutory provisions

and the regulations implemented in accor-

dance with the Declaration of Conformity of

the company, and to propose to the Supervisory

Board suitable candidates for its nominations

to the Annual General Meeting.

The Mediation Committee performs the duties

assigned to it in accordance with section 27(3)

MitbestG.

In particular, meetings of the Audit Committee

are held in connection with the financial state-

ments meeting of the Supervisory Board and

the half-yearly report. Further meetings of the

Audit Committee are convened as necessary.

Please also see the report of the Supervisory

Board for information on the work of the co-

mmittees.

(d) Target for share of women

For the period from January 1, 2017 to Decem-

ber 31, 2021, in accordance with section 111(5)

AktG, the Supervisory Board has set a target for

the share of women in the Executive Board of

0%.

In accordance with section 76(4) AktG, on

July 27, 2015 the Executive Board set targets for

the share of women in the first and second

management levels below the Executive Board

of 0% and 12.8% respectively. The deadline for

achieving these targets was set as June 30, 2017.

The target was not met for the second manage-

ment level below the Executive Board.

The share of women at the second manage-

ment level below the Executive Board was 10.3%

as of June 30, 2017. The lower deviations results

from the departure of two female managers.

The duties of one of these managers were rea-

ssigned to other organizational functions and a

new manager was not appointed to fill this role.

For the other position, it was not possible to

find a female manager with a corresponding

skills profile.

20

The share of women at the second manage-

ment level is therefore similar to the share of

women in the overall workforce. In particular,

the instructions by the Executive Board to in-

crease the share of women in the overall work-

force, and among academics especially, is in-

tended to help achieve the share of women sti-

pulated by the Executive Board. RENK traditio-

nnally fills most of the management positions

from within its own ranks. In light of this,

women are favored for nomination for the re-

gular training programs for junior managers.

For the period from January 1, 2017 to Decem-

ber 31, 2021, in accordance with section 76(4)

AktG, the Executive Board has again set a target

for the share of women of 0% for the first ma-

nagement level and 12.8% for the second ma-

nagement level below the Executive Board.

(e) Disclosures on compliance with the minimum share of women and men in the Supervisory Board

In accordance with section 96(2) sentence 1

AktG, the supervisory board of a listed stock

corporation subject to the German Codetermi-

nation Act must consist of at least 30% women

and at least 30% men.

The shareholders have objected to full compli-

ance in accordance with section 96(2) AktG.

Thus, the Supervisory Board must consist of at

least two women and two men – in terms of

both shareholders and employees.

The shareholder members of the Supervisory

Board are two women and four men, and this

requirement is therefore fulfilled. The em-

ployee members of the Supervisory Board are

six men and no women. However, as these are

what are known as pre-existing appointments,

this is not a contravention of the legal regula-

tion.

(f) Diversity concept for the Executive Board and the Supervisory Board

The Supervisory Board of RENK AG resolved a

diversity concept for the Supervisory Board and

the Executive Board in December 2017.

The diversity concept for the Executive Board

consists of the following components:

Stipulation of a target for the share of women

in the Executive Board of 0% in accordance

with section 111(5) AktG. However, the Super-

visory Board supports the activities of the Ex-

ecutive Board to increase the share of women

at the highest management levels in the com-

pany, including in terms of developing poten-

tial successors for the Executive Board.

Appointments for members of the Executive

Board should generally end one year after

they reach the age of 65. This age limit will in-

crease in line with the development of the

standard retirement age for the statutory

pension system and the Supervisory Board re-

serves the right to make exceptions in indi-

vidual cases.

Executive Board members should have many

years of management experience and as

much experience as possible from different

professions.

Among other things, the Executive Board as a

whole should have long-term experience in fi-

nance and HR management.

The Supervisory Board decides who should be

appointed to a specific Executive Board posi-

tion in the interests of the company and taking

into account all the circumstances of the indi-

vidual case.

The diversity concept for the Supervisory

Board comprises the following components:


The objectives set for the composition of the

Supervisory Board.

The skills profile for the Supervisory Board.

The gender quota of 30%, which is already

prescribed by law for the composition of the

Supervisory Board of RENK AG in accordance

with section 96(2) sentence 1 AktG and must

be adhered to accordingly.

With the exception of the gender quota on the

Supervisory Board of RENK AG in accordance

with section 96(2) AktG, which was not met on

account of existing appointments (for reasons

see “Disclosures on compliance with the mini-

mum share of women and men in the Supervi-

sory Board”), all the above criteria are met or

adhered to.

(The Corporate Governance Statement can also be found on the Internet under www.renk.eu in In-

vestor Relations under the section of the same name.)


Management Report of the RENK Group for the Fiscal Year from January 1 to December 31, 2017

Order intake and operating profit remain at a high level

Order intake € 434 million (previous year: € 486 million)

Sales revenue € 469 million (previous year: € 496 million)

Headcount 2,235 (previous year: 2,205)

Operating profit € 60 million (previous year: € 67 million)

Operating return on sales 12.8% (previous year: 13.5%)

Earnings per share € 6.30 (previous year: € 6.50)

Net cash flow € 1 million (previous year: € 32 million)

Proposed dividend: distribution of € 2.20 per share

(previous year: € 2.20)

Outlook 2018

Order intake increased significantly

Sales revenue higher than previous year

Operating profit at similar level

Operating return on sales still in double digits


Business activities and management of the RENK Group

RENK AG – Business focus The origins of RENK AG date back to 1873

when Johann Julius Renk founded a small

workshop for the mechanical production of

gear wheels in Augsburg Lechviertel. In 1879

the young firm moved to the Göggingen

neighborhood, which is still the Group’s

headquarter today. The company was trans-

formed into a stock corporation as early as

1897 – 120 years ago. RENK has been a part of

what is now the MAN Group since 1923. Fo-

llowing the majority takeover of MAN SE by

Volkswagen AG in 2011, RENK also became a

member of the Volkswagen Group.

Today, RENK is a key provider of premium

pulsion technology for a wide range of appli-

cations. It has a global outlook and major pro-

duction locations (branches) in Augsburg,

Rheine and Hanover.

RENK has made it its goal to maintain and ex-

pand its top technological position in key are-

as and to achieve profitable growth in the fu-

ture. The main pillars of this strategy are dis-

crete internationalization measures, a dedi-

cated focus on customer requirements, ope-

rational excellence in all fields and a constant

willingness to innovate.

Overview of divisions The Special Gear Units business comprises

large-gear production at RENK AG’s Augsburg

site and RENK-MAAG GmbH, Winterthur,

Switzerland. The product range extends from

stationary gear units for a variety of indus-

trial applications, including the cement in-

dustry, to turbo gear units of up to 140 MW

transmission capacity to complex gear units

for fast craft and naval applications with up

to 90 MW transmission ratings.

The Vehicle Transmissions business is a

leading manufacturer of fully automatic

transmissions for medium-weight and heavy

tracked vehicles, and also offers a broad range

of powerful test rigs for a variety of indus-

tries.

RENK’s automatic power-shift transmissions

are suitable for rear or front installation with

all modern diesel engines. Electronically con-

trolled and monitored, the units are built at

RENK AG’s Augsburg site. Vehicle Transmi-

ssions business also includes the French sub-

sidiary RENK France S.A.S., Saint Ouen

l’Aumône, which currently mainly performs

maintenance services for French army

tracked vehicle transmissions.

RENK’s test rig activities are also assigned to

Vehicle Transmissions. RENK Test System

GmbH (RTS) in Augsburg and its US subsidi-

ary RENK Systems Corporation, Camby (IN),

USA, design and produce customized test rigs

for development, production and quality as-

surance for automotive, aviation, railway ve-

hicles, tracked vehicles and wind turbines.

The Standard Gear Units business comprises

large-gear production at RENK AG’s Rheine

site. It specializes in marine gear units for

merchant ships, ferries, LNG/LPG tankers,

supply vessels and special ships. It also manu-

factures gear units for turbine plants and

couplings for industrial applications. The site

is also the center for RENK’s offshore wind

turbine activities.

The Slide Bearings business at RENK AG’s

Hanover site and the American sales com-

pany RENK Corporation, Duncan (SC), USA,

supply hydrodynamic, lubricated slide bea-

rings in particular. These are used for electric

motors, generators, pumps, blowers, water

turbines, conveyors and marine applications.

RENK has been a leading provider for stan-

dard series for years.

26

Intensive cooperation in the Group Combining the individual strengths and

product expertise of the individual divisions

creates the potential for synergies that can be

leveraged by the divisions working together

on larger projects. In addition, selective pro-

duct allocation allows the optimization of

large-gear unit production and assembly ca-

pacity.

Honing the competitive edge RENK’s competitive capability is built on

maintaining a leading technological position

in individual application areas, its global

presence in its relevant markets and service

quality tailored to the needs of international

customers.

Internal management system and value management

Internal management process in the RENK Group RENK is incorporated in the internal manage-

ment process of the Volkswagen Group. The

starting point for the internal management

of the RENK Group is medium-term planning,

which is produced once per year and forms

the core of operational planning for a period

of five years.

When planning the company’s future, the in-

dividual planning components are deter-

mined on the basis of the timescale involved.

The coordinated results of the upstream pla-

nning processes are used as the basis for the

medium-term financial planning. This com-

prises the upfront investments needed for al-

ternative products and the implementation

of strategic options, the financial planning of

the income statement, cash flow and balance

sheet planning, profitability and liquidity.

The first year of the medium-term planning

period is then fixed and a budget prepared

for the individual months.

During the year, the budget is reviewed each

month to establish the degree to which the

targets have been met. Target/actual compa-

risons, prior-year comparisons, variance ana-

lyses and, if necessary, action plans to ensure

targets are met are used in this process. For

the current fiscal year, revolving monthly

forecasts are prepared for the coming three

months and the full year. This is done taking

into account the current risks and opportuni-

ties. The focus of internal management du-

ring a year is therefore on adapting ongoing

operations to internal and external circum-

stances. At the same time, the current fore-

cast serves as a basis for the medium-term

and budget planning that follows it.

Key performance indicators in the RENK Group The most important financial performance

indicators in the RENK Group are sales reve-

nue, operating profit and operating return on

sales. The operating return on sales is the ra-

tio of the operating profit generated to sales

revenue. The most important non-financial

performance indicator is order intake.

Target returns In accordance with the objectives of the MAN

Group, RENK is striving for an operating re-

turn on sales of 9.0% within a range of +/-2

percentage points throughout a business cy-

cle in its Power Engineering business area. In

2017 the operating return on sales was 12.8%

after 13.5% in the previous year.


* Owing to the change in the financial reporting of the Volkswagen Group, from fiscal year 2014 operating profit as a percentage of sales revenue is reported as the operating return on sales. To ensure comparability, the operating return on sales was also calculated for fiscal year 2013.

28

21,1


Business performance and economic situation of the RENK Group

Economic environment The world economy achieved gross domestic

product (GDP) growth of 3.2% (2.5%) in 2017.

Economic momentum increased year-on-

year in both the advanced and the emerging

economies.

GDP growth in Western Europe picked up

slightly over the year to reach 2.3% (1.8%). The

majority of countries in this region increased

their growth rate. Uncertainty stemmed from

the UK’s exit negotiations now underway

with the European Union, and the question

this entails of the future nature of relations.

The general upward trend intensified in Cen-

tral Europe, and in Eastern Europe the eco-

nomy grew much more strongly than in the

previous year. Russia ended its recessive

phase with a growth rate of 1.6% (-0.4%).

In Germany, the continuing optimistic senti-

ment among consumers and the good situa-

tion on the labor market led to stronger GDP

growth in 2017 than in the previous year of

2.5% (1.9%).

The growth rate of the US economy was

higher than in the previous year at 2.2%

(1.5%). Above all, the economy was aided by

private consumer spending and the expan-

sive monetary policy. Private gross invest-

ment performed positively as well. The US

dollar was slightly weaker than in the previ-

ous year.

Brazil moved on in the year under review af-

ter bottoming out economically: Economic

output increased by 1.0% (-3.5%). Nonethe-

less, the situation for South America’s largest

economy remained tense, due in part to po-

litical uncertainty.

The Chinese economy expanded at the high

level of the previous year with a growth rate

of 6.9% (6.7%). The Indian economy conti-

nued its positive trend but growth was less

rapid than in the previous year at 6.5% (7.1%).

The reform measures introduced have had

since a dampening effect. Japan reported

solid GDP growth of 1.8% (0.9%).

According to the German Engineering Associ-

ation (VDMA), after a slight decline in the pre-

vious year, sales revenue in the global engi-

neering sector climbed by around 6% in 2017,

which was significantly more than originally

expected. There were upward movements in

many countries, especially China, the most

important production location in global me-

chanical engineering. Revenue for German

mechanical engineering industry was also

around 3% higher than in 2016.

Summary by the Executive Board In line with its broad product portfolio and

its presence on a wide range of markets,

RENK again faced different situations and cir-

cumstances on its individual target markets

in 2017. The relevant performance indicators,

compiled at the level of the RENK Group,

therefore did not stray far from the ranges es-

timated at the start of the year. Closer exami-

nation reveals that, thanks to this broad posi-

tioning, positive and negative developments

in individual, only somewhat correlated busi-

ness areas are at least partially offset.

RENK’s business model, with its often signifi-

cant but relatively few large projects com-

pared to the total volume, entails a high level

of volatility in terms of the accuracy of order

volume, structure and timing planning.

RENK’s typical customer-oriented one-off and

small-series production also makes exact

planning difficult, and can lead to both risks

and opportunities.

30

RENK’s Executive Board is not entirely satis-

fied with its volume of order intake or sales

revenue, but the positive development in op-

erating profit and operating return on sales

compared to assumptions is cause for opti-

mism.

The tables below provide an overview of the

individual figures forecast for the year under

review 2017 and their attainment. For detailed

information on the development of key per-

formance indicators, please see the sections

“Results of operations” and “The segments”.

32

Forecast variance analysis

RENK Group

Results 2016 Forecast 2017 Adjustment of forecast

for 2017 during year

Results 2017

Order intake € 486 million Slight decline – € 434 million

Sales revenue € 496 million

Equal to previous year’s level – € 469 million

Operating profit € 67 million Tangible decline – € 60 million

Operating return on sales 13.5%

Double-digit, but tangible decline – 12.8%

Special Gear Units segment



Results 2017

Order intake € 214 million Slight decline – € 154 million

Sales revenue € 162 million Slight increase – € 162 million

Operating profit € 15 million Tangible increase – € 11 million

Operating return on sales 9.1% Slight increase – 6.8%

Vehicle Transmissions segment



Results 2017

Order intake € 135 million Tangible decline – € 124 million



Operating profit € 26 million Tangible decline – € 27 million

Operating return on sales 16.7% Tangible decline – 17.7%


Standard Gear Units segment



Results 2017

Order intake € 57 million Slight increase – € 88 million

Sales revenue € 101 million Significant decline – € 78 million

Operating profit € 13 million Not by a long way – € 8 million

Operating return on sales 12.4% Not by a long way – 10.7%

Slide Bearings segment



Results 2017

Order intake € 90 million




Operating profit € 14 million Slight decline – € 14 million

Operating return on sales 15.1% Slight decline – 16.0%


Results of operations

Order intake € 434 million RENK received new orders worth € 434 mil-

lion in fiscal year 2017. As expected, order in-

take was therefore below the previous year’s

level (€ 486 million). However, as a result of

different developments in the individual seg-

ments, the decline was stronger than origi-

nally planned. Incoming orders in Special

Gear Units fell short of expectations, which

had already been lowered slightly at the be-

ginning of the year compared to the record

level of 2016. This was mainly due to the post-

ponement of major navy projects. By con-

trast, order intake for Vehicle Transmissions

did not decrease as much as originally ex-

pected thanks to more positive development

in after-sales and maintenance. Incoming or-

ders for Standard Gear Units developed sig-

nificantly better than anticipated at the be-

ginning of the year, with key contributions

from new orders in the Standard Gear Units

business unit, mainly for wind turbine and

marine gear units. The development in order

intake in Slide Bearings was close to the fore-

cast, only slightly below the previous year’s

level.

36

Sales revenue down on previous year RENK generated sales revenue of € 469 mil-

lion in 2017 after € 496 million in the previ-

ous year. The original goal of constant sales

revenue compared to the previous year was

thus not achieved. Revenue remained on par

with the previous year’s level in Special Gear

Units, and the slight increase planned was

not achieved in part due to postponements.

In Vehicle Transmissions as well, the target

set at the beginning of the year of sales reve-

nue level with the previous year was not fully

achieved. Owing to the order intake situation

in the previous year, there was little way to

influence the forecast significant decline in

sales revenue for Standard Gear Units, and

the actual decline was therefore almost ex-

actly as predicted. As assumed at the begin-

ning of the year, sales revenue in Slide Bea-

rings was roughly at the same level as the pre-

vious year.


Order backlog of € 748 million In fiscal year 2017, RENK generated € 35 mil-

lion more in sales revenue than new orders

received in the same period. Together with

other changes, this caused the order backlog

to decline from € 799 million as of the begi-

nning of the year to € 748 million as of the

end of the year. With the exception of the

clear increase in Standard Gear Units, the or-

der backlog declined in all segments. The im-

pact of these declines varied according to the

different lead times for orders in the individ-

ual segments. Given the often very long lead

times in Vehicle Transmissions, the effect was

strongest here in absolute terms because a

large amount of its deliveries were for major

orders received several years ago.

38

Operating profit of € 60 million RENK generated an operating profit of

€ 60 million in fiscal year 2017 after € 67 mi-

llion in the previous year. The operating

profit thus underwent a noticeable decline as

anticipated at the start of the year.

The Special Gear Units reported a significant

decline in its operating profit to € 11 million

instead of the strong growth that had been

forecast. In addition to a lack of earnings con-

tributions as a result of increases in sales re-

venue that had been budgeted but did not

materialize, the revenue mix was also less

profitable compared to the previous year and

forecasts. In addition, cost structures were

less favorable due to delays and the post-

ponement of orders.

Vehicle Transmissions performed substan-

tially better than forecast, maintaining the

previous year’s level instead of a notable de-

cline in earnings. All the segment’s business

areas matched the previous year’s levels

again in 2017.

The earnings situation in Standard Gear

Units was likewise much better over the

course of the year than originally assumed.

Thanks also to orders received at short notice,

capacity utilization was considerably better

than expected and thus the decline in ear-

nings was less severe.

Instead of the slight decline forecast, Sliding

Bearings was again on par with the previous

year’s earnings thanks to slight changes in

the product mix.

The RENK Group therefore reported an ope-

rating return on sales of 12.8% (previous year:

13.5%) for fiscal year 2017 – slightly higher

than the figure planned at the beginning of

the year. The better than expected earnings

in Vehicle Transmissions, Standard Gear

Units and Slide Bearings were offset by the

disappointing performance by Special Gear

Units.

40

Income statement1)

2017 2016

€ million in % € million in %

Sales revenue 469 100.0 496 100.0

Cost of sales (364) (77.5) (376) (75.9)

Gross profit 106 22.5 120 24.1

Other operating income 13 2.9 15 3.0

Distribution expenses (35) (7.5) (36) (7.3)

Administrative expenses (20) (4.2) (18) (3.6)

Other operating expenses (4) (0.8) (13) (2.7)

Operating profit 60 12.8 67 13.5

Financial result 1 0.2 (3) (0.5)

Profit before taxes 61 13.0 65 13.0

Income tax expense (18) (3.9) (20) (4.1)

Profit after tax 43 9.1 44 8.9

Earnings per share in € 6.30 – 6.50 –

Distribution per share in €2) 2.20 – 2.20 –

1) Minor differences in totals or percentages in the statements and tables below can occur as a result of the commercial rounding of amounts in the thousands of euro.

2) 2017: Proposal to the Annual General Meeting


The gross margin fell from 24.1% in the previ-

ous year to 22.5% in fiscal year 2017. This was

caused in part by the different product mix of

the orders invoiced. Selling and administra-

tive expenses climbed marginally and thus

remained almost at the previous year’s level.

Other operating income was down € 2 million

year-on-year at € 13 million, mainly on ac-

count of lower income from the reversal of

provisions. Other operating expenses de-

creased significantly to € 4 million (previous

year: € 13 million) in 2017. In particular, this

item had included provisions for capacity ad-

justments and higher currency translation

charges in the previous year.

The financial result was slightly positive in

fiscal year 2017 after the negative impact of

an impairment loss on the carrying amount

of an equity investment in the previous year.

At € 18 million, tax expenses remained below

the previous year’s figure of € 20 million in

2017 as well. The tax rate was 30.0% after

31.5% in the previous year. This results from

the respective income tax rates for the do-

mestic and foreign Group companies and

from prior period and deferred taxes. In total,

the profit after tax amounted to € 43 million

after € 44 million in the previous year. Ear-

nings per share therefore declined from

€ 6.50 to € 6.30.

42

Financial position of the RENK Group

Principles and objectives of financial management As in previous years, RENK’s financial ma-

nagement was performed centrally by MAN

SE.

The aim of central financial management is

to ensure sufficient liquidity at all times, to

limit financial risks and thereby to enhance

enterprise value.

This comprises safeguarding liquidity re-

sources for operating activities, investment

and targeted growth in addition to the hed-

ging of currency risks. Liquidity is managed

by the MAN Group’s central cash manage-

ment system, which includes RENK AG and its

consolidated subsidiaries.

Cash flow – development of cash and cash equivalents and term deposits

€ million 2017 2016

Cash and cash equivalents at beginning of period 214 117

Cash flows from operating activities 25 57

Cash flows from current investing activities (24) (25)

Net cash flow 1 32

Change in deposits – 80

Cash flows from investing activities (24) 55

Cash flows from financing activities (15) (15)

Net change in cash and cash equivalents (15) 97

Cash and cash equivalents at end of period 199 214


RENK generated cash flows from operating

activities of € 25 million in fiscal year 2017 af-

ter € 57 million in the previous year. The

main reason for this decline was the changes

in working capital, in particular the high net

reduction in prepayments received in Vehicle

Transmissions and Special Gear Units as a re-

sult of the processing of the corresponding

orders.

Following the completion of the major multi-

purpose hall investment project for Special

Gear Units in the previous year, the high level

of investment in property, plant and equip-

ment and intangible assets in fiscal year 2017

was significantly lower than in the previous

year. Investments originally planned for 2017

were also postponed to later years. Further

details can be found in the section “Capital

expenditures, environmental management”.

The total net cash flow for fiscal year 2017

therefore amounts to around € 1 million after

€ 32 million in the previous year. In the previ-

ous year, the company reported a change in

deposits that were added to cash and cash

equivalents. Cash flows from financing activi-

ties included dividends paid. The reported

cash and cash equivalents thus fell to

€ 199 million as of the end of 2017 after

€ 214 million at the beginning of the year.

44

Net assets

€ million Dec. 31,

2017

Dec. 31,

2016

Property, plant and equipment and intangible assets 198 200

Other and financial investments 9 4

Inventories 181 182

Trade receivables 88 86

Other current and noncurrent assets 6 4

Taxes 19 18

Cash and cash equivalents 199 214

Assets 700 708

Equity 422 390

Pensions 11 15

Other provisions 57 62

Prepayments received, current and noncurrent 142 168

Trade payables 35 36

Other current and noncurrent liabilities 29 32

Taxes 5 4

Equity and liabilities 700 708


With capital expenditure significantly below

the previous year’s level in fiscal year 2017 as

well, property, plant and equipment and in-

tangible assets declined slightly from

€ 200 million to € 198 million as a result of

depreciation and amortization. Financial as-

sets increased by € 5 million to € 9 million as

a result of the formation and acquisition of

non-consolidated subsidiaries. The were only

minor changes in the amounts of receivables

and other assets compared to Decem-

ber 31, 2016. Please see “Financial position of

the RENK Group” for information on the de-

velopment of cash and cash equivalents.

RENK’s equity rose by € 32 million from

€ 390 million to € 422 million over the course

of fiscal year 2017, bringing the equity ratio

from 55.1% to 60.3%.

Provisions for pension obligations decreased

slightly in fiscal year 2017 from € 15 million to

€ 11 million. This was due to the positive de-

velopment of the fair value of the plan assets

against which the present value of pension

commitments is charged. Current and non-

current prepayments received declined by

€ 26 million in total to € 142 million, as these

were deducted in line with the recognition of

sales revenue from the corresponding orders

on delivery, particularly in Vehicle Transmi-

ssions and Special Gear Units.

Distribution constant at € 2.20 per share The goal of RENK’s dividends policy is still to

allow shareholders to participate appropri-

ately in business performance on the one

hand, while ensuring the RENK Group’s fu-

ture viability by increasing its equity on the

other. RENK AG has reported net income for

fiscal year 2017 in accordance with the Ger-

man Commercial Code of € 38.2 million (pre-

vious year: € 39.3 million). The Executive

Board transferred € 19.1 million of this (previ-

ous year: € 19.7 million) to retained earnings.

Including retained profits brought forward,

the net retained profits therefore amount to

€ 26.7 million (previous year: € 22.6 million).


Board propose to the Annual General Mee-

ting the distribution of a dividend for fiscal

year 2017 as in the previous year of € 2.20 per

share. Measured against the closing price of

RENK shares of € 113.01 as of Decem-

ber 31, 2017, this corresponds to a dividend

yield of 1.9% (previous year: 2.2%).


Capital information/disclosures in accordance with section 315a(1) HGB1)

The disclosures on individual matters in ac-

cordance with section 315a(1) HGB are as fol-

lows:

Clause 1: Composition of subscribed capital. The share capital of RENK AG of € 17.9 million

is divided into 7 million no-par value bearer

shares. There are no other classes of shares.

Clause 2: Restrictions on voting rights or the transfer of shares. Each share grants one vote; there are neither

restrictions on voting rights nor restrictions

concerning the transfer of shares.

Clause 3: Direct or indirect shareholdings of more than 10% of the capital. MAN SE, Munich, held 76% of the subscribed

capital of RENK AG in the fiscal year. Through

their investment in MAN SE, Volkswagen

Truck & Bus GmbH, Braunschweig, its parent

company Volkswagen Aktiengesellschaft,

Wolfsburg, and Porsche Automobil Holding

SE, Stuttgart, and their controlling sharehold-

ers also indirectly held 76% in the subscribed

capital of RENK. RENK AG was not advised of,

nor is it aware of, any other direct or indirect

shareholdings in the capital of the company

exceeding 10% of the voting rights or the re-

levant reporting thresholds of theWertpapier-

handelsgesetz (WpHG – German Securities

Trading Act).

Clause 4: Bearers of shares with special rights granting control. There are no special rights granting control.

Clause 5: Control of voting rights for employee shareholdings in capital. There is no control of voting rights.

Clause 6: Statutory provisions and regulations in the Articles of Association on the appointment and dismissal of members of the Executive Board and amendments to the Articles of Association. The appointment and dismissal of the Execu-

tive Board are regulated by section 84 of the

Aktiengesetz (AktG – German Stock Corpora-

tion Act). Members of the Executive Board are

therefore appointed by the Supervisory Board

for a maximum of five years. In accordance

with Article 5 of the Articles of Association,

the Executive Board of RENK AG consists of at

least two persons. The number of members is

determined by the Supervisory Board.

In accordance with section 179(2) AktG,

amendments to the Articles of Association

can be resolved by the Annual General Mee-

ting with a three-quarter majority of the capi-

tal represented.

1) Please also see the consolidated financial statements for the required capital disclosures in “Equity”.

48

Clause 7: Powers of the Executive Board to issue or redeem shares. The authorization of the Executive Board to

buy back own shares ended on Novem-

ber 8, 2007. 199,903 own shares or 2.86% of

the total number of shares had been bought

back by this date.

The Executive Board is authorized, with the

approval of the Supervisory Board, to dispose

of or acquire own shares in a manner other

than on the stock market or by way of offer to

all shareholders with shareholders’ preemp-

tive rights disapplied,

if the own shares acquired are sold at a

price not significantly less than the market

price of the shares of the company,

and/or

if this is done as consideration in the con-

text of a business combination or to ac-

quire companies or equity investments in

companies.

The Executive Board is also authorized, with

the approval of the Supervisory Board, to

withdraw own shares without this requiring

an additional resolution by the Annual Ge-

neral Meeting.

These authorizations were not exercised in

the year under review. There is no authorized

capital for the issue of new shares.

Clause 8: Material arrangements in the event of a change of control following a takeover bid. There are no such arrangements.

Clause 9: Compensation agreements with members of the Executive Board or employees in the event of a takeover bid. There are no change-of-control regulations

either for members of the Executive Board of

RENK AG or its employees.

Closing statement by the Executive Board on the dependent company report in accordance with section 312 AktG

In accordance with section 312 of the Aktien-

gesetz (AktG – German Stock Corporation

Act), the Executive Board of RENK AG has pre-

pared a dependent company report. It lists all

the transactions with affiliates of MAN SE in

fiscal year 2017. The closing statement by the

Executive Board on this report ends as fo-

llows:

“The Executive Board hereby declares that,

according to the circumstances known to it at

the time that each transaction was per-

formed, our company received appropriate

consideration for each transaction.”

50

Research and development

Constant change processes, accelerated inno-

vation and increased global networking are

posing new challenges for companies. Not

just accepting these challenges, but also hel-

ping to shape them is a basic requirement for

being able to compete successfully on the

market moving ahead.

Research and development play a prominent

role in this. Most of the products in RENK’s

range have long lifecycles, hence our innova-

tion management focuses on progress that

benefits customers in addition to the tar-

geted development of new products. Here

RENK cooperates with various universities

and research institutes.

In fiscal year 2017 RENK invested € 14 million

(previous year: € 11 million) of its own funds

in the development of new products and the

enhancement of existing ones. RENK there-

fore continued its long-term strategy of gea-

ring its development work towards customer

demand for technologically advanced con-

cepts and integrated service packages in the

past year.

As in previous years, development activities

for high-end marine gear units in Special

Gear Units focused on the optimization and

advancement of the CODELAG technology,

which allows various combinations of gas

turbines and electric motors. Based on this,

RENK developed its innovative AED (Ad-

vanced Electric Drive) module, which can be

used as a primary or auxiliary drive for low-

noise drives. The first systems have since

been delivered. This technology is being de-

veloped continuously to tap additional appli-

cation areas in the marine sector and outside

RENK’s previous fields.

In the stationary gear units, the drive concept

for high-performance vertical mill drives for

cement, COPE ® (COmpact Planetary Electric

Drive) developed in the last few years was

supplemented by a version designed for the

specific requirements of the middle market.

Development work in turbo gear units fo-

cused on variable transmission models and a

newly designed series with planetary gear

units.

Vehicle Transmissions also concentrated on

continuing projects initiated in previous

years. This included both the ongoing deve-

lopment of individual transmission compo-

nents and extending the existing product

portfolio, where initial trial activities were al-

ready begun. An additional area of focus was

the cooperation with system providers for the

integration of RENK transmissions in their

vehicles.

As in the past, the R&D work of RENK’s test

rig business is closely aligned to the require-

ments of specific customer applications. Fur-

thermore, work continued intensively on the

“Acoustic Roller Dynamometer” project and

the previous theoretical approaches were

tested and verified on a 1:1 experimental

setup.

Activities in Standard Gear Units also focused

on continuing development projects initiated

in previous years. The focus in marine gear

units was on the advancement and cost opti-

mization of dredger gear units and on hybrid

drive system components. A wide range of

different versions were designed, for example

for railway drives or wind turbine drives, in

the couplings unit.As in previous years, Slide

Bearings focused on process improvements

in coating techno-logies, for instance with a

view to cutting back on resources and opti-

mizing costs by reducing the storage of

metal.

In addition, work continued on optimizing

the product portfolio in terms of its specific

performance limits within a fail-safe indica-

tor field.


Capital expenditures and environmental management

In fiscal year 2017, RENK invested € 19 million

in property, plant and equipment and intan-

gible assets, € 6 million less than the previ-

ous year’s figure of € 25 million. RENK’s long-

term investment policy is geared towards the

current expected market requirements for

RENK products and services, and the continu-

ous improvement of cost structures to stand

up to intensive competition.

Most of capital expenditure again related to

the Augsburg plant in fiscal year 2017. In addi-

tion to a number of smaller measures, the

priority for activities in Special Gear Units

was the long-term restructuring and renewal

of gear grinding technology. Efforts in Vehicle

Transmissions focused on continuing the re-

organization of the assembly processes that

began in the previous year. Furthermore, the

infrastructure in production was optimized

and added to.

In logistics, design and planning work for the

new goods receiving, testing and storage cen-

ter to the south of Augsburg continued; con-

struction work is to begin in the course of

2018. This state-of-the-art logistics center will

create the framework for the centralization

and more efficient handling of logistics pro-

cesses. In addition, the space created at the

main plant can be used for the needs of the

other segments.

At the Standard Gear Units site in Rheine,

new machinery and grinding technology was

brought and updated for the processing cen-

ters. A similar thing happened at the Hanover

Slide Bearings site, where a new universal test

rig was put into operation.

In line with planning, RENK France also con-

tinued and almost completed its extensive,

long-term modernization and renovation of

the building infrastructure for production,

technology, administration and distribution.

RENK expanded its global presence as part of

its internationalization strategy in 2017 as

well. New subsidiaries were created in India

and South Korea to strengthen new equip-

ment business thanks to their local position-

ing on the one hand and, on the other, to

open up the possibility of tapping service po-

tential for RENK that was previously inacces-

sible due to time and cost constraints. RENK

also rounded off its range of high-quality ma-

rine construction and services with the acqui-

sition of what was Damen Schelde Gears B.V.

in the Netherlands (in the future: Schelde

Gears B.V.). € 5 million in total was invested in

founding or acquiring these companies.

Environmental issues are a top priority at all

RENK’s production sites. The monitoring

audit for the environmental management

system (DIN EN ISO 14001) of RENK AG’s

Augsburg site introduced in 2012 was success-

fully carried out in fiscal year 2017. The envi-

ronmental management systems at RENK

AG’s Hanover site and RENK-MAAG GmbH in

Switzerland are also certified to ISO 14001.

RENK AG’s second environmental program is

now running at the Augsburg site. It defines

the goals and measures for protecting the en-

vironment for 2015 to 2018. With this pro-

gram, the company is committed to imple-

menting further voluntary protective

measures in the different environmental

fields that go beyond the extent required by

law. In some parts of the hall, the lighting sys-

tem has been changed to long-lasting and en-

ergy-saving LED lighting. The commissioning

of an extraction system for an oil bath in the

hardening shop has reduced soot emissions.

An open boring mill at the Hanover site was

replaced by a completely enclosed universal

CNC table boring mill, including robotic tool

change and air filtration. This makes a signifi-

cant contribution to improving air quality

and reducing noise in the production hall.

52

All container pitches at the site were checked

and optimized in line with the new Ver-

ordnung über Anlagen zum Umgang mit wa-

ssergefährdenden Stoffen (AwSV – German

Ordinance on Systems for the Handling of

Water-Hazardous Substances). These preven-

tive measures to secure container pitches sig-

nificantly reduce environmental risks due to

water-hazardous substances.

The roof insulation on the administrative

building at the Rheine site was renovated and

brought up to date. This will allow a signifi-

cant reduction in heating costs. Double-digit

savings in the consumption of cooling lubri-

cants is expected thanks to the introduction

of fluid management for production machin-

ery that uses them. The preparations for the

introduction of paperless production and as-

sembly in the entire production area are

largely complete, and paperless assembly be-

gan in the initial pilot areas. Substantial re-

ductions in paper consumption are expected

here.

RENK-MAAG renovated and insulated the

cooling tower at its Winterthur site.

These measures entail advantages in terms of

energy efficiency, carbon footprint and waste

gas management.


Employees

The RENK Group employed 2,235 people on

December 31, 2017 (previous year: 2,205). It

also had 74 subcontracted employees (previ-

ous year: 44). The number of employees in

Germany was 2,068 (previous year: 2,041), at

the foreign companies this figure was 167

(previous year: 164).

RENK’s many years of success are closely

linked to the high level of skill and dedication

of its employees, and their sense of identity

with the company. Preserving these qualities

while at the same time empowering the com-

pany and its employees for evolving challen-

ges within and outside the company was a

key area of manager and employee develop-

ment.

Guiding principles The company’s management devised new

corporate guiding principles at the end of

2016. This includes the basic principles of the

company and is intended to serve as a guide-

line for employees and their actions. The va-

lues established in it are the measure for our

day-to-day activities and support us both in-

ternally and externally. RENK’s success is built

on both understanding and practicing com-

mon values.

Implementation of the RENK strategy Managers and employees will only success-

fully implement RENK’s strategy if they know,

understand and can identify with it. Only

then will they be able to make their contribu-

tion. To achieve this and to get all managers

involved, the “RENK Summit”, a meeting of

more than 100 managers from different sites,

was held in Würzburg for the first time in No-

vember. Embedded in the RENK guiding prin-

ciples, work was done to implement the 2025

corporate strategy in various formats.

Leadership focus – Assessment of RENK’s guiding management principles Good management is not just crucial to busi-

ness success, but also to employee satisfac-

tion. In the employee survey last conducted

in 2016, more than 73% of staff stated that

they are satisfied with their supervisor’s ma-

nagement. While this value shows that RENK

is on the right path and that the different HR

development programs for management are

having an effect, there is still a focus on hel-

ping managers to improve their leadership

skills.

A feedback process on the basis of RENK’s

guiding management principles was

launched for this purpose. The RENK guiding

management principles comprise ten ma-

nagement principles. These describe key su-

ccess factors for management roles at RENK.

Recruitment and loyalty – the best talent for RENK, even from a school age Competition for the most talented people has

become even greater in light of the good state

of the economy and the high employment

rate this entails. For this reason, RENK takes

selective measures to establish contact with

potential applicants long before they enter

the workforce. For example, RENK is a spon-

soring company for the regional “Jugend

forscht” contest for the first time. Together

with MAN Diesel & Turbo, RENK will be or-

ganizing the event for the Swabia region of

southwestern Germany. This grants RENK ac-

cess to school students who love technology

from as early as fourth grade, who can prove

what they know and what they can do with

their own projects in a number of math and

natural sciences fields.

54

RENK is pursuing the same goal by offering a

number of high school student internships.

The pool of suitable applicants for training

places is growing increasingly small. This is

why it is important to show school children

early on how appealing it can be to train with

and later work for RENK.

As in previous years, RENK relies on its inten-

sive university marketing activities in com-

peting for the best academic graduates. By

awarding a high number of internships, dis-

sertations and working students, RENK can

show students how exciting it is to work in

the world of drive technology and position it-

self as a top employer. Its success can be seen

by the fact that around 50% of the open aca-

demic positions at the Augsburg plant were

filled from among this group of applicants

and its own dual students. In addition, RENK

participates in relevant university fairs and

organizes its own presentations by its tech-

nical departments at different universities.

Groups of engineering students regularly

visit the individual plants and gain an over-

view of the various career opportunities at

RENK through keynote speeches and com-

pany tours.

RENK is also pursuing the goal of signifi-

cantly increasing the share of women among

its employees. Women of equal aptitude are

favored for vacancies. Unfortunately, the in-

terest in technical vocational training careers

and engineering is not yet at the same level

among women. In order to increase the share

of female applicants for vocational training

careers, “Girls’ Day” events were held at all

sites, where participants not only learned

about technical vocational training careers,

but were also given the chance to demon-

strate their skills in small practical activities.

Given the high complexity of the work in-

volved and the extensive training required, it

is important that RENK not just finds the

right employees but also ensures their long-

term loyalty to the company. In addition to

intensive induction programs, introductory

days and corporate events, such as the Christ-

mas market, this goal will also be aided by the

RENK Academic Onboarding Program, which

was first held in 2016 and is repeated every

year. As well as boosting loyalty among aca-

demically trained employees, this is also ex-

pected to assist in the expansion of key skills

and the improvement of interdisciplinary co-

operation. Alongside various components

such as external team-building exercises, mu-

tual presentations on activities and areas and

job rotation, participants are currently work-

ing on the general RENK issue of “Employer

Branding”. The goal is to further consolidate

the RENK brand as a top employer.

Employee participation in business success RENK’s image as an employer and employee

motivation depend not least on an attractive

salary package. Accordingly, the great co-

mmitment by employees will be rewarded for

fiscal year 2017 by allowing them to partici-

pate directly in business performance. This

profit-sharing is based on the stipulated tar-

gets.

Company pension plan RENK rewards the long-term loyalty of its em-

ployees with an additional attractive com-

pany pension plan in the form of the MAN-

Profit-Sharing and Pension Plan (MEV). In

addition to employer contributions, employ-

ees have the option of voluntary deferred

compensation as part of their personal pen-

sion provision. Such contributions are free

from tax and social security contributions up

to the statutory contribution assessment cei-

ling. The company supports this voluntary

deferred compensation with additional top-

ups.

Promotion of occupational health management In the third year since its launch, occupa-

tional health management again focused on

occupational integration management. With

suitably appropriate preventive measures

taken by the integration management team

in cooperation with safety engineers and

works physicians, attempts are being made to


prevent future long-term illnesses and to

allow employees to take part in work again af-

ter a long-term illness. One of the key areas

for occupational integration management at

the Augsburg plant was helping an employee

who needs a wheelchair take part in normal

working life. A number of alterations were

made in close cooperation with the employ-

ees of the integration office for this purpose.

In cooperation with the company health in-

surance system, previous health-based activi-

ties such as the free back school, health weeks

in the works restaurant, colon cancer scree-

ning, vaccination consulting and skin scree-

ning were continued. The employee restau-

rant set up in Augsburg in 2016 was even

more frequently attended in 2017 than in its

successful first year, and contributes to

healthy eating habits among employees, even

with vegetarian dishes that have been well ac-

cepted.

Employee vocational training and continuous professional development RENK continues to develop the technical and

managerial skills of its employees so that

every site will still have well trained and

highly motivated employees in the future.

The success of the vocational training con-

cept at RENK has again been highlighted by

numerous awards at all sites. At the end of

2017 a total of 119 vocational trainees (previ-

ous year: 123) were being trained either di-

rectly at RENK’s individual divisions or by

RENK indirectly at the MAN vocational trai-

ning center in Augsburg. Of RENK AG’s 111 vo-

cational trainees (previous year: 113), the

Augsburg plant accounted for 69 (previous

year: 67), Rheine for 28 (previous year: 32) and

Hanover 14 (previous year: 14). There were

also five vocational training places at RTS,

two at RENK-MAAG and one at RENK France.

15 of the 119 vocational trainees are doing

combined studies of either mechanical engi-

neering or mechatronics at a university para-

llel to their vocational training.

More and more, RENK is developing away

from being a manufacturer of gear units and

towards being a provider for end-to-end sys-

tems. This requires that employees have addi-

tional electronics expertise in addition to

their excellent knowledge of engineering.

This is why electronics was one of the main

areas of continuous professional develop-

ment. In addition to various basic training

units, several employees were financed to

fully train as industrial electricians, which

they completed with great commitment and

excellent performance.

Another focus was on communication trai-

ning. Regardless of whether the task at hand

is to “present information convincingly” or to

“conduct difficult employee appraisals”, good

communication is crucial. To advance the

company’s many projects successfully, a uni-

form project management system was set up

and a number of employees from all sites

were trained in the same way. Furthermore,

corresponding training was provided for pro-

ject contractors. This ensures that all employ-

ees who regularly work in project teams have

a common understanding of and approach to

achieving their goals and milestones faster.

Our thanks to the employees and their representatives We would like to thank all our employees for

their great dedication and contribution to the

successes achieved. Our thanks also go to the

employee representatives on the Supervisory

Board, the members of the Works Council and

the Economic Committee for continuing the

open and constructive cooperation of past

years.

We will fondly remember the members of

staff and former employees who passed away

in the period under review.


The segments

The segment tables below show order intake

and sales revenue for the individual seg-

ments and intersegment transactions.

Special Gear Units (Augsburg plant/RENK-MAAG)

€ million 2017 2016 Change*

Order intake 154 214 (60)

Sales revenue 162 162 0


Operating return on sales (%)* 6.8 9.1 (2.3)

* Calculated in € thousand

General economic conditions As in previous years, 2017 was characterized

by divergent developments on the individual

target markets of Special Gear Units.

The procurement activities of government

contractors continue to dominate the market

for marine gear units. The general demand

for technically sophisticated gear sets for na-

vies and coast guards continued in the re-

porting year, based both on many countries’

ongoing need to replace partially outdated

units, and new or extended requirement pro-

files. High-end solutions that enable a combi-

nation of different drive sources optimized

for the respective application situation are

frequently used here. In addition to supply-

ing complex gear sets and partial drive sys-

tems for frigates, corvettes and patrol vessels,

there is also growing demand for system con-

sulting and support for system integration

for the entire drive system. Beyond govern-

ment applications, this transmission techno-

logy is also used in highly discerning market

segment for mega-yachts, where similar de-

mands are made in terms of performance,

flexibility, noiselessness and smooth ru-

nning.

By contrast, conditions on the markets for

stationary gear units remained difficult in

2017 as well. The price of oil has not yet

reached the level necessary to kick-start more

extensive, long-term investment in oil pro-

duction, particularly in offshore or deep sea

projects. Declining revenues in oil-producing

countries are also causing budget cuts and

shifts in investment not just to oil production

but also to infrastructure projects – both in

countries with offshore oil production and

conventional oil-producing countries. The

market for turbo gear units has not yet reco-

vered from its collapse a few years ago, and

there was a shrinking trend in the volumes of

gear units needed for cement grinding plants.

As a result, the lack of satisfactory capacity

utilization among suppliers again led to con-

tinued intensive competitive and thus price

pressure on all sub-markets for industrial

gear units in 2017.

The same is also true for our Swiss company.

Some positive nonrecurring factors for RENK-

MAAG resulted from the relocation and mo-

dernization of steel mills in China, which

were initiated with the aim of reducing air

pollution in urban areas.

58

Business development As expected, order intake in Special Gear

Units fell short of the high level of the previ-

ous year at € 154 million in fiscal year 2017

(€ 214 million). As had been forecast, the re-

cord level of incoming orders for marine gear

units in Augsburg was not repeated, and pro-

jects originally expected to be implemented

in 2017 were postponed to later years. In addi-

tion to follow-up orders under US Navy pro-

curement programs that have been running

for several years, the first call-off orders were

also placed a new US Coast Guard program. In

addition, there were orders for single ships or

small series for use in a number of states. Or-

ders were also taken in the mega-yacht seg-

ment.

Incoming orders for stationary gear units al-

most matched the previous year’s level in

2017. Growth in orders for gear units for ce-

ment mills almost completely offset declines

for industrial and turbo gear units. The order

volume for the Swiss company RENK-MAAG

was significantly higher than in the previous

year.

At € 162 million, sales revenue in Special Gear

Units was exactly level year-on-year. Both

marine gear units and stationary gear units

continued the previous year’s sales revenue

volumes. As part of the deliveries for long-

term projects for individual navies, activities

in marine gear units focused on the initial de-

livery of the first highly complex ship set for

the Italian Navy. Furthermore, the highly so-

phisticated AED system was delivered for an

Antarctic research vessel as of the end of the

year. The slight increase in industrial gear

units in stationary gear units offset the

changes in the other product areas. RENK-

MAAG also achieved sales revenue slightly

higher than the previous year’s level in 2017.

In December 2017 RENK acquired all shares in

what was Damen Schelde Gears B.V., an expert

for marine gear units based in Vlissingen in

the Netherlands. As part of the marine gear

units business area, under the new name of

Schelde Gears B.V., the company will continue

its previous activities – mainly engineering

and after-sales services for the marine sector

– within the RENK Group, thereby supple-

menting RENK’s product range for these

applications.

Result Special Gear Units generated an operating

profit of € 11 million in fiscal year 2017, down

€ 4 million on the figure for the previous

year. Less favorable cost structures due to a

less profitable revenue mix and short-term

postponements contributed to this decline.

The operating profit of the Swiss company

RENK-MAAG was also significantly lower than

in the previous year. Accordingly, the opera-

ting return on sales in Special Gear Units de-

creased from 9.1% in the previous year to

6.8% in the year under review.


Outlook The promising overall market situation for

complex gear units for use in naval and coast-

guard vessels is not expected to change sub-

stantially in 2018. There is still substantial po-

tential worldwide, but the scope and timing

of implementation is difficult to assess in in-

dividual cases, especially as political develop-

ments and considerations play a greater role

in decision-making.

We also expect little movement in industrial

gear units. There will be no tangible improve-

ment in the difficult market environment for

all main product areas. Individual turbo

applications appear promising, and potential

exists in the plastics processing industry. In

stationary gear units as well, political deve-

lopments are weighing on sales opportunities

– Iran, for example, will make only slow pro-

gress working through its investment backlog

as a result of sanctions in 2018. In the Middle

East, necessary investment in, for instance,

the cement mill area or oil and gas produ-

ction is failing because the continuing insta-

bility does not allow for regular construction

site operation.

RENK-MAAG will continue to pursue the path

it has embarked on in 2018, focusing on ex-

panding its market presence and further de-

veloping individual product groups.


Vehicle Transmissions (Augsburg plant/RENK France/RTS/RENK Systems)



Sales revenue 151 158 (7)

Operating profit 27 26 1

Operating return on sales (%)* 17.7 16.7 1


General economic conditions There were no significant changes in the

basic market situation for RENK as a manu-

facturer of transmissions for medium-weight

and heavy tracked vehicles in the year under

review. The part of the world market accessi-

ble to RENK consists of a relatively small

number of procurement programs that usu-

ally take years to carry out with low annual

shipments. It remains RENK’s primary goal to

participate in the majority of these procure-

ment programs for which opportunities are

still open, but it is becoming increasingly di-

fficult to forecast both the timing and con-

tent of actual implementation. For one thing,

decision-making in potential customer coun-

tries is influenced by a variety of domestic,

foreign and fiscal policy factors that can

range from local to global. For another, the

impact assessment of a restrictive German

export approval policy is not going unnoticed

by decision-makers. This is apparently moti-

vating the need to specifically strengthen or

consciously build up alternative providers.

After-sales business continues to be defined

by strong competition, especially for mainte-

nance. It is not always the case that contrac-

tors have complied with the required quality

criteria in the past. As an original equipment

manufacturer (OEM), RENK is also standing

by its established high technical standards for

maintenance.

As in previous years, RENK France’s activities

focused on the maintenance and repair of

gear models manufactured for the French

army.

The market for technically sophisticated test

rig applications was mixed in 2017, driven by

a more restrictive investment policy on the

part of some potential customers and in-

creased crowding out among suppliers. There

are also increasingly protectionist tendencies

in some regions and for certain applications.

Business development At € 124 million, order intake in Vehicle

Transmissions as a whole was € 11 million

lower than in the previous year. Unlike in

2016, vehicle transmissions in Augsburg was

not awarded a major order for new transmis-

sions in 2017. This gap was not entirely filled

by increased incoming orders for repairs and

after-sales services. Orders for HSWL 354 se-

ries gear units were particularly important

here. RENK France’s incoming orders were in

line with the previous year’s level in 2017. The

aviation and vehicle industries accounted for

most of the order intake for test rigs.

At € 151 million, sales revenue in Vehicle

Transmissions business was also unable to

match the previous year’s figure in 2017

(€ 158 million). RENK AG’s vehicle transmis-

sions business achieved a slight increase,

thanks in particular to higher deliveries of

HSWL 256 series gear units for the PUMA and

AJAX programs and the RK 325 series. RENK

France generated revenue in line with the

previous year. Test rigs reported a clear de-

cline in sales revenue, which was mainly

driven by test rigs for the aviation, railway

and vehicle industries.

62

Result Vehicle Transmissions generated an opera-

ting profit of € 27 million in fiscal year 2017

after € 26 million in the previous year. All

business areas – of RENK AG, RENK France

and RENK test rigs – maintained their opera-

ting profit at the respective level of the previ-

ous year. The operating return on sales there-

fore improved by one percentage point from

16.7% in the previous year to 17.7% in the year

under review.

Outlook The general shape of the market for tracked

vehicle transmissions will not change in the

coming years, and the procurement practices

of individual countries will define further de-

velopment. Irrelevant considerations from

various corners frequently play a defining

part in decision-making – such as demands to

share expertise, local participation in value

added, or even other forms of compensation.

The significance of new competitors is likely

to rise, and in some cases their targeted su-

pport from individual states is a counter-re-

action to Germany’s export control policy, es-

pecially as there is no uniform procedure

within the EU in this regard. The implications

of the intention expressed by NATO Member

States to increase defense spending are still

unclear. It remains to be seen whether this

will be reflected in procurement projects rele-

vant to RENK.

RENK France will continue its current busi-

ness model in 2018. The prospects in service

business remain stable, and there are indivi-

dual opportunities in retooling business out-

side France. The RENK test rigs unit antici-

pates further sales opportunities primarily in

the railway and aviation industries. There are

only few large-scale wind power projects.

There is highly substantial competitive pre-

ssure for contracts in the automotive indus-

try.


Standard Gear Units (Rheine plant)


Order intake 88 57 31



Operating return on sales (%)* 10.7 12.4 (1.7)


General economic conditions Again in 2017, there were no signs of lasting

improvement in the Standard Gear Units

market for civil marine gear units. The slight

increase in the price of oil has not yet invigo-

rated new construction in the offshore sector.

There were also hardly any new orders for li-

quefied natural gas (LNG) tankers on account

of the current surplus capacity. The only new

builds were for floating storage regasification

units (LNG FSRUs). Demand for dredgers ra-

llied slightly towards the end of the reporting

period as a result of greater demand for

coastal protection and waterway mainte-

nance.

Demand for turbo gear units remained al-

most unchanged at a low level. Key customers

are still complaining that capacity utilization

is too low, and are therefore downsizing on

RENK’s target markets (energy generation, oil

and gas), even going as far as plans to shut

plants down.

The positive overall economic development

in German mechanical engineering has not

yet reached the part of the couplings market

relevant to RENK: manufacturers of drive

technology.

Changes in the legal framework in Germany

(amendment of the German Renewable Ene-

rgies Act) is having a clear impact on the

country’s wind power industry. Smaller sys-

tem provi-ders seem to be facing serious di-

fficulties, with gains more likely for large pro-

viders. An unmistakable price war is develop-

ing between component manufacturers,

which is being fueled by Eastern European

and Chinese suppliers entering the market.

Business development After a sharp slump in the previous year, or-

der intake in Standard Gear Units increased

significantly in 2017. Incoming orders of

€ 88 million mark growth of 55% over the pre-

vious year’s figure of € 57 million. Significant

increases were generated by marine gear

units, including for dredger and LNG FSRU

ships. In the wind power sector there were

additional orders for existing wind farms and

the order for a prototype. Couplings were no-

ticeably reinvigorated, while the previous

year’s level for stationary gear units was al-

most maintained.

As a result of the low order intake in the pre-

vious year, sales revenue for Standard Gear

Units declined from € 101 million in 2016 to

€ 78 million in 2017. This was crucially caused

by the slump in wind turbine gear unit deli-

veries, where no relevant new orders were re-

ceived in the previous year. In the other pro-

duct groups, increases in stationary gear

units and couplings virtually offset the down-

turn in marine gear units.

Result Even though the contraction in sales revenue

was not quite as extreme as feared in 2017,

operating profit still took a heavy hit. It fell

from € 13 million in the previous year to

€ 8 million in fiscal year 2017, which was sig-

nificantly higher than expected at the begi-

nning of the year. In the previous year the

operating profit also included the provisions

66

recognized for the planned capacity down-

sizing. The operating return on sales was

therefore 10.7% for fiscal year 2017 after 12.4%

in fiscal year 2016.

Outlook Standard Gear Units business assumes that

conditions on its sales markets will remain

challenging in 2018.

There are currently no signs of easing on the

commercial maritime market. The potential

for LNG-FSRUs is expected to remain virtually

the same, while there could be a slight in-

crease for dredgers and RoPax ferries (roll-

on/roll-off ferries with passenger cabins). A

noticeable recovery is not expected for the

offshore market.

New and expanded systems for energy gene-

ration and in the oil and gas sector will pre-

sumably remain isolated in 2018 as well. This

could only be aided in the short term by a

rise in the price of oil because then, for in-

stance, fracking technology would become

more attractive again.

While there is no discernible improvement

on the couplings market for the applications

of oil and gas, shipbuilding or the steel indus-

try, isolated opportunities could arise in

other fields. Similarly, there could be indivi-

dual opportunities in the wind sector, though

the competitive situation constitutes a major

challenge, particularly in Asia.

68

Slide Bearings (Hanover plant/RENK Corporation)




Operating profit 14 14 0

Operating return on sales (%)* 16.0 15.1 0.9


General economic conditions 2017 was once again characterized by global

political and regional crises. The develop-

ment of Slide Bearings business at RENK, as a

manufacturer of components for mechanical

and plant engineering and ship and marine

technology, is highly dependent on the initial

conditions for these primary requisitioners.

The positive general sentiment in the highly

mixed drive technology sector reported in

the year under review has not yet had a posi-

tive effect on the standard e-bearings seg-

ment. The key customers here are found in

the electrical engineering sector, which tends

to be at the late end of a recovery cycle. The

trends already seen in previous years conti-

nued in 2017 as well - production capacity is

migrating to future growth markets, while

emerging and developing economies are

promising much stronger growth momen-

tum than the fully developed yet somewhat

shrinking markets of the industrialized na-

tions. This is being further intensified by the

transformation processes in the industria-

lized nations away from energy traditionally

produced with rotary machines and towards

renewable energies. This will lead to signifi-

cant structural adjustments for the manufac-

turers of large systems for conventional

power plants – even going as far as mass

downsizing and plant closures.

For RENK this meant an increase in competi-

tive pressure from aggressive bearing manu-

facturers, e.g. from the mid-market segment,

and also the continued substitution of slide

bearings with rolling bearings for the lower

power ranges.

Potential for special bearings identified in the

past can also only be achieved to a limited ex-

tent because, for example, the continued

sanctions against Russia prohibit the delivery

of goods with which to replace its naval fleet.

The willingness to invest in technologically

sophisticated applications where RENK is tra-

ditionally strong, such as the oil and gas in-

dustry, is still being greatly stifled by general

economic developments.

Business development Owing to the short lead times for standard e-

bearings, this market situation was also re-

flected in the order intake for Slide Bearings

business; at € 84 million, 6% fewer orders

were received in 2017 than in 2016 (€ 90 mil-

lion). In particular, there were declines in

standard e-bearings and other horizontal

bearings.

At € 88 million, sales revenue in Slide Bea-

rings business was almost on par with the

previous year in 2017 (€ 90 million). This was

also affected by the standard e-bearings situa-

tion.


Result The operating profit for Slide Bearings was

level with the previous year at € 14 million in

2017. Declines in standard e-bearings were

compensated by positive effects from bea-

rings for projects. As a result of the slight de-

cline in sales revenue, the operating return

on sales for Slide Bearings business therefore

amounted to 16.0% in fiscal year 2017 (previ-

ous year: 15.1%).

Outlook The market conditions for Slide Bearings’

standard e-bearings business will not change

fundamentally in 2018. The trends observed

thus far will continue. Political developments

at both the global and regional level – such as

a change in US policy, Brexit or the situation

in Brazil – can have a significant impact.

Structural changes in the energy-producing

industry will continue to progress; previous

applications for slide bearings will shrink and

it will be challenging to compensate for this

with other applications. Investment propen-

sity in the oil and gas industry will continue

to be largely determined by the development

of the price of oil – growth can only be ex-

pected if a stable, adequate price level is an-

ticipated.

70

Report on risks and opportunities*)

Company-wide risk management system Doing business means constantly being ex-

posed to risk. RENK defines risk as the threat

that events, decisions or actions will prevent

the company from achieving defined goals or

successfully pursuing certain strategies. In or-

der to leverage market opportunities the

company consciously takes risks if it can

thereby expect an appropriate contribution

to enterprise value. Risks that threaten the

company’s continued existence should not be

taken or, if they are unavoidable, must be

minimized with appropriate measures. This

requires an effective risk management sys-

tem tailored to the needs of business activi-

ties and that provides the necessary infor-

mation early on to guide the company.

Risk management at RENK is incorporated

into the risk management system of the MAN

Group. It is an integral part of corporate ma-

nagement and business processes and is

composed of the core elements of corporate

planning, including a review process during

the year, risk and opportunities management

(“risk management”), the internal control sys-

tem and the compliance management sys-

tem.

One of the goals of corporate planning is to

guarantee that risks and opportunities are

identified and assessed early on so that suita-

ble measures can be taken. Risk management

is set up at all levels to provide current and

relevant information on the development of

material risks and opportunities and on the

effectiveness of the measures taken at an

early stage. The internal control system fo-

cuses on the close monitoring and contro-

lling of risks, in particular with regard to the

effectiveness of business processes, the relia-

bility of financial reporting and compliance

with legislation and regulations. The RENK

compliance system assists in ensuring com-

pliance with all laws applicable to the com-

pany, internal guidelines and codes of con-

duct. It places special emphasis on the issues

of combating corruption, antitrust law, data

privacy, preventing money laundering and

combating terrorism. Details of this can be

found under “Compliance system”.

Organization of risk management and the internal control system Overall responsibility for setting up and

maintaining an appropriate and targeted sys-

tem for the early identification of risks lies

with the RENK Executive Board. RENK’s Exec-

utive Board has organized the extent and

structure of risk management and the inter-

nal control system in line with the company’s

specific requirements. The industrial gover-

nance management concept calls for local de-

cision-making processes for operations in the

RENK Group. The management is responsible

for ensuring that in addition to the RENK AG,

by far the most important company, the

other RENK companies are included in the

risk management and internal control system

to the necessary extent. The Group-wide po-

licy for risk and opportunities management

and the internal control system provides the

framework for a Group-wide concept of risk

management and the internal control sys-

tem, and contains regulations for structural

organization, processes and reporting.

*) Includes the report in accordance with section 289(4) HGB


Structural organization The structural organization for risk manage-

ment and the internal control system is based

on the RENK management hierarchy. Roles and

bodies have thus been set up. There are coordi-

nators for risk management and the internal

control system to ensure that the processes de-

fined in the Group policy are implemented.

They also play a part in the ongoing develop-

ment and improvement of the risk manage-

ment system. RENK has set up an interdiscipli-

nary Risk and Compliance Board that acts as a

central controlling and monitoring body for

risk management, the internal control system

and compliance. In the course of discussions by

the Risk and Compliance Board, the risk situa-

tion is assessed and measures for managing

risk and remedying control weaknesses are re-

solved.

Risk management processes The standard risk management control process

comprises the phases of identification, analysis,

assessment, controlling, monitoring and com-

munication. Risks and opportunities are classi-

fied as either short-term, i.e. until the end of

the fiscal year, or long-term, i.e. up to five years.

Risks are assessed according to their probability

of occurrence and the extent of possible loss on

a gross and net basis, whereby the net assess-

ment includes any measures implemented to

mitigate risk. Qualitative analyses are also pos-

sible. The planned operating profit of the re-

spective organizational unit is taken as the ba-

sis for assessing the materiality of such a net

analysis. Within their areas of responsibility,

risk officers define and implement risk-mini-

mizing measures in addition to monitoring

their effectiveness. Using uniformly defined

risk areas, any risk clusters can be identified

early on and actively handled.

The Risk and Compliance Board assesses the

current risk situation by discussing and com-

paring risks and opportunities, resolving

measures and monitoring their effectiveness.

Discussions focus on the causes of risk and

measures. The risk and opportunities situation,

and the measures taken to manage and amelio-

rate this situation, are reported to the Executive

Board. Furthermore, the Supervisory Board re-

ceives regular reports on the risk position and

the effectiveness of the internal control system

in Audit Committee meetings.

Moreover, risk management and the internal

control system are subject to constant further

development in order to take into account

changes in conditions and to further increase

their benefit at every level of the company.

Accounting-related risk management system and internal control system Generally, risk management and the internal

control system, as an integral component, com-

prise the accounting-related processes and all

risks and controls with regard to financial re-

porting. This applies to all aspects that can sig-

nificantly affect the consolidated financial

statements. Risk management assesses identi-

fied risks in terms of their influence on the con-

solidated financial statements and takes corre-

sponding measures to manage and control risk.

The internal controls are geared towards limi-

ting risks of material misstatements in finan-

cial reporting, risks of non-compliance with

regulatory standards or due to fraud, and mini-

mizing operational and business risks (such as

asset risks resulting from unauthorized opera-

tional decisions or obligations illegitimately en-

tered into). Accounting controls have to provide

reasonable assurance that the Group’s financial

reporting process is in accordance with IFRSs,

the German Commercial Code and other ac-

counting-related rules and laws, and that it is

reliable.

72

As the MAN Group has, RENK has structured

and documented the internal control system in

place in accordance with the recommendations

of the Committee of Sponsoring Organizations

of the Treadway Commission (COSO) in order to

systematically assess the effectiveness of inter-

nal controls. The documentation covers all

standard business processes, including pro-

cesses relevant to the preparation of financial

reporting with the respective necessary con-

trols. It also comprises controls for business-

specific risks. The scope of the documentation

is determined by the companies that are mate-

rial to the consolidated financial statements or

whose qualitative characteristics imply greater

exposure to risk. This is reviewed annually

based on defined criteria.

Key elements of risk management and control

in financial reporting are the clear allocation of

responsibilities and controls in the preparation

of financial statements, transparent rules

thanks to policies on accounting and the prepa-

ration of financial statements, appropriate re-

gulations governing access to the IT systems

relevant to financial reporting and the clear as-

signment of responsibilities when using exter-

nal specialists. The dual control principle and

the separation of functions are also key princi-

ples in the financial reporting process that are

implemented in the internal controls at RENK.

The effectiveness of accounting-related internal

controls must be assessed at least once per

year, primarily in the process of preparing the

financial reporting. Identified weaknesses in

controls and agreed measures are included in

the quarterly reports to the Risk and Compli-

ance Board. In addition, Corporate Audit at

MAN SE, acting on behalf of the RENK Executive

Board as an independent internal auditor, as-

sesses the regularity, the security and the ma-

nagement and monitoring processes for ac-

counting-related internal controls.

The internal control system is regularly checked

for completeness, suitability and effectiveness

to ensure that the rules for reducing procedural

and organizational risks are complied with at

all levels.

Opportunities and risks RENK classifies the material opportunities and

risks for RENK that can have a significant im-

pact on the net assets, financial position and re-

sults of operations on the basis of the five risk

areas of market, products, processes, employees

and finance.

Market RENK anticipates opportunities for profitable

growth in the medium- to long-term in all areas

of the transportation and energy markets. The

fundamental global economic trends will pre-

sumably continue. In particular, these include

sustained albeit moderate growth, the interna-

tional division of labor along value chains and

thus a high level of global transport. Further-

more, there is growing demand for energy and

the necessary innovation due to climate policy,

which is gaining momentum. As part of its stra-

tegic focus, RENK is continuously working to re-

alize these market opportunities worldwide.

In our opinion, risks to a continuation of world

economic growth mainly lie in turbulence on

the financial markets, protectionist tendencies

and structural deficits that could endanger the

development of advanced and emerging econo-

mies. The global transition from an expansion-

ary to a more restrictive monetary policy also

means risks for the general economic environ-

ment. In addition, uncertainty is entailed by

the implications of the UK’s planned exit from

the EU. While the UK is not currently a main

area for RENK’s business activities, there could

be further imponderables owing to its coopera-

tion in international projects.


The consistently high private and public debt in

many places is also hampering growth pro-

spects and can lead to negative market reac-

tions. Growth declines in key countries and re-

gions often directly affect the global economy

and therefore constitute a central risk. The eco-

nomic development of some emerging econo-

mies is inhibited mainly by a dependence on

capital imports and energy and commodity

prices in addition to socio-political tension.

Furthermore, risks are arising from flawed gov-

ernment structures and the absence of rule of

law.

Geopolitical tensions and conflicts are another

major risk factor in the development of indivi-

dual economies and regions. As a result of ri-

sing global economic interrelations, even local

developments can harm the world economy.

For example, an escalation of the conflicts in

Eastern Europe, the Middle East or Africa can

trigger further disruptions on the global energy

and commodity markets and exacerbate migra-

tion trends. Additional negative effects could

result from an exacerbation of the situation in

East Asia. The same is true of armed hostilities,

terrorist activities or the spread of infectious

disease, which can lead to sudden and unex-

pected market reactions.

Overall, we are not anticipating a global rece-

ssion in the coming year. Given these risk fac-

tors, however, a decline in global economic

growth or a phase of below-average growth

rates is possible.

As part of the capital goods industry, RENK is

also subject to fluctuations in the investment

climate. Even small fluctuations in growth rates

or forecasts, or alterations in government in-

vestment subsidies, can result in significant

changes in demand for capital goods on the

RENK Group’s markets, cancellations of orders

already booked or the reorganization of longer-

term business relationships. RENK’s methods

for countering these economic sales risks in-

clude flexible production concepts and cost

flexibility through subcontracted employees,

working time accounts, short-time work and, if

necessary, contractual compensation arrange-

ments.

The overall economic environment can also

mean opportunities for RENK, if actual develop-

ment deviates positively from forecasts.

In addition, there are risks that protectionist ef-

forts, minimum requirements in terms of the

share of local production in individual coun-

tries or changing competitive conditions on the

sales markets of the RENK Group adversely af-

fect the planned growth. The markets for pro-

ducts in the military environment are also sub-

ject to further risks on account of their depen-

dence on political decision-making – as regards

opinions on export control law, the stipulations

made by supplier countries such as Germany or

France and the respective political environment

in the target countries. There are also uncer-

tainties due to cash-strapped public sectors in

many countries, and possibly demands for local

content and technology transfer. In particular,

failure to achieve a necessary level of localiza-

tion can lead to additional import duties or

penalties. Furthermore, across all product areas

on many markets, RENK faces substantial com-

petitive and price pressure that can lead to a de-

terioration of the profit margins it can achieve.

Changes in legislation, affecting taxes or cus-

toms, or to other provisions in individual coun-

tries can likewise entail risks to RENK. RENK

constantly monitors and assesses its economic,

political, legal and social environments in order

to take into account the resulting risks and op-

portunities in a timely manner when making

business decisions. Further information on the

current developments in connection with the

economic situation and the repercussions of

this can be found in the sections entitled “Eco-

nomic environment”, “Outlook” and in the

comments on the individual segments under

“The segments”.

74

Products As a provider of premium technology, RENK’s

mission is to develop high-quality technologi-

cally and economically advanced products and

launch them on the market, which opens up

opportunities for RENK in a wide range of mar-

ket segments. Abandoning such a mission

would constitute an irresponsible risk to the

Group’s market position. Still, introducing new

products entails design and market risks. RENK

counters these with meticulous strategic pla-

nning that analyzes developments in its mar-

ketplace and business environment. Ensuring

that RENK products are of a consistently high

quality is an essential prerequisite for tapping

further global market potential. This is reflected

by extensive capital expenditures in corre-

sponding production capacity and equipment

in the fiscal year and previous years. In order to

meet the future requirements of advancing di-

gitization, the segments are expanding their

business models and seizing the challenges of

digital transformation as an opportunity.

Products that have already been introduced on

the market are subject to risks in terms of the

product quality expected by customers. Poor

quality can lead to warranty and guarantee

costs, and to losses of market share or lower

profit margins. In extreme cases, product liabi-

lity claims and damages are possible. Suppliers

and the components they provide must un-

dergo a strict approval procedure to ensure that

high quality standards are maintained. Once

production has begun, established in-process

quality assurance measures ensure that manu-

facturing defects are identified and fixed in

good time. Later, when the products are in use,

any defects that arise are recorded, analyzed

and fixed together with the service operations.

RENK’s international presence with a variety of

products and services leads to the diversifica-

tion of its economic base. This counteracts the

risks of dependence on major customers or on

individual products and markets. However, this

also entails risks of patent infringements by

third parties and the unauthorized disclosure

of the company’s specific expertise by third

parties. We therefore monitor our sales markets

and protect the company’s expertise with legal

action where necessary.

Long-term customer contracts harbor addi-

tional risk potential. Changes in a market’s po-

litical or business framework can lead to addi-

tional expenses in the handling of major pro-

jects. Whenever agreements with customers in-

clude warranties or guarantee obligations, there

is the risk of illegitimate claims. This risk is

managed by formulating contracts with the ut-

most care.

RENK also monitors technological advances

and new developments to be able to respond to

these technological changes promptly with a

revised product focus.

Processes RENK sees the continuous optimization of busi-

ness processes in Development, Purchasing,

Production, Sales and Administration as an on-

going challenge to increase the efficiency of

these processes and also to counteract the

sometimes significant cost risks in these areas.

For example, suppliers are monitored preve-

ntively and continuously to detect significant

risks of delays in delivery or loss of suppliers at

an early stage and thus to mitigate their im-

pact. RENK also decisively and systematically

improves the underlying processes with regard

to the optimized commitment of current as-

sets.

Risks can arise in handling major projects that

may only be recognized in the course of the

project. These can include problems in contract

design, the miscalculation of orders, changes in

economic and technical conditions, flaws in

project management or inadequate perfor-

mance by subcontractors. The RENK Group

minimizes these risks with comprehensive pro-

ject management and order controlling. All ma-

jor projects are submitted to the Executive

Board of RENK AG for approval. Orders already

approved and ongoing that deviate signifi-

cantly from their planned development are

logged as critical orders in a special reporting


system and regularly presented to the Execu-

tive Board.

Business processes at RENK AG are closely su-

pported and in some cases even made possible

by IT. This leads to efficiency gains but also har-

bors risk. Parts of its infrastructure can mal-

function as a result of accidents, disasters, tech-

nical disruption or Internet attacks, thereby im-

pairing or completely shutting down business

processes. Moreover, there are the risks of un-

authorized access, theft and the destruction or

misuse of business data and information. The

resulting financial damage and loss of reputa-

tion can affect individual companies or even

the Group as a whole. To safeguard the availa-

bility, authenticity, integrity and confidentiality

of information while reducing and avoiding

risks, and to minimize identified and potential

risks, RENK uses a risk-oriented information se-

curity management system and state-of-the-art

hardware and software technologies with effec-

tive IT organization mechanisms in conjunc-

tion with a constantly evolving internal IT con-

trol system.

The centralization and selective sourcing of IT

operations and the systematic introduction of

IT service management processes in accordance

with the ITIL (IT Infrastructure Library) organi-

zational standard assist in the efficient support

of business processes. By organizing its infor-

mation security based on the internationally

recognized ISO 27001 safety standard, RENK has

significantly improved the transparency and

operational security of its IT processes and in-

frastructure.

The internal control system plays a crucial role

in all business processes, including the ac-

counting process, as it is designed to ensure

compliance with the relevant regulations and

to reduce unavoidable risks, thereby protecting

assets. It makes a vital contribution to protect-

ing RENK’s assets.

Employees A key component of RENK’s corporate strategy

is to be perceived as a top employer to remain

attractive to skilled and motivated employees

moving ahead. A significant factor in RENK’s

success is the highly qualified specialists and

managers who set new technological bench-

marks with RENK products and effectively and

efficiently manage its operations.

Opportunities for RENK lie in the continuing

professional training of all employees from

trainees to management. This forms the funda-

mental basis for a sustainable and trusting cus-

tomer relationship with recurring business su-

ccess on all markets. RENK actively monitors

the changes in the world of work and the asso-

ciated new requirements for professional

knowledge in the context of work process digi-

tization. Risks lie in being unable to staff key

positions in good time and in line with future

requirements. Thanks to a wide array of HR

marketing activities, the company has su-

cceeded in recruiting and ensuring loyalty to

the company among excellently qualified spe-

cialists and managers.

An intentional or grossly negligent violation of

the law or regulations by employees or mana-

gers would be a material risk to RENK. RENK

counters the risks of corruption, antitrust law,

money laundering and terrorism funding with

a variety of measures as part of its compliance

system. In particular, these include the Code of

Conduct, compliance policies and training, the

compliance help desk, the “Speak Up!” whistle-

blower portal and regular compliance risk as-

sessments and communications measures. For

further information, please refer to the section

“Compliance system”.

76

Finance As an international player, the RENK Group is

exposed to significant market price, liquidity

and credit risks. RENK addresses these risks,

which can also represent opportunities due to

market fluctuations, with its Group-wide finan-

cial risk management. There are also risks from

changes in the value of equity investments and

pension obligations.

Market price risk also comprises currency, in-

terest rate and commodity price risks. If trans-

actions are conducted in a currency other than

RENK’s functional currency, they are exposed to

a currency risk that can affect prices for goods

and services as well as profit margins. RENK

therefore largely hedges its currency risks from

orders, receivables and liabilities and, in part,

those from planned sales. The inclusion of sub-

sidiaries from countries outside the euro area

in the consolidated financial statements gives

rise to risks affecting profit or loss due to cu-

rrency translation. RENK does not hedge these

translation risks with derivative financial in-

struments. The hedging activities of the RENK

Group and its operating companies are handled

centrally by MAN SE as a counterparty. Substan-

tial quantities of raw materials are also needed

for the manufacture of products. Commodity

market price trends or escalator clauses in con-

tracts with suppliers expose RENK to commod-

ity price risks that cannot always be passed on

to customers and that therefore erode profit

margins. Such risks are counteracted with long-

term supply agreements and escalator clauses

in contracts with customers.

Liquidity risk describes the risk that RENK is

unable to adequately meet its financial obliga-

tions. Inflows and outflows of cash are moni-

tored and managed at all times to safeguard li-

quidity. Moreover, cash flow trends are moni-

tored in the context of detailed financial pla-

nning. The company’s inclusion in the central

cash management of the MAN Group ensures

the availability of the necessary funds.

The operating activities of the RENK Group ex-

pose it to credit risk. This includes the risk that

a partner does not meet its contractual obliga-

tions on account of its own economic situation

or the political environment, thereby causing a

financial loss to RENK. These sovereign and

counterparty risks are reduced by the careful

selection of business partners, suitable contract

and payment terms, guarantees and letters of

credit.

If there are indications of impairment on an

equity investment carried at cost, RENK is ex-

posed to the risk of an impairment loss in net

profit or loss. Further information on this can

be found in the notes to the consolidated finan-

cial statements.

The derivative hedges for currency risks – to the

extent that they are used at RENK – are compo-

nents of economic hedges whose effectiveness

is regularly checked. These hedges are ac-

counted for as cash flow hedges in currency risk

management. Further information on the ma-

nagement of market price, liquidity and credit

risks can be found in the notes to the consoli-

dated financial statements.

To reduce the inherent financial risks and, in

part, on account of legal regulations, the de-

fined benefit obligations of the RENK Group are

largely covered pension assets kept separate

from working capital.

Assessment of the risk and opportunities situation of the Group by the Executive Board As in previous years, the market risks continue

to outweigh the other risk areas, though the

overall risk position has not changed signifi-

cantly. The opportunities identified can only

partly counteract the risks. It should be noted

that the realization of market opportunities is

already included in sophisticated internal pla-

nning. Based on the risks reported in the Risk

and Compliance Board, the Executive Board is

satisfied that there are no significant risks in

the respective segments that, individually or

collectively, are not covered by the budgeted


operating profit on the basis of the net assess-

ment. This also applies to risks for which a

higher gross loss was calculated, as risk-mitiga-

ting measures were taken or a low probability

of occurrence was assumed. Regarding the indi-

vidual risk areas, the Executive Board antici-

pates the most significant short-term risks in

the market risk area. In particular, this concerns

the uncertainties and the strong competitive

pressure in many markets relevant to RENK, i.e.

in business areas of Special Gear Units, Stan-

dard Gear Units and Slide Bearings.In product-

related risks, the focus is on potential technical

risks and warranty claims based on customer-

oriented use of RENK products. The quantified

short-term risks in the processes and employ-

ees risk areas are of lesser importance.

On the basis of the risk management system es-

tablished by the MAN Group and introduced at

RENK, the Executive Board has again found that

no risks are discernible at the current time that

could lead to a lasting and substantial impair-

ment of the net assets, financial position and

results of operations of the RENK Group. The

risk management system implemented and the

related organizational measures thus allow the

Executive Board to learn of risks in a timely

manner and to initiate adequate measures.

Given the partially uncertain development, the

focus of activities in 2018 will continue to be on

the management of market risks.

Compliance In fiscal year 2017 RENK systematically imple-

mented and continued to develop the compli-

ance program covering the combating of cor-

ruption, antitrust law, data privacy and money

laundering.

RENK has established compliance as an integral

part of its corporate culture. The compliance

management system is coordinated, taught and

constantly refined by the compliance officer on

the basis of the MAN SE compliance program.

He reports directly to the RENK AG Executive

Board and functionally to the Audit Committee

of the Supervisory Board.

The compliance officer is assisted by a deputy

and two other employees in the area of review-

ing business partners. The Rheine and Hanover

plants are also assisted by “compliance champi-

ons” – managers who are not full-time compli-

ance employees but who assume special re-

sponsibility for compliance at their sites.

Furthermore, the compliance officer can use

the resources of MAN’s corporate compliance

office. In particular, training and information

materials and e-learning courses are managed

from here. Policies are adapted to RENK’s struc-

ture and business model.

The compliance organization and the introduc-

tion of new compliance measures were closely

coordinated with the Executive Board and plant

management teams on the basis of identified

risks. The Risk and Compliance Board, which

meets quarterly, is informed of the progress in

measures and coordinates the next steps as

necessary.

Ethical principles of conduct and compliance

requirements for RENK are established in the

Code of Conduct. Rules substantiating the spe-

cification of the Code of Conduct are contained

in the following compliance policies:

policy on the handling gifts, hospitality and

invitations,

policy on the involvement of business part-

ners,

policy on the handling of donations and

sponsorship activities,

policy on compliance with antitrust provi-

sions,

policy on the fight against terrorism, corrup-

tion and money laundering,

policy on the handling of personal data.

In addition to the Code of Conduct for Emplo-

yees, RENK has issued a Code of Conduct for

Suppliers and Business Partners that defines

certain minimum ethical standards that RENK’s

suppliers and sales support business partners

must agree to comply with.

78

The integrity of business partners is checked as

a mandatory requirement and they are subject

to an approval process.

In the induction phase after joining the com-

pany, the Compliance Officer introduces new

employees to the compliance organization,

compliance processes and compliance tools,

and takes the opportunity to discuss the com-

pany’s expectations of employees.

In addition, in line with their risk classification,

employees still receive compliance awareness

training in classroom sessions and e-learning.

As per the policy on the involvement of busi-

ness partners, the integrity of sales support

business partners is checked as a mandatory re-

quirement and they are subject to an approval

process. The integrity checks conducted in the

reporting period and the scheduled follow-up

inspections did not lead to any objections.

The electronic monitoring system, also known

as the continuous controls monitoring system

(CCMS), for the early identification of possible

compliance risks and policy violations in pur-

chasing and payment processes, was still run-

ning at all RENK sites in Germany in the report-

ing period. CCMS reporting consists of various

check files. Changes in the extent of control

and control irregularities are evaluated on a

monthly basis and assessed in a meeting with

the Head of IT, Head of Finance and the Compli-

ance Officer, and finally reported to the RENK

Risk and Compliance Board.

The compliance officer and the compliance

help desk, which can be used by all employees

for matters concerning compliance, received 28

inquiries for the RENK Group and 26 for RENK

AG in the reporting period (compliance officer

(25 and 23), MAN compliance helpdesk (3)).

These were answered by the compliance officer

and documented.

No compliance violations were identified in the

reporting period.

MAN’s “Speak up!” whistleblower portal helps

to detect and avoid dangerous risks. Through

“Speak up!”, tips concerning severe compliance

violations, particularly in the area of white col-

lar crime (such as corruption), antitrust law and

privacy, are received and processed.

RENK employees and third parties therefore

have another way to provide tips on compli-

ance violations – confidentially, internationally

and at any time – other than contacting the

compliance officer directly. Compliance viola-

tions are not tolerated at RENK under any cir-

cumstances. Information on possible violations

is examined in detail, violations are stopped

and sanctioned as far as labor law allows. Fur-

thermore, the findings from investigating com-

pliance violations are used for the continuous

improvement of the compliance system. No tip-

offs of compliance violations were received

through the whistleblower portal in the year

under review.

MAN Corporate Audit conducted an audit of

the compliance management system and the

business partner process from July 10 to

July 28, 2017.

The objective of the audit was to determine

whether:

there is an effective compliance management

system;

internal rules, policies and instructions are

adhered to;

the handling of business partners is in order.

The results found that the processes were es-

sentially in order and that there were no hu-

man errors.

80

Remuneration report for fiscal year 2017

Remuneration of members of the Executive Board In accordance with the statutory rules, the total

remuneration of individual Executive Board

members is set by the full Supervisory Board.

The subject matter is prepared by the Supervi-

sory Board’s Executive Personnel Committee.

At the proposal of the Committee, the structure

of the remuneration system for the Executive

Board is also discussed by the full Supervisory

Board and – in accordance with the recommen-

dation of the German Corporate Governance

Code (GCGC, item 4.2.2) – regularly reviewed

and revised as necessary.

The objective and purpose of this is to establish

appropriate remuneration. In particular, the cri-

teria for this are the duties of the respective

member of the Executive Board, his personal

performance, the economic situation, the su-

ccess and the future prospects of RENK and the

RENK Group and the question of what is usual

for remuneration, taking into account the peer

group and remuneration structure otherwise in

place at RENK.

Remuneration structure and components Remuneration for members of the Executive

Board consists of a salary and benefits in kind

not related to performance, pension contribu-

tions and performance-based components. The

performance-based, variable remuneration

takes into account individual performance, the

company’s success and long-term strategic ob-

jectives. The remuneration structure and its

components are based on the respective em-

ployment contract.

(a) Fixed remuneration

The fixed remuneration is paid as a monthly

salary. There are also benefits in kind, including

in particular the provision of company cars and

the payment of insurance premiums. The fixed

remuneration is regularly reviewed and revised

as appropriate to take into account the general

pay trend and the responsibilities of the respec-

tive Executive Board member.

(b) Variable remuneration

A new system of variable compensation was in-

troduced for the members of RENK AG’s Execu-

tive Board from fiscal year 2016. The variable

compensation is calculated on the basis of

three equally weighted components, each of

which is limited to 200% of the target value:

Long-term incentive (LTI)

Corporate bonus (CB)

Personal performance bonus (PPB)

The long-term incentive is directly linked to

the goals of the Volkswagen Group’s 2018 strat-

egy and is based on the performance criteria

derived from the strategy. The calculation is

based on a four-year period.

The target areas are:

Top customer satisfaction

(measured by the customer satisfaction in-

dex)

Top employer

(measured by the employee index)

Increase in sales

(measured by the growth index) and

Increase in return

(measured by the return index)

The customer satisfaction index is calculated

using indicators that reflect customers’ overall

satisfaction with the delivering dealers, new ve-

hicles and service operations on the basis of

their last workshop visit. The employee index is

determined from the indicators “employment”

and “productivity” and from the participation

rate and the result of employee surveys. The

growth index is calculated from the indicators

“delivery to customers” and “market share”.


The return index is calculated from the devel-

opment of the return on sales and the dividend

on ordinary shares.

The indices calculated for customer satisfaction

and on employees and the sales situation are

added together and the result is then multi-

plied by the return index. This method ensures

that the LTI is only paid out if the Group is fi-

nancially successful as a whole. This is because

the return index is zero if the return on sales

does not exceed a threshold of 1.5%. Conse-

quently, the overall index for the fiscal year in

question is then also zero.

Taking into account the four-year average of the

overall indices – for the year under review and

the three preceding fiscal years – the maximum

amount of the LTI was set at € 255 thousand for

the Chief Executive Officer and € 230 thousand

for the second member of the Executive Board.

The corporate bonus allows the Executive

Board to share in the business success of the

RENK Group. This success is measured by the

operating profit of the RENK Group. The calcu-

lation is based on a two-year period.

The achievement of targets is measured using

the following system:

The average value of the operating profit of the

RENK Group for the last two fiscal years (inclu-

ding the fiscal year in which the bonus is

granted) is compared against a target value set

by the company’s Supervisory Board before the

beginning of the fiscal year in which the bonus

is granted. The target value is 100% target

achievement. The target value is reviewed by

the Supervisory Board at regular intervals, at

least every three years, and adjusted if neces-

sary.

The resulting percentage ratio between the

average value and the target value is the per-

centage value for the target, which is capped at

200% of the average. The Supervisory Board has

set the target value at € 55 million.

The personal performance bonus honors indi-

vidual performance in the previous fiscal year

on the basis of target achievement according to

the individual target agreement and perfor-

mance evaluation. Quantitative and qualitative

factors are used to determine the bonus. The

personal performance bonus is set by the Su-

pervisory Board of the company.

(c) Company pension plan

Pension benefits for members of the Executive

Board comprise old age, disability and survi-

vors’ benefits. Entitlements to such benefits are

accumulated under a defined contribution,

fund-based system, the Capital Account Plan.

Each year RENK AG pays a contribution of 20%

of eligible pay, which is the total of the contrac-

tually agreed fixed and variable remuneration.

Additional contributions through gross de-

ferred compensation are possible. The contri-

butions paid and interest on them are accumu-

lated in individual capital accounts. The perfor-

mance of capital account is directly linked to

the capital market and defined by a basket of

indices and other suitable parameters. Invest-

ment risks are gradually reduced with increa-

sing age (lifecycle concept). On retirement, the

credit in the capital account, or at least the total

contributions paid, can be paid out in a lump

sum, in installments or converted into an an-

nuity. In the event of disability or death, the

balance accumulated, or at least capital in the

amount of four times the fixed annual remu-

neration, is paid out.

Special employment contract regulations In the event of a member of the Executive

Board’s appointment ending early without

cause and at the instigation of the company,

the member in question receives the fixed re-

muneration, the bonus, insurance premium al-

lowances and pension plan contributions until

the regular end of his term of office, or for a

maximum of two years. Any income from other

activities will be offset.

82

In the event of a member of the Executive

Board’s appointment ending at his own instiga-

tion – which is possible giving notice without

stating grounds – he will receive his pay only

until the end of his notice period. There are no

special regulations for a change of control.

Remuneration of members of the Executive Board in 2017 The total remuneration of active members of

the Executive Board for their activities in fiscal

year 2017 amounted to € 1,548 thousand plus

€ 196 thousand for pensions (previous year:

€ 1,478 thousand plus € 186 thousand for pen-

sions). Individual details broken down by fixed,

performance-based and long-term incentive

components can be found in the table in the

notes to the consolidated financial statements

and the tables below.

The individual remuneration of members of

the Executive Board is reported in this remu-

neration report on the basis of the uniform

sample tables recommended in the GCGC as

published on September 30, 2014. A key feature

of these sample tables is the separate reporting

of benefits granted and amounts actually paid.

The targets (payment on 100%) and the mini-

mum and maximum values possible are shown

under benefits.


Remuneration of members of the Executive Board in 2017 (granted)

€ thousand Florian Hofbauer

Chief Executive Officer

2017 Minimum Maximum

Fixed remuneration 255 255 255

Additional benefits 31 31 31

Total 286 286 286

Short-term variable remuneration

Personal performance bonus 127 0 255

Long-term variable remuneration

Corporate bonus 127 0 255

Long-term incentive 127 0 255

Total 382 0 764

Pension cost 101 101 101

Total remuneration 769 387 1,152

€ thousand Christian Hammel

Production and Administration




Total 281 281 281


Personal performance bonus1) 115 0 230




Total 345 0 690



84

Remuneration of members of the Executive Board in 2016 (granted)






Total 271 271 271






Total 368 0 735








Total 279 279 279






Total 345 0 690




Remuneration of members of the Executive Board in 2017 (actually received)



2017

Fixed remuneration 255

Additional benefits 31

Total 286


Personal performance bonus1) 194


Corporate bonus 173

Long-term incentive1) 152

Total 519

Pension cost 101

Total remuneration 906

1) 2017: According to figures currently available



2017



Total 281




Corporate bonus 154


Total 462

Pension cost 95


1) 2017: According to figures currently available

86

Remuneration of members of the Executive Board in 2016 (actually received)



2016



Total 271




Corporate bonus 150


Total 479

Pension cost 95




2016



Total 279




Corporate bonus 141


Total 449

Pension cost 91



Remuneration of members of the Supervisory Board The structure and amount of the remuneration

of the Supervisory Board are determined by the

Annual General Meeting and regulated in Arti-

cle 12 of the Articles of Association. They take

into account the duties and responsibilities of

the members of the Supervisory Board.

The annual remuneration consists of the fol-

lowing components:

Fixed remuneration of € 10,000.

Additional remuneration for the chair and

deputy chair of the Supervisory Board, and

for the chair and members of a committee,

with the exception of the Mediation Commi-

ttee. The chair of the Supervisory Board is

granted double the fixed remuneration, the

deputy chair and the chair of a committee

one and a half times this amount, a commi-

ttee member 1.25 times the amount. If mem-

bers perform several functions, remuneration

is based on the function with the highest re-

muneration entitlement.

Supervisory Board members’ expenses are also

reimbursed.

Remuneration of members of the Supervisory Board in 2017 The total remuneration payable to members of

the Supervisory Board for 2017 amounts to

€ 92,341 (previous year: € 100,000). An indivi-

dual breakdown of the remuneration of the

members of the Supervisory Board who served

on the Supervisory Board in 2017 can be found

in the notes to the consolidated financial state-

ments.

Furthermore, members of the Supervisory

Board did not receive any further remuneration

or benefits for services rendered personally, in-

cluding in particular consulting and mediation

services in the year under review.

Former members of the Supervisory Board who

left the Supervisory Board before Janu-

ary 1, 2017 are not paid any remuneration.

88

Events after the end of the reporting period

There were no special events after December 31, 2017 with a material effect on the net assets, finan-

cial position and results of operations.

Separate non-financial report

RENK Aktiengesellschaft exercises the option provided by section 289b(2) HGB and section 315b(2)

HGB to exempt itself from issuing a non-financial declaration and a non-financial Group declara-

tion, and refers to the combined separate non-financial report of Volkswagen AG for fiscal year 2017,

which is available in German at https://www.volkswagenag.com/presence/nachhaltigkeit/docu-

ments/sustainability-report/2017/Nichtfinanzieller_Bericht_2017_d.pdf and in English at

https://www.volkswagenag.com/presence/nachhaltigkeit/documents/sustainability-re-

port/2017/Nonfinancial_Report_2017_e.pdf from no later than April 30, 2018.

90

Forecast

The expected development of the RENK

Group and the general conditions for its busi-

ness activities are described below. Risks and

opportunities that could cause a departure

from the projected developments are pre-

sented in the report on risks and opportuni-

ties.

Our assumptions are based on the current as-

sessments of external institutions, including

economic research institutes, banks, multina-

tional organizations and consulting firms.

We expect that the growth of the global eco-

nomy will slow slightly in 2018. We see risks

in protectionist tendencies, turbulence on

the financial and structural deficits in indi-

vidual countries. Furthermore, growth pro-

spects will continue to be weighed down by

geopolitical tensions and conflicts. We there-

fore anticipate somewhat diminished mo-

mentum for both the advanced and the

emerging markets compared to 2017. We ex-

pect the highest increases in the emerging

economies of Asia.

Moreover, we assume that the growth of the

global economy will continue in the years

2019 to 2022.

Economic growth in Western Europe will pre-

sumably slow down slightly in 2018 com-

pared to the year under review. The major

challenges are solving structural problems

and the uncertain outcome and implications

of the exit negotiations between the EU and

the UK.

For Central Europe we anticipate lower

growth rates in 2018 than in the past fiscal

year. The economic situation should con-

tinue to stabilize in Eastern Europe, unless

there is a further escalation of the smolde-

ring conflict between Russia and Ukraine.

Russia’s economic output will presumably

continue to rise following last year’s growth.

Gross domestic product in Germany is ex-

pected to rise less energetically in 2018 than

in the year under review. However, the stable

situation on the labor market is likely to con-

tinue and support private consumer spen-

ding.

We expect that the economic situation in the

US will continue to improve in 2018. Growth

in Canada is likely to decelerate, while it will

remain virtually constant in Mexico.

Brazil’s economy is fully expected to continue

to stabilize in 2018, achieving slightly higher

growth than in the year under review.

The Chinese economy will presumably con-

tinue to grow at a relatively high level in 2018,

though with less momentum than in previ-

ous years. For India we expect a rate of expan-

sion in line with 2017. It is anticipated that

the economic situation in Japan will deterio-

rate over the year under review.

According to the German Engineering Associ-

ation (VDMA), international mechanical engi-

neering grew by 6% in 2017, significantly

more than forecast. The VDMA is forecasting

further expansion in 2018 – albeit at a lower

rate of 4%. Obstacles to stronger growth are

believed to lie in the lingering structural

problems and continuing uncertainty over

political and economic development in many

regions. The VDMA is forecasting growth in

sales revenue for German mechanical and

plant engineering of 3%, which should also

benefit the market for drive technology.

The Executive Board anticipates that RENK

will experience a clear recovery in fiscal year

2018 compared to 2017, assuming that

planned major projects – particularly in Spe-

cial Gear Units and Vehicle Transmissions –

are implemented as planned. Sales revenue is

expected to be slightly higher than the previ-

ous year’s level in 2018. The operating profit


of the RENK Group should remain almost at

the level of 2017 in 2018, hence the operating

return on sales will decline slightly but stay

in the double digits.

RENK will continue its long-term strategy in

2018 as well. Safeguarding its top technologi-

cal position in gear units and slide bearings

will therefore remain at the heart of research

and development activities. Also, technologi-

cal change and changing market and cus-

tomer requirements can only be mastered

with appropriately qualified and motivated

employees, hence training and continuous

professional development will be of central

importance. Finally, the material groundwork

also has to be in place if the coming cha-

llenges are to be mastered. The continuation

of the long-term investment program will

provide the basis for this.

RENK’s assessment of the developments in

the individual segments is as follows:

In 2018 – as in 2017 and 2016 – order intake in

Special Gear Units will be largely determined

by orders for complex marine gear units;

some more major projects are expected to

reach the tendering phase in 2018. This would

result in a noticeable increase in incoming

orders compared to 2017 for the entire seg-

ment. Sales revenue should rise slightly in the

new fiscal year. Owing to the continuing

tense market situation, an operating profit at

the level of the previous year and thus also an

operating return on sales in line with that of

2017 are expected.

If the major projects planned are imple-

mented on time, Vehicle Transmissions can

look forward to a significant increase in new

orders in 2018. Sales revenue is also set to rise

substantially as planned deliveries are imple-

mented. Taking into account a change in the

revenue mix, this will be reflected in slight

growth in operating profit, hence the opera-

ting return on sales will be at a similar level

to 2017.

Fiscal year 2017 developed better than ex-

pected one year ago for Standard Gear Units.

Order intake and sales revenue should be able

to continue the 2017 level in 2018. In the

Standard Gear Units as well, a slight decline

in operating profit and the operating return

on sales is forecast owing to changes in the

product mix.

With no sign of a significant improvement in

the initial situation on the markets for Slide

Bearings, only a marginal increase in orders

is anticipated for fiscal year 2018. Sales reve-

nue will be at a similar amount to 2017; ope-

rating profit and operating return on sales

will therefore be down slightly.

92

The forward-looking statements and information described above are based on our current expecta-

tions, assumptions and estimates, and they therefore entail a series of risks and uncertainties. A va-

riety of factors, many of them outside our control, can influence our business activities and their

outcome.

These factors can result in the actual performance of RENK Group deviating significantly from the

forward-looking statements.



The Executive Board

The Board of Management

Florian Hofbauer Christian Hammel


RENK AG, Augsburg RENK Consolidated Financial Statements for the Fiscal Year from January 1 to December 31, 2017

Content

Page

Consolidated Income Statement 96

Reconciliation to Total Comprehensive Income for the Period 96

Consolidated Statement of Financial Position 97

Consolidated Statement of Changes in Equity 98

Consolidated Statement of Cash Flows 99

Notes to the Consolidated Financial Statements 100

Principles of Financial Reporting 100

Notes to the Consolidated Income Statement 120

Notes to the Consolidated Statement of Financial Position 127

Other Disclosures 141

Events after the end of the reporting period 165

Members of the Supervisory Board and the Executive Board and their mandates 166

Responsibility statement 173

Audit Report for the consolidated financial statements of RENK AG 174

Six-year Overview 182

96

Consolidated Income Statement

€ thousand Note 2017 2016

Sales revenue [6] 469,406 495,867

Cost of sales (363,796) (376,230)

Gross profit 105,610 119,637

Other operating income [7] 13,380 15,118

Distribution expenses (35,094) (36,406)

General administrative expenses (19,889) (17,788)

Other operating expenses [8] (3,960) (13,450)

Operating profit 60,047 67,111

Interest expense [9] (462) (488)

Other financial result [9] 1,619 (2,058)

Financial result 1,157 (2,546)

Profit before taxes 61,204 64,565

Income tax expense [10] (18,376) (20,343)

Profit after tax (share of RENK shareholders) 42,828 44,222

Earnings per share in € (basic and diluted) [11] 6.30 6.50

Reconciliation to Total Comprehensive Income for the Period

€ thousand 2017 2016

Profit after tax 42,828 44,222

Items not reclassified to profit or loss

Remeasurement of pension plans1) 6,021 (4,178)

Deferred taxes1) (306) 3,143

5,715 (1,035)

Items reclassified to profit or loss in the future

Currency translation differences1) 2) (2,771) 521

Change in fair values of derivatives2) 1,908 1,117

Deferred taxes (610) (335)

(1,473) 1,303

Other comprehensive income for the period 4,242 268

Total comprehensive income 47,070 44,490

Other comprehensive income for the period as of Dec. 31 (11,390) (15,632)

1) No deferred taxes relate to currency translation differences. 2) Please see chapter “Derivative financial instruments and hedging strategies” for information on the reclassification

of recognized gains and losses to the income statement.


Consolidated Statement of Financial Position

Assets

€ thousand Note Dec. 31, 2017 Dec. 31, 2016

Intangible assets [14] 1,657 1,356

Property, plant and equipment [15] 196,686 198,223

Other and financial investments [16] 9,079 3,687

Deferred tax assets [10] 7,652 10,498

Other noncurrent financial assets [19] [28] 126 8

Other noncurrent receivables [19] 32 37

Noncurrent assets 215,232 213,809

Inventories [17] 180,503 182,086

Trade receivables [18] 87,883 86,323

Current income tax receivables 11,581 7,318

Other current financial assets [19] [28] 2,866 1,915

Other current receivables [19] 3,380 2,327

Cash and cash equivalents [20] 198,553 213,957

Current assets 484,765 493,926

699,997 707,735

Equity and liabilities

€ thousand Note Dec. 31, 2017 Dec. 31, 2016

Subscribed capital 17,920 17,920

Capital reserves 10,669 10,669

Retained earnings 404,651 376,783

Accumulated other comprehensive income (11,390) (15,632)

Equity [21] 421,851 389,740

Pension provisions [22] 10,505 15,108

Deferred tax liabilities [10] 4,739 3,429

Prepayments received, noncurrent*) 70,606 96,366

Other noncurrent provisions [23] 8,052 7,050

Other noncurrent financial liabilities [26] [28] 0 295

Other noncurrent liabilities [26] 76 101

Noncurrent liabilities and provisions 93,978 122,349

Effective income tax provisions 390 950

Trade payables [24] 34,635 36,447

Prepayments received, current*) [25] 71,055 71,230

Current income tax payables 2 7

Other current provisions [23] 48,917 55,423

Other current financial liabilities [26] [28] 1,175 2,040

Other current liabilities [26] 27,995 29,549

Current liabilities and provisions 184,169 195,646

699,997 707,735

*) Adjustment of prior-year information. Please see the information in the notes.

98

Consolidated Statement of Changes in Equity

€ thousand Subscribed

capital

Capital

reserves

Retained

earnings

Other

comprehensi

ve income

for the

period

Total

As of Dec. 31, 2015 17,920 10,669 347,522 (15,900) 360,211

Profit after tax – – 44,222 – 44,222

Other comprehensive income for the period – – – 268 268

Total comprehensive income – – 44,222 268 44,490

Dividends paid – – (14,960) – (14,960)

Other changes – – (1) – (1)

As of Dec. 31, 2016 17,920 10,669 376,783 (15,632) 389,740

Profit after tax – – 42,828 – 42,828

Other comprehensive income for the period – – – 4,242 4,242

Total comprehensive income – – 42,828 4,242 47,070

Dividends paid – – (14,960) – (14,960)

Other changes – – 0 – 0

As of Dec. 31, 2017 17,920 10,669 404,652 (11,390) 421,851

See also the supplementary disclosures on equity in the notes to the annual financial statements.


Consolidated Statement of Cash Flows1)

€ thousand Note 2017 2016

Cash and cash equivalents at beginning of period 213,957 117,061

Profit before taxes 61,204 64,565

Income taxes paid (20,038) (28,177)

Depreciation, amortization and impairment losses on intangible assets and property, plant and equipment [14] [15] 18,925 19,295

Impairment of other and financial investments [16] – 1,847

Change in provisions for pension obligations 1,378 (5,124)

Gains/losses from asset disposals (19) 230

Other non-cash expenses and income (906) (1,050)

Change in inventories 133 (10,598)

Change in receivables (2,725) (3,334)

Change in liabilities and prepayments received (28,005) 13,193

Change in other provisions (5,098) 5,729

Cash flows from operating activities2) 24,849 56,576

Payments to acquire property, plant and equipment and intangible assets [14] [15] (18,735) (24,520)

Capital contributions in other and financial investments, acquisition of non-consolidated subsidiaries [16] (5,392) (1,000)

Proceeds from asset disposals 479 612

Cash inflow from deposits – 80,000

Cash flows from investing activities (23,648) 55,092

Dividends paid [21] (14,960) (14,960)

Cash flows from financing activities (14,960) (14,960)

Effect of exchange rate changes on cash and cash equivalents (1,645) 188

Change in cash and cash equivalents (15,404) 96,896

Cash and cash equivalents at end of period [20] 198,553 213,957

1) See also the supplementary disclosures on the statement of cash flows in the notes to the annual financial statements.

2) The cash flows from operating activities include interest income of € 350 thousand (previous year: € 167 thousand), interest expenses of € 154 thousand (previous year: € 110 thousand) and income from other and financial investments of € 1,217 thousand (previous year: € 1,660 thousand).

100

Notes to the Consolidated Financial Statements

Principles of Financial Reporting

(1) General principles

RENK Aktiengesellschaft (hereinafter: RENK AG) is a listed corporation domiciled at

Gögginger Strasse 73, Augsburg, Germany. It is registered with Augsburg Local Court

under HRB 6193. The RENK Group develops, produces and distributes high-quality

drive technology worldwide. Its divisions are Special Gear Units, Vehicle Transmi-

ssions, Standard Gear Units and Slide Bearings.

As a 76% subsidiary of MAN SE, Munich, RENK AG is included in the consolidated fi-

nancial statements of MAN SE. In turn, MAN SE is a subsidiary of Volkswagen Truck &

Bus GmbH, Braunschweig, a wholly owned, direct subsidiary of Volkswagen Aktienge-

sellschaft, Wolfsburg. Volkswagen Truck & Bus GmbH holds 74.55% of the capital in

MAN SE. MAN SE and thus RENK AG as well are included in the consolidated financial

statements of Volkswagen Aktiengesellschaft, the ultimate parent company, which are

published in Bundesanzeiger (the Federal Gazette).

These consolidated financial statements of RENK AG for the fiscal year from January 1

to December 31, 2017 were prepared in line with section 315e(1) of the German Co-

mmercial Code (HGB) in accordance with the International Financial Reporting Stan-

dards (IFRS) of the International Accounting Standards Board (IASB), as applicable in

the European Union as per Regulation (EC) No. 1606/2002 of the European Parliament

and of the Council, and the supplementary provisions of the Articles of Association.

They were prepared on February 8, 2018 and approved for submission to the Supervi-

sory Board by way of resolution of the Executive Board.

The consolidated financial statements have been prepared in euro, the functional cu-

rrency of the RENK Group. Unless otherwise stated, all figures are in thousands of euro

(€ thousand). Minor differences in totals or percentages can occur as a result of the

commercial rounding of amounts.


(2) Consolidation and measurement of equity investments

(a) Equity investments

The equity investments of RENK AG include subsidiaries, other equity investments

and financial investments. All material domestic and foreign subsidiaries that RENK

AG controls directly or indirectly are included in the consolidated financial state-

ments. Control exists when RENK AG directly or indirectly has power over the poten-

tial subsidiary on the basis of voting or other rights, is exposed to positive and nega-

tive variable returns and can affect the amount of the variable returns on the basis of

voting rights.

Other equity investments include interests in non-consolidated affiliated companies

and financial investments.

(b) Basis of consolidation

Companies included In addition to RENK AG, the consolidated financial statements include the following

wholly owned subsidiaries:

RENK France S.A.S., Saint-Ouen-l’Aumône/France,

RENK Corporation, Duncan (SC)/USA,

RENK Test System GmbH, Augsburg,

RENK-MAAG GmbH, Winterthur/Switzerland and

RENK Systems Corporation, Camby (IN)/USA

Companies not included The subsidiaries and financial investments not included in the consolidated financial

statements are insignificant overall to the net assets, financial position and results of

operations of the RENK Group. These are recognized, in some cases applying practical

expedients, in the consolidated financial statements at their respective cost, taking

into account any impairment losses required.

Please see the corresponding note for a full list of shareholdings of the RENK Group.

The RENK Group founded the following companies and performed the following ac-

quisition in fiscal year 2017. These are not included in the consolidated financial state-

ments as they are insignificant overall to the net assets, financial position and results

of operations of the RENK Group.

RENK Gears Private Ltd., Bangalore/India, was founded on entry in the commercial

register on June 5, 2017. As part of the founding act, RENK AG acquired 99% of shares

and RENK Test System GmbH 1% of shares. The newly founded Group company es-

sentially performs sales and service activities in addition to local procurement and

assembly activities for RENK products in India. The initial capital amounted to

around € 1,402 thousand (converted).

102

Furthermore, on entry in the commercial register on August 30, 2017, RENK AG

founded RENK Korea Co., Ltd., Busan/South Korea, as the sole shareholder. The main

activities of the company are sales and marketing activities, in addition to assembly

and service activities, for RENK products in South Korea. The initial capital

amounted to around € 676 thousand (converted).

Effective December 8, 2017, RENK AG acquired all shares in Damen Schelde Gears B.V.,

Vlissingen/Netherlands, with share capital of € 4,222 thousand. The new subsidiary

will continue its previous activities in the areas of construction, sales and service for

complex marine gear units.

There was no separate reportable goodwill for the fiscal years 2017 and 2016.

(c) Other equity investments and financial investments

Equity investments for which a quoted market price or a reliably determinable fair

value is available are measured at that value. Financial investments in equity instru-

ments that are allocated to the available-for-sale category, but for which there is no

quoted price on an active market and whose fair value cannot be reliably determined,

are excluded from measurement at fair value. These equity investments are measured

at cost. If there are indications of impairment on an equity investment carried at cost,

an impairment test is performed and any impairment loss is recognized in profit or

loss.

(d) Currency translation

Transactions in foreign currencies are translated using the relevant exchange rates at

the time of the transaction. In subsequent periods, monetary assets and liabilities are

measured at the middle rate at the end of the reporting period; exchange rate differe-

nces are recognized in profit or loss. Non-monetary items that are measured in terms

of historical cost in a foreign currency are translated using the exchange rate at the

date of the transaction.

The financial statements of companies from countries outside the euro area are trans-

lated into euro using the functional currency concept. The functional currency is de-

termined by the primary economic environment, it is the respective local currency of

the companies consolidated.

The financial statements are translated using the modified current rate method, ac-

cording to which items in the statement of financial position – except equity – are

translated using the rate at the end of the reporting period, while income statement

items are translated using weighted average exchange rates. Except for other compre-

hensive income, equity is translated at historic rates. The resulting translation diffe-

rences are recognized in other comprehensive income until the disposal of the subsi-

diary and reported as a separate item in equity.


Overview of key exchange rates

Middle rate Average price1)

Dec. 31, 2017 Dec. 31, 2016 2017 2016

US dollar 1.19875 1.05600 1.18351 1.05483

Swiss franc 1.16935 1.07490 1.16860 1.07537

Pound sterling 0.88730 0.85850 0.88282 0.84472

Chinese yuan 7.80085 7.33320 7.80623 7.30168

Japanese yen 134.87000 123.50000 133.60947 122.43667

1) Weighted average price

(3) Accounting principles

The presentation in the statement of financial position distinguishes between current

and noncurrent assets and liabilities. Assets and liabilities are classified as current if

they are due within one year or within the longer operating cycle. Deferred tax assets

and liabilities and assets and provisions from defined benefit pension plans are shown

as noncurrent items. The consolidated income statement has been prepared using the

cost of sales method.

With the exception of certain items such as financial instruments at fair value, availa-

ble-for-sale financial assets and provisions for pensions and similar obligations, the

consolidated financial statements are prepared on the basis of cost.

The consolidated financial statements are based on the financial statements of

RENK AG and its consolidated subsidiaries, which are prepared using the same Group-

wide accounting policies as the Volkswagen and MAN Groups.

104

(a) Revenue recognition

Sales revenue is recognized at the date on which the products or goods are delivered

or services rendered and risk has been transferred to the customer. The amount of

sales revenue must be reliably determinable and the recoverability of the receivable

must be assumed. Discounts, customer bonuses and rebates reduce sales revenue.

Sales revenue from customer-specific construction contracts is accounted for using

the percentage of completion method.

(b) Operating expenses

Operating expenses are recognized when the service is utilized; expenses for adverti-

sing and sales promotion and other sales-related expenses are recognized at the time

they are incurred. The cost of sales consists of costs of the products and merchandise

sold. In addition to the direct material and manufacturing costs, production costs also

comprise production-related overheads, including depreciation of production equip-

ment.

Warranty provisions are recognized when the products are sold. Expenses for research

are immediately recognized in profit or loss. Interest and other borrowing costs are

recognized as expenses in the period in which they arise, with the exception of bo-

rrowing costs that are capitalized as part of the cost of qualifying assets. A qualifying

asset is an asset that necessarily takes a period of at least a year to get ready for its in-

tended use or sale. No borrowing costs were recognized in either of the past two fiscal

years.

(c) Intangible assets

Individually acquired intangible assets are carried at cost. Intangible assets acquired in

a business combination are measured at fair value at the acquisition date.

If the intangible assets have a finite useful life they are amortized on a straight-line ba-

sis over their period of use. The amortization period for software is predominantly

three years. Licenses and similar rights are amortized over their contractual terms of

use. If the useful life cannot be determined, there is no amortization. Instead, the in-

tangible assets are tested for impairment at least once a year and impairment losses

are recognized if necessary. No goodwill or other intangible assets with an indefinite

useful life were capitalized as of December 31, 2017 or the same date of the previous

year.

Expenses for the development of new products or series are capitalized when the new

products or series are technically and economically feasible, are scheduled for internal

use or for sale, the expenses can be measured reliably and sufficient resources to com-

plete the development project are available. Development costs that do not meet these

criteria and all research costs are recognized immediately in profit or loss. The capita-

lized development costs are amortized on a straight-line basis from the date of launch,

typically over five to seven years. While a development project is still in progress, the


amounts capitalized to date are tested for impairment at least annually. No such deve-

lopment costs were capitalized as of the end of the 2017 and 2016 reporting periods.

(d) Property, plant and equipment

Property, plant and equipment are measured at historic cost less depreciation and im-

pairment losses. Investment grants are deducted from cost. The cost of internally ge-

nerated assets includes directly attributable production costs and pro rata production

overheads. Where property, plant and equipment consist of material identifiable com-

ponents with different useful lives, these components are recognized and depreciated

separately. Borrowing costs were not included in cost for the 2017 and 2016 fiscal years.

Expenses for maintenance and repairs are recognized in profit or loss, unless they

must be capitalized.

Property, plant and equipment are depreciated on a straight-line basis over their ex-

pected useful life. The useful lives of property, plant and equipment are reviewed at

the end of each reporting period and adjusted if necessary. Depreciation is essentially

based on the following useful lives:

in years

Buildings 10 to 50

Improvements 5 to 33

Technical equipment and machinery 5 to 21

Other equipment, operating and office equipment 3 to 15

(e) Leases

Leases for property, plant and equipment (investment leases) must be classified as

either a finance lease or an operating lease. The leases reported by the RENK Group are

classified as operating leases and the lease payments are recognized as an expense. As-

sets leased under operating leases are carried at cost and depreciated to their residual

value on a straight-line basis over the lease term. Impairment is recognized in the

form of write-downs and adjustments to the lease installments. RENK leases assets

only to a limited extent.

106

(f) Impairment

If there are indications that the carrying amounts of intangible assets, property, plant

and equipment, other equity investments and financial investments carried at cost or

other receivables may be impaired, an impairment test is performed. The intangible

assets with indefinite useful lives, capitalized development costs and goodwill are

tested for impairment at least annually. At the RENK Group, there were no items in the

statement of financial position subject to an annual impairment test as of the end of

the 2017 and 2016 reporting periods.

The recoverable amount of the asset in question is calculated to determine the extent

of a possible impairment loss. The recoverable amount is the higher of the fair value

less costs to sell and value in use. The value in use is the present value of the expected

cash flows. A weighted average cost of capital before taxes (WACC) that reflects the

market conditions is used as the discount rate. The discount rate is calculated on the

basis of the interest rate for risk-free investments, a market risk premium and the bo-

rrowing rate and taking into account specific peer group information for the beta fac-

tors and the debt-to-equity ratio. The underlying assumptions are reviewed on an on-

going basis and adjusted as necessary. The weighted average cost applied in 2017 was

8.0% (previous year: 7.9%). If a recoverable amount cannot be determined for an indi-

vidual asset, the recoverable amount of the smallest identifiable cash-generating unit

to which the asset in question can be assigned is determined. If the recoverable

amount of an asset is lower than its carrying amount, an impairment loss on the asset

is immediately recognized in profit or loss.

If an asset or cash-generating unit on which an impairment loss was recognized later

has a higher recoverable amount, an impairment loss is reversed up to no higher than

the amortized cost that would have resulted without the impairment. The impairment

loss is reversed in profit or loss and is recognized in other operating income. The re-

versal of impairment losses on goodwill is not permitted. There was no recognized

goodwill in the RENK Group as of the end of the 2017 or 2016 reporting periods, nor

were any reversals in income required to be recognized for assets or cash-generating

units.


(g) Inventories

Inventories are measured at the lower of cost or net realizable value. Cost includes di-

rectly attributable production costs and pro rata fixed and variable production over-

heads. The allocated overheads are mostly determined on the basis of normal capacity

utilization. Distribution expenses, general and administrative expenses and borro-

wing costs are not capitalized. Raw materials and merchandise are measured at

weighted average cost.

(h) Customer-specific construction contracts

Customer-specific construction contracts are accounted for using the percentage of

completion method. Under this method, pro rata sales revenue and the cost of sales

are reported in accordance with the progress achieved by the end of the reporting pe-

riod. This is based on the contract sales revenue agreed with the customer and the ex-

pected contract costs. The percentage of completion is calculated as the share of the

costs incurred by the end of the reporting period in the total forecast contract costs

(cost to cost method). If the result of a customer-specific construction contract cannot

be reliably determined, sales revenue is only recognized in the amount of the order

costs incurred (zero profit method). Under the percentage of completion method, the

parts of the contract for which sales revenue has been received are recognized net of

prepayments received under trade receivables in the statement of financial position.

Expected losses from customer-specific construction contracts are immediately recog-

nized in full as an expense by writing down capitalized assets and recognizing provi-

sions.

(i) Primary financial instruments

Financial instruments are agreements that give rise to a financial asset at one entity

while at the same time giving rise to a financial liability or equity instrument at an-

other. Regular way purchases and sales of financial instruments are recognized at the

settlement date, i.e. the date on which the asset is delivered.

Primary financial instruments include, in particular, customer receivables, loans, fi-

nancial investments, securities, cash and cash equivalents, financial liabilities and

trade payables. Primary financial instruments are carried at fair value on initial recog-

nition. Fair value on initial measurement is generally the transaction price, i.e. the

consideration given or received. After initial measurement, primary financial instru-

ments are measured at either fair value or at amortized cost, depending on the cate-

gory to which they belong.

A distinction is made between the following categories of financial asset:

financial assets at fair value through profit or loss,

financial assets held to maturity,

loans and receivables, and

available-for-sale financial assets.

108

Financial liabilities are assigned to the following categories:

financial liabilities at amortized cost, and

financial liabilities at fair value through profit or loss.

The RENK Group does not use the “financial assets held to maturity” category. Simi-

larly, the option of recognizing financial assets and liabilities at fair value through

profit or loss is not exercised.

Subsidiaries that are not consolidated for reasons of materiality do not fall within the

scope of IAS 39 and IFRS 7.

The amortized cost of a financial asset or financial liability is the amount

at which the financial asset or financial liability was measured on initial recognition,

less any repayments and

any write-downs for impairment or uncollectibility and

plus or minus the cumulative distribution of any difference between the original

amount and the amount repayable on maturity (premium, discount), which is amor-

tized using the effective interest method over the term of the financial asset or fi-

nancial liability.

Loans and receivables are carried at amortized cost. In the RENK Group this category

mainly includes receivables from customers, other financial receivables, loans and

cash and cash equivalents. Non-interest-bearing and low-interest-bearing receivables

with a remaining term of more than twelve months are discounted by discounting the

future cash flows at the market rate.

The risk of default of financial assets in the loans and receivables category is taken

into account by recognizing specific valuation allowances and portfolio-based allo-

wances.

Specifically, significant individual receivables are checked for objective evidence of in-

dividual impairment. A potential impairment is assumed if certain circumstances ex-

ist, such as late payments over a certain period, the initiation of enforcement

measures, imminent insolvency or over-indebtedness, application for or opening of

insolvency proceedings or failure of restructuring measures. If an individual impair-

ment is determined, specific valuation allowances are recognized in the amount of the

losses already incurred applying uniform Group standards.

To calculate portfolio-based allowances, insignificant loans and significant individual

receivables without evidence of impairment are grouped into homogeneous portfo-

lios. As long as there is still uncertainty as to which receivable is impaired, average his-

torical probabilities of default are used for the respective portfolio.

Bad debt allowances on receivables are usually recognized in a separate allowance ac-

count. They are derecognized at the same time as the corresponding impaired receiva-

ble.


Financial instruments that are held neither to maturity nor for speculative purposes

and that do not belong to any other category are classified as available-for-sale finan-

cial assets. Available-for-sale financial assets are measured at fair value. In the RENK

Group this category mainly includes securities and financial investments. The differ-

ence between the cost and the fair value is recognized in accumulated other compre-

hensive income after taking into account deferred taxes. Available-for-sale financial

assets are impaired when there is objective evidence of permanent impairment. If the

fair value is, for example, permanently or significantly below the carrying amount, the

impairment loss is recognized in profit or loss.

For securities the fair value is usually a market price. Financial investments are also

classified as available-for-sale financial assets. If these have no listed market price and

the fair value cannot be reliably determined with reasonable effort, they are measured

at cost. Available-for-sale financial assets are written down when there is objective evi-

dence of permanent impairment. The impairment loss is recognized in profit or loss.

With the exception of derivative financial instruments, financial liabilities are subse-

quently measured at amortized cost.

Financial assets and liabilities are reported at their gross value. They are only offset

when this is legally enforceable for RENK at the current time and it actually intends to

offset them.

RENK uses the central financial management of the MAN Group. Under a cash pooling

process, the balances of the RENK accounts included are closed out by MAN SE, usually

daily, and thus transformed into receivables from/liabilities to MAN SE. As part of its

central financial management, MAN SE manages and guarantees the MAN Group’s li-

quidity and credit supply with corresponding transactions on the international finan-

cial markets. Given their cash-like nature, RENK reports the receivables from financial

transactions with MAN SE as cash and cash equivalents. They essentially result from

central cash pooling and from highly liquid investments of a temporary nature at

MAN SE. By contrast, deposits made with MAN SE of an investment nature are re-

ported as other assets. Analogously, liabilities resulting from the central financial

management of the MAN Group are reported as financial liabilities.

(j) Derivative financial instruments

The RENK Group uses derivative financial instruments to hedge foreign currency, in-

terest rate and other price risks that can mainly arise from operating activities. The

most important derivative financial instruments for RENK are currency forwards and

options.

Derivative financial instruments are measured at fair value on initial recognition and

at the end of each subsequent reporting period. Derivative financial instruments are

recognized on the trade date.

The fair value for listed derivatives is their positive or negative market value, taking

counterparty risk into account as applicable. If no quoted market prices are available,

fair values are calculated based on the conditions at the end of the reporting period,

110

such as interest rates or exchange rates, and using recognized models, such as dis-

counted cash flow models or option pricing models.

The recognition of gains and losses from measurement at fair value is dependent on

the derivative’s classification.

Derivative financial instruments that do not meet the criteria of IAS 39 with regard to

hedge accounting are measured at fair value through profit or loss.

A requirement for hedge accounting is that a clear relationship is documented be-

tween the hedged item and the hedging instrument and that its effectiveness has been

demonstrated. If these criteria are met, the hedge is designated and documented as ei-

ther a cash flow or fair value hedge from this time. RENK uses cash flow hedges only.

In a cash flow hedge, the recognized assets and liabilities, unrecognized firm commit-

ments and highly probable forecast transactions are hedged against the risk of fluctu-

ating cash flows. The effective portion of the change in the fair value of the derivative

financial instrument in a cash flow hedge is recognized in accumulated other compre-

hensive income after the deduction of deferred taxes. Once the hedged item is recog-

nized in profit or loss, the pro rata equity is reclassified to other operating income or

expenses. The ineffective portion of the change in fair value is immediately recog-

nized in profit or loss. When the hedging instrument expires or is sold, terminated or

exercised, or the hedge no longer exists but the proposed transaction is still expected

to occur, the unrealized gains/losses accrued from this hedging instrument to date re-

main in equity and, in accordance with the above, are recognized in profit or loss

when the hedged item is recognized in the income statement. If the originally hedged

transaction is no longer expected to occur, the cumulative unrealized gains and losses

reported within equity until then are also recognized in profit or loss.

(k) Income tax expense

Provisions for taxes include current income tax liabilities. Deferred taxes are reported

in separate items of the statement of financial position and the income statement.

Provisions for potential tax risks are recognized based on the best possible estimate.

The likely amount of the tax arrears payment is used as a basis for recognized income

tax items.

Deferred tax assets and liabilities are recognized for temporary differences between

the financial reporting and the tax basis, for temporary differences in profit or loss

arising on consolidation and for tax credits and tax loss carryforwards. Deferred taxes

are measured at the prevailing tax rate at the end of the reporting period or the future

tax rate highly likely to be used.

Deferred tax assets are only recognized to the extent that taxable profit will be availa-

ble for the utilization of the deductible temporary differences. Valuation allowances

are recognized for deferred tax assets whose realization is not expected in the foresee-

able future. Deferred tax assets for tax loss carryforwards are usually measured based

on future taxable income for a planning period of five fiscal years.


Deferred tax assets are offset against deferred tax liabilities if they relate to the same

taxation authority and to the extent that their maturities match.

Changes in deferred taxes in the statement of financial position lead to deferred tax

expense or income. If the change in deferred taxes results from items recognized di-

rectly in equity, the change in deferred taxes is also recognized directly in equity.

(l) Pensions and similar obligations

Pension obligations from defined benefit plans are calculated using the projected unit

credit method. The future benefit obligations are measured on the basis of the bene-

fits accrued pro rata by the end of the reporting period and discounted to present

value. Their measurement reflects assumptions about the future development of cer-

tain parameters that affect the future level of benefits.

Provisions for pension obligations are reduced by the fair value of the plan assets held

to cover the pension obligations. If plan assets exceed obligations, the excess is only

recognized in other assets if it will result in a refund from the plan or a reduction of

future contributions.

The service cost, which represents the benefits of active employees accumulated in ac-

cordance with the benefit plan in the fiscal year, is reported in functional expenses.

Net interest income and expenses are calculated by multiplying the net asset or net

liability by the discount rate and are included in interest expense.

Remeasurements of the net asset or net liability include actuarial gains and losses

arising from differences between the actuarial assumptions used and the actual

trends, changes in actuarial assumptions and the return on plan assets, not including

amounts included in net interest income or expenses. Remeasurements are recog-

nized net of deferred taxes in equity.

Payments for defined contribution plans are recognized in functional expenses.

(m) Other provisions

Other provisions are recognized for all identifiable risks and uncertain obligations re-

sulting from past events that will probably lead to a future outflow of resources and

whose amount can be reliably estimated. They are measured at the best estimate of

the expenditure required to settle the obligation. The provision is carried at its net

present value where the time value of money is material. The discount rate is based on

market interest rates.

A reimbursement of third parties anticipated in connection with a provision is recog-

nized as a separate asset if its realization is as good as certain. Provisions are regularly

reviewed and adjusted as further information develops or circumstances change. If a

change in an estimate results in a reduction of the obligation, the provision is reversed

accordingly and the income is recognized in other operating income.

112

Provisions for warranties are recognized at the time of sale of the products concerned

or the performance of the relevant service. Their measurement is based primarily on

historical experience. Individual provisions are also recognized for known losses. Pro-

visions for restructuring measures are recognized when the Group has produced a de-

tailed, formal plan of measures containing information on the division affected, the

estimated number of employees and a cost estimate and the parties concerned or

their representatives have been informed accordingly. Provisions for outstanding

costs and other commitments are measured on the basis of services yet to be per-

formed, usually in the amount of the production costs expected to be incurred. Provi-

sions for anticipated losses from onerous contracts are recognized when the expected

benefit resulting from the contract is less than the unavoidable costs to fulfill the con-

tract.

(n) Estimates and judgments

When preparing consolidated financial statements, to a certain extent assumptions

and estimates are made that affect the amount and reporting of the recognized assets

and liabilities, income and expenses and information on contingent assets and liabili-

ties in the reporting period. The estimates were made on the basis of past experience

and other relevant factors, including the assumption of going concern. All estimates

and assumptions are made to the best of knowledge and belief to provide a true and

fair view of the net assets, financial position and results of operations of the Group.

Any uncertainty is adequately reflected in valuations, although future events can still

differ from these estimates and have a material effect on the net assets, financial posi-

tion and results of operations of the RENK Group. Estimates and judgments are re-

viewed on an ongoing basis.

The assumptions made regarding the following matters as of the end of the reporting

period are of particular significance:

If intangible assets, property, plant and equipment, other equity investments and fi-

nancial investments carried at cost or other financial receivables are tested for impair-

ment, this requires a forecast of future cash flows for the calculation of the recoverable

amount and their discounting, among other things. Such cash flows are based on fore-

casts that are in turn based on the business and financial planning approved by the

management. Other material assumptions relate to the weighted average cost of capi-

tal and tax rates.

Estimates of the useful life of depreciable assets are based on past experience. If, in the

context of the review of useful life, a change is made in estimates, the remaining use-

ful life is adjusted and any impairment loss is recognized.

Individual construction contracts are accounted for using the percentage of comple-

tion method. Sales revenue is accounted for using the percentage of completion

method. This method places considerable importance on accurate estimates of the

percentage of completion. Depending on which method is used to determine the per-

centage of completion, significant estimates include contract revenue, total contract

costs, the remaining costs to completion, contract risks and other assessments. The


management of the operating units is continuously reviewing the estimates for such

construction contracts and adjusts them as necessary.

Determining impairment of financial assets requires estimates of the level and proba-

bility of occurrence of future events. As far as possible, estimates are derived from past

experience.

Pensions and similar obligations are measured using actuarial methods. These are

mainly based on assumptions relating to discount rates, salary and pension trends

and mortality. These actuarial assumptions can differ significantly from actual deve-

lopments due to changes in market and economic conditions and therefore lead to a

substantial change in pensions and similar obligations. The underlying assumptions

are presented in the “Pensions and similar obligations” section.

As the Group operates in several countries, it is subject to different tax laws. The ex-

pected current income taxes and the deferred tax assets and liabilities must be calcu-

lated for each taxable entity. This requires, among other things, assumptions about

the interpretation of complex tax regulations and the ability to generate sufficient

taxable income within the respective tax type and jurisdiction. If these assumptions

differ from the actual outcome of such tax uncertainties, this can affect tax expenses

and deferred taxes. The best estimate of the expected tax payment is used for recog-

nized uncertain income tax positions.

Depending on the matter at hand, the measurement of other provisions and similar

obligations is complex at times and entails estimates to a considerable extent. The as-

sumptions made by management with respect to the timing and amount of utiliza-

tion are based, among other things, on historical data, available technical data, esti-

mates of cost trends and potential warranty claims, discount rates and possible reco-

verable amounts. Litigation and other legal proceedings simultaneously give rise to

complex legal issues and are subject to many difficulties and uncertainties. A provi-

sion is recognized for this if it is likely that, in connection with these proceedings, a li-

ability has been incurred that will probably lead to an outflow of resources and its

amount can be reliably estimated. Assessing whether a present obligation as of the

end of the reporting period is as a result of a past event, whether a future outflow is

likely and whether the obligation can be estimated reliably requires considerable judg-

ment and significant estimates by management. Future events and developments as

well as changes in estimates and assumptions can lead to an amended assessment at a

future date. Additional expenses that can have a material effect on the net assets, fi-

nancial position and results of operations of RENK thus cannot be completely ruled

out. Changes in contractual or actual circumstances are monitored and assessed as re-

gards the potential impact on the amount and reporting of the recognized assets and

liabilities, income and expenses and information on contingent assets and liabilities

in the reporting period. Developments in these general conditions that deviate from

assumptions and are beyond management control can cause amounts to differ from

the original estimates.

114

(o) Change in reporting

As of December 31, 2017, the company is reporting the current and noncurrent por-

tions of prepayments received. Data for the previous year have been adjusted to the

new form of presentation for ease of comparability. This change in reporting has no

effect on profit or loss in either the current fiscal year or the previous year.

Jan. 1, 2016 Jan. 1, 2016 Dec. 31, 2016 Dec. 31, 2016

Previous

reporting

New

reporting

Previous

reporting

New

reporting

Prepayments received, noncurrent – 73,152 – 96,366

Noncurrent liabilities and provisions 24,430 97,582 25,983 122,349

Prepayments received, current 154,306 81,154 167,596 71,230

Current liabilities and provisions 279,962 206,810 292,012 195,646

Total assets 664,602 664,602 707,735 707,735

(4) Statement of cash flows

In the statement of cash flows, cash flows are divided into cash flows from operating

activities, cash flows from investing activities and cash flows from financing activities.

The effects of changes in the basis of consolidation and exchange rates are eliminated

in the respective positions. The effect of exchange rate changes on cash and cash

equivalents is reported separately.

Cash flows from operating activities are calculated using the indirect method. Non-

cash operating expenses and gains/losses from asset disposals are therefore elimi-

nated in cash flows from operating activities.

Besides additions to property, plant and equipment, cash flows from investing activi-

ties also include deposits of an investment nature in intangible assets and other equi-

ty investments and financial investments. Proceeds from these items are offset

against each other. Any proceeds from the disposal of subsidiaries are shown net of

their cash and cash equivalents as of the date of disposal.

Cash flows from financing activities consist of the following cash transactions: divi-

dend payments, proceeds from and payments for securities, the borrowing and repay-

ment of financial liabilities. The RENK Group had no financial liabilities in either 2017

or 2016.

The cash and cash equivalents shown in the statement of cash flows correspond to the

“Cash and cash equivalents” item in the statement of financial position. Cash and cash

equivalents include bank balances, highly liquid investments of a temporary nature

that are only subject to minor risks of fluctuations in value and the receivables under

the MAN Group’s internal cash pooling.


(5) New and revised accounting pronouncements and methods

(a) Impact of new and revised IFRSs

RENK has implemented all accounting standards endorsed by the EU and effective for

financial periods from January 1, 2017.

Since 1 January 2017, the amendment to IAS 12 (Income Taxes) has clarified the ac-

counting for deferred tax assets for unrealized losses on assets carried at fair value.

Since 1 January 2017, the International Accounting Standards Board has made

amendments to IFRS 12 (Disclosure of Interests in Other Entities) as part of the im-

provement of International Financial Reporting Standards (2016 Annual Improve-

ment Project). These clarify that disclosures in accordance with IFRS 12 are also re-

quired for subsidiaries, joint arrangements, associates and unconsolidated struc-

tured entities, even if they have been classified as “held for sale” or “intended for dis-

tribution to owners” or are part of a discontinued operation.

Since January 1, 2017, IAS 7 (Statement of Cash Flows) requires additional disclosures

in the notes on cash and non-cash changes in financial liabilities resulting from fi-

nancing activities in the statement of cash flows. The disclosures are required for the

first time for the 2017 annual financial statements. As RENK does not have any finan-

cial liabilities and had none in the previous year, such disclosures are not required in

these consolidated financial statements.

The amendments and other accounting standards effective for the first time in fiscal

year 2017 have no effect on the presentation of the net assets, financial position and

results of operations in the RENK consolidated financial statements.

(b) New and revised IFRSs not adopted

RENK did not adopt the following accounting standards that have been adopted by the

IASB but that are not yet effective for the fiscal year in the 2017 consolidated financial

statements.

116

Standard/Interpretation

Published by

IASB

Mandatory

application1)

Endorsed

by EU

Anticipated impact

IFRS 2 Amendments to IFRS 2: Classification and Measurement of Share-based Payment Transactions

Jun. 20, 2016 Jan. 1, 2018 No No impact

IFRS 4 Amendments to IFRS 4: Applying IFRS 9 Financial Instruments with IFRS 4 Insurance Contracts

Sept. 12, 2016 Jan. 1, 2018 Yes No impact

IFRS 9 Financial instruments July 24, 2014 Jan. 1, 2018 Yes Detailed descriptions after the table

IFRS 9 Amendment – Prepayment features with negative compensation

Oct. 12, 2017 Jan. 1, 2019 No No impact

IFRS 10 IAS 28

Consolidated Financial Statements and Investments in Associates and Joint Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

Sept. 11, 2014 Postponed2) No No impact

IFRS 15 Revenue from Contracts with Customers including Amendments to IFRS 15: Effective date of IFRS 15

May 28, 2014 Jan. 1, 20183) Yes Detailed descriptions after the table

IFRS 15 Clarifications to IFRS 15 – Revenue from Contracts with Customers

Apr. 12, 2016 Jan. 1, 2018 No Additional practical expedients for the transition period; otherwise no material impact.

IFRS 16 Leases Jan. 13, 2016 Jan. 1, 2019 Yes No classification as a finance or operating lease for lessees, instead basic recognition of all leases in the form of a right-of-use asset and a lease liability. No material impact, but additional disclosures.

IFRS 17 Insurance contracts May 18, 2017 Jan. 1, 2021 No No impact

IAS 28 Amendments: Long-term Interests in Associates and Joint Ventures

Oct. 12, 2017 Jan. 1, 2019 No No impact


Standard/Interpretation

Published by

IASB

Mandatory

application1)

Endorsed

by EU

Anticipated impact

IAS 40 Amendments: Transfers of Investment Property

Dec. 8, 2016 Jan. 1, 2018 No No impact

IFRIC 22 Foreign Currency Transactions and Advance Consideration

Dec. 8, 2016 Jan. 1, 2018 No Translation of advance payments denominated in foreign currency into the functional currency at the spot rate on the day of payment. No material impact

IFRIC 23 Uncertainty over Income Tax Treatments

Jun. 7, 2017 Jan. 1, 2019 No No material impact

Improvements to International Financial Reporting Standards 20164)

Dec. 8, 2016 Jan. 1, 2018 5) No No material impact

Improvements to International Financial Reporting Standards 20176)

Dec. 12, 2017 Jan. 1, 2019 No No material impact

1) Initial adoption mandatory for the RENK Group. 2) The IASB resolved on December 15, 2015 to postpone the date of initial adoption indefinitely. 3) Postponed until January 1, 2018 (IASB resolution of August 11, 2015). 4) Minor amendments to a variety of IFRSs (IFRS 1 and IAS 28). 5) This relates to the first-time adoption of the amendments to IFRS 1 and IAS 28. 6) Minor amendments to a variety of IFRSs (IFRS 3, IFRS 11, IAS 12 and IAS 23).

IFRS 9 – Financial Instruments IFRS 9 amends the accounting requirements for the classification and measurement

of financial assets, impairment on financial assets and hedge accounting. The RENK

Group will use the modified retrospective transition approach, under which the cumu-

lative effects are recognized in the opening statement of financial position for 2018.

The classification and measurement of financial assets is determined by the business

model applied and the structure of cash flows. On initial recognition, a financial asset

is classified either as:

at amortized cost;

at fair value through profit or loss; or

at fair value through other comprehensive income.

In the future, financial investments must always be recognized at fair value, even if the

company in which the investment is held is not listed. This is expected to give rise to

an increase in value in the seven-figure range. If the equity investment is not held for

trading, IFRS 9 allows for changes in value to be recognized on OCI. The RENK Group

intends to exercise this option for the relevant equity investment. The increase in

118

value resulting from the first-time adoption of IFRS 9 has thus been recognized in ac-

cumulated other comprehensive income. Also in the event of subsequent derecogni-

tion, e.g. when selling the equity investment, the cumulative changes in the value of

financial investments will no longer be reclassified to profit or loss. Under IFRS 9, the

classification and measurement of financial liabilities is largely unchanged compared

to the current accounting requirements of IAS 39.

The model for calculating impairment losses and recognizing loss allowances is chan-

ging from an incurred loss model to an expected credit loss model. The RENK Group

will apply the simplified approach allowed by IFRS 9 to calculate impairment losses on

trade receivables. Applying this approach, the loss allowances on the individual recei-

vables are calculated using a provision matrix with provision rates graded depending

on the number of days that a receivable is past due. On first-time adoption, the

amended measurement method results in an increase in loss allowances of around

€ 0.5 million. These amounts are recognized in retained earnings. The increase in the

loss allowance results from the requirement to recognize loss allowances for non-im-

paired financial assets.

With regard to hedge accounting, the standard extends the designation options and

introduces a requirement to implement more complex accounting logic. Furthermore,

IFRS 9 eliminates the quantitative thresholds for effectiveness testing. In particular,

reclassification practice will change under IFRS 9. The more substantial the exchange

rate fluctuations, the higher the compensating effect of hedges on operating

profit/loss. As this will continue to apply under IFRS 9, we do not expect our operating

profit/loss from hedges to change significantly compared to the current accounting

treatment. No first-time adoption effects will result from these hedges as the new re-

gulations for hedges are applied prospectively with currency forwards.

This will also lead to significantly more extensive disclosures in the notes.

IFRS 15 – Revenue from Contracts with Customers IFRS 15 updates the accounting treatment of revenue recognition. For certain types of

contracts, the RENK Group expects sales revenues to be recognized later than under

current accounting, particularly if the transaction price is divided among several per-

formance obligations. “Other provisions” and “Other liabilities” will be adjusted in line

with this. Total sales revenue is unlikely to change, or will only change insignificantly,

as a result of IFRS 15.

In addition, there will be changes in the statement of financial position as the RENK

Group will group prepayments received and other deferred items relating to sales re-

venue under IFRS 15 and report these under the new item “Contractual liability” in the

future. The amount reported in the statement of financial position will increase be-

tween ten and fifteen million as a result of the accounting for prepayments that are

unconditional but that have not yet paid by the customer in the form of cash. This will

also lead to significantly more extensive disclosures in the notes.

The RENK Group uses the modified retrospective transition approach, under which the

cumulative effects are recognized in the opening statement of financial position for

2018. It is assumed that this will have no effect on retained earnings.


IFRS 16 – Leases IFRS 16 amends the requirements for accounting for leases. The central objective of

IFRS 16 is the recognition of all leases in the statement of financial position. Accor-

dingly, lessees will no longer distinguish between finance and operating leases. In-

stead, they must recognize a right of use and a lease liability for all leases in their

statement of financial position in the future. Exceptions only apply for short-term and

low-value leases. During the term of the lease, the right of use must be amortized and

the lease liability must be carried forward using the effective interest method and ta-

king lease payments into account. New lessee accounting will generally lead to higher

noncurrent assets and noncurrent liabilities. In the income statement, a reduction in

operating profit and an increase in financial result are expected. This will also lead to

significantly more extensive disclosures in the notes. Lessor accounting is essentially

the same as the current requirements of IAS 17. Lessors must continue to distinguish

between finance and operating leases in the future on the basis of the distribution of

the risks and opportunities from the asset. The impact of IFRS 16 on the consolidated

financial statements is currently being examined.

120

Notes to the Consolidated Income Statement

(6) Sales revenue


Germany 146,866 200,193

Other EU countries 153,519 109,769

Other European countries 30,048 28,239

Asia 73,883 92,796

Americas 56,684 59,404

Africa 3,644 3,002

Australia and Oceania 4,762 2,464

469,406 495,867

Sales revenue from customer-specific construction contracts amounted to

€ 21,813 thousand (previous year: € 35,888 thousand).

(7) Other operating income


Income from reversal of provisions 10,544 11,171

Income from currency translation differences and derivatives 1,130 1,724

Prior-period income 543 1,079

Income from asset disposals 115 204

Income from reversal of bad debt allowances on receivables and receivables written off 69 119

Income from penalties 4 12

Other income 975 809

13,380 15,118

Please see “Other noncurrent and current provisions” for information on income from

the reversal of provisions.

Income from currency translation differences includes gains from exchange rate

changes between the origination and payment date of receivables and liabilities in for-

eign currency and price gains from measurement at the closing date. The resulting ex-

change rate losses are reported in other operating expenses.


(8) Other operating expenses


Expenses from currency translation differences and derivatives 1,428 3,163

Addition to miscellaneous other provisions 675 1,168

Surety and bank fees 598 642

Bad debt allowances on receivables and other assets and write-off of bad debts 153 1,264

Personnel expenses 98 5,386

Losses on asset disposals 97 434

Allocated costs – 792

Other expenses 911 601

3,960 13,450

Personnel expenses had included the addition to other provisions for capacity adjust-

ments in Standard Gear Units in the previous year.

Other operating expenses comprise the expenses not allocated to functional ex-

penses, in particular the cost of sales.

The changes in the expense from derivatives essentially result from changes in US do-

llar exchange rates between the transaction rate and the rate at the realization date.

(9) Interest expense and other financial result

Interest expense


Interest cost on provisions and liabilities 224 312

Interest and similar expenses 238 176

Interest expense 462 488

The effect of changes in the discount rate for liabilities and other provisions resulted

in an expense of € 59 thousand in fiscal year 2017 (previous year: € 73 thousand) and is

included in interest expense.

122

Other financial result


Income

Income from equity investments 1,217 1,660

Other interest and similar income 352 113

Income from the fair value measurement of derivatives 798 1,050

Expenses

Expenses from equity investments – (1,847)

Expenses from measurement effects and write-downs of financial instruments (748) (3,034)

Other financial result 1,619 (2,058)

€ 56 thousand (previous year: € 48 thousand) of interest income results from financial

transactions with MAN SE. Exchange rate hedges invoiced in the reporting period and

the measurement of amounts in foreign currencies resulted in income of € 50 thou-

sand as against expenses of € 1,984 thousand reported in the previous year, which

played a key role in the development of the “Other financial result”.

(10) Income tax expense


Current taxes

Germany 14,153 17,361

Outside Germany 998 1,707

Deferred taxes

Germany 2,115 1,062

Outside Germany 1,110 213

18,376 20,343

The tax expense forecast for fiscal year 2017 results from applying the domestic tax

rate of 32.01% (unchanged year-on-year) for the 2017 assessment period to the profit

before tax. This tax rate still takes into account German municipal trade tax of 16.19%

and German corporate income tax of 15.0% and the solidarity surcharge of 5.5% of cor-

porate income tax, both of which were unchanged as against the previous year.


Reconciliation of forecast to current income taxes:

€ thousand 2017 % 2016 %

Profit before taxes 61,204 100 64,565 100

Forecast tax expense 19,591 32.0 20,667 32.0

Difference due to changes in tax rates 79 0.1 118 0.2

Tax-exempt income (916) (1.5) (1,670) (2.6)

Non-deductible expenses 214 0.3 840 1.3

Taxes for previous years and other (592) (1.0) 388 0.6

Current tax expense 18,376 30.0 20,343 31.5

The current tax expense includes a prior-period income tax expense of € 1,331 thou-

sand (previous year: € 497 thousand).

Deferred taxes are attributable to the following items:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Deferred tax assets

Intangible assets 17 37

Property, plant and equipment 122 –

Other equity investments and financial investments – 4

Inventories 14,556 11,124

Receivables and other assets 4 15

Pensions and similar obligations 14,305 13,784

Liabilities and other provisions 3,892 4,847

Loss carryforwards 2 145

Impairment losses on deferred tax assets – –

Gross amount 32,900 29,956

of which noncurrent 14,325 13,970

Offset (26,248) (20,697)

Consolidation 1,000 1,240

Carrying amount in statement of financial position 7,652 10,498

124

€ thousand Dec. 31, 2017 Dec. 31, 2016

Deferred tax liabilities

Intangible assets 9 1

Property, plant and equipment 11,399 10,251

Inventories 56 55

Receivables and other assets 3,753 4,428

Pensions and similar obligations – –

Liabilities and other provisions 15,566 9,272

Gross amount 30,784 24,006

of which noncurrent 11,408 10,252

Offset (26,248) (20,697)

Consolidation 203 121

Carrying amount in statement of financial position 4,739 3,429

In connection with investments in subsidiaries there are temporary differences for

which no deferred taxes were recognized in the amount of € 295 thousand (previous

year: € 386 thousand).

(11) Earnings per share

2017 2016

Profit after tax in € thousand 42,828 44,222

Weighted average shares outstanding (in thousands) 6,800 6,800

Earnings per share in € 6.30 6.50

In accordance with IAS 33, earnings per share are calculated from the consolidated

profit after tax and the average number of shares outstanding in the year. There were

no instruments as of either December 31, 2017 or December 31, 2016 that would dilute

earnings per share.

(12) Other income statement disclosures

The cost of materials is as follows:


Cost of raw materials, consumables and supplies, and of purchased merchandise 169,736 161,285

Cost of purchased services 49,940 17,984

219,676 179,269

The cost of sales includes research and development costs of € 14,098 thousand (previ-

ous year: € 11,316 thousand).


Staff costs break down as follows:


Wages and salaries 142,854 146,426

Social security and post-employment expenses 30,625 28,405

173,479 174,831

RENK employed 2,112 people (previous year: 2,104) on average over the year. Of these,

1,210 (previous year: 1,225) worked directly and 902 (previous year: 879) indirectly in

production. There were 37 employees in the non-active phase of early retirement (pre-

vious year: 33). On average, 107 people (previous year: 115) were in vocational training.

Lease expenses amount to:


Rental and lease expenses 2,049 2,186

2,049 2,186

126

(13) Total remuneration for work by the auditor

In the year under review, the Supervisory Board proposed PricewaterhouseCoopers

GmbH Wirtschaftsprüfungsgesellschaft, Munich, (PwC) as the auditor; the Annual

General Meeting endorsed this proposal on April 26, 2017.

The table below shows the fees charged for the work of the auditor PwC and the com-

panies of the international PwC network in fiscal year 2017 and 2016:


Audit of the financial statements 202 189

Other assurance services 44 20

Tax advisory services 2 2

Other services – –

Auditor remuneration 247 211

The fees charged for work by the German auditor PwC and its affiliated German com-

panies in fiscal year 2017 totaled € 219 thousand (previous year: € 179 thousand).

€ 175 thousand (previous year: € 159 thousand) of this related to the audit of the finan-

cial statements and € 44 thousand (previous year: € 20 thousand) to other assurance

services.

Audit services comprise the audit of the consolidated and single-entity financial state-

ments of RENK AG and its subsidiaries. Other assurance services essentially include

certificates for ERP system changes.


Notes to the Consolidated Statement of Financial Position

(14) Intangible assets

€ thousand Licenses,

software

and similar

rights

Other

intangible

assets

Total

Gross carrying amount on Jan. 1, 2016 14,188 5,865 20,053

Cumulative depreciation/amortization and impairment losses (12,709) (5,865) (18,574)

As of Jan. 1, 2016 1,479 0 1,479

Additions 764 – 764

Reclassifications 45 – 45

Disposals (393) – (393)

Depreciation/amortization (907) – (907)

Cumulative depreciation/amortization on disposals 368 – 368

Currency adjustment – – –

As of Dec. 31, 2016 1,356 0 1,356

Gross carrying amount on Jan. 1, 2017 14,648 5,912 20,560


As of Jan. 1, 2017 1,356 0 1,356

Additions 1,129 – 1,129

Reclassifications 55 – 55

Disposals (840) – (840)

Depreciation/amortization (863) – (863)

Cumulative depreciation/amortization on disposals 832 – 832

Currency adjustment (12) – (12)

As of Dec. 31, 2017 1,657 0 1,657

Gross carrying amount on Dec. 31, 2017 14,550 5,435 19,985


Amortization of intangible assets is included in the functional expenses, in the cost of

sales in particular.

128

(15) Property, plant and equipment

€ thousand Land and

buildings

Technical

equipment

and

machinery

Other

equipment,

operating

and office

equipment

Prepay-

ments and

assets under

construction

Total

Gross carrying amount on Jan. 1, 2016 102,471 194,356 49,868 30,898 377,593

Cumulative depreciation/amortization and impairment losses (40,177) (105,559) (38,278) – (184,014)

As of Jan. 1, 2016 62,294 88,797 11,590 30,898 193,579

Additions 4,959 8,050 2,803 7,944 23,756

Reclassifications 6,197 21,641 1,609 (29,492) (45)

Disposals (1,561) (4,269) (16,845) – (22,675)

Depreciation/amortization (2,616) (11,969) (3,225) – (17,810)

Impairment losses – (579) – – (579)

Cumulative depreciation/amortization on disposals 1,206 3,911 16,741 – 21,858

Currency adjustment 78 21 9 31 139

As of Dec. 31, 2016 70,557 105,603 12,682 9,381 198,223

Gross carrying amount on Jan. 1, 2017 112,182 219,900 37,455 9,381 378,918


As of Jan. 1, 2017 70,557 105,603 12,682 9,381 198,223

Additions 615 3,752 6,998 6,241 17,606

Reclassifications – 4,002 78 (4,135) (55)

Disposals – (2,847) (1,269) – (4,116)

Depreciation/amortization (2,595) (11,715) (3,752) – (18,062)

Cumulative depreciation/amortization on disposals – 2,714 951 – 3,665

Currency adjustment (319) (203) (45) (8) (575)

As of Dec. 31, 2017 68,258 101,306 15,643 11,479 196,686

Gross carrying amount on Dec. 31, 2017 112,339 223,665 43,130 11,479 390,613


Depreciation on property, plant and equipment is included in the functional expenses,

in the cost of sales in particular.


Leased assets were tested for impairment as part of the regular inventory of property,

plant and equipment. There were no impairment losses on property, plant and equip-

ment in the reporting period. An impairment loss on technical equipment and ma-

chinery was recognized in the Slide Bearings segment in the amount of € 579 thou-

sand in the previous year. The recoverable amount, which is the same as the value in

use, was € 719 thousand as of the date of the impairment test.

(16) Other equity investments and financial investments

The equity investments in Renk Gears Private Ltd., Bangalore/India, Renk Korea Co.,

Ltd., Busan/South Korea, and Damen Schelde Gears B.V., Vlissingen/Netherlands, which

were acquired in the fiscal year 2017, are reported at a cost of € 5,392 thousand.

An impairment loss of € 1,847 thousand was identified in intra-year testing at RENK

Shanghai Services Commercial Co. Ltd, Shanghai, China (RSH) in the previous year.

This was included in the Group’s “Other financial result” for 2016.

(17) Inventories

€ thousand Dec. 31, 2017 Dec. 31, 2016

Raw materials, consumables and supplies 26,371 27,729

Finished goods and work in progress 153,393 149,997

Prepayments for inventories 739 4,360

180,503 182,086

Consumption of inventories of € 294 million (previous year: € 312 million) was recog-

nized in the cost of sales in the reporting period.

Write-downs on inventories of € 2,415 thousand were recognized in fiscal year 2017

(previous year: € 4,070 thousand).

(18) Trade receivables

€ thousand Dec. 31, 2017 Dec. 31, 2016

Customer receivables 73,636 69,684

Receivables from affiliated companies 6,665 4,744

Receivables from customer-specific construction contracts (PoC receivables)1) 7,582 11,895

87,883 86,323

1) Of which receivables from affiliated companies of € 138 thousand (previous year: € 835 thousand)

In line with the operating cycle, all trade receivables are reported as current.

130

PoC receivables are calculated as follows:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Production costs and pro rata receivables from customer-specific construction contracts 61,479 52,567

Used prepayments received (53,897) (40,672)

7,582 11,895

Specific valuation allowances on trade receivables developed as follows:


As of Jan. 1 613 209

Addition 20 430

Utilization (344) (1)

Reversal (31) (26)

Currency translation differences (14) 1

As of Dec. 31 244 613

In fiscal year 2017, there were specific valuation allowances on receivables with a gross

carrying amount of € 118 thousand (previous year: € 612 thousand).

Portfolio-based allowances on trade receivables developed as follows:


As of Jan. 1 651 669

Addition 87 71

Reversal (42) (90)

Currency translation differences (4) 1

As of Dec. 31 692 651


(19) Other noncurrent and current assets and receivables

€ thousand Dec. 31, 2017 Dec. 31, 2016

Other tax assets 2,500 1,815

Commission claims 1,539 922

Prepaid expenses 788 405

Derivative financial instruments 796 153

Miscellaneous other assets 781 992

6,404 4,287

Other assets break down as follows according to maturity:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Other noncurrent assets and receivables 158 45

Other current assets and receivables 6,246 4,242

6,404 4,287

Derivative financial instruments are carried at fair value. They are used to hedge cur-

rency risks on customer orders and other foreign exchange positions.

(20) Cash and cash equivalents

€ thousand Dec. 31, 2017 Dec. 31, 2016

Bank balances, cheques, cash in hand 263 810

Receivables from financial transactions with MAN SE 198,290 213,147

198,553 213,957

Receivables from financial transactions with MAN SE essentially result from the cen-

tral cash pooling of the MAN Group and from highly liquid investments at MAN SE.

These investments are of a temporary nature and are only subject to insignificant risks

of fluctuations in value.

(21) Equity

The share capital of RENK AG of € 17,920,000 is divided into 7 million no-par value

shares with equal rights. All shares are fully paid up. In the year under review, MAN SE,

Munich, held 76% of the subscribed capital of RENK AG.

132

A total of 199,903 treasury shares or 2.86% of the share capital (share of capital: € 512

thousand) were held by the company on December 31, 2017. The capital reserves relate

exclusively to share premiums in the context of capital increases by RENK AG. The ac-

cumulated other comprehensive income predominantly results from the fair value

measurement of provisions for pension obligations.

In accordance with the provisions of the German Stock Corporation Act, the net re-

tained profits of the Group parent RENK AG are available for distributions. The net re-

tained profits of RENK AG amount to € 26,738 thousand as of December 31, 2017. The

Executive Board and the Supervisory Board propose to the Annual General Meeting on

April 27, 2018 the distribution of a dividend for fiscal 2017 unchanged as against the

previous year of € 2.20 per share. With 7,000,000 no-par value shares less the treasury

shares without dividend rights in accordance with section 71b of the Aktiengesetz

(AktG – German Stock Corporation Act) (199,903 shares), this corresponds to an

amount of € 14,960,213.40. Shareholders’ entitlement to the dividend arises only with

the resolution by the Annual General Meeting.

The most important goals of capital management at RENK are sustainably increasing

enterprise value and safeguarding the liquidity and creditworthiness of the Group.

Factors contributing to this are the reduction of the cost of capital, the optimization of

the capital structure and effective risk management.

RENK AG is not subject to any capital requirements on the basis of its Articles of Asso-

ciation.

(22) Pensions and similar obligations

The RENK Group grants its employees retirement benefits in accordance with the

country-specific circumstances in the form of defined benefit or defined contribution

pension plans.

In defined contribution plans, contributions are paid to state or private pension funds

on the basis of legal or contractual regulations. There are no further payment obliga-

tions other than the payment of contributions.

The expenses for pensions amounted to € 16,620 thousand (previous year:

€ 14,647 thousand). These are included in the respective functional costs. The net inter-

est expense from additions to provisions for pension obligations is reported in inter-

est expense.

Current contributions are recognized as an expense in the respective year; in 2017

they amounted to a total of € 10,971 thousand (previous year: € 11,151 thousand) in the

RENK Group. These were paid in full in Germany (previous year: € 10,693 thousand) as

a contribution to the statutory pension system.


The following amounts were recognized in the statement of financial position for de-

fined benefit pension plans:


Present value of externally financed obligations 157,261 157,883

Plan assets at fair value (147,266) (143,245)

Funding status on December 31 9,994 14,638

Present value of unfunded obligations 480 435

Surplus in accordance with IAS 19.64 31 35

Carrying amount on December 31 10,505 15,108

of which provisions for pension obligations 10,505 15,108

(a) Pension plans in Germany

As one of the essential elements of its remuneration policy, the RENK Group provides

its domestic employees with benefits under a modern and attractive occupational

pension system for the time after their active working life. This provides reliable addi-

tional income on retirement and risk protection for disability and death.

Under the current pension plans, the active employees receive employer contribu-

tions linked to their remuneration and, in addition, also have the option of personal

provision through deferred compensation (paid for by the employer for employees

subject to collective bargaining agreements). When actively working, employees ac-

crue pension capital from employer- and employee-financed contributions and re-

turns from investment on the capital market. On retirement this pension capital is

paid out as a lump sum or in installments, or in certain cases can be converted into an

annuity. Employees’ investment risks are gradually reduced with increasing age (lifecy-

cle concept). The performance of the pension capital is derived from the return on the

investments. As required by law, at least the total contributions paid for the employee

will be paid out on retirement.

Former employees, pensioners or employees who have left the plan with vested bene-

fits have pension commitments from closed pension funds, which are predominantly

geared towards providing lifetime annuity payments. These commitments entail the

usual longevity and inflation risks, which are regularly monitored and evaluated.

The domestic pension assets of the RENK Group are managed by the MAN Pension

Trust e.V. and MAN Pensionsfonds AG. These assets are irrevocably unavailable to the

RENK companies and must be used exclusively to fund current pension payments or

for employee claims in the event of insolvency. The proper management and use of

trust assets is monitored by independent trustees. MAN Pensionsfonds AG is also sub-

ject to the supervision of the German Federal Financial Supervisory Authority (BaFin).

The pension assets are invested by professional investment managers according to in-

vestment guidelines set by an Investment Committee. The strategic allocation of plan

assets is based on asset liability management studies conducted at regular intervals.

134

(b) Pension plans outside Germany

In Switzerland, the defined benefit pension claims and the actuarial reserves are ma-

naged in an industry-wide company pension institution. Employees accrue pension

capital with this institution, which is then converted into a lifelong pension under the

conditions prevailing at the time. The pension institution is managed conservatively

based on government regulations. If the claims are no longer covered by capital due to

negative market developments, restructuring contributions can be levied from the

affiliated employers and their employees.

Obligatory post-employment benefits are paid in France.

(c) Funding status

The calculation of the present value of defined benefit pension obligations is based on

the following assumptions:

in % Germany Outside Germany1)

2017 2016 2017 2016

Discount rate as of Dec. 31 1.60 1.60 0.73 0.73

Salary trend 3.60 3.20 1.02 1.02

Pension trend 1.50 1.50 – –

Fluctuation rate 4.39 4.42 7.73 7.12

1) Weighted average rates

The Heubeck 2005 G mortality tables adapted to empirical MAN-specific data were

used as the biometric data in Germany; the BVG 2015 GT mortality tables were used in

Switzerland.

Discount rates are based on the yields on corporate bonds with high credit ratings,

with a maturity and currency matching the respective obligations. Pension and pay

trends either correspond to contractual adjustments or are based on those found in

the general regulations applicable. Pay trends comprise expected wage and salary in-

creases that also take into account increases resulting from career development.


The present value of defined benefit obligations developed as follows:


Defined benefit obligation on January 1 158,318 143,316

Current service cost1) 4,945 2,462

Interest expense 2,204 3,243

Actuarial gains (-)/losses (+) due to changes in demographic assumptions 1,450 131

Actuarial gains (-)/losses (+) due to changes in financial assumptions 35 11,303

Actuarial gains (-)/losses (+) due to experience adjustments 487 441

Employee contributions to funds 1,271 1,343

Pension payments from company assets (3,397) (1,022)

Pension payments from fund (5,007) (3,155)

Other changes 21 14

Currency differences from plans abroad (2,588) 243

Defined benefit obligation on December 31 157,740 158,318

1) Including past service cost of € -2,421 thousand in the previous year.

Changes in the main actuarial assumptions would have had the following effects on

defined benefit obligations:

Dec. 31, 2017 Dec. 31, 2016

Defined benefit obligation

if

€

thousand

% €

thousand

%

Discount rate +0.5 percentage

points 149,772 (5.3) 150,065 (5.5)

(0.5) percentage

points 166,717 5.4 167,634 5.6

Salary trend +0.5 percentage

points 158,070 0.2 158,666 0.2

(0.5) percentage

points 157,462 (0.2) 158,013 (0.2)

Pension trend +0.5 percentage

points 164,278 4.0 164,450 3.7

(0.5) percentage

points 151,757 (3.9) 152,663 (3.7)

Longevity + 1 year 160,815 1.9 161,412 1.9

The sensitivity analyses shown each take into account the change in one assumption

with the other assumptions unchanged from the original calculation, i.e. possible co-

rrelation effects between the individual assumptions are not taken into account.

136

To analyze the sensitivity of the defined benefit obligation to a change in the assumed

life expectancy, the age of beneficiaries was increased by one year as part of a compa-

rative calculation.

As in the previous year, the weighted average term to maturity (Macaulay duration) of

the defined benefit pension obligations is eleven years.

The defined benefit obligation is divided among the members of the plan as follows:


Active members 88,617 88,267

Former members 6,339 8,179

Beneficiaries 62,784 61,872

Defined benefit obligation 157,740 158,318

The maturity profile of the payments for the defined benefit obligation is shown be-

low by breaking down the present value of the obligation by the maturity of the un-

derlying payments:


Payment due

Within one year 6,526 6,458

Between one and five years 25,447 26,713

More than five years 125,767 125,147

Defined benefit obligation 157,740 158,318

The development of plan assets is shown by the table below:


Plan assets on January 1 143,245 127,274

Interest income from plan assets – in amount of interest rate 2,039 3,004

Return on plan assets not recognized in interest income 7,734 7,721

Employer contributions to funds 1,006 7,536

Employee contributions to funds 600 614

Pension payments from fund (5,007) (3,155)

Other changes 21 14

Currency differences from plans abroad (2,372) 237

Plan assets on December 31 147,266 143,245


The investment of plan assets resulted in income of € 9,773 thousand (previous year:

€ 10,725 thousand), € 8,457 thousand (previous year: € 9,444 thousand) of which re-

lated to Germany and € 1,316 thousand (previous year: € 1,282 thousand) of which to

other countries.

In the next fiscal year employer contributions to plan assets are expected to amount

to € 4,028 thousand (amount stated in previous year: € 3,998 thousand).

The plan assets are invested in the following categories:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Quoted

price on

an active

market

No

quoted

price on

an active

market

Total Quoted

price on

an active

market

No

quoted

price on

an active

market

Total

Cash and cash equivalents 5,624 – 5,624 7,422 – 7,422

Equity instruments 6,187 – 6,187 6,655 – 6,655

Debt instruments 10,147 – 10,147 10,925 – 10,925

Direct investments in real estate – 6,383 6,383 – 6,566 6,566

Equity funds 29,282 – 29,282 24,191 – 24,191

Pension funds 48,849 – 48,849 50,493 – 50,493

Real estate funds 5,336 – 5,336 3,516 0 3,516

Other funds – 1,310 1,310 – 1,256 1,256

Other 2,688 31,462 34,149 1,643 30,579 32,222

Plan assets at fair value 108,111 39,155 147,266 104,844 38,401 143,245

The plan assets are 29% (previous year: 30%) invested in domestic assets, 52% (previ-

ous year: 52%) in other European assets and 19% (previous year: 18%) in assets from

other regions.

(d) Expenses for pension obligations

The following amounts were recognized in the income statement:


Current service cost 1) 4,945 2,462

Net interest expense (+)/income (-) 165 239

5,110 2,701

1) Including past service cost of € -2,421 thousand in the previous year.

138

(23) Other noncurrent and current provisions

€ thousand As of Jan.

1,2017

Utilization Addition Reversal Interest

cost

Other1) As of Dec.

31, 2017

Warranties 38,241 (4,758) 7,484 (8,782) – (81) 32,105

Outstanding costs 6,350 (1,296) 3,013 (871) – 2 7,199

Obligations to employees 10,122 (1,545) 1,676 (826) 55 (10) 9,472

Miscellaneous other provisions 7,760 (1,686) 2,504 (67) – (317) 8,194

62,473 (9,284) 14,676 (10,544) 55 (406) 56,969

1) Including currency translation differences

Other provisions break down as follows according to maturity:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Noncurrent Current Noncurrent Current

Warranties 2,102 30,003 1,521 36,720

Outstanding costs – 7,199 – 6,350

Obligations to employees 5,095 4,376 4,599 5,523

Miscellaneous other provisions 855 7,339 930 6,830

8,052 48,917 7,050 55,423

Provisions for warranties relate to legal and contractual warranty obligations and to

goodwill towards customers. The timing of the utilization of provisions for warranties

is dependent on the occurrence of the warranty claim and can extend over the entire

warranty and goodwill period. In particular, the reversal of the provision for warran-

ties also includes the amicable settlement of the arbitration proceedings with a Special

Gear Units customer. Provisions for outstanding costs were recognized for outstan-

ding services for invoiced customer contracts, contract components and obligations

under maintenance and service agreements.

Noncurrent obligations to employees relate in particular to partial retirement and an-

niversaries. Current obligations to employees primarily relate to planned expenditure

for staff restructuring measures in the Standard Gear Units segment.

Miscellaneous other provisions essentially relate to provisions for anticipated losses

from onerous contracts and penalties.


(24) Trade payables

€ thousand Dec. 31, 2017 Dec. 31, 2016

Trade payables 34,635 36,447

There are trade payables to affiliated companies of € 1,041 thousand (previous year:

€ 570 thousand).

(25) Prepayments received

€ thousand Dec. 31, 2017 Dec. 31, 2016

Prepayments received, noncurrent 70,606 96,366

Prepayments received, current 71,055 71,230

Prepayments received 141,661 167,596

Prepayments received from affiliated companies amounted to € 701 thousand (previ-

ous year: € 1,860 thousand). Prepayments received but not yet used of € 717 thousand

(previous year: € 3,044 thousand) relate to customer-specific construction contracts;

this figure includes no prepayments from affiliated companies in the fiscal year (previ-

ous year: € 771 thousand). Please see “Principles of Financial Reporting” for details of

the adjustment of prior-year information.

(26) Other noncurrent and current liabilities

€ thousand Dec. 31, 2017 Dec. 31, 2016

Employee-related liabilities 26,616 28,453

Social security liabilities 982 1,014

Liabilities from other taxes 415 134

Derivative financial instruments 43 1,706

Miscellaneous other liabilities 1,190 678

29,246 31,985

Employee-related liabilities mainly include wages, salaries and social security contri-

butions not yet paid at the end of the reporting period, deferred vacation not yet

taken and annual bonuses.

The liability derivative financial instruments included in other liabilities are mostly

used to hedge currency risks in customer contracts.

140

Other liabilities break down as follows according to maturity:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Other noncurrent liabilities 76 396

Other current liabilities 29,170 31,589

29,246 31,985


Other Disclosures

(27) Contingent liabilities

€ thousand Dec. 31, 2017 Dec. 31, 2016

Repayment obligations 14 12

14 12

With regard to the liabilities of RENK subsidiaries from their business relationship

with MAN SE, RENK AG has issued MAN SE a perpetual payment guarantee that is un-

likely to be utilized in light of the comfortable liquidity position.

Contingent liabilities are usually measured in the amount of the maximum claims on

RENK. Any rights of recourse are not deducted.

(28) Other financial obligations

Other financial obligations comprise rental and lease agreements. These are mainly

building rentals and vehicle leases. The maturities of future rental and lease payments

until the end of their minimum term are as follows:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Due within one year 1,521 1,680

Due between one and five years 3,406 4,043

Due after more than five years 1,726 1,684

6,653 7,407

The purchase commitment for the acquisition of intangible assets and property, plant

and equipment was € 2,666 thousand as of the end of the reporting period (previous

year: € 3,076 thousand). The commitment value for the acquisition of inventories and

services was € 88,202 thousand (previous year: € 84,114 thousand). The financial obli-

gations to third parties under investment projects initiated were within normal limits.

142

(29) Additional information on financial instruments

This section contains additional information on the significance of financial instru-

ments and on individual items of the statement of financial position and the income

statement that relate to financial instruments.

The following table shows the reconciliation of statement of financial position items

to the classes of financial instruments as of December 31, 2017, broken down by carry-

ing amounts and fair values of financial instruments, and the allocation of statement

of financial position items to the measurement categories.

€ thousand At fair value

In other

comprehen

sive

income1)

In profit or

loss2)

At amortized cost3) Hedging

derivative

financial

instruments

Not covered

by IFRS 7

Statement of

financial

position item

as of

Dec. 31,

2017

Carrying

amount

Carrying

amount

Carrying

amount

Fair

value

Carrying

amount

Carrying

amount

Noncurrent assets

Other and financial investments 774 – – – – 8,305 9,079

Other financial assets – 10 7 7 109 – 126

Current assets

Trade receivables – – 87,883 87,883 – – 87,883

Other financial assets – 490 2,188 2,188 188 – 2,866

Cash and cash equivalents – – 198,553 198,553 – – 198,553

Noncurrent liabilities

Other financial liabilities – – – – – – –

Current liabilities

Trade payables – – 34,635 34,635 – – 34,635

Other financial liabilities – 43 1,132 1,132 – – 1,175

1) Corresponds to the measurement category “Available for sale financial assets” under IAS 39. 2) Corresponds to the measurement category “Financial instruments measured at fair value through profit or loss”

under IAS 39. 3) Includes the measurement categories “Loans and receivables” and “Financial liabilities at amortized cost”.


The following table shows the carrying amounts, the measurement categories by class,

the fair values and the fair value hierarchy under IFRS 7 as of December 31, 2016:

€ thousand At fair value

In other

comprehensi

ve income1)

In profit or

loss2)

At amortized cost3) Hedging

derivative

financial

instruments

Not

covered

by IFRS 7

Statement

of financial

position

item

as of

Dec. 31,

2016

Carrying

amount

Carrying

amount

Carrying

amount

Fair

value

Carrying

amount

Carrying

amount

Noncurrent assets

Other and financial investments 774 – – – – 2,913 3,687

Other financial assets – – 8 8 – – 8

Current assets

Trade receivables – – 86,322 86,322 – – 86,322

Other financial assets – 153 1,762 1,762 – – 1,915

Cash and cash equivalents 213,957 213,957 213,957

Noncurrent liabilities

Other financial liabilities – 20 – – 275 – 295

Current liabilities

Trade payables – – 36,447 36,447 – – 36,447

Other financial liabilities – 585 629 629 827 – 2,040

1) Corresponds to the measurement category “Available for sale financial assets” under IAS 39. 2) Corresponds to the measurement category “Financial instruments measured at fair value through profit or loss”

under IAS 39. 3) Includes the measurement categories “Loans and receivables” and “Financial liabilities at amortized cost”.

144

The cumulative carrying amounts of financial instruments, broken down by IAS 39

measurement category, are as follows:

€ thousand Dec. 31, 2017 Dec. 31, 2016

Measurement category in accordance with IAS 39

Assets Equity and

liabilities

Assets Equity and

liabilities

Available-for-sale financial assets 774 – 774 –

Financial instruments measured at fair value through profit or loss 796 43 153 604

Loans and receivables 288,632 – 302,050 –

Financial liabilities at amortized cost – 35,767 – 37,076

The fair values were calculated based on the market conditions at the end of the re-

porting period and the measurement methods described below. They are the prices at

which one party would assume the rights or obligations from these financial instru-

ments from an independent third party. There were no significant changes since the

previous year in the measurement methods applied.

Cash and cash equivalents, trade receivables, other financial assets, trade payables and

miscellaneous financial liabilities predominantly have a short remaining term. Their

carrying amounts as of the end of the reporting period therefore approximately

match their fair value. Furthermore, appropriate impairment losses are recognized on

trade receivables when there is objective evidence.

Available-for-sale financial assets include equity shares of € 774 thousand (previous

year: € 774 thousand). These are measured at cost applying the practical expedient.

These are shares in unlisted companies for which the measurement by discounting of

forecast cash flows has been dispensed with given the lack of reliably determinable

cash flows. The shares of unlisted companies relate to companies for which there are

no quoted market values as there is no active market for these shares. There is cu-

rrently no intention to sell these shares.

The future cash flows for derivative financial instruments without option compo-

nents, particularly currency forwards, are calculated using forward curves. The fair

value of these instruments is the total of the discounted cash flows. The options on

currency pairs are measured on the basis of standard option pricing models, i.e. gene-

ralized Black-Scholes formulas.


Financial assets and liabilities measured at fair value and hedge derivative financial in-

struments are level 2 of the fair value hierarchy with the exception of other equity in-

vestments, which are level 3.

The following table provides an overview of the fair value of the financial assets and

liabilities at amortized cost by level:

€ thousand Dec. 31, 2017 Level 1 Level 2 Level 3

Noncurrent assets

Other financial assets 7 – 7 –

Current assets

Trade receivables 87,883 – 87,883 –

Other financial assets 2,188 – 2,188 –

Cash and cash equivalents 198,553 198,553 – –

Current liabilities

Trade payables 34,635 – 34,635 –

Other financial liabilities 1,132 – 1,132 –

€ thousand Dec. 31, 2016 Level 1 Level 2 Level 3

Noncurrent assets

Other financial assets 8 – 8 –

Current assets

Trade receivables 86,322 – 86,322 –

Other financial assets 1,762 – 1,762 –

Cash and cash equivalents 213,957 213,957 – –

Current liabilities

Trade payables 36,447 – 36,447 –

Other financial liabilities 629 – 629 –

146

Fair value hierarchy: The classification and reporting of the fair values of financial instruments are based

on a fair value hierarchy that reflects the significance of the inputs used for measure-

ment and breaks down as follows:

Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.

Level 2: Inputs other than quoted prices included within level 1 that are observable for an asset

or liability either directly (as a price) or indirectly (derived from prices). The fair values

of level 2 financial instruments are calculated based on the conditions at the end of

the reporting period, such as interest rates or exchange rates, and using recognized

models, such as discounted cash flow models or option pricing models.

Level 3: Input data used for the measurement of the asset or liability not based on observable

market data (unobservable inputs). For level 3 receivables the fair value is determined

taking into account individual loss expectations that are essentially based on assump-

tions by the company regarding the counterparty’s credit.

In the fiscal years 2017 and 2016 there were no reclassifications between levels 1 and 2

and no reclassifications into or out of level 3.

The interest income and expenses generated in connection with financial assets and

financial liabilities are as follows:


Interest income 194 89

Interest expense (208) (137)

Interest income on impaired financial assets is of secondary importance due to the

usually short time before the expected payment.

The following tables contain information on the offsetting effects on the consolidated

statement of financial position and the financial impact of offsetting in the case of in-

struments which are subject to a legally enforceable master offsetting agreement or

similar agreement.

The “Financial instruments” column shows the amounts that are the subject of a mas-

ter offsetting agreement, but that cannot be offset because the conditions have not

been met. Offsetting can only occur given certain future events, such as the insolvency

of one of the parties. The columns “Collateral received” and “Collateral provided” show

the amounts of cash collateral or collateral in the form of financial instruments re-

ceived/pledged in relation to the total amount of assets and liabilities.


Financial assets

€ thousand

Carrying amount in

statement of financial

position

Amounts not offset in the statement of

financial position

Net amount of financial

assets

Financial

instruments

Collateral

received

Net amount on

Dec. 31, 2017

Derivative financial instruments 797 (43) – 753

€ thousand

Carrying amount in


position


financial position


assets

Financial

instruments

Collateral

received

Net amount on

Dec. 31, 2016


Financial liabilities

€ thousand

Carrying amount in


position


financial position


liabilities

Financial

instruments

Collateral

provided

Net amount on

Dec. 31, 2017


148

€ thousand

Carrying amount in


position


financial position


liabilities

Financial

instruments

Collateral

provided

Net amount on

Dec. 31, 2016

Derivative financial instruments 1,704 (153) – 1,551

The net gains and losses from financial instruments are shown in the table below:


Loans and receivables (191) (4,435)

Available-for-sale financial assets 1,217 907

Financial liabilities at cost (1,095) (2,457)

Financial assets and liabilities at fair value through profit or loss 218 1,050

Net gain (+)/net loss (–) 149 (4,934)

Net gains and losses from loans and receivables primarily contain changes in valua-

tion allowances and currency translation and the reversal of impairment losses.

The net gains or losses from available-for-sale financial assets comprise the net in-

come from other and financial investments.

The net gains or losses from financial assets and liabilities measured at fair value

through profit or loss include changes in the fair value of derivative financial instru-

ments not used in hedge accounting.

The net gains or losses from financial liabilities at cost mainly result from currency

translation.

(30) Derivative financial instruments and hedging strategies

On account of its business activities and international orientation, the assets, liabili-

ties and planned transactions of the MAN Group are subject to market, credit and li-

quidity risks. There is a Group-wide risk management system to identify, quantify and

mitigate these risks. RENK is integrated into this risk management system and uses

the instruments thus available.


(a) Risk management of the MAN Group

The companies of the MAN Group hedge their currency risks at market conditions via

the central Group Treasury of MAN SE. This uses primary and predominantly deriva-

tive financial instruments. In countries where exchange control regulations or regula-

tory provisions do not allow MAN SE to hedge its risks, foreign currency interest and

money market transactions are entered into by MAN SE in the name and on behalf of

the respective Group company. Derivative financial instruments are recognized on the

trade date.

The risk positions of the Group are hedged externally with banks within predeter-

mined risk limits by Group Treasury. Hedging is carried out with due regard for banks’

risk management requirements and is subject to stringent monitoring, which is gua-

ranteed in particular by the strict separation of functions in trading, settlement and

control.

Liquidity management and investment in the MAN Group is centralized under Group-

wide cash management. When investing cash and cash equivalents, financial institu-

tions and investment vehicles are carefully selected and diversified with a limit sys-

tem. The limits and their utilization are reviewed regularly. The majority of cash and

cash equivalents are held in cash deposits at banks with an investment grade rating.

The Executive Board and the Supervisory Board of MAN SE are regularly informed

about the market price risks of the MAN Group. Compliance with policies is monitored

by the internal audit function.

(b) Currency risk at RENK

For each RENK company there is a currency risk if it performs transactions and incurs

future cash flows in a currency other than its functional currency. To reduce the effect

of exchange rate fluctuations, the RENK companies continuously quantify the ex-

change risk and hedge all material risks by using currency forwards and options.

In the RENK Group, all firm customer contracts, its own orders, receivables and liabili-

ties in foreign currency are hedged. Currencies with a high correlation to the euro,

such as the Danish krone, and equity investments or equity-type loans in foreign cu-

rrencies are hedged only in individual cases. In addition, there is hedging for planned

sales revenue in foreign currency from series production business within defined

hedging ranges and, occasionally, for customer projects whose materialization is

highly probable. The Executive Board of RENK is regularly informed of the currency

positions of the RENK Group.

As of the end of the reporting period, RENK’s foreign exchange exposure is primarily

from transactions in USD, CHF, JPY and CNY. Thanks to the currency forwards and op-

tions in place for these currencies, RENK was not exposed to any significant risks.

These hedges are accounted for as cash flow hedges in the RENK Group.

150

In connection with cash flow hedges, total unrealized gains and losses of € 1,397 thou-

sand (previous year: € 277 thousand) were recognized in equity for the measurement

of derivatives (before tax). Over the course of the fiscal year realized gains and losses

of € -511 thousand (previous year: € -840 thousand) were taken from equity to profit or

loss for the period.

The maximum remaining term of cash flow hedges for future transactions is 57

months as of the end of fiscal year 2017. The occurrence of and therefore recognition

in profit or loss for the period are expected for 28.6% of hedged future transactions in

the first quarter of 2018. A further 33.1% of the planned transactions are expected to go

ahead by the end of 2018.

In a sensitivity analysis, the primary and derivative financial instruments in place at

the end of the reporting period were measured in a hypothetical scenario. The effects

of a 10% appreciation/depreciation of a currency per currency pair as of December 31,

2017 and December 31, 2016 are as follows:

€ thousand Dec. 31, 2017

Equity Net profit/loss for the

period

Currency pair +10% (10)% +10% (10)%

Euro/US dollar 1,910 (1,910) 10 (10)

Euro/Swiss franc – – (1,628) 1,628

Euro/Chinese yuan – – 90 (90)

Euro/Pound sterling – – (33) 33

Euro/Japanese yen – – 72 (72)

Euro/Norwegian krone – – 4 (4)

Swiss franc/US dollar – – 50 (50)

€ thousand Dec. 31, 2016

Equity Net profit/loss for the

period

Currency pair +10% (10)% +10% (10)%

Euro/US dollar 2,902 (2,902) (458) 458

Euro/Swiss franc – – (957) 957

Euro/Chinese yuan – – 80 (80)

Euro/Pound sterling – – (45) 45

Euro/Japanese yen – – 303 (303)

Swiss franc/US dollar – – 20 (20)


(c) Commodity price risk at RENK

RENK is exposed to the risk of changes in commodity prices and their availability, i.e.

commodity procurement risk, both in connection with the procurement of the means

of production but also in the procurement of energy (electricity, gas, oil, etc.).

As far as possible, this risk is countered by fixed price agreements with suppliers.

Owing to the variety of commodities used and the resulting quantities, each compara-

tively small, the hedging of prices using corresponding instruments on the financial

markets is not a substantial alternative for RENK. RENK had no commodity derivatives

in fiscal year 2017.

There were no significant risk clusters in the past fiscal year.

(d) Credit risk at RENK

On account of its operating activities, RENK is exposed to credit risk, i.e. the risk that a

counterparty does not meet its contractual obligations and thus causes a financial

loss. Credit risks include direct counterparty risk and the risk of a deterioration in

credit quality.

The maximum credit risk is reflected by the carrying amounts of financial assets re-

ported in the statement of financial position. Credit risks are minimized, and risk pro-

visions calculated, mainly with the following measures:

Sovereign and counterparty risks arising from business operations are continuously

assessed locally. Security levels and forms are determined based on this. Outstanding

debts are also continuously monitored locally. If default risks arise, allowances are re-

cognized. Credit risk is limited by various, sometimes country-specific, forms of secu-

rity. Letters of credit, credit insurance, guarantees, warranties, retention of title and

customer prepayments are used. In project business, the risk of default is minimized

by prepayments and by obtaining collateral.

RENK recognizes appropriate risk provisions for credit risks in connection with its

business operations. This entails the ongoing monitoring of all receivables. Allo-

wances are recognized if there is objective evidence of default or other contractual

anomalies. Significant individual receivables and receivables whose collectibility is in

doubt are assessed on an individual basis. Taking into account country-specific risks

and any collateral received, other receivables are placed into groups of similar con-

tracts and impairment requirements are subsequently determined.

There were no significant clusters in terms of credit risk in the RENK Group in the past

fiscal year.

152

Maturities of financial assets not impaired:


up to 30 days past due 8,584 9,990

31–60 days 2,024 2,460

61–90 days 3,321 682

91-365 days 2,544 1,327

> 1 year 535 177

Assets, past due, not impaired 17,008 14,635

Assets, not past due, not impaired 74,908 74,110

Carrying amounts of financial assets not impaired 91,916 88,745

To cover the credit risk of these receivables and of receivables not past due, impair-

ment losses are recognized at group level based on historical experience.

Regarding the receivables and other financial assets that are neither impaired nor past

due, there are no indications of a default in payment as of the end of the reporting pe-

riod.

In line with the nature of RENK’s inclusion in the central financial management of the

MAN Group agreed with MAN SE, a significant portion of RENK’s financial assets is

concentrated on a single partner, MAN SE. This portion is therefore subject in princi-

ple to the same risks that MAN SE as a whole is exposed. These risks are limited by the

risk management mechanisms installed at MAN SE.


(e) Liquidity risk at RENK

Liquidity risk describes the risk that the RENK Group is unable to adequately meet its

payment obligations or can raise liquidity only at a higher price.

RENK is included in the liquidity management system of the MAN Group. To limit this

risk, inflows and outflows of cash and maturities are monitored and managed at all

times. Financing requirements are covered by both operating cash flow and external

financing. There were therefore no significant risk clusters in the past fiscal year.

Cash for the operating units is essentially managed centrally as part of cash pooling.

The cash and cash equivalents of the Group companies and MAN SE are merged daily.

Thus, liquidity surpluses and requirements can be managed as necessary. For external

financing, the opportunities on the financial markets are tracked continuously to en-

sure financial flexibility and to limit refinancing risks.

In certain countries (such as Brazil and China), the Group can only dispose over local

cash and cash equivalents internationally in compliance with the applicable foreign

exchange restrictions. Other than this there are no significant restrictions.

Cash and cash equivalents are essentially used to finance working capital and short-

term obligations. Management is informed regularly about cash inflows and outflows.

The cash flows at RENK are dominated by the maturities arising from business opera-

tions. These are predominantly of a short-term nature. Cash clearing takes place

through the inclusion in the central financial management of the MAN Group.

The following table shows how the cash flows of liabilities, derivative financial instru-

ments and contingent liabilities affect RENK’s liquidity situation:

154

Maturities1)

€ thousand Dec. 31, 2017 Dec. 31, 2016

2018 2019 to

2022

> 2022 2017 2018 to

2021

> 2021

Cash outflows from primary financial liabilities 35,767 – – 37,076 – –

of which trade payables 34,635 – – 36,447 – –

of which other financial liabilities 1,132 – – 629 – –

Cash outflows from liability derivative financial instruments and gross fulfillment2) (2,216) – – (24,306) (6,261) –

Associated cash inflows 2,138 – – 22,682 5,755 –

Potential cash outflows from contingent liabilities3) 14 – – 12 – –

of which for repayment obligations 14 – – 12 – –

1) The procedure for calculating the amounts was as follows: – If the maturity date is not fixed, the liability is assigned to the earliest maturity date. – Interest payments for floating rate interest are taken into account in line with the conditions as of the end of the reporting period. – It is assumed that the cash outflows will not occur earlier than shown.

2) In accordance with the requirements of IFRS 7, only undiscounted cash flows of the contractual interest and principal payments are shown.

3) There are guarantee obligations for guarantees under trade obligations. The maximum possible cash outflows are shown. The amounts are assumed to be due in the first year.

(f) Breakdown of hedging instruments by type of hedge

The table below shows the fair values of hedging instruments. These essentially relate

to currency forwards.

€ thousand Dec. 31, 2017 Dec. 31, 2016

with a

positive

market

value

with a

negative

market

value

with a

positive

market

value

with a

negative

market

value

Cash flow hedge 297 – – 1,102

297 – – 1,102

155RENK Group – Annual Report 2017

(31) Remuneration of the Executive Board

The remuneration of the members of the Executive Board of RENK Aktiengesellschaft

consists of fixed remuneration and variable remuneration (see remuneration report).

Furthermore, members of the Executive Board receive a pension commitment.

Total Executive Board remuneration in accordance with section 314(1) no. 6a HGB and

IFRS amounts to € 1,744 thousand in 2017 (previous year: € 1,664 thousand).

The tables below show the individual remuneration for the active members of the

Executive Board for 2017 (2016).

€ thousand Florian Hofbauer Christian Hammel Total

2017 2016 2017 2016 2017 2016

Fixed remuneration1) 286 271 281 279 567 550

Variable remuneration2) 519 479 462 449 981 928

Pension cost 101 95 95 91 196 186

Total 906 845 838 819 1,744 1,664

Present value of pension obligation 2,315 2,081 324 199 2,639 2,280

1) Non-performance-based remuneration component including additional benefits 2) Performance-based remuneration component: 2017 – according to figures currently available

Short-term employee benefits comprise fixed and variable remuneration. The pension

cost and the present value of the pension obligations are assigned to the accumulated

post-employment benefit obligation. There are no other long-term employee benefits,

termination benefits or share-based payments.

There was no subsequent adjustment of the bonus in variable remuneration in 2017 or

in the previous year.

The reported pension cost exclusively comprises the service cost incurred in the re-

spective fiscal year.

The pension benefits for former members of the Executive Board of the company and

their surviving dependents amounted to € 262 thousand (€ 259 thousand). Total provi-

sions of € 3,686 thousand were recognized for pension obligations to former members

of the Executive Board and their surviving dependents (previous year: € 6,162 thou-

sand).

Information on the members of the Executive Board, including their memberships of

other statutory supervisory boards and similar executive bodies, can be found in the

“Members of the Supervisory Board and the Executive Board and their mandates” sec-

tion.

156

(32) The Supervisory Board

The remuneration of the members of the Supervisory Board is regulated in the Arti-

cles of Association. They provide for fixed remuneration of € 10,000. The chair of the

Supervisory Board receives double the fixed remuneration, the deputy chair and the

chair of a committee one and a half times this amount, a committee member 1.25

times the amount. There is no separate remuneration for the chair or members of the

Mediation Committee. If members perform several functions, remuneration is based

on the function with the highest remuneration entitlement.

Any expenses arising are also reimbursed.

Remuneration of the Supervisory Board in €

Name Membership

period

Total

Dr. Ingrun-Ulla Bartölke Full year –

Roberto Armellini* Full year 15,000

Michael Behrendt Full year 15,000

Hardy Brennecke from April 26 –

Joachim Drees from April 26 7,591

Rainer Handschuh* Full year 12,500

Christiane Hesse Full year –

Frank Hoffmann Full year –

Thorsten Jablonski Full year –

Dr. Hans O. Jeske until April 26 3,222

Dr. Georg Pachta-Reyhofen until April 26 4,028

Herbert Surmann* Full year 12,500

Walter Vogt* Full year 12,500

Ingo Weidner* Full year 10,000

Total 2017 92,341

Total 2016 100,000

* These employee representatives have declared that they pay their Supervisory Board remuneration to the Hans Böckler Foundation in accordance with German Trade Union Confederation policy.

The employee representatives on the Supervisory Board also employed at RENK addi-

tionally receive their standard pay as employees. Information on the members of the

Supervisory Board, including their memberships of other statutory supervisory

boards and similar executive bodies, can be found in the corresponding section.


(33) German Corporate Governance Code

On December 5, 2017, the Executive Board and the Supervisory Board issued the decla-

ration of compliance reproduced below in accordance with section 161 of the German

Stock Corporation Act (AktG):

“The Executive Board and the Supervisory Board of RENK AG declare that the reco-

mmendations of the Government Commission on the German Corporate Governance

Code as amended on February 7, 2017 promulgated by the Federal Ministry of Justice

on April 24, 2017 in the official section of the Bundesanzeiger (the Federal Gazette) are

complied with effective immediately, with the exception of items 4.2.3(2) sentence 3

(forward-looking variable remuneration), 5.4.1(6) to (8) (disclosure of proposals of can-

didates for election) and 7.1.1 sentence 2 (intra-year financial information).

1.) The recommendation of item 4.2.3(2) sentence 3 is not complied with in that the

assessment base for variable remuneration components is not essentially for-

ward-looking. The current remuneration system is based on the recommenda-

tion found in the version of the Code dated May 5, 2015. As the Supervisory Board

considers a long-term assessment basis that is essentially forward-looking to be

appropriate, an adjustment of the remuneration system in line with the reco-

mmendations of the current version of the Code is being prepared but has not

yet been completed or implemented.

2.) Regarding the recommendation in items 5.4.1(6) to (8) of the Code on the disclo-

sure of certain circumstances of nominations by the Supervisory Board to the

Annual General Meeting, the requirements of the Code are unspecific and un-

clear in their application. A departure from the Code as regards this matter has

thus been declared as a precaution. Regardless of this, the Supervisory Board will

endeavor to comply with the requirements of items 5.4.1(6) to (8) of the Code.

3.) The recommendation of item 7.1.1 sentence 2 (intra-year financial information) is

not complied with as the Executive Board and Supervisory Board of RENK AG

consider an obligation to release quarterly publications in addition to the statu-

tory requirement of the Wertpapierhandelsgesetz (WpHG – German Securities

Trading Act) to be unnecessary.

The Executive Board and the Supervisory Board of RENK AG further declare that the

recommendations of the Government Commission on the German Corporate Gover-

nance Code as amended on May 5, 2015 promulgated by the Federal Ministry of Justice

on June 12, 2015 in the official section of the Bundesanzeiger were complied with in the

period December 2016 to April 24, 2017, with the exception of items 5.4.1(5) to (7) (dis-

closure of proposals of candidates for election; items 5.4.1(6) to (8) in the Febru-

ary 7, 2017 version of the Code). The reasons for the exception are explained above.

From April 24, 2017 until the time that this declaration of conformity was issued, the

recommendations of the Government Commission on the German Corporate Gover-

nance Code as amended on February 7, 2017 promulgated by the Federal Ministry of

Justice on April 24, 2017 in the official section of the Bundesanzeiger (the Federal Ga-

zette) were complied with, with the exception of items 4.2.3(2) sentence 3 (forward-

158

looking variable remuneration), 5.4.1(2) sentence 1 and (4) sentence 1 (preparation of a

skills profile and efforts to adhere to it), 5.4.1(5) (résumés for all Supervisory Board

members), 5.4.1(6) to (8) (disclosure of proposals of candidates for election) and 7.1.1

sentence 2 (intra-year financial information). The reasons for the departures from

items 4.2.3(2) sentence 3, 5.4.1(6) to (8) and 7.1.1 sentence 2 are explained above.

The new recommendations of item 5.4.1(2), (4) and (5) added effective from

April 24, 2017 – which relate to the composition of the Supervisory Board and the pre-

paration of a skills profile for the body as a whole, striving to adhere to the skills pro-

file for the body as a whole and publishing résumés for all Supervisory Board mem-

bers supplemented by overviews of their main activities in addition to their Supervi-

sory Board appointment on the company’s website – have been complied with since

December 5, 2017 when this was discussed accordingly and resolved by the Supervi-

sory Board.”


(34) Segment reporting

The activities of the RENK Group are still divided into the reportable segments Special

Gear Units, Vehicle Transmissions, Standard Gear Units and Slide Bearings. The ma-

nagement of each of these segments reports directly to the Executive Board of RENK

AG in its function as the responsible chief operating decision maker.

The Special Gear Units segment comprises large-gear production at RENK AG’s Augs-

burg site and RENK-MAAG GmbH, Winterthur, Switzerland. The product range extends

from stationary gear units for a variety of industrial applications, to turbo gear units,

to complex gear units for fast craft and naval applications.

The Vehicle Transmissions segment is a leading manufacturer of fully automatic

transmissions for medium-weight and heavy tracked vehicles, and also offers a broad

range of powerful test rigs for a variety of industries. It comprises the corresponding

activities at RENK AG’s Augsburg site, the French subsidiary RENK France S.A.S., Saint-

Ouen-l’Aumône, RENK Test System GmbH (RTS) in Augsburg and its US sales company

RENK Systems Corporation, Camby (IN), USA.

The Standard Gear Units segment includes large-gear production at RENK AG’s Rheine

site. It specializes in marine gear units for merchant shipping, LNG/LPG tankers, spe-

cial ships and offshore wind turbine gear units. It also manufactures gear units for tur-

bine plants and couplings for industrial applications.

The Slide Bearings segment at RENK AG’s Hanover site and the American sales com-

pany RENK Corporation, Duncan (SC), USA, primarily supply hydrodynamic, lubricated

slide bearings. These are used for electric motors, generators, pumps, blowers, water

turbines, conveyors and marine applications.

The financial performance indicators for segments are sales revenue, operating profit

and operating return on sales. The operating return on sales is the ratio of the opera-

ting profit generated to sales revenue. The non-financial performance indicator is or-

der intake as measured by reference to binding incoming orders. Segment infor-

mation is determined applying the same accounting policies as those used in the

preparation of the consolidated financial statements. Transactions between segments

are performed on an arm’s length basis.

160

Segment information by segment

€ thousand Special Gear Units

2017 2016

Order intake from third parties 151,328 210,940

Order intake from other segments 2,281 2,636

Total order intake 153,609 213,576

Sales revenue with third parties 160,775 154,896

Sales revenue with other segments 1,655 7,267

Total sales revenue 162,430 162,163

Order backlog Dec. 31 239,473 256,066

Operating profit 10,988 14,797

Capital expenditures 7,902 13,234

Depreciation1) 7,405 8,091

Operating return on sales 6.8% 9.1%

1) Depreciation and amortization for 2017 includes no impairment losses (previous year: € 579 thousand).


Vehicle Transmissions Standard Gear Units Slide Bearings Consolidation Group

2017 2016 2017 2016 2017 2016 2017 2016 2017 2016

122,556 134,798 78,772 52,294 81,447 87,564 – – 434,103 485,596

1,566 253 9,676 4,687 2,465 2,065 (15,989) (9,641) – –

124,122 135,051 88,448 56,981 83,912 89,629 (15,989) (9,641) 434,103 485,596

149,149 157,533 72,717 97,548 86,765 85,890 – – 469,406 495,867

1,767 253 5,216 3,559 1,517 3,780 (10,155) (14,859) – –

150,916 157,786 77,933 101,107 88,282 89,670 (10,155) (14,859) 469,406 495,867

426,343 459,137 61,313 51,875 32,643 37,353 (11,847) (5,805) 747,925 798,626

26,698 26,376 8,303 12,501 14,113 13,508 (55) (71) 60,047 67,111

7,011 7,392 2,059 1,857 1,763 2,037 – – 18,735 24,520

5,658 4,675 3,534 3,597 2,405 2,987 (77) (55) 18,925 19,295

17.7% 16.7% 10.7% 12.4% 16.0% 15.1% – – 12.8% 13.5%

162

Segment information by region

€ thousand Germany Rest of

Europe

Other

regions

Total

2017

Sales revenue 146,866 183,566 138,974 469,406

Payments to acquire property, plant and equipment and intangible assets 15,935 2,630 170 18,735

2016

Sales revenue 200,194 126,593 169,080 495,867

Payments to acquire property, plant and equipment and intangible assets 21,521 2,103 896 24,520

(35) List of shareholdings of RENK AG as of December 31, 2017

Name and registered office of the

company

Share of

capital in %

Local

currency

(LC)

Exchange rate

(EUR/LW)

Equity

(1,000 LC)

Result

(1,000 LC)

RENK France S.A.S., Saint-Ouen-l’Aumône, France 100 EUR 1 20,419 1,519

RENK Corporation, Duncan, South Carolina, USA 100 USD 1.1988 12,128 980

RENK Test System GmbH, Augsburg 100 EUR 1 8,641 (80)

RENK Systems Corporation, Camby, Indiana, USA 100 USD 1.1988 1,222 551

RENK Transmisyon Sanayi A.S., Istanbul, Turkey1) 55 TRY 3.7263 4,819 857

RENK UAE LLC, Abu Dhabi, United Arab Emirates1) 49 AED 3.8790 25,815 10,354

COFICAL RENK MANCAIS DO BRASIL LTDA, Guaramirim, Brazil1) 98 BRL 3.4372 19,144 1,065

RENK-MAAG GmbH, Winterthur, Switzerland 100 CHF 1.1694 15,979 472

RENK Shanghai Service and Commercial Co., Ltd. Shanghai, China1) 100 CNY 7.3332 4,466 (2,623)

RENK (UK) Ltd., London, UK (inactive) 100 GBP n/a n/a n/a

Renk Gears Private Ltd., Bangalore/India2) 100 INR 76.5670 108,000 n/a

Renk Korea Co., Ltd., Busan/South Korea2) 100 KRW 1,278.2200 900,000 n/a

Damen Schelde Gears B.V., Vlissingen/Netherlands2) 100 EUR 1 1,397 n/a

1) As of: December 31, 2016 2) Equity is stated as of the acquisition date on account of the new formation/acquisition.


(36) Equity investments in RENK AG

The share of the voting rights held by MAN SE in RENK AG is 76%.

In accordance with section 21(1) of the German Securities Trading Act (WpHG),

Volkswagen Truck & Bus GmbH, Braunschweig, informed RENK AG on April 18, 2013

that its share of the voting rights exceeded the threshold of 75% on April 16, 2013 and

amounted to 78.86% (5,519,903 of 7,000,000 total voting rights in RENK AG) on that

day. All of the above 5,519,903 voting rights were attributed to Volkswagen Truck & Bus

GmbH in accordance with section 22(1) sentence 1 no. 1 WpHG through MAN SE. In ac-

cordance with section 21(1) sentence 1 WpHG, Volkswagen Aktiengesellschaft, informed

RENK AG on November 14, 2011 that Volkswagen Aktiengesellschaft’s share of the vo-

ting rights exceeded the threshold of 75% on November 9, 2011 and amounted to

78.86% (5,519,903 of 7,000,000 total voting rights in RENK AG) on that day. All of the

above 5,519,903 voting rights were attributed to Volkswagen Aktiengesellschaft in ac-

cordance with section 22(1) sentence 1 no. 1 WpHG through MAN SE and – since the

transfer of the shares held by Volkswagen Aktiengesellschaft in MAN SE to Volkswagen

Truck & Bus GmbH on April 16, 2013 – also through Volkswagen Truck & Bus GmbH.

Furthermore, Porsche Automobil Holding SE and its controlling shareholders in-

formed RENK AG in accordance with section 21(1) WpHG that the equity investments

of Volkswagen AG and Volkswagen Truck & Bus GmbH are also attributed to Porsche

Automobil Holding SE and its controlling shareholders.

The difference between the above equity holding of MAN SE of 76% and the above eq-

uity holdings of Volkswagen Truck & Bus GmbH and Volkswagen Aktiengesellschaft of

78.86% is due to the fact that the latter includes 199,903 (2.86%) voting rights that are

held directly by RENK AG as treasury shares.

RENK AG was not advised of, nor is it aware of, any other direct or indirect sharehol-

dings in the capital of the company exceeding 10% of the voting rights or the relevant

reporting thresholds of the German Securities Trading Act.

164

(37) Related party disclosures

Related parties as defined by IAS 24 are natural persons and companies that can be in-

fluenced by RENK AG, that can significantly influence RENK AG or that are influenced

by another related party of RENK AG.

Given its shareholding of 76% in RENK AG, MAN SE is its parent company and there-

fore a related party of RENK. This also applies to the subsidiaries of MAN SE and the re-

lated parties of MAN SE itself. In particular, these include Volkswagen Truck & Bus

GmbH, Volkswagen Aktiengesellschaft and Porsche Automobil Holding SE with all

their affiliated companies.

Exchanges of goods and services between RENK and its related parties are conducted

as at arm’s length.

Essentially the following types of transactions are performed with companies of the

MAN Group:

Deliveries of goods to MAN companies, in particular gear units and bearings for

ships and turbines, plus test rigs and related services.

Sourcing from MAN companies, mainly primary materials for gear unit production

such as cast components.

Other services and reciprocal services, such as debit and credit interest from inter-

company payment transactions with MAN SE, and cost reimbursements for other

services.

The exchange of services with companies of the Volkswagen and Porsche Groups re-

late to individual projects to supply test rigs and related services. RENK purchases ser-

vices, e.g. in the context of vehicle leases.

The table below shows the extent of relationships between RENK and MAN SE:


Services rendered (income) 56 49

Services received (expense) 855 914

Receivables (Dec. 31) 199,086 213,300

Liabilities (Dec. 31) 43 1,706

MAN SE provided RENK companies with direct and indirect guarantees of

€ 9,794 thousand and derivative hedges with a nominal value of € 27,989 thousand as

of December 31, 2017. There are receivables of € 198,290 thousand (previous year:

€ 213,147 thousand) from cash management with MAN SE and other MAN companies

as of December 31, 2017.


The table below shows the extent of relationships with other companies of the MAN

Group, Volkswagen and the Porsche Group:


Services rendered (income) 22,363 21,001

Services received (expense) 5,270 6,411

Receivables (Dec. 31) 4,855 4,228

Liabilities (Dec. 31) 1,497 3,117

Other related parties are the subsidiaries of the RENK Group that are not included in

the consolidated financial statements. The exchange of services essentially comprises

the supply of parts and the performance of services at market rates. The following ta-

ble shows the extent of services:


Services rendered (income) 6,138 6,788

Services received (expense) 1,449 1,197

Receivables (Dec. 31) 1,948 1,351

Liabilities (Dec. 31) 246 84

Trade receivables from and trade payables to affiliated companies are reported under

notes (18) and (24). There are financial obligations to affiliated companies under ope-

rating leases of € 190 thousand (previous year: € 231 thousand).

Outstanding items in connection with related parties are not collateralized, nor had

valuation allowances been recognized as of the end of the reporting period.

Related parties of RENK also include persons who can influence or be influenced by

RENK AG, such as the members of the Executive Board and Supervisory Board of RENK

AG, the members of the Executive Board and Supervisory Board of MAN SE, the mem-

bers of management and the Supervisory Board of Volkswagen Truck & Bus GmbH

and the members of the Executive Board and Supervisory Board of Volkswagen AG.

Please see “Remuneration of the Executive Board” and “Supervisory Board” for disclo-

sures required in accordance with IAS 24 on management remuneration for key posi-

tions.

(38) Events after the end of the reporting period

There were no special events after December 31, 2017 with a material effect on the net

assets, financial position and results of operations.

166

Members of the Supervisory Board and the Executive Board and their mandates

(39) Supervisory Board

Dr. Ingrun-Ulla Bartölke Wolfsburg


Head of Group Accounting and External Reporting at


Volkswagen Bank GmbH 2)

SEAT S.A., Spain 4)

Roberto Armellini*) Augsburg

Deputy Chairman of the Supervisory Board

Managing Director IG Metall Augsburg

VALEO Schalter und Sensoren GmbH (Deputy Chairman)1)

AGCO Fendt GmbH1)

Michael Behrendt Hamburg, Germany

Chairman of the Supervisory Board of Hapag-Lloyd AG

Barmenia Allgemeine Versicherungs-AG (Deputy Chairman)1)

Barmenia Krankenversicherung a. G. (Deputy Chairman)1)

Barmenia Lebensversicherung a. G. (Deputy Chairman)1)

Esso Deutschland GmbH1)

ExxonMobil C. E. Holding GmbH1)

Hapag-Lloyd AG (Chairman)1)

MAN Diesel & Turbo SE1)

MAN SE1)

MAN Truck & Bus AG1)

*) elected by employees 1) Memberships of statutory supervisory boards in Germany 2) Memberships of statutory supervisory boards in Germany (Group mandates) 3) Memberships of comparable supervisory bodies in Germany and abroad 4) Memberships of comparable supervisory bodies in Germany and abroad (Group mandates)


Hardy Brennecke Wolfenbüttel

Member of the Supervisory Board since April 26, 2017

Head of the Executive Office for the Commercial Vehicles division of


Secretary General of Volkswagen Truck & Bus GmbH

Joachim Drees Stuttgart

Member of the Supervisory Board since April 26, 2017

Managing Director of Volkswagen Truck & Bus GmbH

Chairman of the Executive Board of MAN SE

Chairman of the Executive Board of MAN Truck & Bus AG

Veritas AG1)

Volkswagen Financial Services AG1)

MAN Diesel & Turbo SE2)

Sinotruk (Hong Kong) Ltd., China3)

Dipl.-Ing. (FH) Rainer Handschuh*) Augsburg

Chairman of the Group Works Council of RENK AG

Chairman of the Works Council of RENK AG, Augsburg plant and RENK Test System

GmbH

Christiane Hesse Wunstorf

Member of the Board of Management (Human Resources and Organization) of

Volkswagen Financial Services AG

EURO-Leasing GmbH4)

MAN Financial Services GmbH4)

MAN Financial Services (S.A.) (Pty.) Ltd., South Africa (Chairwoman)4)

VDF Faktoring A.S., Turkey (Chairwoman)4)

VDF Filo Kiralama A.S., Turkey (Chairwoman)4)

VDF Servis ve Ticaret A.S., Turkey (Chairwoman)4)

VDF Sigorta Aracilik Hizmetleri A.S., Turkey (Chairwoman)4)

Volkswagen Doğuş Finansman A.S., Turkey (Chairwoman)4)

Volkswagen Financial Services Digital Solutions GmbH4)

Volkswagen Financial Services South Africa (Pty.) Ltd., South Africa (Chairwoman)4)

168

Dipl.-Ing. (FH) Frank Hoffmann*) Augsburg

Head of Vehicle Transmissions at RENK AG, Augsburg

Thorsten Jablonski Ilsede

Head of Transmissions/Head of Kassel site for Volkswagen Aktiengesellschaft

Volkswagen Automatic Transmission (Dalian) Co., Ltd., China (Chairman)4)

Volkswagen Automatic Transmission (Tianjin) Co., Ltd., China4)

Volkswagen Transmission (Shanghai) Company Ltd., China4)

Dr. Hans O. Jeske Wesel

Member of the Supervisory Board until April 26, 2017

Former member of the Executive Board of MAN Diesel & Turbo SE

RWTÜV GmbH3)

Dr. Georg Pachta-Reyhofen Niederpöcking

Member of the Supervisory Board until April 26, 2017

Former Chief Executive Officer of MAN SE

MAN Diesel & Turbo SE (Chairman)1)

Herbert Surmann*) Rheine

Chairman of the Works Council RENK AG, Rheine plant


Walter Vogt*) Eltville

Labor union secretary at IG Metall Executive Board, Frankfurt/Main

Baugenossenschaft Darmstadt eG (Deputy Chairman)1)

IBM Deutschland GmbH1)

Mercedes-Benz Bank AG1)

Ingo Weidner*) Hanover

Deputy Chairman of the Works Council of RENK AG, Hanover

As of December 31, 2017 or, if earlier, date of resignation.

(40) Committees of the Supervisory Board

Members of the Committee for Management Board Personnel Dr. Ingrun-Ulla Bartölke (Chairwoman)

Roberto Armellini (Deputy Chairman)

Joachim Drees

Dipl.-Ing. (FH) Rainer Handschuh

Members of the Nomination Committee Dr. Ingrun-Ulla Bartölke

Joachim Drees

Members of the Mediation Committee Dr. Ingrun-Ulla Bartölke (Chairwoman)

Roberto Armellini (Deputy Chairman)

Joachim Dress

Dipl.-Ing. (FH) Rainer Handschuh

Members of the Audit Committee Michael Behrendt (Chairman)

Walter Vogt (Deputy Chairman)

Dr. Ingrun-Ulla Bartölke

Herbert Surmann

170

(41) The Executive Board

Dipl.-Ing. (FH) Florian Hofbauer Landsberg

Spokesperson

Engineering and Sales

RENK Shanghai Service and Commercial Co., Ltd., China4)

Dipl.-Kfm. (Univ.) Christian Hammel Munich


RENK Gears Private Ltd., India4)

RENK Korea Co. Ltd., Korea4)



The Executive Board

The Board of Management


1) Memberships of statutory supervisory boards in Germany 2) Memberships of statutory supervisory boards in Germany (Group mandates) 3) Memberships of comparable supervisory bodies in Germany and abroad 4) Memberships of comparable supervisory bodies in Germany and abroad (Group mandates)


Responsibility statement

To the best of our knowledge and in accordance with the applicable accounting princi-

ples, the consolidated financial statements give a true and fair view of the net assets,

financial position and results of operations of the Group, and the management report

of the Group includes a fair review of the development and performance of the busi-

ness and the position of the Group, together with a description of the principal oppor-

tunities and risks associated with the expected development of the Group.



The Executive Board


174

INDEPENDENT AUDITOR’S REPORT

To Renk Aktiengesellschaft, Augsburg

REPORT ON THE AUDIT OF THE CONSOLIDATED FINANCIAL STATEMENTS AND OF THE

GROUP MANAGEMENT REPORT

Audit Opinions We have audited the consolidated financial statements of Renk Aktiengesellschaft, Augsburg, and its

subsidiaries (the Group), which comprise the consolidated statement of profit or loss for the finan-

cial year from 1 January to 31 December 2017, the consolidated statement of comprehensive income,

the consolidated statement of financial position as at 31 December 2017, and the consolidated state-

ment of changes in equity and consolidated statement of cash flows for the financial year from 1

January to 31 December 2017, and notes to the consolidated financial statements, including a su-

mmary of significant accounting policies. In addition, we have audited the group management re-

port of Renk Aktiengesellschaft for the financial year from 1 January to 31 December 2017. We have

not audited the content of those parts of the group management report listed in the “Other Infor-

mation” section of our auditor’s report in accordance with the German legal requirements.

In our opinion, on the basis of the knowledge obtained in the audit,

the accompanying consolidated financial statements comply, in all material respects, with the

IFRSs as adopted by the EU, and the additional requirements of German commercial law pursuant

to § [Article] 315e Abs. [paragraph] 1 HGB [Handelsgesetzbuch: German Commercial Code] and, in

compliance with these requirements, give a true and fair view of the assets, liabilities, and finan-

cial position of the Group as at 31 December 2017, and of its financial performance for the financial

year from 1 January to 31 December 2017, and

the accompanying group management report as a whole provides an appropriate view of the

Group’s position. In all material respects, this group management report is consistent with the

consolidated financial statements, complies with German legal requirements and appropriately

presents the opportunities and risks of future development. Our audit opinion on the group ma-

nagement report does not cover the content of those parts of the group management report listed

in the “Other Information” section of our auditor’s report.

Pursuant to § 322 Abs. 3 Satz [sentence] 1 HGB, we declare that our audit has not led to any reserva-

tions relating to the legal compliance of the consolidated financial statements and of the group

management report.

Basis for the Audit Opinions We conducted our audit of the consolidated financial statements and of the group management re-

port in accordance with § 317 HGB and the EU Audit Regulation (No. 537/2014, referred to subse-

quently as “EU Audit Regulation”) and in compliance with German Generally Accepted Standards for

Financial Statement Audits promulgated by the Institut der Wirtschaftsprüfer [Institute of Public

Auditors in Germany] (IDW). Our responsibilities under those requirements and principles are fur-

ther described in the “Auditor’s Responsibilities for the Audit of the Consolidated Financial State-

ments and of the Group Management Report” section of our auditor’s report. We are independent of

the group entities in accordance with the requirements of European law and German commercial

and professional law, and we have fulfilled our other German professional responsibilities in accor-


dance with these requirements. In addition, in accordance with Article 10 (2) point (f) of the EU Au-

dit Regulation, we declare that we have not provided non-audit services prohibited under Arti-

cle 5 (1) of the EU Audit Regulation. We believe that the audit evidence we have obtained is sufficient

and appropriate to provide a basis for our audit opinions on the consolidated financial statements

and on the group management report.

Key Audit Matters in the Audit of the Consolidated Financial Statements Key audit matters are those matters that, in our professional judgment, were of most significance in

our audit of the consolidated financial statements for the financial year from 1 January to 31 Decem-

ber 2017. These matters were addressed in the context of our audit of the consolidated financial

statements as a whole, and in forming our audit opinion thereon; we do not provide a separate audit

opinion on these matters.

In our view, the matters of most significance in our audit were as follows:

❶ Management and measurement of inventories

❷ Completeness and measurement of provisions for warranty obligations arising from sales

❸ Customer-specific construction contracts

Our presentation of these key audit matters has been structured in each case as follows:

① Matter and issue

② Audit approach and findings

③ Reference to further information

Hereinafter we present the key audit matters:

❶ Management and measurement of inventories

① EUR 26 million in raw materials, consumables and supplies, EUR 153 million in work in pro-

gress, and EUR 0.7 million in prepayments were recognized under "Inventories" in the con-

solidated statement of financial position of Renk Aktiengesellschaft, Augsburg. From our

point of view, this balance sheet item is of particular importance due to its material

amount and the fact that the measurement of inventories is to a large extent based on esti-

mates and assumptions made by management. The reliability of the processes and controls

put in place is also a material requirement for managing inventories of work in progress.

② Given that the management and measurement complexity of inventories gives rise to an

increased risk of accounting misstatements, we assessed the Group's processes and controls

relating to the management and measurement of inventories. Our specific audit approach

included testing of the controls and substantive audit procedures, in particular:

observing stocktaking at multiple sites;

auditing the measurement of inventories.

176

We verified the appropriateness of the systems, processes and controls in place, and that

the estimates and assumptions made by management are sufficiently substantiated and

documented to ensure that inventories are properly recognized.

③ The Company's disclosures relating to inventories are contained in notes (3)(g) and (17) to

the consolidated financial statements.

❷ Completeness and measurement of provisions for warranty obligations arising from

sales

① In the consolidated financial statements of Renk Aktiengesellschaft, Augsburg, EUR 32 mi-

llion in provisions for obligations arising from sales are reported under the "Other provi-

sions" balance sheet item. These obligations arise under statutory and contractual guaran-

tee obligations with customers. Warranty claims are calculated on the basis of losses to date

and estimated future losses. In addition, assumptions must be made about the nature and

extent of future warranty claims. These assumptions are based on qualified estimates.

From our point of view, this matter was of particular importance for our audit because the

recognition and measurement of this material item is to a large extent based on estimates

and assumptions made by the Company's management.

② With the knowledge that estimated values result in an increased risk of accounting mis-

statements and that the measurement decisions made by management have a direct and

significant effect on consolidated net profit/loss, we assessed the appropriateness of the

carrying amounts, including by comparing these figures with historical data and using the

measurement bases presented to us. We evaluated the entire calculations for the provisions

using the applicable measurement inputs and assessed the planned timetable for utilizing

the provisions.

In doing so, we were able to satisfy ourselves that the estimates applied and the assump-

tions made by management were sufficiently documented and supported to justify the

recognition and measurement of the provisions for warranty obligations arising from sales.

③ The Company's disclosures on other provisions are contained in notes (3)(m) and (23) to the

consolidated financial statements.

❸ Customer-specific construction contracts

① In the consolidated income statement of Renk Aktiengesellschaft, Augsburg revenue from

customer-specific construction contracts amounting to EUR 22 million are reported. Reve-

nue for this material item is recognized in accordance with the percentage of completion

(PoC) method. This issue was of particular importance for our audit due to the complexity

of the applicable accounting standard and the requirement for estimates and assumptions

on the part of management with corresponding ranges from an accounting point of view.

② As part of our audit, we evaluated the processes and controls established by the Group for

the purposes of recognizing revenue from customer-specific construction contracts. On

this basis, we evaluated the determination of the degree of completion of customer-specific

construction contracts on the basis of the cost-to-cost method and the resulting proportion


of revenue and profit recognized. For this purpose, we satisfied ourselves of the progress of

the respective projects, among other things based on interviews with project managers and

by inspecting project documentation.

We were able to satisfy ourselves of the appropriateness of the systems, processes and con-

trols in place, and that the estimates and assumptions made by management are suffi-

ciently documented and substantiated to ensure that revenue is properly recognized.

③ The Company's disclosures on customer-specific construction contracts are contained in

note (3)(a), (3)(h) and (6) to the consolidated financial statements.

Other Information The executive directors are responsible for the other information. The other information comprises

the following non-audited parts of the group management report:

the group statement on corporate governance pursuant to § 289f HGB and § 315d HGB

the corporate governance report pursuant to No. 3.10 of the German Corporate Governance Code

The other information comprises further the remaining parts of the annual report – excluding

cross-references to external information – with the exception of the audited consolidated financial

statements, the audited group management report and our auditor’s report.

Our audit opinions on the consolidated financial statements and on the group management report

do not cover the other information, and consequently we do not express an audit opinion or any

other form of assurance conclusion thereon.

In connection with our audit, our responsibility is to read the other information and, in so doing, to

consider whether the other information

is materially inconsistent with the consolidated financial statements, with the group management

report or our knowledge obtained in the audit, or

otherwise appears to be materially misstated.

Responsibilities of the Executive Directors and the Supervisory Board for the Consolidated Financial Statements and the Group Management Report The executive directors are responsible for the preparation of the consolidated financial statements

that comply, in all material respects, with IFRSs as adopted by the EU and the additional require-

ments of German commercial law pursuant to § 315e Abs. 1 HGB and that the consolidated financial

statements, in compliance with these requirements, give a true and fair view of the assets, liabilities,

financial position, and financial performance of the Group. In addition the executive directors are

responsible for such internal control as they have determined necessary to enable the preparation

of consolidated financial statements that are free from material misstatement, whether due to fraud

or error.

In preparing the consolidated financial statements, the executive directors are responsible for as-

sessing the Group’s ability to continue as a going concern. They also have the responsibility for dis-

closing, as applicable, matters related to going concern. In addition, they are responsible for finan-

cial reporting based on the going concern basis of accounting unless there is an intention to liqui-

date the Group or to cease operations, or there is no realistic alternative but to do so.

178

Furthermore, the executive directors are responsible for the preparation of the group management

report that, as a whole, provides an appropriate view of the Group’s position and is, in all material

respects, consistent with the consolidated financial statements, complies with German legal re-

quirements, and appropriately presents the opportunities and risks of future development. In addi-

tion, the executive directors are responsible for such arrangements and measures (systems) as they

have considered necessary to enable the preparation of a group management report that is in ac-

cordance with the applicable German legal requirements, and to be able to provide sufficient appro-

priate evidence for the assertions in the group management report.

The supervisory board is responsible for overseeing the Group’s financial reporting process for the

preparation of the consolidated financial statements and of the group management report.

Auditor’s Responsibilities for the Audit of the Consolidated Financial Statements and of the Group Management Report Our objectives are to obtain reasonable assurance about whether the consolidated financial state-

ments as a whole are free from material misstatement, whether due to fraud or error, and whether

the group management report as a whole provides an appropriate view of the Group’s position and,

in all material respects, is consistent with the consolidated financial statements and the knowledge

obtained in the audit, complies with the German legal requirements and appropriately presents the

opportunities and risks of future development, as well as to issue an auditor’s report that includes

our audit opinions on the consolidated financial statements and on the group management report.

Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in

accordance with § 317 HGB and the EU Audit Regulation and in compliance with German Generally

Accepted Standards for Financial Statement Audits promulgated by the Institut der

Wirtschaftsprüfer (IDW) will always detect a material misstatement. Misstatements can arise from

fraud or error and are considered material if, individually or in the aggregate, they could reasonably

be expected to influence the economic decisions of users taken on the basis of these consolidated

financial statements and this group management report.

We exercise professional judgment and maintain professional skepticism throughout the audit. We

also:

Identify and assess the risks of material misstatement of the consolidated financial statements

and of the group management report, whether due to fraud or error, design and perform audit

procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate

to provide a basis for our audit opinions. The risk of not detecting a material misstatement resul-

ting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,

intentional omissions, misrepresentations, or the override of internal control.

Obtain an understanding of internal control relevant to the audit of the consolidated financial

statements and of arrangements and measures (systems) relevant to the audit of the group ma-

nagement report in order to design audit procedures that are appropriate in the circumstances,

but not for the purpose of expressing an audit opinion on the effectiveness of these systems.

Evaluate the appropriateness of accounting policies used by the executive directors and the rea-

sonableness of estimates made by the executive directors and related disclosures.

Conclude on the appropriateness of the executive directors’ use of the going concern basis of ac-

counting and, based on the audit evidence obtained, whether a material uncertainty exists related

to events or conditions that may cast significant doubt on the Group’s ability to continue as a go-

ing concern. If we conclude that a material uncertainty exists, we are required to draw attention in


the auditor’s report to the related disclosures in the consolidated financial statements and in the

group management report or, if such disclosures are inadequate, to modify our respective audit

opinions. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s

report. However, future events or conditions may cause the Group to cease to be able to continue

as a going concern.

Evaluate the overall presentation, structure and content of the consolidated financial statements,

including the disclosures, and whether the consolidated financial statements present the under-

lying transactions and events in a manner that the consolidated financial statements give a true

and fair view of the assets, liabilities, financial position and financial performance of the Group in

compliance with IFRSs as adopted by the EU and the additional requirements of German commer-

cial law pursuant to § 315e Abs. 1 HGB.

Obtain sufficient appropriate audit evidence regarding the financial information of the entities or

business activities within the Group to express audit opinions on the consolidated financial state-

ments and on the group management report. We are responsible for the direction, supervision

and performance of the group audit. We remain solely responsible for our audit opinions.

Evaluate the consistency of the group management report with the consolidated financial state-

ments, its conformity with German law, and the view of the Group’s position it provides.

Perform audit procedures on the prospective information presented by the executive directors in

the group management report. On the basis of sufficient appropriate audit evidence we evaluate,

in particular, the significant assumptions used by the executive directors as a basis for the pro-

spective information, and evaluate the proper derivation of the prospective information from

these assumptions. We do not express a separate audit opinion on the prospective information

and on the assumptions used as a basis. There is a substantial unavoidable risk that future events

will differ materially from the prospective information.

We communicate with those charged with governance regarding, among other matters, the planned

scope and timing of the audit and significant audit findings, including any significant deficiencies in

internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with the

relevant independence requirements, and communicate with them all relationships and other ma-

tters that may reasonably be thought to bear on our independence, and where applicable, the re-

lated safeguards.

From the matters communicated with those charged with governance, we determine those matters

that were of most significance in the audit of the consolidated financial statements of the current

period and are therefore the key audit matters. We describe these matters in our auditor’s report un-

less law or regulation precludes public disclosure about the matter.

OTHER LEGAL AND REGULATORY REQUIREMENTS

Further Information pursuant to Article 10 of the EU Audit Regulation We were elected as group auditor by the annual general meeting on 26 April 2017. We were engaged

by the supervisory board on 12 June 2017. We have been the group auditor of the Renk Aktiengesell-

schaft, Augsburg, without interruption since the financial year 2010.

We declare that the audit opinions expressed in this auditor’s report are consistent with the addi-

tional report to the audit committee pursuant to Article 11 of the EU Audit Regulation (long-form

audit report).

180

GERMAN PUBLIC AUDITOR RESPONSIBLE FOR THE ENGAGEMENT The German Public Auditor responsible for the engagement is Holger Graßnick.

Munich, February 8, 2018

PricewaterhouseCoopers GmbH

Wirtschaftsprüfungsgesellschaft

Klaus Schuster Holger Graßnick

Wirtschaftsprüfer Wirtschaftsprüfer

(German Public Auditor) (German Public Auditor)

182

€ million 20121) 20132) 2014 2015 2016 2017

Order intake 525 504 666 483 486 434

Germany 176 196 137 181 173 153

Outside Germany 349 308 529 301 313 281

Sales revenue 476 485 480 487 496 469

Germany 165 168 153 147 200 147

Outside Germany 311 317 327 339 296 322

Order backlog Dec. 31 634 648 827 812 799 748

Germany 296 323 295 297 256 242

Outside Germany 338 325 532 515 543 506

Employees Dec. 31

Headcount – 2,306 2,196 2,198 2,205 2,235

Core workforce employees on Dec. 31 2,098 2,199 2,112 2,087 2,194 2,203

Capital expenditures and financing

Payments to acquire property, plant and equipment and intangible assets 28 27 38 41 25 19

Depreciation of property, plant and equipment, amortization of intangible assets and impairment 14 16 17 21 19 19

Cash flows from operating activities 66 85 35 101 57 25

Net cash flow (free cash flow until 2013) 35 56 (3) 60 32 1

Key performance indicators (%)

Operating return on sales – 13.5 15.0 14.0 13.5 12.8

Equity ratio 48.1 52.1 55.6 54.2 55.1 60.3

Key performance indicators for RENK shares

Earnings per share as per IAS 33 (in €) 6.74 6.39 7.17 6.14 6.50 6.30

Dividend per share (in €) 2.00 2.00 2.20 2.20 2.20 2.20

Price-earnings ratio 10.80 13.07 11.66 17.05 15.51 17.94

Balance Sheet

Noncurrent assets 184 163 185 207 214 215

Inventories 164 157 179 171 182 181

Other current assets 81 94 155 170 98 106

Cash and cash equivalents 125 167 70 117 214 199

Equity 266 303 327 360 390 422

Pensions 30 9 25 16 15 11

Other noncurrent liabilities and provisions 31 10 9 8 11 13

Prepayments received 100 133 110 154 168 142

Other current liabilities and provisions 127 126 118 127 124 113

Total assets/total capital 554 581 589 665 708 700

Income statement

Sales revenue 476 485 480 487 496 469

Cost of sales (356) (377) (362) (377) (376) (364)

Gross profit 120 108 118 109 120 106

Other expenses and income (54) (43) (46) (42) (53) (46)

Operating profit (EBIT) 66 66 72 68 67 60

Net interest income 0 0 0 (4) (2) 1

Profit before taxes 66 66 72 64 65 61

Income tax expense (20) (23) (23) (22) (21) (18)

Profit after tax 46 43 49 42 44 43

1) Adjusted in 2013 due to the retroactive amendment to IAS 19 (2011) 2) Adjusted of individual prior-year figures due to transition to the financial reporting of the Volkswagen Group

Six-year Overview

183

RENK Group – Annual Report 2017

185


186

Products and Services

Vehicle transmissions Fully automatic shift, reverse and steering transmissions with brake systems and final

drives for tracked vehicles of medium and large weight classes.

Industrial gears Gear units for cement plants, spur and planetary gear units for turbomachinery, in

particular for the petrochemical industry and for power plants, high-performance gear

units for the plastics industry, gear units for wind turbines.

Marine gear units Gear units for merchant vessels, ferries, cruise liners and naval craft with diesel engine

or turbine drive and electric drive, marine reversing gear units, reduction and control

gear units for ship generator systems.

Slide bearings Standard and special horizontal and vertical slide bearings for electrical machinery,

blowers, compressors, pumps, turbines and general mechanical engineering, slide

bearings for transmissions, marine shaft bearings and thrust bearings.

Couplings Curved-tooth couplings for industrial applications of all kinds, for ship and marine en-

gineering, for rail vehicles, steel multi-disc clutches for slow- and high-speed indus-

trial systems, diaphragm couplings for high-speed machinery, safety couplings, tor-

sionally flexible couplings.

Test systems Test rigs for development and quality assurance for the automotive industry, the avia-

tion industry and railway engineering.

187


Produced with firesys

www.firesys.de


Gögginger Str. 7386159 AugsburgGermanyPhone: +49 821 5700-0Fax: +49 821 5700-460

www.renk.eu

A company of the MAN Group

annual financial statements as of december 2017 and ......at a glance € million 2017 2016 change...

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