Annual Report 2011. A consistent strategy of

Annual Report 2011.
A consistent strategy
of tightening focus and
minimizing risks for
the future.
Annual Report 2011
3
Contents.
4
8
12
22
22
28
34
40
46
52
56
110
111
113
115
116
117
118
118
119
Profile
Foreword
Together ahead. RUAG
Business performance
Space
Aviation
Technology
Ammotec
Defence
Service & Support
Financial statements
Corporate governance
Board of Directors
Executive Board
Compensation
Capital structure
Shareholder
Employee benefits
Statutory auditor and information policy
Forthcoming events
4
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Continuing on the road to success.
Performance improves despite the strong
Swiss franc, government cost-cutting measures, and higher prices for raw materials.
Business performance and environment
Research and development
In 2011, RUAG generated net sales of CHF 1,777 million (previous year:
CHF 1,796 million). Currency-adjusted growth stood at 2.5%. EBIT, i.e.
earnings before interest and taxes, rose by 12.5% to CHF 110 million
(CHF 98 million) and the EBIT margin rose from 5.3% to 6.1%. All in all,
RUAG generated net profit of CHF 97 million (CHF 92 million).
The expenses for research and development totalled CHF 140 million,
which corresponds to RUAG’s target of 8% of sales. The decline
­compared with the previous year is attributable to development
­programmes that were completed.
These results were achieved in a business environment that was heavily
impacted by the strength of the Swiss franc, cuts in national defence
budgets, and higher prices for raw materials. They are the consequence
of a consistent strategy of tightening focus and minimizing risks in the
core businesses of Aerospace and Defence.
By market segment, Aerospace accounted for CHF 97 million
(CHF 137 million) of these expenses and Defence for CHF 43 million
(CHF 53 million). As at 31 December 2011, RUAG had 7,739 em­
ployees, which represents only a slight change from the previous year
(7,719). For more information, please refer to the Foreword, page 10.
In the year under review, the Swiss Armed Forces and thus the Swiss
Armed Forces were once again the single most important customer.
Its share of total sales remained constant at 37% (35%). The most
important programmes for the Swiss Armed Forces included, among
others, the upgrade of the fleet of F/A-18 fighter aircraft, the delivery
of the first Kodiak armoured engineer and mine clearance vehicles, and
the handing over of the key for the live simulation platform in Bure. For
more information, please refer to the Foreword, page 11.
Total sales were once again evenly balanced between civil applications
with a share of 48% (52%) and military applications with 52% (48%).
Cash flow from operating activities amounted to CHF 127 million
(CHF 130 million).
Overview of key figures
in CHF million
Order inflow
Net sales
Cash flow from operating activities
Order backlog
EBIT
EBITDA
Net profit
Research and development expenses
Employees as at 31 December 2011
2011
1,720
1,777
127
1,480
110
194
97
140
7,739
2010
1,713
1,796
130
1,653
98
194
92
190
7,719
Change in %
0.4%
–1.0%
–2.2%
–10.5%
12.5%
0.0%
5.9%
–26.3%
0.3%
Annual Report 2011
5
Net sales by application
Civil
48
Military
52
%
%
35%
37%
52%
48%
0%20%40%60%80%
100%
48%
52%
0%20%40%60%80%
100%
Net sales by region
Switzerland
47
International (without Switzerland)
53
%
%
43%
47%
57%
53%
0%20%40%60%80%
100%
Swiss Armed Forces
2010
2011
0%20%40%60%80%
100%
Europe
42
%
43%
42%
International activities
0%20%40%60%80%
100%
Two small international acquisitions systematically expanded the core
com­petencies of the RUAG Group. Firstly, it acquired a unit of US
automotive supplier Delphi, specialized in the production of igniters for
airbag systems. Secondly, RUAG’s acquisition of Germany’s Base Ten
Systems Electronics GmbH enhances its existing expertise in the field of
robotics for land forces. In respect of distribution, RUAG continued
its internationalization efforts by opening sales offices for small-calibre
ammunition in Brazil and for civil and military aircraft MRO in Malaysia,
which will strengthen customer proximity in South America and Asia.
In 2011, the strategy of internationalizing business activities was slowed
by the appreciation of the Swiss franc, in particular against the US
dollar and the Euro. However, this challenging exchange rate impact was
kept in check by stable operating results and existing currency hedges.
Whereas the proportion of sales generated in Switzerland increased from
43% to 47%, the proportion attributable to markets abroad sank
slightly from 57% to 53% owing to currency effects. The proportion of
sales attributable to Europe was 42% (43%), North America 7% (9%)
and Asia/Pacific 2% (3%). The proportion of sales generated in other
regions, including South America, the Middle East and Africa, remained
unchanged at 2% (2%).
Major projects abroad included the delivery of various assemblies for
Galileo satellites, F/A-18 engine module maintenance for the Royal
Malaysian Air Force, ramping up production rates in Aerostructures for
Airbus, and producing anti-mine kits for 350 Puma infantry fighting
vehicles for the German Bundeswehr.
North America
7
%
9%
7%
0%20%40%60%80%
100%
Asia/Pacific
2
%
3%
2%
0%20%40%60%80%
100%
Others
2
%
2%
2%
0%20%40%60%80%
100%
6
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Net sales by market segment
Aerospace
CHF
1,012
Defence
million
CHF
746
million
757
746
1023
1012
0
200 400 600 800 1000
0
200 400 600 800 1000
400 500
Net sales by division
Space
CHF
275
Ammotec
million
CHF
312
million
283
275
0
100 200 320
312
300 400 500
Aviation
CHF
0
100 200 300 Defence
487
million
CHF
435
million
438
435
471
487
0
100 200 300 400 500
400 500
0
100 200 300 400 500
Technology
CHF
268
million
273
268
0
100 200 300 2010
2011
Detailed figures can be found in Note 38 to
the financial statements, “Segment information”.
Annual Report 2011
7
Strategy of tightening focus
The activities of the RUAG Group are centred on its two market segments, Aerospace and Defence. Both segments produce for civil and
military applications with the support of the RUAG Group’s five divi­sions. Focal markets are Switzerland, Europe, America and Asia/Pacific.
Consistent trend
Sales of CHF 1,012 million (CHF 1,023 million) in the Aerospace
and CHF 746 million (CHF 757 million) in the Defence market segment
were marginally lower than in the previous year. Sales proportions
attributable to the market segments were unchanged at 58% to 42%.
and extreme volatility in the prices of non-ferrous metals. In other
developments, a new range of handgun ammunition was launched in a
lower price segment for hunting and sports customers.
RUAG Defence generated net sales of CHF 435 million (CHF 438 million)
and EBIT of CHF 38 million (CHF 32 million). RUAG Defence was created
as a new division on 1 January 2011 by merging the core businesses of
the former RUAG Electronics and RUAG Land Systems divisions. This
considerably more comprehensive and, in many fields, complementary
portfolio of products and services improves RUAG’s brand image and
simplifies its customer approach.
Business performance of the divisions
In a stable market environment, RUAG Space generated marginally lower
net sales of CHF 275 million (CHF 283 million), and was able to increase EBIT by 46% from CHF 9 million to CHF 13 million. The division
confirmed its position as the largest independent space supplier in
Europe. It is concentrating on its core business with a restructured and
refocused product portfolio in Switzerland, Sweden and Austria.
RUAG Aviation increased net sales to CHF 487 million (CHF 471 million)
and EBIT to CHF 22 million (CHF –11.0 million, including one-time
charges of CHF –30 million). Since the beginning of 2011, the division
has pursued a strategy of focusing on military and civil aircraft MRO
and component maintenance on the basis of platforms operated by the
Swiss Air Force and the German Bundeswehr. In the process it is able
to sys­tematically tap synergies between civil and military applications.
RUAG Technology generated net sales of CHF 268 million (CHF 273
million) and EBIT of CHF –5 million (CHF 21 million, including one-time
charges of CHF 35 million). While Aerostructures in Oberpfaffenhofen
has returned to profit, the Swiss sites suffered from structural cost disadvantages. Measures were introduced in Altdorf and Emmen to restore
their international competitiveness.
RUAG Ammotec generated net sales of CHF 312 million (CHF 320 million) and EBIT of CHF 25 million (CHF 31 million). The highly international
division stood its ground in global markets despite the strong Swiss franc
People
Geography
Switzerland
Europe
Americas
Asia
Divisions
Applications
Markets
Space
Civil
Aerospace
Aviation
Technology
Defence
Ammotec
Defence
Military
Company Value
Strategy
8
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Successful strategy implementation.
The consistent implementation of RUAG’s
strategy is bearing fruit and opening
up additional market opportunities. RUAG
faces the future with a new brand image.
Annual Report 2011
9
Top, from l.: Philipp M. Berner (CEO RUAG Aviation), Dr Peter Guggenbach (CEO RUAG Space), Konrad Peter (Executive Chairman), Cyril
Kubelka (CEO RUAG Ammotec); bottom: Urs Breitmeier (CEO RUAG
Defence), Dr Viktor Haefeli (CEO RUAG Technology).
Dear shareholder,
customers and readers,
From management‘s perspective, the divisions‘ activities in 2011 were
consistently focused on sustainably profitable core activities in the air
and space industries (Aerospace) and security and defence (Defence).
Parallel to this, the company pursued a policy of minimizing risks
through a strategy of innovation and further internationalization of
activities.
The encouraging business trend, despite the challenging environment,
is a consequence of the RUAG Group’s consistent implementation of
its corporate strategy in all areas.
In the year under review, RUAG Space confirmed its position as
Europe’s largest independent supplier of space technology. The division is concentrating on its core business with a newly structured
and focused product portfolio in Switzerland, Sweden and Austria.
In addition to its involvement in space programmes in the institutional markets of Europe and the USA, RUAG Space is also exploiting
growth opportunities in the commercial market for telecommuni­
cation satellites.
Since the beginning of 2011, RUAG Aviation has pursued a strategy
of focusing on military and civil aircraft MRO and component maintenance on the basis of platforms operated by the Swiss Air Force and
the German Bundeswehr. In the process it is able to systematically tap
synergies between civil and military applications. The division has also
succeeded in stabilizing its centres of expertise for civil aircraft MRO in
Geneva, Berne and Oberpfaffenhofen.
RUAG Technology continued with its strategy of focusing on highquality, profitable special products and niche applications. Whereas
Aerostructures in Oberpfaffenhofen returned to profit in 2011,
Aerostructures in Emmen is still in the turnaround process. The op­
erations in Emmen, as in Altdorf, are subject to high pressure from
competitors and exchange-rate and location-related structural cost
disadvantages.
RUAG Ammotec specializes in high-quality pyrotechnic products
for military and civil markets and for industry. The division was able to
hold its own in global markets despite the strong Swiss franc and
extreme price volatility in non-ferrous metals. With the acquisition of
the airbag igniter production of Delphi, a US automotive supplier,
it has expanded its activities in the field of industrial pyrotechnics and
achieved synergies in ammunition development. On the distribution
side, internationalization efforts continued with the founding of
RUAG Brazil.
RUAG Defence was created as a new division on 1 January 2011 by
merging the core businesses of the RUAG Electronics and RUAG
Land Systems divisions. With this considerably more comprehensive
and, in many fields, complementary portfolio of products and services, RUAG has optimized its brand image and simplified its customer approach. With the goal of reinforcing its technology base,
RUAG Defence acquired the operations of Germany‘s Base Ten Systems Electronics GmbH in 2011. The acquisition complements its
existing activities in the field of robotics for land forces.
Firm foundation with the Swiss Armed Forces
The Swiss Armed Forces and thus the Swiss Army, remained the
RUAG Group’s single most important customer, accounting for 37%
of total sales (previous year: 35%). In accordance with the Federal
Council’s owner’s strategy, as technology partner of the Swiss Armed
Forces the RUAG Group is responsible for the maintenance and op­
erational readiness of aircraft and air defence systems, radar, command
and control, information and reconnaissance systems, simulation
systems and associated training facilities as well as tracked armoured
vehicles.
In 2011, a number of major programmes for the Swiss Armed Forces
were completed or enhanced. RUAG Aviation concentrated on two
upgrade programmes for the Swiss Air Force: the upgrade programme
for the fleet of F/A-18 fighter aircraft to prepare them for the second
half of their anticipated 30-year service life, and the upgrade programme for the TH-06 Super Puma transport helicopters, under which
the first two helicopters are now in the operational test flight phase.
Among the projects that RUAG Defence carried out for the Swiss
10
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Army, the most significant were the upgrade programme for the
Leopard 2 main battle tank and the Kodiak armoured engineer and
mine clearance vehicle, of which the first five of twelve were delivered to procurement organization armasuisse. Also, in the year
under review, the system key for the SIM MOUT (Military Operations
in Urban Terrain) live simulation platform was handed over at the
Bure training ground.
RUAG Ammotec was able to build on its special ammunition expertise
in the manufacture of small-calibre ammunition for defence and law
enforcement.
RUAG’s international network
of technology partners includes
Airbus, ASML, Astrium, Boeing,
Bombardier, Dassault, ESA, Hilti,
Krauss-Maffei Wegmann and
Rheinmetall.
At the end of the year, the Federal Council made a type selection to
eventually replace a part of the F-5 Tiger fighter aircraft fleet. However, a number of political hurdles still have to be overcome. RUAG is
neutral in this regard. As technology partner to the Swiss Air Force,
it is important to RUAG to become the MRO (maintenance, repair and
overhaul) centre of excellence for any new aircraft. Generally speaking, RUAG’s focus here is on technology transfer that benefits the
Swiss Armed Forces and on skilled jobs in Switzerland. In this respect,
RUAG is pursuing a long-term, sustainable strategy.
Internationalization and innovation
According to the strategy of RUAG’s owner, an objective of the RUAG
Group is to focus on civil and military applications as the drivers of
international expansion. This involves systematically tapping synergies
with the Swiss Armed Forces and implementing know-how-based
transfers of innovative processes in a structured manner. RUAG now
generates more than half of its net sales (53%) with customers outside
of Switzerland and works with an international network of technology partners, including Airbus, ASML, Astrium, Boeing, Bombardier,
Dassault, the European Space Agency (ESA), Hilti, Krauss-Maffei
Wegmann and Rheinmetall.
Delivery of a number of assemblies for Galileo satellites, including
their onboard computers, solar array drive mechanisms and electronics
for producing navigation signals, were among its important international projects and programmes. Local contacts and capabilities made it
possible to negotiate a direct purchasing agreement covering maintenance of engine modules for the fleet of F/A-18 fighter aircraft of the
Royal Malaysian Air Force. In response to growing demand, Airbus,
RUAG Aerostructures’ most important customer, sharply increased
production rates of the A320, A330 and A380 aircraft. In Germany,
RUAG Defence’s technology capabilities made it the German Bundeswehr’s choice to manufacture and deliver anti-mine kits for 350
Puma infantry fighting vehicles.
The RUAG Group is best able to advance its customers’ interests
through innovative solutions. They are the foundation for RUAG’s future
international success. Structured innovation management is respon­
sible for ensuring a constant rate of new developments in the individual divisions and business units. In the year under review, research and
development expenses amounted to CHF 97 million (CHF 137 million)
in the Aerospace market segment and CHF 43 million (CHF 53 million)
in the Defence market segment, which is in line with the long-term
target of 8% of sales. The decline compared with the previous year is
attributable to programmes that were in the process of beeing completed.
Annual Report 2011
11
Among other projects, in the Aerospace market segment RUAG Space
developed a payload fairing for the new European launch vehicle Vega.
Furthermore, advanced software applications for flight data monitoring
were successfully launched on the market. The French aircraft manufacturer Dassault Aviation selected the partnership between RUAG
Aviation and CAE Flightscape as its preferred provider of flight data
monitoring (FDM) services for all Falcon business jets. RUAG Technology
developed a novel friction stir welding (FSW) prototype for Airbus
that enables light metal alloys to be securely joined without rivets,
which results in a substantial saving in weight. In designing and efficiently producing a twelve-metre long composite rotor blade for wind
turbines, RUAG Technology was able to realize synergies with Aerostructures.
Research and development in the Defence market segment focused
on specific performance enhancements to existing products and on
developing low-pollutant product variants and special ammunition.
Developments included, among others, a polyvalent passive protection
system against improvised explosive devices (IED), shaped charges
and KE (kinetic energy) rounds for medium-weight to heavy vehicles
such as infantry fighting vehicles and main battle tanks. In live simulations, the Gladiator laser system for military and police training was
further developed as a high-performance, expandable modular system
that can be adapted to the specific needs of customers.
new “Together ahead. RUAG” branding communicates our promise to
our customers, partners and employees: “working together to ensure
mutual success”.
The basis of our corporate success and the keepers of this brand promise
are our around 7,700 employees worldwide. Their know-how and experience ensures that, day after day, we keep or exceed our service and
performance promises to our customers and partners. As our brand
am­bassadors, our employees form the face of the RUAG Group.
Therefore, the Group’s management team will henceforth attach even
greater importance to consistent behaviour both internally and externally.
This is laid out in a new Code of Conduct that has been drawn up to
regulate our day-to-day business activities. Starting in early 2012, the entire
RUAG Group will receive training in how to comply with this Code.
The Code of Conduct also regulates etiquette in dealings with customers,
employees and partners and the duty to comply with all statutory regu­
lations.
In collaboration with our employees, our management will gradually make
the new brand image a living part of our day-to-day business in the coming
months. In this way, RUAG will develop a new corporate identity that will
generate additional dynamism to drive sustainable and profitable growth.
At the same time, it will ensure that we rise to the challenge of our international focus.
Facing the future with a new brand image
Changes in the 2011 financial year
In view of the unresolved debt crisis in Europe and the strength of the
Swiss franc, the business environment will remain challenging. Governments will remain under pressure to tighten spending. We shall continue
our strategy of consistently focusing on profitable core activities and markets and minimizing risks. The Board of Directors and Executive Board have
identified growth potential in particular in the further systematic development of selected international markets.
As RUAG expands and becomes more international, a transparent and
consistent brand image is becoming increasingly important. The Group
already generates 53% of its sales in foreign markets, mainly in Europe,
North America and Asia/Pacific. In addition to enhancing the very high
level of satisfaction among our existing customers, we have set ourselves
the goal of increasing the proportion of foreign sales in the coming
years. In accordance with the Swiss Confederation’s owner’s strategy,
our functions include fostering an innovative exchange with leading
global providers, thereby ensuring that we are the best possible technology partner for the Swiss Armed Forces.
To help us cultivate international markets, the Executive Board has
decided to gradually introduce a new, more distinctive brand image,
which will be presented to the public for the first time at the 2012
Annual Press Conference and in this Annual Report. Our new branding
will close the gap between the global public perception of the RUAG
Group and the perception already current among experts in our field of
business: namely, as a dynamic, international Aerospace and Defence
technology group.
Building on our existing strengths, we attach great importance to a
new and more internationally distinctive corporate design and to consistent behaviour on the part of all employees, based on three key
values: collaboration, high performance and visionary thinking. Our
After twelve years, Dr Hanspeter Käser is stepping down as a member
of the Board of Directors and Vice Chairman of RUAG Holding Ltd. Egon
W. Behle and Jürg Oleas were elected as new members to the Board of
Directors. After Dr Lukas Braunschweiler stepped down as CEO of RUAG
Holding Ltd on 31 October 2011, Konrad Peter, Chairman of the Board
of Directors, took over operational management as Executive Chairman on
1 November 2011. Hans Bracher left the Executive Board on 31 December
2011. Dr Christian Ferber succeeded him as Senior Vice President Corporate Human Resources with effect from 1 January 2012.
The Board of Directors and the Executive Board look forward to working with RUAG’s employees to achieve further progress for the RUAG
Group.
We would like to thank Dr Hanspeter Käser, Dr Lukas Braunschweiler
and Hans Bracher for their good and successful collaboration and
to wish Egon W. Behle, Jürg Oleas and Dr Christian Ferber every success
in their new positions.
We owe very special thanks to our customers for their confidence,
loyalty and custom, to our owner the Swiss Confederation for a
positive working relationship, and to our employees for their great
dedication and commitment.
Konrad Peter
Chairman of the Board of Directors of RUAG Holding Ltd
12
Annual Report 2011
Together ahead.
For a successful launch.
We build reliable products.
RUAG Space.
Annual Report 2011
13
14
Annual Report 2011
Together ahead.
When you count on availability.
We offer dependable solutions.
RUAG Aviation.
Annual Report 2011
15
16
Annual Report 2011
Together ahead.
Your planes have to lift-off.
That is why our parts do fit on.
RUAG Technology.
Annual Report 2011
17
18
Annual Report 2011
Together ahead.
Don’t risk an extra round.
Rely on our precision.
RUAG Ammotec.
Annual Report 2011
19
20
Annual Report 2011
Together ahead.
Be prepared!
Secure communication to
command successfully.
RUAG Defence.
Annual Report 2011
21
22
Annual Report 2011
4 Profile
8 Foreword
28 Business performance Space
56 Financial statements
110 Corporate governance
Stable, with a focused portfolio.
All five product units met their perform­
ance targets. Competitiveness was further
strengthened through efficiency enhance­
ment programmes, collaboration among the
national subsidiaries and a focused expan­
sion of production capacity.
24
Annual Report 2011
4 Profile
8 Foreword
28 Business performance Space
56 Financial statements
110 Corporate governance
Core business
As the largest independent supplier of space technology in Europe,
RUAG Space specializes in component assemblies for use on board of
satellites and launch vehicles. The division develops and manufactures
a broad spectrum of space products for institutional and commercial
customers. The five major project areas are structures and separation
systems for launch vehicles, structures and mechanisms for satellites,
digital electronics for satellites and launch vehicles, satellite com­
munications equipment and satellite instruments.
The three national subsidiaries in Switzerland, Sweden and Austria
are established founding partners in the institutional programmes of
the European Space Agency (ESA) and the Ariane European launch
vehicle programme. Most European space missions are controlled and
monitored by RUAG Space computers. Precision mechanisms, slip
rings, thermal systems and satellite structures have been key factors in
the success of many space projects.
For the first time, a dispenser for
proper separation of the payload
into Earth orbit, a product jointly
developed in Sweden and Switzer­
land as part of the European Galileo
programme, was put in service.
The division has applied its expertise from institutional programmes
to gain a foothold in the commercial space market as well. It is market
leader in composite payload fairings, in adapters and in launch vehicle
separation systems. Digital computers and signal processing products
are a further important pillar. Products for the commercial market
include receivers and converters for telecommunication satellites, ther­
mal insulation, pointing mechanisms for electric propulsion thrusters,
solar array drive mechanisms and mechanical ground support equip­
ment. Quality niche products such as mechanisms used in the pro­
duction of microchips, thermal insulation and high-end slip rings are
also supplied to customers outside the space industry.
Business performance
RUAG Space’s net sales for the 2011 financial year were CHF 275 mil­
lion, slightly below the previous year’s figure of CHF 283 million.
EBIT was CHF 13 million, compared to EBIT of CHF 9 million for 2010.
The product area with the highest sales volume during the past year
was again structures and separation systems for launch vehicles.
The division’s payload fairings were used in eight launches of Ariane 5
and Atlas V launch vehicles. Particular highlights included the 200th
flight of an Ariane launcher in February carrying the European space
transfer vehicle “Johannes Kepler” and the launch of an Atlas V
launcher bearing the American Mars rover “Curiosity”. A newly devel­
oped dispenser was also deployed for launching the first two satellites
for the European Galileo navigation system. This dispenser, a joint
Swedish-Swiss product, secures the satellites to the upper stage of the
rocket and ensures proper entry of the payload into Earth orbit.
RUAG Space also supplied a number of other assemblies for the
Galileo satellites, including their onboard computers, solar array drive
mechanisms and electronics to emit navigation signals.
RUAG Space is also involved in the new French “Pleiades” Earth obser­
vation satellite programme. The first of these satellites was launched
in December 2011 from the European spaceport in Kourou, French
Guiana. Equipped with a RUAG Space onboard computer, French
space agency CNES’s “Pleiades” satellites will provide high-resolution
images of the Earth.
Annual Report 2011
25
RUAG Space AB in Sweden posted a record order. The company will
produce 81 electronics units for the next generation of Iridium mobile
communications satellites. These “payload interface units” control
the payload aboard the satellite. The Iridium programme was also the
source of the single largest order so far for the Nyon site: RUAG Space
will equip the satellites with slip rings, used to transmit power from the
solar arrays to the satellites.
Order intake was also strong in the Satellite Structures and Mecha­
nisms product area. In Structures, RUAG Space bolstered its leading
role in the ESA market with orders for the “Solar Orbiter” probe, the
EarthCare climate research satellite and the Intermediate Experimental
Vehicle (IXV) re-entry vehicle. In the Launch Vehicles product area,
major orders were received for Atlas V launcher components as well
as for development of a new separation system for the Ariane 5’s
payload fairing. This system will be designed to significantly reduce the
mechanical load operating on the satellite upon separation of the
payload fairing.
RUAG Space also strengthened its position in the growing commercial markets outside Europe, winning new orders for precision solar
array drive mechanisms, electric propulsion pointing mechanisms,
high-precision GPS receivers to track satellites in orbit and mechanical
ground support equipment.
Innovation and initiatives
Research and development efforts focus on systematically strengthen­
ing and improving the existing strategically defined product portfolio
of the three national subsidiaries. The emphasis is on products of inter­
est to growth markets outside of institutional space missions. Current
examples of such products include new solar array drive mechanisms,
precise GPS receivers for use on board satellites, radiation monitors,
converters and receivers as well as terminals for optical communication.
In addition, the first payload fairing for the Vega launch vehicle was
delivered during the year under review. This new rocket will begin
carrying small and mid-sized payloads into space from the European
spaceport in Kourou in 2012. It will supplement the Ariane 5, ensuring
independent European access to space for smaller missions, particu­
larly in the fields of Earth observation, climate research and science.
At all locations, the division is engaged in considerable efforts to fur­
ther enhance competitiveness. In Switzerland, a comprehensive pro­
gramme was initiated in 2010 to improve efficiency and shorten lead
times. For better customer alignment, the activities of the division at
the Swiss locations in Zurich and Emmen were reorganized under the
four business units Launchers, Structures, Mechanisms and Opto-Elec­
tronics & Instruments, effective from 1 January 2012.
At the Vienna and Berndorf sites in Austria, expansion buildings were
occupied in the first half of 2011. An enlarged production facility in
Berndorf created space for a second production line for low-tempera­
ture insulation with automated manufacturing processes and signifi­
cantly higher production capacity. Additional space for production is
also planned at the Nyon site in Switzerland.
For the next generation of
Iridium mobile communications
satellites, RUAG Space will be
ready to supply payload control
units and the slip rings that
carry power from the solar arrays
for 81 satellites.
26
Annual Report 2011
4 Profile
8 Foreword
28 Business performance Space
56 Financial statements
110 Corporate governance
Outlook
RUAG Space operates in a stable market environment. Thanks to the
long life cycles of space programmes and the high proportion of insti­
tutional customers, the business is subject to few cyclical fluctuations.
Growth drivers in recent years have primarily included replacement of
satellite fleets by commercial telecommunication operators. This mar­
ket segment is expected to slow down initially in the next few years. In
the medium and long term, however, we anticipate renewed growth
in global space missions, propelled by the ambitious programmes of
rising nations in Asia and the unfolding of new application areas,
particularly in earth observation and navigation.
At the Berndorf, Austria site,
a second production line for lowtemperature insulation with
significantly higher capacity was
brought online.
With a focused product portfolio, RUAG Space holds a good starting
position to participate in the expected market growth. Among the
decisive factors will be the successful development of innovative prod­
ucts. The institutional market, especially European Space Agency
(ESA) programmes, remains the key driver for such development.
In these programmes European space enterprises acquire the tech­
nological capabilities that can subsequently be commercialized. The
decisions taken for the coming years by the ESA countries’ space
ministers at their autumn 2012 conference will thus give direction
to the European space industry.
RUAG Space in numbers
Net sales:
CHF 275 million
EBITDA:
CHF 33 million
EBIT:
CHF 13 million
Employees:1,113
Based in: Switzerland, Sweden, Austria
“For us, the decades of experience
and the exceptional qualityconsciousness of RUAG Space are
an important guarantee of
many more successful missions.”
Jean-Yves Le Gall, Chairman and CEO Arianespace
Payload fairings and onboard computers for 200 Ariane missions
A milestone for the European launch vehicle programme: On 16 February
2011, a European Ariane rocket lifted off from the Kourou spaceport
in French Guiana for the 200th time. The unmanned European space
transfer vehicle “Johannes Kepler” was on board. Ariane flight V200
was also a milestone for RUAG Space. All 200 of these rockets had been
equipped with payload fairings and onboard computers from Europe’s
largest independent space supplier.
Since 1979, Ariane has secured independent access to space for Europe.
Outstanding dependability and mission flexibility have made operator
Arianespace the global market leader in commercial satellite launches.
The current version of the launcher is capable of lifting two large sat­ellites with a total weight of nearly ten tonnes into space on one flight.
RUAG Space has been part of Ariane’s success story from the very be­
ginning. A payload fairing built by the division was used in the successful
first launch of the Ariane 1 on 24 December 1979. The division is now
the world market leader in composite payload fairings. The fairings, built
at the Zurich and Emmen sites in Switzerland, are used not only on the
Ariane 5 but also aboard the American Atlas-V-500.
The payload fairing at the launcher’s tip protects satellites during launch.
They must be capable of withstanding enormous strain while keeping
weight to a minimum. To meet this challenge, the world’s first composite
fairing was developed in 1988 for the Ariane 4. The current Ariane 5
payload fairing has a diameter of 5.40 metres, a height of 17 metres and
weighs in at just under 3 tonnes.
The onboard computers for Ariane rockets are developed and built in
Gothenburg, Sweden. Two of these extremely robust and error-tolerant
computers operate in parallel aboard each Ariane 5 to ensure optimum
reliability and security. Over 250 onboard computers in all have been
delivered since the start of the Ariane programme.
The new European launch vehicle Vega will likewise be equipped with
a fairing and a computer from RUAG. The 30-metre rocket is designed to
carry small to medium-sized payloads such as those used in Earth obser­
vation and meteorology into near Earth orbit.
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Annual Report 2011
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8 Foreword
28 Business performance Aviation
56 Financial statements
110 Corporate governance
Greater profitability on a firmer base.
Milestones were reached in the upgrade
programmes for the Swiss Air Force.
Internationally, sales were reduced by
budget cuts. The turnaround is underway in civil aircraft MRO. The components
and subsystems business saw further
expansion.
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Annual Report 2011
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8 Foreword
28 Business performance Aviation
56 Financial statements
110 Corporate governance
Core business
RUAG Aviation is a centre of excellence for civil and military aircraft
maintenance, repair and overhaul (MRO) and for developing, manufacturing and integrating aviation systems and subsystems. As technology partner to the Swiss and German Air Forces, other international air
forces and civil aircraft operators and manufacturers, the division
focuses on its three core competencies of civil MRO, military MRO and
maintaining subsystems and components.
In military aircraft MRO in
Switzerland, prototypes from the
upgrade programmes for both
the F/A-18 fighter aircraft fleet and
the TH-06 Super Pumas achieved
smooth initial test flights.
Activities in military aviation are based on integral service programmes
for all fighter aircraft, helicopters, training aircraft and reconnaissance
UAVs for the Swiss Air Force. The service spectrum includes support for
evaluation of new systems, final assembly and MRO work as well as
trading and remarketing. The focus is on platforms used in Switzerland
such as the F-5 Tiger and F/A-18 Hornet fighter aircraft and the Super
Puma, Cougar and Eurocopter EC635 helicopter types. Lifecycle support
services for the Bell UH-1D helicopter and the Alpha Jet are provided
at the Ober­pfaffenhofen site in Germany.
In business aviation, services range from comprehensive maintenance,
repair and overhaul work through to interiors and painting for owners
and operators of select civil aircraft types. As partner to aircraft manu­
facturers Bombardier, Cessna, Dassault, Embraer, Hawker Beechcraft,
Piaggio and Pilatus, RUAG Aviation operates authorized service centres
in Switzerland and Germany. The division is also the original equipment
manufacturer (OEM) of the Dornier 228NG turboprop aircraft, a modernized version of the Dornier 228-212.
Business performance
In the face of stiff competition, RUAG Aviation increased net sales to
CHF 487 million. EBIT came to CHF 22 million. While the military aviation
business in Switzerland remained stable, the effects of defence budget
cuts in Germany were palpable. Successes were achieved in implementing an international strategy as an MRO service provider in selected
core markets. The component and subsystem maintenance business for
the Swiss Air Force and international customers saw both qualitative
and quantitative improvements. Synergies were successfully exploited
between military and civil applications.
In Switzerland, a milestone was reached in the Upgrade 25 programme
for the Swiss Air Force’s F/A-18 C/D fleet when the prototype achieved
a flawless initial test flight. The comprehensive upgrade will bring the
latest technologies for airborne policing and air defence missions to the
Swiss F/A-18 fleet, getting it ready for the second half of its anticipated
30-year service life. Alongside state-of-the-art instruments and new
mission computer software installed and tested by RUAG Aviation, a new
video amplifier was specially developed and certified for the F/A-18
fighter aircraft. The Swiss Mission Data System (SMDS) likewise underwent further development. The division also successfully expanded the
F/A-18 maintenance business in international markets. To strengthen the
existing F/A-18 Hornet engine module maintenance business for the
Royal Malaysian Air Force and gain additional civil and military aircraft
MRO customers in Asia, the division entered into a joint venture with
a local middle-sized MRO company in Malaysia.
After the first flight of the modified prototype for the Swiss Air Force’s
WE890 upgrade programme a second TH-06 Super Puma entered
the operational test flight phase. Both helicopters are nearly ready for
handover to the customer. An order to install RUAG’s ISSYS system
Annual Report 2011
31
for protection against guided and laser-guided defence systems on transport helicopters for the Slovenian Air Force was successfully executed.
This order has also led the Slovenian Air Force to entrust RUAG Aviation
with maintenance of its helicopters.
In Oberpfaffenhofen, the division provides life cycle support services
such as evaluation, final assembly, maintenance and repair work as well
as upgrades for helicopters (UH-1D) and, in cooperation with Dassault
Aviation, for all operators of the German version of the Alpha Jet. Thanks
to RUAG Aviation’s support over the 40-plus years since the German
Bundeswehr adopted the Bell UH-1D, availability of the helicopter fleet
remains very high.
In civil aircraft MRO, RUAG Aviation has bundled the capabilities of
the Geneva, Berne Belp, Agno (Switzerland) and Oberpfaffenhofen
(Germany) sites with a view to meeting customer needs even more
closely. Business Aviation also celebrated its 30th anniversary as Europe’s
leading service centre for Bombardier business jets. At the same time
a new customer lounge was opened in Oberpfaffenhofen to provide an
pleasant environment for customers visiting the one-stop-shop. The
Geneva location’s fixed base operator (FBO) status was likewise enhanced,
providing customers with a broader, faster and more convenient range
of services. The unit now offers a comprehensive service portfolio ranging
from passenger and crew care to technical support and aircraft MRO.
The existing range of services for various helicopter types was also
ex­panded during the year under review. RUAG was awarded the status
of authorized Customer Service Centre (CSC) for Southeast and SouthCentral Europe for the S-76 helicopter platform by US company Sikorsky
Aircraft Corporation.
The Bangladesh Navy followed customers in Japan, Norway and Germany in 2011 in purchasing two Dornier 228NG turboprop aircraft.
These are the first fixed-wing aircraft deployed by the Bangladesh Navy
for coastal patrol. Both are specially outfitted for marine reconnaissance
missions.
Innovation and initiatives
Updated versions of flight data monitoring software applications for
airlines and business jet operators were released in 2011. These applications contribute significantly to the safety of both passengers and
crew. At the end of the year, Dassault Aviation selected the RUAG
Aviation and CAE Flightscape partnership as its preferred provider for
flight data monitoring (FDM) services for all new and in-service Falcon
aircraft.
With its missim product, RUAG Aviation is a global technology leader
in pre-mission test equipment used on the flight line to ensure that
self-protection systems are functioning reliably. missim is the only
three-in-one solution capable of testing radar, laser and infrared potential threats in a compact device. A broadband radar module providing
exceptionally high performance in a small space at a very attractive price
was added to the product in 2011. The broadband version of missim
has already proven its worth in active service with the CH-53 helicopter
fleet by the German Bundeswehr and Eurocopter.
RUAG Aviation makes its wind tunnel facilities available to international
aircraft and automobile manufacturers. The equipment at these facilities includes strain gauge balances designed in-house for extremely
precise measurement of the effects of the airstream on the test object.
The latest generation of balances, launched last year, can withstand
The Business Aviation unit
celebrated its 30th anniversary
as the leading service centre
for Bombardier business jets.
A new customer lounge was
opened in Oberpfaffenhofen, and
the Geneva site’s fixed base
operator status was further enhanced.
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28 Business performance Aviation
56 Financial statements
110 Corporate governance
higher forces while providing more precise measurements and resisting
deformation or changes in volume.
In Oberpfaffenhofen, RUAG Aviation responded to growing demand in
early 2011 by opening a new business unit, the Centre of Excellence
for Refurbishment & Upgrades. A team was established here to focus
not only on the traditional MRO business but also on refurbishment
and upgrades of business jet interior furnishings. Moreover, a liaison
office was opened in Berlin to support distribution in Germany and
cultivate closer relations with government customers such as the Bundeswehr and the Federal Police.
Outlook
RUAG Aviation will continue in 2012 to focus on its core competencies
in military and civil aircraft and component MRO. In both the civil and
military sectors, RUAG Aviation sees further potential in selected international markets.
The flight data monitoring software was successfully updated.
Dassault has designated the part­
nership between RUAG Aviation
and CAE Flightscape as its preferred supplier of flight data monitoring services for all Falcon aircraft.
In military MRO, the focus in Switzerland in 2012 will be on optimizing
services for the main customer, the Federal Department of Defence, Civil
Protection and Sport (DDPS). On the German domestic market, the
emphasis will be on expanding the relationship with the main customer,
the German Luftwaffe, and establishing a position as lifecycle support
partner for future platforms. In the global military business, the division is
pursuing growth opportunities with international key customers, especially in the United States, Asia and South America.
Technical innovation is a high priority for the division, giving it a competitive edge in the face of shrinking military budgets with its high-quality,
affordable solutions. These are rounded off with commercial inno­vations
that offer customers an attractive total package.
RUAG Aviation in numbers
Net sales:
CHF 487 million
EBITDA:
CHF 27 million
EBIT:
CHF 22 million
Employees:1,980
Based in: Switzerland, Germany, USA
“Availability for repairs of our
F/A-18 engines has improved
markedly since the start of our
collaboration. We are impressed
with the RUAG Aviation specialists’
careful planning and strong commitment.”
Major General Dato‘ Kamalruzaman Bin Mohd Othman,
Royal Malaysian Air Force
Growth in global aircraft component MRO
The continual expansion of the worldwide component maintenance,
repair and overhaul (MRO) business is based on many years of
experience servicing all aircraft and helicopters of the Swiss Air Force.
By establishing and expanding centres of excellence for specific
subsystems, the unit continually broadens its expertise.
In the civil sector, thanks to close collaboration with the business
unit that performs business jet maintenance, the achievements of 2011
included a licence agreement on landing gear maintenance for the
Dornier 328 with manufacturer Messier-Dowty. Based on close internal
collaboration, expansion of the maintenance work to cover additional
components such as engine assemblies, tyres and brakes along with various propulsion systems is planned for 2012.
Californian company Aero Turbine offers an example of entry via a local
partner, opening the door to a long-term contract signed with the US
Navy to perform maintenance on J85 engine systems for the entire F-5
Tiger fighter aircraft fleet. The MISTR (Management of Items Subject
to Repair) contract provides access to the world’s largest customer. Local
contacts and capabilities made it possible to negotiate a direct purchasing
agreement including maintenance of engine modules for the F/A-18
fleet of the Royal Malaysian Air Force.
OEM licences have been obtained for instance by means of a coope­
ration agreement with Eaton Aerospace Limited in Ohio (USA). The
agreement authorizes RUAG Aviation to maintain and repair hydraulic
and electromechanical components for the F-5 Tiger worldwide.
Maintenance licences were also acquired for Breeze Eastern and Goodrich rescue winches for the Super Puma and Cougar helicopter types.
RUAG subsidiary Mecanex is a key hub in the component MRO business. Mecanex purchases aircraft replacement parts on the US
market and resells them worldwide, complying with all legal requirements and working with some 2,000 suppliers.
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Annual Report 2011
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28 Business performance Technology
56 Financial statements
110 Corporate governance
Growing volumes under pressure.
The order situation has developed favour-­
ably in the aviation, machine and semi­
conductor industry and in materials recyc­
ling. The strong Swiss franc, however,
had a significant negative impact on earnings.
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28 Business performance Technology
56 Financial statements
110 Corporate governance
Core business
RUAG Technology manufactures and machines structural assemblies
and high-quality components and provides special services to customers in the aviation, machine, semiconductor, energy, automotive and
recycling industries. Activities focus on Aerostructures and on activities
in Altdorf (Mechanical Engineering, Coatings and Environment).
In Aerostructures, key focal points are producing complete passenger
aircraft fuselage sections for major customers such as Airbus and
Bombardier, wing and control surface components as well as sophisticated component assemblies and parts for civil and military aircraft.
As a centre of excellence for wingtip fences (winglets), RUAG Technology
produces all of the winglets for all Airbus civil aircraft and serves as a
“quality gate“ for final assembly and the entire global fuselage section
supply chain for the European aircraft manufacturer.
At the Oberpfaffenhofen site,
accelerated production rates
by main customer Airbus in
combination with efficiency
enhancements led to a marked
improvement in profitability.
Mechanical Engineering produces sophisticated structural elements
and components for machinery and equipment manufacturing,
the semiconductor, wind power and automotive industries and for
aerospace, precision mechanics and tool production. The business
area’s specialties include high-precision machining of large parts. The
Coatings business area is proficient in a comprehensive array of
layering, chemical, electrolytic, electrochemical, tribological and nanotechnological surface treatment processes. Environment is a total
service provider for electrical, electronic and industrial materials recycling.
Business performance
RUAG Technology achieved net sales of CHF 268 million in 2011, a
decline of CHF 5 million from the previous year. Earnings were impacted by two opposing trends. On the one hand, order volume grew in
all four business areas, and customer satisfaction was again very high.
On the other hand, however, the strained currency situation weighed
on sales for the export-oriented division, which manufactures primarily
in Switzerland. Especially in the second half, the euro and US dollar
exchange rates had an enormous effect on earnings. At CHF –5 million, EBIT — further impacted by one-time charges of CHF 4 million in
Aerostructures and for activities at the Altdorf site — subsequently
also ended in the negative range. To stabilize the business areas, various restructuring measures progressed with a focus on risk minimization and profitability.
The future of Aerostructures will see a focus on high-value, profitable
speciality products and niche applications along with efforts to minimize risks for the RUAG Group as a supplier in aircraft manufacturers’
global supply chains. A permanent solution was found in 2011 for
the 2010 decision to stop manufacturing titanium and nickel com­ponents
for civil and military aviation at the Plan-les-Ouates site. The 40 employees’ jobs were preserved with the sale of the facility to the French
family-owned company Saint Jean Industries. 2011 was a highly
successful year for Aerostructures’ most important customer, Airbus,
which sharply increased production rates for the A320, A330 and
A380 aircraft in response to rising demand. At the Oberpfaffenhofen
site, which is located in the Eurozone, this increase was successfully
implemented in combination with efficiency enhancement programmes. As a “quality gate“ for the entire global fuselage section
supply chain for the A320 family, Oberpfaffenhofen was responsible
for ensuring that quality standards were upheld during the rapid production ramp-up. One highlight was the delivery of the 5,000th fuse-
Annual Report 2011
37
lage section. In Emmen, by contrast, the strong Swiss franc meant that
the order volume could not be profitably increased, despite ongoing
process enhancements, reduced overheads and improvements in the
supply chain.
At Mechanical Engineering, a budding recovery in the machine in­
dustry and especially the semiconductor industry resulted in a healthy
order book. However, here too, the exchange rate had a negative
impact on earnings. The situation in respect of new orders from the
Eurozone became critical in the second half of the year. Optimization
of cost structures became necessary to preserve international competitiveness and profitability and retain the ability to carry out export
orders from Switzerland. Structural measures included temporary
implementation of short-time work. Since the automotive sector is not
part of the division’s core business, the Automotive business area
was consolidated with Mechanical Engi­neering in 2011 and a decision
was taken to stop processing heavy-gauge sheet metal.
The Environment business area, which focuses on the Swiss market,
experienced stable growth and reasserted its status as national end-toend recycling service provider, from collection through demanufac­
turing to reintroduction of valuable materials into production cycles.
Innovation and initiatives
As supplier to a wide range of industries, the division focuses development and engineering efforts on innovative solutions to our cus­tomers’
ambitious requirements. RUAG Technology addresses the entire development, engineering and production cycle, from prototype design to
industrial manufacturing.
In 2011, RUAG Technology developed a friction stir welding (FSW)
prototype in collaboration with Airbus. This clean and innovative
process for joining light metal alloys makes rivets superfluous. In comparison with conventional joining processes, the high seam strength
resulting from the process yields considerable weight savings in lightweight construction.
The Structural Engineering team designed a twelve-metre long rotor
blade for an innovative wind power plant during the year under review. The blade is based on the vertical axle principle, making it ideal
for weak, variable and gusty winds. The composite rotor blade is made
of a mixture of glass and hydrocarbon materials with innovative preimpregnated fibre (prepreg) materials that eliminate the need for autoclaves during production.
In the Mechanical Engineering business area, the division worked
closely with the main customer ASML on a new aluminium bottom
frame, supplying the process engineering input. The new model
will be built into a new lithographic machine in which wafers for the
semiconductor industry will be exposed to beams of ultraviolet light
rather than the visible light of conventional equipment. Since the light
beam must propagate in a vacuum to properly fulfil its function,
the bottom frame is subject to very stringent purity standards. The use
of shorter-wavelength light makes it possible to produce much smaller
structures on silicon memory chips, enabling a significantly larger quantity of data to be stored in the same space.
In the Coatings business area, lubricating coating technologies that
significantly reduce abrasion were developed further.
The structural engineering
team created a twelve-metre-long
rotor blade for an innovative
vertical-axis wind power plant,
specially designed for weak
and variable winds.
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Annual Report 2011
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28 Business performance Technology
56 Financial statements
110 Corporate governance
In addition to its technology development initiatives, under enormous
market pressure from abroad, RUAG Technology also systematically
intensified sales efforts in its core markets, focusing both on gaining
new customers and on expanding relationships with existing cus­
tomers.
Outlook
It is anticipated that economic conditions will remain difficult in 2012.
It will remain a challenge for RUAG Technology to export to global
markets from Switzerland. The year to come will thus be marked by an
ongoing, systematic continuation of the economic turnaround by
optimizing cost structures.
The bottom frame developed
jointly with ASML for computer
memory chip production must
be capable of functioning in a
high vacuum.
The key to long-term success will be continuous improvement in processes at all business areas. This is being pursued throughout the
division through a structured improvement process, including ongoing
optimization of its own supply chains. A major consideration is more
flexible management of exchange rate fluctuations by means of currency
hedges.
RUAG Technology in numbers
Net sales:
CHF 268 million
EBITDA: CHF 11 million
EBIT:CHF –5 million
Employees:1,322
Based in:
Switzerland, Germany
“We can depend on RUAG as a
flexible first-tier supplier and supply
chain ‘quality gate’.”
Dr L. Scheimann, Head of Supply Chain Quality Fuselage/Cabin,
Airbus Hamburg
Expanding aircraft production while maintaining top quality
In Aerostructures, RUAG Technology expanded and deepened cooperation with the main customer, Airbus, in 2011. In particular, as a “quality
gate“ for the global fuselage supply chain for the A320 family, Ober­
pfaffenhofen was responsible for upholding impeccable quality standards as Airbus rapidly ramped up production rates.
The background to this expansion in volume is rapid growth in worldwide demand for single-aisle aircraft (A318, A319, A320 and A321).
Airbus plans to increase the pace of production of such aircraft by
stages from 36 per month at the end of 2010 to 42 per month by the
end of 2012. This corresponds to delivery of nearly 490 shipsets per
year by RUAG Technology. To achieve these higher rates, Airbus must
be sure that all components will be delivered on time and with flawless
quality for final assembly. Delivery delays or rework due to quality issues would throw the entire production chain out of pace.
The Aerostructures unit at Oberpfaffenhofen achieved the increase
in production volume at its own facility without problems in 2011, even
exceeding quality improvement targets compared to the prior year.
In its function as a “quality gate“, RUAG Technology also ensures that
the entire supply chain meets these requirements, also overseeing
and providing guidance to the suppliers who deliver free issue parts for
Airbus to RUAG Technology. Efficient quality management identifies
problems early; these are then solved in close cooperation with the
supplier.
However, keeping the fuselage supply chain running smoothly was not
RUAG Technology‘s only role in 2011. RUAG Technology specialists also
assisted the customer in managing the production ramp-up at the final
assembly site in Hamburg. This assistance underscores the collaborative,
trust-based relationship between RUAG Technology and Airbus. Under a
new master agreement concluded in 2010, the two parties are also
working jointly to ensure long-term economic viability in the face of
dynamic global competition. Among other things, this will involve expanding the supplier base outside of Europe as well.
40
Annual Report 2011
4 Profile
8 Foreword
28 Business performance Ammotec
56 Financial statements
110 Corporate governance
Organic growth achieved.
The division achieved nearly full capacity
utilization in a difficult environment. The
financial result was impacted by exchange
rate losses and rising raw material prices.
Further internationalization and diversifica­
tion was pursued in all business units.
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Annual Report 2011
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28 Business performance Ammotec
56 Financial statements
110 Corporate governance
Core business
RUAG Ammotec specializes in high-quality pyrotechnic products for
military and civil markets and for industry. Its primary activities include
developing and manufacturing small-calibre ammunition for Hunting &
Sports as well as for Defence & Law enforcement. The products are
renowned for their ultimate dependability, precision and optimally engineered effect. Environmentally safe disposal of pyrotechnic products
also forms part of the service portfolio.
RUAG Ammotec is the European market leader in Hunting & Sports
ammunition. Its hunting ammunition includes a broad range of
classic brands such as RWS, Rottweil, GECO, Norma and Hirtenberger.
Among sporting marksmen, numerous Olympic medals and world
records underscore the world-class quality of RUAG Ammotec‘s products, especially those sold under the RWS and Norma brands.
Although demand on the defence
and law enforcement market
declined somewhat due to budget
cuts, the impact was offset by
new orders. The German Bundes­
wehr and the Armed Forces of the
Netherlands exercised their options.
For Defence & Law enforcement, the division supplies high-precision
ammunition across the entire small-calibre spectrum, including spe­cial-purpose sniper ammunition under the SWISS P brand. A wide
range of small-calibre ammunition for various operational and training
applications is available for law enforcement. The company also
produces a unique line of low-pollutant, NATO-qualified small-calibre
ammunition. Customers include the Swiss Armed Forces, German
Bundeswehr and other international government agencies and security
forces.
In its Industrial Products business area, the division utilizes its extensive
ammunition expertise and a systematic innovation strategy to develop
products such as actuator cartridges for fastening systems in the construction sector and for safety systems.
Business performance
Although RUAG Ammotec experienced organic growth in 2011, net
sales declined slightly (by CHF 8 million) from the previous year’s figure
to CHF 312 million. EBIT came to CHF 25 million, a CHF 6 million decline from 2010.
While the impact of exchange rate effects was strong, a prudent stockpiling policy kept the effects of ongoing increases in non-ferrous metal
prices within bounds in 2011.
These results were above target. The division has operated at near-full
capacity now for three consecutive years.
In volume terms, every business area saw gains in 2011. At the Defence &
Law Enforcement unit, efforts continued to expand international market penetration, with long-awaited orders finally coming through. The
German Bundeswehr and the Armed Forces of the Netherlands exer-
Annual Report 2011
43
cised their options. Although volumes purchased under some existing
contracts fell due to defence budget cuts, these declines were more
than compensated for by new orders.
The Hunting & Sports business area has noticed more price-conscious
buying behaviour among final customers for some time. The unit has
successfully countered this trend through targeted marketing initiatives
and the launch of a new economy range of handgun ammu­nition under
the GECO brand.
The Industrial Products business area achieved growth from an already
strong base in 2011. Highlights included a doubling in sales of airbag
igniters, a product line acquired in 2010 from American automotive
supplier Delphi, and the start of production of low-pollutant actuator
cartridges for direct fastening systems for Liechtenstein’s Hilti Group.
Innovation and initiatives
In research and development, RUAG Ammotec focuses on specific
performance enhancements in existing products and on developing
low-pollutant variants and special ammunition optimized for particular applications, firearm types and country-specific requirements.
Innovative pyrotechnic applications are also developed for industry.
In the ammunition domain, the unit achieved performance enhancements in 2011 in 300 grains (19.4 gramme) projectiles of various
standard calibres. These include a standard penetrator projectile with a
steel core and a temperature-independent propellant powder that
improves range and precision in both cold and hot weather. A new
338LM-calibre armour-piercing incendiary (API) round aids in targeting
by emitting a bright flash on impact.
In the Hunting & Sports business area, work continued on developing
lead-free cartridges to meet the growing need for low-pollutant products. A further innovation is electric ignition elements that help prevent
accidents by minimizing electromagnetic charges.
In terms of distribution, internationalization efforts continued, alongside ongoing expansion of existing subsidiaries, with the foundation of
RUAG Brazil. In the Hunting & Sports business area, moreover, several
diverse, promising co-marketing initiatives were launched with leading
suppliers of precision optics and firearms.
New capacity was installed at the Hungary production site to enhance
production flexibility. In Fürth, Germany, a new production system
for industrial actuator cartridges was also commissioned. Moreover, a
major forward-looking investment in percussion cap production was
completed, significantly increasing capacity while markedly reducing
manufacturing costs.
A range of handgun products with
an optimized price-performance
ratio was launched to address the
more price-conscious behaviour
that has been apparent for some
time in the Hunting & Sports
ammunition sector.
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Annual Report 2011
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28 Business performance Ammotec
56 Financial statements
110 Corporate governance
Outlook
RUAG Ammotec anticipates continued positive business performance
in 2012 and expects to remain on its growth trajectory. Above all,
continuing high demand from the German Bundeswehr will have a
positive impact even if the market environment remains difficult.
The overall market is characterized by a subdued growth outlook for
the global economy, further budget cuts in international public budgets,
in­creasingly restrictive legislation and worldwide excess capacity in the
ammunition sector.
Against this background, securing major international orders far from
the domestic markets remains difficult, especially in light of the strong
Swiss franc. The situation in respect of currency and commodity markets also remains strained.
Internationalization efforts
continued with the founding
of RUAG Brazil along with
ongoing expansion of existing
subsidiaries.
The foundation for further internationalization of the business will lie
in ongoing development of the niche market strategy and targeted marketing of products adapted to country-specific requirements. Among
other efforts, this will include a systematic, step-by-step approach to
entering growth markets.
Growth impetus in 2012 is most likely to come from the Industrial
Products business area, where the low-pollutant direct-fastening
actuator cartridges introduced in the construction sector by Hilti in
late 2011 will generate sales for a whole year for the first time.
Extending global market leadership in low-pollutant pyrotechnics is also
the top priority in the small-calibre ammunition segment.
RUAG Ammotec in numbers
Net sales:
CHF 312 million
EBITDA: CHF 36 million
EBIT:
CHF 25 million
Employees:1,733
Based in:
Belgium, Germany, France, UK, Austria, Sweden,
Switzerland, Hungary, USA and Brazil
For the division, the automotive
safety sector represents not only
an expansion of the Industrial
Products unit and the civil busi­
ness, but also a further differen­
tiation of sales markets.
Successful return to the automotive future
Extremely fast, precise and high-energy effects can be achieved
through pyrotechnics. For example, explosive charges are used in
automotive safety to inflate airbags within a few hundredths of
a second in the event of an accident. The ignition units used to activate the gas generators are essentially the same as the propellant
charges used in firearm ammunition. RUAG Ammotec has taken advantage of these technological synergies since acquiring the igniters
unit of American automotive supplier Delphi in 2010 for manufacturing ignition elements at its site in Fürth, Germany.
It is no coincidence that the newly acquired production site is located
on the RUAG Ammotec site in Fürth. The ignition element plant,
which has been in operation since the 1990s, was sold to Delphi by
the former Dynamit Nobel at the same time that the small-calibre
ammunition business was handed over to the RUAG Group. The most
recent transaction thus represents a return to the former parent company.
For the division, the automotive safety sector represents not only an
expansion of the Industrial Products unit and the civil business, but
also a further differentiation of sales markets. Customers in the sector
include various airbag system and component producers such as
Japan’s Takata Corporation, which has production sites worldwide.
19 employees in all were taken over from Delphi.
Synergies have been found in practically all areas of the new product
line, but the key aspect certainly is the division’s technological market
leadership in the field of low-pollutant pyrotechnics. Automotive
applications demand a particularly high level of compatibility with
human health.
In addition to igniter production, RUAG Ammotec also acquired Delphi’s
laminated metallic element production technology in 2010. Developed
by Dynamit Nobel, this type of component produces controlled sparks
for low-risk, ultra-rapid electrical ignition of charges.
In financial terms, the acquisition already paid off for the new product
line in the first year, with sales nearly doubling in 2011. In addition to
the successful launch of new system models by main customer Takata,
three new customers also contributed to this encouraging result.
46
Annual Report 2011
4 Profile
8 Foreword
28 Business performance Defence
56 Financial statements
110 Corporate governance
Successful Swiss programmes.
The highlights of the financial year included
the final stage of the Leopard 2 upgrade
programme, the handover of a live simulation system and further enhancement of
materiel centre of excellence status for the
IFASS integrated radio reconnaissance
and transmission system.
48
Annual Report 2011
4 Profile
8 Foreword
28 Business performance Defence
56 Financial statements
110 Corporate governance
Core business
RUAG Defence is a strategic technology partner for land forces. Its
focus lies on the needs of the Swiss Army in terms of protection,
training, and upgrades of defence systems. In addition, the division
goes to great lengths to ensure that its products and services are
aligned with international requirements. The activities of the three
business units Land Systems, Simulation & Training and Network
Enabled Operations cover innovative products, maintenance, upgrades,
training and systems integration services.
The Simulation & Training business
unit reached an important milestone in delivering the keys for the
SIM MOUT live simulation facility
at the Bure training ground to the
Swiss Army.
The core competency of the Land Systems business unit is service life
extension and upgrading heavy weapons systems. The focus is on
the Leopard 2 main battle tank platforms that have been adopted in
Switzerland, the CV 90 infantry fighting vehicle and the M 109 selfpropelled howitzer. A further specialization is developing and manufacturing protection solutions for armoured vehicles. The unit also offers
comprehensive maintenance services along with logistics solutions
such as special containers that provide protection against electromagnetic interference and electronic eavesdropping.
The Simulation & Training business unit specializes in virtual and live
simulation systems for land forces training purposes. Integration of
modular systems yields a range of effective training programmes, from
individual training of soldiers to tactical exercises for entire units.
The business unit also provides comprehensive servicing and operation
of installed equipment.
As a vendor-independent technology partner, the Network Enabled
Operations business unit ensures integration, operation and maintenance of electronic command and control, communication, radar and
reconnaissance systems for the Swiss Armed Forces and related systems
for civil organizations. The unit also develops solutions for information
security and long-term protection of corporate assets against cyberwar
threats.
Business performance
RUAG Defence’s net sales declined slightly (by CHF 3 million) from the
previous year’s figure to CHF 435 million. EBIT improved 19.8% to CHF 38
million. The division was formed at the start of 2011 as part of an effort
to focus on the core business by consolidating the two former divisions
RUAG Electronics and RUAG Land Systems, both of which operated in
the same markets. Combining their product portfolios, including complementary services, into a one-stop-shop simplified commu­nication with
both the Swiss Armed Forces as the key customer and inter­national
customers.
The Land Systems business unit faced delays in major projects due to
defence budget cuts in 2011. The impact was felt most strongly in order
intake. Nevertheless, the unit achieved several successes in its operations. The upgrade programme for the Leopard 2 main battle tank for
the Swiss Army successfully entered its final phase, and the first five
of twelve Kodiak armoured engineer and mine clearance vehicles were
delivered to the armasuisse procurement organization for the Swiss Army
at the end of 2011. The armoured engineer vehicle system is produced
and distributed in close collaboration with the main systems contractor
Rheinmetall.
In Germany, RUAG Defence’s technology capabilities made it the Bundeswehr’s choice to manufacture and deliver anti-mine kits for 350 Puma
Annual Report 2011
49
infantry fighting vehicles. With the aim of expanding its international
presence and reinforcing its technology base, the business unit took over
the operations of Germany’s Base Ten Systems Electronics GmbH
(Base 10). The acquisition provides value for customers by complementing existing activities in the field of robotics for land forces.
The Simulation & Training business unit reached an important milestone
in delivering the keys for the SIM MOUT live simulation facility at the
Bure training ground to the Swiss Army. The system provides simulation
support for Military operations in urban terrain and will enable realistic
and efficient urban combat training for troops and cadres on a joint
level on Switzerland’s biggest military exercise ground. All weapons
systems and their effects on the surroundings are precisely simulated by
an integrated bundle of technologies including two-way laser systems, ultrasound and GPS tracking. Data from the exercises is gathered
by thousands of sensors seeded throughout the training ground, fed
into Switzerland’s biggest wireless LAN network and transmitted to the
exercise command centre for after-action reviews. In Virtual Simulation,
the first six of twelve simulators for the new French light armoured vehicle were, after intensive testing, delivered to the French infantry academy.
The Network Enabled Operations business unit further enhanced its
status as materiel centre of excellence for the Swiss Armed Forces
and integrated radio recon­naissance and transmission system (IFASS).
To­gether with the original equipment manufacturer, the division is
developing the know-how to reliably provide all support services for
the complex system’s hardware and software in future. Following a
strategic review, a decision was taken to cease involvement with the
PantherCommand operational command and control system.
Innovation and initiatives
One area of innovation at the Land Systems business unit is unmanned
ground vehicles (UGVs) for ground forces. The Base 10 acquisition
has brought a new impetus to this pioneering field. Research and development efforts focus on unmanned vehicle platforms with integrated navigation and communication modules. UGVs have numerous
uses, for example as autonomous surveillance devices using sensors
to reliably acquire information or as unmanned transport vehicles for
hazardous goods. Intelligent UGVs can enhance effectiveness in asymmetric combat situations and reduce risks to troops.
In the protection field, the Land Systems business unit launched a proprietary polyvalent passive protection system against improvised explosive
devices (IED), hollow charges and KE-rounds. The product is well suited
to medium-weight to heavy vehicles such as armoured personnel carriers and main battle tanks. The newly developed product has already
attracted an international order. A new family of containers offers not
only electromagnetic compatibility (EMC) but also protection against
nuclear electromagnetic pulses (NEMP). The base model is available as a
simple or hinged container with various shielding options and can be
tailored to individual customer requirements.
In the Simulation & Training business unit, the Gladiator police and
military training system saw further development as a high-performance, expandable modular system that can be adapted to specific
customer needs. Its unique value proposition is its ability to grow
from a simple duel simulator into a system capable of being incorporated into a complete combat training centre. The embedded Linux
operating system on the main processor ensures maximum perfor-
As materiel centre of excellence
for the IFASS integrated radio
reconnaissance and transmission
system, the Network Enabled
Operations business unit is acquiring the know-how to take over
support functions for the complex
system’s hardware and software
as a service provider.
50
Annual Report 2011
4 Profile
8 Foreword
28 Business performance Defence
56 Financial statements
110 Corporate governance
mance and easy portability of future versions. The integrated audio
interface is available in the customer’s local language. New positioning
systems enable fixing of a soldier’s location to within half a metre.
The Network Enabled Operations business unit consolidated and expanded its operations in the field of information security against cyberwar in early 2011 by founding the Security Centre of Excellence (SKZ).
The SKZ applies methodological approaches and forward-looking technologies to develop innovative solutions that provide optimal protection for critical infrastructure and important data.
Outlook
In protection systems, the Land
Systems business unit developed
a polyvalent passive protection
system for medium-weight to
heavy ve­hicles. A first international
sales success is already on the
books.
RUAG Defence expects business to remain stable in 2012. Since major
projects for the Swiss Army will enter their final phase during the next
few years, the division is working intensively as the centre of excellence
for ground forces on securing new international orders to ensure future
capacity utilization. The currency situation and budget restrictions in the
main European markets are likely to make this more difficult.
For the Land Systems business unit, in light of the foreseeable decline
in Swiss orders, it will be essential for major international projects
to come to fruition. The Simulation & Training business unit has strong
international growth potential with both virtual and live simulation
solutions for new and existing customers. For the Network Enabled
Operations business unit, one of the key initiatives for the future
is developing and expanding the materiel centre of excellence for the
IFASS integrated radio reconnaissance and transmission system, for
which RUAG Defence offers a multi-year service level agreement with
substantial cost savings for customers.
The company is pressing ahead with internationalization of its business
in selected markets in 2012. Europe will remain the key market. In
addition, other selected countries where Swiss Army-operated system
platforms are used will also be important.
RUAG Defence in numbers
Net sales:
CHF 435 million
EBITDA: CHF 44 million
EBIT:
CHF 38 million
Employees:1,306
Based in:
Switzerland, Germany
“The troop is receiving a powerful, versatile system in the shape
of the Kodiak armoured engineer
and mine clearance vehicle. We
are pleased that most of the development work took place in Switzerland.”
Brig Gen Jean Pierre Leuenberger,
Commander of Tanks/Artillery Training Unit
Versatile engineer system based on the Leopard 2
In December 2011, RUAG Defence delivered the first five of twelve
Kodiak engineer and mine clearance vehicles to armasuisse for the Swiss
Army. These vehicles are a newly developed technology capable of
providing diverse forms of support for military deployments and disaster
relief operations. The remaining seven vehicles will be delivered starting
in April 2012 and will reach the troops in the final quarter of 2012.
Besides the Swiss Army, the Swedish and Dutch armies are also already
using this versatile piece of equipment.
The Kodiak armoured engineer and mine clearance vehicle is manufactured and distributed by RUAG Defence as technology partner of the
Swiss Army in close cooperation with the main system contractor Rheinmetall. Based on a Leopard 2 chassis, it is the first system of its kind
in the world. In addition to military operations, it is also equipped to
provide effective support in the event of natural disasters or for civilmilitary cooperation.
Urs Breitmeier, CEO of RUAG Defence, sums up the delivery experience:
“What is special about the armoured engineer vehicle is the extreme
conditions under which it must operate. Unlike a standard excavator, for
example, it has to be capable of functioning in different climatic zones
from –40 to +60 degrees Celsius. Endurance tests have verified that it is,
and we have achieved production readiness. I am pleased that we were
able to deliver the heavy-duty engineer system to armasuisse before the
end of the year.”
The Kodiak armoured engineer and mine clearance vehicle features a
powerful jointed-arm excavator with a quick-release tool coupling for
additional specific engineer functions, a dozer blade with adjustable
cutting and tilt angles and a dual winch system with two nine-tonne capstan winches. The dozer system can be replaced with a mine-clearing
plough as needed. Among other applications, the vehicle is thus capable
of breaching minefields, excavating field fortifications and placing or
removing artificial obstacles.
Training unit officers and maintenance specialists within the Swiss
Armed Forces logistics organization will undergo training before the
vehicle enters active service in the fourth quarter of 2012.
52
Annual Report 2011
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8 Foreword
52 Service & Support
56 Financial statements
110 Corporate governance
Efficient and economical services.
A concerted effort was made in all central
Service & Support units to establish
uniform standards and improve efficiency
by consolidating cross-cutting functions.
Top, l to r: Oliver Meyer (CIO), Thomas Kopp (General Counsel & Head
of Legal), Hans Bracher (Senior Vice President Corporate Human Resources until 31/12/2011), Christiane Schneider (Senior Vice President
Marketing & Communication); bottom, l to r: Urs Kiener (CFO),
Dr Christian Ferber (Senior Vice President Corporate Human Resources
from 1/1/2012).
Strategic management and infrastructure
RUAG is focused on profitable core activities. This applies both to the
Group as a whole and, with respect to the strategic objectives, to
each division and its business units. To ensure the consistent orientation
of the Group and enable each division to focus optimally on its core
businesses, strategic cross-cutting functions are handled by centralized
Service & Support units. These units help the divisions to successfully
target markets and ensure consistent standards throughout the company. Wherever appropriate and possible, the Group also takes advantage of synergies between the divisions to enhance profitability and
the quality of products and customer projects.
centres staffed with full-time apprenticeship supervisors are available to
support these young professionals.
Further priorities include establishing Human Resources as a business
partner for the divisions in Switzerland and abroad, developing a cor­
porate culture focused on the market and the customer, based on
three key values — visionary thinking, high performance and collaboration — and dialogue with internal employee representatives and social
partners.
With a view to establishing uniform standards, processes are being
implemented throughout the Group to ensure efficient collaboration
between Human Resources and the business.
Specifically, RUAG has centralized management in the Finance & Controlling, Human Resources, Legal, Marketing & Communication, Risk
Management and the RUAG Services and RUAG Real Estate infrastructure units. The management areas are organized as in-house departments at Group level. This ensures that their activities are aligned very
closely with the broader strategy. The infrastructure units are organized
as independent, profit-oriented units to enable them to provide services
as efficiently as possible.
Marketing & Communication
This support unit, in close collaboration with the divisions, conducts
a dialogue with all stakeholders on strategic priorities, objectives and
the resulting activities of the Group. The new, uniform “Together
Ahead. RUAG” branding enhances and strengthens the brand’s global
visibility and brings the corporate profile into sharper focus. Marketing & Communication coordinates and designs both internal and external communications with the relevant audiences as well as public appearances at trade fairs and events. The support unit also conducts an
active dialogue with Swiss and international media to highlight, promote and proactively address topics of relevance to the Group as a
whole or to individual divisions. The Marketing & Communication
departments of the individual divisions are responsible for specifically
cultivating each division’s customer markets based on central requirements.
Human Resources
RUAG Services
The employees are the foundation of RUAG’s success. It is they who
promote innovation and guarantee the high product and service quality.
With its IT Services and Software House business units, RUAG Services
provides quality IT services at a competitive price-performance ratio,
thereby supporting the Group’s international market orientation.
The positioning of RUAG as an attractive employer is becoming increasingly important in attracting qualified employees. Development opportunities and internationally certified training courses form the basis for
successful performance. An important management development tool
is the three-step modular Leadership Programme. Supporting apprentices,
our professionals of tomorrow, is a high priority for RUAG. Apprentices
make up some 10% of all employees in Switzerland. Special training
The IT Services business unit serves the RUAG Group as an IT infrastructure service provider. This includes operating and administering the
global corporate network and high-security data centres as well as operating, managing and consulting in respect of SAP, business intelligence
and e-business solutions, Microsoft platforms and specialized applications,
telephony and PC workstations.
54
Annual Report 2011
4 Profile
8 Foreword
In 2011, the services available in Switzerland and at the second location, established the previous year in Oberpfaffenhofen, Germany, were
synchronized. The rollout of basic IT services from Oberpfaffenhofen
for the Group locations in Sweden and Austria was also set in motion.
The Software House business unit, set up in 2010, specializes in software engineering as a partner for customer projects. It also develops
specialized applications for use within the Group. With standardized
processes and development platforms, Software House enhances value
creation and efficiency in the divisions’ customer projects while ensuring constant high quality in software components.
General Counsel & Legal
The General Counsel & Legal support unit provides services for RUAG’s
governing bodies, i.e. the Annual General Meeting, the Board of
Directors and the Executive Board, and furnishes advice at Group level
and to the divisions and subsidiaries in all legal and compliance matters. Core competencies include cultivating shareholder relations, monitoring legal conformity and compliance in the domestic markets and
the export business as well as contracts and contract management.
RUAG is a joint stock company wholly owned by the Swiss Confederation. The Swiss Confederation’s interests as shareholder are exercised
by the Swiss Armed Forces. The owner’s strategy of the Federal Council
establishes a binding framework, ensuring that the RUAG Group can
fulfil its duties profitably while taking into consideration Switzerland’s
superordinate interests. These interests concern in particular Swiss
national defence, expectations regarding cooperation and investments,
as well as human resource policy and financial objectives.
Legal coordination and critical assessment of export activities is a key issue.
In all its activities, the Group complies with the strict provisions of
Swiss law and maintains close contact with the relevant authority, the
State Secretariat for Economic Affairs (seco). In addition to the appli­cable
export regulations, observance of Swiss and international compliance
rules is essential. For this purpose, Legal has in-house regulations drawn
up and updated as required and monitors the contracts negotiated by
the divisions. The employees involved in the divisions receive regular
training and advice.
Finance & Controlling and RUAG Real Estate
By establishing a systematic reporting structure with defined measures
and indicators, the Finance & Controlling support unit provides guidance for the Group as a whole. High-performance information systems
provide timely support for operational management and ensure rapid
transparency.
RUAG’s approach to internal transparency is based on the concept
of “economic value added” (EVA), comprising the total cost of capital
including proportionate shareholder equity costs. The approach is
implemented systematically down to the business unit level to minimize
investment, acquisition and customer project risks.
In 2011, a pilot project was implemented in Switzerland in the area
of working capital management. Optimization measures along the
entire process chain markedly reduced the level of capital tied up and
thus financing requirements. In addition, surveys, interviews and
workshops were used during the past year to closely examine the planning process with the aim of making this central management func-
52 Service & Support
56 Financial statements
110 Corporate governance
tion leaner and more focused, and optimizing resource allocation by
means of objective economic criteria.
Support for internationalization is one of the functions of Risk Man­
agement. This department provides specific tools and a constructive risk
dialogue to support the divisions, carrying out an annual supervised
assessment for this purpose. The risk assessment is based on a model
specifically defined for RUAG in which risks are classified in four
categories: reporting, compliance, strategic and operational risks. The
support unit tracks and manages currency, interest rate and credit
risks at Group level.
RUAG Real Estate is the centre of expertise for real estate manage­ment. The unit is organized as an independent joint stock company and
acquires and disposes of property and real rights for the RUAG com­
panies and for third parties. Its main tasks are to improve the return on
investment and increase the value of the Group’s considerable real
estate portfolio and to acquire, plan, develop and manage production
facilities and infrastructure for the divisions and business units. RUAG
Real Estate Ltd seeks to be known as “best owner” for industrial properties.
As a market-oriented, all-in-one service provider for themed industrial
parks, RUAG Real Estate manages its properties over their entire lifecycle. Its core activities include transactions, commercial real estate
management, plant and area planning, client representation and technical and structural building management services. The Business
Development and Safety & Environment departments round off its
functions.
“The themed industrial park offers
a production infrastructure that
precisely meets our needs. We anticipate additional synergies from
being direct neighbours with other
companies in our industry.”
Max Bucher, Chairman and CEO, Aerolite Max Bucher AG
High-quality jobs in specialized industrial parks
Upon its foundation, RUAG took over the expansive industrial complexes of the Swiss Confederation’s former defence companies, particularly at the sites Thun, Altdorf, Stans and Emmen. These sites present
considerable development potential. To preserve their long-term value
and infrastructure, RUAG Real Estate is developing special-purpose
industrial parks at these facilities, enabling businesses related to the
local divisions to locate there. This not only opens up synergies in
respect of infrastructure but also creates clusters of know-how that
make the local labour market more attractive for specialists in the
given fields.
In addition to production and office buildings, these industrial parks
will also offer a core zone with infrastructure available to all companies
located there as well as to external parties. Implementation has advanced farthest in Stans, where an industrial park for aviation and
aviation suppliers is being built adjacent to the Swiss Air Force air base
in Buochs starting in 2012. Nidwalden AirPark AG, established for
this purpose in 2010 at the initiative of RUAG Real Estate, plans to
invest a total of CHF 70 to 100 million in the project over the next
ten years. Halls will be built alongside the airfield for assembly, outfitting and maintenance of aircraft with wingspans of up to 30 metres.
The AirPark Tower will form the heart of the complex, providing training, meeting and accommodation areas for customers and crews
along with a public restaurant on the top floor.
The first leases at the Altdorf and Stans facilities were signed in 2011.
The thematic clustering approach of the industrial parks was a key
deciding factor both for precision tool manufacturer G-Elit (Altdorf)
and for helicopter and fixed-wing aircraft completion specialist
Aerolite Max Bucher AG (Stans).
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Financial
statements.
56-109_Ruag_FB_E-v19_K5.indd 57
Annual Report 2011
58
59
60
61
62
63
64
101
103
104
107
108
57
Key figures
Five-year overview
Consolidated income statement and other comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in equity
Notes to the consolidated financial statements
Auditors’ report on the consolidated financial statements
Income statement of RUAG Holding Ltd
Statement of financial position before allocation of profit
Proposed allocation of balance sheet profit
Auditors’ report on the financial statements of RUAG Holding Ltd
13.03.12 14:13 13. März
58
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Key figures
in CHF m
2011
2010
1 720
1 480
1 777
1 793
(622)
(810)
(166)
192
194
10.8%
113
110
6.1%
97
5.4%
1 713
1 653
1 796
1 837
(648)
(820)
(174)
168
194
10.6%
93
98
5.3%
92
5.0%
127
(46)
81
(65)
130
(50)
80
(78)
793
46.3%
12.7%
734
41.3%
13.3%
84
—
140
7.8%
90
6
190
10.3%
Net sales per employee in CHF
Added value per employee in CHF
Number of employees at end-December
Number of employees (annual average)
229 639
138 605
7 739
7 739
233 563
141 875
7 719
7 689
Number of registered shares (par value CHF 1,000)
Earnings per registered share
Dividend per registered share 6
Distribution ratio
Book value per registered share in CHF
340 000
285.07
58.82
20.6%
2 331
340 000
269.26
58.82
21.8%
2 132
Order inflow
Order backlog
Net sales
Operating income
Cost of materials and purchased services
Personnel expenses
Other operating expenses
EBITDA before one-time effects 1
EBITDA2
EBITDA in % of operating income
EBIT before one-time effects 1
EBIT3
EBIT in % of operating income
Net profit
Net profit in % of operating income
Cash flow from operating activities
Cash flow from investing activities
Free cash flow
Cash flow from financing activities
Equity before non-controlling interests
Equity in % of total assets
Return on equity 4
Depreciation and amortization 5
Goodwill impairment
Research and development expenses
Research and development expenses in % of operating income
One-time effects are described in Note 4 to the consolidated financial statements.
EBITDA = Earnings before interest, taxes, depreciation, amortization and goodwill impairment.
3
EBIT = Earnings before interest and taxes.
4
Net profit as a percentage of average equity.
5
Depreciation of property, plant and equipment and amortization of intangible assets.
6
Probable dividend of CHF 20 million in respect of 2011 according to proposal of the Board of Directors.
1
2
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Annual Report 2011
Summary
59
Five-year overview
in CHF m
2011
2010
2009
2008
2007
1 720
1 480
1 777
110
6.1%
97
5.4%
1 713
1 653
1 796
98
5.3%
92
5.0%
1 872
1 783
1 696
(113)
(6.6%)
(107)
(6.2%)
1 582
1 508
1 537
57
3.7%
51
3.2%
1 684
1 394
1 409
76
5.4%
76
5.4%
127
(46)
81
(65)
130
(50)
80
(78)
131
(230)
(99)
87
81
(121)
(40)
32
52
(80)
(28)
53
793
46.3%
12.7%
734
41.3%
13.3%
661
37.3%
(15.0%)
763
48.1%
6.6%
784
54.5%
10.0%
Research and development expenses
Research and development expenses in % of operating income
140
7.8%
190
10.3%
149
8.6%
123
7.9%
85
6.0%
Number of employees at end-December
Number of employees (annual average)
7 739
7 739
7 719
7 689
7 534
7 253
6 687
6 310
6 104
6 050
Order inflow
Order backlog
Net sales
EBIT 1
EBIT in % of operating income
Net profit (loss)
Net profit (loss) in % of operating income
Cash flow from operating activities
Cash flow from investing activities
Free cash flow
Cash flow from financing activities
Equity before non-controlling interests
Equity in % of total assets
Return on equity 2
1
2
EBIT = Earnings before interest and taxes.
Net profit as a percentage of average equity.
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60
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Consolidated income statement and other comprehensive income
in CHF m
Note
2011
2010
6
1 777
1 796
3
13
1 793
5
36
1 837
(622)
(810)
(166)
194
(648)
(820)
(174)
194
4, 18, 19, 20
4, 20
(84)
—
110
(90)
(6)
98
10
10
21
4
(7)
3
110
1
(15)
4
88
11, 12
(14)
97
4
92
(10)
(9)
1
(18)
9
(36)
(0)
(27)
Total comprehensive income
79
65
Attributable to
Shareholders of RUAG Holding Ltd
Non-controlling interests
Net profit
97
0
97
92
(0)
92
Shareholders of RUAG Holding Ltd
Non-controlling interests
Total comprehensive income
79
0
79
65
(0)
65
Net sales
Own work capitalized
Changes in inventories and work in progress
Operating income
Cost of materials and purchased services
Personnel expenses
Other operating expenses
EBITDA1
Depreciation and amortization
Goodwill impairment
EBIT 2
Finance income
Finance costs
Profit of associates
Profit before tax
Income tax
Net profit
Other comprehensive income
Hedge accounting
Exchange differences
Tax effects
Other comprehensive income recyclable in future periods
7
8
EBITDA = Earnings before interest, taxes, depreciation, amortization and goodwill impairment.
EBIT = Earnings before interest and taxes.
1
2
The notes to the consolidated financial statements on
pages 64 to 100 form an integral part of the consolidated
financial statements.
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Annual Report 2011
Consolidated financial statements
61
Consolidated statement of financial position
in CHF m
Cash and cash equivalents
Current financial assets
Receivables and prepayments
Tax assets
Prepaid expenses and deferred income
Inventories and work in progress
Current assets
Property, plant and equipment
Investment property
Intangible assets
Goodwill
Associates
Non-current financial assets
Deferred tax assets
Non-current assets
Assets held for sale
Note
2011
2010
13
14
15
86
10
284
5
10
558
953
70
17
338
2
11
535
972
18
19
20
20
21
14
12
445
80
79
78
41
4
22
748
461
83
97
78
39
3
42
804
5
10
—
1 710
1 776
56
34
309
3
183
92
677
49
39
378
10
165
103
744
16, 17
Total assets
Current financial liabilities
Other current liabilities
Trade accounts payable and prepayments
Tax liabilities
Deferred income and accrued expenses
Current provisions
Current liabilities
22
23
24
Non-current financial liabilities
Other non-current liabilities
Employee benefit obligations
Non-current provisions
Deferred tax liabilities
Non-current liabilities
22
25
37
26
12
83
2
42
58
54
239
123
3
46
62
63
297
Share capital
Additional paid-in capital
Retained earnings
Other reserves
Exchange differences
Equity before non-controlling interests
Non-controlling interests
Total equity
31
340
10
508
(3)
(62)
793
1
794
340
10
431
7
(53)
734
1
735
1 710
1 776
Total equity and liabilities
26
The notes to the consolidated financial statements on
pages 64 to 100 form an integral part of the consolidated
financial statements.
56-109_Ruag_FB_E-v19_K5.indd 61
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62
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Consolidated statement of cash flows
in CHF m
Note
Net profit
Depreciation and amortization
Goodwill impairment
Change in non-current provisions and deferred taxes
Utilization of non-current provisions
Share of profit (loss) of associates
Other non-cash items
Change in working capital 1
Adjustment for net gain (loss) on disposal of non-current assets
Foreign exchange effect on loans
Finance income received
Finance costs paid
Cash flow from operating activities 2
Acquisition of plant and equipment 3
Acquisition of property
Acquisition of intangible assets
Acquisition of investments
Disposal of plant and equipment
Disposal of property
Disposal of intangible assets
Disposal of investments
Dividends received from equity investments
Dividends received from non-consolidated investments
Cash flow from investing activities
4, 18, 19, 20
4, 20
21
18
18, 19
20
5
21
Free cash flow
Net increase (decrease) in share capital
Increase in third-party financial assets
Decrease in third-party financial assets
Increase in third-party financial liabilities
Decrease in third-party financial liabilities
Payments for finance leases
Finance income received
Finance costs paid
Dividends to shareholders
Cash flow from financing activities
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents acquired (disposed)
Change in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
5
2011
2010
97
92
84
—
22
(12)
(3)
5
(53)
(13)
0
(3)
4
127
90
6
7
(4)
(4)
(3)
(54)
(11)
5
(1)
7
130
(33)
(26)
(0)
(2)
3
12
0
—
1
0
(46)
(62)
(8)
(1)
(3)
4
20
0
—
1
0
(50)
81
80
—
(1)
0
0
(44)
(0)
3
(4)
(20)
(65)
0
(0)
0
(0)
(71)
(1)
1
(7)
(0)
(78)
(0)
—
16
(2)
—
1
70
86
69
70
Excludes current financial assets and current financial liabilities and other non-current liabilities.
Including income taxes of CHF 2 million (previous year CHF 10 million) paid in the year under review.
3
Actual leasing payments accounted for in the case of leases.
1
2
The notes to the consolidated financial statements on
pages 64 to 100 form an integral part of the consolidated
financial statements.
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Annual Report 2011
Consolidated financial statements
63
Consolidated statement of changes in equity
Share capital
Additional
paid-in capital
Retained
earnings 1
Other
reserves
Exchange
differences
Non-controlling
interests
Total equity
Balance as at 31 December 2009
Restatement 1
Balance as at 1 January 2010
Net profit
Other comprehensive income
Total comprehensive income for 2010
Dividends paid
Buyout of non-controlling interests
Initial consolidation
of non-controlling interests
340
—
340
—
—
—
—
—
10
—
10
—
—
—
—
—
330
9
340
92
(0)
92
—
—
(2)
—
(2)
—
9
9
—
—
(18)
—
(18)
—
(36)
(36)
—
—
1
—
1
0
(0)
0
—
—
662
9
671
92
(27)
65
—
—
—
—
—
—
—
—
—
Balance as at 31 December 2010
340
10
431
7
(53)
1
735
Balance as at 1 January 2011
Net profit
Other comprehensive income
Total comprehensive income for 2011
Dividends paid
Buyout of non-controlling interests
Initial consolidation
of non-controlling interests
340
—
—
—
—
—
10
—
—
—
—
—
431
97
—
97
(20)
—
7
—
(9)
(9)
—
—
(53)
—
(9)
(9)
—
—
1
0
—
0
—
—
735
97
(18)
79
(20)
—
—
—
—
—
—
—
in CHF m
—
Eine Überprüfung
Dienstzeit2011
der Mitarbeiter führte zu einer
für Treueprämien.
Der Effekt
beträgt netto 9 Mio. 1
CHF,
Balance
as at 31 der
December
340 Korrektur der Rückstellung
10
508
(3)dieser Korrektur(62)
1
794
nach Abzug von Steuern von 2 Mio. CHF. Für weitere Erläuterungen siehe Anhang 26, «Rückstellungen».
A review of the length of service of employees resulted in a correction to the provision for loyalty bonuses. The effect of this correction amounts to a net CHF 9 million,
after deduction for taxes of CHF 2 million. For further details, see Note 26, “Provisions”.
1
In 2011, a dividend of CHF 20 million was paid to the owner
from the 2010 result. This is equivalent to a dividend per share of
CHF 58.82. In 2010, no dividend was paid.
The notes to the consolidated financial statements on
pages 64 to 100 form an integral part of the consolidated
financial statements.
56-109_Ruag_FB_E-v19_K5.indd 63
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64
Annual Report 2011
4 Profile
8 Foreword
This financial report is a translation from the original
German version. In case of any inconsistency the German
version shall prevail.
1 Business activities and relationship with the
Swiss Confederation
RUAG Holding Ltd is a Swiss joint-stock company headquartered
in Berne. It is wholly owned by the Swiss Confederation. RUAG
Holding Ltd and its subsidiary companies (hereinafter referred to as
“RUAG”) are bound by the owner’s strategy of the Swiss Federal
Council. In May 2011, the Federal Council approved a new owner’s
strategy for RUAG, the State-Owned Defence Technology Company,
for the period 2011 to 2014 According to this strategy, the Federal
Council expects RUAG to direct its activities towards the key defence
equipment and technologies – in particular system technologies –
that are essential to Switzerland’s national defence capability.
Relationship with the Swiss Confederation The Swiss Confederation is the sole shareholder of RUAG Holding Ltd. Under the
terms of the Federal Act on State-Owned Defence Companies, any
disposal of the capital or voting majority of the Swiss Confederation
to third parties requires the approval of the Federal Assembly. As sole
shareholder, the Confederation exercises control over all decisions
taken at the General Meeting, including the election and remuneration of members of the Board of Directors and dividend resolutions.
Transactions with the Confederation RUAG provides maintenance services and produces defence equipment for the Federal
Department of Defence, Civil Protection and Sport (DDPS), and
procures services from the same. The DDPS is RUAG’s largest customer. The procurement contracts awarded by the DDPS for defence
equipment and services are subject to civil law. The process of
awarding contracts is subject to the Swiss Confederation’s provisions regarding public procurement. These provisions apply to
all suppliers of goods and services, and are based on the principle
of free competition.
2 Summary of significant accounting policies
2.1 Format of presentation
RUAG’s consolidated financial statements have been drawn up in
accordance with the latest International Financial Reporting Standards
(IFRS) produced by the International Accounting Standards Board
(IASB) and Interpretations of the IFRS Interpretations Committee
(IFRS IC), as well as the provisions of Swiss law. The consolidated
financial statements are presented in Swiss francs (CHF). All figures
are given in millions of Swiss francs, unless stated otherwise.
2.2 New and revised accounting standards
Revised International Financial Reporting Standards and Interpretations adopted for the first time in the year under review:
• IAS 24 (revised) “Related Party Disclosures” contains amendments
to the definition of a related party together with a simplifica tion of disclosure requirements for government-related entities.
Adoption of this revised Standard does not have any effect on
RUAG’s reporting.
• IFRIC 14 (revised) “The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and Their Interaction“: This amendment re lates to situations where an entity is subject to minimum funding
56-109_Ruag_FB_E-v19_K5.indd 64
22 Business performance
56 Financial statements
110 Corporate governance
requirements and prepays its contributions in order to meet these
requirements. The amendment enables the benefits arising from
such prepayment to be recognized as an asset. Adoption of this revised Interpretation does not have any effect on RUAG’s reporting.
Amendments to existing International Financial Reporting Standards
and Interpretations that are not yet mandatory but that RUAG has
chosen to adopt early:
• IAS 1 (revised) “Presentation of Financial Statements” (effective
1 July 2012) states that profit or loss and other comprehensive
income shall no longer be shown separately. Furthermore, items in
other comprehensive income should be grouped in accordance
with whether they may at some future date be recycled to the
income statement. RUAG has adopted this revised Standard early
in its financial statements as at 31 December 2011.
Changes to International Financial Reporting Standards and Interpretations that are not yet mandatory: The following International
Financial Reporting Standards and Interpretations, which were published prior to the end of 2011, must be adopted either from financial
year 2012 or at a later date:
• IAS 19 (revised) “Employee Benefits” (effective 1 January 2013)
contains amendments on accounting for and measuring employee
benefit obligations and expense of benefit plans. As RUAG uses
the so-called corridor method at present, this revised Standard
brings significant changes compared with the current presentation.
On the basis of the situation as at 31 December 2011, as detailed
in Note 37, “Employee benefits”, RUAG expects the following
changes in the consolidated financial statements (tax effects are
not taken into account):
in CHF m
IAS 19
IAS 19 (revised)
Employee benefit obligations funded
pension plans (Switzerland)
Employee benefit obligations other plans
—
42
47
48
Expense of benefit plans
Current service cost
Interest on employee benefit obligations
Expected return on assets
49
54
(60)
49
—
—
Recognition of gain (loss)
in accordance with IAS 19.58 1
Plan curtailments 1
0
(14)
—
(89)
—
5
Employee benefit obligations
Interest on net obligation –
discount rate 2.5%
1
Effects of actuarial gains and losses are stated in other comprehensive income.
• IFRS 10 “Consolidated Financial Statements” (effective 1 January
2013) supersedes IAS 27 “Consolidated and Separate Financial State ments” as well as SIC 12 “Consolidation – Special Purpose Entities“.
In particular, this new Standard contains more detailed requirements
regarding consolidation. RUAG does not expect adoption of this
Standard to result in any change to its scope of consolidation or,
therefore, to have any effect on its reporting.
• IFRS 11 “Joint Arrangements” (effective 1 January 2013) supersedes
IAS 31 “Interests in Joint Ventures“, and IAS 28 (revised), “Invest ments in Associates”. The new and the revised standard govern the
treatment of joint ventures in the consolidated financial statements
13.03.12 14:13 13. März
Notes to the consolidated financial statements
and particularly prohibit the application of proportionate consoli dation. RUAG does not currently hold any relevant interests in joint
ventures and does not, therefore, expect adoption of this Standard to have any effect on its reporting.
• IFRS 12 “Disclosure of Interests in Other Entities” (effective
1 January 2013) contains additional disclosure requirements in
connection with interests in other entities and influence through
third parties with interests. RUAG will adopt the new disclosure
obligations in its annual report as at 31 December 2013.
• IFRS 13 “Fair Value Measurement” (effective 1 January 2013)
sets out the rules for measuring fair value in a single Standard for
the first time. RUAG does not expect adoption of this Standard
to have a material effect on its reporting.
• IFRS 7 (revised) “Financial Instruments: Disclosures” (effective
1 July 2011) contains changes concerning the disclosure of
derecognized financial instruments. RUAG will adopt the new
disclosure obligations in its financial reporting, effective
31 December 2012.
• IFRS 9 “Financial Instruments” (effective 1 January 2013):
IFRS 9 replaces the current IAS 39 ”Financial Instruments:
Recognition and Measurement”. RUAG will review its reporting
in light of the entry into force of this new Standard.
• IAS 12 (revised) “Income Taxes” (effective 1 January 2012) contains
changes concerning deferred taxes in connection with invest ment property measured at fair value. RUAG does not expect this
revised Standard to have any effect on its reporting.
2.3 Use of benchmarks such as EBITDA, EBIT, free cash flow
and net debt
In the company’s opinion, EBITDA, EBIT, free cash flow and net debt
are important benchmarks that are of special significance to RUAG.
EBITDA, EBIT, free cash flow and net debt do not constitute IFRScompliant benchmarks for operating performance or liquidity, however, since the benchmarks have not been defined on a uniform
basis. For this reason, the reported EBITDA, EBIT, free cash flow and
net debt may not be comparable with similarly termed benchmarks
used by other companies.
2.4 Consolidation principles
RUAG’s consolidated financial statements include all subsidiary
companies that it directly or indirectly controls by a majority of the
votes or by any other means. An overview of all major subsidiaries
and associates is provided in Note 39.
Capital is consolidated in accordance with the purchase method.
The assets, liabilities, equity, income and expenses of fully consolidated subsidiary companies, are included in their entirety in the
consolidated financial statements. Non-controlling interests in equity
and profit are stated separately.
Annual Report 2011
65
control, are recognized using the equity method. An equity investment is initially recorded at cost, or at fair value in the event of
negative goodwill. In the reporting periods following the acquisition,
this figure is adjusted to take account of RUAG’s share in the additional capital generated or losses incurred.
Significant positions and transactions with associates recognized using
the equity method are shown separately as “Associates”.
Other investments on which RUAG does not exercise significant
influence (less than 20% of direct or indirect voting rights) are stated
at fair value and shown under “Non-current financial assets”.
2.5 Foreign currencies
RUAG’s consolidated financial statements are presented in
Swiss Francs (CHF).
Transactions in foreign currencies are translated into the functional
currency at the exchange rate applicable at the time of the transaction. Foreign-currency receivables and liabilities are converted into
the functional currency at the exchange rate applicable at the end
of the reporting period. The resulting exchange differences are recognized in the income statement.
Differences arising in the year under review from the conversion
of equity and non-current intra-Group financial transactions related
to net investments in foreign operations, in addition to retained
earnings and other equity items, are assigned directly to cumulative
exchange differences under equity.
The assets and liabilities of subsidiaries and associates recognized
using the equity method, whose functional currency is not the
Swiss Franc, are converted into Swiss francs on consolidation at the
exchange rate applicable at the end of the reporting period. The
income statement, cash flow statements and other fluctuating items
are translated at the average exchange rate for the reporting period.
The effects of exchange differences resulting from the translation
of the financial statements of subsidiaries or associates are recognized
in other comprehensive income and are shown separately as cumulative exchange differences. In the event of the disposal of a foreign
operation or associate, cumulative translation differences are recognized in the income statement as a component of the profit or loss
from disposals.
The exchange rates of significance to the consolidated financial
statements in the reporting years were:
Subsidiaries and associates are consolidated with effect from the
date of their acquisition, and eliminated from the consolidated financial statements in the event of a loss of control.
All intra-Group receivables, liabilities, expenses and income, as well
as unrealized interim profits, are eliminated on consolidation.
Annual reporting for all subsidiaries ends on 31 December.
Associates on which RUAG exerts a significant influence (normally
20 to 50% of direct or indirect voting rights), but which it does not
56-109_Ruag_FB_E-v19_K5.indd 65
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66
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Exchange rates
Currency
Euro Swedish krona
US dollar
Pound Sterling
Hungarian forint
Annual average 2011
End-of-year rate 2011
Annual average 2010
End-of-year rate 2010
1.23
13.68
0.89
1.42
0.44
1.22
13.64
0.94
1.46
0.39
1.38
14.47
1.04
1.61
0.50
1.25
13.95
0.94
1.45
0.45
EUR
SEK
USD
GBP
HUF
2.6 Cash and cash equivalents
Cash and cash equivalents comprise cash and the balances in postal
checking and demand deposit accounts with banks. They also include
term deposits held with financial institutions and short-term money
market investments with an initial term of max. three months. They are
stated at par value.
2.7 Current financial assets
Current financial assets comprise term deposits held with financial
institutions and short-term money market investments with an initial
term of more than three months but no longer than twelve months
(par value), the equivalent amount of open foreign currency hedging
transactions (fair value) and lendings.
2.8 Receivables and prepayments
Trade receivables are measured at the original invoiced amount
(amortized cost), minus a valuation allowance for doubtful accounts
which is estimated on the basis of an analysis of receivables outstanding at the end of the reporting period. Receivables judged to be
nonrecoverable are shown in the income statement under “Other
operating expenses”.
In the Space segment, the milestone method is applied. Here, project
milestones are defined on the basis of individual customer contracts;
upon reaching these milestones, services performed are invoiced
to the customer and sales and income are realized on a pro-rata basis.
If the conditions for applying the percentage of completion method
are not fulfilled, valuation follows the completed contract method.
In this case realization of income is generally permitted only when the
associated risks have been transferred and the service has been provided. Semi-finished products and services in progress are stated under
“Inventories of finished goods and work in progress item”.
Sales from services provided are recognized in the income statement
on the basis of the stage of completion at the end of the reporting
period.
2.10 Property, plant and equipment and intangible assets
with a finite useful life
Property, plant and equipment and intangible assets are measured at
cost minus accumulated depreciation calculated on a straight-line basis.
Repair and maintenance costs are stated as an expense. Major renovations and other value-enhancing costs are capitalized and are recognized under property, plant and equipment and depreciated over their
estimated useful life. Land is shown at cost.
2.9 Inventories and work in progress
Inventories are measured at the lower value of cost or net realizable
value. Cost includes all production costs including pro rata production
overheads. All foreseeable exposures to loss from orders in progress
are accounted for by economically reasonable valuation allowances.
The valuation of inventories follows the weighted average method or
standard cost accounting. Standard costs are regularly monitored
and, if any major discrepancies are observed, adjusted to the latest
conditions. Impairment losses are reported for hard-to-sell or
slow-moving inventories. Non-saleable inventories are written off
in full.
Useful life
in years
Operating properties Plant and equipment Fixtures and fittings Motor vehicles Computer hardware / software Intangible assets 20 to 60
5 to 12
10
5 to 10
3 to 5
1 to 10
Long-term construction contracts are measured according to the
percentage of completion method. Subject to the fulfilment of certain
conditions, receivables and sales are stated in accordance with the
percentage of completion method. Long-term construction contracts
are defined as manufacturing orders where completion of the order
extends over at least two reporting periods, calculated from the time
the order is awarded to the time it is essentially completed.
2.11 Investment properties
Investment properties are measured at cost minus accumulated depreciation calculated on a straight-line basis. Repair and maintenance
costs are stated as an expense. Major renovations and other valueenhancing costs are capitalized and depreciated over their estimated
useful life. Investment properties are depreciated over a useful life of
40 of 60 years with the exception of land, which is not depreciated.
The percentage of completion is derived from the relationship between the costs incurred by the order and the overall estimated cost of
the order (cost-to-cost method). Losses from long-term construction
contracts are recognized immediately and in full in the financial
year in which the losses are identified, irrespective of the percentage
of completion. Order costs and pro rata profits from long-term
construction contracts which are valued according to the percentage
of completion method are shown as work in progress (percentage
of completion) as a component of inventories and work in progress.
They are stated at cost plus a pro rata profit that corresponds to
the percentage of completion achieved.
Sites that are majority-leased to third parties are classified as investment properties. The fair value of the properties is calculated solely for
disclosure reasons and is based on capitalized rental income. No expert
market appraisal was carried out in the reporting period.
56-109_Ruag_FB_E-v19_K5.indd 66
RUAG applies the following estimated useful life:
2.12 Leases
Leased assets where the benefits and risk arising from ownership are
essentially transferred to RUAG are recognized at the lower of fair
value of the leased asset and present value of the minimum lease payments on inception of the lease. Correspondingly, the estimated net
present value of future, non-cancellable lease payments is carried under
13.03.12 14:13 13. März
Notes to the consolidated financial statements
liabilities from finance leases. Assets under finance leases are amortized over the shorter of their estimated useful life or the duration of
the lease. All other lease transactions are classified as operating leases.
2.13 Intangible assets and goodwill
Acquired companies are consolidated in accordance with the purchase
method. The acquisition costs comprise the sum of the fair values
of the assets transferred to the seller and liabilities incurred or assumed
on the transaction date.
Identifiable acquired assets, liabilities and contingent liabilities are
stated on the balance sheet at their fair values on the date of acquisition, irrespective of the extent of any minority interests. Goodwill
is measured by the Group as the excess of the cost of the acquisition
over its share of the fair values of the identifiable net assets. Companies acquired or disposed during the financial year are recognized in
the consolidated financial statements as of the date of acquisition
or disposal.
2.14 Impairment
Goodwill impairment For impairment testing purposes, goodwill
is allocated to cash generating units. The impairment test is performed
in the fourth quarter following completion of the business plan. If
there are indications of a possible impairment during the year, an impairment test is performed for the cash generating unit at such time.
Where the recoverable amount of the cash generating unit is less than
the carrying amount, an impairment is recognized. The recoverable
amount is the higher of fair value less costs to sell or value in use. An
impairment loss of goodwill cannot be offset in future periods.
Impairment of property, plant and equipment and other intangible assets The current value of property, plant and equipment and
other intangible assets is reassessed whenever changes in circumstances or events indicate that the carrying amount may be overestimated. Where there is an indication of a possible overestimate, the Group
measures fair value on the basis of expected future cash flows from
use and eventual sale, minus any cost of disposal. Where the carrying
amount exceeds the higher of fair value less costs to sell and value in
use, an impairment loss equivalent to the difference is recorded.
The impairment assessment is based on the smallest group of assets
for which independent cash generating units are identifiable. The
estimation of future discounted cash flows is based on the forecasts
and assumptions of the Executive Board. Accordingly, the actual
cash flows generated may differ significantly from these estimates.
2.15 Research and development expenses
Research expenses are not capitalized and are expensed as incurred.
The Group examines the capitalization of development costs in
each individual case and in the process assesses the inherent risk
of new products and their development in the light of the uncertain
nature of future benefits and the timing of returns. Contributions
from third parties arising from contract development work are recognized as sales and assigned to the period in which the corresponding development costs are incurred.
2.16 Provisions
Provisions are recognized where, due to a past event:
a) RUAG has a current liability;
b) it is likely that an outflow of resources embodying economic bene fits will be required to settle the liability; and
c) a reliable estimate can be made of the amount of the liability.
56-109_Ruag_FB_E-v19_K5.indd 67
Annual Report 2011
67
Provisions for restructuring Costs arising in connection with staff
reduction programmes are treated as an expense when Management has decided on a programme from which a probable liability has
arisen and the amount of this liability can be estimated reliably. The
terms and the number of employees affected must be determined, and
the employees or their representatives must be informed about
the staff reduction programme.
Provisions for contract losses Contract losses are calculated
immediately and in full in the financial year in which the losses are
identified.
Provisions for warranties Provisions for warranties are made
in accordance with standard business practices. These are based on
services provided in the past and on current contracts.
Provisions for leave and overtime credits Employees’ entitlements to leave and overtime credits are recognized and deferred at
the end of the reporting period.
2.17 Employee benefit obligations
The projected unit credit method is used throughout the Group. This
method takes account of the number of completed years of service
and the salary growth of the insured individuals up to the cut-off date
for the calculation.
The majority of RUAG employees are insured under defined benefit
plans according to IAS 19. For its staff in Switzerland, RUAG pays contributions to VORSORGE RUAG, an employee benefit fund set up in
line with the Swiss defined contribution system. This provides statutory
coverage for retirement, death and disability. The expenses and obligations arising from the employee benefit fund are calculated using
the actuarial principles of the projected unit credit method. This takes
account of the numbers of years in service of employees up to the
cut-off date for the calculation and makes assumptions as to future
development of salaries.
The annual expense of benefit plans is calculated on an actuarial
basis. The latest actuarial appraisal was carried out on the basis of data
as at 1 January 2011. Current benefit entitlements are stated in the
period of the income statement in which they arise. The effects of
changes in the actuarial assumptions are stated on an equal basis in
the incomestatement via the assumed average remaining service
years of the insured individuals. The actuarial gains and losses to be
stated on a pro rata basis correspond to the cumulative, non-recognized actuarial gains and losses at the end of the previous reporting
period that exceeded the higher of the following amounts:
10% of the present value of the defined benefit obligations at the
time (prior to deduction of the scheme assets) and 10% of the
fair value of the fund’s assets at the time. The past service cost arising
from changes in the scheme is stated as an expense on a straightline basis over the average period until the vesting period. Insofar as
qualifying rights are immediately vested, the corresponding expense
is recognized immediately.
RUAG pays premiums to various employee benefit plans for its subsidiaries abroad (essentially Germany and Sweden).
13.03.12 14:13 13. März
68
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
2.18 Other long-term employee benefits
Other long-term employee benefits include long-service awards.
These are calculated using the projected unit credit method and are
reported in the item “Provisions for loyalty bonuses and anniversary benefits”.
2.19 Current and deferred income taxes
Income taxes are recognized on an accrual basis. Deferred taxes are
recognized in accordance with the comprehensive liability method. The
calculation is based on the temporary differences between the tax
base of assets or liabilities and the values as stated in the consolidated
financial statements, unless such temporary difference relates to investments in subsidiaries or associates where the timing of the reversal
can be controlled and it is likely that this will not occur in the foreseeable future. Furthermore, provided no profit distributions are anticipated, withholding taxes and other taxes on possible subsequent
distributions are not measured since profits are generally reinvested.
The Group’s deferred tax assets or liabilities, as calculated on the basis
of corresponding local tax rates, are stated under noncurrent assets
(deferred tax assets) or non-current liabilities (deferred tax liabilities).
The change in this item over the course of the year is recognized in the
income statement, provided it relates to a position that is included
in or disclosed under equity. Deferred tax claims on a company’s taxdeductible losses are taken into account to the extent that there are
likely to be future profits against which they can be used. The tax
rates are determined by the actual and anticipated tax rates in the
relevant legal units.
2.20 Net sales
Net sales include the fair value of the consideration received from
the sale of goods and the rendering of services by RUAG in its
ordinary business operations. The amount is shown after any deductions for value added tax, price reductions, rebates and discounts
and intra-Group sales.
RUAG records its sales when the amounts can be measured reliably,
future cash flows are likely and the specific criteria described below
have been fulfilled.
RUAG-specific definitions: Within RUAG, net sales for the period
are defined as the total of “invoiced sales“ plus “change in percentage
of completion“. Invoiced sales comprise billing and sub-billing for
goods already sold /services already rendered during the period, while
the change in percentage of completion covers other goods sold /
services rendered during the period.
Sale of goods Sales from the sale of goods are stated at the time
of delivery or performance, i.e. when the relevant opportunities and
risks are transferred to the buyer.
Rendering of services Sales from the rendering of services
are determined on the basis of either time material or a fixed price
contract.
Sales on the basis of time and material, which are typical for service
agreements in the maintenance business for the Federal Department
of Defence, Civil Protection and Sport (DDPS), are measured on the
basis of contractually agreed rates and direct costs.
Sales from fixed price agreements, when both the full costs incurred
up to completion of the order and the percentage of completion
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56 Financial statements
110 Corporate governance
at the end of the reporting period can be reliably measured, are realized on the basis of the percentage of completion method (POC).
If the proceeds of a construction contract cannot be reliably measured, sales are recognized only to the extent of the potentially recoverable costs incurred by the contract recognized as an expense in
the relevant period.
Other income RUAG’s other income, such as rental income and
interest income, is stated on a time-proportionate basis, as is dividend
income where the legal entitlement to payment has arisen.
2.21 Advance payments received
Advance payments are deferred and then realized when the corresponding services are provided.
2.22 Segment information
Reportable operating segments are determined on the basis of the
management approach. External segment reporting is then carried out
in accordance with RUAG’s organizational and management structure as well as internal financial reporting to RUAG’s Chief Operating
Decision Maker. The Chief Operating Decision Maker (CODM) at RUAG
is the Executive Chairman. Reporting is based on the Space, Aviation,
Technology, Defence and Ammotec segments. In addition, Services –
comprising central services such as IT and real estate management,
as well as RUAG’s corporate units – is presented as a separate segment.
Unrealized gains or losses may be incurred as a result of services or
disposal of assets between the individual segments. They are eliminated and stated in segment information, in the “Elimination” column.
The segment assets contain all the assets required for operations that
can be assigned to a specific operating segment. The segment assets
primarily comprise receivables, inventories, property, plant and equipment and intangible assets. The segment investments contain additions
to property, plant and equipment and other intangible assets.
Space segment* Europe’s largest independent space supplier. Development and manufacturing expertise is focussed on five product areas:
structures and separation systems for launch vehicles, structures and
mechanisms for satellites, digital electronics for satellites and launch
vehicles, satellite communications equipment and satellite instruments.
Aviation segment* Centre of excellence for civil and military aircraft
maintenance, repair and overhaul (MRO) and for developing, manufacturing and integrating aviation systems and subsystems. RUAG Aviation
maintains all fixed-wing aircraft, helicopters and reconnaissance UAVs
belonging to the Swiss Armed Forces and is also a technology partner
for other international air forces. In civil aviation, RUAG Aviation provides life cycle support services to numerous operators and manufacturers of business jets.
Technology segment* The activities of RUAG Technology focus
on producing aerostructures, high-precision machining of large parts,
coating services for various industries and industrial recycling. The
mainstay in aerostructures is producing wing components and fuselage
sections. RUAG Technology is the winglet centre of excellence for
Airbus and a quality gate for the global aircraft fuselage supply chain.
Ammotec segment* The global technology leader in low-pollutant
pyrotechnics. RUAG Ammotec specializes in high-quality pyrotechnic
*
According to IFRS: segment = division.
13.03.12 14:13 13. März
Notes to the consolidated financial statements
Annual Report 2011
products for military and civil markets. It supplies high-precision
ammunition across the entire small-calibre spectrum as well as special
ammunition for defence and law enforcement purposes. Industrial
products include actuator cartridges for the construction industry and
for safety systems.
Upon occurrence of the underlying transaction, the relevant hedging
instrument is reclassified from equity to the income statement.
Defence segment* The strategic technology partner for land forces.
Core competencies are heavy weapon system upgrades, protection
solutions for armoured vehicles, logistics solutions, virtual and live simulation systems and integrating, maintaining and operating electronic
command and control, communication, radar and reconnaissance
systems for military and civil organizations.
2.25 Fair value measurement
The fair value of a financial instrument is the price at which a party
would accept the rights and /or obligations arising from the financial
instrument from another party. The fair value measurement of financial instruments is based on the following hierarchy:
a) Quoted prices (unadjusted) in active markets for
identical assets or liabilities (Level 1).
b) Comparable values for assets or liabilities that are directly or
indirectly observable by parameters (Level 2).
c) Inputs for assets or liabilities that are based on unobservable
market data (Level 3).
2.23 Related party transactions
RUAG provides maintenance services and produces defence equipment for the Federal Department of Defence, Civil Protection and Sport
(DDPS), and procures services from the same. The DDPS is RUAG’s
largest customer. The procurement contracts awarded by the DDPS for
defence products and services are subject to civil law. The process
of awarding such contracts is subject to the Swiss Confederation’s
provisions regarding public procurement. These provisions apply to all
suppliers of goods and services, and are based on the principle of
free competition.
2.24 Derivative financial and hedging instruments
Derivative financial instruments are initially recognized in the balance
sheet at cost, and thereafter remeasured at fair value. The way in
which the gain or loss is measured depends on whether the instrument
is used for the purpose of hedging a specific risk and the conditions
for hedge accounting are met. The objective of hedge accounting
is to ensure the change in value of the hedged item and hedge instrument is included in the income statement at the same time. To
qualify for hedge accounting, a hedge transaction must meet strict
conditions in terms of documentation, the probability of occurrence,
the effectiveness of the hedging instrument and the accuracy of
measurement.
When concluding a hedge transaction, the Group documents the
relationship between hedging instruments and hedged items, as well
as the purpose and strategy of the hedge. The process also involves
linking all hedging derivatives with specific assets and liabilities, or
firm commitments and forecasted transactions. At inception as well
as during the life of the hedge, the Group documents the extent
to which the derivatives used for the hedge offset the change in fair
value of the hedged item. When a contract is concluded, a derivative
instrument qualifying for hedge accounting is defined as:
a) a hedge on the change in the fair value of a stated asset or
a liability (fair value hedge), or as
b) a hedge on cash flows from a forecast transaction or firm
commitment (cash flow hedge), or as
c) a hedge on a net investment in a foreign operation
69
The only current hedges of RUAG are for payment flows from forecast transactions or firm commitments (cash flow hedge).
The recognized financial instruments are measured on the
following basis:
Financial assets Fair values are obtained from stock market prices.
Financial liabilities The fair values of long-term financial liabilities
are calculated as the present value of future cash flows. The current
market interest rates for bonds with corresponding maturities are
used for discounting purposes. Due to their short terms, it is assumed
that the carrying amounts for current financial liabilities correspond
closely to fair values.
Derivative instruments The fair value of foreign currency forward
transactions is determined on the basis of current benchmark prices at
the end of the reporting period, taking account of forward premiums
and discounts. Foreign currency options are valued using option pricing
models. Fair values of interest rate hedging instruments are calculassted on the basis of discounted, expected future cash flows. In this
case, the market interest rates for the residual maturity of the financial
instruments are used. Options are valued on the basis of generally
recognized option pricing models.
Changes in the fair value of hedging instruments used to hedge the
cash flows from a forecast transaction or firm commitment and that
offer an effective hedge are recognized as cash flow hedges.
Hedging instruments are measured at fair value; the effective portion
of the change in fair value of the hedging instrument is recognized
in other comprehensive income and separately disclosed under other
reserves in shareholders’ equity. The ineffective portion is recognized in
profit or loss in the income statement under other operating expenses.
56-109_Ruag_FB_E-v19_K5.indd 69
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4 Profile
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22 Business performance
3 Critical accounting estimates and assumptions
Preparation of the consolidated financial statements in accordance
with generally accepted accounting principles requires the use of estimates and assumptions that influence the stated amounts of assets
and liabilities, income and expenses and the associated disclosure of
contingent assets and liabilities at the end of the reporting period.
At the same time, the Group makes estimates and assumptions relating to the future. Estimates made for accounting purposes may by
definition differ from actual results. Estimates and assessments are
continuously analysed and are based partly on historical experience
and partly also on other factors including the occurrence of possible
future events. Key estimates and assumptions are made in particular
about the following items:
Property, plant and equipment, goodwill and intangible assets
Property, plant and equipment and intangible assets are reviewed
annually for indications of impairment. If there are indications that
these assets are overvalued, an estimate is made of the future cash
flows expected to result from the utilization of these assets or their
possible disposal. Actual cash flows may differ from the discounted
future cash flows based on these estimates. Factors such as changes
in the planned use of property, plant and equipment, site closures,
technical obsolescence or lower-than-forecast sales of products, the
rights to which have been recognized, may shorten the estimated
useful life or result in impairment.
56 Financial statements
110 Corporate governance
Provisions As part of their ordinary business operations, Group
companies are exposed to various risks. These are continuously assessed and provisions are set aside accordingly in light of the available
information on the basis of the cash flows that can realistically be
expected. For example, provisions for warranties are determined on
the basis of empirical values and provisions for litigation by means
of a legal assessment.
Deferred tax assets The possible application of existing and available tax loss carryforwards is periodically assessed and measured.
The basis for measuring the tax loss carryforwards is realistic performance planning on the part of the taxable entity. The assessment of
future performance is based on a wide range of assumptions and
estimates. If the actual values differ from the estimates, this can lead
to a change in the fair value assessment of deferred tax assets. As
at 31 December 2011, recognized deferred tax assets from tax loss
carryforwards totalled CHF 6 million (previous year: CHF 19 million).
For more information, see Note 12, “Deferred taxes”.
Employee benefit obligations Various actuarial assumptions are
made in calculating employee benefit obligations and the net obligation in accordance with IAS 19, especially the discount rate, expected
annual salary increases and employee benefit adjustments, anticipated return on plan assets, probability of withdrawal and expected
mortality. The assumptions used in these statements are explained
in Note 37, “Employee benefits”.
The Group reviews the value of its recognized goodwill annually.
The recoverable amount of cash-generating units is determined on the
basis of value in use. At the same time estimates are made of future
cash flows and assumptions are made to determine the capitalization
rate. The main assumptions are described in Note 20, Intangible assets.
As at 31 December 2011, goodwill of CHF 78 million was recognized.
No impairment of goodwill was recognized in the year under review.
No impairment of goodwill would have occurred during the year under
review even if significant assumptions regarding the discount rate
(increased by 2%) or future cash flows (reduced by 10%) were to have
changed.
An impairment of CHF 6 million on property, plant and equipment,
conversely, was recognized in Aerostructures. For more information,
see Note 4, “One-time effects“.
Inventories and work in progress The current value of inventories and work in progress is reassessed periodically. This involves
classifying the individual items in terms of inventory sales ratios
and valuing them accordingly. Total value adjustments amounted
to CHF 108 million as at 31 December 2011 (previous year:
CHF 117 million).
Construction contracts Estimates with a significant influence are
made in evaluating long-term construction contracts by the percentage of completion method. Although the estimates, such as the
stage of completion and estimated cost to complete the projects,
are made to the best of Management’s knowledge about current
events and possible future measures, the actual results may ultimately
differ from these estimates. As at 31 December 2011, a net amount
of CHF 38 million was recognized for construction contracts (see
Note 17, “Percentage of completion”). In addition, provisions totalling
CHF 42 million were recognized for anticipated contract losses as
at 31 December 2011.
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Notes to the consolidated financial statements
Annual Report 2011
71
4 One-time effects
in CHF m
Goodwill impairment
Impairment of other intangible assets
Impairment of property, plant and equipment
Write-down of inventories
Recognition
Reversal
Provisions
Additions
Release of unused provisions
Other costs
Total effect on EBIT
Effect on segment results 1
Aviation
Technology
Total one-time effects for segments
1
2011
2010
—
—
(6)
(6)
(2)
(12)
—
—
—
18
(3)
6
—
(3)
(17)
25
—
5
1
(4)
(3)
(30)
35
5
Please also refer to Note 38, “Segment information”.
Technology The Technology segment recorded one-time
effects totalling CHF 4 million in 2011, incurred on Aerostructures
and activities in Altdorf. This figure arises from an impairment
of CHF 6 million of property, plant and equipment, and one-time
effects of CHF 3 million in respect of redundancies in Altdorf.
These charges were partially balanced by releasing provisions
totalling CHF 5 million in Aerostructures.
Aerostructures in Emmen was impacted by the strong Swiss franc.
Future cash flows were reassessed in consequence. This resulted
in a recoverable amount (value in use) lower than the carrying
amount, leading to an impairment of property, plant and equipment
of CHF 6 million in 2011.
In addition, provisions were released and allowances reversed
totalling CHF 35 million net in 2010, and an additional CHF 5 million
in 2011.
to discontinue activity as an automotive component supplier.
The ensuing job losses incurred one-time effects of CHF 3 million
in 2011.
Aviation The segment posted one-time effects of CHF 30 million
in 2010 in the form of impairment losses and restructuring provisions.
These were necessitated by capacity adjustments in Oberpfaffenhofen due to cuts in the defence budget and delayed sales of the
Dornier 228NG. Owing to the poorer outlook in Germany, future cash
flows had to be reassessed. This reassessment resulted in a recoverable
amount lower than the carrying amount, leading to impairment
losses of CHF 12 million on property, plant and equipment and of
CHF 8 million on intangible assets (including goodwill).
The restructuring in Oberpfaffenhofen was largely completed by the
end of 2011. The final payments arising from it are scheduled for
early 2012. On the basis of actual expenditure, provisions totalling
CHF 1 million were released in 2011.
A structural adjustment to the activities of RUAG Technology in
the field of Mechanical Engineering in Altdorf was required in 2011
to maintain its international competitiveness. It was also decided
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5 Acquisitions, disposals and mergers
56 Financial statements
110 Corporate governance
Disposal of business activities A decision was taken in 2010 to
cease activities at the Plan-les-Ouates site. A buyer was found in the
form of Saint Jean Industries, and the company took over operations at the Plan-les-Ouates site on 31 May 2011. Inventories as well as
property, plant and equipment were transferred to the purchaser as
part of the acquisition. The transfer generated a gain of CHF 2.6 million for RUAG Switzerland Ltd (Technology segment). The disposal gain
is shown in other operating income for the Technology segment.
Acquisitions RUAG took over the activities of Base Ten Systems Electronics GmbH (Base 10), headquartered in Hallbergmoos (Germany), on
1 January 2011. Its activities have been fully consolidated since the acquisition. The purchase price was EUR 1.4 million, paid in cash. Base 10
generated revenues of EUR 2.3 million in the first year after takeover.
The activities of Base 10 were integrated into RUAG COEL GmbH.
Mergers RUAG Electronics AG and RUAG Land Systems AG were
merged with RUAG Switzerland Ltd as of 1 January 2011.
New companies RUAG Ammotec Brazil was established in 2011.
This company is not yet operational.
The buyer was also given an option to purchase the real estate at
the Plan-les-Ouates site as part of the disposal of the business activities.
The buyer exercised this option in December 2011. The transaction
takes effect in 2012. The carrying value of the property is shown as
“Assets held for sale”.
In 2010, Nidwalden Airpark AG was established in conjunction with
additional partners. The company is included as an associate in RUAG’s
consolidated financial statements.
Effect of acquisitions and disposals Acquisitions and disposals
had the impact shown in the table below on RUAG’s consolidated
financial statements:
Effect of acquisitions and disposals
in CHF m
Acquisition in 2011
Disposal in 2011
Acquisition in 2010
Disposal in 2010
Current assets
Property, plant and equipment
Intangible assets
Goodwill
Current and non-current liabilities
Deferred tax liabilities
Assets and liabilities acquired (disposed)
1
1
—
—
—
—
2
(3)
(0)
—
—
—
—
(3)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Agreed price
Escrow account
Assumption of financial liabilities
Exchange differences
Gross cash (outflow) inflow
(2)
—
—
—
(2)
6
—
(1)
—
5
—
—
—
—
—
—
—
—
—
—
Cash and cash equivalents acquired (disposed)
Net cash (outflow) inflow
—
(2)
—
5
—
—
—
—
56-109_Ruag_FB_E-v19_K5.indd 72
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Notes to the consolidated financial statements
Annual Report 2011
73
6 Net sales
in CHF m
2011
2010
Invoiced sales
Change in percentage of completion
Net sales
1 800
(23)
1 777
1 757
39
1 796
DDPS
Third parties
Invoiced sales by customer group
665
1 134
1 800
608
1 149
1 757
Defence
Civil
Invoiced sales by type of use
938
861
1 800
843
914
1 757
Production
Maintenance
Services
Invoiced sales by order type
1 072
568
160
1 800
1 047
499
211
1 757
Switzerland
Rest of Europe
Middle East
North America
South America
Asia / Pacific
Africa
Invoiced sales by region
837
764
16
129
13
39
3
1 800
753
748
16
162
14
53
11
1 757
Aside from the DDPS, RUAG has no other customers that account
for more than 10% of total sales.
Sales from transactions with the DDPS is primarily attributable to
the Aviation and Defence segments.
Sales in rest of Europe primarily concern
Germany and Sweden.
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56 Financial statements
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7 Personnel expenses
in CHF m
Salaries and wages
Expense of benefit plans
Other social security expenses
Contract personnel
Other personnel expenses
Total
2011
2010
(613)
(34)
(84)
(46)
(32)
(810)
(630)
(39)
(90)
(48)
(13)
(820)
2011
2010
(22)
(60)
(14)
(8)
(49)
(18)
4
(166)
(27)
(56)
(13)
(8)
(51)
(19)
1
(174)
2011
2010
(140)
(190)
8 Other operating expenses
in CHF m
Premises costs
Maintenance and repairs of property, plant and equipment
Cost of energy and waste disposal
Insurance and duties
Administration and IT costs
Advertising costs
Other operating expenses and income, net
Total
Other operating income includes in particular the cost of
maintaining operational security, surveillance, capital taxes and
expenses for additions to and release of provisions, together with
net proceeds from the disposal of assets.
9 Research and development expenses
in CHF m
Total
Research and development expenses include all own work and work
carried out by third parties or services required from third parties that
was recognized as an expense during the year under review.
Most of the decline in research and development costs during the
year under review was due to the expiry of major customer-financed
development projects in the Space, Aviation and Defence segments.
Internally financed research and development costs amounted
to CHF 41 million (previous year: CHF 48 million). The corresponding
share in total research and development costs rose to 29% in
2011 (26%).
10 Finance income
2011
2010
Interest income
Realized exchange gains
Realized gains from securities
Total finance income
in CHF m
4
0
—
4
1
—
—
1
Finance costs
Interest expense
Realized exchange losses
Realized losses from securities
Impairment of financial assets
Total finance costs
(7)
(0)
—
—
(7)
(10)
(5)
0
—
(15)
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Notes to the consolidated financial statements
Annual Report 2011
75
11 Income taxes
in CHF m
2011
2010
Current income taxes
Deferred income taxes
Total income tax expense
(1)
(13)
(14)
(14)
18
4
The tax income in 2010 resulted primarily from the recognition
of tax loss carryforwards and the utilization of non-recognized tax
loss carryforwards from the previous periods.
Deferred tax assets are only recognized for loss carryforwards to
the extent that they can probably be offset against future taxable
profits. Individual countries (cantons in the case of Switzerland)
Profit before tax
Expected weighted tax rate in %
Expected income tax expense
Recognition of tax loss carryforwards from previous years
Utilization of non-recognized tax loss carryforwards from previous years
Effect of recognized loss carryforwards on current result
Non-deductible expenses
Non-taxable income
Income taxed at a lower rate
Increase/reduction in tax rate
Tax credits (losses) from preceding periods
Goodwill impairment
Effective income tax expense
56-109_Ruag_FB_E-v19_K5.indd 75
operate different tax laws and different rates of tax. For this reason,
the weighted average of the expected tax rate may vary between
periods, which is attributable to the profits (or losses) generated
in each individual country. The expected, weighted tax rate, which
is calculated by multiplying the local statutory tax rate by the local
taxable profit or loss, differed from the effective tax rate as follows
(in CHF million):
2011
2010
110
21.9%
(24)
88
26.2%
(23)
5
(0)
(1)
(2)
2
6
(1)
1
—
(14)
10
18
(0)
(1)
1
—
4
(5)
(0)
4
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56 Financial statements
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12 Deferred taxes
in CHF m
2011
2010
Origination (reversal) of temporary differences arising from the current period
Effect of tax rate changes
Recognition of tax loss carryforwards
Utilization of recognized deferred taxes from tax loss carryforwards
Exchange differences
Total deferred taxes
(0)
0
5
(18)
—
(13)
5
5
9
(1)
—
18
Change in deferred taxes
Total deferred taxes as at 1 January
Exchange differences
Effect of acquisitions
Recognized in profit or loss
Recognized in other comprehensive income
Total deferred taxes as at 31 December
Of which deferred tax assets
Of which deferred tax liabilities
(21)
2
—
(13)
(1)
(32)
22
(54)
(34)
(1)
—
18
(3)
(21)
42
(63)
Tax loss carryforwards by date of expiry
2011
2012
2013
2014
2015
2016
2017
After 2017
Total
—
7
—
—
—
4
0
25
36
3
—
—
—
—
101
12
24
140
9
6
3
29
19
11
Potential tax effects from tax loss carryforwards
Of which recognized as deferred tax assets
Of which not recognized
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Notes to the consolidated financial statements
Annual Report 2011
77
13 Cash and cash equivalents
in CHF m
2011
2010
Cash on hand
Demand deposits with banks
Money-market investments
Total
1
85
0
86
0
68
2
70
Currencies of cash and cash equivalents
CHF
EUR
USD
GBP
SEK
HUF
CAD
Total cash and cash equivalents
16
38
9
5
17
0
1
86
5
24
19
7
14
0
1
70
2011
2010
10
10
17
17
2011
2010
Money-market investments
Loans
Loans to associates
Valuation allowances
Total non-current financial assets
0
4
—
(0)
4
0
3
—
(0)
3
Currencies of financial assets
CHF
EUR
USD
GBP
SEK
HUF
CAD
Total financial assets
2
7
3
0
2
0
—
13
0
14
4
0
2
0
0
20
14 Financial assets
in CHF m
Current financial assets
Current third-party assets
Total current financial assets
Current financial assets comprise the fair value of open foreign
currency hedging transactions (see Note 36, “Risk management
and additional information on financial instruments”).
Non-current financial assets
in CHF m
The fair value of the non-current financial assets corresponds to the carrying amount.
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15 Receivables and prepayments
in CHF m
2011
2010
Trade and other receivables
Receivables from associates
Prepayments to suppliers
Prepayments to associates
Valuation allowances
Total trade and other receivables and prepayments
258
0
20
—
(8)
270
305
0
29
—
(9)
325
Current receivables from shareholders
Current receivables from government bodies
Other current receivables
Total receivables and prepayments
—
8
6
284
—
5
8
338
Maturity structure of receivables
Not past-due
Past due 1– 30 days
Past due 31–60 days
Past due 61–90 days
Past due 91–180 days
Past due over 180 days
Total
178
68
10
7
9
12
284
248
49
13
7
10
11
338
Currencies of receivables and prepayments
CHF
EUR
USD
GBP
SEK
HUF
CAD
Total
89
138
52
1
2
1
0
284
154
133
45
2
3
0
0
338
The allowance for doubtful receivables contains individual
valuation allowances totalling CHF 8 million (previous year:
CHF 9 million). Effective losses on receivables in each
of the past two years were less than 0.2% of net sales.
Allowance for doubtful receivables
in CHF m
2011
2010
Balance at 1 January
Initial consolidation
Increase in allowance
Utilization of allowance
Reversal of allowance
Disposals
Currency differences
Balance at 31 December
(9)
—
(5)
2
4
—
1
(8)
(9)
—
(2)
0
2
—
(0)
(9)
Allowance for doubtful receivables
Interest on doubtful receivables
(8)
—
(9)
—
Allowances for doubtful receivables are held in an allowance
account. Charges are recognized in other operating expenses.
No value allowances are required for financial instruments
in categories other than loans or receivables. Receivables judged
as non-recoverable are written off as losses.
56-109_Ruag_FB_E-v19_K5.indd 78
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Notes to the consolidated financial statements
Annual Report 2011
79
16 Inventories and work in progress
in CHF m
Raw materials and supplies
Work in progress at cost of conversion
Work in progress (percentage of completion) 1
Semi-finished goods
Finished goods
Valuation allowances
Total
2011
2010
222
118
136
120
71
(108)
558
246
99
125
118
64
(117)
535
2011
2010
1 132
(993)
139
1 465
(1 254)
211
136
(98)
38
125
(65)
61
92
139
The key figures for work in progress, which is measured using the percentage of completion method, are detailed below.
1
The carrying amount of inventories at fair value less costs to sell
is CHF 189 million (previous year: CHF 254 million). In the year under
review, a total of CHF 428 million was recognized as cost of material
(CHF 460 million). The write-down of inventories recognized as an
expense totalled CHF 15 million (CHF 42 million). Reversals of writedowns of inventories recognized in a prior period, arising from
an increase in net realizable value, totalled CHF 7 million in the year
under review (CHF 26 million).
17 Percentage of Completion (POC)
in CHF m
Contract sales and costs of ongoing projects at the end of the reporting period
Aggregated contract sales of ongoing projects
Aggregated contract costs of ongoing projects
Realized margin of ongoing projects at the end of the reporting period
Cumulative balance at the end of the reporting period
Gross amount due from customers for contract work
Gross amount due to customers for contract work
Net position at the end of the reporting period
Advances received from customers
56-109_Ruag_FB_E-v19_K5.indd 79
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80
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
18 Property, plant and equipment
Plant and
equipment
Other 1
Land
Buildings
Assets under
construction
Property, plant
and equipment
At cost
As at 1 January 2010
Initial consolidation
Eliminations from the scope of consolidation
Additions
Disposals
Reclassifications
Exchange differences
As at 31 December 2010
538
—
0
32
(20)
12
(14)
548
207
—
(0)
29
(11)
2
(9)
219
76
—
—
(0)
(0)
1
(0)
77
580
—
—
2
(7)
(5)
(3)
567
31
—
—
7
(0)
(21)
(2)
16
1 432
—
0
70
(38)
(10)
(28)
1 427
Accumulated depreciation and impairment
As at 1 January 2010
Initial consolidation
Eliminations from the scope of consolidation
Scheduled depreciation
Impairment
Disposals
Depreciation of net carrying amount
Reclassifications
Exchange differences
As at 31 December 2010
427
—
0
20
2
(19)
—
5
(9)
427
164
—
(0)
15
9
(9)
—
0
(7)
172
0
—
—
0
—
—
—
—
(0)
0
367
—
—
18
1
(7)
—
(10)
(1)
368
—
—
—
—
—
—
—
(0)
—
(0)
958
—
0
53
12
(35)
—
(5)
(17)
966
At cost
As at 1 January 2011
Initial consolidation
Eliminations from the scope of consolidation
Additions
Disposals
Reclassifications
Exchange differences
As at 31 December 2011
548
1
—
19
(28)
5
(3)
541
219
—
—
15
(13)
4
(2)
223
77
—
—
—
(2)
(1)
(0)
74
567
—
—
11
(1)
(9)
(1)
568
16
—
—
15
(0)
(13)
(0)
17
1 427
1
—
59
(44)
(15)
(6)
1423
Accumulated depreciation and impairment
As at 1 January 2011
Initial consolidation
Eliminations from the scope of consolidation
Scheduled depreciation
Impairment
Disposals
Depreciation of net carrying amount
Reclassifications
Exchange differences
As at 31 December 2011
427
—
—
23
5
(28)
—
2
(2)
427
172
—
—
16
0
(13)
—
(2)
(1)
172
0
—
—
—
—
(0)
—
0
(0)
0
368
—
—
18
1
(1)
—
(5)
(0)
380
(0)
—
—
—
—
—
—
0
—
—
966
—
—
57
6
(41)
—
(5)
(3)
979
Net carrying amount
As at 1 January 2011
As at 31 December 2011
121
114
47
51
77
74
200
188
16
17
461
445
in CHF m
1
Fixtures and fittings, computer hardware and software, motor vehicles.
Further information on impairment is given in Note 4,
“One-time effects”.
56-109_Ruag_FB_E-v19_K5.indd 80
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Notes to the consolidated financial statements
Annual Report 2011
81
Leased assets
in CHF m
2011
2010
4
(3)
1
3
(3)
—
in CHF m
2011
2010
At cost
As at 1 January
Initial consolidation
Eliminations from the scope of consolidation
Additions
Disposals
Reclassifications
Exchange differences
As at 31 December
225
—
—
0
—
—
—
226
215
—
—
0
(0)
10
—
225
Accumulated depreciation and impairment
As at 1 January
Initial consolidation
Eliminations from the scope of consolidation
Scheduled depreciation
Impairment
Disposals
Depreciation of net carrying amount
Reclassifications
Exchange differences
As at 31 December
142
—
—
4
—
—
—
—
—
146
133
—
—
4
—
(0)
—
5
—
142
83
80
83
83
At cost
Accumulated depreciation and impairment
Net carrying amount
19 Investment property
Net carrying amount
As at 1 January
As at 31 December
Investment properties were worth an estimated CHF 180 –200 million
in 2011 and 2010. No market evaluation by an expert was carried out.
The rental and other earnings from the investment property amounted to CHF 17 million (CHF 18 million in the previous year) and the total
real estate expenses to CHF 11 million (CHF 11 million).
56-109_Ruag_FB_E-v19_K5.indd 81
Majority leased sites to third parties are classified as investment
properties. In 2011, there were five such sites (Berne, Boden, Wimmis,
Unterseen and Aigle). No agreed capital commitments or commitments in respect of maintenance work were in place at the end of
December 2011 and 2010.
13.03.12 14:13 13. März
82
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
20 Intangible assets /goodwill
Patents
Brands
and models
At cost
As at 1 January 2010
Initial consolidation
Eliminations from the scope of consolidation
Additions
Disposals
Reclassifications
Exchange differences
As at 31 December 2010
8
—
—
—
(0)
0
(0)
7
14
—
—
—
—
(1)
(2)
11
16
—
—
1
(0)
0
(2)
15
Accumulated amortization and impairment
As at 1 January 2010
Initial consolidation
Eliminations from the scope of consolidation
Scheduled depreciation
Impairment
Disposals
Reclassifications
Exchange differences
As at 31 December 2010
5
—
—
1
—
—
0
(0)
5
7
—
—
2
—
—
(0)
(1)
7
At cost
As at 1 January 2011
Initial consolidation
Eliminations from the scope of consolidation
Additions
Disposals
Reclassifications
Exchange differences
As at 31 December 2011
7
—
—
—
(5)
(0)
(0)
2
Accumulated amortization and impairment
As at 1 January 2011
Initial consolidation
Eliminations from the scope of consolidation
Scheduled depreciation
Impairment
Disposals
Reclassifications
Exchange differences
As at 31 December 2011
in CHF m
Net carrying amount
As at 1 January 2011
As at 31 December 2011
56-109_Ruag_FB_E-v19_K5.indd 82
Licences
Order backlog
and rights and customer lists
Intangible
assets
Goodwill
115
—
—
—
—
1
(2)
114
153
—
—
1
(0)
0
(6)
147
97
—
—
—
(0)
—
(4)
94
10
—
—
1
2
(0)
0
(1)
12
11
—
—
15
—
—
0
(1)
25
33
—
—
18
2
(0)
0
(3)
50
9
—
—
—
6
—
—
—
15
11
—
—
—
—
—
(0)
11
15
—
—
0
(0)
0
(0)
15
114
—
—
—
—
—
(1)
113
147
—
—
0
(5)
0
(1)
141
94
—
—
—
—
—
(1)
93
5
—
—
1
—
(5)
—
(0)
2
7
—
—
1
—
—
—
(0)
8
12
—
—
0
—
(0)
—
(0)
12
25
—
—
15
—
—
—
(0)
40
50
—
—
17
—
(5)
—
(1)
61
15
—
—
—
—
—
—
—
15
2
1
4
3
2
3
88
73
97
79
78
78
13.03.12 14:13 13. März
Notes to the consolidated financial statements
The recoverable amount of cash generating units is determined on
the basis of their value in use. Value in use is derived from the present
value of future cash flows from a cash generating unit corresponding
to the relevant Group division. The net present values of future cash
flows are based on a medium-term plan, approved by the management, covering a five-year period. Cash flows after this five-year period
are extrapolated without taking any growth rate into account. Cash
flows are calculated using a segment-specific pretax discount rate of
Space 1
Aviation
Technology
Defence
Ammotec
As at 31 December
Annual Report 2011
83
8 –10% (previous year: 8 –10%), based on target equity of 40%
of total assets.
Further information on impairment is given in Note 4, “One-time
effects”.
Goodwill is a result of acquisitions and breaks down between the
various segments as follows (in CHF million):
2011
2010
61
0
—
4
13
78
61
0
—
4
13
78
Mainly concerns goodwill from the acquisition of the Space business operations of OC Oerlikon amounting to CHF 52 million. The cash-generating unit is “Space Switzerland”.
The relevant discount rate for Space Switzerland is 9%.
1
Amortization and impairment of intangible assets is reported
in the income statement under Amortization, and goodwill impairment is shown as such.
21 Associates
in CHF m
2011
2010
39
—
—
3
(1)
—
—
(1)
41
38
0
0
4
(1)
—
—
(2)
39
in CHF m
2011
2010
Total assets
Total liabilities
Net assets
170
83
87
156
72
84
Sales
Profit
139
7
138
5
Balance at 1 January
Acquisitions
Initial consolidation
Share of results after taxes
Dividends
Reclassifications
Other changes in equity
Exchange differences
Balance at 31 December
Financial information for associates (100%)
is as follows:
Aggregate financial information for associates
There are no contingent liabilities relating
to associates.
56-109_Ruag_FB_E-v19_K5.indd 83
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84
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
22 Financial liabilities
in CHF m
2011
2010
41
15
—
41
7
—
0
—
56
—
—
49
2011
2010
82
1
—
—
—
83
123
—
—
—
—
123
in CHF m
2011
2010
Up to 1 year
Up to 2 years
Up to 3 years
Up to 4 years
Over 4 years
Total financial liabilities
56
41
41
0
0
139
49
41
41
41
0
172
in CHF m
2011
2010
CHF
EUR
USD
GBP
SEK
HUF
CAD
Total financial liabilities
128
2
9
0
—
0
0
139
168
2
1
1
0
—
0
172
Current financial liabilities
Due to banks
Financial derivatives at fair value
Liabilities to associates
Lease liabilities
Current portion of non-current financial liabilities
Total current financial liabilities
Non-current financial liabilities
in CHF m
Due to banks
Lease liabilities
Loans secured by property
Bond issues
Liabilities to associates
Total non-current financial liabilities
The fair value of the non-current financial liabilities corresponds to the
carrying amount. The average rate of interest on non-current financial
liabilities in the year under review was 2.5% (previous year: 2.8%).
Maturity structure of financial liabilities
Non-current liabilities to banks include covenants concerning the
net debt/EBITDA ratio, the debt servicing ratio (expressed as the ratio of
EBITDA less investments for amortization of financial debt plus net
interest expense) and a covenant concerning the minimum equity ratio.
The key financial figures were met as at 31 December 2011 and
31 December 2010.
Currencies of financial liabilities
56-109_Ruag_FB_E-v19_K5.indd 84
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Notes to the consolidated financial statements
Annual Report 2011
85
23 Other current liabilities
in CHF m
2011
2010
16
—
16
—
2
34
18
—
20
0
0
39
in CHF m
2011
2010
Trade accounts payable
Accounts payable to associates
Prepayments from customers
Prepayments from associates
Total
105
0
204
—
309
107
0
271
—
378
in CHF m
2011
2010
Not past-due
Past due 1–30 days
Past due 31–60 days
Past due 61– 90 days
Past due 91– 180 days
Past due over 180 days
Total trade accounts payable and prepayments
283
21
4
2
(0)
0
309
357
20
0
0
0
1
378
in CHF m
2011
2010
CHF
EUR
USD
GBP
SEK
HUF
CAD
Total trade accounts payable and prepayments
174
95
16
5
19
0
0
309
231
89
22
6
29
0
0
378
2011
2010
2
—
—
—
2
3
—
—
—
3
Due to third parties
Due to associates
Due to government bodies
Due to shareholders
Due to employee benefit funds
Total
24 Trade accounts payable and prepayments
Maturity structure of trade accounts payable and prepayments
Currencies of trade accounts payable and prepayments
25 Other non-current liabilities
in CHF m
Due to third parties
Due to associates
Due to shareholders
Due to employee benefit funds
Total
56-109_Ruag_FB_E-v19_K5.indd 85
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86
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
26 Provisions
in CHF m
Restructuring
Balance at 1 January 2011
Initial consolidation
Eliminations from the scope of consolidation
Additions
Release of unused provisions
Use of provisions
Reclassifications
Exchange differences
Balance at 31 December 2011
Current provisions
Non-current provisions
18
—
—
4
(5)
(7)
—
(1)
8
5
3
Contract losses
Warranties
Holiday and
overtime
49
—
—
28
(5)
(29)
—
(0)
42
21
21
25
—
—
10
(7)
(6)
—
(0)
23
17
6
40
—
—
27
(2)
(25)
—
(0)
40
40
0
Additions to provisions for restructuring in 2011 mainly concern the
announced headcount reduction at the Altdorf site. For more information, see Note 4, “One-time effects“.
The statement as at 31 December 2011 in respect of the provision
of long-service awards for employees, entered under the item “Provisions for loyalty bonuses and anniversary benefits”, was based on
the following assumptions: Discount rate of 2.5% (previous year:
3.0%) and other actuarial assumptions on matters such as staff turnover and salary increases.
The service years of RUAG’s employees form a significant basis for
measuring the provisions for loyalty bonuses and anniversary benefits. In reviewing this data, it was ascertained that the assumed
length of service was too long in the past. Adjustment in line with
Loyalty bonuses
and anniversary
benefits
Other
provisions
Total
19
—
—
4
(1)
(2)
—
(0)
20
0
20
13
—
—
8
(1)
(4)
—
(0)
16
9
7
165
—
—
81
(21)
(74)
—
(2)
149
92
58
the effective service years led to a reduction in these provisions of
CHF 11 million. The balance sheet figure for provisions for loyalty
bonuses and anniversary benefits was retroactively adjusted by this
amount as at 1 January 2010. This adjustment of the provisions has
no significant influence on the income statement.
Other provisions mainly include follow-up costs for projects, deferred costs for partial retirement and the framework agreements (ERA)
in Germany, as well as severance payment obligations in Austria.
The framework agreements concerning remuneration for services
put into effect a wage policy reform project for workers and whitecollar employees in Germany. ERA ensures that workers receive equal
pay for equal work. The severance payment obligations in Austria
relate to departing employees and are based on the number of years
of service.
27 Contingent liabilities towards third parties
in CHF m
2011
2010
Guarantees
Securities
Warranty commitments
Total
112
160
62
334
148
160
53
361
Guarantees are primarily performance and advance payment guarantees from operational business. An intra-Group loan of CHF 160 million
to RUAG Real Estate Ltd was pledged to secure the credit agreement for RUAG Holding Ltd. Warranty commitments are solely bank
guarantees.
56-109_Ruag_FB_E-v19_K5.indd 86
13.03.12 14:13 13. März
Notes to the consolidated financial statements
Annual Report 2011
87
28 Additional contingent liabilities not stated on the balance sheet
in CHF m
Warranty contracts
Letters of intent
Agreed contractual penalties (fines and premiums)
Legal proceedings
Bill commitments
Capital commitments for property, plant and equipment
Other contingent liabilities
Total
2011
2010
1
—
16
2
—
6
15
41
7
4
23
2
—
4
17
57
Warranty contracts As a manufacturer, RUAG undertakes to rectify,
through repair or replacement, products and services that it has
delivered and in which manufacturer’s faults appear within a defined
period from the date of sale. Warranty obligations are treated in
accordance with standard business practices and are recognized under
provisions for warranties. Provisions for warranties are recognized to
the amount of the best estimate of the cost of rectifying faults in
products sold with a warranty before the end of the reporting period.
The possibility of a cash outflow over and above the recognized provisions for warranties is currently viewed as improbable.
that a cash outflow will arise, a provision is recognized for it. The
possibility of a cash outflow over and above the recognized provisions
is currently considered improbable.
Contractual penalties By the nature of its operations, RUAG has
to deal with contractual penalties. The amounts reported reflect all
agreed contractual penalties as at the end of the reporting period.
These obligations are regularly reassessed. As soon as it is probable
Capital commitments Capital commitments include the value
of investments to which RUAG has committed as at the end of the
reporting period.
Legal proceedings Open or potential legal proceedings are handled by the Legal department and regularly monitored as to the probability of a future cash outflow. As soon as it is probable that a cash
outflow will arise, a provision is recognized for it. The possibility of
a cash outflow over and above the recognized provisions is currently
considered improbable.
29 Assets pledged as collateral
in CHF m
Cash and cash equivalents
Receivables and inventories
Plant and equipment
Property
Total
56-109_Ruag_FB_E-v19_K5.indd 87
2011
2010
1
—
0
7
8
—
2
—
7
9
13.03.12 14:13 13. März
88
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
30 Fire insurance values
in CHF m
2011
2010
1 222
1 356
2 579
1 448
1 507
2 954
in CHF m
2011
2010
Receivables from related parties
Liabilities to related parties
Prepayments from related parties
Current liabilities to employee benefit funds
Non-current liabilities to employee benefit funds
49
(2)
(56)
(2)
(0)
111
(0)
(84)
(1)
—
Plant and equipment
Property
Total
31 Share capital
There are a total of 340,000 fully paid-up shares with a par value
of CHF 1,000 each. There is no conditional share capital. All shares in
RUAG Holding Ltd are owned by the Swiss Confederation.
32 Events after the reporting period
The Board of Directors of RUAG Holding Ltd approved the consolidated financial statements for publication on 24 February 2012. The
Annual General Meeting has the right to approve the consolidated
financial statements.
33 Related party transactions
In the year under review, CHF 49 million of receivables from related
parties (previous year: CHF 111 million) and CHF 2 million of liabilities to
related parties (CHF 0 million) were attributable to the DDPS. Invoiced
sales to the DDPS totalled CHF 665 million (CHF 608 million) as stated
in Note 6, “Net sales“. There were no loans between the Group companies and members of the Board of Directors. In 2011, turnover of
CHF 1 million was generated with associates and services with a value
of CHF 2 million purchased.
34 Compensation of key management personnel
The overall emoluments (excluding employer contributions to statutory
retirement and survivors’ insurance) paid to the non-executive members of the Board of Directors for the 2011 financial year amounted to
CHF 495,000 (previous year: CHF 499,000). The overall emoluments
(including all employer contributions to employee benefit funds, excluding employer contributions to statutory retirement and survivors’
56-109_Ruag_FB_E-v19_K5.indd 88
insurance or similar state social insurance contributions) paid to the
CEO and the other members of the Executive Board for the 2011 financial year amounted to CHF 5,325,000 (CHF 4,818,000). The 2011 total
includes the compensation paid to the CEO, Dr Lukas Braunschweiler,
up to 31 October 2011, and the Executive Chairman, Konrad Peter,
from 1 November 2011 onwards.
The overall emoluments (including all employer contributions to
employee benefit funds, excluding employer contributions to statutory
retirement and survivors’ insurance or similar state social insurance
contributions) paid to the CEO for the 2011 financial year amounted
to CHF 553,000 (previous year: CHF 848,000). The 2011 total
includes the compensation paid to the CEO, Dr Lukas Braunschweiler
(CHF 476,000), up to 31 October 2011, and the Executive Chairman,
Konrad Peter (CHF 77,000), from 1 November 2011 onwards.
13.03.12 14:13 13. März
Annual Report 2011
Notes to the consolidated financial statements
89
Compensation of key management personnel
in CHF 1000
Board of Directors
Total compensation CBD 2
2011
2010
2011
2010
Basic salary
Cash compensation 1
Employer contributions to employee benefit funds
Payments in kind
495
—
—
499
—
—
117
—
—
140
—
—
Performance-related component
Cash compensation 1
Shares
Options
Total compensation
—
—
—
495
—
—
—
499
—
—
—
117
—
—
—
140
Executive Board
Total compensation CEO 2
2011
2010
2011
2010
Basic salary
Cash compensation 1
Employer contributions to employee benefit funds
Payments in kind
3 476
471
52
2 915
378
43
440
82
31
442
65
8
Performance-related component
Cash compensation 1
Shares
Options
Total compensation
1 326
—
—
5 325
1 482
—
—
4 818
—
—
—
553
332
—
—
848
38%
51%
—
75%
Relation between performance-related component
and cash compensation
1
2
Excluding employer contributions to statutory retirement and survivors’ insurance or similar state social insurance contributions.
In the case of the Board of Directors, the amount includes the compensation paid to the Chairman of the Board of Directors CBD, Konrad Peter, in respect of the year under
review and the previous year; for the Executive Board, the amount includes the compensation paid to the CEO, Dr Lukas Braunschweiler, up to 31 October 2011 and from
1 November 2011 onwards the compensation paid to Executive Chairman Konrad Peter, and, for the previous year, compensation paid to the CEO, Dr Lukas Braunschweiler.
35 Future minimum obligations under finance leases
in CHF m
Within 1 year
Between 1 and 5 years
After 5 years
Total
Less future finance costs
Total lease liabilities
Future minimum obligations under operating leases
Within 1 year
Between 1 and 5 years
After 5 years
Total
2011
2010
0
1
—
1
(0)
1
—
—
—
—
—
—
21
62
22
105
18
59
35
112
These items relate exclusively to non-recognized liabilities
arising from operating leases (incl. rent). Future lease liabilities
are not reported on the balance sheet.
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56 Financial statements
110 Corporate governance
36 Risk management and additional information on
financial instruments
The risk management system of RUAG differentiates between strategic and operational risks and focuses on relevant topics. Risks are
identified, assessed and monitored in the individual business units at
all levels of the management structure. In order to minimize individual risks, appropriate measures are defined and implemented. The
most significant risks aggregated from the segments are monitored
and controlled by the Executive Board.
Market risk RUAG is exposed to market risks, notably those associated with changes in exchange rates, interest rates and fair values of
investments in cash and cash equivalents. The company monitors
these risks continuously. The Group employs a number of derivative
financial instruments to manage the volatility associated with these
risks. The Group’s objective is to reduce where appropriate fluctuations
in earnings and cash flows associated with changes in interest rates,
exchange rates and the value of financial assets and the exchange rate
risks of certain net investments in Group companies abroad.
Identified risks are quantified (in terms of probability of occurrence
and impact) and entered on a risk map. This risk map is discussed
periodically by the Board of Directors and the Audit Committee. Ongoing risk monitoring, supervision and control is the responsibility
of Management. Management is supported in this task by a corporate Group Risk Management function.
In compliance with company policy, the company employs derivative
financial instruments (e.g. foreign currency forward transactions,
interest rate swaps, etc.) to manage risk. RUAG avoids any financial
transaction in which the risk cannot be gauged at the time the transaction is concluded. The Group does not sell any assets that it does
not own or does not know that it will own. RUAG sells only existing
assets and hedges only existing transactions and (in the case of
forward hedges) forecast transactions that can be expected to materialize on the basis of past experience.
36.1 Financial risk management
RUAG is exposed to various financial risks as a result of its business
activities. The most significant financial risks arise as a result
of changes in exchange rates, interest rates and commodity prices.
A further risk is the ability to secure adequate liquidity.
Currency risk The consolidated financial statements are presented
in Swiss Francs (CHF). The company is mainly subject to changes in the
exchange rates of the US dollar, Euro and Swedish krona. In the case
of transaction risk, it faces the risk of fluctuations in the value of
foreign currencies between the date of a contractual agreement and
the actual date of payment. Accordingly, RUAG employs different
contracts to compensate for exchange rate-induced changes in asset
values, firm commitments and forecast transactions. RUAG also
employs forward transactions and currency options to hedge certain
cash flows anticipated in foreign currency.
Financial risk management is a corporate function and is carried
out by the Group Treasury department in compliance with the directives issued by the Board of Directors. Group Treasury identifies,
evaluates and hedges financial risks in close cooperation with the
operating units.
Foreign currency positions in the balance sheet
in CHF m
EUR
USD
SEK
Other
Cash and cash equivalents
Receivables and prepayments
Other financial assets
Financial liabilities
Trade accounts payable and prepayments
Other financial liabilities
Carrying amount of exposure as at 31 December 2011
38
138
7
(2)
(95)
(1)
86
9
52
3
(9)
(16)
—
38
17
2
2
—
(19)
(2)
1
7
2
0
(0)
(6)
(0)
3
Cash and cash equivalents
Receivables and prepayments
Other financial assets
Financial liabilities
Trade accounts payable and prepayments
Other financial liabilities
Carrying amount of exposure as at 31 December 2010
24
133
14
(1)
(89)
(1)
79
19
45
4
(1)
(22)
—
44
14
3
2
(0)
(29)
(2)
(12)
8
2
1
(1)
(7)
—
3
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Annual Report 2011
Notes to the consolidated financial statements
The following currency hedging transactions existed
as at 31 December:
91
institutions with variable interest rates. For the purpose of hedging
interest rate risk, RUAG concluded interest rate swaps corresponding to
the term of the financial liabilities.
Contract volumes
in CHF m
2011
2010
Interest-bearing financial liabilities
Currency hedging contracts banks positive
Currency hedging contracts banks negative
326
(85)
260
(54)
in CHF m
Recognized values for currency hedge transactions
in CHF m
2011
2010
Current financial assets
Current financial liabilities
9
(11)
17
(3)
2011
2010
(3)
7
Due to the occurrence of the underlying transactions, CHF 15 million was transferred from other reserves to other operating expenses
(previous year: CHF 9 million).
Commodity price risk In buying commodities (particularly copper,
zinc, lead, aluminium, steel etc.) to be used as raw materials in production, the company is sometimes subject to a price risk. Commodity
price changes can affect the gross profit margins of the operations
concerned. Therefore, RUAG uses commodity futures transactions to
manage the price fluctuation risk of planned purchases.
Consumption
2011
2010
6
7
17
5
3
39
5
7
21
8
2
43
Interest rate risk RUAG is exposed to interest rate risks arising from
the volatility of market interest rates. Demand deposits and moneymarket investments are subject to an interest rate risk that can impact
on net profit. Financial liabilities largely comprise loans from financial
56-109_Ruag_FB_E-v19_K5.indd 91
in CHF m
2011
2010
Interest rate swap
160
214
2011
2010
—
(4)
—
(4)
Recognized values for interest rate swaps
in CHF m
Current financial assets
Current financial liabilities
Credit risk Credit risks arise in particular when customers are not in
a position to fulfil their contractual commitments. To manage this risk,
RUAG periodically evaluates customers’ solvency. Sales from transactions with the DDPS amount to around 37% of total sales. No other
customer accounts for more than 10% of the Group’s net sales. Trade
and other receivables from the DDPS account for around 19% (previous
year: 34%) of total trade and other receivables as per 31 December
2011. There are no other concentrated credit risks that exceed 5% of
total trade and other receivables.
The carrying amount of financial assets corresponds to the credit risk
and is composed as follows:
The following table shows an overview of the annual consumption
of commodities.
Aluminium
Lead
Copper
Steel
Zinc
Total
41
123
165
165
(164)
1
Contract volumes
Hedge Accounting RUAG uses hedge accounting in accordance
with IAS 39. The following values in relation to hedging transactions
were recognized in equity as at 31 December:
in CHF m
2010
41
83
124
124
(123)
1
The following hedging transactions for interest rate risks existed
as at 31 December:
RUAG Holding Ltd provides RUAG Deutschland AG with a eurodenominated loan. This loan is not hedged. The loan amount as at
31 December 2011 was EUR 181 million (previous year: EUR 143 million).
The cumulative exchange losses for this loan recognized in equity as
at 31 December 2011 amounted to CHF 44 million (CHF 37 million).
Other reserves
2011
Interest expense for interest-bearing financial liabilities in the year under
review amounted to CHF 5 million (CHF 5 million).
Net investments in foreign operations are long-term investments.
Their fair value changes as exchange rates fluctuate. Over the very long
term, however, differences in inflation rates should offset the exchange
rate fluctuations, with the result that adjustments in the fair value
of tangible investments abroad should compensate for any exchange
rate-induced changes in value. For this reason, RUAG hedges its
investments in foreign Group companies only in exceptional cases.
in CHF m
Current financial liabilities
Non-current financial liabilities
Total financial liabilities
Of which variable interest-bearing
Fixed through interest rate swap
Variable interest-bearing, net
in CHF m
2011
2010
Cash and cash equivalents
Current financial assets
Receivables and prepayments
Non-current financial assets
Total credit risk
86
10
284
4
384
70
17
338
3
428
Counterparty risk Counterparty risk comprises the risk of default
on derivative financial instruments and money market transactions and
the credit risk on current account balances and time deposits. RUAG
reduces default risk and credit risk by choosing as counterparties only
banks and financial institutions that have a minimum credit rating
when the transaction is concluded. These risks are strictly monitored
to ensure that they remain within the prescribed parameters. Group
guidelines ensure that the credit risk in respect of financial institutions
is limited. RUAG does not expect any losses arising from counterparties’ non-fulfilment of their contractual obligations.
Liquidity risk Liquidity risk describes the risk that arises if the company is not in a position to fulfil its obligations when due or at a
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8 Foreword
22 Business performance
reasonable price. Group Treasury is responsible for monitoring liquidity,
financing and repayment. In addition, Management controls processes
and guidelines in this connection. To maintain flexibility, RUAG manages its liquidity risk on a consolidated basis, drawing on social, tax and
financial considerations and, if necessary, various funding sources.
RUAG maintains on principle a liquidity reserve that exceeds the daily
and monthly operating cash requirements. This includes maintaining
56 Financial statements
110 Corporate governance
adequate reserves of cash and cash equivalents as well as the availability of adequate open lines of credit. A rolling liquidity plan is drawn
up on the basis of expected cash flows and is regularly updated.
Net debt is a key measure of liquidity management. The table below
provides an analysis of the Group’s net debt by due date from the end of
the reporting period to the contractual expiry date.
Net debt
in CHF m
Up to 3 years
Up to 4 years
Over 4 years
Total
Cash and cash equivalents
Current financial assets 1
Non-current financial assets
Current financial liabilities 1
Non-current financial liabilities
Other non-current liabilities
Net debt at 31 December 2011
86
0
0
(41)
(0)
—
45
—
—
1
—
(41)
(2)
(42)
—
—
0
—
(41)
—
(41)
—
—
0
—
(0)
—
0
—
—
1
—
(0)
—
1
86
0
4
(41)
(83)
(2)
(36)
Cash and cash equivalents
Current financial assets 1
Non-current financial assets
Current financial liabilities 1
Non-current financial liabilities
Other non-current liabilities
Net debt at 31 December 2010
70
—
—
0
—
(41)
(3)
(43)
—
—
0
—
(41)
—
(41)
—
—
0
—
(41)
—
(41)
—
—
2
—
(0)
—
2
70
—
3
(41)
(123)
(3)
(94)
1
Up to 1 year
—
0
(41)
—
—
29
Up to 2 years
Cash flow hedges recognized in current financial assets and liabilities are not part of net debt as they are not interest bearing.
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Notes to the consolidated financial statements
36.2 Capital risk management
In managing capital, RUAG’s aims are to ensure that the company
can continue its operating activities, that the owner receives an
adequate return and that the balance sheet structure is optimized
with regard to the cost of capital. In order to meet these objectives,
RUAG can apply for higher or lower dividend payments, repay capital
to the shareholder, issue new shares, or dispose of assets in order
to reduce debt. RUAG monitors its capital structure on the basis of
net debt and equity, by measuring the ratio of net debt to equity.
Net debt is the sum of cash and cash equivalents, current and noncurrent financial assets minus current and non-current financial
liabilities and other non-current liabilities.
Total capital is the sum of equity and net debt. RUAG has set itself
the long-term target of keeping net debt below 40% of equity. At the
end of 2011, the figure was 4.5% (previous year: 12.9%).
Annual Report 2011
93
36.3 Fair value estimates
Due to the short maturity, the carrying amount of current financial assets and current financial liabilities corresponds to the carrying
amount at the end of the reporting period. The fair value of noncurrent financial assets corresponds to the cost of acquisition. The fair
value of non-current financial liabilities is estimated on the basis
of future payments due, which are discounted at market interest
rates. There are no significant differences in relation to the carrying
amount.
Interest rate swaps are discounted at market interest rates. Foreign
currency forward transactions are measured at forward exchange rates
at the end of the reporting period.
The carrying amounts or fair value of financial assets and liabilities
are assigned to the measurement categories as follows:
Financial assets in current assets
in CHF m
Hedging transactions
Financial derivatives at fair value
Loans and receivables
Receivables and prepayments
Current financial assets
Total
Financial assets in non-current assets
Loans and receivables
Non-current financial assets
Total
Current financial liabilities
At amortized cost
Current financial liabilities
Trade accounts payable and prepayments
Hedging transactions
Financial derivatives at fair value
Total
Non-current financial liabilities
At amortized cost
Non-current financial liabilities
Total
2011
2010
9
17
284
0
294
338
—
354
4
4
3
3
41
309
41
378
15
366
7
427
83
83
123
123
The financial derivatives measured at fair value consist
exclusively of Level 2 instruments in accordance with IFRS 7.27
and are measured on the basis of models with mainly marketobservable parameters. Financial derivatives are held by RUAG
exclusively for hedging purposes.
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37 Employee benefits
The company has a number of independent employee benefit plans
in addition to statutory social security. Most of these plans are financed
externally, in units that are legally separate from the company. Group
companies without sufficient assets in their plans to cover employee
benefits recognize appropriate provisions in the statement of financial
position.
56 Financial statements
110 Corporate governance
Major employee benefit plans that are classed as defined benefit plans
under IAS 19 are evaluated by an independent insurance actuary every
year. The most recent actuarial appraisal in accordance with IAS 19
was carried out on 1 January 2011.
All pension plans are based on local legal provisions.
The following figures give an overview of the status of the funded and
non-funded defined benefit plans as at 31 December 2011 and 2010.
Net expense of benefit plans
in CHF m
2011
2010
Current service cost
Interest on employee benefit obligations
Expected return on plan assets
Amortization of actuarial losses
Increase (decrease) in non-recognized assets
and recognized loss in accordance with IAS 19.58
49
54
(60)
0
47
55
(76)
—
—
11
Plan curtailments
Total expense of defined benefit plans
(14)
29
—
36
Employer contributions for the 2012 financial year are expected to
total CHF 35 million.
As per 31 December 2011, as was also the case at the end of the
previous year, actuarial losses not yet amortized exceeded the present
value of employee benefit obligations by less than 10% and were
thus within the corridor stipulated by IAS 19.
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Annual Report 2011
Notes to the consolidated financial statements
95
The following table shows the changes in projected employee benefit obligations and the benefit plan assets as at 31 December 2011 and
2010 for funded plans (Switzerland) and non-funded plans (foreign
plans, primarily in Germany and Sweden):
Employee benefit obligations
in CHF m
2011
2010
1 793
49
24
54
(68)
(1)
—
—
(14)
(53)
1 784
1 688
(96)
1 619
47
23
55
97
(3)
—
—
—
(44)
1 793
1 677
(116)
2011
2010
1 677
9
—
30
24
—
(52)
1 688
1 618
47
—
34
23
—
(44)
1 677
Long-term target
2011
2010
0 – 6%
44 – 62%
20 – 3 8%
13 – 22%
3%
52%
31%
14%
100%
1%
50%
33%
16%
100%
Employee benefit obligations at beginning of year
Benefit entitlements earned
Employee contributions
Interest on employee benefit obligations
Actuarial loss (gain)
Exchange differences
Plan amendments
Changes in the scope of consolidation
Plan curtailments
Net employee benefits paid
Present value of employee benefit obligations at end of year
Fair value of plan assets
Deficient cover
Plan assets
in CHF m
Fair value of plan assets at beginning of year
Actual return on plan assets
Exchange differences
Employer contributions
Employee contributions
Changes in the scope of consolidation
Net employee benefits paid
Fair value of plan assets at end of year
Allocation of plan assets at 31 December
in %
Cash and cash equivalents
Debt instruments (bonds)
Equity instruments (shares)
Other assets
Total plan assets
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110 Corporate governance
The following table presents the cover of the performance-related
employee benefit obligations and the influence of deviations between
expected and actual return on the plan assets for the past five years.
Multi-year overview
in CHF m
Present value of employee benefit obligations at end of year
Fair value of plan assets
(Deficient) / surplus cover
Difference between expected and actual return on plan assets
Revaluation of employee benefit obligations
2011
2010
2009
2008
2007
1 784
1 688
(96)
1 793
1 677
(116)
1 619
1 618
(1)
1 438
1 327
(111)
1 393
1 533
140
(51)
(23)
(29)
24
99
19
(284)
29
(70)
31
Summary of financial position at year-end
in CHF m
2011
2010
Deficient cover
Unrecognized actuarial losses
Non-amortized first-time difference
Unrecognized plan assets
Employee benefit obligations
(96)
54
—
(1)
(42)
(116)
70
—
(1)
(46)
in CHF m
2011
2010
Recognised employee benefit obligations at beginning of year
Net expense of benefit plans
Changes in the scope of consolidation
Employer contributions
Exchange differences
Employee benefit obligations at end of year
(46)
(29)
—
32
1
(42)
(47)
(36)
—
34
3
(46)
Change in employee benefit obligations
As at 31 December 2011, the employee benefit funds owned
no shares in RUAG Holding Ltd.
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Notes to the consolidated financial statements
Annual Report 2011
97
Employee benefit obligations are measured based on the following
actuarial assumptions:
Actuarial assumptions
in %
Funded pension plans (Switzerland)
Discount rate
Expected long-term return on plan assets
Annual salary increases
Annual pension adjustments
Other pension plans
Discount rate
Annual salary increases
Annual pension adjustments
To estimate the anticipated return on plan assets, periodic expectations – based on long-term empirical figures from the financial markets
– are defined regarding the long-term return and risk characteristics
(volatility) of the various investment categories. The interdependencies
between investment categories are estimated and taken into account.
56-109_Ruag_FB_E-v19_K5.indd 97
2011
2010
2.50%
3.50%
2.00%
0.00%
3.00%
4.75%
2.00%
0.75%
3.50 – 4.50%
2.50 – 3.00%
1.50 – 2.00%
4.00 – 5.00%
2.50 – 3.00%
1.50 – 2.00%
To calculate the employee benefit obligations as at 31 December 2011,
life expectancy was calculated for the first time on the basis of generation tables; this resulted in an increase in the employee benefit obligations. Due to the expected higher life expectancy, the conversion rates
for plan participants were reduced, resulting in a corresponding reduction of the employee benefit obligations. Changed assumptions for
pension adjustments also resulted in a decrease of the employee benefit obligations.
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56 Financial statements
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38 Segment information
in CHF m
2011
2010
2011
2010
2011
2010
Space
Space
Aviation
Aviation
Technology
Technology
Net sales with third parties
Net sales with other segments
Total net sales
274
0
275
283
0
283
474
13
487
465
6
471
259
9
268
270
3
273
EBITDA
Depreciation and amortization
Goodwill impairment
33
(20)
—
30
(22)
—
27
(5)
—
15
(20)
(6)
11
(16)
—
30
(8)
—
EBIT
Net financial income
Profit of associates
Profit before tax
Tax expense
Net profit
13
9
22
(11)
(5)
21
Net operating assets by region
Net operating assets Switzerland
Net operating assets rest of Europe
Net operating assets North America
85
82
3
—
127
121
6
—
111
46
58
7
136
70
60
6
101
79
23
—
90
77
13
—
Acquisition of property, plant and equipment
and intangible assets
(9)
(13)
(7)
(6)
(8)
(11)
0
16
0
0
1
2
Disposal of property, plant and equipment
and intangible assets
Further information on sales and customers is provided in Note 6,
“Net sales”.
Information on one-time effects in the segments is given in Note 4,
“One-time effects”.
Products and services of the individual segments are described
in Note 2.22, “Segment information”.
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Annual Report 2011
Notes to the consolidated financial statements
99
2011
2010
Group
total
Group
total
—
(141)
(141)
1 777
—
1 777
1 796
—
1 796
0
—
—
(0)
—
—
194
(84)
—
194
(90)
(6)
0
(0)
110
(3)
3
110
(14)
97
98
(14)
4
88
4
92
2011
2010
2011
2010
2011
2010
2011
Ammotec
Ammotec
Defence
Defence
Services
Services
311
1
312
319
1
320
429
6
435
433
6
438
30
128
158
26
126
152
—
(157)
(157)
36
(11)
—
42
(10)
—
44
(6)
—
38
(6)
—
43
(27)
—
39
(24)
—
25
31
38
32
17
15
3
4
2010
Elimination Elimination
187
37
135
15
179
37
123
19
(30)
(48)
18
—
(35)
(47)
12
—
331
326
5
—
275
279
(3)
—
(1)
(2)
1
(0)
(0)
(0)
0
(0)
786
520
243
22
771
537
210
25
(14)
(20)
(4)
(4)
(17)
(17)
—
—
(60)
(71)
0
0
1
1
12
5
—
—
15
24
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56 Financial statements
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39 Consolidated companies, associates and non-controlling interests
Equity capital (100%)
Shareholding
Method of
consolidation
Company
Head office
Country
RUAG Holding AG 1
Berne
Switzerland
CHF
340 000 000
Consolidated companies
RUAG Switzerland Ltd
Mecanex USA Inc
RUAG Deutschland GmbH
RUAG Aerospace Services GmbH
RUAG Aerospace Structures GmbH
RUAG Sweden AB
RUAG Space AB
RUAG Space GmbH
RUAG Aerospace USA Inc
RUAG COEL GmbH
RUAG Ammotec Deutschland GmbH
RUAG Ammotec GmbH
RUAG Ammotec AG
RUAG Ammotec Austria GmbH
RUAG Ammotec France
RUAG Ammotec UK Ltd
RUAG Ammotec Benelux BVBA
RUAG Ammotec USA Inc
Norma Precision AB
RUAG Hungarian Ammotec Inc
RUAG Industria e Comercio de Municoes Ltda
RUAG Real Estate Ltd
RUAG Services AG
brings! AG
SwissRepair AG
GEKE Schutztechnik GmbH
RUAG Aerospace GmbH
Emmen
Berlin, CT
Wessling
Wessling
Wessling
Gothenburg
Gothenburg
Vienna
El Segundo, CA
Wedel
Fürth
Fürth
Thun
Vienna Neudorf
Paris
Liskeard
Boechout
Tampa, FL
Amotfors
Sirok
São Francisco
Berne
Berne
Schattdorf
Schlieren
Lichtenau
Zurich
Switzerland
USA
Germany
Germany
Germany
Sweden
Sweden
Austria
USA
Germany
Germany
Germany
Switzerland
Austria
France
England
Belgium
USA
Sweden
Hungary
Brazil
Switzerland
Switzerland
Switzerland
Switzerland
Germany
Switzerland
CHF
USD
EUR
EUR
EUR
SEK
SEK
EUR
USD
EUR
EUR
EUR
CHF
EUR
EUR
GBP
EUR
USD
SEK
HUF
BRL
CHF
CHF
CHF
CHF
EUR
CHF
112 200 000
1 500
1 000 000
1 000 000
25 000
100 000
15 000 000
1 500 000
1 000
260 000
100 000
25 000
12 000 000
298 000
1 000 000
15 000
25 000
15 000
2 500 000
280 000
200 000
8 000 000
100 000
100 000
100 000
100 000
20 000
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
55.0%
52.0%
51.0%
100.0%
Full
Full
Full
Full
Full
Full
Full
Full
Associates 2
Nitrochemie AG
Nitrochemie Wimmis AG
Nitrochemie Aschau GmbH
HTS GmbH
Nidwalden AirPark AG
Wimmis
Wimmis
Aschau
Coswig
Stans
Switzerland
Switzerland
Germany
Germany
Switzerland
CHF
CHF
EUR
EUR
CHF
1 000 000
25 000 000
7 700 000
26 000
600 000
49.0%
45.0%
45.0%
24.6%
33.3%
Equity
Equity
Equity
Equity
Equity
Other investments
Saab Bofors Dynamics Switzerland Ltd
Alpar, Flug- und Flugplatz-Gesellschaft AG
CFS Engineering SA
Arianespace SA
Arianespace Participation
Thun
Berne
Lausanne
Évry
Évry
Switzerland
Switzerland
Switzerland
France
France
CHF
CHF
CHF
EUR
EUR
2 000 000
10 150 000
150 000
395 010
21 918 756
5.0%
2.0%
40.0%
0.1%
3.4%
3
Full
3
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
Full
3
Full
Full
Full
Full
Full
3
3
3
3
3
RUAG Holding Ltd, Stauffacherstrasse 65, P.O. Box, CH-3000 Berne 22.
Investments of between 20 and 50% are measured using the equity method.
3
Non-material other investments are valued at cost minus a valuation allowance.
1
2
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Annual Report 2011
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110 Corporate governance
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Financial statements of RUAG Holding Ltd
Annual Report 2011
103
Income statement
in CHF m
Income from investments
Interest income
Gains from securities
Income from the disposal of investments
Income from services
Currency gains
Income
Investment expense
Finance costs
Losses from securities
Personnel expenses
Administration costs
Amortization
Currency losses
Tax
Expenses
Annual profit (loss)
2011
2010
33
20
—
—
14
—
67
21
20
—
—
13
—
54
—
(6)
—
(8)
(10)
(0)
(9)
(0)
(33)
—
(7)
—
(9)
(8)
(0)
(41)
(0)
(65)
35
(12)
Currency losses in 2010 mainly result from an
intra-Group Euro loan.
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Annual Report 2011
4 Profile
8 Foreword
22 Business performance
56 Financial statements
110 Corporate governance
Statement of financial position before allocation of profit
in CHF m
2011
2010
43
30
0
285
0
370
1
—
329
1
—
401
29.2%
33.5%
637
637
0
160
1
798
—
160
0
798
in % of total assets
70.8%
66.5%
Total assets
1 128
1 199
42
250
43
295
2
—
2
0
82
—
0
377
123
—
0
463
33.4%
38.6%
340
26
10
—
340
35
751
340
26
10
—
372
(12)
736
in % of total equity and liabilities
66.6%
61.4%
Total equity and liabilities
1 128
1 199
Cash and cash equivalents
Receivables
Third parties
Group companies
Prepaid expenses and deferred income
Third parties
Group companies
Current assets
in % of total assets
Investments
Financial assets
Third parties
Group companies
Plant and equipment
Non-current assets
Current financial liabilities
Third parties
Group companies
Deferred income and accrued expenses
Third parties
Group companies
Non-current financial liabilities
Third parties
Group companies
Provisions
Liabilities
in % of total equity and liabilities
Share capital
Statutory reserve
Statutory reserve from capital contribution
Voluntary reserve
Retained earnings brought forward
Annual profit (loss)
Equity
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Notes to the financial statements of RUAG Holding Ltd
Annual Report 2011
105
Contingent liabilities towards third parties
in CHF m
2011
2010
Guarantees
Warranty commitments
Total
133
41
174
162
35
196
2011
2010
—
0
—
—
—
—
—
—
0
—
0
—
—
—
—
—
—
0
2011
2010
1
—
1
1
—
1
in CHF m
2011
2010
Cash and cash equivalents
Receivables
Financial assets to Group companies
Property, plant and equipment
Investments
Total
—
—
160
—
—
160
—
—
160
—
19
179
Guarantees are primarily performance and advance payment
guarantees from operational business.
The bank guarantees were issued by various banks on the
instructions of RUAG Holding Ltd on behalf of RUAG Aerospace
Services GmbH, Oberpfaffenhofen and RUAG Switzerland Ltd
“Defence“, Thun in favour of third parties.
Other liabilities not stated on the balance sheet
in CHF m
Warranty contracts
Long-term rental and leasing contracts
Letters of intent
Agreed contractual penalties (fines and premiums)
Legal proceedings
Contingent liabilities
Subordinated receivables from Group companies
Capital commitments
Total
The valuation is conducted on the basis of the probability
and extent of future unilateral payments and costs exceeding
the provisions recognized.
Fire insurance values of property, plant and equipment
in CHF m
Plant and equipment
Property
Total
Assets pledged as collateral
An intra-Group loan of CHF 160 million to RUAG Real Estate Ltd
was pledged to secure the credit agreement for RUAG Holding Ltd.
The debt repayments led to the release of the RUAG Space AB shares
pledged in addition to the loan of CHF 160 million.
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Annual Report 2011
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56 Financial statements
110 Corporate governance
Foreign currency forward transactions
in CHF m
Volume of contracts with banks
Volume of contracts with banks
Volume of contracts with Group companies
Volume of contracts with Group companies
Positive replacement value banks
Negative replacement value banks
Positive replacement value Group companies
Negative replacement value Group companies
Total replacement values
2011
2010
303
(85)
79
(293)
260
(54)
63
(300)
9
(11)
10
(8)
(0)
17
(3)
3
(17)
0
2011
2010
—
—
—
—
—
—
In the financial statements prepared under commercial law, the net
principle is used for foreign currency forward transactions.
Liabilities to employee benefit funds
in CHF m
Current liabilities to employee benefit funds
Non-current liabilities to employee benefit funds
Total
Treasury shares of RUAG Holding All shares of RUAG Holding Ltd
are owned by the Swiss Confederation.
Events after the reporting period The Board of Directors of
RUAG Holding Ltd approved the consolidated financial statements
for publication on 24 February 2012. The Annual General Meeting
has the right to approve the consolidated financial statements.
Investments (as at 31 December 2011)
Company
Head office
Country
RUAG Switzerland Ltd
RUAG Deutschland GmbH
RUAG Ammotec AG
RUAG Real Estate Ltd
RUAG Services AG
RUAG Sweden AB
Nitrochemie AG
Nitrochemie Wimmis AG
Nitrochemie Aschau GmbH
Saab Bofors Dynamics Switzerland Ltd
Alpar, Flug- und Flugplatz-Gesellschaft AG
Emmen
Wessling
Thun
Berne
Berne
Gothenburg
Wimmis
Wimmis
Aschau
Thun
Berne
Switzerland
Germany
Switzerland
Switzerland
Switzerland
Sweden
Switzerland
Switzerland
Germany
Switzerland
Switzerland
Risk management and risk assessment RUAG has a risk management system that differentiates between strategic and operational
risks and focuses on the relevant topics. Risks are identified, assessed
and monitored in the individual business units at all levels of the
management structure. In order to minimize the individual risks, the
appropriate measures are defined and implemented. The most
56-109_Ruag_FB_E-v19_K5.indd 106
Equity capital (100%)
CHF
EUR
CHF
CHF
CHF
SEK
CHF
CHF
EUR
CHF
CHF
112 200 000
1 000 000
12 000 000
8 000 000
100 000
100 000
1 000 000
25 000 000
7 700 000
2 000 000
10 150 000
Shareholding
100.0%
100.0%
100.0%
100.0%
100.0%
100.0%
49.0%
45.0%
45.0%
5.0%
2.0%
significant risks aggregated from the segments are monitored and
controlled by the Executive Board. The risks identified are quantified
(in terms of probability of occurrence and impact) and entered
on a risk map. This risk map is discussed periodically by the Board of
Directors and the Audit Committee. Ongoing risk monitoring,
supervision and control are the responsibility of the Management.
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Notes to the financial statements of RUAG Holding Ltd
Annual Report 2011
107
Proposed allocation of balance sheet profit
in CHF m
2011
2010
Annual profit (loss)
Amount brought forward from previous year
Profit at the disposal of the Annual General Meeting
35
340
375
(12)
372
360
in CHF m
2011
2010
Dividend
Allocation to statutory reserve
Balance to be carried forward
20
2
353
20
—
340
Allocation of profit proposed by Board of Directors
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Corporate management and control
principles.
RUAG adheres to the corporate governance
guidelines of SIX Swiss Exchange. Unless
otherwise specified, the information is appli­
cable as at 31 December 2011.
From left to right: Jürg Oleas, Paul Häring, Konrad Peter (standing),
Hans-Peter Schwald, Egon W. Behle, Dr Hans Lauri (seated).
Board of Directors
The duties of the Board of Directors of RUAG Holding Ltd are governed
by the Swiss Code of Obligations, the Federal Council’s owner’s strategy,
the Articles of Association and the Regulations Governing Organization
and Operations.
Until 3 May 2011, the Board of Directors of RUAG Holding Ltd consisted
of five non-executive members. Dr Hanspeter Käser withdrew from his post
on the Board of Directors and as Vice-Chairman of RUAG Holding Ltd after
twelve years. Egon W. Behle and Jürg Oleas were elected as new members
to the Board of Directors. Chairman of the Board of Directors, Konrad
Peter, took over operational management as Executive Chairman on
1 No­vember 2011. Otherwise, the members of the Board of Directors
have no material business relationship with the RUAG Group. The list lower
down on this page provides details of name, age, position, date of joining and remaining term in office of each member of the Board of Directors.
Other activities
There are no reciprocal memberships between the Board of Directors of
RUAG Holding Ltd and that of a listed company.
Election and term of office
The Board of Directors of RUAG Holding Ltd is elected by the Annual
General Meeting (AGM). In accordance with the Articles of Association,
the Board of Directors consists of at least three individuals. A majority
of the members of the Board of Directors must be Swiss nationals
domiciled in Switzerland. The members of the Board of Directors are
elected annually and individually and may be re-elected.
Internal organization and tasks
The Board of Directors holds ultimate responsibility for the business
strategy and overall management of the RUAG Group. It possesses
supreme decision-making powers and determines the guidelines for
strategy and organization, and the financial guidelines for accounting.
The Board of Directors has delegated the management of day-today business to Executive Chairman Konrad Peter on an interim basis.
Together with the Executive Board, he is responsible for the overall
management of the RUAG Group and for all matters not delegated to
another governing body of the company by law, the Articles of Asso­
ciation, the Federal Council’s owner’s strategy or the Regulations Governing Organization and Operations.
The main duties of the Board of Directors under the terms of the Swiss
Code of Obligations and Articles of Association of RUAG Holding Ltd are:
The strategic orientation and management of the RUAG Group in
accordance with the owner’s strategy of the Federal Council
The structuring of the accounting system, financial controlling and
financial planning
Board of Directors
Name
Born
Position
Konrad Peter
Hans-Peter Schwald
Paul Häring
Dr Hans Lauri
Egon W. Behle
Jürg Oleas
1946
1959
1957
1944
1955
1957
Chairman
Vice-Chairman, non-executive
Non-executive member
Non-executive member
Non-executive member
Non-executive member
Member since
Elected until
2002
2002
2004
2008
2011
2011
2012
2012
2012
2012
2012
2012
112
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56 Financial statements
110 Corporate governance
The appointment and dismissal of the CEO, other members of the
Executive Board and other senior executives
Supreme oversight of business activities
Production of the Annual Report, preparation of the AGM and
implementation of resolutions passed by the latter
Decisions are taken by the Board of Directors as a whole. To assist the
Board in its role, two committees have been formed: an Audit Committee
and a Nomination & Compensation Committee. Beside the usual six
meetings, the Board of Directors met for a two-day strategy meeting in
summer 2011, and held telephone calls or committee meetings as required. The agenda for meetings of the Board of Directors is set by the
Chairman. Any member of the Board of Directors may request that
an item be included on the agenda. The members are provided with
documentation prior to each meeting to enable them to prepare for
the items to be discussed.
The Board of Directors maintains
an exchange dialogue with the
senior operating executives of the
company and regularly visits
one or more of RUAG’s sites.
The Board of Directors maintains an exchange dialogue with the senior
operating executives of the company and regularly visits one or more of
RUAG’s sites.
Committees
The Board of Directors has formed an Audit Committee and a Nomination & Compensation Committee and elected chairmen. The committees
meet regularly and prepare business for the full Board of Directors, draft
proposals in respect thereof and implement resolutions of the Board of
Directors as required. The agenda of each committee’s meetings is set by
its chairman. The members of the committees are provided with documentation prior to the meetings to enable them to prepare for the items
to be discussed.
Audit Committee
The Audit Committee is composed of three members of the Board of
Directors: Paul Häring (Chairman), Konrad Peter and Jürg Oleas.
The members of the Audit Committee are experienced in financial
and accounting matters. The Audit Committee meets regularly and
is convened by the Chairman as often as business requires. Usually
the meetings are also attended by the CFO, internal auditor, General
Counsel and representatives of the statutory auditor.
The main task of the Audit Committee is to ensure a comprehensive and
efficient audit strategy for RUAG Holding Ltd and the RUAG Group. The
duties of the Audit Committee include:
Assessing processes in the risk and control environment (internal
control system)
Monitoring financial reporting
Assessing the internal and external auditor
Defining and approving the focal points of the audit
Accepting the audit report and any recommendations of the statutory
auditor prior to submission of the annual financial statements (indi vidual and consolidated) to the full Board of Directors for approval
Submitting a proposal to the full Board of Directors as to which external auditor should be recommended to the AGM for appointment;
assessing the performance, fees and independence of the external
auditor and examining the compatibility of audit activities with any
consultancy mandates. The representatives of the statutory auditor
recuse themselves during deliberation of these matters.
Annual Report 2011
113
The Audit Committee regulates, supervises and commissions the internal
auditor. It provides the full Board of Directors with a regular report on
its activities and immediately informs the Board of any important matters.
Nomination & Compensation Committee
The Nomination & Compensation Committee is composed of three
members of the Board of Directors: Dr Hans Lauri (Chairman), Konrad
Peter and Hans-Peter Schwald. The Nomination & Compensation
Committee meets regularly and is convened by the Chairman as often
as business requires. The meetings are usually also attended by the
Senior Vice President Corporate HR.
in the form of a feasibility forecast based on quarterly results. The
Executive Chairman submits a written monthly report on budget compliance to the Board of Directors.
Executive Board
Management organization
The Board of Directors has appointed an Executive Board under the
chairmanship of the Executive Chairman. Its powers and duties are set
out in the Regulations Governing Organization and Operations and in
the job description of the Executive Chairman.
The main task of the Nomination & Compensation Committee is to
propose the outlines of human resource policies and planning to the full
Board of Directors and to present proposals on the selection and compensation of Executive Board members. This also includes preparing
necessary decisions for the full Board of Directors in the areas of management development, compensation system and policies, objective
setting, pension fund matters and social partnership.
Finally, the Nomination & Compensation Committee is tasked with proposing the compensation of members of the Board of Directors in line
with the guidelines set forth by the Swiss Confederation. The final decision is taken by the AGM at the proposal of the Board of Directors.
The members of the Executive Board report to the Executive Chairman,
who is responsible for overall management and cross-divisional cooperation.
The Executive Board comprises the Executive Chairman, CEOs of the
operating divisions, CFO, CIO and CEO of RUAG Services, Senior
Vice President Corporate HR, Senior Vice President Marketing & Communication and the General Counsel and Head of Legal.
Dr Lukas Braunschweiler left his position as CEO of RUAG Holding Ltd
on 31 October 2011. Chairman of the Board of Directors, Konrad
Peter, took over operational management as Executive Chairman on
Information and control instruments
The Management Information System (MIS) of the RUAG Group is
structured as follows: The separate financial statements (balance sheet,
income statement and cash flow statement) of the individual subsidi­
aries/divisions are compiled on a monthly, quarterly, semi-annual and
annual basis. These figures are consolidated for each division and
for the Group as a whole and compared with the budget. The budget,
which represents the first year of a rolling five-year plan, is examined
Executive Board as at 1 January 2012
Name
Born
Position
Konrad Peter
Dr Peter Guggenbach
Phillipp M. Berner
Dr Viktor Haefeli
Cyril Kubelka
Urs Breitmeier
Urs Kiener
Dr Christian Ferber
Oliver Meyer
Thomas Kopp
Christiane Schneider
1946
1962
1966
1966
1963
1963
1965
1965
1976
1955
1967
Executive Chairman*
Member, CEO of RUAG Space
Member, CEO of RUAG Aviation
Member, CEO of RUAG Technology
Member, CEO of RUAG Ammotec
Member, CEO of RUAG Defence
Member, CFO
Member, Senior Vice President Corporate HR**
Member, CIO and CEO of RUAG Services
Member, General Counsel and Head of Legal
Member, Senior Vice President Marketing & Communication
* Dr Lukas Braunschweiler, CEO of RUAG Holding Ltd until 31 October 2011.
** Hans Bracher, Senior Vice President Corporate HR until 31 December 2011.
Member since
2011
2009
2010
2006
2004
2006
2002
2012
2011
2011
2011
114
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8 Foreword
22 Business performance
1 November 2011. Hans Bracher stepped down as Senior Vice President
Corporate HR on 31 December 2011. Dr Christian Ferber became his
successor as of 1 January 2012.
Executive Chairman
The Executive Chairman manages the RUAG Group. He submits the
RUAG Group’s strategy, long and medium-term objectives and management guidelines to the full Board of Directors for their approval.
56 Financial statements
110 Corporate governance
The Executive Chairman regularly reports to the Board of Directors on
business performance, anticipated business matters and risks, as well as
changes at the next management level. The members of the Board of
Directors may request and review further information on operations as
provided by the law and the Articles of Association.
The Executive Chairman regularly assesses whether the Articles of Association and the regulations and signatory powers issued by the Board of
Directors require amendment, and applies for such amendments to be
made.
At the proposal of the Executive Chairman, the full Board of Directors
decides on the five-year corporate plan, annual budget, individual
projects, division and consolidated financial statements and human
resource issues.
Management structure as at 1/1/2012
Board of Directors
Konrad Peter (Chairman)
Hans-Peter Schwald (Vice-Chairman)
Egon W. Behle
Paul Häring
Dr Hans Lauri
Jürg Oleas
Nomination &
Com­pensation
Committee
Audit Committee
Board of
Directors,
Committees
Internal Auditor
Executive
Executive Chairman
Konrad Peter
Board
Space
Dr Peter
Guggenbach
Aviation
Philipp M. Berner
Technology
Dr Viktor Haefeli
Ammotec
Cyril Kubelka
Defence
Urs Breitmeier
Services
Oliver Meyer
Space Switzerland
Military Aviation
Switzerland
Aerostructures
Switzerland
Ammotec
Switzerland
Land Systems
IT Services
Space Sweden
Military Aviation
Germany
Aerostructures
Germany
Ammotec
International
Simulation &
Training
Software House
Space Austria
Business Aviation
Components
Altdorf
Divisions
Business Units
Network Enabled
Operations
Subsystems &
Products
GC & Legal*
Thomas Kopp
F&C*
Urs Kiener
HR*
Dr Christian Ferber
MarCom*
Christiane Schneider
* General Counsel & Legal (GC & Legal); Finance & Controlling incl. Real Estate (F&C), Corporate Human Resources (HR), Marketing & Communication (MarCom)
Service &
Support
Annual Report 2011
115
Members of the Executive Board
The list on page 113 provides information on the name, age, position
and date of joining of each member of the Executive Board.
Management contracts
No management contracts have been concluded by RUAG Holding Ltd
and its subsidiaries with any third parties.
Compensation, profit-sharing and loans
Compensation report
The following details correspond to the guidelines provided in the guidelines of SIX Swiss Exchange concerning compensation paid to members
of the Board of Directors and Executive Board, taking the transparency
provisions of the Swiss Code of Obligations (Arts 663bbis and Art. 663c)
into account. Compensation paid in accordance with these provisions
of the Swiss Code of Obligations is listed in the financial statements in
Note 34 “Compensation of key management personnel”, with further
details provided.
Compensation policy
RUAG’s HR policy includes the principle that employee performance and
company success are the main factors that determine compensation.
The policy is aimed at implementing simple, clearly structured compensation systems that ensure fair pay and are transparent for employees.
RUAG bases its salary level on market wages in the specific salary market
concerned and checks it regularly. Individual compensation is based
on job requirements, skills, performance and the company’s financial
success. Wherever possible, RUAG applies success and performancebased compensation systems with an additional performance-based
variable component. These principles also apply in setting the compensation policy for the Executive Board, which is determined by the Board of
Directors at the request of the Nomination & Compensation Committee.
Board of Directors
The members of the Board of Directors receive compensation for their
work that is determined annually by the AGM in accordance with
the guidelines set forth by the Swiss Confederation. The criteria for
determining compensation paid to the Board of Directors is based
on the responsibility accorded to its members, the complexity of the task,
the specialist and personal demands placed on the individual and the
expected, average time required to fulfil the task. Compensation consists
of the following:
Fixed basic salary
Other benefits
Each member of the Board of Directors receives a fixed basic salary as
part of his or her basic compensation. Other benefits comprise employer’s contributions to social security funds and lump-sum allowances
for expenses, paid by RUAG Holding Ltd.
No compensation was paid to former Board members.
RUAG’s HR policy includes the
principle that employee perfor­
mance and company success are
the main factors that determine
compensation.
116
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8 Foreword
22 Business performance
Further details of compensation paid in the year under review can be
found in the financial statements in Note 34 “Compensation of key
management personnel”.
Executive Board
The composition and amount of compensation are based on the industry
and labour market environment and are regularly checked. To this end,
publicly available information on companies of a similar size from Swiss
industry and, where applicable, the results of surveys and external studies
are taken into account. The performance-based component for members of the Executive Board depends on the extent to which individual
performance objectives are reached, and on the company’s financial
success. Compensation consists of the following:
Fixed basic salary
Performance-based component
Employer contributions to pension funds
Benefits in kind
The fixed basic salary is determined primarily by the task, responsibility,
qualifications and experience of the Board members, as well as the
market environment. The performance-based component is determined based on the extent to which individual performance ob­jectives are reached, and on the company’s financial success. As part of
the objective-setting process, measurable goals are set at the beginning of each year between the Board of Directors and the Executive
Chairman for the members of the Executive Board. At the end of the
financial year, the extent to which these objectives have been met is
assessed. The financial success of the RUAG Group overall and of the
individual divisions is measured based on four financial value drivers:
Net sales
Operating result (EBIT)
Net assets
Cash flow from operating activities
The target figures are set for one year and are weighted according to
strategic priorities. A lower and an upper threshold are defined for each
of the four value drivers. If the lower threshold is not reached for the
criterion concerned, the proportion of the perfomance-based component related to it is ruled out. In contrast, exceeding the upper threshold
does not lead to a further increase in the amount of perfomance-based
component.
The amount of the perfomance-based component is based on reaching
objectives. For all members of the Executive Board, the perfomancebased component in 2011 ranged from 0% (previous year: 29%) to a
maximum of 58% (75%) of the annual basic salary. The CEO of RUAG
Holding Ltd who left, Dr Lukas Braunschweiler, waived the performance-based component. The extent to which objectives are reached is
weighted for all members of the Executive Board as follows: 20% can
be achieved for personal goals and 80% for financial goals. In the case of
the divisional CEOs, the financial goals are defined per division. In the
case of the Executive Chairman and heads of Service & Support, the
financial goals of the RUAG Group apply.
Other benefits comprise employer contributions paid to social security
funds and for mandatory and extra-mandatory employee benefits.
56 Financial statements
110 Corporate governance
The same regulations on expenses apply for the members of the Executive Board as for all other employees of the RUAG Group. Additional
regulations also apply to the members of the Executive Board and all
members of management in Switzerland concerning a lump-sum
allowance for entertainment and other incidental expenses. Both regulations have been approved by the cantonal tax authorities concerned.
A company car is provided to the members of the Executive Board.
No appreciable compensation was paid to former Executive Board
members.
Further details of compensation paid in the year under review can be
found in the financial statements in Note 34 “Compensation of key
management personnel”.
Other compensation
Severance payments: Members of the Board of Directors or Executive Board
are not contractually entitled to any severance payments. In the 2011
financial year, no severance payments were paid to persons who terminated their function as a Board member in the year under review or earlier.
Shares and options: No shares and/or options are allocated to members
of the Executive Board or Board of Directors.
Additional fees: During the 2011 financial year, the members of the
Board of Directors and Executive Board received no appreciable
fees or other compensation for additional services rendered to RUAG
Holding Ltd or any of its subsidiaries.
Loans to Board members: RUAG and its subsidiaries have not provided
any securities, loans, advances or credits to the members of the Board of
Directors or Executive Board and related parties, nor waived any amounts
receivable.
Capital structure
The equity capital of RUAG Holding Ltd amounts to CHF 340 million,
comprising 340,000 fully paid-up registered shares, each with a par value
of CHF 1,000. As at 31 December 2011, RUAG Holding Ltd did not
have any conditional or authorized capital, nor had it issued participation
or dividend right certificates. The registered shares of RUAG Holding Ltd
are not listed.
Changes in capital
No changes in capital were decided upon in the last three reporting
periods.
Shares, share register
Each registered share entitles its bearer to one vote at the AGM of
RUAG Holding Ltd. The voting right may only be exercised provided that
the shareholder is recorded in the RUAG Holding Ltd share register
as a shareholder with voting rights. The registered shares carry full entitlement to dividends.
Annual Report 2011
117
In place of shares, the Company may issue certificates. It may also elect
to issue neither shares nor certificates. In this case, the shareholder is
entitled at any time to demand issuance of a statement of shares held.
The Board of Directors keeps a share register.
Shareholder structure
Shareholder
The Swiss Confederation holds 100% of shares and thus all voting
rights to RUAG Holding Ltd. The Swiss Armed Forces exercises the
Confederation’s shareholder interests.
Owner’s strategy of the Federal Council
The updated 2011–2014 owner’s strategy of the Federal Council entered
into force on 1 May 2011. It establishes the transparent, binding framework that enables RUAG Holding Ltd and its subsidiaries to fulfil their
duties profitably while taking account of overarching interests. The owner’s strategy is enshrined in the Articles of Association of RUAG Holding
Ltd.
In its owner’s strategy, the Federal Council lays down strategic objectives
for its shareholding in RUAG Holding Ltd, specifically strategic focal
points, human resource policy and financial objectives, cooperation and
investments and reporting to the Federal Council.
Cross-shareholdings
The RUAG Group has not entered into any cross-shareholdings with
other companies, either in terms of capital or votes.
Codetermination rights of shareholders
Voting right
At the AGM of RUAG Holding Ltd, each registered share carries one
vote. A shareholder may be represented by another shareholder only by
written proxy.
The AGM is convened and its agenda set as governed by law and by the
Articles of Association.
Qualified majorities
The following resolutions are subject to decision by qualified majority in
accordance with the Swiss Code of Obligations (Art. 704):
Changes to the purpose of the company
Introduction of voting shares
Restrictions on the transferability of registered shares
Approved or conditional capital increase
Capital increase out of equity in consideration of a contribution in
kind or for the purpose of acquisition in kind and the granting of
special benefits
Restriction or abolition of subscription rights
Relocation of the company’s registered office
Dissolution of the company or liquidation
Convening the AGM
The AGM is convened and its agenda set as governed by law and by the
Articles of Association.
Change in control and defensive measures
The updated 2011–2014 owner’s
strategy of the Federal Council
entered into force on 1 May 2011
and establishes the binding
framework that enables the RUAG
Group to fulfil its duties consci­
entiously and profitably.
118
Annual Report 2011
4 Profile
8 Foreword
22 Business performance
Obligation to make an offer
The Articles of Association contain no provisions concerning opting-out
and opting-up as specified in the Federal Act on Stock Exchanges and
Securities Trading (SESTA Art. 22).
Change of control clauses
Any disposal of the capital or voting majority of the Swiss Confederation in RUAG Holding Ltd to third parties requires the approval of
Swiss parliament (by simple federal decree, not subject to referendum,
Art. 3 Para. 3, Federal Act on State-Owned Defence Companies
(BGRB)). In all other respects, there are no specific clauses concerning a
change of control of RUAG Holding Ltd.
Employee benefits
The pension fund cover ratio as at 31 December 2011 was 101%
(previous year 103%). The financial situation thus remained stable.
56 Financial statements
110 Corporate governance
CHF 0.5 million (CHF 0.6 million) during the 2011 financial year for
audit-related services, tax advice and due diligence services.
Supervisory and control instruments
The Audit Committee of the Board of Directors assesses the performance,
fees and independence of the statutory auditor each year and submits
a proposal to the Board of Directors as to which external auditor should
be recommended to the AGM for appointment. The Audit Committee
then annually reviews the scope of external auditing, the auditing plans
and the relevant processes and discusses the audit results with
the external auditor in each case.
Information policy
The RUAG Group pursues an open information policy in relation to the
public and to the financial markets. The published figures extend beyond
the statutory requirements in terms of transparency.
Statutory auditor
Duration of mandate of head auditor
PricewaterhouseCoopers AG, Berne has been RUAG’s statutory auditor
since 1999.
Head auditor Rolf Johner has been responsible for the audit mandate
since 2007.
Audit fees and additional expenses
PricewaterhouseCoopers invoiced the RUAG Group CHF 1.1 million
(CHF 1.1 million) during the 2011 financial year for services related to the
audit of the financial statements of RUAG Holding Ltd and its subsidi­
aries and of the consolidated financial statements of the RUAG Group.
In addition, PricewaterhouseCoopers invoiced the RUAG Group
Fees paid to PricewaterhouseCoopers
in CHF 1,000
Audit fees
Tax advice
Due diligence advice
All other advice
Total fees
2011
2010
1,054
108
121
269
1,552
1,112
80
–
479
1,671
Annual Report 2011
119
Forthcoming events
Annual results Annual Press Conference AGM 31/12/2011
22/03/2012
26/04/2012
The Annual Report containing the financial statements for
the year ended 31 December 2011 is sent to the shareholder
together with an invitation to the AGM.
RUAG Holding Ltd, Stauffacherstrasse 65, 3000 Berne 22,
Switzerland, info@ruag.com, www.ruag.com, +41 31 376 64 50
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