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Glossary

B2B – Business-to-Business

The sale of goods or services to other companies or corporate customers.

Capital employed

Difference between total assets and the non-interest-bearing capital provided.

Cash flow

Balance of cash receipts and cash payments in a reporting period. A measure of a company’s financial and earning power. For example, operating cash flow indicates how much of the recognised net profit for the period is reflected in cash inflows from operating activities. This cash flow can be used to finance capital expenditures, repay liabilities or pay dividends.

Commercial Papers

Special instruments (money market paper), usually discount bonds, issued in order to finance short-term credit needs. As a rule, the issuer requires an excellent rating in order to place and deal in papers of this kind.

Compliance

A key element of Corporate Governance. It denotes the observance of relevant laws and internal guidelines.

Consolidation

In the consolidated financial statements, the Group, comprising several legally independent companies, is depicted as if it were a single business. Consolidation consists of bookkeeping techniques that eliminate all intra-Group transactions. It eliminates the double counting of intra-Group transactions when consolidated financial statements are being prepared from the data contained in the annual financial statements of the individual Group companies.

Core repayment period

A capital management indicator within the Haniel Group. It is determined by dividing the net financial position, reduced by the debt allocated to the Metro investment, by the operating profit before depreciation, amortisation and impairments.

Corporate Governance

Rules, statutes, directives and recommendations pertaining to how a company is managed and controlled. The principles of Corporate Governance at Haniel are described in greater detail in the Corporate Governance report.

COSO – Committee of Sponsoring Organizations of the Treadway Commission

A joint initiative of private sector organisations in the USA dedicated to the development of frameworks and guidance on the establishment and structuring of internal control systems (ICS).

Cost of capital

Product of the weighted average cost of capital and the average capital employed.

Current net assets

essentially comprise trade receivables and inventories less trade payables. This is an indicator used to determine the capital needed to finance operating activities.

DCF – Discounted Cash Flow

A method by which future cash flows from an asset are discounted to determine the net present value of that asset. The Haniel Group uses DCF calculations to assess the profitability of investment projects and business acquisitions and to determine the fair value of non-listed financial instruments.

Debt Issuance Programme

An annually renewed prospectus listed by a European stock market for the issue of medium-term bonds at any time.

Deferred taxes

Differences between the requirements under tax law and the accounting and measurement regulations in accordance with IFRS give rise to variances in the amounts recognised for assets and liabilities. Consequently, the tax burden anticipated on the basis of the profit before taxes reported in the consolidated financial statements differs from the actual amount payable. To allow a corresponding tax expense to be posted in the income statement, the effects of these deviations are counterbalanced by deferrals.

Derivative (derivative financial instrument)

A contract that is dependent on another asset (underlying asset). The fair value of a derivative can therefore be derived from market values of traditional underlying assets, such as stocks and commodities, or from market prices, such as interest rates or exchange rates. Derivatives exist in a range of different forms, such as options, futures, interest rate caps and swaps. In the context of Haniel’s financial management, derivatives are used to hedge risk.

Divisions

Various business activities in the Haniel portfolio.

Early risk identification system

Systematic reporting measures designed to detect adverse, risk-entailing developments in good time with the help of financial and non-financial company-specific indicators and factors. The early risk identification system forms part of risk management.

E-Commerce

The marketing and sale of products and services via the Internet.

Equity method

A method for measuring investments in companies over whose business and financial policy Haniel can exert a significant influence or over which it has joint control (investments accounted for at equity). Under the equity method, the carrying amount of the investment is determined by the change in the investor’s proportionate interest in the investment’s equity. Thus, the carrying amount is increased or decreased by the investor’s share in the investment’s profit or loss for the period. Distributions received from the investment reduce the carrying amount of the investment.

Equity ratio

A capital management indicator within the Haniel Group which is calculated by dividing recognised equity by total assets.

Exchangeable bond

An interest-bearing corporate bond that carries a right to exchange the bond for a specified number of shares in another company. Because of this option, exchangeable bonds have a lower interest rate than normal bonds of the same maturity.

Fair value

A measurement approach based on market prices in accordance with IFRS.

Family-equity company

A holding company owned by a family which combines the professionalism of a private equity investor with the values of a family-owned company.

Financial liabilities

The total non-current and current financial liabilities presented in the consolidated statement of financial position.

Free cash flow

indicates the cash flows from operating activities that were not used for capital expenditures. At Haniel, the free cash flow is the balance of the cash flow from operating activities and the cash flow from investing activities.

Full consolidation

Procedure for including subsidiaries in the consolidated financial statements if they are under the parent company’s control on the basis of a voting right majority or other means of influence. The subsidiary’s individual assets and liabilities are included in full in the consolidated statement of financial position.

Future

A listed derivative in which two parties agree to trade a certain quantity of a reference asset, such as a foreign currency, at a future date at a predetermined price.

Gearing

A capital management indicator within the Haniel Group which is calculated by dividing the net financial position by the recognised equity.

Goodwill

An intangible asset that corresponds to the amount by which the purchase price for a business combination exceeds the total fair value of the assets and liabilities acquired (net assets). Essentially, it represents the favourable future prospects accompanying the acquisition of the combined business and the expertise of the assembled workforce.

Goodwill impairment

If goodwill is recognised in the course of an acquisition, its carrying amount must be tested at least once a year for indication of impairment. If the anticipated future cash flows from sales and other income and expenses associated with the takeover are lower than the carrying amount of goodwill at the time of the impairment test, the goodwill must be written down accordingly.

Haniel cash flow

An internal indicator at the Haniel Group that comprises the profit after taxes, adjusted for all material non-cash income and expenditure, and non-recurring, non-operating income and expenses, plus other cash components. In detail, the profit after taxes is adjusted for non-cash depreciation, amortisation, impairment losses and reversals on non-current assets, the change in pension provisions and other non-current provisions, the income and expenses from changes in deferred taxes, the non-cash income and expenses and dividends from investments accounted for at equity, and the gains and losses from the disposal of non-current assets and consolidated companies and from remeasurement for changes in ownership interests and other non-cash income and expenses.

Haniel value added (HVA)

Value-oriented performance indicator used by the Haniel Group, calculated by subtracting cost of capital from the return.

Hedging

A strategy for managing interest, foreign exchange rate, share price or other market price risks by means of derivatives, which limit the risks associated with the underlying transactions.

HGB – Handelsgesetzbuch (German Commercial Code)

Legal basis for the annual financial statements (separate financial statements) of all companies registered in Germany. This is relevant to German corporations in connection with profit distribution.

IAS – International Accounting Standard(s)

Financial reporting standard(s) within the IFRS international regulatory framework.

IASB – International Accounting Standards Board

An independent, international body which approves and continuously develops the International Financial Reporting Standards (IFRS).

ICS – Internal control system

Systematic control measures for monitoring whether existing rules for reducing risks are being observed. This is intended to ensure the functionality and cost-effectiveness of business processes and to counteract impairments of assets. It covers all material business processes, including accounting. The purpose of the accounting-related ICS is to ensure that financial reporting is reliable and that the risk of misstatements in the external and internal Group Reports is minimised.

IFRS – International Financial Reporting Standard(s)

An international regulatory framework of accounting standards and interpretations which are developed by the IASB (International Accounting Standards Board) and ratified by the European Commission. These accounting standards are intended to ensure the internationally comparable preparation of accounts. Publicly traded companies registered in the EU are required to prepare their consolidated financial statements in accordance with the provisions of IFRS.

IFRS IC – International Financial Reporting Standards Interpretations Committee

An independent, international body which issues interpretations and guidance on issues not specifically covered by the IFRS.

Interest cover ratio

A capital management indicator within the Haniel Group that is derived as a quotient from certain items of the income statement. The sum of the operating profit, result from investments accounted for at equity and other investment result is divided by the sum of the finance costs and other net financial income. This indicator states how many times the interest to be paid to lenders and financial investors is covered by earnings from the operating business and investments.

Investment position of the Haniel Holding Company

Non-current and current financial assets and other assets held by the Haniel Holding Company, excluding cash and cash equivalents, which are available for the acquisition of new divisions.

Market value gearing

Relationship between net financial liabilities at the Haniel Holding Company and the market value of Haniel’s investment portfolio.

Multi-channel

Combination and integration of a variety of channels to approach customers and to market offered products and services.

Net financial liabilities

Difference between financial liabilities and cash and cash equivalents recognised in the consolidated statement of financial position.

Net financial position

Difference between the net financial liabilities and the investment position of the Haniel Holding Company.

Nickel pig iron

A substitute product used particularly in China to produce stainless steel. Nickel pig iron is produced from lower-quality nickel ore which comes primarily from Indonesia and the Philippines.

Non-controlling interests

Interests in the equity of subsidiaries of the Haniel Group held by third parties.

Operating profit

This measure of earnings shows the profit contribution made in the period by the operating business, that is to say from the purchase and sale of goods and the provision of services, after deducting the associated expenses. The amount recognised in the income statement is the result before the profit/loss from investments and discontinued operations, interest and income tax expense.

Option

Agreement between two parties granting one party the right to receive or sell a certain quantity of an underlying asset, such as a foreign currency, at an predetermined price at a later date.

Plan assets

Comprise assets that are held by a fund invested for the long term for satisfying payments to employees as well as qualified insurance contracts.

Publicly traded companies

Enterprises that have issued securities, e.g. shares or bonds, which are publicly listed and traded (on a stock exchange).

Purchase price allocation

Allocation of the purchase price in a business combination to the individual assets and liabilities acquired. The acquired assets and liabilities are measured at fair value. If the total purchase price exceeds the net assets acquired, this gives rise to goodwill.

Rating

A credit score given to companies or financial instruments by agencies, such as Standard & Poor’s, Moody’s, or Scope or banks.

Recognised investments

include the acquisition of non-current assets such as buildings, machinery or software. Specifically, the acquisition of assets reported under property, plant and equipment, intangible assets, investments accounted for at equity or non-current financial assets.

Result from investments accounted for at equity

Includes the portion of the net profit for the period attributable to Haniel which is generated by companies measured in the consolidated financial statements in accordance with the equity method.

Return

Operating profit of continuing and discontinued operations plus profit/loss from investments and other net financial income less income tax expenses.

Return on Capital Employed (ROCE)

Value-oriented performance indicator used within the Haniel Group that is determined by dividing the return by the average capital employed.

Risk management

Systematic procedures for identifying and assessing potential risks for the Group, and for deciding on, implementing and monitoring measures to avoid risks and/or reduce their possible negative impact.

Scope of consolidation

The companies included in the consolidated financial statements.

Statement of cash flows

The statement of cash flows is used to determine and depict cash inflows and outflows. It shows the cash that is generated and expended in a period ( cash flow).

Strategic business unit (SBU)

The organisational level below division. The strategic business units can be structured according to various criteria, e.g. regions or product groups. The strategic business units are frequently depicted in internal controlling and planning processes for analysis purposes, in order to illuminate trends in the divisions.

Superalloys

At the ELG division, these are high-alloy, nickel-containing scrap and titanium scrap processed by ELG for its customers.

Sustainability

The model of sustainable development pursues the objective of engaging in business activity to create not only economic value, but also ecological and social benefits, without undermining the development opportunities of future generations (Corporate Responsibility – CR).

Swap

An agreement between two parties to exchange commodity or cash flows in the future. In an interest rate swap, interest payments are exchanged for an agreed principal amount on the basis of different interest rates. Thus, floating interest rates can be exchanged with fixed interest rates, for example.

United Nations Global Compact (UN Global Compact)

Initiative of the United Nations under which companies undertake to align their business activities and strategies with ten universally accepted principles relating to human rights, labour standards, environmental protection and the fight against corruption.

Web-focused brands

sell their products and services primarily via the Internet.

Weighted average cost of capital (WACC)

represents the return demanded by providers of capital in relation to the capital employed in the company. It is defined as the weighted average cost of equity and debt; the cost of the equity component corresponds to the return expectations of shareholders, taking into account business model-specific risks. The cost of the debt component reflects the company’s financing conditions.