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Consolidated Financial Statements Arbonia Group

Notes to the Consolidated Financial Statements

A Accounting principles

1. General information

Arbonia Group (Arbonia) is a focused building components supplier. Arbonia is divided into two main divisions, namely Climate and Doors. Manufacturing plants are located in Switzerland, Germany, the Czech Republic, Italy, Poland, Belgium, Russia and Serbia. Arbonia owns major brands such as Kermi, Arbonia, Prolux, Koralle, Sabiana, Vasco, Brugman, Superia, RWD Schlatter, Prüm, Garant and Invado and possesses a strong position in its home markets in Switzerland and Germany. The Group focuses on the development of existing markets in Central and Eastern Europe. Arbonia is represented in over 70 countries worldwide.

The Board of Directors of Arbonia is examining several expressions of interest but also offers for the purchase of the Climate Division (formerly HVAC). As at the balance sheet date 31 December 2023, a sale of the Climate Division is considered highly probable and consequently, in accordance with IFRS 5, Arbonia reports the Climate Division as discontinued operations (see note 36).

The ultimate parent company, Arbonia AG is a corporation organised under Swiss law incorporated and domiciled at Amriswilerstrasse 50, CH-9320 Arbon (Canton Thurgau). Arbonia AG is listed on the SIX Swiss Exchange in Zurich under the valor number 11024060 / ISIN CH0110240600.

These consolidated financial statements have been approved for issue by the Board of Directors of Arbonia AG on 20 February 2024 and require approval from the Annual General Meeting on 19 April 2024. The publication of the consolidated financial statements occurred on 27 February 2024 at the media and analyst conference.

2. General principles and basis of preparation

The consolidated financial statements of Arbonia have been prepared in accordance with IFRS Accounting Standards.

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates and assumptions. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies. Areas involving a higher degree of judgement or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 30.

Amendments to significant published standards

The accounting policies adopted in the preparation of the annual consolidated financial statements are consistent with those used in the preparation of the annual consolidated financial statements for the year ended 31 December 2022, except for the adoption of the following amended standard.

Amendments to IAS 1

Arbonia adopted Disclosures of Accounting Policies (Amendments to IAS 1 and Practice Statement 2) for the first time in 2023. Although the amendments did not result in any changes to the accounting policies themselves, they impacted the accounting policy information disclosed in the consolidated financial statements.

The amendments require the disclosure of "material", rather than "significant", accounting policies. The amendments also provide guidance on the application of materiality to disclosure of accounting policies, assisting entities to provide useful, entity-specific accounting policy information that users need to understand the other information in the financial statements. 

Management reviewed the accounting policies and made updates to the information disclosed.

The other new or amended standards had no material impact on the Group’s financial statements.

Published standards that are not yet effective nor adopted early

The published but as of the balance sheet date not yet effective significant new or amended standards will not have a material impact on the Group’s financial statements.

3. Reporting entity

The consolidated financial statements are based on the financial statements of the individual Group companies prepared as of 31 December. Subsidiaries are fully consolidated from the date on which control is transferred to Arbonia (generally where the interest in votes and share capital is more than 50%). They are deconsolidated from the date that control ceases.

Investments in associated companies, over which Arbonia exercises significant influence but does not control, are initially recognised at cost. The cost comprises the share in net assets and a possible goodwill. After the date of acquisition, the investment is accounted for using the equity method. A significant influence is generally assumed by a shareholding of between 20% to 50% of the voting rights.

The following material changes occurred in the Group:

In the financial year 2023

  • As of 24 October 2023, Arbonia acquired 100% of Interwand GmbH, DE-Dörzbach (see note 41).

In the financial year 2022

  • As of 16 July 2022, Arbonia acquired 100% of Joro Türen Gmbh, DE-Renchen (see note 41).
  • As of 5 December 2022, Arbonia acquired 100% of Cirelius S.A., PT-Avintes (see note 41).

An overview of the material Group companies is included in note 60.

4. Full consolidation

In line with the full consolidation method, 100% of all balance sheet and income statement items are included in the consolidated financial statements. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated.

5. Capital consolidation

Subsidiaries are fully consolidated from the date on which control is transferred to Arbonia. The acquisition method of accounting is used to account for the acquisition of subsidiaries. The cost of an acquisition is measured at the fair value of the assets given and liabilities incurred or assumed at the date of exchange. The excess of the cost of acquisition over the fair value of the Group’s share of the identifiable net assets acquired is recorded as goodwill. Contingent considerations are measured at fair value and are included in the purchase price. Subsequent changes to the fair value of the contingent consideration are recognised in the income statement unless the consideration is an equity instrument. Directly attributable acquisition-related costs are expensed.

Companies which are sold are deconsolidated from the date that control ceases. The difference between the consideration received and the net assets is recognised in the income statement as other operating income / expenses.

B Summary of material accounting policy information

6. Material accounting policy information

The principal accounting policies applied in the preparation of these consolidated financial statements are set out below, from notes 7 to 29.

These consolidated financial statements are based on the annual financial statements of the Group companies prepared in accordance with the Group’s uniform accounting policies. Balance sheet items are generally stated at cost as modified by the revaluation of financial instruments at fair value through profit or loss. Assets held for sale and disposal groups are measured at the lower of its carrying amount and fair value less costs to sell. Investments in associated companies are measured at cost at the time of acquisition and subsequently at the proportionate share of equity.

7. Foreign currency translation

Functional and presentation currency

Items included in the financial statements of each Group company are measured using the currency of the primary economic environment in which the company operates (the functional currency). The consolidated financial statements are presented in Swiss francs (CHF).

Transactions and balances

Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income statement.

Group companies

The results and financial position of all the Group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows:

Assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet. Income and expenses for each income statement as well as the cash flow statements are translated at average exchange rates. All resulting exchange differences are recognised as a separate component of comprehensive income under other reserves.

Exchange differences arising on intercompany loans of an equity nature that essentially form part of the company’s net investment in the foreign entity are classified in comprehensive income under other reserves.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing rate.

When a foreign operation is sold or liquidated, exchange differences that were recorded in comprehensive income are recognised in the income statement.

The following foreign currency rates have been applied:

Currency

Unit

2023

2022

Year-end rate

Average rate

Year-end rate

Average rate

EUR

1

0.9284

0.9717

0.9897

1.0053

CZK

100

3.7549

4.0507

4.1041

4.0939

PLN

100

21.3523

21.4040

21.1028

21.4807

CNY

100

11.8129

12.7689

13.3331

14.2048

RUB

100

0.9367

1.0652

1.2829

1.4206

RSD

100

0.7966

0.8286

0.8385

0.8559

8. Maturities

Assets realised or consumed within 12 months in the ordinary course of business or held for trading purposes are classified as current assets. All other assets are classified as non-current assets.

Liabilities to be redeemed in the ordinary course of business, held primarily for the purpose of trading, falling due within 12 months from the balance sheet date or do not have an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date are classified as current liabilities. All other liabilities are classified as non-current liabilities. If a binding commitment to extend an expiring financial liability has been received as of the balance sheet date, the new maturity is also taken into account in the classification.

9. Financial instruments

A financial instrument is a transaction that results in the creation of a financial asset for one party and simultaneously in the creation of a financial liability or equity instrument for the other party.

Financial assets are divided into the following categories: (1) Financial assets measured at amortised cost (FA AC) and (2) Financial assets measured at fair value through profit or loss (FA FVTPL).

At each balance sheet date, financial assets (debt securities) that are not measured at fair value through profit or loss are assessed for expected credit losses. Indications that the creditworthiness of assets is impaired include financial difficulties, breaches of contract and possible bankruptcy of the contracting party. A default with respect to a financial asset exists if it appears unlikely that the contracting party will meet its contractual payments to the Group in full. If loans or receivables have been impaired, the company continues to enforce the receivable to recover it. Financial assets are written-off as soon as there is no reasonable expectation of recovery. Among the indicators that there is no reasonable expectation of recovery is the bankruptcy of the counterparty.

Financial liabilities are divided into the following two categories: (1) Financial liabilities measured at fair value through profit or loss (FL FVTPL) and (2) financial liabilities measured at amortised cost (FL AC).

Financial assets and financial liabilities are normally reported on a gross basis. They are only reported on a net basis if there is at presence a right of offset and an intent to settle on a net basis.

10. Derivative financial instruments

The Group uses derivative financial instruments to minimise interest rate and commodity price risks resulting from operational business and financial transactions. They are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at their fair value.

Arbonia does not apply hedge accounting in accordance with IFRS 9. Derivatives are measured at fair value through profit or loss and disclosed in the balance sheet as other current assets or other current liabilities.

11. Fair value estimation of financial instruments

The fair value of financial instruments traded in active markets (such as publicly traded derivatives and securities) is based on quoted market prices at the balance sheet date. The quoted market price used for financial assets is the current bid price, for financial liabilities the current asking price.

The fair value of financial instruments that are not traded in an active market is determined by using appropriate valuation techniques, e.g. comparison with similar at arm’s length transactions, valuation using the discounted cash flow method or other established valuation methods.

Financial instruments measured at fair value are disclosed under the following hierarchy:

  • Level 1 – quoted prices in active markets for identical assets or liabilities.
  • Level 2 – inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (derived from prices).
  • Level 3 – unobservable market data.

Due to its current nature, the nominal value less estimated allowance of accounts receivable is assumed to approximate their fair value. The nominal value of accounts payable is assumed to approximate their fair value. The fair value of financial liabilities disclosed in note 44 is estimated by discounting the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.

The fair value of financial debts is assigned to level 2 of the above mentioned hierarchy.

12. Cash and cash equivalents

Cash and cash equivalents includes cash on hand, deposits held at call with post and banks, other short-term highly liquid investments with original maturities not exceeding three months. Cash and cash equivalents are subject to the impairment provisions of IFRS 9, but as the expected losses are completely insignificant, no impairment losses have been recognised.

13. Receivables and contract assets

Accounts receivable and other current assets are measured at amortised cost using the effective interest method, less provision for impairment. Accounts receivable and contract assets are regularly monitored and expected credit defaults assessed. The expected losses are estimated as part of the determination of specific allowances. The assessment is based both on historical experience and on current circumstances, as well as on forward-looking information. This includes an assessment of the expected business and economic conditions as well as the future financial performance of the contracting party. Collateral received is taken into account when calculating the provision for impairment. Impairment losses on receivables are recognised using an allowance account.

14. Inventories

Inventories are stated at the lower of cost and net realisable value. Cost is determined using the weighted average cost method based on normal operating capacity. It excludes borrowing costs. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Claimed cash discounts are treated as a reduction of cost. Items with a low turnover rate are depreciated and obsolete items are fully written off.

15. Assets held for sale and associated liabilities

Non-current assets or a disposal group held for sale and liabilities associated with assets held for sale are classified as such if their carrying amount will be recovered principally through a sale transaction, not through continuing use. For this to be the case, the successful sale must be highly probable, an active search for a buyer is taking place and the asset must be available for immediate sale in its present condition. For the sale to be highly probable, management must be committed to a plan to sell the asset, the offer price of the asset is reasonable in relation to its current fair value and the sale is expected to be completed within one year. The assets are stated at the lower of carrying amount and fair value less costs to sell. Potential impairments are directly recorded within the income statement. Starting from the date of reclassification to this category, depreciation is ceased.

16. Discontinued operations

A discontinued operation is a component of an entity that either has been disposed of, or is classified as held for sale and represents a separate major line of business or geographical area of operations. Such a component comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the entity. The classification as discontinued operations occurs on the disposal of the operation or at an earlier point in time, provided the operation meets the criteria for the classification as held for sale. Discontinued operations are disclosed separately in the income statement and previous comparative periods are restated accordingly. However previous year’s balance sheet is not restated.

17. Property, plant and equipment

Land is stated at cost. Buildings, plant, machinery and other equipment are stated at cost less depreciation. Depreciation is calculated using the straight-line method based on estimated useful lives as stipulated under note 21.

Impairments (see also note 20) are separately disclosed under accumulated depreciation. Repair and maintenance costs are expensed.

18. Investment property

Investment property, principally comprising land and buildings, is held for long-term rental yields or appreciation and only an insignificant portion is used for operational purposes. Investment property is carried at cost less accumulated depreciation and any accumulated impairment losses. Depreciation is calculated using the straight-line method.

The fair value of investment property, which is required for disclosure purposes, is determined using the discounted cash flow method. Based on attainable net rental income (gross rental income minus operating costs and future refurbishment costs), the discounted cash flows are calculated for the next 10 years with a residual value for the time thereafter. The fair value of undeveloped land is determined by considering current local market conditions.

19. Intangible assets

Intangible assets include goodwill, which represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net identifiable assets of the acquired subsidiary including contingent liabilities at the date of acquisition. Goodwill is seen as an intangible asset with an indefinite useful life. Impairment on goodwill (see note 20) is separately disclosed under accumulated impairment losses.

Intangible assets comprise computer software and licenses at costs incurred. They are measured at cost less accumulated amortisation, calculated using the straight-line method based on estimated useful lives as stipulated under note 21.

Intangible assets acquired in a business combination (brands, patents, technologies, client relationships, distribution channels, etc.) are carried at fair value less accumulated amortisation, calculated using the straight-line method based on estimated useful lives as stipulated under note 21.

Expenses relating to research activities are directly charged to the income statement in the period in which they are incurred. Development costs are capitalised at acquisition cost or production cost and reported under intangible assets if all criteria under IAS 38 have been met on a cumulative basis, including evidence of technical and economic feasibility, evidence of expected future economic benefit and attributability of costs and their reliable valuation. They are amortised over the expected useful life on the basis specified in note 21. Development costs not meeting the criteria under IAS 38 are directly charged to the income statement in the period in which they are incurred.

20. Impairment of assets

The recoverability of property, plant and equipment, right-of-use assets, investment properties, goodwill and other intangible assets is reviewed whenever events or changes in circumstances indicate that the carrying amounts may be overstated. Intangible assets that have an indefinite useful life, such as goodwill, are tested annually for impairment. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of its fair value less costs to sell and its value in use. The value in use is based on discounted future cash flows. The applied discount rate is a pre-tax rate using the weighted average cost of capital (WACC) method. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash-generating units – CGU).

21. Estimated useful lives

Asset categories

main category

Useful lives(in years)

Office buildings

Land and buildings

35  60

Factory buildings

Land and buildings

25  40

Investment properties – buildings

Investment property - buildings

25  50

Production machinery

Plant and machinery

8  20

Transport and storage equipment

Plant and machinery

8  15

Tools and moulds

Plant and machinery

5

IT-hardware

Plant and machinery

up to 5

Vehicles

Other equipment

5  10

Office furniture and equipment

Other equipment

up to 5

Capitalised development costs

Other intangibleassets

up to 5

Other intangible assets (mainly IT-software)

Other intangibleassets

up to 8

Intangible assets from business combinations

– Customer relationships

Customerrelationships

7  20

– Brands, technologies

Brands, Technologies

10 – 20

– Distribution channels

Other intangibleassets from businesscombinations

10 – 20

– Order backlog

Other intangibleassets from businesscombinations

up to 2

Land is not systematically depreciated.

22. Provisions

Provisions are recognised only when Arbonia has a present legal or constructive obligation as a result of past events, the amount has been reliably estimated and it is more likely than not that an outflow of resources will be required to settle the obligation.

Provisions for restructuring are only recognised when costs for such a programme can be reliably estimated by virtue of a detailed formal plan and Arbonia has a legal or constructive obligation or has raised a valid expectation in those affected.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation. The increase in provision due to passage of time is recognised as interest expense.

23. Employee benefit obligations

Arbonia manages various pension plans within Switzerland and abroad. The plans are funded through payments to trustee-administered funds or insurance companies or are unfunded arrangements.

Based on their characteristics the pension plans qualify under IAS 19 as defined benefit plans. A defined benefit plan is a pension plan that defines an amount of pension benefit that an employee will receive on retirement, usually dependent on one or more factors such as age, years of service and compensation.

The liability recognised in the balance sheet to pay future retirement benefits is determined using the projected unit credit method, which is the present value of the defined benefit obligation at the balance sheet date less the fair value of plan assets. If the fair value of plan assets exceeds the present value of the defined benefit obligation, a pension surplus will only be recognised taking the asset ceiling into account. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates of high-quality bonds. Actuarial valuations are carried out on a regular basis by independent actuaries. Components of defined benefit costs are service cost, net interest result and remeasurement of pension obligations. Service cost includes the increase in current service cost, past service cost (plan amendments or curtailments) and settlements and is reported under personnel expenses. The net interest result is calculated on the net amount of the defined benefit obligation and plan assets using the discount rate and is reported in the financial result. The remeasurement of pension benefit obligations include actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions and is recognised immediately in the statement of comprehensive income in other comprehensive income. Likewise, this position includes the return on plan assets (without interest income) and asset ceiling effects.

24. Financial debts

Current and non-current financial debts consist of promissory note loans, syndicated loans, bank loans and mortgages. Financial debts are initially recognised at fair value, net of transaction costs incurred. They are subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the financial debt, using the effective interest method.

25. Leases

An assessment is made at the beginning of the contract as to whether an agreement constitutes or contains a lease. A contract is or contains a lease if the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration. Arbonia uses the optional exemption not to recognise short-term and low-value leases in the balance sheet, but to recognise the corresponding lease payments as an expense on a straight-line basis over the lease term.

The lease liability is initially measured at the present value of future lease payments during the non-cancellable period of the lease. Arbonia uses incremental borrowing rates as discount rates. On initial measurement, the right-of-use asset corresponds to the lease liability plus any dismantling costs, initial direct costs and advance payments. The right-of-use asset is depreciated on a straight-line basis over the shorter of the useful life and the lease term. If it is intended to exercise a purchase option at the end of the contract period, the asset is depreciated over its useful life. The right-of-use asset is subject to an impairment test if there are indications of impairment.

If the expected lease payments change, e.g. in the case of payments based on an index or due to new estimates regarding contractual options, the lease liability is remeasured. The remeasurement to the lease liability is generally recognised as an adjustment to the related right-of-use asset without affecting the income statement.

26. Deferred income tax

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, the deferred income tax is not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates that have been enacted by the balance sheet date. Deferred income tax is provided on temporary differences arising on investments in subsidiaries, except where the timing of the reversal of the temporary difference is controlled by Arbonia and it is probable that the temporary difference will not reverse in the foreseeable future.

Deferred income tax assets including unused tax loss carryforwards are recognised to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilised.

The book value of capitalised deferred income tax assets is assessed for impairment at each balance sheet date and a loss is recognised in case of insufficient future taxable profit.

27. Share based payment

Members of the Board of Directors and Group Manage- ment as well as certain employees participate in a share based payment plan. The fair value of the equity compensation instruments granted to employees is estimated at the grant date and recorded over the service period to the income statement as personnel expenses with a corresponding offsetting entry to equity.

28. Shareholders’ equity

The share premium relates to the Company going public back in 1988 and the capital increases in 2007, 2009, 2015, 2016 and 2017 reduced by previous distributions. Retained earnings include also remeasurements of employee benefit obligations.

Treasury shares are deducted from shareholders’ equity. The cost of these treasury shares and the consideration received from the sale of these instruments (net of transaction cost and taxes) are recorded directly in shareholders’ equity.

The other reserves include currency effects due to the translation of the financial statements of foreign Group companies and on intercompany loans of an equity nature.

29. Income statement

Net revenue

The Climate Division generates its sales in the heating technology sector by selling individual product components as well as complete system solutions for residential, commercial and public construction. In the ventilation and air conditioning sector, the product portfolio includes fan coils, ceiling systems, air heaters and ventilation units, as well as systems for residential, commercial and industrial buildings. In addition, radiators, underfloor heating systems, heating walls, underfloor convectors, heat pumps and battery storage units are sold.

With its Wood Solutions Business Unit, the Doors Division generates its sales by selling interior and functional doors in a wide variety of designs and configurations. In the area of Glass Solutions, the division generates its sales through the sale of shower areas, shower enclosures and shower stalls for individual bathroom situations.

Contracts within the Division Climate and the Business Unit Glass Solutions may include several different products which qualify as separate performance obligations. The performance obligation is generally fulfilled when the customer has received delivery. The individual products of a contract are delivered at the same time. It is therefore not necessary to allocate the transaction price to the individual performance obligations. At the time of delivery the invoice is issued and hence a recognition of a contract asset is not required. Revenue is therefore recognized at a point in time.

In the short-term series production (resale /  commercial business) of the Wood Solutions business, the transactions always consist of one single performance obligation. The performance obligation is fulfilled when the customer has received the delivery. As a result of that, an invoice is issued and hence recognition of a contract asset is not required.

The variable considerations can be reliably measured at the time the performance obligation is fulfilled and are taken into account as sales deductions. Payment periods customary in the industry are granted unless special payment periods have been agreed. There is therefore no financing component.

The Wood Solutions Business Unit and a minor part of the Division Climate operate, in addition to the short-term series production, in the project business. The project business is characterised by long-term contracts which partially have a duration of over one year. The products are made to measure, have no alternative use and therefore fulfil the criteria for revenue recognition over time. The performance obligation is progressively satisfied over the period of the provided services (planning, production, assembly, acceptance) using the cost-to-cost method. Under the cost-to-cost method, the stage of completion is measured based on the ratio of costs incurred to date to the total budgeted costs. Revenue is recognised in proportion to the contract costs incurred. Therefore, revenue is recognised over the term of a contract. The allocation of the transaction price to separate performance obligations is not required because of the existence of only one performance obligation in the project business. Variable considerations such as discounts or construction rebates which can be measured reliably are deducted from the transaction price at the beginning of the contract term. In this way, these revenue reductions can be realised proportionally to the revenue recognition over the contract term. For reasons of materiality, it is not necessary to adjust the consideration for the time value of money or to measure non-cash consideration. If revenue is recognised as mentioned before, but the expected amount of consideration has not yet been invoiced, then a contract asset is recognised due to the conditional right to consideration. Accounts receivable from project business are recognised when the right to the consideration becomes unconditional. The right becomes unconditional when an acceptance protocol is signed and accordingly the invoice is issued to the customer. Payment periods customary in the industry are granted unless special payment periods have been agreed. The contract liability relates to contracts whose partial payments exceed the stage of completion or the revenue already recognised respectively, on a net contract-by-contract basis. Contract liabilities are recognised as revenue when the contractual performance obligation has been satisfied. Based on the analysed order durations, there are no significant financing components. The treatment of loss-making contracts occurs regardless of the stage of completion by recognising a provision amounting to the total contract loss resulting from the total budgeted costs not covered by the total amount of the transaction price.

Net revenues are reported net of sales or value-added taxes and are shown net of sales deductions.

If significant costs are incurred in the course of initiating or fulfilling a contract with a customer, these are capitalised.

The assessment of right of return, refund and similar obligations is not necessary as they do not constitute an integral part of Arbonia’s business.

Revenues from contracts with customers are broken down by category in the segment reporting. Segment reporting also shows a breakdown of revenues recognised at a point in time and satisfied over time.

Other operating income

Other operating income is recognised when the service has been rendered and comprises amongst others proceeds from the sale of scrap metal, service income, rental income, insurance benefits and gains on the sale of property, plant and equipment.

EBITDA

EBITDA shows earnings before financial results, tax, depreciation and amortisation on non-current assets.

EBITA

EBITA shows earnings before financial results, tax and amortisation of intangible assets from acquisitions.

EBIT

EBIT shows earnings before financial results and tax.

Financial income

Financial income comprises amongst others interest income and minority share from associated companies. Interest income is recognised on a time-proportion basis using the effective interest method.

Financial expenses

Financial expenses primarily include interest expenses, minority share from associated companies, bank charges and foreign exchange losses. Interest expenses are recognised using the effective interest method. Foreign exchange gains and losses are shown on a net basis.

30. Significant accounting judgments, estimates and assumptions

All estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. Arbonia makes judgments, estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, not always equal the related actual results. The judgments, estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.

Revenue recognition

In project business, sales are realised over a period of time. Arbonia determines the stage of completion by using the cost-to-cost method. In Arbonia’s opinion, this method best depicts the transfer of control of the products to the customer. Under the cost-to-cost method, the stage of completion is measured based on the ratio of costs incurred to date to the total budgeted costs. Changes due to post calculations and actively managed project controlling are taken into account when determining the stage of completion. Such changes in estimates are recognised prospectively. Revenue is recognised proportionally as costs are incurred. If the expected margin cannot be measured reliably, then revenue is recognised only in the amount of costs incurred.

Inventory provision

In order to determine the adequacy of the inventory provision, factors such as expected sales prices, inventory turnover and coverage days of inventory are considered. As of 31 December 2023, the carrying amount of inventory was at CHF 55.4 million. Therein a provision for inventories of CHF 6.1 million is included. A falling market demand or falling sales prices could lead to additional provisions needed. For further information on the inventory provision, see note 34.

Useful lives for property, plant and equipment

Arbonia has a significant amount of its assets invested in property, plant and equipment. As of 31 December 2023, the carrying amount of property, plant and equipment totalled CHF 393.1 million. At the time of the purchase useful lives for such assets are based on estimates, as technical obsolescence or competition could lead to shorter useful lives than initially anticipated. Therefore the determination of useful lives is based on stringent standards and thereafter continuously reviewed and if necessary adjusted. A change in estimate could impact the level of future depreciation charges. For further information on property, plant and equipment, see note 37.

Estimated impairment of goodwill

As of 31 December 2023, the carrying amount of goodwill was at CHF 146.1 million. Arbonia tests at least annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note 20. The recoverable amounts of cash-generating units have been determined based on value in use calculations. These calculations require the use of estimates such as expected future cash flows, margins, discount rates and growth rates. These estimates could change or differ from the actual outcome and therefore lead to additional impairments. For further information on goodwill, see note 40.

Intangible assets acquired in a business combination

Brands, technologies, client relationships and distribution channels are amortised over their estimated useful lives. At initial recognition, assumptions and estimates must be made about the expected cash flows such as sales prices, margins, discount rates, attrition rates of clients and technological development which of course are exposed to some uncertainties. As of 31 December 2023, the carrying amount of intangible assets acquired in a business combination amounted to CHF 73.3 million. For further information on such acquired intangible assets, see note 40.

Provisions

Provisions are recognised based on the criteria as set out under note 22. As of 31 December 2023, the carrying amount of the provisions totalled CHF 8.3 million. In estimating the amount of provision, assumptions are used and depending on the outcome of the various business transactions, the actual cash outflow and its timing could significantly differ from the booked provision. For further information on provisions, see note 45.

Employee benefit obligations

Employee benefit obligations for defined benefit plans are based on actuarial valuations, which use statistical calculations and actuarial assumptions (see note 23). Such assumptions include amongst others future salary and pension increases, probable turnover rates as well as life expectancy of plan participants. The assumptions underlying these calculations are dependent on a number of prospective factors, therefore actual results could significantly differ from the original valuations and as a consequence impact the carrying amount of capitalised pension surplus and employee benefit obligation. As of 31 December 2023, the overfunding amounted to CHF 12.8 million, thereof CHF 24.5  million recorded in the balance sheet as capitalised pension surplus and CHF 11.7 million as employee benefit obligation. For further information on employee benefit obligation, see note 47.

Income taxes

Arbonia is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the worldwide liability for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. Arbonia recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will become due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax in the period in which such determination is made. Deferred tax assets, including those on tax loss carryforwards and expected tax credits, are only recognised if it is probable that they can be used by future taxable profits. The assessment of the recoverability of those deferred tax assets is therefore based on estimates, which could differ from actual results and consequently lead to valuation allowances. As of 31 December 2023, the carrying amount of deferred tax assets before offsetting totalled CHF 23.0 million. For further information on income taxes, see notes 46 and 52.

C Explanation to certain positions of the consolidated financial statements

31. Segment information

Arbonia is organised into the divisions or segments Climate (formerly HVAC) and Doors. Corporate Services which mainly include service, finance, real estate and investment companies, provides their services almost entirely to Group companies. They have not been allocated to an operating segment and are therefore shown separately.

For the monitoring and assessment of the financial performance, EBITDA, EBITA and EBIT are pivotal key measures. However, Group Management and the Board of Directors also are provided with financial data down to the line item "result after income tax" by operating segment. The segments apply the same accounting policies as the Group. Purchases, sales and services between segments are entered into under normal commercial terms and conditions that would also be available to unrelated third parties. Income and expenses between segments are eliminated on consolidation and disclosed in "Eliminations".

Segment assets and liabilities include all assets, liabilities and intercompany transactions. Goodwill has been allocated to the respective segments.

Climate Division (formerly HVAC)

Climate Division is a leading and highly integrated provider to the industry. Under the main brands – Kermi, Arbonia, Prolux, Sabiana, Vasco, Superia and Brugman – it sells its wide product range across Europe. Production takes place in Germany, the Czech Republic, Italy, Belgium, Poland, Russia and Serbia. In addition a large number of sales locations in Europe and a world-wide network of exclusive distribution partners ensure customer proximity.

The Board of Directors of Arbonia is examining several expressions of interest but also offers for the purchase of the Climate Division (formerly HVAC). As at the balance sheet date 31 December 2023, a sale of the Climate Division is considered highly probable and consequently, in accordance with IFRS 5, Arbonia reports the Climate Division as discontinued operations (see note 36).

Doors Division

With its Wood Solutions Business Unit and the associated companies Prüm, Garant, Invado and RWD Schlatter, the Doors Division is one of Europe’s leading suppliers of interior doors and wood frames. In its domestic markets, the business unit offers its customers a comprehensive product range from standard doors to complex functional doors. With the Glass Solutions Business Unit and the well-known brands Kermi, Koralle and Baduscho, the Doors Division is also the European market leader with shower solutions for all generations and lifestyles. The Doors Division has eight production sites: five are located in Germany, two in Switzerland and one in Poland.

Corporate Services

Corporate Services mainly consists of service, finance, real estate and investment companies. These companies provide their services across divisions and almost entirely to Group companies.

in 1 000 CHF

2023

Climate

Doors

Total reportable segments

Corporate Services

Eliminations

Total Group

Sales with third parties at point in time

567 131

439 489

1 006 620

3 065

1 009 685

Sales with third parties over time

9 476

62 051

71 527

71 527

Sales with other segments

23

23

– 23

Net revenues

576 607

501 563

1 078 170

3 065

– 23

1 081 212

Segment results I (EBITDA)

42 771

39 138

81 909

– 8 858

34

73 085

in % of net revenues

7.4

7.8

7.6

6.8

Depreciation and amortisation

– 30 761

– 26 528

– 57 289

– 2 449

– 59 738

Reversal of impairment on property, plant and equipment

167

167

167

Impairment property, plant and equipment

– 1 232

– 1 232

– 1 232

Segment results II (EBITA)

10 945

12 610

23 555

– 11 306

34

12 283

in % of net revenues

1.9

2.5

2.2

1.1

Amortisation of intangible assets from acquisitions

– 5 411

– 11 600

– 17 011

– 17 011

Segment results III (EBIT)

5 534

1 010

6 544

– 11 306

34

– 4 728

in % of net revenues

1.0

0.2

0.6

– 0.4

Interest income

1 337

272

1 609

29 869

– 30 936

542

Interest expenses

– 15 364

– 17 302

– 32 666

– 8 540

30 983

– 10 223

Minority share from associated companies

– 674

– 674

– 674

Other financial result

– 4 805

– 2 806

– 7 611

9 888

– 10 669

– 8 392

Result before income tax

– 13 298

– 19 500

– 32 798

19 912

– 10 588

– 23 475

Income tax expense

– 3 544

4 714

1 170

5 092

6 263

Result after income tax

– 16 842

– 14 786

– 31 628

25 004

– 10 588

– 17 212

Average number of employees

3 054

3 025

6 079

95

6 174

Total assets

657 381

795 442

1 452 823

1 138 000

– 1 108 245

1 482 578

thereof associated companies

22 497

22 497

22 497

Total liabilities

427 960

471 998

899 958

282 785

– 621 136

561 607

Purchases of property, plant and equipment, right-of-use assets, investment properties and intangible assets

42 502

58 993

101 495

1 816

103 311

The impairment in the Climate Division relates to machinery in connection with the relocation of the production of design radiators from a production site in Belgium.

in 1 000 CHF

2022

Climate

Doors

Total reportable segments

Corporate Services

Eliminations

Total Group

Sales with third parties at point in time

636 650

483 442

1 120 092

3 219

1 123 311

Sales with third parties over time

9 541

69 245

78 786

78 786

Sales with other segments

51

51

– 51

Net revenues

646 191

552 738

1 198 929

3 219

– 51

1 202 097

Segment results I (EBITDA)

58 569

59 217

117 786

– 9 488

5

108 303

in % of net revenues

9.1

10.7

9.8

9.0

Depreciation and amortisation

– 29 439

– 23 551

– 52 990

– 2 079

– 55 069

Impairment right-of-use assets

– 262

– 262

– 262

Segment results II (EBITA)

29 130

35 404

64 534

– 11 567

5

52 972

in % of net revenues

4.5

6.4

5.4

4.4

Amortisation of intangible assets from acquisitions

– 4 538

– 11 420

– 15 958

– 15 958

Segment results III (EBIT)

24 592

23 984

48 576

– 11 567

5

37 014

in % of net revenues

3.8

4.3

4.1

3.1

Interest income

675

134

809

9 667

– 10 075

401

Interest expenses

– 6 751

– 4 521

– 11 272

– 2 978

10 089

– 4 161

Minority share from associated companies

1 263

1 263

1 263

Other financial result

– 2 467

– 3 235

– 5 703

15 250

– 14 246

– 4 699

Result before income tax

16 048

17 625

33 674

10 372

– 14 227

29 818

Income tax expense

– 4 463

– 3 757

– 8 220

– 926

– 9 146

Result after income tax

11 585

13 868

25 454

9 446

– 14 227

20 672

Average number of employees

3 239

3 176

6 415

117

6 532

Total assets

704 699

795 510

1 500 209

1 116 381

– 1 097 078

1 519 512

thereof associated companies

10 457

10 457

10 457

Total liabilities

441 430

455 184

896 614

253 775

– 618 419

531 970

Purchases of property, plant and equipment, right-of-use assets, investment properties and intangible assets

52 774

104 073

156 847

30 115

186 962

The consolidated financial statements were prepared in accordance with IFRS 5 "Non-current assets held for sale and discontinued operations" and the related disclosures and adjustments of certain prior-year figures. The above-mentioned segment information however follows internal management reporting, which is why the discontinued operations per note 36 consisting of the Climate Division are also included.

The reconciliation of the continuing and discontinued operations on the segment information is presented as follows:

in 1 000 CHF

2023

Continuing operations

Discontinued operations Climate

Total segments

Net revenues

504 605

576 607

1 081 212

Segment results I (EBITDA)

31 719

41 367

73 085

in % of net revenues

6.3

7.2

6.8

Segment results II (EBITA)

2 741

9 542

12 283

in % of net revenues

0.5

1.7

1.1

Segment results III (EBIT)

– 8 858

4 130

– 4 728

in % of net revenues

– 1.8

0.7

– 0.4

Interest result

– 7 976

– 1 705

– 9 681

Other financial result

– 7 191

– 1 875

– 9 066

Result before income tax

– 24 025

551

– 23 475

Income tax expense

9 806

– 3 543

6 263

Result after income tax

– 14 219

– 2 992

– 17 212

Total assets

862 766

619 812

1 482 578

Total liabilities

366 414

195 193

561 607

in 1 000 CHF

2022

Continuing operations

Discontinued operations Climate

Total segments

Net revenues

555 906

646 191

1 202 097

Segment results I (EBITDA)

49 735

58 568

108 303

in % of net revenues

8.9

9.1

9.0

Segment results II (EBITA)

23 842

29 130

52 972

in % of net revenues

4.3

4.5

4.4

Segment results III (EBIT)

12 423

24 591

37 014

in % of net revenues

2.2

3.8

3.1

Interest result

– 2 906

– 854

– 3 760

Other financial result

– 4 336

900

– 3 436

Result before income tax

5 181

24 636

29 818

Income tax expense

– 4 683

– 4 463

– 9 146

Result after income tax

498

20 174

20 672

Total assets

852 521

666 991

1 519 512

Total liabilities

339 813

192 157

531 970

Information about geographical areas

in 1 000 CHF

2023

Switzerland

Germany

Other Countries

Total

Net revenues

118 780

309 043

76 782

504 605

Property, plant and equipment, right-of-use assets, investment properties, intangible assets and goodwill

115 367

483 608

60 281

659 256

in 1 000 CHF

2022 restated 1

Switzerland

Germany

Other Countries

Total

Net revenues

125 126

346 620

84 160

555 906

Property, plant and equipment, right-of-use assets, investment properties, intangible assets and goodwill

114 909

619 635

342 046

1 076 590

1 see note 36

Major customers

Arbonia has no customer who generates more than 10% of the Group’s net revenues (see also paragraph credit default risk in note 53).

32. Cash and cash equivalents

Cash and cash equivalents are denominated in the following currencies:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

CHF

4 793

1 382

EUR

9 496

18 638

PLN

1 530

751

CZK

1 200

1 971

RUB

3 502

Other currencies

141

2 952

Total

17 160

29 196

33. Accounts receivable / contract balances

Accounts receivable

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Accounts receivable

53 554

117 773

Allowance for accounts receivable

– 3 513

– 8 214

Total

50 041

109 559

thereof accounts receivable project business

18 316

9 920

The allowance for accounts receivable includes expected credit losses and cash discounts.

The ageing analysis is as follows:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Not yet due

43 601

96 423

Overdue up to 30 days

4 513

7 246

Overdue more than 30, less than 60 days

1 096

2 811

Overdue more than 60, less than 90 days

363

1 797

Overdue more than 90, less than 180 days

351

1 003

Overdue more than 180, less than 360 days

139

306

Overdue more than 360 days

– 22

– 27

Total accounts receivable, net

50 041

109 559

Outstanding accounts receivable amounting to CHF 12.7 million (2022: CHF 74.5 million) were secured and mainly consist of credit insurances. No allowances are made on the secured receivables.

The expected credit losses on accounts receivable developed as follows:

in 1 000 CHF

2023

2022

Balance at 01/ 01

– 3 892

– 4 206

Foreign exchange differences

106

84

Changes in scope of consolidation

– 82

– 175

Additional allowances

– 1 049

– 323

Used during year

540

474

Unused amounts reversed

319

253

Reclassification to assets held for sale

2 172

Balance at 31/ 12

– 1 886

– 3 892

Contract balance

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Contract assets project business

7 068

18 822

Total contract assets

7 068

18 822

Contract liabilities project business

6 413

6 592

Other advance payments by customers

1 522

3 207

Total contract liabilities

7 935

9 799

The contract balances project business result from Arbonia’s longer-term contracts. Revenues recognised over the term of a contract are shown as contract assets. Contract assets are presented on a net contract-by-contract basis, e.g. less the received partial payments. As soon as the acceptance protocol is signed, the final invoice is issued and the items are transferred to accounts receivable. The movement in the contract assets is as follows:

in 1 000 CHF

2023

2022

Balance at 01/ 01

18 822

13 527

Foreign exchange differences

– 43

– 45

Reclassification of contract assets existing at the beginning of the period to accounts receivable

– 15 776

– 10 424

Revenue recognition on projects in progress as of the balance sheet date based on percentage of completion

5 811

36 757

Offset against contract liabilities due to partial payments received

– 882

– 20 993

Reclassification to assets held for sale

– 864

Balance at 31/ 12

7 068

18 822

The contract liabilities project business relate to contracts whose partial payments exceed the stage of completion. Contract liabilities are recognised as revenue when the contractual performance obligation has been satisfied. The movement in the contract liabilities project business is as follows:

in 1 000 CHF

2023

2022

Balance at 01/ 01

6 592

5 317

Foreign exchange differences

– 288

– 143

Revenue recognised from amounts included in the contract liabilities at the beginning of the period

– 3 516

– 623

Partial payments received for projects in progress at the balance sheet date

10 528

23 034

Offset against contract assets

– 882

– 20 993

Reclassification to assets held for sale

– 6 021

Balance at 31/ 12

6 413

6 592

In 2023, there were no known default risks and therefore no need for specific allowances on contract assets. The expected credit losses are estimated to be insignificant and therefore no allowance was made.

There have been no general changes in the timeframe until an enforceable right for consideration or a performance obligation is fulfilled.

The expected revenues to be recognised on the current order backlog are as follows:

in 1 000 CHF

within 1 year

in 1-2 years

after 2 years

Revenues expected to be recognised on uncompleted order backlog as at 31/ 12/ 2023

21 331

1 419

Revenues expected to be recognised on uncompleted order backlog as at 31/ 12/ 2022

62 799

16 401

576

These amounts only include contracts of project business with an expected original duration of more than one year.

34. Inventories

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Raw material and supplies

29 264

119 601

Semi-finished and finished goods

24 156

96 132

Goods purchased for resale

1 872

10 787

Prepayments

123

401

Total

55 415

226 921

A provision of CHF 6.1 million (2022: CHF 19.7 million) has been provided for obsolete and slow-moving items and is deducted from inventories. 2023 and 2022, there are no material inventories written down to the net realisable value and no material write-downs to net realisable value were recorded.

35. Financial assets

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Investments in associated companies > 20 % < 50 %

22 497

10 457

Other financial assets

18

424

Loans

40

Total

22 515

10 921

thereof disclosed as current assets

12

In November 2023, Arbonia further increased its shares in the German KIWI-KI GmbH, DE-Berlin, and now holds 49.9% of the company. The purchase price amounted to CHF 1.8 million. In the cash flow statement, the cash outflow is included in the position issuance of financial assets.

In October 2022, Arbonia had increased its shares in the KIWI-KI GmbH and held 34.0% of the company as at 31 December 2022.

In April 2023, Arbonia acquired 17.2% of the German Griffwerk GmbH, DE-Blaustein. The purchase price was CHF 12.2 million and was paid almost exclusively in Arbonia shares.

Although Arbonia holds less than 20% of the ownership interest and voting control of Griffwerk, Arbonia has the ability to exercise significant influence. This influence results, among other things, from the shareholding, the active participation of the representatives provided by Arbonia in the shareholders' meeting and in the advisory board of Griffwerk as well as from the cooperation agreement concluded with Griffwerk. The investment in Griffwerk is consequently valued using the equity method.

Associated companies

in 1 000 CHF

2023

2022

Balance at 01/ 01

10 457

7 276

Foreign exchange differences

– 1 320

– 374

Increase of investment

14 034

2 292

Minority share from associated companies

– 674

1 263

Balance at 31/ 12

22 497

10 457

Subsequently, the financial information of the associated companies are disclosed in condensed form.

Associated companies – Balance sheet

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Current assets

40 007

8 348

Non-current assets

3 378

1 454

Total assets

43 384

9 802

Current liabilities

7 480

952

Shareholders' equity

35 904

8 850

Total liabilities and shareholders' equity

43 384

9 802

Associated companies - Income statement

in 1 000 CHF

2023

2022

Net revenues

25 122

9 205

Results after taxes

2 358

3 730

Business transactions with associated companies

in 1 000 CHF

2023

2022

Sale of goods and services

299

Purchase of goods and services

33

1

36. Non-current assets held for sale and discontinued operations

The Board of Directors of Arbonia is examining several expressions of interest but also offers for the purchase of the Climate Division (formerly HVAC). As at the balance sheet date 31 December 2023, a sale of the Climate Division is considered highly probable and consequently, in accordance with IFRS 5, Arbonia reports the Climate Division as discontinued operations. All prior-year figures in the income statement and the accompanying notes have been adjusted accordingly. In the consolidated balance sheet as of 31 December 2023, assets and liabilities of the discontinued operations Climate are disclosed in the respective held for sale asset and liability positions. Previous year's figures in the balance sheet, however, were not adjusted.

Assets held for sale and discontinued operations

in 1 000 CHF

31/ 12/ 2023

Cash and cash equivalents

13 756

Receivables and other assets

79 927

Inventories and contract assets

129 055

Deferred expenses

1 276

Financial assets

407

Property, plant and equipment and right-of-use assets

288 064

Investment property

4 095

Intangible assets and goodwill

92 215

Deferred income tax assets

3 812

Capitalised pension surplus

7 205

Total

619 812

Liabilities associated with assets held for sale and discontinued operations

in 1 000 CHF

31/ 12/ 2023

Liabilities

78 108

Financial debts and lease liabilities

22 174

Accruals and deferred income

24 842

Provisions

17 485

Deferred income tax liabilities

19 572

Employee benefit obligations

33 012

Total

195 193

Result from discontinued operations

in 1 000 CHF

2023

2022

Net revenues

576 607

646 191

Other operating income and capitalised own services

11 835

12 436

Changes in inventories of semi-finished and finished goods

– 7 547

4 781

Cost of material and goods

– 286 261

– 354 522

Personnel expenses

– 163 724

– 156 815

Other operating expenses

– 89 543

– 93 503

EBITDA

41 367

58 568

Depreciation, amortisation and impairments

– 31 827

– 29 438

Amortisation of intangible assets from acquisitions

– 5 410

– 4 539

EBIT

4 130

24 591

Financial result

– 3 579

45

Result from discontinued operations before income tax

551

24 636

Income tax expense

– 3 544

– 4 463

Result from discontinued operations

– 2 993

20 174

Loss on disposal of discontinued operations

– 1 545

Net result from discontinued operations

– 2 993

18 629

The results for the reporting period 2023 includes currently incurred sales costs for the disposal of the Climate Division of CHF 1.4 million.

In 2022, costs of CHF 2.5 million were incurred for the sale of the windows business and provisions of CHF 1.0 million built for the sale were not used and could be released over the income statement.

In the consolidated cash flow statement, the cash flows from the discontinued operations are included, however, subsequently condensed and shown separately below.

Cash flow from discontinued operations

in 1 000 CHF

2023

2022

Cash flows from operating activities

48 259

– 16 652

Cash flows from investing activities

– 33 674

– 44 471

Cash flows from financing activities

– 6 570

– 5 859

As per 31 December 2023, other comprehensive income includes cumulative expenses in connection with discontinued operations totalling around CHF 82 million.

37. Property, plant and equipment

in 1 000 CHF

Land and buildings

Plant and machinery

Other equipment

Prepayments and assets under construction

Total

Net book value at 01/ 01/ 2022

247 336

198 502

14 106

130 409

590 353

Cost

Balance at 01/ 01/ 2022

361 672

408 959

46 192

136 769

953 591

Foreign exchange differences

– 12 461

– 14 709

– 1 487

– 5 094

– 33 751

Change in scope of consolidation

2 593

1 982

255

4 830

Additions

38 442

15 338

6 477

97 728

157 985

Disposals

– 1 617

– 15 282

– 3 015

– 22

– 19 936

Reclassifications

4 125

45 187

1 281

– 62 734

– 12 141

Balance at 31/ 12/ 2022

392 754

441 475

49 703

166 647

1 050 578

Foreign exchange differences

– 25 105

– 34 584

– 2 880

– 8 879

– 71 448

Change in scope of consolidation

2 984

361

71

3 416

Additions

10 413

10 318

4 340

52 507

77 578

Disposals

– 84

– 11 217

– 2 238

– 105

– 13 644

Reclassification to assets held for sale

– 230 828

– 278 499

– 27 678

– 14 822

– 551 827

Reclassifications

32 615

41 423

– 1 347

– 75 185

– 2 494

Balance at 31/ 12/ 2023

182 749

169 277

19 971

120 163

492 159

in 1 000 CHF

Land and buildings

Plant and machinery

Other equipment

Prepayments and assets under construction

Total

Accumulated depreciation

Balance at 01/ 01/ 2022

114 335

210 457

32 086

6 360

363 238

Foreign exchange differences

– 4 098

– 7 527

– 990

949

– 11 666

Depreciation

10 386

28 131

4 500

43 017

Disposals

– 1 223

– 15 162

– 2 877

– 19 262

Reclassifications

– 63

7 356

70

– 7 133

230

Balance at 31/ 12/ 2022

119 337

223 255

32 789

176

375 557

Foreign exchange differences

– 7 768

– 18 487

– 1 982

– 28 237

Depreciation

10 853

29 894

4 706

45 453

Impairment

1 232

1 232

Reversal of impairment

– 167

– 167

Disposals

– 38

– 11 053

– 2 065

– 13 156

Reclassification to assets held for sale

– 96 497

– 167 007

– 18 285

– 227

– 282 016

Reclassifications

1 497

– 1 195

51

353

Balance at 31/ 12/ 2023

25 887

59 164

13 968

99 019

Net book value at 31/ 12/ 2022

273 416

218 220

16 914

166 471

675 021

Net book value at 31/ 12/ 2023

156 861

110 113

6 003

120 163

393 140

No borrowing costs were capitalised in 2023 and 2022.

Capital commitments

As of the balance sheet date, Arbonia had entered into the following capital commitments for the purchase of property, plant and equipment and intangible assets:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Property, plant and equipment

22 443

51 976

Intangible assets

124

Total

22 443

52 100

Land and buildings amounting to CHF 37.1 million (2022: CHF 39.6 million) are pledged to secure mortgages, which are fully attributable to discontinued operations.

38. Leasing

Arbonia leases various assets, including buildings, machinery, vehicles, tools and IT equipment. The lease conditions are negotiated individually and contain a variety of different conditions. The rights-of-use assets in connection with these leases are as follows:

in 1 000 CHF

Right-of-use buildings

Right-of-use plant and machinery

Right-of-use other equipment

Total

Net book value at 01/ 01/ 2022

33 867

4 090

6 589

44 546

Cost

Balance at 01/ 01/ 2022

45 781

6 509

14 685

66 975

Foreign exchange differences

– 909

– 247

– 561

– 1 717

Change in scope of consolidation

1 922

12

1 934

Additions

9 307

409

2 803

12 519

Disposals and remeasurements

– 31 927

– 503

– 2 909

– 35 339

Reclassifications

– 10

– 749

– 149

– 908

Balance at 31/ 12/ 2022

24 164

5 419

13 881

43 464

Foreign exchange differences

– 1 541

– 454

– 702

– 2 697

Change in scope of consolidation

33

133

166

Additions

5 031

1 086

4 254

10 371

Disposals and remeasurements

735

– 279

– 3 815

– 3 359

Reclassification to assets held for sale

– 19 358

– 4 617

– 8 728

– 32 703

Reclassifications

– 680

– 680

Balance at 31/ 12/ 2023

9 064

1 155

4 343

14 562

in 1 000 CHF

Right-of-use buildings

Right-of-use plant and machinery

Right-of-use other equipment

Total

Accumulated depreciation

Balance at 01/ 01/ 2022

11 914

2 419

8 096

22 429

Foreign exchange differences

– 299

– 98

– 299

– 696

Depreciation

3 889

737

3 335

7 961

Impairment

262

262

Disposals

– 6 899

– 485

– 2 836

– 10 220

Reclassifications

– 208

– 70

– 278

Balance at 31/ 12/ 2022

8 867

2 365

8 226

19 458

Foreign exchange differences

– 494

– 245

– 366

– 1 105

Depreciation

4 251

821

3 252

8 324

Disposals

– 1 294

– 119

– 4 079

– 5 492

Reclassification to assets held for sale

– 7 914

– 2 225

– 4 311

– 14 450

Reclassifications

– 167

– 208

– 375

Balance at 31/ 12/ 2023

3 416

430

2 514

6 360

Net book value at 31/ 12/ 2022

15 297

3 054

5 655

24 006

Net book value at 31/ 12/ 2023

5 648

725

1 829

8 202

The disposals in the right-of-use buildings in 2022 included the Corporate Center in CH-Arbon for CHF 21.5 million. In the 2nd quarter of 2022, Arbonia had repurchased the Corporate Center prematurely for CHF 25.1 million and thus also early terminated the lease agreement. The lease agreement had an original term until 31 August 2027. The lease liability and the purchase price obligation recognised in other non-current liabilities were derecognised against the right-of-use asset.

Other operating expenses include the following expenses in connection with leases:

in 1 000 CHF

2023

2022 restated1

Expenses relating to short-term leases

841

989

Expenses relating to leases of low-value assets (excluding short-term leases)

308

430

Expenses for variable lease payments

412

738

Total

1 561

2 157

1 see note 36

Total cash outflows for leases amounted to CHF 12.8 million in 2023 (2022: CHF 13.2 million). Of this amount, CHF 4.8 million (2022: CHF 5.6 million) was attributable to continuing operations.

Some of Arbonia’s rental leases include renewal options. The determination of the lease term of these leases requires judgement. The assessment of whether it is reasonably certain to exercise such options impacts the lease term, which significantly affects the amount of lease liabilities and right-of-use assets recognised. In its assessment, Arbonia considers the facts and circumstances that create an economic incentive to exercise such options. The assessment is reviewed if a significant event or a significant change in circumstances occurs. As of 31 December 2023, possible future cash outflows of CHF 0.9 million (2022: CHF 0.9 million) were not included in the lease liability as it is not reasonably certain that the lease agreements will be renewed.

39. Investment property

in 1 000 CHF

Investment property – land

Investment property – buildings

Total

Net book value at 01/ 01/ 2022

1 104

148

1 252

Cost

Balance at 01/ 01/ 2022

1 603

24 728

26 331

Foreign exchange differences

– 66

– 4

– 70

Additions

3 296

3 296

Reclassifications

4 250

236

4 486

Balance at 31/ 12/ 2022

5 787

28 256

34 043

Foreign exchange differences

– 260

– 16

– 276

Additions

1 086

1 086

Disposals

– 2 071

– 2 071

Reclassification to assets held for sale

– 3 925

– 243

– 4 168

Balance at 31/ 12/ 2023

1 602

27 012

28 614

Accumulated depreciation

Balance at 01/ 01/ 2022

499

24 580

25 079

Foreign exchange differences

– 1

– 1

Depreciation

38

38

Reclassifications

38

25

63

Balance at 31/ 12/ 2022

536

24 643

25 179

Foreign exchange differences

– 2

– 2

– 4

Depreciation

284

284

Disposals

– 2 071

– 2 071

Reclassification to assets held for sale

– 35

– 39

– 74

Balance at 31/ 12/ 2023

499

22 815

23 314

Net book value at 31/ 12/ 2022

5 251

3 613

8 864

Net book value at 31/ 12/ 2023

1 103

4 197

5 300

Fair values of investment properties at 31/ 12/ 2022

16 994

Fair values of investment properties at 31/ 12/ 2023

12 355

Rental income from investment properties amounted to CHF 1.8  million (2022: CHF 0.7 million) and is included in other operating income. Of this amount, CHF 1.5 million (2022: CHF 0.7 million) was attributable to continuing operations. Related direct operating expenses were CHF 0.2 million (2022: CHF 0.3 million), are included in other operating expenses and relate only to continuing operations. The fair values of investment properties are, in the hierarchy according to IFRS 13, assigned to level 3 for non-observable market data, since they are calculated on the basis of estimates that have been determined by independent external valuers and internal assessments.

40. Intangible assets

in 1 000 CHF

Brands

Customer relationships

Technologies

Other intangible assets from business combinations

Other intangible assets

Total

Goodwill

Net book value at 01/ 01/ 2022

55 527

80 270

11 782

54

13 489

161 122

178 621

Cost

Balance at 01/ 01/ 2022

86 587

127 751

19 328

4 441

31 347

269 454

207 622

Foreign exchange differences

– 3 733

– 5 155

– 926

– 89

– 1 204

– 11 107

– 7 973

Change in scope of consolidation

5 638

19 426

4 800

653

28

30 545

11 747

Additions

13 161

13 161

Disposals

– 915

– 915

Reclassifications

8 607

8 607

Balance at 31/ 12/ 2022

88 492

142 022

23 202

5 005

51 024

309 745

211 396

Foreign exchange differences

– 4 496

– 6 797

– 1 448

– 142

– 2 507

– 15 390

– 9 098

Change in scope of consolidation

8

8

Additions

14 320

14 320

Disposals

– 713

– 713

Reclassification to assets held for sale

– 26 358

– 42 407

– 16 569

– 246

– 15 021

– 100 601

– 48 075

Reclassifications

3 158

3 158

Balance at 31/ 12/ 2023

57 638

92 818

5 185

4 617

50 269

210 527

154 223

Accumulated amortisation

Balance at 01/ 01/ 2022

31 060

47 481

7 546

4 387

17 858

108 332

29 001

Foreign exchange differences

– 1 313

– 1 701

– 352

– 85

– 538

– 3 989

Amortisation

5 608

8 796

1 200

355

4 054

20 013

Disposals

– 915

– 915

Balance at 31/ 12/ 2022

35 355

54 576

8 394

4 657

20 459

123 441

29 001

Foreign exchange differences

– 1 882

– 2 304

– 591

– 137

– 866

– 5 780

Amortisation

5 706

9 605

1 355

343

5 678

22 687

Disposals

– 713

– 713

Reclassification to assets held for sale

– 8 257

– 11 503

– 8 088

– 246

– 7 467

– 35 561

– 20 901

Reclassifications

– 38

– 38

Balance at 31/ 12/ 2023

30 922

50 374

1 070

4 617

17 053

104 036

8 100

Net book value at 31/ 12/ 2022

53 137

87 446

14 808

348

30 565

186 304

182 395

Net book value at 31/ 12/ 2023

26 716

42 444

4 115

33 216

106 491

146 123

Expenses for research and development in the amount of CHF 12.8 million (2022: CHF 12.7 million) have been charged to the income statement, since they did not fulfil the capitalisation criteria. Of this amount, CHF 4.3 million (2022: CHF 4.1 million) was attributable to continuing operations. Out of other intangible assets as of 31 December 2023, CHF 31.1 million (2022: CHF 27.5 million) relate to software and software licenses. The additions to intangible assets consist of CHF 3.1 million (2022: CHF 3.3 million) of own development costs and CHF 11.2 million (2022: CHF 9.9 million) of purchased or acquired items. Of the additions to other intangible assets, CHF 6.7 million (2022: CHF 6.2 million) relate to implementation costs in connection with the introduction of SAP S / 4HANA in the Doors Division.

Goodwill

As of 31 December 2023 goodwill from business combinations is allocated to the Group’s five cash-generating units (CGUs) Termovent, Sabiana, Joro Doors, Wood Solutions and Glass Solutions. The movements of the carrying amounts of goodwill during the reporting period were as follows:

in 1 000 CHF

Termovent

Sabiana

Joro Doors

Wood Solutions

Glass Solutions

Total

Balance at 31/ 12/ 2022

7 271

21 604

11 615

127 258

14 647

182 395

Foreign exchange differences

– 363

– 1 338

– 719

– 6 678

– 9 098

Reclassification to assets held for sale

– 6 908

– 20 266

– 27 174

Balance at 31/ 12/ 2023

10 896

120 580

14 647

146 123

Goodwill impairment tests 2023

The recoverability of goodwill is assessed annually towards year-end or whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of its value in use and its fair value less costs to sell.

The recoverable amount of the CGUs was determined based on value in use calculations. These calculations used cash flow projections which, with the exception of the CGU Wood Solutions, cover a five-year period. Cash flows beyond the five-year period were extrapolated using estimated growth rates.

The underlying financial data consisting of one budget year and four plan years form part of the Group’s medium term plan approved by the Board of Directors in autumn 2023 and were used for the impairment tests.

For the first time this year a planning horizon of ten years was applied to the CGU Wood Solutions. This consists of one budget year and four plan years with subsequent reconciliation of a further five years to the residual values. The slump in the construction industry, particularly in Germany, led to a drop in demand for doors in the reporting period. Due to this decreased demand, the highly automated "Werk der Zukunft" in Germany, which is currently being completed, will only reach full value creation and corresponding capacity utilisation after the first five planning years, meaning that five additional planning years have been used.

The value in use calculation for the annual 2023 impairment tests assumed the following key assumptions:

in %

Termovent

Sabiana

Joro Doors

Wood Solutions

Glass Solutions

Budgeted gross margin

49.3

42.5

69.7

58.0

71.6

Eternal growth rate

2.3

1.5

1.5

2.0

1.5

Discount rate

13.1

12.5

11.5

10.6

10.6

Budgeted gross margins are based on expectations for the market development and initiated optimisation measures. The eternal growth rates used are consistent with the forecasts included in industry reports. The discount rates used are pre-tax and reflect specific risks relating to the relevant CGUs.

Based on a reasonably possible change in the key assumptions, sensitivity analyses were calculated in 2023 on higher discount rates, lower than actually expected EBITDAs, lower gross margins and lower eternal growth rates which only led to a possible impairment at the CGU Wood Solutions.

Due to the longer planning horizon for the CGU Wood Solutions and the associated greater uncertainties, higher changes were applied to the sensitivities compared to the previous year.

Other key assumptions for the impairment test of the CGU Wood Solutions included an annual average growth rate of 5.5% until 2028 and 5.0% until 2033 as well as an EBITDA margin development to 14.9% until 2028 and to 16.9% until 2033.

A reduction in the budgeted gross margin from 58.0% to 51.0% would have been sufficient for the CGU Wood Solutions to prevent an impairment. A 20% reduction in EBITDA would lead to an impairment of CHF 7 million. At a reduction of 19.1% in EBITDA, the calculated value would be equal to its carrying amount. A 20% reduction in EBITDA and a simultaneous reduction of eternal growth from 2.0% to 1.5% would lead to an impairment of CHF 31 million. At a reduction of 17.4% in EBITDA and an eternal growth of 1.75%, the recoverable amount was equal to its carrying amount.

Goodwill impairment tests 2022

The value in use calculation for the annual 2022 impairment tests assumed the following key assumptions:

in %

Termovent

Sabiana

Joro Doors

Wood Solutions

Glass Solutions

Budgeted gross margin

40.4

40.6

72.0

54.5

67.7

Eternal growth rate

2.5

1.8

2.5

2.1

2.0

Discount rate

11.4

12.0

11.2

10.8

10.3

Budgeted gross margins were determined based on expectations for the market development and initiated optimisation measures. The eternal growth rates used were consistent with the forecasts included in industry reports. The discount rates used were pre-tax and reflected specific risks relating to the relevant CGUs.

Based on a reasonably possible change in the key as- sumptions, sensitivity analyses were calculated in 2022 on higher discount rates, lower than actually expected EBITDAs, lower gross margins and lower eternal growth rates which only led to a possible impairment at the CGU Wood Solutions.

A reduction in the budgeted gross margin from 54.5% to 52.5% would have resulted in an impairment of the CGU Wood Solutions amounting to CHF 64.8 million. At a budgeted gross margin of 53.6%, the calculated value would have been equal to its carrying amount. A 10% reduction in EBITDA and a simultaneous reduction of eternal growth from 2.1% to 1.6% would have led to an impairment of CHF 51.8 million. At a reduction of 5.1% in EBITDA and a simultaneous reduction of eternal growth to 1.9%, the calculated value would have been equal to its carrying amount.

41. Acquisitions

The following fair value of assets and liabilities had arisen from acquisitions as mentioned under note 3:

Acquisitions 2023

Interwand GmbH

in 1 000 CHF

Fair Value

Assets

Cash and cash equivalents

1 249

Accounts receivable

738

Other current assets

193

Inventories

1 954

Deferred expenses

31

Current income tax receivables

196

Property, plant and equipment

3 581

Intangible assets

8

Total assets

7 950

Liabilities

Accounts payable

195

Contract liabilites

1 107

Other liabilities

96

Lease liabilities

166

Accruals and deferred income

369

Provisions

77

Deferred income tax liabilities

602

Total liabilities

2 612

Net assets acquired

5 338

Cost of acquisition

Purchase price

4 262

Deferred purchase price

1 076

Total cost of acquisition

5 338

Net cash outflow was as follows:

Purchase price

4 262

Cash and cash equivalents acquired

– 1 249

Net cash outflow on acquisition

3 014

As of 24 October 2023, Arbonia acquired 100% of Interwand GmbH, DE-Dörzbach. The company is specialised in the manufacture and installation of office partition walls and industrial walls. The purchase price amounted to CHF 5.3 million which includs a deferred purchase price payment of CHF 1.1 million. From the date of acquisition, Interwand contributed CHF 1.8 million in net revenues and CHF 0.3 million in profit to the Group. Had the acquisition taken place on 1 January 2023, net revenues would have been CHF 9.2 million and profit would have been CHF 0.3 million. The gross carrying amount of accounts receivable amounted to CHF 0.8 million, of which CHF 0.1 million were considered uncollectable. The acquisition-related costs amounted to CHF 0.2 million and are included in other operating expenses in 2023.

In 2023, deferred purchase price payments for Joro, Tecna and CICSA of CHF 1.4 million were due and paid.

Acquisitions 2022

Joro Türen GmbH

in 1 000 CHF

Fair Value

Assets

Cash and cash equivalents

767

Accounts receivable

845

Other current assets

572

Inventories

1 920

Deferred expenses

29

Property, plant and equipment

1 709

Right-of-use assets

1 617

Intangible assets

10 635

Financial assets

11

Total assets

18 106

Liabilities

Accounts payable

160

Other liabilities

246

Lease liabilities

1 617

Accruals and deferred income

403

Current income tax liabilities

200

Provisions

25

Deferred income tax liabilities

2 919

Employee benefit obligations

1 159

Total liabilities

6 730

Net assets acquired

11 376

Goodwill

11 747

Acquisition price

23 123

Cost of acquisition

Purchase price

20 811

Deferred purchase price

2 312

Total cost of acquisition

23 123

Net cash outflow was as follows:

Purchase price

20 811

Cash and cash equivalents acquired

– 767

Net cash outflow on acquisition

20 044

As of 16 July 2022, Arbonia had acquired 100% of Joro Türen GmbH, DE-Renchen. This company is a producer of special doors for the project business in the area of fire, smoke, sound and burglary protection. This acquisition gave the Doors Division access to the German project business and access to extensive approvals and certificates for oversized doors that cannot be manufactured on industrial equipment. The purchase price amounted to CHF 23.1 million which included a deferred purchase price payment of CHF 2.3 million. A first tranche of CHF 1.15 million was paid in July 2023 and a second tranche of CHF 1.15 million will be due on July 2024. From the date of acquisition, Joro contributed CHF 4.3 million in net revenues and CHF 1.1 million in profit to the Group result of 2022. Had the acquisition taken place on 1 January 2022, net revenues would have been CHF 8.7 million and profit, including amortisation charges on intangible assets from acquisitions, would have been CHF 1.5 million for 2022. The gross carrying amount of accounts receivable amounted to CHF 1.1 million, of which CHF 0.3 million were considered uncollectable. The acquisition-related costs amounted to CHF 0.1 million and are included in other operating expenses in 2022. The goodwill from this acquisition was due to the fact that certain intangible assets did not meet the criteria of IFRS 3 «business combinations» for the recognition as intangible assets at the date of acquisition. These intangible assets consisted mainly of the know-how of the workforce. Furthermore goodwill included the expected synergy potentials within the Doors Division.

Cirelius S.A.

in 1 000 CHF

Fair Value

Assets

Cash and cash equivalents

2 899

Accounts receivable

2 054

Other current assets

97

Inventories

4 850

Deferred expenses

38

Property, plant and equipment

3 121

Right-of-use assets

316

Intangible assets

19 909

Financial assets

37

Total assets

33 321

Liabilities

Accounts payable

540

Other liabilities

773

Lease liabilities

323

Accruals and deferred income

266

Current income tax liabilities

621

Deferred income tax liabilities

4 428

Total liabilities

6 950

Net assets acquired

26 371

Cost of acquisition

Purchase price

26 371

Total cost of acquisition

26 371

Net cash outflow was as follows:

Purchase price

26 371

Cash and cash equivalents acquired

– 2 899

Net cash outflow on acquisition

23 471

As of 5 December 2022, Arbonia had acquired 100% of Cirelius S.A., PT-Avintes. Cirelius specialises in particular in the sale and distribution of HVAC system solutions for residential construction throughout Portugal and distributes, among other things, heat pumps and photovoltaic systems. For the Climate Division, this acquisition means a significant strengthening of its activities in the Portuguese and Spanish markets, making it a leading supplier of HVAC system solutions on the Iberian Peninsular. The purchase price amounted to CHF 26.4 million. Since the acquisition took place just shortly before year-end, Arbonia has renounced to consolidate the income statement of Cirelius in 2022 based on materiality reasons. Had the acquisition taken place on 1 January 2022, net revenues would have been CHF 23.2 million and profit for 2022, including amortisation charges on intangible assets from acquisitions, would have been CHF 2.9 million. The gross carrying amount of accounts receivable amounted to CHF 2.2 million, of which CHF 0.2 million were considered uncollectable. The acquisition-related costs amounted to CHF 0.2 million and are included in other operating expenses in 2022.

In 2022, deferred purchase price payments for Tecna and CICSA of CHF 0.7 million were due and paid.

42. Financial debts

On 3 November 2020, Arbonia had entered into a syndicated loan for CHF 250 million. This loan, arranged with a consortium of domestic and foreign banks, has a term of five years, with the option to extend the agreement twice for one year each. The first extension option was exercised in 2021 and the second in 2022, so that the term now runs until 2027.

The financial debts are comprised of the following:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Promissory note loan

60 346

119 754

Syndicated loan

133 926

54 434

Mortgages

15 000

6 446

Bank loans

10 804

Total

209 272

191 438

The syndicated loan contains the leverage ratio as covenant. In the event of non-compliance, the banks may at any time at their option, declare the amounts then outstanding to be immediately due and payable. Arbonia was in compliance with the covenant in 2023 and 2022.

The maturities of the financial debts are as follows:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

within 1 year

134 346

121 586

between 1 and 5 years

74 926

57 708

after 5 years

12 144

Total

209 272

191 438

The effective interest rates for the financial debts at the balance sheet date were as follows:

31/ 12/ 2023

CHF

EUR

Financial debts

2.9%

2.5%

31/ 12/ 2022

CHF

EUR

Financial debts

2.1%

The syndicated loan and bank loans have variable interest rates, whereas the promissory note loan and mortgages have fixed interest rates.

The breakdown for the financial debts by currency was as follows:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

CHF

135 000

EUR

74 272

191 438

Total

209 272

191 438

43. Financial instruments

The contractually agreed undiscounted interest payments and repayments of the non-derivative financial liabilities and the derivatives with a cash outflow are as follows:

31/ 12/ 2023

in 1 000 CHF

Book value

Contractual cash flows

up to 6 months

7 to 12 months

between 1 and 2 years

between 2 and 5 years

after 5 years

Non-derivative financial instruments

Accounts payable

33 139

33 139

33 139

Other liabilities (without derivatives)

2 668

2 668

549

1 600

519

Lease liabilities

8 311

9 674

1 229

1 033

1 841

2 920

2 651

Accruals and deferred income

23 605

23 605

23 408

197

Financial debts

209 272

214 137

135 836

387

52 936

24 978

Total

276 995

283 223

194 161

3 217

55 296

27 898

2 651

31/ 12/ 2022

in 1 000 CHF

Book value

Contractual cash flows

up to 6 months

7 to 12 months

between 1 and 2 years

between 2 and 5 years

after 5 years

Non-derivative financial instruments

Accounts payable

92 970

92 970

92 941

29

Other liabilities (without derivatives)

4 927

4 927

1 941

1 184

1 802

Lease liabilities

22 119

23 305

3 884

3 525

5 502

7 102

3 292

Accruals and deferred income

40 909

40 909

40 138

771

Financial debts

191 438

198 290

123 705

1 023

2 282

58 763

12 517

Total

352 363

360 401

262 609

6 532

9 586

65 865

15 809

Amounts in foreign currency were each translated at the respective year-end rate. Variable interest payments arising from financial instruments were calculated using the conditions prevailing at the balance sheet date. Financial liabilities which can be repaid at any time are always assigned to the earliest possible time period.

44. Additional disclosures on financial instruments

The relation between the relevant balance sheet items and the measurement categories in accordance with IFRS 9 and the disclosure of fair values of financial instruments is shown in the following table. The table does not contain information on fair value for financial assets and financial liabilities that are not measured at fair value if the carrying amount is a reasonable approximation of fair value. Similarly, no information is required on the fair value of lease liabilities.

31/ 12/ 2023

in 1 000 CHF

FA AC

FL AC

Book value

Fair Value

Level 2

Cash and cash equivalents

17 160

17 160

Accounts receivable

50 041

50 041

Other current assets (without derivatives)

3 291

3 291

Deferred expenses

2 410

2 410

Other financial assets

18

18

Assets

72 920

72 920

Accounts payable

33 139

33 139

Other liabilities (without derivatives)

2 668

2 668

Lease liabilities

8 311

8 311

Accruals and deferred income

23 605

23 605

Promissory note loan

60 346

60 346

58 383

Syndicated loan

133 926

133 926

Mortgages

15 000

15 000

Liabilities

276 995

276 995

31/ 12/ 2022

in 1 000 CHF

FA FVTPL

FA AC

FL FVTPL

FL AC

Book value

Fair Value

Level 2

Level 3

Cash and cash equivalents

29 196

29 196

Accounts receivable

109 559

109 559

Derivative financial instruments

70

70

70

Other current assets

1 208

1 208

Deferred expenses

3 198

3 198

Other financial assets

424

424

Loans

40

40

40

Assets

110

143 585

143 695

Accounts payable

92 970

92 970

Other liabilities (without derivatives)

4 927

4 927

Lease liabilities

22 119

22 119

Accruals and deferred income

40 909

40 909

Promissory note loan

119 754

119 754

115 761

Syndicated loan

54 434

54 434

Loans

10 804

10 804

Mortgages

6 446

6 446

6 376

Liabilities

352 363

352 363

Abbreviations in the header of this table are explained in note 9 "Financial Instruments" on page 162.

The derivative financial instruments measured at fair value through profit or loss relate to interest rate transactions for 2022. The fair value of level 2 corresponds to the present value of the expected payments, which are discounted at market rates. The determination of the fair value of these transactions is made by the banks.

In 2023 and 2022, no gains / losses resulted from level 3 financial instruments. Furthermore, no reclassifications occurred between the levels 1 and 2.

45. Provisions

in 1 000 CHF

Warranty

Personnel

Restructuring

Onerous contracts project business

Other provisions

Total

Balance at 01/ 01/ 2022

10 524

7 836

8 662

16

5 265

32 303

Foreign exchange differences

– 385

– 352

– 320

– 98

– 1 155

Change in scope of consolidation

25

25

Additional provisions

3 679

2 965

2 686

12

136

9 478

Used during the year

– 6 097

– 1 568

– 6 363

– 4

– 685

– 14 717

Unused amounts reversed

– 457

– 954

– 290

– 1 385

– 3 086

Balance at 31/ 12/ 2022

7 289

7 927

4 375

24

3 233

22 848

Foreign exchange differences

– 402

– 490

– 521

– 109

– 1 522

Change in scope of consolidation

77

77

Additional provisions

4 783

2 346

9 744

13

265

17 151

Used during the year

– 5 045

– 1 534

– 3 842

– 419

– 10 840

Unused amounts reversed

– 209

– 125

– 258

– 37

– 1 341

– 1 970

Reclassification to liabilities associated with assets held for sale

– 3 704

– 3 495

– 8 983

– 1 303

– 17 485

Balance at 31/ 12/ 2023

2 789

4 629

515

326

8 259

thereof current at 31/ 12/ 2022

4 750

1 700

4 375

23

1 382

12 230

thereof current at 31/ 12/ 2023

2 258

595

515

258

3 626

The current provisions are expected to be fully utilised during 2024. The non-current provisions are expected to be utilised as follows:

in 1 000 CHF

Warranty

Personnel

Restructuring

Onerous contracts project business

Other provisions

Total

between 1 and 5 years

531

2 984

68

3 583

after 5 years

1 050

1 050

Warranty

Warranty provisions are assessed for each order individually. In case of a high volume of orders, such an individual assessment might be impractical and standard rates are applied based on past experience.

Personnel

Personnel provisions comprise mainly provisions for partial retirements.

Restructuring

In July 2023, the Climate Division announced the relocation of the production of design radiators from Vasco's Belgian production site in Dilsen to its plant in Stříbro (CZ). A large part of the restructuring provision recognised in 2023 is attributable to this. A large part of the restructuring provision recognised in 2022 related to the discontinuation of operations in Vlotho (DE) announced by the Doors Division in December 2022. In 2023 costs of CHF 1.9 million were booked against this provision.

Other provisions

Other provisions include costs for environmental risks, legal claims and various risks that could arise in the normal course of business.

46. Deferred income taxes

Deferred tax assets and liabilities arise due to differences between the group valuation and tax valuation in the following balance sheet items:

31/ 12/ 2023

31/ 12/ 2022

in 1 000 CHF

Deferred tax assets

Deferred tax liabilities

Deferred tax assets

Deferred tax liabilities

Assets

Cash and cash equivalents

4

Accounts receivable

456

51

484

226

Other current assets

67

6

134

Inventories

574

72

1 730

635

Property, plant and equipment and right-of-use assets

97

10 896

254

23 162

Investment property

40

67

320

Intangible assets

96

20 080

204

39 519

Capitalised pension surplus and financial assets

132

12 144

130

3 148

Liabilities

Current liabilities

809

3 325

5 505

4 997

Non-current liabilities

4 362

1 661

2 874

858

Current and non-current provisions

306

122

938

312

Employee benefit obligations

2 092

13

3 966

4

Deferred taxes from timing differences

8 924

48 471

16 162

73 315

Deferred tax assets derived from tax loss carryforwards

22 571

13 658

Valuation allowance

– 8 499

– 7 104

Net deferred taxes from timing differences

22 996

48 471

22 716

73 315

Offset of deferred tax assets and liabilities

– 16 945

– 16 945

– 18 330

– 18 330

Total deferred taxes

6 051

31 526

4 386

54 985

From the capitalised pension surplus and employee benefit obligations, CHF 2.3 million (2022: CHF -1.7 million) of deferred taxes from continuing operations were recorded in comprehensive income. All other changes of assets and liabilities were recorded through the income statement.

Deferred income tax assets are recognised for tax loss carryforwards, to the extent that the realisation of the related tax benefit through future taxable profits is probable.

There are temporary differences totalling CHF 15.7 million (2022: CHF 15.7 million) in conjunction with investments in subsidiaries for which Arbonia has not recorded deferred tax liabilities based on the exemption provisions of IAS 12. There are no deductible temporary differences for both 2023 and 2022 on which no deferred tax assets have been recognised.

Activity in the deferred income tax account on a net basis is as follows:

in 1 000 CHF

2023

2022

Balance at 01/01

50 599

45 294

Change in scope of consolidation

602

7 347

Changes to other comprehensive income

2 308

– 1 658

Changes to other comprehensive income for discontinued operations

– 42

2 225

Changes to the income statement

– 8 811

131

Changes to the income statement for discontinued operations

– 1 433

– 1 093

Reclassification to assets held for sale

3 812

Reclassification to liabilities associated with assets held for sale

– 19 572

Foreign exchange differences

– 1 987

– 1 647

Balance at 31/12

25 475

50 599

Unrecognised tax loss carryforwards in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Tax loss carryforwards

135 295

70 007

thereof recognised as deferred taxes

– 77 296

– 35 376

Unrecognised tax loss carryforwards

57 999

34 631

Portion expiring:

after 5 years

57 999

34 631

Total

57 999

34 631

Tax effect on unrecognised tax loss carryforwards

8 499

7 104

thereof pertaining to tax rates below 15.0%

7 560

2 021

thereof pertaining to tax rates between 15.0% and 20.0%

119

59

thereof pertaining to tax rates between 20.1% and 25.0%

148

4 316

thereof pertaining to tax rates between 25.1% and 30.0%

672

708

47. Employee benefit obligations

Pension plans in Switzerland

The Swiss pension plans are governed by the Swiss Federal Law on Occupational Retirement, Survivors’ and Disability Pension Plans (BVG), aiming to safeguard the employees against the risks of old age, death and disability. There are semi-autonomous pension plans, that is, the foundations fully bear the risk of age itself. The risks of disability and death are reinsured entirely (congruent reinsurance) or partially (stop-loss insurance) with Swiss insurance companies. The plans give plan participants a choice regarding the annual amount of contribution payments. The employees’ contributions are determined as a percentage of the insured salary and are deducted monthly. The retirement pension is calculated by multiplying the retirement capital at the retirement age with the then applicable regulatory conversion rate. Plan participants can also draw all or part of the retirement pension as a lump sum. Death and disability benefits are set as a percentage of the insured salary.

The Board of Trustees are by law the supreme governing body of the foundation. The duties of the trustees are set out in the BVG and the regulations of the foundations. The Board of Trustees exercises the overall direction and has overall responsibility. It is composed in accordance with the legal provisions of an equal number of employer and employee representatives, provided the foundation offers BVG-related pension plans.

The actuarial risks of old age, death and disability as well as the investment risks are primarily borne by the foundations. If certain duties are transferred to third parties, they assume the associated risks (insurance companies, external administrator etc.).

An unfavourable development of the semi-autonomous and autonomous foundations can lead to an underfunding of the affected foundation as stipulated by the BVG. The BVG allows a temporary underfunding but the Board of Trustees has to take the necessary remedial measures to remedy the underfunding within a maximum of ten years. Additional employer and employee contributions could be incurred in case the Swiss pension plan has a significant underfunding as per BVG. In such cases, the risk is borne by employers and employees alike and the employer is legally not obliged to accept more than 50% of the additional contributions.

The investment strategy of the Swiss pension plans follows BVG, including the rules and regulations for the diversification of plan assets. The security assessment of the investments takes place in the semi-autonomous foundations in evaluating total assets and liabilities as well as the structure and the expected development of the insured population.

Pension plans in Germany

The occupational pension provision in Germany is subject to the pension law. The method of the direct commitment was elected for the German pension plans. To fund these pension plans for future benefit payments, pension provisions are recorded in accordance with the relevant regulations. The employer has made commitments to the employees under certain benefit arrangements. The pension plans are defined benefit plans and provide current and former employees benefits in the event of reaching the retirement age, in case of disability, or death. The respective benefits become due at maturity and are paid directly by the company to the beneficiaries.

The following amounts are included in the consolidated financial statements:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Present value of funded obligations

98 893

113 997

Fair value of plan assets

123 405

154 418

Overfunding

– 24 513

– 40 421

Present value of unfunded obligations

11 700

42 331

Adjustment to asset ceiling

35 547

Liability (net) recognised in the balance sheet

– 12 813

37 457

thereof recorded as employee benefit obligations

11 700

42 336

thereof recorded as capitalised pension surplus

– 24 513

– 4 879

The movement in the defined benefit obligation over the year is as follows:

in 1 000 CHF

2023

2022

Balance at 01/01

156 327

192 505

Changes in scope of consolidation

1 159

Interest cost

4 351

1 355

Current service cost

3 967

5 413

Contributions by plan participants

2 564

2 494

Benefits paid

– 6 748

– 8 116

Actuarial losses/gains arising from changes in financial assumptions

11 676

– 36 856

Actuarial losses arising from experience adjustements

2 334

827

Other transfers

296

Administration cost

55

62

Reclassification to liabilities associated with assets held for sale

– 60 751

Foreign exchange differences

– 3 184

– 2 811

Balance at 31/12

110 592

156 327

thereof for active members

78 721

96 678

thereof for pensioners

30 618

54 307

thereof for deferred members

1 253

5 342

The movement in the fair value of plan assets over the year is as follows:

in 1 000 CHF

2023

2022

Balance at 01/01

154 416

169 833

Interest income

3 631

628

Return on plan assets excl. interest income

– 696

– 15 707

Contributions by the employer

5 519

5 228

Contributions by plan participants

2 564

2 494

Benefits paid

– 6 748

– 8 116

Other transfers

296

Reclassification to assets held for sale

– 34 944

Foreign exchange differences

– 340

– 239

Balance at 31/12

123 403

154 416

The movement of the effect of the asset ceiling is as follows:

in 1 000 CHF

2023

2022

Balance at 01/01

35 547

Interest cost

817

Change in effect of asset ceiling excl. interest cost

– 36 364

35 547

Balance at 31/12

35 547

The remeasurements of employee benefit obligations in other comprehensive income are as follows:

in 1 000 CHF

2023

2022

Actuarial losses/gains

7 795

– 20 304

Actuarial losses/gains from discontinued operations

6 215

– 15 725

Return on plan assets excl. interest income

696

15 707

Change in effect of asset ceiling excl. interest cost

– 36 364

35 547

Remeasurements of employee benefit obligations

– 21 658

15 224

thereof from discontinued operations

– 1 168

– 3 319

The amounts recognised in the income statement are as follows:

in 1 000 CHF

2023

2022

Current service cost

3 967

5 413

Net interest result

720

727

Interest cost on effect of asset ceiling

817

Administration cost

55

62

Net charges for defined benefit plans

5 560

6 202

thereof recorded under personnel expenses from continuing operations

3 006

4 121

thereof recorded under financial results from continuing operations

603

259

thereof recorded under Group result from discontinued operations after taxes

1 950

1 823

The principal actuarial assumptions used were as follows:

Weighted average

2023

2022

Discount rate at 31/12

1.6%

2.8%

Future salary increases

2.0%

2.1%

Future pension increases

0.2%

0.6%

Mortality tables

Switzerland

BVG 2020 GT

BVG 2020 GT

Germany

HB 2018 GT

HB 2018 GT

The sensitivity of employee benefit obligations due to changes of principal assumptions are as follows, whereby only the continuing operations have been taken into account for 2023:

Impact on employee benefit obligations

Change in assumption

2023

2022

Discount rate

– 0.25%

3 716

4 757

+ 0.25%

– 3 484

– 4 491

Salary increases

– 0.25%

– 484

– 509

+ 0.25%

483

504

Life expectancy

+ 1 year

2 124

3 180

– 1 year

– 2 159

– 3 250

Service cost 2024 with discount rate

+ 0.25%

– 201

– 217

The weighted average duration of employee benefit obligations is 13.3 years (2022: 12.7 years).

The sensitivity analysis above is based on a change in an assumption while all other assumptions remain unchanged. In reality, this is unlikely to happen, because certain assumptions correlate. In the calculation of sensitivities of pension benefit obligations with the principal actuarial assumptions, the same method was applied (present value of the defined benefit obligation is calculated using the projected unit credit method at year-end) as for the calculation of the pension liability in these consolidated financial statements.

Plan assets at fair value consist of:

in 1 000 CHF

quoted

unquoted

31/ 12/ 2023 Total

quoted

unquoted

31/ 12/ 2022 Total

Cash and cash equivalents

7 687

7 687

7 287

7 287

Equity instruments

40 185

40 185

41 204

41 204

Debt instruments

20 836

20 836

26 241

26 241

Real estate

6 923

40 522

47 445

8 818

56 983

65 801

Others

7 250

7 250

8 557

5 326

13 883

Total plan assets

67 944

55 459

123 403

84 820

69 596

154 416

The category "Others" contains assets from full insurance contracts that have been terminated some years ago and are therefore expiring.

The expected maturity profile of benefit payments for unfunded plans is as follows:

in 1 000 CHF

up to 1 year

between 1 and 2 years

between 2 and 5 years

next 5 years

Benefit payments

486

398

1 415

2 785

Expected contributions to pension plans for the year 2024 amount to CHF 5.4 million for the continuing operations (2023: CHF 7.7 million for all operations), of which CHF 3.2 million (2023: CHF 5.2 million for all operations) are attributable to the employer.

48. Share capital

The capital structure is as follows:

31/ 12/ 2023

31/ 12/ 2022

Category

Outstanding shares

Par value in CHF

Share capital in CHF

Outstanding shares

Par value in CHF

Share capital in CHF

Registered shares

69 473 243

4.20

291 787 621

69 473 243

4.20

291 787 621

The distribution per share for the 2022 financial year amounted to CHF 0.30.

On 21 April 2023, the Annual General Meeting of Arbonia AG had approved amongst others the following: To authorise the Board of Directors, within the scope of the capital band pursuant to the Swiss Corporate Law, to increase the share capital during a period ending on 20 April 2028 1.) by issuing a maximum of 13'800'000 fully paid registered shares with a par value of CHF 4.20 each in one or more steps to a maximum of CHF 349'747'620.60 and 2.) to reduce the share capital in one or more steps to not less than CHF 277'297'620.60 either by cancelling a maximum of 3'450'000 registered shares or by reducing the nominal value of the registered shares to not less than CHF 3.992.

Earnings per share

2023

2022

Group earnings from continuing operations after non-controlling interests (in 1 000 CHF)

– 14 219

498

Group earnings from discontinued operations after non-controlling interests (in 1 000 CHF)

– 2 993

18 629

Group earnings for the year (in 1 000 CHF)

– 17 212

19 127

Outstanding shares (average)

69 473 243

69 473 243

Less treasury shares (average)

– 382 435

– 526 858

Average number of shares outstanding for the calculation

69 090 808

68 946 385

There were no dilutive effects impacting the calculation.

49. Treasury shares

2023

2022

Ø market value in CHF

Number of shares

Amount in 1 000 CHF

Ø market value in CHF

Number of shares

Amount in 1 000 CHF

Balance at 01/01

13.96

1 111 022

15 514

15.36

350 373

5 383

Transfer for share based payments

13.62

– 88 153

– 1 201

15.64

– 164 084

– 2 566

Delivery for purchase of shares in associated company

13.62

– 1 148 801

– 15 646

Purchase

10.97

248 073

2 722

13.73

924 733

12 698

Balance at 31/12

11.37

122 141

1 389

13.96

1 111 022

15 514

The delivery of treasury shares for the purchase of shares in associated company relates to the acquisition of shares in Griffwerk GmbH (see note 35). The disposal of treasury shares was recognised at the average price of CHF 13.62 per share, while the increase in investment was valued at the fair value of CHF 10.66 per share at the time of purchase.

50. Other comprehensive income and other reserves

The movements in other comprehensive income after taxes were as follows:

31/ 12/ 2023

31/ 12/ 2022

in 1 000 CHF

Other reserves

Retained earnings

Total other comprehensive income

Other reserves

Retained earnings

Total other comprehensive income

Remeasurements of employee benefit obligations

21 658

21 658

– 15 224

– 15 224

Deferred tax effect

– 2 266

– 2 266

– 567

– 567

Total items that will not be reclassified to income statement

19 392

19 392

– 15 792

– 15 792

Currency translation differences

– 58 874

– 58 874

– 28 971

– 28 971

Total items that may be subsequently reclassified to income statement

– 58 874

– 58 874

– 28 971

– 28 971

Other comprehensive income after taxes

– 58 874

19 392

– 39 482

– 28 971

– 15 792

– 44 763

Other reserves

in 1 000 CHF

Currency translation

Total

Balance at 31/ 12/ 2021

– 98 459

– 98 459

Currency translation differences

– 28 971

– 28 971

Balance at 31/ 12/ 2022

– 127 430

– 127 430

Currency translation differences

– 58 874

– 58 874

Balance at 31/ 12/ 2023

– 186 304

– 186 304

51. Financial results

in 1 000 CHF

2023

2022 restated 1

Financial income

Bank and other interest

227

70

Interest on net pension surplus

74

105

Total interest income

301

175

Gains derivative financial instruments

4

Minority share from associated companies

1 263

Other financial income

21

13

Total other financial income

21

1 280

Total financial income

322

1 455

Financial expenses

Bank and other interest

316

256

Interest on leases

290

291

Interest on non-current financial debts and syndicated loan

6 925

1 955

Interest on net employee benefit obligations

677

364

Compounding of liabilities

69

215

Total interest expenses

8 277

3 081

Impact of exchange rate fluctuations

6 005

4 648

Minority share from associated companies

674

Bank charges and other financial expenses

533

968

Total other financial expenses

7 212

5 616

Total financial expenses

15 489

8 697

Total net financial results

– 15 167

– 7 242

1 see note 36

The classification of the financial result of financial instruments into the categories according to IFRS 9 is as follows:

in 1 000 CHF

2023

2022 restated 1

Total interest income from financial assets measured at amortised cost (FA AC)

227

70

Total interest expenses from financial liabilities measured at amortised cost (FL AC)

7 600

2 717

Net gain from financial assets/ liabilities measured at fair value through profit or loss (FA/ FL FVTPL)

4

Finance costs recognised in financial expenses from financial assets/ liabilities measured at amortised cost (FA/ FL AC)

464

922

1 see note 36

52. Income taxes

in 1 000 CHF

2023

2022 restated 1

Current income taxes

– 995

4 551

Changes in deferred income taxes

– 8 811

131

Total

– 9 806

4 683

1 see note 36

The changes in deferred income taxes (CHF -8.8 million) largely relates to the change in deferred taxes from tax loss carryforwards and temporary differences on intangible assets.

The tax on Group earnings before tax differs from the theoretical amount that would arise using the weighted average tax rate applicable to earnings before tax of the consolidated companies as follows:

in 1 000 CHF

2023

2022 restated 1

Earnings before income tax

– 24 025

5 181

Weighted average tax rate in %

22.9

50.7

Expected tax income/expense

– 5 503

2 629

Income tax reconciliation

Effect of utilisation of previously unrecognised tax losses

– 584

– 64

Effect of not capitalised losses for the year

5 612

2 150

Effect of non-tax-deductible expenses and non-taxable income

– 10 222

– 67

Effect of income and expenses taxed at special rates

584

348

Effect of tax charges related to prior years

10

Effect of tax rate changes

249

– 287

Other items

58

– 36

Effective tax income/expense

– 9 806

4 683

Effective tax rate in %

40.8

90.4

1 see note 36

The Group’s applicable tax rate represents the weighted average of the statutory corporate tax rates, prevailing in the tax jurisdictions in which the Group companies operate.

The expected weighted average tax rate of the continuing operations decreased significantly compared to previous year, but now reflects the weighted medium-term tax rate expected by Arbonia. Compared to 2022, there were no significant changes in local tax rates.

Global minimum tax

In December 2021, the OECD published model rules to introduce a global minimum tax rate of 15% for large multinational corporations (so-called Pillar Two model rules). The Pillar Two rules are relevant for groups with an annual revenues of over EUR 750 million. The net revenues of the continuing operations of Arbonia are below this limit in 2023 and 2022. Consequently, it can be assumed that Arbonia does not fall within the scope of these regulations.

53. Financial risk management

Risk management principles

Arbonia has a centralised risk management system. The risk management process is carried out as stated in the internal guidelines. Any potential and material risks have been identified and quantified according to the likelihood, damage to reputation and impact. Overall, no potential risks have been identified in the business year, which could lead to material adjustments of net assets, the financial position and results of operations of the consolidated financial statements of Arbonia.

Due to its international business activities, the Group is subject to various financial risks, such as credit, liquidity and other market risks. The principal goal of risk management activities is to minimise financial risks to the continued existence (liquidity and default risks) and profitability (currency, interest rate fluctuation, price risks) while ensuring adequate solvency at any time. Risk minimisation does not mean to completely eliminate but rather to control financial risks in an economically useful manner within an identified framework. Depending on their assessment, the Group uses derivative and non-derivative financial instruments to hedge certain risks. To minimise financial default risks, derivative financial instruments are only entered into with banks which are specifically defined in the treasury policy.

There are financial management guidelines and principles within the Group that regulate the handling of currency, interest rate fluctuation, commodity and credit risks, the use of derivative and non-derivative financial instruments as well as the management of liquid funds not required for operations. The risk management guidelines adopted by the Board of Directors are implemented centrally by group treasury but in close cooperation with the Divisions.

The Group’s financial resources are not used for speculation purposes. The derivatives used aim to hedge underlying transactions.

Credit default risk

Credit risks arise from the possibility that the counterparty of a transaction might not be able or willing to meet its obligations. The credit risk relates to financial assets (see note 44) as well as to contract assets (see note 33).

The credit or default risk in relation to receivables and contract assets is controlled by the individual subsidiaries on a decentralised basis and limited through the assignment of credit limits on the basis of systematic and regular credit ratings. Corresponding guidelines are in place within the Group aiming at an ongoing control and value adjustment of open positions. Due to the broad diversification of the customer portfolio into various business segments and geographic regions but also the possibility to create construction tradesman’s liens or the use of credit insurance, the credit risk is limited. The 10 largest debtors of Arbonia's continuing operations as of the balance sheet date accounted for a share of 21.1% (2022: 25.9% for all operations) of existing trade receivables. The 10 largest customers of continuing operations generated 25.2% (2022: 23.5% for all operations) of the Group’s net revenues in the year under review.

To minimise financial default risks, cash and cash equivalents, fixed-term deposits and derivative financial instruments are only deposited or entered into with banks which are specifically defined in the treasury policy. The three largest banks accounted for 65% / 28% / 6% of total liquid funds as of the balance sheet date (2022: 68% / 8% / 5%).

The maximum credit risk corresponds to the book values or fair values reported in note 44 for the financial asset categories "at fair value through profit and loss" (FA FVTPL) and "at amortised cost" (FA AC) and the book values of the contract assets reported in note 33. If applicable, these include derivative financial instruments having a positive fair value.

Liquidity risk

The liquidity risk arises from the fact that the Group might not be in a position to obtain the funds required to meet the obligations assumed in connection with financial instruments on the relevant due dates.

The cash, investments, financing and redemptions are managed and controlled on an ongoing basis by group treasury. The standard policy involves financial structures with matching maturities and currencies for each individual subsidiary. Scheduled cash requirements for the planning horizon must be secured under facility agreements or internal funding within the Group and / or via banks. By means of rolling monthly cash flow forecasts over a planning horizon of 12 months, the future cash development is forecasted in order to take measures in due time in the event of an excess coverage or shortfall. Arbonia monitors its liquidity risk with the aid of a consolidated liquidity plan, taking into account additional funding sources, e.g. undrawn credit limits. As individual divisions of Arbonia are subject to seasonal fluctuations, cash decreases early in the year but normally rises again in the second half of the year.

The available liquidity as of the balance sheet date (continuing and discontinued operations) is shown below:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Cash and cash equivalents

30 916

29 196

+ undrawn credit facilities

130 646

210 404

Total available liquidity

161 562

239 600

The syndicated loan taken out in 2020 includes the leverage ratio as covenant. If such covenant are not complied with, the banks may demand immediate redemption of their share. In 2023 and 2022, Arbonia complied with the covenant.

The contractually agreed maturities of financial liabilities within the meaning of IFRS 7 are set forth in note 43.

Market risk

(a) Currency risk

Due to the Group’s international focus, there are currency risks based on exchange rate fluctuations of various currencies. In the case of Arbonia, these mainly relate to the EUR, PLN, CZK and RUB.

A currency risk arises from transactions that are not settled in the functional currency of the Group companies. Group companies can hedge their net risk position for the period of the risk horizon with hedging transactions at Group Treasury. Arbonia’s risk position equals the sum of the subsidiaries’ net risk positions and is hedged by the group treasury with external counterparties using currency forward contracts of the relevant foreign currency. The hedging ratio depends on the maturity and currency risk exposure and is determined on a case by case basis.

Translation differences (translation risks) also arise from the consolidation in CHF of the financial statements of foreign subsidiaries prepared in foreign currencies. Translation affects the amount of earnings and comprehensive income. The major risk to the Group in connection with translation differences relates to the EUR. The effects of such exchange rate fluctuations on significant net investments are as much as possible hedged by means of natural hedges with liabilities in this currency.

For the description of market risks, IFRS 7 requires sensitivity analyses showing the effects of realistic currency fluctuations on Group earnings and shareholders’ equity. These effects are calculated on the basis of financial instruments existing as of the balance sheet date. In this context, it is assumed that all other variables remain unchanged. Translation risks arising from the translation of foreign subsidiaries are not included in the following table.

A 5% increase (decrease) of the EUR against the CHF (2022: 5%), a 5% increase (decrease) of the CZK against the CHF (2022: 5%), a 5% increase (decrease) of the PLN against the CHF (2022: 5%) or a 5% increase (decrease) of the RUB against the CHF (2022: 5%) would have the following effects on Arbonia’s Group result as of the balance sheet date:

in 1 000 CHF

31/ 12/ 2023

EUR/CHF

CZK/CHF

PLN/CHF

RUB/CHF

Assumed change

5.0%

5.0%

5.0%

5.0%

Impact of an increase on group result

2 545

508

681

178

Impact of a decrease on group result

– 2 545

– 508

– 681

– 178

in 1 000 CHF

31/ 12/ 2022

EUR/CHF

CZK/CHF

PLN/CHF

RUB/CHF

Assumed change

5.0%

5.0%

5.0%

5.0%

Impact of an increase on group result

2 480

687

223

244

Impact of a decrease on group result

– 2 480

– 687

– 223

– 244

(b) Interest rate risk

Interest rate risks arise from interest rate fluctuations which may have a negative effect on the Group’s asset and earnings position. Interest rate fluctuations result in changes in interest income and expenses relating to interest-bearing assets and liabilities. In addition, they may also affect the fair value of certain financial assets, liabilities and financial instruments, as set forth below under «Market risks».

Group companies are exclusively funded via group treasury on terms in line with the market and on a decentralised basis only in exceptional cases and with the prior approval of the Group CFO. Excess cash is also invested via group treasury (with the exception of Russia). The standard policy for the Group as well as for subsidiaries is that interest-bearing financial transactions in terms of capital commitment and fixed interest rates must always meet the underlying requirements. Derivative financial instruments, such as interest rate swaps or interest rate options, are used on a case-by-case basis by group treasury and only upon consultation with or according to the instruction of Group CFO.

For the description of interest fluctuation risks, IFRS 7 requires sensitivity analyses showing the effects of realistic fluctuations in market interest rates on Group earnings and shareholders’ equity. These effects are calculated on the basis of financial instruments existing as of the balance sheet date. In this context, it is assumed that all other variables remain unchanged and that the balance of financial instruments as of the balance sheet date is representative of the entire year. Fixed-rate financial instruments valued at amortised cost are not subject to interest rate fluctuation risks within the meaning of IFRS 7.

An increase (decrease) in the market interest level as of the balance sheet date by 50 basis points for CHF interest rates (2022: 50 basis points) or by 50 basis points for EUR interest rates (2022: 50 basis points) would have the effects set forth below on Group result of Arbonia:

in 1 000 CHF

31/ 12/ 2023

CHF interest rate

EUR interest rate

Assumed change in basis points

50

50

Variable interest-bearing financial instruments

Impact of an increase on group result from continuing operations

– 496

– 19

Impact of a decrease on group result from continuing operations

496

19

in 1 000 CHF

31/ 12/ 2022

CHF interest rate

EUR interest rate

Assumed change in basis points

50

50

Variable interest-bearing financial instruments

Impact of an increase on group result

6

– 157

Impact of a decrease on group result

– 6

157

Interest rate swaps

Impact of an increase on group result

82

Impact of a decrease on group result

– 82

(c) Other market risks

Fair value risk

Changes in fair values of financial assets, liabilities or financial instruments may affect the Group’s asset and earnings position.

For the description of market risks, IFRS 7 requires sensitivity analyses showing the effects of a reasonable potential change in risk variables, such as market prices, indices, etc., on prices of financial instruments, on the Group’s earnings and shareholders’ equity.

Equity management

The objective of Arbonia is a strong equity base to secure the Group’s future development. A sustainable equity ratio of between 45% and 55% is the goal. The shareholders’ equity corresponds to an equity ratio of 62.1% as of the balance sheet date (2022: 65.0%). The decrease in the equity ratio compared to the previous year is in particular due to currency translation effects as a result of the stronger CHF.

With regard to the maximum amount still available for the creation of new share capital through a conditional and / or authorised capital increase, see note 48.

Arbonia is not governed by any regulatory authorities with respect to minimum capital requirements.

54. Derivative financial instruments

The following table shows the fair values of the various derivative financial instruments recognised in the balance sheet as of the balance sheet date:

in 1 000 CHF

31/ 12/ 2023

31/ 12/ 2022

Interest rate swaps without hedges

70

Interest rate swaps of 2022 were entered into to hedge the interest rate risk, i.e. to secure variable interest rates on borrowings in fixed interest rates.

55. Additional information on the cash flow statements

in 1 000 CHF

2023

2022

Changes in non-cash transactions

Additional/reversed provisions

15 042

6 355

Changes in capitalised pension surplus/employee benefit obligations

– 1 495

260

Share based payments

1 033

2 278

Minority share from associated companies

674

– 1 263

Other non-cash effects

4 018

4 172

Total changes in non-cash transactions

19 272

11 802

Changes in working capital

Changes in accounts receivable

– 9 414

– 3 946

Changes in inventories

30 659

– 44 770

Changes in contract assets project business

10 848

– 5 340

Changes in other working capital items

5 375

– 1 884

Total changes in working capital

37 468

– 55 940

Changes in liabilities

Changes in accounts payable

– 576

– 36 642

Changes in contract liabilities

7 981

1 087

Used provisions

– 10 841

– 14 718

Changes in other current liabilities

294

– 11 208

Total changes in liabilities

– 3 142

– 61 481

in 1 000 CHF

Current and non-current financial debts

Balance at 31/ 12/ 2021

134 110

Foreign exchange differences

– 383

Proceeds from financial debts

64 202

Repayments of financial debts

– 1 078

Non-cash foreign exchange effects

– 5 413

Balance at 31/ 12/ 2022

191 438

Foreign exchange differences

– 465

Proceeds from financial debts

233 496

Repayments of financial debts

– 200 337

Non-cash foreign exchange effects

– 8 833

Reclassification to liabilities associated with assets held for sale

– 6 027

Balance at 31/ 12/ 2023

209 272

in 1 000 CHF

Lease liabilities

Balance at 31/ 12/ 2021

26 542

Foreign exchange differences

– 984

Change in scope of consolidation

1 940

Lease additions

12 487

Lease liability payments

– 8 218

Lease disposals and remeasurements

– 9 648

Balance at 31/ 12/ 2022

22 119

Foreign exchange differences

– 1 446

Change in scope of consolidation

166

Lease additions

10 176

Lease liability payments

– 8 598

Lease disposals and remeasurements

2 042

Reclassification to liabilities associated with assets held for sale

– 16 148

Balance at 31/ 12/ 2023

8 311

56. Share based payments

For Group Management and certain other employees a share based payment plan exists. As part of this plan, Group Management members receive 50% (2022: 50%) and the other employees between 20% and 35% (2022: between 20% and 35%) of their bonus in shares. This equity-settled variable remuneration is measured at fair value and recognised as an increase in equity. The determination of the number of shares is based on the volume weighted average share price of 20 trading days, less a 20% discount for the restriction period. These shares granted have a restriction period of four years. A share based payment plan also exists for members of the Board of Directors. Under this plan, members receive a minimum of 50% of their compensation in shares. This plan has the same features as the one for Group Management.

In 2023, Group Management and certain other employees received for their work in the year 2022 a total of 37 400 allotted shares (2022: 72 712 shares) at a fair value of CHF 0.4 million (2022: CHF 1.2 million) and CHF 10.66 per share respectively (2022: CHF 16.84). In 2022, the CEO received a larger portion of his base compensation for his employment 2022 in shares. He was allocated 60 000 shares at a fair value of CHF 1.3 million and CHF 21.17 per share respectively. The members of the Board of Directors received for their work from 22 April 2022 up to the Annual General Meeting on 21 April 2023 a total of 50 753 shares (2022: 31 372 shares) at a fair value of CHF 0.5 million (2022: CHF 0.5 million) and CHF 10.66 per share respectively (2022: CHF 16.84).

Personnel expenses in 2023 for share based payments totalled CHF 1.0 million (2022: CHF 2.2 million).

57. Related party transactions

Members of the Board of Directors and Group Management were compensated as follows:

in 1 000 CHF

2023

2022

Salaries and other short-term employee benefits

2 417

2 168

Share based payments

937

2 027

Pension and social security contributions

578

595

Total

3 932

4 790

The detailed disclosures regarding executive remuneration required by Swiss law are included in the compensation report.

The following transactions were carried out with related parties and the following balances were outstanding as of the balance sheet date respectively:

in 1 000 CHF

Purchase of services

Sale of goods

Purchase of goods

Balance on receivables

Balance on liabilities

2023

31/ 12/ 2023

Key management personnel

1

17

14

Other related parties

30

3 728

183

574

1

Total

31

3 745

197

574

1

in 1 000 CHF

Purchase of services

Sale of goods

Purchase of goods

Balance on receivables

Balance on liabilities

2022

31/ 12/ 2022

Other related parties

216

3 759

175

241

5

Total

216

3 759

175

241

5

Goods sold in 2023 and 2022 are almost exclusively Arbonia products acquired at market prices by companies owned by Michael Pieper (non-executive member of the Board of Directors) and companies in which a non-executive member of the Board of Directors is a director. There were no guarantees granted as of the balance sheet date. Furthermore no provisions were required for receivables. Transactions and outstanding balances with associated companies are disclosed in note 35.

Major shareholders as of 31 December 2023 are disclosed in the notes to the 2023 financial statements of Arbonia AG.

58. Contingencies

There were no contingencies.

59. Events after the balance sheet date

No events occurred between the balance sheet date and the date of this report which could have a significant influence on the 2023 consolidated financial statements.

60. Subsidiaries

Share Capital in million

Interest in Capital 2023

Interest in Capital 2022

Room Climate

Shower Stalls/ Divider walls

Doors

Services

Climate Division

Arbonia Solutions AG

Arbon, CH

4.000

CHF

100%

100%

Prolux Solutions AG

Arbon, CH

1.000

CHF

100%

100%

ARBONIA climate AG

Arbon, CH

0.250

CHF

100%

100%

Vasco Group NV

Dilsen-Stokkem, BE

32.500

EUR

100%

100%

Vasco BVBA

Dilsen-Stokkem, BE

20.029

EUR

100%

100%

Kermi s.r.o.

Stribro, CZ

195.000

CZK

100%

100%

PZP Heating a.s.

Dobre, CZ

7.200

CZK

100%

100%

Arbonia Riesa GmbH

Glaubitz, DE

0.614

EUR

100%

100%

Kermi GmbH

Plattling, DE

15.339

EUR

100%

100%

Vasco Group GmbH

Dortmund, DE

0.077

EUR

100%

100%

Tecnologia de Aislamientos y climatizacion, S.L.

Algete, ES

0.481

EUR

100%

100%

Cirelius S.A.

Avintes, PT

0.250

EUR

100%

100%

Termovent Komerc d.o.o.

Belgrad, RS

0.064

RSD

100%

100%

Arbonia France Sàrl

Hagenbach, FR

0.600

EUR

100%

100%

Vasco Group Sarl

Nogent-sur-Marne, FR

2.000

EUR

100%

100%

Sabiana S.p.A.

Corbetta, IT

4.060

EUR

100%

100%

Brugman Radiatorenfabriek BV

Tubbergen, NL

4.000

EUR

100%

100%

Vasco Group BV

Tubbergen, NL

9.518

EUR

100%

100%

Brugman Fabryka Grzejnikow Sp.z o.o.

Legnica, PL

20.000

PLN

100%

100%

Kermi Sp.z o.o.

Wroclaw, PL

0.900

PLN

100%

100%

Vasco Group Sp.z o.o.

Legnica, PL

0.500

PLN

100%

100%

AFG RUS

Moskau, RU

454.5

RUB

100%

100%

AFG (Shanghai) Building Materials Co. Ltd.

Shanghai, CN

2.000

USD

100%

100%

▲ Production / Sales

■ Trade

● Services / Finances

Share Capital in million

Interest in Capital 2023

Interest in Capital 2022

Room Climate

Shower Stalls/ Divider walls

Doors

Services

Doors Division

Arbonia Doors AG

Arbon, CH

0.250

CHF

100%

100%

RWD Schlatter AG

Roggwil, CH

2.000

CHF

100%

100%

Bekon-Koralle AG

Dagmersellen, CH

1.000

CHF

100%

100%

Prüm-Türenwerk GmbH

Weinsheim, DE

3.500

EUR

100%

100%

Garant Türen- und Zargen GmbH

Amt Wachsenburg, DE

0.100

EUR

100%

100%

TPO Holz-Systeme GmbH

Leutershausen, DE

0.025

EUR

100%

100%

Joro Türen GmbH

Renchen, DE

0.125

EUR

100%

100%

Arbonia Doors GmbH

Erfurt, DE

0.025

EUR

100%

100%

KIWI-KI GmbH

Berlin, DE

0.096

EUR

49.9%

34.0%

Griffwerk GmbH

Blaustein, DE

0.100

EUR

17.2%

Koralle Sanitärprodukte GmbH

Vlotho, DE

2.070

EUR

100%

100%

Arbonia Glassysteme GmbH

Deggendorf, DE

1.278

EUR

100%

100%

Interwand GmbH

Dörzbach, DE

0.520

EUR

100%

Invado Sp.z o.o.

Ciasna, PL

20.000

PLN

100%

100%

Baduscho Dusch- und Badeeinrichtungen Produktions- und Vertriebsgesellschaft m.b.H

Margarethen am Moos, AT

0.036

EUR

100%

100%

Corporate Services

Arbonia AG

Arbon, CH

291.787

CHF

AFG International AG

Arbon, CH

1.000

CHF

100%

100%

Arbonia Schweiz AG

Arbon, CH

1.000

CHF

100%

100%

AFG Immobilien AG

Arbon, CH

1.000

CHF

100%

100%

Arbonia Management AG

Arbon, CH

0.250

CHF

100%

100%

Arbonia Services AG

Arbon, CH

0.250

CHF

100%

100%

Arbonia Deutschland GmbH

Plattling, DE

0.511

EUR

100%

100%

Skyfens Sp.z o.o.

Lublin, PL

13.005

PLN

100%

100%

▲ Production / Sales

■ Trade

● Services / Finances