Notes to the Consolidated Financial Statements

Arbonia Group (Arbonia) is a focused building components supplier. The company with the continuing operations consists of Division Doors with the Wood Solutions and Glass Solutions Business Units. Manufacturing plants are located in Switzerland, Germany, Poland, Spain, Portugal, France and the Czech Republic. Arbonia owns major brands such as Arbonia, Kermi, Koralle, RWD Schlatter, Prüm, Garant, Invado, Dimoldura and Rozière and possesses a strong position in its home markets in Switzerland and Germany.

On 18 April 2024, a contract was signed between Arbonia and Midea Electrics Netherlands B.V., a company of Midea Group for the sale of the Climate business. The closing of the transaction took place on 26 February 2025 (see note 36).

The location in Russia included in the Climate segment (AFG RUS) is not part of this transaction. Several expressions of interest and concrete offers for the sale of AFG RUS have also been received. The sale of AFG RUS is considered highly probable and the company is recognised as a discontinued operation. The closing of the transaction is expected in the first half of 2025, after all regulatory and legal approvals have been granted (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 26 February 2025 and require approval from the Annual General Meeting on 25 April 2025. The publication of the consolidated financial statements occurred on 4 March 2025 at the media and analyst conference.

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 2023, except for the adoption of the following amended standard.

Amendments to IAS 1 - Classification of liabilities as current or non-current and non-current liabilities with covenants

The amendments to IAS 1 clarify certain requirements for determining whether a liability is classified as current or non-current. Borrowings are classified as current liabilities unless at the end of the reporting period, the group has a substantial right to defer settlement of the liability for at least 12 months after the reporting period. The amendments did not result in a change in the classification of Arbonia’s borrowings.

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

Published standards that are not yet effective nor adopted early

IFRS 18 - Presentation and disclosure in financial statements

IFRS 18 will replace IAS 1 «Presentation of financial statements» and applies for annual reporting periods beginning on or after 1 January 2027. The new standard introduces the following key new requirements:

The introduction of IFRS 18 will have an impact on Arbonia's reporting. Arbonia will systematically analyse and review its reporting with regard to the implementation of this standard.

The other 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.

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 2024

In the financial year 2023

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

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.

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.

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.

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 other 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 other comprehensive income.

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 other comprehensive income are recognised in the income statement.

The following foreign currency rates have been applied:

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.

Financial assets of Arbonia are divided into the following categories: (1) Financial assets measured at amortised cost (FA AC) and (2) Financial assets for hedge instruments.

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 of Arbonia comprise 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.

The Group uses derivative financial instruments to minimise interest rate and commodity price risks resulting from operational business and financial transactions. Derivatives are measured at fair value and disclosed in the balance sheet as other current assets or other current liabilities.

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:

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.

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.

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.

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.

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.

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.

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.

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.

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).

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.

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.

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.

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.

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.

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 and adjusted against the right-of-use asset.

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.

Deferred taxes are recognised using the liability method. In accordance with this method, the income tax effects of temporary differences between the intra-group and tax balance sheet values are recognised as non-current liabilities or non-current assets. Deferred income tax is determined using tax rates that have been enacted by the balance sheet date. Deferred taxes on temporary differences are not recognised for (1) goodwill that is not deductible for tax purposes, (2) transactions resulting from the initial recognition of assets or liabilities that affect neither the taxable profit nor the profit for the year and do not result from business combinations, and (3) investments in subsidiaries, provided that the timing of the reversal can be controlled by Arbonia and it is probable that the temporary differences 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.

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.

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. In 2024, the valuation of the Deal Contingent Forward (incl. cost of hedging) concluded in the reporting year is also included in other reserves.

Net revenue

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 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.

In addition to short-term series production, the Wood Solutions Business Unit of the Doors Division is also active 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, Arbonia has an enforceable right to payment and the orders 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 and investment property.

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, minority share from associated companies and foreign exchange gains. Interest income is recognised on a time-proportion basis using the effective interest method. Foreign exchange gains and losses are shown on a net basis.

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.

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 2024, the carrying amount of inventory was at CHF 75.8 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 2024, the carrying amount of property, plant and equipment totalled CHF 432.2 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 2024, the carrying amount of goodwill was at CHF 189.8 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 2024, the carrying amount of intangible assets acquired in a business combination amounted to CHF 119.0 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 2024, the carrying amount of the provisions totalled CHF 8.0 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 2024, the overfunding amounted to CHF 14.3 million, thereof CHF 27.2  million recorded in the balance sheet as capitalised pension surplus and CHF 13.0 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 2024, the carrying amount of deferred tax assets before offsetting totalled CHF 35.5 million. For further information on income taxes, see notes 46 and 52.

On 18 April 2024, a contract was signed between Arbonia and Midea Electrics Netherlands B.V., a company of Midea Group for the sale of the Climate business. The location in Russia included in the Climate segment (AFG RUS) is not part of this transaction. Several expressions of interest and concrete offers for the sale of AFG RUS have also been received. The sale of AFG RUS is considered highly probable as per 31 December 2024. In line with internal management reporting, the Climate segment is no longer included in the segment information. The segment information of the previous year was restated accordingly.

With this sales transaction, Arbonia will focus on its doors business in future, which will remain as the only reportable business segment. A non-operating property in the Netherlands (Brugman Radiatorenfabriek BV), included in the Climate business, is not part of the transaction and will remain with Arbonia. These activities are allocated to Corporate Services in the segment information. This position also includes Corporate Services, which consists of service, finance, real estate and investment companies and provides services almost entirely to Group companies.

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.

Doors Division

With its Wood Solutions Business Unit and the associated companies Prüm, Garant, Invado, RWD Schlatter, Joro, Dimoldura and Lignis 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. Of the seventeen production sites of the Doors Division, seven are located in Germany, two in Switzerland, one in Poland, four in Spain, one in France, one in Portugal and one in the Czech Republic.

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.

¹ see note 36

Information about geographical areas

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).

Cash and cash equivalents are denominated in the following currencies:

Accounts receivable

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

The ageing analysis is as follows:

Outstanding accounts receivable amounting to CHF 19.3 million (2023: CHF 12.7 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:

Contract balance

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:

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 2024, 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:

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

A provision of CHF 6.1 million (2023: CHF 6.1 million) has been provided for obsolete and slow-moving items and is deducted from inventories. 2024 and 2023, there are no material inventories written down to the net realisable value and no material write-downs to net realisable value were recorded.

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 2023, the cash outflow is included in the position issuance of financial assets.

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

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

Associated companies – Balance sheet

Associated companies - Income statement

Business transactions with associated companies

On 18 April 2024, a contract was signed between Arbonia and Midea Electrics Netherlands B.V., a company of Midea Group for the sale of the Climate business. The location in Russia included in the Climate segment (AFG RUS) is not part of this transaction. Several expressions of interest and concrete offers for the sale of AFG RUS have also been received. The sale of AFG RUS is considered highly probable as per 31 December 2024. A non-operating property in the Netherlands (Brugman Radiatorenfabriek BV), included in the Climate business, is not part of the transaction and will remain with Arbonia. In accordance with IFRS 5, Arbonia reports the Climate Division, with the exception of Brugman Radiatorenfabriek BV, as discontinued operations. The Climate business was already recognised as discontinued operation in the 2023 consolidated financial statements. The prior-year figures in the income statement have been adjusted to the effect that the continuing operations of Brugman Radiatorenfabriek BV have been allocated to continuing operations. In the consolidated balance sheet as of 31 December 2024, 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 were not adjusted.

Assets held for sale and discontinued operations

Liabilities associated with assets held for sale and discontinued operations

Result from discontinued operations

The results for the reporting period 2024 includes currently incurred sales costs for the disposal of the Climate Division of CHF 3.3 million (2023: CHF 1.4 million).

The revaluation of assets held for sale and adjustment to the lower of carrying amount and fair value less costs to sell of AFG RUS resulted in impairments on property, plant and equipment in the amount of CHF 21.1 million in the reporting period 2024.

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

As per 31 December 2024, other comprehensive income includes cumulative expenses in connection with discontinued operations totalling around CHF 78 million (2023: CHF 82 million).

The group entity Kermi GmbH was active for both the Doors Division (Glass Solutions) and the Climate Division. Due to the planned sale of the Climate Division, the Glass Solutions segment was carved out in 2024. The carve-out and the final contract negotiations with the buyer led to adjustments in the allocation of assets between continuing and discontinued operations. These shifts are recognised as reclassification to assets held for sale. The reclassification in land and buildings relates to the transfer of the land and factory building in Plattling to the Glass Solutions segment.

No borrowing costs were capitalised in 2024 and 2023.

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:

Land and buildings amounting to CHF 37.6 million (2023: CHF 37.1 million) are pledged to secure mortgages, which are fully attributable to discontinued operations.

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:

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

Total cash outflows for leases amounted to CHF 14.6 million in 2024 (2023: CHF 12.8 million). Of this amount, CHF 5.4 million (2023: CHF 4.8 million) was attributable to continuing operations.

Lease agreements may contain renewal options. The determination of the lease term of these leases requires judgement. As of 31 December 2023, possible future cash outflows of CHF 0.9 million were not included in the lease liability as it was not reasonably certain that the lease agreements will be renewed. There are no not included renewal options as at 31 December 2024.

Rental income from investment properties from continuing operations amounted to CHF 1.2  million (2023: CHF 1.8 million) and is included in other operating income. Related direct operating expenses were CHF 0.1 million (2023: CHF 0.2 million) and are included in other operating expenses.

In the second quarter of 2024, Arbonia sold the non-operating property Zelgstrasse (Arbon). This resulted in a gain on disposal of CHF 28.8 million, which is included in the income statement under other operating income. The cash inflow of CHF 19.0 million is included in the cash flow statement under proceeds from sale of investment property.

At the same time, the mortgage of CHF 14.9 million was repaid and deducted directly from the sales price by the bank.

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.

Expenses for research and development in the amount of CHF 3.2 million (2023: CHF 4.3 million) have been charged to the income statement, since they did not fulfil the capitalisation criteria. The additions to other intangible assets consist of CHF 0.1 million (2023: CHF 3.1 million) of own development costs and CHF 0.1 million (2023: CHF 0.1 million) of purchased or acquired items.

Goodwill

As of 31 December 2024 goodwill from business combinations is allocated to the Group’s five cash-generating units (CGUs) Joro Doors, Wood Solutions, Dimoldura, Lignis and Glass Solutions. The movements of the carrying amounts of goodwill were as follows:

Goodwill impairment tests 2024

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 2024 and were used for the impairment tests.

The value in use calculation for the annual 2024 impairment tests assumed the following key assumptions:

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.

A planning horizon of ten years was used for CGU Wood Solutions, consisting of a budget year and four planning years with a subsequent reconciliation of a further five years to the residual values. The slump in construction activity, particularly in Germany, led to a drop in demand for doors. Due to this slump in demand, the highly automated plant of the future 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.

Based on a reasonably possible change in the key assumptions, sensitivity analyses were calculated in 2024 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.

Other key assumptions for the impairment test of the CGU Wood Solutions included an annual average growth rate of 6.2% until 2029 and 5.0% until 2034 as well as an EBITDA margin development to 13.9% until 2029 and to 16.0% until 2034.

If the discount rate were increased from 10.4% to 11.4%, the calculated value would be equal to its carrying amount. A reduction in the budgeted gross margin from 58.4% to 51.4% would have led to an impairment of CHF 47 million in the CGU Wood Solutions. A 20% reduction in EBITDA would lead to an impairment of CHF 45 million. At a reduction of 13.3% 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 70 million. At a reduction of 11.6% in EBITDA and an eternal growth of 1.75%, the recoverable amount was equal to its carrying amount.

Goodwill impairment tests 2023

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

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 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.

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 of 14.9% until 2028 and 16.9% until 2033.

A reduction in the budgeted gross margin from 58.0% to 51.0% would have been just enough to prevent an impairment in the CGU Wood Solutions. A 20% reduction in EBITDA would have led to an impairment of CHF 7 million. With a 19.1% reduction in EBITDA, the calculated value would be equal to its carrying amount. A 20% reduction in EBITDA with a simultaneous reduction in eternal growth from 2.0% to 1.5% would have led to an impairment of CHF 31 million. In the event of a 17.4% reduction in EBITDA and an eternal growth rate of 1.75%, the calculated value would be equal to its carrying amount.

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

Acquisitions 2024

Dimoldura Group

As of 16 May 2024, Arbonia acquired 100% of Dimoldura Group, ES-Toledo. Dimoldura is the market leader in the area of wooden interior doors in Spain and is also active with a strong market presence in Portugal and France. The markets of Dimoldura therefore complement the existing sales markets of the Doors Division. The Doors Division is additionally expanding its presence in the contractor services business and DIY business. The purchase price in cash amounted to CHF 90.4 million. From the date of acquisition, Dimoldura Group contributed CHF 70.3 million in net revenues and CHF 0.8 million in profit to the Group. Had the acquisition taken place on 1 January 2024, net revenues for the reporting period would have been CHF 112.0 million and profit, including amortisation charges on intangible assets from acquisitions, would have been CHF 2.5 million. The gross carrying amount of accounts receivables amounted to CHF 18.0 million, of which CHF 0.3 million were considered uncollectable. The acquisition-related costs amounted to CHF 1.2 million and are included in operating expenses in 2024. 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. Goodwill contains the expected synergy potential within the Doors Division. With the acquisition of Dimoldura Group, Arbonia is expanding its geographical presence and gaining access to southern Europe, a market in which the Doors Division was hardly active and present before the transaction. In addition to new markets and greater geographical coverage, Arbonia is also expanding its product portfolio, which it can offer to existing and new customers. The goodwill also includes the know-how of the workforce.

Lignis s.r.o.

As of 1 July 2024, Arbonia acquired 100% of Lignis s.r.o., CZ-Koryčany. Lignis is a specialist for functional doors and serves the contractor services business incl. assembly. Lignis is the only door manufacturer in Czechia that can provide the entire product portfolio from standard doors to functional doors made of wood and metal. This acquisition will make Arbonia the second-largest provider in Czechia and Slovakia. The purchase price amounted to CHF 20.7 million, of which CHF 19.7 million was paid in cash and CHF 1.0 million in Arbonia shares. From the date of acquisition, Lignis contributed CHF 6.6 million in net revenues and CHF 0.2 million in profit to the Group. Had the acquisition taken place on 1 January 2024, net revenues for the reporting period would have been CHF 13.0 million and profit, including amortisation charges on intangible assets from acquisitions, would have been CHF 0.3 million. The gross carrying amount of accounts receivables amounted to CHF 4.5 million, of which CHF 0.1 million were considered uncollectable. The acquisition-related costs amounted to CHF 0.3 million and are included in operating expenses in 2024. 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. Goodwill mainly contains the expected synergy potential within the Doors Division. The goodwill also includes the know-how of the workforce.

In 2024, deferred purchase price payments for Joro, CICSA and Interwand of CHF 1.8 million were due and paid.

Acquisitions 2023

Interwand GmbH

As of 24 October 2023, Arbonia had 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 a deferred purchase price payment of CHF 1.1 million was included. From the date of acquisition, Interwand contributed CHF 1.8 million in net revenues for 2023 and CHF 0.3 million in profit for 2023 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 and CICSA of CHF 1.4 million were due and paid.

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.

Arbonia has taken out a bridge loan of EUR 100 million to finance acquisitions. The outstanding bridge loan of EUR 80 million is to be repaid in full once the sale of the Climate Division has been completed.

The financial debts are comprised of the following:

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 2024 and 2023.

The maturities of the financial debts are as follows:

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

The syndicated loan, the bridge loan and the bank borrowings, as well as the majority of bank loans have variable interest rates, whereas the promissory note loan has fixed interest rates.

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

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