2. Invested capital

2.1 Net operating assets and operating free cash flow

Among others, Bystronic uses the key figures “Net Operating Assets”, “Return on Net Operating Assets (RONOA)” and “Operating Free Cash Flow” to manage its operating performance.

Net operating assets and return on net operating assets

For the calculation of the net operating assets (NOA) at the end of 2021, effects from the disposals of discontinued operations in the amount of CHF 80.8 million are not taken into account. Therefore, in the calculation of the NOA, other receivables (excluding derivatives) are reduced by CHF 20.0 million and financial assets (non-current receivables and loans) by CHF 60.8 million. Trade receivables at the end of 2020 include a receivable of CHF 0.3 million from discontinued operations.

Return on net operating assets (RONOA) after tax is calculated from the operating profit (EBIT) after deduction of the chargeable tax expense in relation to the average net operating assets as of January, 1 and the relevant balance sheet date. The chargeable tax expense is calculated by multiplying the earnings before taxes by the effective tax rate.

Operating free cash flow

Operating free cash flow is calculated on the basis of cash flows from operating activities less selected items of cash flows from investing activities. Compared to free cash flow, operating free cash flow excludes changes in marketable securities and money market instruments with a maturity of more than 90 days as well as the acquisition and divestment of business activities.

2.2 Net working capital

Trade receivables

Specific and general value adjustments were recognized for receivables at risk. The general value adjustment is based on empirical values.

Other receivables

Other receivables mainly include recoverable value-added taxes, other tax refund claims and the positive market values of open derivative financial instruments as of the balance sheet date. The increase compared to prior year is primarily due to the receivable of CHF 20.0 million from Recticel in connection with the sale of FoamPartner.

Net receivables from discontinued operations

At the end of 2020, Bystronic held short-term loans to discontinued operations in the amount of CHF 158.4 million.

Inventories

Due to the high order intake and transportation and procurement bottlenecks, Bystronic’s inventories increased by CHF 69.6 million. The value adjustment of inventories amounted to CHF 46.3 million (previous year: CHF 46.6 million).

Advance payments from customers

After placing their orders, customers make corresponding advance payments. Due to high demand, advance payments increased sharply compared to the previous year. 

Other short-term liabilities

The position includes taxes owed, social security contributions and negative market values of open derivative financial instruments as of the balance sheet date.

Accrued expenses and deferred income

Accrued expenses and deferred income include amounts from the accrual of expenses and deferred income. Other accruals and deferrals include commissions, volume discounts, installation and service costs as well as goods and services purchased from third parties but not yet invoiced.

Significant estimates made by management

In assessing the recoverability of inventories, estimates are made on the basis of expected consumption, price trends (lower of cost or market principle) and loss-free valuation. The estimates used to determine value adjustments on inventories are reviewed annually and amended as necessary.

Accounting principles

Trade and other receivables are stated at nominal value, less value adjustments for doubtful accounts.

Inventories are valued at the lower of cost or market. Production costs are calculated without imputed interest. Risks arising in connection with inventories difficult to sell or with a long storage period are accounted for by means of value adjustments.

Liabilities are recognized in the balance sheet at nominal value.

2.3 Fixed assets

Additions to fixed assets in 2021 mainly relate to investments in operating facilities at the production sites in Niederönz (Switzerland) and Shenzhen (China) and the construction of an experience center in Incheon (Korea).

Significant estimates made by management

The recoverability of fixed assets is assessed when there are indications of impairment. If there are indications of impairment, the recoverable amount is calculated. If the carrying amount of an asset exceeds its recoverable amount, an additional value adjustment is recognized. The calculation of the recoverable amount includes the estimation of future cash flows, the determination of the discount factor and the growth rate based on forecasted expectations. Actual cash flows may differ from the discounted future cash flows based on these estimates. Likewise, useful lives may be shortened or values may decline as a result of changes in use due to the relocation or abandonment of sites or lower than expected sales in the medium term.

Accounting principles

Land is carried at acquisition cost less any value adjustments. Other fixed assets are valued at acquisition or production cost less any necessary depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. The useful lives are as follows:

2.4 Intangible assets

Intangible assets mainly include software. The additions basically relate to investments in the digitalization and automation of business processes.

Goodwill

Theoretical capitalization of goodwill would result in the following effects on the consolidated financial statements:

Theoretical assets analysis of goodwill:

The additions are related to the acquisition of Kurago Software S.L., (Spain) (see note 4.2).

Theoretical impact on income statement:

Theoretical impact on balance sheet:

Significant estimates made by management

The recoverability of intangible assets (including goodwill) is assessed when there are indications of impairment. If there are indications of impairment, the recoverable amount is calculated. If the carrying amount of an asset or the cash-generating unit to which the asset belongs exceeds its recoverable amount, an additional impairment loss is recognized. The calculation of the recoverable amount includes the estimation of future cash flows, the determination of the discount factor and the growth rate based on forecasted expectations. Actual cash flows may differ from the discounted future cash flows based on these estimates.

Accounting principles

Intangible assets are carried at acquisition cost less any value adjustments. Amortization is calculated on a straight-line basis over the estimated useful lives of the assets, which is normally between three and five years for software.

Research and development costs are reflected in the income statement.

Goodwill resulting from acquisitions is offset against retained earnings at the time of acquisition. On disposal or liquidation of a business unit, the goodwill previously offset against equity is reflected in the income statement. For shadow accounting purposes, goodwill is generally amortized on a straight-line basis over its useful life, which is normally five years.

2.5 Other financial assets

Further details on the change in assets from employer contribution reserves can be found in note 5.1. Non-current receivables and loans include long-term repayment contracts with customers, deposits for rents and the granting of a vendor loan (including accrued interest) of CHF 60.8 million in connection with the sale of Mammut Sports Group. Financial assets are value adjusted by CHF 2.3 million (previous year: CHF 2.4 million).

Net loans to discontinued operations

At the end of 2020, Bystronic held long-term loans to discontinued operations in the amount of CHF 23.4 million.

Accounting principles

Financial assets are recorded at acquisition cost, less any value adjustments. Financial assets also include employer contribution reserves without waiver of use.

2.6 Provisions and contingent liabilities

Warranty provisions relate to the sale of products and are based on empirical values. Experience shows that the corresponding cash outflow occurs evenly over the warranty period of one to five years.

Provisions for litigations mainly relate to legal cases arising from intellectual property rights and potential guarantees and indemnities in connection with the sale of discontinued operations, where the timing of the cash outflow of the liabilities is uncertain as it depends on the progress of the negotiations or proceedings.

Other provisions include in particular provisions for long-service awards and retirement benefits that do not qualify as employee benefit obligations, provisions for impending losses on purchase commitments under master purchase agreements and provisions for environmental and tax liabilities. In the context of reassessments, provisions increased by CHF 6 million.

Contingent liabilities

In connection with customer financing, there were repurchase obligations for machines to leasing companies in the amount of CHF 36.7 million (previous year: CHF 29.3 million) Bystronic companies guarantee the beneficiary leasing companies to take back machines in the above-mentioned amount if their lessees fail to pay the agreed installments.

Significant estimates made by management

The amount of provisions is primarily determined by the estimate of future costs. The calculation for warranty claims is based on sales of products, contractual agreements and empirical values. In addition to the lump-sum calculation, individual provisions are taken into account for claims that have occurred or have been reported based on management’s assessment.

Accounting principles

Provisions are recognized when an event has occurred prior to the balance sheet date that gives rise to a probable obligation where the amount and/or timing is uncertain but estimable. This obligation may be based on legal or factual grounds.