GEA looks back on an eventful 12 months. Fiscal year 2019 set the course for profound changes in the company’s organizational setup. GEA has returned to a divisional structure while relying on decentralized, entrepreneurial corporate entities. This also included an overhaul of the Executive Board. At the same time, our mechanical engineering enterprise had to stand its ground in a difficult economic environment. Thus, I have all the more respect for our employees who have offered proof of their loyalty and commitment throughout this period of corporate transformation and renewal. Due to an outstanding team effort, we have succeeded in meeting or even exceeding all expectations as far as revenue, earnings and return on capital employed are concerned. The same applies to order intake, which was slightly higher than in the previous year. This is also an encouraging starting point for future value growth.
The most significant internal reform we tackled during the previous year was our new divisional organizational structure. Since the beginning of 2020, our managers have resumed direct responsibility for sales as well as profit and loss. This way, we are seeking to inspire entrepreneurial thinking and behavior while promoting competitive agility. Our new corporate structure also embraces the expansion of the service business, which is profitable and also allows us to establish even closer ties with our customers. Our procurement team has been given more authority and by joining forces the ability to unleash potential which was another priority associated with GEA’s reorganization. This will help us achieve savings of more than EUR 25 million during the current fiscal year. By establishing an Executive Board remit that combines procurement, production and supply chain, we have paved the way for advancing this specific cause. Furthermore, we have also swiftly moved ahead with various restructuring measures and managed to implement them earlier than anticipated. In this context, expenses in the amount of approximately EUR 50 million, which were originally budgeted for 2020, have been accelerated and shown results in the fiscal year just ended.
It is true, that over the previous year, we have scrutinized and challenged many things at GEA. Nonetheless, both the Executive Board and the Supervisory Board remain steadfast in their opinion that our dividend policy shall remain unchanged. Operationally speaking, GEA is a sound company. For this reason, we intend to propose an unchanged dividend payout of EUR 0.85 per share at the Annual General Meeting.
We also plan to achieve much over the coming months. Our medium-term objectives illustrate that we will be seeking to execute further savings potential and to become even more profitable overall; on the other hand, we will divest low-margin and low-synergy activities. At the same time, we are going to invest in state-of-the-art IT systems and put our resource planning on a new footing by setting up a global ERP infrastructure. GEA has got what it takes to create real value. And then, there is another point that really matters to us: As an international mechanical engineering company, GEA is making a commitment regarding urgent and pressing issues impacting our future, issues that are on everybody’s mind all around the globe. In many fields, we are technology leaders. Offering our leading knowhow and value-creating innovations, we can make a difference and step up to the plate by contributing solutions that help meet collective challenges like climate change and the safeguarding of worldwide food supplies.
Our efforts are not merely aimed at building highly efficient and resource-conserving systems and plants for our customers. We are also undertaking efforts to make our own production even more sustainable – with measurable results: Once again, 2019 saw an improvement in our EcoVadis supplier rating. Moreover, GEA was awarded the “Leadership“ grade A- for its action on climate change under the Carbon Disclosure Project (CDP), our best result ever, which ranks us among the group of top performing companies. As one of the largest international suppliers of process technology, we attach great importance to playing an active role in shaping responsible management. This is why we are going to get more involved in the discussion of global issues, an endeavor we began in 2019 within the framework of the World Economic Forum.
During fiscal year 2019, the Supervisory Board performed the monitoring and advisory functions incumbent upon it by virtue of the law, the Articles of Association and the Rules of Procedure. In doing so, it regularly dealt with the progress and the prospects of the company as well as all specific material issues while continuously advising the Executive Board on matters relating to the management of the company.
For fulfilling its tasks, the Supervisory Board, on the one hand, relied on the discussions held during its meetings and the meetings of its committees. On the other hand, the Executive Board – in compliance with its obligation to inform – kept the Supervisory Board and its committees up to date through regular, timely and comprehensive written and/or oral reports on all relevant matters and measures relating to the company, its course of business, corporate planning, strategy as well as the progress of the group. The Supervisory Board was involved in all decisions of fundamental importance to the company and assisted the Executive Board in an advisory capacity. At committee level and during the meetings of the full Supervisory Board, the members of the Supervisory Board were given sufficient opportunity to critically analyze and appraise the reports and motions for resolution submitted by the Executive Board – and to put forward recommendations. The results obtained and the essential contributions made during the discussions held at committee meetings were presented by the chairs of the individual committees at the respective following Supervisory Board meetings and, thus, assisted the full Board in forming an opinion. This way, the preparatory and in-depth work undertaken by the committees was instrumental in enhancing the overall efficiency of the activities of the Supervisory Board.
Furthermore, the Chairmen of the Supervisory Board and the Audit Committee as well as the Chairwoman of the Technology Committee maintained regular contact with the Executive Board. Between the meetings, the Chairman of the Supervisory Board and the CEO regularly discussed matters of strategy, planning, business progress, risk exposure, risk management and compliance. Outside of meetings, the Chairman of the Audit Committee remained in contact with members of the Executive Board, in particular the CFO, to keep abreast of current developments relevant to the work of the Audit Committee and to discuss them, if necessary. In preliminary meetings with the Executive Board, the employee representatives regularly deliberated on the most important agenda items prior to the meetings of the full Supervisory Board.
On a regular basis, the Supervisory Board received specific information on the order intake, revenue, earnings as well as the employment situation of the group and its business areas. Explanations on deviations of business performance from set plans and targets were given on the basis of supporting documents. Prior to and between the meetings, the Executive Board delivered written reports on significant events to the members of the Supervisory Board. Following deliberations at committee level, the future prospects and the strategic orientation of the company and its business areas, as well as corporate planning were extensively discussed and agreed with the Supervisory Board.
After comprehensive scrutiny and deliberations as well as discussions at committee level, as the case may be, the members of the Supervisory Board cast their votes on the reports and motions for resolution submitted by the Executive Board insofar as this was appropriate or required by law, the provisions of the Articles of Association or the Rules of Procedure. For reasons duly substantiated, in particular in matters of special urgency, resolutions were adopted by written procedure.
In the year under review, there were no conflicts of interest involving members of the Executive Board and the Supervisory Board that would have required immediate disclosure to the Supervisory Board and communication to the Annual General Meeting.
In fiscal year 2019, the Supervisory Board held seven meetings. On these occasions, the Supervisory Board regularly discussed matters relating to the company’s business progress, its financial position as well as share price performance. Apart from that, the following key topics were addressed.
The key items on the agenda of the Supervisory Board meeting held on February 11, 2019, included the preliminary financials 2018, the 2019 budget, achievement of targets for the 2018 remuneration of the Executive Board, the appointment of the Labor Relations Director as well as the future committee structure of the Supervisory Board.
Key issues addressed during the Supervisory Board meeting held on March 13, 2019, included the adoption of the annual financial statements including the appropriation of net earnings and the approval of the consolidated financial statements for fiscal year 2018. Apart from that, the Supervisory Board dealt with the final determination and weighting of the Executive Board members’ individual targets for the 2019 fiscal year, the core messages to be conveyed during the presentation of the company’s annual results at a press conference on March 14, 2019, as well as the motions for resolution on the individual agenda items to be submitted to the Annual General Meeting scheduled for April 26, 2019. In addition, the company’s Chief Compliance Officer delivered a detailed report on the 2018 fiscal year just ended. Furthermore, the Supervisory Board and Niels Erik Olsen mutually agreed to terminate his Executive Board mandate, reaching an understanding about Niels Erik Olsen’s departure on March 13, 2019.
At the Supervisory Board meeting held on April 26, 2019, the Board focused on Dr. Helmut Schmale’s premature departure by mutual consent as well as the preparation of the Annual General Meeting held that day.
During its meeting on June 18, 2019, the Supervisory Board was given an account of the progress of Executive Board succession planning and also informed about a lawsuit in the U.S.. Moreover, the Supervisory Board passed resolutions on a pension benefits adjustment for the former members of the Executive Board, on the definition of the 2019 individual targets for Marcus A. Ketter as well as an amendment of the Rules of Procedure of the Audit Committee. Apart from that, the Supervisory Board dealt with various matters relating to public takeovers as part of a thematic focus of its work in the past financial year, which is why it established a Special Committee at this meeting which dealt with these issues in greater depth. Corporate governance, the overhaul of the German Corporate Governance Code as well as public takeovers also represented the priority areas addressed during a full-day Supervisory Board skills training workshop that took place on August 2, 2019.
On the occasion of a strategy meeting held on June 19, 2019, the Supervisory Board exclusively focused on the new organization. In this context, the Supervisory Board was informed about the new management structure as well as the future roles and responsibilities within the new organization. The presentation also included the timeline for implementing the future organization and an introduction to the CREATE transformation project.
On September 24, 2019, the Supervisory Board received a progress report on the CREATE transformation program. Furthermore, the Executive Board provided extensive information on the subject matters to be presented at the Capital Markets Day in London scheduled for September 26, 2019. Apart from that, the Supervisory Board appointed Johannes Giloth as new member of the Executive Board and/or Chief Operating Officer, whereupon it engaged in deliberation on Ms. Snels’s premature and amicable departure from the Executive Board.
At its meeting on December 19, 2019, the Executive Board presented its 2020-2022 mediumterm planning as well as the 2020 budget, which was approved by the Supervisory Board. In addition, the Supervisory Board was once again given an update on the progress of the CREATE transformation project with particular focus given to the new organizational structure, which was explained in detail. Moreover, the meeting also saw the presentation and discussion of a comprehensive portfolio analysis. Furthermore, the Supervisory Board addressed Executive Board target achievement in 2019 and discussed proposals for Executive Board targets for fiscal year 2020.
In the year under review, the Presiding Committee met on six occasions, focusing primarily on succession planning processes in relation to the position of CFO and the head of the new procurement, production and supply chain function that was to be created, as well as the remuneration of the Executive Board. Apart from that, the Presiding Committee specifically addressed the topic of corporate governance and transactions requiring approval. Furthermore, the Presiding Committee’s remit includes matters of corporate strategy, capital investment as well as funding that are addressed together with the Executive Board.
The Audit Committee held five meetings. In the presence of the auditor, the CEO as well as the CFO, it focused on the annual financial statements in conjunction with the consolidated financial statements for 2018 as well as the 2019 quarterly financial statements and halfyearly financial reports. Furthermore, the Committee’s key activities included monitoring the accounting process, the effectiveness of the internal control, risk management and audit systems, the audit of the annual financial accounts as well as compliance. At regular intervals, the Audit Committee was briefed on the risks and opportunities faced by the company. The auditors extensively elaborated on their audit activities and the audit process. In addition, the Audit Committee submitted its proposal for the appointment of an auditor to the Supervisory Board, dealt with the engagement of the auditor of the annual financial accounts, determined the audit process and the key audit areas including audit fees, ensured the required independence of the auditor and addressed the permitted non-audit services provided by the latter.
In the year under review, the Nomination Committee was convened on three occasions and dealt with matters of Supervisory Board succession planning.
With effect from May 1, 2019, the Supervisory Board formed a Technology Committee comprising Dr. Molly Zhang as Chair, Michaela Hubert, Brigitte Krönchen as well as Jean E. Spence. In fiscal year 2019, the members of the Technology Committee gathered for two meetings.
In addition, the Supervisory Board set up a Special Committee comprising Dr. Helmut Perlet, Hartmut Eberlein, Rainer Gröbel and Kurt-Jürgen Löw at its meeting on June 18, 2019. Prior to its dissolution in December 2019, the Committee met on six occasions and focused its attention on various subject matters related to takeover law.
The year under review did not see a meeting of the Mediation Committee.
The committee chairs briefed the Supervisory Board on the activities undertaken by their committees during the Supervisory Board meetings held in the wake of the respective committee meetings.
|Supervisory Board member||Supervisory Board and
|Dr. Helmut Perlet (Chairman)||27||27||100%|
|Kurt-Jürgen Löw (Deputy Chairman)||18||18||100%|
|Dr. Molly Zhang||9||9||100%|
Whenever Supervisory Board members were unable to attend meetings of the Supervisory Board or its committees, they had asked to be excused and usually cast their votes in writing.
The Supervisory Board is continuously monitoring the evolution of the standards set out by the Corporate Governance Code. During a Supervisory Board skills training workshop in early August 2019 and at its meeting on December 19, 2019, the Supervisory Board deliberated on the overhaul of the German Corporate Governance Code that had already been presented in May 2019. On December 19, 2019, the Executive Board and the Supervisory Board also issued an updated Declaration of Conformity in accordance with s. 161 AktG (Aktiengesetz – German Stock Corporation Act) and made it permanently accessible to the general public on the company’s website. Further information on corporate governance can be found in the Corporate Governance Report (see page 76 ff. of the annual report)
The 2019 annual financial statements of GEA Group Aktiengesellschaft, the consolidated financial statements prepared in accordance with IFRS and the combined management report were audited by KPMG AG Wirtschaftsprüfungsgesellschaft and received an unqualified audit opinion. Since fiscal year 2011, KPMG AG Wirtschaftsprüfungsgesellschaft, Berlin, has audited the financial statements of GEA Group Aktiengesellschaft and the group. The head auditor responsible for conducting the audit since 2018 has been Michael Jessen.
In the presence of the auditors, the combined management report, the annual financial statements of GEA Group Aktiengesellschaft, the proposal for the appropriation of net earnings as well as the consolidated financial statements and the audit reports for fiscal year 2019 were extensively discussed during the meeting of the Audit Committee on March 5, 2020, and at the Supervisory Board meeting for balance sheet approval held on March 12, 2020. The auditors reported on the audit process and the key findings of their audit. They were also available to answer questions.
On the basis of the final result of the examination performed by the Audit Committee and after conducting its own scrutiny, the Supervisory Board agreed with the auditors’ findings at its meeting held on March 12, 2020, and found that there were no objections to be raised. The Supervisory Board approved the 2019 consolidated financial statements, the 2019 annual financial statements of GEA Group Aktiengesellschaft, as well as the combined management report. The annual financial statements of GEA Group Aktiengesellschaft are hereby adopted. The Supervisory Board considers the proposal for the appropriation of net earnings to be reasonable.
The review of the company’s consolidated non-financial statement for fiscal year 2019 by the Supervisory Board pursuant to s. 171 para. 1 AktG was supported by a limited assurance engagement conducted by KPMG. For this purpose, KPMG audited GEA’s risk assessment as regards relevant information about the company’s sustainability performance, evaluating the design and implementation of systems and processes designed to ascertain, process and monitor disclosures on environmental, employee-related and social matters, human rights, corruption and fraud, including data consolidation. Referring to the auditor’s findings, the Audit Committee also conducted its own audit steps and satisfied itself that the data submitted complied with the legal requirements; the Chairman of the Audit Committee informed the Supervisory Board accordingly.
Jürg Oleas, CEO, left the company on February 17, 2019. Stefan Klebert took over as CEO from Jürg Oleas on February 18, 2019.
On March 13, 2019, Niels Erik Olsen retired from the Executive Board.
Dr. Helmut Schmale, CFO, left the Executive Board on May 17, 2019. Marcus A. Ketter assumed the position of CFO on May 20, 2019. He was appointed for a term of three years.
Martine Snels, member of the Executive Board, departed on December 31, 2019.
Johannes Giloth joined the Executive Board as Chief Operating Officer on January 20, 2020. He is responsible for the newly established procurement, production and supply chain function. Johannes Giloth was appointed for a three-year term.
Steffen Bersch stepped down from the Executive Board on February 29, 2020.
The Supervisory Board wishes to express its gratitude and appreciation to the senior management teams, employee representative bodies and, in particular, to all employees of GEA Group, thanking them for their personal commitment and all their work during the previous fiscal year.