E_mg_GB_03_vorne-29_3_04

“2003 was a year of transition for mg. 

We laid the foundations of a new Group 

structure and a clearly defined corporate 

strategy. Our prime objective is to sustain- 

ably enhance mg’s shareholder value and 

to transform the company into a focused 

and highly profitable organization whose 

strong performance is rewarded by 

the capital market. 2004 is the year of 

implementation. Our strategy is to pool 

our resources in order to create freedom 

for action.” 

c o n s i s t e n t . i n n o v a t i v e . 

A n n u a l R e p o r t 2003 

mg technologies ag

Pooling 

Resources 

The industrial plant engineering business 

– consisting of Lurgi, Lurgi Lentjes and 

Zimmer – is to be streamlined. Portfolio 

optimization, selective acceptance of new 

business, and cost-cutting will boost mg’s 

profit margins. 

The GEA Group, the linchpin of the new 

mg, is a technology and market leader, 

supplying process engineering and components 

to the food, beverage, dairy and 

pharmaceutical industries. 

The chemicals division – comprising Dynamit Nobel 

and solvadis – is due to be sold in 2004. This disposal 

will strengthen mg’s financial position and place the 

company on a sound footing for future expansion.

Consolidated Key Figures 2003 

RESULTS OF OPERATIONS 

after discontinued operations (1) before discontinued operations 

adjusted adjusted adjusted SFY 

2003 2001/02 SFY 2002 2003 2001/02 2002 

u million s million s million u million s million s million 

Sales 6,403.2 6,826.5 1,518.8 8,156.9 8,585.8 2,032.8 

thereof outside Germany 4,670.6 5,000.6 1,107.8 5,995.7 6,322.2 1,516.6 

thereof in Germany 1,732.6 1,825.9 411.0 2,161.2 2,263.6 516.2 

EBITDA 110.4 591.7 93.9 64.4 633.9 98.5 

EBIT 

Earnings before income taxes 

– 102.6 366.4 45.9 – 160.4 396.6 47.9 

and minority interests – 181.0 290.5 26.2 – 240.7 320.3 27.3 

% of sales (ROS) 

Post-tax profit/loss on discontinued operations 

– 2.8 4.3 1.7 – 3.0 3.7 1.3 

(before minority interests) – 69.6 12.2 2.5 – – – 

Net loss/income – 198.6 189.6 – 31.0 – 198.6 189.6 – 31.0 

NET ASSETS 

Fixed assets 3,091.0 3,124.6 3,105.9 3,203.4 3,263.3 3,244.8 

Non-fixed assets 

thereof cash and cash equivalents 

2,711.8 2,805.6 2,811.2 2,582.4 2,649.0 2,652.1 

at Dec. 31 and Sep. 30 (2) thereof assets from 

184.1 243.1 229.5 196.4 265.7 243.5 

discontinued operations 466.2 511.6 556.9 – – – 

Other assets (prepaid expenses + deferred taxes) 897.5 820.9 782.9 914.5 838.8 803.1 

Total assets at Dec. 31 and Sep. 30 

Consolidated shareholders’ equity 

6,700.3 6,751.1 6,700.0 6,700.3 6,751.1 6,700.0 

at Dec. 31 and Sep. 30 1,663.8 2,036.8 1,991.2 1,663.8 2,036.8 1,991.2 

% of total assets 24.8 30.2 29.7 24.8 30.2 29.7 

Minority interests 41.1 41.4 42.0 42.3 42.4 42.6 

Provisions and accrued liabilities 1,827.6 1,703.4 1,623.1 2,022.3 1,851.7 1,781.8 

Bonds 300.0 298.0 298.0 300.0 298.0 298.0 

Liabilities to banks 843.8 675.3 774.1 891.7 683.6 800.5 

Liabilities from discontinued operations 429.7 366.0 408.4 – – – 

Net position (3) – 959.7 – 730.2 – 842.6 – 995.3 – 715.9 – 855.0 

Gearing in % (4) 57.7 35.9 42.3 59.8 35.1 42.9 

FINANCIAL POSITION 

Net cash provided by (used for) 

operating activities 136.8 178.3 – 43.0 149.8 205.9 – 65.1 

Free cash flow (5) – 36.9 – 0.6 – 96.5 – 4.7 18.3 – 124.8 

Investment (at balance sheet date) (6) 4,532.6 4,609.9 4,691.5 4,311.2 4,381.4 4,428.9 

Capital expenditure incl. capital leases 

thereof on property, plant and equipment 

292.8 266.7 62.5 306.6 304.0 66.7 

and intangible assets 259.5 252.6 62.0 273.2 268.3 65.2 

Depreciation and amortization of fixed assets 213.0 225.3 48.0 224.8 237.4 50.7 

EMPLOYEES (7) 

Employees at Dec. 31 and Sep. 30 29,189 29,940 29,821 30,835 32,015 31,812 

thereof in Germany 15,360 15,668 15,639 16,249 16,623 16,606 

thereof outside Germany 13,829 14,272 14,182 14,586 15,392 15,206 

Average number of employees during the year 29,299 31,091 30,614 31,118 33,185 32,677 

Staff expenses 1,742.7 1,755.6 424.2 1,883.6 1,909.2 462.1 

mg SHARES 

Dividend per share (s) – 0.25 0.06 – 0.25 0.06 

Total dividend payout – 48.3 11.6 – 48.3 11.6 

Share price at Dec. 31 and Sep. 30 (s) 11.10 6.51 5.90 11.10 6.51 5.90 

Basic earnings per share (s) – 1.02 0.99 – 0.16 – 1.02 0.99 – 0.16 

Diluted earnings per share (s) – 1.02 0.97 – 0.16 – 1.02 0.97 – 0.16 

Weighted-average number of shares 

outstanding (million) 193.8 192.3 193.3 193.8 192.3 193.3 

Adjusted diluted weighted-average 

number of shares outstanding (million) 193.8 194.8 193.3 193.8 194.8 193.3 

Economic value added – 369.1 38.2 – – 408.7 91.5 – 

(1) i.e. reporting of discontinued operations in accordance with SFAS 144 

(2) Cash and cash equivalents = liquid funds plus securities 

(3) Net position = cash and cash equivalents (2) minus bonds minus bank debt 

(4) Gearing = net position (3) /consolidated shareholders’ equity 

(5) Free cash flow = net cash provided by (used for) operating activities plus net cash provided by (used for) investing activities 

(6) Investment = fixed assets plus non-fixed assets 

minus (total) trade payables minus liabilities from derivatives minus advance payments received 

minus provisions for outstanding suppliers’ invoices 

(7) Full-time equivalents (FTEs), excluding trainees

mg engineering 

GEA 2003* 2001/02* SFY 2002* 

u million s million s million 

Sales 2,702 2,874 607 

EBITDA 253 293 48 

EBIT (1) 199 241 36 

Pre-tax earnings (1) Depreciation and amortization 

197 235 36 

of fixed assets (1) 54 52 12 

Capital expenditure (2) Net cash provided by (used for) 

50 66 17 

operating activities 209 165 – 35 

New orders 2,665 2,847 638 

Order book 891 1,000 1,017 

Employees (3) 13,820 14,080 14,096 

Share of consolidated sales 42.2% 

Lurgi Lentjes 2003 2001/02 SFY 2002 


Sales 361 486 104 

EBITDA – 112 – 6 – 3 

EBIT – 123 – 8 – 3 

Pre-tax earnings 

Depreciation and amortization 

– 124 – 6 – 3 

of fixed assets 11 3 0 

Capital expenditure (2) Net cash used for 

2 4 0 

operating activities – 125 – 57 – 9 

New orders 538 408 208 

Order book 646 502 597 

Employees (3) 566 647 601 


mg chemical group 


*) Figures for GEA have been adjusted 

for discontinued operations 

Dynamit Nobel 2003* 2001/02* SFY 2002* 


Sales 2,328 2,461 561 

EBITDA 329 398 74 

EBIT (1) 214 279 46 


188 249 38 


Capital expenditure (2) Net cash provided by 

198 179 41 

operating activities 272 288 43 

Employees (3) 12,304 12,596 12,555 

*) Figures for Dynamit Nobel have been 

adjusted for discontinued operations 

Lurgi 2003 2001/02 SFY 2002 


Sales 592 497 129 

EBITDA – 73 2 1 

EBIT – 86 – 8 – 1 



– 76 8 3 



2 5 0 

operating activities – 64 – 43 – 42 

New orders 229 577 36 

Order book 417 833 745 

Employees (3) 1,266 1,425 1,429 


Zimmer 2003 2001/02 SFY 2002 


Sales 223 263 59 

EBITDA 2 9 3 

EBIT (1) 0 7 2 


4 16 4 


Capital expenditure (2) Net cash provided by 

21 5 1 

operating activities 11 14 2 

New orders 220 225 55 

Order book 237 235 228 

Employees (3) 719 362 359 


(1) The mg Group started to use push-down accounting at the beginning of 2003; this has resulted in higher depreciation and amortization 

in the GEA (P5.3 million), Dynamit Nobel (P1.9 million) and Zimmer (P0.6 million) segments as from fiscal 2003. 

(2) Purchases of property, plant and equipment and intangible assets and investments (including capital leases) 

(3) Full-time equivalents (FTEs), excluding trainees, at the balance sheet date 

solvadis 2003* 2001/02* SFY 2002* 


Sales 1,416 1,441 426 

EBITDA 0 35 6 

EBIT – 6 28 5 



– 7 28 4 



10 31 3 

operating activities – 21 39 – 25 

Employees (3) 792 838 835 

*) Figures of solvadis only for information purposes 

(discontinued operations)

Creating freedom 

for action 

CONTENTS 

Management / Executive Board 2 • Letter to the Shareholders 4 

Supervisory Board 6 • Report of the Supervisory Board 8 • Corporate Governance 12 

mg Share 16 • Strategy 22 • Special Section 30 • Focus on GEA 32 

Industrial plant engineering 36 • mg chemical group 38 • Management Report 42 

Economic Environment 43 • Situation of the Company 45 • Organization and Structure 58 

Risk Report 59 • Employees 64 • Performance of the Subgroups 66 • Outlook 72 

Consolidated Financial statements (U.S. GAAP) 78 • Financial Calendar 179

2 

Members of the 

Executive Board 

Udo Stark 

born on November 21, 1947 

Chairman of the Executive Board 

Member of the Executive Board since 

June 4, 2003 

Karlheinz Hornung 

born on December 24, 1950 

Executive Board member responsible 

for Finance 

Member of the Executive Board from 

July 11, 1998 through March 31, 2004 

Klaus Moll 

born on October 21, 1948 


for Industrial Plant Engineering 


December 1, 2003 

Jürg Oleas 

born on December 8, 1957 


for Chemicals 


May 1, 2001 

Peter Steiner 

born on July 16, 1959 


for Finance as from April 1, 2004 


March 1, 2004 

The following directors have stepped 

down from the Executive Board: 

Dr. Karl Josef Neukirchen 

until May 30, 2003 

Dr. Rolf G. Niemann 

until August 15, 2003 

Dr. Fritz Lehnen 

until October 2, 2003 

EXECUTIVE BOARD 

Udo Stark

MANAGEMENT SHARE STRATEGY SPECIAL SECTION MANAGEMENT REPORT FINANCIAL STATEMENTS FURTHER INFORMATION 

Executive Board • Letter to the Shareholders • Supervisory Board • Report of the Supervisory Board • Corporate Governance at mg 

Karlheinz Hornung Klaus Moll 

Jürg Oleas Peter Steiner 

3

4 

LETTER TO THE SHAREHOLDERS 

Dear Shareholders, 

I took over as Chief Executive Officer of mg technologies ag following the Annual Shareholders’ 

Meeting on June 4 last year. The first step towards a new beginning for the 

company – and something that was in the interest of all concerned – was the settlement 

of the long-running conflict between mg and one of its major shareholders. This was accomplished 

– with the backing of the newly elected Supervisory Board – by the beginning of 

September. At the same time, our attention was focused on the forthcoming restructuring. 

By adopting the necessary resolutions, the Executive Board and the Supervisory Board 

dealt with the backlog of decisions that had built up in recent years. They also cleaned 

up the Group’s balance sheet, which largely contributed to its pre-tax loss of a241 million 

under its current structure. This figure includes one-off charges of a437 million, which 

cover the cost of restructuring and reorganization, risk provisioning for pre-existing 

contracts, the settlement of long-running lawsuits, and the disposal or discontinuation 

of loss-making businesses. 

In hindsight, 2003 therefore heralds a new strategic departure and the application of 

more conservative accounting policies. 

It is no longer possible to run the mg Group as a profitable venture while retaining its 

two traditional core businesses: Engineering, consisting of GEA’s specialty mechanical 

engineering activities and the companies engaged in industrial plant engineering; and 

Chemicals, comprising Dynamit Nobel and solvadis’ trading operations. We do not have 

the financial resources to continue this strategy. Having examined all other feasible alternatives, 

the Executive Board – with the backing of the Supervisory Board – decided last 

fall to sell the Chemicals division and, once it had paid down the Group’s debt, to use 

the funds available to expand the Group’s specialty mechanical engineering activities. 

GEA is already a technology leader in all its markets and, with a return on sales of over 

seven percent, highly profitable. We believe that by stepping up its internationalization 

and rounding off its range of activities right along the value chain, GEA will continue to 

have excellent prospects.



The strategic refocus of the mg Group will entail simplifying its entire organizational 

structure. The first step will be to integrate the business operations of those companies 

engaged in industrial plant engineering with mg technologies ag. The current Lurgi AG 

and Lurgi Lentjes AG intermediate holding companies will be wound up. The number of 

staff in mg’s holding company has been reduced. Once the Chemicals division has been 

sold, we plan to merge the remaining holding companies of mg technologies ag and GEA 

AG in Bochum. By successfully completing this project, we will cut the mg Group’s holding-company 

costs from a170 million in 2002 to a50 million. 

GEA and Dynamit Nobel performed satisfactorily in 2003 despite the economic conditions. 

They managed to defend – and, in some cases, enhance – their strong market positions. 

By contrast, the profitability of the industrial plant engineering business once again proved 

problematic. Lurgi and Lurgi Lentjes both suffered heavy losses in their operating business, 

particularly through the completion of existing projects; these included selling Stahlbau 

Plauen, which had been making losses for years, settling disputed pre-existing contracts, 

and setting aside risk provisions to cover their settlement. The Group’s strategic refocus 

will require the industrial plant engineering business to concentrate on proprietary technologies 

in profitable growth markets. It will also necessitate a reduction of capacities 

in order to substantially lower the break-even threshold. Taken together, these measures 

will cut the headcount in this business by about 500 employees. 

2004 will be the year of implementation. This centers on the disposal of the Chemicals 

division and the restructuring of the industrial plant engineering business and in 2005 will 

put the company back on track for growth and expansion. The Group’s sales – excluding 

acquisitions – will then be in the order of a4.5 billion. Its profitability will increase substantially 

on the back of GEA’s robust performance, the improvement in the Group’s financial 

structure – relieving much of the pressure on its interest income – and the sharp reduction 

in its holding-company costs. Assuming the economic environment improves, its pre-tax 

return on sales should be raised to five percent. Should the right opportunities arise, mg 

will once again be in the market for acquisitions. 

In conclusion, we can say that the capital markets have been quick to reward this strategy, 

causing mg’s share price to soar by 88 percent in 2003. This has strengthened our resolve 

to continue the current restructuring process swiftly and without any taboos. 

This venture can only succeed with the support of all concerned. I would therefore like 

to take this opportunity to thank all our employees and their representatives for the work 

they have done and the commitment they have demonstrated throughout the mg Group. 

I would also like to express my gratitude to our shareholders for their continued confidence 

in the company’s stock. My colleagues and I and all mg employees will continue to do 

all we can to make mg a consistently profitable organization. 

Udo Stark 

Chairman of the Executive Board 

5

6 

SUPERVISORY BOARD 

The Supervisory Board of mg technologies ag 

Dr. Jürgen Heraeus, Maintal, 

(since June 3, 2003), 

Chairman of the Supervisory Board 

Chairman of the Supervisory Board of 

Heraeus Holding GmbH 

Helmut Werner (†), Stuttgart, 

(until June 3, 2003) 


Graduate of business economics 

Reinhold Siegers*, Mönchengladbach, 

Deputy Chairman 

Chairman of the Group Works Council of 

mg technologies ag 

Gerhard Adams*, Runkel, 

(since June 2, 2003) 

Member of the Works Council of Chemetall GmbH 

Khaled Al-Sabah, London, 

(until July 20, 2003) 

Government of Kuwait, Kuwait Investment Office 

Dieter Ammer, Bremen, 


Chairman of the Management Board of Tchibo Holding AG 

Ahmad M.A. Bastaki, Safat, Kuwait, 

(since September 2, 2003) 

Director, Kuwait Investment Authority 

Dr. Karl-Hermann Baumann, Munich, 


Chairman of the Supervisory Board of Siemens AG 

Dr. Diethart Breipohl, Icking, 


Former Member of the Management Board of Allianz AG 

Gerd Delaveaux*, Bochum, 

Chairman of the Works Council of 

GEA Happel Klimatechnik GmbH 

Dr. Manfred Döss*, Hofheim, 

Head of the Legal Department of mg technologies ag 

Rolf Erler*, Düsseldorf, 

Regional Head of IG Bergbau, Chemie, Energie, Bonn 

Prof. Dr. Dr. h. c. Joachim Funk, Düsseldorf, 


Former Chairman of the Supervisory Board of 

Mannesmann AG 

* Employee representatives 

Rainer Gröbel*, Sulzbach/Ts., 

Departmental Head, National Executive of IG Metall 

Dr. Otto Happel, Luzern, 


Entrepreneur 

Dr. Gerhard Jooss, Essen, 


Former Member of the Executive Board of ThyssenKrupp AG 

Prof. Dr. med. Dr. h.c. Rolf Krebs, Mainz, 


Former Spokesman for the Management of 

Boehringer Ingelheim GmbH 

Dr. Jürgen Krumnow, Königstein/Ts., 

Member of the Advisory Board of 

Deutsche Bank AG 

Rolf Kümmel*, Kelkheim, 

Chairman of the Works Council of Chemetall GmbH 

Dr. Dietmar Kuhnt, Essen, 

Former Chairman of the Executive Board of RWE AG 

Heinz-Joachim Miller*, Freigericht, 

(until May 31, 2003) 

Employee of Lurgi AG 

Justus Mische, Kelkheim, 



Dieter Rehbein*, Duisburg, 

Chairman of the Works Council of 

Sachtleben Chemie GmbH 

Dr. Andreas Rittstieg, Hamburg, 

(since February 10, 2004) 

Attorney 

Michael Vassiliadis*, Hemmingen, 

Secretary of the National Executive of 

IG Bergbau, Chemie, Energie 

Bernhard Walter, Bad Homburg v.d.H., 

Former Spokesman of the Board of Managing Directors of 

Dresdner Bank AG 

Wolfgang Wick*, Bottrop, 


Dynamit Nobel AG 

Dr. Eberhard Zinn (†), Munich, 

(until December 31, 2003) 


Hauck & Aufhäuser Privatbankiers KGaA



Committees of the Supervisory Board of 



Committee pursuant to section 27 (3) of the German 

Codetermination Act (Mediation Committee) 

Helmut Werner (†), Chairman 

Reinhold Siegers* 

Bernhard Walter 

Wolfgang Wick* 

Audit Committee 


Dr. Jürgen Krumnow 


Michael Vassiliadis* 





(since the end of the Annual Shareholders’ Meeting 

on June 3, 2003) 

Committee pursuant to section 27 (3) of the German 

Codetermination Act (Mediation Committee) 

Dr. Jürgen Heraeus, Chairman 

Dr. Otto Happel 



Chairman’s Committee 


Dieter Ammer 






Dr. Gerhard Jooss, Chairman 

Rainer Gröbel* 

Dr. Jürgen Heraeus 

Dieter Rehbein* 


7

8 

REPORT OF THE SUPERVISORY BOARD 

In 2003, the Supervisory Board monitored the company’s situation closely and performed the duties 

incumbent upon it by virtue of the law, the articles or incorporation and the rules of internal procedure. 

These duties included deliberations based on regular, timely and comprehensive information provided 

by the Executive Board, involvement in decisions of material importance to the company, and the 

necessary monitoring of the Executive Board. 

The Supervisory Board was informed in detail about the company’s business performance and financial 

position, including its risk position and risk management systems. Any deviations in its business 

development from the budgets and targets it had set were explained. The company’s new strategy was 

agreed with the Supervisory Board. Prior to and in between meetings, the Executive Board submitted 

written reports on material events. Furthermore, the Chairman of the Supervisory Board remained in 

regular contact with the Executive Board, especially with its Chairman, who constantly provided him 

with timely information about significant developments and pending decisions. Business transacted 

by the company that required the consent of the Supervisory Board was submitted for approval. 

Nine Supervisory Board meetings were held in 2003, including the constituent meeting after the 

Annual Shareholders’ Meeting on June 3. Three members of the Supervisory Board attended less than 

half of the meetings scheduled during their respective term of office either due to ill health or because 

these meetings clashed with other prior commitments. The Supervisory Board was also provided with 

detailed information between meetings about projects and ventures of particular importance or urgency 

for the company. Where necessary, resolutions were adopted in writing. 

Focal points of the Supervisory Board’s deliberations 

The main issues discussed at the Supervisory Board meetings on February 4, March 25, and April 10, 

2003 were the annual financial statements for 2001/2002 and for the short 2002 fiscal year as well 

as the proposals to be put to the Annual Shareholders’ Meeting for approval on June 3, 2003. The 

meeting immediately prior to the Annual Shareholders’ Meeting was used to prepare for this event. 

The Executive Board’s plans to sell the Stahlbau Plauen Group, which had been making losses for 

years, were approved. 

At its meetings on September 11 and October 2, 2003, the Supervisory Board dealt principally with 

questions pertaining to the company’s strategy, financial position, organizational structure, risk 

situation, and the options available for the future direction of the Group. Having conducted a comprehensive 

review and carefully examining the company’s strategy to date, the Supervisory Board 

concluded at its October meeting – also attended by the Executive Board – that the only way to 

ensure sustainable, profitable growth for the mg Group and to pay down its debt was to dispense 

with its traditional two-pronged strategy and, instead, to concentrate on the GEA Group’s process 

engineering and components businesses and the companies engaged in industrial plant engineering. 

The Chemicals division, consisting of the Dynamit Nobel Group and solvadis, is to be sold. The 

Supervisory Board noted with approval the Executive Board’s plans to reduce complexity and cut 

costs by flattening hierarchies, merging holding-company functions, and concentrating the processes 

available in the industrial plant engineering business. In order to obtain a clearer picture of the 

current positions, prospects and strategies of GEA and Lurgi Lentjes, the Supervisory Board arranged 

for the chief executive officers of these two companies to give presentations on their respective 

organizations. Presentations by Lurgi and Zimmer will follow in the course of 2004.



Work of the committees 

By the time its term of office had expired on June 3, 2003, the Supervisory Board had set up two 

committees: the Audit Committee and the legally prescribed Mediation Committee (pursuant to section 

27 (3) of the German Codetermination Act (MitbestG)). The Audit Committee met on six occasions. 

In addition to its usual remit of discussing the company’s financial statements and accounts, it 

negotiated the modification and termination of certain executive directors’ employment contracts. 

At the meeting on March 18, 2003, the head of Internal Audit reported on the focal points of the 

audits conducted in 2001/2002 and the short 2002 fiscal year as well as the audit schedule for 2003. 

In compliance with the recommendations of the German Corporate Governance Code, it was decided 

on June 3, 2003 that the Audit Committee’s responsibilities should be shared between the newly 

formed Chairman’s Committee and the Audit Committee. The Chairman’s Committee was given 

responsibility for dealing with personnel-related matters pertaining to the Executive Board, strategic 

issues, and the preparation of the plenary sessions. The Audit Committee is responsible for accounting, 

risk management and auditing issues. The posts of Audit Committee Chairman and Supervisory 

Board Chairman are now no longer held by the same person. 

At a joint meeting of the Chairman’s Committee and the Audit Committee on June 4, 2003, the new 

Supervisory Board members on these committees were informed about the mg Group’s various business 

units and their respective market positions, its key performance indicators, its budget, and its 

strategy to date. 

In 2003, the Chairman’s Committee also met on three occasions to discuss strategic issues and, in 

particular, matters pertaining to the contracts of Executive Board members. The Audit Committee 

met on two further occasions. Its deliberations here focused on the measures taken by management 

to reduce the company’s debt, risk management, and presentations by auditing firms to help the 

Audit Committee decide which company’s name should be submitted to the 2004 Annual Shareholders’ 

Meeting so that it could vote on the auditors to be appointed. The Mediation Committee did not 

have to be convened. 

At the plenary sessions, the Chairmen of each of the committees reported at length on the meetings 

and work of their respective committees. 

Corporate governance 

A further focal point of the Supervisory Board’s deliberations was an ongoing review of the corporate 

governance principles applied across the mg Group. Having adopted a resolution to this effect at 

the meeting on December 16, 2003, the Supervisory Board and the Executive Board jointly submitted 

the declaration of compliance prescribed by section 161 of the German Joint Stock Corporation Act. 

This declaration confirms that, with three exceptions concerning the remuneration of the members 

of the Executive Board and the Supervisory Board (Executive Board members’ remuneration is not 

specified individually, no separate compensation is paid for membership of the committees, and no 

performance-related compensation is paid to members of the Supervisory Board), the company complies 

with the recommendations of the German government’s commission on the German Corporate 

Governance Code. Modifications to the Supervisory Board’s rules of internal procedure to bring it 

into line with current legislation and the German Corporate Governance Code as well as rules of 

internal procedure for the newly formed committees were discussed and were adopted in 2004 but 

still need to be approved in part at the Shareholders’ Meeting to become effective. 

9

10 

Annual financial statements and consolidated financial statements for 2003 

The 2003 annual financial statements of mg technologies ag and the management report as well as 

the consolidated financial statements and the Group management report prepared in accordance with 

U.S. generally accepted accounting principles (U.S. GAAP) have been audited by KPMG Deutsche 

Treuhand-Gesellschaft Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, Berlin and Frankfurt am 

Main, and have been given their unqualified opinion. The auditors have confirmed that the consolidated 

financial statements and the Group management report qualify for exemption from the duty to 

prepare accounts in accordance with German law (section 292 a of the German Commercial Code 

(HGB)). The Executive Board has put in place a risk management system that meets the regulatory 

requirements. 

Prior to the Supervisory Board meeting held on March 29, 2004 for the purpose of establishing the 

financial statements, the members of the Supervisory Board had been given copies of the annual 

financial statements, the management report, and the Executive Board’s proposal to carry any profits 

or losses forward to the next period, as well as the consolidated financial statements, the Group 

management report, and the independent auditors’ reports for the 2003 fiscal year. These documents 

were discussed and scrutinized at the Audit Committee meeting on March 23, 2004 and at the 

plenary session held on March 29, 2004 for the purpose of establishing the financial statements. 

The auditors who signed the audit reports attended both meetings and reported on the procedures 

used and the material findings of their audit. They were available to answer any questions. The 

Supervisory Board agreed with the auditors’ findings and, having conducted its own audit, found 

that it had no reservations to make. The Supervisory Board agreed with the Executive Board’s 

proposal for the appropriation of profits and losses. 

At its meeting on March 29, 2004, the Supervisory Board approved the consolidated financial 

statements for 2003 and the annual financial statements of mg technologies ag for 2003. The annual 

financial statements of mg technologies ag have thus been ratified. 

Personnel changes on the Supervisory Board and Executive Board 

On the employee side, Heinz-Joachim Miller left the Supervisory Board on his retirement on 

May 31, 2003. Gerhard Adams was legally appointed as his successor with effect from June 2, 2003. 

Mr. Adams, along with the other employee representatives on the Supervisory Board, had already 

been elected as a delegate member of the Supervisory Board for the new term of office. 

The term of office of the shareholder representatives on the Supervisory Board also expired at the 

end of the Annual Shareholders’ Meeting on June 3, 2003. Helmut Werner, the incumbent Chairman 

of the Supervisory Board, and Dr. Karl-Hermann Baumann, Dr. Diethart Breipohl, Professor Dr. Dr. 

h.c. Joachim Funk and Justus Mische did not stand for re-election. Dieter Ammer, Dr. Otto Happel, 

Dr. Jürgen Heraeus, Dr. Gerhard Jooss and Professor Dr. med. Dr. h.c. Rolf Krebs were elected to the



Supervisory Board as new shareholder representatives. Dr. Jürgen Heraeus was elected as Chairman 

of the Supervisory Board and Reinhold Siegers was elected its Deputy Chairman at the constituent 

meeting following the Annual Shareholders’ Meeting. The committees were also elected: the members 

of the Chairman’s Committee are Dr. Jürgen Heraeus (Chairman), Dieter Ammer, Dr. Otto Happel, 

Reinhold Siegers, Michael Vassiliadis and Wolfgang Wick. Dr. Gerhard Jooss (Chairman), Rainer Gröbel, 

Dr. Jürgen Heraeus and Dieter Rehbein make up the Audit Committee. The Mediation Committee pursuant 

to section 27 (3) of the German Codetermination Act (MitbestG) consists of Dr. Jürgen Heraeus 

(Chairman), Dr. Otto Happel, Reinhold Siegers and Wolfgang Wick. 

The following personnel changes on the Supervisory Board also took place in 2003: Khaled Al-Sabah, 

who had stepped down from the Supervisory Board with effect from July 20, 2003, was succeeded by 

Ahmed Bastaki, who was officially appointed with effect from September 2, 2003. Dr. Eberhard Zinn 

left the Supervisory Board with effect from December 31, 2003. He was succeeded by Dr. Andreas 

Rittstieg, an attorney, who was officially appointed with effect from February 10, 2004. 

The following persons stepped down from the Executive Board: Dr. Karl Josef Neukirchen, Chairman, 

on May 30, 2003; Dr. Rolf G. Niemann on August 15, 2003; and Dr. Fritz Lehnen on October 2, 2003. 

On June 3, 2003, Udo Stark was appointed as a member of the Executive Board with effect from 

June 4, 2003 and was named as its Chairman. In addition to his position as finance director on 

mg’s Executive Board, Karlheinz Hornung was appointed as personnel director with effect from 

August 16, 2003. Klaus Moll joined the Executive Board on December 1, 2003, taking over responsibility 

for industrial plant engineering from Dr. Lehnen. At its meeting in December, the Supervisory 

Board appointed Peter Steiner with effect from March 1, 2004 to take over as finance director from 

Mr. Hornung, who is leaving the Executive Board on March 31. 

The Supervisory Board would like to thank the managements, employee representatives and, especially, 

all employees of the companies in the mg technologies Group for their considerable personal dedication 

and valuable contribution in 2003. 

We will always honor the memory of Helmut Werner, who passed away in February of this year. 

As Chairman of the Supervisory Board, Mr. Werner placed his strong personal commitment and entrepreneurial 

vision at the company’s disposal from April 1998 through June 2003. Dr. Eberhard Zinn, 

who served on mg’s Supervisory Board from 1994 through 2003, died in March of this year. We shall 

also honor his memory. 

Frankfurt am Main, March 29, 2004 



11

12 

CORPORATE GOVERNANCE AT mg 

mg technologies ag regards the German Corporate Governance Code as an important 

benchmark that helps management in its efforts to run the company in a responsible 

and transparent fashion so as to add value. The company complies with all of the 

Code's material recommendations in its version of May 21, 2003. It has implemented 

many of its suggestions. 

Code helps to win and retain investors’ confidence 

The past two years have seen the establishment of the German Corporate Governance 

Code, a standard that aligns German financial legislation more closely with practical 

requirements. The Code stipulates clearly defined disclosure requirements and codes of 

conduct for the executive boards and supervisory boards of publicly traded German 

companies in particular. mg technologies ag views this Code as a major contribution to 

ensuring a functioning capital market. It is the first code to provide companies with a 

binding benchmark against which to measure their efforts to ensure transparency and 

guide their management mechanisms. The company is confident that the Code will help 

strengthen domestic and international investors’ confidence in the German economy. 

Management and control at mg technologies 

As a German stock corporation, mg technologies ag has an executive board and a supervisory 

board, which is the usual structure of corporate management and control in 

Germany. The Executive Board is responsible for running the company on a day-to-day 

basis. The Supervisory Board appoints and monitors the Executive Board and advises 

it on all important corporate issues. 

The interaction between management and control in the Group is governed by an established 

system of structures, processes and responsibilities. The functioning of the system’s 

material inhouse rules and procedures is regularly reviewed and, where necessary, aligned 

with the latest requirements. This is particularly true of the issues addressed by the Code, 

such as the executive board, the supervisory board, the annual shareholders’ meeting, 

transparency, accounting, and auditing. 

The Executive Board and its terms of reference 

The Executive Board is responsible for running the company on a day-to-day basis. It 

devises corporate strategy, coordinates it with the Supervisory Board, and ensures that it 

is implemented. It is responsible for ensuring compliance with the relevant legislation 

and for putting in place an appropriate risk management and control system. The rules of 

internal procedure stipulate in sufficient detail the allocation of mandates and cooperation 

among the members of the Executive Board.



In performing its mandates, the Executive Board undertakes to avoid conflicts, and – if 

they should occur – to inform the Supervisory Board accordingly. The Supervisory Board 

ensures that the company’s interests are safeguarded at all times. 

The Supervisory Board and its terms of reference 

The Supervisory Board consists of 20 members. It comprises equal numbers of shareholder 

representatives and employee representatives, as required by the German Codetermination 

Act (MitbestG). The shareholder representatives are appointed by the Annual Shareholders’ 

Meeting, whereas the employee representatives are elected in accordance with the provisions 

of the Codetermination Act. The Supervisory Board is appointed for a five-year term. 

The current Supervisory Board’s term expires at the end of the 2008 Annual Shareholders’ 

Meeting. 

The Supervisory Board’s main function is to advise and monitor the Executive Board. It 

appoints and removes the members of the Executive Board. Certain Supervisory Board 

and Executive Board functions stipulated in the articles of incorporation and in the rules 

of internal procedure are subject to its approval. 

Supervisory Board committees 

The Supervisory Board is currently assisted in its work by two committees: the Chairman’s 

Committee, which was set up in 2003, and the Audit Committee. There is also the 

Mediation Committee, which was set up under the Codetermination Act. Each committee’s 

responsibilities and procedures are laid down in their own rules of internal procedure. 

Cooperation between Supervisory Board and Executive Board 

The Executive Board and the Supervisory Board collaborate closely in the company’s 

interest and in pursuit of the agreed performance targets. The Executive Board coordinates 

the Group’s strategy with the Supervisory Board and regularly discusses with it the 

issues relevant to the implementation of this strategy. It provides the Supervisory Board 

with regular, timely and comprehensive information on the development of business, 

the company’s performance, and the risks inherent in its operations. 

Communication between the Executive Board and the Supervisory Board is characterized 

by a spirit of openness and trust. They ensure that confidentiality is maintained at all 

times on issues affecting the company, even amongst colleagues. 

13

14 

Transparency of accounting and auditing 

mg technologies ag undertakes to ensure transparency in its financial reporting. To this 

end, the company has been publishing its consolidated financial results in accordance 

with United States generally accepted accounting principles (U.S. GAAP) since its 

1999/2000 fiscal year. The parent company’s financial results continue to be prepared 

in accordance with the German Commercial Code (HGB). 

The Supervisory Board commissions the auditors elected by the Annual Shareholders’ 

Meeting to audit the company’s financial statements and stipulates the auditors’ schedule 

and fees. In doing so, it ensures that the auditors’ work is not compromised by conflicts 

of interest. The Supervisory Board has obtained an undertaking from the auditors that 

they will inform it immediately if, when conducting their audit, they ascertain any facts 

that are inconsistent with the declaration of compliance issued by the Executive Board 

and the Supervisory Board. 

Full disclosure for public and shareholders 

mg technologies ag provides all of its stakeholders with timely, comprehensive and identical 

information. To this end, the company makes its annual and interim reports, press 

releases and other relevant information available on the internet. It also organizes regular 

analysts’ meetings, press conferences, and events for investors. 

The company complies with legal regulations by publishing immediately any facts that 

could influence its share price on the stock market in the form of ad hoc releases, which 

are also made available on its website. 

All material information published in writing is also made publicly available in English.



Declaration of compliance 

The Executive Board and Supervisory Board of mg technologies ag have decided, wherever 

possible, to comply with the requirements and recommendations of the German Corporate 

Governance Code. To this end, they issued the following declaration of compliance in 

December 2003: 

mg technologies ag complies with the recommendations of the German government’s 

commission on the German Corporate Governance Code – to the extent that they are 

currently applicable (at May 21, 2003) – with the following exceptions: 

• There are no plans at present to publish details of the individual remuneration paid to 

each member of the Executive Board in the Notes to the Consolidated Financial Statements, 

broken down into fixed compensation, performance-related pay and long-term 

incentives (Code subparagraph 4.2.4, sentence 2). 

• The post of chairman and membership of the Supervisory Board’s committees have 

no impact on the level of compensation paid to members of the Supervisory Board at 

present (Code subparagraph 5.4.5, subsection 1, sentence 3). 

• The compensation paid to members of the Supervisory Board does not contain any 

variable component that is dependent on either the financial position or the performance 

of mg technologies ag (Code subparagraph 5.4.5, subsection 2, sentence 1). 

The company intends to propose to its Annual Shareholders’ Meeting for fiscal 2003 

that its articles of incorporation be amended in such a way that the Supervisory Board’s 

compensation complies with the Code’s recommendations. 

Frankfurt am Main, December 16, 2003 

On behalf of the Supervisory Board 


On behalf of the Executive Board 

Udo Stark, Karlheinz Hornung 

15

16 

mg-Shares: Key Data 

Security code no. 660 200 

ISIN DE0006602006 

Reuters symbol METG.DE 

Bloomberg symbol MGT GR 

mg SHARE 

mg’s share price performed encouragingly in 2003 

Following the three-year bear market, stock markets around the world bounced back 

sharply in 2003. In this generally encouraging market environment, mg’s share price 

performed particularly well last year, especially on the back of its announcement 

of a significant shift in strategy. mg’s share price climbed 88 percent over the year, 

comfortably outperforming the major international stock market indices. 

Market environment recovered 

Heavily influenced by the political and economic environment, shareholders invested in 

Germany experienced dramatically changing fortunes during the course of the year: after 

share prices had plummeted at the beginning of the year, the German indices posted 

significant gains at year-end. 2003 was a good year for second-line stocks in particular. 

Most stock prices were still in negative territory in the first quarter. However, the swift 

end to the Iraq war triggered a share price rally as from mid-March. By year-end, the 

DAX had gained 37 percent, while the MDAX – which includes mg’s shares – had put on 

as much as 48 percent. International indices such as the Dow Jones (up 25 percent), 

the European Stoxx 50 (up 16 percent) and Japan’s Nikkei (up 24 percent) posted strong 

gains on the previous year-end. 

mg’s share price climbed 88 percent in 2003 

mg’s share price hit a4.95, its low for the year, at the end of the first quarter. In the 

second quarter, hopes of a global economic recovery generally produced significant share 

price gains. mg’s stock was also boosted by the announcement of changes within the 

company’s shareholder and management structure and by related expectations of a shift 

in strategy. At the beginning of April, Dr. Otto Happel announced that he had increased 

his shareholding from ten percent to roughly twenty percent. Dr. Kajo Neukirchen, the 

Chairman of the Executive Board, left the company effective May 30, 2003. On June 3, 

Udo Stark was appointed Chairman of the Executive Board of mg technologies ag with effect 

from June 4, 2003. mg’s share price touched a high of a9.26 for the first half of the year. 

The encouraging trend continued in the second half of the year. At the end of September, 

mg’s share price rose to over a10 prior to the announcement of the Group’s strategic 

refocus. Expectations of a higher valuation for the company on the back of its new strategy 

caused the stock price to climb further in the final quarter of the year, reaching a11.20, 

its high for the year, on December 4. December 31 marked the conclusion of what for mg 

shareholders had been a superb year during which the company’s share price had soared 

by 88 percent on year-end 2002 to a11.10.


Market capitalization grows to over Q2.1 billion 

In line with the performance of its share price, mg technologies ag’s market capitalization 

grew significantly in 2003. Having been a1.14 billion at year-end 2002, it amounted 

to a2.16 billion at the end of December 2003. The underlying number of shares came to 

194.4 million at the balance sheet date. Under the indexing system used by Deutsche 

Börse, which only counts companies’ free float, mg shares advanced three places on yearend 

2002 to 39th in terms of market capitalization. The stock slipped two places year 

on year to 45th in terms of trading volume. 

At 435,442 shares, average daily turnover in 2003 was well in excess of that in 2001/2002 

(308,000 shares). On October 2, the day on which mg announced its new strategic focus, 

trading volume in its shares rose to 3.5 million at one point. Roughly 90 percent of this 

trading volume was settled through XETRA. 

mg’s shares still in the MDAX following new stock market segmentation 

Deutsche Börse’s new stock market segmentation came into force on January 1, 2003. On 

January 15, mg’s shares were admitted to the Prime Standard, the segment with the most 

stringent disclosure requirements. Since March 24, mg’s shares have been listed in the 

new MDAX, which has been reduced from 70 to 50 stocks under the new indexing system 

used by Deutsche Börse. In addition to the MDAX, mg’s shares are listed in other major 

domestic and international stock market indices. 

Modified shareholder structure 

There were a number of changes in mg’s shareholder structure during the year under 

review. Dr. Otto Happel increased his shareholding from roughly 10 percent to 20.7 percent. 

He is now mg’s largest shareholder. According to the most recent reports filed under 

the German Securities Trading Act (WpHG), Allianz held 10.1 percent of the shares and 

the Kuwait Investment Office 7.9 percent. Deutsche Bank reduced its investment in 

the company from 9.04 percent in 2002 to less than five percent, and therefore no longer 

has to report its shareholding to the regulatory authorities. mg’s free float – more than 

half of which is held by institutional investors, such as the five percent held by Capital 

International Ltd. – came to 61.3 percent at the end of 2003. 

Section 15 a of the German Securities Trading Act (WpHG) states that executive and nonexecutive 

directors of publicly traded German companies are obliged to report immediately 

Performance of mg’s share price against the DAX and MDAX 

200% 

175% 

150% 

125% 

100% 

75% 

50% 

1.2003 

2.2003 3.2003 4.2003 5.2003 6.2003 7.2003 8.2003 9.2003 10.2003 11.2003 12.2003 

mg 

MDAX 

DAX 

mg’s shares – stockmarket indices 

MDAX 

HDAX 

Midcap Market 

Classic All Share 

Prime All Share 

CDAX 

CDAX Industrial 

Dow Jones Stoxx 300 

Dow Jones Euro Stoxx 650 

Dow Jones Stoxx Industrials 

Dow Jones Euro Stoxx Industrials 

MSCI Germany Small Cap 

Dow Jones Sustainability Stoxx 

shareholder structure 

20.7% Dr. Otto Happel 

10.1% Allianz 

7.9% Kuwait Investment 

Office 

61.3% Free float 

17

18 

Equity Research on mg: 

ABN Amro 

Bankhaus Lampe 

Bankhaus Metzler 

Bankgesellschaft Berlin 

Bayerische Landesbank 

Baden-Württembergische Bank 

Commerzbank 

Crédit Agricole Indosuez Chevreux 

Crédit Suisse First Boston 

Deutsche Bank 

Dresdner Kleinwort Wasserstein 

DZ Bank 

Delbrück Bethmann Maffei 

Helaba Trust 

HSBC Trinkaus & Burkhardt 

HypoVereinsbank 

ING BHF-Bank 

Independent Research 

Landesbank Baden Württemberg 

MainFirst 

M.M. Warburg 

Sal. Oppenheim 

UBS Warburg 

Vereins- und Westbank 

WestLB 

WGZ-Bank 

the buying and selling of their own company’s securities to the German Financial Supervisory 

Authority (BAFin) and to the company itself if the total dealings in these securities 

exceed the aggregate value of a25,000 within a 30-day period. Spouses, registered life 

partners and immediate relatives of executive and non-executive directors are also subject 

to these reporting requirements. If the company receives such a report pursuant to section 

15 a WpHG, it is obliged to publish it immediately. mg complies with this obligation by 

publishing such dealings on its website at www.mg-technologies.com. 

Executive Board members of mg technologies ag held 10,000 shares (December 31, 2002: 

43,717 shares) at December 31, 2003. At the same date they held 200,000 option rights to 

shares (December 31, 2002: 680,000). The Supervisory Board members held 40,074,371 

shares (December 31, 2002: 1,500 shares). They held a total of 60,000 stock options 

(December 31, 2002: 60,000 options). 

Earnings per share 

Earnings per share – calculated as the net income for the year divided by the weightedaverage 

number of mg shares in issue – came to a loss of a1.02 before discontinued 

operations in 2003. Earnings per share on discontinued operations amounted to a loss 

of a0.36. 

No dividend paid due to one-off charges 

As a result of substantial one-off charges, which caused mg technologies ag to report a net 

loss for 2003, the company will not be paying a dividend for 2003. The reasons for these 

substantial one-off charges were the risk provisioning for pre-existing problem contracts, 

principally in the industrial plant engineering business; the settlement of long-running 

lawsuits; and the disposal or discontinuation of loss-making businesses. They are also due 

to the cost of restructuring the mg Group and streamlining its organizational structures. 

Investor relations activities strengthened 

mg technologies ag believes it is essential to maintain a continuous, highly transparent 

dialog with the capital market. Against the background of the strategic restructuring 

initiated by the Group during 2003, investor relations is one of the key functions of mg’s 

Executive Board. With the participation of its senior managers, the company conducted 

a number of road shows, conference calls and face-to-face meetings with representatives 

of the capital markets during the year under review. Furthermore, the company presented 

its activities and plans for strategic change at investors’ conferences and to representatives 

of banks’ equity trading departments. As in previous years, the regional focus of these 

events was on the financial centers of Frankfurt, London and New York. These activities 

helped win a number of new institutional investors for mg in the second half of 2003. 

mg’s stock is now closely analyzed and evaluated by a number of domestic and international 

financial analysts.


In order to ensure that all shareholders are treated equally, mg technologies ag is stepping 

up its use of the internet as an integral part of its financial communications, particularly 

with private investors. All major company presentations and publications and all sharerelated 

information can be found at www.mg-technologies.com. 

Changes in bond ratings 

In October 2003, rating agencies Moody’s and Fitch adjusted their ratings of the bond 

issued by mg technologies finance B.V. After Moody’s had already switched its rating for 

mg 24 months previously to ‘negative outlook’, it then downgraded the company’s debt 

from Baa3 to Ba1. Nonetheless, Moody’s held out the prospect of an upgrade if mg manages 

to sell Dynamit Nobel successfully and makes headway with its planned cost-cutting 

program. Fitch also downgraded mg’s debt from BBB to BBB-. However, the bond still 

enjoys an investment-grade rating from Fitch. 

The downgrades’ adverse impact on mg’s cost of funds will be limited. The bond’s coupon, 

which matures in July 2005, rose from 6.75 percent to 7.25 percent owing to the agreed 

step-up when the company’s debt was downgraded. 

mg technologies ag continues to believe that in 2004 it will be able to swiftly implement 

the initiatives it adopted and has already initiated as part of its strategic refocus. It anticipates 

that the capital raised from these measures and the improvement in its operating 

business will enable its debt to be upgraded when its rating is reviewed. 

Key per-share figures 

2003 2001/2002 

Number of shares in absolute terms (in millions) 194.4 193.3 

Average number of shares (in millions) 193.8 192.3 

Share price at Dec. 31 and Sep. 30 (in s) 11.10 6.51 

Share price: High (in s) 11.20 13.90 

Share price: Low (in s) 4.95 6.00 

Market capitalization at Dec. 31 and Sep. 30 (in s billion) 2.16 1.25 

Earnings per share (in s) – 1.02 0.99 

of which discontinued operations – 0.36 0.05 

Price/earnings ratio: High – 10.98 14.04 

Price/earnings ratio: Low – 4.85 6.06 

Share price/shareholders’ equity ratio 1.30 1.31 

Share price/cash flow ratio 0.71 0.93 

Dividend (in s) – 0.25 

19

Scope for 

International

zation 

As the world’s population grows, so does the need 

for high-quality refined foodstuffs. The milking 

technology developed by WestfaliaSurge will help 

provide people in China with increasing quantities 

of milk. This GEA subsidiary is supplying 63 milking 

carousels to one of China’s largest dairies in Inner 

Mongolia. GEA’s first-rate technology offers safe 

processes and top-quality products for milk producers 

and processors around the world.

22 

STRATEGY 

2003 was the year of mg’s fundamental strategic reorganization 

Following its Annual Shareholders’ Meeting at the beginning of June 2003, the new management 

at mg technologies ag started to thoroughly reorganize its strategy. The first step 

was to conduct a comprehensive review of the business and its inherent risks. The main 

task here was to clean up the company’s balance sheet and identify business potential. 

The findings of this review were as follows: 

• mg’s two-pronged strategy – based on its Engineering and Chemicals divisions – is 

strategically and financially no longer feasible. 

• Without radical measures, the Group’s excessive debt cannot be sufficiently reduced 

out of its free cash flow alone; it does not possess the resources needed to grow the 

business. 

• The Group’s structures – with their six holding companies and excessive costs – have 

to be adjusted. 

• The industrial plant engineering business is proving a considerable drain on resources 

– not least because of huge problems caused by pre-existing contracts that need to be 

resolved. 

• More conservative accounting policies need to be adopted and the Group’s debt paid 

down in order to provide mg with a sound platform for profitable, dynamic growth.


Four cornerstones of mg’s new strategy 

On October 2, 2003, mg’s Executive Board – with the backing of the Supervisory Board – 

decided on the key aspects of the restructuring program, which was initiated immediately. 

This reorganization also addresses the criticism leveled at mg by the financial markets, 

namely that it suffers from being an industrial conglomerate that has redundant, costly 

holding-company structures: 

The Group’s new structure will be centered on the activities of the GEA Group: specialty 

mechanical engineering, especially process engineering and components. The company 

will focus on the food, milk-processing, pharmaceutical and petrochemical industries. 

The Chemicals division – comprising Dynamit Nobel and solvadis – will be sold for the 

best-possible price in 2004. This will pay down the Group’s debt and place it on a sound 

footing for future expansion through organic growth and acquisitions. 

In line with the new strategy, the current holding-company structures are being considerably 

simplified and streamlined. This will considerably improve our efficiency and cut 

costs in the short term. 

A much leaner industrial plant engineering business – comprising the subsidiaries Lurgi, 

Lurgi Lentjes and Zimmer – rounds off the mg Group’s new structure. 

Swift implementation of initiatives in 2003 

In October 2003, mg began the first stage of its restructuring by streamlining the Group’s 

holding company and winding up the holding companies of Lurgi, Lurgi Lentjes and 

solvadis. 

The launch of a competitive tender process for the Chemicals division involved approaching 

several potential bidders as early as November. The first indicative offers had been 

received in December. Chemicals trading company Safic-Alcan was sold with effect from 

January 2004. 

The GEA Group, the future core of the mg Group, took the first steps towards optimizing 

its portfolio by acquiring Goedhart, the market leader in refrigeration, with effect from 

January 1, 2004. 

Radical restructuring of industrial plant engineering begun 

At the beginning of 2004, mg started to implement the second stage of its restructuring. 

The subgroups Lurgi and Lurgi Lentjes in the industrial plant engineering business play a 

key role in this strategy. This involves setting aside risk provisions for problem contracts, 

settling long-running lawsuits and adjusting capacities. It will also mean concentrating on 

proprietary technologies with sustainable market potential and being more selective in 

the acceptance of new business. These measures will help to substantially cut costs and, 

consequently, lower the break-even thresholds so that the industrial plant engineering 

business can be returned to profitability as quickly as possible in 2004/2005. This will 

involve cutting around 500 jobs by January 2006. 

23

24 

Reconciliation Adjusted Earnings 2003* 

in s million 

210 

GEA 

231 12 – 36 

chemical group 

(to be sold) 

Zimmer 

* Before ‘discontinued operations’ 

Lurgi 

– 28 

Lurgi 

Lentjes 

Adjusted Earnings 

u 196 million 

– 20 

Kessel 

– 50 

Others 

– 123 

Holding 

Earnings affected by one-off charges 

mg reports a pre-tax loss of a241 million for 2003. This consolidated result was depressed 

by one-off charges totaling a437 million. These cover the cost of restructuring and reorganization; 

risk provisioning for pre-existing problem contracts, principally in the industrial 

plant engineering business; the settlement of long-running lawsuits; and the disposal or 

discontinuation of loss-making businesses. They also include the cost of refocusing the mg 

Group’s strategy and streamlining its organizational structures. Excluding one-off charges, 

consolidated pre-tax earnings for 2003 would have been roughly a196 million. Thanks to 

their satisfactory performances, GEA and Dynamit Nobel each reported adjusted pre-tax 

earnings of over a200 million. 

GEA to be merged with mg 

– 130 

Restructuring 

Costs 

– 127 

Risk Provisioning for 

Problem Contracts and 

Pre-existing Projects 

– 104 

Operational 

Spin-Offs 

Extraordinary Factors 

u – 437 million 

In order to simplify the mg Group’s structures, GEA is to be merged with mg with effect 

from January 1, 2005. This will necessitate squeezing out the GEA stock still held by small 

shareholders. mg’s Executive Board initiated the necessary steps on February 23, 2004. 

In parallel, preparations are being made to merge the existing mg and GEA Group holding 

companies into one Group management in Bochum. This measure and the winding-up of 

the subgroups’ holding companies will generate cost savings of approximately a120 million 

and make a substantial contribution to raising profitability. 

– 76 

Other 

One-Time-/ 

Extra-Ordinary Charges 

Pre-tax Loss 

u – 241 million


GEA extends its profitable market and technology leadership 

GEA earned a return of 7.3 percent on sales of a2,702.0 million in 2003. In terms of market 

share, the company is either first or second worldwide in almost all of its businesses. It 

supplies technologically sophisticated machinery, components, systems and process plant 

to its customers around the world. Its major customers are the food, pharmaceutical and 

chemical industries. It plans to extend its technology leadership by spending an aboveindustry-average 

share of roughly five percent of its sales on research and development. 

Depending on business line, GEA already generates up to 70 percent of its sales from products 

that are less than three years old. The proceeds that mg earns on the disposal of its 

Chemicals division will provide it with the financial resources to invest even more heavily 

in fast-growing specialty mechanical-engineering businesses. 

GEA’s sales by region 

Australia 2.9% 

Middle East 3.7% 

Asia 11.1% 

Africa 4.4% 

Central and South America 3.3% 

GEA’s sales by sector 

North America 14.6% 

Engineering 

and related industries 9.6% 

Building and construction 7.5% 

Pharmaceuticals, biochemistry, cosmetics 8.1% 

Energy 9.6% 

Chemicals & petrochemicals 11.0% 

33.5% Europe (excl. Germany) 

15.4% Germany 

6.2% Rest of Europe 

2.0% EFTA 

3.0% Former Soviet Union 

Food and beverages, 

30.0% excluding milk 

24.2% Milk 

Streamlined industrial plant engineering business to become a highly efficient unit 

Once the process of optimizing portfolios, risk provisioning for pre-existing projects and 

adjusting capacities has been completed, mg’s industrial plant engineering business will 

become a highly efficient unit comprising Lurgi, Lurgi Lentjes and Zimmer. 

25

26 

Lurgi possesses huge potential in methanol and bio-fuels 

Once Lurgi has wound up its holding company and merged the operating business units 

Lurgi Oil Gas Chemicals and Lurgi Life Science with Lurgi AG, its cost structure will be 

considerably improved. Discontinuing chronically unprofitable businesses in the field of 

life science, which right from the outset has spectacularly failed to meet expectations, 

will reduce the pressure on costs. Instead, Lurgi will focus in the future on proprietary 

technologies used to manufacture petrochemical products such as methanol, propylene 

and synthetic fuels based on natural gas. A further focal point of its activities will be 

the food business, which includes technologies used to manufacture bio-diesel and bioethanol 

from renewable resources. Lurgi is already the market and technology leader 

in all of these applications. 

Lurgi Lentjes with a much leaner structure 

The Lurgi Lentjes Group specializes in the environmental-engineering and energy business 

within mg’s industrial plant engineering activities. Under the new structure, the 

two operating companies Lurgi Lentjes AG – including its waste-incineration, power-plant 

engineering and flue-gas desulfurization businesses – and Lurgi Bischoff GmbH – including 

its gas-cleaning activities – will be managed directly by mg technologies ag. The company 

will sell off its activities in the fields of flue-gas denitrification and dedusting as well as 

small industrial plant for the mono-incineration of sewage sludge. This restructuring of 

operating units will enable contracts to be handled more efficiently. Lurgi Lentjes possesses 

tried-and-tested proprietary technologies that hold out the prospect of sustainably profitable 

growth. 

Zimmer achieves strong growth in east Asia 

Zimmer is a globally active company specializing in the engineering of processes and 

industrial plant used to produce synthetic fibers and polymers. The company has been 

operating profitably for years. It has continued to optimize its structure by recently 

acquiring Fleissner, an engineering company, and expanding its product portfolio to 

include nonwovens. This provides Zimmer with further expansion opportunities for 

the future in addition to its strong potential in the synthetic-fiber market, especially 

in east Asia.


2004 will be the year of implementation 

The current year will be the year of implementation for the mg Group. It will implement 

the disposal of its chemicals division, including Dynamit Nobel and solvadis. It will 

implement the many structural initiatives aimed at reducing its holding-company costs 

from approximately a170 million originally to around a50 million per year. And it will 

implement the restructuring of its industrial plant engineering business. However, its 

strategic review will have to continue in 2004. Although the majority of restructuring 

measures were initiated in 2003, minor after-effects of this optimization process cannot 

be totally ruled out. 

Ambitious profitability and financial targets for 2005 

By 2005, once its restructuring has been completed, mg will once again be able to grow 

– both organically and by acquisition. The mg Group’s sales – even including the planned 

disposal of its Boiler Plant business unit – will then be in the order of a4.5 billion. Its 

profitability will increase substantially. Assuming the economic environment improves, 

its pre-tax return on sales should be raised to five percent. mg’s management forecasts 

that GEA will earn an above-average return on sales in excess of eight percent. It aims to 

earn a return on sales of four to five per cent in its industrial plant engineering business. 

The disposal of Dynamit Nobel will sustainably strengthen shareholders’ equity. Its net 

debt will be transformed into a net cash position that will be available for future growth 

by acquisition. 

Enhancing shareholder value is the top priority 

The prime objective of this restructuring is to sustainably enhance mg’s shareholder value 

and to transform the company into a focused and highly profitable organization whose 

strong performance is rewarded by the capital markets. mg technologies ag is convinced 

that it has embarked upon the right course of action. The encouraging response from 

the capital markets and the strong performance of mg’s share price in 2003 vindicate the 

company’s strategy and provide an incentive to achieve its ambitious goals. 

27

Scope for 

Expansion

The pharmaceutical industry will continue to grow 

in the future. GEA, a reliable value-adding partner 

to its pharmaceutical and biotech customers, is 

benefiting from this trend. Its technology offering 

ranges from the batching and weighing of active 

and inactive ingredients to the granulation and 

drying stages, including pressing the finished 

tablets. As a global market leader in the cuttingedge 

process engineering used to produce solid 

drugs, GEA can count leading pharmaceutical 

corporations among its clientele.

30 

GEA’s divisions 

process 

engineering 

components 

Heat exchangers, 

valves/pumps, 

homogenizers 

SPECIAL SECTION 

SPECIALTY MECHANICAL ENGINEERING 

GEA 

energy 

technology 

As a technology leader in its markets, GEA AG develops and supplies sophisticated, mostly 

individually customized process lines, systems plant, and components throughout the 

world. It is either first or second worldwide in all the businesses in which it operates, the 

only exception being its air-treatment business, which only operates in Europe, where 

it is number two. 

Structure: decentralized, flexible, customer-focused 

GEA’s business is split into seven divisions, each of which focuses on its core technologies: 

process engineering components, energy technology, air treatment, refrigeration, process 

engineering, mechanical separation, and dairy farm systems. Within each division, business 

units organized as medium-sized enterprises and run on a decentralized basis operate 

in their respective markets. This structure ensures a high degree of flexibility, swift market 

access and sharp client focus. GEA is therefore able to offer its customers in key markets 

one-stop technologies right along the value chain. One example of this is milk processing: 

GEA supplies the process engineering capability and the expertise – from the milking equipment 

and the cooling of fresh milk to the stage where the milk is processed into cream, 

cheese or powdered milk, including the extraction of valuable by-products such as calcium. 

Power plant and 

process cooling 

(dry/wet) 

air treatment 

Air treatment 

equipment 

refrigeration 

Screw compressors, 

reciprocating 

compressors, 

refrigeration 

equipment 

process 

engineering 

Industrial drying, 

thermal separation 

technology, 

liquid processing 

mechanical 

separation 

Separators, 

decanters 

dairy farm 

systems 

Milking equipment, 

cooling 

tanks, services


Innovation: driving technology and quality leadership 

The key to GEA’s success is its leadership in technology and quality. The company invests 

heavily in innovation in order to provide its customers with a competitive advantage in 

the form of cutting-edge technology and efficiency improvements. Depending on business 

line, GEA already generates up to 70 percent of its sales from products that are less than 

three years old. Compared to its competitors, the company therefore occupies one of the 

top spots. Research and development and the encouragement of an innovative culture are 

two of the prime management functions at GEA. In its annual innovation competition, its 

various divisions compete against each other with their latest developments. The top 

three receive cash prizes that are added to the winning companies’ R&D budgets. 

Main markets: future holds out prospect of stable growth 

GEA’s most important markets – accounting for around 60 percent of its sales – are the 

food, beverage, dairy, and pharmaceutical industries. These markets possess sustainable 

growth potential and are relatively non-cyclical. The growth drivers in these areas are the 

world’s rapidly increasing population and its growing demand for foodstuffs and healthcare 

as well as rising incomes, particularly in the emerging markets. Other key markets 

for GEA are the power-generating, chemical, petrochemical, construction and shipbuilding 

industries. 

Specialty mechanical engineering • Industrial plant engineering • mg chemical group 

Sales GEA 

in s million 

2,874.4 

2,702.0 

01/02 03 

31

32 

Food 

Two of GEA’s key markets are the food and milk-processing 

industries. In 2003, this mg subsidiary generated over half of 

its global sales of P2,702.0 million from these sectors. 

As it is relatively immune to short-term developments, the 

food industry is one of the more stable sectors. In 2003, food 

sales in Germany grew by 2.3 percent; a further increase of 

3.5 percent is forecast for 2004. The international food market 

is growing even faster than that in Germany. GEA is a leader 

in many areas of the food and beverage industry both in 

Germany and abroad, generating roughly 30 percent of its 

sales from this sector. 

One example of GEA’s outstanding market position is the 

beer industry: 20 percent of current global beer production 

of approximately 1.3 billion hectoliters is manufactured 

using equipment supplied by Tuchenhagen, a GEA subsidiary. 

Over half of global beer production includes Tuchenhagen 

components at some point in the production process. This 

position was further consolidated in 2003 when Westfalia 

Separator, Oelde, Germany, a GEA subsidiary specializing in 

centrifugal separation technology, signed a master services 

agreement in 2003 with the world’s third-largest brewing 

FOCUS ON GEA: 

INNOVATIVE ENGINEERING FOR INDUSTRIES OF THE FUTURE 

group Interbrew, which sells brands such as Beck’s in Germany 

and Efes in Turkey. The agreement covers all 65 breweries 

in the group. GEA’s centrifuges ensure that the beer is clear 

rather than cloudy when it is poured out. 

GEA is the world’s undisputed leader in the field of industrial 

powder technology, with a market share of approximately 40 

percent. Powdered household products – such as baby food, 

instant coffee, soups and washing powder – have to either 

be dry or to be dried so that they can be consumed and 

stored. Drying and powder processing are among the key 

processes used in the food industry as well as in the chemical, 

pharmaceutical and dairy industries. Danish firm Niro is the 

management holding company in the process-engineering 

division, which also supplies turnkey industrial plant for the 

production of powdered milk and instant coffee. 41 percent 

or 191,000 tonnes of global production of instant coffee 

totaling 467,000 tonnes is manufactured using freeze-drying 

and spray-drying plant supplied by Niro.

Milk 

Last year, over 160 million cows worldwide produced roughly 500 million tonnes of milk. 

The milk produced by buffalo, goats, sheep, mares and camels brought this total to approximately 

600 million tonnes. GEA is a major player in the market for milking technology, with 

a share of roughly 30 percent. Its subsidiary WestfaliaSurge is a leading manufacturer of 

milking equipment, milk-cooling equipment and dairy supplies, i.e. facilities for equipment 

cleaning, animal hygiene, spare parts, accessories as well as services and advice on milk 

production. 

Milk production is on the increase: it is forecast to be 615 million tonnes in 2005. The volume 

of milk processing – to make yogurts, drinks and desserts, for example – is also growing. 

Every year approximately P1.6 billion is invested in milk-processing equipment, of which GEA 

holds a market share of approximately 12 percent. 

The engineers at WestfaliaSurge know that a one-size-fits-all approach to milking is not 

sufficient. Due to their peculiar characteristics, for example, cows, goats, mares and buffalo 

need to be treated differently to camels. The order to supply milking equipment for the 

world’s first dairy farm for camels, being built in Dubai in the Persian Gulf, was therefore a 

pioneering venture for the experts at WestfaliaSurge. Camels’ milk tastes almost the same 

as cows’ milk but, because it contains less than two percent fat, is much easier to digest 

and is practically already homogenized. In addition, camels’ milk contains five times as 

much vitamin C as cows’ milk. Camels’ milk is also said to have highly beneficial properties 

for allergies, diabetes and neurodermatitis. 

Although many consumers might find the idea of cows riding a carousel a bit unusual, it is 

now part of everyday life for many farmers. AUTOROTOR is the name of WestfaliaSurge’s 

milking carousel, which can be used to milk up to 100 cows at the same time. China provided 

the GEA subsidiary with two of the largest orders in its history and the entire milking 

technology industry: for approximately P4 million it supplied 15 milking carousels, each 

capable of milking 48 cows, and 50 milk-cooling tanks to the Chinese province of Fujin. 

63 milking carousels are being supplied to Inner Mongolia as part of an order worth 

P4.5 million. The customer for both orders is Changfu, one of China’s largest dairies. The 

first 30 carousels are due to be delivered to Inner Mongolia by February 2004, and the 

rest will follow in the summer. The order comprises 61 milking carousels that can each 

milk 24 cows at the same time and two systems capable of milking 48 cows each. China’s 

dairy market is growing at the rate of 30 percent per year. 

GEA subsidiary Tuchenhagen Dairy Systems won a major contract from the milk-processing 

industry. The company is building four new milk-processing production lines in Leppersdorf, 

eastern Germany. The customer for the order is Sachsenmilch AG. The contract comprises 

all engineering, assembly and commissioning services for the production lines. The first 

production line is scheduled to come on stream in April 2004, and three further lines are 

due to be added in August. 

33

34 

Pharmaceuticals 

Healthcare – comprising pharmaceuticals, biotechnology and medical technology – is 

one of the economic growth engines of the 21st century. The reasons for this are growing 

populations, medical and technological advances, and greater life expectancy. 

Over the past ten years, spending on medicines in Germany has risen by almost 40 percent 

to roughly P30 billion. The U.S. pharmaceutical market which, with sales worth the equivalent 

of roughly P150 billion in 2002, accounted for virtually half of the global market, has 

almost tripled over this period. And the sector continues to grow disproportionately by 

eight percent per year worldwide. In 2005, the size of this market is forecast to be at least 

P390 billion. The biotech industry will also expand strongly over the medium term. More 

than half of all newly approved drugs now come from the biotech industry. 

As a value-adding partner to the pharmaceutical industry, GEA and its subsidiaries each 

occupy leading positions in their respective markets. Niro Pharma Systems is the global market 

leader in the cutting-edge process engineering used to produce solid medicines. Its technology 

offering ranges from the batching and weighing of active and inactive ingredients to 

the granulation and drying stages and the finished tablet. Its customers include almost all 

major companies in the pharmaceutical industry.

The MODUL tablet press produced by Niro Pharma Systems 

is not just new – it is revolutionary. Its use drastically cuts 

the cost of producing tablets. In the past, whenever the 

product was changed, tablet presses were out of action for 

between six and ten hours due to the complex cleaning 

process involved. An innovative compression module, which 

can be replaced by a clean module within 30 minutes, 

substantially reduces these downtimes and enables productivity 

to be raised by up to 50 percent. 

Roughly 150 million people around the world suffer from the 

metabolic disorder diabetes. They have to inject themselves 

with insulin every day. In a few years’ time, a newly developed 

process should enable patients to inhale insulin. Westfalia 

Separator’s centrifuges play a key role in the production of 

insulin. All the world’s leading insulin producers use this firm’s 

separation technology. 

35

36 

Sales Lurgi 

in s million 

497.3 

591.7 


GROSSANLAGENBAU 

INDUSTRIAL PLANT ENGINEERING 

Lurgi 

Lurgi is a global technology leader in process engineering and plant engineering. Lurgi’s 

strength lies in innovative technologies of the future focusing on client-oriented solutions 

for fast-growing markets. Its technology leadership is based on proprietary technologies 

and exclusive licensed technologies in product areas such as gas-to-petrochemicals, synthesis 

gas, methanol, synthetic fuels, petrochemicals, and renewable resources/food. In 

2003, Lurgi applied for ten new patent families in Germany and as many as 19 outside 

Germany. 

With a view to future development potential, Lurgi is concentrating on technologies in 

the gas-to-petrochemicals chain as well as synthetic fuels, sulfur management and exclusive 

licensing agreements in the field of petrochemicals. The market for methanol alone will 

grow by roughly two to three percent per year up to 2010. Between 60 and 70 percent of 

global methanol production is now based – or will shortly be based – on Lurgi’s technology. 

This provides the mg subsidiary with a leading position in this market. Lurgi’s 

second main area of activity is renewable resources/food, which covers technologies 

used to produce conventional products such as cooking oil, detergents, starching products 

and high fructose, as well as technologies used in the production of fuels and fuel components 

such as bio-diesel and bio-ethanol made from renewable resources such as rape, 

grain and sugar. 

In the past, plastic has been manufactured almost exclusively from crude oil. With its 

MTP® (methanol-to-propylene) process, Lurgi has devised a way of manufacturing the 

plastic polypropylene from gas. This is of particular interest to customers from the oil 

industry, because the extraction of crude oil produces substantial quantities of natural gas, 

which has traditionally been burnt off or recompressed. Lurgi’s MTP® process initially 

turns this seemingly worthless gas into methanol. This methanol is then converted into 

propylene and then polypropylene, a useful value-added product. Polypropylene has 

many applications, for example it is used in the manufacture of kitchen appliances, car 

components, packaging and textile fibers. Demand for this innovative material is ballooning: 

consumption of polypropylene, currently around 35 million tonnes, is forecast to grow 

by roughly six percent per year to 52 million tonnes by the year 2010 as its market price 

continues to rise. 

In 2003, Lurgi's MTP® process reached a major milestone: it managed to polymerize 

propylene manufactured using the MTP® process into polypropylene. This was the first 

time that polypropylene had been produced from gas instead of oil using this process. 

In conjunction with Lurgi’s MegaMethanol® technology, which enables methanol to be produced 

cheaply, the MTP® process can in the future be used to process this raw material 

not only into polypropylene but also into further value-added petrochemical products. 

Consumption of bio-fuels made from renewable resources is also on the increase around 

the world. Under a new directive issued by the European Union (EU), the proportion of 

bio-fuels used in the EU member states is set to rise to at least two percent. In the U.S., 

the addition of bio-ethanol is regulated by statutory quotas. The growing demand for 

alternative fuels is also creating a greater need for new industrial plant. This provides


Lurgi with outstanding business prospects. Lurgi is an international leader in the construction 

of industrial plant used to manufacture oleochemical products from renewable 

resources. 

Lurgi Lentjes 

Lurgi Lentjes is a globally active group engaged in process engineering and plant engineering, 

and is a leader in its field. Its various companies plan, supply and build turnkey 

industrial plant, focusing on processes and technologies that convert residual waste and 

other waste materials into valuable energy resources, while at the same time keeping the 

air clean. This plant-engineering firm combines efficient waste disposal with advanced 

power generation, thus making a significant contribution to protecting the environment. 

Lurgi Lentjes won a number of major orders in 2003, including the construction of a 

waste incineration plant on Guernsey, in the Channel Islands, as part of a contract worth 

a108 million. This plant will be used to extract energy from 72,000 tonnes of residual 

waste per year, which in the past has simply been dumped. Lurgi Lentjes won a contract 

to modernize a waste incineration plant and an adjoining thermal power station in 

Frankfurt am Main, Germany. This order is worth a167 million. 

Zimmer 

Zimmer specializes in the engineering of processes and industrial plant used to produce 

synthetic fibers and polymers, from Asia to South America. Zimmer is the world’s market 

leader in plant engineering for polyester (PET) production. Around 25 percent of global 

PET production is based on Zimmer’s technology. The manufacture of PET bottles is 

becoming increasingly important. 

PET bottles are light, handy and non-breakable, and the proportion of these bottles is 

growing constantly. Global PET consumption for bottles is set to grow by roughly ten 

percent per year until 2010. A particular growth segment is the market for PET bottles for 

beer, health drinks and hot or antiseptic liquids such as fruit juices. The company is 

already well positioned in this market. The development of new recipes and technologies 

enables PET made using Zimmer’s plant to be used for the above products without any 

impairment of quality. 

Zimmer is currently developing a new, ground-breaking technology in the field of PET 

bottle manufacture. This is based on a process in which the PET molten mass is used 

directly to produce preforms for bottles. This cuts out several stages in the process and 

the need to transport intermediates to the processing agent, thus reducing production 

costs by around ten percent. 

Once the deal had been cleared by the German antitrust authorities on November 7, 2003, 

Zimmer acquired Fleissner GmbH & Co. Maschinenfabrik. Fleissner, an internationally 

active company founded as far back as 1848, is one of the world’s leading manufacturers 

of components for staple-fiber plant and has a market share of approximately 35 percent. 

The company also builds high-performance plant for the production of nonwovens and 

high-tech rapid packager driers for the nonwovens, paper and tissue industries. This 

acquisition has provided Zimmer with expertise in the fast-growing business of nonwovens 

and enabled it to enhance its leading position in the field of staple-fiber plant. 


Sales Lurgi Lentjes 

in s million 

485.6 


Sales Zimmer AG 

in s million 

262.9 

361.3 

223.4 


37

38 

Sales Dynamit Nobel 

in s million 

2,460.6 

2,328.2 


mg CHEMICAL GROUP 


Dynamit Nobel 

Dynamit Nobel, which forms part of the chemical group, now concentrates on chemicals 

and materials technology. This internationally active group supplies innovative specialty 

products to niche markets in several industrial sectors such as the pharmaceutical, cosmetics, 

chemical and automotive industries. 

One of the key technologies and a fast-growing market of the 21st century, with annual 

growth rates of 15 to 20 percent, is nanotechnology. Dynamit Nobel already earns roughly 

a20 million from nano-products, which are found in highly effective sun protection 

creams, automobile paints, wood varnish and UV-protected film for the food and farming 

industries. 

One new product to emerge from the research conducted by Sachtleben Chemie, a 

Duisburg-based subsidiary of Dynamit Nobel, is ‘dirtbusters’. Nano-fine pigments made 

from titanium dioxide create self-cleaning, dirt-repellent surfaces. The ultra-fine, specially 

treated titanium-dioxide particles convert light energy into chemical energy. This energy 

then oxidizes and destroys the dirt, so that the remains can easily be washed off with 

water. The nano-fine ‘dirtbusters’ are either added to high-quality paints and varnishes 

or applied directly to the surface as a solution. They are used on house walls, roof tiles 

and paving stones. 

Dynamit Nobel’s sales of this pioneering technology are forecast to rise to a35 million by 

2006 and to between a60 million and a80 million by 2010. The total volume of mg-relevant 

markets for nano-products is forecast to be between a500 million and a600 million by 

2010. 

Its business in medical technology based on advanced ceramics has also been highly 

successful. Dynamit Nobel subsidiary CeramTec is the world’s market leader in the manufacture 

of ceramic components for artificial hip joints. Roughly 18 percent of CeramTec’s 

sales stemmed from this fast-growing business in 2003. This amounted to a sales increase 

of over 30 percent on 2001/2002. Demand for ceramic components in medical equipment 

is growing rapidly. Ceramics are extremely strong, non-corrosive, very comfortable for 

patients, and exceptionally hard-wearing. 

CeramTec expects to see further growth from the U.S. In 2003, the customer to which 

CeramTec supplies ceramic hip joints won approval from the Federal Drug Administration 

(FDA), the U.S. healthcare regulator, for ceramic hip joints. In this connection, the company 

was given approval to supply ceramic couplings to the American market. At present, 

only six percent of artificial limbs fitted in the U.S. are made of ceramics – they are usually 

still made of metal. In Germany, by contrast, the proportion is now 60 percent.


Clinical trials are now being conducted on artificial knee joints made from the new 

ceramic material BIOLOX delta. This material makes it possible to manufacture smaller 

implants and more complex shapes such as knee joints. The plan is to have BIOLOX 

delta ready to develop a new market by 2006. 

Dynamit Nobel is also a globally recognized partner to the automotive industry, supplying 

plastic system components, ceramic components and processes used in the chemical 

pretreatment of metal parts, including complete car bodies. Chemetall, a Dynamit Nobel 

subsidiary, developed and brought to market SAM, a new technology that provides 

environmentally friendly protection against corrosion. ‘SAM’ stands for self-assembling 

molecules. This technology enables aluminum surfaces to be treated with self-assembling, 

monomolecular layers and allows manufacturers of car components, for example, to 

dispense with poisonous additives such as chrome that have traditionally been used. In 

2003, Dynamit Nobel generated roughly 37 percent of its total sales from products for 

the automotive industry. In 2003, technologies produced by this mg subgroup were once 

again featured in numerous new products on display at the Frankfurt International Motor 

Show (IAA): these included multifunctional plastic bumper systems and new processes 

for improving corrosion protection. mg’s customers include all major European carmakers 

as well as U.S. automotive giants General Motors and Ford. 

solvadis 

Part of solvadis’ business involves trading in commodities such as sulfur and methanol. 

The other part of the business entails distributing chemicals. Distribution involves the 

speedy and error-free delivery of chemicals in small packing drums, containers, and tank 

trucks. solvadis also offers a wide spectrum ranging from the storage and distribution of 

industrial chemicals to the distribution of specialty products. These specialty products 

include solid chemicals, acids, alkaline solutions, and solvents. The main customers are 

the pharmaceutical, cosmetics and chemical industries, paint and varnish manufacturers, 

and the plastics processing and metalworking industries. 

solvadis is one of the top three European companies in chemicals distribution. Although 

it operates internationally through the Chemworld Alliance together with U.S., U.K. and 

Asian partners, solvadis’ activities are mainly centered on Europe. 

Its Retailing unit markets liquid and solid elementary sulfur throughout northwestern 

Europe. Its customers include German gas producers and a number of oil companies that 

operate refineries in Europe. 

Apart from sulfur, solvadis also trades in methanol, a key basic commodity for the chemical 

industry. Global consumption is currently around 28 million tonnes per year, and is on the 

increase. solvadis expects to sell approximately 320,000 tonnes of methanol in 2004. 


Sales solvadis 

in s million 

1,440.8 1,416.0 


39

Scope for 

Innovation

For a technology-driven organization such as the 

mg Group, innovation is the lifeblood upon which 

its profitable growth depends. Innovation also 

helps secure the future – for example by conserving 

natural resources. Lurgi has devised an alternative 

method for manufacturing the ubiquitous plastic 

polypropylene from gas instead of oil, which is 

becoming an increasingly scarce commodity. Lurgi’s 

process cuts consumption of resources and provides 

an efficient, future-proof way of meeting some of 

the growing demand for polypropylene by using gas.

42 

MANAGEMENT REPORT 

PRELIMINARY COMMENT 

Limited comparability; change in fiscal year 

2003 saw the initiation of a comprehensive restructuring program in the mg Group based on the 

strategic refocus decided in October. This incurred substantial one-off charges. Because of these 

measures and the alignment of mg’s fiscal year with the calendar year in the previous year, the 

company’s net assets, financial position and results of operations can only be compared to a very 

limited extent with those of prior years. 

After mg’s fiscal year was aligned with the calendar year at December 31, 2002, the 2003 fiscal year 

now corresponds to the period from January 1 through December 31, 2003. For this reason, the 

2003 fiscal year should technically be compared to the short 2002 fiscal year. In order to present the 

mg Group’s financial results on a like-for-like basis, however, the management report contains the 

figures for the last full fiscal year of 2001/2002 (October 1, 2001 to September 30, 2002) as a basis 

for comparison. In other words, the comparative figures for the prior year mentioned in the management 

report – described as the ‘corresponding’ or ‘comparative’ prior-year period – always relate 

to the full 2001/2002 fiscal year. In the case of reporting-date-related figures – such as those shown 

in the balance sheet – however, the figures at December 31, 2003 are largely compared with the 

corresponding figures at December 31, 2002. 

Discontinued operations 

Having conducted a comprehensive review of the organization, mg’s Executive Board decided in 

2003 to concentrate the company’s activities in the future on specialty mechanical engineering 

– especially process engineering and components – and plant engineering. In the wake of this review, 

preparations were made to sell mg’s Chemicals division, along with Dynamit Nobel and solvadis. 

In accordance with SFAS 144, however, only the subgroup solvadis, the Boiler Plant strategic business 

unit, and some of the non-core activities of GEA and Dynamit Nobel have not been reported as 

‘continued operations’ for 2003. Consequently, these businesses are shown separately as ‘discontinued 

operations’ in the statements of income for 2003 and for the short 2002 fiscal year. Dynamit Nobel 

is still included under ‘continued operations’ in the consolidated financial statements at December 31, 

2003. In line with the fundamental principles of the ‘Holzmüller’ ruling by Germany’s Federal Court 

of Justice, the Executive Board of mg technologies ag will seek the Annual Shareholders’ Meeting’s 

approval to sell Dynamit Nobel. Consequently, as of the balance sheet date Dynamit Nobel cannot be 

reported under ‘discontinued operations’ in accordance with SFAS 144.


Sarbanes-Oxley Act 

Economic Environment • Situation of the Company • Organization and Structure • Risk Report • Employees • Performance of the Subgroups • Outlook 

In the past, the mg Group has reported its pre-tax earnings both including and excluding one-off items. 

Since the beginning of 2003, the company’s policy has been to report only its ‘pre-tax earnings’, 

without any adjustments. However, one-off items incurred by the mg Group during the reporting and 

comparative periods will continue to be disclosed as additional information. 

By adopting this practice, the mg Group is complying with the Conditions for Use of Non-GAAP 

Financial Measures, enacted in January 2003 by the Securities and Exchange Commission (SEC) and 

based on the Sarbanes-Oxley Act of 2002. These rules apply much more restrictive criteria to the 

publication of pro forma figures. 

ECONOMIC ENVIRONMENT IN 2003 

While the first half of 2003 was characterized by recessionary trends, there were signs in the 

third quarter of a gradual global economic recovery. This trend intensified towards the end of 

the year. 

U.S. economy buoys global economy 

Once again, the U.S. economy proved to be the engine driving the global economic recovery. The 

U.S. Department of Commerce calculated GDP growth of 3.1 percent for the world’s largest economy 

in 2003. 

The economies in Asia and eastern Europe continued to perform well. Japan’s economic recovery 

continued throughout 2003. China managed to build on its strong economic performance of recent 

years, with growth of 9.1 percent. 

Sluggish economic recovery in the euro-zone 

The economic performance of the euro-zone was extremely sluggish in the first six months of 2003, 

a decisive turnaround setting in only around mid-year. According to Eurostat, however, economic 

growth in the euro zone came to only 0.4 percent for 2003 as a whole. 

Germany showed signs of a tentative economic recovery towards the end of 2003, after its GDP had 

contracted in the second and third quarters. In the fourth quarter its GDP edged up by 0.2 percent. 

Despite these encouraging signs, the Federal Statistical Office calculated that German GDP for 2003 

as a whole had contracted by 0.1 percent. 

43

44 

Engineering and chemical industries unsatisfactory 

2003 was a disappointing year for the German engineering sector. At the end of August, the German 

Engineering Federation revised downwards its forecast for 2003, which in the fall had still been 

predicting just above zero growth for the year as a whole. Instead of stagnating, production fell by 

one percent in real terms in 2003. 

The chemical industry performed sluggishly in 2003 after the sector was hit by weak demand and 

strong pressure on prices. The German Chemical Industry Federation (VCI) expects production in 

Germany to rise by only 0.5 percent in 2003. 

Performance of mg-relevant markets varies 

The performance of mg’s key markets varied in 2003. The food industry, one of GEA’s most important 

customers, can look back on an encouraging year. According to the Federation of German Food and 

Drink Industries (BVE), sales in Germany’s fourth-largest industrial sector rose year on year by a 

nominal 2.3 percent in 2003. 

The performance of the international dairy markets relevant to GEA’s dairy farm systems business 

varied widely. While Germany and France showed signs of improvement on the previous year, dairy 

markets in the U.S. and parts of western Europe suffered from weak milk prices. 

Unfazed by the generally poor performance of the chemical industry, the pharmaceutical sector 

continued to grow in 2003. According to the German Chemical Industry Federation, German pharmaceutical 

companies managed to raise their production by 3.5 percent in 2003. 

Business activity in the automotive industry – a major customer for Dynamit Nobel – remained 

relatively low in its core European and U.S. markets in 2003. By contrast, Asia – particularly China – 

increased its production. According to the German Association of the Automotive Industry (VDA), 

the number of new car registrations stagnated in Germany, a total of 3.24 million cars being registered 

here in 2003. 

Dollar continued to weaken 

The dollar/euro exchange rate is of great importance to the currency translation and invoicing of 

a large proportion of mg’s business activities. The U.S. dollar continued to weaken during the 

course of 2003. One euro cost an average of 1.13 dollars in 2003. The value of the euro had therefore 

increased by an average of roughly 20 percent year on year against the dollar.


SITUATION OF THE COMPANY 


At the beginning of October 2003, mg technologies ag announced significant changes in its 

strategic positioning: the company has decided to concentrate in the future on specialty mechanical 

engineering – especially process engineering and components - and plant engineering. During 

the year under review, the company’s performance was hit by the weak global economic environment. 

Its sales and earnings were also depressed by adverse currency developments resulting 

from the euro’s strength (especially against the U.S. dollar). This situation was compounded 

by substantial one-off charges for pre-existing problem contracts in the industrial plant engineering 

business, the settlement of long-running lawsuits, and the disposal or discontinuation 

of loss-making businesses. These charges also include the cost of restructuring and reorganizing 

the mg Group. 

Strategy 

2003 was a year of radical strategic transformation for mg technologies ag. Following its Annual 

Shareholders’ Meeting on June 3 last year, the company started to conduct a comprehensive review 

of its structures. This involved re-examining the Group’s entire strategic position, which was based 

on the two pillars of engineering and chemicals. The aim of this strategy was to identify mg’s potential 

and, consequently, provide a sound basis for profitable growth in the future. 

Having presented the findings of this review and carefully considered all available options, mg’s 

Executive Board announced the main points of the restructuring on October 2 last year. The next 

step was to start with the swift implementation of the measures adopted. 

The key aspects of the company’s new strategy are as follows: In the future, the new mg will concentrate 

on GEA’s specialty mechanical engineering – especially process engineering and components – 

and on the heavily streamlined industrial plant engineering business including the subsidiaries Lurgi, 

Lurgi Lentjes and Zimmer. 

The chemicals division – comprising Dynamit Nobel and solvadis – is due to be sold for the bestpossible 

price in 2004. This will pay down the Group’s debt and place it on a sound footing for 

future expansion through organic growth and acquisitions. 

Industrial plant engineering is to be streamlined. Businesses with low profitability or a weak market 

position will be discontinued. Under new management, mg’s activities in this field will concentrate 

more on pioneering technologies with sustainable market potential. The break-even thresholds of 

Lurgi and Lurgi Lentjes are to be considerably lowered. The plan is to ensure that the entire industrial 

plant engineering business returns to profitability as soon as possible by means of more stringent 

selection of new business, portfolio modifications and capacity adjustments. 

In line with the new strategy, the current holding-company structures are being considerably simplified. 

This will considerably enhance mg’s efficiency and improve its cost structure in the short term. 

45

46 

Consolidated sales after 

discontinued operations 

in s million 

6,826.5 

6,403.2 


Sales 

Sales broken down by region after discontinued operations 

Africa 2% 

Asia, Australia, Middle East 17% 

America 17% 

27% Germany 

Sales performance largely affected by economic conditions and exchange rates 

The subgroup solvadis, which is due to be sold, the Boiler Plant business, and some of the non-core 

activities of GEA and Dynamit Nobel are shown as ‘discontinued operations’. Consequently, the 

sales generated by these companies are not included in the consolidated sales figure. Because of this 

reclassification, the mg Group reports sales of a6,403.2 million for 2003 instead of a8,156.9 million. 

For the sake of comparability, the sales figures for 2001/2002 are also shown in this report excluding 

solvadis, the Boiler Plant business, and the non-core activities of GEA and Dynamit Nobel. On a 

comparable basis, the mg Group’s sales thus fell from a6,826.5 million in 2001/2002 by a423.3 million 

to a6,403.2 million in 2003. The main reasons for this decline in sales revenue were lower volumes 

as a result of the economic downturn and adverse currency developments as a result of the euro’s 

strength (especially against the U.S. dollar). 

At a3,878.4 million, mg engineering’s sales for 2003 (before consolidation) were a241.8 million 

lower than in 2001/2002. At a2,702.0 million, GEA’s sales were a172.4 million lower than the in 

prior year. Lurgi’s sales during the period under review rose by a94.4 million to a591.7 million. 

Lurgi Lentjes reported sales of a361.3 million, a decrease of a124.3 million. Zimmer generated sales 

of a223.4 million in 2003, a39.5 million less than in the comparable period of the prior year. 

Dynamit Nobel achieved sales of a2,328.2 million in 2003, a decrease of a132.4 million on 2001/2002. 

The disposal of its ammunition business needs to be taken into account in this context. 

solvadis’ sales contracted year on year by a24.8 million to a1,416.0 million. 

37% Europe 

(including Former Soviet Union, 

excl. Germany)


New Orders and Order Books 


Level of new orders and order book down due to sluggish capital spending 

In 2003, mg engineering received new orders worth a3,652.0 million, a decrease of a405.8 million 

on 2001/2002. The main reason for this decrease was the cyclical lack of capital spending on big-ticket 

projects. This affected the subgroup Lurgi in particular. mg engineering’s order book at December 31, 

2003 came to a2,190.6 million. At December 31, 2002 its order book totaled a2,585.7 million. During 

the year under review, GEA received orders worth a2,665.1 million, which was a182.2 million down 

on 2001/2002. GEA thus reported an order book worth a890.9 million at December 31, 2003. At the 

end of 2002, its order book amounted to a1,016.6 million. Lurgi won new orders worth a229.3 million, 

a year-on-year decrease of a347.6 million. At December 31, 2003, the order book of this segment 

totaled a416.8 million. At December 31, 2002, its order book came to a744.8 million. The volume of 

new orders received by Lurgi Lentjes during the year under review came to a537.8 million. This was 

an increase of a129.5 million on the corresponding prior-year period. This subgroup’s order book 

came to a645.9 million at December 31, 2003. It amounted to a596.6 million at the end of 2002. 

The new orders received by Zimmer fell slightly by a5.5 million to a219.8 million in 2003. The order 

book of this segment amounted to a237.0 million at December 31, 2003. At the end of 2002, Zimmer 

reported an order book worth a227.7 million. 

New orders received by mg engineering after discontinued operations 

in s million 

GEA 

2,847.3 

2,665.1 


Lurgi 

576.9 

229.3 


Lurgi Lentjes 

408.8 

537.8 


Zimmer 

225.3 219.8 


47

48 

Pre-tax earnings for the mg Group 

after discontinued operations 

in s million 

290.5 

01/02 

– 181.0 

03 

Net Assets, Financial Position and Results of Operations 

Earnings depressed by lower sales, strong euro and one-off charges 

The mg Group’s pre-tax earnings for its continued operations amounted to a loss of a181.0 million 

in 2003 after a290.5 million in 2001/2002. Because they were due to be sold, solvadis, the Boiler 

Plant strategic business unit, and the non-core activities of GEA and Dynamit Nobel that had either 

already been sold or were due to be sold are reported under ‘Profit/loss on discontinued operations’ 

in the consolidated statements of income. Including the pre-tax loss of a59.7 million attributable to 

these companies, the pre-tax earnings for the mg Group under its old structure would have amounted 

to a loss of a240.7 million. In 2001/2002, by contrast, pre-tax earnings of a320.3 million were reported. 

If one compares the pre-tax loss of a240.7 million with the corresponding figure for 2001/2002, the 

change amounts to a decrease of a561.0 million. The reasons for this sharp decline in earnings were 

the fall in sales caused by the economic downturn, operating losses, and adverse currency trends as 

a result of the euro’s strength (especially against the U.S. dollar). The deterioration in earnings was 

also caused to a large extent by substantial one-off charges. These cover the cost of restructuring 

and reorganization; risk provisioning charges for pre-existing problem contracts, principally in the 

industrial plant engineering business; the settlement of long-running lawsuits; and the disposal or 

discontinuation of loss-making businesses. 

The restructuring costs of a –121.5 million (2001/2002: a26.1 million) reported separately in the 

consolidated statements of income essentially relate to the expenses incurred by the optimization 

of mg's holding-company structures and by capacity adjustments. The discontinued operations 

also incur restructuring costs of a8.4 million (2001/2002: a1.5 million), which are reported under 

‘Profit/loss on discontinued operations’. 

Consolidated Statements of Income in Short 

adjusted 

1/1/2003 - 10/1/2001 

12/31/2003 9/30/2002 

u million t million 

Gross margin 1,374.7 1,681.9 


and minority interests – 181.0 290.5 

Net loss/income – 198.6 189.6 

Profit/loss on continued operations 

thereof: consolidated net loss/income 

from continued operations – 128.1 180.0 

Basic earnings per share (in s) – 1.02 0.99 

Diluted earnings per share (in s) – 1.02 0.97 

Weighted average number of 

shares outstanding (in thousands) 193.8 192.3



In 2003, a loss of a63.0 million was also incurred on the sale and winding-up of the remaining 

activities of the Stahlbau Plauen strategic business unit, which was being closed down. 

mg engineering’s pre-tax earnings during the period under review (before consolidation) amounted 

to a1.3 million, a decrease of a251.7 million on 2001/2002. In 2003, GEA reported earnings of 

a196.7 million, a38.0 million less than in the corresponding period last year. Lurgi reported a loss 

of a75.7 million, a decrease of a84.0 million on 2001/2002. Lurgi Lentjes’ earnings fell by a117.8 

million to a loss of a124.1 million in 2003. Zimmer’s earnings were a11.9 million down on the 

a16.3 million it reported in 2001/2002. 

Dynamit Nobel reported pre-tax earnings of a187.7 million during the period under review, a decrease 

of a61.1 million on the corresponding period last year. The disposal of its ammunition business needs 

to be taken into account in this context. 

solvadis’ earnings contracted year on year by a35.0 million to a loss of a7.4 million. This figure 

includes the anticipated loss on the disposal of Safic-Alcan in January 2004. 

Net loss incurred due to substantial one-off charges 

The mg Group reports a net loss of a198.6 million for 2003, a decline of a388.2 million on 2001/2002. 

a69.6 million of this loss is attributable to discontinued operations operations (before minority 

interests). A profit of a12.2 million was reported for discontinued operations in 2001/2002. 

Earnings per share reports a loss 

Earnings per share – calculated as the net income for the year divided by the weighted-average 

number of mg shares in issue (193.8 million) – came to a loss of a1.02 per share due to the net loss 

reported in 2003. 

Earnings per share was reduced by a0.36 as a result of the businesses reported as discontinued 

operations, which comprised solvadis, the Boiler Plant strategic business unit, and various non-core 

activities of GEA and Dynamit Nobel. 

No dividend for 2003 

mg technologies ag will not be paying a dividend for fiscal 2003 owing to the accumulated loss it has 

reported for this year. 

Decline in return on sales and return on capital employed 

mg’s key performance indicators deteriorated sharply due to the pre-tax losses it reported. The 

return on sales (ROS) came to minus 2.8 percent in 2003 compared to a positive return of 4.3 percent 

in 2001/2002. The return on capital employed (ROCE) fell from 8.6 percent in 2001/2002 to minus 

1.9 percent in 2003. The cash flow return on investment (CFROI) amounted to 2.1 percent during the 

period under review after 9.4 percent in the corresponding prior-year period. 

49

50 

Secure financing 

Including discontinued operations, the balance sheet on the whole shows that mg’s financing of 

its assets is well balanced. Liabilities to banks at the balance sheet date amounted to a843.8 million 

(December 31, 2002: a774.1 million); this figure includes a42.4 million for the first-time consolidation 

of four variable-interest entities in accordance with FIN 46r. Of these liabilities, a200.3 million 

will mature in 2004 and a470.1 million in 2005. Furthermore, the a300.0 million long-term bond 

issued by mg technologies finance B.V. will fall due in 2005. The proceeds from the disposal of mg’s 

Chemicals division (Dynamit Nobel and solvadis), which is scheduled for 2004, will be used to repay 

these liabilities when they fall due. Total liabilities came to a3,068.4 million (December 31, 2002: 

a2,926.5 million). This figure includes the liabilities from discontinued operations of a429.7 million 

(December 31, 2002: a408.4 million). Cash and cash equivalents (including securities) totaled 

a184.1 million at the balance sheet date (December 31, 2002: a229.5 million). The gearing rate 

(ratio of net debt to shareholders’ equity) came to 57.7 percent (December 31, 2002: 42.3 percent). 

Consolidated Balance Sheets in Short 

Assets 

adjusted 

12/31/2003 12/31/2002 

u million t million 

Fixed Assets 3,091.0 3,105.9 

Non-fixed assets 2,245.7 2,254.3 

Assets from discontinued operations 466.1 556.9 

Deferred taxes 876.8 748.9 

Prepaid expenses 29.7 34.0 

Total assets 6,700.3 6,700.0 

Liabilities and shareholders’ equity 

Shareholders’ equity 1,663.8 1,991.2 

Minority interests 41.1 42.0 

Provisions and accrued liabilities 1,827.6 1,623.1 

Liabilities 2,638.8 2,518.1 

Liabilities from discontinued operations 429.7 408.4 

Deferred taxes 61.9 66.6 

Deferred income 37.4 50.6 

Total liabilities excluding shareholders’ equity 5,036.5 4,708.8 

Total liabilities and shareholders’ equity 6,700.3 6,700.0


Shareholders’ equity 


Shareholders’ equity at December 31, 2003 decreased by a327.4 million to a1,663.8 million compared 

to the end of 2002. This was largely due to the consolidated net loss of a198.6 million reported for 

2003. Furthermore, the dividends paid in the second quarter of 2003 for fiscal 2001/2002 (a48.3 million) 

and for the short 2002 fiscal year (a11.6 million) reduced shareholders’ equity by an aggregate 

a59.9 million. In addition, the persistent weakness of the U.S. dollar and sterling caused shareholders’ 

equity to contract further. The accumulated other comprehensive loss arising from currency translation 

increased by a70.1 million in 2003. Given that the volume of the mg Group’s total assets remained 

virtually unchanged, the equity ratio amounted to 24.8 percent at the balance sheet date compared 

to 29.7 percent at December 31, 2002. 

Cash flow and net position 

Net cash provided by the operating activities of continued operations declined year on year by 

a41.5 million from a178.3 million to a136.8 million. Including the net loss of a198.6 million 

reported for 2003 (2001/2002: net income of a189.6 million), a69.6 million (2001/2002: profit of 

a12.2 million) of which was attributable to discontinued operations, however, net cash provided 

by operating activities fell only slightly. In particular, other provisions and accrued liabilities grew 

by a165.8 million on year-end 2002, mainly owing to the restructuring of the mg Group. 

At a173.7 million, net cash used for investing activities remained virtually unchanged year on year 

(2001/2002: a178.9 million). Free cash flow came to an outflow of a36.9 million after an outflow of 

a0.6 million in 2001/2002. 

Net purchases of financial liabilities amounted to a48.0 million. The payment of dividends for 

2001/2002 and for the short 2002 fiscal year led to a cash outflow of a59.9 million. Net cash used 

for financing activities totaled a10.3 million. 

In particular proceeds from the disposal of discontinued non-core operations of GEA and Dynamit 

Nobel and changes in the net assets of discontinued operations led to a reduction of only a1.3 million 

in unrestricted cash and cash equivalents. Cash and cash equivalents, as reported on the balance 

sheet, grew by a6.7 million compared to year-end 2002. The settlement of the Customer Cases II 

lawsuit has tied up restricted cash and cash equivalents. 

The net position decreased on year-end 2002 by a117.1 million to minus a959.7 million. Liabilities 

to banks increased by a42.4 million as a result of the first-time consolidation of four variableinterest 

entities in accordance with FIN 46r. At the same time, lease liabilities fell by a27.9 million. 

Including these purely accounting-related effects and the total dividends of a59.9 million paid in 

2003, the net position of minus a857.4 million remained almost unchanged on year-end 2002 

(minus a842.6 million). 

51

52 

Capital Expenditure 

The mg Group invested a total of a292.8 million after discontinued operations. This was an increase 

of a26.1 million on the prior year. Capital spending on property, plant and equipment (including 

capital leases) came to a259.5 million, a6.9 million more than in 2001/2002. 

Purchases of companies and businesses in 2003 came to a33.3 million, a19.3 million more than in 

2001/2002. A large proportion of this amount was spent by Zimmer on its acquisition of Fleissner, an 

engineering company. In acquiring this firm, the mg subgroup – which is engaged in industrial plant 

engineering – plans to extend its global market leadership in the field of staple fiber plant and to add 

the fast-growing nonwovens business to its product portfolio. 

Procurement 

Procurement restructured 

With the globalization of competition, it is becoming increasingly important for companies to constantly 

review their cost of materials and procurement. In order to make its purchasing of materials 

and services even more efficient, customer-focused and flexible, the mg Group restructured its global 

purchasing activities in 2003. 

Implementation of a commodity management system 

mg technologies ag is currently implementing a decentralized commodity management system. Lead 

buyers at the various operating companies are responsible for organizing and managing the procurement 

of technical components such as pumps, drive systems, and valves on a decentralized basis. 

Each lead buyer has Group-wide responsibility for procuring a particular group of products. The 

buyers work closely with technical units, which then integrate the respective product into their 

processes. They are involved right from the outset in new development projects. By virtue of their 

proximity to technical processes and developments, the lead buyers can apply a consistent valueanalysis 

process to examine whether alternative materials or components could be used that are 

cheaper while offering the same quality. 

mg identifies further cost-cutting potential by using design-to-cost projects, which start right at the 

product-development stage. Under these projects, development processes are carried out on the basis 

of fixed cost targets. 

One-stop procurement of services 

mg’s global sourcing activities, which in the past have covered all procurement operations for the 

mg Group, will in the future concentrate on purchasing in non-technical areas such as telecommunications, 

vehicle fleets, personnel leasing, IT and other services. The bundling of activities in these 

areas will enable mg to sign Group-wide framework agreements and will enable it to obtain much 

more favorable rates on its purchases.


Production 


The mg Group operates in each of its markets through decentrally managed operating business units, 

as this structure provides it with a high degree of flexibility and customer focus. 

The various production strategies are strictly geared to customer requirements and the respective 

market structure. The spectrum ranges from products individually produced to order via line and batch 

production to flexible manufacturing cells. mg is constantly reviewing its production parameters to 

ensure it meets the highest standards of performance and efficiency. Key benchmarks include throughput 

times, productivity by area, zero-error production, and the ability to meet customers’ just-in-time 

and just-in-sequence requirements. 

In Sarstedt, in the Netherlands, GEA Ecoflex GmbH, which specializes in the manufacture and development 

of plate heat exchangers, built a new workshop and a new pressing line for the production of 

heat exchangers. This will enable the company to expand its production capacities substantially and to 

set new standards in the industrial production of plate heat exchangers: the new pressing line, which 

has 15,000 tonnes of stamping power, is generally regarded as one of the most modern of its kind in 

the world. By committing this level of investment, the GEA subsidiary plans to grow its share of the 

global market and further improve the quality of its products. 

GEA’s air-treatment business successfully completed the restructuring of its production activities. 

It concentrated a large proportion of its production facilities for industrial air-treatment equipment 

at Liberec in the Czech Republic, where GEA already manufactures air-treatment equipment. The 

concentration of its production capacities in Liberec will enable it to reap synergies and enhance 

its competitiveness. By expanding its production facilities in eastern Europe, GEA’s air-treatment 

business is also responding to the growing demand in this region. 

Under the umbrella of Dynamic Synthesis, Dynamit Nobel is making significant advances in the 

production of active ingredients for pharmaceuticals. For the pharmaceutical industry, it develops 

intermediates and active ingredients that are produced in complex chemical reactions. 

During the period under review, the special-chemistry business in Leverkusen, Germany, increased 

its capacities for the production of pharmaceutical active ingredients based on azide chemistry. 

In order to significantly increase its production capacities for the extraction of active-ingredient 

molecules, Dynamit Nobel invested over a11 million in the refurbishment of a multi-column chromatography 

(MCC) plant at Finorga’s site in Mourenx, France. This is one of Finorga’s proprietary 

technologies, which is used to separate identically structured molecules with varying effects according 

to type. These molecules – so-called ‘enantiomers’ – are found in roughly 75 percent of all newly 

developed drugs. They are used, for example, in medicines for the treatment of depression. By continuing 

to expand its technological and production capabilities, Dynamit Nobel remains an important 

value-adding partner to the pharmaceutical industry. 

53

54 

Environmental Protection 

The mg Group acts responsibly in helping to shape the future. In doing so, it realizes that there is 

no inherent contradiction between environmental interests and commercial objectives. Its holistic 

corporate philosophy, which is geared to sustainability, aims to enhance shareholder value over the 

long term at the same time as meeting ecological criteria. And the company has set itself exacting 

standards here: many of the measures it has implemented to protect the environment go beyond 

what is required by law. Cutting-edge, production-integrated environmental protection, conservation 

of resources, integrated materials management, and comprehensive health and safety regulations are 

a matter of course at all companies in the mg Group engaged in manufacturing activities. 

Proactive environmental management 

Environmental management plays a key role at GEA’s production sites. For many years now, production 

waste here has been sorted and recycled wherever possible. Air filters, the preparation of process 

liquids, and storage tanks are used to minimize the impact on the environment. The effectiveness of 

these measures is evidenced by a number of environmental certifications to DIN EN ISO 14001 standard. 

Dynamit Nobel also regards environmental protection and safety as an integral part of its corporate 

philosophy. An outstanding example of this approach is the Duisburg-based Sachtleben Chemie. This 

Dynamit Nobel subsidiary's holistic management system views protection of the environment as 

being equally important as issues such as quality, health and safety. Contracting parties and suppliers 

are also integrated into this system and are required to comply with stringent environmental and 

safety standards. In addition, employees specially trained in matters of environmental protection and 

health & safety issues constantly monitor compliance with environmental standards. At the company’s 

site in Duisburg, for example, all significant emissions are measured around the clock as soon as 

they leave the chimneys using highly sensitive equipment, and the relevant values are forwarded 

immediately by data line to the national environmental agency. 

Environmentally friendly processes and products 

In addition to its proprietary production processes, the mg Group ensures that the services it provides 

to its customers comply with environmental protection standards. Its products and innovative processes 

combine efficiency with optimum environmental compatibility. 

Many of the technologies produced by GEA’s Mechanical Separation division are used to conserve 

and protect natural resources. Large decanters are used to thicken and dehydrate sewage sludge. 

These centrifuges are used, for example, in Changi, Singapore. One of the world’s largest and most 

modern sewage-treatment plants is being built here on a site covering 54 hectares. Once it has been 

completed in 2008, the plant will be able to purify roughly 800,000 m3 of water per day. 

GEA’s air-treatment business: air-conditioning using water 

This division responded to the growing market for small commercial and private air-conditioning 

systems by developing GEA acqua. This water-based and, therefore, environmentally friendly airconditioning 

system for offices or homes can be connected to the heating system and is easy for any 

heating engineer to install. Its market launch has been promising so far. This technology enables 

GEA to reach an additional customer segment: the end-consumer.


GEA’s spray dryers keep the air clean 


GEA’s spray dryers are also used to protect the environment. Although they are really intended to be 

used to produce powder, they are also used worldwide in power plants and waste incineration plants 

to clean flue gas. Absorption through spray drying is cheap, reliable and complies with the most 

stringent emissions protection legislation. 

Lurgi: technology for the production of alternative fuels 

Lurgi’s industrial plant is used to produce bio-diesel and bio-ethanol from renewable resources such 

as rape and grain. Both of these fuels are environmentally friendly alternatives to conventional gasoline 

and diesel and help to drastically cut carbon dioxide emissions. Lurgi is the global market leader 

in the construction of plant for the production of methanol from gas. Lurgi’s technologies are used to 

process the liquid inexpensively into environmentally friendly fuels and fuel additives. 

Lurgi Lentjes’ plant converts residual waste and other waste materials into valuable energy 

Lurgi Lentjes builds industrial plant that is used to efficiently convert residual waste and other waste 

materials into valuable energy. Proprietary flue-gas-cleaning processes ensure that statutory limits 

on emissions are not exceeded. 

Dynamit Nobel: innovative processes protect the environment 

The companies in the mg chemical group also make a valuable contribution to protecting the environment. 

Dynamit Nobel subsidiary Chemetall, for example, offers its customers innovative processes 

that are designed to provide better protection against corrosion of metal surfaces and do not use harmful 

heavy metals such as chrome. During the year under review, Dynamit Nobel’s plastics business 

started to modernize and retool all of the painting plants at its European sites in order to further cut 

the level of emissions. 

Research & Development 

Operating in an environment of perpetual competition, a technology-driven organization such as the 

mg Group relies on innovation for its future growth and commercial success. The company therefore 

invests heavily in research and development. This includes efficient innovation management and a 

forward-looking culture of innovation. As a result, mg technologies ag is one of the market and technology 

leaders in 90 percent of its businesses, generating almost half of its sales from products that 

are no more than three years old. 

The mg Group continued to spend a considerable amount on research and development in 2003, 

investing a204.8 million. This was a decrease of a33.3 million on the corresponding period of last 

year and accounted for 3.2 percent of total sales (roughly 3.5 percent in 2001/2002). It applied for 

186 patents in 2003, having applied for 179 in 2001/2002. 

In 2003, GEA spent approximately a31 million – 1.2 percent of the GEA Group’s total sales – on 

proprietary research and development projects. Including development projects conducted in close 

cooperation with GEA customers and in connection with specific customer contracts, the total 

proportion of its sales spent by GEA on research and development comes to around five percent. 

Depending on business line, GEA already generates up to 70 percent of its sales from products 

that are less than three years old. 

55

56 

GEA: innovation that adds value 

The Mechanical Separation division developed and brought to market its Protein-Plus system. This 

enables significantly more protein to be extracted from milk. Because the system does not have to be 

emptied as frequently as before, its availability is improved. A further environmental benefit is that 

the system saves up to 600,000 liters of water per year. This provides customers with added value 

worth tens of thousands of euros in total per machine per year. The system’s modular construction 

also means that separators already in use can be upgraded. 

GEA’s Refrigeration division continued to make advances in the use of environmentally friendly 

refrigerants, especially those that are not harmful to the climate. GEA’s engineers devised a new 

patented process for the efficient use of carbon dioxide in conjunction with ammonia for lowtemperature 

applications. The company extended its range of screw compressors with the launch 

of a new product line. These compressors are mainly installed when environmentally friendly 

ammonia is used as a refrigerant. This division is therefore well-equipped to meet the needs of 

the market and offers its customers tailor-made solutions for their preferred application using 

the most suitable, environmentally friendly refrigerant. 

Lurgi: plastic made from gas 

During the period under review, Lurgi’s research and development activities focused mainly on 

its fast-growing gas-to-petrochemicals business. As a market and technology leader, Lurgi offers its 

customers innovative, inexpensive and resource-saving processes for converting natural gas into 

value-added chemical and petrochemical products. Under this process, gas is first converted into 

synthesis gas. The next stage is to turn the synthesis gas into methanol, from which petrochemical 

products such as plastics and synthetic fuels are finally extracted. 

Traditionally these products are manufactured from crude oil, which is an increasingly scarce and 

relatively expensive resource. Lurgi’s continuous expansion of its alternative and extremely efficient 

gas-to-petrochemicals and gas-to-synfuels technologies provides this plant engineering firm with 

outstanding business prospects. 

At a newly built HP POX high-pressure synthesis-gas research facility on the premises of the Freiberg 

University of Mining and Technology in eastern Germany, Lurgi’s engineers are working with scientists 

from the Institute of Energy Process Engineering and Chemical Engineering on the optimization 

of proprietary Lurgi processes for the production of synthesis gas. Their aim is to use extremely high 

pressure to convert gas and other commodities, such as hydrocarbons, even more efficiently and 

economically into synthesis gas before this is refined into methanol and other petrochemical products. 

This offers considerable competitive advantages for Lurgi’s customers, as it substantially reduces 

plant operating costs.



Lurgi Lentjes: optimization of proprietary processes lowers costs 

As a specialist in environmentally friendly processes for thermal waste disposal, Lurgi Lentjes continued 

to optimize its processes for the incineration of waste. During this time, Lurgi Lentjes engineers 

gained valuable insights into the mechanism by which nitrogen oxides are formed. These findings 

are now being translated to an industrial scale. The company believes this will considerably reduce 

the cost of running waste disposal plants. Once it has successfully optimized its proprietary processes, 

Lurgi Lentjes will be able to offer a simplified, more compact form of flue-gas desulfurization plants 

that will generate further cost savings in this product area. 

Zimmer: cutting the cost of producing PET bottles 

Zimmer is currently developing a new process for manufacturing PET bottles, a rapidly growing market. 

This process facilitates the direct production of bottle preforms from the PET polymer without the 

need to produce granules. Because this process has fewer stages and does not involve transporting 

intermediates to the processing agent, it reduces production costs by around ten percent. 

Dynamit Nobel: successful development projects in all businesses 

Chemetall’s specialty chemicals business developed and brought to market its Cerate process, an 

environmentally friendly way of protecting aluminum surfaces against corrosion. In the past, 

such surfaces have been protected against corrosion using highly-toxic chromic acid. Chemetall’s 

chrome-free process protects aluminum against environmental influences and optimizes the paint's 

adhesiveness. 

Dynamit Nobel’s plastics business focused on developing its so-called hybrid technology, which is 

used in the automotive industry. This process uses plastic-metal compounds as stabilizers in the 

front section of cars. This mix of materials is much lighter than conventional stabilizing elements 

made of metal. The hybrid construction reduces the vehicle’s weight and fuel consumption. 

In the growth area of nanotechnology, researchers at Sachtleben Chemie have developed a new 

generation of nano-particles for a new field of application: nano-fine pigments made of titanium 

dioxide make it possible to produce self-cleaning, dirt-repellent surfaces. They are used, for example, 

on house walls, roof tiles and paving stones. Experiments have shown that as dirt does not stick 

to surfaces coated with titanium-dioxide pigments, it is easy to rinse it off with water. The nanoparticles 

are either added to high-quality paints and varnishes or applied directly to the surface as 

a solution. 

As part of a development project funded by the European Union, Dynamit Nobel’s advanced-ceramics 

business is working on the development of a ceramic material for use in medical equipment. 

57

58 

Organization and Structure 

The mg Group is organized on a decentralized basis and managed by mg technologies ag as a strategic 

management holding company. The latter’s main task is to run the Group by setting concrete targets, 

and to optimize the Group’s portfolio. Until the end of 2003, the structure of the mg Group was based 

on its core competencies of engineering and chemicals. The management holding companies of mg 

engineering and the mg chemical group – with the exception of Zimmer AG, which is an operating 

company – were in turn managed by holding companies, which are affiliated to mg technologies ag. 

In announcing its decision in October 2003 to refocus its strategy on specialty mechanical engineering 

and plant engineering, mg decided to discontinue its two-pronged strategy. The chemicals division 

– comprising Dynamit Nobel and solvadis – is due to be sold in 2004. In the future, the mg Group 

will therefore consist of the GEA Group plus Lurgi, Lurgi Lentjes and Zimmer, which are engaged 

in industrial plant engineering. The Group’s holding company will retain responsibility for strategic 

aspects and – in order to improve efficiency throughout the Group – will coordinate cross-cutting 

functions. 

Streamlining the Group’s structure 

The mg Group’s focus on one sector will substantially streamline what has to date been a complex 

organizational structure. It has already started to wind up the holding companies of Lurgi, Lurgi Lentjes 

and solvadis. The intention here is to integrate the business operations of Lurgi and Lurgi Lentjes 

with mg technologies ag. There are also plans to merge the Group’s Frankfurt-based holding company 

with the holding company of GEA AG in Bochum. These measures will generate cost savings in 

excess of a100 million and make a substantial contribution to raising profitability. The Group’s new 

structure will also ensure more flexibility, greater transparency, and the dismantling of bureaucratic 

barriers within the Group network. 

Market- and customer-focused operating business 

mg technologies ag has hived off its operating business into decentralized strategic business units 

(SBUs), which are organized as medium-sized enterprises and cater for specific markets. This form 

of structure ensures a high degree of flexibility, swift market access and sharp client focus. Furthermore, 

the operating units benefit from their membership of a large corporate group, which often 

enables them to exploit synergies and transfer know-how between the individual operating companies. 

Internally, the business units are run like independent enterprises: market- and competition-specific 

targets are set as part of a strategic planning process. In addition, each unit prepares its own balance 

sheet and statement of income. An ongoing monitoring process then verifies whether these targets 

are being achieved and strategic measures are being implemented.


RISK REPORT 

Risk management system 


The mg Group’s global reach exposes it to numerous risks that are inseparable from its business 

activity. It is crucial to the Group’s commercial success that it should expose itself only to risks that 

are quantifiable and that are adequately rewarded by the rate of return it achieves. The Group’s 

Executive Board has adopted the following principles of risk-aware corporate management, enshrining 

them in a risk manual that is distributed throughout the Group: 

• The achievement of commercial success necessarily entails risk. 

• No action or decision may involve exposure to a risk that threatens the continued existence 

of the Group. 

• Risks must be rewarded by appropriate returns. 

• Risks must be avoided to the maximum extent possible. 

• Unavoidable risks must be hedged to the maximum extent that is commercially justifiable. 

• Residual risks must be controlled using risk management mechanisms. 

The mg Group has established a risk management system to identify, monitor and control risks. Its 

purpose is to ensure that the Executive Board and Supervisory Board of mg technologies ag are 

informed in a timely fashion of the possible risk of future developments and are thus in a position 

to take the appropriate preventive action. 

In addition to a Group-wide controlling system with fully consolidated budget accounts, monthly 

consolidated financial statements and regular discussions of business performance at review meetings, 

there are also Risk Assessment and Advisory Committees (RAACs) with responsibility for detecting 

risks in advance. These committees identify, structure and analyze risks and devise countermeasures. 

mg’s risk management system therefore not only provides protection against risks jeopardizing 

the continued existence of the company as prescribed in the German Control and Transparency of 

Companies Act (KonTraG). It is also designed to identify in advance any risks that could significantly 

impair the Group’s earnings position. In 2003, mg’s risk management system underwent internal 

audits in order to ensure the effectiveness of the risk management function. 

Furthermore, in 2003 the Executive Board engaged two auditing firms to examine the findings of 

the internal risk management process and to compile a risk inventory. The findings of this review 

confirmed the surveillance system’s ability to identify potential risks at an early stage. 

At present there is no evidence of any risks that might jeopardize the continued existence of the 

mg Group as a going concern. Adequate provision was made for all risks discernible in day-to-day 

business when the consolidated financial statements were prepared, insofar as the risks concerned 

were subject to reporting requirements. The following section contains details of risks in specific 

areas. 

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External risks 

Risks arising from the economic environment 

The leading economic research institutes are predicting that the global economy will bounce back in 

2004. The U.S., in particular, is expected to achieve strong growth. In Europe, the eastward enlargement 

of the EU on May 1 of this year will have a major impact on the performance of the economy. 

Whereas the recovery of the global economy is likely to provide a fillip for the mg Group, the EU’s 

eastward enlargement presents both opportunities and risks: although it provides the chance to open 

up new markets, the accession of further countries could intensify competition. 

Sectoral risks 

With its strategic business units (SBUs), the mg Group serves a number of specialized niche markets, 

each of them subject to differing demand and innovation cycles. Risks specific to certain sectors and 

regions may thus have an adverse effect on the profits of individual strategic business units, but may 

have only a limited impact on the results of the Group as a whole. 

The EU Commission is currently planning to amend all legislation on chemicals, and this will be 

summarized in its White Book. The legislation under discussion would mean that chemicals that had 

been on the market for years would be subject to new registration and approval processes. The cost 

of such registration and approval would be borne by the respective producers and end-users. If this 

legislation is adopted, European chemical companies would be saddled with additional costs that 

would damage the competitiveness of the European chemical industry compared to the rest of the 

world. The mg Group estimates that this would cost its chemicals business tens of millions of euros 

extra over the first three years after the new laws are implemented. 

Legal risks 

The legal action taken by a group of former customers of MG Refining & Marketing alleging a breach 

of contractual obligations arising from oil transactions in 1993 (Customer Cases II) was settled in 2003. 

This settlement had no impact on mg’s financial results during the year under review. 

Furthermore, the application filed by shareholder Dr. Otto Happel for the court to appoint a special 

auditor pursuant to section 142 of the German Joint Stock Corporation Act (AktG) was withdrawn in 

the appellate instance by mutual agreement. 

In connection with the conclusion of the control and profit-transfer agreement between mg technologies 

ag and GEA AG, an appeal is pending regarding the appropriateness of the exchange offer made to 

shareholders of GEA AG. 

In September 1998, an mg Group company won a contract from a young company to work as general 

contractor on the construction of industrial plant for the recycling of old carpets containing polyamide; 

it subcontracted a large part of the construction work to another mg Group company. Both Group 

companies acquired minority shareholdings in the customer at the insistence of the customer’s majority 

shareholder and the lead bank in the banking syndicate financing the deal. The plant was delivered 

to the customer on September 10, 2002. Subsequently, the customer’s financial position deteriorated 

rapidly. In February/March 2003, the shareholders and the banks financing the deal first accused 

the mg Group companies concerned of having failed to comply with the regulations on post-formation



acquisitions stipulated in the German Joint Stock Corporation Act (AktG), as a result of which the 

contract to construct the plant was null and void. Precautionary attempts to remedy the possible 

invalidity of the contract for the construction of the plant failed because the majority shareholder 

and the lead bank refused to give their approval. Proceedings to declare the customer bankrupt 

were initiated on September 1, 2003. 

The insolvency administrator is demanding that several mg Group companies repay the fee paid by 

the customer – amounting to a164.6 million plus sales tax – because the mg Group companies 

concerned had failed to comply with the regulations on post-formation acquisitions stipulated in the 

German Joint Stock Corporation Act (AktG), as a result of which the contract to construct the plant 

was null and void. The insolvency administrator’s application for legal aid was rejected by the 

regional court in Frankfurt am Main. Since the main creditor then evidently agreed to finance the 

legal action, this action has now been filed (since the balance sheet date). 

In accordance with SFAS 5, no provision has been set aside due to the complex nature of this case 

and the large number of outstanding legal issues. 

Taxation risks 

The applicable national tax legislation could affect the usability of NOL carryforwards and thus both 

the value of the deferred taxes capitalized on them and the current taxation of the mg Group. The 

usability of U.S. NOL carryforwards could also be restricted by changes in mg’s shareholder structure, 

since the provision of section 382 of the IRC (Change of Ownership) applies to mg in the U.S. In 

addition, the parlous state of Germany’s public finances and the ongoing need for reforms continue 

to create considerable uncertainty about the future shape of the country’s tax legislation. 

In December 2003, a minimum rate of corporation tax and trade tax was introduced with effect from 

2004 as part of the package of laws implemented by the German government to reduce tax breaks. 

The introduction of this minimum rate of taxation means that the usability of mg’s NOL carryforwards 

at December 31, 2003 will be delayed. mg technologies ag had already taken account of these foreseeable 

risks arising from amendments to tax legislation and had modified its structure accordingly 

by transferring beneficial ownership of business operations. The profits resulting from this transfer 

of business operations are therefore not affected by the minimum rate of taxation. They were offset 

in full against existing NOL carryforwards. However, the introduction of the minimum rate of taxation 

will mean in the future that mg technologies ag will have to pay further income taxes. 

However, the adoption of this legislation in December 2003 does not mean that the package of tax 

reforms has been finalized. It remains to be seen how these reforms evolve (e.g. with respect to the 

broadening of the tax base and possible restrictions on the system under which German companies 

can file combined tax returns). 

Internal risks 

Business-performance risks 

The mg Group’s Engineering division consists of the subgroups Lurgi, Lurgi Lentjes and Zimmer, 

which are engaged in industrial plant engineering, as well as GEA, which specializes in the engineering 

of components and the construction of smaller-scale industrial plant. The industrial plant 

engineering business frequently handles orders worth in excess of a100 million, while the GEA 

subgroup generally handles contracts worth up to around a25 million. 

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Industrial plant engineering covers the construction of complete plant in the field of power generation, 

oil and gas refining, and plastic and fiber production, as well as other large-scale environmentalengineering 

and chemical plant for various purposes. This business is generally characterized by large 

individual order volumes, an international orientation, long-term planning and project terms as 

well as complex contractual and financing arrangements. The risks involved in large-scale projects 

lie principally in the fact that the prevailing conditions and circumstances may deteriorate during 

the course of the project. At the same time, any failure to meet milestones and completion dates 

normally incurs contractual penalties, so that unforeseeable difficulties in completing a contract may 

impair its profitability. 

Furthermore, new technologies and processes are constantly being developed and implemented on an 

industrial scale. This so-called first-of-its-kind plant exposes the plant builder to the risk of extensive 

corrective work if industrial-scale process solutions prove more complex than expected. This entrepreneurial 

risk is mitigated by the selective acceptance of such contracts. 

mg’s industrial plant engineering business operates internationally. One focal point of its work is 

power-plant projects and industrial plant for oil and gas refining, which are often erected in emerging 

markets. In order to be able to identify potential risks in the handling of such projects at the earliestpossible 

stage, mg has set up a Risk Board, which checks contracts from a technical, legal and commercial 

viewpoint before they are accepted and arranges for any necessary adjustments to be made. 

mg implements forward-looking measures to mitigate risks arising from contracts in critical regions 

by using appropriate contractual arrangements, hedging instruments and ongoing project controlling. 

GEA’s business is characterized by lower contract volumes, shorter component-production runs, and 

the construction of smaller plant. Accordingly, GEA is less affected by risks from individual contracts. 

Its trading results are more subject to the prevailing procurement and sales situation in the relevant 

markets of its strategic business units. In December 2003, the Italian Parmalat Group, which is 

engaged, among other things, in milk processing, filed for bankruptcy. Despite the fact that GEA is 

a market leader in the field of milk processing, Parmalat’s bankruptcy has had no material adverse 

impact on GEA’s profits. This issue is expected to depress GEA’s sales only very slightly in the 

current year. 

Production in the chemicals business involves the commitment of substantially more capital than 

in engineering. Companies are particularly exposed to risks arising from the fact that capital investment 

is tied up in plant for long periods. mg mitigates the risk of misplaced investments with its 

sophisticated investment-controlling system. There is also a procurement risk attaching to the supply 

of raw materials and energy to industrial plant. Dynamit Nobel’s plastics business, for example, is 

particularly dependent on oil as the source of its raw materials. This risk is substantially reduced by 

the conclusion of long-term procurement and sales agreements. In the chemical industry – particularly 

where hazardous chemicals are used or produced – there is also a risk of possible accidents or environmental 

pollution. mg mitigates these risks by following the prescribed safety and organizational 

precautions. 

The chemical retailing and distribution activities engaged in by solvadis require extensive knowledge 

of the various procurement and sales markets. For this subgroup it is thus crucially important to recruit 

and retain suitable employees. The cost of capital is lower in chemical retailing and distribution than 

in production, so the barriers to market entry facing competitors are lower. This creates the risk that 

competition may intensify as a result of the entry or expansionist strategies of competitors.


Financial risks 


The Group’s international activities expose it to foreign-exchange risk, particularly against the U.S. 

dollar. In addition, all transactions entail a certain default risk. Industrial plant engineering contracts 

– especially those carried out in critical regions – are usually invoiced in either U.S. dollars or euros. 

For international industrial plant engineering projects, expected cash flows in foreign currency must 

be fully hedged. Even so, significant variations in exchange rates and interest rates from their budgeted 

levels can adversely affect the Group’s results. If the euro weakens against the U.S. dollar, the Group’s 

profits tend to improve – and vice versa. 

The mg Group is involved in projects in a number of emerging markets and developing countries as 

well as in Western industrialized countries. For transactions in problematic regions, receivables must 

be fully secured by the usual export-guarantee arrangements. 

The Group’s profits are earned from its operating business. In the mg Group, financial derivatives 

may only be used for hedging purposes, not for speculation. 

The mg Group has adequate credit lines to finance its business operations and offset adverse trends. 

Although the rating agency Fitch confirmed its investment-grade rating for mg in October 2003, 

it downgraded the company by one notch to BBB- in view of the risks involved with its planned 

disposal of the Chemicals division and the restructuring of the mg Group. Moody’s gave the same 

reason for downgrading the mg Group by one notch to Ba1 in October 2003. This downgrade of 

mg’s credit rating will increase its cost of funds in the future. 

Organizational and structural risks 

In 2003, the decision was taken to fundamentally restructure the mg Group and refocus its strategy. 

This restructuring will entail mg selling off all of its chemicals activities and focusing on engineering. 

It will be accompanied by sweeping changes to the Group’s organization and management structures. 

Once the restructuring has been completed, the new-look mg will be focused, lean and profitable. 

The Group will use the proceeds from this disposal to pay off all of its outstanding debt. This in turn 

will free up resources for strategic growth in the future and substantially reduce mg’s vulnerability 

to potential risks. 

As part of its restructuring, the mg Group will sell off a number of businesses, modify its organizational 

structures and take far-reaching strategic decisions. The success of this restructuring process 

will depend to a large extent on its swift implementation and the broad-based support given by the 

Group’s executives. The period of transition to the new Group structure will therefore be temporarily 

accompanied by settlement risks. 

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Employees by region 

(trainees excluding) 

Asia, Australia, Middle East 3.2% 

Africa 1.4% 

America 9.9% 

Rest of Europe, 7.1% 

Former Soviet Union 

EMPLOYEES 

Headcount affected by economic conditions 

The mg Group employed 29,189 members of staff and 802 trainees at the balance sheet date of 

December 31, 2003. The number of employees fell by 632 compared to the prior year. This decline is 

due to divestments and the reduction in staff as a result of the economic conditions. The Engineering 

division was particularly affected by this trend, losing a net 114 employees. 

Headcount was reduced in such a way that took personal circumstances into account and made use 

of options such as flexible working hours, natural wastage, part-time employment for staff over the 

age of 55, and relocations both within the mg Group and to employment companies. 

Employees in the mg Group (excluding trainees) 

Balance sheet date 12/31/2003 12/31/2002 

mg engineering industrial plant engineering 2,551* 2,389 

mg engineering GEA 13,820 14,096 

Dynamit Nobel 12,304 12,555 

Other companies 422 653 

mg’s holding company 92 128 

Total 29,189 29,821 

mg’s decision to concentrate in the future on specialty mechanical engineering – especially process 

engineering and components – and plant engineering did not have any material impact on headcount 

in 2003. The first severance agreements and preretirement part-time contracts were signed at the end 

of 2003 in the wake of the restructuring of the holding companies. The resultant changes in headcount 

will not have an impact until 2004. The second stage will take place in the first half of 2004 and will 

affect headcount at the end of 2004/beginning of 2005. 

The mg Group had a total of 15,360 employees in Germany at December 31, 2003, while 13,829 worked 

outside Germany. 

24.7% Rest of EU 

53.7% Germany 

Breakdown by type of traineeship 

* due to the acquisition 

of Fleissner GmbH & Co. 

Maschinenfabrik 

9.2% Technical professions 

24.4% Commercial professions 

66.3% Industrial professions


Stock option program exercised 


In 2003, executives in the mg Group were able to purchase shares under mg’s stock option program for 

the third year running. The options acquired in 2000 were exercisable for the first time. All executives 

exercised their option rights. 

mg academy continues successful staff development 

In 2003, the Supply Management curriculum was added to the range of high-quality training programs 

offered by mg academy; these seminars are geared both to the individual needs of employees and to 

the company’s requirements. The new training program is designed, among other things, to put in place 

new purchasing structures (so-called ‘commodity management’), thus cutting the cost of materials 

over the long term. 

mg academy ensures that mg technologies ag has a ready supply of well-trained, highly qualified 

staff that will secure its success – now and in the future. The success of this policy can be measured, 

among other things, by the proportion of job vacancies that are filled with inhouse candidates. This 

ratio was raised to 69 percent in 2003, after it had been only 60 percent in the prior year. mg has 

therefore almost achieved its long-term target of 70 percent. 

Trainee ratio remains stable 

Despite the fall in headcount, the trainee ratio remained relatively stable at 2.7 percent. 66 percent 

(532) of trainees are training for technical vocations. 

The quality of traineeships continued to be ensured by means of external collaborations, such as 

training schemes run in conjunction with employment exchanges, chambers of industry and commerce, 

vocational schools and other corporations, as well as collaborations within the mg Group. This highquality 

training was supported by Group-wide inhouse activities such as induction seminars, language 

courses, subject-specific training, and courses preparing candidates for examinations. 

Number of preretirement part-time contracts up 

At December 31, 2003, 354 members of staff were in the active phase of their preretirement part-time 

contracts. The corresponding figure in 2001/2002 was 343. The vast majority of employees on such 

contracts opted for the so-called ‘block model’, under which the full period of preretirement parttime 

employment is divided into equal ‘active’ and ‘passive’ phases. During the period under review, 

preretirement part-time contracts were principally used to reduce the mg Group’s headcount in such 

a way as to take employees’ personal circumstances into account. 

Thanks to our staff and members of the works council 

We would like to take this opportunity to thank all of our employees for their commitment and 

good work. We would also like to express our gratitude to the members of the works council, whose 

constructive mediation helped to ensure that decisions were implemented swiftly and effectively. 

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PERFORMANCE OF THE SUBGROUPS 

The performance of the subgroups varied in 2003. While the industrial plant engineering companies 

incurred heavy losses, the performance of GEA and Dynamit Nobel was relatively robust. 

Overall, the subgroups’ performance was hit by the continued ailing state of the economy and 

the adverse currency effects of the strong euro (especially against the U.S. dollar). 

Robust performance by GEA despite the impact of the economy and exchange rates 

GEA recorded lower new orders and sales in 2003. The main reason for this was the movements in 

the euro exchange rate against the currencies of major export markets. This was particularly true of 

the U.S. dollar and dollar-bloc currencies. Outside the United States, GEA’s sales grew by approximately 

five percent. 

At the beginning of the year under review, the structural organization of the GEA Group was streamlined 

further and the liquid-processing business was split up. Since then, the components business 

has been managed by the Process-Engineering Components division, and liquid engineering has been 

run by the Process Engineering division. 

The new Process Engineering Components division consists of the former Thermal Technology 

division, the components business of the former Liquid Processing division, and the homogenizer 

business. As expected, levels of new orders and sales declined slightly on a comparable basis, as 

the secondary energy market – which had been extraordinarily strong in previous years – weakened. 

By contrast, business in plate heat exchangers and homogenizers grew encouragingly. 

The Energy Technology business, particularly in the field of power plant cooling, continued to contract 

as expected. This was mainly due to the weakness of the U.S. market. Following the process 

of consolidation among competitors, the pressure on prices – even in growth markets – intensified 

significantly. The Energy Technology division achieved a few notable successes in southern Europe. 

The process cooler business grew despite the weak U.S. market. This was due, among other things, 

to the high levels of capital spending on natural gas, which is becoming increasingly important in 

the global mix of primary fossil fuels. The Energy Technology division managed to achieve strong 

double-digit growth in its services business. 

The Air Treatment division, which only operates in Europe, had to defend its market position in a 

chronically difficult market environment. Lack of activity in commercial building construction caused 

volumes to contract in Austria and, especially, Germany. By contrast, the Air Treatment business 

achieved growth in France and Belgium. The central and east European marketing companies offered 

a mixed picture. While business in Hungary and Poland contracted slightly, there were positive 

signs in Croatia, Lithuania, Slovakia, Slovenia, the Czech Republic, and Ukraine. The announced 

restructuring of production capacities was completed by the end of the year.



Despite the slight contraction in the global market for industrial refrigeration technology during 

the year under review, GEA’s Refrigeration division managed to slightly increase its volumes and 

maintain its high profitability. It continued to expand its sales and marketing presence in eastern 

Europe in order to consolidate its leading market position. The division also achieved its first sales 

in southern Europe in the field of gas compression. This new market segment offers further growth 

potential once the U.S. secondary energy market recovers. Despite the sluggish level of business 

activity, particularly in the food sector, GEA managed to defend its position in the U.S. and grow its 

market share compared to its main competitor. Its European service business was expanded further 


Despite the sluggish market and the lower level of capital spending in the chemical and pharmaceutical 

industries, the Process Engineering division managed to defend its position. This new division 

includes the former Powder Technology division and, since the beginning of 2003, the liquid engineering 

business. Business in thermal separation technology (evaporators, distillation plant) was 

particularly strong. Growth in its traditional core business of powder technology was at its strongest 

in the Scandinavian and Chinese markets. 

The Mechanical Separation division, together with its management holding company Westfalia 

Separator, grew more rapidly than the market during the period under review. But for exchange rate 

effects, it would just about have achieved double-digit growth. Its ongoing innovation enabled it to 

raise the proportion of its products that are less than three years old to roughly two-thirds of its 

sales. In some areas this proportion was even higher. 

The main reasons for the decline in sales in the dairy farm systems business were adverse exchange 

rate movements and the low milk prices in the U.S. This market accounts for roughly one-third of 

the business volume in dairy farm systems. The division managed to maintain its market share in the 

U.S. Its business remained stable in Germany, its home market. In the rest of Europe, the unresolved 

issue of subsidies for the EU accession countries as well as low milk prices in Italy and Spain caused 

the general level of capital spending to fall. Its business in the U.K. matched the very high level of 

the previous year. The Dairy Farm Systems division achieved considerable success in China, where 

it opened its own branch during the year under review. 

Lurgi hit by lackluster capital spending 

Lurgi posted double-digit sales growth in 2003 on the back of big-ticket orders it had won prior to 

the period under review. This subgroup suffered declines in new orders due to the continuing 

lackluster performance of the economy and the uncertain geopolitical situation in key markets. Its 

earnings were depressed by high restructuring costs, for which Lurgi set aside accrued liabilities 

amounting to tens of millions of euros during the period under review. 

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Lurgi’s business in 2003 was hit by the depressed levels of capital spending around the world and in 

Europe in particular. The only exceptions here were the growing markets of China and the Middle 

East. The plant engineering sector was characterized by intense competition for markets and the 

extremely high pressure on costs exerted by customers. Investor structures, particularly for large-scale 

projects, produced complex and long-term contractual and funding models. The strength of the euro 

compounded the situation in Germany’s export-driven industrial plant engineering sector. Taken 

together, these factors delayed the awarding of large-scale projects expected in 2003. 

As part of the restructuring program launched by the mg Group, Lurgi started to implement the first 

of these measures towards the end of 2003, and commenced the process of winding up its holding 

company. In 2004, Lurgi Oel Gas Chemie GmbH and Lurgi Life Science GmbH will be merged with 

Lurgi AG, which will then be an operating company. The aim of this measure was to improve efficiency 

and generate cost savings over the foreseeable future. Lurgi started to close down the Chemnitz site 

of Lurgi Life Science GmbH in line with the mg Group’s strategy of disposing of businesses that fail 

to achieve sustainable profitability. It is currently examining alternative options that would secure 

these jobs. Its restructuring costs affected its profits accordingly. Further one-off charges were taken 

as a result of necessary valuation allowances on inventories. 

In the future, Lurgi will concentrate on technologies such as gas-to-petrochemicals and synthetic 

fuels, sulfur management, exclusive licensing agreements in the field of petrochemicals, as well as 

food, oleochemicals, and fuels and fuel components made from renewable resources such as bio-diesel 

and bio-ethanol. Its gas-to-petrochemicals business – focusing on synthesis gas, MegaMethanol®, 

methanol-to-propylene (MTP®), Megammonia®, methanol-to-synthetic-fuels and sulfur management – 

is largely based on proprietary technologies. Over the past ten years Lurgi has established itself as 

the market leader in methanol: between 60 and 70 percent of global methanol production either 

already comes from Lurgi’s plant or will do so in the near future. As part of its strategy of focusing 

on growth markets, Lurgi plans to dispose of its refinery technology, fine chemicals, and pharmaceuticals 

businesses. 

The Oil Gas Chemicals strategic business unit won a smaller volume of new orders due to delays in 

the awarding of big-ticket projects. During the period under review, this unit won its first contract in 

the field of Eastman polymer-grade terephthalic acid (EPTA) technology, which is being developed 

jointly with Eastman. Terephthalic acid is an important intermediate in the production of polyester. 

In Iran a Letter of Award was signed for a further MegaMethanol plant®. The order for this plant is 

expected in the first half of 2004. This unit’s earnings were depressed by problems with two major 

contracts. This deterioration in its profits was caused by additional charges and follow-up costs 

incurred by a strike and disruptions lasting several months as well as inefficient working by plantassembly 

firms. Its profitability was also hit by insufficient capacity utilization.



The Life Science strategic business unit won a larger volume of new orders during the period under 

review than in the previous year. After the low level of new orders received in the first nine months 

of 2003, the volume it achieved in the fourth quarter was encouraging. This was largely due to its 

food business, which will continue to belong to Lurgi after its portfolio has been optimized. It won a 

contract from Russia’s largest producer of cooking oil as well as two further orders from Russian clients. 

Strong growth in new orders at Lurgi Lentjes 

In 2003, Lurgi Lentjes substantially increased its volume of new orders on 2001/2002. These largely 

involved projects for which the company can mainly use proprietary technologies. Nonetheless, its 

sales and earnings came in lower. The main reasons for this were delays in new orders in the first 

two quarters, measures relating to the strategic restructuring of the mg Group, and a deterioration 

in its business operations. 

Despite the difficult economic environment, the Gas Cleaning strategic business unit turned in a 

respectable performance. Its sales, volume of new orders, and earnings all increased year on year. 

The Energy and Environment strategic business unit won several big-ticket contracts during the 

period under review, reporting a year-on-year increase in new orders. Its earnings were depressed by 

the deteriorating state of ongoing projects and by one-off charges from risk provisioning for problem 

contracts and the settlement of long-running lawsuits. Its profitability was also adversely affected by 

restructuring costs incurred in connection with the strategic restructuring of the mg Group. 

During the period under review, Lurgi Energie und Entsorgung GmbH won an order from the Frankfurtbased 

Mainova AG to modernize a thermal power station. This will involve using a power-thermal 

coupling process to simultaneously generate electricity and heat for the local district heating network. 

Once the plant comes on stream, customers will receive subsidies to promote power-thermal coupling 

in order to cut carbon dioxide emissions. 

This strategic business unit won a contract from AVA Nordweststadt and Mainova AG, Frankfurt am 

Main, Germany, to modernize a waste incineration plant in Frankfurt in order to make it compliant 

with the increasingly stringent environmental legislation. 

Lurgi Energie und Entsorgung GmbH achieved further success when it won a contract to build a waste 

incineration plant on the Channel Island of Guernsey. The customer for the order is the island’s 

government. Starting in 2006, the plant – which will be the only one of its kind on the island – will 

be used to extract energy from up to 72,000 tonnes of residual waste per year, which in the past 

has simply been dumped. 

Lurgi Energie und Entsorgung’s business in China also went well. During the period under review it 

signed seven licensing agreements on smoke-cleaning technologies with Chinese firms. These agreements 

cover the company’s entire product range, and the anticipated royalty income will help boost 

its earnings over the coming years. 

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Zimmer wins major contract for direct spinning plant 

Last year Zimmer failed to repeat its good performance of 2001/2002. The main reasons for this 

were the increasingly intense competition from suppliers from the U.S. dollar bloc due to the strength 

of the euro, and the already low level of capital spending worldwide. In addition, local suppliers 

– particularly from China – improved their market position in the fields of polymers and synthetic 

fibers. 

Zimmer won eight contracts during the period under review. Due to their significance, the orders it 

won in Lithuania and China are particularly worth mentioning here. In Klaipeda, Lithuania, the 

company is building a plant that will manufacture 400 tonnes of granules for PET bottles per day 

for an international group of investors. Zimmer also secured an order from one of China’s largest 

weaving businesses for the construction of a polyester direct spinning plant in Wujiang, China. The 

plant has 32 production lines and a total annual capacity of 350,000 tonnes. It will be the world’s 

largest direct spinning plant project ever to be completed in a single investment stage. 

Once the deal had been cleared by Germany’s antitrust authorities, Zimmer acquired Fleissner GmbH 

& Co. Maschinenfabrik, Egelsbach. Fleissner was consolidated in the subgroup’s accounts as from 

December 1 of last year. Zimmer believes this acquisition will enable it to strategically consolidate its 

market position in staple-fiber plant engineering, and will add the fast-growing nonwovens business 

to its product range. 

Dynamit Nobel affected by the economy 

Dynamit Nobel’s sales and earnings declined in 2003 due to the ailing state of the economy and 

adverse exchange rate movements. The decrease was also caused by portfolio adjustments. 

Adjusted for divestments, the custom-synthesis business reported slightly higher sales. Its specialchemistry 

unit managed to defend its position in the pharmaceutical sector despite intensifying competition 

and the loss of a key customer at Rohner AG in Pratteln, Germany, in the custom-synthesis 

market. A restructuring project introduced in 2003 took account of the resultant effects on capacity 

utilization at Rohner AG. 

In Mourenx, France, Dynamit Nobel subsidiary Finorga S.A. commissioned a new plant that can 

efficiently produce highly effective pharmaceutical active ingredients on an industrial scale in compliance 

with the rules laid down by the FDA, the U.S. healthcare regulator. During the year under 

review, negotiations on the disposal of the remaining activities of the former explosives business 

(industrial ignition systems and defense technology) were initiated. 

The Plastics business unit, virtually all of whose business is with the automotive industry, slightly 

increased its sales despite the low level of business activity in this sector. The unit managed to safeguard 

its strong market position for the long term by acquiring follow-up orders for model updates 

of key model series. 

The Advanced Ceramics business unit reported slightly higher sales during the period under review. 

Sales in the medical technology business were particularly encouraging, strengthening the unit’s 

market position in ceramic components for artificial hip joints. The official approval of its ceramic 

hip-joint components for the U.S. provided it with access to a market with considerable growth



potential. CeramTec is also a supplier of piezo actuators used in multilayer technology for diesel 

injection systems. CeramTec decided not to shoulder the business risk of the follow-up investment 

owing to the differing expectations about the future development of this business. It agreed with its 

customer to discontinue deliveries of piezo actuators. The start-up and discontinuation of this new 

actuator product depressed CeramTec’s earnings in 2003. 

Following the dramatic drop in sales in 2001/2002, the business in ceramic components for the 

electronics industry recovered despite persistently lackluster demand for consumer electronics and 

telecommunications. 

CeramTec, which manufactures and markets thread guides for textile machinery, continued its growth. 

The company strengthened its position in this segment of the Asian market by acquiring the shares of 

its joint venture partner in China and relocating to its own production facilities. 

The systems engineering business achieved strong sales growth despite the ailing state of the 

construction industry. In Europe it continued to extend its market leadership in sealing washers for 

sanitary appliances. 

Sales in the Specialty Chemicals business unit in 2003 failed to match those achieved in 2001/2002. 

This decrease stemmed from Chemetall’s surface technology, lithium and polymer chemistry businesses. 

The main reasons for this were the disposal of the glazing sealing compounds business (insulating 

glass sealing materials and cast resins), adverse exchange rate movements, and certain weak markets. 

Adjusted for the effects of this disposal and exchange rates, sales were only marginally down on the 

previous year. 

Chemetall continued to pursue its strategy of internationalization in its surface technology business, 

signing a cooperation agreement with Russian company Ecohim to work as a subcontractor to Russia’s 

automotive and automotive supplier industries. This will provide the company with new growth 

prospects as a partner to these Russian industries. 

In lithium chemistry, Chemetall defended its position as a global market leader. 

On July 1, 2003, Chemetall sold its business in insulating glass sealing materials and cast resins for 

the glass industry to Kömmerling Chemische Fabrik GmbH. 

The sales of the Pigment Chemicals business unit were hit by the difficult economic environment, 

adverse exchange rate movements, and weak market prices. 

Following the marked slowdown in business activity in the aftermath of the Iraq war and the SARS 

epidemic, the synthetic fiber industry’s demand for anatase crystals returned to normal during the 

second half of 2003. This business continued to expand in Asia, with disproportionate growth being 

achieved in China. Dynamit Nobel subsidiary Sachtleben opened a representative office in Shanghai 

in order to serve its customers on the ground. By sharpening its focus on the Chinese market and 

intensifying its customer relationship management in this region, Sachtleben aims to benefit from 

the rapid growth of the synthetic fiber market in the world’s most populous country. 

Its pioneering nano-products business posted double-digit growth in 2003. Sachtleben established itself 

in the fast-growing cosmetics market with its highly effective broadband filters based on nano-fine 

titanium dioxides. The fashion for UV-protecting day-to-day cosmetics made a major contribution to 

this encouraging trend. 

71

72 

solvadis holds up well in a difficult market environment 

solvadis’ earnings for 2003 fell year on year. However, not all strategic business units contributed 

equally to this trend. Whereas the Specialty Chemicals and Distribution business units (base and 

industrial chemicals) held up well despite the difficult market conditions, earnings in the Natural 

Products strategic business unit were down by more than 50 percent. This was attributable to lower 

gross margins, the weak U.S. dollar, and higher costs in connection with the closure of its naturalrubber 

business in North America. 

On the whole, the Specialty Chemicals business performed in line with expectations. With economic 

activity in the relevant markets persistently weak – especially in the French automotive industry – 

earnings were more or less consistent with the previous year’s result. Business in Spain and Portugal 

was encouraging. 

The Distribution business unit performed soundly. This was mainly due to its activities in base 

chemicals. In addition, part of the methanol business in North America was sold. Industrial chemicals 

repeated their performance of the previous year. 

Earnings were depressed by restructuring costs. In order to continue the streamlining of its administrative 

functions, which had begun in the previous quarters, solvadis implemented a plan to optimize 

its administrative functions in Germany in the fourth quarter of 2003. 

solvadis’ earnings also include the anticipated loss on the sale of Safic-Alcan in January 2004. 

OUTLOOK 

Since mid-2003, indicators of market sentiment have all been pointing to a global economic 

recovery. In their fall report, Germany’s leading economic research institutes forecast that global 

GDP would grow by 3.1 percent in 2004. However, the strength of this recovery will vary from 

region to region. Various adverse factors such as rising oil prices, the ongoing instability of the 

geopolitical situation, the continuing appreciation of the euro against the U.S. dollar, and the 

high current account deficit in the U.S. could still jeopardize any global economic expansion. 

Dynamic U.S. economy 

The driving force behind the global economic recovery in 2004 will once again be the U.S. Having 

bounced back in the second half of 2003, the world’s largest economy is likely to continue on its 

path of expansion. The Kiel Institute for World Economics (IfW) is forecasting U.S. GDP growth of 

4.1 percent for 2004.



The Asian economies will also continue to grow. China’s economy will continue its rapid pace of 

expansion in 2004. However, the country’s currency problems still need to be resolved. Experts also 

expect the southeast Asian emerging markets to achieve stellar growth. Germany’s economic research 

institutes believe that Japan’s modest economic recovery will continue. The German Institute for 

Economic Research (DIW) is forecasting Japanese GDP growth of 1.5 percent for 2004. The improved 

political framework in the Latin American emerging markets has given their economies a new lease 

on life. 

Euro-zone economy recovering only slowly 

The performance of the euro-zone economy will be somewhat less impressive. The European Central 

Bank is forecasting that GDP in the euro-zone will grow by around 1.7 percent in 2004 and roughly 

two percent in 2005. By contrast, the central and east European countries joining the EU on May 1 

this year should have good growth prospects. According to Germany’s leading economic research 

institutes, GDP in these countries should grow by 3.7 percent in 2004. 

Relatively lackluster growth is predicted for Germany. While the German government expects the 

country’s GDP to grow by up to two percent, the forecast of the German Institute for Economic 

Research is for growth of only 1.4 percent. A major reason for this sluggish performance is Germany’s 

chronically weak domestic demand. Nonetheless, exports are expected to grow in 2004. 

Slightly improved prospects for mg’s major markets 

According to trade associations, the growth prospects for mg’s key markets have marginally improved 

since last year. 

After a disappointing year in 2003, the German Engineering Federation (VDMA) expects to see output 

grow by two percent in 2004. The substantial increase in the volume of new orders received last 

autumn has fueled hopes that demand for capital goods will start to grow in Germany as well. 

Germany’s Chemical Industry Federation (VCI) is forecasting a modest recovery. After output in 

2003 was only slightly up on the previous year, the federation expects to see output and sales in the 

German chemical industry rise by 1.5 percent and producer prices to fall slightly in 2004. According 

to its estimates, the fine and specialty chemicals sector will grow by around 2.5 percent and the 

pharmaceutical industry by roughly two percent. 

Experts believe that the relatively non-cyclical food industry, which is one of GEA’s most important 

markets, will continue to perform well. Demand for high-quality processed food in particular will grow. 

The automotive industry is cautiously optimistic about 2004. Experts see continued strong demand 

from Asia and eastern Europe. After a disappointing year in 2003, U.S. output is likely to increase 

marginally in 2004. The German Association of the Automotive Industry (VDA) is forecasting an 

increase of roughly three percent in new vehicle registrations in Germany. The automotive industry 

is one of Dynamit Nobel’s key markets. 

The weakness of the U.S. dollar against the euro, which intensified throughout 2003 and continued 

at the beginning of 2004, makes accurate forecasting difficult. Some trade associations, including 

Germany’s Chemical Industry Federation, have already indicated that they might have to revise 

downwards their forecasts for 2004 if the U.S. dollar continues to slide. 

73

74 

GEA forecasts higher new orders and sales 

Despite the persistently adverse impact that the euro’s exchange rate – particularly against the U.S. 

dollar – is expected to have on business volumes, GEA is forecasting a modest increase in its new 

orders and sales. Although the U.S. primary and secondary energy markets are not expected to 

recover just yet, the American dairy farm systems market should improve – provided that the muchpublicized 

first case of BSE remains a one-off. GEA is mitigating regional fluctuations in its markets 

by extending its market and technology leadership, implementing cost-cutting measures as swiftly as 

possible, and developing new market segments. Its goal is to increase its earnings significantly. 

Lurgi forecasts recovery 

Lurgi believes that in 2004 it will benefit from the anticipated recovery in business by virtue of its 

outstanding technological position. This subgroup expects to win contracts for delayed big-ticket 

projects and to close deals on a number of promising projects involving methanol and petrochemical 

plant. The markets it intends to focus on this year are the Middle East, China, southeast Asia and 

South America. Lurgi sees further lucrative business opportunities in the development of technology 

chains for gas-based petrochemicals as an alternative to oil and in bio-diesel plant and conceptual 

studies on bio-ethanol plant. If these expectations fail to materialize during the course of the year, 

further capacity adjustments may well be needed in view of the insufficient level of capacity utilization 

at present. 

Lurgi Lentjes predicts strong performance in 2004 

Lurgi Lentjes has laid the foundations for a strong performance this year by focusing on profitable, 

limited-risk proprietary technologies and reorganizing its corporate and management structures. 

In 2004 it again expects to win a high level of new orders on the back of its strong market position 

in key projects. 

Zimmer forecasts higher earnings 

Although conditions in 2004 are likely to be difficult, Zimmer expects to increase its earnings this 

year. The euro’s strength against the U.S. dollar will continue to have an adverse impact on the 

market environment for industrial plant engineering. In the Middle East, the propensity to invest 

will continue to be low. The potential performance of markets in the Americas and western Europe 

must also be viewed with some skepticism. Nonetheless, the signals coming out of eastern Europe 

are increasingly encouraging, and the textile industry in India and Pakistan is expected to add 

capacity. Although the Chinese market will continue to expand in the field of polymers and fibers, 

this growth will be very much localized, fueling strong price competition that will be intensified 

by the local currency’s peg to the U.S. dollar.


Dynamit Nobel confident about 2004 


In the current year Dynamit Nobel once again expects to see only a slight increase in demand from 

its main customer segments. It should manage to raise its sales to the automotive industry further 

by launching new products and technologies in its plastics and specialty chemicals businesses. This 

subgroup also expects to see a continuation of the strong performance in its advanced-ceramics 

business, especially in the fields of medical equipment and special engineering applications. Dynamit 

Nobel is forecasting growing unit sales and rising prices in its pigment chemicals business in 2004. 

If the euro continues to appreciate against the U.S. dollar, this will affect Dynamit Nobel’s sales and 

earnings. Its business this year will be impacted by the process of disposals. As a result of divestments, 

this subgroup is forecasting slightly lower sales and higher earnings for 2004. 

2004 will be the year of implementation for the mg Group 

The current year will be one of implementation for the mg Group. This will center on the successful 

disposal of the Chemicals division and the restructuring of the mg Group, and will put the company 

back on track for growth and expansion in 2005. The Group’s sales – excluding acquisitions – will 

then be in the order of a4.5 billion. Its profitability will increase substantially on the back of GEA’s 

robust performance, the improvement in the Group’s financial structure – relieving much of the 

pressure on its financial income – and the sharp reduction in its holding-company costs. Assuming 

the economic environment improves, its pre-tax return on sales should be raised to five percent. 

Should the right opportunities arise, mg will once again be in the market for acquisitions. 

Outlook for discontinued operations 

Year of restructuring at solvadis 

In 2004, solvadis is restricting its activities to the distribution of base and industrial chemicals. Its 

Natural Products and Specialty Chemicals strategic business units left the mg Group at the beginning 

of 2004 when Safic-Alcan was sold. This year, solvadis will continue to restructure low-margin businesses 

and improve its supply chain management in order to strengthen its sales activities and supplier 

relationships. Reducing its administrative functions will have a beneficial impact on its costs. 

In view of the persistently difficult market conditions, however, the company does not expect 2004 

to bring any improvement on the disappointing level of earnings reported last year for its remaining 

Distribution strategic business unit. 

Frankfurt am Main, March 23, 2004 

The Executive Board 

Udo Stark Karlheinz Hornung Jürg Oleas Klaus Moll Peter Steiner 

75

Scope for 

Acquisition

mg's mission is to ensure sustainable growth in its 

shareholder value – through both organic growth 

and acquisitions in growth sectors. By acquiring 

Dutch refrigeration specialist Goedhart, GEA has 

strengthened its business in industrial refrigeration 

and attained European market leadership in the 

field of air coolers for refrigeration equipment.

78 

CONSOLIDATED BALANCE SHEETS at December 31, 2003 

ASSETS 

Fixed Assets 

Note 12/31/2003 12/31/2002 

u ’000 t ’000 

Intangible assets 1 1,547,664 1,575,745 

thereof goodwill e 1,482,392,000 (prior year: e1,494,531,000) 

Property, plant and equipment 1 1,412,206 1,381,669 

Investments and long-term financial assets 1/5 131,160 148,513 


3,091,030 3,105,927 

Inventories 3 618,016 628,611 

Receivables and other assets 4 1,443,511 1,396,171 

Securities 5 12,175 64,185 

Cash and cash equivalents 6 171,952 165,291 

2,245,654 2,254,258 

Assets from discontinued operations G 466,151 556,931 

Deferred taxes 20 867,760 748,947 

Prepaid expenses 7 29,697 33,951 

Total assets 

(thereof short-term 12/31/2003: e2,238,785,000; 12/31/2002: e2,252,325,000) 

6,700,292 6,700,014 

The accompanying notes are an integral part of these consolidated financial statements


Consolidated Balance Sheets • Statements of Income • Statements of Cash Flows • Statements of Changes in shareholders’ Equity • Fixed Assets Schedule • Notes • Independent Auditors’ Report 

LIABILITIES AND SHAREHOLDERS’ EQUITY 

Shareholders' equity 8 

Note 12/31/2003 12/31/2002 

u ’000 t ’000 

Capital stock 496,890 494,247 

Additional paid-in capital 1,085,396 1,079,680 

Retained earnings 523,977 442,823 

Accumulated loss (prior year: unappropriated retained earnings) – 269,536 69,001 

Accumulated other comprehensive loss – 172,966 – 94,579 

1,663,761 1,991,172 

Minority interests 9 41,141 42,006 

Provisions and accrued liabilities 10 1,827,608 1,623,115 

Liabilities 11 

Financial liabilities 1,244,484 1,208,172 

Other liabilities 1,394,305 1,309,963 

2,638,789 2,518,135 

Liabilities from discontinued operations G 429,657 408,386 

Deferred taxes 20 61,870 66,604 

Deferred income 12 37,466 50,596 

Total liabilities excluding shareholders’equity 5,036,531 4,708,842 

Total liabilities and shareholders’ equity 

thereof short-term 12/31/2003: e2,838,239,000; 12/31/2002: e2,533,680,000) 

6,700,292 6,700,014 

The accompanying notes are an integral part of these consolidated financial statements 

79

80 

CONSOLIDATED STATEMENTS OF INCOME January 1 - December 31, 2003 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

Note u ’000 t ’000 

Revenues 6,403,195 1,518,791 

Cost of sales – 5,028,468 – 1,146,619 

Gross margin 1,374,727 372,172 

Selling expenses – 614,472 – 161,141 

Administrative expenses – 583,512 – 155,768 

Other operating income 16 115,419 39,913 

Other operating expenses 17 – 263,005 – 43,658 

Restructuring costs 18 – 121,535 – 7,530 

Financial income, net 19 – 88,655 – 17,813 

Income before income taxes 

and minority interests – 181,033 26,175 

Income taxes 20 55,391 – 58,033 

Minority interests 21 – 2,431 – 1,200 

Profit/loss on continued operations 22 – 128,073 – 33,058 

Profit/loss on discontinued operations – 70,527 2,060 

thereof gains/losses on disposals – 5,223 0 

thereof taxes on income – 9,945 1,402 

thereof minority interests – 904 – 428 

Net loss – 198,600 – 30,998 

e per share e per share 

Basic earnings per share 23 – 1.02 – 0.16 

thereof on continued operations – 0.66 – 0.17 

thereof on discontinued operations – 0.36 0.01 

Diluted earnings per share 23 – 1.02 – 0.16 

thereof on continued operations – 0.66 – 0.17 

thereof on discontinued operations – 0.36 0.01 

Weighted average number of shares 

outstanding (in thousands) 23 193,778 193,333 

The accompanying notes are an integral part of these consolidated financial statements



CONSOLIDATED STATEMENTS OF CASH FLOWS January 1 - December 31, 2003 

1.1.2003 - 1.10.2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Net loss – 198,600 – 30,998 

Adjustment of net profit/loss from discontinued operations 69,623 – 2,488 

Depreciation and amortization of fixed assets 212,953 48,783 

Further non-cash expenses 2,644 22 

Change in pension reserves 10,418 6,461 

Change in other accrued liabilities 165,769 – 83,074 

Loss on disposal of fixed assets (prior year: profit) 5,790 – 2,903 

Change in inventories incl. unbilled PoC receivables 1) – 6,407 – 53,880 

Change in trade receivables – 87,559 85,654 

Change in trade payables 55,580 – 67,733 

Change in deferred tax assets and liabilities – 108,169 44,240 

Change in other operating assets and liabilities 14,805 12,929 

= Net cash used for operating activities of continued operations 136,847 – 42,987 

Proceeds from disposal of fixed assets 54,954 8,462 

Purchases of property, plant and equipment and intangible assets – 256,054 – 62,026 

Purchases of investments and long-term financial assets – 16,134 – 1,515 

Purchases of securities – 32,385 – 11,181 

Proceeds from disposal of securities 86,605 19,977 

Payments for acquisition of businesses – 11,859 – 7,231 

Proceeds from disposal of businesses 1,137 0 

= Net cash used for investing activities of continued operations – 173,736 – 53,514 

Proceeds from the issue of new shares (SOP) 6,545 0 

Dividend paid by mg technologies ag for the prior year – 59,937 0 

Dividends paid to minority interests – 2,546 0 

Change in capital lease liability – 9,130 – 3,909 

Net purchases of bonds and financial liabilities 48,011 99,116 

Change in the Group’s financing 6,770 519 

= Net cash provided by financing activities of continued operations – 10,287 95,726 

Changes in net assets from discontinued operations 23,965 2,911 

Proceeds from disposal of discontinued operations 30,254 0 

Exchange-rate-related and other changes in cash and cash equivalents – 8,375 2,227 

= Change in unrestricted cash and cash equivalents of continued operations – 1,332 4,363 

= Unrestricted cash and cash equivalents at beginning of year 160,554 156,191 

= Unrestricted cash and cash equivalents from continued operations 

at end of year 159,222 160,554 

Restricted cash and cash equivalents 12,730 4,737 

= Cash and cash equivalents from continued operations 

as reported on the balance sheet 171,952 165,291 

1) less advance payments received 

The accompanying notes are an integral part of these consolidated financial statements 

81

82 

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY 

at December 31, 2003 

Capital Additional Retained 

Shares stock paid-in capital earnings 

t ’000 t ’000 t ’000 

Balance at 9/30/2002 193,331,211 494,243 1,078,809 351,606 

Net loss 

Other comprehensive loss 

Total comprehensive loss 

Capital increase 1,400 4 20 

Expense incurred by SOP & ESOP 851 

Addition to retained earnings 91,217 

Balance at 12/31/2002 193,332,611 494,247 1,079,680 442,823 

Net loss 

Other comprehensive loss 

Total comprehensive loss 

Capital increase 1,034,007 2,643 4,119 

Expense incurred by SOP & ESOP 1,597 

Addition to retained earnings 80,000 

Disposal of treasury stock 1,154 

Dividend paid by mg ag 

Balance at 12/31/2003 194,366,618 496,890 1,085,396 523,977



Accumulated other comprehensive income 

Accumulated loss 

(prior year: Cumulative Available- Minimum 

unappropriated translation for-sale pension Hedge 

retained earnings) adjustment securities liability accounting Total 

t ’000 t ’000 t ’000 t ’000 t ’000 u ’000 

191,216 – 33,373 – 5,195 – 37,557 – 2,924 2,036,825 

– 30,998 – 30,998 

– 16,785 844 – 3,074 3,485 – 15,530 

– 46,528 

– 91,217 0 

69,001 – 50,158 – 4,351 – 40,631 561 1,991,172 

– 198,600 – 198,600 

– 70,144 5,213 – 17,476 4,020 – 78,387 

24 

851 

– 276,987 

7,916 6,762 

– 80,000 0 

– 59,937 – 59,937 

– 269,536 – 120,302 862 – 58,107 4,581 1,663,761 

1,597 

1,154 

83

84 

Acquisition or manufacturing costs 

Additions Disposals 

Balance at First-time Decon- Reclassifi- Currency Balance at 

in t ’000 1/1/2003 Additions consolidation Disposals solidation cations translation 12/31/2003 

Intangible assets 

CONSOLIDATED FIXED ASSETS SCHEDULE 

at December 31, 2003 

Patents, licenses, trademarks, and 

similar rights and assets, including 

licenses for such rights and assets 110,761 4,903 3,879 – 405 – 271 – 5,746 113,121 

Goodwill 1,733,746 11,611 4,577 – 3,198 – 720 – 32,967 1,713,049 

Capitalized software 77,554 5,477 – 4,750 – 1,350 76,931 

(thereof capitalized leasing liabilities) 19,811 5 – 163 19,653 

Intangible pension assets 8,403 924 – 4,815 – 17 4,495 

Total 

Property, plant and equipment 

1,930,464 22,915 8,456 – 13,168 – 991 – 40,080 1,907,596 

Land, leasehold improvements 

and buildings, including buildings 

on land owned by others 1,230,092 28,467 36,236 – 53,056 – 195 20,131 – 23,223 1,238,452 

(thereof capitalized leasing liabilities) 61,655 1,844 2 63,501 

Plant and equipment 1,989,380 69,204 22,321 – 62,840 – 3,037 57,192 – 38,389 2,033,831 

(thereof capitalized leasing liabilities) 30,257 44 1,103 – 188 31,216 

Other plant, office furniture 

and equipment 536,588 35,568 6,412 – 56,414 – 465 3,405 – 10,551 514,543 

(thereof capitalized leasing liabilities) 12,403 1,592 – 2,478 215 11,732 

Advance payments relating to plant and 

equipment and construction in progress 102,938 122,356 81 – 1,891 – 80,728 – 768 141,988 

Total 

Investments and long-term financial assets 

3,858,998 255,595 65,050 – 174,201 – 3,697 – 72,931 3,928,814 

Investments in affiliated companies 92,388 5,133 51 – 4,424 243 – 193 93,198 

Loans to affiliated companies 8,067 1,144 – 148 9,063 

Investments in associated companies 19,422 2,892 – 1,397 – 3,055 – 1,675 16,187 

Other investments in related companies 16,656 – 282 2,812 – 176 19,010 

Loans to associated and related companies 41,994 46 – 541 – 2,206 39,293 

Long-term securities 1,985 1,711 – 43 – 29 3,624 

Other loans 16,205 9,622 21 – 4,636 – 602 20,610 

Long-term capital lease receivables 37,435 – 4,632 32,803 

Total 234,152 20,548 72 – 16,103 – 4,881 233,788 

Fixed assets 6,023,614 299,058 73,578 – 203,472 – 4,688 – 117,892 6,070,198



Depreciation/amortization 

Book value Book value 

Additions Disposals 12/31/2002 12/31/2002 

Balance at First-time Decon- Reclassifi- Currency Balance at Book value Continued Discontinued 

1/1/2003 Additions consolidation Disposals solidation cations translation 12/31/2003 12/31/2003 operations operations 

64,633 5,334 2,863 – 54 – 1,587 71,189 41,932 46,128 399 

239,208 – 3,041 – 245 – 5,265 230,657 1,482,392 1,494,538 68,168 

50,871 12,680 – 4,311 – 1,154 58,086 18,845 26,683 395 

9,287 3,288 – 127 12,448 7,205 10,524 

4,495 8,403 859 

354,712 18,014 2,863 – 7,352 – 299 – 8,006 359,932 1,547,664 1,575,752 69,821 

544,500 41,282 6,442 – 20,739 – 18 1,814 – 7,806 565,475 672,977 685,592 18,869 

9,125 1,803 – 1 10,927 52,574 52,530 4,414 

1,502,817 93,428 17,380 – 56,021 – 1,123 – 1,694 – 22,013 1,532,774 501,057 486,563 14,232 

6,715 2,583 – 93 9,205 22,011 23,542 

428,522 40,751 5,006 – 47,353 – 335 – 120 – 8,323 418,148 96,395 108,066 15,762 

5,884 2,588 – 2,206 6,266 5,466 6,519 

1,490 112 – 1,391 211 141,777 101,448 1,440 

2,477,329 175,573 28,828 – 125,504 – 1,476 – 38,142 2,516,608 1,412,206 479,652 50,303 

41,846 6,482 – 92 48,236 44,962 50,542 4,732 

529 198 727 8,336 7,538 

7,004 – 2,812 – 596 3,596 12,591 12,418 1,292 

3,990 5,074 – 28 2,812 11,848 7,162 12,666 665 

26,535 – 1,618 24,917 14,376 15,459 

161 13 – 16 158 3,466 1,824 22 

5,574 7,599 – 16 – 11 13,146 7,464 10,631 12,028 

32,803 37,435 

85,639 19,366 – 136 – 2,241 102,628 131,160 148,513 18,739 

2,917,680 212,953 31,691 – 132,992 – 1,775 – 48,389 2,979,168 3,091,030 2,203,917 138,863 

85

86 

A) Basis of Presentation 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

The consolidated financial statements of mg technologies ag (‘the mg Group’) and the annual financial 

statements of the mg Group companies included in the consolidated accounts for the fiscal year 

from January 1 through December 31, 2003 and for the short 2002 fiscal year from October 1 through 

December 31, 2002 (hereinafter referred to as ‘prior year’) have been prepared in accordance with 

United States generally accepted accounting principles (U.S. GAAP). 

Section 292a of the German Commercial Code (‘HGB’) obviates the requirement to prepare consolidated 

financial statements according to the HGB if consolidated financial statements prepared according 

to international accounting standards are of the same value and meaningfulness as consolidated 

accounts prepared in accordance with the HGB. U.S. GAAP is one of the internationally recognized 

accounting standards. 

The euro (a) is the official currency for the mg Group. 

The figures for the prior year have been adjusted in accordance with SFAS 144 (for further information 

see Note G) ‘Discontinued operations’. Furthermore, certain prior-year figures have been adjusted. 

B) Principles of Consolidation 

Consolidation includes both fully consolidated subsidiaries and associated companies and joint 

ventures accounted for at equity. All material companies over which mg technologies ag directly or 

indirectly exerts control are consolidated under the purchase method of accounting. mg technologies ag 

is deemed to exert control wherever it either directly or indirectly owns a majority of the voting rights 

and can therefore exert a controlling influence. Variable-interest entities in which mg technologies ag 

is either directly or indirectly the main beneficiary are also consolidated. Material equity investments 

on which a significant influence can be exerted (‘associated companies’) as well as joint ventures are 

accounted for under the equity method. All other investments are accounted for at cost. 

Consolidated companies with a different balance sheet date from that of the parent company have 

prepared interim financial statements as of December 31. 

When the investment in subsidiaries is consolidated under the purchase method, the purchase price 

is offset against the value of interest held in subsidiaries’ shareholders’ equity at the time of acquisition 

after the pro rata hidden reserves and hidden liabilities have been disclosed. Any excess purchase 

price over fair market value of assets acquired and liabilities assumed is capitalized as goodwill. Under 

the rules of SFAS 142 (‘Goodwill and Other Intangible Assets’), this goodwill is tested for impairment 

at least once a year and, where necessary, written down. Any shortfall in purchase price over fair 

market value of assets acquired and liabilities assumed (negative goodwill) is deducted from the 

carrying amount of certain non-current assets acquired. Under SFAS 141 (‘Business Combinations’), 

any further shortfall is reported as extraordinary income or, in exceptional cases (‘contingent considerations’), 

recognized as deferred income. 

Companies on which significant influence can be exerted (associated companies) and joint ventures 

are valued under the equity method. This is principally in instances where the mg Group holds 

between 20% and 50% of the voting rights. Investments valued at equity are reported at the interest 

held in shareholders’ equity. Recognized changes in the associated company’s shareholders’ equity, 

including any necessary goodwill write-down and any necessary depreciation, amortization or 

releases of allocated hidden reserves or liabilities, are recognized as net income from investments.



All material intercompany gains and losses, assets, liabilities, revenues, expenses and income are 

consolidated as part of the elimination of intercompany gains and losses and the consolidation of 

liabilities, expenses and income. 

The consolidation of liabilities essentially means that receivables and liabilities between consolidated 

Group companies are offset against each other, since the Group – which, according to the entity point 

of view, constitutes a theoretical single legal entity – cannot report any assets or liabilities with respect 

to itself. 

The main purpose of consolidating expenses and income is to offset all expenses and income 

between fully consolidated subsidiaries against each other. The consolidated statements of income 

may only report expenses and income resulting from transactions with non-Group entities. 

The purpose of eliminating intercompany gains and losses is to eliminate intercompany profits 

and losses resulting from goods and services supplied by one consolidated subsidiary to another, as 

the Group can only recognize gains or losses if the goods or services were supplied to external third 

parties, i.e. to non-consolidated companies. If, for example, a consolidated companysupplies assets 

at a valueexceeding their acquisition or manufacturing cost to another consolidated company, this 

gives rise to an intercompany gain. If the company that purchased these goods or services is still 

accounting for them as an asset at the balance sheet date, the asset must be written down by the 

amount of the intercompany gain (the difference between the asset value reported by the purchasing 

company and the [Group’s] acquisition or manufacturing cost. This method ensures that assets 

resulting from goods or services supplied by one consolidated company to another are shown in the 

consolidated financial statements at the amount that would be reported if the Group were a single 

company. This intercompany gain is recognized in the future if the asset in question is sold to a non- 

Group entity or written off. A similar procedure is applied to companies reported at equity. 

Unless based in countries suffering from hyperinflation, subsidiaries whose reporting currency is not 

the euro are consolidated according to the functional currency concept. If the local currency is the 

functional currency, the financial statements are translated into the reporting currency (euro) at 

modified exchange rates as of the balance sheet date. The financial statements are translated as follows: 

• Investments in affiliated, consolidated companies and the shareholders’ equity are reported at 

historical rates, while assets (including goodwill), liabilities and deferred items are shown at 

mid-rates as of the balance sheet date. 

• Revenues and expenses are translated at average exchange rates in effect during the year. 

• Resultant translation adjustments are reported as a separate component of shareholders’ equity 

(‘accumulated other comprehensive income/loss’). 

Subsidiaries based in countries suffering from hyperinflation have the euro as their functional currency. 

Adjustments arising from the translation of the functional currency into euros are recognized 

in the subsidiary’s statement of income. A country is deemed to suffer from hyperinflation if its 

cumulative inflation rate over the past three years exceeds 100%. As in 2001/2002, this applies to 

Turkey. 

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The exchange rates of the non-euro currencies that have a material impact on the consolidated financial 

statements are as follows: 

Rate at the Balance Sheet Date Average Rate 

1/1/2003 - 10/1/2002 - 

1t= 12/31/2003 12/31/2002 12/31/2003 12/31/2002 

Pound sterling 0.7048 0.6505 0.6918 0.6364 

U.S. dollar 1.2630 1.0487 1.1309 1.0002 

Argentine peso 3.7095 3.5340 3.3915 3.5468 

Brazilian real 3.6094 3.6920 3.4858 3.6252 

C) Accounting Policies 

Intangible assets acquired for a consideration are reported at acquisition cost. If the assets are to be 

used for a limited period, they are amortized on a straight-line basis over their estimated useful life. 

The useful economic lives applied are as follows: 

Estimated Useful Life (Years) 

Patents, licenses, trademarks and similar rights and 

assets, including licenses for such rights and assets 3 to 15 

Capitalized software 3 to 10 

A license to mine a raw material used to produce lithium carbonate is amortized according to the 

extent of its mining. The useful economic life estimated on this basis is 57 years. 

Goodwill represents the excess purchase price over the fair market value of assets acquired and 

liabilities assumed. Until the end of fiscal 2000/2001 it was amortized on a straight-line basis over its 

estimated useful life. Since 2001/2002, goodwill has been subjected to a two-stage impairment test 

based on reporting units at least once a year. In the first stage, the reporting unit’s fair value is 

compared with its book value. Fair value is calculated on the basis of estimated future cash flows 

(‘discounted cash flow method’). This procedure is based on certain estimates by management. If 

the reporting unit’s fair value is less than its book value, the goodwill is impaired. In the second 

stage, the fair value of the reporting unit’s goodwill is compared with its book value. The fair value 

of goodwill is the difference between the reporting unit’s fair value and the net fair values of the 

reporting unit’s assets and liabilities. If the fair value of goodwill is below its book value, the difference 

is reported as an impairment write-down. After mg’s fiscal year had been aligned with the 

calendar year in the previous year, the annually required impairment test was conducted in the 

fourth quarter of 2003 in accordance with the planning process that had been adjusted to the new 

fiscal year. This test confirmed that the value of goodwill at December 31, 2003 was not impaired. 

The intangible pension asset essentially represents the excess of pension provisions under national 

accounting rules over those under U.S. GAAP, which had to be capitalized the first time the mg 

Group applied U.S. GAAP accounting standards. The remaining estimated useful life of this asset is 

one year. For further information see Note 10)a) ‘Provisions for Pensions and Similar Obligations’.



Intangible assets whose useful life is unlimited are not amortized over their useful life, but instead 

may be amortized as a result of an impairment test carried out at least once a year. Under this procedure, 

the book value of these assets is compared with their fair value. If their fair value is below 

book value, they are written down accordingly. The mg Group possesses no such intangible assets 

at present. 

Property, plant and equipment are valued at acquisition or manufacturing cost, less depreciation, over 

their estimated useful life, as customary in the industry. Manufacturing costs of internally produced 

plant and equipment include direct costs and allocable manufacturing overheads and depreciation and 

– where construction takes place over a lengthy period – debt interest over the construction period 

(qualifying assets). Administrative costs are only capitalized if they are directly related to construction. 

The following depreciation methods and estimated useful lives are used in the mg Group: 

Method of Depreciation Useful Life 

German Foreign Years 

Buildings and fixtures straight-line and declining-balance, straight-line 10 to 50 

Plant and equipment, other plant 

with transition to straight-line 

straight-line and declining-balance, 


straight-line 3 to 30 

Office furniture and equipment straight-line and declining-balance, 


straight-line 3 to 10 

The first-year tax convention, under which the full annual rate of depreciation was charged on 

mobile assets acquired in the first half of the year and half the annual rate was charged on assets 

acquired in the second half, was applied during the year under review. The resulting effects are not 

of material importance for an assessment of the company’s net assets, financial position and results 

of operations. Low-value assets of up to a410 are written off in the year of acquisition and reported 

as a disposal in the Consolidated Fixed Assets Schedule. The resulting effects and the impact of 

the transition from the declining-balance method of depreciation to the straight-line method are not 

material to the true and fair presentation of the Group’s net assets, financial position and results 

of operations. 

Under SFAS 144 (‘Accounting for the Impairment or Disposal of Long-Lived Assets’), long-lived 

assets (including certain identifiable intangibles and goodwill) are tested for impairment whenever 

events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. 

Impairment is measured by comparing the estimated future discounted pre-tax cash flows of 

the related asset to its carrying amount. 

Leasing arrangements are classified either as capital leases or operating leases. Leases under which 

the mg Group as lessee bears all material opportunities and risks arising from the use of the leased 

asset, and where it is consequently deemed to be the beneficial owner, are treated as capital leases. 

The leased asset and the corresponding liability are accordingly reported in the consolidated financial 

statements. The leased asset is generally capitalized at the net present value of future lease installments 

at the time of the transaction, and a liability to the lessor is recognized. The leased asset is 

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depreciated over the life of the lease. The lease installments consist of interest and principal. 

The interest payable constitutes an expense, while the principal reduces the lease liability. All 

other leases in which the Group acts as lessee are treated as operating leases, with resulting lease 

payments expensed at the time they fall due. 

Various companies in the mg Group have entered into sale-and-leaseback agreements with 

respect to both intangible assets and property, plant and equipment. In the case of major 

leaseback agreements, gains on these disposals are deferred and recognized over the term of 

the lease or over their estimated useful life. With minor leasebacks, on the other hand, these 

gains are recognized immediately. In cases where there is neither a minor nor a major leaseback, 

gains are deferred proportionately and recognized over the term of the lease or over their 

estimated useful life. 

Inventories are valued in accordance with the lower-of-cost-or-market rule, ascertained by 

comparing the acquisition or manufacturing cost with the mean value of any lower replacement 

costs, the realizable divestment value or the realizable divestment values less a profit margin. 

Exchange-traded goods and commodities are marked to market. The cost of acquisition and 

manufacturing is computed on average cost or the first-in, first-out method. Manufacturing costs 

include direct costs and attributable manufacturing overheads as well as depreciation charges 

and production-related administrative costs. 

Receivables and sales arising from long-term construction contracts are reported according to 

the percentage-of-completion (PoC) method. Long-term construction-type contracts are those 

that take at least six months to complete, calculated from the date when the contract is awarded 

until the point at which the contract has essentially been completed. 

The percentage of completion is calculated as the ratio of the contract costs incurred at the 

balance sheet date to the total estimated costs for the entire contract (cost-to-cost method). 

Discounts are made for risks. Irrespective of the percentage of completion, losses resulting from 

long-term contracts are recognized in full in the period in which they are determined. After 

deduction of advance payments relating to the respective contract, contract costs and pro-rata 

profits from long-term contracts calculated according to the percentage-of-completion method 

are recognized as unbilled PoC receivables from long-term contracts, less advance payments 

received. If the advance payments received exceed accrued costs at the balance sheet date, they 

are reported as a liability under the item ‘Excess of advance payments received over unbilled 

PoC receivables from long-term contracts’. Long-term construction contracts are valued at 

manufacturing cost plus a profit proportionate to the percentage of completion. 

If contracts do not qualify for the percentage-of-completion method, they are reported under 

the completed-contract method. This means that income can only be recognized once title to 

the assets has passed and the contract has been completed. Work in process and incomplete 

contracts are reported as work in process (from long-term contracts).



Receivables are stated at net realizable value. Allowances against receivables are established 

depending on the probability that they will be fully or partly realized. Non-interest-bearing and lowinterest-bearing 

receivables maturing in more than one year are discounted at market interest rates 

at the time they arise and are capitalized at the resulting net present value. Interest is added to these 

receivables in the following periods at the respective interest rates. 

Sales of receivables reduce the carrying amount of receivables (off balance sheet) if the seller has 

relinquished control over the receivables sold. Under SFAS 140 (‘Accounting for Transfers and Servicing 

of Financial Assets and Extinguishments of Liabilities’), this is the case if the following three conditions 

are met: the seller and its creditors have no access to the receivables (isolation); the buyer can 

pledge or exchange the receivables; and the seller has no (effective) power of disposal over the 

receivables owing to a right to repurchase them. 

Securities held as investments and marketable securities include available-for-sale securities, 

which are reported at fair value. They also include held-to-maturity securities, which are stated at 

amortized cost. Unrealized gains and losses on available-for-sale securities are included in other 

comprehensive income as a separate component of shareholders’ equity, net of applicable deferred 

income taxes. Unrealized losses that are deemed permanent are recognized in earnings. No trading 

securities are held. 

If there is a firm intention to sell individual assets, a group of assets, or a component of an entity as 

defined by SFAS 144, these assets must be classified separately as ‘discontinued operations’. Individual 

assets or groups of assets are reported under ‘other assets’ as ‘assets held for sale’ as part of non-fixed 

assets. If a component of an entity is discontinued or sold, its assets are shown separately on the 

balance sheet as ‘assets from discontinued operations’. The assets are tested for impairment at the 

time they are reclassified. The assets are therefore shown at the lower of book value and fair value. 

Thereafter, these assets are no longer depreciated or amortized. Liabilities sold in connection with 

assets are reported correspondingly as ‘liabilities held for sale’ or as ‘liabilities from discontinued 

operations’. 

Cash and cash equivalents include readily available funds such as checks, cash on hand, credit 

balances held with banks, and deposits held with Deutsche Bundesbank with a term of up to three 

months. They also include fixed-term deposits and restricted cash and cash equivalents (including 

other deposits consisting of non-fixed assets with a residual term of over three months). 

Deferred tax assets and liabilities are computed for all temporary differences between the carrying 

amounts in the respective national tax accounts and those in the U.S. GAAP financial statements 

included in the consolidated accounts (temporary concept). Deferred taxes are also recognized in 

relation to various consolidation measures. Deferred tax assets are also recognized for losses carried 

forward. If deferred tax assets are unlikely to be realized, a valuation allowance is reported. Deferred 

taxes are computed using national tax rates which, according to the enacted law in the respective 

countries at the balance sheet date, will apply on the date on which the timing differences are likely 

to be eliminated or net operating loss (NOL) carryforwards are likely to be utilized. 

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Certain changes in shareholders’ equity included as a separate component are reported as ‘accumulated 

other comprehensive income/loss’. This includes the cumulative translation adjustment, 

unrealized gains and losses on the marking-to-market of securities and hedging transactions, and the 

minimum pension liability. 

Accrued liabilities for pensions and other postretirement obligations are valued according to the 

projected unit credit method. The amounts reported are based on calculations by independent actuaries. 

Provisions for taxes and other accruals and liabilities are reported when an obligation to a third 

party exists, there is a likelihood of its crystallization, and its amount can be reasonably estimated. 

If the amount of the necessary provision or accrual or liability can only be computed to within a 

certain range, the most likely amount is reported; if the amounts are equally likely, the lowest is 

reported. Provisions for warranties and for impending losses are computed on the basis of manufacturing 

costs. Provisions for guarantees covering third-party financial obligations and for guarantees 

covering changes in the value of underlying instruments are shown at their fair value, irrespective 

of the likelihood that the obligation will materialize. 

Liabilities are reported at their repayment amount. Non-interest-bearing and low-interest-bearing 

liabilities due after one year are discounted at the prevailing market interest rate as of the balance 

sheet date. Interest is added to the liabilities in the following periods at this interest rate. 

Receivables and liabilities denominated in foreign currency are translated at the rate prevailing at 

the balance sheet date. Translation gains and losses are generally recognized in income. 

Revenue is recognized from the sale of products – after deduction of bonuses and discounts – once 

title to the assets has passed to the buyer and the contract has been completed. This presupposes 

that the price has been – or can be – determined and that receipt of the outstanding receivable is 

likely. In cases where products are supplied on a sale-or-return basis, revenue is not recognized until 

acceptance has been confirmed by the customer. Revenue from maintenance and service contracts 

is realized as and when the services are performed. Revenue on long-term contracts is generally 

recognized under the percentage-of-completion method. 

Research and development costs that are not contract related and are not reimbursed by the customer 

are expensed as incurred. Otherwise they are recognized as part of the contract cost and capitalized. 

Basic earnings per share is calculated by dividing net income (after minority interests) by the weighted 

average number of shares outstanding during the period. Diluted earnings per share is calculated by 

adjusting the number of shares outstanding for potential dilutive stock options, convertible debt and 

notes, and profit-sharing rights.



With respect to the Group’s stock option plan underlying its stock-based compensation scheme, the 

mg Group applies the provisions of SFAS 123 ‘Accounting for Stock-Based Compensation’ and has 

elected to account for the options under the fair value method. Under this method, compensation cost 

is measured at the grant date based on the value of the award and is recognized over the service period, 

which is usually the vesting period. The compensation cost for the fiscal year ended – included as 

part of functional costs – is shown under additional paid-in capital. 

The mg Group uses financial instruments purely for hedging purposes, in particular in order to 

mitigate the risk of interest rate fluctuations inherent in financing transactions and to hedge against 

currency risk and price movements. Fair value hedges are used to hedge assets or liabilities and firm 

commitments against a clearly defined market risk. Cash flow hedges are used to hedge future cash 

flows generated by existing balance sheet items, forecasted transactions and currency-hedged firm 

commitments. Under SFAS 133 (‘Accounting for Derivative Instruments and Hedging Activities’), 

as amended by SFAS 137 (‘Accounting for Derivative Instruments and Hedging Activities – Deferral 

of the Effective Date of FASB Statement No. 133’), SFAS 138 (‘Accounting for Certain Derivative 

Instruments and Certain Hedging Activities – an Amendment of FASB Statement No. 133’), and SFAS 

149 (‘Amendment of Statement 133 on Derivative Instruments and Hedging Activities’), all derivatives 

are reported at their fair value as ‘Other assets’ or ‘Other liabilities’. With fair value hedges, gains 

and losses resulting from changes in the fair values of derivatives and their underlying transactions 

are recognized in income. With cash flow hedges, the hedge-effective part of the changes in fair 

value is initially recognized in shareholders’ equity (accumulated other comprehensive income). It 

is only recorded in the statements of income when the hedged underlying transaction has been recognized 

in income. The hedge-ineffective part of the changes in fair value is immediately recognized 

in income. Unrealized gains and losses resulting from changes in the fair value of derivatives not 

included in hedge accounting (essentially derivatives used to hedge assets and liabilities denominated 

in foreign currency as well as commodities futures) are always immediately recognized in income. 

The preparation of the consolidated financial statements in accordance with the principles of proper 

accounting requires management to make estimates and assumptions that have an impact on the 

Group’s net assets, liabilities, provisions and accrued liabilities, deferred tax assets and liabilities, 

income and expense shown in the consolidated financial statements as well as the contingent assets 

and liabilities reported. Although these estimates and assumptions are assumed to be realistic, we 

cannot guarantee that they turn out to be correct. These estimates and assumptions may contain 

risks and uncertainties that cause the actual figures to differ from these forward-looking estimates. 

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New Accounting Pronouncements 

In April 2002, the FASB adopted SFAS 145 ‘Rescission of FASB Statements No. 4, 44 and 64, 

Amendment of FASB Statement No. 13, and Technical Corrections’, which rescinds SFAS 4, 44 and 

64, amends SFAS 13 and contains various instructions regarding adoption of the standard. Under this 

statement, gains and losses resulting from material early repayments of debt are no longer reported 

as extraordinary items in all cases, but only if the criteria of APB 30 for extraordinary expenses and 

income are met. The second material amendment relates to capital leases reclassified as operating 

leases. Income arising from such reclassification must be deferred – as for sale-and-leaseback agreements 

– and released over the residual term of the lease. This statement is mandatory for the reporting 

of debt repayments for fiscal years commencing after May 15, 2002. Since May 15, 2002, it has also 

been mandatory for the deferral of income arising from reclassifications of leases. The new statement 

did not apply to any items at mg. It therefore had no material impact on the mg Group’s net assets, 

financial position or results of operations. 

In June 2002, the FASB published SFAS 146 ‘Accounting for Exit or Disposal Activities’. SFAS 146 

replaces EITF 94-3 (‘Liability Recognition for Certain Employee Termination Benefits and Other 

Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)’) and concerns the 

establishment of provisions for liabilities in connection with the discontinuation or disposal of business 

activities. SFAS 146 essentially prescribes how to account for the cost of granting severance 

payments that do not form part of an ongoing social plan, costs incurred by the termination of contracts 

(excluding capital leases), and the cost of relocating employees and of merging or closing down 

permanent establishments. In departure from the previous statement, SFAS 146 only applies to the 

cost of severance payments if such payments have not been granted as a result of laws, contracts, 

articles of incorporation, established practice, or company policy. If SFAS 146 is not applicable, 

provisions are set aside for severance payments and social plans in accordance with SFAS 88 and 

SFAS 112. The formation of a provision under SFAS 146 is contingent on the fulfillment of all liabilityrelated 

criteria. The existence of a formal plan approved by the company’s management – as under 

EITF 94-3 – is no longer sufficient. The expenses must have been incurred to such an extent that the 

company cannot avoid them. Another new feature is the recognition of provisions at their fair value. 

SFAS 146 is mandatory for all exit or disposal activities commenced after December 31, 2002 and 

was therefore first applied throughout the mg Group during the year ended. 

In October 2002, the FASB adopted SFAS 147 ‘Acquisitions of Certain Financial Institutions – an 

amendment of FASB Statements No. 72 and 144 and FASB Interpretation No. 9’. This statement 

only affects financial services institutions and therefore does not apply to mg.



In December 2002, the FASB published SFAS 148 ‘Accounting for Stock-Based Compensation 

– Transition and Disclosure – an amendment of FAS 123’. As a supplement to SFAS 123 (‘Accounting 

for Stock-Based Compensation’), this statement outlines three alternative methods that can be used 

when the valuation of employees’ stock-based compensation is switched from the intrinsic-value 

method to the fair-value method. This statement also supplements the information on stock-based 

compensation required by SFAS 123 in the notes to the accounts. SFAS 148 is mandatory for fiscal 

years commencing after December 15, 2002. As the mg Group already uses the fair-value method to 

value stock-based compensation, SFAS 148 has had no impact on its net assets, financial position 

or results of operations. 

In April 2003, the FASB published SFAS 149 ‘Amendment of Statement 133 on Derivative Instruments 

and Hedging Activities’. This statement is intended to align practice with existing or planned 

pronouncements and to clarify various issues of its application. For example, SFAS 149 defines what 

types of transaction are classified as a normal purchase or sale and, as such, are not reported as 

derivatives under SFAS 133. It also stresses the need to accurately document forward transactions if 

they are to be exempted from SFAS 133. Furthermore, the statement defines the circumstances under 

which financial guarantees give rise to a default, which is a precondition for the exemption from 

reporting such guarantees as derivatives under SFAS 133. SFAS 149 is applicable to contracts that 

were amended or renewed after June 30, 2003. The adoption of this standard last year had no impact 

on the mg Group. 

In May 2003, the FASB adopted SFAS 150 ‘Accounting for Certain Financial Instruments with 

Characteristics of both Liabilities and Equity’. This statement applies to certain forms of preferred 

stock, issued put options, or financial instruments that create an obligation to issue capital stock. 

These financial instruments must be accounted for at fair value. SFAS 150 does not cover stock options 

issued as compensation, which are accounted for under SFAS 123, or convertible bonds. SFAS 150 

is applicable to financial instruments issued or modified after May 31, 2003. For existing financial 

instruments, the statement applies as from the first quarter commencing after June 15, 2003. An 

FASB Staff Position published in November 2003 exempts certain financial instruments from SFAS 150. 

As the mg Group currently possesses only a few financial instruments that fall under the scope of 

SFAS 150, the adoption of this statement has had no material impact on the consolidated financial 

statements. 

In December 2003, the FASB revised SFAS 132 ‘Employers’ Disclosures about Pensions and Other 

Postretirement Benefits’. The new statement essentially broadens employers’ duties to disclose 

assets, liabilities, cash flows and expenses relating to pension plans and other plans granting pensions 

and other postretirement benefits. For German plans, the new rules apply as from the fiscal year 

ending after December 15, 2003. For non-German plans, they only apply to fiscal years ending after 

June 15, 2004. mg has utilized this exempting provision. 

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In November 2002, the FASB adopted FIN 45 ‘Guarantor’s Accounting and Disclosure Requirements 

for Guarantees, including Indirect Guarantees of Indebtedness of Others, an interpretation 

of SFAS 5, 57 and 107’, which prescribes the accounting treatment of guarantees and warranties. 

This stipulates that at the time certain guarantees are issued, a provision corresponding to their fair 

value must be set aside. Furthermore, this statement widens the scope of the disclosures required 

in the notes to the accounts. FIN 45 is mandatory for fiscal years ending after December 15, 2002 

with respect to the more extensive disclosures required in the notes to the accounts, and has been 

implemented by the mg Group. The rules relating to the reporting of provisions at fair value apply 

to certain guarantees and warranties issued or modified after January 1, 2003, and were also implemented 

on a timely basis by the mg Group. They have had no material impact. 

At the end of January 2003, the FASB published FIN 46 ‘Consolidation of Variable Interest Entities, 

an interpretation of ARB No. 51’. Irrespective of whether a company can exert control over another 

company by virtue of the voting rights it holds, this statement requires that such interests be consolidated 

under certain conditions even if the company does not hold a majority of the shares in 

the interest. According to the FASB’s interpretation, the requirement to consolidate such interests 

depends on the extent to which an investor has a commercial interest in a company (‘variableinterest 

entity’). If the opportunities and risks arising from a variable-interest entity are not shared 

among its investors according to their shareholdings, the company deemed to be the main beneficiary 

and bearing most of the risk is required to consolidate the variable-interest entity. FIN 46 

was revised in December 2003. These amendments are essentially clarifications and exemptions and 

have no impact on mg. Owing to its adoption of FIN 46r, mg has consolidated four variable-interest 

entities for the first time at December 31, 2003. It has also identified one variable-interest entity that 

does not need to be consolidated (for further information see Note D) ‘Scope of Consolidation’). 

At the end of November 2002, EITF 00-21 ‘Accounting for Multiple-Element Revenue Arrangements’ 

was published in amended form after further discussion. EITF 00-21 addresses the issue of how revenues 

arising from multiple-element arrangements should be allocated and recognized. The amended 

version essentially identifies characteristics used to define separate revenue elements of multipleelement 

arrangements and, consequently, for pro-rata revenue recognition. The amended version of 

EITF 00-21 applies to agreements concluded in reporting periods commencing after June 15, 2003. 

It therefore first applied to mg in the fourth quarter of last year. This had no material impact. 

In May 2003, the FASB adopted EITF 01-8 ‘Determining Whether an Arrangement Is a Lease’. This 

is intended to determine whether a sale or purchase agreement – particularly in the context of outsourcing 

– constitutes a hidden lease. This is usually deemed to be the case if a seller works almost 

exclusively for one customer or has a liability to the latter, and no fixed purchase price – in the sense 

of a market price – has been agreed. EITF 01-8 is mandatory for accounting periods commencing 

after May 28, 2003.



D) Scope of Consolidation 

In addition to mg technologies ag, 111 German (prior year: 110) and 307 foreign subsidiaries (prior 

year: 314) have been fully consolidated as shown in the list of shareholdings. In 2003, 15 subsidiaries 

were consolidated for the first time and 21 were deconsolidated. mg has consolidated four leasing 

companies as variable-interest entities in accordance with FIN 46r. 

The four leasing companies, which belong to Dynamit Nobel, own various types of equipment and 

real estate, which are leased to three companies and used in the normal course of business. The 

leasing companies work exclusively for these three Dynamit Nobel companies. 

In the past, the equipment leased by two of the companies was treated as capital leases. The requirement 

to consolidate these leasing companies has had no material impact on mg’s consolidated financial 

statements. Consolidation has reduced the level of lease liabilities and increased the level of bank debt 

and other liabilities. The total effect on these two companies amounts to a27.909 million. The book 

values of leased assets come to a26.907 million and a2.657 million respectively at December 31, 2003. 

In the past, the other two companies’ leases have been treated as operating leases. The necessary 

consolidation has increased property, plant and equipment and bank debt by a10.835 million and 

a16.296 million respectively. The difference arises from the offsetting of deferred income – resulting 

from a previous sale-and-leaseback agreement – against the property, plant and equipment. 

188 subsidiaries have not been consolidated (prior year: 202) because their individual and joint 

influence on the true and fair presentation of the Group’s net assets, financial position, results of 

operations and cash flows is not material. In addition to the four above-mentioned variable-interest 

entities that had to be consolidated, the mg Group owns a variable-interest entity that does not have 

to be consolidated (a trading company belonging to solvadis). 

This trading company’s business essentially comprises the trading and reworking of metal products 

and similar manufactures. mg’s commercial interest in this company has existed since November 16, 

1989 and consists of its shareholding and guarantees in favor of the variable-interest entity. At 

December 31, 2003, solvadis has fully provisioned all discernible risks arising from this company. 

32 associated companies and joint ventures (prior year: 32) are accounted for at equity. A further 

62 associated companies (prior year: 64) are reported at cost. 

A full list of the shares in other companies held by the Group and mg technologies ag has been filed 

with the commercial register of the Frankfurt am Main District Court under No. B 8433. 

Material Information on Companies Reported at Equity 

At December 31, 2003, the associated companies and joint ventures mentioned in the list of major 

shareholdings are reported at equity. 

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The following list summarizes the main unaudited key figures of companies reported at equity at 

December 31, 2003. The relevant figures are given in full and are based on the most recently available 

annual accounts in each case. For the sake of comparability, the prior year figures have been adjusted 

to take account of two factors. First, they do not include discontinued operations; and second, a company 

that filed for bankruptcy last year has been excluded. As the vast majority of the companies 

reported at equity did not prepare separate annual accounts at December 31, 2002 and, consequently, 

the data for the short 2002 fiscal year was largely identical to that at the balance sheet date of the 

last full fiscal year (September 30, 2002), the figures for the last full fiscal year have been repeated 

for the short 2002 fiscal year. These figures constitute the comparative figures for fiscal 2003. 

Figures from the Statements of Income 1/1/2003 - 10/1/2001 - 

12/31/2003 9/30/2002 

u ’000 t ’000 

Revenues 101,672 74,094 

Net loss 2,358 1,025 

Figures from the Balance Sheets 12/31/2003 9/30/2002 

u ’000 t ’000 

Total assets 190,167 122,376 

Shareholders’ equity 64,213 57,674 

The growth in total assets is the result of a substantial purchase of fixed assets by one GEA company 

and the completion of a long-term construction contract by a Lurgi company. This construction contract 

is also the reason for the rise in revenues. 

E) Acquisitions 

In fiscal 2003, the following significant acquisitions were consolidated under the purchase method 

of accounting. Accordingly, all assets acquired and liabilities assumed are recorded at fair value. 

GEA 

In addition to the GEA shares acquired in prior years, the mg Group acquired a further 0.01% of 

GEA’s common stock and 0.03% of its preferred stock in 2003. mg technologies ag therefore held 

98.04% of GEA’s capital stock at December 31, 2003. 

GEA’s shares were acquired in two tranches. Effective April 1, 1999, mg acquired a first tranche of 

74.85% of the common stock (37.43% of the total outstanding shares) of GEA Aktiengesellschaft, 

Bochum. Since fiscal 1998/1999, mg technologies ag has made the remaining GEA shareholders the 

following offer for the remaining outstanding shares: a second tranche consisting of five mg technologies 

ag shares for three GEA AG common shares, or three mg technologies ag shares for two 

GEA AG preferred shares.



The following table documents the take-up of mg’s exchange offer. 

Preferred Common 

Stock Stock Total 

First tranche: Acquired on April 1, 1999 0.00% 74.85% 37.43% 

Second tranche: Acquired up to September 30, 1999 5.42% 1.32% 3.37% 

Balance at September 30, 1999 5.42% 76.17% 40.80% 

Acquired up to September 30, 2000 91.13% 22.70% 56.91% 


Acquired up to September 30, 2001 0.41% 0.11% 0.27% 


Acquired up to September 30, 2002 0.04% 0.04% 0.03% 

Balance at September 30, 2002 97.00% 99.03% 98.01% 

Acquired up to December 31, 2002 0.002% 0.003% 0.002% 

Balance at December 31, 2002 97.00% 99.03% 98.02% 

Acquired up to December 31, 2003 0.03 % 0.01 % 0.02 % 

Balance at December 31, 2003 97.03 % 99.04 % 98.04 % 

In addition to a cash component, 58,566,723 mg technologies ag shares (2001/2002: 58,553,716 shares) 

worth a total of a1,835.3 million (2001/2002: a1,835.1 million) were used in the two tranches. 

Owing to the minor importance of the newly acquired GEA shares, as in the prior year, the excess 

of the consideration given for the shares over the fair value of net assets acquired was not calculated 

separately. 

Morris & Young Ltd. 

Grasso Holding Ltd., London, U.K., which belongs to GEA, acquired Morris & Young Ltd., London, 

effective March 1, 2003. The acquisition cost amounted to a654,000. This acquisition gave rise to 

goodwill of a1.898 million. 

Fleissner 

Zimmer AG, Frankfurt am Main, acquired Fleissner GmbH & Co. Maschinenfabrik, Egelsbach, 

Germany, indirectly via Zimmer Betriebs-GmbH, Frankfurt am Main, effective November 14, 2003. 

The acquisition cost amounted to a26.553 million. This acquisition revealed hidden reserves of 

a21.1 million. It also gave rise to goodwill of a2.679 million. 

During the short 2002 fiscal year from October 1 through December 31, 2002, the following significant 

acquisitions were consolidated under the purchase method of accounting. 

Plate Heat Exchanger Activities of BBP Service Ratingen GmbH 

Effective October 10, 2002, GEA Ecoflex GmbH, Sarstedt, Germany, acquired the plate heat exchanger 

activities of BBP Service Ratingen GmbH, Ratingen, Germany, as part of an asset deal. The acquisition 

cost amounted to a5.157 million. This gave rise to goodwill of a4.791 million. 

99

100 

Liquid Technologies (New Zealand) Limited and Liquid Technologies Australia PTY Limited 

Effective November 12, 2002, Niro NZ Limited, Auckland (New Zealand), and Niro Australia Pty. Ltd., 

Blackburn (Australia), which belong to GEA, acquired the engineering activities belonging to the 

liquid processing businesses of Liquid Technologies (New Zealand) Limited, Auckland (New Zealand), 

and Liquid Technologies Australia PTY Limited, Victoria (Australia), as part of an asset deal. The 

acquisition cost amounted to a2.074 million. This acquisition gave rise to total goodwill 

of a1.601 million. 

F) Disposal of Businesses 

The following businesses were sold or discontinued during the year under review. Disposals and 

exits qualifying as discontinued operations are mentioned under Note G) ‘Discontinued operations’. 

CeramTec Heimbach Dewatering Technology GmbH 

CeramTec Heimbach Dewatering Technology GmbH, Plochingen, Germany, was sold to Leripa 

Kunststoff GmbH & Co. KG, Rohrbach, Austria, effective March 1, 2003. This resulted in a loss of 

a107,000. 

Stahlbau Plauen 

Effective June 27, 2003, mg technologies ag sold the majority of mg Group’s heavy structural steel 

engineering activities (Stahlbau Plauen and Brückenbau Plauen) to Steel Holding AG, Baar, Switzerland, 

a subsidiary of the Belgian Pirson Group. The remaining shares were sold to a private investor. 

The disposal resulted in a loss of a26.098 million. The disposal price does not include any goodwill. 

No businesses were sold or discontinued during the short 2002 fiscal year from October 1 through 

December 31, 2002. 

G) Discontinued operations 

SFAS 144 states that continued and discontinued operations must be reported separately. To this 

end, the assets and liabilities attributable to such activities are combined under one item in the balance 

sheets as ‘Assets from discontinued operations’ and ‘Liabilities from discontinued operations’. The 

same applies to the income and expenses attributable to these activities. They are reported in the 

statements of income as ‘Profit/loss on discontinued operations’. This figure does not include any 

pro rata interest expense attributable to the respective parent company. 

The prior year has been adjusted accordingly for the sake of comparability. 

As the book value of assets is realized by their disposal rather than by their use, depreciable assets 

are no longer depreciated once they are classified as assets from discontinued operations. 

The consolidated statements of cash flows have been adjusted to take account of the effects of discontinued 

operations both for the year under review and for the comparative short 2002 fiscal year. 

In 2003, solvadis, the Boiler Plant strategic business unit, and various non-core activities of GEA 

and Dynamit Nobel qualified as discontinued operations.



Although the Executive Board of mg technologies ag decided in October 2003 to concentrate the 

company’s activities on specialty mechanical engineering and plant engineering and subsequently 

made preparations to sell Dynamit Nobel, Dynamit Nobel is still reported as a continued operation. 

In line with the fundamental principles of the ‘Holzmüller’ ruling by in Germany’s Federal Court of 

Justice, the Executive Board of mg technologies ag will seek the Annual Shareholders’ Meeting’s 

approval to sell Dynamit Nobel. Consequently, as of the balance sheet date Dynamit Nobel cannot 

be reported under ‘discontinued operations’ in accordance with SFAS 144. 

As various investors have shown a keen interest in acquiring either all or part of these activities, 

the Executive Board of mg technologies ag – subject to approval being granted by the Annual Shareholders’ 

Meeting – expects this disposal to have been completed by the end of 2004. In order to 

illustrate the impact of Dynamit Nobel’s disposal on the balance sheets, however, in some cases the 

figures relating to the Dynamit Nobel companies are given. 

solvadis 

Once the Executive Board of mg technologies ag had decided to focus the company’s activities on 

specialty mechanical engineering and plant engineering, preparations were made to sell solvadis. 

Safic-Alcan S.A., Paris, France, which belonged to solvadis, was sold in January 2004 (see below). 

There are several prospective buyers for solvadis’ remaining businesses, so that the Executive Board 

of mg technologies ag expects its disposal to be completed by the end of 2004. 

The (abridged) statement of income for solvadis is as follows: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Revenues 1,416,038 425,624 

Cost of sales – 1,288,500 – 390,882 

Other expenses and income – 134,944 – 30,636 

Pre-tax earnings – 7,406 4,106 

Income taxes – 5,926 259 

Minority interests – 23 – 3 

Profit/loss on discontinued operations – 13,355 4,362 

The following assets and liabilities attributable to solvadis are reported in the consolidated balance 

sheets as ‘Assets from discontinued operations’ and ‘Liabilities from discontinued operations’: 

101

102 

12/31/2003 12/31/2002 

u ’000 t ’000 

Intangible assets 56,092 56,255 

of which goodwill 55,524 55,524 

Property, plant and equipment 34,785 31,821 

Investments and long-term financial assets 7,178 19,662 

Inventories 72,671 89,000 

Receivables and other assets 232,101 213,688 

Cash and cash equivalents 5,883 8,803 

Sundry assets 17,268 16,479 

Assets from discontinued operations 425,978 435,708 

Provisions and accrued liabilities 137,154 117,702 

Liabilities 159,313 179,318 

Sundry liabilities 2,340 2,296 

Liabilities from discontinued operations 298,807 299,316 

Depreciable fixed assets continued to be depreciated and amortized throughout the period under 

review, as the preconditions for reporting them as discontinued operations – and thus for discontinuing 

their depreciation and amortization – did not exist until December 31, 2003. The useful economic lives 

are within the bands shown under C) ‘Accounting Policies’. 

Property, plant and equipment includes land and buildings of a3.958 million on capital leases. 

The inventories of a subsidiary belonging to solvadis include exchange-traded merchandise of 

a49.378 million that is capitalized above historical cost. This generated a gain of a1.643 million. 

The other inventories of a23.295 million are mainly valued under the weighted average cost 

method. 

The companies in the solvadis segment sold receivables under existing factoring agreements, as in 

the prior year; for further information see Note 4) ‘Receivables and Other Assets’. 

Provisions and accrued liabilities essentially comprise provisions for pensions (a41.572 million), 

outstanding suppliers’ invoices (a30.817 million) and personnel expenses (a15.215 million). 

Liabilities primarily consist of trade payables (a61.218 million), bank debt (a47.883 million), and 

liabilities arising from financial derivatives (a26.440 million). 

For further information on contingent liabilities and other financial obligations in the solvadis segment, 

please refer to Note 13) ‘Commitments and Contingencies’. 

On January 16, 2004, retailing company Safic-Alcan S.A., based in Paris, France – which belongs to 

solvadis ag, Frankfurt am Main, Germany – was sold to French holding company Daniel Lebard 

Management Development (DLMD) and Alpha-Associés, a French private equity house. This sale 

includes the disposal of assets worth a228.337 million and a reduction of a6.750 million in goodwill. 

This deal resulted in a loss of a15.172 million. solvadis recognized the loss of a15.172 million 

realized on this deal at December 31, 2003 by writing these assets down to their fair value. In 2003, 

Safic-Alcan generated sales of a954.282 million (prior year: a299.007 million). After its assets had 

been written down to their fair value, it reported a pre-tax loss of a80,000 (prior year: profit of 

a3.832 million).



Boiler-Plant business 

The disposal of the Boiler Plant business unit, which had been planned for some time, had progressed 

by the end of 2003 to such an extent that this business was reported as discontinued operations. The 

Executive Board of mg technologies ag expects it to have been sold by the end of 2004. 

The (abridged) statement of income for the Boiler Plant business is as follows: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Revenues 298,935 69,924 

Cost of sales – 304,980 – 65,355 

Other expenses and income – 22,118 – 5,415 

Pre-tax earnings – 28,163 – 846 

Income taxes – 933 913 

Minority interests – 881 – 425 

Profit/loss on discontinued operations – 29,977 – 358 

The following assets and liabilities attributable to the Boiler Plant business are reported in the consolidated 

balance sheets as ‘Assets from discontinued operations’ and ‘Liabilities from discontinued 

operations’: 

12/31/2003 12/31/2002 

u ’000 t ’000 


of which goodwill 1,387 1,394 

Property, plant and equipment 5,573 5,735 

Investments and long-term financial assets 579 628 

Inventories 7,810 7,432 

Receivables and other assets 121,047 82,552 

Cash and cash equivalents 3,786 2,347 

Sundry assets 1,545 1,298 

Assets from discontinued operations 142,748 102,152 

Provisions and accrued liabilities 52,921 34,701 

Liabilities 89,609 65,612 

Sundry liabilities 4,144 2,490 

Liabilities from discontinued operations 146,674 102,803 

Depreciable fixed assets continued to be depreciated and amortized throughout the period under 

review, as the preconditions for reporting them as discontinued operations – and thus for discontinuing 

their depreciation and amortization – did not exist until December 31, 2003. 

103

104 

Other discontinued operations 

Dynamit Nobel’s non-core activities 

In 2003, Dynamit Nobel sold its glazing sealing compounds business, which formed part of the 

specialty chemicals business unit. With effect from June 10, 2003, it transferred ownership of these 

activities to KÖMMERLING CHEMISCHE FABRIK GmbH, Pirmasens, Germany, as part of an asset 

deal. The disposal realized a pre-tax gain of a5.974 million, which forms part of the profit/loss on 

discontinued operations. 

There are plans to sell Dynamit Nobel’s defense technology business – also as part of an asset deal – 

in 2004. This completes a further stage in the company’s strategy of selling off its defense technology 

business. A pre-tax loss of a4.800 million on this planned deal was anticipated. Dynamit Nobel 

recognized this loss in its pre-tax earnings from discontinued operations at December 31, 2003 by 

writing these assets down to their fair value. 

At the balance sheet date, Dynamit Nobel’s non-core activities comprised assets of a14.836 million 

(prior year: a18.690 million) and liabilities of a1.616 million (prior year: a4.553 million). In 2003, 

its discontinued operations generated sales of a24.806 million (prior year: a9.788 million) and 

a pre-tax loss of a7.464 million from operating activities (prior year: loss of a18,000). Including 

the gains on the disposal of the glazing sealing compounds business and the write-down of the 

defense technology assets, pre-tax earnings from discontinued operations for 2003 came to a loss 

of a6.290 million. 

GEA’s Non-Core Activities 

In 2003, GEA either sold or decided to sell various non-core activities. Its disposals essentially comprise 

its filling-systems activities for the automotive industry, which form part of its refrigeration 

business. The company that runs this business – Rapidcharge Frigofrance SAS, Nantes, France – 

was sold to Cinetic Industries SAS, Montreuil-sons-Bois, France, effective December 31, 2003. The 

disposal of this business generated pre-tax earnings of a3.638 million. 

In 2003, the sales generated by discontinued operations came to a41.672 million (prior year: 

a13.901 million) and their pre-tax earnings – reported in the statements of income under ‘Profit/loss 

on discontinued operations’ – amounted to a loss of a17.819 million (prior year: loss of a2.036 million). 

This figure includes a current loss of a12.596 million (prior year: loss of a2.036 million), total 

disposal proceeds of a3.053 million, and a write-down of a8.276 million on assets held for sale. 

Operations for sale comprise assets of a4.579 million (prior year: a31.120 million) and liabilities of 

a5.128 million (prior year: a12.202 million). These activities are due to be sold by March 2004. 

Rapidcharge generated sales of a24.619 million (prior year: a4.8 million) and pre-tax earnings from 

operating activities of a3.425 million (prior year: a575,000).



Reconciliation to Figures Shown in the Balance Sheets and the Statements of Income 

The following table shows the reconciliation of earnings generated by discontinued operations to the 

profit/loss on discontinued operations reported in the statements of income. 

Non-Core Activities Consoli- P+L 

t ’000 

1/1/2003 – 12/31/2003 

Solvadis Boiler Plant DN GEA dated Figure 

Revenues 1,416,038 298,935 24,806 41,672 

Cost of sales – 1,288,500 – 304,980 – 24,555 – 34,727 

Other expenses and income – 134,944 – 22,118 – 6,541 – 24,764 

Pre-tax earnings – 7,406 – 28,163 – 6,290 – 17,819 – 59,678 

Income taxes – 5,926 – 933 – 598 – 2,740 – 252 9,945 

Minority interests – 23 – 881 – – – – 904 

Profit/loss on 


10/1/2002 – 12/31/2002 

– 13,355 – 29,977 – 6,888 – 20,559 – 252 – 70,527 

Revenues 425,624 69,924 9,788 13,901 

Cost of sales – 390,882 – 65,355 – 8,719 – 12,034 

Other expenses and income – 30,636 – 5,415 – 1,087 – 3,903 

Pre-tax earnings 4,106 – 846 – 18 – 2,036 – 120 1,086 

Income taxes 259 913 432 – 238 36 1,402 

Minority interests – 3 – 425 – – – – 428 

Profit/loss on 

discontinued operations 4,362 – 358 414 – 2,274 – 84 2,060 

The following table shows the reconciliation of assets and liabilities from discontinued operations to 

the assets and liabilities from discontinued operations as reported on the consolidated balance sheets. 

105

106 

Balance 

Non-Core Activities Consoli- Sheet 

t ’000 

At 12/31/2003 

solvadis Boiler Plant DN GEA dated Figure 

Intangible assets 56,092 2,408 21 – 


Investments and long-term 

34,785 5,573 1,679 1,330 

financial assets 7,178 579 – – 

Inventories 72,671 7,810 13,136 175 

Receivables and other assets 232,101 121,047 – 1,889 

Cash and cash equivalents 5,883 3,786 – 985 

Sundry assets 17,268 1,545 – 200 

Assets from 

discontinued operations 425,978 142,748 14,836 4,579 – 121,990 466,151 

Provisions and accrued liabilities 137,154 52,921 1,616 3,015 

Liabilities 159,313 89,609 – 1,583 

Sundry liabilities 2,340 4,144 – – 

Liabilities from 


At 12/31/2002 

298,807 146,674 1,616 5,128 – 22,568 429,657 

Intangible assets 56,255 2,160 156 – 


Investments and long-term 

31,821 5,735 4,633 8,119 

financial assets 19,662 628 – – 

Inventories 89,000 7,432 13,469 5,406 

Receivables and other assets 213,688 82,552 – 15,654 

Cash and cash equivalentsl 8,803 2,347 – 1,155 

Sundry assets 16,479 1,298 432 786 

Assets from 

discontinued operations 435,708 102,152 18,690 31,120 – 30,739 556,931 

Provisions and accrued liabilities 117,702 34,701 2,652 3,595 

Liabilities 179,318 65,612 1,901 8,203 

Sundry liabilities 2,296 2,490 – 404 

Liabilities from 

discontinued operations 299,316 102,803 4,553 12,202 – 10,488 408,386



H) Restructuring 

In 2003, the Executive Board of mg technologies ag took the decision to focus the mg Group’s strategy 

on specialty mechanical engineering and plant engineering. The chemicals activities at Dynamit Nobel 

and solvadis were put up for sale. The proceeds from their sale will be used to pay down the mg 

Group’s debt and to strengthen its remaining operations. The strategic refocus will also involve a 

comprehensive restructuring of the remaining activities. The restructuring program includes a portfolio 

optimization for Lurgi and Lurgi Lentjes, which form part of the industrial plant engineering 

business; the dismantling of redundant holding-company structures; and the implementation of 

various initiatives to improve efficiency. 

In order to improve the earnings situation and risk position of Lurgi and Lurgi Lentjes, those businesses 

with poor profitability and weak market positions will be sold. In the future, Lurgi will focus 

on extending its market and technology leadership in the fields of methanol, gas-to-chemicals, and 

food, which includes activities such as bio-fuels and renewable resources. Lurgi is already a market 

and technology leader in the supply of technologies used to produce methanol. Almost 60 percent of 

global methanol production is based on Lurgi’s technology. By contrast, its refinery technology, 

chemicals and pharmaceuticals businesses are to be sold. This restructuring will particularly affect 

its former Life Science activities. Once its portfolio has been optimized, Lurgi Lentjes will focus on 

the cleaning of waste gases and contaminated air for process industries and desulfurization systems 

for power plants. The denitrification and dedusting technologies for waste incineration and power 

plant engineering, which currently belong to the flue-gas cleaning business, are to be discontinued. 

Overall, the Executive Board of mg technologies ag expects that these portfolio adjustments will cut 

approximately five hundred jobs in these two segments. 

The decision to streamline the mg Group’s structure in the wake of its strategic refocus started to be 

implemented last year in the form of preparations to dismantle the holding companies of the Lurgi 

and Lurgi Lentjes subgroups. There are also plans to merge Lurgi Energie und Entsorgung GmbH, 

Ratingen, Germany, and Lentjes Shared Services GmbH, Düsseldorf, Germany, with Lurgi Lentjes AG, 

Düsseldorf, in 2004. 

In addition, measures aimed at merging GEA’s holding company with the mg Group’s holding 

company in Frankfurt am Main were initiated at the beginning of 2004 (for further information see 

Note 25) ‘Subsequent Events’). Headcount at the mg Group’s holding company in Frankfurt had 

been cut to 92 by December 31, 2003 (prior year: 128). The target is to reduce the total number of 

employees at both holding companies to less than 100 by the time the merger has been completed. 

Costs of a121.535 million were incurred in 2003 (prior year: a7.530 million) for measures adopted 

as part of mg’s strategic refocus for its continued operations: these included the restructuring and 

reorganization of the industrial plant engineering business, the early termination of contracts with 

executive directors, the dismantling of redundant holding-company structures, and the improvement 

of efficiency. These costs are shown separately in the statements of income (see Note 18) 

‘Restructuring Costs’). Restructuring costs of a8.392 million (prior year: a680,000) were incurred 

for its discontinued operations. These are included in ‘Profit/loss on discontinued operations’. 

107

108 

NOTES TO THE CONSOLIDATED BALANCE SHEETS 

AND CONSOLIDATED STATEMENTS OF INCOME 

1) Fixed Assets 

The changes in fixed assets are shown in the Consolidated Fixed Assets Schedule. 

Intangible assets essentially comprise goodwill, patents and licenses. The licenses include a permit 

worth a17.510 million (prior year: a21.536 million) to mine a raw material used in the production of 

lithium carbonate. The license is amortized according to the extent to which the raw material is mined. 

The residual useful economic life estimated on this basis is 52 years. The fall in its carrying amount 

is mainly due to movements in the euro/U.S. dollar exchange rate. 

Intangible assets also include a leased standard software license worth a7.205 million (prior year: 

a10.524 million); because this software license is on a capital lease, the mg Group is deemed to be its 

beneficial owner (for further information see Note 2) ‘Leasing’). 

The mg Group first adopted SFAS 142 (‘Goodwill and Other Intangible Assets’) in 2001/2002. The 

annually required impairment test was conducted in the fourth quarter of the fiscal year in accordance 

with the planning process. This test revealed no need for impairment write-downs. The changes in 

goodwill for each segment are shown under Note 26) ‘Segment Reporting’. 

The impairment test conducted in accordance with SFAS 144 identified a need for valuation allowances 

of a860,000 on software and licenses. 

Intangible assets acquired in 2003 have a weighted-average useful life of 8.2 years (patents, licenses, 

trademarks and similar rights and assets, including licenses for such rights and assets) and 4.5 years 

(software). 

The following amortization costs are expected in future years for the intangible assets reported at 

December 31, 2003: 

Expected Amortization 

of Intangible Assets 

Up to December 31 t ’000 

2004 16,274 

2005 10,774 

2006 5,601 

2007 2,767 

2008 2,278 

Property, plant and equipment includes land and buildings, plant and equipment, and office furniture 

and equipment of a80.051 million on capital leases (prior year: a82.591 million). a73.276 million 

(prior year: a74.804 million) of this amount is attributable to Dynamit Nobel (for further information 

see Note 2) ‘Leasing’).



The impairment test conducted in accordance with SFAS 144 identified a need for valuation allowances 

of a4.559 million on property, plant and equipment; this amount is mainly reported under the cost 

of sales. These valuation allowances largely relate to land and buildings, mainly at Lurgi. The computation 

of the valuation allowances needed is largely based on expert opinions. 

At the balance sheet date, the mg Group reported loans of a68.966 million (prior year: a66.266 million), 

a38.790 million (prior year: a32.638 million) of which contained valuation allowances. These 

valuation allowances were as follows in 2003: 

Valuation Allowances 

on Loans 

t ’000 

Balance at 12/31/2002 32,638 

Additional charges 7,797 

Amounts reversed – 16 

Price differences – 1,629 

Balance at 12/31/2003 38,790 

The investments and long-term financial assets include receivables arising from a direct capital 

lease between a company belonging to Dynamit Nobel and MCC Micro Compact Car (‘Smart Car’) 

and its subsidiaries. This lease covers the transfer of certain production facilities, the development of 

a module, and a supply agreement. The lease runs for twelve years. The lease receivables amounted 

to a39.680 million (prior year: a44.257 million) at December 31, 2003. An obligation of the same 

amount under this agreement is included under liabilities, as the company is the lessee. Total interest 

income of a6.862 million will be generated in future years over the residual life of the project. 

The following schedule shows the discounted minimum lease payments receivable under the direct 

capital lease at December 31, 2003 by maturity: 

Year Ending December 31 P ’000 


2005 6,551 

2006 6,248 

2007 5,959 

2008 5,665 

Danach 8,379 

Total minimum lease payments receivable 39,680 

2) Leasing 

In addition to the capital leases mentioned under Note 1) ‘Fixed Assets’, the mg Group uses various 

operating leases. The cost of these operating leases amounted to a104.416 million in 2003 (prior year: 

a27.672 million). a38.119 million (prior year: a9.201 million) of this amount is attributable to 

Dynamit Nobel. 

109

110 

Future minimum lease payments for operating and capital leases with an original or residual life of 

more than one year are reported separately and explained under ‘Other financial obligations’. At 

December 31, 2003, they were spread over future years as follows: 

Capital Operating 

Lease Lease 

Year Ending December 31 t ’000 t ’000 

2004 10,688 93,642 

2005 11,045 87,084 

2006 7,748 64,137 

2007 5,498 53,353 

2008 4,990 47,317 

Thereafter 44,967 217,167 

Total minimum lease payments 84,936 562,700 

Less amounts representing interest 26,403 

Present value of obligations under capital lease 58,533 

Future lease payments receivable of a74.719 million will be earned from non-callable sub-leases 

– largely operating leases – over a period of up to eleven years. None of these revenues are attributable 

to Dynamit Nobel. 

3) Inventories 

12/31/2003 12/31/2002 

u ’000 t ’000 

Raw materials and supplies 180,675 199,283 

Work in process 240,746 295,764 

thereof relating to long-term contracts (57,704) (75,855) 

Finished goods and merchandise 235,967 245,800 

Advances to suppliers 36,054 36,019 

Advances received from customers – 75,426 – 148,255 

Total 618,016 628,611 

Dynamit Nobel’s companies hold total inventories of a299.919 million (prior year: a300.303 million). 

Inventories are valued in accordance with the lower-of-cost-or-market rule and market conditions 

taken into consideration in terms of replacement costs, realizable values or realizable values less a 

profit margin. 

4) Receivables and Other Assets 

Receivables and other assets were as follows at the balance sheet date: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Gross trade receivables 1,022,972 976,745 

Other receivables and other assets 420,539 419,426 

Total 1,443,511 1,396,171



Receivables and other assets of a277.138 million (prior year: a248.399 million) are attributable to 

Dynamit Nobel. 

Trade receivables comprise the following: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Gross trade receivables 835,660 737,669 

Less valuation allowance – 90,004 – 51,935 

745,656 685,734 

Unbilled receivables from long-term contracts 2,681,998 2,263,350 

net of advance payments received – 2,404,682 – 1,972,339 

277,316 291,011 

Total 1,022,972 976,745 

Other receivables and other assets are composed as follows: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Receivables from affiliated companies 65,005 67,298 

Less valuation allowance – 30,727 – 40,775 

34,278 26,523 

Receivables from associated and related companies 21,531 27,872 

Less valuation allowance – 10,808 – 10,033 

10,723 17,839 

Other receivables and other assets 439,527 457,308 

Less valuation allowance – 63,989 – 82,244 

375,538 375,064 

Total 420,539 419,426 

Other receivables and other assets include receivables from tax authorities of a76.918 million 

(prior year: a89.012 million), financial derivatives of a51.437 million (prior year: a43.480 million) 

and assets held for sale amounting to a31.134 million (prior year: a0 million). 

Assets held for sale essentially consist of the assets sold in the project company Daimlerstrasse 

GmbH & Co. KG, Frankfurt am Main. At the balance sheet date, mg planned to sell 68% of the capital 

stock in this project company to third parties (for further information see Note 25) ‘Subsequent 

Events’). This proportion of its assets is therefore reported as ‘assets held for sale’. The same applies 

to the company’s divested liabilities, which are reported as ‘liabilities held for sale’ (for further 

information see Note 11) ‘Liabilities’). 

111

112 

Receivables and other assets that mature after more than one year are as follows: 

12/31/2003 12/31/2002 

Due after more than one year u ’000 t ’000 

Gross trade receivables 16,993 5,895 

Receivables from affiliated companies 1 283 

Receivables from associated and related companies 1,313 7 

Other receivables and other assets 65,584 70,104 

Total 83,891 76,289 

Some Group companies entered into factoring agreements and asset-backed securitizations with 

various banks and financial services providers. 

The purpose of factoring agreements is the sale of receivables, under which the payment risk is 

transferred to the buyer of the receivables. Where sellers of receivables have assumed blanket liability 

on a limited scale, this obligation has been reported at its fair market value. The excess up to the 

maximum level of liability is reported under ‘Other financial obligations’. Where sellers of receivables 

perform the collection of receivables sold, a market-rate fee is agreed for this service. 

Under an asset-backed securitization program various companies in the mg Group sells short-dated 

trade receivables to a qualifying special-purpose entity on a revolving basis. The special-purpose entity 

is an independent trust that meets the criteria of a qualifying special-purpose entity and is therefore 

not consolidated by mg pursuant to SFAS 140 (‘Accounting for Transfers and Servicing of Financial 

Assets and Extinguishments of Liabilities’) and FIN 46r. 

The Group continues to service (and collect) the receivables sold under the ABS program. The marketrate 

fees agreed for these services are offset pro rata temporis against the administrative fees paid 

by the Group for these transactions. The purchase price for the receivables sold is derived from their 

nominal amount less a contractually agreed discount, which contains a certain amount to cover future 

financing and administration costs and any risks arising from the sale of receivables. The purchase 

price is paid in two installments. While the first installment is paid as soon as the receivables are 

sold, the second is not paid until the receivables sold have been repaid. 

Asset-backed securitizations are generally recognized in income at the time the receivables are sold 

and when the monthly fees are billed for qualifying special-purpose entities. Where these expenses 

relate to commitment fees for credit lines under these transactions, they are recognized in the statements 

of income as incidental payment costs. The administrative fees incurred are reported as administrative 

expenses. 

At December 31, 2003, the mg Group had sold receivables of a237.258 million (prior year: a303.165 million) 

under factoring agreements and asset-backed securitizations that are not shown on the balance 

sheet. Discontinued operations accounted for a28.750 million (prior year: a69.007 million), which 

relates to solvadis. Most of the remaining receivables were sold by Dynamit Nobel companies.



Of the total receivables sold at the balance sheet date, receivables of a46.443 million (prior year: 

a88.319 million) were sold under the ABS program. These relate exclusively to Dynamit Nobel. The 

prior-year figure also includes receivables sold by solvadis. However, solvadis left the ABS program 

during the year under review. Total cash flows between Dynamit Nobel and solvadis, on the one hand, 

and the qualifying special-purpose entity, on the other, in 2003 and in the prior year were as follows: 

Continued operations (Dynamit Nobel) 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Total receivables sold under ongoing ABS transactions 

over the 12 (prior year: 3) month period 694,763 199,046 

Amounts collected for receivables sold under ABS transactions 

Total fees for ABS transactions, less payments 

697,533 195,604 

received for servicing 2,010 737 

Discontinued operations (solvadis) 

Total receivables sold under ongoing ABS transactions 

over the 12 (prior year: 3) month period 295,373 95,014 

Amounts collected for receivables sold under ABS transactions 

Total fees for ABS transactions, less payments 

329,133 100,476 

received for servicing 672 244 

In 2003 – as in previous years – the mg Group received payments for receivables that had already been 

sold by the previous balance sheet date. Payments received during the current fiscal year therefore 

do not only include receivables sold to the qualifying special-purpose entity in 2003. 

5) Securities 

Short- and long-term securities are broken down as follows: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Long-term securities 3,466 1,824 

Short-term securities 12,175 64,185 

Total 15,641 66,009 

Thereof 

Available for sale (at fair value) 15,569 63,505 

Held to maturity (at amortized cost) 72 2,504 

Total 15,641 66,009 

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The securities attributable to Dynamit Nobel are not of material importance. Marketable securities 

attributable to continued operations were classified as follows at December 31, 2003: 

12/31/2003 

Available for sale 

Amortized Gross Gross 

Cost Unrealized Gain Unrealized Loss Fair Value 

t ’000 t ’000 t ’000 t ’000 

Equity 5,329 1,405 -9 6,725 

Debt 8,772 72 8,844 

Total available for sale 

Held to maturity 

14,101 1,477 -9 15,569 

Debt 72 - - 72 

Total held to maturity 72 - - 72 

Total 

12/31/2002 

14,173 1,477 -9 15,641 

Available for sale 

Equity 22,456 25 -7,975 14,506 

Debt 48,176 823 - 48,999 

Total available for sale 

Held to maturity 

70,632 848 -7,975 63,505 

Debt 2,504 2 - 2,506 

Total held to maturity 2,504 2 - 2,506 

Total 73,136 850 -7,975 66,011 

Contractual maturities of debt securities, regardless of their balance sheet classification, are given in 

the following schedule: 

Amortized 

Cost Fair Value 

Contractual Maturity P ’000 t ’000 

Due in 

2004 8,652 8,724 

2005-2007 125 125 

Thereafter 67 67 

Total 8,844 8,916 

Actual maturities may differ from contractual maturities because borrowers have the right to call or 

repay certain obligations. 

Proceeds from the sale of available-for-sale securities amounted to a83.549 million in 2003 (prior 

year: a20.000 million). Purchases of securities came to a32.420 million (prior year: a9.458 million). 

Gross gains of a2.129 million (prior year: a1.841 million) and losses of a6.410 million (prior year: 

a70,000) were realized on those sales and are reported as ‘Other income’ and 'Other expenses'.



In 2003, losses of a118,000 (prior year: a2.271 million) from ‘Accumulated other comprehensive 

income/loss’ were expensed in the statements of income and reported as ‘Write-down of investments 

and long-term financial assets and marketable securities’, as the impairment of the securities in 

question is not expected to be merely temporary. The gains and losses realized in 2003 were calculated 

based on a specific valuation of these securities. 

6) Cash and Cash Equivalents 

Restricted cash and cash equivalents of a12.730 million were held at December 31, 2003 (prior year: 

a4.737 million). The majority of these relate to the settlement of the Customer Cases II lawsuit 

reached during the year under review (for further information see Note 14) ‘Litigation’). The prioryear 

amounts relating to deposits held at the bankrupt Gontard & MetallBank AG i.I. were liquidated 


In accordance with SFAS 95 (‘Statement of Cash Flows’), the consolidated statements of cash flows 

have been broken down into operating activities, investing activities and financing activities. Any 

effects resulting from changes in the scope of consolidation and exchange rate influences have been 

adjusted accordingly in the three above-mentioned sections. Non-cash expenses mainly comprise 

gains and losses of companies reported at equity as well as losses on securities transactions realized 

in 2003. Cash flows from the sale and acquisition of businesses in the ‘investing activities’ section 

have been adjusted for outflows and inflows of cash and cash equivalents. 

DVFA/SG cash flow comes to a97.038 million (prior year: a21.780 million). Net cash provided by 

asset management activities amounts to a39.809 million (prior year: cash outflow of a 64.767 million). 

This results in net cash of a136.847 million provided by operating activities (prior year: cash outflow 

of a42.987 million). Allowing for the net cash used for investing activities, free cash flow comes 

to minus a36.889 million (prior year: cash outflow of a96.501 million). 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Net loss – 198,600 – 30,998 

Adjustment for net profit/loss on discontinued operations 69,623 – 2,488 

Depreciation and amortization of fixed assets 212,953 48,783 

Other non-cash expenses 2,644 22 

Change in pension reserves 10,418 6,461 

= DVFA/SG cash flow 97,038 21,780 

+ Net cash provided by (used for) asset management activities 39,809 – 64,767 

= Net cash provided by (used for) operating activities 136,847 – 42,987 

+ Net cash used for investing activities – 173,736 – 53,514 

= Free cash flow – 36,889 – 96,501 

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Supplemental cash flow information 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Cash paid for interest – 79,607 – 10,819 

Cash paid for taxes – 51,130 – 12,453 

7) Prepaid Expenses 

This item essentially comprises rents, vehicle tax, and insurance premiums. As of December 31, 2003, 

the total amount came to a29.697 million (prior year: a33.951 million), a23.125 million (prior year: 

a27.531 million) of which was deferred for less than one year. 

8) Shareholders’ Equity 

Capital stock 

The capital stock of mg technologies ag totaled a496.890 million at the balance sheet date. It consists 

of 194,366,618 no par value bearer shares. Changes in capital stock during the year were as follows: 

Balance at December 31, 2002 494,246,972 

Increase in capital stock pursuant to the resolution adopted by 

the Annual Shareholders’ Meeting on March 31, 2000 2,610,145 

Increase in capital stock pursuant to the resolution adopted by 

the Extraordinary Shareholders’ Meeting on August 20, 1999 33,252 

Balance at December 31, 2003 496,890,369 

Each equity security accounts for a rounded notional a2.56 (DM 5) of the capital stock. 

1,021,000 options were exercised and exchanged for 1,021,000 mg shares under the 2000/2003 

stock option program based on the authorization granted by the Annual Shareholders’ Meeting on 

March 31, 2000 to increase the conditional capital. 

Pursuant to the resolution adopted by the Extraordinary Shareholders’ Meeting on August 20, 1999 

concerning the increase of conditional capital, 2,487 GEA common shares and 5,908 GEA preference 

shares were exchanged for 13,007 mg technologies ag shares in 2003. 

Authorized Capital 

Resolution Adopted by Expiring Amount 

Annual Shareholders’ Meeting on t 

Authorized capital I March 28, 2002 March 27, 2007 77,000,000 

Authorized capital II March 27, 1997 March 26, 2002 

– expired 

– 

Authorized capital III March 31, 2000 March 30, 2005 75,000,000 

Authorized capital IV April 2, 1998 April 1, 2003 

– expired 

– 

t 

152,000,000



With the authorized capital I, the Executive Board is authorized, with Supervisory Board approval, 

to increase the share capital by issuing new no par value shares against cash contributions on one or 

more occasions and, in doing so, to determine a starting date for profit participation other than that 

stipulated by law pursuant to section 5 (4) of the articles of incorporation. 

The authorized capital III allows the capital stock to be increased through the issue, on one or more 

occasions, of new no par value shares against non-cash contributions, and the Executive Board may, 

pursuant to section 5 (4) of the articles of incorporation, determine a starting date for profit participation 

other than that stipulated by law. Furthermore, the Executive Board is authorized, with Supervisory 

Board approval, to decide on the exclusion of subscription rights and to determine the further 

details of the capital increase and the conditions governing the issuance of shares. 

Conditional Capital 

12/31/2003 12/31/2002 

u ’000 t ’000 

Stock option program 

GEA shareholders’ right to compensation pursuant to 

25,510,908 28,121,053 

section 305 of the German Joint Stock Corporation Act (AktG) 3,210,619 3,243,871 

Convertible participatory capital 1,278 1,278 

28,722,805 31,366,202 

By resolution of the Extraordinary Shareholders’ Meeting of August 20, 1999, the conditional capital 

was increased by a total of a101,804,881, divided into up to 39,822,608 bearer shares. The increase 

in conditional capital is utilized for compensation payments in the form of shares of mg technologies 

ag to external shareholders of GEA Aktiengesellschaft, Bochum. The exchange ratio is five mg technologies 

ag shares for three common shares of GEA Aktiengesellschaft or three mg technologies ag 

shares for two preferred shares of GEA Aktiengesellschaft. The conditional capital increase will only 

be carried out to the extent that external shareholders of GEA Aktiengesellschaft utilize their right 

to compensation. For further details, please refer to the comments on capital stock. 

For further information on the conditional capital relating to the stock option program, please refer to 

the sections below. 

Stock Option Program 

As part of a stock option program based on a conditional capital of a28,121,053, the Annual Shareholders’ 

Meeting of mg technologies ag of March 31, 2000 decided to authorize the Executive Board, 

with Supervisory Board approval, to issue on one or more occasions up to 11 million option rights 

with a maximum maturity of five years to Group executives on or before September 30, 2005. Shareholders’ 

statutory subscription rights are excluded. 

The stock option program has been offered annually to executives of the mg Group in tranches, each 

of which runs for a period of three years. 

The option rights were offered to eligible participants for subscription for a period of four weeks, 

starting from the respective Annual Shareholders’ Meeting. 

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118 

Eligible executives had the right to convert the option rights into shares of mg technologies ag at a 

ratio of 1 for 1. The purchase rights may only be exercised during a period of four weeks following 

the Annual Shareholders’ Meeting in the third fiscal year after the option rights have been issued. 

The aim of the program is to increase average pre-tax earnings per share (pre-tax EPS) during the 

three-year period between subscription and exercise of such rights (EPS performance value) in relation 

to average pre-tax EPS during the three years prior to subscription (base EPS value). This quotient 

constitutes the profit increase factor. The options can only be exercised if the EPS performance value 

exceeds the base EPS value, i.e. if the profit increase factor is at least 1 (program target). 

The purchase price for one mg no par value share is determined by dividing the share’s market price 

by the profit increase factor at the time of exercise. The applicable market price is the mean of the 

closing prices for the share in Xetra trading on the Frankfurt Stock Exchange over the five trading 

days following the Annual Shareholders’ Meeting of mg technologies ag in the year of the respective 

exercise. 

In June 2000, those eligible had the opportunity to decide whether to participate in the stock option 

program. To this end, mg technologies ag issued 1,410,000 option rights (2000/2003) in July 2000 

(tranche III). Eligible participants were able to exercise the option rights after the 2003 Annual Shareholders’ 

Meeting. All option rights remaining after employees had left the company in the meantime 

were exercised, so that there were no option rights from the program outstanding at December 31, 2003. 

In April 2001, those eligible again had the opportunity to decide whether to participate in the stock 

option program. To this end, mg technologies ag issued 1,557,000 option rights (2001/2004) in July 

2001 (tranche IV). Eligible participants can exercise the option rights after the Annual Shareholders’ 

Meeting in 2004 provided the program target is met. The number of option rights issued in this 

tranche fell to 1,109,000 at December 31, 2003 owing to the fact that some eligible participants had 

left the company. This was the first time that the program target was not achieved; the profit increase 

factor was less than 1. The eligible participants were therefore unable to exercise their option rights, 

and all 2001/2004 option rights thus expired. 

In April 2002, those eligible had a further opportunity to participate in the stock option program. 

To this end, mg technologies ag issued 1,633,000 option rights (2002/2005) in June 2002 (tranche V). 

Eligible participants can exercise the option rights after the Annual Shareholders’ Meeting in 2005 

provided the program target is met. The number of option rights issued in this tranche fell to 

1,249,000 at December 31, 2003 owing to the fact that eligible participants had left the company. 

In June 2003, those eligible had their final opportunity to participate in the stock option program. 

To this end, mg technologies ag issued 1,464,000 option rights (2003/2006) in July 2003 (tranche VI). 

Eligible participants can exercise the option rights after the Annual Shareholders’ Meeting in 2006 

provided the program target is met. The number of option rights issued in this tranche fell to 

1,396,000 at December 31, 2003 owing to the fact that eligible participants had left the company. 

Despite the fact that mg has aligned its fiscal year with the calendar year, the outstanding tranches of 

the stock option program will continue to be based on a 12-month period ending on September 30. 

The 2003/2006 tranche was the last one to grant stock options based on the resolution adopted by 

the Annual Shareholders’ Meeting on March 31, 2000.



The key data of this stock option program are as follows. The option rights for tranches I and II were 

based on convertible bonds. 

Expected Weighted 

Average Number Average 

Conversion Price of Options Remaining Life 

Balance at 9/30/1999 7.78 720,400 

Granted (tranche III) 8.73 1,410,000 April 2003 

Exercised – – 

Expired 7.53 – 61,000 

Converted – – 

Balance at 9/30/2000 8.44 2,069,400 

Granted (tranche IV) 5.81 1,557,000 April 2004 


Expired 4.49 – 165,000 

Converted (tranche I) 7.10 – 298,000 April/May 2001 

Balance at 9/30/2001 4.41 3,163,400 

Granted (tranche V) 6.02 1,633,000 April 2005 


Expired 5.49 – 219,000 

Converted (tranche II) 6.90 – 290,400 April/May 2002 

Balance at 9/30/2002 5.63 4,287,000 

Granted – – 


Expired 4.93 – 56,000 

Balance at 12/31/2002 5.12 4,231,000 

Granted (tranche VI) N.N. 1,464,000 June 2006 

Exercised (tranche III) 6.41 1,021,000 June 2003 

Expired – 920,000 

Balance at 12/31/2003 N.N. 3,754,000 

The profit increase factor for the stock option program launched in April 2000 (tranche III) is 1.36058. 

This resulted in a discount of 26.5% on the share price during the 2003 subscription period. 

The fair value of the options is calculated by an actuary at the grant date based on a modified Black- 

Scholes model. The fair value of tranche VI of the stock option program (expense per share) came to 

a1.49 per option at the date of issue. The fair value of each option under tranche V came to a1.90. 

The following parameters were used to calculate the fair value of tranche VI: 

Parameters Specific Terms 

Volatility of mg share price 56.4% over a three-year period 

Volatility of EPS increase 60.9% 

Correlation between stock yield and EPS Correlation coefficient of 0.4241 

Risk-free interest rate 2.46% 

Dividend yield 2.7% 

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120 

As described above, the calculation of the conversion price is based on the future share price and the 

EPS performance value. Stating the conversion price thus requires us to predict both of these variables. 

The uncertainty inherent in any forecast is further compounded in the case of the EPS performance 

value by last year’s one-off charges, which have depressed the mg Group’s earnings. It is uncertain 

whether the EPS performance value for tranches V and VI will exceed the base EPS value so that the 

options can be exercised. For this reason, no estimate of the expected conversion price for these two 

tranches has been given this year. 

Employee Share Ownership Program 

On April 2, 1998, the Annual Shareholders’ Meeting of mg technologies ag (still Metallgesellschaft 

AG at the time) adopted a resolution to launch an employee share ownership program (ESOP)for 

Group employees on the basis of an ‘authorized capital’. The Executive Board of mg was authorized, 

with Supervisory Board approval, to increase mg’s capital stock by up to a7.669 million on or before 

April 1, 2003 by issuing new bearer shares (‘staff shares’) on one or more occasions to employees of 

mg and its affiliated companies resident in Germany as part of an employee share ownership program. 

Employees can purchase no par value bearer shares of mg. Eligible participants are all mg Group 

employees resident in Germany who have an unterminated employment or training contract at the 

time they agree to participate in the program and at the time the two-year subscription period expires. 

These employees may only participate and acquire stock-purchasing rights in their own name and 

for their own account. The stock-purchasing rights may not be transferred or pledged. Once they 

have agreed to participate, all eligible employees have the right to purchase either 50, 100 or 200 staff 

shares two years after they agree to participate. Employees may participate once a year during a 

four-week period following the Annual Shareholders’ Meeting of mg technologies ag (‘subscription 

period’). 

The purchase price for employees is calculated as the mean of the closing prices for mg shares in 

Xetra trading on the Frankfurt Stock Exchange over the five trading days following the Annual 

Shareholders’ Meeting of mg technologies ag in the year of the respective agreement to participate 

in the employee share ownership program, and is fixed on the last of these five trading days, i.e. 

the purchase price is fixed at the start of the respective employee share ownership program tranche, 

two years prior to the exercise period. 

Once the two-year waiting period has elapsed, employees participating in the employee share ownership 

program may exercise their purchase rights within four weeks of the second trading day after 

the second Annual Shareholders’ Meeting of mg technologies ag following the respective agreement 

to participate (‘exercise period’). 

During the exercise period, participants can choose to buy the shares and place them in a securities 

account, to buy and then sell them immediately, or not to exercise their purchase rights at all. In order 

to prevent employees from suffering losses if mg’s share price performs poorly, their agreement to 

exercise their purchase rights is only valid (and is therefore merely conditional) if mg’s share price is 

above the purchase price at the time the purchase right is exercised; the sell order is therefore limited.



If the right to purchase shares on this basis has not been exercised by the time the exercise period 

expires, the respective employees’ purchase rights expire and their initial down payment is reimbursed 

with interest. 

The employee share ownership program has run five times since 1998. Because of the performance 

of mg’s share price, participants have been unable to exercise any of the tranches to date. All participants 

have therefore been reimbursed their initial down payment with interest. The fifth and final 

tranche (2002 ESOP) will be exercised immediately after the 2004 Annual Shareholders’ Meeting. 

The purchase price for each of these options is a10.90. They will be sold with effect from and at the 

price quoted in the first intraday auction in XETRA trading on the Frankfurt Stock Exchange on the 

day on which the bank receives the exercise notice. 

Since the previous employee share ownership program expired in 2003, no new program has been 

launched. 

Tranches IV (2001 ESOP) and V (2002 ESOP) of the employee share ownership program have performed 

as follows: 

2001 ESOP 2002 ESOP 

Number of participants registered in April 2001 and 2002 1,534 1,058 

Equivalent number of shares 282,900 195,050 

Balance at 9/30/2001 

Participants at balance sheet date 1,526 n.a. 

Equivalent number of shares 281,450 n.a. 

Number of participants leaving mg 8 n.a. 

Percentage of participants leaving mg 0.5 n.a. 


Participants at balance sheet date 1,480 1,051 


Number of participants leaving mg 54 7 

Percentage of participants leaving mg 3.5 0.7 


Participants at balance sheet date 1,430 1,051 


Number of participants leaving mg 104 7 

Percentage of participants leaving mg 6.8 0.7 

Balance at 12/31/2003 

Participants at balance sheet date n.a. 1,028 

Equivalent number of shares n.a. 189,750 

Number of participants leaving mg n.a. 30 

Percentage of participants leaving mg n.a. 2.8 

The fair value of these options is calculated at their grant date using a Black-Scholes model. The fair 

value of each option under the 2002 ESOP came to a2.78 at their grant date; the fair value of each 

option under the 2001 ESOP was a2.40. 

Total compensation expense recognized for the stock option program and the employee share ownership 

program amounted to a1.597 million in 2003 (three-month prior-year period: a851,000). The 

lower expense in relative terms compared to the short 2002 fiscal year is due to the fact that several 

executives left the stock option program last year. 

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122 

Retained Earnings 

The Executive Board was authorized by the Annual Shareholders’ Meeting resolution of June 3, 2003 

to purchase the company’s outstanding shares pursuant to section 71 (1) No. 8 AktG. Based on this 

authorization, mg technologies ag purchased a total of 1,269,838 of its own shares in August and 

October 2003. In October 2003, the company sold all of its own shares it had purchased during that 

year. The resultant book profit of a1.154 million was transferred directly to the company’s retained 

earnings. 

The following schedule gives a monthly breakdown of the shares purchased and sold by mg technologies 

ag in 2003: 

Amount of Percentage of Purchase/ 

Number of Capital Stock Capital Stock Selling Price 

Month Shares t ’000 % t ’000 

Purchased in August 650,000 1,662 0.33 5,524 

Purchased in October 619,838 1,584 0.32 6,337 

Sold in October 1,269,838 – 3,246 – 0.65 13,015 

Balance at 12/31/2003 0 0 0 1,154 

Accumulated Other Comprehensive Loss 

The changes in accumulated other comprehensive loss were as follows: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Accumulated other comprehensive loss at beginning of period under review – 94,579 – 79,049 

Unrealized holding gains on available-for-sale securities 4,187 859 

Realized losses on available-for-sale securities 4,400 500 

Tax effect of available-for-sale securities – 3,374 – 515 

Total gains on available-for-sale securities 5,213 844 

Unrealized holding gains on cash flow hedges 21,343 8,705 

Realized gains on derivatives – 12,882 – 3,346 

Tax effect of derivatives – 4,441 – 1,874 

Total gains on derivatives 4,020 3,485 

Foreign currency translation adjustments – 70,144 – 16,785 

Change in minimum pension liability – 30,505 – 5,374 

Tax effect of change in pension liability 13,029 2,300 

Total gains (losses) on change in pension liability 17,476 – 3,074 

Accumulated other comprehensive loss at end of year – 172,966 – 94,579 

The change in the minimum pension liability covers the amounts attributable to both continued and 

discontinued operations. a28.457 million (prior year: a5.393 million) of the increase in minimum 

pension liability is attributable to continued operations. 

9) Minority Interests 

At December 31, 2003, minority interests consisted largely of the 27.7% (prior year: 27.7%) holding 

in the Menzolit Fibron Group and the 1.96% (prior year: 1.98%) stake in GEA.



10) Provisions and Accrued Liabilities 

Provisions and accruals are composed as follows: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Provisions for pensions and similar obligations 910,177 875,869 

Provisions for taxes 47,961 52,141 

Other provisions and accruals 869,470 695,105 

Total 1,827,608 1,623,115 

Provisions and accruals of a423.630 million are attributable to Dynamit Nobel (prior year: 

a393.707 million. 

Provisions and accruals due after more than one year were as follows: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Provisions for pensions and similar obligations 868,180 833,885 

Provisions for taxes 6,003 12,201 

Other provisions and accruals 158,037 140,855 

Due after more than one year 1,032,220 986,941 

a) Provisions for Pensions and Similar Obligations 

These are broken down as follows: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Pension liabilities (pension plans) 842,449 806,552 

Other postretirement benefits 57,005 58,083 

Other accrued pension-related obligations 10,723 11,234 

aa) Pension Plans 

910,177 875,869 

The mg Group provides pension benefits to the majority of its employees. The benefits in Germany 

usually consist of pension payments. Employees generally receive fixed pension amounts per year 

of service. The subsidiaries outside Germany operate country-specific pension plans, some of which 

are funded. Benefit obligations in Germany are primarily unfunded. 

With the exception of GEA, the German subsidiaries’ ongoing pension liabilities up to September 30, 

1999 are valued using the Chemie 1996R pension fund mortality tables, while ongoing pension plans 

after September 30, 1999 and all benefits are valued using 1998 Heubeck tables modified for Groupspecific 

disability probabilities (35% for women and 50% for men). The Heubeck tables are used 

throughout for GEA. 

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124 

The changes in projected benefit obligations and plan assets and the reconciliation of the funded 

status for the companies reported as continued operations are as follows: 

12/31/2003 12/31/2002 

Pension Plans Pension Plans 

t ’000 German Foreign German Foreign 

Change in 

projected benefit obligation 

Projected benefit obligation 

at beginning of year 750,408 211,307 751,679 212,647 

Service cost 9,634 6,572 2,174 1,730 

Interest cost 42,241 11,540 10,988 2,878 

Actuarial loss (+ )/gain (-) 

Changes in scope of consolidation/ 

51,721 – 1,904 – 2,583 – 1,509 

foreign exchange differences – – 10,104 – – 1,158 

Benefits paid – 49,659 – 6,259 – 11,850 – 3,281 

Accumulated postretirement 

benefit obligations at end of year 

Change in plan assets 

804,345 211,152 750,408 211,307 

Fair value of plan assets 

at beginning of year 19,124 156,333 19,246 159,239 

Expected return on plan assets 714 10,257 179 2,846 

Actuarial loss (-)/gain (+) 123 – 2,109 – – 2,929 

Employer contributions 

Changes in scope of consolidation/ 

941 5,621 200 1,253 

foreign exchange differences – – 2,729 – – 824 

Benefits paid – 2,018 – 5,491 – 501 – 3,252 

Fair value of plan assets 

at end of year 

Reconciliation of funded status 

18,884 161,882 19,124 156,333 

Funded status 785,461 49,270 731,284 54,974 

Unrecognized transition obligation 

Unrecognized service cost 

– 5,441 – 1,103 – 12,696 – 1,710 

arising from retroactive plan changes – 1,724 – – 

Unrecognized actuarial loss – 63,095 – 31,751 – 12,693 – 36,014 

Net amount recognized 716,925 18,140 705,895 17,250



Amounts recognized in the consolidated balance sheets for the pension plans of companies reported 

as continued operations consist of the following: 

12/31/2003 12/31/2002 


Accrued pension liability 

(including minimum pension liability) 802,103 40,346 762,010 44,542 

Prepaid expenses – – 1,379 – – 1,951 

Intangible assets 

Accumulated other comprehensive 

– 4,209 – 286 – 8,080 – 323 

income/loss – 80,969 – 20,541 – 48,035 – 25,018 

Net amount recognized 716,925 18,140 705,895 17,250 

The net amount recognized is calculated by netting the accrued net pension liability (excluding the 

minimum pension liability) with the prepaid expenses. 

The share of discontinued operations in the accumulated other comprehensive income/loss has 

been adjusted for the purposes of the above reconciliation. This amount is not reclassified like the 

accrued pension liability, prepaid expenses, and intangible assets in accordance with SFAS 144. 

Actuarial assumptions used to determine costs and benefit obligations at NPV for the principal pension 

plans were as follows: 

Weighted-Average 12/31/2003 12/31/2002 

Assumptions German Foreign German Foreign 

% % % % 

Discount rate 5.5 2.5 - 6.5 6.0 2.5 - 7.5 

Rate of compensation increase 

Expected long-term return 

3.0 2.0 - 6.5 3.0 2.5 - 5.0 

on plan assets 2.2 - 7.0 2.0 - 8.5 3.3 - 5.9 3.0 - 8.5 

The actuarial assumptions for German pension plans were coordinated with actuarial experts 

Dr. Dr. Heissmann GmbH, Wiesbaden. 

Components of net periodic pension cost for the plan for companies reported as continued operations 

were as follows: 

1/1/2003 – 12/31/2003 10/1/2002 – 12/31/2002 

Pension Plans Pension Plans 


Service cost 9,634 6,572 2,174 1,730 

Interest cost 42,241 11,540 10,988 2,878 

Expected return on plan assets 

Amortization of unrecognized 

– 714 – 10,257 – 179 – 2,846 

transitional amount 

Amortization of service cost 

7,255 607 1,814 119 

arising from retroactive plan changes – – 115 – – 

Amortization of actuarial losses 1,457 3,263 90 710 

Net periodic pension cost 59,873 11,610 14,887 2,591 

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The above tables give the fair values and the expected long-term returns on these plan assets for 

German pension plans. The returns are estimated based on both historical and future expected market 

and portfolio performance. a582,000 is expected to be allocated to German pension plan assets in 

2004. The plan assets continue to be managed by benevolent funds and foundations and are mainly 

invested in fixed-income securities and fixed-term deposits. There are no plans at present to change 

this investment strategy. The accumulated benefit obligation (excluding future salary increases) for 

German pension plans amounted to a790.572 million in 2003 (prior year: a736.913 million). The 

balance sheet date used to report German pension plan assets is December 31, 2003. 

ab) Defined Contribution Plans 

The individual companies of the mg Group’s continued operations offer various postretirement benefits 

in the form of defined contribution plans. The pension cost of these plans lies not with mg but with 

the respective pension provider. Total contributions of a12.645 million (prior year: a639,000) were 

paid in 2003. 

ac) Other Postretirement Benefits 

In addition to pensions and similar obligations, the mg Group provides certain retired employees 

with postretirement benefits for health insurance premiums. The following information refers to the 

Group’s postretirement benefit plans in Germany. 

Change in projected benefit obligation 

12/31/2003 12/31/2002 

u ’000 t ’000 

Projected benefit obligation at beginning of year 48,778 48,780 

Service cost 354 82 

Interest cost 2,722 713 

Actuarial losses (+)/gains (–) 4,716 – 3 

Benefits paid – 3,410 – 794 

Accumulated postretirement benefit obligations at end of year 

Reconciliation of funded status 

53,160 48,778 

Funded status 53,160 48,778 

Unrecognized actuarial losses (–)/gains (+) – 397 4,212 

Net amount recognized 52,763 52,990



Actuarial assumptions used to determine costs and benefit obligations for principal additional 

domestic pension plans were as follows: 

12/31/2003 12/31/2002 

Weighted-Average Assumptions % % 

Discount rate 5.5 6.0 

Healthcare and life insurance inflation rate 4.0 4.0 

The inflation rate for German pension plans with respect to healthcare and life insurance costs 

is estimated to be 4.0% for 2004. The balance sheet date used to report German pension plans is 

December 31, 2003. 

Components of net periodic postretirement benefit cost for the plan are as follows: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Service cost 354 82 

Interest cost 2,722 713 

Amortization of actuarial losses (+) / gains (–) 2 -7 

Net periodic pension cost 3,078 788 

Additional postretirement benefits are also paid by two foreign companies. Their funded status at 

December 31, 2003 comes to a3.710 million (prior year: a4.361 million) and the net amount recognized 

for additional foreign postretirement benefits totals a4.242 million (prior year: a5.093 million). 

The relevant cost of these benefits in 2003 amounted to a353,000 (prior year: a103,000). Actuarial 

assumptions used to determine costs and benefit obligations for additional foreign postretirement 

benefits include a discount rate of 6.25% (prior year: 7.0% and 6.75%). These assumptions also 

took into account projections of the rising cost of medical and dental treatment benefits. The rise in 

the cost of medical healthcare benefits amounts to 15.0% and 9.0% (prior year: 8.5% and 9.5%). 

These costs will fall by 1.0% and 0.5% per year respectively (prior year: 0.5%) up to 2013 and 2011 

(prior year: 2009 and 2011). The rise in the cost of dental healthcare benefits amounts to 7.5% and 

9.0% (prior year: 7.5% and 9.5%). They will fall by 0.5% per year (prior year: identical) up to 2010 

and 2011. There was no change on the prior year. 

The following schedule presents the effect of a one percentage point change in the inflation 

rate on the service cost and accumulated postretirement benefit obligations for pension plans at 


1% Increase 1% Decrease 

German Foreign German Foreign 

P ’000 P ’000 P ’000 P ’000 

Effect on service cost 

Effect on accumulated postretirement 

+ 54 + 43 – 43 – 37 

benefit obligations + 5,724 + 357 – 4,917 – 328 

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b) Provisions for Taxes 

Provisions and accrued liabilities for taxes relate to current taxes and were largely established to 

cover foreign tax liabilities and future audits. 

c) Other Provisions and Accrued Liabilities 

Other provisions and accruals consist of the following: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Personnel expenses 

Outstanding suppliers’ invoices 

216,201 197,793 

(excl. provisions for outstanding invoices and losses on long-term contracts) 

Provisions for outstanding invoices and losses on long-term contracts (incl. provisions 

70,780 64,908 

for guarantee commitments: s31.652 million; 2001/2002: s29.361 million) 227,826 185,208 

Environmental/recultivation 67,023 42,335 

Other guarantee obligations 33,319 40,280 

Restructuring 83,736 18,782 

Sundry 170,585 145,799 

Total 869,470 695,105 

Provisions for personnel expenditures largely comprise bonuses, vacation net yet taken, anniversaries, 

part-time retirement, and excess working hours accumulated. The rise is largely due to the 

increasing use of preretirement part-time contracts for staff over 55 years of age, which are being 

used as a way of reducing the headcount. 

The environmental and recultivation provisions and accrued liabilities primarily relate to soil 

decontamination, demolition of buildings, waste disposal and treatment of effluents. Provisions with 

a nominal value of roughly a10.500 million were discounted at a rate of 5.5%. The discounted amount 

comes to approximately a4.000 million. In addition to the reported liabilities of a67.023 million 

there is a further maximum potential liability risk of a8.050 million. This additional risk is attributable 

almost exclusively to Dynamit Nobel. 

Provisions for guarantee commitments, including guarantee commitments included in provisions 

for outstanding invoices and losses on long-term contracts, were as follows: 

t ’000 

Initial balance at 1/1/2003 69,641 

Payments – 26,826 

Provisions for newly issued guarantees 

Changes in provisions for guarantee commitments already issued in 2001/2002 

25,962 

(incl. adjustments due to changes in assessment) – 756 

Other changes (currency translation adjustments, scope of consolidation) – 3,050 

Final balance at 12/31/2003 64,971 

Provisions for guarantee commitments mainly relate to to GEA and the plant engineering business. 

The guarantees and warranties on which they are based are usually granted, as is customary in the 

industry, in connection with certain performance criteria relating to plant, equipment or products 

(e.g. output guarantee, quality of product manufactured). Guarantee commitments generally run for 

between one and two years from the time when delivery of the products, plant or equipment is



accepted. In addition to guarantees explicitly agreed by contract, many countries also recognize 

product liability arrangements, which in some cases may stipulate that the manufacturer is liable 

beyond the contractually agreed life of the guarantee. If the products, plant or equipment sold fail 

to meet the contractually agreed specifications, the mg Group will be faced with claims under its 

guarantee. In some cases the mg Group can demand collateral in the form of insurance premium 

refunds or guarantees from subcontractors. 

Provisions for guarantees are set aside on the basis of empirical values from similar products or 

based on the evaluated overall risk of the plant or equipment in question. The percentage of sales 

set aside as a provision will vary depending on the type of product, plant or equipment (general 

provision). General provisions are recognized at the time of final acceptance by the customer of 

the product, plant or equipment if the contract in question is accounted for under the completedcontract 

method. If it is accounted for under the PoC method, provisions are set aside according to 

the contract’s percentage of completion. If a claim is made under a guarantee and a loss is deemed 

likely, specific guarantee provisions are set aside to cover the anticipated cost (specific provisions). 

The restructuring provisions largely relate to the reorganization of the remaining activities in 

connection with the strategic restructuring of the mg Group. For further information see Note 

H) ‘Restructuring’. Provisions of a83.736 million have been set aside for the future cost of reorganization. 

Personnel-related measures will account for a67.639 million of this amount. The majority 

of this cost relates to continued salary payments and severance payments to employees under 

social plans. The exit costs of a16.097 million concern plans to divest or merge certain industrial 

plant engineering activities (for further information see Note 18) ‘Restructuring Costs’). 

The changes in these restructuring provisions are summarized as follows: 

Personnel-Related 

Obligations Exit Costs Total 

t ’000 t ’000 u ’000 

Balance at 9/30/2002 14,673 7,401 22,074 

Additional charges 3,388 4 3,392 

Amounts utilized 5,485 591 6,076 

Amounts reversed 540 68 608 

Acquisitions - - - 

Balance at 12/31/2002 12,036 6,746 18,782 

Additional charges 64,720 11,679 76,399 

Amounts utilized 7,978 3,534 11,512 

Amounts reversed 1,157 10 1,167 

Acquisitions 18 1,216 1,234 

Balance at 12/31/2003 67,639 16,097 83,736 

The a1.234 million increase in restructuring provisions owing to acquisitions resulted from the acquisition 

of Fleissner. 

The remaining provisions have essentially been established to cover risks arising from litigation as well 

as the cost of legal advice and other advisory costs of a36.763 million (prior year: a32.744 million) 

as well as provisions for impending losses of a21.836 million (prior year: a6.763 million). 

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11) Liabilities 

Financial liabilities at December 31, 2003 consisted of: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Bonds 300,000 298,000 

thereof maturing in up to 1 year (–) (–) 

thereof maturing in 5 years or later (–) (–) 

Liabilities to banks 843,797 774,097 

thereof maturing in up to 1 year (200,300) (122,987) 

thereof maturing in 5 years or later (65,546) (52,361) 

Liabilities from capital lease obligations 98,210 133,543 



Promissory notes payable 2,477 2,532 



Total 1,244,484 1,208,172 

Of the total financial liabilities, a306.425 million (prior year: a309.601 million) relates to Dynamit 

Nobel. These are broken down as follows: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Liabilities to banks 219,638 192,695 

Liabilities from capital lease obligations 86,093 116,145 

Promissory notes payable 694 761 

Total 306,425 309,601 

Bonds relate to a bond issued by mg technologies finance B.V., Rotterdam, and guaranteed by mg 

technologies ag. The interest coupon on the bond is 7.25% (prior year: 6.75%) p.a. The increase 

in the coupon is due to the credit rating downgrade by rating agency Moody’s Investors Service in 

October 2003. 

The interest paid on liabilities to banks mainly varied between 4% and 6% p.a. 

The increase in liabilities to banks and the decrease in liabilities from capital leases essentially arise 

from the first-time consolidation of the four leasing companies belonging to Dynamit Nobel in accordance 

with FIN 46r (for further information see Note D) ‘Scope of Consolidation’). As a result of 

this consolidation, liabilities to banks increased year on year by a42.358 million and liabilities from 

capital leases decreased year on year by a27.909 million. 

Total financial liabilities of a43.156 million (prior year: a53.479 million) are collateralized by 

mortgages. 

Cash and cash equivalents of a26.3 million (prior year: a114.6 million) were used to temporarily 

repay medium-term bank loans beyond the balance sheet date. Appropriate loans were utilized again 

in January 2004 and 2003. 

The fair value of financial liabilities at the balance sheet date came to a1.264843 billion (prior year: 

a1.209707 billion).



Aggregate amounts of financial liabilities maturing during the next five years and thereafter are as follows: 

Maturing up to December 31 t ’000 


2005 482,967 

2006 387,515 

2007 26,848 

2008 19,555 

Thereafter 111,051 

Total 1,244,484 

Other liabilities at December 31, 2003 consisted of: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Trade accounts payable 789,031 731,772 


thereof maturing in 5 years or later 

Excess of advance payments received over 

(17) (324) 

unbilled receivables from long-term contracts 172,081 214,130 


Advances received on orders 99,018 76,461 


Liabilities to affiliated companies 31,033 42,172 

thereof maturing in up to 1 year (31,033) (41,869) 


Liabilities to associated and related companies 17,720 22,035 



Sundry liabilities 285,422 223,393 

thereof maturing in up to 1 year (254,625) (205,504) 


thereof relating to tax (49,699) (43,943) 

thereof relating to derivatives (16,009) (20,680) 

thereof relating to social security (33,448) (31,067) 

thereof relating to employees (6,035) (5,898) 

Total 1,394,305 1,309,963 

Of the other liabilities, a596.349 million (prior year: a467.525 million) relates to Dynamit Nobel. 

Sundry liabilities include a21.429 million in divested liabilities of Projektgesellschaft Daimlerstrasse 

GmbH & Co. KG, Frankfurt am Main (for further information see Note 4) ‘Receivables and Other 

Assets’). 

Liabilities to affiliated, associated and related companies include trade accounts payable of 

a13.202 million (prior year: a17.537 million). Trade accounts payable to third parties and to affiliated, 

associated and related companies totaled a802.233 million at the balance sheet date (prior year: 

a749.309 million). 

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12) Deferred Income 

Deferred income consists of the following: 

12/31/2003 12/31/2002 

u ’000 t ’000 

Sale-and-leaseback arrangements 30,029 34,267 

Deferred option premiums 4,143 7,692 

Other deferrals 3,294 8,637 

Total 37,466 50,596 

Gains from sale-and-leaseback arrangements were deferred and recognized by way of a reduction 

of related rental expense. As of December 31, 2003, a22.721 million (prior year: a38.413 million) of 

deferred income is to be recognized after more than one year. 

13) Commitments and Contingencies 

Commitments and contingencies not shown on the balance sheet at December 31, 2003 were as follows: 

Continued operations 

12/31/2003 12/31/2002 

u ’000 t ’000 

Liabilities on guarantees 27,981 38,685 

Liabilities on warranties 42,830 47,879 

Liabilities from providing collateral for third-party liabilities 3,579 3,656 

Liabilities on notes 366 200 


74,756 90,420 

Liabilities on guarantees 9,972 8,267 

Liabilities on warranties - 

Liabilities from providing collateral for third-party liabilities - - 

Liabilities on notes - - 

9,972 8,267 

Total 84,728 98,687 

Liabilities on guarantees mainly consisted of advance payment guarantees, performance bonds, 

guarantees for warranty obligations and guarantees for bank loans provided on behalf of related 

companies. Liabilities on guarantees for continued operations largely relate to GEA, Lurgi Lentjes, 

and Zimmer. The liabilities on guarantees for discontinued operations all relate to solvadis. 

Liabilities on warranties during the year under review related largely to divested companies. They 

also relate to security for pension commitments and warranties on customer contracts. There is also 

loan collateral for related companies. 

The likely maturity of contingent liabilities arising from guarantees and warranties is up to five years. 

There are also contingencies with maturity periods that depend on the performance of contractually 

agreed obligations or the occurrence of certain events. These contingent liabilities are largely to 

customers, banks and employees of former subsidiaries. mg is faced with claims under its guarantees 

if the debtor is unable to meet its contractual obligations.



In addition to the contingent liabilities shown in the above table, there are warranty commitments 

of an amount customary for the industry at GEA, Lurgi, Lurgi Lentjes and Zimmer (for further 

information see Note 10c) ‘Other Provisions and Accrued Liabilities’). 

Liabilities from providing collateral for third-party liabilities essentially include a realization 

agreement on collateralization for an industrial plant. 

Other financial commitments at December 31, 2003 consist of: 


12/31/2003 12/31/2002 

u ’000 P ’000 

Rental and lease agreements 647,634 617,686 

thereof with affiliated companies (186) (–) 

Orders 337,125 322,829 

thereof with affiliated companies (267) (542) 

Factoring liability 6,643 7,453 

Committed but not fully utilized credit lines for third parties 1,149 5,527 


992,551 953,495 

Rental and lease agreements 19,103 22,029 

thereof with affiliated companies - - 

Orders - - 

thereof with affiliated companies - - 

Factoring liability - - 

Committed but not fully utilized credit lines for third parties - - 

19,103 22,029 

Total 1,011,654 975,524 

Of the total rental and lease agreements, a191.689 million (prior year: a205.943 million) is attributable 

to Dynamit Nobel. These relate largely to real estate and equipment belonging to Dynamit 

Nobel Kunststoff GmbH, Weissenburg; the laboratory, technical and office buildings of CHEMETALL 

GMBH, Frankfurt am Main; and leases of office furniture and equipment. The leases on these 

premises run until the year 2019. 

Other continued operations account for rental and lease commitments of a455.945 million (prior 

year: a411.743 million). They essentially relate to real estate used by GEA, the premises of mg 

vermögensverwaltungs-ag, Frankfurt am Main, and office space in New York. The leases on these 

premises run until no later than 2031. These commitments under rental and lease agreements are 

partly offset by claims arising from subletting agreements totaling a74.719 million (prior year: 

a67.719 million). For further information on leases please refer to Note 2) ‘Leasing’. 

The order commitments attributable to continued operations largely relate to Dynamit Nobel 

(a86.588 million), Lurgi (a152.042 million) and Zimmer (a44.479 million). 

In some factoring agreements entered into by Dynamit Nobel, the seller of the receivables assumed 

a blanket liability for the receivables sold; this liability amounted to less than ten percent of total 

receivables sold. In cases where the countervalue of the receivables has been paid in full, the maximum 

liability is shown under ‘factoring liability’, provided no provision has been established. There have 

been no significant defaults to date. 

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14) Litigation 

During the period under review, mg technologies ag succeeded in settling its Customer Cases in the 

U.S. These actions by former customers of MG Refining & Marketing related to oil-futures contracts 

predating 1994. Defending these actions in the past incurred significant costs. The settlement reached 

by mg technologies ag did not adversely affect its earnings in 2003, as the Group had already made 

appropriate provision in its accounts. 

During the period under review, the Executive Board of mg technologies ag and Dr. Otto Happel 

ended all past legal disputes. 

In September 1998, an mg Group company won a contract from a young company to work as general 

contractor on the construction of industrial plant for the recycling of old carpets containing polyamide; 

it subcontracted a large part of the construction work to another mg Group company. Both Group 

companies acquired minority shareholdings in the customer at the insistence of the customer’s 

majority shareholder and the lead bank in the banking syndicate financing the deal. The plant was 

delivered to the customer on September 10, 2002. Subsequently, the customer’s financial position 

deteriorated rapidly. In February/March 2003, the shareholders and the banks financing the deal first 

accused the mg Group companies concerned of having failed to comply with the regulations on 

post-formation acquisitions stipulated in the German Joint Stock Corporation Act (AktG), as a result 

of which the contract to construct the plant was null and void. Precautionary attempts to remedy 

the possible invalidity of the contract for the construction of the plant failed because the majority 

shareholder and the lead bank refused to give their approval. Proceedings to declare the customer 

bankrupt were initiated on September 1, 2003. 

The insolvency administrator is demanding that several mg Group companies repay the fee paid by 

the customer – amounting to a164.6 million (including sales tax) – because the mg Group companies 

concerned had failed to comply with the regulations on post-formation acquisitions stipulated in the 

German Joint Stock Corporation Act (AktG), as a result of which the contract to construct the plant 

was null and void. The insolvency administrator’s application for legal aid was rejected by the 

regional court in Frankfurt am Main. Since the main creditor then evidently agreed to finance the 

legal action, this legal action has been filed (after the balance sheet date). 

In accordance with SFAS 5, no provision has been established owing to the complex nature of the 

case and a number of unresolved legal issues. 

In connection with the conclusion of the control and profit-transfer agreement between mg technologies 

ag and GEA AG, an appeal is pending regarding the appropriateness of the exchange offer 

made to shareholders of GEA AG. 

In addition, further litigation, official investigations, legal proceedings and other claims are either 

pending or might be instituted or enforced in the future against companies of the mg Group as a 

result of their ongoing business operations; it is not always possible to predict the outcome of such 

proceedings with any degree of certainty. 

Litigation is subject to many unknown factors, and it is not possible to predict the outcome of individual 

cases with any degree of certainty. mg cannot rule out the possibility that the final rulings on 

some of these cases may give rise to expenses that exceed the provisions and accruals set aside for 

such purposes; mg therefore cannot predict with any degree of accuracy either the amount or timing 

of such expenses. 

Appropriate provision for risks arising from litigation was made in accordance with SFAS 5.



15) Derivatives and Financial Instruments 

a) Use of Derivatives and Financial Instruments 

In its day-to-day financial management, the mg Group uses all customary forms of investments, 

such as fixed-term deposits, fixed-income securities and mutual funds. The Group funds its operations, 

among other things, through bank loans, factoring arrangements and ABS transactions. 

The mg Group uses derivatives to mitigate the risk of adverse movements in interest rates, share 

prices and other investments. 

Forward exchange deals and currency options are largely used to hedge assets, liabilities and firm 

buy or sell commitments in foreign currency and, to a lesser degree, to hedge forecasted transactions 

denominated in foreign currency. Hedges are used to mitigate the risk of adverse movements in the 

exchange rates of certain currencies, especially the U.S. dollar and pound sterling. 

Interest rate swaps and options are used to hedge the interest rate risk inherent in liabilities to banks. 

Commodity derivatives are used primarily in the discontinued chemicals trading business to mitigate 

the risk inherent in commodities prices. 

b) Fair Value of Financial Instruments 

The fair value of a financial instrument is the price at which a counterparty is willing to assume 

the rights and/or obligations arising from this financial instrument from another counterparty. Fair 

values have been computed on the basis of the market information available at the balance sheet 

date and the valuation methods outlined below, which are based on certain assumptions. Because 

of the varying factors influencing them, the fair values stated here may differ from the values that 

can be realized in the market at the present time. 

Original financial instruments 

Securities: Fair value is the market price. 

Cash and cash equivalents: Owing to their short maturity, the nominal values of cash and cash 

equivalents correspond to their fair value. 

Financial liabilities: The fair value of listed debt securities is their market price. The fair value of 

other long-term bonds corresponds to the present value of future anticipated cash flows. The discount 

rate used is the current market interest rate on bonds of the same maturity. Owing to their short 

maturity, it is assumed that the nominal value of bonds and loans under revolving credit facilities 

approximates to their fair value. It is generally assumed that the nominal value of floating-rate loans 

corresponds to their fair value. 

Receivable from direct capital lease: As the current market interest rate was used to calculate the 

present value of the receivable, the fair value and nominal value of the receivable are the same. 

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136 

Derivatives 

The fair value of forward exchange deals is determined using current balance sheet date reference 

rates that take account of forward premiums and discounts. 

The fair value of interest-rate instruments is determined using discounted anticipated future cash flows 

based on the market interest rates applicable to the residual maturities of these financial instruments. 

Options are valued using recognized option pricing models. 

The fair value of commodity derivatives is obtained by valuing all the contracts at the market terms 

prevailing at the valuation date, and thus corresponds to the actual value of the contract portfolio at the 

end of the fiscal year. The fair value of exchange-traded contracts is derived from their market price. 

The value of contracts not traded on an exchange is determined on the basis of market conditions. 


Assets 


12/31/2003 12/31/2002 

Nominal Fair Nominal Fair 

Value Value Value Value 

u ’000 u ’000 t ’000 t ’000 

Capital lease receivable 39,680 39,680 44,257 44,257 

Securities 15,641 15,641 66,009 66,011 

Cash and cash equivalents 

Derivatives 

171,952 171,952 165,291 165,291 

Forward exchange deals 51,181 51,181 42,657 42,657 

Interest-rate instruments 24 24 116 116 

Commodity derivatives 232 232 707 707 

Liabilities 


Financial liabilities 

Derivatives 

1,244,484 1,264,843 1,208,172 1,209,707 


Interest-rate instruments 9,413 9,413 14,545 14,545 

Commodity derivatives 1,016 1,016 529 529 


Assets 


Securities 1,606 1,606 1,789 1,789 

Cash and cash equivalents 

Derivatives 

10,654 10,654 12,305 12,305 

Forward exchange deals –- – 577 577 

Interest-rate instruments – – – – 

Commodity derivatives 21,914 21,914 25,322 25,322 

Liabilities 


Financial liabilities 

Derivatives 

50,578 50,578 29,653 29,653 


Interest-rate instruments – – – – 

Commodity derivatives 23,485 23,485 39,051 39,051



c) Nominal Values and Credit Risk 

The nominal value of derivatives is obtained by multiplying their contract volumes by the agreed contract 

prices. Some of the individual nominal values consist of countervailing buy and sell agreements. 

The Group is consequently exposed to a market price risk only with respect to the substantially lower 

volume representing the net difference between the buy and sell volumes. 

The hedged nominal values of derivatives are as follows: 


12/31/2003 12/31/2002 

u ’000 t ’000 

Forward exchange deals 884,987 923,703 

Interest-rate instruments 412,578 537,713 

Commodity derivatives (zinc) 42,865 49,903 


1,340,430 1,511,319 

Forward exchange deals 117,724 181,634 

Interest-rate instruments – 

Commodity derivatives (tropical oils, rubber, latex) 294,587 323,970 

412,311 505,604 

Total 1,752,741 2,016,923 

The mg Group is exposed to credit risk, which may arise if its counterparties fail to meet their contractual 

obligations. The mg Group’s counterparties for forward exchange deals and interest-rate 

instruments are all reputable banks with an investment-grade rating. The general credit risk related 

to forward exchange deals and interest-rate instruments is therefore not material. mg’s counterparties 

with respect to commodity derivatives are mainly suppliers resident outside Germany. mg makes 

adequate provision for this credit risk by making appropriate valuation allowances on the derivatives 

it reports. 

d) Management of Foreign-Exchange, Interest-Rate and Other Price Risks 

Management of foreign-exchange risk: The international dimension of the mg Group’s business 

gives rise to a foreign-exchange risk that impacts on its operating results and cash flows. Foreignexchange 

risk exists, for example, if sales are billed in a currency other than that of their related 

costs. In order to mitigate the impact of currency fluctuations, foreign-exchange risk is constantly 

evaluated and, where necessary, hedged through the use of derivatives, especially forward exchange 

deals. The Group’s foreign-exchange risk and its hedging are generally managed on a decentralized 

basis by mg’s various segments, which act in accordance with mg’s binding rules and procedures. 

Future cash flows from international projects denominated in foreign currency must be fully hedged. 

Management of interest-rate risk: The mg Group monitors its interest-rate risk on an ongoing basis 

by following changes in its net interest positions that could adversely impact its future cash flows and 

implementing suitable hedging strategies. Interest-rate instruments are used only by the treasury/ 

finance departments of mg technologies ag and the management holding companies of the various 

segments. 

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138 

Management of price risks: Price risks arise especially in the discontinued chemicals trading business 

in the form of fluctuating commodity prices. Traders who agree to buy or sell commodities hedge 

their prices by using commodity derivatives. Commodity derivatives are used solely for hedging purposes. 

Derivatives contracts are governed by binding rules and procedures; compliance with these 

procedures is monitored by the Risk Controlling unit of the chemicals business. 

e) Reporting of Derivatives and Hedge Accounting 

Management of foreign-exchange risk: The hedging of foreign-exchange risks inherent in firm 

commitments and forecasted transactions is accounted for as a cash flow hedge. Under this scenario, 

the hedge-effective part of the changes in the fair value of derivatives is reported as accumulated 

other comprehensive income. The accumulated other comprehensive income is reclassified as income 

once the firm commitments or forecasted transactions have been recognized. 

Hedge accounting is not generally used to hedge recognized assets and liabilities, as these constitute 

a natural hedge. This means that changes in the fair value of these derivatives – and those in the 

carrying amounts of the respective assets and liabilities – are recognized in income. 

Foreign-exchange gains and losses are reported as other operating income and other operating expenses 

respectively. 

Interest-rate instruments: Changes in the fair values of interest-rate swaps included in cash flow 

hedges to cover floating-rate bank loans are also reported as ‘Accumulated other comprehensive 

income’. Gains and losses on interest-rate instruments are reported under interest expense (net) as 

interest expense or interest income. 

Commodity derivatives: All changes in the fair values of commodity derivatives are recognized in 

income. 

In the following twelve months, a net gain of a11.535 million will probably be reclassified from 

‘Accumulated other comprehensive income’ to the statements of income, because the cost of sales 

relating to underlying transactions is also likely to be recognized accordingly in income. 

At December 31, 2003, interest income (net) included a net loss of a25,000 resulting from components 

of derivatives and financial instruments excluded from calculations of the effectiveness of such hedges. 

At December 31, 2003, the mg Group held financial instruments mostly with maturities of no more 

than 12 months in its portfolio in order to hedge the foreign-exchange risk of forecasted transactions.



16) Other Operating Income 

Other operating income consisted of the following components: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Gain from disposal of assets 14,206 4,051 

Gain from exchange rates 34,819 9,413 

Income from reversal of provisions 5,964 3,948 

Income from rental and lease agreements 4,744 1,264 

Sundry 55,686 21,237 

Total 115,419 39,913 

Other operating income of a29.117 million is attributable to Dynamit Nobel (prior year: a6.546 million). 

Sundry other operating income in 2003 essentially consisted of payments received for valuation 

allowances on receivables, various cost reimbursements and credits, and income from the sale of 

securities. 

17) Other Operating Expenses 

Other operating expenses consisted of the following components: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Research and development costs 93,600 22,315 

Loss from exchange rates 36,845 13,451 

Loss from disposal of assets 19,996 1,133 

Sundry 112,564 6,759 

Total 263,005 43,658 

Other operating expenses of a58.536 million are attributable to Dynamit Nobel (prior year: 

a15.966 million). 

Sundry other operating expenses comprise the transfer of a27.007 million to provisions for environmental 

and clean-up costs, losses of a17.720 million on the disposal of the Stahlbau Plauen operations, 

and an expense of a10.636 million incurred by Lurgi Lentjes for services rendered to the Boiler Plant 

business unit. The corresponding income is included under ‘Loss on discontinued operations’. Eliminating 

such gains and losses would distort the segment reporting. 

Sundry other operating expenses also include losses on the disposal of securities and other assets. 

139

140 

The mg Group’s research and development activities were as follows: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Customer-funded (reimbursed) 111,192 32,348 

Group-funded (non-reimbursed) 93,600 22,315 

Total 204,792 54,663 

A portion of research and development (R&D) costs are incurred for R&D that is recoverable through 

overhead charged to certain long-term contracts (reimbursed). 

Group-funded (non-reimbursed) R&D is not directly contract-related and is immediately recognized 

as an expense. 

The ratio of R&D expenditure to sales was 3.2% in 2003 (prior year: 3.6%). 

18) Restructuring Costs 

The restructuring costs relate to the measures outlined under Note H) ‘Restructuring’. They are 

broken down by segment as follows: 

Costs Thereof 

Cash- Staff 

t ’000 Effective Provision Total Exit Costs Expenses 

1/1/2003 - 12/31/2003 

GEA 4,636 3,984 8,620 720 7,900 

Dynamit Nobel 8,997 7,737 16,734 6,233 10,501 

Lurgi 5,689 28,246 33,935 9,415 24,520 

Lurgi Lentjes 124 16,225 16,349 6,128 10,221 

Zimmer – 176 176 – 176 

Other 19,572 26,149 45,721 – 45,721 

Total 39,018 82,517 121,535 22,496 99,039 

10/1/2002 - 12/31/2002 

GEA 1,725 24 1,749 4 1,745 

Dynamit Nobel 1,988 2,295 4,283 257 4,026 

Lurgi 539 187 726 – 726 

Lurgi Lentjes 20 418 438 – 438 

Zimmer – 32 32 – 32 

Other 474 – 172 302 262 40 

Total 4,746 2,784 7,530 523 7,007 

The costs incurred by the change in the provision include income from the release of provisions 

totaling a1.167 million (prior year: a608,000) (for further information see Note 10)c) ‘Other 

Provisions and Accrued Liabilities’. The transfers to provisions and the staff expenses include 

expenses of a7.285 million incurred by the conclusion of preretirement part-time contracts relating 

to restructuring. On the balance sheets, however, these expenses are shown under provisions for 

staff.



19) Financial Income 

Financial income consists of the following components: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Income under profit-and-loss transfer agreements 184 8 

thereof from affiliated companies (184) (8) 

Income from investments in associated companies 2,635 397 

Miscellaneous investment income 6,753 4,082 

thereof from affiliated companies (5,358) (3,679) 

Expenses from the assumption of losses – 300 – 245 

thereof from affiliated companies (– 300) (– 245) 

Investment income 9,272 4,242 

Income from other securities and loans included in investments 205 88 

Other interest and similar income 16,468 5,505 

thereof from affiliated companies (648) (193) 

Other interest and similar expenses – 95,110 – 25,273 

thereof paid to affiliated companies (– 977) (– 295) 

Interest expense, net – 78,437 – 19,680 

Write-down of investments and long-term financial assets and marketable securities – 19,490 – 2,375 

Other financial income – 19,490 – 2,375 

Total interest expense, net, and other financial income – 97,927 – 22,055 

Total – 88,655 – 17,813 

Dynamit Nobel incurred a net loss of a24.295 million on its financial income (prior year: net income 

of a6.204 million). 

The write-down of investments and long-term financial assets and marketable securities includes valuation 

allowances owing to impairments of available-for-sale securities that are not merely temporary 

(for further information see Note 5) ‘Securities’). 

20) Income Taxes 

Income taxes contain the following components: 

Current taxes 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

German – 1,332 – 747 

Foreign 

Current taxes 

57,971 13,294 

German – 108,144 42,701 

Foreign – 3,886 2,785 

Total – 55,391 58,033 

141

142 

Since fiscal 2001/2002, a uniform corporation tax rate of 25% and the so-called half-income system 

of taxation have applied to German limited companies. Under Germany’s flood victims’ solidarity 

legislation of September 19, 2002, the rate of German corporation tax for fiscal 2003 was raised on a 

one-off basis by 1.5 percentage points to 26.5%. 

At December 31, 2002, German companies therefore calculated deferred taxes for fiscal 2003 based 

on the corporation tax rate of 26.5% (28% including the solidarity surcharge) applicable for this year. 

German companies’ computation of deferred taxes was thus based on the pertinent tax rates of 

26.4% and 28.0% and the relevant trade tax rates of 13.3% and 13.0% respectively. The calculation 

of German companies’ deferred taxes was therefore based on a total rate of 39.7% and 41.0% respectively. 

The impact of this tax increase due to the flood victims’ solidarity legislation, which was 

limited to one year, was not of material importance. At December 31, 2003, German companies are 

calculating their deferred taxes based on an overall tax rate of 39.7%. 

Deferred taxes are computed using national tax rates which, according to the enacted law in the 

respective countries at the balance sheet date, will apply on the date on which the timing differences 

are likely to be eliminated or net operating loss (NOL) carryforwards are likely to be utilized. 

The following breakdown of tax expense for fiscal 2003 is based on an overall tax rate of 39.7% and 

reconciliation to the effective tax rate of 30.6%: 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Expected income tax benefit (prior year: income tax expense) – 71,870 10,391 

Non-deductible expenses 

Foreign tax rate differential (including change in 

12,068 1,365 

valuation allowance on deferred tax assets) – 12,910 3,350 

Effect of deferred taxes from affiliated and related companies 13,087 9,128 

Change in valuation allowance on deferred tax assets – Germany 12,960 45,117 

Other – 8,726 – 11,318 

Actual income tax benefit (prior year: income tax expense) – 55,391 58,033 

Deferred tax assets and liabilities are recognized for all temporary differences between the amounts 

reported in the tax accounts and those in the U.S. GAAP financial statements included in the consolidated 

accounts. Deferred taxes are also recognized in relation to various consolidation measures. 

Furthermore, deferred tax assets are recognized for losses carried forward. If deferred tax assets are 

unlikely to be realized, a valuation allowance is reported. Deferred tax liabilities on retained earnings 

at foreign subsidiaries of mg technologies ag were not established, because the vast majority of these 

earnings are not intended to be distributed in the future either, but constitute a permanent investment. 

The calculation of the deferred taxes not reported would have involved a disproportionate amount of 

time and effort. The primary components of deferred tax assets and liabilities and the related valuation 

allowances result from adjustments in the following items:



Deferred tax assets 

12/31/2003 12/31/2002 

u ’000 t ’000 

Net operating loss carryforwards 1,308,799 1,223,826 


Investments and long-term financial assets 4,810 1,475 

Inventories 16,872 43,004 

Pension and other postretirement benefits 94,178 86,989 

Other provisions and accruals 83,225 53,024 

Deferred income 14,707 16,928 

Other 4,458 5,270 

Total 2,082,035 2,029,687 

Less valuation allowance – 1,046,389 – 1,143,423 

Total deferred tax assets 

Deferred tax liabilities 

1,035,646 886,264 

Intangible assets – 66,968 – 60,750 

Property, plant and equipment – 70,285 – 58,397 

Inventories – 40,061 – 35,844 

Other provisions and accruals – 21,938 – 25,258 

Liabilities – 16,303 – 4,227 

Deferred income – 8,222 – 10,368 

Other – 5,979 – 8,644 

Total deferred tax liabilities – 229,756 – 203,488 

Total deferred tax assets, net 805,890 682,776 

Net deferred tax assets and liabilities are further broken down by current and non-current portions as 

follows: 

Deferred tax assets 

12/31/2003 12/31/2002 

u ’000 t ’000 

Current 53,897 47,929 

Non-current 813,863 701,018 

Total deferred tax assets, net 

Deferred tax liabilities 

867,760 748,947 

Current – 34,086 – 46,291 

Non-current – 27,784 – 20,313 

Total deferred tax liabilities, net – 61,870 – 66,604 

Total deferred tax assets, net 805,890 682,343 

At December 31, 2003, the mg Group had corporate tax net operating loss (NOL) carryforwards of 

a3,175 million (prior year: a2,970 million) and German trade tax NOLs of a1,943 million (prior year: 

a1,411 million). The NOLs of German companies have an unlimited carryforward period. The losses 

of foreign companies can usually only be carried forward for a limited period. A deferred tax allowance 

of a1.036 billion (prior year: a1.138 billion) has been established against the total NOLs. The income 

taxes paid by the companies reported as discontinued operations amounted to a9.945 million in 2003 

(prior year: minus a1.402 million). 

143

144 

21) Minority Interests 

Minority interests relate mainly to GEA and to the Menzolit Fibron Group, which belongs to Dynamit 

Nobel. 

22) Profit/Loss on discontinued operations 

A breakdown of the profit/loss on discontinued operations is shown under Note G) ‘Discontinued 

operations’. 

23) Earnings per Share 

Basic and diluted earnings per share are computed as follows (in thousands of euros; exceptions are 

indicated accordingly): 

1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Net loss – 198,600 – 30,998 

thereof on continued operations – 128,073 – 33,058 

thereof on discontinued operations – 70,527 2,060 

Weighted-average number of shares outstanding (in thousands) 193,778 193,333 

Basic earnings per share in u 

on net loss – 1.02 – 0.16 

on continued operations – 0.66 – 0.17 

on discontinued operations – 0.36 0.01 

Net loss – diluted – 198,600 – 30,998 

thereof on continued operations – diluted – 128,073 – 33,058 

thereof on discontinued operations – diluted – 70,527 2,060 

Weighted-average number of shares outstanding (in thousands) 193,778 193,333 

Shares from GEA acquisition not yet exchanged – – 

Dilutive effect of convertible bonds and notes – – 

Shares purchasable with proceeds of options 

Adjusted weighted-average number of shares outstanding 

– – 

– diluted (in thousands) 193,778 193,333 

Diluted earnings per share in u 

on net loss – 1.02 – 0.16 

on continued operations – 0.66 – 0.17 

on discontinued operations – 0.36 0.01 

There was no dilutive effect as a result of GEA shares not yet exchanged, the existing stock option 

program and employee share ownership program, or convertible participatory capital. Because mg’s 

continued operations reported a net loss for the year, any potentially dilutive effects had an antidilutive 

effect, as in the short 2002 fiscal year. This would improve its diluted earnings per share 

rather than reducing them. 

24) Related-Party Transactions 

As in the two previous fiscal years, Allianz AG (including Dresdner Bank AG) and Dr. Otto Happel 

continued to hold over 10% each of the voting stock in mg technologies ag during the year under 

review and were therefore deemed to be principal owners as defined by SFAS 57 (‘Related Party 

Disclosures’). In 2003, Dr. Otto Happel became mg’s largest shareholder when he raised his stake 

from 10.02% in the prior year to 20.7%.



During the aforementioned periods, Allianz AG (including Dresdner Bank AG) performed various 

financial services for the mg Group at arm’s-length market rates and conditions. These business 

relations were not of material importance for either the mg Group or the principal owners. Furthermore, 

the investment bank Dresdner Kleinwort Wasserstein, which belongs to Dresdner Bank AG, 

is involved in the disposal of Dynamit Nobel. This mandate is being performed at arm’s-length 

market rates. 

There are no business relations with the shareholder Dr. Otto Happel. 

25) Subsequent Events 

On January 16, 2004, chemicals trading company Safic-Alcan S.A., based in Paris, France – which 

belongs to solvadis ag, Frankfurt am Main – was sold to French holding company Daniel Lebard 

Management Development (DLMD) and Alpha-Associés, a French private equity house (for further 

information please refer to Note G) ‘Discontinued operations’). 

Grasso’s Koninklijke Machinefabrieken N.V., ‘s-Hertogenbosch, Netherlands, which belongs to GEA, 

acquired the Dutch Goedhart Holdings B.V. with effect from January 1, 2004. Goedhart manufactures 

and sells customized air coolers, heat exchanger coils, and condensers for industrial refrigeration. It 

employs roughly 240 people at its two sites in the Netherlands and the Czech Republic. The company 

generated sales of a28.6 million in 2002. The transaction still needs to be approved by the antitrust 

authorities. 

On January 30 and February 5, 2004, mg vv ag, Frankfurt am Main, sold 51% and 17% of the shares 

in mg vv Projektentwicklung Daimlerstrasse GmbH & Co. KG, Frankfurt am Main, to DAL, Mainz, 

and INC Projektentwicklung GmbH, Fürth, respectively. mg vv’s shareholding now amounts to 32%. 

The same shareholdings apply to Komplementär GmbH. This transaction still has to be cleared by 

the competent EU Commission and the German antitrust authorities (for further information see 

Note 4) ‘Receivables and Other Assets’). 

In order to simply the structure of the mg Group, the Executive Board of mg technologies ag decided 

on February 23, 2004 to merge GEA AG with mg technologies ag with effect from January 1, 2005. 

In preparation for this measure, the Executive Board of GEA AG was asked to initiate the squeeze-out 

of GEA’s external shareholders pursuant to section 327a of the German Joint Stock Corporation Act 

(AktG). In parallel with these measures, preparations are being made to merge the Head Office functions 

of mg technologies ag and GEA AG. The merged company will probably be based in Bochum. 

In order to strengthen its process engineering business, GEA acquired Diessel GmbH & Co. KG, 

Hildesheim, Germany, and Colby Powder Systems, based in New Zealand, in March 2004. Both 

acquisitions still need to be cleared by the relevant antitrust authorities. Diessel GmbH & Co. KG is 

a leading provider of process plant for breweries, the beverage industry and for the pharmaceutical 

and biotech sectors. GEA will take on 177 of Diessel’s employees, its fixed assets, and the majority 

of its order book. The company’s sales target for 2004 is approximately a33 million. Colby Powder 

Systems designs and builds integrated powder, handling and powder-filling equipment for the milkprocessing 

industry and the production of baby food. With 109 employees, it generates sales of 

roughly a22 million. 

145

146 

26) Segment Reporting 

SFAS 131 (‘Disclosures about Segments of an Enterprise and Related Information’) states that segment 

reporting must be consistent with the company’s internal organizational and reporting structures 

(‘management approach’). mg’s Executive Board is responsible for assessing the segments’ performance 

and the related allocation of resources. 

In 2003, the Executive Board of mg technologies ag decided that mg should discontinue its chemical 

activities and concentrate solely on engineering. It is not yet clear to what extent the disposal of the 

one division will impact on the internal organizational and reporting structures of the remaining one. 

For this reason, and because the chemical division still formed part of the Group’s activities during 

the year under review, the format of our segment reporting remains unchanged. In order to highlight 

the impact of the disposal of the chemical division, however, the segment reporting distinguishes 

between ‘continued’ and ‘discontinued’ operations. 

Continued Operations 

GEA 

GEA is engaged worldwide in process engineering and thermal technology. It supplies technologically 

sophisticated, mostly customized equipment, components, systems and process plants that improve 

the efficiency and environmental compatibility of production processes as well as the quality of products 

in many industrial sectors. GEA focuses on the food, beverage, pharmaceutical and petrochemical 

industries, but is also active in power plant technology, engineering, and the construction industry. It 

operates globally and generates over 80 percent of its business outside Germany. 

Lurgi 

Lurgi is a global leader in process engineering and plant engineering. The companies in this segment 

design and build technologically sophisticated plant for the gas, oil, pharmaceutical and chemical 

industries. Their particular strengths lie in their leading technology position in the fields of synthesis 

gas and methanol plant, in the processes they use to convert gas into petrochemical products, and 

in the construction of industrial plant that processes renewable resources for the production of oils, 

fats, starch and alcohol, principally for the production of environmentally friendly bio-fuels. In the 

future, this segment will concentrate on these businesses. Its refinery technology, fine chemicals, 

and pharmaceutical businesses are to be discontinued. 

Lurgi Lentjes 

This segment combines the environmental and energy activities of the Energy, Environmental Engineering 

and Gas Cleaning units. Lurgi Lentjes focuses on processes and technologies that facilitate the 

industrial use of energy forms extracted from various fuels, while at the same time keeping the air 

clean. Since its portfolio was optimized, it has specialized in the construction of plant that cleans waste 

gases and contaminated air for process industries such as the nonferrous, steel, chemical, and glass 

industries, and in supplying desulfurization systems for fossil-fuel power stations. The segment’s 

denitrification and dedusting technologies for waste incineration and power plant technology are to 

be discontinued.



Zimmer 

This segment provides process-driven plant engineering for polymers, synthetic fibers and thermoplastics, 

covering the entire life cycle of these products – from production and processing to the 

recycling stage. Zimmer specializes in the construction of plant that manufactures polyester and 

nylon as well as textile filaments, staple fibers, industrial yarn, and packing materials. By acquiring 

Fleissner towards the end of 2003, Zimmer secured its market position in staple fibers and extended 

its product range in the fast-growing nonwoven market. As a global market leader, the segment 

possesses a large number of proprietary processes and is a leader, for example, in plant engineering 

for PET production. Zimmer’s product range also includes industrial plant that manufactures cellulosic 

fibers (lyocell fibers). 

Dynamit Nobel 

In 2003, the Executive Board took the decision to focus the company’s activities on specialty 

mechanical engineering and plant engineering. As a result of this decision, the process of selling 

Dynamit Nobel was initiated. As explained under Note G) ‘Discontinued operations’, Dynamit 

Nobel still qualifies as a continued operation. 

Dynamit Nobel specializes in technologically sophisticated niche markets in the fields of chemicals 

and materials processing and, by developing its specialist expertise, has positioned itself as a valueadding 

partner to its customers, most of which come from the automotive, pharmaceutical, construction, 

chemical and electronics industries. It therefore operates in the growing custom-synthesis 

market, supplying intermediates and active ingredients to the pharmaceutical and agrochemical 

industries. As a systems engineering partner to the automotive industry, Dynamit Nobel supplies 

plastics for internal and external applications, surface chemicals for corrosion protection and cutting 

tools made of advanced ceramics. This material is also used in medical technology, electronics, 

electrical engineering and high-quality sanitary appliances. Dynamit Nobel is the global market leader 

in lithium chemistry and in pigments for the delustering of synthetic fibers. 

Other 

This segment contains all the companies that do not belong to the core businesses of the other 

segments and are under the direct control of mg technologies ag. It contains mg technologies ag, 

Ruhr-Zink GmbH, MG Rohstoffhandel GmbH, and the U.S.-based companies mg technologies Inc. 

(formerly Metallgesellschaft Corp.) and MG North America Holdings Inc. 


solvadis 

solvadis – including Safic-Alcan – is a globally active chemicals trader as well as a chemicals distributor. 

It trades in and distributes various chemical feedstocks, chemicals, specialties and natural raw 

materials. solvadis is increasingly offering chemical and pharmaceutical companies customized 

logistics solutions for their procurement and distribution. 

Other 

Operations reported under ‘Other’ comprise the Boiler Plant business unit and the discontinued 

non-core operations of Dynamit Nobel and GEA. 

147

148 

Continued operations Discontinued operations 

Lurgi Dynamit Consoli- Consolit 

million GEA Lurgi Lentjes Zimmer Nobel Other dated Total solvadis Other dated Total 


Revenues 2,697.5 588.6 349.7 219.6 2,327.0 220.8 6,403.2 1,411.9 341.8 1,753.7 

Intersegment sales 4.5 3.1 11.6 3.8 1.2 49.5 – 73.7 4.1 23.6 – 27.7 

Total revenues 2,702.0 591.7 361.3 223.4 2,328.2 270.3 – 73.7 6,403.2 1,416.0 365.4 – 27.7 1,753.7 

Pre-tax earnings 196.7 – 75.7 – 124.1 4.4 187.7 – 674.1 304.1 – 181.0 – 7.4 – 52.3 0.0 – 59.7 

Financial income 

thereof interest income 

– 0.4 11.1 – 10.3 4.5 – 24.3 – 375.7 306.4 – 88.7 – 0.7 – 0.3 – 0.6 – 1.6 

& gains on securities 8.3 11.8 3.3 5.3 6.2 47.4 – 65.6 16.7 2.5 0.8 – 1.0 2.3 

thereof interest expense 

thereof equity method 

10.7 1.1 4.7 0.8 32.9 110.8 – 65.9 95.1 3.5 1.2 – 0.5 4.2 

income/loss 

Identifiable segment 

1.8 0.8 0.0 0.0 0.0 0.0 0.0 2.6 0.4 0.0 0.0 0.4 

assets 2,830.7 718.8 428.5 369.1 2,406.8 5,010.2 – 5,530.0 6,234.1 426.0 162.2 – 122.0 466.2 

Capital expenditure 

Depreciation and 

47.5 1.3 1.8 0.9 195.1 12.9 259.5 9.5 4.2 13.7 

amortization 51.6 12.8 2.3 2.3 114.8 9.9 – 0.1 193.6 6.0 5.2 0.0 11.2 

Number of employees 13,820 1,266 566 719 12,304 514 29,189 792 854 1,646 

10/1/2002 - 12/31/2002 

Revenues 606.7 128.6 99.1 59.0 561.1 64.3 1,518.8 423.8 90.2 514.0 

Intersegment sales 0.4 0.2 5.2 0.2 0.2 13.9 – 20.1 1.8 3.4 – 5.2 

Total revenues 607.1 128.8 104.3 59.2 561.3 78.2 – 20.1 1,518.8 425.6 93.6 – 5.2 514.0 

Pre-tax earnings 35.6 2.6 – 2.6 3.5 38.0 – 14.8 – 36.1 26.2 4.1 – 2.9 – 0.1 1.1 

Financial income 

thereof interest income 

1.1 4.0 0.4 0.5 – 6.2 16.6 – 34.2 – 17.8 0.1 – 0.5 0.1 – 0.3 

& gains on securities 3.0 4.1 1.3 1.5 1.8 10.5 – 16.6 5.6 0.8 0.0 – 0.1 0.7 

thereof interest expense 

thereof equity method 

3.7 0.4 0.9 0.1 10.1 26.5 – 16.4 25.3 1.3 0.5 – 0.2 1.6 

income/loss 

Identifiable segment 

0.0 0.2 0.0 0,0 0.2 0.0 0.0 0.4 0.1 0.0 0.0 0.1 

assets 1,919.4 687.8 353.0 298.4 2,282.7 4,670.9 – 4,069.1 6,143.1 435.7 152.0 – 30.8 556.9 

Capital expenditure 

Depreciation and 

16.7 0.4 0.3 0.8 40.3 3.5 62.0 2.0 1.2 3.2 

amortization 11.8 2.3 0.4 0.5 28.1 2.8 2.1 48.0 1.5 1.3 – 0.2 2.6 

Number of employees 14,096 1,429 601 359 12,555 781 29,821 835 1,156 1,991 

The total amount of identifiable segment assets from both continued and discontinued operations 

gives rise to total reported assets of a6.700292 billion (prior year: a6.700014 billion). 

Intersegment sales are based on arm’s-length transfer pricing. Capital expenditures relate to cash 

acquisitions of intangible assets and property, plant and equipment as well as capitalized liabilities 

resulting from capital leases. Depreciation and amortization relate to the diminution in the value 

of intangible assets and property, plant and equipment. 

For the sake of comparability, the effects on the statement of income of mg technologies ag resulting 

from the transfer of beneficial ownership of business operations in the short 2002 fiscal year have 

been eliminated in the U.S. GAAP financial statements of mg technologies ag. 

In the past, mg’s Executive Board has assumed direct responsibility for the risk management of all 

strategic and financial aspects of individual projects completed by Lurgi Lentjes and Zimmer. These 

projects incurred total expenses of a50.5 million in 2003. In order to ensure that the mg Executive 

Board’s direct responsibility for the financial decisions and risks relating to these projects is correctly



reported, this expense is shown in mg’s ‘Other’ column rather than in the Lurgi Lentjes and Zimmer 

segments. Since Lurgi Lentjes and Zimmer were responsible for the technical implementation of these 

projects, the profits generated by the projects were shown according to the percentage-of-completion 

method in the respective segments until mg’s Executive Board assumed responsibility for them. 

A similar relationship exists between Lurgi Lentjes and the Boiler Plant business unit. In the past, 

Lurgi Lentjes has assumed responsibility for two contracts processed by this unit. This assumption 

of responsibility incurred an expense of a12.2 million for the Lurgi Lentjes segment in 2003. 

As in previous years, during the period under review the Lurgi Lentjes segment contains income 

from a service agreement with mg capital gmbh (‘Other’ segment). Under this agreement, Lurgi 

Lentjes helps mg capital gmbh to perform its management responsibilities and administrative duties 

with respect to the Boiler Plant and Stahlbau Plauen business units it took over effective October 1, 

2000. This restructuring of the investment portfolio aligned the legal structure with the management 

and reporting structures already implemented. As a result of this service agreement, a5.5 million 

(prior year: a1.7 million) was reimbursed to Lurgi Lentjes in 2003. 

As in previous years, mg Altersversorgung GmbH has agreed to pay postretirement benefits to retirees 

in the Lurgi and Lurgi Lentjes segments. As a result of this agreement, mg Altersversorgung GmbH 

(‘Other’ segment) has incurred an additional expense of a2.5 million for 2003. Correspondingly, 

the Lurgi and Lurgi Lentjes segments contain income of a1.4 million and a1.1 million respectively 

as a result of this agreement. As this constitutes an intercompany transaction, the pertinent income 

and expenses are eliminated in the ‘Consolidated’ column. 

The number of employees at the balance sheet date is stated on the basis of full-time equivalents, 

excluding trainees and directors of mg technologies ag. 

For further information on the two types of business reported as ‘discontinued operations’, please 

refer to Note G) ‘Discontinued operations’. 

Goodwill per segment was as follows in 2003: 

Continued operations Discontinued operations 

Lurgi Dynamit Consoli- Consolit 

million GEA Lurgi Lentjes Zimmer Nobel Other dated Total solvadis Other dated Total 

Book value at 

12/31/2002 221.1 9.9 3.6 341.2 – 918.7 1,494.5 55.5 1.4 11.3 68.2 

Allocation of 

consolidation to 

segments 853.9 – – 51.0 13.8 – – 918.7 – – 11.3 – 11.3 – 

Book value at 

1/1/2003 1,075.0 9.9 3.6 51.0 355.0 – – 1,494.5 55.5 12.7 – 68.2 

Increase in goodwill 

Goodwill 

2.1 – – 2.7 11.4 – 16.2 – – – 

impairment – – – – – – – – – – 

Decrease in goodwill – 0.4 – – – – – 0.4 – – 11.3 – 11.3 

Price differences – 5.8 – 1.3 – – – 20.8 – – 27.9 – – – 

Book value at 

12/31/2003 1,070.9 8.6 3.6 53.7 345.6 – 1,482.4 55.5 1.4 56.9 

149

150 

Up to December 31, 2002, the book value of goodwill shown in the ‘Consolidated’ column was still 

reported at Group level. Since January 1, 2003, this goodwill – and, similarly, hidden reserves and 

undisclosed charges – has been broken down into the various segments and accounted for there. 

The increase of a11.4 million in goodwill in the Dynamit Nobel segment relates to the post-capitalization 

of assets under purchase accounting. 

Sales by geographical area were as follows: 

Central/ 

Asia, 

Australia, 

EU (excl. Rest of North South Middle 

t million 


Germany Germany Europe America America East Africa Total 

Continued operations 1,732.6 1,752.1 600.4 801.6 292.3 1,081.6 142.6 6,403.2 

Discontinued operations 428.6 787.9 141.5 183.1 29.1 104.6 78.9 1,753.7 

Total 

10/1/2002 - 12/31/2002 

2,161.2 2,540.0 741.9 984.7 321.4 1,186.2 221.5 8,156.9 

Continued operations 411.0 418.1 162.5 213.5 82.1 205.3 26.3 1,518.8 

Discontinued operations 105.2 228.5 52.2 69.1 4.6 23.8 30.6 514.0 

Total 516.2 646.6 214.7 282.6 86.7 229.1 56.9 2,032.8 

Sales are broken down by geographical area according to the domicile of the customer or the 

location of the services provided. 

There were no relationships with individual customers that accounted for a significant share of the 

Group’s sales. 

As the internal figures reported to the Executive Board and the Supervisory Board are prepared 

according to U.S. GAAP, the above segment reporting corresponds to U.S. GAAP (management 

approach). The accounting principles applied to the segments are therefore the same as those 

described for the Group in the summary of significant accounting policies.



MATERIAL DIFFERENCES BETWEEN GERMAN AND U.S. ACCOUNTING PRINCIPLES 

The mg Group utilizes the exempting provision of section 292a of the German Commercial Code 

(HGB), which states that consolidated financial statements and consolidated management reports 

may be prepared according to internationally recognized accounting standards. 

The consolidated financial statements have been prepared in accordance with the current United 

States generally accepted accounting principles (U.S. GAAP). They are consistent with the 4th and 

7th EU Directives based on the interpretation according to DRS No. 1 of the German Accounting 

Standards Committee (DRSC). 

For the mg Group, the accounting policies and consolidation methods under U.S. GAAP differ from 

the German provisions of the HGB primarily in the following respects: 

Differences in the Principles of Consolidation 

Goodwill and Purchase Accounting 

While the HGB states that an acquisition may be consolidated for the first time either at the time of 

the acquisition or at the time the subsidiary is included in the consolidated financial statements 

for the first time, U.S. GAAP state that the first-time consolidation must be at the time of acquisition 

(change of control). The adoption of FIN 46r gives rise to further differences with respect to the 

companies to be consolidated. In departure from the HGB, FIN 46r states the requirement – irrespective 

of any controlling influence – to consolidate companies for which the reporting company is deemed 

to be the main beneficiary by virtue of a commercial interest. 

Goodwill represents the excess purchase price over the fair market value of assets acquired and 

liabilities assumed. U.S. GAAP state that goodwill must be capitalized and, in contrast to the HGB, 

may no longer be amortized over its estimated useful life. Instead, it must be tested for impairment 

at least once a year and, if necessary, written down. Writing off goodwill through shareholders’ 

equity, which is an option under section 309 of the HGB, is not permitted. 

If shares are issued to fund an acquisition, they must be reported at their fair value and not, as is 

customary under the HGB, at their nominal or par value. 

If the fair market value of net assets acquired exceeds acquisition cost, the consolidation of investments 

in subsidiaries produces negative goodwill. Section 309 (2) of the HGB states that this difference 

may only be recognized in income if it reflects an expected adverse trend in future earnings or it 

is clear that it corresponds to a realized gain. SFAS 141 (‘Business Combinations’) states that the 

negative goodwill must be deducted from the carrying amount of certain non-current assets acquired. 

Under SFAS 141, any further shortfall is reported as extraordinary income or, in exceptional cases 

(‘contingent considerations’), recognized as deferred income. 

151

152 

Section 307 (I) of the HGB states that minority interests must be reported as a component of shareholders’ 

equity. Minority interests are also contained in the Group’s net income or loss for the year. 

Under U.S. GAAP, however, minority interests are reported not under shareholders’ equity, but 

separately between equity and debt capital. Consequently, minority interests must be recognized 

as a separate income or expense item before the consolidated net income or loss. 

Differences in Accounting Policies and Reporting 

Reinstatement of Original Values for Long-Lived Assets 

If an asset has been written down due to impairment pursuant to section 253 (II) and (III) of the 

HGB, the requirement to reinstate its original value under section 280 (I) of the HGB states that this 

value may not be retained if the reasons for the write-down no longer apply at a later balance sheet 

date. In such cases, the asset must be written up. 

Under U.S. GAAP, the carrying amount of a long-lived asset has to be tested for impairment if 

events or changed circumstances indicate that the asset’s carrying amount may exceed its fair value. 

Impairment is measured by comparing the estimated future discounted pre-tax cash flows of the 

related asset to its carrying amount. SFAS 144 (‘Accounting for the Impairment or Disposal of Long- 

Lived Assets’) states that original values may not be reinstated even if the reasons for such a writedown 

no longer apply. 

Leases 

The accounting treatment of leases is not explicitly stated in the HGB. As a rule, we have therefore 

based our accounting treatment on the tax authorities’ pronouncements on leases, which state that 

leased assets should generally be capitalized by the lessor. 

U.S. GAAP contain detailed rules on the recognition of leases, especially SFAS 13 (‘Accounting for 

Leases’). These distinguish between capital leases and operating leases, depending on who bears 

the main risks and derives the main opportunities arising from use of the leased assets and is therefore 

deemed to be the beneficial owner. With capital leases, the lessee, as beneficial owner, has to 

capitalize the leased assets, while the lessor has to carry them as an asset in the case of operating 

leases. 

Valuation of Inventories 

Inventories are reported at cost. Section 255 (II) of the HGB states that manufacturing costs may 

include not just compulsory items such as direct material and production costs and specific manufacturing 

costs, but also attributable manufacturing overheads and administrative costs, depreciation, 

and the cost of certain social benefits. By contrast, U.S. GAAP (ARB 43) state that, in addition to 

direct costs, production-related overheads, depreciation, and production-related administrative costs 

have to be recognized as part of manufacturing cost.



Long-Term Construction Contracts 

Long-term construction-type contracts are those that take at least six months to complete, calculated 

from the date when the contract is awarded until the point at which the contract has essentially 

been completed. 

For long-term construction contracts, the HGB and Germany’s generally accepted accounting 

principles basically only permit profits to be realized once the entire contract has been supplied and 

accepted or partially billed, i.e. not until contractually agreed delivery has been largely completed 

and the residual risks are insignificant (completed-contract method). 

U.S. GAAP (SOP 81-1 and ARB 45), however, allow profits on long-term contracts to be partially 

recognized prior to completion, provided a sufficiently reliable computation of the total proceeds, 

aggregate costs, and percentage of completion is possible. The percentage of completion is defined 

within the Group as the ratio of contract costs incurred at fiscal year-end to total estimated costs 

for the entire contract (cost-to-cost method). 

Marking-to-Market 

The imparity principle of the HGB states that unrealized losses have to be accounted for, but not 

unrealized profits. Under U.S. GAAP, however, unrealized profits are also reported, which is reflected 

in the following items: 

Under the HGB, assets and liabilities denominated in foreign currency are valued at the lower of 

cost or market at the balance sheet date. Under U.S. GAAP SFAS 52 (‘Foreign Currency Translation’), 

however, all assets and liabilities denominated in foreign currency have to be translated at their 

market rate at the balance sheet date, so that unrealized profits are recognized in income. 

While under the HGB, securities are accounted for at the lower of cost or market at the balance 

sheet date, their accounting treatment under U.S. GAAP (SFAS 115 ‘Accounting for Certain Investments 

in Debt and Equity Securities’) depends on their classification. Available-for-sale securities are always 

reported at fair value at the balance sheet date, with adjustments resulting from this mark-to-market 

valuation being recorded as other comprehensive income unless an impairment is not merely temporary. 

Trading securities, which are held solely for dealing or speculative purposes, are reported at 

fair value at the balance sheet date and recognized in income. Held-to-maturity securities are reported 

at amortized cost under U.S. GAAP. 

Factoring and ABS Transactions 

For accounting treatment under the German Commercial Code, statement IdW RS HFA 8 of October 1, 

2002 stipulates with respect to ABS and similar transactions that assets sold are no longer to be 

reported on the seller’s balance sheet only if beneficial ownership of these assets has passed to the 

buyer. The decisive criterion for determining whether beneficial ownership has passed to the buyer 

is whether the latter bears the credit risk attaching to the assets. 

Under U.S. GAAP, however, sales of assets reduce the carrying amount of assets if the seller has 

relinquished control over the assets sold. Under SFAS 140 (‘Accounting for Transfers and Servicing 

of Financial Assets and Extinguishments of Liabilities’), this is the case if the following three conditions 

are met: the seller and its creditors no longer have access to the receivables (isolation); the 

buyer can pledge or exchange the receivables; and the seller no longer has any (effective) power 

of disposal over the receivables owing to a right to repurchase them. 

153

154 

Deferred taxes 

Section 306 of the HGB states that deferred taxes must be recognized for all temporary differences 

between the carrying amounts in the tax accounts and those reported in the consolidated financial 

statements (timing concept); they are computed at the current tax rate. This recognizes timing differences 

between the tax accounts and the statutory financial statements (financial statements I) as 

well as the financial statements prepared for inclusion in the consolidated accounts (financial statements 

II). The effects of consolidation measures that are subsequently reversed over the course of 

time also have to be recognized. The HGB does not permit deferred taxes to be recognized for either 

quasi-permanent differences or losses carried forward. 

U.S. GAAP (SFAS 109 ‘Accounting for Income Taxes’) state that deferred taxes have to be recognized 

for temporary differences arising between the tax bases of assets or liabilities and their carrying 

amounts in the consolidated financial statements, with quasi-permanent differences being classified 

as temporary (temporary concept). As under the HGB, this recognizes differences between the tax 

accounts and financial statements I and II and the effects of consolidation measures. Unlike the HGB, 

it only recognizes such differences if they are temporary. Additionally, deferred taxes are recognized 

on net operating loss (NOL) carryforwards to the extent that their future tax benefit or utilization 

can be realized. Tax is computed at the rate applicable under current law to retained earnings at the 

balance sheet date, taking account of future known changes to the tax rate. If deferred tax assets 

are unlikely to be realized, a valuation allowance is reported. 

Other Provisions and Accruals 

In addition to the requirement to report provisions for liabilities and impending losses pursuant to 

section 249 (I), the HGB also states that provisions and accruals may be recognized for certain 

expenses that do not constitute an obligation toward a third party (expense provisions pursuant to 

section 249 (II) of the HGB). Provisions and accruals are calculated pursuant to section 253 (I) of 

the HGB in accordance with customary commercial principles and the prudence principle. 

The reporting of provisions and accruals under U.S. GAAP (CON 6 ‘Elements of Financial Statements’ 

and SFAS 5 ‘Accounting for Contingencies’) is much more restrictive. Accruals and provisions may only 

be established if an obligation toward a third party exists, there is a likelihood of its crystallization 

and its amount can be reasonably estimated. Expense provisions are not permitted. When such provisions 

and accruals are accounted for, the most probable value is reported; if there is a range of 

equally probable values, the lowest one is reported. 

Provisions and accruals for losses on long-term contracts have to be recognized in full under U.S. 

GAAP – as they do under the HGB – in the period in which such losses become apparent. Under 

U.S. GAAP, however, provisions are formed on the basis of total estimated residual costs, including 

all production-related costs in full.



Provisions for Pensions and Similar Obligations 

Under both the HGB and U.S. GAAP, provisions for pension liabilities are formed on the basis of 

expected, discounted future payments. Under the HGB, the entry age normal method is generally 

applied pursuant to section 6a of the German Income Tax Act. Under U.S. GAAP, the projected unit 

credit method is used in accordance with SFAS 87 (‘Employers’ Accounting for Pensions’). This 

method takes account of future salary increases and inflation-related pension adjustments. Furthermore, 

the discount rate used is the prevailing market interest rate – generally the long-term capital 

market rate – rather than the 6% used under German tax law and generally applied to financial 

statements prepared according to the HGB. 

The minimum pension liability recognized under SFAS 87 meets the provision requirements of the 

HGB. However, additions are not always recognized as an expense under U.S. GAAP; the full amount 

is accounted for by reporting an intangible asset or by offsetting it against shareholders’ equity 

(‘Other comprehensive income’). This is not permitted under the HGB. 

In the case of funded plans, certain qualifying assets are deducted from the total amount of the 

liability or, if there is an excess of assets over the liability, capitalized. This is also not permitted 

under the HGB. 

Reporting Requirements 

The structure of the balance sheets and the statements of income meets the requirements of the 

4th and 7th EU Accounting Directives, with the exception of minority interests. 

In order to ensure compliance with the EU Accounting Directives, certain supplemental information 

was provided in the Notes, such as the Consolidated Fixed Assets Schedule, which is not required 

by U.S. GAAP. 

ADDITIONAL INFORMATION 

The following information has been added to mg’s consolidated financial statements in order to 

exempt the company from the obligation to prepare consolidated accounts in accordance with 

German law: 

Personnel Expenses 

Personnel expenses for continued and discontinued operations are as follows: 


1/1/2003 - 10/1/2002 - 

12/31/2003 12/31/2002 

u ’000 t ’000 

Wages and salaries 1,387,778 337,937 

Social security contributions and employee benefits 354,968 86,235 

(thereof for pensions) (71,483) (17,478) 


1,742,746 424,172 

Wages and salaries 109,667 30,081 

Social security contributions and employee benefits 31,179 7,839 

(thereof for pensions) (4,526) (1,105) 

140,846 37,920 

Total 1,883,592 462,092 

155

156 

Number of employees 

The number of employees (excluding trainees) on the basis of full-time equivalents was as follows at 


Annual Average 1/1/2003 1/1/2002 


Wage earners 13,889 14,661 

Salaried employees 15,410 15,953 


29,299 30,614 

Wage earners 524 661 

Salaried employees 1,295 1,402 

1,819 2,063 

Total 31,118 32,677 

Balance Sheet Date 12/31/2003 12/31/2002 


Wage earners 13,761 14,159 



29,189 29,821 

Wage earners 467 617 


1,646 1,991 

Total 30,835 31,812 

The total number of employees in the mg Group contains an average of 379 directors in 2003 

(prior year: 396). At the balance sheet date there were 377 directors (prior year: 390). 

These figures do not contain the average of 5 (prior year: 6) directors of mg technologies ag 

or the 4 (prior year: 6) at the balance sheet date. 

Total emoluments of the active Executive Board members of mg technologies ag amounted to 

a5.535 million (prior year: a2.265 million) and, in addition to a fixed amount of a3.688 million 

(prior year: a1.092 million), contained a variable bonus of a1.847 million (prior year: a1.173 million). 

Former Executive Board members or their surviving dependents received a23.849 million (prior year: 

a1.105 million). Pension commitments to former Executive Board members or their surviving dependents 

totaled a47.268 million (prior year: a41.568 million). These commitments are fully provided for. 

In 2003, the Executive Board subscribed for 80,000 option rights (2003/2006) of mg technologies ag. 

These options are subscribed for only once per calendar year. This corresponds to 80,000 shares. For 

further information on the terms and conditions of these options, please refer to the note 8) ‘Shareholders’ 

equity’.



§ 15 (1) of the articles of incorporation states that each member of the Supervisory Board receives a 

fixed, annual remuneration of a21,000, which is payable after the end of the respective fiscal year. The 

Chairman of the Supervisory Board receives twice this amount and his or her deputy one-and-a-half 

times this amount. Members who join or leave the Supervisory Board during the year are paid only 

pro rata temporis for the period of their membership. The emoluments of the Supervisory Board 

amounted to a516,000 in 2003 (2001/2002: a128.000). 

No advances, loans, guarantees or warranties were granted to directors of mg technologies ag. 

Exempting Provision under Section 264 (3) of the HGB 

The following domestic subsidiaries, which are included in the consolidated financial statements of 

mg technologies ag, made use of the exempting provision under section 264 (3) of the HGB: 

• Aachener Chemische Werke Gesellschaft für glastechnische Produkte und Verfahren mbH, 

Würselen 

• Brent International GmbH, Mönchengladbach 

• CeramTec AG Innovative Ceramic Engineering, Plochingen 

• CHEMETALL GMBH, Frankfurt am Main 

• CM Gesellschaft für Funktion-Additive mbH, Frankfurt am Main 

• Dynamit Nobel GmbH Explosivstoff- u. Systemtechnik, Troisdorf 

• Dynamit Nobel Kunststoff GmbH, Weißenburg 

• EKOKEMI GmbH, Ibbenbüren 

• Gervinusstraße Beteiligungs GmbH, Frankfurt am Main 

• hebro chemie GmbH, Mönchengladbach 

• Lurgi Bischoff GmbH, Essen 

• Lurgi Energie und Entsorgung GmbH, Ratingen 

• Lurgi Lentjes Service GmbH, Duisburg 

• Lurgi Lentjes STANDARDKESSEL Aktiengesellschaft, Duisburg 

• Lurgi Life Science GmbH, Chemnitz 

• Lurgi Oel·Gas·Chemie GmbH, Frankfurt am Main 

• mg Altersversorgung GmbH, Frankfurt am Main 

• mg Bautechnik GmbH, Frankfurt am Main 

• mg capital gmbh, Frankfurt am Main 

• mg corporate developmemt gmbH, Frankfurt am Main 

• mg financial services gmbh, Frankfurt am Main 

• mg global sourcing GmbH, Frankfurt am Main 

• mg IT services GmbH, Frankfurt am Main 

• MIWAC Mitteldeutsche Wasserchemie GmbH, Duisburg 

• Polytrade GmbH, Frankfurt am Main 

• Sachtleben Chemie GmbH, Duisburg 

• Siegfried Schlüßler Feuerungsbau GmbH, Bispingen 

• Standardkessel Lentjes GmbH, Duisburg 

• Zimmer Aktiengesellschaft, Frankfurt am Main 

The companies in the GEA segment that make use of the exempting provision under section 264 (3) 

of the HGB are contained in the annual report of GEA AG, Bochum. 

157

158 

Declaration on the German Corporate Governance Code 

The declarations prescribed by section 161 of the German Joint Stock Corporation Act have been 

submitted and made permanently available to shareholders of mg ag and its listed subsidiaries 

GEA Aktiengesellschaft and mg vermögensverwaltungs-ag. 

Accumulated Loss 

The annual financial statements of mg technologies ag report an accumulated loss of a559.362 million 

at December 31, 2003. There is therefore no proposal from the Executive Board and Supervisory Board 

for the appropriation of profit. The accumulated loss will be carried forward to the next period. 

CONVERSION OF ACCOUNTING TO IFRS 

EU Regulation No. 1606/2002 of the European Parliament and the Council concerning the use of 

International Accounting Standards was adopted on July 19, 2002. This regulation states that consolidated 

financial statements must be prepared in accordance with International Financial Reporting 

Standards (IFRS) as from 2005. 

The mg Group, however, has decided to adopt the recommendations of the Committee of European 

Securities Regulators (CESR) and will thus already publish its quarterly reports in 2005 in accordance 

with the IFRS. This means that the first financial statements that mg publishes in accordance with 

the IFRS will be its report for the first quarter (January 1 through March 31) of 2005, which will 

contain a balance sheet, a statement of income, a statement of cash flows, a reconciliation of shareholders’ 

equity at the end of the comparative period, and a reconciliation of profit or loss for 

the comparative period. 

As the first financial statements published in accordance with the IFRS will also have to state the 

comparative figures for the prior year, mg will have to prepare opening accounts in accordance 

with the IFRS at January 1, 2004. The preparation of the IFRS opening accounts will immediately 

follow the preparation of the year-end accounts at December 31, 2003 and should be completed by 

mid-April 2004. 

During 2004, the mg Group will prepare its accounts in accordance with both U.S. GAAP and the 

IFRS. As from 2004, the mg Group's planning processes – with the exception of its outlook for the 

current year – will be performed exclusively in accordance with the IFRS. The outlook for 2004 

will be prepared in accordance with both the IFRS and U.S. GAAP. 

In preparation for the introduction of the IFRS, mg offered its employees around the world training 

on this issue in the summer and fall of last year. 


The Executive Board 

Udo Stark Karlheinz Hornung Klaus Moll Jürg Oleas Peter Steiner

MANAGEMENT AKTIE STRATEGIE SONDERTEIL LAGEBERICHT KONZERNABSCHLUSS WEITERE ANGABEN 


INDEPENDENT AUDITORS’ REPORT 

We have audited the consolidated financial statements, comprising the balance sheet, the income 

statement and the statements of changes in shareholders’ equity and cash flows as well as the notes 

to the financial statements prepared by mg technologies ag, Frankfurt am Main, for the business year 

from January 1 through December 31, 2003. The preparation and the content of the consolidated 

financial statements in accordance with United States Generally Accepted Accounting Principles 

(U.S. GAAP) are the responsibility of the Company's Executive Board. Our responsibility is to express 

an opinion on the consolidated financial statements based on our audit. 

We conducted our audit of the consolidated financial statements in accordance with German auditing 

regulations and German generally accepted standards for the audit of financial statements promulgated 

by the Institut der Wirtschaftsprüfer (IDW). Those standards require that we plan and perform 

the audit such that it can be assessed with reasonable assurance whether the consolidated financial 

statements is free of material misstatements. The evidence supporting the amounts and disclosures 

in the consolidated financial statements is examined on a test basis within the framework of the 

audit. The audit includes assessing the accounting principles used and significant estimates made by 

management, as well as evaluating the overall presentation of the consolidated financial statements. 

We believe that our audit provides a reasonable basis for our opinion. 

In our opinion, the consolidated financial statements give a true and fair view of the net assets, 

financial position, results of operations and cash flows of the Group for the business year in accordance 

with U.S. GAAP. 

Our audit, which also extends to the group management report prepared by the Executive Board 

for the business year from January 1 through December 31, 2003, has not led to any reservations. In 

our opinion, on the whole the group management report provides a suitable understanding of the 

Group’s position and suitably presents the risks of future development. In addition, we confirm that 

the consolidated financial statements and the group management report for the business year from 

January 1 through December 31, 2003 satisfy the conditions required for the Company’s exemption 

from its duty to prepare consolidated financial statements and the group management report in 

accordance with German law. 


KPMG Deutsche Treuhand-Gesellschaft 

Aktiengesellschaft 

Wirtschaftsprüfungsgesellschaft 

Prof. Dr. Nonnenmacher Wagenseil 

Wirtschaftsprüfer (German Public Auditor) Wirtschaftsprüfer (German Public Auditor) 

159

160 

MAJOR SHAREHOLDING of the mg technologies Group as of December 31, 2003 

AFFILIATED COMPANIES INCLUDED IN THE SCOPE OF CONSOLIDATION 

Share- Shares held 

No. Company Registered Office Country holding (%) through no. 

1 GEA Aktiengesellschaft Bochum Germany 98.02 390 

2 „SEMENOWSKY VAL“ Immobilien-Verwaltungs-GmbH Bochum Germany 100.00 97 

3 3180913 Canada Inc. Montreal Canada 50.00 11 

3180913 Canada Inc. Montreal Canada 25.00 9 

3180913 Canada Inc. Montreal Canada 25.00 14 

4 Aeromatic-Fielder AG Bubendorf Switzerland 100.00 163 

5 Agro Contractants S.A. Avignon France 100.00 160 

6 AJ UC V GEA-Ukrayina Ltd. Kiev Ukraine 60.00 159 

7 Avalon Engineering Ltd. Hamilton New Zealand 100.00 178 

8 Babson Bros. Canada, Inc. Halifax, Nova Scotia Canada 100.00 267 

9 Barr & Murphy (Canada) Ltd. Montreal Canada 50.00 11 

Barr & Murphy (Canada) Ltd. Montreal Canada 25.00 14 

Barr & Murphy (Canada) Ltd. Montreal Canada 25.00 3 

10 Barr & Murphy Construction Inc. Montreal Canada 100.00 9 

11 Barr & Murphy Holdings Ltd. Maidenhead Great Britain 100.00 15 

12 Barr & Murphy Management Ltd. Stourbridge Great Britain 100.00 15 

13 Barr & Murphy Overseas Ltd. Stourbridge Great Britain 100.00 15 

14 Barr & Murphy Technologies Inc. Montreal Canada 100.00 11 

15 Barr Rosin Limited Maidenhead Great Britain 100.00 100 

16 Barr-Rosin (USA) Inc. Chicago USA 100.00 9 

17 Barr-Rosin, Inc. Boisbriand, Quebec Canada 100.00 15 

18 Batignolles Technologies Thermiques S.A. Nantes France 99.99 99 

19 Bowen Engineering Inc. Columbia USA 100.00 164 

20 Buck Systems Ltd. Birmingham Great Britain 100.00 92 

21 Centrico Canada Inc. Toronto Canada 100.00 252 

22 Collette N.V. Wommelgem Belgium 100.00 163 

23 Courtoy N.V. Halle Belgium 100.00 22 

24 DELBAG S.A.R.L. Montry France 99.60 158 

DELBAG S.A.R.L. Montry France 0.40 1 

25 Dobbelenberg S.A./N.V. Haren (Brussels) Belgium 100.00 59 

26 Dunia Ikatan Sdn. Bhd. Petaling Jaya Malaysia 100.00 243 

7 Energiagazdalkodasi Rt Budapest Hungary 99.47 67 

28 EXOS VENTILATION AB Enköping Sweden 100.00 57 

29 Felsina Ltd. Naas Ireland 75.00 96 

30 FES Systems Inc. York - Pennsylvania USA 100.00 105 

31 FK Wärmetauscher Kemmerling GmbH Wickede Germany 100.00 188 

32 Franz Wieland Apparatebau GmbH Sprockhövel Germany 100.00 184 

33 Frigofrance S.A. Les Couets/Bouguenais France 100.00 160 

34 Frigostar S.A. Beziers France 100.00 160 

35 GEA (Philippines) Inc. Manila Philippines 100.00 162 

36 GEA Abfülltechnik GmbH Büchen Germany 100.00 97 

37 GEA Air Treatment Marketing Services International GmbH Herne Germany 100.00 158 

38 GEA Aircooled Systems (Pty) Ltd. Germiston South Africa 100.00 67 

39 GEA America Inc. San Diego USA 100.00 407 

40 GEA Automation Ireland Ltd. Naas Ireland 100.00 102 

41 GEA Automation Research & Development Ltd. Naas Ireland 100.00 102 

42 GEA Buck Valve GmbH Müllheim Germany 100.00 170


Major Shareholding • Directorships Held by Members of the Executive Board • Directorships Held by Members of the Supervisory Board • List of Abbreviations • Index for the Notes • Financial Calendar 



43 GEA Climatizacion Espana s.l. Madrid Spain 100.00 158 

44 GEA Comercio e Servicos Ltda. Franco da Rocha Brazil 100.00 49 

45 GEA Comfortair Ltd. Daventry Great Britain 100.00 158 

46 GEA Delbag Luftfilter GmbH Berlin Germany 100.00 1 

47 GEA Delbag Luftfilter Vertriebsgesellschaft mbH Herne Germany 100.00 156 

48 GEA Delbag Lufttechnik GmbH Herne Germany 100.00 1 

49 GEA do Brasil Intercambiadores Ltda. Franco da Rocha Brazil 100.00 67 

50 GEA Dutch Holding B.V. ’s-Hertogenbosch Netherlands 100.00 158 

51 GEA Ecobraze AB Landskrona Sweden 100.00 97 

52 GEA Ecoflex GmbH Sarstedt Germany 100.00 201 

53 GEA Energietechnik GmbH Bochum Germany 100.00 85 

54 GEA Energy Technology GmbH Bochum Germany 100.00 1 

55 GEA Ergé-Spirale et Soramat S.A. Wingles France 99.99 99 

56 GEA Exergy AB Göteborg Sweden 100.00 118 

57 GEA EXOS Luftbehandling AB Stockholm Sweden 100.00 158 

58 GEA GP GmbH Bochum Germany 100.00 97 

59 GEA Happel Belgium N.V. Haren (Brussels) Belgien 100.00 158 

60 GEA Happel GmbH & Co. KG Gaspoltshofen Austria 98.00 67 

GEA Happel GmbH & Co. KG Gaspoltshofen Austria 2.00 153 

61 GEA Happel Klimatechnik GmbH Herne Germany 100.00 62 

62 GEA Happel Klimatechnik Produktions- und Servicegesellschaft mbH Herne Germany 100.00 1 

63 GEA Happel Nederland B.V. Capelle an der Yssel Netherlands 100.00 158 

64 GEA Happel S.A.R.L. Roncq France 99.80 62 

65 GEA Happel SiCo GmbH Herne Germany 100.00 37 

66 GEA Ibérica S.A. Igorre Spain 100.00 67 

67 GEA Industriebeteiligungen GmbH Bochum Germany 100.00 1 

68 GEA Integrated Cooling Technologies, Inc. Lakewood, Colorado USA 100.00 39 

69 GEA IT Services GmbH Oelde Germany 100.00 1 

70 GEA Jet Pumps GmbH Ettlingen Germany 100.00 118 

71 GEA Kestner SAS Montigny le Bretonneux France 100.00 99 

72 GEA klima rashladna tehnika d.o.o. Zagreb Croatia 100.00 153 

73 GEA Klima- und Filtertechnik Wurzen GmbH Wurzen Germany 100.00 1 

74 GEA Klimatechnik GmbH Gaspoltshofen Austria 100.00 37 

75 GEA Klimatechnika Kft. Budapest Hungary 96.67 153 

GEA Klimatechnika Kft. Budapest Hungary 3.33 37 

76 GEA Klimateknik Aps Copenhagen Denmark 100.00 37 

77 GEA Klimatizace spol. s r.o. Liberec Czech Republic 67.00 153 

GEA Klimatizace spol. s r.o. Liberec Czech Republic 33.00 159 

78 GEA Klimatizacia s.r.o. Bratislava Slovakia 50.00 153 

GEA Klimatizacia s.r.o. Bratislava Slovakia 50.00 159 

79 GEA Klimatizacijska tehnika d.o.o. Ljubljana Slovenia 100.00 37 

80 GEA Klimatyzacja spolka z o.o. Wroclaw Poland 50.00 153 

GEA Klimatyzacja spolka z o.o. Wroclaw Poland 50.00 159 

81 GEA Kühlturmbau GmbH Bochum Germany 100.00 53 

82 GEA L-Division North America Inc. Baltimore USA 100.00 105 

83 GEA Liquid Processing Scandinavia A/S Skanderborg Denmark 100.00 163 

84 GEA Luftkühler GmbH Bochum Germany 100.00 85 

161

162 



85 GEA Luftkühler Holding GmbH Bochum Germany 90.00 128 

GEA Luftkühler Holding GmbH Bochum Germany 10.00 1 

86 GEA Management Gesellschaft für Wärme- u. Energietechnik mbH Bochum Germany 100.00 85 

87 GEA Maschinenkühltechnik GmbH Herne Germany 100.00 85 

88 GEA Polska Sp. z o.o. Swiebodzice Poland 100.00 67 

89 GEA Power Cooling Systems Inc. San Diego, California USA 100.00 39 

90 GEA Process Engineering Australia Pty. Ltd. Melbourne Australia 100.00 163 

91 GEA Process Engineering de México, S.A. de C.V. Mexico City Mexico 100.00 163 

92 GEA Process Engineering Ltd. Eastleigh Hampshire Great Britain 100.00 100 

93 GEA Process Engineering Nederland B.V. Deventer Netherlands 100.00 107 

94 GEA Process Engineering S.A.S. Saint-Quentin en Yvelines Ced. France 100.00 99 

95 GEA Process Equipment GmbH Bochum Germany 100.00 1 

96 GEA Process Technologies Ireland Limited Dublin Ireland 100.00 102 

97 GEA Process Technology GmbH Bochum Germany 100.00 1 

98 GEA PT Canada Inc. Saint John, New Brunswick Canada 100.00 105 

99 GEA PT France SAS Saint-Quentin en Yvelines France 100.00 101 

100 GEA PT Holdings Ltd. Birchwood Great Britain 100.00 101 

101 GEA PT Industriebeteiligungs GmbH Bochum Germany 100.00 97 

102 GEA PT Ireland Ltd. Kildare Ireland 100.00 101 

103 GEA PT Italia Holding S.p.A. Parma Italy 99.95 101 

104 GEA PT Nederland B.V. Apeldoorn Netherlands 100.00 101 

105 GEA PT North America, Inc. Columbia USA 100.00 407 

106 GEA PT S.A., Argentina Buenos Aires Argentina 99.90 101 

GEA PT S.A., Argentina Buenos Aires Argentina 0.10 97 

107 GEA PT Tussenholding B.V. Gorssel Netherlands 100.00 104 

108 GEA PT Warsaw Spolka z o.o. Warsaw Poland 100.00 97 

109 GEA Rainey Corp. Tulsa USA 100.00 39 

110 GEA Refrigeration Ireland Limited Dublin Ireland 100.00 152 

111 GEA Saturn GmbH Bochum Germany 100.00 84 

112 GEA Scambiatori di Calore S.r.l. Monvalle Italy 100.00 67 

113 GEA Schwimmbad-Komforttechnik GmbH Herne Germany 100.00 158 

114 GEA Spiro-Gills Ltd. Stafford Great Britain 100.00 100 

115 GEA Technology Equipment (Shanghai) Company Ltd. Shanghai (China) China 100.00 117 

116 GEA Thermtec Schweiz AG Bolligen Switzerland 51.00 158 

117 GEA Tuchenhagen (China) Ltd. Hong Kong China 100.00 199 

118 GEA Wiegand GmbH Ettlingen Germany 100.00 97 

119 Geneglace SAS Les Couets/Bougenais France 100.00 33 

120 Grasso (Pty) Ltd. Cape Town South Africa 100.00 145 

121 Grasso Chile B.V. ’s-Hertogenbosch Netherlands 100.00 145 

122 Grasso Componenten Benelux BV ’s-Hertogenbosch Netherlands 100.00 145 

123 Grasso Components Ibéria Lda. Cascais Portugal 99.80 145 

Grasso Components Ibéria Lda. Cascais Portugal 0.20 137 

124 Grasso Components Srl Castel Maggiore Italy 99.00 145 

Grasso Components Srl Castel Maggiore Italy 1.00 137 

125 Grasso Consultants B.V. ’s-Hertogenbosch Netherlands 100.00 145 

126 Grasso Filipijnen B.V. ’s-Hertogenbosch Netherlands 100.00 145 

127 Grasso Finance B.V. ’s-Hertogenbosch Netherlands 100.00 145 

128 Grasso GmbH Refrigeration Technology Berlin Germany 100.00 1 

129 Grasso Holding Ltd. London Great Britain 100.00 145





130 Grasso Holdings Australia Pty. Ltd. Thomastown, Victoria Australia 100.00 145 

131 Grasso International (Thailand) Co. Ltd. Bangkok Thailand 48.80 145 

Grasso International (Thailand) Co. Ltd. Bangkok Thailand 0.10 147 

Grasso International (Thailand) Co. Ltd. Bangkok Thailand 0.10 137 

132 Grasso International B.V. ’s-Hertogenbosch Netherlands 100.00 145 

133 Grasso International GmbH Berlin Germany 99.00 128 

134 Grasso KAB (Thailand) Co., Ltd. Bangkok Thailand 51.00 131 

Grasso KAB (Thailand) Co., Ltd. Bangkok Thailand 49.00 145 

135 Grasso Kältemaschinenbau Halle GmbH Döllnitz Germany 100.00 1 

136 Grasso Nordic A/S Kolding Denmark 100.00 145 

137 Grasso Products B.V. ’s-Hertogenbosch Netherlands 100.00 145 

138 Grasso Products Ltd. London Great Britain 100.00 129 

139 Grasso Refrigeration B.V. ’s-Hertogenbosch Netherlands 100.00 145 

140 Grasso Refrigeration O.o.o. Moscow Russian Federation 100.00 132 

141 Grasso s.r.l. Cluj Rumänien 100.00 132 

142 Grasso Spolka z o.o. Gdynia Poland 100.00 145 

143 Grasso UAB Vilnius Litauen 100.00 145 

144 Grasso-KAB Australia (Pty) Ltd. Thomastown, Victoria Australia 100.00 130 

145 Grasso’s Koninklijke Machinefabrieken N.V. ’s-Hertogenbosch Netherlands 100.00 50 

146 Grenco (South Africa) (Pty) Ltd. Kapstadt South Africa 100.00 145 

147 Grenco B.V. ’s-Hertogenbosch Netherlands 100.00 145 

148 Grenco Ibérica S.A. Vigo Spain 100.00 145 

149 Grenco Property (Pty) Ltd. Kapstadt South Africa 51.00 146 

150 Grenco Property Durban (Pty) Ltd. Kapstadt South Africa 50.50 146 

151 Grenco Refrigeration B.V. ‘s-Hertogenbosch Netherlands 100.00 145 

152 Grenco Refrigeration Ltd. London Great Britain 100.00 129 

153 Happel GmbH Gaspoltshofen Austria 100.00 1 

154 Hovex B.V. Engineering Veendam Netherlands 100.00 107 

155 Industrie Technofrigo dell’Orto S.p.A. Castel Maggiore (Bo) Italy 100.00 145 

156 KÜBA Kältetechnik GmbH Baierbrunn Germany 90.00 128 

KÜBA Kältetechnik GmbH Baierbrunn Germany 10.00 1 

157 LKH Lüftung-, Klima-, Heizung-Service GmbH Willich Germany 100.00 1 

158 LuK Industriebeteiligungen GmbH Herne Germany 100.00 1 

159 LVZ, a.s. Liberec Czech Republic 89.94 1 

160 Matal S.A. Les Sorinières France 100.00 145 

161 Morris & Young Ltd. London Great Britain 100.00 129 

162 Niro (S.E.A.) Pte. Ltd. Singapore Singapore 100.00 163 

163 Niro A/S Soeborg Denmark 100.00 101 

164 Niro Atomizer Acquisition, Inc. Columbia USA 100.00 171 

165 Niro Atomizer Canada Ltd. Montreal Canada 100.00 171 

166 Niro Bola A/S Soeborg Denmark 100.00 163 

167 Niro España S.A. Barcelona Spain 100.00 235 

168 NIRO Financial, Inc. Columbia USA 100.00 171 

169 Niro Finland Oy Vantaa Finnland 100.00 163 

170 Niro GmbH Müllheim Germany 100.00 97 

171 Niro Inc. Columbia USA 100.00 105 

172 Niro Indústria e Comércio Ltda. Sao Paolo Brasilia 100.00 174 

173 Niro Industries B.V. Amsterdam Netherlands 100.00 163 

174 Niro Instalacoes Industrias Ltda. Sao Paulo Brasilia 100.00 163 

163

164 



175 Niro Italy S.p.A. Parma Italy 100.00 163 

176 Niro Japan Co. Ltd. Tokyo Japan 100.00 163 

177 Niro Limited Abingdon Oxfordshire Great Britain 100.00 100 

178 Niro NZ Limited Auckland New Zealand 100.00 163 

179 Niro Process Technology B.V. ‘s-Hertogenbosch Netherlands 100.00 107 

180 Niro Soavi S.p.A. Parma Italy 100.00 103 

181 Niro Sterner Inc. Columbia USA 100.00 171 

182 P.T. Grasso Indonesia Djakarta Indonesia 99.00 145 

P.T. Grasso Indonesia Djakarta Indonesia 1.00 132 

183 P.T. Separindo Permai Djakarta Indonesia 100.00 220 

184 Paul Pollrich GmbH Mönchengladbach Germany 100.00 1 

185 Polacel B.V. Doetinchem Netherlands 100.00 67 

186 Process Control Panels Ltd. Birmingham Great Britain 100.00 212 

187 PT Westfalia Indonesia Djakarta Indonesia 100.00 220 

188 Renzmann & Grünewald GmbH Monzingen Germany 100.00 85 

189 Revalco B.V. ‘s-Hertogenbosch Netherlands 100.00 145 

190 RO-KA Industri A/S Rodding Denmark 100.00 215 

191 Rosin Americas Ltd. Montreal Canada 65.00 15 

Rosin Americas Ltd. Montreal Canada 35.00 100 

192 Scami Tuchenhagen S.A. Saint-Quentin en Yvelines France 100.00 99 

193 Shanghai Grasso Refrigeration Equipment Co. Ltd. Shanghai China 51.00 145 

194 Tri Tech Refrigeration Pty. Ltd. Thomastown, Victoria Australia 100.00 130 

195 Tuchenhagen (Philippines) Inc. Manila Philippines 100.00 196 

196 Tuchenhagen (S.E.A.) Pte. Ltd. Singapore Singapore 100.00 199 

197 Tuchenhagen (Thailand) Co. Ltd. Bangkok Thailand 100.00 196 

198 Tuchenhagen Belgium S.A./N.V. Schoten Belgium 100.00 199 

199 Tuchenhagen Brewery Systems GmbH Büchen Germany 100.00 97 

200 Tuchenhagen Canada Inc. Mississauga, Ontario Canada 100.00 82 

201 Tuchenhagen Dairy Systems GmbH Sarstedt Germany 100.00 97 

202 Tuchenhagen de Mexico S.A. de C.V. Mexico Mexico 100.00 82 

203 Tuchenhagen do Brasil LTDA. Campinas Brazil 100.00 199 

204 Tuchenhagen GmbH Büchen Germany 100.00 97 

205 Tuchenhagen Italia S.r.l. Parma Italy 100.00 199 

206 Tuchenhagen Japan Ltd. Osaka Japan 86.96 199 

207 Tuchenhagen Moscow OOO Moscow Russian Federation 100.00 201 

208 Tuchenhagen North America LLC Baltimore USA 100.00 82 

209 Tuchenhagen S.A. Buenos Aires Argentina 100.00 213 

210 Tuchenhagen S.A. (Pty) Ltd. Midrand South Africa 100.00 199 

211 Tuchenhagen Systems Engineering, LLC Columbia USA 100.00 82 

212 Tuchenhagen UK Ltd. Birchwood,Warrington,Chesire Great Britain 100.00 100 

213 Tuchenhagen, S.A. Alcobendas (Madrid) Spain 100.00 235 

214 UAB GEA Klimatechnik Vilnius Lithuania 100.00 37 

215 Westfalia Japy St. Apollinaire France 100.00 254 

216 Westfalia Landtechnik Acier SAS Château-Thierry France 100.00 215 

217 Westfalia Prominox SAS Nevers France 100.00 215 

218 Westfalia Separator (Philippines), Inc. Manila Philippines 100.00 220 

219 Westfalia Separator (S.A.) (Pty) Ltd. Johannesburg South Africa 100.00 224 

220 Westfalia Separator (S.E.A.) Pte. Ltd. Singapore Singapore 100.00 224





221 Westfalia Separator (Thailand) Ltd. Bangkok Thailand 100.00 220 

222 Westfalia Separator A/S Skanderborg Denmark 100.00 163 

223 Westfalia Separator ACE GmbH Ennigerloh Germany 100.00 224 

224 Westfalia Separator AG Oelde Germany 99.36 85 

Westfalia Separator AG Oelde Germany 0.64 1 

225 Westfalia Separator Andalucia, Sociedad Limitada Ubeda Spain 100.00 235 

226 Westfalia Separator AS Oslo Norway 100.00 224 

227 Westfalia Separator Australia Pty. Ltd. Thomastown, Victoria Australia 100.00 224 

228 Westfalia Separator Austria GmbH Vienna Austria 100.00 257 

229 Westfalia Separator Belgium N.V./S.A. Schoten Belgium 100.00 224 

230 Westfalia Separator Deutschland GmbH Oelde Germany 100.00 224 

231 Westfalia Separator do Brasil Ltda. Campinas Brazil 99.99 235 

Westfalia Separator do Brasil Ltda. Campinas Brazil 0.01 245 

232 Westfalia Separator EHF Reykjavik Iceland 100.00 226 

233 Westfalia Separator Engineering GmbH Oelde Germany 100.00 224 

234 Westfalia Separator Food Tec GmbH Oelde Germany 100.00 224 

235 Westfalia Separator Ibérica S.A. Granollers Spain 100.00 224 

236 Westfalia Separator Inc. Northvale, New Jersey USA 100.00 252 

237 Westfalia Separator Industrie SAS Château-Thierry France 99.98 99 

Westfalia Separator Industrie SAS Château-Thierry France 0.02 224 

238 Westfalia Separator Industry GmbH Oelde Germany 100.00 224 

239 Westfalia Separator Ireland Ltd. Ballincollig Cork Ireland 100.00 102 

240 Westfalia Separator Italiana S.r.l. Parma Italy 100.00 224 

241 Westfalia Separator K.K. Minato-ku,Tokyo Japan 100.00 224 

242 Westfalia Separator Ltd. Milton Keynes Great Britain 100.00 100 

243 Westfalia Separator Malaysia SDN. BHD. Petaling Jaya Malaysia 100.00 220 

244 Westfalia Separator Mexicana S.A. de C.V. Cuernavaca,Morelos Mexico 100.00 224 

245 Westfalia Separator Mineraloil Systems GmbH Oelde Germany 100.00 224 

246 Westfalia Separator Mineraloil Systems SAS Château-Thierry France 99.99 99 

Westfalia Separator Mineraloil Systems SAS Château-Thierry France 0.01 245 

247 Westfalia Separator Nederland B.V. Cuijk Netherlands 100.00 107 

248 Westfalia Separator Nederland Service B.V. Cuijk Netherlands 100.00 247 

249 Westfalia Separator NZ Limited Penrose-Auckland New Zealand 100.00 224 

250 Westfalia Separator Sweden A/B Göteborg Sweden 100.00 226 

251 Westfalia Separator Umwelttechnik GmbH Oelde Germany 100.00 224 

252 Westfalia Separator, Inc. Northvale, New Jersey USA 100.00 105 

253 Westfalia Surge AG Ittigen Switzerland 100.00 261 

254 Westfalia Surge SAS Château-Thierry Cedex France 100.00 99 

255 WestfaliaSurge Argentina SRL Buenos Aires Argentina 99.90 261 

256 WestfaliaSurge Australia Pty. Ltd. Tullamarine, Victoria Australia 100.00 261 

257 WestfaliaSurge Austria GmbH Eugendorf Austria 100.00 261 

258 WestfaliaSurge Canada Company Mississauga, Ontario Canada 100.00 267 

259 WestfaliaSurge Deutschland GmbH Oelde Germany 100.00 261 

260 WestfaliaSurge do Brasil Ltda. Jaguariúna Brazil 91.70 261 

WestfaliaSurge do Brasil Ltda. Jaguariúna Brazil 8.30 215 

261 WestfaliaSurge GmbH Oelde Germany 94.50 85 

WestfaliaSurge GmbH Oelde Germany 5.50 224 

262 WestfaliaSurge Ibérica S.L. Granollers Spain 100.00 235 

165

166 



263 WestfaliaSurge Mexicana S.A. de C.V. Cuernavaca Mexico 100.00 224 

264 WestfaliaSurge Polska Sp. z o.o. Bydgoszcz Poland 100.00 261 

265 WestfaliaSurge UK Ltd. Milton Keynes Great Britain 100.00 242 

266 Westfalia-Surge West, Inc. Fresno, California USA 100.00 267 

267 WestfaliaSurge, Inc. Naperville USA 100.00 252 

Lurgi 

268 Lurgi Aktiengesellschaft Frankfurt am Main Germany 100.00 390 

269 Lucon (Australia) Pty. Ltd. Melbourne Australia 100.00 278 

270 Lurgi Caribbean Limited Port of Spain Trinidad,Tobago 100.00 277 

271 Lurgi Chile Limitada Santiago de Chile Chile 95.00 277 

Lurgi Chile Limitada Santiago de Chile Chile 5.00 547 

272 Lurgi Dry Coal Pty. Ltd. South Melbourne Victoria Australia 51.00 268 

Lurgi Dry Coal Pty. Ltd. South Melbourne Victoria Australia 49.00 278 

273 Lurgi Española S.A. Madrid Spain 100.00 268 

274 Lurgi Holdings, Inc. Wilmington USA 100.00 407 

275 Lurgi India Company Ltd. New Delhi India 99.70 268 

276 Lurgi Life Science GmbH Chemnitz Germany 100.00 268 

277 Lurgi Oel·Gas·Chemie GmbH Frankfurt am Main Germany 100.00 268 

278 Lurgi Pacific Pty. Ltd. Melbourne Australia 100.00 268 

279 Lurgi Polska S.A. Krakau Poland 97.03 277 

280 Lurgi PSI, Inc. Memphis USA 100.00 274 

281 Lurgi South Africa (Pty) Ltd. Bedfordview South Africa 100.00 268 

282 Lurgi TPS AG Bubendorf Switzerland 100.00 276 

Lurgi Lentjes 

283 Lurgi Lentjes Aktiengesellschaft Düsseldorf Germany 100.00 390 

284 Lentjes Shared Services GmbH Düsseldorf Germany 100.00 283 

285 LURGI (UK) Ltd. Woking Great Britain 100.00 283 

286 Lurgi Bischoff GmbH Essen Germany 100.00 283 

287 Lurgi Energie und Entsorgung GmbH Düsseldorf Germany 100.00 283 

288 Lurgi Lentjes Bischoff Ltd. Cambridge Canada 100.00 287 

289 Lurgi Lentjes North America, Inc. Columbia USA 100.00 407 

290 Lurgi Nederland B.V. Utrecht Netherlands 100.00 283 

291 Lurgi Praha s.r.o. Prague Czech Republic 99.89 287 

Lurgi Praha s.r.o. Prague Czech Republic 0.11 283 

292 Lurgi S.A. Saint-Cloud France 99.96 283 

293 Lurgi S.p.A. Milan Italy 100.00 283 

294 Skandinavisk Miljo Service A/S Albertslund Denmark 100.00 287 

Zimmer 

295 Zimmer Aktiengesellschaft Frankfurt am Main Germany 100.00 390 

296 Lurgi Austria GmbH Wien Austria 100.00 295 

297 Lurgi Zürich AG Zürich Switzerland 100.00 295 

298 Polytrade GmbH Frankfurt am Main Germany 100.00 295 

299 Shanghai Zimmer International Trading Co. Ltd. Shanghai China 100.00 295 

300 Zimmer Betriebs-GmbH 

(zukünftig firmierend unter: Fleissner GmbH) Frankfurt am Main Germany 100.00 295






Dynamit Nobel 

301 Dynamit Nobel AG Troisdorf Germany 100.00 390 

302 Aachener Chemische Werke Gesellschaft für 

glastechnische Produkte und Verfahren mbH Würselen Germany 100.00 323 

303 AM Craig Limited Bletchley, Milton Keynes Great Britain 100.00 330 

304 Brent International B.V. Bletchley, Milton Keynes Great Britain 100.00 303 

305 Brent International GmbH Mönchengladbach Germany 100.00 323 

306 CeramTec AG Innovative Ceramic Engineering Plochingen Germany 51.00 343 

CeramTec AG Innovative Ceramic Engineering Plochingen Germany 26.60 390 

CeramTec AG Innovative Ceramic Engineering Plochingen Germany 22.40 301 

307 CeramTec Czech Republik spol s.r.o. Sumperk Czech Republic 100.00 306 

308 CeramTec Innovative Ceramic Engineering (M) Sdn. Seremban Malaysia 100.00 306 

309 CeramTec Italia S.r.l. Caravaggio Italy 100.00 306 

310 CeramTec North America Innovative Ceramic Engineering Corp. Laurens USA 100.00 407 

311 CeramTec UK Ltd. Colyton Great Britain 100.00 306 

312 Cerasiv GmbH Innovatives Keramik-Engineering Plochingen Germany 100.00 306 

313 CETEMA B.V. Oss Netherlands 100.00 323 

314 CHEMETALL (PROPRIETARY) LIMITED Boksburg East South Africa 100.00 313 

315 Chemetall Asia Pte Ltd Singapore Singapore 100.00 323 

316 Chemetall Chemical Products Inc. Berkeley Heights USA 100.00 317 

317 Chemetall Corporation Berkeley Heights USA 100.00 407 

318 Chemetall Danmark A/S Herlev Denmark 100.00 333 

319 Chemetall do Brasil Ltda. Sao Paulo Brazil 100.00 323 

320 Chemetall Finland Oy Helsinki Finland 100.00 333 

321 Chemetall Foote Corp. Delaware USA 100.00 317 

322 CHEMETALL Ges.m.b.H. Wien Austria 100.00 338 

323 CHEMETALL GMBH Frankfurt am Main Germany 51.00 343 

CHEMETALL GMBH Frankfurt am Main Germany 49.00 301 

324 Chemetall Hispania S.A. Barcelona Spain 100.00 323 

325 CHEMETALL HONG KONG LIMITED Hong Kong China 100.00 315 

326 CHEMETALL ITALIA s.r.l. Guissano-Birone Italy 100.00 331 

327 Chemetall Mexicana, S.A. de C.V. Mexico-City Mexico 99.99 366 

328 Chemetall N.V. Kontich Belgium 58.88 313 

Chemetall N.V. Kontich Belgium 41.12 332 

329 Chemetall Philippines Co. Ltd., Inc. Manila Philippines 100.00 315 

330 CHEMETALL PLC Bletchley, Milton Keynes Great Britain 100.00 323 

331 CHEMETALL s.r.l. Giussano-Birone Italy 100.00 323 

332 CHEMETALL SA Clichy France 99.98 323 

333 Chemetall Skandinavien Ytteknik AB Balsta Sweden 100.00 323 

334 CHEMETALL SPECIALITES CHIMIQUES SAS Clichy France 100.00 332 

335 CHEMETALL SPECIALITY CHEMICALS LIMITED Bletchley, Milton Keynes Great Britain 100.00 323 

336 CHEMETALL TAIWAN CO., LTD. Taipei Hsien Taiwan 100.00 323 

337 CHEMETALL TRAITEMENT DE SURFACE SAS Clichy France 100.00 332 

338 CM Gesellschaft für Funktion-Additive mbH Frankfurt am Main Germany 100.00 323 

339 CM Services B.V. Oss Netherlands 100.00 328 

340 DNVJ Vermögensverwaltung GmbH Troisdorf Germany 99.95 301 

167

168 



341 Dynamit Nobel AIS GmbH Automotive Ignition Systems Fürth Germany 100.00 346 

342 Dynamit Nobel Argentina S.A. Buenos Aires Argentina 100.00 347 

343 Dynamit Nobel Beteiligungen GmbH Troisdorf Germany 100.00 301 

344 Dynamit Nobel Chimie Specialisee Pharmaceutique SAS Chasse-sur-Rhône France 100.00 346 

345 Dynamit Nobel France S.A.S. Hambach France 100.00 349 

346 Dynamit Nobel GmbH Explosivstoff- u. Systemtechnik Troisdorf Germany 100.00 301 

347 Dynamit Nobel Ibérica S.A. Sant Andreu de la Barca Spain 100.00 349 

348 Dynamit Nobel ICAS Beteiligungen GmbH Weißenburg Germany 100.00 349 

349 Dynamit Nobel Kunststoff GmbH Weißenburg Germany 100.00 301 

350 EKOKEMI GmbH Ibbenbüren Germany 95.64 364 

EKOKEMI GmbH Ibbenbüren Germany 4.36 368 

351 Finorga S.A. Chasse-sur-Rhône France 100.00 344 

352 Foote Chile Holding Company Delaware USA 100.00 321 

353 Foote Minera e Inversiones Limitada Santiago de Chile Chile 50.00 352 

Foote Minera e Inversiones Limitada Santiago de Chile Chile 50.00 321 

354 hebro chemie GmbH Mönchengladbach Germany 100.00 305 

355 Menzolit Ltd. Eastwood Great Britain 100.00 361 

356 Menzolit S.A. Vineuil France 99.98 361 

357 Menzolit S.r.l. Milan Italy 99.00 361 

Menzolit S.r.l. Milan Italy 1.00 349 

358 Menzolit Vitroplast S.l. Granollers Spain 100.00 361 

359 Menzolit-Fibron A.S. Dolayoba, Pendik-Istanbul Turkey 99.98 361 

360 Menzolit-Fibron Automotive s.r.o. Trnava Slovakia 100.00 361 

361 Menzolit-Fibron GmbH Bretten Germany 72.30 349 

362 Menzolit-Fibron Immobilien s.r.o. Trnava Slovakia 100.00 361 

363 Menzolit-Fibron s.r.o. Trnava Slovakia 100.00 361 

364 MIWAC Mitteldeutsche Wasserchemie GmbH Duisburg Germany 100.00 368 

365 Oakite Canada Limited Bramalea Canada 100.00 366 

366 Oakite Products, Inc. Berkeley Heights USA 100.00 317 

367 Rohner AG Pratteln Switzerland 100.00 346 

368 Sachtleben Chemie GmbH Duisburg Germany 51.00 343 

Sachtleben Chemie GmbH Duisburg Germany 49.00 301 

369 Sociedad Chilena de Litio Ltda. Santiago de Chile Chile 55.00 321 

Sociedad Chilena de Litio Ltda. Santiago de Chile Chile 45.00 353 

solvadis 

370 solvadis ag Frankfurt am Main Germany 100.00 390 

371 Alcan Far East (Private) Ltd. Singapore Singapore 80.00 381 

Alcan Far East (Private) Ltd. Singapore Singapore 20.00 378 

372 Alcan Rubber & Chemical Inc. New York USA 100.00 381 

373 Clément-RPC S.A. Montereau-Fault Yonne France 100.00 385 

374 mgts UK Holding London Great Britain 100.00 370 

375 SAFIC ALCAN GmbH Bingen Germany 100.00 381 

376 Safic Alcan Italia S.p.A. (S.A.I.) Milan Italy 99.90 381 

377 Safic Alcan Malaysia Sdn. Bhd. Kuala Lumpur Malaysia 100.00 381 

378 SAFIC ALCAN UK Ltd. London Great Britain 100.00 381 

379 Safic-Alcan España S.A. Barcelona Spain 100.00 381 

380 Safic-Alcan Portugal Sociedade de Representações Lda. Perafita (Matosinhos) Portugal 94.00 381





Safic-Alcan Portugal Sociedade de Representações Lda. Perafita (Matosinhos) Portugal 6.00 379 

381 SAFIC-ALCAN S.A.S. Paris (Puteaux Cedex) France 100.00 370 

382 Sochibo S.A. Le Plessis Robinson Cedex France 100.00 381 

383 solvadis chemag ag Frankfurt am Main Germany 100.00 370 

384 solvadis cpc gmbh Krefeld Germany 100.00 383 

385 solvadis france S.A. Saint Jacques de la Lande France 100.00 383 

386 solvadis ibérica S.A. Barcelona Spain 95.00 383 

387 solvadis nederland b.v. Wormerveer Netherlands 100.00 383 

388 solvadis norge AS Tananger Norway 100.00 387 

389 solvadis polymere gmbh Solingen Germany 100.00 383 

Other 

390 mg technologies ag Frankfurt am Main Germany 

391 Brückenbau Plauen GmbH Plauen Germany 100.00 417 

392 Claus Queck GmbH Düren Germany 100.00 417 

393 Baumgarte Boiler Systems & Services GmbH Bielefeld Germany 100.00 397 

394 Frankfurter Assekuranz-Kontor GmbH Frankfurt am Main Germany 100.00 390 

395 Gervinusstraße Beteiligungs GmbH Frankfurt am Main Germany 100.00 390 

396 Lurgi Lentjes Service GmbH Duisburg Germany 100.00 397 

397 Lurgi Lentjes STANDARDKESSEL Aktiengesellschaft Duisburg Germany 100.00 402 

398 Merton Wohnprojekt GmbH Frankfurt am Main Germany 50.00 411 

399 Metallgesellschaft Canada Ltd. Toronto/Ontario Canada 100.00 407 

400 mg Altersversorgung GmbH Frankfurt am Main Germany 100.00 390 

401 MG Bautechnik GmbH Frankfurt am Main Germany 100.00 402 

402 mg capital gmbh Frankfurt am Main Germany 100.00 390 

403 mg corporate development gmbh Frankfurt am Main Germany 100.00 395 

404 mg financial services gmbh Frankfurt am Main Germany 100.00 395 

405 mg global sourcing GmbH Frankfurt am Main Germany 100.00 402 

406 mg IT services gmbh Frankfurt am Main Germany 100.00 402 

407 MG North America Holdings Inc. Delaware USA 100.00 390 

408 MG Rohstoffhandel GmbH Frankfurt am Main Germany 100.00 415 

409 mg technologies finance B.V. Barendrecht Netherlands 100.00 390 

410 MG Technologies Inc. Delaware USA 100.00 407 

411 mg vermögensverwaltungs-ag Frankfurt am Main Germany 99.40 390 

412 mg vv Asset Development GmbH Frankfurt am Main Germany 100.00 411 

413 mgvv Projektentwicklung Daimlerstrasse GmbH & Co. KG Frankfurt am Main Germany 100.00 411 

414 mgvv Projektgesellschaft Bottrop mbH Frankfurt am Main Germany 100.00 411 

415 Ruhr-Zink GmbH Datteln Germany 85.00 390 

416 Siegfried Schlüßler Feuerungsbau GmbH Bispingen Germany 74.00 396 

417 Stahlbau Plauen GmbH Plauen Germany 100.00 402 

418 Standard Fasel-Lentjes B.V. Utrecht Netherlands 100.00 50 

419 Standardkessel Lentjes GmbH Duisburg Germany 100.00 397 

169

170 

COMPANIES VALUED AT EQUITY 



mg engineering 

GEA 

420 ACO Engineering A/S Kolding Denmark 100.00 421 

421 ACO Service A/S Odense Denmark 40.00 163 

422 Agropur Carpur S.A. de C.V. Veracruz Mexico 14.05 91 

423 Agropur Lacpur, S.A. de C.V. Veracruz Mexico 25.17 91 

424 Alunan Sukma Sdn. Bhd. Petaling Jaya Malaysia 100.00 243 

425 Animal Health Supplies Inc. Jacksonville, Florida USA 100.00 267 

426 Courtoy Press Service, LLC New Brunswick, NJ USA 30.00 171 

427 Dairy Technology Services Pty Limited Tatura, Victoria Australia 100.00 256 

428 Dan Kaffe (Malaysia) Sdn. Bhd. Kuala Lumpur Malaysia 37.68 173 

429 IMAI S.A. Buenos Aires Argentina 20.00 106 

430 L&T-Niro Limited Bombay India 50.00 163 

431 Les Produits Agro B Inc. Mercier Canada 100.00 267 

432 Liofil s.r.l. Ribera Italy 21.00 163 

433 Matma S.a.r.l. Château-Thierry France 100.00 254 

434 Moscow Coffee House Ltd. Moscow Russian Federation 29.00 163 

435 OOO WestfaliaSurge Moscow Russian Federation 100.00 261 

436 Orion-Babson Co., Ltd. Nagano Japan 49.00 267 

437 Westfalia Robo Techno K.K. Sumida-ku,Tokyo Japan 96.20 261 

438 Westfalia Surge Belgium N.V.-S.A. Aarschot Belgium 100.00 261 

439 Westfalia Surge la Laguna, S.A. de C.V. Torreon Mexico 99.00 263 

440 Westfalia Surge Nederland B.V. Lelystad Netherlands 100.00 261 

Lurgi 

441 Adkins Energie LLC Lena USA 7.54 280 

Zimmer/Lurgi Lentjes 

442 Polyamid 2000 Handels- und Produktionsgesellschaft 

Premnitz AG i.I. 

Polyamid 2000 Handels- und Produktionsgesellschaft 

Premnitz Germany 34.93 295 

Premnitz AG i.I. Premnitz Germany 14.97 287 


Dynamit Nobel 

443 ChemStore GmbH Langelsheim Germany 50.00 323 

444 Guangzhou Huali Sachtleben Chemicals Company Ltd. Guangzhou China 40.00 368 

solvadis 

445 CHEMSPEC Uniontown, Ohio USA 24.87 381 

446 Marine Cargo Chartering S.A. Noisy-Le-Roi France 34.00 381 

447 MG NE-Produkthandel GmbH Eschborn Germany 50.00 370 

448 Nordica Elastomer AB Kungsbacka Sweden 50.00 381 

449 solvadis austria ges.m.b.h. Wien Austria 100.00 383 

450 solvadis chemag inc. Houston, Texas USA 100.00 383 

451 solvadis polska Sp. z o.o. Wroclaw Poland 99.99 383 

solvadis polska Sp. z o.o. Wroclaw Poland 0.01 370



DIRECTORSHIPS 

DIRECTORSHIPS HELD BY MEMBERS OF THE EXECUTIVE BOARD 

Udo G. Stark, Munich, 


Chairman of the Executive Board of mg technologies ag 

• Balfour Beatty plc, London, U.K. 

Non-Executive Director 


• Balfour Beatty Rail GmbH, Munich 



• Bilfinger Berger AG, Mannheim 

Member of the Supervisory Board 

(since May 28, 2003) 

• Dynamit Nobel AG, Troisdorf 


(since July 1, 2003) 



• GEA AG, Bochum 




(since November 4, 2003) 

• Lurgi AG, Frankfurt am Main 


(since October 14, 2003) 

• Lurgi Lentjes AG, Düsseldorf 



• Messer Griesheim GmbH, Frankfurt am Main 


• Zimmer AG, Frankfurt am Main 



Dr. Karl Josef Neukirchen, Bad Homburg v.d.H., 


Chairman of the Executive Board of mg technologies ag 

• Allianz Versicherungs AG, Munich 



Chairman of the Supervisory Board* 



• Sixt AG, Pullach 


• Sixt Leasing KGaA, Pullach 


• Vossloh AG, Werdohl 


* Resigned this post when he retired from the Executive Board of mg technologies ag 

Karlheinz Hornung, Bad Homburg v.d.H., 

(until March 31, 2004) 

Member of the Executive Board 


Member of the Supervisory Board* 







• mg venture capital ag, Frankfurt am Main 


• mg vermögensverwaltungs-ag, 

Frankfurt am Main 


• solvadis ag, Frankfurt am Main 


Dr. Fritz Lehnen, Franfurt am Main, 

(until October 2, 2003) 


• DBG Fonds III GmbH 


(since March 27, 2003) 

• Deutsche Beteiligungs AG, Frankfurt 






Member of the Supervisory Board*, 


(since July 15, 2003)* 




Member of the Supervisory Board*, 


(until March 20, 2003)* 

• Polyamid 2000 AG 


(since February 18, 2003)* 

• Vaillant GmbH, Remscheid 





171

172 

Dr. Rolf G. Niemann, Bad Homburg v.d.H., 

(until August 15, 2003) 




• Frankfurter Assekuranz-Kontor GmbH, 



(since February 18, 2003)* 







• mg venture capital ag, Frankfurt am Main 


• mg vermögensverwaltungs-ag, 



• Rheinzink Holding GmbH, Datteln 


Jürg Oleas, Hausen near Brugg (Switzerland) 


Chairman of the Executive Board of Dynamit Nobel AG 

(since January 1, 2003) 

• Chemetall GmbH, Frankfurt am Main 


• Dynamit Nobel GmbH Explosivstoff- und 

Systemtechnik 






• solvadis ag, Frankfurt am Main 




• Safic-Alcan S.A., Paris, France 


* Resigned this post when he retired from the Executive Board of mg technologies ag 

Klaus K. Moll, Ludwigshafen, 

(since December 1, 2003) 






• Otto Junker GmbH, Simmerath 



Member of the Supervisory Board, 











Peter Steiner, Wiesbaden, 


Member of the Executive Board



DIRECTORSHIPS HELD BY MEMBERS OF THE SUPERVISORY BOARD 

Dr. Jürgen Heraeus, Maintal, 

(since June 3, 2003), Chairman of the Supervisory Board 

Chairman of the Supervisory Board of Heraeus 

Holding GmbH 

a) Buderus AG, Wetzlar 



EPCOS AG, Munich 


Heidelberger Druckmaschinen AG, Heidelberg 


Heraeus Holding GmbH, Hanau 


Heraeus Tenevo AG, Hanau 


(until August 1, 2003) 

IKB Deutsche Industriebank AG, Düsseldorf 


Messer Griesheim GmbH, Frankfurt am Main 


b) Argor-Heraeus S.A., Mendrisio, Switzerland 

Chairman of the Board of Directors 

Helmut Werner (†), Stuttgart, 




a) BASF AG, Ludwigshafen 


Ernst & Young Deutsche Allgemeine 

Treuhand AG WPGes., Stuttgart 

Deputy Chairman of the Supervisory Board 

Gerling-Konzern Versicherungs- 

Beteiligungs AG, Cologne 


b) Aktiebolaget SKF, Gothenburg, Sweden 


Alcatel, Paris, France 


(until April 17, 2003) 

Penske Corporation, U.S.A. 

Board of Directors 

Reinhold Siegers*, Mönchengladbach 

Deputy Chairman of the Supervisory board 



a) Lurgi Lentjes AG, Düsseldorf 


Gerhard Adams*, Runkel, 


Member of the Works Council of Chemetall GmbH 


a Membership of statutory German supervisory boards 

b Membership of comparable German and foreign supervisory bodies of business enterprises 

Khaled Al-Sabah, London, 


Government of Kuwait, Kuwait Investment Office 

Dieter Ammer, Bremen, 


Chairman of the Management Board of Tchibo Holding AG 

a) Beiersdorf AG, Hamburg 



BWB Holding AG, Bremen 



Conergy AG, Hamburg 


Interbrew Deutschland Holding GmbH, Bremen 


Tchibo GmbH, Hamburg 


b) Die Sparkasse in Bremen 

Wirtschaftlicher Verein, Bremen 

Deputy Chairman of the Board of Directors 

Ahmad M.A. Bastaki, Safat, Kuwait, 


Director, Kuwait Investment Authority 

b) Banco Arabe Espanol (Aresbank), Madrid 

Member of the Board of Directors 

Dr. Karl-Hermann Baumann, Munich, 


Chairman of the Supervisory Board of Siemens AG 

a) Deutsche Bank AG, Frankfurt am Main 


E.ON AG, Düsseldorf 


Linde AG, Wiesbaden 


Schering AG, Berlin 


Siemens AG, Munich 


ThyssenKrupp AG, Düsseldorf 


Wilhelm von Finck AG, Grasbrunn 


173

174 

Dr. Diethart Breipohl, Icking, 


Former Member of the Management Board of Allianz AG 

a) Allianz AG, Munich 


Beiersdorf AG, Hamburg 


Continental AG, Hanover 


Karstadt Quelle AG, Essen 


KM Europa Metal AG, Osnabrück 


Chairman since January 28, 2003 

b) Assurances Générales de France (AGF), Paris, France 

Conseil d’Administration 

Banco Popular Espanol, Madrid, Spain 

Consejo de Administracion 

Banco Portugues de Investimento SA, Oporto, Portugal 


Crédit Lyonnais, Paris, France 

Conseil d‘ Administration 

EULER & Hermes, Paris, France 

Conseil d‘ Administration 

Gerd Delaveaux*, Bochum 

Chairman of the Works Council of GEA Happel 

Klimatechnik GmbH 

Dr. Manfred Döss*, Hofheim 

Head of the Legal Department of mg technologies ag 

Rolf Erler*, Düsseldorf 

Regional Head of IG Bergbau, Chemie, Energie, Bonn 

a) Dynamit Nobel AG, Troisdorf 


Prof. Dr. Dr. h.c. Joachim Funk, Düsseldorf, 


Former Chairman of the Supervisory Board of Mannesmann AG 

a) ERGO Versicherungsgruppe AG, Düsseldorf 


b) WISTA-Management GmbH, Berlin 


Rainer Gröbel*, Sulzbach/Ts. 

Departmental Head, National Executive of IG Metall 

a) Schunk GmbH, Heuchelheim 


Dr. Otto Happel, Lucerne, 


Entrepreneur 




a) Commerzbank AG, Frankfurt am Main 


Dr. Gerhard Jooss, Essen, 


Former Member of the Executive Board of ThyssenKrupp AG 

a) Allgemeine Kreditversicherung Coface AG, Mainz 


Allgemeine Kredit Coface Holding AG, Mainz 



ERGO Versicherungsgruppe AG, Düsseldorf 


FAG Kugelfischer Georg Schäfer AG, Schweinfurt 

Member of the Supervisory Board Board 

(until October 31, 2003) 

Viktoria Lebensversicherung AG, Düsseldorf 


Viktoria Versicherung AG, Düsseldorf 


Westfalenbank AG, Bochum 


b) Giddings & Lewis, LLC, Fonds du Lac, Wisconsin, U.S.A. 


West LB International S.A., Luxembourg 


Prof. Dr. med. Dr. h.c. Rolf Krebs, Mainz, 


Former Spokesman for the Management of Boehringer 

Ingelheim GmbH 

a) Epigenomics AG, Berlin 


Ganymed AG, Mainz 



Vita 34 AG, Leipzig 



Dr. Jürgen Krumnow, Königstein/Ts. 

Member of the Advisory Board of Deutsche Bank AG 

a) Lenze AG, Aerzen 


Phoenix AG, Hamburg 



TUI AG, Hanover 


Vivascience AG, Hanover 


b) Peek & Cloppenburg KG, Düsseldorf 

Member of the Advisory Council



Rolf Kümmel*, Kelkheim 

Chairman of the Works Council of Chemetall GmbH 

a) Chemetall GmbH, Frankfurt am Main 


Dr. Dietmar Kuhnt, Essen 

Former Chairman of the Executive Board of RWE AG 

a) Allianz Versicherungs AG, Munich 


Dresdner Bank AG, Frankfurt am Main 


Hapag-Lloyd AG, Hamburg 


Heidelberger Druckmaschinen AG, Heidelberg 


(until September 12, 2003) 

HOCHTIEF AG, Essen 


RWE AG, Essen 



RWE Plus AG, Essen 



RWE Power AG, Essen 


(until February 21, 2003) 

TUI AG, Hanover 


b) Innogy Holdings plc, Swindon, U.K. 

Chairman of the Board (until February 18, 2003) 

Thames Water plc, London, U.K. 

Chairman of the Board (until February 18, 2003) 

Heinz-Joachim Miller*, Freigericht, 


Employee of Lurgi AG 

Justus Mische, Kelkheim, 



a) ALTANA AG, Bad Homburg v.d.H. 


B. Braun Melsungen AG, Melsungen 


Hoechst AG, Frankfurt am Main 


Dieter Rehbein*, Duisburg 

Chairman of the Works Council of Sachtleben Chemie GmbH 






Dr. Andreas Rittstieg, Hamburg, 

(since February 10, 2004) 

Attorney 

a) TOMORROW FOCUS AG, Munich 


KERAMAG Keramische Werke Aktiengesellschaft, 

Ratingen 


Michael Vassiliadis*, Hemmingen 

Secretary of the National Executive of IG Bergbau, 

Chemie, Energie 

a) Henkel KGaA, Düsseldorf 


K + S AG, Kassel 



K + S Kali GmbH, Kassel 



Preussag Energie GmbH, Hanover 



Bernhard Walter, Bad Homburg v.d.H. 

Former Spokesman of the Board of Managing Directors of 

Dresdner Bank AG 

a) BilfingerBerger AG, Mannheim 


DaimlerChrysler AG, Stuttgart 


Deutsche Telekom AG, Bonn 


Henkel KGaA, Düsseldorf 


Staatliche Porzellan-Manufaktur Meissen 

GmbH, Meissen 


ThyssenKrupp AG, Düsseldorf 


Wintershall AG, Kassel 


b) KG Allgemeine Leasing GmbH & Co., Grünwald 

Chairman of the Board of Directors 

Joint Stock Company ‘Sikirsko-Uralskaya 

Neftegazohimicheskaya’ (AK ‘Sibur’) 



175

176 

Wolfgang Wick*, Bottrop 


Dynamit Nobel AG 



Dr. Eberhard Zinn (†), Munich, 

(until December 31, 2003) 


Hauck & Aufhäuser Privatbankiers KGaA 

a) AKA Ausfuhrkreditgesellschaft mbH, 



DaimlerChrysler Aerospace AG, Munich 


DaimlerChrysler Luft- und Raumfahrt Holding AG, 

Munich 


EADS Deutschland GmbH, Ottobrunn 



Hauck & Aufhäuser Privatbankiers KGaA, 



b) CDX IXIS S.A., Paris, France 



debis Airfinance B.V., Amsterdam, Netherlands 



Ferring Holding S.A., Lausanne, Switzerland 


Südtiroler Sparkasse AG, Bolzano, Italy 



mg technologies ag (until June 3, 2003) 

Committee pursuant to section 27 (3) of 

the German Codetermination Act 

(Mediation Committee) 







Dr. Jürgen Krumnow 







(since the end of the Annual Shareholders’ 

Meeting on June 3, 2003) 

Committee pursuant to section 27 (3) of 

the German Codetermination Act 

(Mediation Committee) 





Chairman’s Committee 


Dieter Ammer 









Dr. Gerhard Jooss, Chairman 

Rainer Gröbel* 


Dieter Rehbein*



LIST OF ABBREVIATIONS FOR THE NOTES TO THE 

CONSOLIDATED FINANCIAL STATEMENTS 

ABS Asset-backed securities 

AktG German Joint Stock Corporation Act 

APB Accounting Principles Board Opinion 

ARB Accounting Research Bulletin 

CON FASB Statements of Financial Accounting Concepts 

DRSC German Accounting Standards Committee 

DVFA/SG German Association of Financial Analysts and Investment Consultants/ 

Schmalenbach Society 

EBIT Earnings before interest and taxes 

EBITDA Earnings before interest, taxes, depreciation and amortization 

EBT Earnings before taxes 

EITF Emerging Issues Task Force 

EPS Earnings Per Share 

ESOP Employee share ownership program 

EStG German Income Tax Act 

a million Millions of euros 

a ’000 Thousands of euros 

FASB Financial Accounting Standards Board 

FIN FASB Interpretation 

HGB German Commercial Code 

IFRS International Financial Reporting Standards 

i.I. In insolvency 

KonTraG German Control and Transparency of Companies Act 

P+L Profit and loss account 

PoC Percentage of Completion 

r revised 

SBU Strategic business unit 

SFAS Statement of Financial Accounting Standards 

SFY Short fiscal year 

SOP Statement of Position 

U.S.$ U.S. dollar 

U.S. GAAP United States generally accepted accounting principles 

177

178 

INDEX FOR THE NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 

Key word Page 

A Accounting Policies 88, 152 

Accumulated other 87, 92, 93, 115, 

comprehensive income 122, 125, 138, 155 

Acquisitions 98, 99, 145, 151 

Appropriation of profit 158 

Asset-backed securitization 112, 113, 153 

Assets held for sale 91, 111 

C Cash and cash equivalents 91, 115, 130, 135, 136 

Commitments and contingencies 93, 112, 132, 133 

Companies reported at equity 97 

Completed-contract method 90, 129, 153 

Consolidation 86, 151 

Consolidation of expenses and income 87 

Consolidation of liabilities 87 

D Deferred income 86, 132, 

Deferred taxes 91 141, 142, 154 

Derivatives 93, 102, 122,135, 

136, 153 

Discontinued operations 91, 100, 107, 113, 

132, 133, 136, 144, 156 

Disposals 100, 102, 104 

Dividend 79, 114 

E Earnings per share 

Elimination of intercompany 

92, 118, 144 

gains and losses 87 

Emoluments of the Executive Board 156 

Employee share ownership program 120, 121, 144 

Exchange rates 88, 108, 137 

F Factoring 112, 133, 163 

Financial income 141, 148 

Financial instruments 111, 135 

Financial liabilities 130, 131, 135, 136 

Fixed assets 89, 102,103,108, 

113, 115, 152 

Foreign-currency assets and liabilities 92, 135, 153 

G Goodwill 86, 88, 99,100, 102 

103, 108, 149, 150, 151 

I Income taxes 141 

Intangible assets 88, 89, 108, 125, 

148, 155 

Inventories 90, 102, 110, 152 

Key word Page 

L Leases 89, 90, 94, 97, 102, 

108, 109, 110, 123, 152 

Liabilities 87, 92, 102, 109, 130 

Liabilities held for sale 91, 131 

Litigation 134 

Long-term construction contracts (PoC) 90, 92, 98, 111, 

131, 140, 153, 154 

M Marking-to-market 153 

Minority interests 122, 144, 152, 155 

N New accounting pronouncements 94 

Number of employees 107, 148, 149, 156 

O Other liabilities 131 

Other operating expenses 139 

Other operating income 139 

Other provisions and accruals 123, 128, 154 

P Pension reserves 88, 92, 95,115, 123 

Prepaid expenses 116, 125 

Principles of consolidation 86, 151 

Property, plant and equipment 89, 90, 102, 103, 

108, 148 

Provisions and accrued liabilities 92, 96, 102, 

123, 139, 154 

R Receivables and other assets 91, 110, 

Related-party transactions 144 

Research and development costs 92, 140 

Restructuring 94, 107, 128, 129, 140 

S Scope of consolidation 86, 97, 115, 129 

Securities 91, 92, 113, 114, 

135, 153 

Segment reporting 146 

Shareholders’ equity 86, 92, 95, 98, 116, 

138, 151,155 

Special-purpose entities 112, 113 

Staff expenses 102, 155 

Statements of cash flows 81, 115 

Stock-based compensation/ 93, 95 

stock option program 117, 121, 156 

Subsequent events 145 

T Treasury stock 122 

V Valuation allowances 91, 137, 141 

Variable-interest entities 97, 98, 130



FINANCIAL CALENDAR 

May 12, 2004 Interim Report for the period to March 31, 2004 

August 11, 2004 Interim Report for the period to June 30, 2004 

August 23, 2004 Annual Shareholders’ Meeting for fiscal 2003 

November 9, 2004 Interim Report for the period to September 30, 2004 

179

180 

IMPRINT 


Bockenheimer Landstrasse 73-77 

60325 Frankfurt am Main 

Germany 

www.mg-technologies.com 

Newsletter subscription at 

‘Shareholder Info/News’ 

Communications 

Tel: + 49 (0) 69/7 11 99-241 

Fax: + 49 (0) 69/7 11 99-112 

e-mail: info.mg@mg-technologies.com 

Investor Relations 

Tel: + 49 (0) 69/7 11 99-261 

Fax: + 49 (0) 69/7 11 99-116 

e-mail: investor.relations@mg-technologies.com 

Concept, Design and Typography 

HGB Hamburger Geschäftsberichte GmbH & Co. KG, Hamburg 

Photography 

Corporate Photo Jens Waldenmaier, Hamburg 

Getty Images, Photonica, National Geographic 

Jürgen Röhrscheid, Frankfurt am Main 

English Translation 

ETS-English Translation Services GmbH, Frankfurt am Main

Key Figures for the mg Group 

RESULTS OF OPERATIONS 

SFY 

1998/1999 1999/2000 2000/2001 2001/2002 2002 2003 

s million s million s million s million s million u million 

Sales 7,456 8,797 8,818 8,585.8 2,032.8 6,403.2 

thereof outside Germany 4,680 6,077 6,419 6,322.2 1,516.6 4,670.6 

thereof in Germany 2,776 2,720 2,399 2,263.6 516.2 1,732.6 

EBITDA 515 708 702 633.9 98.5 110.4 

EBIT 


254 388 388 396.6 47.9 – 102.6 

and minority interests 189 279 294 320.3 27.3 – 181.0 

% of sales (ROS) 

Post-tax profit/loss on discontinued operations 

2.5 3.2 3.3 3.7 1.3 – 2.8 

(before minority interests) – – – – – –69.6 

Net loss/income 126 192 132 189.6 –31.0 – 198.6 

NET ASSETS 

Fixed assets 3,083 3,336 3,281 3,263.3 3,244.8 3,091.0 


thereof cash and cash equivalents 

3,043 2,910 2,707 2,649.0 2,652.1 2,711.8 

at Dec. 31 and Sep. 30 (1) 483 457 317 265.7 243.5 184.1 

thereof assets from discontinued operations – – – – – 466.2 

Other assets (prepaid expenses + deferred taxes) 1,082 1,129 922 838.8 803.1 897.5 

Total assets at Dec. 31 and Sep. 30. 

Consolidated shareholders’ equity 

7,208 7,375 6,910 6,751.1 6,700.0 6,700.3 

at Dec. 31 and Sep. 30 1,114 1,899 1,929 2,036.8 1,991.2 1,663.8 

% of total assets 15.5 25.8 28 30.2 29.7 24.8 

Minority interests 373 64 55 42.4 42.6 41.1 

Provisions and accrued liabilities 2,161 2,086 1,967 1,851.7 1,781.8 1,827.6 

Bonds 258 404 301 298.0 298.0 300.0 

Liabilities to banks 921 876 716 683.6 800.5 843.8 

Liabilities from discontinued operations – – – – – 429.7 

Net position (2) – 988 – 823 – 700 – 715.9 – 855.0 – 959.7 

Gearing in % (3) 88.7 43.3 36.3 35.1 42.9 57.7 

FINANCIAL POSITION 

Net cash provided by (used for) operating activities 357 207 390 205.9 – 65.1 136.8 

Free cash flow (4) – 948 289 207 18.3 – 124.8 – 36.9 

Investment (at balance sheet date) (5) 4,812 4,818 4,376 4,381.4 4,428.9 4,532.6 

Capital expenditure incl. capital leases 

thereof on property, plant and 

685 416 416 304.0 66.7 292.8 

equipment and intangible assets 225 275 293 268.3 65.2 259.5 

Depreciation and amortization of fixed assets 261 320 314 237.4 50.7 213.0 

EMPLOYEES (6) 

Employees at Dec. 31 and Sep. 30 40,164 37,369 34,360 32,015 31,812 29,189 

thereof in Germany 23,569 20,906 18,355 16,623 16,606 15,360 

thereof outside Germany 16,595 16,463 16,005 15,392 15,206 13,829 

Average number of employees during the year 33,104 38,145 35,994 33,185 32,677 29,299 

Staff expenses 1,625 2,065 1,981 1,909.2 462.1 1,742.7 

mg SHARES 

Dividend per share (s) 0.26 0.25 0.25 0.25 0.06 – 

Total dividend payout 48 48 48 48.3 11.6 – 

Share price at Dec. 31 and Sep. 30 (s) 19.00 12.00 6.17 6.51 5.90 11.10 

Basic earnings per share on continued operations 0.88 1.03 0.69 0.99 – 0.16 – 0.66 

Basic earnings per share on discontinued operations 

Weighted-average number of shares 

– – – – – –0.36 

outstanding (million) 144 186 191 192.3 193.3 193.8 

Economic value added – 38 43 54 91.5 – – 369.1 

(1) Cash and cash equivalents = liquid funds plus securities 

(2) Net position = cash and cash equivalents (2) minus bonds minus bank debt 

(3) Gearing = net position (3) / consolidated shareholders’ equity 

(4) Free cash flow = net cash provided by (used for) operating activities plus net cash provided by (used for) investing activities 

(5) Investment = fixed assets plus non-fixed assets 

minus (total) trade payables minus liabilities from derivatives minus advance payments received 

minus provisions for outstanding suppliers’ invoices 

(6) Full-time equivalents (FTEs), excluding trainees

E_mg_GB_03_vorne-29_3_04

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