Annual Report

2019
2
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Our company's success depends not only on our

technological expertise, but also on long-term
partnerships with our customers. Our goal is
to actively support customers in achieving their
development goals and to make them more
successful as a result. That is what we mean by

Living partnership
One outstanding example of a successful partner­-
ship is our long-standing collaboration with US
manufacturing and technology company Orizon
Aerostructures. We were brought in by Orizon as
early as the planning phase of the new production
site in Grove for the development of appropriate
processes around Orizons business systems – long
before the first machine was even sold. Find out
more in our lead story.
Starrag Group Annual Report 2018 3 Starrag Group Annual Report 2019 3
–– ––

from left to right

Henry Newell, President of Orizon
Charlie Newell, CEO of Orizon
Douglas Henderson, Vice President
of Sales (Aerospace), Starrag USA.
4
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Collaboration with Orizon sets

new standards for machining
aircraft components.
Orizon Aerostructures is a manufacturing and technology company
with a significant presence in the Midwest: A total of 800 dedicated
employees over six sites produce components and complex assemblies
for the aerospace industry.

At the newly constructed site in the small city of One way Starrag has done this is by offering excel-
Grove, in which $ 50 million has been invested lent levels of knowledge transfer and assisting us
(including in ten ECOSPEED F 2060 machines), in developing the appropriate processes around our
Orizon has installed a flexible manufacturing sys- business systems.”
tem which is based on nine of Starrag's Ecospeed
five-axis machining centres. This system is currently “It was also clear that Starrag was a
setting new standards for machining aircraft com- company we could truly trust and
ponents. one with common values in attaining
world-class machining results,”
The flexible manufacturing systems – the largest
integrated system of its type in the western hemis- he adds. “Even one chip not removed in one
phere – is enabling the company to achieve: pocket timely could result in a $ 20,000 part being
scrapped – and nobody can afford that!”
 At least a 30 percent reduction in machining
times across all the parts, compared to former Having achieved such gains in machining efficiency,
methods Orizon is not resting on its laurels, however, as
 Considerable improvement in surface quality; Josh Fink points out: “System performance is
significantly less deburring and polishing re- continually scrutinised, with conference calls every
quirements week between us and Starrag to discuss machine
 Exceptional revenue/expenditure ratio and two availability levels (currently 97%) and spindle
to three times the per capita yield compared to utilisation (87% targeted). Yes, it's all very well
conventional machining methods having such targets but the key is being able
to reach them. It's simply a case of continual impro-
Vice President of Machining Josh vement.”
Fink: “Working from the start with
Starrag, together we have created
an unbelievably formidable and
highly successful partnership for
world-class machining of aerostruc-
ture parts.”

“It was clear, even before the first machine sale,

that Starrag was willing to listen and to share and
support our vision.
 Starrag Group Annual Report 2019 5
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During the Aerostructure Days at

Orizon, numerous US customers
were able to convince themselves
of the performance of the Ecospeed
manufacturing system.
6 Contents
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Content

__
8 To our shareholders
11 At a glance
14 Highlights
26 Company profile
36 One for all
52 Management Report
58 Holistic sustainability
__
62 Corporate Governance
__
82 Compensation Report
__
90 Financial Report
91 Financial commentary
97 Consolidated financial statements
124 Annual financial statements
134 Five-year overview
__
135 Financial calender
 Starrag Group Annual Report 2019 7
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High-precision machine tools

for greater productivity

Starrag Group is a global technology leader in manufacturing high-precision

machine tools for milling, turning, boring and grinding workpieces of metallic,
composite and ceramic materials. Principle customers are internationally
active companies in the Aerospace, Energy, Transportation and Industrial
sectors (Industrial Components, Luxury Goods, Med Tech). In addition to
its portfolio of machine tools, Starrag Group provides integrated technology
and maintenance services that significantly enhance customer quality and
productivity.

The umbrella brand Starrag unites the product ranges Berthiez, Bumotec,
Dörries, Droop+Rein, Ecospeed, Heckert, Scharmann, SIP, Starrag, TTL
and WMW. Headquartered in Rorschach/Switzerland, the Starrag Group
operates manufacturing plants in Switzerland, Germany, France, the UK
and India and has established a network of sales and services subsidiaries
in the most important customer countries.

The shares of Starrag Group Holding AG are listed on the SIX Swiss
Exchange.
8 To our shareholders
––

Dear shareholders

As already announced during the course of the reporting year, Starrag Group’s order intake
in 2019 was lower than in the previous year. At CHF 343 million, it was 26% below the 2018
level (24% at constant exchange rates), which was the second-highest in the history of
the company.

Sales amounted to CHF 418 million in 2019, surpassing the previous year’s level by 8% (9%
at constant exchange rates). The increase can primarily be explained by the high order intake
in 2018, but can also be put down to the fact that it was possible to partly offset the delays
in order processing in the reporting year thanks to various measures that were taken to
improve project management.

The operating result before restructuring costs EBITR amounted to CHF 14.0 million, or 3.4%
of sales (compared with CHF 13.0 million in the previous year). After restructuring costs
of CHF 9.2 million, EBIT was CHF 4.8 million, or a disappointing 1.1%. After standing at
CHF 0.9 million as recently as the first half of the year, EBIT improved substantially in the
second semester thanks not least to a considerable reduction in restructuring costs.

As a result of the fall in EBIT, there was also a fall in net income to CHF 6.9 million (CHF 2.02
per share). The decline in EBIT was partly offset by the removal of tax provisions owing to
the reform of corporation tax in various cantons.

Owing to higher net equity and lower liabilities, the solid equity ratio of 53% exceeded
the previous year’s level by around 5 percentage points, meaning that it was in the range
of the past few years. Net debt, which had already been cut to CHF 5.3 million in 2018,
turned into net liquidity of CHF 0.7 million in 2019. Contributing to this was free cash flow
of CHF 8.3 million, which was achieved thanks to restrained investment activity and cash
flow from operating activities remaining intact.

First steps of the “Starrag 2021” programme realised

The “Starrag 2021” programme, which was adopted in April 2019 with the objective of a
significant and sustainable improvement in profitability, is specifically aimed at optimising the
product portfolio, comprehensively taking advantage of potential synergies, strengthening
corporate leadership and improving project management. Numerous projects are in the
process of being realised or, in some cases, have already been completed.

The new management structure has been in place since 1 July, with an increased focus on
target markets and the associated application competencies. For example, the four operational
business units were restructured according to product areas. Sales now come under group-
wide management. Alexander Attenberger, the Chief Sales Officer designated for this, was
originally due to take on the role in July 2020, but this has now been brought forward to April
2020. Supply chain management (procurement), manufacturing and component assembly
have been integrated under the same management in the unit Group Operations in order
to systematically take advantage of the group-wide synergies that are available. Finally, the
position of a group-wide HR manager was also created. All these positions are now filled.
 Starrag Group Annual Report 2019 9
––

In the course of this group restructuring, the planned reduction in staff at the Mönchengladbach
site was completed in the reporting year and mechanical manufacturing was concentrated in
Chemnitz. This will effect annual cost savings of CHF 8 million to CHF 10 million from 2021.

Nothing changed in 2019 in terms of Starrag Group’s basic strategy, i.e. concentrating on the
market segments and regions that offer the best growth and earnings potential, in particular
China and the US. With regard to the most important Asian market, namely China, we opened
a new TechCenter in Shanghai in the reporting year in cooperation with the local university.
The site, which covers an area of over 2’000m2, allows us to showcase our application expertise
to customers using several machine tools.

Following the new strategy that we have been pursuing since 2016 and the systematic
implementation of the “Starrag 2021” programme, we are sticking to our medium-term
objectives of a growth in sales of 5% and an operating margin of 8%, albeit over a longer
time horizon than originally envisaged.

Successful trade shows and customer events

As usual, Starrag Group continued to attend trade shows in 2019 that were relevant to us
with an up-to-date exhibition. In April, we again attended the China International Machine
Tool Show (CIMT) in Beijing. The numerous interesting contacts made there have further
strengthened the basis for future orders. Then came the EMO in Hanover in September, the
most significant leading trade fair worldwide for machine tools. Here, we placed a particular
emphasis on consistent customer orientation, as well as the high availability of our machines.
Our in-house technology days have already become something of a tradition. They enable
customers, strategic partners and the relevant specialist media, as well as institutions and
universities, to meet in order to get a picture of the Group’s latest developments and inno­
vations. For example, the well-attended Turbine Technology Days event once again took
place in Rorschacherberg in June.

Value reporting enhanced

In the yearly ranking of annual reports conducted by HarbourClub in conjunction with the Swiss
business magazine “Bilanz”, our 2018 annual report did very well in coming 27th out of a total
of 238 listed companies in the Value Reporting (print) category. This was 10 places higher
than in the previous year. In Inrate’s zRating for 2019, which rated the corporate governance
of 174 companies based on numerous criteria, Starrag Group again did well in coming 26th.

Changes on the Board of Directors and Executive Board

At the 2019 Annual General Meeting, Walter Fust, who is our Group’s majority shareholder,
took over as chairman of the board of directors from Daniel Frutig, who was not standing
for re-election. There were various changes in the management in connection with the new
management structure. Stefan Breu joined Starrag Group as head of the newly created Group
Operations units. Bernhard Bringmann, who had already been working for the company since
2008, was appointed head of the High Performance Systems business unit. Marcus Queins
is the new head of the Large Parts Machining Systems business unit. Finally, as already
mentioned, Alexander Attenberger was appointed the future Chief Sales Officer in November.
10 To our shareholders
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Outlook
Global economic developments will again be shaped by lots of political and economic
uncertainty in 2020, not least the impact of the coronavirus, which cannot yet be gauged.
This makes them increasingly difficult to forecast. These external influencing factors aside,
Starrag Group is optimistic about its target markets in a longer-term perspective.

With regard to the order intake, we currently expect a figure in line with that of the previous
year (in local currency), or a small increase in the best-case scenario. This depends not least
on the behaviour of those manufacturers that – unlike Starrag Group – primarily supply the
automotive industry, whose demand for machine tools has been declining for some time.
It can be assumed that these manufacturers will continue to attempt to switch to some of
Starrag Group’s target markets, resulting in additional competitive pressure.

Sales in 2020 are expected to be significantly below the previous year’s level owing to the
weaker order intake in 2019. With regard to earnings, we expect EBIT before restructuring
costs to be somewhat lower or unchanged compared with 2019. The measures taken in
the previous year to cut fixed costs and improved project management offset a negative
volume effect resulting from the lower order backlog.

Dividends
At the Annual General Meeting on 25 April 2020, the Board of Directors will propose a
dividend in the form of a reduction in nominal value free of withholding tax amounting to
CHF 1.00 per share. This corresponds to a dividend yield of 2.2% on the year-end 2019,
or a payout ratio of 49%. It is therefore again at the upper end of the targeted range of
35% to 50%.

Thanks
The Board of Directors and Executive Board would like to express their thanks to all members
of staff for their commitment in the reporting year. We would also like to thank our customers
and suppliers, as well as yourselves – our valued shareholders.

Walter Fust Dr. Christian Walti

Chairman of the Board of Directors CEO
 Starrag Group Annual Report 2019 11
––

At a glance
As expected, lower order intake and higher sales, while EBIT
margin lower – order backlog still solid

 Order intake down 26% to CHF 343 million  Net income CHF 6.9 million – earnings
(down 24% at constant exchange rates) per share CHF 2.02

 Sales up 8% to CHF 418 million  Solid balance sheet with 53% equity ratio
(up 9% at constant exchange rates)
 Profit distribution of CHF 1.00 CHF per share,
 Solid order backlog of CHF 284 million payout ratio of 49% – i.e. at the upper end of
the targeted range
 Operating result before restructuring costs:
EBITR up 8% to CHF 14 million, EBITR margin  Initial effects of “Starrag 2021” programme
3.4%, EBIT margin 1.1%% can be seen

CHF m 2019 2018 Change

Order intake 343.2 461.0 -25.6%

Order backlog end of the year 284.3 365.9 -22.3%

Sales revenue 418.1 388.8 7.6%

Operating result EBIT 4.8 11.1 -56.8%
Net income 6.9 8.4 -18.2%
EBIT as percentage of sales revenue 1.1% 2.9% n/a

Cash flow from operating activities 10.5 26.9 -61.0%

Capital expenditure in non-current assets 5.1 7.1 -30.8%
Free cash flow 8.3 19.7 -57.7%

Employees (full-time equivalents, annual average) 1'514 1'516 -0.1%

Total assets 334.6 369.7 -9.5%

Net cash 0.6 -5.3 -112.1%
Shareholders' equity 178.1 176.6 0.8%
Equity ratio 53.2% 47.8% n/a
Return on equity ROE 3.9% 4.7% n/a

Earnings per share (in CHF) 2.02 2.49 -18.7%

Profit distribution per share (in CHF) 1.00 1)
1.00 0.0%

1)
In the form of a reduction in nominal value free of withholding tax from CHF 8.50 to CHF 7.50 (proposal of the
Board of Directors to the Annual General Meeting).
12 At a glance
––

Order intake Order backlog

CHF m CHF m
Mio. CHF
500 500

400 400

300 300

200 200

100 100

0 0
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Sales revenue Operating result EBIT

CHF m CHF m

500 50

400 40

300 30

200 20

100 10

0 0
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

EBIT as percentage of sales revenue Net income

% CHF m

10 20

8 16

6 12

4 8

2 4

0 0
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Since 2017, the financial statements of Starrag Group have been prepared in accordance with the Swiss GAAP FER
accounting standards. The 2016 figures have been adjusted accordingly. The 2015 key figures are prepared in accordance
with International Financial Reporting Standards (IFRS) and are only partially comparable to a limited extent.
 Starrag Group Annual Report 2019 13
––

Earnings per share Return on equity

CHF %

10 10

8 %
8

6 6

4 4

2 2

0 0
2015 2016 2017 2018 2019 2015 2016 2017 2018 2019

Net cash Employees

CHF m full-time equivalents, annual average

20 2’500

10 2’000

2015 2016 2017 2018

0 1’500
2019

-10 1‘000

-20 500

-30 0
2015 2016 2017 2018 2019

Share price
CHF

100

80

60

40

20

0
2015 2016 2017 2018 2019

STGN SPI indexed

Since 2017, the financial statements of Starrag Group have been prepared in accordance with the Swiss GAAP FER
accounting standards. The 2016 figures have been adjusted accordingly. The 2015 key figures are prepared in accordance
with International Financial Reporting Standards (IFRS) and are only partially comparable to a limited extent.
14 Highlights
––

Highlights

__
15 Successful start for Starrag TechCenter in Shanghai
16 Successful trade fair year
18 Reliable production conditions with at least
95% machine availability
19 Increasing efficiency in machining of fluid ends
20 Manufacturing blisk rotors in a single clamping operation
21 Starrag, Kennametal and Rolls-Royce offer aerospace
specialists future-proof machining solutions
22 New dimension in grinding roller bearings
24 Starrag.com has a new digital appearance
25 Double award for outstanding training
 Starrag Group Annual Report 2019 15
––

Successful start for Starrag

TechCenter in Shanghai

It may have only just had its official opening, but the new Starrag
TechCenter in Shanghai can already show off some impressive figures.
Five machine tools have already been installed on a surface area of
2,200 m2 for the purpose of presenting application and mechanical
engineering expertise to customers.

For demonstration there is a Starrag LX 051

(for turbine blades), a Starrag NB 251 (specially
for impellers and blisks) as well as Bumotec
s191 and s181 5-axis machining centres - ideal
for applications in the areas of luxury goods,
jewellery, medical and watchmaking. As well as
a Heckert H50 machining centre for a wide range
of industrial and transportation applications.

The innovations were

presented to the visitors
using live machine
demonstrations.
16 Highlights
––

Successful trade fair year

In September the industry met at the EMO in Hannover, the world's

leading trade fair for machine tools. Starrag has put special accents
on a consequent customer orientation as well as on the extraordinarily
high machine availability.

At one of our representative trade fair booths, the The expert talks, which were held at a trade fair
key issue of machine availability was showcased for the first time, were particularly well received.
impressively to fellow trade pro­fes­sionals under Many new and excellent projects were initiated
the motto “95 Plus”. With the promise of guaran- during excellent technical discussions with visitors.
teed machine availability of at least 95%, Starrag
underlines the claim of a premium provider. Participation in the CIMT in Beijing was also
successful. The leading trade fair for mechanical
engineering in the vital sales market of China was
well attended, and Starrag was able to benefit
from this.
 Starrag Group Annual Report 2019 17
––

The expert talk with our special-

ists was confidently led by well-
known presenter Miriam Rickli.

Many visitors were greatly

impressed by the complexity
and manufacturing quality of
the exhibits on display as part
of the presentation of the new
NB machine series.
18 Highlights
––

Reliable production conditions with

at least 95% machine availability

Günther Eller, Head of Starrag Customer Service, explained

the basic idea behind the ServicePlus offer in a discussion
with Miriam Rickli and showed how this customer promise
is individually implemented in practice.

ServicePlus is a complete solution for optimised Identifying improvement potential and continuous
availability and long-term machine value retention implementation of improvement measures are
at a fixed price. Our customer environment and integral to ServicePlus.
customer requirements are highly specialised
and therefore ServicePlus is individually custo- The basic content of any ServicePlus offer inclu-
mised. In a close partnership, ServicePlus leads des our annual preventive and predictive mainte-
to success. Together with customers, we custo- nance, spare parts, wear parts and repair service
mise ServicePlus and set targets for availability. for OEMs, including warranty as well as priority
The results are monitored and reviewed regularly. access to Starrag's field engineers, technical
hotline and remote diagnosis. Customised are
parts storage and parts supply concepts, motor-
spindle solutions, customer training, technology
and production support. As previously mentioned,
availability targets are set and a bonus-malus
system for target achievement can be negotiated.

The main theme at EMO Hannover

ServicePlus was accompanied by
Miriam Rickli (presenter) and Günther
Eller (Head of Customer Service).
 Starrag Group Annual Report 2019 19
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Increasing efficiency in machining of fluid ends:

Heckert DBF 1000 enables an all-in-one process.

The Heckert DBF series from Starrag has made a name for
itself with suppliers to the oil and gas industry thanks to its
outstanding performance.

The series owes its success to the DBF head,

which consists of a facing head with integrated
work spindle and CNC radial cross slide. DBF is
named for the German words for turning, drilling
The new Heckert
and cutting. One special feature of the series is
DBF 1000 machining
the extended Z-axis path. This allows hydraulic
centre is particularly
connections in units, known as fluid ends, to be
suitable for highly
attached quickly and in a process-reliable way efficient heavy-duty
through long-hole drilling. cutting of heavy
housings weighing
This is where the new Heckert DBF 1000 machi- up to 4,000 kg, such
ning centre comes into play, allowing the user as on the fluid ends.
to perform heavy-duty cutting on fluid ends in
housings weighing a maximum of 4,000 kg. The
fluid ends made of stainless steel blocks are than 20%. This productivity gain has also been
particularly demanding; they are designed for an successful in very difficult machining tasks such
average product life cycle of 2,000 to 3,000 hours. as spherical drilling.
Accordingly, the complete machining process
is also long and complex. However, one manu­- DBF machining centre replaces two roughing
fac­turer has managed, with a DBF model, to machines and one sizing machine
reduce the overall machining process from 50 to Doug Henderson, Vice President of Sales at
38 hours – equivalent to a time saving of more Starrag US, reports on an especially successful
deployment in the USA: “Thanks to the all-in-one
process, there is no need for separate roughing
and sizing machines and no associated costs.
A single DBF machining centre has even repla-
ced two four-axis roughing machines and a
four-axis machining centre.”

Thanks to an additional six-pallet linear storage

system and 320-ATC tool changer, the new
Heckert DBF 1000 machining centre can also
work without human intervention.
20 Highlights
––

Manufacturing blisk rotors in a single clamping operation

Machining blisks and impellers efficiently and reliably in a single

working step saves both time and money.

Thanks to the five-axis Starrag NB 151, which The two circular axes are among the highlights
has been specially designed for such machining of the NB 151; specially developed for blisk ma-
processes, users from the aviation, aerospace chining by Starrag in Rorschacherberg, they are
and energy sectors can benefit from these ad- 100% made in Switzerland. Without compromise,
vantages. Users of the new Starrag NB 151 can the axes have been optimised for performance
expect to benefit from short cycle times, redu- in multi-blade applications, as their layout has
ced tool costs and a low amount of wastage. been carefully designed to reduce compensating
As with the larger models in this range of five- movements of the linear axes to a minimum.
axis machining centres, the NB 151 can perform
all relevant production steps for manufacturing One key factor for successful blisk machining is
blisks and impellers – from the efficient roughing being able to access the component easily. This
of components from a single piece of material to is ensured by the wide 280-degree angle of the
the adaptive machining of friction-welded blisks, B-axis, as well as the incredibly compact A-axis.
right the way through to the highly dynamic The machine's optimised obstacle contour both
smoothing of flow surfaces in point contact. prevents collisions with the spindle and allows
the use of shorter tools. The resulting cutting
stability ensures the shortest possible roughing
times and perfect surfaces after smoothing.

In addition to shorter cycle times and

reduced tool costs, the new Starrag
NB 151 also guarantees significantly
lower wastage.
 Starrag Group Annual Report 2019 21
––

Starrag, Kennametal and Rolls-Royce offer aerospace

specialists future-proof machining solutions

A number of aerospace production specialists were briefed on a range

of new manufacturing findings at the Advanced Manufacturing Research
Centre (AMRC) of the Boeing Centre in Sheffield.

The event not only offered technical presentations,

for example on the advantages of the Starrag
machining centres and a range of new develop-
ments from Kennametal, but also featured demon­-
strations of the optimal machining processes of
Inconel and titanium workpieces at the Starrag
STC 1250 machining centre of the AMRC. The
talk by Dr Jamie McGourlay, Technology Partner-
ship Manager at Rolls-Royce, on the subject of
“High Performance Manufacturing” was also met
with great interest.

Dr McGourlay spoke about the manufacturing ser-

vices of Rolls-Royce and how they have develo-
ped over the past decade in collaboration with the
AMRC. These services include process modelling,
intelligent devices, multi-tasking processing and
the use of advanced milling technologies.
The 60 participants also learnt interesting facts
about innovative products from Kennametal,
such as the flat-bottom drill for fast and effective
pre-drilling of pockets and corners, or the KM4X
toolholder which has already been successfully
installed in a Starrag STC 1000 machining centre.

The new KM4X toolholder from

Kennametal boasts an extremely
high clamping force.
22 Highlights
––

New dimension in grinding roller bearings:

Major Chinese manufacturer orders Starrag machine

A smart combination of robust mechanical engineering and clever

software has arrived in the wind energy sector, as proven by an
order Starrag has received from China.

A new Berthiez machining centre will be built by wind parks will need turbines in the multi-mega-
the beginning of 2021 – with a degree of concen- watt range. Their new towers already have wings
tricity and axial run-out accuracy of four to five more than 100 metres in length. “China wants to
micrometres, it will set new standards in the high- install much larger wind turbines, which currently
precision cylindrical grinding of roller bearings require roller bearings with a diameter of up to
with a diameter of up to 4.5 metres. The French 4,500 mm,” reports Jean Luc Baechlé, Plant Man-
subsidiary of the Swiss Starrag Group has proven ager of the Starrag plant in Saint-Etienne. “That
that it meets these requirements for smaller roller is why we have also received the order from a
bearings. Its latest machine builds on this success large Chinese manufacturer in the roller bearing
and will now help China to write a new chapter sector to construct a large vertical grinding ma-
in the production of wind turbines: The planned chine to start operation in 2021.”

The horizontal, hydrostatically mounted tool table

plays a key role too – it is driven by a powerful
torque motor with a maximum torque of 12,000
Nm in permanent S1 operation. Until now, Starrag
has supplied many vertical grinding machines for
components with a diameter of up to 2,800 mm,
but now it has extended the assembly unit due to
growing demand. The table of the RVU 4700/450
is therefore designed for 12-tonne workpieces
with a diameter of up to 4,500 mm. The new,
larger design rests on bases that can grow with
the workpiece size.

Dr Marcus Queins, Head of the Large Parts

Machining Systems business unit, explains:
“Thanks to the specially prepared cycles
for a wide range of precision bearings, the
Berthigrind software supports the user
with regard to grinding in many sectors”.
 Starrag Group Annual Report 2019 23
––

Built for XXL and maximum precision:

The new Berthiez RVU 4700/450 grinding
centre has a hydrostatically mounted tool
table designed for 12-tonne workpieces
with a diameter of up to 4,500 mm.

“Within the Group, we are combining the assembly “You find out how extremely tough and specific
units from Droop+Rein and Dörries with the grind- the demands are on precise roller bearings for
ing expertise of Berthiez to create one synergistic wind power when you assess these drives up
portal assembly unit”, explains Dr Marcus Queins, close at a later point in time,” explains Dr Queins.
Managing Director for the Large Parts Machining “For example, this includes shadows that are
Systems business unit. “This new development is almost impossible to measure. This is understand-
a grinding centre that can also be used for turning.” able as these properties influence the service life
of the roller bearings. The dimensional and shape
It is a machine that has been developed and con- accuracy in micrometres, as well as the surface
structed for high-precision cylindrical grinding in quality, therefore play a crucial role.” Starrag has
new dimensions. The keyword is “shadow-free” now successfully transferred the micrometre
grinding of roller bearing surfaces, which record precision of smaller work spaces to much larger
a concentricity and axial run-out accuracy within work spaces.
a range of four to five micrometres, even with a
huge diameter of 4,500 mm. And that is where the digital icing on the cake –
including with regard to “Industrie 4.0” – comes
But what can the machine do better than compa- into play, namely the Berthigrind software, which
rable plants, and how does it reflect the Starrag enables high-precision machining within the
claim of “Engineering precisely what you value”? micro­metre range to run as a partially automated
According to Baechlé, aside from the high level process. Dr Queins explains: “Thanks to the
of availability and reliability, customers are mainly specially prepared cycles for a wide range of
impressed by the high accuracy in the very large precision bearings, we are able to support the
work space. user with regard to grinding in many sectors.”
24 Highlights
––

Starrag.com has a new digital appearance

The new Starrag website was launched at the beginning of September

in time for the leading EMO trade fair in Hannover. The impressive new
design is highly user-friendly and has a clear information structure.

Technologically up-to-date, the new website

offers fast navigation to the information you
need and a consistent focus on customer needs.

The application focus provides a quick overview

of Starrag's services. Given their importance,
the Investor Relations and HR pages have also
been given their own sub-website homepage.
 Starrag Group Annual Report 2019 25
––

Double award for outstanding training

Starrag sees the training of junior staff as the answer to the long-running
shortage of skilled workers. In the year under review, this commitment was
recognised twice by the IHK Industrie- und Handelskammer Mittlerer Nieder-
rhein IHK (German Chamber of Commerce and Industry).

In 2019, a total of 5,530 trainees were assessed

in the Central Lower Rhine region. Of these, 300
graduated with a “very good” mark, including
our very own Saskia Schmitz, who successfully
completed her training as an industrial clerk
at Starrag Technology GmbH. The ceremony
took place on 15 November, 2019 at the Kunst-
werk venue in Mönchengladbach. The honour
was awarded by the President of the Chamber,
Elmar te Neues, and Managing Director Jürgen
Steinmetz.

In addition to this personal honour, the IHK

additionally named Starrag Technology GmbH
as “Best Training Company 2019”.
26 Company profile
––

Company profile
Vision and strategy sustainable improvement in operational excellence
Starrag Group is a leading manufacturer of highly throughout the Group and ultimately a clear and
productive and sustainable comprehensive solu- long-term improvement in profitability. Specifically,
tions for precision milling machine tools. Its pre- “Starrag 2021” focusses on optimising the product
ferred partners are internationally active compa- portfolio, taking full advantage of potential syner-
nies in the Aerospace, Energy, Transportation and gies, strengthening corporate governance and
Industrial (Industrial Components, Luxury Goods, improving project management.
Med Tech) sectors. It offers a comprehensive
range of high-end precision machine tools, which In order to achieve these objectives, a new group
includes the most up-to-date technology and structure came into effect in mid-2019 that is even
services and generates significant and lasting more heavily geared towards the requirements of
quality and productivity gains for the customer. the target markets than before. Accordingly, the
Starrag Group is pursuing the following strategic management structure is composed of four oper-
objectives to make this vision a reality: ating business units that are geared towards prod-
ucts and applications, as well as three group-wide
 Concentration on clearly defined areas. The business units have been restructured
market segments according to product areas (clusters) with a view
 Consistent focus on customers and their to exploiting synergies:
individual needs
 Concentration on the top-quality segment  High performance systems: Product areas
through technological and service-orientated Starrag, Ecospeed, TTL
leadership  Horizontal machining systems: Product areas
 Qualified and motivated employees Heckert, Scharmann/Ecoforce, WMW
 High internal flexibility  Large parts machining systems: Dörries,
 Solid financial basis Berthiez, Droop+Rein
 Innovative management  Ultra precision machining centres: Bumotec, SIP

We focus on the most promising market segments These four business units concentrate on develop-
and regions – i.e. those with the best growth and ment, project engineering, order fulfillment, design,
earnings potential, namely the priority markets that operational purchasing, final assembly, delivery
are Europe, the US and China – paying particular and customer acceptance in terms of the services
attention to the aspect of services. offered.

“Starrag 2021” programme The three areas under group-wide management

The Group’s inherent growth and earnings potential are Customer Service, Group Operations (synergy
has hitherto not been exploited consistently enough. exploitation in supply chain management, strategic
This challenge has been recognised and is reflected purchasing, manufacturing and assembly of com-
in the “Starrag 2021” programme with a clear am- ponents) and Sales with three teams for the Aero-
bition to achieve the medium-term growth and earn- space, Energy, Transportation and Industrial sectors.
ings targets as quickly as possible and sustainably. The regional sales organisations are also allocated
An even stronger focus on the needs of the cus- to the central sales area.
tomer, an increase in competitiveness and a com-
prehensive optimisation of the entire value chain
are at the heart of this so as to bring about a
 Starrag Group Annual Report 2019 27
––

Market positioning Customer sectors

The strategic focus determines Starrag Group’s Starrag Group’s products and services are con­
market positioning, which can be summarised in centrated on the four customer sectors, i.e.
the following claim: Aerospace, Energy, Transportation and Industrial.
These sectors are sub-divided into 11 market
“Engineering precisely what you value”. On the segments according to the applications specifi-
one hand, this claim expresses one of Starrag cally requested.
Group’s most important core competencies: Engi-
neering – the outstanding capabilities of our em- Aerospace
ployees enable us to manufacture machine tools Aerospace comprises the market segments
for the upper quality segment which stand out Aero Engines, Aero Structures and Avionics.
for the top performance that they provide and, in
particular, their precision. We also offer all asso­ The Aero Engines market segment
ciated services for this segment. Designing aircraft engines requires maximum
efficiency, low kerosene consumption and lower
Precisely – stands on the one hand for precisely noise pollution. This requires ever-greater preci-
this precision and on the other hand for our con- sion in the cutting of challenging raw materials
sistent customer focus. Our customers receive for the production of turbine elements such as
individual solutions that provide them with added engine blades, blisks and casings. As a long-term
value and for which they are also willing to pay: partner to the engine industry, Starrag Group
What you value! has the necessary expertise to achieve this.

No more, but also no less. We work consistently In the area of engine reconditioning, the repair
to focus our work on bringing profitability, growth of blades and blisks plays an important role, since
and security to our customers and their needs, in these are produced from very expensive raw ma-
the sense of a partnership that is reliable in every terials and semi-finished products, making repair
respect. preferable to the production of new components.
With the help of our software and engineering
Brand strategy solutions, flow components such as these can
The umbrella brand Starrag unites the product be overhauled in a fully automated, reliable and
ranges Berthiez, Bumotec, Dörries, Droop+Rein, cost-effective process.
Eco-speed, Heckert, Scharmann, SIP, Starrag, TTL
and WMW. The common brand stands for the The Aero Structures market segment
four core values that apply throughout the Group Rising kerosene prices and increasing environ-
and are lived by: competent, focussed, dynami- mental awareness call for lighter, quieter, more
cally and successful in partnership. It expresses cost-efficient and more economical aircraft with
a shared understanding of our objectives, values lower emissions and pollution. For all manufac­
and services. With regard to the market, this turers and their suppliers, this means ever-more
means individual customer solutions based on complex and larger, integrated structural com­
common values. ponents. These must be manufactured reliably
within narrow tolerances and within short cycle
times under constant process monitoring.
28 Company profile
––

This is where our machines for heavy-duty cutting, multiple machining technologies in a single ma-
high-performance cutting and complete machining chine is also becoming increasingly important.
are very much in demand. Our machines are used The components to be manufactured must satisfy
to manufacture highly stressed structural com­ ever-stricter requirements; they are becoming
ponents such as landing gear components, critical more complex and are increasingly manufactured
primary structural components in the area of the from materials that are difficult to machine.
fuselage, steering gear and wings.
Renewables market segment
The Avionics market segment Thanks to a clear focus on applications such as
Avionics is a collective term for the electrical and gearbox housings, planet carriers, torque arms,
electronic systems used on aircraft and satellites. large bearing or Pelton turbines, we are able to
Flight control, management, communications and create measurable added value in the renewable
navigation systems are the main avionics systems energy sector, for example in the wind energy
in use today. Avionics systems are highly complex sector.
and extreme precision is required. Starrag’s ma-
chine tool competencies in this market segment Transportation
are in the areas of injection systems, combustion Transportation comprises the market segments
chambers, gyroscopes and flight control compo- Heavy Duty Vehicles & Engines and On-Road
nents. Vehicles.

Energy The Heavy Duty Vehicles & Engines

Energy comprises the market segments market segment
Oil & Gas, Power Turbines and Renewables. Starrag Group specialises in the machining of
drive components such as transmission and engine
The Oil & Gas market segment components, axles and other prismatic chassis
In the field of oil and gas exploration, large ball stop components. These are produced in a highly pro-
valves for gas and oil pipelines, complex boring ductive process, ideally in small and medium-sized
heads and other safety components are manu­ series. To reduce manufacturing times and increase
factured on our machines. We are in a position to workpiece quality, complete machining with the
cover the entire value chain – from extraction and minimum possible clamping is becoming increas-
conveying (upstream) through transport and storage ingly important. We have responded to this trend
(midstream) to further processing and refinement with the use of quills and our newly developed
(downstream). The spectrum of products and continuous swivel heads. In this segment, we
customers is similarly broad – from classical end concentrate on agricultural vehicles, construction
products such as pumps, valves, fittings and com- machinery, railway technology and large diesel
pressors to boring equipment for the extraction engines for stationary applications.
of raw materials. Such products are also used in
petrochemical plants, in the field of transport and The On-Road Vehicles market segment
water treatment, and in many other industrial This segment comprises technical solutions for
sectors. the production of high-precision vehicle com­
ponents for cars, lorries, buses and motorcycles.
The Power Turbines market segment The trend towards electric mobility has also
In the field of turbo machine engineering, Starrag opened up new application possibilities. The focus
Group has the most experience in the machining is on the series manufacturing of precision com-
of high-precision flow components. The same ponents such as cylinder blocks and heads, trans-
applies to the production of complex housings mission housing, crankshafts and other drive
for steam and gas turbines. The combination of train components. Customers attach particular
 Starrag Group Annual Report 2019 29
––

importance to reducing unit costs. Thanks to while also guaranteeing that demanding technical
automation solutions for handling workpieces safety and regulatory standards are met.
between the different stages of machining, and
the integration of test, cleaning and assembly Product ranges
systems and equipment, cost-effective holistic As a result of organic growth and various mid
solutions can be achieved. and larger-sized acquisitions since the turn of the
century, we have built a solid portfolio of business
Industrial activities covering a comprehensive range of
Industrial comprises the market segments Indus- technologies and competencies. Throughout our
trial Components, Luxury Goods and Med Tech. various stages of expansion, we have always
followed the logic that new developments must
The Industrial Components market segment effectively complement the old and thereby rein-
This segment includes components for machine force the competitiveness of the Group as a whole.
tools, packaging machines, printing machines This has made Starrag Group what it is today – a
and plastics machines, as well as hydraulic and combination of 11 precision machining product
pneumatic aggregates. Here, too, there is a trend ranges under one roof, boasting a wide range of
towards more complex workpieces. Optimised competencies that few rivals can match.
components call for new, innovative manufacturing
concepts that simplify the production process The product ranges operate under the name of
with maximum precision and guaranteed quality, Starrag, together with the figurative mark in red
and which increase cost-effectiveness and are denoting high-precision machining capabilities.
extremely flexible in operation. Starrag Group Both are registered and protected nationally and
meets these requirements with machining centres internationally. The product ranges are used in all
that combine different machining technologies corporate and marketing communications, espe-
in a single machine. cially at leading fairs with a high international
standing, at specialised trade fairs with a strong
The Luxury Goods market segment regional attraction and in our new customer ma­
In the Luxury Goods segment, the spectrum of gazine “Starrag Star”. The best trademark ambas-
base materials ranges from hard ceramics to pre- sadors can be found in our installed base at cus-
cious metals and stainless steel. Frequent changes tomer sites around the world, where every day
in the manufactured products and ever smaller our machine tools substantiate our claim of engi-
lot sizes require maximum manufacturing flexibility. neering precisely what the customer values.
As many machining steps as possible must be We assess perception of our appearance in the
performed in the same clamping position in order marketplace during our regular contact with
to achieve the necessary precision and surface customers.
quality for the expensive end products. Starrag
Group offers machining solutions for many watch Berthiez
and jewellery components. Maximum precision in vertical turning and cylin­
drical grinding: Outstanding solutions for the air-
The Med Tech market segment craft engine and roller bearing industry based on
Cost pressure is high in the medical technology specialised vertical lathes and grinding machines.
sector. Starrag Group helps to relieve this pres-
sure by using fully automated, highly efficient Bumotec
machines to manufacture implants, medical in- Multifunctional machine tools: High-precision com­-
struments and dental components. Our machining plete machining of small workpieces in sectors
solutions enable the simplification of machining such as watches and jewellery, medical technology
steps and shortening of the production chain and micromechanics.
30 Company profile
––

Dörries Starrag
Synonym for vertical lathes ranging from single Maximum precision flow components: Five-axis,
column machines with a turning diameter of robust and high tensile-strength machines with
1.6 metres or more to large gantry machines with high metal removal rates for maximum precision
a 12-metre turning diameter, 10-metre turning manufacturing of turbines, compressor blades,
height and workpieces weighing up to 450 tonnes. impellers, blisks and complex structural compo-
nents.
Droop+Rein
Maximum precision for large workpieces: Machine TTL
tools for machining large to ultra large workpieces The home of adaptive machining: Internationally
(up to 250 t in weight) such as large format and renowned, software-supported manufacturing
bodywork machine tools, diesel engines, power solutions for the machining and repair of compo-
plant components and large aircraft landing gear nents for gas turbines and aircraft engines.
components.
WMW
Ecospeed Machining centres for emerging markets: Horizontal
The most productive solution for high performance machining centres for rapidly developing emerging
machining of aluminium structural components on nations.
the market: The patented parallel kinematic ma-
chining head Sprint Z3, the heart of the Ecospeed Flexible production at eight locations
series, surpasses the performance of all conven- Starrag Group manufactures its machines and
tional bent axis and fork milling heads and enables production systems at eight production plants in
performance increases of up to 87%. Switzerland, Germany, France, Great Britain and
India. All production facilities are part of our pro-
Heckert duction network, which enables us to balance
The perfect balance between long-lasting precision capacity and risk. Our development and techno­
and productivity: Scaled range of high-precision logy centres are also situated in these locations.
and highly productive horizontal machining centres We use our exemplary technological expertise
for milling, turning and boring medium and high across all segments throughout the Group.
quantities of workpieces.
Keys to success
Scharmann/Ecoforce Sustainable commercial success, as Starrag Group
Complete machining solutions with the shortest has distinguished it for many years, is based on a
possible cycle times: Specialist solutions for number of strategic success factors that we con-
heavy-duty cutting and the complete machining tinue to nurture consistently: individual customer
of extremely large workpieces based on high focus, global presence, continuous innovation,
performance, automatically interchangeable consistent efficiency enhancement and profitable,
head attachments. long-term orientated management.

SIP Individual customer focus

Uncompromising commitment to precision: Starrag Group largely operates discrete manufac-
Jig boring machines and machining centres to turing according to the individual, and therefore
meet the most stringent demands for accuracy very different, needs of its customers. In addition
of research institutes, aerospace companies, to stand-alone machines, there is a growing focus
the aircraft industry and leading precision on system solutions in which individual Starrag
engineering firms. machines are integrated into customer-specific,
flexible manufacturing systems. As a result, almost
all the machines delivered are distinct items.
 Starrag Group Annual Report 2019 31
––

Global presence Systematic increase in efficiency

Starrag Group is represented in the most important As the overarching link, the Group ensures Starrag’s
industrial centres (Europe, Asia and North America). high quality expectations and opens up synergies
Our international customers value short and direct along the added value chain – from product deve­
communication channels. Experienced local sales, lopment and purchasing to sales and service. This
application and service specialists are therefore includes, for example, the development of joint
familiar with local cultures and customs, and are in modules that can be used and processed in various
a position to respond rapidly. They ensure a close companies throughout the Group. Internally, this
and lasting customer relationship based on trust. requires continuous improvement in procedures
The global service team receives constant training and processes to increase productivity. This is the
and development and is being expanded. The task of our Business Process Management, which
global logistics system with its optimised trans- simplifies and standardises processes wherever it
port routes and decentralised spare parts ware- makes sense. Defined key processes are regularly
houses ensures fast and efficient parts supply. checked and improved. The best possible distri­
The intensive customer contact up to the delivery bution of risk in terms of markets and regions, as
and commissioning of the machines, as well as well as a solid financing structure, should ensure
the operating phase, enable a continuous and growth and innovation over the long term.
comprehensive survey of customer satisfaction.
This is all the more so as Starrag Group tends Attractive for shareholders
to serve specialised larger customers. Customer Five key components make shares in Starrag Group
care is supported by a global CRM system. attractive for long-term, value-orientated investors.

Continuous innovation Positioned in sustainable megatrends

Measured as a percentage of sales, our invest- We serve markets that are characterised by sus-
ments in the development of new products, tainable growth potential due to global trends
components and processes is usually higher than and challenges: increased mobility (aviation and
average for our industry as we aim to maintain land transport with their demands on safety and
and extend our technology leadership. We view fuel efficiency), investment needs in the global
market-orientated innovation as the central driving infrastructure (lorries and construction machinery),
force of our business. We operate research and nutrition for a globally growing population (efficiency
development centres in Switzerland, Germany, in agriculture), increasing need for energy with
France, Great Britain and India, and protect our improved energy efficiency at the same time. In
technological developments with a broad patent addition, increasing demands on the production
portfolio. efficiency require higher precision in production,
both with larger workpieces such as structural
Development work carried out by the Group is parts for aircraft or ship propellers and with increa­
supported by close cooperation with our cus­ singly small and complex workpieces such as
tomers as well as leading technical universities precision mechanics, watches and medical tech-
and research institutes. Professors Reimund nology. This is exactly in line with the core com­
Neugebauer (President of the Fraunhofer Society) petencies of Starrag Group. Experts estimate that
and Christian Brecher (RWTH Aachen University), we have access to a market potential of around
two university luminaries in machine tool engi- CHF 4.5 billion worldwide in our four customer
neering, are members of the Supervisory Board sectors, which is more than ten times the current
of one of our German subsidiaries. sales revenue. This means that substantial growth
opportunities still open up for Starrag in these
long-term growing markets.
32 Company profile
––

Innovation leadership as a key differentiating Forward-looking management with

element to the competition undisputed track record – major shareholder
Starrag Group focusses its innovation activities ensures continuity
systematically on customers and their individual The entrepreneurial members of our management
needs, with a focus on the high-quality segment team and Board of Directors have many years of
and the Group’s own expectation of technological professional and managerial experience in industry,
and service-orientated leadership. Every year, in particular the machine tool industry, and are
we invest a disproportionate share of, on average, therefore very familiar with its specific challenges
around 7% of our sales in research and develop- and cycles. This is not only an important basis for
ment and, in addition, maintain close contact with careful planning, but also for the corresponding
the science sector. Our customers and other reliable external communication, for example with
market experts confirm this technology leadership our investors. The focus on four customer sectors
of the globally recognised brand Starrag – but also means the Starrag leadership team already occu-
of our individual product ranges. We are also well pies a top ten position in all four sectors today:
on the way to “Industry 4.0”, for example by net- In Aerospace and Energy, we are even among the
working with our customers’ production systems. top three suppliers worldwide. With Walter Fust,
We systematically modularise our machines in Starrag Group has a majority shareholder with a
order to expand the application possibilities of ex- long-term focus who, as an engineer, is very familiar
isting machine series to other market segments with industry and its challenges and has success-
served by Starrag Group while reducing complexity. fully created a group of companies that specialises,
Thanks to the core competency of Starrag Group among other things, in customer service. The cor-
in optimising the overall system of machine – soft- porate governance of Starrag Group is committed
ware – application – system integration – customer to the highest standards, which has also been
service, we not only create added value for our honoured in various external ratings
shareholders, but also for our customers.
Solid financial basis and management
Focussed strategy – reduced to the max, with long-term orientation using modern,
but this from A to Z value-based instruments
As part of its clear brand strategy, Starrag Group Primarily, the financial management of Starrag
focusses on the most promising market segments Group is consistently focussed on growth and
and regions – i.e. those with the strongest growth increasing profitability. We measure these by the
and those that are the most profitable – committed following key performance indicators: growth in
to providing our customers with our solutions for sales revenue and order intake, operating profit-
profitability, growth and security, in the spirit of ability (EBIT margin) and return on equity (ROE).
a partnership that is reliable in every respect. We Starrag Group’s history of reliably distributing a
support our customers through professional cus- dividend year after year with a planned payout
tomer service organisation, which makes a signi­ ratio of 33% to 50% of net profit results in an
ficant contribution to the profitability and stability attractive dividend yield (applied payout ratio for
of Starrag Group with its innovative service prod- the financial year 2019: 49% or dividend yield of
ucts. Operational excellence with clear processes 2.2% on the year-end 2019). For many years,
and reduced complexity is a key element for us. Starrag Group has been able to report sustainable
In this way, we can differentiate ourselves from positive results. Even during the 2008-09 financial
our competitors and provide our customers with crisis, we were able to continue to distribute
tailor-made added value. dividends without interruption. Starrag Group’s
 Starrag Group Annual Report 2019 33
––

extremely sound financing and capital structure – position. In addition, we are focussing on further
with an equity ratio traditionally of around 50% – strengthening and expanding our service business.
is not only the basis for reliable dividend payments.
It is also a valuable foundation for the long-term The focus on organic growth does not rule out
capital goods business and the successful conc­ further complementary acquisitions in individual
lusion of suitable, complementary acquisitions. cases. The basic prerequisites for this continue
to be the strategic “fit”, an attractive and com­
Outlook: Creating long-term value plementary market and product portfolio, cultural
Starrag Group aims to achieve profitable growth compatibility and, last but not least, an attractive
in the interest of its sustainable, value-enhancing valuation.
positioning, based on a strong financial base and
a stable shareholder structure with a renowned We remain committed to our sustained ambition
anchor shareholder. We expect our activities to to play a leading role in all four of our customer
generate an EBIT margin of at least 8% on aver- sectors.
age over economic cycles and to earn the cost of
ca­pital. We intend to achieve this financial require-
ment in the future by means of clear strategic
positioning, a further improvement in operational
excellence and the use of economies of scale –
operating leverage – with increasing sales and
consistent cost management.

At present, Starrag Group cannot be satisfied with

its earnings performance. Measures have therefore
been taken to optimise the entire value chain. This
involves increasing the transparency and control-
lability of project management, reviewing the prof-
itability of the entire product portfolio and system-
atically continuing employee development. The aim
is to achieve a significant and sustainable improve­-
ment in operational excellence at all levels and in
all areas. The basic strategy will be further sharp-
ened by the Board of Directors and the Executive
Board.

Although recent growth has been driven primarily

by acquisitions, organic growth will take precedence
over the coming years, with potential synergies
across the Group being exploited consistently. In
the medium term, we aim for an annual increase
in sales of 5%. We expect this growth as a result
of the worldwide scalability of our expertise in
areas of activity and markets in which we have
not yet achieved the desired leading market
34 Company profile
––

Milestones in
the company's history

1890 1910 1920 1950 1960 1970 1980 1990 2000

1897 1952 1998

The company is founded in Post-war period: The com- Stock-market listing
Rorschacherberg, Switzerland pany establishes itself as and acquisition of
under the name «Henri Levy a manufacturer of turbine Heckert in Chemnitz,
Mechanische Werkstatt» and milling machines. Germany.
manufactures threading ma-
chines for the textile industry.

1921 1973 2002

The company is renamed Starrfräs- The world's first five-axis Acquisition of TTL
maschinen AG. Manufacturing of milling machine is in the UK and SIP
copy milling machines for automotive, introduced by the company. in Geneva, a company
aircraft and mould-manufacturing whose roots go back
companies begins in the mid-1930s. to 1862.
 Starrag Group Annual Report 2019 35
––

2011 2012 2013 2014 2015 2016 2017 2018 2019

2012 2015
Acquisition of Bumotec, Sales operations are reorganized
Freiburg, Switzerland. with a focus on ten market
segments within the four target
industries of Aerospace, Energy,
Transportation and Industrial.

2011 2019
Acquisition of Dörries Scharmann Group, New group structure: composed
comprising Berthiez (Saint-Etienne, France), of four operating business units
Dörries (Mönchengladbach, Germany), that are geared towards products
Droop+Rein (Bielefeld, Germany) and Scharmann and applications, as well as three
(Mönchengladbach, Germany). Brand concept is group-wide areas: Sales, Group
updated and the company name is changed to Operations and Customer Service.
Starrag Group.
Customer Story: Aerospace
Premium AEROTEC_Varel, Germany

—
A highly
dynamic duo
 Starrag Group Annual Report 2019 37
––

Benchmark: Tripod technology is still the

most advanced in the world when it comes to
machining complex aluminium parts.
Benchmark in the aircraft industry

Premium AEROTEC's Varel plant in north Germany produces highly

complex machining components made of aluminium and titanium
using one of Europe's most advanced pool of machines. And this pool
has recently been boosted by a new, highly dynamic duo: A Starrag
ECOSPEED F 2040 flexible manufacturing system consisting of two
linked machining centres.

It was almost 20 years ago that Europe's largest A new angled milling head that can be changed
aircraft manufacturer first took a chance on the pa- automatically now enables aluminium workpieces
rallel kinematics of the ECOSPEED product lines – measuring up to four metres long to be machined
a technology that was revolutionary at the time. on the FMS – not just completely but in a single
Thanks to highly dynamic five-axis simultaneous clamping operation too.
cutting with a tripod head, these machines still
set the benchmark for machining large, complex Flexibility is a must, since the aircraft manufacturer
aluminium structural components today, especially currently machines 700 different components on
in the aviation industry. its ECOSPEED machining centres alone, for clients
including Airbus and the European Space Agency
“In addition to their reliability, it was ESA (for Ariane 6).
the high overall dynamism of the
ECOSPEED machines that won us
over,”

explains Christian Welter, Head of Large-Part Pro-

duction at Premium AEROTEC. “That's why for our
latest investment we chose two ECOSPEED
F 2040s which were linked to the flexible manufac-
turing system.”

Christian Welter, Head of Large-Part Pro-

duction, and cutting machine operator
Kjell Leushacke during a quality check on
the Starrag FMS.
 Starrag Group Annual Report 2019 39
––

Logistics: A conveyor system with

double loading trolley takes care of
workpiece handling in the background.

180° Index machining: The angled milling

head makes it possible to carry out special
cutting and drilling operations such as
envelope machining, which was previous-
ly done afterwards on a different machine.
Customer Story: Energy
KOSO Kent Introl Ltd, West Yorkshire, UK
 Starrag Group Annual Report 2019 41
––

—
When the head
decides

Instead of two machines: The Heckert 630

DBF allows valve housings to be fully
machined in one or two working steps. This
means that this five-axis machining centre
can produce significantly more parts per week
than two separate machines.
Highly productive complete machining
in a single clamping operation

Once again, the British valve manufacturer KOSO Kent Introl

showed it has its “head screwed on correctly” by opting
for a Starrag machine. The British company have recently
began to use a five-axis horizontal machining centre, Heckert
DBF 630, with the “smart” DBF head, because it handles
the highly productive complete machining process in a single
clamping operation.

“In the past, we needed two machines for com- This means that this five-axis machining centre can
plete machining,” explains production manager produce significantly more parts per week than
Richard Addy. This time-consuming procedure is two separate machines.” The previous require-
now a thing of the past: the magic word is DBF. ment of multiple clamping operations on the lathe
The three letters stand for the integrated turning, no longer exists, and the additional waiting and
drilling and milling head (German: Dreh-, Bohr, und setup times for the boring mill are dispensed with.
Fräskopf), which enables the turning, drilling and Addy: “All of this has resulted in considerable time
milling of non-rotationally symmetrical parts in a savings.”
single clamping operation with only one toolholder
and thus reduces unproductive downtimes for Regular customers who have been using Starrag
handling and setup. machines for many years are excited by the new
machine. Only Starrag machines are in heavy-duty
“Because of our good collaboration cutting. The Starrag newcomer is also well received.
with Starrag, we didn't hesitate to “Starrag machines have always demonstrated
invest in a Heckert DBF 630,” says reliability and consistently high-quality machining
Addy. results,” emphasises the production manager.

“It offers machining functions and specifications In view of the “always excellent service and the
that far exceed our requirements for valve body support of the company” provided by the Starrag
machining.” customer service team, it was therefore appro­
priate to also use Starrag's production technology
Efficient complete processing without for smaller valve housings.
waiting times
“Not only are separate machining processes no “The new Heckert DBF offers the same productivity
longer needed, but the Heckert DBF considerably advantages as the larger Scharmann machining
simplifies the production process too,” he contin- centre: it effectively improved the entire produc-
ues. “We now machine the parts completely – tion process.”
from raw material to finished part – in a single
clamping operation, without waiting times.
 Starrag Group Annual Report 2019 43
––

Richard Addy, production manager at KOSO

Kent Introl: “Not only are separate ma-
chining processes no longer needed, but
the Heckert DBF considerably simplifies
the production process too.”

Efficient manufacturing: On the Heckert DBF 630,

workpieces are manufactured completely – from
the raw material to the finished part – in one
clamping operation and without waiting times.
Customer Story: Energy
Neumann & Esser GmbH
Übach-Palenberg, Germany
 Starrag Group Annual Report 2019 45
––

—
XXL
satisfaction

Machinist Jürgen Seek: “The machine can

do much more. We've never been able
to really wear it out – not even when even
test-machining titanium.”
 The strength of the Starrag Droop+Rein
T portal machining centre lies in com-
plete machining, which is performed
with or without coolant depending on
the workpiece. Minimal-volume lubri-
cation, however, is not required owing
to the high-strength materials.

Starrag portal milling machine:

smooth operation in the Rhineland

“And there at the back is the Droop+Rein, one of our

best workhorses in the stable,” says Alexander Peters,
Managing Partner of NEUMAN & ESSER GmbH & Co. KG
from Übach-Palenberg near Aachen (NEA GROUP), while
on a tour of the company. “We are very satisfied with this
machine tool, its performance and the service provided
by the manufacturer.”
 Starrag Group Annual Report 2019 47
––

He is talking about a Starrag portal machining in three steps: After milling the lower, lasered sur-
centre with adjustable crossbeam and movable face, Seek rotates the housing by 180° to allow the
clamping table (Droop+Rein T 30 40 DT R50 C). bottom of the housing to be machined. He then
Currently the largest machine tool investment in turns the GGG-40 component back to its initial
the history of the NEA GROUP, it has proven itself position for complete machining.
in the complete machining of components – and
especially demanding machine components – The NEA GROUP has not regretted their decision.
since 2011. The investment has paid off because, depending
on the size, the machining time has fallen by an
Machinist Jürgen Seek, who was working on average of 30 to 40% and accuracy has doubled
a 45-tonne crankcase made of ductile cast iron even in critical areas. Tolerance in the bearing race
(GGG 40) during our visit, is also satisfied with this is now only 20 µm instead of 40 µm. Starrag
investment. checks the geometry completely every two years
and realigns it if necessary. Simon Prell, Head
“Thanks to the use of ceramic of Mechanical Manufacturing: “So far the realign-
tools, we can largely manage with- ment has been to such a small degree that we
out coolant,” could actually go without it.”

Seek explains of the dry machining process. He is

glad he no longer has to reclamp the workpiece
multiple times. The gigantic component is machined

Machinist Seek is glad he no longer has

to laboriously reclamp the workpiece
multiple times during the complete
machining of a 45-tonne crankcase made
of ductile cast iron (GGG 40).
Customer Story: Industrial
Shanghai Medical Instruments Co., Ltd.
Shanghai, China
 Starrag Group Annual Report 2019 49
––

—
Door opener for
minimally invasive
equipment

Production volume: More than 10 million

medical devices are produced every year in the
four production facilities of Shanghai Medi-
cal Instruments (Group) Co. Ltd.
Chinese company
relies on Bumotec
In the vast city of Shanghai, home to many international companies
and firms which are well established on the national market, one
such company has met with great success in the medical industry
since 1928. Hidden in the more traditional suburbs of Shanghai,
this thriving company is investing in Starrag technology and making
its way to the top.

Shanghai Medical Instruments (Group) Co., Ltd. is Why did you choose machines from the Bumo-
a company in the Yuwell Group. Inside its four tec range to produce your medical parts?
medical equipment production plants – including Our conventional processes and machines were un-
three finished product workshops and one workshop able to produce minimally invasive instruments
dedicated to forging, surface finishes and heat effectively. With Bumotec machines, we can work
treatments – the company produces over 10 million from bar stock to produce complete parts, i.e. six
parts which are used in hospitals throughout China machined faces including finishes, with a single
and also in some developing countries. clamping operation and in record time. This has
enabled us to increase productivity and efficiency
Your company produces a vast range of pro­- and has enabled our company to reap vast benefits.
ducts. Can you tell us what your product port-
folio comprises? The latest machine performs surface
Since we specialise in medical equipment, our finishing on the sixth side at the same
largest market is for essential equipment such as time, which has increased our pro­
clamps, scissors and surgical knives. Our market ductivity by 20% on some parts.
share in China is around 50% for these products.

Can you give us a specific example of parts you

have produced using your Bumotec machining
centres?
Since we received our first Bumotec s192 centre in
2005, we have developed a full catalogue of micro
instruments. Here, for example, two assemblies
were manufactured for an orthopaedic instrument

Increases productivity by 20% – the

new Bumotec s181.
 Starrag Group Annual Report 2019 51
––

Yao Jinhua: “I am very satisfied

with our three Bumotec machin-
ing centres, that is why we have
recently invested in the new
s181 model.”

produced with our second machining centre, a How would you rate your three Bumotec ma-
Bumotec s191 that was installed in our third plant chines installed in your plants?
in 2009. These two components are produced I am very satisfied with our three Bumotec machin-
alternately on the same machine and are assembled ing centres, that is why we have recently invested
to form the moving part of a clamp. in the new s181 model. Their stability in terms of
production is exceptional.
This naturally requires a very high
level of precision to be able to assem- What projects have you got in the pipeline?
ble the two parts without needing to We want to continue to provide our customers with
retouch the components separately. varied solutions tailored to their needs, by speeding
up the launch process for new products. This will
Not only is the Bumotec s191 machining centre able enable us to reinforce our standing as a key global
to produce these two parts on the same machine supplier of medical instrumentation in China and
from bar stock all by itself, but it also ensures such abroad.
a high level of stability in precision that no retouch
is required at the end of production.

Another example which is just as interesting, and

much more recent, concerns the production of an Highly effective: The internal coolant supply
instrument for ENT surgery produced since our through the tool plus external cooling shaves
Bumotec s181 centre arrived. This micro instrument off seconds when working with aluminium, thus
is now produced in eight minutes instead of ten ensuring greater productivity.
minutes, using the second machining station simul-
taneously.
52 Management report
––

Management Report
Sales higher, order intake synergies, strengthening corporate leadership
and earnings lower and improving project management. Some of
With the 2019 business closing, Starrag Group the associated measures are in the process of
confirms the expectations expressed in the Half- being realised or have already been completed.
Year Report of July. Thus, the order intake fell For example, around 150 jobs were cut at the
short of the previous year’s level, which was the Mönchengladbach site and mechanical manu­
second-highest in the history of the company. facturing was concentrated in Chemnitz, as
Nevertheless, several attractive large orders were planned. This will effect annual cost savings of
received, in particular in Aero-space. Sales sur- CHF 8 million to CHF 10 million from 2021.
passed the previous year’s level, which can pri-
marily be explained by the high order intake in Together with the reinforced strategy of concen-
2018. Earnings were also unsatisfactory in 2019, trating on the market segments and regions that
although they were better in the second half of offer the best growth and earnings potential, in
the year than in the first thanks to a considerable particular China and the US, Starrag Group remains
reduction in restructuring costs. convinced that it can achieve its medium-term
sales and earnings targets, albeit with a longer
“Starrag 2021” programme time horizon than previously assumed. Specifically,
designed to counter this this means average sales growth of 5% and an
Accordingly, the “Starrag 2021” programme, which operating margin of at least 8% across economic
was launched in spring 2019, was systematically cycles.
implemented and started to have an impact. The
programme aims for a signficant and long-term
sustainable improvement in profitability and spe-
cifically consists of optimising the product portfo-
lio, comprehensively taking advantage of potential
 Starrag Group Annual Report 2019 53
––

Average order In terms of order size, the share of large orders

Owing to the long-term character of Starrag was well below the previous year’s level, as men-
Group’s investment activities, the order intake tioned earlier. Medium-sized and small orders
can be heavily influenced by individual large also fell compared with 2018 owing to the weaker
orders, depending on the period. This was the activity in capital goods in general. Service orders
case in the first half of 2018, for example, in remained at a high level; the slight decline can
contrast to the year under review. Back then, mainly be attributed to currency effects.
the order intake for the year as a whole was the
second-highest in Starrag Group’s history at
CHF 461 million. At CHF 343 million, new orders
in 2019 were 26% below the level of the previous
year (24% at constant exchange rates).

Order intake by order size

CHF m
500

450

400

350

300

250

200

150

100

50

0
2015 2016 2017 2018 2019

CHF m 2015 2016 2017 2018 2019

Large orders (> CHF 5 million) 79 239 41 143 67
Small/medium orders 199 178 239 237 199
Recurring service 63 68 69 80 77
54 Management report
––

Declines in most Irrespective of the lower order intake as a whole,

customer sectors Starrag Group again received several attractive
The decline in new orders mainly affected Aero- large orders in 2019, for example one in Industrial
space and Industrial, the two most important from an Australian customer for a large machining
customer sectors, and to a similar extent. In the centre in Droop+Rein’s overhead gantry design.
case of Aerospace, however, it should be remem- Added to these were large orders in Aerospace
bered that the previous year was influenced by from both Asia and North America for systems for
several large orders. The fall in the order intake machining structural components.
in Transportation and Energy was on a smaller
scale. As in the previous year, the two dominant
sectors – Aerospace and Industrial – together
accounted for nearly three-quarters of new orders.

Order intake by market segment

25

63

132
CHF m 2019 2018
Industrial 132 38% 176 38%
Aerospace 122 36% 171 37%
Transportation 63 19% 76 17%
Energy 25 7% 38 8%
122

Order intake by region

45

CHF m 2019 2018

186
112 Europe 186 54% 272 59%
Asia 112 33% 120 26%
Americas 45 13% 69 15%
 Starrag Group Annual Report 2019 55
––

Regional variation in developments Increase in sales

The picture differs from one geographic market re- Annual sales of CHF 418 million in 2019 surpassed
gion to another. Europe was the region most affected the previous year’s level by 7% (9% at constant
by the decline in the order intake – es­pecially West- exchange rates), which was in line with the forecast.
ern Europe – followed by North America, although The increase can primarily be explained by the high
it was considerably smaller there. In Asia, the level order intake in 2018, but can also be put down to the
was almost unchanged from the previous year. fact that the delays in order processing were partly
Europe remained the most significant market region, offset in the reporting year by various measures
accounting for 54% of total incoming orders. that were taken to improve project management.

Solid order backlog

The order backlog of CHF 284 million as of the
end of 2019 corresponds to a longer-term average.
The decline of 22% must be put into perspective
in view of the historical record of CHF 366 million
in the pre- vious year. The current work in hand also
continues to ensure a solid basic workload. It is
also important to note that this is always linked to
a substantial recurring service business.

Trend of order intake and order backlog

CHF m
500

450

400

350

300

250

200

150

100

50

0
2015 2016 2017 2018 2019

CHF m 2015 2016 2017 2018 2019

Order intake 333 480 349 461 343
Order backlog 238 348 302 366 284
56 Management report
––

EBIT margin lower New products

The operating result before restructuring costs In the year under review, Berthiez, in cooperation
EBITR amounted to CHF 14.0 million, or 3.4% of with a Chinese customer, developed RVU 4700/450,
sales. After restructuring costs of CHF 9.2 million, a new grinding machine. Its hydrostatic table bear-
EBIT was CHF 4.8 million, or a disappointing 1.1%. ing allows it to machine workpieces weighing up
After standing at CHF 0.9 million as recently as the to 12 tons with a diameter up to 4.5 metres and,
first half of the year, EBIT improved substantially despite this dimension, ensure a radial and axial
in the second semester thanks not least to a con- runout in the area of 4 to 5 micrometres. The cus-
siderable reduction in restructuring costs. tomer, a large manufacturer of multi-megawatt wind
turbines, will put the machine into operation in the
As a result of the fall in EBIT, there was also a fall in course of 2021 (see page 22).
net income to CHF 6.9 million (CHF 2.02 per share).
The decline in EBIT was partly offset by the reversal With the NB 151, Starrag completed the series of
of tax provisions owing to the reform of corporation these 5-axis machining centres for complex blisk
tax in various cantons. machining in turbine construction with a model
whose productivity is 20% higher. Thanks, not least,
Balance sheet still healthy to this advantage, the innovations presented at the
Thanks to lower liabilities, the solid equity ratio of Turbine Technology Days for the first time in 2019,
53% exceeded the previous year’s level by around attracted great interest among those attending,
5 percentage points, meaning that it was in the especially as both the aerospace and energy sectors
range of the past few years. are under cost pressure.

The decrease in free cash flow to CHF 8.3 million Starrag Group’s new ServicePlus concept, which was
(from CHF 19.7 million in the previous year) can be introduced two years ago, was also well received in
explained by the lower cash flow from operating 2019. This maintenance service plan ensures very
activities. Net debt, which had already been cut to high machine availability under multi-year agreements
CHF 5.3 million in 2018, turned into net cash of that are based on fixed prices (see page 18).
CHF 0.6 million in 2019.
Customer events and trade fairs
Investment in fixed assets went down from The “Technology Days” customer event that we
CHF 7.3 million in 2018 to CHF 5.1 million, having have hosted at our headquarters in Rorschach since
reached over CHF 10 million in previous years 2006, attracting well over 100 visitors each time,
when it was boosted by the construction of the took place again in 2019. It is an excellent platform
new manufacturing plant in Vuadens, Switzerland. for presenting our latest innovations to represen­
The majority went on expanding and modernising tatives from industry, specialist media and relevant
machinery and production equipment, developing universities. In June, the Turbine Technology Days
new technologies and products, and upgrading event, which has already become something of
IT systems. a tradition, once again took place.

Starrag Group’s average headcount in 2019 was As usual, Starrag Group continued to attend relevant
practically unchanged at 1,514 employees (full- trade shows in 2019 with an up-to-date exhibition.
time equivalents), as well as 145 apprentices and In April, we again attended the China International
students (compared with 151 in the previous year). Machine Tool Show (CIMT) in Beijing, while in No-
vember we attended the China International Import
 Starrag Group Annual Report 2019 57
––

Expo (CIIE). The numerous interesting contacts In terms of the individual sectors, in Aerospace we
made there have further strengthened the basis expect further growth in air travel in 2020. However,
for future orders. Then came the EMO in Hanover the problems that the two globally dominant aircraft
in September, the most significant leading trade manufacturers are currently having are reflected
fair worldwide for machine tools. Here, a particular in the investment behaviour of our customers. In
emphasis was placed on consistent customer Industrial, we expect stable economic activity at the
orientation, as well as the high availability of the current level. Energy will probably remain at the
machines (see page 16). current low level. Finally, for Transportation, it makes
little sense to make a general statement because
Risk management of its heterogeneous customer structure.
For information about our holistic risk management
process, please refer to page 71. To summarise, with regard to the order intake, we
currently expect a figure in line with that of the
Limited currency effects previous year (in local currency) or, in the best-case
We are less affected than average by currency scenario, a small increase. This depends not least on
fluctuations, compared to other Swiss industrial the behaviour of those manufacturers that – unlike
companies. Currently, 68% of sales originates Starrag Group – primarily supply the automotive
from sites located outside Switzerland; materials industry, whose demand for machine tools has
are sourced from the euro area whenever possible. been declining for some time. It can be assumed
The share of total costs incurred in Swiss francs that these manufacturers will continue to attempt
in 2019 stood at 21%, while in sales the share to switch to some of Starrag Group’s sales markets,
was 25%. resulting in additional competitive pressure.

Outlook for 2020 Sales in 2020 are likely to be significantly below

Global economic developments will again be shaped the previous year’s level owing to the weaker order
by lots of political and economic uncertainty in 2020, intake in 2019. With regard to earnings, we expect
not least the impact of the coronavirus, which can- EBIT before restructuring costs to be somewhat
not yet be gauged. This makes them increasingly dif- lower or unchanged compared with 2019. The
ficult to forecast. These external influencing factors mea­sures taken in the previous year to cut fixed
aside, Starrag Group is optimistic about its target costs and improved project management offset
markets from a longer-term perspective. VDW, the negative volume effects resulting from the lower
German Machine Tool Builders’ Association, expects order backlog.
output to be un¬changed or to fall slightly in 2020.

In regional terms, little momentum is to be expected

in Europe. In contrast, Starrag Group expects positive
developments in the North American market, which
the Group regards as strategically important. The
arguments in favour of this are our recently expan­
ded local sales structures, combined with an in-
crease in staff under new overall management in
the US, as well as demands from those responsible
for economic policy for higher local shares of VAT.
Finally, the greater Asian region continues to have
great potential for growth. Economic developments
in China will play a major role in this respect.
58 Comprehensive sustainability
––

Comprehensive
Sustainability
The industrial and social commitment of Starrag Periodic employee surveys conducted by Great
Group is set up for the long term. We maintain an place to work, an external consultancy that special-
open dialogue with all stakeholders and consider ises in workplace culture assessment and employee
their needs in a balanced way. Measures to en- surveys, suggest that we are on the right track.
hance sustainability are based on the economic, These surveys convey valuable signals on ways to
social and ecological environment. enhance and optimise working conditions in and
around the workplace, management performance,
Results-orientated corporate culture information and communication, and training require­-
Economic sustainability is based on a results- ments. The most recent survey, conducted in 2017,
orientated corporate culture and is intended to was supplemented by additional questions regard-
increase the value of the company in the long- ing health. It again made useful suggestions as to
term to the benefit of all stakeholders. We refer what could potentially be improved. We are making
here to the measures illustrated at various places improvements in this respect on an ongoing basis.
in this annual report comprising all divisions of These include measures such as workshops to
the company. improve the workload situation in the workplace,
process improvements in the entire process chain,
Employee-orientated HR policy improvements in climatic and acoustic conditions
Starrag Group’s success is essentially based on in various work areas, expansion of the group-wide
committed employees who are motivated by Starrag training catalogue and intensification of
working in an open and modern environment and targeted information and communication. The next
want to deliver the highest levels of performance. staff survey at group level is scheduled for 2020.
The central elements of our leadership culture
are therefore mutual trust, respect, regular sharing Starrag Group undertakes a variety of efforts to
of information, participation, appreciation, and increase employee commitment to achieving the
promotion of personal development. company’s objectives. Employees and employee
representatives are kept regularly informed at all
Starrag Group is valued as an attractive employer. sites about the current state of business, as well
Whatever their area of expertise, all our employ- as current topics and projects. The information is
ees come into direct contact with our products at conveyed by their managers, the site managers and,
various stages in the value chain and can derive at least once a year, by the CEO personally at staff
the benefit for the customer as a result. This cre- meetings. Furthermore, the customer magazine
ates a natural identification with their own work. “Star”, which is distributed worldwide twice a year
Our employees are proud to play an active part to all employees, provides further information from
in delivering high-tech solutions to the customer, the various locations and markets. Active commu-
from design to worldwide maintenance, as a nication is also supported by means of regular news­-
result of their vast expertise. letters for the various operating sites that provide
 Starrag Group Annual Report 2019 59
––

information on the current order situation, impor- These training centres were further expanded in
tant development projects, personnel issues the reporting year with targeted investments in
and topics of cultural interest. The high level of training machines and innovative course content.
employee satisfaction is reflected in, among In order to improve the quality of the apprentices
other things, a staff turnover rate that has been and promote interest in the apprenticeships at
low for years. schools, numerous events were held at the train-
ing centres for secondary school pupils, students
We place special emphasis on maintaining our and potential candidates. Apprentices who com-
employees’ expertise. As part of the formal annual plete their apprenticeship with good scores are
employee appraisal, further training needs are retained if possible. In the reporting year, the
also assessed. The courses provided by our Starrag Chemnitz site was again honoured by the emp­
Training Centre are particularly valuable in suppor­ loyers’ association SACHSENMETALL as one of
ting managers in the planning and realisation of the top training companies in the industry, while
professional development measures for their staff. the Monchengladbach site was again honoured by
In recent years, numerous training courses at the local Chamber of Industry and Commerce as
different production sites have been combined one of the top training companies in the region.
and made available in the form of a training cata-
logue. Besides technical training such as control In the framework of systematic health manage-
techno­logy and maintenance courses for our ma- ment, safety in the workplace and the health
chining centres, courses offered include language of our employees have the utmost priority. Our
and software training. In addition, we invest sub- objective is to continuously improve the working
stantially in the training of sales staff and focussed environment, beyond what is required by occu­
on strengthening the training of skilled workers. pational safety and health legislation. At the pro-
Among other things, we focussed on actively duction locations, we compile relevant health
shaping the succession of departing skilled work- and safety indicator statistics on a monthly basis
ers to their future careers and further improving and derive location-specific measures based on
practical in-house training. analyses of the data. Accident figures and absen­
ces through illness again remained at low levels
Further training on the job is likewise crucial, since in 2019; no serious incidents involving employees
the necessary skills and knowledge can only be were recorded. The numerous measures imple-
acquired during day-to-day business, in which mented in previous years in the areas of safety in
questions keep coming up concerning issues that the workplace, health management and working
cannot be taught in the classroom. Our own vo­ atmosphere were systematically continued in
cational training programme plays a key role in 2019. A number of nutrition, healthcare and phy­
acquiring qualified specialists. In 2019, we trained sical activity measures at the various sites are
145 apprentices and students in more than ten designed to enhance employee well-being. Our
professions (compared with 151 in the previous company sporting events such as the annual ski-
year). All of our production locations feature ing day, bike-to-work event and company fun run,
modern vocational training centres in which our as well as family events and Christmas parties,
apprentices receive an educational foundation. enjoyed a high level of participation.
60 Comprehensive sustainability
––

In order to ensure the sustainability of the meas- Under our own eeMC (energy efficient machining
ures and the continuous optimisation of Human centre) label, the entire range of machine systems
Resources processes at group level, the additional were made more energy-efficient. The measures
position of Head of Group HR was created in 2019. range from energy-efficient engines and minimis-
ing base load losses through to using frequency-
Product energy efficiency as controlled pumps, regenerating braking energy
a central starting point and lightweight construction plans. In principle,
The main starting point for a greener approach in the machine illumination is still based on energy-
our corporate group is the energy consumption efficient LED lights. Starrag machines are specifi-
of the machines we deliver to customers, where cally designed to maintain their high precision
they will be in operation for decades. In the past, over a wide range of temperatures, reducing the
and especially in regions with low energy prices, energy consumption of our customers consider-
not enough attention was paid to energy con- ably by lessening the need to keep the tempera-
sumption. We expect energy consumption to play ture stable in the production hall.
a greater role in terms of overall production costs
in the future. The energy efficiency of machine Involvement in national and international standardi­-
tools could become one of the most important sation committees such as “Energy efficiency in
factors in the calculation of economic efficiency machine tools” and the associated defining of the
over the life cycle of a machine system. Starrag new ISO standard 14955 is important to us. Par-
Group therefore took an early decision to partici- ticipating in research projects in various countries
pate in the “Blue Competence” campaign of the to increase the energy efficiency of machine tools
European association of machine tool builders means that we can quickly introduce new discov-
(CECIMO) and the national industry associations eries and technologies into product developments.
the German Machine Tool Builders’ Association The focus is on cost savings in the energy con-
(VDW), the Mechanical Engineering Industry sumption of machine tools, in particular making
Association (VDMA) and the Swiss Association of progress in terms of drive systems, cooling lubri-
Machinery Manufacturers (Swissmem) for higher cants, mechanical drives and stand-by and warm-
energy efficiency and sustainability in manufac­ up settings to reduce the required preheating
turing technology, and to incorporate the relevant time. This opens up significant potential by redu­
recommendations into the development of new cing the amount of air conditioning in the pro­
products. The main driver for energy efficiency duction halls without compromising quality and
in the machining of workpieces is, however, the functionality thanks to more precise and more
cycle time. Since Starrag Group’s entire machine intelligent production technology. The energy-
portfolio is characterised by a higher cutting saving potential over time to be attained across
performance and, as a result, shorter production the entire production process and infrastructure
times than its competitors, investment in our is clearly in the double digit percent range.
machines is particularly worthwhile from the point
of view of energy savings.
 Starrag Group Annual Report 2019 61
––

Continuous improvement of The photovoltaic plant which has a surface of

environmental performance 8,250 m2 and was commissioned at the new
Starrag Group is continuously implementing mea­ production site in Vuadens in 2016 produced
sures to improve its environmental performance 1,403 MWh of electricity in 2019 and fed it into
at all business and plant locations. This includes the grid (compared with 1,230 MWh in 2018).
ensuring that our own production processes are The factory is equipped with a state-of-the-art
always energy efficient and minimising effects on lighting management system, with solely LED
the environment. For all projects involving invest- lights being used.
ments, as well as maintenance, upgrade and ren-
ovation of buildings, environmental aspects are The approximately 100 MWh of electricity pro-
always observed alongside cost/benefit conside­ duced annually by the photovoltaic plant at the
rations. At 19,800 MWh, group-wide energy Rorschacherberg site is consumed by the company
consumption in 2019 was below the level of the itself. We also want to contribute to electromo­
previous year (21,600 MWh) and again the lowest bility. For example, employees currently have two
it has been for many years. charging stations for electric vehicles at their
disposal, with more to follow. In addition, we are
The ISO 50001-based certified energy manage- optimising the infrastructure of the buildings to
ment system applied at the Bielefeld, Chemnitz promote cycling and providing staff with attractive
and Mönchengladbach production sites is expec­ shower and changing facilities. At our German
ted to boost Starrag Group’s energy efficiency by sites of Bielefeld, Chemnitz and Mönchenglad-
tapping into unused energy efficiency potential, bach, we help employees to lease bicycles so that
lowering energy costs and reducing greenhouse they can travel to and from work in a way that is
gas emissions (including carbon emissions) and environmentally-friendly and healthy.
other environmental impacts. These efforts were
continued in the year under review, for example The company’s own paint shops use environmen-
with the replacement of existing lighting with en- tally-friendly water-soluble paints rather than sol-
ergy-efficient LED light sources both in the pro- vent-based paints wherever possible. Recyclable
duction halls and in the outdoor areas and office materials and waste such as oil, grease and
buildings. In addition, air-conditioned measuring chips are reused as part of a systematic recycling
rooms and measuring equipment rooms were process. In addition, splitting systems for cooling
fitted with insulation in order to prevent the input lubricants ensure that these materials are dis-
of heat and thus reduce the energy requirements posed of properly or returned to the system for
for air-conditioning. re-use.
62 Corporate Governance
––

Corporate Governance

__
63 Corporate structure and shareholders
66 Capital structure
68 Board of Directors
73 Executive Board
78 Compensation, shareholdings and loans
79 Shareholders' participation rights
80 Changes of control and defence measures
80 Auditors
81 Information policy
 Starrag Group Annual Report 2019 63
––

Corporate structure and shareholders

Management organisation

Board of Directors
Walter Fust, Chairman
Michael Hauser, Vice-Chairman
Prof. Dr. Christian Belz
Dr. Erich Bohli
Adrian Stürm

CEO
Dr. Christian Walti

Sales
Dr. Christian Walti a.i.
(As of April 2020: Alexander Attenberger)
Aerospace and Turbines / Industrial and Transportation / Luxury Goods and Med Tech / Regional Sales

High Performance Horizontal Machining Large Parts Machining Ultra Precision

Systems Systems Systems Machining Centers
Dr. Bernhard Bringmann Dr. Stefan Breu Dr. Marcus Queins Jean-Daniel Isoz
   
Product ranges: Product ranges: Product ranges: Product ranges:
 Ecospeed  Heckert  Berthiez  Bumotec
 Starrag  Scharmann/Ecoforce  Dörries  SIP
 WMW  Droop+Rein

Customer Service
Günther Eller

Group Operations
Dr. Stefan Breu
Supply Chain Management / Strategic procurement / Manufacturing / Subassemblies

CFO/Corporate Center
Gerold Brütsch
64 Corporate Governance
––

Participation structure

Starrag Group Holding AG

Rorschacherberg / CH

Starrag AG
Rorschacherberg / CH
Starrag GmbH
Chemnitz / DE
Starrag Group Holding GmbH Starrag S.A.S.
Chemnitz / DE Saint-Etienne / FR
Starrag Technology GmbH
Mönchengladbach  / DE
Starrag India Private Limited Starrag Service Center
Bangalore / IN GmbH & Co. KG
Ichtershausen / DE
Starrag Vuadens SA
Vuadens / CH FIRMUS Grundstücks-Vermietungs-
gesellschaft GmbH & Co. KG
Starrag USA Inc. Mönchengladbach / DE
Hebron / USA
Starrag UK Ltd.
Scharmann GmbH
Birmingham / UK
Starrag Group Holdings Ltd. Mönchengladbach / DE
Birmingham / UK
Toolroom Technology Ltd.
Haddenham / UK
Starrag (Shanghai) Co. Ltd.
Shanghai / PRC

Starrag Makina Ticaret

ve Servis Ltd.
Ankara  /  TR

Starrag RU Ltd.
Moskau / RU

Starrag Italia Srl

Rivoli / IT

Starrag Mexico, S. de R.L. de C.V.

San Pedro Garcia / MX

Details of share capital and the equity interest held are given in the consolidated financial statements on page 123 of this annual report.
 Starrag Group Annual Report 2019 65
––

The registered shares of Starrag Group Holding In earlier financial years, the following current
AG (hereafter referred to as the “company”) disclosure notifications were made in accordance
are traded at the SIX Swiss Exchange (securities with Art. 20 of the Swiss Federal Act on Stock
number 236106, ISIN CH0002361068, ticker Exchanges and Securities Trading:
STGN). The market capitalisation on 31 December
2019 was CHF 155.2 million.   29/09/2011: Max Rössler, Hergiswil /
Parmino Holding AG, Goldach, Switzerland, 5.25%
Shareholders   04/05/2011: Eduard Stürm AG, Goldach,
There were 1,003 shareholders registered in the Switzerland, 9.73%
company's share register on 31 December 2019,   04/05/2011: Walter Fust, Freienbach,
who held the following numbers of shares: Switzerland, 54.88%

More than 100,000 shares  3 shareholders Further information about the respective disclo-
10,001 to 100,000 shares  13 shareholders sure notifications is published on the website of
1,001 to 10,000 shares  96 shareholders the Disclosure Office of the SIX Swiss Exchange
1 to 1,000 shares  891 shareholders https://www.six-exchange-regulation.com/de/
home/publications/significant-shareholders.html
140,960 shares or 4.2% were not registered
in the share register on 31 December 2019 The company is not aware of any agreements
(cleared shares). between shareholders.

Significant shareholders with more than 3 Cross-Shareholdings

percent of voting rights are known to the There are no cross-shareholdings.
company as follows:

  Walter Fust, Freienbach, Switzerland

1,854,703 shares, 55.20%
  Eduard Stürm AG, Goldach, Switzerland
311,079 shares, 9.26%
  Max Rössler, Hergiswil / Parmino Holding AG,
Goldach, Switzerland, 268,200 shares, 7.98%

No disclosure notifications were made during the

2019 financial year in accordance with Art. 20 of
the Swiss Federal Act on Stock Exchanges and
Securities Trading.
66 Corporate Governance
––

Capital Structure
Ordinary Share Capital Shares
The company's issued share capital amounts Shareholder rights of membership are stipulated
to CHF 28,560,000 and is split into 3,360,000 in the Swiss Code of Obligations as well as in the
fully paid-in registered shares with a nominal company's Articles of Association. Each regis-
value of CHF 8.50 each. tered share with a nominal value of CHF 8.50 has
one vote at the Annual General Meeting. The right
Authorised Share Capital to vote can only be exercised if the shareholder
There is no authorised capital. is registered in the company's share register as
a shareholder with voting rights. Distribution of
Conditional Share Capital profit can be decided upon within the framework
The company has no outstanding conditional of the law by the General Meeting and can be
share capital. carried out in proportion to the equity investment.
The company's Articles of Association are pub-
Changes in Capital lished on www.starrag.com (click on Articles of
In the last three years under report, the share Association under Investors) and can be obtained
capital of Starrag Group Holding AG has not from the company at any time.
changed.
Participation and Profit Sharing
Certificates
The company has not issued any participation
or profit sharing certificates.
 Starrag Group Annual Report 2019 67
––

Limitations on Transferability
and Nominee Registration
In general, there are no limitations to the transfer
of shares. The registration of shareholders with
voting rights or beneficiaries in the share register
can be denied due to the following reasons:

  if the purchaser does not, at the company’s re-

quest, explicitly confirm that they have acquired
and are holding the shares on their own behalf,
in their own interests and for their own account;

  if and as long as the recognition of the purchaser

may, based on the available information, prevent
the company from complying with Swiss law
requiring proof of Swiss control of the company.

Nominees who are subject to recognised banking

and financial market supervision areenteredin the
share register with voting rights for shares they
acquire on behalf of third parties without limitation.
If a nominee acquires more than 3% of the out-
standing share capital, they must disclose the
names, addresses, nationality and shareholdings
of all persons for whose account they hold 0.5 %
or more of the outstanding share capital prior to
registration.

Convertible Bonds and Options

There are no outstanding convertible bonds or
issued option rights.
68 Corporate Governance
––

Board of Directors
Walter Fust (1941, Swiss) has been a member Zurich (ETHZ). He has never held an executive
of the Board of Directors of Starrag Group Holding position in the Starrag Group and he does not
AG since 1988 and Chairman since April 2019 have any significant business relationships with
(Chairman from 1992 until 2015). the Group.

From 1997 to 2009 he was a member of the Board Prof. em. Dr. Christian Belz (1953, Swiss) has
of Directors of Jelmoli Holding AG (Chairman until been a member of the Board of Directors of
2007), in which he held a majority shareholding Starrag Group Holding AG since 2008.
from 1996 to 2003. He had previously sold the
company Dipl. Ing. Fust AG listed on the stock From 1989 to 2018 he was a full professor of
exchange in 1987 to Jelmoli Holding AG in 1994. Business Administration with special consideration
Dipl. Ing. Fust AG was sold in 2007 by Jelmoli of Marketing at the University of St. Gallen. From
Holding AG to the Coop Group. Walter Fust has 1992 to 2018 he was Director of the Institute for
been a member of the Board of Directors of Tornos Marketing at the University of St. Gallen. He has
Holding AG in Moutier, Switzerland since 2014. never held an executive position in the Starrag
Mr. Walter Fust holds a degree in engineering Group and he does not have any significant busi-
from the Swiss Federal Institute of Technology in ness relationships with the Group.

From left to right: Prof. em. Dr. Christian Belz, Adrian Stürm, Michael Hauser, Walter Fust, Dr. Erich Bohli
 Starrag Group Annual Report 2019 69
––

Dr. Erich Bohli (1950, Swiss) has been a member Technology Group based in Biel, Switzerland.
of the Board of Directors of Starrag Group Holding He also serves at the European Association of the
AG since April 2017. Machine Tool Industries CECIMO as Delegate
(2015 – present), as Board Member (2012– 2017)
After completing his degree in business manage- and Chairman (2009 –2010). He is a member of
ment (1977) and his doctorate (1980) at the Uni- the Board of Directors of the Swiss Association
versity of Zurich, Erich Bohli held various positions of Mechanical, Metal and Electrical Engineering
at Unilever (Switzerland), including Internal Auditor, Industries SWISSMEM, where he has headed the
General Secretary, PR Manager and Marketing Machine Tools division since 2005. Michael Haus-
Manager for several international brands. He then er holds a degree in business administration from
worked as an independent turnaround manager, the University of Mannheim. He has never held an
a profession he pursued for the next 15 years. executive management position with the Starrag
During this time, he managed various companies, Group and he does not have any significant busi-
some of which were international, in a variety of ness relationships with the Group.
fields including computer training/direct sales,
branded consumer goods, OTC pharmaceuticals, Adrian Stürm (1970, Swiss) has been a member
multimedia and e-commerce development. From of the Board of Directors of Starrag Group Holding
1999 to 2010, he served as CEO of Dipl. Ing. Fust AG since 2008.
AG and also served on the Boards of Directors
of AEG (Switzerland) AG, Swiss Dairy Food AG Since 2001, he has been active in Controlling,
and Service 7000 AG. Since then, he has been Operational Risk Control and Risk Management at
working in the area of business development and UBS Switzerland AG, and in the areas of Opera-
as an Internet entrepreneur. From 2010 to 2014, tional Risk Control and UBS WM Controlling since
Erich Bohli also graduated with a third degree in 2008 at UBS WM Investment Platforms & Solu-
cultural and literary studies at the University of tions. Prior to that he was an auditor with KPMG
Zurich, which he completed in 2014 with a Master Zurich and London from 1997 to 2000. He is
of Arts in Social Science. Chairman of the Board of Directors of the family-
owned company Eduard Stürm AG (Holding) and
Michael Hauser (1961, Swiss and German) has its subsidiaries Holz Stürm AG and Eduard Stürm
been a member of the Board of Directors of Immobilien AG, which are all based in Goldach,
Starrag Group Holding AG since 2018 and its Switzerland. He is also a member of the Board of
Vice-Chairman since May 2019. Directors at Holz Michel AG, Hasle, Switzerland.
Mr. Adrian Stürm holds a degree in Economics
Since 2011 he has been CEO of Tornos SA, based from the University of St. Gallen (lic. oec. HSG).
in Moutier, Switzerland and is also a member of He has never held an executive management
the Board of Directors of Schlatter Industries AG, position with the Starrag Group and he does not
based in Schlieren, Switzerland. From 2008 to have any significant business relationships with
2010, he was a member of the Executive Board the Group.
of Georg Fischer AG and headed its division
GF Agie Charmilles. From 2000 to 2008, he was
a member of the Executive Board of the Agie
Charmilles Group where he was responsible for
the Milling Division. From 1996 to 2000 he was
Chairman of the Milling Division of the Mikron
70 Corporate Governance
––

Maximum Number of Minutes are to be kept of the discussions, and are

Permissible Mandates to be signed by the Chairman and the minute-taker.
The members of the Board of Directors may not The minute-taker will be designated by the Board
hold more than ten mandates in other companies. of Directors. They do not need to be a member of
Of these, a maximum of five mandates may be the Board of Directors. A majority of the Board of
held in companies listed on the stock exchange. Directors must be present in order for resolutions
The following mandates are not subject to the to be validly adopted. No attendance quorum is
aforementioned limitations: required to determine the execution of a capital
increase and to resolve the subsequent amend-
1. Mandates in companies that are controlled ment of the Articles of Association. Resolutions
by the company; shall be passed by a simple majority of the votes
2. Mandates held at the request of the company cast. In the event of a tied vote, the Chairman,
or companies controlled by it; no member of who shall always cast a vote, shall have the casting
the Board of Directors or the Executive Board vote. Resolutions can also be passed in writing
shall hold more than ten such mandates; and by way of circular letter, provided no members re-
3. Mandates in associations, charitable foundations, quest a verbal discussion of the item in question.
staff welfare foundations and associations; These are to be included in the minutes.
no member of the Board of Directors or the
Executive Board may hold more than six such There are usually six Board meetings a year, each
mandates. lasting about five hours. Members of the Executive
Board will be called in to these meetings if and
Mandates are defined as mandates in the supreme when necessary. In the financial year 2019, eight
governing body of a legal entity that is required meetings of the Board of Directors took place,
to be registered in the Swiss Commercial Register with an average duration of five hours (two of
or a comparable foreign register. Mandates in which were held as a telephone conference). All
different legal entities that are under joint control members of the Board of Directors attended all
are deemed to be a single mandate. meetings.

Election and Term of Office The tasks and responsibilities of the Compensation
The members of the Board of Directors, the Chair- Committee are presented in the Compensation
man of the Board of the Directors, the members Report (page 82). The Board of Directors has not
of the Compensation Committee and the indepen­ established any other committees. At our mid-sized
dent proxies are elected annually at the Annual company, the respective tasks are performed
General Meeting of the Shareholders. There are by the Board of Directors as a whole. Moreover,
no restrictions on terms of office. the Executive Board regularly consults with the
Chairman of the Board of Directors and individual
Internal Organisation members on an informal basis regarding impor-
The Board of Directors shall constitute itself, tant aspects of specific topics.
unless otherwise provided by law. The Chairman
shall convene meetings of the Board of Directors
if and when the need arises or upon the written
request of any other member. Except in urgent
cases, callings for meetings are to be sent out five
days before the meeting, stating the items for
discussion.
 Starrag Group Annual Report 2019 71
––

Definition of Areas of Responsibility Risk Management

The Board of Directors has the overall responsibility As a leading global manufacturer of precision
for the management of the company as well as machine tools, the Starrag Group is faced with
the supervision of the executive management. various risks.
The Board of Directors has delegated most of the
executive management powers to the CEO. How- The most significant risks include:
ever, the Board of Directors remains responsible   the weakening of the economic environment in
for tasks that legally cannot be delegated and other customer markets as well as business cycles
important business. These include in particular could lead to a reduction in demand,
matters such as business strategy, approval of the   misjudgements of developments in customer
annual budget, decisions with regard to acquisi- markets or in the competitive environment could
tions and important personnel matters. lead to missed business opportunities or losses,
  failure in research and development as well as
Information and Control Instruments other innovation-based activities could prevent
Vis-à-Vis the Executive Board business potential from being realised,
Executive management control is exercised pri-   a lack of availability of financial resources could
marily through regular reporting by the Executive impair the performance and operations of the
Board to the Board of Directors, in particular by Starrag Group and
means of:   natural events (such as fires) could impair
operating activities.
  monthly and quarterly financial reports including
commentary on the corresponding key figures the Board of Directors and the Executive Board give
(incoming orders, sales revenues, margins, prof- high priority to the careful handling of strategic,
its, investments, liquidity, capital commitment); financial and operational risks. The Starrag Group
  regular information about market and business has a holistic risk management process which is
developments as well as important projects; analysed every year by the Executive Board and
  detailed information about market and business the Board of Directors.
developments at every Board meeting, which
are partially attended by the CEO and CFO and The following goals are pursued:
by other members of the Executive Board as   systematically identifying special risks,
required.   establishing processes to monitor, reduce
and ideally to prevent risks and
In addition, the Chairman of the Board of Directors   finding the right balance between risks and
discusses current developments with the CEO opportunities.
on a regular basis. Walter Fust and Adrian Stürm
also exercise further control functions as members The risk management system is based on a classic
of the Supervisory Board of Starrag Technology risk matrix involving the probability of occurrence
GmbH and Walter Fust as a member of the Board and possible extent of damage (identification and
of Directors of Starrag Vuadens SA. classification) and includes internal instructions
as well as a risk log, in which operational data as
well as action planning for risk management are
documented.
72 Corporate Governance
––

The Executive Board has appointed an officer Internal Auditing

to implement and moderate risk management, In accordance with the simplifications stated in
who reports directly to the CFO, as well as a the Swiss Code of Best Practice for Corporate
responsible member of the Executive Board for Governance, the Board of Directors has decided
each risk area. not to implement an internal audit.

In the annual risk review, the risks are carefully The codex implies corresponding simplifications
identified, analysed and evaluated, and appropriate for small and medium companies as well as for
measures are defined to reduce the risks. This companies with active majority shareholders.
information is documented in a comprehensive
group-wide risk matrix. The implementation of the
measures is monitored by the risk management
officer. In business processes with recurring risks,
the resolved measures are integrated as process
steps in the operative processes of the daily
business.

On an annual basis, the Executive Board reports

on the nature, extent and assessment of significant
risks and the measures taken for risk minimisation
to the Board of Directors. Risks in the area of
accounting and financial reporting are monitored
and reduced by a suitable internal control system.

Additional information on financial risk management

can be found on page 103.
 Starrag Group Annual Report 2019 73
––

Executive Board
Members of the Executive Board
The Board of Directors has appointed an Executive Board and has specified its powers
and responsibilities in organisational guidelines and an accompanying functional chart.

From left to right: Dr. Marcus Queins, Dr. Stefan Breu, Gerold Brütsch, Dr. Christina Walti, Dr. Bernhard Bringmann, Jean-Daniel Isoz, Günther Eller
74 Corporate Governance
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Dr. Christian Walti (1967, Swiss) has been CEO Gerold Brütsch (1966, Swiss) has been Chief
of the Starrag Group since June 2018 CEO and Financial Officer (CFO) since 2000, and since
interim Head of Sales since July 2019 (up to June 2005 Deputy CEO and Head of the Corporate
2019 Head of Regional Sales). Centre of the Starrag Group.

From 2012 to 2018 he was the Managing Gerold Brutsch previously served as Chief Financial
Director of Bosch Packaging Systems in Beringen, Officer of the international machine manufacturing
Switzerland. He was additionally responsible for company Müller Martini Buchbinde-Systeme AG
the Horizontal Packaging Systems Food from and as an auditor with KPMG in Zurich and San
2017, a unit with five international production Francisco.
sites. From 2005 to 2011, as a shareholder and
member of the Board of Directors of Faes Finanz Gerold Brutsch is a graduate of the University
AG (Holding), he held the position of delegate of Applied Sciences in St. Gallen and earned his
of the Board of Directors and CEO of Faes AG in degree as a Business Economist (FH) in 1990.
Wollerau, Switzerland. He previously worked for He is a graduate auditor and U.S. Certified Public
Capgemini Consulting AG and ABB Switzerland AG. Accountant.

Christian Walti completed his studies in Business

Administration at the University of St. Gallen (HSG)
with a doctorate.
 Starrag Group Annual Report 2019 75
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Alexander Attenberger (1977, German) will be Dr. Stefan Breu (1964, Swiss) has been Director of
responsible for the Sales division of the Starrag Group Operations of the Starrag Group and interim
Group from 1 April 2020. Head of the business unit Horizontal Machining
Systems (product areas Heckert, Scharmann,
He previously worked for the German Grob Group WMW) since July 2019.
since 2013, first as a Head of Department and
then as Division Manager of Sales of universal He previously held various management positions
machines. From 2010 to 2012, he was the Exe­ at Bosch Packaging Systems, Beringen/Switzerland
cutive Vice President of Sales Industrial Equipment (previously SIG Division SIGpack), most recently as
at MAG IAS. Between 2007 and 2010, he worked General Manager, between 2017 and 2019. From
for Deckel Maho Pfronten, first as the Head of 2015 to 2016 he was employed as COO of the
Back Office Sales, then as Sales Director for hori- Schleuniger Group and between 2008 and 2014
zontal machining centres. From 2003 to 2007, he Head of Global Production and Supply Chain of
was the Product Sales Manager Milling at DMG the SIG Combibloc Group. Further stages in his
München Vertriebs und Service GmbH. career included management positions at SIKA in
China and ATEL, most recently as Director of group-
Alexander Attenberger is a Precision Engineering wide operations and member of the Executive
Master and an HWK (Chamber of Crafts) Business Board.
Economist.
Stefan Breu completed his studies as an MSc.
Engineer at the ETH Zurich and as a Dr. of Econo­
mics (Dr. oec. HSG) at the University of St. Gallen.
He also graduated from an International Executive
Program at INSEAD Fontainebleau and the Stanford
Executive Program at Stanford University, USA.
76 Corporate Governance
––

Dr. Bernhard Bringmann (1977, Swiss and Günther Eller (1960, German) has been head of
German) has been Head of the business unit High Customer Service at the Starrag Group since 2007.
Performance Systems (product areas Starrag,
Ecospeed, TTL) since July 2019. From 1986, he previously held various manage-
ment positions at OC Oerlikon in Sales and
From 2015, he was previously Head of the Starrag Customer Service, 2001 to 2006 as Head of the
plant in Rorschach as part of the former business business unit Customer Service in the Data
unit Aerospace & Energy in Rorschach and bore Storage Division, 1995 to 2001 as Managing
overall responsibility for the market segments Aero Director of a sales and service company for the
Engine and Power Turbine as well as central func- investment business and prior to this various
tions in the segment Aero Structure. In 2014, he management positions in the areas of Sales and
was Head of the former business unit 1 and thus Key Account Management.
responsible for the brands Starrag and the tech-
nology subsidiary TTL, UK. Bernhard Bringmann Gunther Eller holds an M.Sc. in Engineering Physics.
has previously held various management positions
in the areas of Development, Innovation and Tech-
nology since joining Starrag in 2008.

Bernhard Bringmann holds a Dr. of Science (Dr. Sc.)

from the ETH Zurich and has a Master of Science
in Mechanical Engineering from the Rensselaer
Polytechnic Institute in Troy/USA.
 Starrag Group Annual Report 2019 77
––

Jean-Daniel Isoz (1959, Swiss) has been Head Dr. Marcus Queins (1969, German) has been
of the business unit Precision Machining Centres Head of the business unit Large Parts Machining
(product areas Bumotec, SIP) since July 2019. Systems (product areas Berthiez, Dörries,
Droop+Rein) since July 2019.
From 2015, he was previously Head of the former
business unit Precision Engineering with overall Since 2005, he has been working for Starrag in
responsibility for the market segments Luxury Mönchengladbach, since 2008 in the role of Head
Goods, Micromechanics and Med Tech. Prior to of Technology (product areas Dörries, Scharmann,
this, he was responsible for the former business Ecospeed, Droop+Rein). He was previously em-
unit 4 (Bumotec, SIP) from 2013. He was previ- ployed at the Laboratory for Machine Tools and
ously Sales Manager between 2000 and 2002 and Business Administration at the RWTH Aachen
from 2006 Managing Director of SIP. Further stages as an academic assistant, where he was most
included various management positions at Bobst recently responsible between 2003 and 2005 for
SA and Bula Machines SA. the research area of Mechanical Engineering.

Mr. Isoz holds a M.Sc. HTL in Electrical Engineering Marcus Queins completed his Mechanical Engi-
and completed additional training programmes in neering studies at the RWTH Aachen in In-Depth
Finance and Marketing at INSEAD, France. Construction Technology as a Doctor of Engineering
Sciences (Dr.-Ing.).
78 Corporate Governance
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Maximum Number of or a comparable foreign register. Mandates in

Permissible Mandates different legal entities that are under joint control
The members of the Executive Board may not hold are deemed to be a single mandate.
more than three mandates in other companies.
Acceptance of mandates/appointments outside
The following mandates are not subject to the the Starrag Group by members of the Executive
aforementioned limitations: Board requires prior approval by the Board of
Directors.
1. Mandates in companies that are controlled
by the company; Management Contracts
2. Mandates held at the request of the company There are no management contracts with
or companies controlled by it; no member of com­panies outside the Starrag Group.
the Board of Directors or the Executive Board
may hold more than ten such mandates; and
3. Mandates in associations, charitable foundations,
staff welfare foundations and associations;
no member of the Board of Directors or the
Executive Board may hold more than six such
mandates.

Mandates are defined as mandates in the supreme

governing body of a legal entity that is required
to be registered in the Swiss Commercial Register

Compensation, Shareholdings
And Loans
Information on compensation and loans are speci-
fied in the Compensation Report (page 85) and
information regarding participation can be found in
the Notes to the Financial Statement (page 124).
 Starrag Group Annual Report 2019 79
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Shareholders' Participation Rights

Shareholders of Swiss stock corporations have the agenda items to be discussed and the propos-
extensive participation and protective rights. The als to be voted on.
protective rights include the right to inspection
and information, the right to a special audit, the Additions to the Agenda
right to convene a General Meeting, the right to The notice convening a General Meeting shall state
add topics to the agenda, the right to challenge the agenda items and the motions of the Board of
resolutions and the right to raise claims regarding Directors as well as any proposals by shareholders
responsibility. who have duly requested that a General Meeting
be called or that an item be included in the agenda.
The participation rights include, in particular, the Shareholders representing at least 1% of the share
right to participate in General Meetings, the right capital can request the addition to the agenda of
to express opinions and the right to vote. an item to be discussed. Such inclusion must be
requested in writing at least 40 days prior to the
Voting Rights Restrictions next scheduled General Meeting, specifying the
and Representation agenda items to be discussed and shareholder
There are no restrictions on the voting right for all proposals to be voted on.
shareholders whose right to vote is registered in
the share register. Every shareholder is entitled to Registrations in the Share Register
be represented at the General Meeting by another The Board of Directors keeps a share register
shareholder who is authorised to do so in writing, in which the shareholders and beneficiaries are
by their legal representative or by the independent entered with their names and addresses. With
voting representative. respect to the company, shareholders and bene­
ficiaries are only recognised as such if they are
The Board of Directors determines the require- registered in the share register. Any entry requires
ments for proxy and the instructions given to the the approval of the Board of Directors, a committee
independent voting representative. determined by the Board of Directors or a single
person determined by the Board of Directors. The
Statutory Quorum Board of Directors may request from the applicant
There is no statutory quorum. all information necessary for the assessment of
the registration request that appears to be relevant
Convening of the to the request. The entry in the share register of a
Annual General Meeting shareholder with the right to vote or a beneficiary
There are no statutory regulations regarding the can be denied for the following reasons:
convening of General Meetings that deviate from
the law. A notice convening a General Meeting   if the acquirer does not, at the company’s re-
must be sent in writing to shareholders at least quest, explicitly confirm that they have acquired
20 days before the scheduled date of the General and are holding the shares on their own behalf,
Meeting. in their own interests and for their own account;
  if and as long as the recognition of the acquirer
Extraordinary General Meetings are to be called may, based on the available information, prevent
upon resolution of a General Meeting of share- the company from complying with Swiss law
holders or the Board of Directors, or at the request requiring proof of Swiss control of the company.
of the auditors, or if shareholders representing at
least 3 percent of the share capital request in writ-
ing that a General Meeting be called, specifying
80 Corporate Governance
––

Acquirers who are not yet recognised by the com- The key date for the registration of registered
pany are to be registered in the share register as shareholders in the share register with regard to
shareholders without voting rights after the transfer attendance of the General Meeting will be set
of rights. The corresponding shares are deemed on a date shortly before expiry of the statutory
not to be represented at the General Meeting. period on the convention of the General Meeting.

After hearing the person in question, the Board

of Directors can delete registrations in the share
register if these have resulted from invalid infor-
mation by the acquirer. The acquirer has to be
informed immediately of this deletion.

Changes in Control and Defence Measures

Obligation to Make an Offer Clauses on Changes in Control
There are no statutory regulations regarding There are no clauses on changes in control.
“opting out” and “opting-up” which differ
from law.

Auditors
Duration of the Mandate and Term Additional Fees
of Office of the Auditor in Charge No additional fees were paid to Pricewaterhouse-
PricewaterhouseCoopers AG, St. Gallen, has been Coopers AG in the financial year 2019.
the statutory and consolidated financial statement
auditor since 1981. They are elected for a term Supervisory and Control Instruments
of office of one year by the General Meeting. The Pertaining to the Auditors
current term of office expires at the Annual General The external audit is supervised by the Board of
Meeting in 2020. The auditor in charge, Oliver Directors. The Board of Directors assesses the
Kuntze, was first assigned the auditing mandate audit plan, the audit scope, the audit and the results
with the auditing of the 2019 financial statement. of the audit. The auditors report significant findings
The rotation rhythm of the leading auditor corre- directly to the Board of Directors. In the reporting
sponds to the maximum duration of seven years year, the auditor in charge attended two meetings
legally applicable for Swiss companies. of the Board of Directors. At these meetings,
the audit plan, scope, and results of the audit, as
Audit Fees well as other important aspects of auditing were
Audit fees paid to PricewaterhouseCoopers AG discussed.
during the 2019 financial year and charged to
the consolidated financial statement amounted
to CHF 269,000.
 Starrag Group Annual Report 2019 81
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Information Policy
The company informs its shareholders and the capital  29/01/2021
market in an open and timely fashion and with the Sales and order situation 2020
highest possible levels of transparency. The most
important information tools are the Annual and  05/03/2021
Half-Year Reports, the www.starrag.com website, Annual Report 2020, Analysts and
media releases, balance sheet presentations for Media Conference in Zurich
the media and analysts and the Annual General
Meeting.  23/04/2021
Annual General Meeting in Rorschach
As a company listed on the stock exchange,
the Starrag Group Holding AG is required to dis- The information mentioned will be published on
close information relevant to the share price in our website www.starrag.com as far as possible.
accordance with the ad hoc publicity guidelines
of the listing regulations of the SIX Swiss stock Official announcements and invitations will be
exchange. Any interested party can register at sent by post to shareholders using the addresses
www.starrag.com (click on E-mail distribution under recorded in the share register. Public announce-
Investors) to receive potential information relevant ments prescribed by law are made by publication
to the share price directly from the company via in the Swiss Official Gazette of Commerce.
the e-mail distribution list. This information is also
available on the website (www.starrag.com, click
on Media releases under Investors) and can be
provided to any interested parties upon request.

Important Data: Contacts:

 25/04/2020 Gerold Brütsch, CFO

Annual General Meeting in Rorschach
T +41 71 858 81 11
 23/07/2020 investor@starrag.com
Half-Year Report 2020
82 Compensation Report
––

Compensation Report

__
83 Introduction
83 Compensation Policy and Principles
83 Responsibilities in Determining Compensation
85 Compensation Elements
86 Compensation
87 Notes Regarding Compensation
87 Loans and Credits
88 Report of the Statutory Auditor
 Starrag Group Annual Report 2019 83
––

Compensation report
Introduction Responsibilities in
This Compensation Report contains information Determining Compensation
on the compensation of the members of the The responsibilities in determining the compensa-
Board of Directors and the Executive Board. The tion are regulated on the basis of the Ordinance
report was prepared in accordance with the Ordi- against Excessive Compensation with respect to
nance against Excessive Compensation with Listed Stock Corporations (OaEC) in the Articles
respect to Listed Stock Corporations (OaEC). Fur- of Association and Organisational Regulations of
thermore, the report is consistent with the Swiss Starrag Group Holding AG.
Code of Best Practice for Corporate Governance
of the Swiss Business Federation economiesuisse General Meeting
and Chapter 5 of the Appendix to the SIX Exchange The General Meeting has the non-transferable
Regulation Corporate Governance Directive. power to:
 elect and dismiss members of the Compen­
The information included under the headings sation Committee;
“Remunerations” and “Loans and Credits” was  approve the compensation of the Board of
audited by the statutory auditors. Directors and the Executive Board
 determine the statutory principles governing
Compensation Policy and Principles the performance-related compensation of the
The Starrag Group ensures comprehensive trans- members of the Board of Directors and the
parency regarding the compensation of members Executive Board, as well as other provisions
of the Board of Directors and the Executive Board. of the Articles of Association in accordance with
Within the Starrag Group, compensation is based the Ordinance against Excessive Compensation
on the principles of value-based management with with respect to Listed Stock Corporations.
the aim of guaranteeing that management com-
pensation is in line with market conditions and thus Each year, the ordinary General Meeting approves
ensuring that qualified executives can be recruited the maximum total compensation of the Board
and remain with the company in the long-term. of Directors for the period until the next ordinary
Compensation policy also promotes entrepreneurial General Meeting and the maximum total compen-
thinking and approaches and aligns the interests sation of the Executive Board for the financial year
of executive bodies with those of the shareholders. following the General Meeting.

The compensation of the members of the Board In addition, the General Meeting approves the
of Directors and the Executive Board is determined Compensation Report retrospectively in a non-
on the basis of individual tasks and performance, binding consultative vote.
the course of business of the company, market
conditions in the respective global sales and local
labour market as well as salary comparisons with
regard to the function, business activity, size and
internationality of employers with similar positions.
These criteria are applied individually for each
member of the Executive Board at their due dis-
cretion.
84 Compensation Report
––

Board of Directors  preparing all relevant decisions of the Board

Subject to the powers of the General Meeting, the of Directors relating to the compensation of the
Board of Directors is responsible, at the request members of the Board of Directors and the
of the Compensation Committee, for determining Executive Board, and submitting proposals to
the compensation that is to be paid to the members the Board of Directors concerning the nature
of the Board of Directors and the members of the and amount of the annual compensation of the
Executive Board. In particular, at the request of the members of the Board of Directors and the
Compensation Committee it has the following Executive Board, and preparing a proposal for
tasks and responsibilities: the maximum total amount of compensation.
 defining the compensation system for the
members of the Board of Directors and the During the 2019 financial year, the Compensation
Executive Board in accordance with the Articles Committee held two meetings at which all mem-
of Association; bers were present as well as numerous informal
 reviewing the fixed compensation of the mem- consultations in the fulfilment of its statutory duties.
bers of the Board of Directors and the Executive In the previous year, the Compensation Committee
Board and determining the same, within the developed and introduced a new system for the
framework of the total compensation approved variable salary component of the Executive Board
by the General Meeting; members valid for the period from 2018 to 2020,
 determining any additional compensation for the with the aim of focusing even more consistently
members of the Board of Directors for special on growth and increasing the profitability of the
tasks and bonuses for extra services within the units and the Group.
framework of the total compensation approved
by the General Meeting; The Board of Directors and the Compensation
 determining variable profit-sharing plans for Committee can engage external experts on com-
the members of the Board of Directors and the pensation issues to obtain neutral advice and/or
Executive Board in accordance with the Articles data as a basis for comparison of compensation
of Association and within the framework of total levels. The Board of Directors and the Compen­
compensation approved by the General Meeting; sation Committee performed their duties during
 preparing the Compensation Report. the past year without the involvement of external
consultants.
Compensation Committee
The Compensation Committee shall have the
following tasks and responsibilities (fundamental
principles):
 drafting and periodic review of the compensation
policy and principles of the Starrag Group and
periodic review of the implementation thereof,
and submission of proposals and recommenda-
tions to the Board of Directors;
 Starrag Group Annual Report 2019 85
––

Compensation Elements Executive Board

Board of Directors The members of the Executive Board receive
The members of the Board of Directors each fixed compensation and variable profit-sharing
receive fixed compensation and variable profit- compensation. The Board of Directors may
based compensation. The Board of Directors resolve special bonuses for exceptional per­
may grant additional compensation to individual formance.
members for extra duties (serving on committees,
etc.). The Board of Directors determines the variable
profit-sharing compensation of the Executive
In the financial years 2018 to 2020, the net profit Board members based on individual performance
is the basis of assessment for variable profit-sharing metrics pertaining to the areas of operation for
compensation for the members of the Board of which they are responsible and/or to collective
Directors, reduced by an advance interest on equity performance metrics pertaining to the consolidated
capital depending on the development of interest results.
rates. The amount of the advance interest and
the shares of the individual members of the Board In the financial years 2018 to 2020, the basis of
of Directors in the basis of assessment as well assessment for the variable profit-sharing com-
as the other details (payout terms and date, any pensation of members of the Executive Board
limitation on the variable profit sharing, etc.) are was calculated on the basis of the operating result
determined by the Board of Directors. If net profit EBIT minus minimum expected results. Group
falls below the defined amount of advance interest, operating result EBIT was one measure of perfor-
no variable profit-sharing compensation will be mance. For the business unit managers, a second
paid. Variable profit-sharing compensation for the measure based on the operating result EBIT of
members of the Board of Directors is capped at their particular area of responsibility was applied.
CHF 125,000 per member. In the average expected result distribution, this
second component accounts for around two-thirds
The fixed compensation is paid monthly in cash. of the total variable compensation for the heads
The variable profit-sharing compensation is paid of the business units, while the percentage of
annually in cash after the consolidated financial their compensation based on the Group result
statement has been approved by the General amounts to approximately one-third. If the opera­
Meeting. The company does not have any share ting result EBIT falls below the specified minimum
participation plans. threshold, no variable compensation will be paid.
The variable profit-sharing compensation for the
The members of the Board of Directors are not members of the Executive Board is limited to
insured through pension plans or comparable 150% of the fixed compensation.
schemes of the company or Group companies.
Members of the Board of Directors are not The fixed compensation is paid monthly in cash.
entitled to severance pay or other benefits upon The variable profit-sharing compensation is paid
separation of service. annually in cash after the consolidated financial
statement has been approved by the General
Meeting. The company does not have any share
participation plans. Pension benefits are only paid
to members of the Executive Board within the
framework of domestic and foreign pension plans
and comparable plans of the company or Group
companies. The benefits to insured parties and
the employer's plan contributions are defined in
the aforementioned plans or the corresponding
plan regulations.
86 Compensation Report
––

An additional amount of compensation as defined Company loans and credits to a member of the
in Art. 19 of the OaEC equivalent to 40% of the Executive Board and any guarantees or other
approved total amount of compensation of the Ex- collateral offered to secure the obligations of an
ecutive Board is available for members appointed Executive Board member may not exceed three
to the Executive Board after the maximum total times the annual salary of the respective member
amount is approved. Compensation may be paid of the Executive Board.
by the company or the corresponding Group com-
pany for services rendered at companies that are Members of the Executive Board are not entitled
directly or indirectly controlled by the company. to severance pay or other benefits upon separation
Such compensation must be consolidated at Group of service.
level and included in the votes on compensation
at the General Meeting.

Remuneration
CHF 1'000 2019 2018

Additional Pension Additional Pension

Fixed services Variable and other Total Fixed services Variable and other Total

Prof. em. Dr. Christian Belz 50 - 7 3 60 50 - 12 4 66

Dr. Erich Bohli 50 7 7 3 67 50 4 12 4 70
Prof. Dr. Frank Brinken
- - - - - 17 4 4 1 26
(until 28.4.2018)
Daniel Frutig
37 - 2 3 42 110 60 12 13 195
(until 26.4.2019, Chairman)
Walter Fust (Chairman from
70 29 7 4 110 50 63 12 6 131
26.4.2019, previously member)
Michael Hauser (from 28.4.2018) 50 7 4 61 33 - 8 4 45
Adrian Stürm 50 12 7 4 73 50 13 12 5 80
Total Board of Directors 307 48 37 21 413 360 144 72 37 613
Variable as percentage of total
9% 13%
compensation

Total Executive Board 1'703 - 1'445 429 3'577 1'878 - 1'215 390 3'483
Variable as percentage of total
46% 39%
compensation
Thereof:
 Dr. Christian Walti, CEO 387 - 477 110 974 n/a
 J ean-Daniel Isoz, Head Business
n/a 240 - 349 83 672
Unit Precision Engineering
Variable as percentage of total
55% 59%
compensation

Compensation is reported on a gross basis (including employee contributions to pension plans and social insurance schemes)
The reported contributions to pension plans and social insurance schemes include the employer’s contributions.
 Starrag Group Annual Report 2019 87
––

Notes Regarding Compensation The variable compensation paid to the Executive

Compensation for additional duties performed by Board was higher in 2019 than in the previous
members of the Board of Directors is owed in year, as higher variable compensation was due
connection with the service of Walter Fust and as a result of considerable improved results in
Adrian Stürm on the Supervisory Board of Starrag individual units.
Technology GmbH in Mönchengladbach, the
service of Walter Fust and Prof. Dr. Frank Brinken All compensation was assigned to the appropriate
(until 28/4/2018) on the Board of Directors of period in accordance with the Swiss GAAP FER
Starrag Vuadens SA and the work of the Compen- accounting and reporting recommendations
sation Committee. In 2018, compensation for (accrual basis).
additional services provided by members of the
Board of Directors in connection with the recruit- Loans and Credits
ment of a new CEO also accrued. The variable In the year under review, as well as in previous
compensation paid to members of the Board of years, the Starrag Group granted no loans or cred-
Directors in 2019 was lower as net profit for the its to current or former members of the Board of
year was lower. Directors or the Executive Board. Neither did the
Starrag Group provide compensation or any loans
The fixed compensation paid to members of the or credit to any related parties of current or former
Executive Board in 2019 was lower, as higher members of the Board of Directors or the Execu-
fixed compensation accrued due to the change tive Board at non-market rates or conditions.
of CEO in 2018 (Christian Walti joined on June 1,
2018 while Walter Borsch stepped down at the
same time, but continued to receive compensation
during the transition period up to 30 September
2018). On the other hand, there was also a slight
temporary decline due to the changes implemented
in the Executive Board.
88 Compensation Report
––

Report of the statutory auditor

Report of the statutory auditor

to the General Meeting of Starrag Group Holding AG
Rorschacherberg

We have audited the remuneration report of Starrag Group Holding AG for the year ended 31 December 2019. The audit
was limited to the information according to articles 14–16 of the Ordinance against Excessive Compensation in Stock Ex-
change Listed Companies (Ordinance) contained on page 86 (table) and page 87 of the remuneration report.

Board of Directors’ responsibility

The Board of Directors is responsible for the preparation and overall fair presentation of the remuneration report in accord-
ance with Swiss law and the Ordinance against Excessive Compensation in Stock Exchange Listed Companies (Ordi-
nance). The Board of Directors is also responsible for designing the remuneration system and defining individual remunera-
tion packages.

Auditor’s responsibility
Our responsibility is to express an opinion on the accompanying remuneration report. We conducted our audit in accordance
with Swiss Auditing Standards. Those standards require that we comply with ethical requirements and plan and perform the
audit to obtain reasonable assurance about whether the remuneration report complies with Swiss law and articles 14–16 of
the Ordinance.

An audit involves performing procedures to obtain audit evidence on the disclosures made in the remuneration report with
regard to compensation, loans and credits in accordance with articles 14–16 of the Ordinance. The procedures selected
depend on the auditor’s judgment, including the assessment of the risks of material misstatements in the remuneration re-
port, whether due to fraud or error. This audit also includes evaluating the reasonableness of the methods applied to value
components of remuneration, as well as assessing the overall presentation of the remuneration report.

PricewaterhouseCoopers AG, Vadianstrasse 25a/Neumarkt 5, Postfach, CH-9001 St. Gallen, Switzerland

Telefon: +41 58 792 72 00, Telefax: +41 58 792 72 10, www.pwc.ch

PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
 Starrag Group Annual Report 2019 89
––

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion
In our opinion, the remuneration report of Starrag Group Holding AG for the year ended 31 December 2019 complies with
Swiss law and articles 14–16 of the Ordinance.

PricewaterhouseCoopers AG

Oliver Kuntze Oscar Maier

Audit expert Audit expert
Auditor in charge

St. Gallen, 4 March 2020

90 Financial Report
––

Financial Report

__
91 Financial Commentary
__
97 Consolidated Financial Statement
97 Consolidated Income Statement
98 Consolidated Balance Sheet
99 Consolidated Cash Flow Statement
100 Consolidated Equity Statement
101 Notes to the Consolidated Financial Statement
116 Report of the Statutory Auditor on the Consolidated Financial Statement
__
120 Financial Statement
120 Income Statement
121 Balance Sheet
122 Other Notes
125 Appropriation of Profits
126 Report of the Statutory Auditor on the Financial Statement
__
130 Multi-Year Overview
 Starrag Group Annual Report 2019 91
––

Financial commentary
As expected, lower order intake and higher sales, while EBIT
margin lower – order backlog still solid

 Order intake down 26% to CHF 343 million  Net income CHF 6.9 million – earnings
(down 24% at constant exchange rates) per share CHF 2.02

 Sales up 8% to CHF 418 million  Solid balance sheet with 53% equity ratio
(up 9% at constant exchange rates)
 Profit distribution of CHF 1.00 CHF per share,
 Solid order backlog of CHF 284 million payout ratio of 49% – i.e. at the upper end of
the targeted range
 Operating result before restructuring costs:
EBITR up 8% to CHF 14 million, EBITR margin  Initial effects of “Starrag 2021” programme
3.4%, EBIT margin 1.1%% can be seen

CHF m 2019 2018 Change

Order intake 343.2 461.0 -25.6%

Order backlog end of the year 284.3 365.9 -22.3%

Sales revenue 418.1 388.8 7.6%

Operating result EBIT 4.8 11.1 -56.8%
Net income 6.9 8.4 -18.2%
EBIT as percentage of sales revenue 1.1% 2.9% n/a

Cash flow from operating activities 10.5 26.9 -61.0%

Capital expenditure in non-current assets 5.1 7.1 -30.8%
Free cash flow 8.3 19.7 -57.7%

Employees (full-time equivalents, annual average) 1'514 1'516 -0.1%

Total assets 334.6 369.7 -9.5%

Net cash 0.6 -5.3 -112.1%
Shareholders' equity 178.1 176.6 0.8%
Equity ratio 53.2% 47.8% n/a
Return on equity ROE 3.9% 4.7% n/a

Earnings per share (in CHF) 2.02 2.49 -18.7%

Profit distribution per share (in CHF) 1.00 1)
1.00 0.0%

1)
In the form of a reduction in nominal value free of withholding tax from CHF 8.50 to CHF 7.50 (proposal of the
Board of Directors to the Annual General Meeting).
92 Financial Commentary
––

The Starrag Group closed the 2019 financial year. The decline compared with the previous year
year with a net profit of CHF 6.9 million. As a was 26% (-24% adjusted for currency effects)
result of restructuring costs in conjunction and led to an order intake of CHF 343 million for
with the “Starrag 2021” programme, this was the year as a whole.
considerably lower than the previous year.
The EBIT margin was an unsatisfactory 1.1% The decline mainly concerned the customer in-
of sales revenue (previous year 2.9%). The op- dustries Aerospace and Industrial as well as the
erating result before restructuring costs EBITR areas of Transportation and Energy to a lesser
increased by 7.6% to CHF 14 million (previous extent. Viewed by geographic market region, the
year CHF 13 million). At CHF 343 million, in- incoming orders declined particularly in Europe,
coming orders were down 26% on the previous followed by North America, while Asia was only
year’s second highest level in the history of the marginally weaker. The recurring service portion
company. The orders on hand of CHF 284 mil- of incoming orders was almost unchanged at
lion were within the long-term average, which CHF 77 million, adjusted for currency effects (pre-
ensures a solid workload. vious year CHF 80 million). Due to weakened in-
vestment activity, the share of the stable business
The Board of Directors will propose a dividend with medium and small shares (< CHF 5 million)
distribution of CHF 1.00 per share at the Annual declined to CHF 199 million (previous year CHF 237
General Meeting on 25 April 2020, in the form million), while the major contracts (> CHF 5 million)
of a withholding tax-free reduction of the nom- fluctuated more heavily as expected at CHF 67
inal value of the share. This corresponds to million (previous year CHF 143 million).
a payout ratio of 49% of the net income and
a dividend yield of 2.2%. The order situation is thus characterised by a nor-
malised order backlog of CHF 284 million, which
Increase in Sales corresponds to a long-term average. The decline
At CHF 418 million, sales revenue was 7.6% of 22% must be put into perspective in view of
(+9.2% adjusted for currency effects) above the the historical record of CHF 366 million in the pre-
previous year (CHF 389 million). The increase can vious year. The current work in hand also continues
primarily be explained by the high order intake in to ensure a solid basic workload. It is also impor-
2018, but can also be put down to the fact that in tant to note that the Starrag Group additionally
the reporting year, it was possible to partly offset operates a substantial recurring service business.
the delays in order processing in the previous year The book-to-bill ratio (incoming orders to sales)
thanks to various measures that were taken to was 0.82 (previous year 1.19).
improve project management.

Incoming Orders Considerably Lower

Than Record-High Previous Year
Incoming orders developed regressively, as ex-
pected, after the second-highest order intake in
the history of the Starrag Group in the previous
 Starrag Group Annual Report 2019 93
––

Increase in the Operating Result for currency effects. Due to the higher sales vol-
Before Restructuring Costs ume, its share reduced from 14.5 to 13.1 percent-
Gross profit (sales revenue minus cost of materials age of sales. Depreciation and amortisation were
plus/minus change in inventory) amounted to slightly higher at CHF 12 million (previous year:
CHF 226 million and was CHF 2 million or 0.8% CHF 11.1 million).
higher than the prior-year figure of CHF 224 million.
At 54.1%, the gross profit margin was considerable Accordingly, the operating result before depreciation
lower than the previous year’s margin of 57.7% and restructuring costs EBITDAR increased from
(-3.6%). This decline can be explained in particular CHF 24.1 million to CHF 26.1 million, corresponding
by more system solutions with an above-average to 6.2 percentage of sales. After taking depreciation
external procurement share and the associated into account, the operating result before restruc-
higher share of material. In addition, the consump- turing costs EBITR increased from CHF 13 to 14
tion of unfinished and finished products manu­ million (3.4 percentage of sales).
factured in the previous year of CHF 7.1 million
also reduced the gross profit margin. Restructuring Costs Affect the
Financial Result
The gross profit margin was also positively im- The reduction of 150 jobs announced in April 2019
pacted by a higher average percentage of com­ at the Mönchengladbach location was implemented
pletion of the processed orders and the associated as planned. For restructuring costs in conjunction
lower share of material. Negative factors were with the “Programme 2021”, the financial year
the selective reassessment of some projects due 2019 was debited CHF 9.2 million. Of this, CHF 8.5
to higher than expected costs, lower margins million was recorded as personnel expenses, while
stemming from a shift in the product mix and the CHF 0.3 million was debited for impairments to cost
increased cost of certain materials. of materials and to depreciations, as well as a fur-
ther CHF 0.2 million to other operating expenses.
Personnel expenses amounted to CHF 155 million,
an increase of CHF 8.5 million or 5.8% from the Operating earnings before interest and taxes (EBIT)
previous year. Of this increase, CHF 6.5 million can declined as a result by CHF 6.3 million to CHF 4.8
be attributed to restructuring costs in conjunction million (previous year: CHF 11.1 million).
with the programme “Starrag 2021”. Currency
conversion differences resulted in a reduction in
personnel expense by CHF 3.4 million, leaving a
currency-adjusted increase (before restructuring
costs) of CHF 5.4 million or 3.7%. This increase
can be attributed to the increased capacity utilisa-
tion as well as additional costs due to increased
unit labour costs of CHF 2.6 million, in particular
in Germany and in the emerging countries. Opera­
ting expenses amounted to CHF 55 million and
were thus 0.2% above the previous year, adjusted
94 Financial Commentary
––

Investments in Development As a result, net profit dropped from CHF 8.4 to

at a High Level 6.9 million. The earnings per share dropped accor­
Expenditure for development remained at a high dingly from CHF 2.49 to CHF 2.02. The resulting
level. During the year under review, CHF 29.7 return on equity was 3.9% (4.7% in the previous
million or 7.1% of sales revenue was spent on year).
developing innovative products and processes as
well as on customer-specific further development. Balance Sheet Still Sound
After consideration of capitalisation and deprecia- On 31 December 2019, the balance sheet total
tion of R&D projects, a net amount of CHF 32.5 was lower by 9.5% than the previous year (CHF
million (7.8% of sales) was debited to the income 370 million) due to a lower capital employed and
statement (net CHF 29.3 million or 7.5% of sales a decline in cash with simultaneous reduction in
in the previous year). financial liabilities. This significant decline corre-
sponds to a normalisation, after the balance sheet
One-Time Positive Tax Effect total rose considerably in the previous year due
Relieves Net Profit to short-term incoming payments before the end
The financial result developed positively at of the year.
CHF -1.0 million (previous year: CHF -2.2 million).
Currency gains due to the stronger Dollar on The capital employed through construction con­-
average over the year of CHF 0.7 million contri­ tracts in progress increased from CHF 38 million
buted to this, whereas in the previous year a to CHF 42 million, whereby CHF 79 million was
currency loss of CHF -0.3 million occurred. shown under receivables (previous year: CHF 87
million) and CHF 37 million under liabilities (previous
Overall, income from taxes on earnings of CHF 3 year: CHF 49 million). The capital commitment
million was recorded. The corporate tax reforms consists of order costs and recognized profits of
in various Swiss cantons resolved in 2019 had CHF 290 million (previous year: CHF 312 million),
a positive effect. This resulted in the release of less advance payments received in the amount of
tax provisions according to the Swiss Accounting CHF 248 million (previous year: CHF 274 million).
Standard GAAP FER, which led to a one-off relief The level of financing of construction contracts in
on income tax expense of CHF 2.6 million. In addi- progress thus declined slightly from 88% to 85%.
tion, income tax expense was positively impacted
by higher profit shares in countries with lower Current assets reduced by 8.7% to CHF 241 million
tax rates. in the reporting period (previous year: CHF 264
million). As a result of the repayment of financial
liabilities, cash was reduced by CHF 17 million,
while the receivables declined by CHF 11 million.
These continue to show a healthy maturity struc-
ture. Fixed assets declined to CHF 93 million (previ-
ous year: CHF 105 million).
 Starrag Group Annual Report 2019 95
––

Investments in fixed assets amounted to CHF 5.1 An additional CHF 2.6 million was invested in the
million (previous year: CHF 7.3 million) and were expansion and modernisation of machinery and
more than compensated for by divestitures of production equipment at the manufacturing plants
CHF 3 million as well as depreciation of CHF 12 and the development of new technologies and
million (previous year: CHF 11 million). products. CHF 1.1 million was spent on upgrading
IT systems to improve integration within the Star-
Liabilities reduced by 19% to CHF 156 million rag Group's global network, for example, and to
(previous year: CHF 193 million). This decrease provide further IT support for business processes.
can be particularly attributed to the reduction in CHF 3 million flowed in from divestitures, primarily
financial liabilities by CHF 23 million. The operating for the sale of the remaining part of the former
liabilities from goods and services also declined production plant in Sâles/Switzerland.
by CHF 7 million.
Due to the lower cash flow from operating activi-
Shareholders' equity was virtually unchanged at ties, the free cash flow dropped to CHF 8.3 million
CHF 178 million. The increase of CHF 6.9 million (previous year CHF 19.7 million).
from net profit was compensated by the dividend
payout of CHF 3.4 million and exchange-rate dif- CHF 25.8 million was used for financial activity. This
ferences of CHF 2 million due to the weaker Euro includes a CHF 22.4 million repayment of financial
at the balance sheet date. The equity ratio at the liabilities and the outflow of CHF 3.4 million from
end of the reporting year remained solid at 53% capital contribution reserves for the withholding
(previous year: 48%). tax-exempt dividend distributed in April 2019.
This corresponded to a dividend payout ratio of
Intact Free Cash Flow 40% of net income for 2018.
The operating cash flow declined from CHF 26.9
million to CHF 10.5 million. This significant decline Currency Effects
resulted in particular from a slight increase on The Swiss Franc developed in 2019 below the av-
the reporting date of the non-financial net working erage exchange rate of 2018. This led to negative
capital by CHF 2.1 million, after this was reduced currency conversion effects in the income state-
substantially in the previous year by CHF 7.5 million. ment and cash flow statement, due to the weak-
ening of the Euro in comparison with the previous
Cash outflow from investment activities of CHF 2.1 year. The negative effects included a negative
million was clearly lower than in the previous year impact of the revenue by 1.7%. The much lower
(CHF 7.1 million) due to cautious investment activity year-end exchange rate led to negative currency
and also less than depreciation of CHF 12 million. conversion effects in the balance sheet that re-
Investments in fixed assets include CHF 0.6 million sulted in a reduction of shareholders’ equity by
for investments, primarily for selective improve- CHF 2 million, amongst others effects. The annual
ments of existing manufacturing buildings. average exchange rate for translating the income
statement and cash flow statement was consider-
ably below the previous year at 1.1247 (previous
year: 1.1677), which also applied to the year-end
exchange rate used to translate the balance sheet
(1.0960 compared with 1.1373).
96 Financial Commentary
––

The impact of transaction effects was limited to Currency-Adjusted Changes

the revaluation of open items in foreign currencies, To calculate the currency-adjusted changes, the
which led to a positive currency result of CHF 0.7 corresponding key indicators are translated at the
million, partially due to the stronger Dollar over exchange rates of the comparative period.
the course of the year.
Restructuring Costs
Overall, the Starrag Group is less affected than Restructuring costs include costs in conjunction
average by currency fluctuations, compared to with strategic restructuring.
other Swiss industrial companies. Currently 68%
of its sales originates from sites located outside Operating Result Before
Switzerland (unchanged from previous year); Restructuring Costs EBITR
materials are sourced from the Euro area when- The operating result before restructuring costs
ever possible. Nevertheless, the share of costs EBITR is calculated as follows:
incurred in Swiss Francs in 2019 stood at 21%, + Operating result EBIT
while 25% of sales was invoiced in Swiss Francs - Restructuring costs
(previous year: 24% of costs and 20% of sales).
To reduce its economic currency risks and maintain Free Cash Flow
the competitiveness of the company's manufac- The free cash flow is calculated as follows:
turing plants in Switzerland, thereby offsetting + Cash flow from operating activities, net
pressure from the strong Swiss Franc, the Starrag + Cash flow from investment activities, net
Group is constantly seeking ways to improve
productivity. Net Liquidity
The net liquidity is calculated as follows:
Additional Definitions of Perfor- + Liquid assets
mance Indicators - Current financial liabilities
The financial information in this Annual Report in- - Non-current financial liabilities
cludes in addition certain performance indicators
that are not defined by the Swiss GAAP FER. Equity Ratio
These are used by management to measure the To calculate the equity ratio, the equity is divided
performance of the company. They might deviate by the total of the assets.
from similar measurement parameters used in
other companies and are not to be considered as Return on Equity ROE
a replacement for the Swiss GAAP FER indicators. To calculate the return on equity, the net profit is
divided by the equity at the start of the reporting
Incoming Orders period.
Incoming orders include all the orders that have
been received during the reporting period, including Total Shareholder Return TSR
products (new machines, modernisation, mainte- To calculate the total shareholder return, the
nance and repairs). share price at the start of the reporting period is
subtracted from the share price at the end of the
Order On Hand reporting period and added to the dividend distri-
The orders on hand include all orders that have bution that has taken place in the reporting period.
not yet been completed, net after deduction of This interim result is divided by the share price
the revenue already recognised. at the start of the reporting period.
 Starrag Group Annual Report 2019 97
––

Consolidated
income statement
CHF 1'000 2019 2018

Sales revenue 1 418'138 388'773

Other operating income 2 2'312 2'059
Change in inventory of finished and unfinished goods -7'100 6'774
Cost of materials and components -187'091 -173'111
Personnnel expenses 3 -154'523 -146'058
Other operating expenses 4 -54'892 -56'259
Earnings before interest, taxes, depreciation and amortization EBITDA 16'844 22'178
Depreciation of tangible fixed assets 9 -7'988 -8'303
Depreciation of intangible assets 10 -4'060 -2'766
Operating result EBIT 4'796 11'109

Financial result 5 -957 -2'221

Profit before taxes 3'839 8'888

Income tax expenses 16 3'038 -484

Net income 6'877 8'404
Thereof:
 Shareholders of the company 6'802 8'359
 Minority shareholders 75 45
Earnings per share in CHF 6 2.02 2.49
Diluted earnings per share in CHF 6 2.02 2.49

The enclosed notes are part of the consolidated financial statements.

98 Consolidated financial statements
––

Consolidated balance sheet

CHF 1'000 31.12.2019 31.12.2018

Cash and cash equivalents 14'611 31'842

Receivables from goods and services 7 110'553 121'492
Other receivables 6'172 3'572
Inventories 8 108'360 104'782
Prepaid expenses and accrued income 1'672 2'713
Total current assets 241'368 264'401
Tangible fixed assets 9 90'798 99'215
Intangible assets 10 2'426 6'036
Total non-current assets 93'224 105'251
Total assets 334'592 369'652

CHF 1'000 31.12.2019 31.12.2018

Financial debts 11 11'249 34'072
Payables for goods and services 23'355 30'639
Other liabilities 10'742 12'320
Provisions 12 6'395 4'611
Accrued expenses and deferred income 13 85'940 85'221
Total current liabilities 137'681 166'863
Financial debts 11 2'718 3'094
Provisions 12 16'136 23'051
Total non-current liabilities 18'854 26'145
Total liabilities 156'535 193'008
Share capital 28'560 28'560
Additional paid-in capital 51'884 55'244
Retained earnings 97'569 92'810
Total shareholders' equity, shareholders of the company 178'013 176'614
Minority shareholders 44 30
Total shareholders' equity 14 178'057 176'644
Total liabilities and shareholders' equity 334'592 369'652

The enclosed notes are part of the consolidated financial statements.

 Starrag Group Annual Report 2019 99
––

Consolidated cash flow statement

CHF 1'000 2019 2018

Net income 6'877 8'404

Depreciation of tangible fixed assets 12'048 11'069
Change in non-current provisions -6'528 -289
Other non-cash items 144 211
Change in non financial net working capital
 Receivables from goods and services 8'611 -1'925
 Inventories -5'991 -22'413
 Other receivables and deferred expenses -1'772 -1'115
 Payables from goods and services -5'966 3'360
O
 ther liabilities, accrued expenses
3'052 29'571
and deferred income
Cash flow from operating activities, net 10'475 26'873

Capital expenditure for:

 Tangible fixed assets -4'558 -5'107
 Intangible assets -521 -2'234
Disposals of fixed assets 2'953 194
Cash flow from investing activities, net -2'126 -7'147

Change in current financial liabilitites -22'096 7'360

Repayment of non-current financial liabilities -271 -662
Dividend payment -3'419 -5'094
Cash flow from financing activities, net -25'786 1'604

Currency translation 206 -560

Net change in cash and cash equivalents -17'231 20'770

Cash and cash equivalents at beginning of period 31'842 11'072
Cash and cash equivalents at end of period 14'611 31'842

The enclosed notes are part of the consolidated financial statements.

100 Consolidated financial statements
––

Consolidated statement of
shareholders' equity
Additional Retained earnings Shareholders' Minority Total Share-
Share paid-in Currency Goodwill equity share­holders share- holders'
CHF 1'000 capital capital translation offset Others Total of the company holders equity

31.12.2017 28'560 60'284 7'127 -30'357 111'642 88'412 177'256 39 177'295

Net income - - - - 8'359 8'359 8'359 45 8'404
Currrency translation - - -4'938 977 - -3'961 -3'961 - -3'961
Dividend payment - -5'040 - - - - -5'040 -54 -5'094

31.12.2018 28'560 55'244 2'189 -29'380 120'001 92'810 176'614 30 176'644

Net income - - 6'802 6'802 6'802 75 6'877
Currency translation - - -2’926 883 -2'043 -2'043 -2 -2'045
Dividend payment - -3'360 - - - - -3'360 -59 -3'419

31.12.2019 28'560 51'884 -737 -28'497 126'803 97'569 178'013 44 178'057

The enclosed notes are part of the consolidated financial statements.

 Starrag Group Annual Report 2019 101
––

Notes to the Consolidated

Financial Statement
Machine Tools for Greater The umbrella brand Starrag unites the product
Accuracy and Productivity areas of Berthiez, Bumotec, Dörries, Droop+Rein,
The Starrag Group is a global technology leader in Ecospeed, Heckert, Scharmann, SIP, Starrag, TTL
manufacturing high-precision machining tools for and WMW. Headquartered in Rorschach/Switzer-
milling, turning, boring and grinding work pieces of land, the company Group operates production sites
metallic, composite and ceramic materials. Its cus- in Switzerland, Germany, France, the UK and India
tomers include leading companies in the customer as well as sales and services companies in numer-
sectors of Aerospace, Energy, Transportation and ous other countries.
Industrial (Industrial Components, Luxury Goods,
Med Tech). Its portfolio of machine tools in combi- The shares of Starrag Group Holding AG are listed
nation with wide-ranging technology and services on the SIX Swiss Exchange.
enables customers to substantially enhance their
quality and productivity.

As per 31 December and as per the end of the previous year, Starrag Group Holding AG held the
following fully consolidated participations directly or significantly indirectly with a capital share of
100% (provided not otherwise specified):

 Starrag Group Holding GmbH, Chemnitz, Germany

 Starrag Group Holdings Ltd., Birmingham, UK
 Starrag AG, Rorschacherberg, Switzerland
 Starrag GmbH, Chemnitz, Germany
 Starrag SAS, Saint-Etienne, France
 Starrag Service Center GmbH & Co. KG, Ichtershausen, Germany (capital share 80%)
 Starrag Technology GmbH, Mönchengladbach, Germany
 Starrag Vuadens SA, Vuadens, Switzerland
 Toolroom Technology Limited, Haddenham, UK
 Starrag (Shanghai) Co. Ltd., Shanghai, China
 Starrag India Private Limited, Bangalore, India
 Starrag Italia Sri, Rivoli, Italy
 Starrag RU Ltd., Moscow, Russia
 Starrag UK Limited, Birmingham, UK
 Starrag USA Inc., Hebron USA
102 Consolidated financial statements
––

Capital Management Risk Management

The managed capital corresponds to the sharehold- As a leading global manufacturer of precision ma-
ers’ equity shown in the consolidated balance sheet. chine tools, the Starrag Group is faced with various
The main goals of capital management are to ensure risks.
the necessary financial flexibility and to optimise the
capital structure for reducing capital costs in order The most significant risks include:
to create additional value for shareholders and other  The weakening of the economic environment in
stakeholders. customer markets as well as business cycles
could lead to a reduction in demand,
The equity base is periodically reviewed and adjus­  misjudgements of developments in customer
ted, taking into consideration economic conditions markets or in the competitive environment could
and loan agreements (see Note 11 ). In particular, lead to missed business opportunities or losses,
the General Meeting of the shareholders passes  failure in research and development as well as
resolutions each year on the appropriation of prof- other innovation-based activities could prevent
its and thus the dividend payment. business potential from being realised,
 a lack of availability of financial resources could
Business performance is measured using an internal have an impact on the performance and
income statement. The results can then be classified operating activity of the Starrag Group and
and analysed in various different ways within this  natural events (such as fires) could impair
income statement. The primary control key figure operating activities.
is the earnings before interest and taxes (EBIT).
Additionally, a balanced set of key figures is report- The Board of Directors and the Executive Board
ed on a regular basis, which gives consideration give high priority to the careful handling of strategic,
to the areas of conflict of liquidity, growth and prof- financial and operational risks. The Starrag Group
itability. has a holistic risk management process which is
analysed every year by the Executive Board and
Segment Information the Board of Directors.
Internal reporting to the Board of Directors is carried
out according to the existing operational business The following goals are pursued:
units. The business unit High Performance Systems  systematically identifying special risks,
is responsible for the product areas Starrag and  establishing processes to monitor, reduce and
Ecospeed. The business unit Horizontal Machining ideally to prevent risks and
Systems processes the product areas Heckert,  finding the right balance between risks and
Scharmann/Ecoforce and WMW. The business unit opportunities.
Large Parts Machining Systems includes the product
areas Dörries, Berthiez and Droop+Rein. The busi- The risk management system is based on a classic
ness unit Ultra Precision Machining Centres is re- risk matrix involving the probability of occurrence
sponsible for the product areas Bumotec and SIP. and possible extent of damage (identification and
A significant proportion of the employees are re- classification) and includes internal instructions
sponsible for the central functions distributed as well as a risk log, in which operational data as
among the locations and regions for all business well as an action plan for risk management are
units and brands. documented. The Executive Board has designated
an officer for implementing and moderating risk
management, who reports directly to the CFO.
 Starrag Group Annual Report 2019 103
––

An annual risk review includes diligent identification, Counterparty Risk

analysis and evaluation of risks and a definition The Starrag Group mainly holds its liquid assets as
of appropriate measures to reduce the risks. This deposits or current account deposits with major
information is documented in a group-wide risk creditworthy banks. These deposits generally have
matrix. The risk management officer monitors the a term of less than three months. Transactions
implementation of the measures. In business pro- with derivative financial instruments are also only
cesses with recurring risks, the resolved measures concluded with major creditworthy banks.
are integrated as process steps in the operative
processes of the daily business. On an annual basis, Foreign Currency Risk
the Executive Board reports on the nature, extent The Starrag Group does not engage in business
and assessment of significant risks and the meas- operations in foreign currencies which show an
ures taken for risk minimisation to the Board of unusual volatility. The foreign currency risk results
Directors. Risks in accounting and financial reporting mainly from sales and purchases which are not
are monitored and reduced by a suitable internal made in a functional currency. In the case of orders
control system. in foreign currencies, hedging transactions (forward
exchange contracts and currency options) are
Financial Risk Management sometimes deployed with major credit institutions
The main risks occurring from the group's financial as a counterparty in order to hedge foreign curren-
instruments consist of risk of receivables default, cy risks. Probable future orders will also be hedged
counterparty risk, foreign currency risk, interest rate in certain cases. Foreign currency risks arising from
risk and liquidity risk. the conversion of income statement and balance
sheet items of foreign group companies are not
Risk of Receivables Default hedged.
The risk of receivables default is limited by the
number and the geographical spread of customer Interest Rate Risk
credit balances. In addition, it is limited by ade- Interest rate risk results primarily from variable in-
quately examining the financial circumstances of terest rates for financial liabilities. In some cases,
customers before entering into a contract. In most these interest rates are fixed through fixed advances
transactions, customers make advance payments and fixed interest rates in the short- or long-term.
upon order confirmation. Delivery might only follow
against prepayment or credit. The outstanding Liquidity Risk
receivables are continuously monitored. The liquidity risk is limited by contractually agreed
cash lines which cover the peak demand for oper-
ating resources. It is continuously monitored by
liquidity status reports.
104 Consolidated financial statements
––

Management assumptions These adjustments may lead to adjustments affec­

and Estimates ting the net income of the balance sheet items
Estimates and assumptions are continually evalu- concerned. The book value of the balance sheet
ated and are based on experience values and other items concerned is shown in Note 15 (Construction
factors, including the expectation and assessment Contracts).
of future events that are believed to be reasonable
under the prevailing circumstances. The resulting Provisions for Warranty Obligations and
accounting estimates will by definition seldom Onerous Contracts
comply with the actual subsequent outcome. The In the ordinary course of business, the Group may
main sources of estimation uncertainties are: be involved in legal disputes. Provisions for pending
disputes are measured on the basis of available
Determination of net realisable values and information based on a realistically expected cash
profit shares in the case of construction con- outflow. The final outcome of such a dispute might
tracts valued with percentage of completion require recognition of adjustments in provisions in
While preparing the financial statement, the Group the income statement (see Note 12).
continuously examines the valuation of various
balance sheet items which are connected with the Income Taxes
regular machine tool business. In this connection, The evaluation of current tax liabilities is subject to
assumptions must be made with regard to costs an interpretation of the tax laws in the respective
for completion and realisable market prices. Should countries, the suitability of which will be mostly
situations occur which change original assumptions assessed retrospectively for several financial years
regarding realisable income, costs that are still in the context of the final assessment and during
necessary or work progress, these assumptions tax audits by the tax authorities. Substantial adjust-
will be adjusted. ments in tax expenses may occur as a result (see
Note 16).
 Starrag Group Annual Report 2019 105
––

Significant Accounting of five years. In the event of a possible subsequent

Principles sale, the goodwill offset against shareholders’
Principles of Presentation capital at the time of the acquisition is calculated
The consolidated financial statement of the Starrag in profit or loss against the proceeds of the sale.
Group has been prepared in accordance with the The earnings of acquired companies are included
Guidelines of the Accounting Regulations (Swiss in the consolidated accounts as of the acquisition
GAAP FER). In addition, the provisions of the List- date.
ing Rules of the SIX Swiss Exchange as well as
Swiss accounting legislation have been complied Currency Conversion
with. This consolidated financial statement is Foreign currency transactions are converted at
based on historical costs, with the exception of the exchange rate of the transaction date. Out-
liquid assets and derivative financial instruments, standing foreign currency receivables and paya-
which are valued at market value. Reporting is in bles at balance sheet date are converted using
Swiss Francs (CHF). This financial statement in- the exchange rate of that date. The resulting
cludes estimates and assumptions that affect the exchange rate differences are recorded in the in-
reported figures and related disclosures. Actual come statement. Non-monetary items are not
results may differ from these estimates. revaluated at the balance sheet date. Assets and
borrowed capital of foreign subsidiaries are con-
Principles of Consolidation verted to CHF using the exchange rates at the
The scope of consolidation comprises the annual balance sheet date. Annual average exchange
annual statements of Starrag Group Holding AG rates are applied to convert the income state-
and all directly or indirectly controlled subsidiaries. ments. Conversion differences arising from the
Assets and liabilities as well as income and ex- consolidation of foreign currency financial state-
penses are fully included in the consolidated finan­- ments are recorded directly in retained earnings.
cial statement using the full consolidation method.
All intra-group relationships (income and expenses, Sales Revenue and Profit Realisation
receivables and liabilities) as well as intercompany Sales revenue is recorded at the transition of
profits on intra-group transactions and inventories benefit and risk. Sales revenue from construction
are eliminated. contracts at fixed prices is reported including a
profit share, depending on the percentage of com-
Capital consolidation is based on the purchase pletion (percentage of completion method). Per-
method, i.e. the acquisition costs of an acquired centage of completion is defined by the direct
company are offset against the net assets meas- order costs excluding material costs. In the balance
ured at fair value at the time of acquisition. Any sheet, the order value after deduction of advance
resulting goodwill is offset directly with the retai­ payments received is reported under receivables
ned earnings in shareholders' equity by purchase. or accrued expenses and deferred income from
In the Notes to the Financial Statement, the effects construction contracts valued using the percentage
of a theoretical capitalisation and any value impair- of completion method.
ment are shown by applying a depreciation period
106 Consolidated financial statements
––

Research and Development Receivables

Research costs are charged to the income state- Receivables are balanced at their nominal value
ment on a continuous basis. Development costs less necessary value adjustments. The value
will only be capitalised to the extent that the adjustment is determined on the basis of due
amount to be capitalised is covered by corre- dates and recognisable credit risks. Receivables
sponding expected income. Capitalised develop- include the value from construction contracts
ments are reassessed annually with regard to valued according to percentage of completion
impairment. All other research and development after deduction of received payments.
costs are charged to the income statement.
Inventories
Income Taxes Raw materials and supplies as well as trading
Income tax expense includes all income tax levied goods are assessed at average purchase costs,
on the taxable profits of the group. For tax, in par- manufactured products at average manufacturing
ticular withholding tax levied on dividend payments costs. Discounts are recognised as purchase cost
of retained earnings (mainly of group companies), reductions. If the realisable net value is lower,
provisions are only set up if the distribution of such valuation adjustments are made accordingly. Manu-
profits is probable. Provisions for deferred income facturing costs include the direct costs of mate­rials
taxes will be set up according to the liability method. used, labour and operating costs as well as an
appropriate portion of production and construction
This takes into account the income tax effects of overhead costs. Obsolete and slow-moving items
temporary differences between the intercompany are adjusted appropriately. Inventories also include
and the tax-related assets and liabilities. Tax losses advance payments to suppliers.
carried forward are only taken into account in the
calculation of deferred income tax to the extent Tangible Fixed Assets
that it is probable that sufficient future taxable profit Tangible fixed assets are carried at acquisition costs
will be available to be set off against the tax loss or manufacturing costs less depreciation required
carry forward. for business purposes. Depreciation of tangible
fixed assets is calculated using the straight line
Cash and cash equivalents method for the estimated useful lives of: buildings
Cash and cash equivalents include cash in hand, 20 to 50 years, technical equipment and machines
postal cheque and bank balances as well as sight 4 to 12 years, IT hardware and communication
and deposit money with an original term of less 3 to 8 years. Land is not depreciated.
than 3 months. These are valued at market value.
All gains and losses resulting from the disposal of
tangible fixed assets are recognised in the income
statement. Expenditure for goods of low value
are debited directly to operating expenses in the
income statement.
 Starrag Group Annual Report 2019 107
––

Intangible Assets
Goodwill resulting from the acquisition of a com- The German companies do not maintain any pro-
pany is offset against retained earnings in share- fessional pension plans. Staff are insured with the
holders' equity at the time of an acquisition. In national pension insurance scheme of Germany.
the Notes to the Financial Statement, the effects
of a theoretical capitalisation and any impairment The economic obligations or benefits of Swiss
of value are shown using a depreciation period pension plans are determined on the basis of the
of five years. financial statement prepared in accordance with
Swiss GAAP FER 26 “Accounting for Pension
Other intangible assets are carried at acquisition Funds” accounting standard. The economic impact
or manufacturing costs less depreciation required of pension plans of foreign subsidiaries is deter-
for business purposes. These intangible assets mined according to the valuation methods applied
are amortised on a straight-line basis over their locally. Employer contribution reserves and com-
estimated useful lives, which is 3 to 8 years for parable items are capitalised in accordance with
software and 5 to 10 years for development costs. Swiss GAAP FER 16.

Provisions Financial Instruments

Provisions are made if a legal or constructive obli- Financial assets include liquid assets and receiva-
gation resulting from a past event exists at the bles. Financial liabilities mainly include financial
key date, the use of resources for the settlement debts and operating liabilities. These are valued
of such an obligation is probable and a reliable according to the “effective interest method” at
estimation of the amount of the obligation can discounted costs. In addition to the effective inter-
be made. The amount of provisions depends on est payments, interest expenses also include the
the expected use of funds needed to cover the annual compound interest and pro-rata transaction
obli­gation. costs.

Employee Benefits In order to be able to react to short-term foreign

The professional pension situation for the Starrag exchange fluctuations, derivative currency hedge
Group companies' personnel is governed by the instruments can be held. Financial instruments
legal regulations and practices of the respective held for trading are recognised at market value.
country and is correspondingly different. Changes in market value are included in the
financial result.
The pension situation of the companies located in
Switzerland is governed by the provisions of the The hedging of future cash flows (“cash flow
Swiss Federal Law on Occupational Benefits. The hedges”), whose underlying transactions have
Swiss pension funds of the Starrag Group are not yet been recognised in the balance sheet,
foundations which are legally independent of the are disclosed in the Notes to the Financial State-
Starrag Group, and which have re-insured the ment, if future cash flows will occur with high
pension plans (according to the contribution plans probability.
defined by law) with an insurance company in a
congruent manner. The plans are financed by
employer and employee contributions, which are
periodically determined such that the insurance
premiums due can be financed.
108 Consolidated financial statements
––

1. Sales revenue by production site

CHF 1'000 2019 2018

Switzerland 133'973 124'902

Germany 234'461 219'984
Other countries 49'704 43'887
Total 418'138 388'773

2. Other operating income

Other operating income includes in particular compensation payments from insurance companies,
income from subleases, gains on the sale of fixed assets and government grants.

3. Personnel expenses
CHF 1'000 2019 2018

Wages and salaries 116'952 116'505

Pension benefit expenses 17 2'608 2'502
Other social benefit expenses 20'396 19'922
Restructuring charges 8'459 1'940
Other personnel expenses 6'108 5'189
Total personnel expenses 154'523 146'058

4. Other operating expenses

Other operating expenses include in particular travel expenses, sales expenses, administration
expenses, vehicle and transport charges, expenses for premises, repair and maintenance of tangible
fixed assets as well as other expenses.

5. Financial result
CHF 1'000 2019 2018

Interest income 118 154

Interest expenses -559 -581
Currency result 710 -267
Other financial expenses -1'226 -1'527
Total financial result -957 -2'221
 Starrag Group Annual Report 2019 109
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6. Information per share

Earnings per share are calculated from earnings after income taxes less share of minority interest
based on the average number of shares outstanding (excluding treasury shares). In 2019, this number
of shares was 3,360,000 (unchanged from previous year). Based on the net profit attributable to the
shareholders of the company of CHF 6.8 million (prior year CHF 8.4 million) net earnings per share
amount to CHF 2.02 (prior year CHF 2.49). As the company has not issued any stock options or
convertible bonds, earnings per share were not diluted.

7. Receivables from goods and services

CHF 1'000 31.12.2019 31.12.2018

Trade receivables from goods and services 30'907 34'985

Receivables from construction contracts 15 79'646 86'507
Total receivables 110'553 121'492

Thereof:
 not due 99'874 111'080
 past due < 90 days 7'468 7'772
 past due >
_ 90 days 3'211 2'640

Receivables are stated net of value adjustments of CHF 2.1 million (prior year CHF 1.6 million).

8. Inventories
CHF 1'000 31.12.2019 31.12.2018

Raw materials and components 61'122 59'184

Work in progress 29'290 31'299
Finished products 6'405 6'176
Prepayments to suppliers 11'543 8'123
Total inventories 108'360 104'782

Inventories are stated net of value adjustments of CHF 39.4 million (prior year CHF 38.8 million).
110 Consolidated financial statements
––

9. Tangible fixed assets

2019 2018

Land and Machinery and Other tangible Land and Machinery and Other tangible
CHF 1'000 buildings equipment fixed assets Total buildings equipment fixed assets Total

Cost at beginning of year 118'915 54'756 12'777 186'448 119'519 55'033 12'738 187'290
Additions 604 2'216 1'013 3'833 1'703 2'875 823 5'401
Disposals -3'946 -2'571 -499 -7'016 -140 -1'563 -411 -2'114
Currency translation -1'719 -1'267 -336 -3'322 -2'167 -1'589 -373 -4'129
Cost at year end 113'854 53'134 12'955 179'943 118'915 54'756 12'777 186'448

Accumulated depreciation at
35'591 40'858 10'784 87'233 32'936 39'911 10'267 83'114
beginning of year
Depreciation 3'372 3'569 1'047 7'988 3'546 3'492 1'265 8'303
Disposals -1'005 -2'565 -496 -4'066 -138 -1'384 -411 -1'933
Currency translation -731 -986 -293 -2'010 -753 -1'161 -337 -2'251
Accumulated depreciation at
37'227 40'876 11'042 89'145 35'591 40'858 10'784 87'233
year end

Net carrying value at

83'324 13'898 1'993 99'215 86'583 15'122 2'471 104'176
beginning of year

Net carrying value at year end 76'627 12'258 1'913 90'798 83'324 13'898 1'993 99'215

10. Intangible assets

2019 2018

Development Development
CHF 1'000 Software cost Total Software cost Total

Cost at beginning of year 12'778 15'461 28'239 11'940 14'866 26'806

Additions 521 - 521 1'306 928 2'234
Disposals -94 -4'440 -4'534 -188 - -188
Currency translation -276 -211 -487 -280 -333 -613
Cost at year end 12'929 10'810 23'739 12'778 15'461 28'239

Accumulated amortization at
10'085 12'118 22'203 9'288 10'775 20'063
beginning of year
Depreciation 1'140 2'920 4'060 1'198 1'568 2'766
Disposals -94 -4'440 -4'534 -172 - -172
Currency translation -238 -178 -416 -229 -225 -454
Accumulated depreciation
10'893 10'420 21'313 10'085 12'118 22'203
at year end

Net carrying value at beginnig of year 2'693 3'343 6'036 2'652 4'091 6'743
Net carrying value at year end 2'036 390 2'426 2'693 3'343 6'036
 Starrag Group Annual Report 2019 111
––

11. Financial liabilities

CHF 1'000 31.12.2019 31.12.2018

Current financial liabilities 11'249 34'072

Non-current financial liabilities 2'718 3'094
Total financial liabilities 13'967 37'166

Thereof in:
 EUR 12'469 37'166
 CHF 1'498 -

Average interest rate 0.9% 0.9%

Undrawn current cash credit line 89'276 69'913

Credit agreements contain partly financial covenants and other conditions under which banks are
able to terminate financial liabilities which are recorded as non-current at short notice. These financial
covenants are based on key figures, resulting from EBITDA, net equity and net debt. The financial
covenants were complied with in 2019 and 2018.

12. Provisions
2019 2018

CHF 1'000 Deferred Deferred

income taxes Warranty Total income taxes Warranty Total

Carrying value at
19'955 7'707 27'662 21'930 7'443 29'373
beginning of year

Addition 2'957 7'689 10'646 2'685 7'929 10'614

Utilization -6'315 -6'296 -12'611 -4'178 -7'310 -11'488
Release -2'625 - -2'625 -95 -144 -239
Currency translation -306 -235 -541 -387 -211 -598

Carrying value
13'666 8'865 22'531 19'955 7'707 27'662
at year end

Thereof:
 current - 6'395 6'395 - 4'611 4'611
 non-current 13'666 2'470 16'136 19'955 3'096 23'051

Die Rückstellungen für latente Ertragssteuern enthalten einen Anspruch für noch nicht genutzte
steuerliche Verlustvorträge von 5.0 Mio. CHF (Vorjahr 3.7 Mio CHF).
112 Consolidated financial statements
––

13. Accrued expenses and deferred income

CHF 1'000 31.12.2019 31.12.2018

Accrued costs for customer orders 13'421 10'045

Liabilities from construction contracts 15 37'208 48'837
Personnel expenses 21'236 15'669
Commissions 261 227
Current income taxes 5'396 3'758
Other 8'418 6'685
Total accrued expenses and deferred income 85'940 85'221

14. Shareholders' equity

The share capital of CHF 28.6 million consists of 3’360’000 registered shares with the nominal value
of CHF 8.50 each. The company has no outstanding conditional capital and there is no authorised
capital (previous year: no conditional capital, CHF 5.7 million authorised capital).

As at 31 December 2019, non-distributable reserves amounted to CHF 5.7 million, unchanged from
the previous year.

Goodwill resulting from the acquisition of a company is offset against retained earnings in shareholders'
equity at the time of an acquisition. This was completely depreciated at the start of the previous period.

15. Construction contracts

CHF 1'000 2019 2018

Revenue from construction contracts valued using

the Percentage of completion method 319'064 297'643

CHF 1'000 31.12.2019 31.12.2018

Contract costs incurred and recognized profit share 290'094 311'528

Advance payments received -247'656 -273'858
Net carrying value 42'438 37'670

Thereof:
 Receivables from goods and services 7 79'646 86'507
 Accrued expenses and deferred income 13 -37'208 -48'837
 Starrag Group Annual Report 2019 113
––

16. Income tax expenses

CHF 1'000 2019 2018

Income before taxes 3'839 8'888

Expected tax rate 53.6% 2.7%
Expected income tax expenses -2'059 243
Debits / credits from prior reporting periods 344 -50
Non-deductable expenses / non-taxable income 372 232
Change in tax rate -2'620 438
Effect of unrecognized tax loss carry forwards 925 -379
Income tax expenses -3'038 484

Thereof:
 Current income tax expenses -3'111 -2'072
 Deferred income tax expenses 6'149 1'588

The expected tax rate was 53.6% (prior year 2.7%) and corresponds to the weighted average tax rate
resulting from the profit/loss before tax and the tax rate of each individual Group company. The change
in the expected tax rate is the result of changed profitability situations and the tax rates at various
Group companies.

There are unrecognised claims for unused tax losses carried forward of CHF 2.7 million (previous year
CHF 3.2 million). Of this, CHF 1.5 million (previous year CHF 1 million) will expire within one to three
years, CHF 1.2 million (previous year CHF 2.1 million) within four to seven years and in the previous year
CHF 0.1 million after more than seven years. See also Note 12.

17. Pension benefits

2019 2018
Employee Employee
benefit plans Employee benefit plans Employee
Patronage without benefit plans Patronage without benefit plans
CHF 1'000 funds surplus/deficit with surplus Total funds surplus/deficit with surplus Total

Surplus/deficit
pension benefit plan 1'388 - 7'159 8'547 1'179 - 5'971 7'150
at end of year

Economic benefit
- - - - - - - -
at end of year

Change in
- - - - - - - -
economic benefit

Accrued
- 325 2'283 2'608 - 336 2'166 2'502
contributions

Pension benefit
- 325 2'283 2'608 - 336 2'166 2'502
expenses

There are no employer contribution reserves.

114 Consolidated financial statements
––

18. Pledged assets

CHF 1'000 31.12.2019 31.12.2018

To ensure financial debts in the amount of 2'737 3'104

the following land and buildings are mortgaged:

 Net carrying value 5'877 6'589

 Charge 5'877 6'589

19. Derivative financial instruments

CHF 1'000 31.12.2019 31.12.2018

Forward currency exchange contracts:

Contract value 18'485 26'687
Replacement value:
 positive 775 158
 negative -42 -105

Currency options:
Contract value 14'890 29'768
Replacement value:
 positive 225 66
 negative -1 -171

20. Operating lease liabilities

CHF 1'000 31.12.2019 31.12.2018

 Due within 1 year 2'149 2'193

 Due within 2 to 5 years 1'789 1'961
 Due after more than 5 years 443 513
Total operating lease liabilities 4'381 4'667

The lease contracts are for premises, cars and IT equipment.

 Starrag Group Annual Report 2019 115
––

21. Other unrecognised obligations

The Starrag Group is occasionally confronted with claims for damages, which are to be regarded as
a normal side effect of ordinary business activities. These mainly relate to warranties, property and
financial damages as well as product liability. Provisions and sureties exist for these claims, which
the Starrag Group assumes will cover all foreseeable risks.

22. Exchange rates

CHF 1'000 2019 2018

Average rates
(for income statement and cash flow statement)

1 EUR 1.1247 1.1677

1 USD 1.0039 0.9880
1 GBP 1.2817 1.3205
1 CNY 0.1455 0.1497

CHF 1'000 31.12.2019 31.12.2018

Year end rates (for balance sheet)

1 EUR 1.0960 1.1373

1 USD 0.9778 0.9943
1 GBP 1.2835 1.2616
1 CNY 0.1401 0.1446

23. Events after the balance sheet date

The consolidated financial statement was approved and released for publication by the Board of
Directors on 4 March 2020. It is also subject to approval by the Annual General Meeting of the
shareholders scheduled for 25 April 2020.
116 Consolidated financial statements
––

Report of the statutory auditor

Report of the statutory auditor

to the General Meeting of Starrag Group Holding AG
Rorschacherberg

Report on the audit of the consolidated financial statements

Opinion
We have audited the consolidated financial statements of Starrag Group Holding AG and its subsidiaries (the Group),
which comprise the consolidated income statement for the year ended 31 December 2019, the consolidated balance
sheet as at 31 December 2019, the consolidated cash flow statement and consolidated statement of changes in equity
for the year then ended, and notes to the consolidated financial statements, including a summary of significant account-
ing policies.

In our opinion, the consolidated financial statements (pages 97 to 115) give a true and fair view of the consolidated fi-
nancial position of the Group as at 31 December 2019 and its consolidated financial performance and its consolidated
cash flows for the year then ended in accordance with Swiss GAAP FER and comply with Swiss law.

Basis for opinion

We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those
provisions and standards are further described in the “Auditor’s responsibilities for the audit of the consolidated financial
statements” section of our report.

We are independent of the Group in accordance with the provisions of Swiss law and the requirements of the Swiss au-
dit profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe
that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach

Overview Overall Group materiality: CHF 2'000'000

We concluded full scope audit work at six reporting units in two countries. Our
audit scope addressed over 72% of the Group's revenue.

As key audit matter the following area of focus has been identified:

Accounting construction contracts

PricewaterhouseCoopers AG, Vadianstrasse 25a/Neumarkt 5, Postfach, CH-9001 St. Gallen, Switzerland

Telefon: +41 58 792 72 00, Telefax: +41 58 792 72 10, www.pwc.ch

PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
 Starrag Group Annual Report 2019 117
––

Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable
assurance that the consolidated financial statements are free from material misstatement. Misstatements may arise due
to fraud or error. They are considered material if, individually or in aggregate, they could reasonably be expected to influ-
ence the economic decisions of users taken on the basis of the consolidated financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall
Group materiality for the consolidated financial statements as a whole as set out in the table below. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures and to evaluate the effect of misstatements, both individually and in aggregate, on the consolidated financial
statements as a whole.

Overall Group materiality CHF 2'000'000

How we determined it 0.5% of sales revenue

Rationale for the materiality bench- We chose sales revenue as the benchmark for determining materiality. This
mark applied benchmark takes into account the volatility of the business environment and it
is a generally accepted benchmark for materiality considerations.

We agreed with the Board of Directors that we would report to them misstatements above CHF 200'000 identified during
our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.

Audit scope
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion on the consoli-
dated financial statements as a whole, taking into account the structure of the Group, the accounting processes and con-
trols, and the industry in which the Group operates.

The audit strategy for the audit of the consolidated financial statements was determined taking into account the work
performed by the component auditors in the PwC network. As Group auditor, we performed the audit of the consolidation
and the disclosures and the presentation of the consolidated financial statements. Where audits were performed by com-
ponent auditors, we ensured that, as Group auditor, we were adequately involved in the audit in order to assess whether
sufficient appropriate audit evidence was obtained from the work of the component auditors to provide a basis for our
opinion. Our involvement comprised the inspection of the reporting, taking part in telephone calls with the component
auditors during the interim audit and the year-end audit, communicating the risks identified at Group level, specifying the
audit procedures relating to the recognition and measurement of term construction contracts and specifying the material-
ity levels to be applied.

Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
consolidated financial statements of the current period. These matters were addressed in the context of our audit of the
consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters.
118 Consolidated financial statements
––

Accounting construction contracts

Key audit matter How our audit addressed the key audit matter

Starrag Group has construction contracts, which Our audit procedures regarding the recognition and measurement
it recognises and measures using the percent- of construction contracts using the per-centage-of-completion
age-of-completion (PoC) method in accordance (PoC) method comprised in particular the following:
with Swiss GAAP FER 22 – Long-term contracts.
The degree of completion is determined on the • We assessed the design and the existence of the key
basis of the direct con-tract costs excluding costs controls regarding the production orders and tested the
of materials. effectiveness of selected controls.

Management has to estimate the progress of • We selected various production orders (sample testing
projects as of the balance sheet date and the based on the contract volumes, the contribution margin
costs to be incurred in the future until their com- and changes in the margin compared with the planning
pletion. An incorrect estimate could have a signif- phase) and focussed our testing on the following, in par-
icant impact on the result for the period. ticular:

Please refer to page 104 (Management assump- - We assessed the contract related calculations to de-
tions and estimates), page 105 (Key accounting termine whether the contractual terms – including
principles – Sales revenue and profit realisation) sale proceeds and penalties for non-performance –
and page 112 (Other notes – Percentage-of- had been recorded ap-propriately.
completion-valued construc-tion contracts) in the
notes to the consolidat-ed financial statements. - We discussed with the project controllers and project
managers the progress of the projects based on the
latest project accounts, the costs still to be incurred
until their completion and changes in the margin.

- We obtained written information from the legal repre-

sentatives of the Group. We inspected this written in-
formation with regard to indications of potential qual-
ity deficiencies or penalties for non-performance and
assessed whether these matters were presented ap-
propriately in the consolidated financial statements.

• During the audit, we conducted on-site inspections of

various machines still under construction and assessed
the progress of the projects.

• For the production orders completed during the year un-

der review, we compared various final parameters with
the estimates made in the planning phase or those as of
the previous balance sheet date in order to assess, with
hindsight, the accuracy of the estimates made by Man-
agement.

• We checked the arithmetical correctness of the key as-

sessments relating to the progress of projects, costs to
be incurred in the future and sales revenue.

• We checked whether the disclosures in the con-soli-

dated financial statements were made in accordance
with Swiss GAAP FER 22 – Long-term contracts.

The results of our audit support the recognition and measurement

of construction contracts and their disclosure in the 2019 consoli-
dated financial statements.
 Starrag Group Annual Report 2019 119
––

Responsibilities of the Board of Directors for the consolidated financial statements

The Board of Directors is responsible for the preparation of the consolidated financial statements that give a true and fair
view in accordance with Swiss GAAP FER and the provisions of Swiss law, and for such internal control as the Board of
Directors determines is necessary to enable the preparation of consolidated financial statements that are free from mate-
rial misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, the Board of Directors is responsible for assessing the Group’s ability
to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern
basis of accounting unless the Board of Directors either intends to liquidate the Group or to cease operations, or has no
realistic alternative but to do so.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Swiss law and Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be ex-
pected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located at the website
of EXPERTsuisse: http://expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our audi-
tor’s report.

Report on other legal and regulatory requirements

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal
control system exists which has been designed for the preparation of consolidated financial statements according to the
instructions of the Board of Directors.

We recommend that the consolidated financial statements submitted to you be approved.

PricewaterhouseCoopers AG

Oliver Kuntze Oscar Maier

Audit expert Audit expert
Auditor in charge

St. Gallen, 4 March 2020

120 Financial Report
––

Income statement
CHF 1'000 2019 2018

Other operating income:

 Income from investments 21'956 8
Financial income 3'462 4'679
Total revenue 25'417 4'687

Personnel expenses -291 -555

Other operating expenses -23 -751
Depreciation and value adjustments
-431 -431
of fixed assets
Financial expenses -916 -909
Income tax expenses -233 -6
Net income 23'522 2'035
 Starrag Group Annual Report 2019 121
––

Balance sheet
CHF 1'000 31.12.2019 31.12.2017

Cash and cash equivalents 16 8

Other receivables:
 from group companies 11'056 4'805
 from third parties 1 -
Prepaid expenses 34 25
Total current assets 11'107 4'838

Financial assets:
 Loans to group companies 50'194 54'453
Investments 7 144'174 123'517
Total fixed assets 194'368 177'970

Total assets 205'475 182'808

CHF 1'000 31.12.2019 31.12.2018

Other liabilities:
 to group companies 6'879 2'034
 to third parties 18 23
Accrued expenses and deferred income 721 547
Total current liabilities 7'618 2'604
Total liabilities 7'618 2'604
Share capital 8 28'560 28'560
Legal capital reserves:
 Capital contribution reserves 12 51'121 54'481
 Other legal capital reserves 1'222 1'222
Voluntary retained earnings
 Retained earnings 93'432 91'397
 Net income 23'522 2'035
Total shareholders' equity 197'857 177'695

Total liabilities and shareholders' equity 205'475 180'299

122 Financial Report
––

Notes to the Financial Statement

Key Accounting Principles

1. Principles of presentation
The financial statement of Starrag Group Holding AG, Rorschacherberg was prepared in accordance
with the provisions of the Swiss Law on Commercial Accounting defined by the Swiss Code of
Obligations.
The company prepares a consolidated financial statement in accordance with the Swiss GAAP FER
accounting standards. Correspondingly, the company does not prepare any additional Notes to the
Financial Statement, a management report or a cash flow statement.
The main balance sheet items are accounted for as explained below.

2. Other current receivables and liabilities

Other current receivables and liabilities are carried at their nominal value. Individual value adjustments
on other current receivables are recognised taking into account the maturity structure and identifiable
credit risks. For the remainder, general value adjustments are created at the discretion of the Board of
Directors as permitted by tax legislation.

3. Financial assets
The financial assets include long-term loans to Group companies. Loans granted in foreign currency
are valued at the current year-end exchange rate, whereby unrealised losses are recognised but
unrealised gains are not recognised.

4. Shareholdings
Shareholdings are reported in the balance sheet at the cost of acquisition less appropriate value
adjustments for impairments that are anticipated to be permanent.

5. Currency conversion
Transactions in foreign currencies are converted into Swiss Francs at the exchange rate valid at the
time of the transaction. Pursuant to the imparity principle, assets and liabilities in foreign currencies
are converted into Swiss Francs at the year-end rate.
 Starrag Group Annual Report 2019 123
––

Supplementary Information and Explanations on the Financial Statement

6. Full-time employees
The company does not have any employees.

7. Shareholdings
On 31 December and as per the end of the prior year, the company held the following direct or
significantly indirect shareholdings with an equity share and percentage of voting rights of 100%
each (unless otherwise indicated):

 Starrag Group Holding GmbH, Chemnitz, Germany (share capital EUR 4.5 million)
 Starrag Group Holdings Ltd., Birmingham, UK (share capital GBP 0.1 million)
Starrag AG, Rorschacherberg, Switzerland (share capital CHF 10 million)

 Starrag GmbH, Chemnitz, Germany (share capital CHF 5.1 million)
Starrag SAS, Saint-Etienne, France (share capital CHF 1.3 million)

Starrag Service Center GmbH & Co. KG, Ichtershausen, Germany (share capital EUR 0.1 million)

(capital share 80%)
 Starrag Technology GmbH, Mönchengladbach, Germany (share capital EUR 22 million)
 Starrag Vuadens SA, Vuadens, Switzerland (share capital CHF 0.5 million)
 Toolroom Technology Limited, Haddenham, UK (share capital GBP 0.02 million)
 Starrag (Shanghai) Co. Ltd., Shanghai, China (share capital CNY 1.5 million)
 Starrag India Private Limited, Bangalore, India (share capital INR 848 million)
 Starrag Italia Srl, Rivoli, Italy (share capital EUR 0.01 million)
 Starrag RU Ltd., Moscow, Russia (share capital RUB 2 million)
 Starrag UK Limited, Birmingham, UK (share capital GBP 1 million)
 Starrag USA Inc., Hebron, USA (share capital USD 0.03 million)

Income from investments in the year under review includes a recovery in the value of investments
of CHF 4.2 million.

8. Share capital
The share capital of CHF 28.6 million consists of 3,360,000 registered shares with the nominal value
of CHF 8.50 each. The company has no outstanding conditional capital and there is no authorised
capital (previous year: no conditional capital, CHF 5.7 million authorised capital).
124 Financial Report
––

9. Major shareholders
The following major shareholders hold more than three per cent of the voting rights:

31.12.2019 31.12.2018

Walter Fust, Freienbach, Switzerland 55.20% 55.20%

Eduard Stürm AG, Goldach, Switzerland 9.26% 9.26%
Max Rössler, Hergiswil / Parmino Holding AG, Goldach, Switzerland 7.98% 7.98%

10. Compensations
Compensations to the Board of Directors and to the Executive Board are disclosed in the compen-
sation report from page 82 of the annual report.

11. Participations of the Board of Directors and Executive Board

Number of shares 31.12.2019 31.12.2018

Prof. em. Dr. Christian Belz, Member 2'800 2'800

Daniel Frutig, Chairman until 26.04.2019 n/a 3'040
Walter Fust, Chairman from 26.04.2019 1'854'703 1'854'703
Adrian Stürm, Member 27'150 27'150
Dr. Bernhard Bringmann, Head BU High Performance Systems 121 n/a
Gerold Brütsch, CFO 400 400
Günther Eller, Head Customer Service 200 200

12. Capital contribution reserves

The reported legal capital contribution reserves at 31 December 2019 amounted to CHF 51.1
million (prior year CHF 54.5 million), of which CHF 47.9 million (prior year CHF 51.3 million) were
recognized by the Swiss Federal Tax Administration within the meaning of Article 20 (3) of the
Federal Income Tax Act and Article 5 (1) of the Federal Withholding Tax Act.

13. Securities for the benefit of Group companies

The total amount of securities furnished for third-party liabilities amounts to CHF 362.2 million
(prior year CHF 371.4 million).

14. Contingent liabilities

The company is part of the VAT group of Starrag AG and thus jointly liable for VAT debts of the
whole group to the Swiss Federal Tax Administration.
 Starrag Group Annual Report 2019 125
––

Appropriation of Retained Earnings

Proposal of the Board of Directors for the appropriation of retained earnings

CHF 1'000 2019 2018

Retained earnings 93'432 91'397

Net income 23'522 2'035
Retained earnings 116'954 93'432

To be carried forward 116'954 93'432

Proposal of the Board of Directors for the appropriation of legal capital

contribution reserves

CHF 1'000 2019 2018

Available capital contribution reserves 12 51'121 54'481

Withholding tax free distribution - -3'360
To be carried forward 51'121 51'121

At the General Meeting on 25 April 2020, the Board of Directors will propose the distribution of a
dividend of CHF 1.00 in the form of a reduction of the par value per registered share of CHF 8.50 to
CHF 7.50 (total reduction CHF 3.4 million). In addition, the Board of Directors will propose that the
available retained earnings of CHF 117 million and the available reserve from capital contribution of
CHF 51.1 million will be carried forward.

In the previous year, a dividend distribution from legal reserves from capital contributions of CHF 1.00
per registered share (total distribution CHF 3.4 million) was carried out according to the resolution
of the General Meeting. In addition, the Annual General Meeting decided that the available retained
earnings of CHF 93.4 million would be carried forward.
126 Financial Report
––

Report of the statutory auditor

Report of the statutory auditor

to the General Meeting of Starrag Group Holding AG
Rorschacherberg

Report on the audit of the financial statements

Opinion
We have audited the financial statements of Starrag Group Holding AG, which comprise the income statement for the
year ended 31 December 2019, the balance sheet as at 31 December 2019, income statement and notes for the year
then ended, including a summary of significant accounting policies.

In our opinion, the financial statements (pages 120 bis 125) as at 31 December 2019 comply with Swiss law and the
company’s articles of incorporation.

Basis for opinion

We conducted our audit in accordance with Swiss law and Swiss Auditing Standards. Our responsibilities under those
provisions and standards are further described in the “Auditor’s responsibilities for the audit of the financial statements”
section of our report.

We are independent of the entity in accordance with the provisions of Swiss law and the requirements of the Swiss audit
profession and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that
the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Our audit approach

Overview Overall materiality: CHF 900'000

We tailored the scope of our audit in order to perform sufficient work to enable
us to provide an opinion on the financial statements as a whole, taking into ac-
count the structure of the entity, the accounting processes and controls, and
the industry in which the entity operates.

As key audit matter the following area of focus has been identified:

Impairment testing of investments in subsidiaries

PricewaterhouseCoopers AG, Vadianstrasse 25a/Neumarkt 5, Postfach, CH-9001 St. Gallen, Switzerland

Telefon: +41 58 792 72 00, Telefax: +41 58 792 72 10, www.pwc.ch

PricewaterhouseCoopers AG is a member of the global PricewaterhouseCoopers network of firms, each of which is a separate and independent legal entity.
 Starrag Group Annual Report 2019 127
––

Materiality
The scope of our audit was influenced by our application of materiality. Our audit opinion aims to provide reasonable
assurance that the financial statements are free from material misstatement. Misstatements may arise due to fraud or
error. They are considered material if, individually or in aggregate, they could reasonably be expected to influence the
economic decisions of users taken on the basis of the financial statements.

Based on our professional judgement, we determined certain quantitative thresholds for materiality, including the overall
materiality for the financial statements as a whole as set out in the table below. These, together with qualitative consider-
ations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures and to
evaluate the effect of misstatements, both individually and in aggregate, on the financial statements as a whole.

Overall materiality CHF 900'000

How we determined it 0.5% of total assets

Rationale for the materiality bench- We chose total assets as the benchmark because, in our view, it is a relevant
mark applied bechmark for holding company, and it is a generally accepted benchmark for
holding companies.

We agreed with the Board of Directors that we would report to them misstatements above CHF 90'000 identified during
our audit as well as any misstatements below that amount which, in our view, warranted reporting for qualitative reasons.

Audit scope
We designed our audit by determining materiality and assessing the risks of material misstatement in the financial state-
ments. In particular, we considered where subjective judgements were made; for example, in respect of significant ac-
counting estimates that involved making assumptions and considering future events that are inherently uncertain. As in
all of our audits, we also addressed the risk of management override of internal controls, including among other matters
consideration of whether there was evidence of bias that represented a risk of material misstatement due to fraud.

Report on key audit matters based on the circular 1/2015 of the Federal Audit Oversight Authority
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the fi-
nancial statements of the current period. These matters were addressed in the context of our audit of the financial state-
ments as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Impairment testing of investments in subsidiaries

Key audit matter How our audit addressed the key audit matter

Investments in subsidiaries is a significant asset cate-gory In our audit of investments in subsidiaries, we per-formed
on the balance sheet (CHF 144.2 million). Impairment test- the following main audit procedures:
ing of investments whose book value is greater than the
book value of the underlying net assets requires Manage- • We compared the book value of the investments
ment to consider capitalised earnings. Doing so involves in the year under review with their pro-rata share
significant scope for judgement, particularly to determine of the respective company's equity or the compa-
the assumptions to use concerning future business results. ny's valuation, based on capitalised earnings.

In identifying the potential need for impairment of invest- • We checked for plausibility the key assumptions
ments in subsidiaries, Management uses a predefined im- applied by Management (revenue, margin growth
pairment testing process. and discount rate).

Please refer to page 122 and 123 (Investments) of the We consider the valuation process and the assumptions
notes to the financial statements. used to be an appropriate and adequate basis for the im-
pairment testing of the goodwill as at 31 December 2019.
128 Financial Report
––

Responsibilities of the Board of Directors for the financial statements

The Board of Directors is responsible for the preparation of the financial statements in accordance with the provisions of
Swiss law and the company’s articles of incorporation, and for such internal control as the Board of Directors determines
is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to
fraud or error.

In preparing the financial statements, the Board of Directors is responsible for assessing the entity’s ability to continue as
a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of ac-
counting unless the Board of Directors either intends to liquidate the entity or to cease operations, or has no realistic al-
ternative but to do so.

Auditor’s responsibilities for the audit of the financial statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from ma-
terial misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable
assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Swiss law and
Swiss Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud
or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these financial statements.

A further description of our responsibilities for the audit of the financial statements is located at the website of EXPERT-
suisse: http://expertsuisse.ch/en/audit-report-for-public-companies. This description forms part of our auditor’s report.
 Starrag Group Annual Report 2019 129
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Report on other legal and regulatory requirements

In accordance with article 728a paragraph 1 item 3 CO and Swiss Auditing Standard 890, we confirm that an internal
control system exists which has been designed for the preparation of financial statements according to the instructions of
the Board of Directors.

We further confirm that the proposed appropriation of available earnings complies with Swiss law and the company’s
articles of incorporation. We recommend that the financial statements submitted to you be approved.

PricewaterhouseCoopers AG

Oliver Kuntze Oscar Maier

Audit expert Audit expert
Auditor in charge

St. Gallen, 4 March 2020

130 Financial Report
––

Five-year overview
CHF 1'000 2019 2018 2017 2016 2015

FER IFRS1)

Order intake 343.2 461.0 349.3 480.3 333.4

Order backlog at year end 284.3 365.9 301.7 348.3 237.8

Sales revenue 418.1 388.8 405.3 371.6 363.7

Operating result before deprecation
and amortization EBITDA 16.8 22.2 26.1 19.8 27.1

Operating result EBIT 4.8 11.1 15.3 9.3 14.7

Net income 6.9 8.4 12.1 6.1 9.5

EBITDA as % of sales revenue 4.0% 5.7% 6.4% 5.3% 7.4%

EBIT as % of sales revenue 1.1% 2.9% 3.8% 2.5% 4.0%

Cash flow from operating activities 10.5 26.9 13.1 21.2 11.0
Capital expenditure in non-current assets 5.1 7.3 11.7 19.4 22.3
Free cash flow 8.3 19.7 3.9 1.8 -11.3

Employees (full-time equivalents,

annual average) 1'514 1'516 1'503 1'524 1'573

Total assets 334.6 369.7 335.3 316.3 341.5

Net cash 0.6 -5.3 -20.7 -18.7 -15.9
Shareholders' equity 178.1 176.6 177.3 161.4 186.1
Equity ratio 53.2% 47.8% 52.9% 51.0% 54.5%
Return on equity ROE 3.9% 4.7% 7.5% 3.8% 4.9%

Earnings per share (in CHF) 2.02 2.49 3.58 1.77 2.78
Share price at year end (in CHF) 46.20 43.00 65.35 52.50 46.00
Profit distribution per share (in CHF) 1.00 2) 1.00 1.50 1.00 1.80
Total shareholder return TSR 9.8% -31.9% 26.4% 16.7% -25.9%

1)
Since 2017, the financial statements of Starrag Group have been prepared in accordance with the Swiss GAAP FER accounting
standards. The 2016 figures have been adjusted accordingly. The key figures 2015 were prepared in accordance with International
Financial Reporting Standards (IFRS) and some of them are only comparable to a limited extent.

2)
Proposal of the Board of Directions to the Annual General Meeting on 25 April 2020 in the form of a reduction of the par value
per registered share from CHF 8.50 to CHF 7.50.
 Starrag Group Annual Report 2019 131
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Financial calendar
 25 April 2020 Annual General Meeting in Rorschach

 23 July 2020 Half-year report 2020

 29 January 2021 Sales and orders 2020

 5 March 2021 Annual report 2020, Analysts and Media

conference in Zurich

 23 April 2021 Annual General Meeting in Rorschach

Contact information:

Gerold Brütsch, CFO

T +41 71 858 81 11
investor@starrag.com
132 Credits
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Imprint
Publisher
Starrag Group Holding AG, Rorschacherberg, Switzerland

Concept and Design

Level East AG, Rorschach, Switzerland

Copywriter
PEPR, Oetwil am See, Switzerland

Printer
Buchdruckerei Lustenau GmbH, Austria
 Starrag Group Annual Report 2019 133
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This annual report is also available in German. In case of any discrepancy between the two versions, the
German text shall prevail. The annual report may also be viewed online on our website: www.starrag.com
_
Berthiez
Bumotec
Dörries
Droop + Rein
Heckert
Scharmann
SIP
Starrag
TTL
WMW

Starrag Group Holding AG

Seebleichestrasse 61
9404 Rorschacherberg
Switzerland

T +41 71 858 81 11

investor@starrag.com
www.starrag.com