Segment Reporting and Operating Earnings

2. Operations of the BLG Group

As an international seaport-oriented logistics service provider with AUTOMOBILE, CONTRACT and CONTAINER Divisions for its customers in industry and retailing, the BLG Group is represented in over 100 subsidiaries and offices in Europe, North and South America, Africa and Asia.

The services offered range from operation of the seaport terminals in Europe to complex supply chain management with value-added services on an international level. The main services of the divisions, divided into business areas, are presented below.

AUTOMOBILE

The AUTOMOBILE Division offers a full range of finished vehicle logistics services in its seaport terminals, inland terminals, car transport, rail and Southern/Eastern Europe business areas.

The locations of the seaport terminals business area serve as hubs and are export ports for European vehicle production overseas such as China, Japan, Korea, the US, Australia, South Africa and Scandinavia. As import ports, these terminals provide all services for the European vehicle market. In addition to passenger car handling, the services also include traditional warehouse logistics and a large number of technical services such as pre-delivery inspection (PDI), special installations and conversions for new and used vehicles. In order to bundle the expertise in heavy goods handling, the logistics for offshore and onshore wind energy and high & heavy cargo handling segments in Bremerhaven were integrated into the seaport terminals business area. Conventional goods handling at Neustädter Hafen in Bremen is also assigned to the seaport terminals. This includes the handling, storage and other logistics services for handling paper, forestry and steel products as well as project business and the handling of other heavy or bulky goods.

The inland terminals offer short distances to the European highway network, have their own railway connections, and most have a direct connection to the waterways. This network creates reliable logistics chains from car manufacturers around the world to car dealers and private end customers in the destination countries. The services include passenger car handling, warehouse logistics and technical services, e.g. the preparation of newer used vehicles, auctions, Internet sales.

In addition, through its Southern/Eastern Europe business area, BLG LOGISTICS is represented by several maritime and inland terminals in Europe.

In the AutoTransport and rail business areas, the core competence lies in transport by road, rail and inland waterways. The services also include individual transports and special shuttle concepts. Our focus here is on modernizing our fleets in order to be able to offer our customers low-emission transport chains.

In the AUTOMOBILE Division, revenue is normally recognized in the amount permitted to be invoiced, as the invoiced amounts correspond directly with the value of the performance completed to date. The services are mostly invoiced and paid on a monthly basis. This is based on the number of vehicles processed or transported and the agreed unit prices. In some cases, the invoice is issued before the performance obligation is fully met or only after all performance steps have been carried out. The portion of the consideration received from customers for which the services have not yet been performed is recognized as contract liabilities in the statement of financial position. In these cases, the sales are only recognized once the services have been transferred to the customer. Services already performed for which no invoice has yet been issued are recognized as contract assets in the statement of financial position.

CONTRACT

The CONTRACT Division develops customized logistics solutions. The focus of its services is on automotive parts, industrial and production logistics, retail and distribution logistics as well as freight forwarding services.

The industrial logistics (Europe and overseas) business areas provide logistics activities for the manufacturing industry. For car manufacturers, this includes the procurement logistics of the suppliers, supplying production lines, as well as consolidation, processing, packaging and shipping in order to supply production plants. Complex system services ensure reliable supplies to assembly lines in Germany and abroad. With the pre-assembly of vehicle components and production-related work processes, the industrial logistics business area functions as an extended workbench of automobile manufacturers.

In industrial companies in other sectors, complex goods flows relating to production are designed and optimized. The range of services also includes the supplies to and waste removal from production lines, on-site logistics for the optimal design of internal goods flows, reverse logistics management and complex assemblies. In addition, forwarding activities are carried out for the planning and scheduling of land transports.

Complex logistics processes are designed, implemented, managed and executed for retail companies in the retail logistics business area. In all sectors of the retail logistics business area, solutions are offered to customers from a single source. This applies in particular to the areas of e commerce, multi-channel retailing, processing and value-added services for goods, the collection and processing of returns, as well as the handling of flat and hanging merchandise in the fashion logistics segment. Customized innovative solutions for high-profile customers are developed with the help of in-house IT expertise and ensure comprehensive information transparency and goods movements. In addition, the retail logistics business area includes the handling and storage of refrigerated and frozen goods at the Bremerhaven container terminal, as well as all related services.

As part of a reorganization of the CONTRACT Division, the previous division into the industrial and retail logistics business areas will be replaced by three areas of competence. In the new organization by region, Contract Operations places the focus on proximity to the customer, While Customer & Business Development focuses on market developments, thus positioning itself competitively and flexibly. Performance Support intrinsically strengthens the organization, making it future-proof and transparent. Overall, the bundling of competencies helps us to be more broadly positioned vis-à-vis customers, to benefit from synergies, and to design solutions that are even more tailored to customers’ needs.

In the CONTRACT Division, revenue is usually recognized in the amount permitted to be invoiced, as the invoiced amounts correspond directly with the value of the performance completed to date. The services are mostly invoiced and paid on a monthly basis. Capital-intensive services such as the provision of space and storage facilities are largely invoiced at fixed prices, but sometimes also according to actual use. The invoicing of personnel-intensive services is based on prices per performance unit or a combination of fixed basic remuneration and variable remuneration per performance unit, sometimes using volume tiers.

CONTAINER

The CONTAINER Division is represented by the joint venture EUROGATE GmbH & Co. KGaA, KG, Bremen, in which BLG holds a 50 percent share. EUROGATE has its own subsidiaries and investees. The EUROGATE Group companies are included in the consolidated financial statements using the equity method of accounting.

The focus of the activities of the EUROGATE Group includes handling containers on the European continent. EUROGATE operates, in some cases with partners, container terminals in Bremerhaven, Hamburg and Wilhelmshaven, Germany, at the Italian locations La Spezia, Ravenna and Salerno, in Tangier, Morocco, in Limassol, Cyprus, and in Ust-Luga, Russia. In addition, EUROGATE has investments in several inland terminals and rail transport companies.

Intermodal services (the transport of sea containers to and from the terminals), repairs, depot storage and trading of containers, cargo-modal services and technical services are offered as secondary services.

3. Notes on Segment Reporting

In accordance with IFRS 8, segment information is based on the internal management and reporting structure. With regard to BLG LOGISTICS, this means that segments are reported by division in line with the Group structure, i.e., the CONTAINER Division is still recognized as a separate segment in segment reporting and is eliminated again in the reconciliation column. At the same time, the earnings from companies accounted for using the equity method, which primarily include the earnings of the CONTAINER Division, are reported as part of EBIT in line with internal management. This also applies to the other companies accounted for using the equity method.

Entire companies are each assigned to the AUTOMOBILE, CONTRACT and CONTAINER Divisions. These companies each represent operating segments, which are grouped together for reporting purposes according to division, as they operate in a similar economic environment and are very similar in their services, processes and customer groups.

The AUTOMOBILE and CONTRACT Divisions were subdivided into eight business areas in 2022. Responsibility for the operational management of the business areas, including earnings responsibility, lies with the relevant business area managers of the AUTOMOBILE and CONTRACT Divisions, and with the Group management of the subgroup EUROGATE GmbH & Co. KGaA, KG for the CONTAINER Division.

The AUTOMOBILE Division essentially comprises the companies BLG AutoTerminal Bremerhaven GmbH & Co. KG, BLG AutoTerminal Deutschland GmbH & Co. KG, BLG AutoTransport GmbH & Co. KG and BLG AutoRail GmbH.

The significant companies of the CONTRACT Division are BLG Industrielogistik GmbH & Co. KG, BLG Handelslogistik GmbH & Co. KG and BLG Sports & Fashion Logistics GmbH.

The CONTAINER Division includes the 50-percent stake in the operational management company EUROGATE GmbH & Co. KGaA, KG of the EUROGATE Group.

The operations of the divisions are described in detail in note 2.

BLG AG and BLG KG, as the management and financial holding companies of the BLG Group, are not an operating segment as defined by IFRS 8. These central departments, with their assets, liabilities and results, are included in the reconciliation column. For disclosures regarding employees, the central departments are referred to as “Services.” The relevant disclosures can be found in the Group management report.

BLG LOGISTICS predominantly conducts its activities in Germany. EUR 1,070,318 thousand of Group revenue (previous year: EUR 1,016,393 thousand) was attributable to Germany and EUR 48,662 thousand (previous year: EUR 34,045 thousand) to other countries. This allocation was based on the location at which the Group performs services. EUR 529,555 thousand of the Group’s non-current intangible assets and property, plant and equipment (previous year: EUR 551,089 thousand) was attributable to Germany and EUR 23,084 thousand (previous year: EUR 18,167 thousand) to other countries.

Around 18 percent (previous year: 17 percent) of total Group revenue was generated with the Group’s largest customer in the AUTOMOBILE and CONTRACT Divisions. Of this amount, EUR 196,156 thousand (previous year: EUR 178,956 thousand) was attributable to Germany and EUR 35 thousand (previous year: EUR 2,658 thousand) to other countries. Around 10 percent (previous year: 11 percent) of total Group revenue was generated with the Group’s second-largest customer in the AUTOMOBILE and CONTRACT Divisions. Of this amount, EUR 100,004 thousand (previous year: EUR 109,756 thousand) was attributable to Germany and EUR 7,982 thousand (previous year: EUR 858 thousand) to other countries.

BLG LOGISTICS is managed on the basis of the financial data for the operating segments determined in accordance with IFRSs; the accounting policies apply to the segments in the same way as to the entire Group. The key performance indicators for the segments are revenue, earnings before interest and taxes, earnings before taxes (EBT), and the EBT margin. In addition, RoCE (Return on Capital Employed) is calculated at Group level.

Services between the segments are billed on an arm’s length basis.

Depreciation and amortization relate to the segments’ property, plant and equipment, including right-of-use assets.

Segment assets do not include equity investments in companies accounted for using the equity method, or deferred or current taxes. There are no segment assets not required for operations. In line with internal control, intra-Group subleases are recognized by the end user only.

Segment liabilities include lease liabilities, current liabilities necessary for financing and provisions, excluding interest-bearing loans.

Capital expenditure relates to additions to property, plant and equipment, right-of-use assets and non-current intangible assets.

The reconciliation of the total of the reportable segments with the Group data was as follows for the main items of segment reporting:

4. Revenue from Contracts with Customers

Revenue

In accordance with IFRS 15, revenue is recognized either at a point in time or over time when or as the performance obligation is satisfied and control is passed to the customer.

The amount of the revenue is based on the consideration agreed with the customer in exchange for transferring the promised goods or services.

The main services of the divisions, according to business areas, are described in note 2.

In the BLG Group, revenue is normally recognized pursuant to IFRS 15.B16 in the amount permitted to be invoiced, as the invoiced amounts correspond directly with the value of the performance completed to date. BLG LOGISTICS therefore makes use of the practical expedient provided by IFRS 15.121 (b) and does not disclose the amount of the remaining performance obligations for these contracts.

The tables below itemize revenue by service type and by business area and allocate the subdivided revenue to the AUTOMOBILE and CONTRACT Divisions. The CONTAINER Division is not included because it is accounted for using the equity method. A breakdown by revenue generated in Germany and abroad is included in note 3.

Assets and liabilities from contracts with customers

Contract assets relate primarily to rights to receive consideration from customers arising from the satisfaction of performance obligations for which no invoice has been issued at the end of the reporting period. They are recognized under other assets in the statement of financial position (note 18).

Contract assets are reclassified as trade receivables if the right to receive consideration becomes unconditional. This is the case if the payment is due or will become due automatically as a result of the passage of time.

Loss allowances reported in net profit or loss are recognized on the basis of expected credit losses using the simplified approach. According to this approach, the amount of the loss allowance is to be determined on the basis of the lifetime expected credit losses. Changes in credit risk do not have to be tracked. The loss allowances are reported net as a separate item in the statement of profit or loss. Please also refer to note 32.

As the risk structure of the contract assets essentially corresponds to the risk structure of the trade receivables, the same expected credit loss rates are recognized for the loss allowances. The calculation of credit loss rates is described in note 18.

Contract liabilities result from advance payments by the customer or unconditional rights to receive consideration from the customer already existing before the (full) satisfaction of the performance obligations. Revenue is only recognized once the services have been transferred to the customer. They are recognized under other liabilities in the statement of financial position (note 28).

The tables below contain information on the development of contract assets and contract liabilities.

The credit risk and the expected credit losses for contract assets were as follows as of December 31, 2022, and December 31, 2021:

Loss allowances for contract assets developed as follows:

5. Other Operating Income

Of the ground rent and rental income, EUR 1,294 thousand (previous year: EUR 1,371 thousand) was attributable to income from operating leases for own non-current assets and EUR 792 thousand (previous year: EUR 634 thousand) to income from subleases (see note 14).

6. Cost of Materials

7. Personnel Expenses

Amounts resulting from the interest cost of personnel provisions, particularly pension provisions, are not recognized as personnel expenses. These are reported as a component of net interest income (expense).

Statutory social expenses included EUR 32,829 thousand (previous year: EUR 33,509 thousand) for contributions to statutory retirement plans. Of this amount, EUR 175 thousand (previous year: EUR 199 thousand) was attributable to key management personnel and EUR 13 thousand (previous year: EUR 19 thousand) to employee representatives on the Supervisory Board.

In 2022, BLG LOGISTICS had an average of 9,887 employees (previous year: 10,370). Of these employees, 7,726 (previous year: 8,212) were blue-collar workers and 2,161 (previous year: 2,158) worked in commercial functions. Please refer to the Group management report and the Segment reporting for further information.

8. Depreciation, Amortization and Impairment of Non-current Intangible Assets, Property, Plant and Equipment and Right-of-Use Assets from Leases

A breakdown of the depreciation, amortization and impairment of the individual asset classes can be found in notes 12 and 13.

The impairments in the reporting year related with EUR 7,836 thousand in the full amount to two cross-network planning and control tools.

Depreciation and amortization included depreciation on right-of-use assets from leases in accordance with IFRS 16 of EUR 45,894 thousand (previous year: EUR 47,693 thousand). Further disclosures can be found in note 14.

9. Other Operating Expense

10. Net Income (Net Loss) of Companies Accounted for Using the Equity Method

Profit shares from partnerships are realized immediately at the end of the financial year, unless the partnership arrangement links the existence of a withdrawal claim to a separate partner resolution. By contrast, dividends from corporations are recognized through profit or loss only once a profit appropriation resolution exists.

As a result of the Russian war of aggression, the equity investment in BLG ViDi LOGISTICS TOW, Kyiv, Ukraine, was written down in full (EUR 1,984 thousand, previous year: EUR 0 thousand). The impairment was allocable in full to the AUTOMOBILE Division.

Income from joint ventures included the CONTAINER Division’s earnings of EUR 76,705 thousand (previous year: EUR 61,879 thousand).

11. Net Interest Income (Expense)

Please refer to note 14 for information on interest income from lease receivables and interest expense from lease liabilities.

Borrowing costs of EUR 0 thousand (previous year: EUR 412 thousand) were capitalized. The underlying capitalization rate in the previous year was 2.15 percent.