Payment risks from customers
Much of the Group’s business involves handling major projects with a large contract volume.  If customers fail to meet their payment obligations for these projects, this may have negative effects on the net worth and liquidity position of the Group.  The Andritz Group tries to limit these risks by securing payment guarantees from banks.  Even in projects covered by export credit insurance, typically only 85% of the purchase price is secured through such insurance.  

Liabilities and performance of projects
In conjunction with the performance of plants supplied by Andritz, the Group is in many cases under contractual obligation to make performance guarantees and to meet certain deadlines. If the performances stated are not achieved, or if deadlines are exceeded, the Group may have to perform remedial work at its expense or pay damages. If a guaranteed performance level or deadline is missed by a wide margin, the customer may have the right to terminate the agreement and return the delivered system to the Group for a full refund and/or recover damages.  Such action could adversely affect the Group’s financial development. The Group has put risk management procedures in place to reduce, inter alia, its contractual and financial risk exposure on projects.

Cost overruns
The Group’s projects are usually based on long-term contracts, the substantial majority of which are fixed price contracts awarded on a competitive bidding basis. The sales and operating margins realized in a fixed price contract may vary from original estimates as a result of changes in costs and productivity over the term of the contract, especially on projects that include plant-wide engineering and/or construction. In addition, since certain parts of the manufacture of the Group’s supplies are outsourced, the Group may be compelled to quote at a fixed price to the customer without knowing exactly how much the purchased parts will cost.  While estimates are made using empirical data and quotes from potential suppliers, these may not be accurate.  The Group has experienced significant losses on certain past and pending projects and project difficulties and losses may occur in the future in a way that would adversely affect the Group's financial condition.