2021 ANNUAL REPORT
CREATIVE CONCEPT
The creative concept of the Sabaf Annual Report 2021 focuses on the company’s strategic vision, enabling to have a clear direction to follow, even within an unpredictable and turbulent scenario like the current one. Sabaf’s values, commitments and goals become real and tangible, carved like laws onto three-dimensional tablets, through aphorisms that faithfully condense an important principle into an expression that is powerful in its ability to be remembered and conveyed. These seven panels describe Sabaf, a Group that aspires to be the author of its very own future.
All Creative
10
INTRODUCTION TO THE ANNUAL REPORT
13
Summary of key performance indicators (KPI)
21
Products and markets
28
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
30
Methodological note
31
Letter from the Chief Executive Officer to stakeholders
33
Business model, strategic approach and sustainable creation of value
33
Strategic approach and creation of value
33 Sustainable value creation 33 Values, vision and mission 36
Business model
45
Materiality analysis
48
Corporate Governance, Risk Management and Compliance
48
Corporate Governance
61
Risk Management
63
Compliance
70
Sabaf and employees
70
Risks
71
Personnel management policy
72
The people of the Sabaf Group
76
Recruitment policy
80
Personnel training
80
Internal Communication
81
Diversity and equal opportunities
82
Remuneration, incentive and enhancement systems
85
Occupational health and safety and working environment
88
Industrial relations
89
Business climate analysis
89
Disciplinary measures and disputes
90
Sabaf and environment
90
Risks
90
Health and safety, environmental and energy policy
91
Process and product innovation and environmental sustainability
92
Environmental impact
95
Disputes
96
Sabaf, the management of product quality and customer relations
96
Risks
97
Quality management policy
99
Sabaf and supply chain management
99
Risks
99
Supply chain management policy
101
Sabaf, Public Administration and Community
105
Sabaf and shareholders
107
Sabaf and lenders
108
Sabaf and competitors
110
EU Taxonomy
111
GRI Content Index
115
Independent auditors’ report on the consolidated disclosure of non-financial information
120
REPORT ON OPERATIONS
132
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
182
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
238
REPORT ON REMUNERATION
INTRODUCTION TO THE ANNUAL REPORT
Summary of key performance indicators (KPI)
13
Products and markets
21
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
The publication of the Annual Report of the Sabaf Group, now in its seventeenth edition, confirms the Group’s commitment, undertaken since 2005, to an integrated reporting of its economic, social, and environmental performance. Sabaf, one of the first international-level companies to embrace the trend of integrated reporting, intends to continue along this path, aware that integrated, complete and transparent reporting can benefit both the companies themselves, through a better understanding of the structure of the strategy and greater internal cohesion, and the community of investors, which can thus more clearly understand the connection between strategy, governance and company performance. The Annual Report provides an overview of the Group’s business model and the process of creating corporate value. The business model and the main results achieved (summary of key performance indicators) are in fact presented from the standpoint of the capital employed (financial; social and relational; human; intellectual, infrastructural, and natural) to create value over time, thereby generating results for the business, with positive impacts on the community and on
LO
TE N G-
stakeholders as a whole. “Non-financial indicators” include the results achieved in managing and enhancing intangible capital, the main driver that allows monitoring the ability of the company’s strategy to create value in a perspective of medium/long-term sustainability. On 30 December 2016, Legislative Decree no. 254 came into force, which, in implementation of Directive 2014/95/EU on Non-financial and diversity information, requires relevant public interest entities to disclose non-financial and diversity information starting from the 2017 financial statements. As a relevant public-interest entity, Sabaf prepared for the fifth year the Consolidated disclosure of nonfinancial information presenting the main policies practiced by the company, the management models, the risks, the activities carried out by the Group during 2021, and the related performance indicators as pertains to the topics expressly referred to by Legislative Decree no. 254/2016 (environmental, social, personnel-related, respect for human rights, fight against corruption) and to the extent needed to ensure understanding of the business activity, its trend, its results, and the impacts it produces.
RM SUSTAINABLE SU CCE S
STRATEGY
ECONOMIC PERFORMANCE
12
S
GOVERNANCE
SOCIAL PERFORMANCE
ENVIRONMETAL PERFORMANCE
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
Summary of key performance indicators (KPI) ECONOMIC CAPITAL
2021
2020
2019
SALES REVENUES
€/000
263,259
184,906
155,923
EBITDA
€/000
54,140
37,097
27,033
EBIT
€/000
37,508
20,093
11,896
PRE-TAX PROFIT
€/000
29,680
14,509
9,776
NET PROFIT
€/000
23,903
13,961
9,915
WORKING CAPITAL
€/000
68,631
52,229
49,693
INVESTED CAPITAL
€/000
190,043
174,129
176,233
SHAREHOLDERS’ EQUITY
€/000
122,436
117,807
121,105
NET FINANCIAL DEBT
€/000
67,607
56,322
55,128
%
19.7
11.5
6.8
€/000
6,172
3,924
6,060
ROCE (RETURN ON CAPITAL EMPLOYED) DIVIDENDS PAID OUT
Net Profit
2021
€/000
2020
25,000
23,903
€/000
2019
25,000
13,961
€/000
9,915
25,000
13
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
HUMAN CAPITAL
TOTAL EMPLOYEES
no.
%
AVERAGE AGE OF PERSONNEL
(sum of employee age/ total employees at 31/12)
(number of graduates/total employees at 31/12)
YEARS
%
%
LEAVING TURNOVER
(employees no longer in office/ total employees at 31/12) %
%
%
2021
1,278 60.9 39.1
39.5
64.4
17.7 21.9 11.2
2020
1,168 62.0 38.0
39.3
61.6
10.8 11.5
2019
1,035 63.5 36.5
39.8
59.1
9.1
10.2
9.7 7.1
(hours of training/total employees at 31/12)
HOURS OF TRAINING PER COLLABORATOR
(hours of training/total collaborators at 31/12)
INVESTMENTS IN TRAINING OF EMPLOYEES/ TURNOVER
h
h
%
2021
17.4
20.4
0.21
2020
10.8
13.9
0.19
2019
15.3
-
0.25
HOURS OF TRAINING PER EMPLOYEE
14
LEVEL OF EDUCATION
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
INVESTMENTS IN TRAINING OF COLLABORATORS/TURNOVER
HOURS OF STRIKE FOR INTERNAL CAUSES
%
h
TOTAL INJURY RATE
(number of injuries x 1,000,000/total hours worked)
2021
0.27
39
15.59
2020
0.26
0
16.10
2019
-
0
10.57
SUMMARY INDICATOR OF INJURIES
JOBS CREATED (LOST)
INJURY LOST DAY RATE1
(days of absence x 1,000/total hours worked)
(injury rate x injury lost day rate x 100)
no.
1
2021
0.21
327
110
2020
0.11
177
133
2019
0.51
539
15
The 2019 injury lost day rate has been restated due to the continued absence of an injury in 2021. 15
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
RELATIONAL CAPITAL
2021
VALUE OF GOODS AND SERVICES OUTSOURCED
2019
AVERAGE TURNOVER BY CUSTOMER (total turnover/number of customers)
€/000
€/000
18,227
629
10,670
465
8,190
388 0
10,000
20,000
0
PERCENTAGE OF TOP 10 CUSTOMERS
500
1,000
50
100
PERCENTAGE OF TOP 20 CUSTOMERS
%
%
47
67
50
70
47
66 0
50
0
100
TURNOVER FROM CERTIFIED SUPPLIERS
NUMBER OF ANALYSTS WHO FOLLOW THE SECURITY CONTINUOUSLY
(turnover from certified suppliers/purchases) %
no.
72
2
65
1
74
2 0
50
100
5
10
LAWSUITS FILED AGAINST GROUP COMPANIES no.
1 2 6 0
16
2020
0
5
10
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
PRODUCTIVE CAPITAL
2021
€/000
20,000
12,014
0.9
0.8
0.6
10,000
0
0
QUANTITIES SOLD OF LIGHT ALLOY VALVES ON TOTAL VALVES AND THERMOSTATS
QUANTITIES SOLD OF HIGH ENERGY EFFICIENCY BURNERS ON TOTAL BURNERS
%
%
25
0
91.7 0
23.1
50
23.3
5
26.5
50
91.3
100
89.3
10
7.4
9.0
1
0.5
0
%
8.7
17,296
100,000
REAL INVESTMENT/ TURNOVER
2
%
30,000
50,000
2019
IT BUDGET 2 (investments + current expenditure)/ TURNOVER
150,000
23,752
138,506
€/000
131,543
TOTAL NET INVESTMENTS
130,093
FIXED ASSETS
2020
0
For the 2019 reporting period, the indicator does not consider data relating to the C.M.I. Group, over which Sabaf acquired control on 31 July 2019. 17
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
ENVIRONMENTAL CAPITAL
2021
2020
2019
Materials used t
Aluminium alloys
Steel
0
21,881
9,188
0
5,000
26,046
10,000
50,000
26,801
1,000
6,476
15,000
11,326
1,500
500
481
638
1,227
Brass
Electricity consumption
Natural gas consumption
Energy intensity
MWh
m x1,000
(kWh/turnover)
3
kWh/€
From renewable sources
From non-renewable sources
5,000
50,000
10,000
0.5
2,500
25,000
5,000
0.25
18
0.426
0.436
0
0.378
3,740
4,478
0
5,474
28,526
35,220
0
39,276
50
158
4,853
0
25,000
0
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
2021
2020
2019
Waste by type3 t
Total waste/Generated economic value kg in €/000
0
CO2 emissions
Intensity of CO2 emissions
(scope 1+scope 2 market-based)
(scope 1 and 2 market-based emissions/turnover)
Water consumption 4 m3
100
50,000
200
100,000
50
25,000
100
50,000
91,925
78,357
0
99,739
130
132
20,277
24,378
0
111
0
29,134
50
56
45
0
tCO2eq/millions of Euro
0
4
0
6,164
5,000
8,132
5,000
9,385
250
1,631
10,000
2,256
10,000
tCO2eq
3
Non-hazardous
500
2,238
225
Hazardous
291
356
Similar to urban
The indicator does not include data relating to the Polish branch of C.M.I.. The indicator does not include data relating to C.G.D. s.r.l.. 19
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
INTELLECTUAL CAPITAL
Capitalised investments in research and development
Hours dedicated to the development of new products/hours worked5
Hours dedicated to process engineering/hours worked
(hours dedicated to orders for the construction of new machines for new products or to increase production capacity/total hours worked)
Investments in intangible assets/turnover
Value of waste/turnover (production waste/turnover)
Impact of quality costs/turnover
(charges and returns from customers/turnover)
Number of samples for customers
5
The 2019 data does not include the C.M.I. Group and Okida.
20
2021
2020
2019
€/000
€/000
€/000
1,770
465
460
%
%
%
3.1
3.3
1.0
%
%
%
1.7
2.6
2.2
%
%
%
0.8
0.6
0.7
%
%
%
0.48
0.48
0.47
%
%
%
0.05
0.13
0.14
no.
no.
no.
5,571
5,034
6,184
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
Products and markets Historically, the Sabaf Group is one of the world’s leading manufacturers of components for household gas cooking appliances, with a market share of about 40% in Europe and over 10% worldwide. In recent years, through a policy of organic investments and through acquisitions, the Group expanded its product range and is now active in the following segments of the household appliance market:
• gas parts; • hinges; • electronic components. The reference market is represented by manufacturers of household appliances. The range also includes products for the professional sector.
THE 2021-2023 BUSINESS PLAN On 23 March 2021, the Board of Directors approved the 2021-2023 Business Plan. The aim was to accelerate growth, both organic and through acquisitions, which was positively launched with the carrying-out of the 2018-2020 Plan. The Business Plan set a revenue target of €300 million in 2023, gross profitability (EBITDA%) of at least 19%, and an improvement in return on invested capital (ROI) of at least one percentage point from 11.5% in 2020. Over the three-year period, total investments of €130 million (including those for M&A) were planned.
Therefore, the industrial footprint to 2023 envisaged 13 production plants, of which 5 in Italy and 8 abroad with new sites in India, Turkey and Mexico.
Organic development
With the new Plan, the Group promotes the improvement of the quality of the environment and the community in which it operates so that the basic needs of all are met in an environmentally sustainable way. To this end, specific objectives are defined in the Plan, such as the reduction of emissions, safety at work and the growth of its own people through training.
The Group has set an average annual growth target for sales of more than 10%. Organic growth will be supported by strengthening technical and commercial relations with some of the major global players. Research and development activities will increasingly focus on the study of ad hoc solutions to meet the specific needs of individual markets and the design of customised products.
Development through acquisitions
The Group is also determinedly pursuing new growth opportunities through acquisitions and/or joint ventures, which will be aimed at further extending the product range and fully exploiting the Group’s production potential.
Sustainability
THE PRODUCT RANGE GAS PARTS Valves: they regulate the flow of gas to the covered (of the oven or grill) or uncovered burners.
HINGES They allow movement and balancing when opening and closing the oven door, washing machine door or dishwasher door.
Burners: by mixing the gas with air and burning the gases used, they produce one or more flame rings. Accessories: include spark plugs, microswitches, injectors and other components to complete the range.
ELECTRONIC COMPONENTS Electronic control boards, timers and display and power units for ovens, refrigerators, freezers, hoods and other products.
21
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
SALES BY DIVISION (€/000)
HINGES
ELECTRONIC COMPONENTS
136,169
150,000
122,205
129,834
200,000
141,314
182,468
GAS PARTS
8,905
4,037
10,436
9,944
23,774
50,000
13,746
22,416
41,326
58,375
100,000
0
2021
2020
2019
2018 2021
COUNTRIES AND CUSTOMERS6
COUNTRIES
CUSTOMERS
(no.)
(no.)
2017 2020
2019
70
500
60
400
50
300
40
10
402
20
399
200
418
55
64
56
30
100
0
In line with the followed commercial policies, most of the active commercial relations are characterised by relations consolidated over the long term. There are 48 customers with annual sales of more
than €48 million (32 in 2020). The distribution by class of turnover is as follows:
2021
2020
2019
> €5,000,000
15
10
7
from €1,000,001 to €5,000,000
33
22
25
from €500,001 to €1,000,000
18
24
16
from €100,001 to €500,000
81
64
75
< €100,000
271
279
279
Total customers
418
399
402
(no.)
6
0
Data processed considering customers with sales above €1,000.
22
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
THE INDUSTRIAL FOOTPRINT
SABAF S.P.A.
FARINGOSI HINGES S.R.L.
Valves and thermostats Standard burners Special burners
Oven hinges Dishwasher hinges
REVENUE € 144 MILLION 588 EMPLOYEES
REVENUE € 15.7 MILLION 59 EMPLOYEES
SABAF TURKEY
C.M.I. ITALY
Standard burners
Oven hinges Dishwasher hinges
REVENUE € 41 MILLION 176 EMPLOYEES
REVENUE € 37.4 MILLION 242 EMPLOYEES
OKIDA ELEKTRONIK
A.R.C. S.R.L.
Electronics for household appliances REVENUE € 22 MILLION 222 EMPLOYEES
Professional burners REVENUE € 6.3 MILLION 22 EMPLOYEES
SABAF MEXICO Burners and hinges
SABAF DO BRASIL
SABAF INDIA
REVENUE € 11.6 MILLION 50 EMPLOYEES
A.R.C. HANDAN JV
Wok burners
Valves and burners
Dishwasher hinges
Standard burners Special burners REVENUE € 16.6 MILLION 119 EMPLOYEES
€
263.3 million
2021 GROUP TURNOVER 7
SABAF CHINA
C.M.I. - POLISH BRANCH
REVENUE € 2 MILLION 9 EMPLOYEES
Professional wok burners
1,487 employees
EMPLOYEES OF THE GROUP AT 31.12.20217
Including agency workers and trainees. 23
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
SABAF’S INTERNATIONAL DEVELOPMENT: CHALLENGES AND OPPORTUNITIES ANALYSIS OF THE SCENARIO
PERFORMANCE DATA8
EUROPE (EXCLUDING TURKEY) Europe has historically been the Sabaf Group’s main market. European household appliance production is characterised by high quality, innovative contents - especially in terms of digitalisation and energy efficiency -
92,935 | 35.3%
2021
69,618 | 37.7%
2020
and design. Therefore, the demand for components is also increasingly characterised by more technological and higher performance goods.
58,684 | 37.6%
51,961 | 34.5%
54,753 | 36.4%
2019
2018
2017
TURKEY Turkey is the main production hub of household appliances for the European market. In this context, the opening of a production plant in 2012 and the acquisition of Okida Elektronik (September 2018) were key elements in support of the growth strategy. In 2021, Sabaf opened a new plant in Turkey to increase production capacity for electronic components.
65,526 | 24.9%
2021
44,806 | 24.2%
2020
Sabaf estimates that about 75% of sales in Turkey are exported by our customers; however, the Turkish domestic market is of increasing importance although subject to the fluctuations that can characterise emerging economies, such as currency crises and high inflation. The Group’s strategy is to further develop its activities in Turkey as early as 2022.
39,813 | 25.6%
38,256 | 25.4%
36,272 | 24.2%
2019
2018
2017
NORTH AMERICA Sabaf’s presence in North America is relatively recent, but sales and market share have been growing steadily in recent years, also thanks to the development of codesigned products with major customers. In 2021, the Group acquired a plot of land in San Luis de
30,472 | 11.6%
2021
8
Sales by geographical area (€/000) and percentage incidence on Group sales.
24
22,700 | 12.3%
2020
Potosi (Mexico), where work began on the construction of a plant for the production of burners and hinges. We believe that the direct presence in North America, which will enable us to cut time and logistical costs, foreshadows further development opportunities.
17,727 | 11.4%
2019
15,071 | 10.0%
2018
12,735 | 8.5%
2017
SABAF . 2021 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
ANALYSIS OF THE SCENARIO
PERFORMANCE DATA
SOUTH AMERICA Sabaf has a well-established presence in Brazil (one plant has been operational since 2001). The Sabaf Group believes that the development potential of this area is extremely interesting, considering the significant size of the market and the demographic growth
39,589 | 15.0%
2021
27,639 | 14.9%
trends. The product range for the local market was recently expanded, with the production of special burners in Brazil, also to meet the specific nature of demand. Other markets of great interest to the Group are those in the Andean area.
23,451 | 15.0%
2020
2019
25,461 | 16.9%
2018
22,938 | 15.3%
2017
AFRICA AND MIDDLE EAST Sabaf has a long-standing presence and reputation in the Middle East and Africa. The Group considers the Middle East and Africa among the
19,614 | 7.5 %
12,040 | 6.5%
2021
2020
most promising markets in the medium term, also in view of demographic trends and the growing rate of urbanisation.
7,050 | 4.5 %
2019
12,303 | 8.2%
13,009 | 8.6%
2018
2017
ASIA AND OCEANIA China, with its production of more than 30 million hobs per year, is the most important market in the world. The Group aims to establish long-term partnerships with major Chinese customers. Another market with great potential is the Indian market, for which Sabaf developed a range of dedicated burners: a production site was acquired in Hosur
(Tamil Nadu) in 2020, where production of gas parts will begin in 2022. Although sales in China and India still represent a small share of Sabaf’s total business, these areas are a strategic priority for the Group.
15,123 | 5.7%
8,103 | 4.4%
9,198 | 5.9%
7,590 | 5.0%
2021
2020
2019
2018
10,516 | 7.0%
2017
25
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION prepared pursuant to Article 4 of Legislative Decree 254/2016
Methodological note
30
Letter from the Chief Executive Officer to stakeholders
31
Business model, strategic approach and sustainable creation of value
33
Corporate Governance, Risk Management and Compliance
48
Sabaf and employees
70
Sabaf and environment
90
Sabaf, the management of product quality and customer relations
96
Sabaf and supply chain management
99
Sabaf, Public Administration and Community 101 Sabaf and shareholders 105 Sabaf and lenders 107 Sabaf and competitors 108 EU Taxonomy 110 GRI Content Index 111 Independent auditors’ report on the consolidated disclosure 115 of non-financial information
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Methodological note PREPARATION CRITERIA
REPORTING BOUNDARY
The consolidated disclosure of non-financial information of the Sabaf Group (hereinafter also referred to as the “Disclosure”), prepared in accordance with Art. 4 of Legislative Decree 254/2016 as amended (hereinafter also referred to as the “Decree”), contains information (policies practiced, risks and related management methods, management models and performance indicators) on environmental, social, personnel, human rights and anti-corruption issues, to the extent necessary to ensure understanding of the activities carried out by the Group, its performance, results and impact. Each section also describes the main risks, generated or suffered, related to the above issues and deriving from the Group’s activities.
The reporting boundary of qualitative and quantitative data and information contained in the Consolidated Disclosure of NonFinancial Information of the Sabaf Group refers to the performance of the Sabaf Group (hereinafter also referred to as “Group” or “Sabaf”) for the year ended 31 December 2021 and includes all companies consolidated on a line-by-line basis, except for: • Sabaf India and Sabaf Mexico, newly established and not yet operational companies in 2021; • A.R.C. Handan, a small company whose non-financial performance is entirely negligible. The 2019 data relating to the C.M.I. Group is consolidated from the date Sabaf acquired control (31 July 2019). Any exceptions are clearly indicated in the text at specific indicators.
The Sabaf Group identified the GRI Sustainability Reporting Standards (hereinafter also referred to as “GRI Standards”) published by the Global Reporting Initiative (GRI) as the “reference standard” for fulfilling the obligations of Legislative Decree 254/2016, as the most widely recognised and internationally disseminated Guidelines. As from 2019, Sabaf reports on occupational health and safety using the GRI 403 indicator: Occupational Health and Safety 2018; as from 2020, it reports on taxes using the GRI 207 indicator: Tax 2019; as from 2021, it reports on waste using the GRI 306 indicator: Waste 2020. This Disclosure is prepared according to the “in accordance - core” reporting option. The process of defining the contents and determining the material topics, also in relation to the areas envisaged by the Decree, was based on the principles envisaged by GRI Standards (materiality, stakeholder inclusiveness, sustainability context, completeness, comparability, accuracy, timeliness, clarity, reliability and balance). To help readers find the information in the document, the GRI Content Index is at the bottom of the disclosure. This Disclosure was approved by the Board of Directors on 22 March 2022 and will be prepared annually. In accordance with one of the options envisaged by Art. 5 of Legislative Decree 254/2016, it constitutes a separate report from the Report on operations. Moreover, this Disclosure is subject to limited review according to ISAE 3000 Revised by the independent auditors EY S.p.A., appointed to audit the Group’s accounts.
30
REPORTING PROCESS In 2019, the Board of Directors of Sabaf S.p.A. approved a procedure for the reporting process of non-financial information. The procedure defines the phases, activities, timing, roles and responsibilities for the management of the reporting process and for the definition, collection and validation of data and other contents of the Disclosure. The procedure, which has been applied for the preparation of this Disclosure, envisages the involvement of the parent company’s management (“group data owners”) and the representatives of all subsidiaries (“subsidiary data owners”), who are responsible for the relevant areas and the related data and information covered by the Group’s non-financial reporting. In particular, the data and information included in this Disclosure derive from the company information system used for the management and accounting of the Group and from a non-financial reporting system (data collection package) specifically implemented to meet the requirements of Legislative Decree 254/2016 and GRI Standards. In order to ensure the reliability of the information contained in the Disclosure, directly measurable quantities have been included, limiting the use of estimates as much as possible. Calculations are based on the best information available or on sample surveys. The estimated quantities are clearly indicated as such. The economic and financial data and information are derived from the Consolidated Financial Statements at 31 December 2021.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Letter from the Chief Executive Officer to stakeholders An assessment of 2021 can only start with a very satisfying figure: the Sabaf Group achieved its highest ever revenues and margins for the year. This extraordinary performance reflects a particularly favourable market phase, but also rewards the strategic direction followed in recent years and the management choices that have accompanied it. Let us start with the market. In 2021, global demand for household goods, already fuelled in the previous year by the new lifestyles imposed by the pandemic, remained at high levels. The growth in demand, estimated at 10%-15%, gave a strong boost to orders, also driven by the acquisition of new market shares. The Group was ready to handle this massive growth (over 40% compared to 2020) and was able to cope with its intensity: it was a test of resilience that our organisation passed brilliantly. The record results prove the validity of the path of change started in 2018 to which I will return later in this letter. Suffice it to say that the expansion, through acquisitions, of the offered range of products, the development of synergies between the components of the Group and the strengthening of the industrial footprint significantly increased our development potential, which the market momentum has allowed us to fully exploit. The organisation’s ability to overcome difficulties also explains the performance. In 2021, the effects of the pandemic continued to obstruct operations. The climate of uncertainty that a phenomenon of this magnitude and extension generates, already an obstacle in itself in that it influences the strategic decisions of economic operators, was accompanied by the critical issues generated by the global economic recovery. It was difficult to manage logistics, the costs of which increased exponentially, to source raw materials, to absorb rising energy costs and to organise the work of employees. We have succeeded in doing this by negotiating sales price adjustments with our
customers and implementing measures to reduce energy consumption, starting with measures to increase the efficiency of the most energy-intensive systems. Last, but certainly not least, I would like to emphasise that the results of the 2021 financial year would not have been possible without the extraordinary commitment of our 1,500 employees, whose professionalism and dedication, already decisive in ensuring continuity of production after the outbreak of the pandemic, was also evident in 2021. Going beyond the results, it is appropriate to dwell on how Sabaf is moving to ensure in the long term, for shareholders and stakeholders, a constant generation of economic and social value. With the business plan presented in 2018, updated in 2021, we have initiated a transformation aimed at a new market positioning: from a company mainly focused on gas cooking parts to an all-round player in smart appliances. The objective reflects a clear view of how consumption patterns and the global economy trends are evolving (including the income of Countries with the best growth prospects) and of the qualities our customers will demand of component suppliers. Sabaf is a player committed to improving the quality of domestic life. This strategic policy was translated into actions that have already allowed us to increase our product portfolio, adding electronic components (displays and timers for programming ovens, electronic hobs, fridges, hood control boards) to the mechanical components (where our international leadership is solid). The path will continue, both with the development of new proprietary products and by evaluating acquisitions of specialised manufacturers. Thanks in part to our financial strength, we are supporting the expansion of the offer with strong investments that came to €23.8 million in 2021, up from €17.3 million in 2020 and €12 million in 2019. We can say that today we have the skills and technologies to offer, even in the electronics
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segment, competitive and cutting-edge products on energy transition. We continue to increase production capacity with a threefold objective: to support the growth in demand, to be closer to our customers’ plants to serve them better and to reduce logistics and transport costs. A new unit in India is nearing completion in the first half of this year. It will produce gas cooking parts for the domestic market and for a number of large players, already our customers, who have recently located to the Country. Work is underway on a new plant in Mexico, in San Luis de Potosi, which will serve the North American market from early 2023. In Turkey, the production capacity of the Electronics Division was doubled and production lines for gas valves and hinges for dishwashers were set up. Ospitaletto is, and will remain, the heart of the Group, home to its know-how and expertise. The integration of the Environment, Social and Governance (ESG) principles into our organisation plays a central role in this process. Our company’s and consumers’ awareness of the environmental and social impact of production activities, already widespread globally for some time, has grown in the last two years. Inevitably, rules and regulations governing the compliance of institutional investors and banks with ESG principles are evolving in a more restrictive direction, which has become a pre-condition for accessing capital markets. There is much to be done, but Sabaf, which has been publishing its own Sustainability Report since 2000, can already claim to have adopted all three policy components that place it at the highest international standards. We are ahead, even though we know we have work to do because the path of ESG, like that of quality, requires continuous improvement. I would like to close with a reference to the first quarter of 2022, marked by the beginning of the conflict between Russia and Ukraine. The outcome is, by definition, as unpredictable as the evolution of the geopolitical framework that will emerge. The Group’s exposure to the effects of this crisis is mainly related to the increased costs of energy, raw materials and transport. We have taken steps to mitigate these effects, adjusting sales lists thanks to excellent customer relations (which recognised that it was
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necessary) and the production flexibility of our industrial footprint. We have also partially covered ourselves against this situation by signing some supply contracts at fixed prices and by increasing efficiency in cost control. We have a solid organisation and the professional qualities required to cope with volatile times. This, I believe, is the best way to ensure the stability of the company despite the adverse and unpredictable events that this situation could generate. 2022 started with a very good flow of incoming orders from the main markets in which we operate. We are confident that this trend will be consolidated in the coming months, also thanks to new orders. We expect, net of a further escalation of the conflict, revenue growth compared to 2021. Therefore, I believe that Sabaf will be able to cope successfully with the difficult times we are going through and continue to pursue its growth objectives.
Pietro Iotti
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Business model, strategic approach and sustainable creation of value STRATEGIC APPROACH AND CREATION OF VALUE SUSTAINABLE VALUE CREATION
VALUES, VISION AND MISSION
For the Sabaf Group, respect for business ethics and socially responsible behaviour are the fundamental elements of its business model. Accordingly, the Group developed a strategy and a governance model that can guarantee sustainable success over time. The Sabaf Group is aware that sustainable success depends on the degree of harmony and the sharing of values with its stakeholders: compliance with common values increases mutual trust, encourages the development of common knowledge, and therefore contributes to the containment of transaction costs and control costs; in essence, it benefits the Group and all its stakeholders.
Sabaf takes the Person as its original value and therefore as the fundamental criterion of every choice: this results in an entrepreneurial vision that ensures dignity and freedom to the Person within shared rules of behaviour. The centricity of the Person represents a universal value, i.e. a hyper-standard applicable without differences in time and space. In compliance with this universal value, the Sabaf Group operates by promoting cultural diversity through the criterion of equity in space and time. Such a moral commitment implies an a priori renunciation of all choices that do not respect the physical, cultural and moral integrity of the Person, even if such decisions can be efficient, economically convenient and legally acceptable. Respecting the value of the Person means that, first of all, the dimension of the category of Being in relation to Doing and Having is the overriding consideration, and therefore implies the protection and enhancement of the “essential” manifestations expressing the fullness of the Person.
The Charter of Values of Sabaf The Charter of Values is the governance tool through which the Sabaf Group clearly explains the Company’s values, standards of behaviour and commitments in relations with its stakeholders – employees, shareholders, customers, suppliers, lenders, the Public Administration, the community and the environment. The spirit of the Charter is to reconcile the principles of economic management with ethics based on the centricity of Man, as an essential condition for the sustainable success of business in the long term. Sustainable success, intended as the ability to combine at the same time: • economic sustainability, i.e. operate in such a way that company choices increase the value of the company not only in the short term but above all are able to guarantee business continuity in the long term through the application of an advanced model of corporate governance; • social sustainability, i.e. promote ethical behaviour in business and reconcile the legitimate expectations of the various stakeholders in accordance with common shared values; • environmental sustainability, i.e. produce by minimising the direct and indirect environmental impacts of its production activities to preserve the natural environment
for the benefit of future generations in compliance with current laws on the subject. The Charter aims to give a vision of ethics, focusing mainly on positive and just actions to be taken and not only on incorrect behaviour to be avoided. This vision is the basis for a positive use of freedom by decision-makers, where ethical references guide decisions in a manner consistent with the Group’s culture of social responsibility. The Sabaf Group aims to develop a process based on people being given a sense of responsibility within shared rules of behaviour with which to voluntarily comply. According to this approach, it is still imperative to comply absolutely with the law and regulations in force in Italy and in the other countries where the Group operates, as well as with all the internal regulations of the Group and the values declared in the Charter. The Charter of Values also represents a reference document as part of the Organisation, Management and Control Model pursuant to Legislative Decree 231/2001 and, as such, sets out a series of general rules of behaviour Group employees are required to comply with. 33
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Table summarising the Policies of the Sabaf Group with reference to the contents of Legislative Decree 254/2016 as amended
Topic envisaged by Legislative Decree 254/2016
Reference policies
ENVIRONMENT Basic principles • Raise staff awareness and train the personnel to promote environmental awareness • Minimise direct and indirect environmental impacts • Adopt a precautionary approach to environmental impacts • Encourage the development and diffusion of environmentally friendly technologies and products • Define environmental objectives and improvement programmes • Search for the right balance between economic objectives and environmental sustainability
• Charter of Values • Manual of the Integrated Management System of Health and Safety, Environment and Energy in compliance with ISO 14001, ISO 50001 and ISO 45001 standards
HUMAN RIGHTS Basic principles • Adopt socially responsible behaviour • Promote respect for the fundamental human rights of workers in all countries where the Group operates • Avoid all forms of discrimination and favouritism in respect of employment and occupation • Enhance and respect diversity
• Charter of Values
PERSONNEL Basic principles • Encourage continuous learning, professional growth and knowledge sharing • Provide clear and transparent information on the tasks to be carried out and the position held • Encourage teamwork and the dissemination of creativity in order to allow the full expression of individual skills • Adopt criteria of merit and competence in employment relationships • Encourage the involvement and satisfaction of all the personnel
• Charter of Values
PERSONNEL/HEALTH AND SAFETY Basic principles • Reach working standards that guarantee health and maximum safety, also through the modernisation and continuous improvement of workplaces • Minimise any form of exposure to risks at work • Disseminate the culture of risk prevention through systematic and effective training • Promote the protection not only of oneself, but also of colleagues and third parties • Encourage the diffusion of products with security systems
• Charter of Values • Manual of the Integrated Management System of Health and Safety, Environment and Energy in compliance with ISO 14001, ISO 50001 and ISO 45001 standards
ANTI-CORRUPTION Basic principles • Raise awareness among all those who work for Sabaf so that they behave correctly and transparently in the performance of their activities • Comply with local anti-corruption regulations
• Group Anti-corruption Policy • Organisation, management and control Model pursuant to Legislative Decree 231/2001
SOCIAL/SUPPLY CHAIN Basic principles • Ensure absolute impartiality in the choice of suppliers • Establish long-term relationships based on fairness in negotiations, integrity and contractual fairness
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• Charter of Values
SABAF . 2021 ANNUAL REPORT
The Charter of Values and the Anti-corruption Policy are applied and disseminated in all Group companies. Sabaf S.p.A. has an integrated Health and Safety, Environment and Energy management system certified to ISO 45001, ISO 14001 and ISO 50001. Faringosi Hinges s.r.l. and C.G.D. s.r.l. adopt a Health and Safety management system certified and compliant with ISO 45001 standard.
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In any case, the ISO 14001, ISO 45001 and ISO 50001 standards are sources of reference and inspiration for the entire Group. The Organisation, Management and Control Model pursuant to Legislative Decree 231/2001 is adopted by Sabaf S.p.A. and Faringosi Hinges s.r.l. and, limited to the part concerning Occupational Health and Safety, by C.G.D. s.r.l. and C.M.I. s.r.l.
VISION
Combine business decisions and results with ethical values by going beyond family capitalism and opting for a managerial rationale oriented not only towards the creation of value but also towards the respect of values.
MISSION
Consolidate the technological and market leadership in the design, production and distribution of the entire range of components for household appliances through constant attention to innovation, safety and the enhancement of internal expertise. Associate the growth of company services with social and environmental sustainability, promoting an open dialogue with the legitimate expectations of stakeholders.
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BUSINESS MODEL STRATEGIC PILLARS OF SABAF’S BUSINESS MODEL In line with its shared values and mission, Sabaf believes that there is a successful industrial and cultural model to be consolidated both through organic growth and growth through acquisitions. The Group believes that its business model - oriented towards long-term sustainability and characterised by a high level of verticalisation of production and production facilities close to the main markets - is adequate to face future challenges and new scenarios. The distinctive features of the Sabaf model are set below.
Innovation
Innovation represents one of the essential elements of Sabaf’s industrial model and one of its main strategic levers. Thanks to continuous innovation, the Group has managed to achieve excellent results, identifying technological and production solutions that are among the most advanced and effective currently available and establishing a virtuous circle of continuous improvement of processes and products, until acquiring technological competence with characteristics that are difficult to match for competitors. The know-how acquired over the years in the development and internal production of machinery, tools and moulds, which is integrated synergistically with the know-how in the development and production of our products, represents the main critical success factor of the Group. With the acquisition of Okida, Sabaf has also acquired a strong electronic know-how that, together with the traditional and strong mechanical skills, can further expand the business spaces for the Group. The investments in innovation allowed the Group to become a world leader in a highly specialised sector. The production sites in Italy and abroad are designed to guarantee products according to the highest levels of technology available today and represent a cutting-edge model both for environmental protection and safety of the employees.
Eco-efficiency
Sabaf’s product innovation strategy gives priority to the search for improved environmental performance. Attention to environmental issues is reflected both in innovative production processes that have a lower energy impact in the manufacture of products, and for what concerns gas parts, in the design of eco-efficient products during their daily use. Innovation efforts in this area are directed towards the development of burners that reduce fuel consumption (natural gas or other gases) and emissions (carbon dioxide and carbon monoxide, in particular) in users.
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Safety
Safety has always been one of the essential elements of Sabaf’s business project. Safety for Sabaf is not just a matter of complying with existing standards but a management philosophy oriented towards the continuous improvement of its performance, in order to guarantee the end user an increasingly safe product. In addition to investing in research and development of new products, the Group has chosen to play an active role in disseminating a safety culture: Sabaf has long been promoting the introduction of regulations worldwide - in the various institutional venues - that make it compulsory to adopt products with thermoelectric safety devices. Sabaf also promoted the ban on the use of zamak (zinc and aluminium alloy) for the production of gas valves for cooking, in consideration of the intrinsic danger. To date, the use of zamak is still permitted in Brazil, Mexico and other South American countries, limiting business opportunities in the valves segment for Sabaf.
Success on international markets and partnerships with multinational groups
Sabaf pursues its growth through its success in international markets by trying to replicate its industrial model in emerging countries with due consideration of local culture. In line with its reference values and mission, the Group operates in emerging Countries in full respect of human rights and the environment and in compliance with the United Nations Code of Conduct for Transnational Corporations. This choice is driven by the awareness that only by operating in a socially responsible way it is possible to ensure long-term development of industrial experience in emerging markets. The Group also intends to further strengthen its collaboration with customers and its position as main supplier of a complete range of products in the cooking components market, also thanks to its ability to adapt production processes to specific customer needs and provide an increasingly wide range of products. In relations with large household appliance groups, the reliability of partners along the supply chain is more than ever an essential requirement. The presence of production facilities in all strategic geographical areas, the ability to react immediately to sudden changes in macroeconomic scenarios - such as those brought about by the pandemic - and financial solidity put the Sabaf Group in a favourable position compared to smaller, less structured competitors.
SABAF . 2021 ANNUAL REPORT
Widening the range of components and development through acquisitions
The continuous expansion of the range aims to increase customer loyalty through the widest satisfaction of market requirements. The possibility of offering a complete range of components is an additional distinguishing feature for Sabaf compared to its competitors. In order to sustain a dynamic growth path, the Group intends to extend its product range to other components for household appliances. This expansion is pursued both through internal research and through growth through acquisitions, assessing opportunities for partnerships and acquisitions of other companies. Examples of this are the acquisition of A.R.C. s.r.l. in 2016 and 100% in Okida in 2018, through which Sabaf entered the professional burners and electronic components for household appliance sectors. Finally, in 2019, Sabaf acquired control of the C.M.I. Group, an important manufacturer of hinges for ovens and dishwashers, significantly strengthening its position also in this product range where it was already present through Faringosi Hinges.
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Enhancement of intangible assets and of its intellectual capital
Sabaf carefully monitors and increases the value of its intangible assets: the high technical and professional competence of the people who work there, the image synonymous with quality and reliability, the reputation of a company attentive to social and environmental issues and the requirements of its stakeholders. The promotion of the idea of work and relations with stakeholders as a passion for a project based on common values in which everyone can recognise themselves symmetrically represents not only a moral commitment, but the real guarantee of enhancement of intangible assets. In this perspective, the sharing of values represents the link between the promotion of a corporate culture oriented towards social responsibility and the enhancement of its intellectual capital.
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Business model
1
ECONOMIC CAPITAL
BUSINESS APPROACH Innovation, enhancement of internal resources and continuous learning
ECONOMIC CAPITAL
Internationalisation
2
3
4
5
HUMAN CAPITAL
RELATIONAL CAPITAL
PRODUCTIVE CAPITAL
ENVIRONMENTAL CAPITAL
Quality, internal and external safety, eco-compatibility Sustainability
DISTINCTIVE FEATURES Internal and verticalised production of: • components and products • machinery, tools and moulds based on specific know-how
PRODUCTS
HUMAN CAPITAL
RELATIONAL CAPITAL
PRODUCTIVE CAPITAL
ENVIRONMENTAL CAPITAL
Gas parts Hinges
6 38
INTELLECTUAL CAPITAL
Electronic components
INTELLECTUAL CAPITAL
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ECONOMIC CAPITAL
1
· · · ·
Net financial debt 67,607,000 € Shareholders’ Equity 122,436,000 € Invested capital 190,043,000 € Market capitalisation at 31 December/ Shareholders’ Equity 2.26
· Sales revenue +42.4% · EBITDA as a percentage of sales 20.6%
HUMAN CAPITAL
2
· Employees 1,487 (including agency workers and trainees) · Advanced education: employees with a degree or diploma 64.4% · Training hours by collaborator 20.4 · Investments in training of collaborators/turnover 0.27%
· · · · ·
No. of hires 336 Leaving turnover 17.68% Strike hours on hours worked 0.10% Recordable injury rate 15.59 Injury lost day rate 0.21
RELATIONAL CAPITAL
3
· Turnover from the top 10 customers 47% · No. customers (with sales over €1,000) 418
· Average turnover by customer 629,000 € · Lawsuits filed against Group companies 1 · No. of samples for customers 5,571
PRODUCTIVE CAPITAL
4
· Production sites 11 · Real investment on turnover 8.7% · Value of property, plant and equipment 84,718,000 €
· · · ·
Burners sold no. of parts 44,218,936 High efficiency burners 26.5% Valves and thermostats sold no. of parts 26,043,939 Light alloy valves and thermostats sold 89%
ENVIRONMENTAL CAPITAL
5
Steel 26,801 t Aluminium alloys 11,326 t Brass 1,227 t Electricity consumed 44,129 MWh (of which 4,853 MWh from renewable sources) · Natural gas consumed 5,474,000 m3 · Water used 99,739 m3 · · · ·
· Waste (kg) on economic value generated by the Group (€/1,000) 45 · CO2 emissions (scope 1 + scope 2 market based) 29,134 tCO2eq
INTELLECTUAL CAPITAL
6
· Hours dedicated to the development of new products 3.1% · Hours dedicated to process engineering 1.7%
· No. of patents 88 · Capitalised investments in research and development 1,770,000 €
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SABAF . 2021 ANNUAL REPORT
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GENERATED AND DISTRIBUTED ECONOMIC VALUE The analysis of the determination and distribution of economic value among stakeholders, prepared in accordance with the indications of the GRI is shown below. The table was prepared distinguishing between three levels of economic value. The generated one, the distributed one and the one
2021
2020
Change
ECONOMIC VALUE GENERATED BY THE GROUP
267,918
190,001
77,917
Revenue
263,259
184,906
78,353
8,649
7,184
1,465
750
1,366
(616)
Value adjustments
2,525
1,502
1,023
Bad debt provision
(103)
(118)
15
(7,399)
(4,811)
(2,588)
237
105
132
Value adjustments to property, plant and equipment and intangible assets
0
(141)
141
Profits/losses from equity investments
0
8
(8)
ECONOMIC VALUE DISTRIBUTED BY THE GROUP
232,521
161,995
70,526
Remuneration of suppliers
166,164
112,014
54,150
Remuneration of employees
53,964
43,700
10,264
Remuneration of lenders
1,179
2,146
(967)
Remuneration of shareholders
6,172
3,924
2,248
Remuneration of the Public Administration1
4,997
150
4,847
45
61
(16)
ECONOMIC VALUE RETAINED BY THE GROUP
35,397
28,006
7,391
Depreciations and amortisation
16,869
16,968
(99)
Provisions
29
612
(583)
Use of provisions
(12)
(10)
(2)
18,511
10,436
8,075
(€/000)
Other income Financial income
Exchange rate differences Income/expenses from the sale of property, plant and equipment and intangible assets
External perks
Reserves
1
retained by the Group. The economic value represents the overall wealth created by Sabaf, which is then distributed among the various stakeholders: suppliers (operating costs), employees, lenders, shareholders, public administration and community (external perks).
Includes deferred taxes.
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GOVERNANCE OF SOCIAL RESPONSIBILITY AND STAKEHOLDER ENGAGEMENT
SOCIAL RESPONSIBILITY IN BUSINESS PROCESSES To transform the values and principles of sustainable development into intervention choices and management activities, Sabaf applies a structured methodology, the key factors of which are as follows:
SHARING VALUES, MISSION AND SUSTAINABILITY STRATEGY
KEY PERFORMANCE INDICATORS (KPIs), WHICH CAN MONITOR ECONOMIC, SOCIAL AND ENVIRONMENTAL PERFORMANCE
TRAINING AND COMMUNICATION
AN INTERNAL CONTROL SYSTEM CAPABLE OF MONITORING RISKS (INCLUDING SOCIAL, ENVIRONMENTAL AND REPUTATIONAL RISKS) AND VERIFYING THE IMPLEMENTATION OF COMMITMENTS TO STAKEHOLDERS
A CLEAR AND COMPLETE REPORTING SYSTEM, ABLE TO EFFECTIVELY INFORM THE DIFFERENT CATEGORIES OF STAKEHOLDERS
A STAKEHOLDER ENGAGEMENT SYSTEM, TO COMPARE WITH THE EXPECTATIONS OF ALL STAKEHOLDERS AND TO RECEIVE USEFUL FEEDBACK FOR CONTINUOUS IMPROVEMENT
THE PRECAUTIONARY APPROACH The awareness of the social and environmental aspects that accompany the Group’s activities, together with the consideration of the importance of a cooperative approach with stakeholders and the Group’s good reputation, has led Sabaf to adopt a precautionary approach in managing the economic, social and environmental variables that it has to manage on a daily basis. To this end, the Group analysed specifically the main risks of the different operating dimensions. Detailed information on the internal control system and on the risk management system is provided in the next paragraph “Corporate Governance, Risk Management and Compliance”.
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STAKEHOLDER ENGAGEMENT Sabaf is committed to constantly strengthening the social value of its business activities through careful management of relations with stakeholders. The Group intends to establish an open and transparent
dialogue, encouraging opportunities for discussion in order to identify lawful expectations, increase trust in the Group, manage risks and identify new opportunities.
Regular stakeholder engagement initiatives
Employee satisfaction survey and climate analysis Meetings with employees Meetings with trade unions
EMPLOYEES CUSTOMERS
Customer Satisfaction Survey
SUPPLIERS
S TA
KEHOLDE
RS
Regular meetings
ENVIRONMENT
SHAREHOLDERS
COMMUNITY AND PUBLIC ADMINISTRATION LENDERS COMPETITORS
The identification of stakeholders is an essential starting point for defining social and environmental reporting processes. The “stakeholder map” provides a summary representation of Sabaf’s main stakeholders, identified on the basis of their business characteristics, the characteristic aspects of the market and the intensity of their relations with the latter. The Annual Report is the preferred communication tool for presenting the significant
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-
Dialogue with current and potential investors Comparison with proxy advisors Dialogue with financial analysts
Dialogue with universities
Regular dialogue
-
economic, social and environmental performance achieved during the year. The initiatives for involving each stakeholder that are carried out periodically are described in the previous table (generally every two or three years). In 2021, as a result of pandemic containment restrictions, some engagement activities took place remotely. The relevant issues arising from these activities are reported in the following paragraphs.
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Sabaf complies with the Code of Conduct of APPLiA Europe Sabaf complies with the code of conduct of APPLiA Europe, an association of manufacturers of household appliances representing companies in the household appliances industry.
The Code of Conduct confirms the commitment of the European household appliance industry to ethical and fair behaviour. The Code aims to promote fair and sustainable standards in working conditions and environmental protection to support fair competition in global markets.
The producers complying with the Code commit themselves voluntarily to implement decent working conditions, which include compliance with common standards regarding:
MINIMUM AGE
WORKING HOURS
HYGIENE AND SAFETY CONDITIONS
RESPECT FOR FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING
RESPECT FOR ENVIRONMENTAL STANDARDS
The signatory companies also undertake to raise awareness among their suppliers of the principles of the Code of Conduct and encourage them to pursue them. They also require that the same principles be proposed to the whole supply chain through the latter.
The Annual Report of Sabaf is also the tool through which the Group reports year by year on the practical implementation of the principles of the Code and the progress achieved, as specifically required of the companies complying with it.
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Sabaf complies with the Global Compact In 2004, Sabaf complied formally with the Global Compact, the United Nations initiative for companies that commit to upholding and promoting the ten universally accepted principles of human rights, labour rights, environmental protection and anti-corruption. With the publication of the 2021 Annual Report, we renew our commitment to making the Global Compact and its principles an
integral part of our strategy, culture and day-to-day operations, and we also commit to explicitly declare our commitment to all employees, partners, customers and the general public. The consolidated disclosure of non-financial information sets out in detail the actions taken by the Sabaf Group in support of the ten principles.
THE 10 PRINCIPLES OF THE GLOBAL COMPACT
I
Businesses should support and respect the protection of internationally proclaimed human rights and
II
make sure that they are not - even if indirectly - complicit in human rights abuses.
III
Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining.
IV
The elimination of all forms of forced and compulsory labour.
V
The effective abolition of child labour.
VI
The elimination of discrimination in respect of employment and occupation.
VII
Businesses should support a precautionary approach to environmental challenges and
VIII
undertake initiatives to promote greater environmental responsibility; and
IX
encourage the development and diffusion of environmentally friendly technologies.
X
Businesses should work against corruption in all its forms, including extortion and bribery.
HUMAN RIGHTS
LABOUR
ENVIRONMENT
FIGHT AGAINST CORRUPTION
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MATERIALITY ANALYSIS The GRI Standards require that the contents of the Disclosure of NonFinancial Information be defined on the basis of a materiality analysis. In compliance with the requests of GRI Standards, Sabaf has started since 2014 a process of identifying the material topics to be reported, i.e. those topics: • of significant economic, environmental or social impact for Sabaf’s business; • that could substantially affect the assessments and decisions of stakeholders. From this perspective, materiality takes into consideration not only the point of view of the organisation but also that of stakeholders. Considering the pervasive impacts of the pandemic, at the end of 2020 the Group deemed it appropriate to update the materiality analysis, integrate the material topics and resubmit them to management for assessment. The top managers involved were asked to express an evaluation (on a scale from 0 to 5) on the material topics identified and inherent to their responsibilities, both from an internal perspective and from the perspective of the stakeholders concerned. The materiality analysis was approved by the Board of Directors at its meeting on 11 February 2021. On 16 December 2021, the Board re-approved the materiality analysis, without changing its assessments.
The materiality analysis shows: • from an internal perspective, the greater materiality of health and safety topics and the protection of diversity and equal opportunities; • from the point of view of external stakeholders, the increasing importance of reliable relations with customers and suppliers and the guarantee of continuity of supplies. It is noted that in defining material topics, the following topics are considered preconditions for operating and are therefore considered very important for both Sabaf and its stakeholders: • creation and distribution of sustainable value over time (GRI 201: Economic Performance; scope of the Decree: transversal); • transparent and effective governance system to support business (GRI 102-18: Governance structure; scope of the Decree: transversal); • constant attention to compliance with the law in the performance of its activities2 (GRI 205: Anti-Corruption and GRI 307: Environmental Compliance; scope of the Decree: fight against corruption); • an approach of fairness and transparency towards the public administration (GRI 207: Tax; scope of the Decree: transversal).
Materiality matrix3
VERY SIGNIFICANT
2. Emissions into the atmosphere waste and management of environmental impacts 3. Protection of Human and Workers’ Rights 4. Remuneration and incentive policy 5. Development of resources and skills
1
8
14
3 6 12
2 SIGNIFICANT
SIGNIFICANCE FOR STAKEHOLDERS
1. Use of raw materials and materials
10
4
7
5
13
6. Health and safety of personnel and contractors
11
7. Diversity and equal opportunities 8. Management of relations with suppliers, supplier assessment and contractual conditions 9. Industrial relations 10. Compliance with the competitive system 11. Customer satisfaction and customer support 12. Research and innovation of products and processes also with reference to safety and environmental performance 13. Partnership with multinational groups
9 SIGNIFICANT
14. Production quality and eco-efficiency VERY SIGNIFICANT
SIGNIFICANCE FOR SABAF This includes the fight against corruption, which is an essential aspect of managing the Group’s business and therefore included in the preconditions. It is discussed in this document in the section “Corporate Governance, Risk Management and Compliance”. 3 Only the topics considered relevant by the organisation and subject matter of reporting are represented. 2
45
SABAF . 2021 ANNUAL REPORT
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MATERIAL TOPICS Scope Legislative Decree 254/16
ID
Material topic
Importance of the topic for Sabaf
Link to GRI Standards
Internal impacts
External impacts (*)
1
Use of raw materials and materials
Use of materials for production, considering the maintenance of quality standards and assessing their environmental and social impact.
GRI 301: Materials 2016
Sabaf
-
Emissions into the atmosphere, waste and management of environmental impacts
Definition of monitoring and reduction activities of emissions of polluting substances into the atmosphere and of waste generated by the production processes of Sabaf. Impacts to be considered include smart working for part of the workforce, which has led to a reduction in travel by employees.
Sabaf
Suppliers
Protection of Human and Workers’ Rights
Protection of human rights as provided for in the “Universal Declaration of Human Rights” and the principles laid down in the conventions of the International Labour Organisation. One of the main objectives is to ensure working conditions with health and safety standards adapted to the health emergency period and, consequently, to safeguard business continuity.
Sabaf
Suppliers
Sabaf
Trade union org.
Sabaf
-
ENVIRONMENT
2
HUMAN RIGHTS
3
Definition of fixed and variable components of remuneration for employees.
4
Remuneration and incentive policy
Incentive system based on the achievement of pre-established targets in order to pursue company targets. Establishment of a welfare bonus system to recognise activities carried out during the health emergency.
5
Development of resources and skills
PERSONNELRELATED
46
Boost the Group’s expansion, through organic growth, maintaining the excellence of its economic results and preserving its financial solidity. Increase skills through training activities with the aim of guaranteeing the continuous professional growth of employees.
6
Health and safety of personnel and contractors
Management, in compliance with occupational health and safety regulations, of topics related to occupational health and safety: training, prevention, monitoring, improvement objectives, also with reference to the measures implemented against the spread of the Coronavirus during health emergencies in the workplace and the protection of frail persons in extraordinary working conditions.
7
Diversity and equal opportunities
Commitment to ensuring equal opportunities for women and protectedcategories.
GRI 302: Energy 2016 GRI 305: Emissions 2016 GRI 306: Waste 2020
GRI 406: Non discrimination 2016 GRI 414: Supplier social assessment 2016
GRI 202: Market Presence 2016 GRI 404: Training and education 2016
GRI 401: Employment 2016 GRI 404: Training and education 2016
GRI 403: Occupational Health and Safety 2018
Sabaf
Suppliers
GRI 405: Diversity and equal opportunity 2016
Sabaf
-
SABAF . 2021 ANNUAL REPORT
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MATERIAL TOPICS Scope Legislative Decree 254/16
ID
8
Material topic
Management of relations with suppliers, supplier assessment and contractual conditions
SOCIAL
Importance of the topic for Sabaf Sabaf’s commitment to defining a relation with the supply chain based on the principles of fairness in negotiations, integrity and contractual fairness. These include supporting the supply chain by joining industry initiatives and observing contract payment terms in times of possible difficulty. Sharing corporate values with suppliers.
Link to GRI Standards
Internal impacts
External impacts (*)
GRI 414: Supplier Social Assessment 2016
Sabaf
Suppliers
GRI 402: Labor management relations 2016
Sabaf
Trade union org.
Sabaf defines minimum criteria for the creation of a lasting relationship with suppliers, based on the principles of social responsibility.
9
Industrial relations
The relationship between Sabaf and trade union representatives, based on the principles of transparency, mutual fairness and willingness to negotiate agreements aimed at ensuring healthy and safe working conditions.
10
Compliance with the competitive system
Compliance with regulations and behaviour that ensure Sabaf conducts its business in a balanced and regular competitive environment.
GRI 206: Anti-competitive Behaviour 2016
Sabaf
-
11
Customer satisfaction and customer support
Ability to respond effectively to customer expectations, at all stages of the relationship (from design to after-sales service).
GRI 416: Customer Health and Safety 2016
Sabaf
-
12
Research and innovation of products and processes also with reference to safety and environmental performance
Identification of new technological and production solutions (also with a special attention to safety and environmental performance) that allow the Group to strengthen its leadership in the industrial sector to which it belongs.
GRI 416: Customer Health and Safety 2016
Sabaf
Customers
13
Partnership with multinational groups
Sabaf’s opening to strategic collaborations with the main players in the sector.
(**)
Sabaf
-
Please refer to topics 2 and 12
Sabaf
-
TRANSVERSAL
Search for better product or process performance and solutions in terms of environmental impact.
14
Production quality and eco-efficiency
Designing new eco-efficient products. Revision of business processes with the introduction of smart working, which can promote a lower environmental impact while maintaining standards of effectiveness and efficiency.
(*) Reporting is not extended to the external boundary. (**) With regard to these topics (not directly related to a Material Topic envisaged by the GRI Standards Guidelines), Sabaf indicates in the document the adopted management approach.
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Corporate Governance, Risk Management and Compliance CORPORATE GOVERNANCE OVERVIEW Since its listing on the stock exchange in 1998, the corporate governance model of Sabaf has been based on a strict separation between the shareholding structure and management of the Company and of the Group. Sabaf is committed to maintaining a
The purpose of this section of the file is to highlight the choices made by Sabaf and the peculiarities of its governance system. Where possible, a comparison with other listed companies is also provided, using the information collected by Assonime in its document “Report on Corporate Governance in Italy: the implementation of the Italian Corporate Governance Code (2021)”, published in January 2022 and concerning the Corporate Governance reports for the 2020 financial year of 219
48
system of governance aligned with the recommendations and best practice. The Company has welcomed the new Corporate Governance Code, fully agrees with its innovations and has taken action on its own model to fully implement the Code.
listed Italian companies. The benchmark used below takes into account, where available, a panel of “non-financial” companies only. An analysis of the characteristics and functioning of the Board of Directors is also provided in comparison with the top 100 Italian listed companies (industrial and financial) and with the main European and non-European countries, based on data published by Spencer Stuart in the analysis “Boards around the world”.
SABAF . 2021 ANNUAL REPORT
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SABAF S.p.A. 100%
100%
Faringosi Hinges s.r.l.
Sabaf do Brasil Ltda
(Italy)
A.R.C. s.r.l.
(Brazil)
100%
100%
(Italy)
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
(Turkey) 70%
51% 30%
Handan A.R.C. Burners Co., Ltd (China)
C.M.I. s.r.l
Okida Elektronik Sanayi ve Ticaret Anonim Şirketi
(Turkey)
100%
Sabaf US Corp. (USA)
100%
Sabaf Appliance Components Ltd
100%
(Italy and Poland)
(China)
100%
C.G.D. s.r.l (Italy)
Sabaf Mexico
100%
Sabaf India Private Limited (India)
100%
(Mexico)
Manufacturing company Trading company
Sabaf Group companies are active in the following business segments:
GAS PARTS
ELECTRONIC COMPONENTS
HINGES FOR HOUSEHOLD APPLIANCES
• • • • •
• Okida, electronic control boards, timers, display and power units for ovens, hoods, vacuum cleaners, refrigerators and freezers.
• Faringosi Hinges s.r.l.; • C.M.I. Group.
Sabaf S.p.A., valves and burners; Sabaf Brazil, burners; Sabaf Turkey, burners; Sabaf Appliance Components, burners; A.R.C. s.r.l. and A.R.C. Handan, professional burners; • Sabaf India, valves and burners (start of production scheduled for 2022); • Sabaf Mexico, burners and hinges (start of production scheduled at the end of 2022).
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THE GOVERNANCE STRUCTURE Sabaf adopted a traditional model of management and control, characterised by the presence of:
This model is supplemented, in accordance with the provisions of the Corporate Governance Code the Company complied with, by:
• Shareholders’ Meetings, (ordinary and extraordinary) called to pass resolutions pursuant to the laws in force and the Company’s Articles of Association;
a) the Committees set up by the Board of Directors within its members, each one with proposal and advisory functions on specific matters and without decision-making powers, such as: • Control, Risks and Sustainability Committee, that also takes on the functions of the Related Party Committee; • Remuneration and Nomination Committee that takes on the functions envisaged by the Remuneration Committee and integrates them with those relating to the appointment and composition of the control bodies indicated by the Code; b) the Internal Audit department in charge of checking the operation and adequacy of the internal control and risk management system. Finally, the Group’s administration and control model is completed by the presence of the Supervisory Body, set up following the adoption of the organisation, management and control model pursuant to Legislative Decree 231/2001, adopted by Sabaf since 2006.
• Board of Statutory Auditors, in charge of supervising: (i) compliance with the law and Articles of Incorporation and adherence to principles of proper management in the performance of corporate activities; (ii) the adequacy of the Company’s organisational structure, internal control and risk management system and administrative/accounting system; (iii) the procedures for effective implementation of the corporate governance rules envisaged in the Corporate Governance Code; (iv) risk management; (v) the regulatory audit of the accounts and the independence of the auditing firm; • Board of Directors, in charge of company administration and management of Company operations.
BOARD OF STATUTORY AUDITORS
SHAREHOLDERS’ MEETING
BOARDS OF DIRECTORS
SUPERVISORY BODY
REMUNERATION AND NOMINATION COMMITTEE
INTERNAL AUDIT DEPARTMENT
COMMITTEE FOR CONTROL AND RISKS AND SUSTAINABILITY (also Related-Party Committee)
OUTSOURCING
CHIEF EXECUTIVE OFFICER Director in charge of the Internal Control System
KEY 50
Organisational carry-overs
SABAF . 2021 ANNUAL REPORT
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POLICY ON THE COMPOSITION OF CORPORATE BODIES On 26 March 2018, Sabaf S.p.A. adopted a Policy on the composition of the Corporate Bodies. The Policy was updated by the Board of Directors on 11 February 2021, in view of the renewal of corporate offices and to implement the provisions of the new Corporate Governance Code. The Policy sets out the Company’s guidelines on the characteristics considered functional to ensuring an optimal composition of the corporate bodies (Board of Directors and Board of Statutory Auditors), with the aim of guiding the names put forward when
renewing the Corporate Bodies, so that the benefits that can derive from a balanced composition of the Board and Board of Statutory Auditors inspired by criteria of diversity are taken into consideration. The Policy sets out the characteristics and factors considered necessary for the BoD to be able to carry out its assigned tasks more efficiently, take decisions thanks to the contribution of a number of qualified points of view and examine the issues under discussion from different perspectives, also within the framework of the internal board committees established from time to time.
The Policy sets out the following characteristics for the composition of each of the two bodies:
INDEPENDENCE
TRAINING AND PROFESSIONAL EXPERIENCE
GENDER
AGE AND SENIORITY IN OFFICE
NUMBERS
The Policy on the composition of the Corporate Bodies is published on the Group’s website and described in the Report on corporate governance and ownership structure.
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SABAF . 2021 ANNUAL REPORT
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BOARD OF DIRECTORS The Board of Directors currently in office, appointed by the Shareholders’ Meeting on 6 May 2021 for the period 2021-2023, is composed of 9 members4, including: • 2 executive directors; • 3 non-executive directors; • 4 non-executive and independent directors.
OFFICE
MEMBERS
Chairman
Claudio Bulgarelli
COMPOSITION OF THE BOARD OF DIRECTORS
EXECUTIVE DIRECTORS OFFICE
MEMBERS
Chief Executive Officer
Pietro Iotti
Executive Director
Gianluca Beschi
SABAF
45%
NON-EXECUTIVE DIRECTORS
Vice Chairman
47%
MEMBERS
Nicla Picchi
LEAD INDEPENDENT DIRECTOR
Director
Daniela Toscani
Director
Stefania Triva
Director
Carlo Scarpa
Director
Alessandro Potestà
Director
Cinzia Saleri
INDEPENDENT DIRECTORS pursuant to T.U.F. and/or Code
OFFICE
2021 ASSONIME AVERAGE
33%
27%
22%
26%
Executive Directors
The Curriculum Vitae of each Member is available on the Group’s website.
4
52
Non-Executive Directors Independent Directors pursuant to T.U.F. and/or Code
SABAF . 2021 ANNUAL REPORT
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COMPOSITION OF THE BOARD OF DIRECTORS
CLAUDIO BULGARELLI Chairman
NICLA PICCHI Vice Chairman
Degree in Mechanical Engineering, entrepreneur, chairman of Fintel srl, joined the BoD of Sabaf in 2018.
Degree in Law, Partner of Studio Picchi & Associati where she works as a lawyer. In Sabaf since 2006, she is also Chairman of SB 231 of Sabaf S.p.A. and of the subsidiary Faringosi-Hinges. She has been chairman of the Control and Risk Committee since 2015.
CINZIA SALERI Director
PIETRO IOTTI Chief Executive Officer Mechanical Engineer, holds positions of increasing responsibility in several industrial companies. In Sabaf since 2017, he holds the position of Chief Executive Officer.
Chairman of the Board of Directors of Cinzia Saleri S.a.p.A. and already director of sabaf S.p.A. in the period from 2012 to 2018.
DANIELA TOSCANI Director Degree in business finance, she has gained many professional experiences in the field of finance and held positions of increasing responsibility in many financial and industrial companies; she joined the BoD of Sabaf in 2018.
CARLO SCARPA Director He is a university professor of economics, joined the BoD of Sabaf in 2019.
GIANLUCA BESCHI Executive Director
STEFANIA TRIVA Director Entrepreneur, since 2014 she has been holding the position of Chairman and CEO of Copan Italia S.p.A., she joined the BoD of Sabaf in 2018.
ALESSANDRO POTESTÀ Director
Certified public accountant, at Sabaf since 1997 as Investor Relations Manager and Head of Management Control. He has been holding the position of Director of Administration, Finance and Control since 2012.
Degree in Economics and Commerce, he held management positions in investments and Corporate Development. Today, he is Senior Portfolio Manager at Quaestio Capital Management SGR S.p.A..
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SABAF . 2021 ANNUAL REPORT
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NUMBER OF MEETINGS (2019-2021)
AVERAGE AGE OF DIRECTORS
12 10.5
10.4
33%
45%
22%
9
50-55
56-60
over 60
11
8
2019
2020
2021
Overall average age
Sabaf 60 years old vs Assonime 57 years old
78% of the members of the Board in office are between 50 and 60 years old; the average age is higher than the average of the Assonime sample (60 vs 57 years old).
In 2021, the Board of Sabaf met on 12 occasions (slightly above the Assonime average), with an average attendance rate of 94%. In general, the attendance of the Sabaf directors at the Board meetings in the last three years is slightly below than that of the Assonime panel. The meetings were attended by the Board of Statutory Auditors and - regularly - the managers of Sabaf, who were invited to attend and report on specific issues on the agenda.
AVERAGE ATTENDANCE AT THE MEETINGS (2019-2021) 5
90% 93%
2019
Assonime panel including financial companies.
54
93%
2020
SABAF
5
88%
94% 96%
2021
ASSONIME AVERAGE
SABAF . 2021 ANNUAL REPORT
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AVERAGE SIZE OF THE BoD
AVERAGE NUMBER OF MEETINGS OF THE BoD 20
15 10.36 average
15
11.5 average
10 10 5
AVERAGE AGE OF NON-EXECUTIVE DIRECTORS
U.S.A.
U.K.
SWEDEN
NORWAY
FINLAND
DENMARK
BELGIUM
SPAIN
SWITZERLAND
FRANCE
ITALIY
0
SABAF
U.S.A.
U.K.
SWEDEN
NORWAY
FINLAND
DENMARK
BELGIUM
SPAIN
SWITZERLAND
FRANCE
0
ITALY
SABAF
5
% OF WOMEN IN THE BoD
59 average
60
50%
36% average
40% 30%
40
20% 20
U.S.A.
U.K.
SWEDEN
NORWAY
FINLAND
DENMARK
BELGIUM
SPAIN
SWITZERLAND
FRANCE
ITALY
0
SABAF
U.K.
SWEDEN
NORWAY
FINLAND
DENMARK
BELGIUM
SPAIN
SWITZERLAND
FRANCE
0
ITALY
SABAF
10%
% OF INDEPENDENT DIRECTORS IN THE BoD
100% 80%
65% average
60% 40%
SABAF
SOUTH EUROPE
NORTH EUROPE
ANGLO-SAXON COUNTRIES
U.S.A.
U.K.
SWEDEN
NORWAY
FINLAND
DENMARK
BELGIUM
SPAIN
SWITZERLAND
FRANCE
ITALY
0
SABAF
20%
The comparison was made using data published by Spencer Stuart in the analysis “Boards around the world” 6. Also for 2021, the Board of Directors carried out its assessment of the size, membership (including professional competences, managerial skills and seniority) and operation of the Board of Directors and its Committees, opting for the self-assessment of individual directors, coordinated by the Lead Independent Director. The results of the assessment were generally positive and were discussed at the Board of Directors’ meeting of 11 February 2022.
Source: Spencer Stuart Boards Around the World 2021 6
https://www.spencerstuart.com/research-and-insight/boards-around-the-world?category=all-board-composition&topic=all-topics.
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SABAF . 2021 ANNUAL REPORT
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BOARD OF STATUTORY AUDITORS The Board of Statutory Auditors, appointed by the Shareholders’ Meeting on 6 May 2021 for the period 2021 to 2023, is composed of 3 members7 with an average age of 60 years (higher than the Assonime average of 56 years). The Chairman of the Board of Statutory Auditors is the expression of the minority list. OFFICE
MEMBERS
NUMBER OF MEETINGS (2019-2021)
10
9
Chairman
Alessandra Tronconi
Statutory Auditor
Mauro Giorgio Vivenzi
Statutory Auditor
Maria Alessandra Zunino de Pignier
7
2019
2020
0%
67%
33%
100% 97%
51-60
over 60
2021
AVERAGE ATTENDANCE AT THE MEETINGS (2019-2021) 8
AVERAGE AGE OF STATUTORY AUDITORS
40-50
13
12.2
11.7
2019
100% 97%
100% 99%
2020
2021
Overall average age
Sabaf 60 years old vs Assonime 56 years old The Board of Statutory Auditors of Sabaf met on average 8.7 times in the last three years (7 meetings in 2021), a number of times lower than the average number of meetings of the Assonime sample (12.3 meetings on average). The attendance of members at meetings was 100% in the period 2019 to 2021, higher than that of other listed companies of the research. In general, the commitment of the Board of Statutory Auditors of Sabaf is achieved not only by carrying out checks and attending the periodic meetings required by law, but also by involving all members in the meetings of the Board of Directors, of the Control, Risks and Sustainability Committee and of the Remuneration and Nomination Committee, in the half-yearly collective meetings with the Control Bodies and individual meetings with the independent auditors.
7 8
The Curriculum Vitae of each statutory auditor is available on the Group’s website. Assonime panel including financial companies.
56
SABAF
ASSONIME AVERAGE
SABAF . 2021 ANNUAL REPORT
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CONTROL, RISKS AND SUSTAINABILITY COMMITTEE The Control, Risks and Sustainability Committee currently in office, set up within the Board, consists of 3 members. In line with the choice made by about 63% of the Assonime panel (referring only to CRC), the CRSC of Sabaf is made up exclusively of independent directors. The Committee was also assigned the functions pertaining to the Related-Party Committee.
NUMBER OF MEETINGS (2019-2021) 9
7
9.1
8.6
8.1
7 5
OFFICE
MEMBERS
Chairman
Nicla Picchi 2019
Member
Daniela Toscani
Member
Carlo Scarpa
The Committee met on average 6.3 times in the last three years (7 meetings in 2021), a number of times lower than the average number of meetings of the Assonime sample (8.6 meetings on average). In 2021, the Committee, among other things: • evaluated, together with the Financial Reporting Officer and the auditors, the correct application of the accounting standards; • analysed the results of the risk assessment carried out at the end of 2021 and the consequent 2022 Audit Plan Proposal;
9
2020
SABAF
2021
ASSONIME AVERAGE
• analysed the results of the Internal Audit operations carried out during the year; • made considerations on sustainability issues (sustainability objectives defined in the 2021-2023 Business Plan, new European standards for sustainability, participation in CDP’s Climate Change and Water programmes, other possible projects to be analysed in the medium term).
Assonime panel including financial companies and referred only to the Control and Risks Commitee.
57
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REMUNERATION AND NOMINATION COMMITTEE The Remuneration and Nomination Committee, set up within the Board, comprises three non-executive members, the majority of them independent (in line with the choice made by 39% of the Assonime panel), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors. OFFICE
MEMBERS
Chairman
Daniela Toscani
Member
Stefania Triva
NUMBER OF MEETINGS (2019-2021) 10
6
5.1
2019
5.2
2020
SABAF
Member
6
6
5.7
2021
ASSONIME AVERAGE
Alessandro Potestà
In the last three years, the Committee met a number of times higher than the Assonime average (6 vs 5.3). In particular, during the last financial year, the Committee met six times. In 2021, the Committee, among other things: • analysed final results of the managerial incentive plan (MBO) for the financial year 2020 and prepared the managerial incentive plan for the year 2021, approved by the Board of Directors on 23 March 2021; • analysed the summary of the long-term incentive plan (or also “LTIP”) for directors and employees of the Company and its subsidiaries through the free allocation of shares (“Stock Grant Plan”), approved by the Board of Directors on 15 May 2018; the Committee also drafted the regulations for a new Stock Grant Plan for the period from 2021 to 2023, which was approved by the Board of Directors on 13 May 2021;
• proposed changes to the “Policy on the composition of corporate bodies”, in line with the recommendations of the Corporate Code; • in view of the expiry of the term of office of the Board of Directors in office for the three-year period from 2018 to 2020 and in accordance with the power provided for by the Articles of Association, formulated a proposal regarding the list of candidates for the office of Director for the three-year period from 2021 to 2023 to be submitted by the Board of Directors to the Shareholders’ Meeting; • formulated a proposal to the Board of Directors on the remuneration for the offices of Chairman, Vice-Chairman, Honorary Chairman and Chief Executive Officer, as well as a proposal on the remuneration for attendance at Committee meetings.
GOVERNANCE OF SUSTAINABILITY Sabaf has always believed that social and environmental topics are an integral part of the Group’s strategy and, as such, are the responsibility of the Board of Directors. With reference to the governance of these topics, at the meeting of the Board of Directors on 6 May 2021, it was confirmed that the criteria for implementing Corporate Social Responsibility (“CSR”) are the responsibility of the Board itself. At the same meeting, the Board of Directors set up a Board committee, called the Control, Risks and Sustainability Committee, which, with reference to sustainability issues, has the task of: • supporting the Board of Directors in the analysis of issues relevant to the Company and the Group, promoting a policy that integrates sustainability into business processes in order to ensure the creation of sustainable value over time for shareholders and all other stakeholders;
10
Assonime panel including finncial company and referred only to the Remuneration Commitee.
58
• promoting the dissemination of the culture of sustainability among all stakeholders; • assessing the environmental, economic and social impacts of business activities; • expressing opinions on the annual and multi-year sustainability targets to be achieved; • expressing opinions on the initiatives and programmes promoted by the Company and the Group in terms of corporate social responsibility. All Sabaf employees, as part of their responsibilities and competences, are required to implement CSR every day in the performance of their activities.
SABAF . 2021 ANNUAL REPORT
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INTERNAL AUDIT AND SUPERVISORY BODY INTERNAL AUDIT On 25 June 2019, the Board of Directors, upon the proposal of the Director in charge of the Internal Control and Risk Management System, as well as after hearing the Board of Statutory Auditors, entrusted the Group Internal Audit Department for the period from 1 July 2019 to 31 December 2021 to PricewaterhouseCoopers Advisory S.p.A. (PwC) identifying Giuseppe Garzillo, partner of the company, as the Head of the department. On 16 December 2021, the
Board of Directors, subject to the favourable opinion of the Control, Risks and Sustainability Committee and after hearing the Board of Statutory Auditors, renewed the appointment of PwC for the threeyear period 2022 to 2024 and confirmed Garzillo as Head of Internal Audit. The Head of Internal Audit reports hierarchically to the Board of Directors, which approves the Work Plan.
SUPERVISORY BODY The Supervisory Body, appointed on 6 May 2021 by the Board of Directors for the three-year period 2021 to 2024, comprises Nicla
Picchi, independent director and Vice Chairman of the Company, and Giuseppe Garzillo, Head of Internal Audit.
OFFICE
MEMBERS
Chairman
Nicla Picchi
Member
Giuseppe Garzillo
Also a member of the Board of Directors, as independent director (Vice Chairman).
Also Head of Internal Audit Department. Representative of the Company that manages Internal Audit activities on an outsourcing basis.
During 2021, the Supervisory Body of Sabaf met 6 times, asking the Company’s management to attend the meetings in order to carry out in-depth analysis on specific topics.
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INFORMATION FLOWS The administration and control model of Sabaf operates through a network of periodic and systematic information flows between the various corporate bodies. Each body, according to the timing and methods defined by the Articles of Association, the Governance Model and other in-
ternal documents, reports to the functionally superior body on the activities carried out in the reference period and those planned for the following period, any observations noted and suggested actions.
Information flows within the Governance structure
At each meeting of the CRSC and of the control bodies
Every 3 months, on the occasion of the BoD
SHAREHOLDERS’ MEETING
BOARD OF STATUTORY AUDITORS
Information on Committee meetings (at the first available meeting of the BoD)
BOARD OF DIRECTORS
Information on Committee meetings (at the first available meeting of the BoD)
At each meeting of the SB
INTERNAL AUDIT DEPARTMENT
OUTSOURCING
Report on activities carried out (at least every 6 months)
At each meeting of CRSC
REMUNERATION AND NOMINATION COMMITTEE
Every 6 months, through a Report
At each meeting of CRSC
SUPERVISORY BODY
Information on activities carried out (at least once a year)
COMMITEE FOR CONTROL AND RISKS AND SUSTAINABILITY
CHIEF EXECUTIVE OFFICER Continuously
Director in charge of the Internal Control System
At each meeting of CRSC
KEY Organisational carry-overs Information flows
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RISK MANAGEMENT In the course of its business, Sabaf defines its strategic and operational objectives and identifies, assesses and manages risks that could prevent the achievement of these objectives. In recent years, Sabaf has gradually moved closer to the concepts of risk assessment and risk management, developing a structured process of periodic identification, assessment and management of risks, defined and formalised in a Guideline of the Corporate Governance Manual.
The risk management process includes all the material topics identified by the Group as part of the materiality analysis carried out in accordance with the provisions of the GRI Standards.
RISK MANAGEMENT FRAMEWORK
RISK MAP
OPERATIONAL GUIDELINE: “Process of periodic identification and assessment of Sabaf Group risks”
BUSINESS ANALYSIS
ORGANISATIONAL STRUCTURE ANALYSES
The Guidelines define the roles and responsibilities of the risk assessment and risk management processes, indicating the subjects to be involved, the frequency of the process and the assessment scales. The most recent risk assessment activity, coordinated by the Internal Audit department and aimed at updating the risk assessment, was carried out in October and November 2021. The identification of risks was carried out according to a structured approach that involved the following steps:
RISK CATALOGUE
RISK ASSESSMENT SCALE
• conducting specific interviews with the front lines and the Chief Executive Officer - risk owner/process owner; • sharing of risk assessment documents drawn up after meetings with risk owner/process owner; • identification of the universe of risks considered relevant for the Group; • identification of top risks; • prior examination of the risk assessment by the Control, Risks and Sustainability Committee; • approval of the Board of Directors. 61
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CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
All risks were investigated in terms of initial impact and probability, inherent risk and, taking into account existing mitigation measures, residual risk. The result of this analysis was represented within
specific “heat maps” representing the risks in terms of “residual risk” and “current level of control”.
SEVERITY RATE SEVERITY DRIVERS
ECONOMIC (EBITDA)
HSE
REPUTATIONAL
OPERATIONAL
LOWER
MODERATE
SIGNIFICANT
1
2
< €0.5 million
between €1.5 and €2 million
between €2 and €5 million
> €5 million
Limited or negligible temporary impact on health and safety and/or the environment (minor environmental damage).
Moderate impacts/damage on health and safety and/or the environment (recoverable environmental damage).
Serious impacts/damage on health and safety and/ or the environment (critical environmental damage).
Very serious impacts/damage on health and safety and/or the environment (catastrophic pollution).
Insignificant or small impacts on the level of trust of stakeholders.
Moderate impacts on the level of trust of stakeholders but requiring targeted action by the company.
Significant impacts on the level of trust of stakeholders requiring action by the company.
Trust of key stakeholders significantly compromised with need for immediate action.
No impact on business processes and/or customer relations.
Low impacts on: i) efficiency/continuity of one or more non-critical business processes and/or ii) rapporto con clienti diversi dai “key account”.
Significant impacts on: i) efficiency/continuity of one or more key business processes and/or ii) relations with key customers (key account).
Critical impacts on: i) efficiency/continuity of business and/or ii) relations with key customers (key account).
3
VERY SIGNIFICANT
4
FREQUENCY RATE FREQUENCY DRIVERS Probability of occurrence in the following three years Frequency of occurrence
RARE
UNLIKELY
POSSIBLE
1
2
< 5%
from 5% to 25%
from 25% to 50%
> 50%
Event never occurred in the past and considered unlikely.
Event occurred in the past and considered not very likely.
Event occurred in the past and considered likely.
Event occurred (several times) in the past/recently.
3
LIKELY
4
LEVEL OF CONTROL LEVEL OF CONTROL
Description
% of reduction of inherent risk
OPTIMAL
ADEQUATE (WITH POSSIBLE ROOM FOR IMPROVEMENT)
TO BE STRENGTHENED
1
2
In line with best practices and best in class.
There are policies, procedures and/or operating instructions. However, there is still room for improvement.
Processes are not structured and are based on the skills of the individuals involved.
Lack of controls, policies, procedures and organisational structures to manage and address risks/opportunities.
75-90%
50-75%
30-50%
0-30%
3
LACKING/NON-EXISTENT
4
The risks relating to the topics referred to in Legislative Decree 254/2016 are set out in this Disclosure, under the different chapters. For further details on risk factors, please also refer to the Report on Operations.
62
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
COMPLIANCE INTEGRATED COMPLIANCE INTERNAL CONTROL SYSTEM
OR ND C
Charter of Values Corporate Governance Manual Operating guidelines
FR
Model 231
NT Y ME ET ON SAF VIR D EN H AN T AL
AU DA
Internal Audit Department and Director in charge HE
RU PT ION
QUALITY
Accounting Control Model Organisational Model Data Protection Quality Management System
PE
RT Y
Integrated Management System of Health and Safety, Environment and Energy
EC TU AL P INT
EL L
CY IVA
PR
Training and business information
RO
Body of procedures
Integrated Audit activities
INFORMATION SECURITY
The risk management activity carried out by Sabaf also takes into account compliance requirements in order to achieve the company’s objectives. The internal control system is based on the following elements: • organisation of the internal control and risk management system; • procedures and mechanisms for the concrete implementation of the control principles; • continuous verification and monitoring processes carried out at various levels of the organisation, both within the company processes and through independent structures. In particular, Sabaf prepares an integrated and risk-based Audit Plan,
broken down according to specific control objectives (operational risks, compliance risks with Law 262/2005, Legislative Decree 231/2001, GDPS, security of company information systems, etc.). The execution of the interventions is assigned, in outsourcing, to a single structure, the Internal Audit, in turn responsible for reporting the results of the activities carried out to the competent control bodies.
All this translates into an integrated compliance culture and tools.
63
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
INTEGRATED COMPLIANCE AND THE CORPORATE GOVERNANCE MANUAL Following compliance with the Corporate Governance Code for listed companies and in order to internalise the good governance practices sponsored in this document in its processes, Sabaf adopted a Corporate Governance Manual11 that regulates principles, rules and operating procedures. This Manual, adopted by Board resolution of 19 December 2006, has been updated several times over the years in order
to reflect new laws and regulations in Corporate Governance, as well as best practices adopted by the Company over time. The Manual includes some operating guidelines, also approved by the Board of Directors, prepared for the purpose of the correct carrying-out of the activities pertaining to Sabaf’s management and control bodies.
OPERATING GUIDELINES
Self-Assessment of the BoD
Means of compliance with disclosure obligations to Statutory Auditors pursuant to Art. 150 of the T.U.F.
11
Management, coordination and control of Group subsidiaries
REGULATED SUBJECTS
Assessment of the Group’s internal control system
Process of periodic identification and assessment of Group risks
Management of significant operations in which directors have an interest
Assignment of professional mandates to the Independent Auditors
The latest version of the document in accordance with the provisions of the Corporate Governance Code, approved by the Board of Directors on 16 December 2021, is available on the Company website, at www.sabafgroup.com under the Investors - Corporate Governance section.
64
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
INTEGRATED COMPLIANCE AND LEGISLATIVE DECREE 231/2001 In 2006, Sabaf S.p.A. adopted the Organisation, Management and Control Model, as suggested by Legislative Decree 231/200112, aimed at preventing the commission of specific types of offences by employees and/or employees in the interest or for the benefit of the Company. In the following years, the Company, under the supervision of the Supervisory Body, promptly responded to the need to adapt the Model and the control structure to the regulatory changes that had occurred from time to time.
The Company entrusts the Supervisory Body with the task of assessing the adequacy of the Model itself, i.e. its real capacity to prevent offences as well as to supervise the operation and correct observance of the adopted protocols. In 2008, the subsidiary Faringosi Hinges s.r.l. also adopted Model 231 and appointed the SB, ensuring, in line with the parent company, its proper updating and effective operation. In 2019 and in 2021, C.G.D. and C.M.I. respectively adopted their own Model 231, limited to the management of issues related to occupational health and safety.
Activities carried out in 2021 In 2021, the Body: • verified the effectiveness of the Model, both through checks carried out by Internal Audit and through conversations with personnel involved in sensitive activities; • monitored the state of updating of the Model, and in particular analysed the assessments and documents produced by the Company in order to update its Model 231 with regard to smuggling offences; • held periodic consultation meetings with Company management in order to analyse certain issues relating to the management of personnel and related information flows, the environment and occupational health and safety matters in the workplace, as well as issues subject to audits during the year.
12
The latest version of the document, approved by the Board of Directors on 13 May 2021, is available on the Company website, at www.sabafgroup.com under the Investors - Corporate Governance section.
65
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
INTEGRATED COMPLIANCE AND ANTI-CORRUPTION The Sabaf Group, aware of the negative effects of corrupt practices in business management, is committed to preventing and combating the occurrence of offences in the carrying-out of its activities.
Risk analysis and assessment in case of violation of anticorruption regulations is included in the annual Risk Assessment process.
Sabaf is committed to preventing unlawful behaviour by disseminating the contents of its Charter of Values and of the Organisation, Management and Control Model pursuant to Legislative Decree 231/2001 (adopted by Sabaf S.p.A. and Faringosi-Hinges s.r.l. and, limited to the part concerning Health and Safety at Work, by C.M.I. s.r.l. and C.G.D. s.r.l.).
There were no cases of corruption for the three-year period from 2019 to 2021.
66
As further confirmation of its commitment to fight against unlawful behaviour, during 2018, Sabaf adopted a Group AntiCorruption Policy. The provisions and guidelines set out in the Policy are intended to promote the highest ethical standards in all business relationships in line with national and international best practices. The Anti-Corruption Policy applies globally to Sabaf, to the Group’s subsidiaries and to all of their employees.
The Anti-Corruption Policy identifies some general principles of behaviour (prohibited obligations and behaviour), applicable to all Recipients. Based on activities carried out by Sabaf and inspired by international best practices, rules of behaviour have been developed in the following main areas assessed as potentially exposed to risks of corruption: • trade relations with intermediaries and agents; • trade relations with customers, suppliers and other third parties; • relations with trade unions and political organisations; • human resource management; • management of gifts and presents, entertainment expenses, • donations and sponsorships; • accounting and financial procedures and controls.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
INTEGRATED COMPLIANCE AND LAW 262/2005 Sabaf considers the Internal Control and Risk Management System for financial information an integral part of its risk management system. In this regard, Sabaf has integrated the activities relating to the management of the internal control system on financial reporting into its Audit and Compliance process since 2008.
The Group defined its own Accounting Control Model, approved for the first time by the Board of Directors on 12 February 2008, subsequently revised and updated.
ELEMENTS CHARACTERISING THE ACCOUNTING CONTROL MODEL
se
ss
n me
fa to
dequa
cy and effec
t i ve
ap
pli
ca
ntr
ols
CONTROL ENVIRONMENT
co
iod
ic
of
Pe r
ti
on
as
RISK ASSESSMENT RELATED TO ECONOMIC, EQUITY AND FINANCIAL REPORTING.
ADMINISTRATIVE AND ACCOUNTING PROCEDURES Internal certifications of completeness and correctness of information
AUDIT ACTIVITY
67
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf and employees RISKS The management of relations with the employees of the Sabaf Group cannot disregard the identification, assessment and management of potential risks. The relevant risk categories in this area are set out below. Strategic risks, which could affect the achievement of the Group’s development objectives, such as the lack of adequate skills, the loss of key resources or the difficulty of replacing them. Legal and compliance risks, related to contractual liabilities, compliance with the regulations applicable to the Group and the commitments set out in the Charter of Values, such as the correct application of labour contracts in force in the various countries in which the Group operates, health and safety regulations, compliance with the criteria of fairness and impartiality in the management of human resources. Operational risks, which may lead to malfunctions in the carrying-out of current activities, such as high turnover or conflicting industrial relations.
The Sabaf Group implements structured policies and defines centrally coordinated guidelines in the following areas: • selection and recruitment of personnel; • training; • health and safety; • internal communication; • remuneration and incentive systems; • company welfare; • industrial relations. To this end, the group’s organisational structure includes the positions of Global Group HR Director and Group HSE Manager. The combination of these systems and policies enables the Group to have an adequate control of the risks related to the management of relations with employees. The following paragraphs outline, for each of these topics, the characteristics of the “Sabaf model” and the performance achieved.
Health emergency and relations with employees In 2021, the pandemic again had a pervasive impact on the Group’s business and the people who work for it. Protecting the health and safety of people has always been a top priority, so strict protocols have been maintained in all companies to mitigate the risks of contagion. Serological tests and swabs were periodically performed, which prevented the spread of significant hotbeds. For all functions that allow it, smart working has been widely used and forms of flexibility have been guaranteed to ensure a balance between personal and family needs and
70
work commitments. An insurance policy is in place for all employees of Italian companies. The extraordinary dedication of all the personnel, their competence and willingness to help enabled the organisation to react quickly to all the challenges posed by a highly dynamic scenario. In this regard, a one-off bonus was awarded for outstanding achievements despite the difficulties faced in the health emergency.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
PERSONNEL MANAGEMENT POLICY The commitment of the Sabaf Group to social responsibility and the protection of workers’ health and safety are strategic elements for Sabaf and the compliance with labour standards that guarantee respect for human rights, health and maximum safety is an essential paradigm. The Group is committed to pursuing the following objectives, which are also set out in the Charter of Values: • promote respect for the fundamental human rights of workers in all countries where the Group operates, as identified in the principles established in the Global Compact and in the Code of Conduct of APPLiA Europe (European association of household appliances), relating to child labour, forced and compulsory labour, occupational health and safety, freedom of association and right to collective bargaining, discrimination, disciplinary procedures, working hours and remuneration criteria; • carry out their activities by creating a group of motivated people who can operate in a work environment that encourages and rewards fairness and respect for others; • produce profits without ever losing sight of the respect for the rights of its workers; • identify and analyse potential hazards and risks in business processes, in order to make workplaces safer and more comfortable; • avoid any form of discrimination and favouritism during the recruitment phase of personnel, whose selection must be made on the basis of the applicants’ profiles meeting the company’s requirements;
• value and respect diversity, avoiding any form of discrimination in career advancement on the grounds of gender, sexual orientation, age, nationality, state of health, political opinions, race and religious beliefs at all stages of the employment relationship; • adopt criteria of merit and competence in employment relationships, based also on the achievement of collective and personal objectives; • avoid all forms of harassment of workers; • enhance the contribution of human capital in decision-making processes, encouraging continuous learning, professional growth and knowledge sharing; • provide clear and transparent information on the tasks to be carried out and the position held, the performance of the Group and market developments; • establish a responsible and constructive dialogue with trade unions, fostering a climate of mutual trust in compliance with the principles of fairness and transparency, respecting their roles. From 2021, Sabaf S.p.A. has decided not to renew the SA8000 certification. The policies and procedures in place at all Group companies ensure full compliance with all the requirements of the Standard, regardless of external certification. During 2021, no episodes of discrimination were observed, no transactions/activities with a high risk of recourse to child labour and forced or compulsory labour or with a high risk of violation of the right of workers to exercise their freedom of association and collective bargaining were identified.
71
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
THE PEOPLE OF THE SABAF GROUP The Sabaf Group had 1,278 employees at 31 December 2021 compared to 1,168 at the end of 2020. The increase in the number of employees compared to the previous year was 110 (+9.42%). 31.12.2021
31.12.2020
31.12.2019
(no.) Sabaf S.p.A. (Ospitaletto, Brescia - Italy)
309
164
473
312
168
480
318
170
488
Faringosi Hinges s.r.l. (Bareggio, Milan - Italy)
22
23
45
23
23
46
23
21
44
A.R.C. s.r.l. (Campodarsego, Padua - Italy)
16
5
21
15
5
20
16
5
21
C.M.I. s.r.l. (Loc. Crespellano – Valsamoggia, Bologna – Italy)
31
53
84
31
51
82
33
52
85
C.G.D. s.r.l. (Loc. Crespellano – Valsamoggia, Bologna – Italy)
41
3
44
35
3
38
34
4
38
C.M.I. - Polish branch (Myszków, Poland)
19
26
45
19
25
44
18
29
47
Sabaf Brazil (Jundiaí, São Paulo - Brazil)
94
18
112
74
13
87
69
13
82
Sabaf Turkey (Manisa - Turkey)
144
94
238
129
69
198
84
42
126
Okida (Esenyurt/Istanbul – Turkey)
97
112
209
80
85
165
56
40
96
Sabaf Appliance Components (Kunshan) Co., Ltd. (Kunshan, Jiangsu Province – China)
5
2
7
6
2
8
6
2
8
778
500
1,278
724
444
1,168
657
378
1,035
GROUP TOTAL
As regards the types of contract adopted, at 31 December 2021, there are 1,268 employees with permanent contracts equal to 99.2% of the total (97.9% at the end of 2020) and 10 employees with a fixed-term contract, equal to 0.8% of the total (2.1% at the end of 2020).
GROUP 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
770
498
1,268
711
432
1,143
621
369
990
Fixed term
8
2
10
13
12
25
36
9
45
778
500
1,278
724
444
1,168
657
378
1,035
GROUP TOTAL
Sabaf S.p.A. 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
307
162
469
306
166
472
312
167
479
Fixed term
2
2
4
6
2
8
6
3
9
309
164
473
312
168
480
318
170
488
TOTAL 72
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Faringosi Hinges s.r.l. 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
22
23
45
23
23
46
23
21
44
Fixed term
0
0
0
0
0
0
0
0
0
TOTAL
22
23
45
23
23
46
23
21
44
A.R.C. s.r.l. 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
16
5
21
15
5
20
16
5
21
Fixed term
0
0
0
0
0
0
0
0
0
TOTAL
16
5
21
15
5
20
16
5
21
C.M.I. s.r.l. 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
31
53
84
28
51
79
30
51
81
Fixed term
0
0
0
3
0
3
3
1
4
TOTAL
31
53
84
31
51
82
33
52
85
C.G.D. s.r.l. 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
36
3
39
34
3
37
33
4
37
Fixed term
5
0
5
1
0
1
1
0
1
TOTAL
41
3
44
35
3
38
34
4
38
C.M.I. s.r.l. - Polish branch 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
19
26
45
19
25
44
17
29
46
Fixed term
0
0
0
0
0
0
1
0
1
TOTAL
19
26
45
19
25
44
18
29
47 73
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf Brazil 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
94
18
112
74
13
87
65
13
78
Fixed term
0
0
0
0
0
0
4
0
4
TOTAL
94
18
112
74
13
87
69
13
82
Sabaf Turkey 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
144
94
238
128
59
187
65
37
102
Fixed term
0
0
0
1
10
11
19
5
24
144
94
238
129
69
198
84
42
126
TOTAL
Okida 31.12.2021
31.12.2020
31.12.2019
(no.) Permanent
97
112
209
80
85
165
56
40
96
Fixed term
0
0
0
0
0
0
0
0
0
TOTAL
97
112
209
80
85
165
56
40
96
Sabaf China 31.12.2021
31.12.2020
31.12.2019
(no.)
74
Permanent
4
2
6
4
2
6
4
2
6
Fixed term
1
0
1
2
0
2
2
0
2
TOTAL
5
2
7
6
2
8
6
2
8
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
PERSONNEL WITH TEMPORARY WORK CONTRACT OR SIMILAR AND TRAINEES 31.12.2021
31.12.2020
31.12.2019
198
155
42
11
8
2
31.12.2021
31.12.2020
31.12.2019
< 30 years old
20.6
18.9
17.2
31–40 years old
35.4
34.5
35.1
41–50 years old
27.8
31.6
31.8
over 50 years old
16.2
15.0
15.9
100.0
100.0
100.0
(no.) Agency workers Trainees
BREAKDOWN OF PERSONNEL BY AGE (%)
Total
The low average age of Group employees (39.5 years old) confirms the strategy of hiring young workers, giving priority to training and internal growth rather than acquiring skills from outside.
The age of the youngest employees in the Group is 20 years old for Italy, 20 years old for Poland, 19 years old for Turkey, 17 years old for Brazil and 32 years old for China.
BREAKDOWN OF THE PERSONNEL BY LENGTH OF SERVICE 31.12.2021
31.12.2020
31.12.2019
48.4
44.5
37.2
6–10 years
9.9
9.0
12.3
11–20 years
27.9
31.9
36.6
over 20 years
13.8
14.6
13.9
100.0
100.0
100.0
(%) < 5 years
Total
Sabaf is aware of the fundamental importance of having a stable and qualified workforce that is a key factor in maintaining its competitive advantage.
75
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
RECRUITMENT POLICY In order to attract the best resources, the recruitment policy aims to ensure equal opportunities for all candidates, avoiding any kind of discrimination. The selection procedure requires, inter alia: • the selection process to be carried out in at least two stages with two different representatives; • that at least two applicants be assessed for each position.
The assessment of the applicants is based on their skills, training, previous experience, expectations and potential, tailoring them to the specific needs of the company.
BREAKDOWN BY QUALIFICATION 31.12.2021
31.12.2020
31.12.2019
Degree
16.0
15.4
14.9
High school leaving diploma
48.4
46.2
44.2
Middle school leaving certificate
33.1
36.5
39.7
Elementary school leaving certificate
2.5
1.9
1.2
100.0
100.0
100.0
(%)
TOTAL
CHANGE IN PERSONNEL IN THE THREE-YEAR PERIOD BY AGE AND GENDER HIRES (H) AND TURNOVER (T) 2021
(no.)
2019
H
T
H
T
H
T
< 30 years old
37
19
52
19
18
9
31-40 years old
57
21
37
7
9
9
41-50 years old
13
13
20
10
6
8
> 50 years old
5
3
0
7
0
1
112
56
109
43
33
27
< 30 years old
131
88
72
27
46
32
31-40 years old
66
54
50
32
25
19
41-50 years old
21
16
21
8
3
10
> 50 years old
6
12
7
16
2
6
TOTAL MEN
224
170
150
83
76
67
TOTAL
336
226
259
126
109
94
TOTAL WOMEN
76
2020
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
RATES OF EMPLOYEE HIRE (H) AND TURNOVER (T) BY GEOGRAPHICAL AREA, AGE GROUP AND GENDER GROUP 2021
(%)
2020
2019
H
T
H
T
H
T
< 30 years old
7.40
3.80
11.71
4.28
4.76
2.38
31-40 years old
11.40
4.20
8.33
1.58
2.38
2.38
41-50 years old
2.60
2.60
4.50
2.25
1.59
2.12
> 50 years old
1.00
0.60
0.00
1.58
0.00
0.26
22.40
11.20
24.54
9.69
8.73
7.14
< 30 years old
16.84
11.31
9.94
3.73
7.00
4.87
31-40 years old
8.48
6.94
6.91
4.42
3.81
2.89
41-50 years old
2.70
2.06
2.90
1.10
0.46
1.52
> 50 years old
0.77
1.54
0.97
2.21
0.30
0.91
TOTAL MEN
28.79
21.85
20.72
11.46
11.57
10.19
TOTAL
26.29
17.68
22.17
10.79
10.53
9.08
TOTAL WOMEN
ITALY (SABAF S.p.A., FARINGOSI, A.R.C., C.M.I., C.G.D.) 2021
(%)
2020
2019
H
T
H
T
H
T
< 30 years old
1.21
0.00
0.00
0.40
1.59
0.51
31-40 years old
2.02
1.21
1.60
0.00
0.00
1.53
41-50 years old
0.40
2.42
1.20
0.80
0.40
1.53
> 50 years old
0.40
1.21
0.00
2.40
0.00
0.51
4.03
4.84
2.80
3.60
1.98
4.08
< 30 years old
3.34
0.95
0.48
0.00
0.71
0.56
31-40 years old
2.15
1.91
0.96
1.68
1.18
1.40
41-50 years old
1.19
1.43
0.96
0.48
0.00
1.96
> 50 years old
0.48
2.15
0.96
3.13
0.47
0.84
TOTAL MEN
7.16
6.44
3.36
5.29
2.36
4.76
TOTAL
6.00
5.85
3.15
4.65
2.22
4.52
TOTAL WOMEN
77
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
POLAND (C.M.I. – POLISH BRANCH) 2021
(%)
2020
2019
H
T
H
T
H
T
< 30 years old
0.00
0.00
0.00
4.00
0.00
3.45
31-40 years old
3.85
3.85
0.00
0.00
10.34
3.45
41-50 years old
3.85
3.85
0.00
8.00
6.90
0.00
> 50 years old
3.85
0.00
0.00
4.00
0.00
0.00
11.55
7.70
0.00
16.00
17.24
6.90
< 30 years old
10.53
10.53
10.53
5.26
11.11
5.56
31-40 years old
0.00
5.26
0.00
0.00
0.00
0.00
41-50 years old
5.26
0.00
0.00
0.00
0.00
0.00
> 50 years old
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL MEN
15.79
15.79
10.53
5.26
11.11
5.56
TOTAL
13.33
11.11
4.55
11.36
14.89
6.38
TOTAL WOMEN
BRAZIL (SABAF BRAZIL) 2021
(%)
2019
H
T
H
T
H
T
< 30 years old
5.56
0.00
0.00
0.00
0.00
7.60
31-40 years old
27.78
11.11
15.38
15.38
7.69
15.38
41-50 years old
0.00
0.00
7.69
7.69
0.00
15.38
> 50 years old
5.56
0.00
0.00
0.00
0.00
0.00
38.90
11.11
23.07
23.07
7.69
38.46
< 30 years old
38.30
26.60
14.86
17.57
8.70
7.25
31-40 years old
15.96
10.64
14.86
8.11
7.25
7.25
41-50 years old
6.38
2.13
2.70
2.70
1.45
4.35
> 50 years old
1.06
1.06
2.70
0.00
0.00
0.00
TOTAL MEN
61.70
40.43
35.12
28.38
17.40
18.85
TOTAL
58.04
35.71
33.33
27.59
15.85
21.95
TOTAL WOMEN
78
2020
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
TURKEY (SABAF TURKEY AND OKIDA) 2021
(%)
2020
2019
H
T
H
T
H
T
< 30 years old
16.02
9.22
33.77
11.04
17.07
7.32
31-40 years old
22.33
7.28
20.13
3.25
6.10
3.66
41-50 years old
5.34
2.91
10.39
3.25
3.66
3.66
> 50 years old
0.97
0.00
0.00
0.00
0.00
0.00
44.66
19.41
64.29
17.54
26.83
14.64
< 30 years old
32.78
23.65
27.27
6.22
25.00
16.43
31-40 years old
17.43
14.11
16.75
9.09
10.71
6.43
41-50 years old
3.73
3.32
7.18
1.91
1.43
0.00
> 50 years old
1.24
0.83
0.48
1.44
0.00
1.43
TOTAL MEN
55.18
41.91
51.68
18.66
37.14
24.29
TOTAL
50.34
31.54
57.02
18.18
33.33
20.72
TOTAL WOMEN
CHINA (SABAF CHINA) 2021
(%)
2020
2019
H
T
H
T
H
T
< 30 years old
0.00
0.00
0.00
0.00
0.00
0.00
31-40 years old
0.00
0.00
0.00
0.00
0.00
0.00
41-50 years old
0.00
0.00
0.00
0.00
0.00
0.00
> 50 years old
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
< 30 years old
0.00
0.00
0.00
0.00
0.00
0.00
31-40 years old
0.00
20.00
0.00
0.00
0.00
0.00
41-50 years old
0.00
0.00
0.00
0.00
0.00
0.00
> 50 years old
0.00
0.00
0.00
0.00
0.00
0.00
TOTAL MEN
0.00
20.00
0.00
0.00
0.00
0.00
TOTAL
0.00
14.29
0.00
0.00
0.00
0.00
TOTAL WOMEN
In 2021, the very strong growth in business volumes and the volatility of demand, especially in Brazil and Turkey, led to a significant increase in hire and turnover rates, which were higher than historical levels
and those considered physiological. The Group expects a gradual adjustment of these indicators, also due to the retention policies in place.
79
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
PERSONNEL TRAINING Within the Sabaf Group, the professional growth of employees is supported by continuous training. The Group Human Resources Department, having consulted the rel-
evant heads and gathered the training requirements, prepares an annual training plan on the basis of which the specific courses to be carried out are planned.
2021
2020
2019
(hours) Training for new employees, apprentices, training contracts
2,112
463
2,575
1,615
546
2,161
2,340
1,302
3,642
Technical training and information systems
3,671
1,040
4,711
2,393
823
3,216
2,316
117
2,433
Quality, safety, environment, energy and social responsibility
6,519
2,486
9,005
3,963
1,095
5,058
3,079
878
3,957
752
412
1,164
434
106
540
683
545
1,228
Foreign languages
1,447
959
2,406
470
268
738
1,234
540
1,774
Other (e.g. lean philosophy/production/office)
1,529
889
2,418
675
267
942
2,036
767
2,803
TOTAL HOURS OF TRAINING RECEIVED
16,030
6,249
22,279
9,550
3,105
12,655
11,688
4,149
15,837
Hours of training provided by internal trainers 13
1,677
273
1,950
4,306
946
5,252
979
284
1,263
TOTAL
17,707
6,522
24,229
13,856
4,051
17,907
12,667
4,433
17,100
Administration and organisation
In 2021, the number of training hours provided to employees was 22,279 (12,655 in 2020, when training activities were slowed down
due to the health emergency). In addition to this, 7,859 hours of training were received by agency workers (5,725 in 2020).
AVERAGE HOURS OF TRAINING PER CAPITA RECEIVED BY CATEGORY 2021
2020
2019
(hours) Blue collars
18.2
7.6
13.8
11.6
4.4
8.7
18.2
10.0
15.1
White collars and middle managers
29.2
34.8
31.0
16.9
18.2
17.3
16.9
15.2
16.3
Managers
11.6
11.1
11.6
24.7
4.0
22.6
11.6
3.5
10.8
TOTAL EMPLOYEES
20.6
12.5
17.4
13.2
7.0
10.8
17.8
11.0
15.3
Agency workers
44.4
32.5
39.7
TOTAL PERSONNEL
23.8
15.2
20.4
In 2021, the total cost incurred for training activities of Group employees was approximately €540,000 (approximately €360,000 in
2020). In addition, there are training costs for agency workers, which in 2021 were around €178,000 (around €123,000 in 2020).
INTERNAL COMMUNICATION With the aim of developing a dialogue and continuous involvement between the company and its employees, Sabaf organises meetings and sharing sessions in which the results of projects to improve quality, efficiency and productivity are presented. The HR representatives provide assistance to all Group employees on matters relating to the employment relationship.
13
Including training given to employees with temporary work contract.
80
The focus on internal communication uses, among other things, advanced tools that can reach all employees, such as a dedicated portal and electronic bulletin boards. Systematic meetings in the various departments promote communication and involvement of personnel.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
DIVERSITY AND EQUAL OPPORTUNITIES Sabaf is constantly committed to ensuring equal opportunities for women employees, who at the end of 2021 represent 39.1% of the workforce (38% in 2020).
PERCENTAGE DISTRIBUTION OF EMPLOYMENT BY GENDER 31.12.2021
TOTAL
31.12.2020
31.12.2019
no.
%
no.
%
no.
%
778
60.9
724
62.0
657
63.5
500
39.1
444
38.0
378
36.5
1,278
100.0
1,168
100.0
1,035
100.0
PERCENTAGE DISTRIBUTION OF EMPLOYMENT BY CONTRACT AND GENDER The Group, in accordance with the organisational and production requirements, is attentive to the family requirements of its employees. To date, most of the demands for reduced working time made by workers have been met. 31.12.2021
31.12.2019
no.
%
no.
%
776
60.7
722
61.8
651
62.9
446
34.9
387
33.1
327
31.6
1,222
95.6
1,109
94.9
978
94.5
2
0.2
2
0.2
6
0.6
54
4.2
57
4.9
51
4.9
56
4.4
59
5.1
57
5.5
1,278
100.0
1,168
100.0
1,035
100.0
Full-time
Part-time
TOTAL
31.12.2020
%
no.
PERCENTAGE DISTRIBUTION OF EMPLOYMENT BY CATEGORY, AGE AND GENDER 31.12.2021
31.12.2020
31.12.2019
(%)
Managers
White collars and middle managers
Blue collars
< 30 years old
0
0
0
0
0
0
0
0
0
from 30 to 50 years old
0
0
0
1
0
1
1
0
1
over 50 years old
1
0
1
1
0
1
1
0
1
TOTAL
1
0
1
2
0
2
2
0
2
< 30 years old
3
1
4
2
1
3
1
2
3
from 30 to 50 years old
10
5
15
10
5
15
10
5
15
over 50 years old
2
1
3
2
1
3
2
1
3
TOTAL
15
7
22
14
7
21
13
8
21
< 30 years old
11
5
16
10
4
14
10
3
13
from 30 to 50 years old
27
22
49
29
22
51
31
22
53
over 50 years old
7
5
12
7
4
11
7
4
11
45
32
77
46
30
76
48
29
77
TOTAL
TOTAL
< 30 years old
14
6
20
12
6
18
10
5
15
from 30 to 50 years old
37
27
64
40
27
67
42
27
69
over 50 years old
10
6
16
10
5
15
11
5
16
TOTAL
61
39
100
62
38
100
63
37
100
The managers of all Group offices come from a geographical area close to the registered offices in which they operate, with the exception of the general manager at the premises of Sabaf China, who has been living in China for many years.
81
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
REMUNERATION, INCENTIVE AND ENHANCEMENT SYSTEMS All Group companies apply local national contracts, supplemented with any best deals. The employees of Sabaf S.p.A. are classified according to the provisions of the National Collective Labour Contract for the metal and engineering industry, supplemented by second-level negotiations, which include: • contractual minimum; • company welfare from National Collective Labour Agreement; • productivity or personal bonuses per level; • production bonus per level;
• fixed performance bonus (part of which includes part of the previous variable bonus) for all levels; • variable performance bonus that is the same for all levels. As from 2019, Sabaf S.p.A. and Faringosi Hinges have launched a new corporate welfare platform (Edenred), which has been very well received by employees. The platform has also been extended to C.M.I. and C.G.D. as from 2020. The Group believes that a fundamental element of the valuation system is represented by the training opportunities provided.
LONG-TERM INCENTIVE (LTI) The socio-environmental sustainability objectives were defined with reference to the issues that the materiality analysis has highlighted as being of greatest relevance to Sabaf and its stakeholders:
A long-term incentive plan (stock grant plan) was introduced in 2018, which envisages the free allocation of shares to parties (directors and employees) who hold or will hold key positions for Sabaf S.p.A. and its subsidiaries. In 2021, the shareholders’ meeting approved a new long-term incentive plan, linked to the economic-financial and sustainability objectives set out in the 2021-2023 Business Plan.
MATERIAL TOPIC
KPI
IMPACT ON THE LTI PLAN
Emissions into the atmosphere
CO2 emissions scope 1 + scope 2 market-based/Revenue
15%
Development of resources and skills
Hours of training per capita (by collaborator)
5%
Health and safety of personnel
Summary indicator of injuries (injury rate x injury lost day rate x 100)
5%
KPI
Unit of measurement
2020 FINAL BALANCE
2021 OBJECTIVE
2021 FINAL BALANCE
2022 OBJECTIVE
2023 OBJECTIVE
CO2 emissions
tCO2eq/millions of Euro
132
126
111
120
114
Hours of training
h
13.9
11.0
20.4
13
15
Summary indicator of injuries
-
177
140
327
120
100
The Remuneration Report explains the other key features of the LTI Plan.
MANAGEMENT BY OBJECTIVES (MBO) A Group-wide incentive system linked to collective and individual objectives (MBOs) is in place, involving managers and other employees with managerial responsibilities. In 2021, this incentive
82
system involved 63 employees of the Group (57 men and 6 women). The operating mechanisms of the LTI system are described in the Remuneration Report.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
The Qualità del Flusso Produttivo (QFP) (Quality of Production Flow) Award With the aim of rewarding the contribution of personnel to the achievement of company objectives, as from 2016 Sabaf S.p.A. introduced an incentive system related to quality objectives (reduction of waste and rework), production efficiency and precision in carrying out projects. In 2021, improvement targets in these areas were set for 113 people involved in relevant business processes. (no.)
TOTAL
White Collars
Blue Collars
TOTAL
39
65
104
3
6
9
42
71
113
In addition to being a tool for steering towards challenging objectives (580 objectives were assigned, achieved or exceeded in 62% of cases), the QFP award stimulated teamwork and favoured the sharing of short- and medium-long term development plans at all company levels.
Variable Performance Bonus (VPB) The supplementary company contract of Sabaf S.p.A. envisages a variable performance bonus for all employees, also based on quality and productivity indicators, which also in 2021 could be enjoyed in the form of company welfare. In consideration of the results achieved, the VPB is 103.8% above target in 2021. C.M.I. has a VPB agreement in place for the three-year period 2020 to 2022, with the possibility of converting all or part of the bonus achieved into company welfare. The VPB is 75% above target in 2021. In 2021, at Faringosi Hinges, a VBP agreement was established for the first time, shared with trade union representatives and valid for the three-year period 2021 to 2023, with the possibility of converting all or part of the bonus achieved into company welfare. The VPB is 100% above target in 2021.
Personnel Participation Bonus (PPB) In 2018, Sabaf S.p.A. introduced a Personnel Participation Bonus (PPB) for all its employees who, through effective participation, help to achieve the company’s objectives. This bonus was paid also in 2021 in the form of company welfare.
The forms of social security in force for all Group employees are those envisaged by the regulations in force in the various Countries in which the Group operates.
83
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
RATIO BETWEEN THE STANDARD SALARY OF A NEW RECRUIT BY GENDER RECOGNISED BY GROUP COMPANIES AND THE MINIMUM SALARY PROVIDED FOR IN THE CONTRACTS14 2021
MINIMUM INCREASE (%)
2020
2019
Sabaf S.p.A.
29%
29%
29%
29%
29%
29%
Faringosi Hinges s.r.l.
3%
3%
3%
3%
3%
3%
A.R.C. s.r.l.
0%
0%
0%
0%
0%
0%
C.M.I. s.r.l.15
2%
2%
2%
2%
-
-
C.G.D. s.r.l.
0%
0%
0%
0%
0%
0%
C.M.I. Polish branch
2%
2%
4%
4%
20%
20%
Sabaf Turkey
15%
15%
14%
14%
14%
14%
Okida
0%
0%
0%
0%
0%
0%
Sabaf Brazi
14%
14%
13%
13%
13%
13%
Sabaf China
338%
292%
395%
342%
240%
204%
The Group has procedures in place to systematically check the regular contribution of suppliers and contractors and the correct hiring of their employees.
RATIO OF AVERAGE SALARY OF FEMALE PERSONNEL TO AVERAGE SALARY OF MALE PERSONNEL16 (%)
2021
2020
2019
White-collars, middle managers and managers
82%
78%
83%
Blue Collars
87%
79%
82%
As part of the calculation of the data relating to the ratio between the standard salary of a newly hired employee by gender recognised by the Group companies and the minimum salary provided for in the contracts, more detailed data became available than was considered for the calculation carried out last year and reported in 2020 DNI. The data that became available during 2021 made it possible to refine the calculation both for the current reporting year (2021) and, consistently, for the previous years (2019 and 2020), in order to give as reliable and consistent a representation as possible; therefore, this DNI reports the most accurate data for both 2021 and 2019 and 2020. For a better representation of the data, compared to last year, the increases in percentage terms of the minimum salary recognised by Group companies compared to the minimum salary provided for by collective agreements are shown. 15 2019 data not available for C.M.I. s.r.l.. 16 Calculated on basic salary. 14
84
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
OCCUPATIONAL HEALTH AND SAFETY AND WORKING ENVIRONMENT RISKS The Health & Safety risks to which Sabaf and contractors’ personnel are exposed are related to the processes at the various sites where the business is carried out. In general, the main risks to workers’ health and safety are: • risks with high associated damage (falls from a height, work in confined spaces); • the risks resulting from the presence of aluminium casting departments (burn, exposure to high temperatures); • typical risks in metalworking companies, such as cuts and bruises. The Group is also exposed to the compliance risk, resulting from any failure to adopt measures to bring its procedures and operations into line with current health and safety regulations.
RISK MANAGEMENT The Sabaf Group formally defines the responsibilities, criteria and operating procedures for identifying and planning prevention measures to eliminate and/or mitigate risks, as part of a system that allows the level of safety and hygiene to be optimised and constantly improved through preventive actions. As from 2019, the function of Group HSE Manager was established with the aim of coordinating the management of Health, Safety and Environment of all companies based on a common policy. The occupational health and safety management systems of Group companies are structured according to a risk-based approach. Prevention and reduction of risk levels are based on the following factors. • Effective training: all training courses are planned and managed by internal personnel and/or external trainers, with a propensity to teach and with strong experience in the reference sector (first aid, fire-fighting, work at height, etc.). Job-specific training courses have been designed with a focus on the simulation of real cases and actual experiences, in order to make training meetings more effective. The approach to training aims to overcome the compulsory approach to encourage the active participation of all employees.
• Cutting-edge plants: continuous investment in increasingly modern and technologically advanced machinery reduced the levels of risk related to ergonomics and manual handling of loads and improved the systems to protect against physical risks. • Organisation: the strong involvement and constant training of department heads and their awareness of obligations and responsibilities led to a clear improvement in all aspects of Health and Safety. With reference to the Covid pandemic, in order to mitigate the risks of contagion, all Group companies promptly adopted preventive measures and strict protocols, which are currently in force and constantly adapted based on best practice. In the Group companies based in Italy (Sabaf S.p.A., Faringosi Hinges s.r.l., A.R.C. s.r.l., C.M.I. s.r.l., C.G.D. s.r.l.), the risk assessment is carried out by the Employer through the collaboration of the Occupational Health and Safety Officer and the Company Physician, with the participation of all responsible parties (managers and representatives). The involvement of workers is envisaged, both through periodic meetings with safety representatives through the obligation to report possible additional risks. Equivalent systems, applied in accordance with applicable laws, are in place at the foreign offices. In Sabaf S.p.A., in Faringosi Hinges s.r.l. and C.G.D. s.r.l., the health and safety management system has been certified according to ISO 45001 since 2017, 2021 and 2020, respectively. The management systems of the other Group companies are not certified. Moreover, the coordination at central level directs all companies towards a shared approach and methodology. For example, the support management system used at Sabaf S.p.A. has been gradually extended to certain subsidiaries (Faringosi Hinges, A.R.C., Sabaf Brazil, Sabaf Turkey). The Group started the management and coordination of the related safety management systems for the recently acquired companies (Okida and the C.M.I. Group) as well.
85
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
EMPLOYEES 2021
2020
2019
2,308,816
1,801,120
1,513,620
Near misses/Medical treatments without lost days
47
103
39
Recordable injuries (absence < 6 months) – excluding fatalities
35
29
15
0
0
0
1
0
1
0
0
0
0
0
0
0
0
0
484
194
77519
36
29
16
0
0
0
INJURY RATE (number of injuries x 1,000,000/hours worked)
2021
2020
2019
Recordable injury rate
15.16
16.10
9.91
High-consequence injury rate
0.43
0.00
0.66
Fatality rate as a result of injuries
0.00
0.00
0.00
Total injury rate
15.59
16.10
10.57
INJURY LOST DAY RATE (days of absence x 1,000/hours worked)
2021
2020
2019
Rate based on recordable and high-consequence injuries
0.21
0.11
0.51
NUMBER AND DURATION OF INJURIES Hours worked
17
of which injuries while travelling to/from work
18
Accidents with serious consequences (absence > 6 months) - excluding fatalities
of which injuries while travelling to/from work Deaths as a result of injuries
of which injuries while travelling to/from work Days lost due to injury Total injuries - including fatalities
of which injuries while travelling to/from work
Recordable injury includes any occupational injury, including fatal injury, that occurs to a person during or as a result of work, resulting in absence from work for less than 6 months, alternative activities or medical treatment. 18 Only if transport has been organised by the organisation and the transfers have taken place within working hours. 19 The 2019 days lost and injury severity index have been restated due to the continued absence of an injury in 2021. 17
86
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
EXTERNAL WORKERS 2021
2020
2019
460,135
201,761
85,927
7
0
1
0
0
0
0
1
0
0
0
0
0
0
0
0
0
0
Days lost due to injury
76
198
32
Total injuries - including fatalities
7
1
1
0
0
0
INJURY RATE (number of injuries x 1,000,000/hours worked)
2021
2020
2019
Recordable injury rate
15.21
0.00
11.64
High- consequence injury rate
0.00
4.96
0.00
Fatality rate as a result of injuries
0.00
0.00
0.00
Total injury rate
15.21
4.96
11.64
INJURY LOST DAY RATE (days of absence x 1,000/hours worked)
2021
2020
2019
0.17
0.98
0.37
NUMBER AND DURATION OF INJURIES Hours worked Recordable injuries
20
(absence < 6 months) - excluding fatalities
of which injuries while travelling to/from work
21
Accidents with serious consequences (absence > 6 months) - excluding fatalities
of which injuries while travelling to/from work Deaths as a result of injuries
of which injuries while travelling to/from work
of which injuries while travelling to/from work
Rate based on recordable and high-consequence injuries
During 2021, there was an injury resulting in a period of absence of more than 6 months and related to a hand injury suffered by an operator during a routine maintenance activity. All other recorded injuries were minor and mainly related to operator distraction. The injury rate is slightly down compared to 2020. No cases of occupational disease
were reported at Group level in 2021. In compliance with the laws in force, Group companies prepared and implemented health supervisory plans for employees, with health inspections aimed at the specific risks of the work activities carried out.
Recordable injury includes any occupational injury, including fatal injury, that occurs to a person during or as a result of work, resulting in absence from work for less than 6 months, alternative activities or medical treatment. 21 Only if transport has been organised by the organisation and the transfers have taken place within working hours. 20
87
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Sabaf, a health-promoting workplace Since 2016, Sabaf S.p.A. has joined the WHP (Workplace Health Promotion) programme, committing itself to implementing good practices in the field of workplace health promotion. The company is committed not only to implementing all measures to prevent accidents and occupational diseases but also to offering its workers opportunities to improve their health, reducing general risk factors and in particular those most involved in the genesis of chronic diseases. Workplace health promotion is the result of the combined efforts of employers, workers and the company. The following factors contribute to this promotion:
• improving work organisation and the working environment; • encouraging personnel to participate in healthy activities; • promoting healthy choices; • encouraging personal growth. The central idea is simple: Sabaf aims to build, through a participatory process, a context that encourages the adoption of positive behaviour and choices for health. The WHP Programme envisages the development of activities (good practices) in 6 thematic areas: food, fight against smoking, fitness training, safe and sustainable mobility, fight against addictions, wellbeing/reconciling life and work.
USE OF DANGEROUS SUBSTANCES Only materials that fully comply with the requirements of Directive 2011/65/EU (RoHS Directive) which tends to limit the use of hazardous substances such as lead, mercury, cadmium and hexavalent chromium are used for production.
INDUSTRIAL RELATIONS Sabaf complies with the labour laws of the various countries and the conventions of International Labour Organisation (ILO) on Workers’ Rights (freedom of association and collective bargaining, consultation, right to strike, etc.), systematically promoting dialogue between the parties and seeking an adequate level of agreement and sharing of company strategies by the personnel. In case of organisational changes, with regard to the minimum notice period, the Group complies with the provisions of the law and the reference contracts of the various countries. In January 2018, the second level company agreement of Sabaf S.p.A. was renewed, valid until June 2021. The agreement includes an extension clause and a renewal is being finalised at the beginning of 2022.
• sharing objectives also through the responsible involvement of personnel; • maintaining fair and transparent industrial relations while respecting individual roles; • the establishment of working groups with the aim of improving the involvement of personnel at all levels; • the continuation of the payment of a variable part of remuneration, the payment of which is related to measurable and verifiable quality and efficiency indicators; data on which dissemination and transparency will be maintained; • the possibility of converting all or part of the variable performance bonus (VPB) into welfare.
The key points of this agreement are set below:
In the Group companies, at 31 December 2021, 150 employees, or 11.7% of the total, were members of trade unions (in 2020, 164 employees, or 14.0% of the total, were members).
• the sharing between the company and trade unions and Unitary Union Representative Body of priorities on which to channel resources and energy in the coming years (producing quality, creating and maintaining efficiency, becoming more flexible);
Hours of participation in trade union activities during 2021 amounted to 0.24% of the hours worked (0.12% in 2020).
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2021
2020
2019
Number of hours
1,537
209
2,373
Percentage over hours worked
0.07
0.01
0.16
1.2
0.2
2.3
Number of hours
1,766
1,009
1,579
Percentage over hours worked
0.08
0.06
0.10
1.4
0.9
1.5
Number of hours
2,196
1,017
1,459
Percentage over hours worked
0.10
0.06
0.10
1.7
0.9
1.4
Number of hours
5,499
2,235
5,410
Percentage over hours worked
0.24
0.12
0.36
Number of hours per capita
4.3
1.9
5.2
PARTICIPATION IN TRADE UNION ACTIVITIES
BENCHMARK22
Meeting
Number of hours per capita
1.7
Leave for trade union duties
Number of hours per capita Strike
Number of hours per capita
2.3
TOTAL
4.0
Among the 2,196 hours of strikes in 2021, only 39 are attributable to internal causes. No social safety valves were used during 2021.
BUSINESS CLIMATE ANALYSIS Between July and October 2021, a climate analysis called “Conoscere e Ascoltare” (Knowing and Listening) was carried out in a first set of Group companies and specifically at Sabaf S.p.A., C.M.I. (in Italy and Poland), C.G.D. and Faringosi Hinges. The attendance was very high (601 total participants) and allowed people to express their perceptions of the key elements of their working life in our Group in a frank and direct manner. The summary of the results reveals an undoubtedly positive and encouraging picture. Among the elements of working life on which more than 70% of
people expressed a positive perception are safety issues, the sense of belonging and pride in their company, and the canteen. Note also that the possession of expertise deemed appropriate to one’s job and the relationship with one’s colleagues are the real treasures of living in the company, which contribute concretely to the foundation of the business climate in the Sabaf Group. The first results also give us an indication of the elements that people perceive as needing improvement, including the chapter on Training, Evaluation and Incentives and that on Information and Communication.
DISCIPLINARY MEASURES AND DISPUTES The Group makes use of all the instruments provided for in the contract for compliance with the company rules and social life. At 31 December 2021, 8 disputes were pending (all with former employees), 1 of which was started in 2021.
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FEDERMECCANICA, L’industria metalmeccanica in cifre (June 2021) – Ore pro–capite di assenza dal lavoro (2019), http://www.federmeccanica.it
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Sabaf and environment RISKS Environmental issues are managed through a risk-based approach, in line with the UNI EN ISO 14001:2015 standard. The relevant risk categories are set out below. Risks of external context context(environmental sustainability), concerning climate change and the objectives of protecting the environment and the territory, through the reduction of environmental impacts and the containment of the use of natural and energy resources. These impacts are considered from the product design stage, through the different stages of its implementation and from a perspective that considers the whole life cycle of the product. With regard to physical risks related to climate change, such as the increase in global temperatures, sea level and the increase in extreme weather events, the Group has not identified any significant risks to
date. On the other hand, transitional risks, such as the increase in energy costs, changes in consumer choices or those related to the introduction of new technologies, which the Group manages at a strategic level, are of significant impact and probability. Strategic risks, including collaboration with strategic service providers with potential environmental risk (waste collection and disposal, cleaning services, maintenances). Legal and compliance risks, related to compliance with law requirements (authorisations and compliance obligations) and requests of local institutions, also with regard to reporting obligations. The following paragraph describes how these risks are managed.
HEALTH AND SAFETY, ENVIRONMENTAL AND ENERGY POLICY PROGRAMME AND OBJECTIVES The Group is committed to the following objectives: • the prevention of pollution and rationalisation of the use of energy through the continuous improvement of its processes and products; • the efficiency in the use of natural and energy resources during production, with a special reference to water and energy consumption; • the reduction of the quantity of waste produced and the improvement of its quality in terms of hazardousness and recoverability. Sabaf S.p.A. adopted and maintains an Integrated Management System of Health and Safety, Environment and Energy (EHS&En) that, by integrating with the other Management Systems operating within the company, is an effective means of pursuing a constant reduction in risks, environmental impacts and energy consumption through the following instruments: • the prior assessment of EHS&En aspects in all company processes, with particular focus on design, production processes and purchases; • maintaining full compliance with current law requirements, proactively using them as elements of continuous process monitoring; • a training and information system involving all employees and collaborators.
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Since 2003, the Environmental Management System of the Ospitaletto production site (which covers approximately 50% of the Group’s total production) has been certified in compliance with ISO 14001. In 2015, the Energy Management System implemented at the premises of Ospitaletto was certified in compliance with the ISO 50001 standard. In 2008, Sabaf S.p.A. obtained the Integrated Environmental Authorisation (IPPC) from the Lombardy Region pursuant to Legislative Decree 59 of 18 February 2005. With regard to the recently acquired companies (Okida and C.M.I. Group), the Group is starting the management and coordination activities for the purpose of managing environmental issues.
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PROCESS AND PRODUCT INNOVATION AND ENVIRONMENTAL SUSTAINABILITY HIGH EFFICIENCY BURNERS
LIGHT ALLOY VALVES
For many years, the Sabaf Group has been at the forefront in offering gas burners that are characterised by yields higher than standard burners. In the range of standard single ring flame sizes, since the beginning of 2000 Sabaf has introduced four series of burners (Series III, AE, AEO and HE) to the market, all of which guarantee high energy efficiency, with an efficiency of up to 68%. The DCC series of special burners was introduced in the range of special burners: they are characterised by an energy efficiency of over 60%, the highest available on the market today for multiple flame ring burners. Moreover, DCC burners with a brass flamespreader ring and efficiency of more than 68% were produced specifically for the Chinese market, the top of what is currently available on that market. High efficiency burners represent more than 25% of the total burners produced.
The production of aluminium alloy valves has several advantages compared to the production of brass valves: elimination of the hot moulding phase of brass, lower lead content in the product, lower weight and consequent reduction in consumption for packaging and transport. Light alloy valves currently account for around 90% of the valves produced by the Sabaf Group.
METAL WASHING In the production process of valves and burners, it is essential to wash metals in several stages. Since 2013, Sabaf S.p.A. has been using a washing system based on a modified alcohol, a solvent that is redistillable (and therefore recyclable) due to its properties. The environmental impact and operating costs of this solvent have been substantially eliminated, as well as the emissions and production of special waste. This efficient and sustainable technology has also been used at the Sabaf do Brasil production site (since 2016 ) and at the Sabaf Turkey production site (since 2018).
A possible revolution Hydrogen burners: the Hy4Heat project The SABAF Group is one of the strategic suppliers of the UK government’s Hy4Heat feasibility project. The Hy4Heat project aims to determine whether it is technically possible, safe and cost-effective to replace natural gas (methane) with 100% hydrogen in residential and commercial buildings and gas appliances. The Hy4Heat project is funded by BEIS (the UK Government’s Department for Business, Energy and Industrial Strategy) and involves ten separate working groups. The Sabaf Group, through its subsidiary A.R.C., participates in the Working Group 4, which deals with domestic cooking and heating appliances. A.R.C. developed and produced the burners that are now included in the world’s first ranges of 100% hydrogen-powered cookers and hobs. These were installed on Glen Dimpex cooking appliances at HyHome, two purpose-
built houses featuring hydrogen-powered appliances in a “real life” scenario in Low Thornley, near Gateshead, in the North of England. In the next phase, cooking appliances with hydrogen burners will be included for the Community Trial involving 300 homes, organised by Scottish Gas Networks (SGN) in Fife and starting in 2022. In addition to the Community Trial, the UK government intends to commission a Village Trial with around 2,500 homes in 2025 and a Town Trial (10,000 homes) in the last part of the decade, before potentially converting the entire UK gas network to hydrogen in the future. A.R.C. also participates in the Working Group 5B (Development of Commercial Hydrogen Appliances, which includes commercial restaurant equipment) and has developed commercial hob burners for Falcon Foodservice Equipment Ltd.
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ENVIRONMENTAL IMPACT CDP PROMOTES SABAF’S COMMITMENT: THE COMPANY RECEIVES A B- RATING IN THE CLIMATE CHANGE SECTION Aware of the value of complete and transparent disclosure, in 2021, Sabaf joined for the second consecutive year the Climate Change and Water programmes of CDP, an international nonprofit organisation that provides businesses, local authorities and governments with a system to measure, track, manage and share information on the environment globally. In particular, companies are required to participate in an annual survey on the impact of their activities on the environment,
the management of their environmental risks and the results achieved. The aim is to make environmental performance central to business and investment decisions by leveraging information transparency. In its second year of participation, Sabaf received a B- rating in the Climate Change section on a scale ranging from A to F.
MATERIALS USED AND RECYCLABILITY OF PRODUCTS Sabaf products can be easily recycled because they are made almost entirely of brass, aluminium alloys, copper and steel. 2021 Consumption
2020 Consumption
2019 Consumption
Steel
26,801
26,046
21,881
Aluminium alloys
11,326
9,188
6,476
Brass
1,227
638
481
Enamel
289
246
193
Cast iron
144
96
142
Stainless steel
139
103
116
Zamak
12
10
11
Copper
7
8
-
Bronze
1
0
1
Cardboard
1,019
706
397
Wood
935
683
479
Plastic
281
220
136
(t) RAW MATERIALS
PACKAGING MATERIALS
90% of brass, 70% of aluminium alloys and 33% of steel used in 2021 are produced by scrap recycling; the remaining 30% of aluminium alloys and 67% of steel are produced from ore. The use of recycled raw materials is constantly increasing. The Group estimates that at least 40% of the cardboard and 66% of the plastic used for packaging comes from recycling. Cardboard and wood are renewable materials. The increases in raw material and packaging consumption in 2021 reflect the Group’s higher production levels compared to the previous year. Sabaf products fully comply with the requirements of Directive 2011/65/EU (RoHS Directive) which tends to limit the use of hazardous substances such as lead in the production of electrical and electronic equipment. Moreover, Sabaf products fully comply with the requirements of Directive 2000/53/EC (End of Life
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Vehicles), i.e. the heavy metal content (lead, mercury, cadmium, hexavalent chromium) is below the limits imposed by the Directive and/or any exemptions. With regard to the REACH Regulation (Regulation no. 1907/2006 of 18/12/2006), Sabaf is a downstream user of substances and preparations. The products supplied by Sabaf are classified as articles that do not give rise to the intentional emission of substances during normal use, therefore there is no registration of the substances contained in them. Sabaf involved the suppliers to ensure that they fully comply with REACH Regulation and to obtain confirmation that they meet their obligations to pre-register and register the substances or preparations they use. The data collected was used to complete the SCIP (Substances of Concern In Products) database as per the provisions of the ECHA agency.
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ENERGY SOURCES23 2021 Consumption
2020 Consumption
2019 Consumption
MWh
44,129
35,378
28,576
MWh
4,853
158
50
MWh
39,276
35,220
28,526
m x1,000
5,474
4,478
3,740
Diesel
lx1,000
79
57
51
Gasoline
lx1,000
12
17
10
LPG
lx1,000
0,10
0
0,09
GJ
358,285
290,125
238,887
Electricity
from renewable sources from non-renewable sources Natural gas
TOTAL CONSUMPTION
3
The main sources used are: • electricity, for all the equipment with electric power supply present, whether functional or not to the production process, which covers about 44% of the total energy requirement; • natural gas, related to the operation of both production plants (foundry furnaces, washing burners, enamel kilns) and service plants (heating), which covers about 55% of total energy requirements.
Electricity from renewable sources is produced by a photovoltaic plant operating at the C.M.I. plant (151 MWh in 2021) or comes from the purchase of I-REC certificates (4,702 MWh in 2021). Sabaf S.p.A., Sabaf Brazil and Sabaf Turkey use natural gas as an energy source for the casting of aluminium and for the firing of enamelled lids. The production of other Group companies does not use methane as an energy source.
INDICATOR: ENERGY INTENSITY (kWh on turnover in €)
2021
2020
2019
Energy intensity
0.378
0.436
0.426
The trend in energy consumption is closely related to production levels; in relation to sales revenues, there was a decrease in consumption,
which was also made possible by constant interventions aimed at improving the energy efficiency of plants.
WATER (m3)
2021
2020
2019
from waterworks
69,109
50,682
56,409
of which freshwater
69,109
50,682
56,409
of which other water
0
0
0
from well
30,630
27,675
35,516
of which freshwater
30,630
27,675
35,516
of which other water
0
0
0
99,739
78,357
91,925
TOTAL
All the water used in the production processes by Group companies is destined for disposal or internal recycling for reuse in company processes: as a consequence, there is no industrial waste water. The water used in the die-casting and enamelling processes at the plant of Ospitaletto, at the end of the production processes, is treated in chemical/physical concentration plants that make it
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possible to significantly reduce the quantities of water required and waste produced. Since 2019, a concentration plant has also been in operation at the Brazilian production site. At the Ospitaletto plant, there is a plant for the collection of rainwater intended for use in industrial activities. In 2021, 2,708 m3 were collected.
Updated factors published in 2019, 2020 and 2021, respectively, by the Department for Environment, Food and Rural Affairs (DEFRA) were used to calculate consumption.
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WASTE Trimmings and waste from the production process are identified and collected separately for recycling or disposal. The risers deriving
from aluminium die-casting are intended for direct reuse. The waste, broken down by type and method of disposal, is summarised below24.
2021 (t)
Incidence (%)
2020 (t)
Incidence (%)
2019 (t)
Incidence (%)
Similar to urban
356
3.0
291
2.7
225
2.8
Total hazardous
2,238
18.7
2,256
21.1
1,631
20.3
- reuse
185
1.5
142
1.3
92
1.2
- recycling
67
0.6
5
0.1
1
0.0
1,421
11.9
1,135
10.6
746
9.3
- temporary and/or last year’s storage
147
1.2
111
1.0
59
0.7
- other 25
418
3.5
863
8.1
733
9.1
Total non hazardous
9,385
78.3
8,132
76.2
6,164
76.9
- reuse
4,725
39.4
3,882
36.3
2,370
29.6
- recycling
2,427
20.3
2,068
19.4
747
9.3
- recovery
68
0.6
70
0.7
111
1.4
- incineration
856
7.0
690
6.5
1,359
17.0
1,266
10.6
1,334
12.5
707
8.8
43
0.4
88
0.8
870
10.8
11,979
100.0
10,679
100.0
8,020
100.0
- incineration
- temporary and/or last year’s storage - other Total waste
The breakdown of waste according to composition is given below: 2021 (t)
Incidence (%)
2020 (t)
Incidence (%)
Metals
8,042
67.1
6,935
64.9
Liquid waste
2,611
21.8
2,606
24.4
Sludge and powdery waste
433
3.6
353
3.3
Plastic
68
0.6
58
0.6
Cardboard and paper
152
1.3
128
1.2
Wood
297
2.5
269
2.5
376
3.1
330
3.1
11,979
100.0
10,679
100.0
Packaging waste
Other Total waste
2021
2020
2019
267,918
190,001
160,095
Total hazardous waste/Generated economic value (kg in €/000)
8
12
10
Total waste/Generated economic value (kg in €/000)
45
56
50
Economic value generated by the Group (€/000)
24 25
Data does not include the Polish branch of C.M.I.. Includes landfill disposal.
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SABAF . 2021 ANNUAL REPORT
The increase in the volume of waste generated in 2021 is related to higher production levels. The incidence of waste on the economic value generated by the Group decreased significantly. The Group continues its efforts to reduce the production of special hazardous
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waste, also by purchasing raw materials and substances that are already not hazardous originally. All Group companies have separate waste collection. No significant spills occurred in 2021.
EMISSIONS INTO THE ATMOSPHERE A large part of atmospheric emissions of the Sabaf Group derives from activities defined as “negligible pollution”. • Three production processes are carried out at Sabaf S.p.A: - the production of the components that make up the burners (nozzle holder sumps and flame spreaders) involves the casting and subsequent die-casting of the aluminium alloy, sandblasting of the pieces, a series of mechanical processes with removal of material, washing of some components, assembly and testing. This production process results in the emission of negligible amounts of oily mists, as well as dust and carbon dioxide; - the production of burner covers, where steel is used as raw material, which is submitted to blanking and minting. The semi-finished covers are then used for washing, sandblasting, application and firing of enamel, a process that generates the emission of dust; - the production of valves and thermostats, in which mainly aluminium alloy, brass bars and moulded bodies and, to a much lesser extent, steel bars are used as raw materials. The production cycle is divided into the following phases: mechanical machining with removal of material, washing of semi-finished products and components obtained in this way, finishing of the coupling surface of bodies and masks with a diamond tool, assembly and
CO2 EMISSIONS26
final inspection of the finished product. This process generates negligible oily mists. • The entire burner production process is carried out at Sabaf do Brasil and Sabaf Turkey. An analysis of the internal process shows that there are no significant emissions. • In Faringosi Hinges s.r.l. and in the companies of the C.M.I. Group, steel is used as the main raw material for the production of hinges, and is subjected to a series of mechanical processing and assembly that do not involve any significant emissions. • In A.R.C. s.r.l., professional burners are produced through mechanical processing and assembly, no significant emissions are recorded. • Sabaf China carries out mechanical processing and burner assembly operations. Emissions are completely negligible. • Electronic components (boards, timers, etc.) are assembled in Okida, the production activity generates negligible emissions. The efficiency level of the filtration systems is ensured through their regular maintenance and the regular monitoring of all emissions. Monitoring in 2021 showed that all emissions complied with the limits imposed by the law.
2021
2020
2019
Scope 1 (direct emissions)
tCO2eq
11,493
9,409
7,793
from refrigerant gases
tCO2eq
231
162
59
from fuel consumption
tCO2
11,262
9,247
7,734
Scope 2 (indirect emissions) - location based
tCO2
14,150
11,998
9,979
Scope 2 (indirect emissions) - market based
tCO2
17,641
14,969
12,484
Total emissions Scope 1+2 (location based)
tCO2eq
25,643
21,407
17,772
Total emissions scope 1+2 (market based)
tCO2eq
29,134
24,378
20,277
The use of natural gas to power melting furnaces results in the emission of NOX and SOX into the atmosphere; however, these emissions are not significant. Sabaf does not currently contain
any substances that damage the atmospheric ozone layer, with the exception of the refrigerant used in some air conditioners, which is managed in compliance with the reference standards.
DISPUTES Over the three-year period from 2019 to 2021, the Group did not suffer any sanctions related to environmental compliance and no dispute is pending.
The factors used for calculating emissions are: ∙ year 2019: Scope 1 fuels and F-GAS: Defra 2019 - Scope 2 location-based: Terna 2017 - Scope 2 market-based: AIB 2018, where available, otherwise Terna 2017; ∙ year 2020: Scope 1 fuels and F-GAS: Defra 2020 where available, otherwise Ispra 2016 - Scope 2 location-based: Terna 2018 - Scope 2 market-based: AIB 2019, where available, otherwise Terna 2018; ∙ year 2021: Scope 1 fuels and F-GAS: Defra 2021 where available, otherwise Ispra 2016 - Scope 2 location-based: Terna 2019 - Scope 2 market-based: AIB 2020, where available, otherwise Terna 2019. The increase in refrigerant gas emissions in 2021 was due to the recharging and maintenance of air conditioning systems.
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Sabaf, the management of product quality and customer relations RISKS The new UNI EN ISO 9001:2015 standard with which Sabaf complies, introduces the concept of a “risk-based approach”, which is fundamental for planning the Quality Management System. The relevant risk categories in this area are set out below. Strategic risks, including intellectual property protection (there is a risk that some Group products, even if under patent protection, may be copied by competitors) and collaboration with critical suppliers. Legal and compliance risks, relating to non-compliance with product regulations: Sabaf operates in international markets that adopt different laws and regulations. The product must therefore
comply with the mandatory and voluntary requirements and the organisation must be able to show this consistency to the certification bodies responsible for control. Business continuity risks, risk of non-delivery to customers due to stoppages for reasons of force majeure (unavailability of raw materials or components, critical logistics and transport issues, production stoppages or delays, total or partial lockdowns). This risk has become increasingly likely and impactful over the past two years, requiring immediate responses from the organisation to avoid or minimise the consequences.
Health emergency and relations with customers The Sabaf Group’s products represent strategic components in the household appliance supply chain. Since many components are supplied on an exclusive or customised basis, it is often impossible or difficult for other players to offer alternative products. The Group is fully aware of the effects of any non-deliveries and has taken all steps to ensure continuity of supply. Specifically, in 2021, the Group: • supported the peak demand of the individual plants also by using the production of the other plants;
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• made extensive use of third shifts and work on public holidays and on days before a holiday; • brought forward some of its planned investments to adapt production capacity to market demands. The pandemic has made it even more obvious to large manufacturers of household appliances that they need a solid, reliable supplier base that can respond immediately to unpredictable changes in the economic scenario. In this context, the Sabaf Group is proving to be a partner you can count on.
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QUALITY MANAGEMENT POLICY The Quality Management System has the aim of enabling the achievement of the following objectives: • increasing customer satisfaction by understanding and meeting their present and future requirements; • continuous improvement of processes and products, also aimed at protecting the environment and the safety of employees; • involvement of partners and suppliers in the continuous improvement process, favouring the “comakership” logic; • valuation of human resources; • improvement of business performance and of the quality management system based on risk based thinking”; • meet the mandatory requirements applicable to the products (laws and regulations).
In order to contribute consistently to the pursuit of these objectives, the Sabaf Group undertakes a series of commitments explicitly stated in the Charter of Values: • to act with transparency, correctness and contractual fairness; • to communicate product information in a clear and transparent manner; • to adopt a professional and helpful behaviour towards customers; • not to give gifts to customers that exceed normal courtesy practices and that may tend to influence their objective assessment of the product; • to guarantee high quality standards of the offered products; • to ensure constant attention in technological research in order to offer innovative products; • to collaborate with customer companies to ensure that the end user is fully confident in using the products; • to promote social responsibility actions throughout the production chain; • to listen to customers’ requirements through constant monitoring of customer satisfaction and complaints, if any; • to inform customers of potential risks related to the use of products, as well as the related environmental impact.
Group companies that have obtained quality certification according to the ISO 9001 standard COMPANY
YEAR OF FIRST CERTIFICATION
Sabaf S.p.A.
1993
Faringosi Hinges s.r.l.
2001
C.G.D. s.r.l.
2002
C.M.I. s.r.l.
2003
Okida
2005
Sabaf Brazil
2008
Sabaf Turkey
2015
During 2021, the Quality Management System was constantly monitored and maintained to ensure the correct implementation and compliance with the requirements of the ISO 9001 standard. As part of the internal audit plan for 2021, a total of 16 functional areas of offices and production departments were checked at the Ospitaletto plant, 14 at Sabaf Brazil and 16 at Sabaf Turkey. The results of these checks did not reveal any critical aspects of the system, which therefore fully complies with the standard.
With regard to third-party inspections of the Quality Management System, annual inspections were carried out in 2021 at all certified plants, with the exception of the plants in Turkey, for which the next inspection is scheduled for 2022. The interventions were successfully concluded, confirming the adequacy of the System and the maintenance of the ISO 9001 certification. Some inspections were carried out remotely due to national regulations and adjustments made by the Group to reduce physical contact and ensure safety.
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CUSTOMER HEALTH AND SAFETY Sabaf protects the health of consumers by checking that the materials that make up its products comply with the international directives in force (REACH and RoHS directives and completion of the SCIP database). To ensure the safe operation of valves, thermostats and burners, Sabaf carries out leak tests on 100% of its production. Valves and thermostats are also certified by third parties that
guarantee compliance with the operating and safety requirements required to be marketed on the world market. Hinges and electronic components do not pose a significant risk to consumer safety. During the reporting period, there were no instances of noncompliance with regulations regarding the health and safety impacts of products.
CUSTOMER SATISFACTION The customer satisfaction survey, carried out every two years, is part of the stakeholder engagement activities that Sabaf undertakes in order to constantly improve the quality of the services offered and to
respond to customer expectations. The last investigation was launched at the end of 2021; at the date of publication of this document, the results are not yet available.
CUSTOMER COMPLAINT HANDLING Sabaf systematically handles all complaints from customers. A specific process is in place and envisages: • analysis of the alleged defect to assess its validity; • identification of the causes of the defect; • corrective actions necessary to prevent or limit the recurrence of the problem;
• customer feedback through 8D reports (quality management tool that enables a cross-functional team to determine the causes of problems and provide effective solutions).
DISPUTES With the exception of actions to recover receivables, there is no dispute with customers.
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Sabaf and supply chain management RISKS The supply chain presents different types of risks, which must be assessed and monitored in order to limit the possibility of damage to the companies of the Group.
derives from a risk assessment that takes into account the type of process, product or service provided and the geographical location of the supplier.
Risks of external context. Considering that a significant (although not predominant) portion of purchases takes place on international markets, the Group monitors and manages the risk of instability in supplier Countries.
Operational risks, which became particularly important in 2021 and are mainly related to: • the continuity of supply, threatened by the shortage of many raw materials and critical components (e.g. microchips) and the global crisis in logistics; • the change in the prices of raw materials, electricity and gas, which in 2021 experienced sudden and large increases in several waves.
Strategic risks related to a socially responsible approach along the supply chain (quality of supply, respect for human rights and protection of workers, respect for the environment, energy consumption). The definition of the criticality level, especially environmental and social,
Health emergency and relations with suppliers In the health emergency, the Sabaf Group has also acted in full compliance with the principles of conduct and the commitments made in the Charter of Values in its dealings with suppliers. Maximum punctuality in meeting payments within the agreed deadline was always ensured.
In the context of the pandemic, sharing good social responsibility practices, mutual fairness and always viewing the relationship as a strategic partnership proved to be strategic factors in facing new and unpredictable challenges together with suppliers. The support of suppliers has been instrumental in ensuring continuity of supply throughout the supply chain, which is essential for the whole household appliance sector.
SUPPLY CHAIN MANAGEMENT POLICY All Group companies comply with the principles of conduct defined in the Charter of Values in managing relations with suppliers. The Group is gradually implementing a purchasing management policy valid for all Group companies. Relations with suppliers of all Group companies are managed on the basis of uniform procedures. With regard to the management by suppliers of quality, environment and social responsibility, if the law in force already requires Sabaf to
27
meet the minimum requirements, the risk is considered to be lower, otherwise periodic audits are carried out on the management of these aspects. In 2021, class A and B suppliers were analysed to cover 95% of the expenditure²⁷. This analysis revealed 40 cases of suppliers considered potentially critical, following which 14 audits were carried out from which no critical non-conformities were found but only observations. In connection with non-critical non-compliances, the suppliers were asked to take appropriate action.
The valuation is made for suppliers with an average annual turnover to Sabaf of more than €5,000 over the previous three years. Residual suppliers are considered not significant.
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RELATIONS WITH SUPPLIERS AND CONTRACTUAL CONDITIONS Relations with suppliers are based on long-term collaboration and on fairness in negotiations, integrity and contractual fairness and the sharing of growth strategies. To encourage the sharing with suppliers of the values that underpin its business model, Sabaf has distributed the Charter of Values in a widespread manner. Sabaf guarantees absolute impartiality in the choice of suppliers and undertakes to strictly comply with the agreed payment terms. Very short payment terms are agreed for artisan and less structured suppliers (mainly 30 days).
Sabaf requires its suppliers to be able to renew themselves technologically, so that the best quality/price ratios can always be proposed, and favours suppliers who have obtained or are obtaining Quality and Environmental System certifications. In 2021, the turnover of suppliers of the Sabaf Group with a Certified Quality System was equal to 72% of the total (65% in 2020).
PURCHASE ANALYSIS As shown in the table below, the Sabaf Group aims to encourage development in the area in which it operates and, therefore, in selecting suppliers, favours local companies28.
Total 2021 purchases (€/000)
% domestic purchases
Total 2020 purchases (€/000)
% domestic purchases
Sabaf S.p.A.
115,185
78%
71,882
75%
Faringosi Hinges
14,382
99%
8,102
100%
A.R.C. s.r.l.
4,186
85%
2,483
85%
C.M.I. Group
34,051
98%
20,391
98%
Sabaf Turkey
18,115
66%
12,506
55%
Okida
14,644
65%
7,917
72%
Sabaf Brazil
21,550
95%
12,341
84%
Sabaf China
1,495
100%
542
97%
DISPUTES No disputes with suppliers have arisen in the last three years.
28
The data in the table does not take account of intercompany supplies. Values converted into euro at the annual average exchange rate.
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Sabaf, Public Administration and Community RELATIONS WITH THE PUBLIC ADMINISTRATION Sabaf has always had an open dialogue with the authorities in every local community in which it is present, in order to promote shared and sustainable industrial development, with positive repercussions for local communities.
APPROACH TO TAX The Group, in line with the principles defined in the Charter of Values, acts according to the values of honesty, moral integrity, transparency and fairness also in the management of its tax activity. The Group also believes that the contribution from taxes paid is an important channel through which it can participate in the economic and social development of the countries in which it operates. For this reason, the Group pays attention to the compliance with tax regulations and therefore acts responsibly in the jurisdictions in which it is present. Therefore, acting responsibly in terms of tax is for the Group a behaviour also oriented towards the protection of the company’s assets and the creation of value in the medium-long term. The Administration and Finance Department is responsible for managing tax issues. The Group has not defined a formalised tax strategy at Group level; individual companies operate in accordance with local tax regulations.
To date, the Group has no formalised tax governance. Responsibility for compliance lies with the Administration and Finance functions of each subsidiary, while the Administration and Finance Department of the parent company performs a supervisory, guidance and coordination function with regard to intra-group relations. Tax risks are analysed and managed in accordance with the company’s overall Enterprise Risk Management model. To date, the Group has not received any requests from its stakeholders regarding tax issues. Should they arrive, they will be dealt with by the corporate functions in charge of compliance on this matter. Relations with tax authorities are based on the principles of fairness and full compliance with the different regulations applicable in the Countries where the Group operates. Note that the Group does not engage in tax advocacy.
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REPORTING BY COUNTRY29 TAXES – 2021 COUNTRY-BY-COUNTRY REPORTING
(€/000)
CONSOLIDATION ADJUSTMENTS
TOTAL CONSOLIDATED FINANCIAL STATEMENTS
BRAZIL
TURKEY
CHINA
U.S.A.
INDIA
667
112
447
7
-
-
-
45
1,278
-
1,278
Property, plant and equipment other than cash and cash equivalents
196,850
19,866
40,328
2,983
-
1,850
2,803
4,432
269,112
(31,989)
237,123
Sales to third parties
178,071
16,632
56,138
1,817
-
-
-
10,601
263,259
-
263,259
Intra-group revenues to other jurisdictions
26,873
-
3,191
212
254
-
-
768
31,298
(31,298)
-
Pre-tax profit
22,438
2,080
6,392
(446)
40
(57)
(134)
746
31,059
(1,379)
29,680
Income taxes paid
1,907
694
2,550
-
-
-
-
145
5,296
-
5,296
Income taxes for the year (A)
4,943
710
1,819
-
-
-
-
145
7,617
-
7,617
441
(3)
(221)
-
-
-
-
(11)
206
-
206
Theoretical income tax (C) = (A)+(B)
5,384
707
1,598
(105)
-
-
-
134
7,718
-
7,718
Permanent tax differences (D)
198
(13)
-
-
-
-
-
-
185
-
185
Other changes (E)
(2.158)
-
(2.107)
105
-
-
-
11
(4.149)
-
(4.149)
Income taxes booked in the accounts, excluding IRAP and withholding taxes (current) (F) = (C)+(D)+(E)
3,424
694
(509)
-
-
-
-
145
3,754
32
3,786
IRAP (current) (G)
1,211
-
-
-
-
-
-
-
1,211
-
1,211
Total (H) = (F) + (G)
4,635
694
(509)
-
-
-
-
145
4,965
32
4,997
Number of employees
Differences between the theoretical tax burden and the tax burden booked in the financial statements (B)
29 30
MEXICO POLAND
TOTAL BEFORE CONSOLIDATION
ITALY
30
The names and main activities carried out by Group companies are listed in the paragraph “Corporate Governance, Risk Management and Compliance” of this document. CMI Polska z.o.o. was merged into C.M.I. Cerniere Meccaniche Industriali s.r.l. on 31 December 2021.
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TAXES – 2020 COUNTRY-BY-COUNTRY REPORTING
CONSOLIDATION ADJUSTMENTS
TOTAL CONSOLIDATED FINANCIAL STATEMENTS
ITALY
BRAZIL
TURKEY
CHINA
U.S.A.
INDIA
POLAND
TOTAL BEFORE CONSOLIDATION
Number of employees
666
87
363
8
-
-
44
1,168
-
1,168
Property, plant and equipment other than cash and cash equivalents
167,729
13,345
39,057
1,808
-
1,585
3,636
227,160
(29,066)
198,094
Sales to third parties
123,156
12,347
38,881
1,092
-
-
9,430
184,906
-
184,906
Intra-group revenues to other jurisdictions
20,794
2
1,927
123
263
-
535
23,645
(23,645)
-
Pre-tax profit
8,693
2,307
4,516
(625)
78
(48)
719
15,640
(1,131)
14,509
Income taxes paid
240
790
1,969
-
-
-
-
2,999
-
2,999
Income taxes for the year (A)
1,770
791
951
-
-
-
129
3,641
-
3,641
Differences between the theoretical tax burden and the tax burden booked in the financial statements (B)
560
(6)
43
-
-
-
-
597
-
597
2,330
785
994
(150)
-
-
129
4,088
-
4,088
233
6
(265)
-
-
-
-
(26)
-
(26)
(1.332)
-
222
150
-
-
-
(960)
-
(960)
Income taxes booked in the accounts, excluding IRAP and withholding taxes (current) (F) = (C)+(D)+(E)
1,231
791
951
-
-
-
129
3,102
(276)
2,826
IRAP (current) (G)
539
-
-
-
-
-
-
539
-
539
Total (H) = (F) + (G)
1,770
791
951
-
-
-
129
3,641
(276)
3,365
(€/000)
Theoretical income tax (C) = (A)+(B)
Permanent tax differences (D)
Other changes (E)
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RELATIONS WITH INDUSTRIAL ASSOCIATIONS Sabaf S.p.A. is one of the founders of APPLiA Italia (former CECED Italia), the association that develops and coordinates in Italy the study activities promoted at European level by APPLiA – Home Appliance
Europe with the related scientific, legal and institutional implications in the household appliances sector. Sabaf S.p.A. has been a member of Confindustria Brescia since 2014.
RELATIONS WITH UNIVERSITIES AND THE STUDENT WORLD Sabaf S.p.A. systematically organises company visits with groups of students and bears witness of best practices on sustainability at important conferences.
CHARITABLE INITIATIVES AND PERKS In 2021, Sabaf joined the “Un vaccino per tutti” (A vaccine for all) project, promoted by Confindustria Brescia and aimed at promoting the spread of Covid-19 vaccination interventions in the world’s most economically fragile countries. The Group’s ongoing humanitarian initiatives include: • support for the ANT Foundation, which provides free specialist medical home-care to cancer patients and cancer prevention activities;
• support for Associazione Volontari per il Servizio Internazionale (AVSI), a non-governmental, non-profit organisation engaged in international development aid projects; the donations are intended to support twenty children living in different Countries of the world at a long distance. Since 2019, Sabaf S.p.A. has been associated with Fondazione Spedali Civili di Brescia.
DISPUTES There was a tax dispute in Sabaf Turkey, for which the third instance is pending. The outcome of the dispute was favourable to the company both in first and second instance. The confirmation of the unfavourable outcome would not imply significant charges for
104
the Group, while a favourable outcome would result in a benefit of approximately 7.2 million Turkish lira. There are no other significant disputes with Public Bodies or other representatives of the community.
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Sabaf and shareholders THE COMPOSITION OF THE SHARE CAPITAL The share capital of Sabaf S.p.A., fully subscribed and paid-up, is €11,533,450, consisting of 11,533,450 ordinary shares having the par value of €1.00 each. At the date of approval of this document
(22 March 2022), a total of 3,618,028 shares had acquired voting rights (two votes for each share).
NO. OF SHARES MAKING UP THE SHARE CAPITAL
NUMBER OF VOTING RIGHTS
11,533,450
15,151,478
ordinary shares IT0001042610
7,915,422
7,915,422
ordinary shares with increased vote IT0005253338
3,618,028
7,236,056
Total of which:
The shareholders entered in the shareholders’ register at 1 March 2022 were 1,912, of whom: • 1,616 own up to 1,000 shares; • 201 own 1,001 to 5,000 shares;
• 34 own 5,001 to 10,000 shares; • 61 own over 10,000 shares. 28.52% of the share capital is held by shareholders resident abroad.
RELEVANT SHAREHOLDERS NUMBER OF SHARES
% OF SHARE CAPITAL
VOTING RIGHTS
% HELD
CINZIA SALERI S.a.p.A.
2,415,644
20.94%
2,415,644
15.94%
QUAESTIO CAPITAL MANAGEMENT SGR S.p.A.
2,306,690
20.00%
4,613,380
30.45%
FINTEL s.r.l.
883,394
7.66%
1,733,394
11.44%
PALOMA RHEEM INVESTMENTS, INC.
570,345
4.95%
1,031,683
6.81%
SHAREHOLDER
There are no other shareholders other than those highlighted above with a shareholding of more than 3%.
INVESTOR RELATIONS AND FINANCIAL ANALYSTS Since its listing on the Stock Exchange (1998), the Company has attached strategic importance to financial communication, which is based on the principles of fairness, transparency and continuity, in the belief that this approach allows investors to correctly evaluate the Company. In this perspective, Sabaf guarantees maximum willingness to engage in dialogue with financial analysts, institutional investors and proxy advisors. On 10 February 2022, the Company adopted the Policy for the Management of Dialogue with Shareholders, which regulates the opportunities for communication and attendance with all the Investors that require contact with the Board of Directors on the following matters:
• • • • •
corporate governance system; remuneration policies; internal control and risk management system; strategic and industrial plans of the Company; strategic guidelines and policies on environmental and social sustainability. The Policy entrusts the management of the dialogue with investors to the Chairman, the Chief Executive Officer and the CFO, also severally. During 2021, the company participated in the Star Conferences in March and October and Sustainability Week in July, events that were held in virtual format due to the health emergency.
REMUNERATION OF SHAREHOLDERS AND SHARE PERFORMANCE In 2021, the Sabaf share recorded the highest official price on 1 November (€28.523) and lowest on 5 January (€15.102). The average
volume traded was 19,581 shares per day, equal to an average value of €461,570 (€121,764 in 2020).
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2021 PERFORMANCE OF SABAF SHARES (PRICE AND VOLUMES TRADED) PRICE
28.43 25.15 21.88 18.60 15.32 12.04 VOLUMES
100 k
0 Jan 21
May 21
Sep 21
Dec 21
SABAF VS. FTSE ITALIAN STAR INDEX
FTSE Italian STAR index Sabaf S.p.A.
90% 80% 70% 60% 50% 40% 30% 20% 10% 0% -10% Jan 21
May 21
Sep 21
Dec 21
The dividend policy aims to guarantee a valid remuneration of shareholders also through the annual dividend of €0.55 per share in 2021.
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ESG INVESTMENTS ESG (Environment, Social, Governance) criteria are increasingly important parameters for the screening and selection of investments by investors. Also through the preparation of this
Disclosure, Sabaf strives to ensure maximum transparency on its sustainability strategy, social and environmental performance and level of alignment with best practices in terms of governance.
DISPUTES There is no dispute with shareholders.
Sabaf and lenders At 31 December 2021, the net financial debt was €67.6 million, compared with €56.3 million at 31 December 2020; the ratio of net financial debt to EBITDA is 1.25 (1.52 at 31 December 2020).
RELATIONS WITH CREDIT INSTITUTIONS Relations with banks have always been based on maximum transparency. Relations with institutions that are able to support the Group in all its financial needs and to propose solutions in a timely manner to meet specific needs are privileged.
During the year, the Group took out new unsecured loans for a total of €46 million to finance the investments made. All loans are signed with an original maturity of ranging from 5 to 6 years and are repayable in instalments.
OTHER LENDERS In December 2021, Sabaf S.p.A. issued a €30 million bond fully subscribed by PRICOA with a maturity of 10 years, an average life of 8 years and a fixed coupon of 1.85% per year. This issue enabled Sabaf to diversify
its sources of financing, improve financial flexibility and significantly lengthen the average duration of its debt.
DISPUTES There is no dispute with the lenders.
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Sabaf and competitors TRENDS IN THE COOKING APPLIANCE MANUFACTURER SECTOR The household appliance industry shows the following trends. • Concentration, with a small number of large players present on a global scale. This trend is less evident for cooking appliances than for other household appliances: in the cooking sector, in fact, design and aesthetics on the one hand and the lower intensity of investments on the other allow the success of even small and highly innovative producers.
• Internationalisation of production, increasingly relocated to countries with low labour costs. • Outsourcing the design and production of components to highly specialised suppliers who, like Sabaf, are active in the main world markets and are able to provide a range of products that meets the specific requirements of different markets.
MAIN ITALIAN AND INTERNATIONAL COMPETITORS In Europe, Sabaf estimates that it has a market share of about 40% in the sector of gas parts. The world market share is estimated at about 10%. The main competitors of the Sabaf on the international market are Copreci, Defendi and Robertshaw. Copreci is a cooperative located in Spain in the Basque Country, part of Mondragon Cooperative Corporation and represents Sabaf’s
main competitor in terms of valves and thermostats. E.G.O. is a major component manufacturer based in Germany. In 2013, it acquired Defendi Italy (now E.G.O. Italia), a company mainly active in the production of burners in Italy and Brazil. Robertshaw is the leading producer of gas parts for the North American market.
Main Italian and international competitors
VALVES AND THERMOSTATS SABAF GROUP
Copreci (Spain)
EGO (Germany, Italy)
Robertshaw (USA)
Somipress (Italy)
Nuova Star (Italy)
108
BURNERS
HINGES
ELECTRONIC COMPONENTS
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2019 and 2020 economic data of the main Italian competitors31 2020
2019
(€/000)
SALES
EBIT
NET RESULT
SALES
EBIT
NET RESULT
SABAF GROUP
184,906
20,093
13,961
155,923
11,896
9,915
E.G.O. Italy
44,579
832
4,932
41,407
(3,661)
(4,237)
Somipress Group
29,361
872
804
35,670
3,288
2,752
Nuova Star
40,924
657
395
35,294
406
259
Sabaf firmly believes that competition between companies promotes both an effective economy and sustainable growth. In making business decisions, Sabaf also takes into account the risk of behaviour that is detrimental to free competition. Currently, the Group has not adopted
a formalised policy aimed at preventing anti-competitive behaviour. According to the information available, there is no evidence of anticompetitive behaviour or infringement of antitrust regulations.
DISPUTES At 31 December 2021: • there is a dispute pending against a competitor following an alleged violation of one of our patents; • there is a dispute brought by a competitor due to an alleged violation of a patent.
31
Sabaf processing from the financial statements of the various companies. Latest available data.
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EU TAXONOMY The Regulation (EU) 2020/852 (known as “Taxonomy”) is part of the European Union’s initiatives in favour of sustainable finance and aims to provide investors and the market with a common language of sustainability metrics. The Taxonomy focuses on the identification of economic activities considered to be eco-sustainable, defined as those economic activities that contribute substantially to the achievement of at least one of the intended environmental objectives32, provided that they do not cause significant damage to any of the other environmental objectives and are carried out in compliance with minimum safeguards. In June 2021, the European Commission formally adopted the Technical Delegated Acts defining the list of economic sectors and activities currently included in the Taxonomy and the related technical screening criteria to check whether they contribute substantially to achieving the environmental objectives of climate change mitigation and adaptation; further delegated acts are expected to be published during 2022 with regard to the remaining four environmental objectives. The Sabaf Group immediately began analysing the regulations in order to understand their potential impact on the reporting process within the scope of its consolidated disclosure of non-financial information. This analysis showed that the Sabaf Group’s revenues originate almost exclusively from the sale of components for household appliances, and these components are not included in the economic activities
currently envisaged by the Taxonomy. Therefore, there are no “eligible” revenues, capital expenditures and operating expenses with respect to its core business. In this regard, note that, as confirmed by the Platform on Sustainable Finance, a body established pursuant to Article 20 of Regulation (EU) 2020/852 with advisory and support functions in favour of the European Commission on Taxonomy, the failure to identify revenues from “eligible” economic activities is not a measure of a company’s environmental performance33. Note that the Group identified certain minor projects “eligible” for the Taxonomy as part of its activities, which refer in particular to the production of electricity using photovoltaic solar technology; however, in the light of the margins of the amounts involved, it was not considered appropriate to report on a timely basis in this context. The Sabaf Group will continue to monitor the evolution of the Taxonomy regulations in that the publication of further delegated acts relating to the remaining four environmental objectives (sustainable use and protection of water and marine resources, transition to a circular economy, prevention and reduction of pollution, and protection and restoration of biodiversity and ecosystems) could allow the Group’s commitment in other areas of environmental sustainability to be reported and enhanced, such as recycling of raw and packaging materials and waste management.
Art. 9 identifies the following environmental objectives: climate change mitigation, climate change adaptation, sustainable use and protection of water and marine resources, transition to a circular economy, prevention and reduction of pollution, and protection and restoration of ecosystems and biodiversity. 33 In the document called Platform considerations on voluntary information as part of Taxonomy-eligibility reporting enclosed with the European Commission’s FAQs published in December 2021 it is stated that “Eligibility is not an indicator of environmental performance; it is an indicator that an activity is in scope for testing and has the potential to be Taxonomy-aligned”. 32
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GRI Content Index GRI STANDARD
DISCLOSURE
PAGE (or direct reference)
OMISSION
GRI 101: Foundation 2016 General disclosures Organisational profile 102-1
Name of the organisation
Front cover
102-2
Activities, brands, products, and services
pp. 21-23
102-3
Location of headquarters
Via dei Carpini, 1 25035 OSPITALETTO (Brescia) Italy
102-4
Location of operations
pp. 22-25
102-5
Ownership and legal form
pp. 48-50; 105
102-6
Markets served
pp. 22-25
102-7
Scale of the organisation
pp. 13-25
102-8
Information on employees and other workers
pp. 72-75
102-9
Supply chain
pp. 99-100
102-10
Significant changes to the organization and its supply chain
p. 30
102-11
Precautionary Principle or approach
pp. 41; 61-62
102-12
External initiatives
pp. 33; 43-44
102-13
Membership of associations
p. 104
Statement from senior decision-maker (Chairman and CEO)
pp. 31-32
Strategy 102-14
Ethics and integrity 102-16
GRI 102: General disclosures 2016
Values, principles, standards and norms of behaviour
pp. 33-35
102-18
Governance structure
pp. 48-60
102-22
Composition of the highest governance body and its committees
pp. 50-55
Governance
Stakeholder engagement 102-40
List of stakeholder groups
p. 42
102-41
Collective bargaining agreements
pp. 82-84
102-42
Identifying and selecting stakeholders
p. 42
102-43
Approach to stakeholder engagement
p. 42
102-44
Key topics and concerns raised
p. 42
Reporting practice 102-45
Entities included in the consolidated financial statements
p. 30
102-46
Defining report content and topic Boundaries
pp. 30; 45
102-47
List of material topics
pp. 45-47
102-48
Restatements of information
pp. 30; 84; 86
102-49
Changes in reporting
pp. 30; 45
102-50
Reporting period
p. 30
102-51
Date of most recent report
Year 2020
102-52
Reporting cycle
p. 30
102-53
Contact point for questions regarding the report
Tel: +39 0306843001 Fax: +39 0306848249 E-mail: info@sabaf.it
102-54
Claims of reporting in accordance with the GRI Standards
p. 30
102-55
GRI Content Index
pp. 111-114
102-56
External assurance
pp. 115-117
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GRI STANDARD
DISCLOSURE
PAGE (or direct reference)
Material topics GRI 200 Economic Standard Series Economic performance
GRI 103: Management approach 2016 GRI 201: Economic performance 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62
103-3
Evaluation of the management approach
pp. 61-62
201-1
Direct economic value generated and distributed
p. 40
Market presence
GRI 103: Management approach 2016 GRI 202: Market Presence 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 70-71; 82-84
103-3
Evaluation of the management approach
pp. 61-62; 70-71; 82-84
202-1
Ratios of standard entry level wage by gender compared to local minimum wage
p. 84
Anti-corruption
GRI 103: Management approach 2016 GRI 205: Anti-corruption 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62
103-3
Evaluation of the management approach
pp. 61-62
205-3
Confirmed incidents of corruption and actions taken
p. 66
Anti-competitive behaviour
GRI 103: Management approach 2016 GRI 206: Anti-competitive behaviour 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 108-109
103-3
Evaluation of the management approach
pp. 61-62; 108-109
206-1
Legal actions for anti-competitive behaviour, anti-trust, and monopoly practices
p. 109
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 101-103
103-3
Evaluation of the management approach
pp. 61-62; 101-103
207-1
Approach to tax
p. 101
207-2
Tax governance, control and risk management
p. 101
207-3
Stakeholder engagement and management of concerns related to tax
p. 101
207-4
Country-by-Country Reporting
pp. 102-103
Tax
GRI 103: Management approach 2016
GRI 207: Tax 2019
112
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GRI STANDARD
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
DISCLOSURE
PAGE (or direct reference)
OMISSION
GRI 300 Environmental Standard Series Materials
GRI 103: Management approach 2016 GRI 301: Materials 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 90-92
103-3
Evaluation of the management approach
pp. 61-62; 90-92
301-1
Materials used by weight or volume
p. 92
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 90-91; 93
103-3
Evaluation of the management approach
pp. 61-62; 90-91; 93
302-1
Energy consumption within the organisation
p. 93
302-3
Energy intensity
p. 93
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 90-91; 95
103-3
Evaluation of the management approach
pp. 61-62; 90-91; 95
305-1
Direct (Scope 1) GHG emissions
p. 95
305-2
Energy indirect (Scope 2) GHG emissions
p. 95
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 90-91; 94-95
103-3
Evaluation of the management approach
pp. 61-62; 90-91; 94-95
306-1
Waste generation and significant waste-related impacts
pp. 94-95
306-2
Management of significant waste-related impacts
pp. 94-95
306-3
Waste generated
pp. 94-95
Energy
GRI 103: Management approach 2016 GRI 302: Energy 2016
Emissions
GRI 103: Management approach 2016 GRI 305: Emissions 2016
Waste
GRI 103: Management approach 2016
GRI 306: Waste 2020
Environmental compliance
GRI 103: Management approach 2016 GRI 307: Environmental compliance 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 90-91; 95
103-3
Evaluation of the management approach
pp. 61-62; 90-91; 95
307-1
Non-compliance with environmental laws and regulations
p. 95
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 70-71; 76-79
103-3
Evaluation of the management approach
pp. 61-62; 70-71; 76-79
401-1
New employee hires and employee turnover
pp. 76-79
GRI 400 Series Employment
GRI 103: Management approach 2016 GRI 401: Employment 2016
Industrial relations
GRI 103: Management approach 2016 GRI 402: Labor/Management relations 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 70-71; 88-89
103-3
Evaluation of the management approach
pp. 61-62; 70-71; 88-89
402-1
Minimum notice periods regarding operational changes
pag. 88
Health and safety
GRI 103: Management approach 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 85-88
103-3
Evaluation of the management approach
pp. 61-62; 85-88
113
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
GRI STANDARD
GRI 403: Occupational Health and Safety 2018
DISCLOSURE
PAGE (or direct reference)
403-1
Occupational health and safety management system
pp. 85-88
403-2
Hazard identification, risk assessment, and incident investigation
pp. 85-88
403-3
Occupational health services
pp. 85-88
403-4
Worker participation, consultation, and communication on occupational health and safety
pp. 85-88
403-5
Worker training on occupational health and safety
pp. 85-88
403-6
Promotion of worker health
pp. 85-88
403-7
Prevention and mitigation of occupational health and safety impacts directly linked by business relationships
pp. 85-88
403-9
Work-related injuries
pag. 86-87
Training and education
GRI 103: Management approach 2016 GRI 404: Training and education 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 70-71; 80
103-3
Evaluation of the management approach
pp. 61-62; 70-71; 80
404-1
Average hours of training per year per employee
p. 80
Diversity and equal opportunities
GRI 103: Management approach 2016 GRI 405: Diversity and equal opportunity 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 51; 61-62; 70-71; 81
103-3
Evaluation of the management approach
pp. 51; 61-62; 70-71; 81
405-1
Diversity of governance bodies and employees
pp. 52-58; 81
Non-discrimination
GRI 103: Management approach 2016 GRI 406: Non-discrimination 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 70-71
103-3
Evaluation of the management approach
pp. 61-62; 70-71
406-1
Incidents of discrimination and corrective actions taken
p. 71
Supplier social assessment
GRI 103: Management approach 2016 GRI 414: Supplier Social Assessment 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 99-100
103-3
Evaluation of the management approach
pp. 61-62; 99-100
414-2
Negative social impacts in the supply chain and actions taken
pp. 99-100
Customer Health and Safety
GRI 103: Management approach 2016 GRI 416: Customer Health and Safety 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 96-98
103-3
Evaluation of the management approach
pp. 61-62; 96-98
416-1
Assessment of the health and safety impacts of product and service categories
p. 98
Customer satisfaction and customer support
GRI 103: Management approach 2016 GRI 416: Customer Health and Safety 2016
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 61-62; 96-98
103-3
Evaluation of the management approach
pp. 61-62; 96-98
416-2
Incidents of non-compliance concerning the health and safety impacts of products and services
p. 98
Topics not covered by specific standards Partnership with multinational groups
GRI 103: Management approach 2016
114
103-1
Explanation of the material topic and its Boundary
pp. 45-47
103-2
The management approach and its components
pp. 36-37; 61-62
103-3
Evaluation of the management approach
pp. 36-37; 61-62
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115
SABAF . 2021 ANNUAL REPORT
116
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
117
REPORT ON OPERATIONS
Business and financial situation of the Group
122
Risk Factors
124
Research and Development
126
Disclosure of Non-Financial Information
127
Personnel
127
Environment
127
Corporate Governance
127
Internal Control System on Financial Reporting
127
Model 231
127
Personal data protection
127
Derivative financial instruments
127
Atypical or unusual transactions
127
Management and coordination
127
Intra-group transactions and related-party transactions
127
Business outlook
128
Business and financial situation of Sabaf S.p.A.
128
Reconciliation between parent company and consolidated shareholders’ equity and net profit for the period
129
Proposal for allocation of 2021 profit
129
SABAF . 2021 ANNUAL REPORT
REPORT ON OPERATIONS
BUSINESS AND FINANCIAL SITUATION OF THE GROUP 2021
%
2020
%
2021-2020 Change
% Change
263,259
100%
184,906
100%
78,353
+42.4%
EBITDA
54,140
20.6%
37,097
20.1%
17,043
+45.9%
EBIT
37,508
14.2%
20,093
10.9%
17,415
+86.7%
Pre-tax profit
29,680
11.3%
14,509
7.8%
15,171
+104.6%
Profit attributable to the Group
23,903
9.1%
13,961
7.6%
9,942
+71.2%
(€/000) Sales revenue
Basic earnings per share (€)
2.132
1.240
0.892
+71.9%
Diluted earnings per share (€)
2.132
1.240
0.892
+71.9%
The Sabaf Group ended the 2021 financial year with a record high revenue of €263 million, up 42.4% from €184.9 million in 2020. The Group is successfully pursuing ahead of schedule the organic growth strategy outlined in the 2021-2023 Business Plan, which focuses on strengthening technical and commercial relations with some of the major global players, increasing internationalisation and exploiting synergies with the most recently acquired companies. In 2021, demand was solid in all markets, with particularly high peaks in the first half of the year. In a highly dynamic environment, the Sabaf Group was able to react promptly and always guarantee the continuity and reliability of supplies to customers.
Average sales prices in 2021 were 3% higher than in 2020, largely offsetting considerable increases in the purchase prices of the main raw materials (aluminium alloys, steel and brass), electricity and gas. Higher volumes and a high level of capacity utilisation further improved profitability: EBITDA was €54.1 million (20.6% of turnover), up 45.9% compared to €37.1 million last year (20.1% of turnover) and EBIT was €37.5 million (14.2% of turnover) with an 86.7% increase compared to €20.1 million in 2020. The net profit for 2021 was €23.9 million, up by 71.2% compared to the figure of €14 million in 2020.
The subdivision of sales revenues by product line is shown in the table below: 2021
%
2020
%
% Change
Gas parts
182,468
69.3%
129,834
70.2%
+40.5%
Hinges
58,375
22.3%
41,326
22.3%
+41.3%
Electronic components
22,416
7.4%
13,746
7.4%
+63.1%
263,259
100%
184,906
100%
+42.4%
(€/000)
Total
In 2021, the increase in sales of electronic components was also particularly significant, continuing to benefit from cross-selling
with the traditional products in the Group’s portfolio and from the strong drive to develop new components.
The geographical breakdown of revenues is shown below: 2021
%
2020
%
% Change
Europe (excluding Turkey)
92,935
35.3%
69,618
37.7%
+33.5%
Turkey
65,526
24.9%
44,806
24.2%
+46.2%
North America
30,472
11.6%
22,700
12.3%
+34.2%
South America
39,589
15.0%
27,639
14.9%
+43.2%
Africa and Middle East
19,614
7.5%
12,177
6.6%
+61.1%
Asia and Oceania
15,123
5.7%
7,966
4.3%
+89.8%
263,259
100%
184,906
100%
+42.4%
(€/000)
Total
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SABAF . 2021 ANNUAL REPORT
The increase in sales was very strong in all geographical areas, with peaks in Asia, Africa and the Middle East, indicating an increasingly global presence of our Group. The impact of labour cost on sales decreased from 23.6% in 2020 to 20.5% in 2021. Net finance expense as a percentage of turnover was extremely minimal, also in view of the low interest rates. During the year,
REPORT ON OPERATIONS
the Group recognised in the income statement negative forex differences of €7.4 million, mainly due to fluctuations in exchange rates with the Turkish lira (€4.8 million of negative forex differences were recognised in 2020). In 2021, the Group recognised positive income taxes of €5 million with a tax rate of 16.8%. The main impacts on the tax rate are shown in Note 32 to the consolidated financial statements.
The Group’s statement of financial position, reclassified based on financial criteria, is illustrated below1: 31.12.2021
31.12.2020
130,093
131,543
141,494
108,246
(72,863)
(56,017)
Working capital
68,631
52,229
Provisions for risks and charges, Post-employment benefits, deferred taxes
(8,681)
(9,643)
190,043
174,129
18,897
(24,169)
Medium/long-term net financial position
(86,504)
(32,153)
Net financial debt
(67,607)
(56,322)
Shareholders’ equity
122,436
117,807
(€/000)
2021
2020
Opening liquidity
13,318
18,687
Operating cash flow
23,216
25,067
(23,752)
(17,296)
Free cash flow
(536)
7,771
Cash flow from financing activities
41,233
(8,133)
Acquisitions
(6,296)
(3,063)
Foreign exchange differences
(4,070)
(1,944)
Cash flow for the period
30,331
(5,369)
Closing liquidity
43,649
13,318
(€/000) Non-current assets Short-term assets
2
Short-term liabilities
3
4
Net invested capital Short-term net financial position
Cash flows for the financial year are summarised in the table below:
Cash flow from investments
In 2021, the Group generated an operating cash flow of €23.2 million (€25.1 million in 2020). The higher levels of activity and the increase in the price of materials led to an increase in working capital, which stood at €68.6 million at 31 December 2021, compared to €52.2 million at the end of 2020: moreover, its impact on turnover decreased to 26.1% compared to 28.2% in 2020. In 2021, the Sabaf Group made net organic investments of €23.8 million (€17.3 million in 2020). During the period, key investments were made:
• in Turkey, where the production capacity of the Electronics Division was doubled and production lines for gas valves and hinges for dishwashers were set up; • in India, where the production of gas components (valves and burners) is about to start; • in Mexico, where work began on the construction of a new plant in San Luis de Potosí. During the financial year, the Group paid dividends for €6.2 million, no treasury shares were purchased.
Net financial debt and liquidity shown in the tables below are defined in compliance with the net financial position detailed in Note 22 of the consolidated financial statements, as required by CONSOB memorandum of 28 July 2006. Sum of Inventories, Trade receivables, Tax receivables and Other current receivables. 3 Sum of Trade payables, Tax payables and Other liabilities. 4 Difference between short-term assets and short-term liabilities. 1
2
123
SABAF . 2021 ANNUAL REPORT
REPORT ON OPERATIONS
At 31 December 2021, the net financial debt was €67.6 million, compared with €56.3 million on 31 December 2020. The change in net financial debt during the year is summarised in the table below: (56,322)
Net financial debt at 31 December 2020 Free cash flow
(536)
Dividends paid out
(6,172)
Buy-back of shares
-
Put options on minority interests – outlay lower than the recognised financial liabilities
438
Financial liabilities IFRS 16 - new contracts entered into in 2021
(954)
Change in fair value of derivative financial instruments
(83) 97
Change in the scope of consolidation
(4,075)
Foreign exchange differences and other changes
(67,607)
Net financial debt at 31 December 2021
At 31 December 2021, shareholders’ equity amounted to €122.4 thousand; the ratio between the net financial debt and the shareholders’ equity was 0.55 versus 0.48 in 2020.
ECONOMIC AND FINANCIAL INDICATORS 2021
2020 pro forma5
Change in turnover ROCE (return on capital employed)
+42.4%
+42.3%
pro forma5 +18.6%
19.7%
+8.4% 11.5%
Net debt/EBITDA
1.25
1.52
Net debt/equity ratio
55%
48%
Market capitalisation (31/12)/equity ratio
2.26
1.49
Please refer to the introductory part of the Annual Report for a detailed examination of other key performance indicators.
RISK FACTORS RISKS RELATED TO CORONAVIRUS PANDEMIC In 2021, the coronavirus pandemic continued to directly and indirectly affect the company’s activities. Since the outbreak of the pandemic, the Group Sabaf has promptly implemented several counteracting and mitigating actions to minimise the impact on the business. Although the most critical phase of the pandemic now seems to be over, all controls continue to be activated, and any elements that may change the following risk factors are constantly monitored: • risks related to the health of people; • the risk arising from possible local or national new lockdowns, with the consequent impossibility of guaranteeing the continuity of the company’s activities; • the risk arising from a temporary reduction in personnel availability; • risks related to supplier reliability and possible interruptions in the supply chain; • risks related to violent fluctuations in demand and failure to comply with contractual agreements with customers.
5
The change in pro-forma turnover is calculated on a like-for-like basis.
124
RISKS RELATED TO THE CONFLICT BETWEEN RUSSIA AND UKRAINE In relation to the recent conflict between Ukraine and Russia, note that the Group has an insignificant direct exposure to the markets of Russia, Belarus and Ukraine. However, these are markets supplied by some of the Sabaf Group’s customers, who are exposed to varying degrees in terms of market access and changes in consumer behaviour.The outbreak of the conflict immediately led to severe tensions in the prices of electricity, gas and raw materials used by the Group. Should the situation not be resolved rapidly, these factors could significantly affect demand and, more generally, the performance of the sector in which the Group operates, especially in Europe.The repercussions on the macroeconomic system are not quantifiable in that they are related to future developments of the conflict, which are currently unpredictable. As part of its periodic risk assessment process, the Group identified and assessed the following main risks.
SABAF . 2021 ANNUAL REPORT
RISKS OF EXTERNAL CONTEXT Risks deriving from the external context in which Sabaf operates, which could have a negative impact on the economic and financial sustainability of the business in the medium/long-term. The most significant risks in this category are related to general economic conditions, trend in demand and product competition.
STRATEGIC RISKS Strategic risks that could negatively impact Sabaf’s mediumterm performance, including, for example, risks related to low profitability of certain product lines, the risks arising from the mismatch between market needs and product innovation and the loss of business opportunities in the Chinese market.
OPERATIONAL RISKS Risks of suffering losses due to inadequate or malfunctioning processes, human resources and information systems. This category includes financial risks (e.g. losses deriving from the volatility of the price of raw materials and from fluctuations in exchange rates), risks related to production processes (e.g. product liability, saturation level of production capacity), organisational risks (e.g. loss of key staff and expertise and/or the difficulty of replacing them) and Information Technology risks.
LEGAL AND COMPLIANCE RISKS Risks related to Sabaf’s contractual liabilities and compliance with the regulations applicable to the Group, including: Legislative Decree 231/2001, Law 262/2005, HSE regulations, regulations applicable to listed companies, tax regulations, labour regulations, international trade regulations and intellectual property regulations. The main risks are described in detail below as well as the relevant risk management actions that are currently being implemented.
Performance of the sector The Group’s financial position, results and cash flows are affected by several factors related to the performance of the sector, including: • general macro-economic performance: the household appliance market is affected by macro-economic factors such as gross domestic product, consumer and business confidence, interest rate trend, the cost of raw materials, the unemployment rate and the ease of access to credit; • concentration of the end markets: as a result of mergers and acquisitions, customers have acquired bargaining power; • stagnation of demand in mature markets (i.e. Europe) in favour of growth in emerging Countries, characterised by different sales conditions and a more unstable macro-economic environment; • increasing competition, which in some cases imposes aggressive pricing policies. To cope with this situation, the Group aims to retain and reinforce its leadership position wherever possible through: • the maintenance of high quality and safety standards, which make it possible to differentiate the product through the use of resources and implementation of production processes that are not easily sustainable by competitors;
REPORT ON OPERATIONS
• development of new products characterised by superior performance compared with market standards, and tailored to the needs of the customer; • strengthening of business relations with the main players in the sector; • diversification of commercial investments in growing and emerging markets with local commercial and productive investments; • entry into new segments/business sectors.
Instability of Emerging countries in which the Group operates The Group is exposed to risks related to (political, economic, tax, regulatory) instability in some emerging countries where it produces or sells. Any embargoes or major political or economic instability, or changes in the regulatory and/or local law systems, or new tariffs or taxes imposed could negatively affect a portion of Group turnover and the related profitability. Sabaf has taken the following measures to mitigate the above risk factors: • diversifying investments at international level, setting different strategic priorities that, in addition to business opportunities, also consider the different associated risk profiles; • monitoring of the economic and social performance of the target countries, also through a local network of agents and collaborators; • timely assessment of (potential) impacts of any business interruption on the markets of Emerging countries; • adoption of contractual sales conditions that protect the Group (e.g. insuring business loans or advance payments). The presence of Sabaf in Turkey, the country that represents the main production hub of household appliances at European level, is of particular importance: over the years, local industry attracted heavy foreign investments and favoured the growth of important manufacturers. In this context, the Sabaf Group created a production plant in Turkey in 2012 that realises today 10% of total production. In 2018, the Group also acquired 100% of Okida Elektronik, a leader in Turkey in the design, manufacture and sale of electronic control boards for household appliances. In 2021 the Group opened a new plant in Turkey. In 2021, Turkey represented 18% of the Group’s production and 25% of its total sales. The Turkish market is estimated to represent around 5% of the final destination of Sabaf components. In consideration of the strategic importance of this Country, the management assessed the risks that could arise from any difficulties/impossibilities of operating in Turkey and envisaged actions to mitigate this risk.
Product competition The Sabaf Group is mainly active in the production of gas cooking components (valves and burners); therefore, there is the risk of not correctly assessing the threats and opportunities deriving from the competition of alternative products (such as electric cooking), with the consequence of not adequately making use of any market opportunities and/or suffering from negative impacts on margins and turnover.In recent years, the Group carried out strategic operations aimed at reducing the dependence of its business on the gas cooking sector, concluding significant acquisitions of companies operating in related sectors.
125
SABAF . 2021 ANNUAL REPORT
REPORT ON OPERATIONS
The Group has recently undertaken a strategic development plan to extend its product range, setting up a dedicated project team in Italy. Research and development also benefits from the expertise derived from the acquisition of Okida, a Turkish leader in electronic components.
Loss of business opportunities in the Chinese market With a production of over 20 million hobs per year, China is one of the world’s most important markets. After many years of commercial presence only, in 2015 Sabaf started a small production unit, which still does not guarantee an adequate economic return. The Group is reviewing its strategy for approaching the Chinese market and intends to: • implement shortly a plan suitable for using growth opportunities offered by the local market; • continue to develop product lines in accordance with the needs of the Chinese market and in compliance with local regulations; • adopt and maintain a quality-price mix in line with the expectations of potential local customers.
Financial risks The Sabaf Group is exposed to a series of financial risks, due to: • Commodity price volatility: a significant portion of the Group’s purchase costs is represented by aluminium, steel and brass. Metal prices rose sharply during 2021, forcing the Group to renegotiate sales prices several times to compensate for the increase in costs. Based on market conditions and contractual agreements, the Group may not be able to pass on changes in raw material prices to customers in a timely and/or complete manner, with consequent effects on margins. • Increase in energy costs: some of the Group’s production processes, such as the die-casting of aluminium parts and the enamelling of burner covers, use gas as an energy source. Other production facilities absorb significant electricity consumption. The increase in energy costs can significantly affect margins. In order to mitigate this risk, the Group is constantly evaluating possible actions to contain energy consumption, including by improving the efficiency of the most energy-intensive plants. • Exchange rate fluctuation: the Group carries out transactions primarily in euro; however, transactions also take place in other currencies, such as the U.S. dollar, the Brazilian real, the Turkish lira and the Chinese renminbi. In particular, since turnover in US dollars accounted for 18.6% of consolidated turnover, the possible depreciation against the euro and the real could lead to a loss in competitiveness on the markets in which sales are made in that currency (mainly South and North America). Moreover, the net value of assets and liabilities in foreign subsidiaries constitutes an investment in foreign currency, which generates a translation difference on consolidation of the Group, with an impact on the comprehensive income statement and the financial position. • Trade receivable: the high concentration of turnover on a small number of customers generates a concentration of the respective trade receivables, with a resulting increase in the negative impact on economic and financial results in the event of insolvency of any one of them.
126
For more information on financial risks and the related management methods, see Note 36 of the consolidated financial statements as regards disclosure for the purposes of IFRS 7.
RESEARCH AND DEVELOPMENT In 2021, the Sabaf Group set up a dedicated team to develop new solutions for home cooking, with the aim of creating innovative products that meet the needs of manufacturers of household appliances and new consumer trends. The most innovative projects in 2021 include the development and prototyping of burners capable of operating with 100% hydrogen (replacing methane), both in domestic cooking appliances and for the professional sector. In this context, the Sabaf Group is participating as a strategic supplier in the Hy4Heat project, funded by BEIS (Department for Business, Energy & Industrial Strategy), the UK Department for Business, Energy and Industrial Strategy. The Hy4Heat project aims to determine whether it is technically possible, safe and cost-effective to replace natural gas (methane) with 100% hydrogen in residential and commercial buildings and gas appliances. The other most important research and development projects carried out in 2021 were as follows: Gas parts • the study for a 4 kW multi-cone burner, based on the existing platform, was launched; • burners for the US market and new customised burners were developed; • two special versions of mini triple ring burners were developed for the South American market; • a new snap-in catenary was developed and industrialised; • premium flame taps were developed for kitchens. Hinges • the development of motorised hinges for built-in ovens continued; • new hinge platforms for dishwashers were developed for strategic customers; • a new hidden hinge for oven doors (in standard and dual soft versions) was designed for the global platform of a major customer; • a soft-close hinge for top-loading washing machines was industrialised. Electronic components • a control platform for gas cookers with a touch interface was developed; • controls were developed for glass ceramic cooking with class B certification; • a timer platform compatible with North American market regulations was developed. The improvement in production processes continued throughout the Group, also in order to minimise set-up times and make production more flexible. The Group also develops and manufactures its own machinery, equipment and moulds. Development costs to the tune of €1,770,000 were capitalised, as all the conditions set by international accounting standards were met; in other cases, they were charged to the income statement.
SABAF . 2021 ANNUAL REPORT
DISCLOSURE OF NON-FINANCIAL INFORMATION Starting from 2017, the Sabaf Group publishes the consolidated disclosure of non-financial information required by Legislative Decree no. 254/2016 in a report separate from this Report on Operations. The disclosure of non-financial information provides all the information needed to ensure understanding of the Group’s activities, performance, results and impact, with particular reference to environmental, social and personnel issues, respect for human rights and the fight against active and passive corruption, which are relevant considering the Group’s activities and characteristics. The disclosure of non-financial information is included in the same file in which the report on operations, the consolidated financial statements, the separate financial statements of the parent company Sabaf S.p.A. and the remuneration report are published. It should be noted that since 2005, the Sabaf Group has drawn up an Annual Report on its economic, social and environmental sustainability performance.
PERSONNEL In 2021, the Sabaf Group suffered no on-the-job deaths or serious accidents that led to serious or very serious injuries to staff for which the Group was definitively held responsible, nor was it held responsible for occupational illnesses of employees or former employees, or causes of mobbing. For all other information, please refer to the Disclosure of nonfinancial information.
ENVIRONMENT In 2021 there was no: • damage caused to the environment for which the Group was held definitively responsible; • definitive fines or penalties imposed on the Group for environmental crimes or damage. For all other information, please refer to the Disclosure of nonfinancial information.
CORPORATE GOVERNANCE For a complete description of the corporate governance system of the Sabaf Group, see the report on corporate governance and on the ownership structure, available in the Investor Relations section of the Group website.
INTERNAL CONTROL SYSTEM ON FINANCIAL REPORTING The internal control system on financial reporting is described in detail in the report on corporate governance and on ownership structure. With reference to the “conditions for listing shares of parent companies set up and regulated by the law of states not belonging to the European Union” pursuant to articles 36 and 39 of the Market Regulations, the Company and its subsidiaries have administrative and accounting
REPORT ON OPERATIONS
systems that can provide the public with the accounting situations prepared for drafting the consolidated report of the companies that fall within the scope of this regulation and can regularly supply management and the auditors of the Parent Company with the data necessary for drafting the consolidated financial statements. The Sabaf Group has also set up an effective information flow to the independent auditor as well as continuous information on the composition of the corporate bodies of the subsidiaries, together with information on the offices held, and requires the systematic and centralised gathering as well as regular updates of the formal documents relating to the articles of association and granting of powers to corporate bodies. The conditions exist as required by article 36, letters a), b) and c) of the Market Regulations issued by CONSOB.
MODEL 231 The Organisation, Management and Control Model, adopted pursuant to Legislative Decree 231/2001, is described in the report on company governance and on the ownership structure, which should be reviewed for reference.
PERSONAL DATA PROTECTION Sabaf S.p.A. has an Organisational Model for the management and protection of personal data consistent with the provisions of European Regulation 2016/679 (General Data Protection Regulation GDPR). Specific projects are implemented or are being implemented for all Group companies for which the GDPR is applicable.
DERIVATIVE FINANCIAL INSTRUMENTS For the comments on this item, please see Note 36 of the consolidated financial statements.
ATYPICAL OR UNUSUAL TRANSACTIONS Sabaf Group companies did not execute any unusual or atypical transactions in 2021.
MANAGEMENT AND COORDINATION Sabaf S.p.A. is not subject to management and coordination by other companies. Sabaf S.p.A. exercises management and coordination activities over its Italian subsidiaries, Faringosi Hinges s.r.l., A.R.C. s.r.l., C.M.I. s.r.l. and C.G.D. s.r.l..
INTRA-GROUP TRANSACTIONS AND RELATED-PARTY TRANSACTIONS The relationships between the Group companies, including those with the parent company, are regulated under market conditions, as well as the relationships with related parties, defined in accordance with the accounting standard IAS 24. The details of intra-group transactions and other related-party transactions are given in Note 37 of the consolidated financial statements and in Note 35 of the separate financial statements of Sabaf S.p.A..
127
SABAF . 2021 ANNUAL REPORT
REPORT ON OPERATIONS
BUSINESS OUTLOOK In the first weeks of 2022, demand remained strong in many of the Group’s major markets and sales order flow was good. This trend is expected to continue in the coming months, also supported by the gradual increase in supplies related to new orders. For the whole of 2022, the Sabaf Group expects to achieve revenues ranging from €275 to €280 million, up by 5%-6% on 2021. The Group acted promptly to counteract the effects of the increases in energy and raw materials: further increases in sales prices were negotiated and actions were taken to contain energy consumption, also by increasing the efficiency of the most energy-consuming
plants. Strategies to mitigate currency risk were also defined. In this way, the Group believes it will be able to maintain excellent profitability in line with historical averages. These assumptions do not take into account the potential impacts of the recent conflict between Ukraine and Russia, which are currently not quantifiable as they are related to future developments in the conflict, the outcome of which cannot be determined. Although the Group has a non-significant direct exposure to the markets of Russia, Belarus and Ukraine, it is exposed to indirect effects on the price trends of raw materials, electricity and gas, the supply chain and final demand.
BUSINESS AND FINANCIAL SITUATION OF SABAF S.P.A.
2021
2020
Change
% Change
Sales revenue
144,034
102,583
41,451
+40.4%
EBITDA
23,078
15,820
7,258
+45.9%
EBIT
13,837
6,610
7,227
+109.3%
Pre-tax profit (EBT)
14,227
6,304
7,923
+125.7%
Net Profit
10,044
6,410
3,634
+56.7%
(€/000)
The reclassification based on financial criteria is illustrated below: 31.12.2021
31.12.2020
Non-current assets 6
142,549
123,679
Non-current financial assets
10,708
5,537
Short-term assets
82,572
69,738
(46,453)
(36,520)
Working capital 9
36,119
33,218
Provisions for risks and charges, Post-employment benefits, deferred taxes
(2,954)
(3,013)
Net invested capital
186,422
159,421
Short-term net financial position
10,502
(22,602)
Medium/long-term net financial position
(82,515)
(26,891)
10
Total financial debt
(72,013)
(49,493)
Shareholders’ equity
114,409
109,928
(€/000)
7
Short-term liabilities
8
Excluding Financial assets. Sum of Inventories, Trade receivables, Tax receivables and Other current receivables. 8 Sum of Trade payables, Tax payables and Other liabilities. 9 Difference between short-term assets and short-term liabilities. 10 Determined in accordance with Consob Communication of 28 July 2006 (Note 22 of the separate financial statements). 6 7
128
SABAF . 2021 ANNUAL REPORT
REPORT ON OPERATIONS
Cash flows for the financial year are summarised in the table below: 2021
2020
Opening liquidity
1,595
8,343
Operating cash flow
17,187
9,590
(€/000)
Cash flow from investments
(28,407)
(13,381)
Free cash flow
(11,220)
(3,791)
Cash flow from financing activities
39,358
(2,957)
Cash flow for the period
28,138
(6,748)
Closing liquidity
29,733
1,595
The 2021 financial year ended with a turnover 40.4% higher than in 2020, thanks to a very strong demand, increased portions on certain strategic customers and increases in sales prices. The investments of the financial year were mainly used: • for €9.1 million for tangible assets (plant, machinery, equipment); • for €12.9 million to subscribe to capital increases in subsidiaries, in order to financially support their development plans; • for increasing the shareholdings in subsidiaries by €6.4 million.
At 31 December 2021, working capital stood at €36.1 million compared with €33.2 million at the end of the previous year: its percentage impact on turnover stood at 25.1% from 32.4% at the end of 2020. The net financial debt was €72 million, compared with €49.5 million at 31 December 2020. At the end of the year, shareholders’ equity amounted to €114.4 million, compared with €109.9 million in 2020. The ratio between the net financial debt and the shareholders’ equity was 63%; it was 45% at the end of 2020.
RECONCILIATION BETWEEN PARENT COMPANY AND CONSOLIDATED SHAREHOLDERS’ EQUITY AND NET PROFIT FOR THE PERIOD Pursuant to the CONSOB memorandum of 28 July 2006, a reconciliation statement of the result of the 2021 financial year and Group shareholders’ equity at 31 December 2021 with the same values of the parent company Sabaf S.p.A. is given below: 31.12.2021
31.12.2020
Profit for the year
Shareholders’ equity
Profit for the year
Shareholders’ equity
Profit and shareholders’ equity of parent company Sabaf S.p.A.
10,044
114,409
6,410
109,928
Equity and consolidated company results
15,008
96,538
8,734
90,566
Derecognition of the carrying value of consolidated equity investments
300
(86,089)
620
(73,816)
Put options on minorities
438
0
456
(6,831)
(1,250)
(2,414)
(1,758)
(1,778)
Other adjustments
143
(8)
(103)
(262)
Minority interests
(780)
(911)
(398)
(4,809)
23,903
121,525
13,961
112,998
Description
Intercompany eliminations
Profit and shareholders’ equity attributable to the Group
Proposal for allocation of 2021 profit As we thank our employees, the Board of Statutory Auditors, the independent auditors and the Supervisory Authorities for their effective collaboration, we ask the shareholders to approve the financial statements for the year ended 31 December 2021, with the proposal to allocate the profit for the year of €10,043,877 in the following manner: • a dividend of €0.60 per share to be paid to shareholders as from 1 June 2022 (ex-date 30 May 2022 and record date 31 May 2022). With regard to treasury shares, we ask you to allocate an amount corresponding to the dividend on the shares held in portfolio on the ex-date to the Extraordinary Reserve; • the remainder to the Extraordinary Reserve. Ospitaletto, 22 March 2022 The Board of Directors
129
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Group Structure and corporate bodies
134
Consolidated statement of financial position
135
Consolidated income statement
136
Consolidated statement of comprehensive income
137
Statement of changes in consolidated shareholders’ equity
137
Consolidated statement of cash flows
138
Explanatory Notes
139
Certification of the Consolidated Financial Statements
174
Report on the Audit of the Consolidated Financial Statements
175
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Group Structure and corporate bodies GROUP STRUCTURE Parent company: SABAF S.p.A. Subsidiaries and equity interest pertaining to the Group Companies consolidated on a line-by-line basis Faringosi Hinges s.r.l.
Okida Elektronik Sanayi ve Ticaret A.S.
Sabaf India Private Limited
Sabaf do Brasil Ltda.
Sabaf US Corp.
Sabaf Mexico Appliance Components S.A. de c.v.
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey)
A.R.C. s.r.l.
100%
100%
100%
100%
100%
100%
100%
C.M.I. s.r.l.
Handan A.R.C. Burners Co., Ltd.
51%
Sabaf Appliance Components (Kunshan) Co., Ltd.
100% C.G.D. s.r.l.
100%
100%
Honorary Chairman
100%
Giuseppe Saleri
Board of Directors Chairman
Claudio Bulgarelli
Director
Cinzia Saleri
Vice Chairman*
Nicla Picchi
Director*
Carlo Scarpa
Chief Executive Officer
Pietro Iotti
Director*
Daniela Toscani
Director
Gianluca Beschi
Director*
Stefania Triva
Director
Alessandro Potestà
Board of Statutory Auditors
Independent Auditors
Chairman
Alessandra Tronconi
Statutory Auditor
Maria Alessandra Zunino de Pignier
Statutory Auditor
Mauro Vivenzi
134
* independent directors
EY S.p.A.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Notes
31.12.2021
31.12.2020
Property, plant and equipment
1
82,407
76,507
Investment property
2
2,311
3,253
Intangible assets
3
35,553
43,017
Equity investments
4
83
173
Non-current receivables
5
1,100
518
Deferred tax assets
21
8,639
8,075
130,093
131,543
(€/000) ASSETS NON-CURRENT ASSETS
TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories
6
64,153
39,224
Trade receivables
7
68,040
63,436
Tax receivables
8
6,165
2,419
Other current receivables
9
3,136
3,167
Current financial assets
10
1,172
1,495
Cash and cash equivalents
11
43,649
13,318
TOTAL CURRENT ASSETS
186,315
123,059
ASSETS HELD FOR SALE
0
0
316,408
254,602
TOTAL ASSETS
SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital
12
11,533
11,533
Retained earnings, Other reserves
13
86,089
87,504
Profit for the year
23,903
13,961
Total equity interest of the Group
121,525
112,998
911
4,809
122,436
117,807
Minority interests TOTAL SHAREHOLDERS’ EQUITY NON-CURRENT LIABILITIES Loans
14
86,504
32,153
Post-employment benefit and retirement provisions
16
3,408
3,513
Provisions for risks and charges
17
1,334
1,433
Deferred tax liabilities
21
3,939
4,697
95,185
41,796
Total non-current liabilities CURRENT LIABILITIES Loans
14
24,405
30,493
Other financial liabilities
15
1,519
8,489
Trade payables
18
54,837
41,773
Tax payables
19
4,951
3,287
Other payables
20
13,075
10,957
TOTAL CURRENT LIABILITIES
98,787
94,999
LIABILITIES HELD FOR SALE
0
0
316,408
254,602
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
135
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
CONSOLIDATED INCOME STATEMENT Notes
2021
2020
Revenue
23
263,259
184,906
Other income
24
8,661
7,194
271,920
192,100
(142,355)
(82,966)
29,922
6,406
(€/000) INCOME STATEMENT COMPONENTS OPERATING REVENUE AND INCOME
TOTAL OPERATING REVENUE AND INCOME OPERATING COSTS Materials
25
Change in inventories Services
26
(52,377)
(34,264)
Personnel costs
27
(53,964)
(43,700)
Other operating costs
28
(1,531)
(1,981)
Costs for capitalised in-house work TOTAL OPERATING COSTS OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/LOSSES, AND WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS Depreciations and amortisation
1, 2, 3
Capital gains on disposals of non-current assets Value adjustments of non-current assets
EBIT
2,525
1,502
(217,780)
(155,003)
54,140
37,097
(16,869)
(16,968)
237
105
0
(141)
37,508
20,093
Financial income
29
750
1,366
Financial expenses
30
(1,179)
(2,146)
Exchange rate gains and losses
31
(7,399)
(4,812)
Profits and losses from equity investments
4
0
8
29,680
14,509
(4,997)
(149)
24,683
14,360
780
399
23,903
13,961
Base (€)
2.132
1.240
Diluted (€)
2.132
1.240
PROFIT BEFORE TAXES Income taxes
32
PROFIT FOR THE YEAR of which: Minority interests PROFIT ATTRIBUTABLE TO THE GROUP
EARNINGS PER SHARE (EPS)
136
33
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 2021
2020
24,683
14,360
Actuarial evaluation of post-employment benefit
26
16
Tax effect
(6)
(3)
20
13
(14,552)
(12,564)
(398)
0
(14,930)
(12,551)
9,753
1,809
780
399
0
8
780
407
8,973
1,402
(€/000) PROFIT FOR THE YEAR Total profits/losses that will not be subsequently reclassified under profit (loss) for the year
Total profits/losses that will be subsequently reclassified under profit (loss) for the year Forex differences due to translation of financial statements in foreign currencies Hedge accounting for derivative financial instruments TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR TOTAL PROFIT of which: Net profit for the period attributable to minority interests Total profits/losses that will be subsequently reclassified under profit (loss) for the year TOTAL PROFIT ATTRIBUTABLE TO MINORITY INTERESTS TOTAL PROFIT ATTRIBUTABLE TO THE GROUP
STATEMENT OF CHANGES IN CONSOLIDATED SHAREHOLDERS’ EQUITY (€/000) Balance at 31 December 2019
Share capital
Share premium reserve
Legal reserve
11,533
10,002
2,307
Treasury Translation shares reserve (2,268)
(18,939)
Postemployment benefit discounting reserve
Other reserves
Profit for the year
Total Group shareholders’ equity
Minority interests
Total shareholders’ equity
(546)
102,024
9,915
114,028
7,077
121,105
9,915
(9,915)
Allocation of 2019 profit - carried forward
0
0
IFRS 2 measurement Stock Grant plan
658
658
658
Hedge accounting for derivatives
240
240
Purchase of treasury shares
(2,073)
(2,073)
Change in the scope of consolidation Dividends paid out Other changes Total profit at 31 December 2020
Balance at 31 December 2020
11,533
10,002
2,307
(4,341)
7
(12,564)
5
(31,503)
(541)
247 (2,073)
2,657
2,657
(3,924)
(3,924)
(2,657)
0
10
10
(25)
(15)
13,961
1,402
407
1,809
111,580
13,961
112,998
4,809
117,807
7,789
(7,789)
0
0
(6,172)
(6,172)
(6,172)
(3,924)
Allocation of 2020 profit - carried forward - dividends paid out IFRS 2 measurement Stock Grant plan Treasury share transactions
438
Change in the scope of consolidation Other changes Total profit at 31 December 2021 Balance at 31 December 2021
11,533
10,002
2,307
(3,903)
805
805
805
(438)
0
0
4,909
4,909
12
12
(4,678)
231 12
(14,552)
20
(398)
23,903
8,973
780
9,753
(46,055)
(521)
124,259
23,903
121,525
911
122,436
137
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
CONSOLIDATED STATEMENT OF CASH FLOWS (€/000)
2021
2020
Cash and cash equivalents at beginning of year
13,318
18,687
Profit for the year
24,683
14,360
16,869
16,968
0
141
- Realised gains/losses
(237)
(105)
- Valuation of the Stock Grant plan
805
658
0
(8)
429
780
4,997
149
Change in post-employment benefit
(85)
(180)
Change in risk provisions
(99)
438
Change in trade receivables
(4,604)
(16,507)
Change in inventories
(24,929)
(3,881)
Change in trade payables
13,064
14,213
Change in net working capital
(16,469)
(6,175)
Change in other receivables and payables, deferred taxes
(1,515)
2,115
Adjustments for: - Depreciations and amortisation - Write-downs of non-current assets
- Profits and losses from equity investments - Net financial income and expenses - Income tax
Payment of taxes
(5,296)
(2,999)
Payment of financial expenses
(1,167)
(1,235)
Collection of financial income
301
160
23,216
25,067
(2,106)
(1,097)
- tangible
(22,803)
(16,623)
- financial
0
(50)
1,157
474
(23,752)
(17,296)
(536)
7,771
Repayment of loans
(47,381)
(18,413)
Raising of loans
Cash flows from operations Investments in non-current assets - intangible
Disposal of non-current assets Cash flow absorbed by investments Free cash flow
94,726
16,216
Short-term financial assets
60
60
Purchase/sale of treasury shares
0
(2,073)
Payment of dividends
(6,172)
(3,924)
Cash flow absorbed by financing activities
41,233
(8,133)
A.R.C. acquisition
(1,650)
0
C.M.I. acquisition
(4,743)
(3,063)
97
0
Foreign exchange differences
(4,070)
(1,944)
Net cash flows for the year
30,331
(5,369)
Cash and cash equivalents at end of year (Note 10 and 11)
43,649
13,318
A.R.C. Handan consolidation
138
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Explanatory Notes ACCOUNTING STANDARDS STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION The consolidated financial statements of the Sabaf Group for the 2021 financial year have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS). The financial statements have been prepared in euro, the current currency in the economies in which the Group mainly operates, rounding amounts to the nearest thousand, and are compared with consolidated financial statements for the previous year, prepared according to the same standards. They consist of the statement of financial position, the income statement, the statement of changes in shareholders’ equity, the statement of cash flows and these explanatory notes. The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. The Group assessed that it is a going concern (as defined by paragraphs 25 and 26 of IAS 1 and by Art. 2423-bis of the Italian Civil Code), also due to the strong competitive position, high profitability and solidity of the financial structure.
FINANCIAL STATEMENTS The Group has adopted the following formats: • current and non-current assets and current and non-current liabilities are stated separately in the statement of the financial position; • an income statement that expresses costs using a classification based on the nature of each item; • a comprehensive income statement that expresses revenue and expense items not recognised in profit (loss) for the year as required or permitted by IFRS; • a statement of cash flows that presents cash flows originating from operating activity, using the indirect method. Use of these formats permits the most meaningful representation of the Group’s operating results, financial position and cash flows.
SCOPE OF CONSOLIDATION The scope of consolidation at 31 December 2021 comprises the parent company Sabaf S.p.A. and the following companies controlled by Sabaf S.p.A.: • Faringosi Hinges s.r.l. • Sabaf do Brasil Ltda. • Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey) • Sabaf Appliance Components (Kunshan) Co., Ltd. • A.R.C. s.r.l. • Handan A.R.C. Burners Co. Ltd • Okida Elektronik Sanayi ve Ticaret A.S. • Sabaf U.S.
• • • •
Sabaf India Private Limited Sabaf Mexico Appliance Components S.A. de c.v. C.M.I. s.r.l. C.G.D. s.r.l.
Compared to the consolidated financial statements at 31 December 2020, the companies Sabaf Mexico Appliance Components, in which Sabaf S.p.A. made a capital contribution of €3,128 thousand during 2021, and Handan A.R.C. Burners Co. Ltd, a company indirectly held through A.R.C. s.r.l. and previously measured at equity, in which the Group acquired control of 51% during 2021 following the purchase of an additional 30% of the share capital of A.R.C. as described in the following paragraph, are consolidated on a line-by-line basis. In October 2021, Sabaf S.p.A. completed the acquisition of 30% of the capital of A.R.C. s.r.l., in execution of the agreement signed between the parties in 2016, when Sabaf had acquired the 70% of A.R.C. As a result of this transaction Sabaf now holds 100% of A.R.C. In November 2021, Sabaf S.p.A. also completed the acquisition of 15.75% of the share capital of C.M.I. s.r.l. by the minority shareholder Starfire s.r.l. (Guandong Xingye Investment Group). Sabaf S.p.A. had acquired 68.5% of C.M.I. in July 2019 and a further 15.75% stake in September 2020. As a result of this transaction Sabaf now holds 100% of C.M.I.. On 31 December 2021, the merger through incorporation of C.M.I. Polska Sp. Z.o.o. into C.M.I. s.r.l. became effective. This transaction did not affect the scope of consolidation or other elements of these consolidated financial statements. The companies in which Sabaf S.p.A. simultaneously possess the following three elements are considered subsidiaries: (a) power over the company; (b) exposure or rights to variable returns resulting from involvement therein; (c) ability to affect the size of these returns by exercising power. Subsidiaries are consolidated from the date on which control begins until the date on which control ceases.
CONSOLIDATION CRITERIA The data used for consolidation have been taken from the income statements and statements of financial position prepared by the directors of the individual subsidiary companies. These figures have been appropriately amended and restated, when necessary, to align them with international accounting standards and with uniform group-wide classification criteria. The criteria applied for consolidation are as follows: a. assets and liabilities, income and costs in financial statements consolidated on a line-by-line basis are incorporated into the Group financial statements, regardless of the entity of the equity interest concerned. Moreover, the carrying value of equity interests is derecognised against the shareholders’ equity relating to investee companies;
139
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
b. positive differences arising from elimination of equity investments against the carrying value of shareholders’ equity at the date of first-time consolidation are attributed to the higher values of assets and liabilities when possible and, for the remainder, to goodwill. In accordance with the provisions of IFRS 3, since 1 January 2004, the Group has not amortised goodwill and instead subjects it to impairment testing; c. payable/receivable and cost/revenue items between consolidated companies and profits/losses arising from intercompany transactions are derecognised; d. the portion of shareholders’ equity and net profit for the period pertaining to minority shareholders is posted in specific items of the balance sheet and income statement.
CONVERSION INTO EURO OF FOREIGN-CURRENCY INCOME STATEMENTS AND STATEMENTS OF FINANCIAL POSITION Separate financial statements of each company belonging to the Group are prepared in the currency of the country in which that company operates (functional currency). For the purposes of the consolidated financial statements, the financial statement of each foreign entity is expressed in euro, which is the Group’s functional currency and the reporting currency for the consolidated financial statements. Balance sheet items in accounts expressed in currencies other than euro are converted by applying current end-of-year exchange rates. Income statement items are converted at average exchange rates for the year. Foreign exchange differences arising from the comparison between opening shareholders’ equity converted at current exchange rates and at historical exchange rates, together with the difference between the net result expressed at average and current exchange rates, are allocated to “Other Reserves” in shareholders’ equity.
The exchange rates used for conversion into euro of the financial statements of the foreign subsidiaries, prepared in local currency, are shown in the following table: Exchange rate in effect at 31.12.2021
Average exchange rate 2021
Exchange rate in effect at 31.12.2020
Average exchange rate 2020
Brazilian real
6.3101
6.3778
6.3735
5.8929
Turkish lira
15.233
10.510
9.1131
8.0548
Chinese renminbi
7.1947
7.6271
8.0225
7.8664
Polish Zloty
4.5969
4.5651
4.5597
4.4431
Indian Rupee
84.229
87.439
89.660
84.638
Mexican peso
23.143
23.985
-
-
Description of currency
SEGMENT REPORTING The Group’s operating segments in accordance with IFRS 8 - Operating Segment are identified in the business segments that generate revenue and costs, whose results are periodically reassessed by top management in order to assess performance and decisions regarding resource allocation. The Group operating segments are the following: • gas parts (household and professional); • hinges; • electronic components for household appliances.
Buildings
33
Light constructions
10
General plant
10
Specific plant and machinery
6–10
Equipment
4–10
Furniture
8
Electronic equipment
5
Vehicles and other transport means
4–5
ACCOUNTING POLICIES The accounting standards and policies applied for the preparation of the consolidated financial statements at 31 December 2021, unchanged versus the previous year, are shown below.
Property, plant and equipment
These are recognised at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers. Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life in years, unchanged compared to previous financial years, is as follows:
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Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer. Land is not depreciated.
Leased assets
The Group assesses at the time of signing an agreement whether it is, or contains, a lease, or if the contract gives the right to control the use of an identified asset for a period of time in exchange for a consideration. The Group adopts a single recognition and measurement model for all leases according to which the assets acquired relating to the right of use are shown under assets at purchase value less depreciation, any impairment losses and adjusted for any re-measurement of lease liabilities.
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Assets are depreciated on a straight-line basis from the starting date of the agreement until the end of the useful life of the asset or the end of the lease agreement, whichever comes first. Set against recognition of such assets, the amounts payable to the lessor, are posted among short- and medium-/long-term payables, by measuring them at the present value of the lease payments not yet made. Moreover, financial charges pertaining to the period are charged to the income statement.
Adoption of the accounting standard IFRS 16 “Leases” The Group applied IFRS 16 from 1 January 2019 by using the amended retrospective approach. When evaluating the lease liabilities, the Group discounted the payments due for the lease using the incremental borrowing rate, the weighted average of which was 3.86% on 31 December 2021 and 2.52% on 31 December 2020. The rate was defined taking also account of the currency in which the lease agreements are denominated and the country in which the leased asset is located. The lease term is calculated based on the non-cancellable period of the lease, including the periods covered by the option to extend or to terminate the lease if it is reasonably certain that those options will be exercised or not exercised, taking account of all relevant factors that create an economic incentive relating to those decisions.
Goodwill Goodwill is the difference between the purchase price and fair value of investee companies’ identifiable assets and liabilities on the date of acquisition. As regards acquisitions completed prior to the date of IFRS adoption, the Sabaf Group has used the option provided by IFRS 1 to refrain from applying IFRS 3 – concerning business combinations – to acquisitions that took place prior to the transition date. Consequently, goodwill arising in relation to past acquisitions has not been recalculated and has been posted in accordance with Italian GAAPs, net of amortisation reported up to 31 December 2003 and any losses caused by a permanent value impairment. After the transition date, goodwill – as an intangible asset with an indefinite useful life – is not amortised but subjected annually to impairment testing to check for value loss, or more frequently if there are signs that the asset may have suffered impairment (impairment test).
Equity investments in associates and joint ventures
An associated company is a company on which the Group exercises significant influence. Significant influence is the power to participate in determining the financial and operational policies of the associated company without having control or joint control over it. A joint venture is a joint control agreement in which the parties holding the joint control have rights on the net assets of the agreement. The Group’s equity investment in associates and joint ventures is measured using the equity method: the equity investment is initially entered at cost, subsequently, the carrying value of the equity investment is increased or decreased to reflect the investor’s share of the investee’s profits and losses realised after the acquisition date. Goodwill pertaining to the associated company or joint venture is included at the carrying value of the equity investment and is not subject to individual assessment of impairment.
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Other intangible assets
As established by IAS 38, other intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably. If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained. Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life. Estimated useful working life in years, unchanged compared to previous financial years, is as follows: Customer relationship
15
Brand
15
Patents
9
Know how
7
Development costs
10
Software
3-5
Impairment
At each end of reporting period, the Group reviews the carrying value of its tangible and intangible assets to determine whether there are signs of impairment losses of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate recoverable amount individually, the Group estimates the recoverable amount of the cash generating unit (CGU) to which the asset belongs. In particular, the recoverable amount of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use. The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects current market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Group prepares operating cash flow forecasts based on the most recent budgets approved by the Board of Directors of the consolidated companies, draws up the forecasts for the coming years and determines the terminal value (current value of perpetual income), which expresses the medium- and long-term operating flows in the specific sector. If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset’s carrying value is reduced to the lower recoverable amount, recognising impairment in the income statement. When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or of the cash-generating unit) - with the exception of goodwill - is increased to the new value resulting from the estimate of its recoverable amount, but not beyond the net
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carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
Investment property
As allowed by IAS 40, non-operating buildings and constructions are assessed at cost net of depreciation and losses due to cumulative impairment. The depreciation criterion applied is the asset’s estimated useful life, which is considered to be 33 years. If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset’s carrying value is reduced to the lower recoverable amount, recognising impairment in the income statement. When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or cash generating unit) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
Equity investments and non-current receivables
Equity investments in companies other than subsidiaries, associates and joint ventures are classified as financial assets measured at fair value, which normally corresponds to the transaction price including directly attributable transaction costs. Subsequent changes in fair value are recognised through profit or loss (FVPL) or, if the option is exercised in accordance with the standard, in Other comprehensive income (FVOCI) under the heading “Instrument reserve at FVOCI”. Non-current receivables are stated at their presumed realisable value.
Inventories
Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products – calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are derecognised in subsequent years if the reasons for such write-downs cease to exist.
Trade receivables and other financial assets Initial recognition Upon initial recognition, financial assets are classified, as the case may be, on the basis of subsequent measurement methods, i.e. at amortised cost, at fair value recognised in other comprehensive income (OCI) and at fair value through profit or loss. The classification of financial assets at initial recognition depends on the characteristics of the contractual cash flows of the financial
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assets and on the business model that the Group uses to manage them. Trade receivables that do not contain a significant financing component are valued at the transaction price determined in accordance with IFRS 15. See the “Revenue from Contracts with Customers” paragraph. Other financial assets are recognised at fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. For a financial asset to be classified and measured at amortised cost or at fair value recognised in OCI, it must generate cash flows that depend solely on the principal and interest on the amount of principal to be repaid (known as “solely payments of principal and interest (SPPI)”). This measurement is referred to as the SPPI test and is carried out at the instrument level.
Subsequent measurement The measurement of financial liabilities depends on their classification, as described below: Financial assets at amortised cost (debt instruments) This category is the most important for the Group. The Group measures the financial assets at amortised cost if both of the following requirements are met: • the financial asset is held as part of a business model whose objective is to hold financial assets for the purpose of collecting contractual cash flows and • the contractual terms of the financial asset envisage, at certain dates, cash flows represented solely by payments of principal and interest on the amount of principal to be repaid. Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the income statement when the asset is derecognised, modified or revalued. Financial assets at amortised cost of the Group include trade receivables. Financial assets at fair value through profit or loss This category includes all assets held for trading, assets designated at initial recognition as financial assets measured at fair value with changes recognised in the income statement, or financial assets that must be measured at fair value. Assets held for trading are all those assets acquired for sale or repurchase in the short term. Derivatives, separated or otherwise, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Financial assets with cash flows that are not represented solely by principal and interest payments are classified and measured at fair value through profit or loss, regardless of the business model. Financial instruments at fair value with changes recognised in the income statement are recognised in the statement of financial position at fair value and net changes in fair value are recognised in the income statement. This category includes derivative instruments. The Group does not hold financial assets at fair value recognised in other comprehensive income with reclassification of cumulative gains and losses or financial assets recognised in other comprehensive income without reversal of cumulative gains and losses upon derecognition.
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Derecognition A financial asset (or, if applicable, part of a financial asset or part of a group of similar financial assets) is firstly written off (e.g. removed from the statement of financial position of the Group) when: • the rights to receive cash flows from the asset are extinguished, or • the Group transferred to a third party the right to receive financial flows from the asset or has taken on the contractual obligation to pay them fully and without delay and (a) transferred substantially all the risks and benefits of the ownership of the financial asset or (b) did not substantially transfer or retain all the risks and benefits of the asset, but transferred their control. If the Group has transferred the rights to receive cash flows from an asset or has signed an agreement on the basis of which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the cash flows to one or more beneficiaries (pass-through), it considers whether or to what extent it has retained the risks and benefits concerning the ownership. If it has not substantially transferred or retained all the risks and benefits or has not lost control over it, the asset continued to be recognised in the financial statements of the Group to the extent of its residual involvement in the asset itself. In this case, the Group also recognises an associated liability. The transferred asset and the associated liability are measured in such a way as to reflect the rights and obligations that pertain to the Group. When the residual involvement of the entity is a guarantee in the transferred asset, the involvement is measured based on the amount of the asset or the maximum amount of the consideration received that the entity could be obliged to pay, whichever lower.
Provisions for risks and charges Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future cash flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
Post-employment benefit The post-employment benefit is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, postemployment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unitcredit method. The regulations of this fund were amended by Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007. In the light of these changes, and, in particular, for companies with at least 50 employees, postemployment benefits must now be considered a defined-benefit
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
plan only for the portions accruing before 1 January 2007 (and not yet paid as at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans. Actuarial gains or losses are recognised immediately under “Other total profits/(losses)”.
Trade payables and other financial liabilities Initial recognition All financial liabilities are initially recognised at fair value, in addition to directly attributable transaction costs in case of mortgages, loans and payables. The Company’s financial liabilities include trade payables and other payables, mortgages and loans, including current account overdrafts and derivative financial instruments. Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Financial liabilities at fair value through profit or loss Financial liabilities at fair value with changes recognised in the income statement include liabilities held for trading and financial liabilities initially recognised at fair value, with changes recognised in the income statement. Liabilities held for trading are those liabilities acquired in order to discharge or transfer them in the short term. This category also includes derivative financial instruments subscribed by the Company and not designated as hedging instruments in a hedging relationship pursuant to IFRS 9. Embedded derivatives, separated from the main contract, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. Financial liabilities are designated at fair value with changes recognised in the income statement from the date of initial recognition, only if the criteria of IFRS 9 are met. Loans and payables This is the most important category for the Company and includes interest-bearing payables and loans. After initial statement, loans are valued using the amortised cost approach, applying the effective interest rate method. Gains and losses are recognised in the income statement when the liability is discharged, as well as through the amortisation process. Amortised cost is calculated by recognising the discount or premium on the acquisition and the fees or costs that are an integral part of the effective interest rate. Amortisation at the effective interest rate is included in financial expenses in the income statement.
Derecognition A financial liability is derecognised when the obligation underlying the liability is discharged, cancelled or fulfilled. If an existing financial liability is replaced by another from the same lender, at substantially different conditions, or if the conditions of an existing liability are substantially changed, this replacement or change is treated as a derecognition of the original liability accompanied by the recognition of a new liability, with any differences between the carrying values recognised in the income statement.
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Policy for conversion of foreign currency items
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date. At year-end, assets and liabilities expressed in foreign currencies, with the exception of non-current items, are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a non-distributable reserve until it is effectively realised.
Derivative instruments and hedge accounting
The Group’s business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The company uses derivative instruments (mainly forward contracts on currencies and commodity options) to hedge risks stemming from changes in foreign currencies relating to irrevocable commitments or to planned future transactions. Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates. Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Group’s contractual commitments and planned transactions are recognised directly in shareholders’ equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place. For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement. Gains and losses stemming from the derivative’s valuation are also posted in the income statement. Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur. Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place. If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year’s income statement. Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts
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and the latter are not measured at fair value with posting of related gains and losses in the income statement.
Revenue from contracts with customers
The Group is engaged in the supply of components for household appliances (mainly gas parts, such as valves and burners, hinges and electronic components). Revenue from contracts with customers is recognised when control of the goods is transferred to the customer for an amount that reflects the consideration that the Group expects to receive in exchange for the goods. The control of the goods passes to the customer according to the terms of return defined with the customer. The usual extended payment terms range from 30 to 120 days from shipment; the Group believes that the price does not include significant financing components. The guarantees provided for in the contracts with customers are of a general nature and not extended and are accounted for in accordance with IAS 37.
Financial income
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recognised in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses. All the other financial expenses are recognised as costs for the year in which they are incurred.
Income taxes for the year Income taxes include all taxes calculated on the Group’s taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders’ equity, in which case the tax effect is recognised directly in shareholders’ equity. Other taxes not relating to income, such as property taxes, are included among operating expenses. Deferred taxes are provisioned in accordance with the global liability provisioning method. They are calculated on all temporary differences emerging between the taxable base of an asset and liability and its book value in the consolidated financial statements, with the exception of goodwill that is not tax-deductible and of differences stemming from investments in subsidiaries for which cancellation is not envisaged in the foreseeable future. Deferred tax assets on unused tax losses and tax credits carried forward are recognised to the extent that it is probable that future taxable income will be available against which they can be recovered. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable, according to the respective regulations of the countries where the Group operates, in the years when temporary differences will be realised or settled.
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Dividends
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Earnings per share
Treasury shares are booked as a reduction of shareholders’ equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders’ equity.
Basic EPS is calculated by dividing the profit or loss attributable to the direct parent company’s shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit or loss attributable to the direct parent company’s shareholders by the weighted average number of shares outstanding, adjusted to take into account the effects of all potential ordinary shares with a dilutive effect.
Equity-settled transactions
Use of estimates
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares
Some Group employees receive part of the remuneration in the form of share-based payments, therefore employees provide services in exchange for shares (“equity-settled transactions”). The cost of equity-settled transactions is determined by the fair value at the date on which the assignment is made using an appropriate measurement method, as explained in more detail in Note 38. This cost, together with the corresponding increase in shareholders’ equity, is recognised under personnel costs (Note 27) over the period in which the conditions relating to the achievement of objectives and/or the provision of the service are met. The cumulative costs recognised for such transactions at the end of each reporting period up to the vesting date are commensurate with the expiry of the vesting period and the best estimate of the number of equity instruments that will actually vest. Service or performance conditions are not taken into account when defining the fair value of the plan at the assignment date. However, the probability of these conditions being met is taken into account when defining the best estimate of the number of equity instruments that will vest. Market conditions are reflected in the fair value at the assignment date. Any other condition related to the plan that does not involve a service obligation is not considered to be a vesting condition. Non-vesting conditions are reflected in the fair value of the plan and result in the immediate recognition of the cost of the plan, unless there are also service or performance conditions. No cost is recognised for rights that do not vest in that the performance and/or service conditions are not met. When the rights include a market condition or a non-vesting condition, these are treated as if they had vested regardless of whether the market conditions or other non-vesting conditions to which they are subject are met or not, it being understood that all other performance and/or service conditions must be met. If the conditions of the plan are changed, the minimum cost to be recognised is the fair value at the assignment date in the absence of the change in the plan itself, on the assumption that the original conditions of the plan are met. Moreover, a cost is recognised for each change that results in an increase in total fair value of the payment plan, or that is in any case favourable for employees; this cost is measured with reference to the date of change. When a plan is cancelled, any remaining element of the plan’s fair value is immediately expensed to the income statement.
Preparation of the financial statements and notes in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities as of the end of the reporting period. Actual results might differ from these estimates. Estimates are used to measure tangible and intangible assets subject to impairment testing, as described earlier, as well as to measure provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset writedowns, employee benefits, taxes, and other provisions. Specifically:
Recoverable amount of tangible and intangible assets The procedure for determining impairment losses of tangible and intangible assets described in “Impairment” implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees’ management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated. Provisions for bad debts Receivables are adjusted by the related bad debt provision to take into account their recoverable amount. To determine the size of the writedowns, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer’s solvency, as well as experience and historical payment trends. Provisions for inventory obsolescence Inventories subject to obsolescence and slow turnover are systematically valued, and written down if their recoverable amount is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results. Employee benefits The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates. Any change in the above-mentioned assumptions might have significant effects on liabilities for pension benefits.
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CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Share-based payments Estimating the fair value of share-based payments requires the determination of the most appropriate valuation model, which depends on the terms and conditions under which these instruments are granted. This also requires the identification of data to feed into the valuation model, including assumptions about the exercise period of the options, volatility and dividend yield. The Group uses a binomial model for the initial measurement of the fair value of share-based payments with employees. Income taxes The Group is subject to different bodies of tax legislation on income. Determining liabilities for Group taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets. Other provisions When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Group in litigation. These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions. Climate change With reference to the potential impact of climate change and energy transition on the Group’s activities, the Management carries out targeted analyses to identify and manage the main risks and uncertainties to which the Group is exposed, adapting the corporate strategy accordingly. To date, these factors have not had a significant impact on the judgements and estimates used in preparing these Consolidated Financial Statements. COVID-19 pandemic Management has reviewed the Group’s exposure to the effects of the COVID-19 pandemic and its impact on the Group’s financial position, results and cash flows, especially with regard to the recoverability of the value of intangible assets, the measurement of receivables, the measurement of inventories and the management of financial risks, with a special reference to credit and liquidity risks. The analysis carried out did not reveal any critical situations and the factors related to the COVID-19 pandemic did not have a significant impact on the judgements and estimates used in preparing these Consolidated Financial Statements. Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
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New accounting standards Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39: Interest rate benchmark reform The Financial Stability Board released the report “Reforming Major Interest Rate Benchmarks” with recommendations to strengthen existing benchmark indexes, other potential interbank market-based benchmark rates and develop alternative near-risk-free benchmark rates. The European Parliament introduced a common framework to ensure the accuracy and integrity of these indexes. Following this Regulation, the IASB published the Reform of benchmark indexes for determining interest rates in order to take into account the consequences of the reform on financial reporting and so that companies can continue to comply with the provisions assuming that the existing benchmark indexes are not changed as a result of the reform of interbank rates. The amendments to the principles outlined provide a number of expedients, applicable to all hedging relationships directly affected by the interest rate benchmark reform, i.e., if the reform generates uncertainties about the timing and/or amount of cash flows based on benchmarks of the hedged item or hedging instrument. These changes had no impact on the Group’s consolidated financial statements. Amendment to IFRS16: Covid-19-Related Rent Concessions beyond 30 June 2021 On 31 March 2021, the IASB issued the document “Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)” by which it extends by one year the period of application of the amendment to IFRS 16, issued in 2020, relating to the accounting for facilities granted to lessees due to Covid-19. These changes that apply as from 1 April 2021 had no impact on the Group’s consolidated financial statements.
IFRS and IFRIC accounting standard, amendments approved by the European Union, not yet universally applicable and not adopted early by the Group at 31 December 2021 IFRS 17 “Insurance Contracts” In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new standard on insurance contracts covering recognition and measurement, presentation and disclosure. The overall objective of IFRS 17 is to present an accounting model for insurance contracts that is more useful and consistent for insurers. This principle does not apply to the Group. Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” In January 2020, the IAS issued amendments to paragraphs 69-76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify what is meant by the right to postpone an expiry, that the right to postpone must exist at the end of the reporting period, that the classification is not affected by the likelihood that the entity will exercise its right to postpone, that only if a derivative embedded in a convertible liability is itself an equity instrument does the maturity of the liability have no impact on classification. The amendments will be effective for financial years beginning on or after 1 January 2023 and must be applied retrospectively. The Group is assessing the impact the changes will have on the current situation.
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Amendments to IFRS 3 “Business Combinations” The amendments are intended to update a reference in IFRS 3 to the previous version of the IASB’s Conceptual Framework (1989 Framework) without affecting the requirements of the standard. Amendments to IAS 16 “Property, Plant and Equipment” The purpose of the amendments is not to allow the deduction from the cost of property, plant and equipment of the amount received from the sale of goods produced in the test phase of the asset. These sales revenues and related production costs will therefore be recognised in the income statement. Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” The amendment clarifies that all costs directly attributable to the contract must be taken into account when estimating the possible onerousness of a contract. Accordingly, the assessment of whether a contract is onerous includes not only incremental costs (such as the cost of direct material used in processing), but also all costs that the enterprise cannot avoid because it has entered into the contract (such as, for example, the share of depreciation of machinery used for the performance of the contract).
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Amendments to “Annual Improvements 2018-2020” The amendments include amendments to the following principles: • IFRS 1“ First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time adopter”: the amendment allows a subsidiary that chooses to apply paragraph D16(a) of IFRS 1 to account for cumulative translation differences on the basis of the amounts recognised by the parent company, taking into account the parent’s date of transition to IFRSs; • IFRS 9 “Financial Instruments”: the amendments clarify what fees can be included in measuring whether the terms of a new financial liability (or changes to an existing financial liability) are materially different from the terms of the original financial liability; • IAS 41 “Agriculture”: the amendment removes the requirement to exclude cash flows arising from taxation when measuring the fair value of assets within the scope of IAS 41; • IFRS 16 “Leases”: amendments to illustrative example no. 13.
All amendments will enter into force on 1 January 2022. Following the adoption of these amendments, the directors do not expect a significant effect on the Group’s consolidated financial statements.
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CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
COMMENTS ON SIGNIFICANT BALANCE SHEET ITEMS 1. PROPERTY, PLANT AND EQUIPMENT Property
Plant and equipment
Other assets
Assets under construction
Total
56,074
215,631
53,428
3,164
328,297
Increases
1,591
7,658
4,190
4,508
17,947
Disposals
-
(1,451)
(218)
-
(1,669)
Change in the scope of consolidation
1,575
-
4
-
1,579
Reclassifications
(518)
1,709
277
(2,834)
(1,366)
Forex differences
(1,496)
(3,955)
(1,804)
(303)
(7,558)
At 31 December 2020
57,226
219,592
55,877
4,535
337,230
Increases
1,589
11,097
4,421
5,120
22,227
Disposals
(48)
(1,366)
(398)
(596)
(2,408)
Change in the scope of consolidation
942
83
-
1,531
2,556
Reclassifications
375
2,092
18
(3,480)
(995)
Forex differences
(654)
(3,201)
(1,089)
(474)
(5,418)
59,430
228,297
58,829
6,636
353,192
22,779
183,664
45,969
-
252,412
2,321
8,696
2,909
-
13,926
-
(1,422)
(81)
-
(1,503)
Reclassifications
(530)
184
(43)
-
(389)
Forex differences
(423)
(2,184)
(1,116)
-
(3,723)
24,147
188,938
47,638
-
260,723
2,367
8,457
3,290
-
14,114
(14)
(1,462)
(319)
-
(1,795)
Reclassifications
-
(116)
3
-
(113)
Forex differences
(297)
(1,287)
(560)
-
(2,144)
26,203
194,530
50,052
-
270,785
At 31 December 2021
33,227
33,767
8,777
6,636
82,407
At 31 December 2020
33,079
30,654
8,239
4,535
76,507
COST At 31 December 2019
At 31 December 2021
ACCUMULATED DEPRECIATIONS At 31 December 2019 Depreciations for the year Disposals
At 31 December 2020 Depreciations for the year Disposals
At 31 December 2021
NET CARRYING VALUE
The breakdown of the net carrying value of Property was as follows: 31.12.2021
31.12.2020
Change
8,613
7,675
938
Industrial buildings
24,614
25,404
(790)
Total
33,227
33,079
148
Land
148
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Changes in property, plant and equipment resulting from the application of IFRS 16 are shown below:
Property
Plant and equipment
Other assets
Total
2,447
340
826
3,613
414
104
681
1,199
Depreciations
(595)
(241)
(575)
(1,411)
Decreases
(47)
-
-
(47)
2
-
-
2
2,221
203
932
3,356
1 January 2021 Increases
Foreign exchange differences At 31 December 2021
The main investments of the financial year were allocated to: • the increase in the production capacity of the Electronics Division, for which production started in a new plant in Manisa (Turkey); • the increase in the production capacity of burners at the plants in Brazil and Turkey, also to support the increase in supplies under recent agreements with some strategic customers; • the start of works for the construction of a new production site in San Luis de Potosi (Mexico), where the Group intends to start production by the end of 2022.
Decreases mainly relate to the disposal of machinery no longer in use. Assets under construction include machinery under construction and advance payments to suppliers of capital equipment. At 31 December 2021, the Group found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
2. INVESTMENT PROPERTY COST At 31 December 2019
11,836
Changes in investment property resulting from the application of IFRS 16 are shown below:
Increases
-
Disposals
(552)
INVESTMENT PROPERTY
At 31 December 2020
11,284
1 January 2021
38
Increases
-
Increases
-
Disposals
(1,107)
Decreases
(35)
At 31 December 2021
10,177
Depreciations
-
Foreign exchange differences
-
At 31 December 2021
3
DEPRECIATIONS AND WRITE-DOWNS At 31 December 2019
7,860
Depreciations for the year
416
Write-downs for the year
-
Derecognition due to disposal
(245)
At 31 December 2020
8,031
Depreciations for the year
369
Write-downs for the year
-
Derecognition due to disposal
(534)
At 31 December 2021
7,866
NET CARRYING VALUE At 31 December 2021
2,311
At 31 December 2020
3,253
The item Investment property includes non-operating buildings owned by the Group: these are mainly properties for residential use, held for rental or sale. Disposals during the period resulted in capital gains totalling €109 thousand. At 31 December 2021, the Group found no other endogenous or exogenous indicators of impairment of its investment property. As a result, the value of investment property was not submitted to impairment testing.
149
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
3. INTANGIBLE ASSETS
Goodwill
Patents and software
Development costs
Other intangible assets
Total
31,615
8,962
6,728
24,959
72,264
Increases
-
547
465
85
1,097
Decreases
-
1
-
(1)
-
Change in the scope of consolidation
-
1
-
-
1
Reclassifications
-
33
(607)
(786)
(1,360)
Forex differences
(4,501)
(143)
-
(2,658)
(7,302)
At 31 December 2020
27,114
9,401
6,586
21,599
64,700
Increases
-
420
1,770
44
2,234
Decreases
-
(2)
-
(3)
(5)
Reclassifications
-
(70)
(58)
-
(128)
Forex differences
(4,978)
(164)
-
(2,939)
(8,081)
At 31 December 2021
22,136
9,585
8,298
18,701
58,720
4,546
8,179
4,338
3,533
20,596
Amortisation for the year
-
480
431
1,723
2,634
Decreases
-
-
-
-
-
Change in the scope of consolidation
-
-
-
-
-
Reclassifications
-
(18)
(344)
(781)
(1,143)
Forex differences
-
(68)
-
(336)
(404)
4,546
8,573
4,425
4,139
21,683
Amortisation for the year
-
419
375
1,553
2,347
Decreases
-
-
-
-
-
Change in the scope of consolidation
-
-
-
-
-
Reclassifications
-
(93)
-
-
(93)
Forex differences
-
(112)
-
(658)
(770)
4,546
8,787
4,800
5,034
23,167
At 31 December 2021
17,590
798
3,498
13,667
35,553
At 31 December 2020
22,568
828
2,161
17,460
43,017
COST At 31 December 2019
AMORTISATION/WRITE-DOWNS At 31 December 2019
At 31 December 2020
At 31 December 2021
NET CARRYING VALUE
Goodwill
Goodwill recognised at 31 December 2021 is allocated: • to the “Hinges” (CGU) cash generating units of €4.414 million; • to the “Professional burners” CGU of €1.770 million; • to the “Electronic components” CGU of €7.726 million; • to the “C.M.I. hinges” CGU of €3.680 million. The Group verifies the ability to recover goodwill at least once a year or more frequently if there are indications of impairment. Recoverable amount is determined through value of use, by discounting expected cash flows. 150
The management defined a single plan for each CGU (approved by the Board of Directors) that represents the normal and expected scenario, with reference to the period from 2022 to 2026, and which was used to develop the impairment tests. The development of forward plans and the calculation of the value in use were carried out following an in-depth analysis that also considered the impact on profitability of the increase in purchase costs and the possibility of transferring this increase to sales prices. The recoverable amount of each CGU, determined on the basis of this plan, was subjected to stress tests and sensitivity analyses that also took into account economic parameters and as a result of which positive results emerged.
SABAF . 2021 ANNUAL REPORT
Goodwill allocated to the Hinges CGU In 2021, the Hinges CGU achieved positive results - in terms of sales and profitability - both compared to the previous year and compared to the budget. The 2022-2026 forward plan envisages a further increase in sales at moderate growth rates. At 31 December 2021, the Group tested - with the support of independent experts - the carrying value of its CGU Hinges for impairment, determining its recoverable amount, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted by the management. Cash flows for the period from 2022 to 2026 were augmented by the terminal value, which expresses the operating flows that the CGU is expected
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (wacc) of 10.11% (8.62% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2020) and a growth rate (g) of 2%, unchanged from the 2020 impairment test. The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €15.497 million, compared with a carrying value of the assets allocated to the Hinges unit of €14.294 million; consequently, the value recognised for goodwill at 31 December 2021 was deemed recoverable.
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: Growth rate
(€/000) Discount rate
1.50%
1.75%
2.00%
2.25%
2.50%
9.11%
16,750
17,163
17,605
18,079
18,590
9.61%
15,746
16,102
16,482
16,888
17,322
10.11%
14,858
15,168
15,497
15,847
16,220
10.61%
14,068
14,339
14,626
14,931
15,254
11.11%
13,359
13,598
13,851
14,117
14,400
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
15,497
13,567
11,638
It was found that under most of the assumptions presented above, which consider changes in the discount rate, growth rate and EBITDA, the recoverable amount of the CGU is higher than its carrying value.
Goodwill allocated to the Professional burners CGU The Professional Burners CGU performed well during the 2021 financial year in terms of both turnover and profitability. The 20222026 forward plan envisages a further increase in sales at moderate growth rates and almost stable margins. At 31 December 2021, the Group tested - with the support of independent experts - the carrying value of its Professional burners CGU for impairment, determining
its recoverable amount, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted at the beginning of 2022. Cash flows for the period from 2022 to 2026 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (wacc) of 6.93% (6.76% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2020) and a growth rate (g) of 2%, unchanged with respect to the 2020 impairment test, considered by management to be the best estimate of the CGU’s growth assumptions, considering the sector in which it operates and in line with the growth rate of other Italian CGUs. The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €19.071 million, compared with a carrying value of the assets allocated to the Professional burners unit of €5.131 million (including minority interests); consequently, the value recognised for goodwill at 31 December 2021 was deemed recoverable.
151
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: Growth rate
(€/000) Discount rate
1.50%
1.75%
2.00%
2.25%
2.50%
5.93%
21,726
22,879
24,179
25,655
27,347
6.43%
19,417
20,325
21,336
22,467
23,743
6.93%
17,535
18,266
19,071
19,962
20,954
7.43%
15,972
16,571
17,226
17,943
18,734
7.93%
14,654
15,152
15,693
16,281
16,923
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA According to the plan
-10%
-20%
19,071
16,634
14,197
(€/000)
Goodwill allocated to the Electronic components CGU The Electronic Components CGU performed extremely well in 2021. At 31 December 2021, the Group tested - with the support of independent experts - the carrying value of its CGU Electronic components for impairment, determining its recoverable amount, considered to be equivalent to its usable value, by discounting ex-
pected future cash flow in the forward plan drafted by the management. Cash flows for the period from 2022 to 2026 were augmented by the terminal value, which expresses the operating flows that the CGU is expected to generate from the fifth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (wacc) of 15.21% (14.18% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2020) and a growth rate (g) of 2.50%, unchanged from the 2020 impairment test. The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €51.556 million, compared with a carrying value of the assets allocated to the Electronic components unit of €18.705 million; consequently, the value recognised for goodwill at 31 December 2021 was deemed recoverable.
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: Growth rate
(€/000) Discount rate
2.00%
2.25%
2.50%
2.75%
3.00%
14.21%
54,611
55,388
56,198
57,043
57,925
14.71%
52,345
53,049
53,781
54,544
55,340
15.21%
50,252
50,892
51,556
52,248
52,968
15.71%
48,314
48,897
49,502
50,131
50,784
16.21%
46,513
47,047
47,599
48,173
48,768
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
51,556
45,676
39,796
Goodwill allocated to the C.M.I. Hinges CGU The Hinges C.M.I. CGU recognised a strong increase in turnover in 2021 compared to the previous year. The positive trend is expected to continue for the period from 2022 to 2026, which forecasts further 152
sales at moderate growth rates. At 31 December 2021, the Group tested - with the support of independent experts - the carrying value of its CGU Hinges C.M.I. for impairment, determining its recoverable amount, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted by the management. Cash flows for the period from 2022 to 2026 were augmented by the terminal value, which expresses the operating flows that the CGU is expected to generate from the third year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (wacc) of 11.31% (9.87% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2020) and a growth rate (g) of 2%, unchanged with respect
SABAF . 2021 ANNUAL REPORT
to the 2020 impairment test, considered by management to be the best estimate of the CGU’s growth assumptions, considering the sector in which it operates and in line with the growth rate of other Italian CGUs.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €57.700 million, compared with a carrying value of the assets allocated to the C.M.I. Hinges unit of €29.313 million; consequently, the value recognised for goodwill at 31 December 2021 was deemed recoverable.
Sensitivity analysis The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: Growth rate
(€/000) Discount rate
1.50%
1.75%
2.00%
2.25%
2.50%
10.31%
62,424
63,900
65,465
67,128
68,896
10.81%
58,694
59,990
61,387
62,810
64,347
11.31%
55,349
56,494
57,700
58,974
60,319
11.81%
52,333
53,350
54,419
55,544
56,729
12.31%
49,600
50,508
51,460
52,459
53,509
The table below shows the change in recoverable amount as EBITDA changes according to the plan.
EBITDA According to the plan
-10%
-20%
57,700
52,378
43,693
(€/000)
Other intangible assets
The other intangible assets recognised in these consolidated financial statements mainly derive from the Purchase Price Allocation carried out following the acquisition of Okida Elektronik in September 2018, and of C.M.I. s.r.l., in July 2019. The net carrying value of other intangible assets is broken down as follows:
Patents and software
Software investments are related to the extension of the application and corporate scope of the Group management system (SAP).
31.12.2021
31.12.2020
Change
Customer Relationship
6,301
8,775
(2,474)
Brand
3,877
4,459
(582)
236
503
(267)
3,038
3,498
(460)
Other
215
225
(10)
Total
13,667
17,460
(3,793)
Know-how
Development costs
In 2021, the Sabaf Group set up a dedicated team to develop new solutions for home cooking, with the aim of creating innovative products that meet manufacturers’ needs and new consumer trends. This is a strategically important innovation that allows Sabaf to enter a fast-growing segment. Development activities continued in the Gas Components, Hinges and Electronics divisions, which are described in the Report on Operations. Increases in development costs include projects in progress and therefore not subject to amortisation.
Patents
At 31 December 2021, the recoverability of the amount of other intangible assets was verified as part of the impairment test of the related goodwill described in the previous paragraph.
With regard to patents, software and development costs, no internal and external indicators that would necessitate an impairment test were identified.
4. EQUITY INVESTMENTS 31.12.2021
31.12.2020
Change
Handan A.R.C. Burners Co.
-
89
(89)
Other equity investments
83
84
(1)
Total
83
173
(90)
153
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The investment in Handan A.R.C. Burners Co. Ltd., held through A.R.C. s.r.l. and previously measured using the equity method, is related to a Chinese joint venture set up with the aim to produce and market in China burners for professional cooking. During 2021, the Group’s share increased from 35.7% to 51%, following the acquisition of an additional 30% of the share capital of A.R.C., therefore as from
this financial year Handan A.R.C. Burners Co. Ltd is consolidated on a line-by-line basis. Internal and external indicators that would necessitate an impairment test on equity investments were not identified.
5. NON-CURRENT RECEIVABLES 31.12.2021
31.12.2020
Change
Tax receivables
985
392
593
Guarantee deposits
115
112
3
Other
-
14
(14)
Total
1,100
518
582
31.12.2021
31.12.2020
Change
Raw Materials
26,771
16,859
9,912
Semi-processed goods
15,133
10,414
4,719
Finished products
25,646
15,056
10,590
Provision for inventory write-downs
(3,397)
(3,105)
(292)
Total
64,153
39,224
24,929
Tax receivables relate to indirect taxes expected to be recovered after 31 December 2022.
6. INVENTORIES
The value of final inventories at 31 December 2021 increased compared to the end of the previous year to meet the higher volumes of activity. Moreover, in addition to the inflationary effect of the significant increases in metal prices, the Group raised the level of safety stocks to ensure continuity of production in a particularly turbulent scenario. The provision for write-downs is mainly allocated for hedging the obsolescence risk. At the end of the financial year, the appropriation is adjusted based on specific analyses carried out on slow-moving and non-moving products.
The following table shows the changes in the Provision for inventory write-downs during the current financial year: 31.12.2020
3,105
Provisions
696
Utilisation
(223)
Forex differences
(181)
31.12.2021
3,397
7. TRADE RECEIVABLES 31.12.2021
31.12.2020
Change
Total trade receivables
69,139
64,525
4,614
Bad debt provision
(1,099)
(1,089)
(10)
Net total
68,040
63,436
4,604
Trade receivables at 31 December 2021 were higher than the balance at the end of 2020 subsequent to higher sales during the financial year. There were no significant changes in the payment terms agreed with customers.The amount of trade receivables recognised in the financial statements includes approximately €24.3 million in insured receivables (€23.9 million at 31 December 2020).
154
Receivables assigned to factors without recourse (€8.398 thousand at 31 December 2021, €9.204 thousand at 31 December 2020) are derecognised from the Statement of Financial Position in that the reference contract provides for the assignment of ownership of the receivables, together with ownership of the cash flows generated by the receivable, as well as of all risks and benefits, to the assignee.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The breakdown of trade receivables by past due period is shown below: 31.12.2021
31.12.2020
Change
60,358
58,143
2,215
Outstanding up to 30 days
4,132
3,278
854
Outstanding from 30 to 60 days
1,290
1,249
41
Outstanding from 60 to 90 days
794
438
356
Outstanding for more than 90 days
2,565
1,417
1,148
Total
69,139
64,525
4,614
Current receivables (not past due)
The bad debt provision was adjusted to the better estimate of the credit risk and expected losses at the end of the reporting period, also carried out by analysing each expired item. Changes during the year were as follows:
31.12.2020
1,089
Provisions
100
Utilisation
(8)
Forex differences
(82)
31.12.2021
1,099
8. TAX RECEIVABLES 31.12.2021
31.12.2020
Change
For income tax
1,395
1,179
216
For VAT and other sales taxes
4,751
1,195
3,556
19
45
(26)
6,165
2,419
3,746
Other tax credits Total
At 31 December 2021, income tax receivables include: • €801 thousand relating to the tax credit for investments in capital goods referred to in Law Decree 160/2019; • €155 thousand relating to the tax credit for research and development referred to in Law Decree 160/2019;
The increase in receivables for VAT and other sales taxes is related to the strong growth in business volumes, which fully eroded the possibility of making tax-free purchases. The Group believes it will be able to recover this receivable in the first months of 2022.
9. OTHER CURRENT RECEIVABLES 31.12.2021
31.12.2020
Change
Credits to be received from suppliers
1,267
669
598
Advances to suppliers
859
1,032
(173)
Accrued income and prepaid expenses
476
487
(11)
Other
534
979
(445)
Total
3,136
3,167
(31)
Credits to be received from suppliers mainly refer to bonuses paid to the Group for the attainment of purchasing objectives, which were achieved in 2021 to a greater extent than in the previous year.
10. FINANCIAL ASSETS 31.12.2021
Restricted bank accounts Currency derivatives Total
31.12.2020
Current
Non-current
Current
Non-current
1,172
-
1,233
-
-
-
262
-
1,172
0
1,495
0
At 31 December 2021, a term deposit of €1,172 thousand, due by 2022, for the portion of the price not yet paid to the sellers of the C.M.I.
equity investment and deposited as collateral in accordance with the terms of the C.M.I. acquisition agreement (Note 15). 155
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
11. CASH AND CASH EQUIVALENTS Cash and cash equivalents, which amounted to €43,649 thousand at 31 December 2021 (€13,318 thousand at 31 December 2020) consisted of bank current account balances of €43.2 million (€12.8 million at
31 December 2020) and investments in liquidity of €432 thousand (€516 thousand at 31 December 2020). Changes in the cash and cash equivalents are analysed in the statement cash flows.
12. SHARE CAPITAL The parent company’s share capital consists of 11,533,450 shares with a par value of €1.00 each. The share capital paid in and subscribed did not change during the year. At 31 December 2021, the structure of the share capital is shown in the table below. No. of shares
% of share capital
Rights and obligations
Ordinary shares
8,376,760
72.63%
-
Ordinary shares with increased vote
3,156,690
27.37%
Two voting rights per share
Total
11,533,450
100%
With the exception of the right to increased vote, there are no rights, privileges or restrictions on the shares of the Parent Company. The availability of the Parent Company’s reserves is indicated in the separate financial statements of Sabaf S.p.A..
13. TREASURY SHARES AND OTHER RESERVES Treasury shares With regard to the 2018 - 2020 Stock Grant Plan, following the expiry of the three-year vesting period, during the first half of 2021, 34,946 ordinary shares of Sabaf S.p.A. were allocated and transferred to the beneficiaries of Cluster 1, through the use of shares already available to the issuer. No other transactions on treasury shares were carried out during the year. At 31 December 2021, the Parent company is the lawful owner of 311,802 treasury shares (2.703% of the share capital), reported in the financial statements as an adjustment to shareholders’ equity at a weighted average unit value of €12.52 (the closing stock market price of the Share at 31 December 2021 was €24.00). Further to what was reported in the Interim Management Statement at 31 December 2021 published on 10 February 2022, it is confirmed that Sabaf S.p.A. recovered the full availability of 311,802 treasury shares on 1 March 2022. There were 11,221,648 outstanding shares at 31 December 2021 (11,186,702 at 31 December 2020).
Stock Grant reserve The item “Retained earnings, other reserves” of €86,089 thousand included, at 31 December 2021, the Stock Grant reserve of €1,701
thousand, which included the measurement at 31 December 2021 of the fair value of rights assigned to receive shares of the Parent Company relating to the following medium- and long-term incentive plans for directors and employees of the Sabaf Group: • 2018 - 2020 Stock Grant Plan, for rights related to Cluster 2 beneficiaries only; • 2021 – 2023 Stock Grant Plan. For details of the Stock Grant Plan, refer to Note 38.
Cash Flow Hedge reserve The following table shows the change in the Cash Flow Hedge reserve related to the application of IFRS 9 on derivative contracts and referring to the recognition in net equity of the effective part of the derivative contracts signed to hedge the foreign exchange rate risk for which the Group applies hedge accounting. Value at 31 December 2020
247
Change during the period
(398)
Value at 31 December 2021
(151)
The characteristics of the derivative financial instruments that gave rise to the Cash Flow Hedge reserve and the accounting effects on other items in the financial statements are broken down in Note 36, in the paragraph Foreign exchange risk management.
14. LOANS 31.12.2021
31.12.2020
Current
Non-current
Total
Current
Non-current
Total
-
29,649
29,649
-
-
-
19,044
53,913
72,957
15,801
28,647
44,448
Short-term bank loans
1,769
-
1,769
8,630
-
8,630
Advances on bank receipts or invoices
2,263
-
2,263
4,668
-
4,668
Leases
1,329
2,942
4,271
1,390
3,506
4,896
-
-
-
4
-
4
24,405
86,504
110,909
30,493
32,153
62,646
Bond issue Unsecured loans
Interest payable Total
156
SABAF . 2021 ANNUAL REPORT
In December 2021, Sabaf S.p.A. issued a €30 million bond fully subscribed by PRICOA with a maturity of 10 years, an average life of 8 years and a fixed coupon of 1.85% per year. This issue enabled Sabaf to diversify its sources of financing, improve financial flexibility and significantly lengthen the average duration of its debt. The loan described has the following covenants, defined with reference to the consolidated financial statements at the end of each reporting period, widely complied with at 31 December 2021 and for which, according to the Group’s business plan, compliance is also expected in subsequent years: • commitment to maintain a ratio of net financial debt to shareholders’ equity of less than 1.5; • commitment to maintain a ratio of net financial debt to EBITDA of less than 3; • commitment to maintain a ratio of EBITDA to net financial position of more than 4. During the year, the Group took out new unsecured loans for a total of €46 million to finance the investments made. All loans are signed with an original maturity of ranging from 5 to 6 years and are repayable in instalments.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Some of the outstanding unsecured loans have covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below: • commitment to maintain a ratio of net financial debt to shareholders’ equity of less than 1 (residual amount of the loans at 31 December 2021 equal to €47.8 million); • commitment to maintain a ratio of net financial debt to EBITDA of less than 2.5 (residual amount of the loans at 31 December 2021 equal to €56.8 million). Widely complied with at 31 December 2021 and for which, according to the Group’s business plan, compliance is also expected in subsequent years. All bank loans are denominated in euro, with the exception of a shortterm loan of USD 2 million. To manage interest rate risk, unsecured loans are either fixed-rate or hedged by IRS. These consolidated financial statements include the negative fair value of the IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately €37.5 million and expiry until 31 December 2027. Financial expenses were recognised in the income statement with a balancing entry.
The following table shows the changes in lease liabilities during the year: Lease liabilities at 31 December 2019
4,528
New agreements signed during 2020
1,706 (1,400)
Repayments during 2020
(64)
Forex differences
4,896
Lease liabilities at 31 December 2020
954
New agreements signed during 2021
(1,581)
Repayments during 2021 Forex differences
2
Lease liabilities at 31 December 2021
4,271
Note 36 provides information on financial risks, pursuant to IFRS 7.
15. OTHER FINANCIAL LIABILITIES 31.12.2021
31.12.2020
Current
Non-current
Current
Non-current
Option on A.R.C. minorities
-
-
1,581
-
Option on C.M.I. minorities
-
-
5,250
-
Payables to A.R.C. shareholders
-
-
60
-
Payables to C.M.I. shareholders
1,173
-
1,173
-
Derivative instruments on interest rates
190
-
425
-
Currency derivatives
156
-
-
-
1,519
-
8,489
-
Total
At 31 December 2020, financial liabilities were recognised for options on minorities amounting to €6,831 thousand and relating to the accounting, in accordance with IAS 32, of call/put options subscribed in the context of the acquisition of A.R.C. s.r.l. (carried out in June 2016) and C.M.I. s.r.l. (carried out in June 2019), i.e. options to purchase by Sabaf and to sell by the minority shareholders, for the remaining shares of the share capital at contractually defined strike prices on the basis of income and financial parameters reported by the subsidiaries.
At 31 December 2021, both options were exercised, in particular: • in October 2021, Sabaf S.p.A. completed the purchase of 30% of the capital of A.R.C. s.r.l., from Loris Gasparini for a consideration of €1,650 thousand. The difference with respect to the value of the financial liability recognised at 31 December 2020 amounting to €69 thousand, in accordance with IAS 39, was allocated to financial expenses. As a result of the transaction, Sabaf S.p.A. now holds 100% of A.R.C. s.r.l.; 157
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
• in November 2021, Sabaf S.p.A. also completed the acquisition of 15.75% of the share capital of C.M.I. s.r.l., following the exercise of the second put option by the minority shareholder Starfire s.r.l. (Guandong Xingye Investment Group). The fee was €4,743 thousand. The difference with respect to the value of the financial liability recognised at 31 December 2020 amounting to €507 thousand, in accordance with IAS 39, was allocated to financial income. As a result of this transaction, Sabaf S.p.A. now holds 100% of C.M.I. s.r.l.. The payable to the C.M.I. of €1,173 thousand at 31 December 2021 is related to the part of the price still to be paid to the sellers, which was deposited on a non-interest-bearing restricted account and will be released in favour of the sellers in accordance with
contractual agreements and guarantees issued by the sellers. Currency derivatives refer to forward sales contracts recognised using hedge accounting. These financial instruments are broken down in Note 36 - Forex risk management. At 31 December 2021, the Group has in place six interest rate swap (IRS) contracts for amounts and maturities coinciding with six unsecured loans that are being amortised, whose residual value at 31 December 2021 is €33,350 thousand. The contracts have not been designated as capital flow hedges and are therefore at their fair value through profit and loss, and recognised in the items “Financial assets” or “Other financial liabilities”.
16. POST-EMPLOYMENT BENEFIT AND RETIREMENT PROVISIONS Following the revision of IAS 19 - Employee benefits, from 1 January 2013, all actuarial gains or losses are recognised immediately in the comprehensive income statement (“Other comprehensive income”) under the item “Actuarial income and losses”.
Post-employment benefit At 31 December 2020
3,513
Provisions
220 7
Financial expenses
Post-employment benefits are calculated as follows:
(226)
Payments made
20
Tax effect
Financial assumptions
-
Change in the scope of consolidation
31.12.2021
31.12.2020
Forex differences
(126)
Discount rate
0.40%
0.23%
At 31 December 2021
3,408
Inflation
1.30%
1.00%
Demographic theory 31.12.2021
31.12.2020
Mortality rate
IPS55 ANIA
IPS55 ANIA
Disability rate
INPS 2000
INPS 2000
Staff turnover
3% - 8%
3% - 6%
Advance payouts
2% - 4%
5% - 6% per year
Pursuant to legislation in force at 31 December 2021
Pursuant to legislation in force at 31 December 2020
Retirement age
17. PROVISIONS FOR RISKS AND CHARGES 31.12.2020
Provisions
Utilisation
Exchange rate differences
31.12.2021
Provision for agents’ indemnities
221
29
(1)
-
249
Product guarantee fund
60
-
-
-
60
Provision for legal risks
970
-
(550)
(4)
416
Other provisions for risks and charges
182
500
-
(73)
609
1,433
529
(551)
(77)
1,334
Total
The provision for agents’ indemnities covers amounts payable to agents if the Group terminates the agency relationship. The product guarantee fund covers the risk of returns or charges by customers for products already sold and, if necessary, is adjusted at the end of the financial year on the basis of analyses carried out and past experience. 158
With regard to the provision for legal risks, note that, at the end of the 2020 financial year, a provision of €500 thousand had been recognised in relation to a patent dispute, for which a settlement was reached with the counterparty at the beginning of 2021. During 2021, the corresponding use of the provision was therefore recognised, against payment.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Note also that following the process of allocating the price paid for the acquisition of the C.M.I. Group on the net assets acquired (Purchase Price Allocation), completed during 2019, a provision for legal risks with a residual value of €328 thousand was recognised. At 31 December 2021, a provision of €500 thousand was recognised under Other provisions for risks and charges, expressing the best
estimate of the liability following the results of a tax audit on the Parent Company for the years from 2016 to 2018. The provisions for risks, which represent the estimate of future payments made based on historical experience, have not been discounted because the effect is considered negligible.
18. TRADE PAYABLES
19. TAX PAYABLES
Total
31.12.2021
31.12.2020
Change
54,837
41,773
13,064
31.12.2021
31.12.2020
Change
3,450
1,923
1,527
Withholding taxes
954
1,029
(75)
Other tax payables
547
335
212
4,951
3,287
1,664
For income tax
The increase in trade payables is related to higher production volumes of the year. Average payment terms did not change versus the previous year. At 31 December 2021, there were no overdue payables of a significant amount and the Group did not receive any injunctions for overdue payables.
Total
The income tax payables refer to the taxes for the year, for the portion exceeding the advances paid.
20. OTHER CURRENT PAYABLES 31.12.2021
31.12.2020
Change
To employees
6,706
5,848
858
To social security institutions
2,844
2,679
165
283
286
(3)
Advances from customers
1,694
1,210
484
Other current payables
1,548
934
614
Total
13,075
10,957
2,118
To agents
At the beginning of 2022, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates. Other current payables include accrued liabilities and deferred income.
21. DEFERRED TAX ASSETS AND LIABILITIES 31.12.2021
31.12.2020
Change
Deferred tax assets
8,639
8,075
564
Deferred tax liabilities
(3,939)
(4,697)
758
Net position
4,700
3,378
1,372
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their changes during the year and the previous year. Non-current tangible and intangible assets
Provisions and value adjustments
Fair value of derivative instruments
Goodwill
Tax incentives
Tax losses
Actuarial evaluation of post-employment benefit
Other temporary differences
Total
(3,461)
1,397
46
1,240
2,645
396
208
907
3,378
Through profit or loss
1,389
(107)
(11)
(177)
1,455
612
0
(194)
2,967
In shareholders’ equity
0
0
0
0
0
0
(16)
0
(16)
160
(12)
0
0
(1,514)
(264)
0
1
(1,629)
(1,912)
1,278
35
1,063
2,586
744
192
714
4,700
31.12.2020
Forex differences 31.12.2021
159
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Deferred tax assets recognised in the income statement in respect of “Non-current tangible and intangible assets” included €1,161 thousand in these consolidated financial statements as a result of the revaluation for tax purposes of the tangible assets of the Group’s Turkish companies. The exercise of the revaluation option results in a substitute tax of approximately €106 thousand, which is accounted for in current taxes for the year.
Deferred tax assets relating to goodwill refer to the exemption of the value of the investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Law Decree 98/2011, deductible in ten instalments starting in 2018. Deferred tax assets relating to tax incentives are commensurate to investments made in Turkey, for which the Group will benefit from a reduction in the effective tax rate in future years.
22. TOTAL FINANCIAL DEBT As required by the CONSOB memorandum of 28 July 2006, we disclose that the Group’s net financial debt is as follows: 31.12.2021
31.12.2020
Change
43,217
12,802
(443)
B. Cash equivalents
432
516
45
C. Other current financial assets
1,172
1,495
(320)
44,821
14,813
(718)
5,551
23,181
6,961
F. Current portion of non-current financial debt
20,373
15,801
1,391
G. Current financial debt (E+F)
25,924
38,982
8,352
H. Net current financial debt (G-D)
(18,897)
24,169
9,070
I. Non-current financial payable
56,855
32,153
5,734
J. Debt instruments
29,649
-
-
-
-
-
L. Non-current financial debt (I+J+K)
86,504
32,153
5,734
M. Total financial debt (H+L)
67,607
56,322
14,804
A. Cash
D. Liquidity (A+B+C) E. Current financial payable
K. Trade payables and other non-current payables
The consolidated statement of cash flows, which shows the changes in cash and cash equivalents (sum of letters A. and B. of this statement), describes in detail the cash flows that led to the change in the net financial debt. In particular, as can be seen from the Consolidated Statement of Cash Flows, the increase in net financial debt in the
period is mainly attributable to: • the change in net working capital; • the investments made; • profits distributed to shareholders.
COMMENTS ON KEY INCOME STATEMENT ITEMS 23. REVENUE In 2021, sales revenue totalled €263,259 thousand, up by €78,353 thousand (+42.4%) compared with 2020.
REVENUE BY GEOGRAPHICAL AREA 2021
%
2020
%
% change
Europe (excluding Turkey)
92,935
35.3%
69,618
37.7%
+33.5%
Turkey
65,526
24.9%
44,806
24.2%
+46.2%
North America
30,472
11.6%
22,700
12.3%
+34.2%
South America
39,589
15.0%
27,639
14.9%
+43.2%
Africa and Middle East
19,614
7.5%
12,177
6.6%
+61.1%
Asia and Oceania
15,123
5.7%
7,966
4.3%
+89.8%
263,259
100%
184,906
100%
+42.4%
Total
160
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
REVENUE BY PRODUCT FAMILY 2021
%
2020
%
% change
Gas parts
182,468
69.3%
129,834
70.2%
+40.5%
Hinges
58,375
22.2%
41,326
22.3%
+41.3%
Electronic components
22,416
8.5%
13,746
7.4%
+63.1%
263,259
100%
184,906
100%
+42.4%
Total
In 2021, demand was solid in all markets, with particularly high peaks in the first half of the year. The increase in sales was very strong in all geographical areas, with peaks in Asia, Africa and the Middle East, indicating an increasingly global presence of our Group. In 2021, the increase in sales of electronic components was also particularly
Average sales prices in 2021 were 3% higher than in 2020.
24. OTHER INCOME
25. MATERIALS 2021
2020
Change
5,546
2,909
2,637
Contingent income
374
999
(625)
Rental income
123
121
2
Use of provisions for risks and charges
12
94
(82)
Other income
2,606
3,071
(465)
Total
8,661
7,194
1,467
Sale of trimmings
significant, continuing to benefit from cross-selling with the traditional products in the Group’s portfolio and from the strong drive to develop new components.
2021
2020
Change
Commodities and outsourced components
132,143
75,443
56,700
Consumables
10,212
7,523
2,689
142,355
82,966
59,389
Total
In 2021, the Group faced violent increases in the costs of its main raw materials (aluminium alloys, steel and brass), with a negative impact estimated at 6.2% of sales.
Other income mainly included: €1,234 thousand revenue from the sale of moulds and equipment, tax credits for investments in capital goods and for research and development of €356 thousand, Turkish public contributions of €332 thousand, referred to incentives for the hiring personnel, and €133 thousand related to the production of energy through photovoltaic plants.
26. COSTS FOR SERVICES 2021
2020
Change
Outsourced processing
18,689
11,094
7,595
Natural gas and power
8,536
4,380
4,156
Maintenance
7,972
5,920
2,052
Transport
4,658
2,986
1,672
Advisory services
2,856
2,320
536
Travel expenses and allowances
292
219
73
Commissions
1,144
835
309
Directors’ fees
829
693
136
Insurance
727
694
33
Canteen
797
560
237
5,877
4,563
1,314
52,377
34,264
18,113
Other costs Total
The main outsourced processing includes aluminium die-casting, hot moulding of brass and steel blanking as well as some mechanical processing and assembly. The increase in costs for outsourced processing reflects the increased use of subcontracting to cope with peaks in demand. The increase in energy costs resulted, in addition to the increase in production volumes, from the extraordinary and sudden increase in electricity and gas prices in the second half of the year, which led to higher charges of €3.4 million. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
161
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
27. PERSONNEL COSTS
28. OTHER OPERATING COSTS
2021
2020
Change
Salaries and wages
32,749
29,048
3,701
Social Security costs
10,175
8,831
Temporary agency workers
7,596
Post-employment benefit and other costs Stock Grant plan Total
2021
2020
Change
Non-income taxes
651
692
(41)
1,344
Other operating expenses
694
524
170
2,869
4,727
Contingent liabilities
54
36
18
2,639
2,294
345
Losses and write-downs of trade receivables
103
118
(15)
805
658
147
Provisions for risks
-
576
(576)
53,964
43,700
10,264
29
35
(6)
1,531
1,981
(450)
The number of Group employees was 1,278 at 31 December 2021 (1,168 at 31 December 2020). The number of temporary staff was 198 at 31 December 2021 (155 at 31 December 2020). The item “Stock Grant Plan” included the measurement at 31 December 2021 of the fair value of options to the allocation of shares of the Parent Company assigned to Group employees. For details of the Stock Grant Plan, refer to Note 38.
29. FINANCIAL INCOME 2020
Change
Exercise of the C.M.I. put option (Note 15)
507
1,137
(630)
Adjustment to the fair value of the A.R.C. option
-
69
(69)
Interest from bank current accounts
227
155
72
16
5
11
750
1,366
(616)
Total
Total
Non-income taxes chiefly relate to property tax.
30. FINANCIAL EXPENSES
2021
Other financial income
Other provisions
Financial income includes €507 thousand related to the difference between the fee actually paid and the carrying value of the second put option on the remaining 15.75% share of C.M.I. s.r.l. (Note 15).
31. EXCHANGE RATE GAINS AND LOSSES In 2021, the Group reported net foreign exchange losses of €7,399 thousand, versus net losses of €4,812 thousand in 2020. The main portion of 2021 foreign exchange losses reflect the sudden devaluation of the Turkish lira and arise from the translation into lira (the currency in which the financial statements of the Group’s Turkish companies are prepared) of trade and financial payables denominated in euro.
2021
2020
Change
Interest paid to banks
598
1,002
(404)
Interest paid on finance lease contracts
138
112
26
Banking expenses
302
251
51
Exercise of A.R.C. option (Note 15)
69
-
69
Adjustment to the Fair value of the C.M.I. option
-
750
(750)
Other financial expense
72
31
41
1,179
2,146
(967)
Total
Financial expenses include €69 thousand related to the difference between the carrying value of the put option related to the purchase of the remaining 30% share of A.R.C. s.r.l. and the fee actually paid (Note 15). Interest paid to banks includes IRS spreads payable that hedge interest rate risks (Note 36).
32. INCOME TAXES
Current taxes for the year Deferred tax assets and liabilities Taxes related to previous financial years Total
162
2021
2020
Change
7,617
3,641
3,976
(2,967)
(4,259)
1,292
347
767
(420)
4,997
149
4,848
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table: 2021
2020
7,411
3,735
Permanent tax differences
113
(192)
Taxes related to previous financial years
(151)
767
Tax effect from different foreign tax rates
227
97
Effect of non-recoverable tax losses
105
150
-
-
“Super and Iperammortamento” tax benefit
(844)
(812)
ACE tax benefit
(375)
-
-
(1,360)
Revaluation of carrying values of fixed assets in Turkey
(1,161)
-
Tax incentives for investments in Turkey
(1,963)
(2,432)
Other differences
(164)
(441)
Income taxes booked in the accounts, excluding IRAP and withholding taxes (current and deferred)
3,198
(488)
IRAP (current and deferred)
1,211
518
Substitute tax on realignment of property values
106
163
Provision for tax risks
500
0
Tax credit on sanitisation costs
(18)
(44)
4,997
149
Theoretical income tax
“Patent box” tax benefit
Realignment between carrying values and tax values of properties (Note 21)
Total
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 24%, to the pre-tax result. IRAP is not taken into account for the purpose of reconciliation because, as it is a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
In these consolidated financial statements, the Group recognised: • the tax benefits relating to “Superammortamento” (Super amortisation) and “Iperammortamento” (Hyper amortisation), related to the investments made in Italy, amounting to €844 thousand (€812 thousand in 2020); • the tax benefits deriving from the investments made in Italy amounting to €1,963 thousand (€2,432 thousand in 2020).
33. EARNINGS PER SHARE Basic and diluted EPS are calculated based on the following data: EARNINGS
2021
2020
23,903
13,961
2021
2020
11,209,078
11,260,791
-
-
11,209,078
11,260,791
(in €)
2021
2020
Basic earnings per share
2.132
1.240
Diluted earnings per share
2.132
1.240
(€/000) Profit for the year NUMBER OF SHARES
Weighted average number of ordinary shares for determining basic earnings per share Dilutive effect from potential ordinary shares Weighted average number of ordinary shares for determining diluted earnings per share EARNINGS PER SHARE
Basic earnings per share are calculated on the average number of outstanding shares minus treasury shares, equal to 324,372 in 2021 (272,659 in 2020).
Diluted earnings per share are calculated taking into account any shares approved but not yet subscribed.
163
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
34. DIVIDENDS On 2 June 2021, shareholders were paid an ordinary dividend of €0.55 per share (total dividends of €6,172 thousand). The Directors have recommended payment of a dividend of €0.60 per share this year. This dividend is subject to approval of shareholders in
the annual Shareholders’ Meeting and was not included under liabilities in these financial statements. The dividend proposed is scheduled for payment on 1 June 2022 (ex-date 30 May and record date 31 May).
35. INFORMATION BY BUSINESS SEGMENT Information by business segment for 2021 and 2020 is provided below. 2021 FY Gas parts (household and professional)
Hinges
Electronic components
Total
Sales
182,618
58,671
21,970
263,259
Ebit
23,649
6,292
7,567
37,508
2020 FY Gas parts (household and professional)
Hinges
Electronic components
Total
Sales
129,864
41,078
13,964
184,906
Ebit
12,683
2,999
4,411
20,093
36. INFORMATION ON FINANCIAL RISK
Categories of financial instruments
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39: 31.12.2021
31.12.2020
43,649
13,318
1,172
1,233
72,276
67,121
-
262
110,909
62,646
1,173
1,233
54,837
41,773
Put option on A.R.C. (Note 15)
-
1,581
C.M.I. put option (Note 15)
-
5,250
190
425
156
262
Financial assets
Amortised cost Cash and cash equivalents Term bank deposits Trade receivables and other receivables
Hedge accounting Derivatives to hedge cash flows Financial liabilities
Amortised cost Loans Other financial liabilities Trade payables
Fair Value through profit or loss
Derivatives to hedge cash flows
Hedge accounting Derivatives to hedge cash flows
The Group is exposed to financial risks related to its operations, mainly: • credit risk, with special reference to normal trade relations with customers;
164
• market risk, relating to the volatility of prices of commodities, foreign exchange and interest rates; • liquidity risk, which can be expressed by the inability to find financial resources necessary to ensure Group operations.
SABAF . 2021 ANNUAL REPORT
It is part of the Sabaf Group’s policies to hedge exposure to changes in prices and in fluctuations in exchange and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Group does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Credit risk management
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Group assesses the creditworthiness of all its customers at the start of supply and systemically at least on an annual basis. After this assessment, each customer is assigned a credit limit. The Group factors receivables with factoring companies based on without recourse agreements, thereby transferring the related risk. A credit insurance policy is in place, which guarantees cover for
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
approximately 35% of trade receivables. Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
Forex risk management
The key currencies other than the euro to which the Group is exposed are the US dollar, the Brazilian real and the Turkish lira, in relation to sales made in dollars (chiefly on some Asian and American markets) and the production units in Brazil and Turkey. Sales in US dollars represented 18.6% of total turnover in 2021, while purchases in dollars represented 4.8% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts. At 31 December 2021, the Group had in place forward sales contracts of USD 8 million, maturing in December 2022 at an average exchange rate of 1.1615. With reference to these contracts, the Group applies hedge accounting, checking compliance with IFRS 9.
The table below shows the balance sheet and income statement effects of forward sales contracts recognised under hedge accounting. (amounts in €/000)
2021
Reduction in financial assets
(262)
Increase in current financial liabilities
(156)
Adjustment to the Cash Flow Hedge reserve (equity reserve)
398
Negative impact through profit or loss
20
The following table shows the characteristics of the derivative financial instruments described in the previous paragraph. EXCHANGE RATE RISK MANAGEMENT: CASH FLOW HEDGE IN ACCORDANCE WITH IFRS 9 ON COMMERCIAL TRANSACTIONS Company
Sabaf S.p.A.
Faringosi Hinges s.r.l.
C.M.I. s.r.l.
Counterparty
Unicredit
BPER Banca
BPER Banca
Instrument
Forward
Forward
Forward
Maturity
Value date
Notional
28/03/2022
500,000
27/06/2022
500,000
28/06/2022
USD
500,000
27/09/2022
500,000
27/12/2022
500,000
28/03/2022
500,000
28/06/2022
USD
500,000
28/09/2022
500,000
05/01/2022
500,000
10/01/2022 06/04/2022 06/07/2022
USD
Fair value hierarchy
2
500,000 1,000,000 1,500,000
Sensitivity analysis With reference to financial assets and liabilities in US dollars at 31 December 2021, a hypothetical and immediate revaluation of 10% of euro against the dollar would have led to a loss of €1,515 thousand.
165
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CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Net value of assets and liabilities in foreign subsidiaries
The net value of assets and liabilities in foreign subsidiaries constitutes an investment in foreign currency, which generates a translation difference on consolidation of the Group, with an impact on the comprehensive income statement and the financial position. A 10% upward or downward change in the value of each currency against the euro would affect the Group’s equity by approximately +/€5.5 million at the end of 2021.
Interest rate risk management
Owing to the current trend in interest rates, the Group favours fixedrate indebtedness: medium to long-term loans originated at a variable rate are converted to a fixed rate by entering into interest rate swaps (IRS) when the loan is opened. At 31 December 2021, IRS totalling €37.5 million were in place, mirrored in mortgages with the same residual debt, through which the Group transformed the floating rate of the mortgages into fixed rate. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the “fair value through profit or loss” method.
The following table shows the characteristics of the derivative financial instruments described in the previous paragraph. Company
Sabaf S.p.A.
Counterparty
Maturity
Value date
Notional
MPS
30/06/2023
1,500,000
Intesa Sanpaolo
15/06/2024
6,000,000
Intesa Sanpaolo Crédit Agricole
Sabaf Turkey
Instrument
IRS
15/06/2024 30/06/2025
EUR
1,850,000 9,000,000
Mediobanca
28/04/2027
15,000,000
Intesa Sanpaolo
17/06/2024
4,150,000
Fair value hierarchy
2
Sensitivity analysis Considering the IRS in place, at the end of 2021 almost all of the Group’s financial debt was at a fixed rate. Therefore, at 31 December
2021 no sensitivity analysis was carried out in that the exposure to interest rate risk, linked to a hypothetical increase (decrease) in interest rates, is not significant.
Commodity price risk management
Liquidity risk management
A significant portion of the Group’s purchase costs is represented by aluminium, steel and brass. Metal prices rose sharply during 2021, forcing the Group to renegotiate sales prices several times to compensate for the increase in costs. Based on market conditions and contractual agreements, the Group may not be able to pass on changes in raw material prices to customers in a timely and/or complete manner, with consequent effects on margins. The Group also protects itself from the risk of changes in the price of aluminium, steel and brass with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2021 and 2020, the Group did not use financial derivatives on commodities.
166
The Group operates with a debt ratio considered physiological (net financial debt/shareholders’ equity at 31 December 2021 of 55.2%, net financial debt/EBITDA of 1.25) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department: • maintains a correct balance of net financial debt, financing investments with capital and with medium to long-term debt; • verifies systematically that the short-term accrued cash flows (amounts received from customers and other income) are expected to accommodate the deferred cash flows (short-term financial debt, payments to suppliers and other outgoings); • regularly assesses expected financial needs in order to promptly take any corrective measures.
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
An analysis by expiry date of financial payables at 31 December 2021 and 31 December 2020 is shown below: Carrying value
Contractual cash flows
Within 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Short-term bank loans
4,378
4,378
4,378
-
-
-
Unsecured loans
72,957
74,574
1,906
17,720
49,273
5,675
Bond issues
29,649
34,440
-
555
2,220
31,665
Finance leases
4,271
4,766
361
1,058
2,793
554
Payables to C.M.I. shareholders
1,173
1,173
-
1,173
-
-
Total financial payables
112,428
119,331
6,645
20,506
54,286
37,894
Trade payables
54,837
54,837
51,218
3,619
-
-
Total
167,265
174,168
57,863
24,125
54,286
37,894
At 31 December 2020
Carrying value
Contractual cash flows
Within 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Short-term bank loans
13,727
13,727
13,727
-
-
-
Unsecured loans
44,448
45,211
2,074
14,022
29,115
-
4,896
5,143
383
1,125
3,206
429
Payables to A.R.C. shareholders
60
60
-
60
-
-
Payables to C.M.I. shareholders
1,173
1,173
-
1,173
-
-
A.R.C. option
1,581
1,581
-
1,581
-
-
C.M.I. option
5,250
5,250
-
5,250
-
-
Total financial payables
71,135
72,145
16,184
23,211
32,321
429
Trade payables
41,773
41,773
38,503
3,270
-
-
112,908
113,918
54,687
26,481
32,321
429
At 31 December 2021
Finance leases
Total
The various due dates are based on the period between the end of the reporting period and the contractual expiry date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period and increased by the spread set forth in each contract.
Hierarchical levels of fair value assessment
The revised IFRS 7 requires that financial instruments reported in the statement of financial position at fair value be classified based on a hierarchy that reflects the significance of the input used in determining the fair value. IFRS 7 makes a distinction between the following levels: • Level 1 – quotations found on an active market for assets or liabilities subject to assessment; • Level 2 - input other than prices listed in the previous point, which can be observed directly (prices) or indirectly (derived from prices) on the market; • Level 3 – input based on observable market data.
The following table shows the financial assets and liabilities valued at fair value at 31 December 2021, by hierarchical level of fair value assessment. Level 1
Level 2
Level 3
Total
Other financial liabilities (interest rate derivatives)
-
190
-
190
Total liabilities
-
190
-
190
167
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
37. RELATED-PARTY TRANSACTIONS Transactions between consolidated companies were derecognised from the consolidated financial statements and are not reported in these notes. The table below illustrates the impact of all transactions between the Group and other related parties on the balance sheet and income statement.
IMPACT OF RELATED-PARTY TRANSACTIONS ON BALANCE SHEET ITEMS
Trade payables
Trade payables
Total 2021
Non-consolidated subsidiaries
Other related parties
54,837
-
4
Total 2020
Non-consolidated subsidiaries
Other related parties
41,773
-
4
Total related parties Impact on the total 4
0.01%
Total related parties Impact on the total 4
0.01%
IMPACT OF RELATED-PARTY TRANSACTIONS ON INCOME STATEMENT ITEMS
Services
Services
Total 2021
Non-consolidated subsidiaries
Other related parties
(52,377)
-
(22)
Total 2020
Non-consolidated subsidiaries
Other related parties
(34,264)
-
(22)
Transactions are regulated by specific contracts regulated at arm’s length conditions.
Fees to directors, statutory auditors and executives with strategic responsibilities Please see the 2021 Report on Remuneration for this information.
168
Total related parties Impact on the total (22)
0.04%
Total related parties Impact on the total (22)
0.06%
SABAF . 2021 ANNUAL REPORT
38. SHARE-BASED PAYMENTS Two Stock Grant plans are in place, namely the 2018 - 2020 Stock Grant Plan and the 2021 - 2023 Stock Grant Plan. The Plans aim to promote and pursue the involvement of the beneficiaries whose activities are considered relevant for the implementation of the contents and the achievement of the objectives set out in the Business Plan, foster loyalty development and motivation of managers, by increasing their entrepreneurial approach as well as align the interests of management with those of the Company’s shareholders more closely, with a view to encouraging the achievement of significant results in the economic and asset growth and sustainability of the Company and of the Group. 2018 – 2020 Stock Grant Plan The Plan was approved by the Shareholders’ Meeting on 8 May 2018 and the related Regulations by the Board of Directors on 15 May 2018, subsequently amended as on 14 May 2019.
Subject matter The subject-matter of the Plan is the free allocation to the Beneficiaries of a maximum of 370,000 Options, each of which entitles them to receive free of charge, under the terms and conditions provided for by the Regulations of the relevant Plan, 1 Sabaf S.p.A. Share. The free allocation of Sabaf S.p.A. shares is conditional, among other things, on the achievement, in whole or in part of the business objectives related to the ROI, EBITDA and TSR indicators and, for a share not exceeding 30%, of individual objectives, on a progressive basis. Beneficiaries The Plan is intended for persons who hold or will hold key positions in the Company and/or its Subsidiaries, with reference to the implementation of the contents and the achievement of the objectives of the 2018 - 2020 Business Plan. The Beneficiaries were divided into two groups: • Cluster 1: beneficiaries identified in the Plan or who will be identified by the Board of Directors by 30 June 2018 and to whom 185,600 rights have been allocated; • Cluster 2: beneficiaries identified by the Board of Directors from 1 July 2018 to 30 June 2019 and to whom 184,400 rights have been allocated. Deadline The 2018 - 2020 Plan expires on 31 December 2022. Rights accrued and allocation of shares With reference to Cluster 1, based on the level of achievement of the objectives and the other conditions set out in the Plan, 34,946 rights accrued, therefore 34,946 shares have been allocated to the Beneficiaries during 2021. With regard to Cluster 2, based on the level of achievement of the objectives set out in the Plan, 114,074 rights accrued. The allocation of the relevant shares will be made during 2022 and is conditional on the continuation of the employment relationship with the Beneficiaries at the date of approval of the financial statements for the year 2021 of Sabaf S.p.A..
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Accounting impacts and Fair Value measurement methods The Group’s shareholders’ equity includes the Stock Grant reserve (Note 13), which includes €896 thousand for the fair value measurement of the Rights assigned to Cluster 2 beneficiaries. Please see the explanatory notes to the consolidated financial statements at 31 December 2020 for an explanation of how to determine the fair value of these rights. 2021 – 2023 Stock Grant Plan The plan was approved by the Shareholders’ Meeting on 6 May 2021 and the related Regulations by the Board of Directors on 13 May 2021.
Subject matter The subject-matter of the Plan is the free allocation to the Beneficiaries of a maximum of 260,000 Options, each of which entitles them to receive free of charge, under the terms and conditions provided for by the Regulations of the relevant Plan, 1 Sabaf S.p.A. Share. The free allocation of Sabaf S.p.A. shares is conditional on the achievement, in whole or in part, with progressiveness, of the business targets related to the ROI and EBITDA and social and environmental targets. Beneficiaries The Plan is intended for persons who hold or will hold key positions in the Company and/or its Subsidiaries, with reference to the implementation of the contents and the achievement of the objectives of the 2021 - 2023 Business Plan. A total of 226,000 Rights were allocated to the Beneficiaries already identified. Deadline The 2021 - 2023 Plan expires on 31 December 2024. Accounting impacts and Fair Value measurement methods In connection with this Plan, €805 (Note 27) were recognised in personnel costs during the year (Note 27), an equity reserve of the same amount (Note 13) was recognised as a balancing entry. In line with the date on which the beneficiaries became aware of the assignment of the rights and terms of the plan, the grant date was set at 13 May 2021. The main assumptions made at the beginning of the vesting period and the methods for determining the fair value at the end of the reporting period are illustrated below. The following economic and financial parameters were taken into account in determining the fair value per share at the start of the vesting period: Share price on grant date adjusted for dividends
23.09
Dividend yield
2.60%
Expected volatility per year Interest rate per year
28% -0.40%
169
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Based on the exercise right at the different dates established by the Plan Regulations and on the estimate of the expected probability of achieving the objectives for each reference period, the unitary fair value at 31 December 2021 was determined as follows:
RIGHTS RELATING TO BUSINESS OBJECTIVES MEASURED ON ROI
Total value on ROI
15.82
Rights on ROI
35%
RIGHTS RELATING TO BUSINESS OBJECTIVES MEASURED ON EBITDA
Total value on EBITDA
16.43
Rights on EBITDA
40%
Total value on “Personell training”
20.41
Rights on “Personell training”
5%
Total value on “Safety indicator”
7.82
Rights on “Safety indicator”
5%
RIGHTS RELATING TO ESG OBJECTIVES MEASURED ON PERSONELL TRAINING
RIGHTS RELATING TO ESG OBJECTIVES MEASURED ON SAFETY INDICATOR
RIGHTS RELATING TO ESG OBJECTIVES MEASURED ON EMISSIONS REDUCTION
Total value on “Emissions reduction”
20.41
Rights on “Emissions reduction”
15%
Fair value per share
170
Fair value
5.54
Fair value
6.57
Fair value
1.02
Fair value
0.39
Fair value
3.06
16.58
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
39. CAPITAL MANAGEMENT For the purposes of managing the Group’s capital, it has been defined that this includes the issued share capital, the share premium reserve and all other capital reserves attributable to the shareholders of the Parent Company. The main objective of capital management is to maximise the value for shareholders. In order to maintain or correct its financial structure, the Group may intervene in dividends paid to shareholders, purchase its own shares, redeem capital to shareholders or issue new shares. The Group controls equity using a gearing ratio consisting of the ratio of net financial debt (as defined in Note 22) to shareholders’ equity. The Group’s policy is to keep this
ratio below 1. In order to achieve this objective, the management of the Group’s capital aims, among other things, to ensure that the covenants, linked to loans, which define the capital structure requirements, are complied with. Violations of covenants would allow the lenders to demand immediate repayment of loans (Note 14). During the current financial year, there were no breaches of the covenants linked to loans. In the years ended 31 December 2021 and 2020, no changes were made to the objectives, policies and procedures for capital management.
40. SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS Pursuant to CONSOB memorandum of 28 July 2006, the following section describes and comments on significant non-recurring events, the consequences of which are reflected in the economic, equity and financial results for the year: Group shareholders’ equity
Group net profit
Net financial debt
Cash flows
121,525
23,903
67,607
30,331
Revaluation of tax values of properties (a)
(728)
(1,055)
0
0
Recognition of tax benefits on investments made in Turkey (b)
(1,512)
(1,963)
(508)
(508)
500
500
0
0
Total non-recurring operations (B)
(1,740)
(2,518)
(508)
(508)
Financial statement notional value (A+B)
119,785
21,385
67,099
29,823
Financial statement values (A)
Provision for tax risks (c)
In these consolidated financial statements, the Group recognised under income taxes: a. a non-recurring income of €801 thousand following the revaluation for tax purposes of the tangible assets of the Group’s Turkish companies. The exercise of the revaluation option results in a substitute tax of approximately €73 thousand, which is accounted for in current taxes for the year (Note 31); b. a non-recurring income of €1,963 thousand relating to the tax benefits arising from investments made in Turkey (Note 31); c. a provision for tax risks of €500 thousand against potential tax liabilities (Note 17 and Note 28).
42. ATYPICAL AND/OR UNUSUAL TRANSACTIONS Pursuant to CONSOB memorandum of 28 July 2006, the Group declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2021.
43. COMMITMENTS
Guarantees issued
The Sabaf Group has issued sureties to guarantee consumer and mortgage loans granted by banks to Group employees for a total of €3,443 thousand (€3,632 thousand at 31 December 2020).
41. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD The recent conflict between Ukraine and Russia led to a sudden change in the global economic scenario. Although the Group has a non-significant direct exposure to the markets of Russia, Belarus and Ukraine, it is exposed to indirect effects on the price trends of raw materials, electricity and gas, the supply chain and final demand. To date, these effects are not quantifiable as they are related to future developments in the conflict, the outcome of which cannot be determined.
171
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
44. SCOPE OF CONSOLIDATION AND SIGNIFICANT EQUITY INVESTMENTS COMPANIES CONSOLIDATED USING THE FULL LINE-BY-LINE CONSOLIDATION METHOD Registered offices
Share capital
Shareholders
% ownership
Faringosi Hinges s.r.l.
Ospitaletto (BS)
EUR 90,000
Sabaf S.p.A.
100%
Sabaf do Brasil Ltda.
Jundiaí - São Paulo (Brazil)
BRL 53,348,061
Sabaf S.p.A.
100%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey)
Manisa (Turkey)
TRY 80,000,000
Sabaf S.p.A.
100%
Okida Elektronik Sanayi ve Ticaret A.S.
Istanbul (Turkey)
TRY 5,000,000
Sabaf S.p.A. Sabaf Turkey
30% 70%
Sabaf Appliance Components Ltd.
Kunshan (China)
EUR 7,900,000
Sabaf S.p.A.
100%
Sabaf US Corp.
Plainfield (USA)
USD 200,000
Sabaf S.p.A.
100%
Bangalore (India)
INR 153,833,140
Sabaf S.p.A.
100%
Campodarsego (PD)
EUR 45,000
Sabaf S.p.A.
100%
Handan (China)
RMB 3,000,000
A.R.C. s.r.l.
51%
San Louis Potosì (Mexico)
USD 3,650,000
Sabaf S.p.A.
100%
C.M.I. Cerniere Meccaniche Industriali s.r.l
Valsamoggia (BO)
EUR 1,000,000
Sabaf S.p.A.
100%
C.G.D. s.r.l.
Valsamoggia (BO)
EUR 26,000
C.M.I. s.r.l.
100%
Company name
Sabaf India Private Limited A.R.C. s.r.l. Handan A.R.C. Burners Co., Ltd. Sabaf Mexico Appliance Components
45. GENERAL INFORMATION ON THE PARENT COMPANY Name of the parent company
Sabaf S.p.A.
Legal status
Joint-stock company (S.p.A.)
Tax Code 03244470179
Domicile of entity
Italy
VAT number 01786910982
Registered and administrative office
Via dei Carpini, 1 – 25035 Ospitaletto (BS) - Italy
Main place of business
Via dei Carpini, 1 – 25035 Ospitaletto (BS) - Italy
Country of registration
Italy
Contacts
Tel: +39 030 - 6843001 Fax: +39 030 - 6848249 E-mail: info@sabaf.it Web site: www.sabafgroup.com
172
Tax information
R.E.A. Brescia 347512
SABAF . 2021 ANNUAL REPORT
Type of business The purpose of the company is the design, production and sale of gas fittings and burners, thermostats, safety valves, other components and accessories for household appliances, as well as sanitary and plumbing fittings in general. The purpose of the company is also the design, construction and trade of machine tools, automation systems in general and related equipment, tools, as well as the provision of related maintenance, repair, support and business organisation services. The company, within the limits set by the relevant regulations in force, may carry out any other security, property, industrial and commercial transaction that is deemed necessary, appropriate or useful for the achievement of the company purpose. It may acquire
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
shareholdings in other companies whose purpose is similar or related to its own as well as provide personal guarantees or collaterals including mortgages also for third parties’ obligations provided that such activities do not take precedence over the company’s business and are not carried out vis-à-vis the public and therefore within the limits and in the manner provided for by Legislative Decree No. 385/93; the company can perform the management and coordination function with regard to its subsidiaries, providing the organisational, technical, managerial and financial support and coordination deemed appropriate. However, the activities reserved to investment companies under Legislative Decree No. 415/96, and pursuant to the relevant provisions in force, are excluded.
APPENDIX
Information as required by Art. 149-duodecies of the CONSOB Issuers’ Regulation The following table, prepared pursuant to Art. 149-duodecies of the CONSOB Issuers’ Regulation, shows fees relating to 2021 for auditing and for services other than auditing provided by the Independent Auditors and their network.
(in thousands of Euro)
Audit
Other services
Party providing the service
Recipient
Fees pertaining to the 2021 financial year
EY S.p.A.
Parent company
35
EY S.p.A.
Italian subsidiaries
41
EY network
Foreign subsidiaries
54
EY S.p.A.
Parent company
331
EY S.p.A.
Italian subsidiaries
42
Total
1 2
167
Auditing procedures agreement relating to interim management reports; limited review of Disclosure of non-financial information. Certification of IRES credit and tax credit for research and development.
173
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS in accordance with Art. 154 bis of Legislative Decree 58/98
Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Art. 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify: • the adequacy, in relation to the business characteristics and • the actual application of the administrative and accounting procedures for the formation of the consolidated financial statements during the 2021 financial year. They also certify that: • the Consolidated financial statements: - were prepared in accordance with the international accounting policies recognised in the European Community in accordance with EC regulation 1606/2002 of the European Parliament and Council of 19 July 2002 and with the measures issued in implementation of Art. 9 of Legislative Decree 38/2005; - are consistent with accounting books and records; - provide a true and fair view of the operating results, financial position and cash flows of the issuer and of the companies included in the consolidation; • the report on operations contains a reliable analysis of the performance and results of operations and the situation of the issuer and the companies included in the scope of consolidation, along with a description of the key risks and uncertainties to which they are exposed.
Ospitaletto, 22 March 2022
174
Chief Executive Officer
The Financial Reporting Officer
Pietro Iotti
Gianluca Beschi
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
175
SABAF . 2021 ANNUAL REPORT
176
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
177
SABAF . 2021 ANNUAL REPORT
178
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
SABAF . 2021 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2021
179
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Corporate bodies
184
Statement of financial position
185
Income statement
186
Comprehensive income statement
187
Statement of changes in shareholders’ equity
187
Statement of Cash Flows
188
Explanatory notes
189
Comments on the main items of the statement of financial position
196
Comments on key income statement items
210
Certification of Separate financial statements
223
224 11 Report of the Board of Statutory auditors 229 18 the Shareholders ’Meeting of SABAF S.p.A.
Report on the Audit of the Financial Statements
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Corporate bodies Honorary Chairman
Giuseppe Saleri
Board of Directors Chairman
Claudio Bulgarelli
Director
Alessandro Potestà
Vice Chairman*
Nicla Picchi
Director*
Carlo Scarpa
Chief Executive Officer
Pietro Iotti
Director*
Daniela Toscani
Director
Gianluca Beschi
Director*
Stefania Triva
Director
Cinzia Saleri
Board of Statutory Auditors
Independent Auditors
Chairman
Alessandra Tronconi
Statutory Auditor
Maria Alessandra Zunino de Pignier
Statutory Auditor
Mauro Vivenzi
184
* Independent directors
EY S.p.A.
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
STATEMENT OF FINANCIAL POSITION Notes
31.12.2021
31.12.2020
Property, plant and equipment
1
48,593,970
48,662,264
Investment property
2
2,311,476
3,252,696
Intangible assets
3
3,778,108
2,315,819
Equity investments
4
84,512,138
65,524,289
Non-current financial assets
5
10,707,311
5,537,324
- of which from related parties
35
10,707,311
5,537,324
31,853
31,421
3,322,620
3,891,955
153,257,475
129,215,768
(in €) ASSETS NON-CURRENT ASSETS
Non-current receivables Deferred tax assets
21
TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories
6
33,985,939
21,512,333
Trade receivables
7
45,194,276
45,024,596
- of which from related parties
35
15,210,599
16,048,130
Tax receivables
8
1,462,789
1,254,041
- of which from related parties
35
766,557
316,208
Other current receivables
9
1,929,121
1,947,372
Current financial assets
10
1,172,947
1,359,993
Cash and cash equivalents
11
29,733,148
1,594,861
TOTAL CURRENT ASSETS
113,478,220
72,693,196
ASSETS HELD FOR SALE
0
0
266,735,695
201,908,964
TOTAL ASSETS SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital
12
11,533,450
11,533,450
Retained earnings, Other reserves
92,831,829
91,985,093
Profit for the year
10,043,877
6,409,674
TOTAL SHAREHOLDERS’ EQUITY
114,409,156
109,928,218
82,515,298
26,891,000
NON-CURRENT LIABILITIES Loans
14
Other financial liabilities
15
0
0
Post-employment benefit and retirement provisions
16
1,779,634
1,929,190
Provisions for risks and charges
17
851,081
853,650
Deferred tax liabilities
21
323,942
230,450
85,469,955
29,904,290
19,010,029
23,996,484
Total non-current liabilities CURRENT LIABILITIES Loans
14
Other financial liabilities
15
1,393,611
1,560,111
Trade payables
18
33,677,766
26,204,071
- of which to related parties
35
1,533,149
1,074,716
Tax payables
19
3,374,435
2,458,942
- of which to related parties
35
54,720
350,721
Other payables
20
9,400,743
7,856,847
TOTAL CURRENT LIABILITIES
66,856,584
48,646,143
LIABILITIES HELD FOR SALE
0
0
266,735,695
201,908,964
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
185
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
INCOME STATEMENT Notes
2021
2020
Revenue
23
144,033,787
102,583,189
- of which from related parties
35
20,212,450
15,221,230
Other income
24
6,195,079
5,647,168
150,228,866
108,230,357
(72,122,067)
(43,270,717)
3,315,935
1,935,572
12,473,605
1,650,153
(in €) INCOME STATEMENT COMPONENTS OPERATING REVENUE AND INCOME
TOTAL OPERATING REVENUE AND INCOME OPERATING COSTS Materials
25
- of which by related parties Change in inventories Services
26
(34,254,138)
(22,208,703)
- of which by related parties
35
(446,675)
(457,769)
Personnel costs
27
(34,780,110)
(28,567,152)
Other operating costs
28
(727,503)
(1,307,048)
2,259,389
1,293,579
(127,150,823)
(92,409,888)
23,078,043
15,820,469
(9,179,378)
(9,414,020)
238,136
964,788
(300,000)
(761,407)
- of which by related parties
(300,000)
(620,000)
EBIT
Costs for capitalised in-house work TOTAL OPERATING COSTS OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/LOSSES, WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS Depreciations and amortisation
1,2,3
Capital gains/(losses) on disposal of non-current assets Write-downs/write-backs of non-current assets
4
13,836,801
6,609,830
Financial income
318,425
201,591
- of which from related parties
255,441
176,889
Financial expenses
29
(530,464)
(717,703)
Exchange rate gains and losses
30
426,824
(398,970)
Profits and losses from equity investments
31
175,504
609,252
175,504
609,252
14,227,088
6,304,001
(4,183,212)
105,674
10,043,877
6,409,674
- of which from related parties
PROFIT BEFORE TAXES Income taxes
PROFIT FOR THE YEAR
186
32
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
COMPREHENSIVE INCOME STATEMENT 2021
2020
10,043,877
6,409,674
Actuarial evaluation of post-employment benefit
3,334
(31,418)
Tax effect
(800)
7,540
Hedge accounting for derivative financial instruments
(198,499)
0
TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR
(195,965)
(23,878)
TOTAL PROFIT
9,847,912
6,385,796
(in €) PROFIT FOR THE YEAR
Total profits/losses that will not be subsequently reclassified under profit (loss) for the year
Total profits/losses that will not be subsequently reclassified under profit (loss) for the year
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY Share Capital
Share premium reserve
Legal reserve
Treasury shares
Actuarial evaluation of post-employment benefit provision
Other reserves
Profit for the year
Total shareholders’ equity
11,533
10,002
2,307
(2,268)
(505)
83,864
3,822
108,755
Allocation of 2019 profit
3,822
(3,822)
0
2020 dividend payment
(3,924)
(€/000) Balance at 31 December 2019
(3,924)
(2,073)
Purchase of treasury shares
(2,073)
Stock Grant plan (IFRS 2)
658
658
Hedge accounting reserve
127
127
Total profit at 31 December 2020
Balance at 31 December 2020
(24)
11,533
10,002
2,307
(4,341)
(529)
84,547
6,409
6,385
6,409
109,928
(6,172)
(6,172)
Allocation of 2020 profit: - Payment of dividends - To the extraordinary reserve
237
Stock Grant plan (IFRS 2) Treasury share transactions
437
Total profit at 31 December 2021
Balance at 31 December 2021
11,533
10,002
2,307
(3,904)
(237)
0
805
805
(437)
0
2
(198)
10,044
9,848
(526)
84,953
10,044
114,409
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SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
STATEMENT OF CASH FLOWS 2021 FY
2020 FY
1,595
8,343
10,044
6,410
- Depreciations and amortisation
9,179
9,414
- Realised gains
(238)
(965)
- Write-downs of non-current assets
300
761
- Profits and losses from equity investments
(176)
(609)
- Valuation of the Stock Grant plan
805
657
- Net financial income and expenses
212
516
- Non-monetary foreign exchange differences
(340)
(199)
- Income tax
4,183
(106)
(147)
(166)
3
569
(170)
(16,461)
(12,474)
(1,650)
Change in trade payables
7,474
10,470
Change in net working capital
(5,170)
(7,642)
487
1,599
Payment of taxes
(1,738)
(141)
Payment of financial expenses
(530)
(710)
Collection of financial income
318
201
17,187
9,590
- intangible
(1,934)
(383)
- tangible
(9,288)
(7,652)
- financial
(19,288)
(8,974)
(€/000) Cash and cash equivalents at beginning of year Profit for the year Adjustments for:
Change in post-employment benefit Change in risk provisions
Change in trade receivables Change in inventories
Change in other receivables and payables, deferred taxes
Cash flows from operations
Investments in non-current assets
Disposal of non-current assets
2,103
3,628
Cash flow absorbed by investments
(28,407)
(13,381)
Free cash flow
(11,220)
(3,791)
Repayment of loans
(23,032)
(11,982)
Raising of loans
73,229
12,811
Change in financial assets
(4,842)
1,602
Purchase/Sale of treasury shares
-
(2,073)
Payment of dividends
(6,172)
(3,924)
Collection of dividends
175
609
Cash flow absorbed by financing activities
39,358
(2,957)
Total cash flows
28,138
(6,748)
Cash and cash equivalents at end of year (Note 11)
29,733
1,595
188
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Explanatory notes ACCOUNTING STANDARDS STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION The separate financial statements of Sabaf S.p.A. for the financial year 2021 have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS). The separate financial statements are drawn up in euro, which is the currency in the economy in which the Company operates. The income statement, the comprehensive income statement and the statement of financial position schedules are prepared in euro, while the statement of cash flows, the statement of changes in shareholders’ equity and the values reported in the explanatory notes are in thousands of euro. The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. With reference to this assumption, the Company assessed that it is a going concern (as defined by paragraphs 25 and 26 of IAS 1), also due to the strong competitive position, high profitability and solidity of the financial structure. Sabaf S.p.A., as the Parent Company, also prepared the consolidated financial statements of the Sabaf Group at 31 December 2021.
FINANCIAL STATEMENTS The Company adopted the following formats: • current and non-current assets and current and non-current liabilities are stated separately in the statement of the financial position; • an income statement that expresses costs using a classification based on the nature of each item; • a comprehensive income statement that expresses revenue and expense items not recognised in profit for the year as required or permitted by IFRS; • a statement of cash flows that presents cash flows originating from operating activity, using the indirect method. Use of these formats permits the most meaningful representation of the Company’s capital, business and financial status.
ACCOUNTING POLICIES The accounting standards and policies applied for the preparation of the separate financial statements at 31 December 2021, unchanged versus the previous year, are shown below.
Property, plant and equipment
These are recognised at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers.
Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life in years, unchanged compared to previous financial years, is as follows: Buildings
33
Light constructions
10
General plant
10
Specific plant and machinery
6–10
Equipment
4
Furniture
8
Electronic equipment
5
Vehicles and other transport means
5
Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer. Land is not depreciated.
Adoption of the accounting standard IFRS 16 “Leases” The Company applied IFRS 16 from 1 January 2019 by using the amended retrospective approach. In adopting IFRS 16, the Company made use of the exemption granted in paragraph 5 a) in relation to leases with a duration of less than 12 months (known as short-term leases) and the exemption granted in paragraph 5 b) in relation to lease agreements whose underlying asset is a low-value asset. For these agreements, lease payments are recognised in the income statement on a straight-line basis for the duration of the respective agreements. When evaluating the lease liabilities, Sabaf S.p.A. discounted the payments due for the lease using the incremental borrowing rate at 1 January 2019. The weighted average of the applied rate was 1.5% on 1 January 2021 and on 31 December 2021. The lease term is calculated based on the non-cancellable period of the lease, including the periods covered by the option to extend or to terminate the lease if it is reasonably certain that those options will be exercised or not exercised, taking account of all relevant factors that create an economic incentive relating to those decisions.
Investment property Investment property is valued at cost, including revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers. The depreciation is calculated based on the estimated useful life, considered to be 33 years.
189
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset’s carrying value is reduced to the lower recoverable amount, recognising impairment in the income statement. When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or cash generating unit) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
Intangible assets
As established by IAS 38, intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably. If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained. Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life. The useful life of projects for which development costs are capitalised is estimated to be 10 years. The SAP management system is amortised over five years.
Equity investments
Equity investments in subsidiaries, associates and joint-ventures are stated in the accounts at cost. In accordance with IAS 36, the value recognised in the financial statements is subject to an impairment test if there are indications of possible impairment. Equity investments in companies other than subsidiaries, associates and joint ventures are classified as financial assets measured at fair value, which normally corresponds to the transaction price including directly attributable transaction costs. Subsequent changes in fair value are recognised in the Income statement (FVPL) or, if the option is exercised in accordance with the standard, in the Statement of comprehensive income (FVOCI) under the heading “Instrument reserve at FVOCI”.
Impairment
At each end of the reporting period, Sabaf S.p.A. reviews the carrying value of its property, plant and equipment, intangible assets and equity investments to determine whether there are signs of impairment of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate the recoverable amount individually, the Company estimates the recoverable amount of the cash generating unit (CGU) to which the asset belongs. In particular, the recoverable amount of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use. The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects current market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating
190
the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Company prepares operating cash flow forecasts based on the most recent budgets approved by the Boards of Directors of the investees, draws up four-year forecasts and determines the terminal value (current value of perpetual income), which expresses the medium- and long-term operating flows in the specific sector. Furthermore, the Company checks the recoverable amount of its investees at least once a year when the separate financial statements are prepared. If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset’s carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement. When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or cash generating unit) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment. Reversal of impairment loss is recognised in the income statement.
Inventories Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products – calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are derecognised in subsequent years if the reasons for such write-downs cease to exist.
Trade receivables and other financial assets
Initial recognition Upon initial recognition, financial assets are classified, as the case may be, on the basis of subsequent measurement methods, i.e. at amortised cost, at fair value recognised in other comprehensive income (OCI) and at fair value recognised in the income statement. The classification of financial assets at initial recognition depends on the characteristics of the contractual cash flows of the financial assets and on the business model that the Company uses to manage them. Trade receivables that do not contain a significant financing component are valued at the transaction price determined in accordance with IFRS 15. See the “Revenue from Contracts with Customers” paragraph. Other financial assets are recognised at fair value plus, in the case of a financial asset not at fair value recognised in the income statement, transaction costs. For a financial asset to be classified and measured at amortised cost or at fair value recognised in OCI, it must generate cash flows that depend solely on the principal and interest on the amount of
SABAF . 2021 ANNUAL REPORT
principal to be repaid (known as ‘solely payments of principal and interest (SPPI)’). This measurement is referred to as the SPPI test and is carried out at the instrument level.
Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Financial assets at amortised cost (debt instruments) This category is the most important for the Company. The Company measures the financial assets at amortised cost if both of the following requirements are met: • the financial asset is held as part of a business model whose objective is to hold financial assets for the purpose of collecting contractual cash flows and • the contractual terms of the financial asset envisage, at certain dates, cash flows represented solely by payments of principal and interest on the amount of principal to be repaid. Financial assets at amortised cost are subsequently measured using the effective interest method and are subject to impairment. Gains and losses are recognised in the income statement when the asset is derecognised, modified or revalued. Financial assets at amortised cost of the Company include trade receivables. Financial assets at fair value through profit or loss This category includes all assets held for trading, assets designated at initial recognition as financial assets measured at fair value with changes recognised in the income statement, or financial assets that must be measured at fair value. Assets held for trading are all those assets acquired for sale or repurchase in the short term. Derivatives, separated or otherwise, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Financial assets with cash flows that are not represented solely by principal and interest payments are classified and measured at fair value through profit or loss, regardless of the business model. Financial instruments at fair value with changes recognised in the income statement are recognised in the statement of financial position at fair value and net changes in fair value through profit or loss. This category includes derivative instruments. The Company does not hold financial assets at fair value throughprofit or loss with reclassification of cumulative gains and losses or financial assets at fair value through profit or loss without reversal of cumulative gains and losses upon derecognition.
Derecognition A financial asset (or, if applicable, part of a financial asset or part of a group of similar financial assets) is firstly written off (e.g. removed from the statement of financial position of the Company) when: • the rights to receive cash flows from the asset are extinguished, or • the Company transferred to a third party the right to receive financial flows from the asset or has taken on the contractual obligation to pay them fully and without delay and (a) transferred substantially all the risks and benefits of the ownership of the financial asset or (b) did not substantially transfer or retain all the risks and benefits of the asset, but transferred their control.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
If the Company has transferred the rights to receive financial flows from an asset or has signed an agreement on the basis of which it retains the contractual rights to receive the cash flows of the financial asset, but assumes a contractual obligation to pay the financial flows to one or more beneficiaries (pass-through), it considers whether or to what extent it has retained the risks and benefits concerning the ownership. If it has not substantially transferred or retained all the risks and benefits or has not lost control over it, the asset continued to be recognised in the financial statements of the Company to the extent of its residual involvement in the asset itself. In this case, the company also recognises an associated liability. The transferred asset and the associated liability are measured in such a way as to reflect the rights and obligations that pertain to the Company. When the residual involvement of the entity is a guarantee in the transferred asset, the involvement is measured based on the amount of the asset or the maximum amount of the consideration received that the entity could be obliged to pay, whichever lower.
Provisions for risks and charges Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future cash flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
Post-employment benefit The post-employment benefit is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, post-employment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unit-credit method. The regulations of this fund were amended by Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007. In the light of these changes, and, in particular, for companies with at least 50 employees, post-employment benefits must now be considered a defined-benefit plan only for the portions accruing before 1 January 2007 (and not yet paid as at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans. Actuarial gains or losses are recognised immediately under “Other total profits/(losses)”.
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SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Trade payables and other financial liabilities Initial recognition All financial liabilities are initially recognised at fair value, in addition to directly attributable transaction costs in case of mortgages, loans and payables. The Company’s financial liabilities include trade payables and other payables, mortgages and loans, including current account overdrafts and derivative financial instruments.
Subsequent measurement The measurement of financial liabilities depends on their classification, as described below. Financial liabilities at fair value through profit or loss Financial liabilities at fair value with changes recognised in the income statement include liabilities held for trading and financial liabilities initially recognised at fair value, with changes recognised in the income statement. Liabilities held for trading are those liabilities acquired in order to discharge or transfer them in the short term. This category also includes derivative financial instruments subscribed by the Company and not designated as hedging instruments in a hedging relationship pursuant to IFRS 9. Embedded derivatives, separated from the main contract, are classified as financial instruments held for trading, unless they are designated as effective hedging instruments. Gains or losses on liabilities held for trading are recognised in the income statement. Financial liabilities are designated at fair value with changes recognised in the income statement from the date of initial recognition, only if the criteria of IFRS 9 are met. Loans and payables This is the most important category for the Company and includes interest-bearing payables and loans. After initial statement, loans are valued using the amortised cost approach, applying the effective interest rate method. Gains and losses are recognised in the income statement when the liability is discharged, as well as through the amortisation process. Amortised cost is calculated by recognising the discount or premium on the acquisition and the fees or costs that are an integral part of the effective interest rate. Amortisation at the effective interest rate is included in financial expenses in the income statement.
Derecognition A financial liability is derecognised when the obligation underlying the liability is discharged, cancelled or fulfilled. If an existing financial liability is replaced by another from the same lender, at substantially different conditions, or if the conditions of an existing liability are substantially changed, this replacement or change is treated as a derecognition of the original liability accompanied by the recognition of a new liability, with any differences between the carrying values recognised in the income statement.
Policy for conversion of foreign currency items
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date.
192
At year-end, assets and liabilities expressed in foreign currencies are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a non-distributable reserve until it is effectively realised.
Derivative instruments and hedge accounting
The Company’s business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The Company may decide to use derivative financial instruments to hedge these risks. Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates. Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Company’s contractual commitments and planned transactions are recognised directly in shareholders’ equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place. For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement. Gains and losses stemming from the derivative’s valuation are also posted in the income statement. Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur. Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place. If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year’s income statement. Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts and the latter are not measured at fair value with posting of related gains and losses in the income statement.
Revenue recognition
Revenue is recognised net of return sales, discounts, allowances and bonuses, as well as of the taxes directly associated with sale of goods and rendering of services. Sales revenue is recognised when the company has transferred the significant risks and benefits associated with ownership of the goods and the amount of revenue can be reliably measured. Revenues of a financial nature are recognised on an accrual basis.
SABAF . 2021 ANNUAL REPORT
Financial income
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recognised in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses. All the other financial expenses are recognised as costs for the year in which they are incurred.
Income taxes for the year
Income taxes include all taxes calculated on the Company’s taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders’ equity, in which case the tax effect is recognised directly in shareholders’ equity. Other taxes not relating to income, such as property taxes, are included among operating expenses. Deferred taxes are provisioned in accordance with the global liability provisioning method. They are calculated on all temporary differences that emerge from the taxable base of an asset or liability and its book value. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable in the years when temporary differences will be realised or settled.
Dividends
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares
Treasury shares are booked as a reduction of shareholders’ equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders’ equity.
Equity-settled transactions Some of the Company employees receive part of the remuneration in the form of share-based payments, therefore employees provide services in exchange for shares (“equity-settled transactions”). The cost of equity-settled transactions is determined by the fair value at the date on which the assignment is made using an appropriate measurement method, as explained in more detail in Note 43. This cost, together with the corresponding increase in shareholders’ equity, is recognised under personnel costs (Note 27) over the period in which the conditions relating to the achievement of objectives and/or the provision of the service are met. The cumulative costs recognised for such transactions at the end of each reporting period up to the vesting date are commensurate with the expiry of the vesting period and the best estimate of the number of equity instruments that will actually vest. Service or performance conditions are not taken into account when defining the fair value of the plan at the assignment date. However, the probability of these conditions being met is taken into account when defining the best estimate of the number of equity instruments
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
that will vest. Market conditions are reflected in the fair value at the assignment date. Any other condition related to the plan that does not involve a service obligation is not considered to be a vesting condition. Non-vesting conditions are reflected in the fair value of the plan and result in the immediate recognition of the cost of the plan, unless there are also service or performance conditions. No cost is recognised for rights that do not vest in that the performance and/or service conditions are not met. When the rights include a market condition or a non-vesting condition, these are treated as if they had vested regardless of whether the market conditions or other non-vesting conditions to which they are subject are met or not, it being understood that all other performance and/or service conditions must be met. If the conditions of the plan are changed, the minimum cost to be recognised is the fair value at the assignment date in the absence of the change in the plan itself, on the assumption that the original conditions of the plan are met. Moreover, a cost is recognised for each change that results in an increase in total fair value of the payment plan, or that is in any case favourable for employees; this cost is measured with reference to the date of change. When a plan is cancelled, any remaining element of the plan’s fair value is immediately expensed to the income statement.
Use of estimates Preparation of the separate financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities at the end of the reporting period. Actual results might differ from these estimates. Estimates are used to measure tangible and intangible assets and investments subject to impairment testing, as described earlier, as well as to measure the ability to recover prepaid tax assets, provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset writedowns, employee benefits, taxes, other provisions. Specifically:
Recoverability of value of tangible and intangible assets and investments The procedure for determining impairment losses of tangible and intangible assets described in “Impairment” implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees’ management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated.
Provisions for bad debts Receivables are adjusted by the related bad debt provision to take into account their recoverable amount. To determine the size of the writedowns, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer’s solvency, as well as experience and historical payment trends.
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SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Provisions for inventory obsolescence
COVID-19 pandemic
Inventories subject to obsolescence and slow turnover are systematically measured and written down if their recoverable value is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
Management has reviewed the Company’s exposure to the effects of the COVID-19 pandemic and its impact on the Company’s financial position, results and cash flows, especially with regard to the recoverability of the value of intangible assets, the measurement of receivables, the measurement of inventories and the management of financial risks, with a special reference to credit and liquidity risks. The analysis carried out did not reveal any critical situations and the factors related to the COVID-19 pandemic did not have a significant impact on the opinions and estimates used in preparing these Separate Financial Statements.
Employee benefits The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates. Any change in the above-mentioned assumptions might have an effect on liabilities for pension benefits.
Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
Share-based payments Estimating the fair value of share-based payments requires the determination of the most appropriate valuation model, which depends on the terms and conditions under which these instruments are granted. This also requires the identification of data to feed into the valuation model, including assumptions about the exercise period of the options, volatility and dividend yield. The Company uses a binomial model for the initial measurement of the fair value of share-based payments with employees.
Income taxes Determining liabilities for Company taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets.
Other provisions When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Company in litigation. These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions.
Climate change With reference to the potential impact of climate change and energy transition on the Company’s activities, the Management carries out targeted analyses to identify and manage the main risks and uncertainties to which the Company is exposed, adapting the corporate strategy accordingly. To date, these factors have not had a significant impact on the opinions and estimates used in preparing these Separate Financial Statements.
194
New accounting standards Amendments to IFRS 4, IFRS 7, IFRS 9, IFRS 16 and IAS 39: Interest rate benchmark reform The Financial Stability Board released the report “Reforming Major Interest Rate Benchmarks” with recommendations to strengthen existing benchmark indexes, other potential interbank market-based benchmark rates and develop alternative near-risk-free benchmark rates. The European Parliament introduced a common framework to ensure the accuracy and integrity of these indexes. Following this Regulation, the IASB published the Reform of benchmark indexes for determining interest rates in order to take into account the consequences of the reform on financial reporting and so that companies can continue to comply with the provisions assuming that the existing benchmark indexes are not changed as a result of the reform of interbank rates. The amendments to the principles outlined provide a number of expedients, applicable to all hedging relationships directly affected by the interest rate benchmark reform, i.e., if the reform generates uncertainties about the timing and/or amount of cash flows based on benchmarks of the hedged item or hedging instrument. These amendments had no impact on the Company’s separate financial statements. Amendment to IFRS16: Covid-19-Related Rent Concessions beyond 30 June 2021 On 31 March 2021, the IASB issued the document “Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)” by which it extends by one year the period of application of the amendment to IFRS 16, issued in 2020, relating to the accounting for facilities granted to lessees due to Covid-19. These changes that apply as from 1 April 2021 had no impact on the Company’s separate financial statements.
SABAF . 2021 ANNUAL REPORT
IFRS and IFRIC accounting standards, amendments and interpretations approved by the European Union, not yet universally applicable and not adopted early by the Company at 31 December 2021 IFRS 17 “Insurance Contracts” In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new standard on insurance contracts covering recognition and measurement, presentation and disclosure. The overall objective of IFRS 17 is to present an accounting model for insurance contracts that is more useful and consistent for insurers. This principle does not apply to the Group. Amendments to IAS 1 “Classification of Liabilities as Current or Non-current” In January 2020, the IAS issued amendments to paragraphs 69-76 of IAS 1 to specify the requirements for classifying liabilities as current or non-current. The amendments clarify what is meant by the right to postpone an expiry, that the right to postpone must exist at the end of the reporting period, that the classification is not affected by the likelihood that the entity will exercise its right to postpone, that only if a derivative embedded in a convertible liability is itself an equity instrument does the maturity of the liability have no impact on classification. The amendments will be effective for financial years beginning on or after 1 January 2023 and must be applied retrospectively. The Group is assessing the impact the changes will have on the current situation.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Amendments to “Annual Improvements 2018-2020” The amendments include amendments to the following principles: • IFRS 1 “First-time Adoption of International Financial Reporting Standards – Subsidiary as a first-time adopter”: the amendment allows a subsidiary that chooses to apply paragraph D16(a) of IFRS 1 to account for cumulative translation differences on the basis of the amounts recognised by the parent company, taking into account the parent’s date of transition to IFRS; • IFRS 9 “Financial Instruments”: the amendments clarify what fees can be included in measuring whether the terms of a new financial liability (or changes to an existing financial liability) are materially different from the terms of the original financial liability; • IAS 41 “Agriculture”: the amendment removes the requirement to exclude cash flows arising from taxation when measuring the fair value of assets within the scope of IAS 41; • IFRS 16 “Leases”: amendments to illustrative example no. 13. All amendments will enter into force on 1 January 2022. Following the adoption of these amendments, the directors do not expect a significant effect on the Company’s separate financial statements.
Amendments to IFRS 3 “Business Combinations” The amendments are intended to update a reference in IFRS 3 to the previous version of the IASB’s Conceptual Framework (1989 Framework) without affecting the requirements of the standard. Amendments to IAS 16 “Property, Plant and Equipment” The purpose of the amendments is not to allow the deduction from the cost of property, plant and equipment of the amount received from the sale of goods produced in the test phase of the asset. These sales revenues and related production costs will therefore be recognised in the income statement. Amendments to IAS 37 “Provisions, Contingent Liabilities and Contingent Assets” The amendment clarifies that all costs directly attributable to the contract must be taken into account when estimating the possible onerousness of a contract. Accordingly, the assessment of whether a contract is onerous includes not only incremental costs (such as the cost of direct material used in processing), but also all costs that the enterprise cannot avoid because it has entered into the contract (such as, for example, the share of depreciation of machinery used for the performance of the contract).
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SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
COMMENTS ON THE MAIN ITEMS OF THE STATEMENT OF FINANCIAL POSITION 1. PROPERTY, PLANT AND EQUIPMENT Property
Plant and equipment
Other assets
Assets under construction
Total
43,324
175,386
36,447
2,217
257,374
Increases
344
3,566
2,481
2,717
9,108
Disposals
-
(4,908)
(1,129)
-
(6,037)
Reclassification
-
1,449
260
(2,412)
(703)
43,668
175,493
38,059
2,522
259,742
Increases
571
3,877
2,016
3,005
9,469
Disposals
-
(1,694)
(404)
-
(2,098)
223
1,108
38
(1,676)
(307)
At 31 December 2021
44,462
178,784
39,709
3,851
266,806
ACCUMULATED DEPRECIATION
18,531
154,288
33,084
-
205,903
At 31 December 2019
1,212
5,758
1,526
-
8,496
Depreciations for the year
-
(3,391)
(69)
-
(3,460)
Derecognition due to disposal
-
141
-
-
141
At 31 December 2020
19,743
156,796
34,541
-
211,080
Depreciations for the year
1,258
5,558
1,562
-
8,378
Derecognition due to disposal
-
(1,151)
(95)
-
(1,246)
Write-downs
-
-
-
-
-
21,001
161,203
36,008
-
218,212
At 31 December 2021
23,461
17,581
3,701
3,851
48,594
At 31 December 2020
23,925
18,697
3,518
2,522
48,662
COST At 31 December 2019
At 31 December 2020
Reclassification
At 31 December 2021
NET CARRYING VALUE
The breakdown of the net carrying value of Property was as follows: 31.12.2021
31.12.2020
Change
Land
5,404
5,404
-
Industrial buildings
18,057
18,521
(464)
Total
23,461
23,925
(464)
196
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Changes in property, plant and equipment resulting from the application of IFRS 16 are shown below:
Property
Plant and equipment
Other assets
Total
256
-
665
921
-
-
275
275
Depreciations
(44)
-
(266)
(310)
At 31 December 2021
212
-
674
887
1 January 2021 Increases
The main investments in the financial year were aimed at adapting production capacity and industrialising new products to significantly increase shares with certain strategic customers. Investments in maintenance and replacement, so that production equipment is kept constantly up to date and efficient, are systematic. Decreases mainly relate to the disposal of machinery to other companies of the Sabaf Group. Assets under construction include
machinery under construction and advance payments to suppliers of capital equipment. At 31 December 2021, the Company found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
2. INVESTMENT PROPERTY COST At 31 December 2019
11,835
Changes in investment property resulting from the application of IFRS 16 are shown below:
Increases
-
Disposals
(552)
INVESTMENT PROPERTY
At 31 December 2020
11,283
1 January 2021
38
Increases
-
Depreciations
(35)
Disposals
(1,107)
At 31 December 2021
10,176
ACCUMULATED DEPRECIATIONS At 31 December 2019
7,859
Depreciations for the year
420
Derecognition due to disposal
(249)
At 31 December 2020
8,030
Depreciations for the year
At 31 December2021
3
At 31 December 2021, the Company found no endogenous or exogenous indicators of impairment of its investment property. As a result, the value of investment property was not submitted to impairment testing.
369
Derecognition due to disposal
(534)
At 31 December 2021
7,865
NET CARRYING VALUE At 31 December 2021
2,311
At 31 December 2020
3,253
This item includes non-operating buildings owned by the Company. Disposals during the period resulted in a capital gain of approximately €109 thousand.
197
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
3. INTANGIBLE ASSETS
Patents, know-how and software
Development costs
Other intangible assets
Total
6,790
5,848
635
13,273
Increases
269
413
6
688
Decreases
(85)
-
-
(85)
-
(241)
-
(241)
6,974
6,020
641
13,635
Increases
250
1,679
4
1,933
Decreases
(2)
-
(3)
(5)
Reclassifications
22
(58)
-
(36)
7,244
7,641
642
15,527
6,508
3,767
545
10,820
156
342
1
499
-
-
-
-
6,664
4,109
546
11,319
142
288
-
430
-
-
-
-
6,806
4,397
546
11,749
At 31 December 2021
438
3,244
96
3,778
At 31 December 2020
310
1,911
95
2,316
COST At 31 December 2019
Reclassifications At 31 December 2020
At 31 December 2021
AMORTISATION AND WRITE-DOWNS At 31 December 2019 Amortisation Decreases At 31 December 2020 Amortisation Decreases At 31 December 2021
NET CARRYING VALUE
Intangible assets have a finite useful life and, as a result, are amortised throughout their life.
Increases in development costs include projects in progress and therefore not subject to amortisation.
In 2021, the Company set up a dedicated team to develop new solutions for home cooking, with the aim of creating innovative products that meet the needs of manufacturers of household appliances and new consumer trends. Investments in the development of gas parts continued, mainly in relation to the expansion of the range of burners.
At 31 December 2021, the Company found no endogenous or exogenous indicators of impairment of its intangible assets. As a result, the value of property, plant and equipment was not submitted to impairment testing.
4. EQUITY INVESTMENTS
In subsidiaries Other equity investments Total
198
31.12.2021
31.12.2020
Change
84,429
65,441
18,988
83
83
0
84,512
65,524
18,988
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The change in equity investments in subsidiaries is broken down in the table below:
Faringosi Hinges
Sabaf do Brasil
Sabaf U.S.
Sabaf Appliance Components (China)
Sabaf Mexico
Sabaf Turkey
A.R.C.
Okida
C.M.I
Sabaf India
Total
31.12.2019
10,329
8,469
139
4,900
0
12,005
4,800
8,782
13,392
-
62,816
Purchase
-
-
-
-
-
-
-
-
3,063
20
3,083
Share capital increase
-
1,092
-
3,000
-
-
-
-
-
1,750
5,842
31.12.2020
10,329
9,561
139
7,900
0
12,005
4,800
8,782
16,455
1,770
71,741
Purchase
-
-
-
-
1
-
1,650
-
4,743
-
6,394
Share capital increase
-
3,600
-
-
3,127
5,167
-
-
-
1,000
12,894
10,329
13,161
139
7,900
3,128
17,172
6,450
8,782
21,198
2,770
91,029
HISTORICAL COST
31.12.2021
PROVISION FOR WRITE-DOWNS 31.12.2019
0
0
0
4,900
0
0
0
0
0
0
4,900
Write-downs
-
-
-
1,400
-
-
-
-
-
-
1,400
31.12.2020
0
0
0
6,300
0
0
0
0
0
0
6,300
Write-downs
-
-
-
300
-
-
-
-
-
-
300
31.12.2021
0
0
0
6,600
0
0
0
0
0
0
6,600
31.12.2021
10,329
13,161
139
1,300
3,128
17,172
6,450
8,782
21,198
2,770
84,429
31.12.2020
10,329
9,561
139
1,600
0
12,005
4,800
8,782
16,455
1,770
65,441
NET CARRYING VALUE
PORTION OF SHAREHOLDERS’ EQUITY (CALCULATED IN COMPLIANCE WITH IFRS) 31.12.2021
8,462
15,716
158
1,317
3,092
15,396
7,371
2,961
15,503
2,755
72,731
31.12.2020
7,462
10,561
108
1,597
0
19,534
4,349
3,294
7,763
1,671
56,339
DIFFERENCE BETWEEN SHAREHOLDERS’ EQUITY AND CARRYING VALUE 31.12.2021
(1,867)
2,555
19
17
(36)
(1,776)
921
(5,821)
(5,695)
(15)
(11,698)
31.12.2020
(2,867)
1,000
(31)
(3)
0
7,529
(451)
(5,488)
(8,692)
(99)
(9,102)
Faringosi Hinges s.r.l.
In 2021, the Faringosi Hinges achieved positive results - in terms of sales and profitability - both compared to the previous year and compared to the budget. The 2022-2026 forward plan prepared at the beginning of 2022 envisages a further increase in sales at moderate growth rates. At 31 December 2021, Sabaf S.p.A. tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount, considered to be equivalent to its value of use plus available liquidity, by discounting expected future cash flows in the forward plan drafted by the management. Cash flows for the period from 2022 to 2026 were augmented by the terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The management prepared a single plan for each CGU that represents
the normal expected scenario, with reference to the period from 2022 to 2026. The development of forward plans and the calculation of the value in use were carried out following an in-depth analysis that also considered the impact on profitability of the increase in purchase costs and the possibility of transferring this increase to sales prices. The value of use was calculated based on a discount rate (WACC) of 10.11% (8.62% in the impairment test carried out while preparing the separate financial statements at 31 December 2020) and a growth rate (g) of 2%, unchanged from the 2020 impairment test. The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €14.431 million, compared with a carrying value of the equity investment of €10.329 million; consequently, the amount recognised for equity investment at 31 December 2021 was deemed recoverable.
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SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Sensitivity analysis The recoverable amount of the equity investment was subjected to stress tests and sensitivity analyses that also took into account economic parameters and as a result of which positive results
Growth rate
(€/000) Discount rate
1.50%
1.75%
2.00%
2.25%
2.50%
9.11%
15,684
16,097
16,539
17,013
17,524
9.61%
14,680
15,036
15,416
15,822
16,256
10.11%
13,792
14,102
14,431
14,781
15,154
10.61%
13,002
13,273
13,560
13,865
14,188
11.11%
12,293
12,532
12,785
13,051
13,334
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
14,431
12,501
10,572
Sabaf do Brasil
In 2021, Sabaf do Brasil continued to obtain positive results. Shareholders’ equity (converted into euros at the end-of-year exchange rate) is higher than the carrying amount of the investment.
Sabaf U.S.
The subsidiary Sabaf U.S. operates as a commercial support for North America. The difference between the carrying value and the shareholders’ equity of the investee is attributable to the non-durable losses taking into consideration expected development on the North American market.
Sabaf Appliance Components
Sabaf Appliance Components (Kunshan) Co., Ltd. has been producing burners for the Chinese market since 2015. Furthermore, the company has performed the function as distributor on the Chinese market of Sabaf products manufactured in Italy and Turkey. Low production volumes have not allowed the company to reach the break-even point. During the financial year, the shareholding was written down by €300 thousand against the loss of 2021.
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey)
In 2021, Sabaf Turkey, a company active in the production of gas parts, recorded a strong sales growth rate and a largely positive operating result. As a result of the strong devaluation of the Turkish lira, the company recorded exchange rate losses from the conversion of eurodenominated liabilities, which led to a negative net result.
200
emerged. The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
A.R.C. s.r.l.
In June 2016, the Company acquired the controlling share (70%) of A.R.C. s.r.l., leading company in the production of burners for professional cooking. The transaction allowed Sabaf to enter into a new sector, contiguous with the traditional sector of components for household gas cooking appliances, and to enhance the consolidated international presence of the Sabaf Group. In October 2021, Sabaf S.p.A. completed the acquisition of the remaining 30% of the share capital of A.R.C. s.r.l., following the exercise of the put option by the minority shareholder. The fee was €1,650 thousand. As a result of the transaction, Sabaf S.p.A. now holds 100% of the share capital of C.M.I. s.r.l.. A.R.C. s.r.l. performed well during the 2021 financial year in terms of both turnover and profitability. The 2022-2026 forward plan envisages a further increase in sales at moderate growth rates and almost stable margins. At 31 December 2021, Sabaf S.p.A. tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount, considered to be equivalent to its value of use plus available liquidity, by discounting expected future cash flows in the forward plan drafted by the management. Cash flows for the period from 2022 to 2026 were augmented by the terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The management prepared a single plan for each CGU that represents the normal expected scenario, with reference to the period from 2022 to 2026. The development of forward plans and the calculation of the value in use were carried out following an in-depth analysis that also considered the impact on profitability of the increase in purchase costs and the possibility of transferring this increase to sales prices. The value of use was calculated based on a discount rate (WACC) of 6.93% (6.76% in the impairment test carried out while preparing the Separate financial statements at 31 December 2020) and a growth rate (g) of 2% (unchanged from the impairment test carried out while preparing the separate financial statements at 31 December 2020). The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €23.079 million, compared with a carrying value of the equity investment of €6.450 million; consequently, the amount recognised for equity investment at 31 December 2021 was deemed recoverable.
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Sensitivity analysis The recoverable amount of the equity investment was subjected to stress tests and sensitivity analyses that also took into account economic parameters and as a result of which positive results
emerged. The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: Growth rate
(€/000) Discount rate
1.50%
1.75%
2.00%
2.25%
2.50%
5.93%
25,734
26,887
28,187
29,663
31,355
6.43%
23,425
24,333
25,344
26,475
27,751
6.93%
21,543
22,274
23,079
23,970
24,962
7.43%
19,980
20,579
21,234
21,951
22,742
7.93%
18,662
19,160
19,701
20,289
20,931
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA According to the plan
-10%
-20%
23,079
14,449
12,743
(€/000)
Okida Elektronik Sanayi ve Ticaret A.S.
In 2018, the Company directly acquired 30% of Okida Elektronik (the remaining 70% was acquired through the subsidiary Sabaf Turkey). Okida is a leader in Turkey in the design and manufacture of electronic components for household appliances (mainly ovens and hoods); the transaction allowed Sabaf to enter into a new sector, contiguous with the traditional sector of components for household gas cooking appliances. Okida Elektronik performed extremely well in 2021. At 31 December 2021, the Company tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount considered to be equivalent to its value of use plus available liquidity, by discounting expected future cash flows in the forward plan
drafted by the management. Cash flows for the period from 2022 to 2026 were augmented by the terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The management prepared a single plan for each CGU that represents the normal expected scenario, with reference to the period from 2022 to 2026. The development of forward plans and the calculation of the value in use were carried out following an in-depth analysis that also considered the impact on profitability of the increase in purchase costs and the possibility of transferring this increase to sales prices. The value of use was calculated based on a discount rate (WACC) of 15.21% (14.18% in the impairment test carried out while preparing the separate financial statements at 31 December 2020) and a growth rate (g) of 2.50%, unchanged from the 2020 impairment test. The portion pertaining to Sabaf S.p.A. of the recoverable amount calculated on the basis of the above-mentioned assumptions and valuation techniques is €15.832 million (30% of total equity value), compared with a carrying value of the equity investment of €8.782 million; consequently, the carrying value recognised for equity investment at 31 December 2021 was deemed recoverable.
Sensitivity analysis The recoverable amount of the equity investment was subjected to stress tests and sensitivity analyses that also took into account economic parameters and as a result of which positive results
emerged. The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g: Growth rate
(€/000) Discount rate
1.00%
1.25%
2.50%
1.75%
2.00%
14.21%
16,748
16,981
17,224
17,477
17,742
14.71%
16,068
16,279
16,499
16,728
16,967
15.21%
15,440
15,632
15,832
16,039
16,255
15.71%
14,859
15,034
15,215
15,444
15,600
16.21%
14,319
14,479
14,645
14,817
14,995
201
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA According to the plan
-10%
-20%
15,832
14,068
12,303
(€/000)
C.M.I. s.r.l.
In July 2019, the Company acquired 68.5% of C.M.I. s.r.l., one of the main players in the design, production and sale of hinges for household appliances. The acquisition of C.M.I. s.r.l. allowed Sabaf to achieve a leadership position on a global scale in the hinge sector, proposing itself also in this area as a reference partner for all manufacturers of household appliances. Sabaf S.p.A. had acquired a further 15.75% stake in September 2020. In November 2021, Sabaf S.p.A. also completed the acquisition of 15.75% of the share capital of C.M.I. s.r.l., following the exercise of the second put option by the minority shareholder. The fee was €4,743 thousand. As a result of the transaction, Sabaf S.p.A. now holds 100% of the share capital of C.M.I. s.r.l.. C.M.I. s.r.l. recognised a strong increase in turnover in 2021 compared to the previous year. The positive trend is expected to continue for the period from 2022 to 2026, which forecasts further sales at moderate growth rates. At 31 December 2021, the Company tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable
amount considered to be equivalent to its value of use plus available liquidity, by discounting expected future cash flows in the forward plan drafted by the management. Cash flows for the period from 2022 to 2026 were augmented by the terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The management prepared a single plan for each CGU that represents the normal expected scenario, with reference to the period from 2022 to 2026. The development of forward plans and the calculation of the value in use were carried out following an in-depth analysis that also considered the impact on profitability of the increase in purchase costs and the possibility of transferring this increase to sales prices. The value of use was calculated based on a discount rate (WACC) of 11.31% (9.87% in the impairment test carried out while preparing the Separate financial statements at 31 December 2020) and a growth rate (g) of 2% (unchanged from that used for the impairment test carried out while preparing the separate financial statements at 31 December 2020). The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €55.656 million, compared with a carrying value of the equity investment of €21.198 million; consequently, the amount recognised for equity investment at 31 December 2021 was deemed recoverable.
Sensitivity analysis The recoverable amount of the equity investment was subjected to stress tests and sensitivity analyses that also took into account economic parameters and as a result of which positive results
Growth rate
(€/000)
202
emerged. The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
Discount rate
1.00%
1.25%
2.00%
1.75%
2.00%
10.31%
60,380
61,856
63,421
65,083
66,852
10.81%
56,649
57,946
59,316
60,766
62,303
11.31%
53,305
54,450
55,656
56,929
58,275
11.81%
50,289
51,306
52,375
53,499
54,685
12.31%
47,556
48,464
49,416
50,415
51,465
SABAF . 2021 ANNUAL REPORT
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
55,656
50,334
41,649
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Sabaf India Private Limited
During the 2020 financial year, a new company was set up in India with the aim of producing gas parts for the local market, where strong growth is expected in the coming years. The impacts of the pandemic caused a postponement in preparatory activities for the start of operations, which is expected during 2022.
Sabaf Mexico S.A. de C.V.
During the 2021 financial year, a new company was established in Mexico. A plot of land was acquired on which a new plant for the production of components for the North American market will be built in 2022.
5. NON-CURRENT FINANCIAL ASSETS 31.12.2021
31.12.2020
Change
Financial receivables from subsidiaries
10,708
5,537
5,171
Total
10,708
5,537
5,171
At 31 December 2021, financial receivables from subsidiaries consist of: • an interest-bearing loan of USD 2.5 million (€2.208 million at the end-of-year exchange rate), granted to the subsidiary Sabaf do Brasil with the aim of optimising the Group’s exposure to foreign exchange rate risk with maturity March 2023;
• an interest-bearing loan of €8.5 million to the subsidiary Sabaf Turkey, of which €3.5 million disbursed during 2018 and €5 million disbursed during 2021 as part of the coordination of the Group’s financial management, with maturity in August 2024 and April 2024, respectively.
6. INVENTORIES 31.12.2021
31.12.2020
Change
Raw materials
13,381
9,062
4,319
Semi-processed goods
9,400
6,812
2,588
Finished products
12,990
7,374
5,616
Provision for inventory write-downs
(1,785)
(1,736)
(49)
Total
33,986
21,512
12,474
The value of final inventories at 31 December 2021 increased compared to the end of the previous year to meet the higher volumes of activity. Moreover, in addition to the inflationary effect of the significant increases in metal prices, the Company raised the level of safety stocks to ensure continuity of production in a particularly turbulent scenario. The provision for write-downs is mainly allocated for hedging the obsolescence risk, quantified on the basis of specific analyses carried out at the end of the year on slow-moving and non-moving products, and refers to raw materials for €487 thousand, semi-
finished products for €328 thousand and finished products for €970 thousand. The following table shows the changes in the Provision for inventory write-downs during the current financial year:
31.12.2020
1,736
Provisions
297
Utilisation
(248)
31.12.2021
1,785
203
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
7. TRADE RECEIVABLES 31.12.2021
31.12.2020
Change
Trade receivables from third parties
30,584
29,477
1,107
Trade receivables from subsidiaries
15,210
16,048
(838)
Bad debt provision
(600)
(500)
(100)
45,194
45,025
169
Net total
At 31 December 2021, trade receivables included balances totalling USD 6,985 thousand, booked at the EUR/USD exchange rate in effect on 31 December 2021, equal to 1.13260. The amount of trade receivables recognised in the financial statements includes approximately €13 million in insured receivables (€17 million at 31 December 2020). There were no significant changes in average payment terms agreed
with customers. Receivables assigned to factors without recourse are derecognised from the Statement of Financial Position in that the reference contract provides for the assignment of ownership of the receivables, together with ownership of the cash flows generated by the receivable, as well as of all risks and benefits, to the assignee.
The following table shows the breakdown of receivables from third parties by maturity date: 31.12.2021
31.12.2020
Change
27,304
27,784
(480)
1,844
1,026
818
Outstanding from 30 to 60 days
348
315
33
Outstanding from 60 to 90 days
211
100
111
Outstanding for more than 90 days
877
252
625
30,584
29,477
1,107
Current receivables (not past due) Outstanding up to 30 days
Total
The bad debt provision was adjusted to the better estimate of the credit risk and expected losses at the end of the reporting period, also carried out by analysing each expired item. Changes during the year were as follows:
Bad debt provision
31.12.2020
Provisions
Utilisation
31.12.2021
500
100
-
600
8. TAX RECEIVABLES 31.12.2021
31.12.2020
Change
For income tax
1,104
1,119
(15)
For VAT
359
135
224
1,463
1,254
209
Total
In the 2020 financial year, the Company has been part of the national tax consolidation scheme pursuant to Articles 117/129 of the Unified Income Tax Law. At 31 December 2021, income tax receivables include: • the receivable from the subsidiary C.M.I. s.r.l. amounting to €457 thousand; • the receivable from the subsidiary Faringosi Hinges s.r.l amounting to €155 thousand; • the receivable from the subsidiary A.R.C. s.r.l. amounting to €155 thousand;
204
relating to the balance of the 2021 income taxes transferred by the subsidiaries to the consolidating company Sabaf S.p.A., in accordance with the provisions of the tax regulations relating to the national tax consolidation and the tax consolidation cotracts entered into between the parties. Income tax receivables also include €352 thousand of receivables for investments in capital equipment referred to Decree Law 160/2019 and Budget Law 178/2020.
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
9. OTHER CURRENT RECEIVABLES 31.12.2021
31.12.2020
Change
1,240
658
582
426
431
(5)
5
42
(37)
Other
258
816
(558)
Total
1,929
1,947
(18)
Credits to be received from suppliers Advances to suppliers Due from INAIL
Credits to be received from suppliers mainly refer to bonuses paid to the Company for the attainment for the year purchasing objectives,
which were achieved in 2021 to a greater extent than in the previous year.
10. CURRENT FINANCIAL ASSETS
Restricted bank accounts Currency derivatives Total
31.12.2021
31.12.2020
Change
1,173
1,233
(60)
-
127
(127)
1,173
1,360
(187)
At 31 December 2021, a term deposit of €1.173 million, due by 2022, for the portion of the price not yet paid to the sellers of the C.M.I. equity
investment and deposited as collateral in accordance with the terms of the C.M.I. acquisition agreement.
11. CASH AND CASH EQUIVALENTS The item Cash and cash equivalents, equal to €29,733 thousand at 31 December 2021 (€1,595 thousand at 31 December 2020), refers almost exclusively to bank current account balances.
12. SHARE CAPITAL The Company’s share capital consists of 11,533,450 shares with a par value of €1.00 each. The share capital paid in and subscribed did not change during the year. At 31 December 2021, the structure of the share capital is shown in the table below. No. of shares
% of share capital
Rights and obligations
Ordinary shares
8,376,760
72.63%
--
Ordinary shares with increased vote
3,156,690
27.37%
Two voting rights per share
Total
11,533,450
100%
With the exception of the right to increased vote, there are no rights, privileges or restrictions on the Company. The availability of reserves is indicated in a table at the end of these Explanatory Notes.
205
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
13. TREASURY SHARES AND OTHER RESERVES With regard to the 2018 - 2020 Stock Grant Plan, following the expiry of the three-year vesting period, during the first half of 2021, 34,946 ordinary shares of the Company were allocated and transferred to the beneficiaries of Cluster 1, through the use of shares already available to the issuer. No other transactions on treasury shares were carried out during the year. At 31 December 2021, the Company is the lawful owner of 311,802 treasury shares (2.703% of the share capital), reported in the financial statements as an adjustment to shareholders’ equity at a weighted average unit value of €12.52 (the closing stock market price of the Share at 31 December 2021 was €24.00). Further to what was reported in the Interim Management Statement at 31 December 2021 published on 10 February 2022, it is confirmed that the Company recovered the full availability of 311,802 treasury shares on 1 March 2022. There were 11,221,648 outstanding shares at 31 December 2021 (11,186,702 at 31 December 2020). The item “Retained earnings, other reserves” of €92,832 thousand included, at 31 December 2021: • the stock grant reserve of €1,701 thousand, which included the measurement at 31 December 2021 of the fair value of rights as-
signed to receive Sabaf shares relating to the following mediumand long-term incentive plans: - 2018 - 2020 Stock Grant Plan, for rights related to Cluster 2 beneficiaries only; - 2021 – 2023 Stock Grant Plan. For details of the Stock Grant Plan, refer to Note 43; • the hedge accounting reserve, negative for €71 thousand. The following table shows the change in the Cash Flow Hedge reserve related to the application of IFRS 9 on derivative contracts and referring to the recognition in net equity of the effective part of the derivative contracts signed to hedge the foreign exchange rate risk for which the Company applies hedge accounting. Opening value at 31 December 2020
127
Change during the period
(198)
Value at 31 December 2021
(71)
The characteristics of the derivative financial instruments that gave rise to the cash flow hedge reserve and the accounting effects on other items in the financial statements are broken down in Note 35, in the paragraph Foreign exchange risk management.
14. LOANS 31.12.2021
Leases Unsecured loans Short-term bank loans Total
Current
Non-current
Total
Current
Non-current
Total
437
1,456
1,893
474
1,633
2,107
16,732
81,059
97,791
12,956
25,258
38,214
1,841
-
1,841
10,567
-
10,567
19,010
82,515
101,525
23,997
26,891
50,888
In December 2021, Sabaf S.p.A. issued a €30 million bond fully subscribed by PRICOA with a maturity of 10 years, an average life of 8 years and a fixed coupon of 1.85% per year. This issue enabled the Company to diversify its sources of financing, improve financial flexibility and significantly lengthen the average duration of its debt. The loan described has the following covenants, defined with reference to the Group consolidated figures widely complied with at 31 December 2021 and for which, according to the Group’s business plan, compliance is also expected in subsequent years: • commitment to maintain a ratio of net financial debt to shareholders’ equity of less than 1.5; • commitment to maintain a ratio of net financial debt to EBITDA of less than 3; • commitment to maintain a ratio of EBITDA to net financial position of more than 4. During the year, the Company took out new unsecured loans for a total of €45 million. All loans are signed with an original maturity of ranging from 5 to 6 years and are repayable in instalments.
206
31.12.2020
Some of the outstanding unsecured loans have covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below: • commitment to maintain a ratio of net financial position to shareholders’ equity of less than 1 (residual amount of the loans at 31 December 2021 equal to €47.8 million); • commitment to maintain a ratio of net financial position to EBITDA of less than 2.5 (residual amount of the loans at 31 December 2021 equal to €56.8 million); widely complied with at 31 December 2021 and for which, according to the Group’s business plan, compliance is also expected in subsequent years. All bank loans are denominated in euro, with the exception of a short-term loan of USD 2 million. To manage interest rate risk, unsecured loans are either fixed-rate or hedged by IRS. In these separate financial statements, “Other financial liabilities” (Note 15) includes the negative fair value of the IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately €33.4 million and expiry until 30 June 2027. Financial expenses were recognised in the income statement with a balancing entry.
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The following table shows the changes in lease liabilities during the year: Lease liabilities at 1 January 2020
2,047 515
New agreements signed during 2020 Repayments during 2020
(455)
Lease liabilities at 31 December 2020
2,107 275
New agreements signed during 2021 Repayments during 2021
(489)
Lease liabilities at 31 December 2021
1,893
Note 36 provides information on financial risks, pursuant to IFRS 7.
15. OTHER FINANCIAL LIABILITIES 31.12.2021
31.12.2020
Current
Non-current
Current
Non-current
Payables to A.R.C. shareholders
-
-
60
-
Payables to C.M.I. shareholders
1,173
-
1,173
-
Derivative instruments on interest rates
72
-
327
-
Currency derivatives
149
-
-
-
1,394
-
1,560
-
Total
The payable to C.M.I. shareholders of €1,173 thousand at 31 December 2021, maturing during 2022, is related to the part of the price still to be paid to the Chinese group Guandong Xingye Investment, seller of C.M.I., which was deposited on a non-interest-bearing restricted
account in accordance with contractual agreements and guarantees issued by the seller. Currency derivatives refer to forward sales contracts recognised using hedge accounting. These financial instruments are broken down in Note 35 - Forex risk management.
16. POST-EMPLOYMENT BENEFIT Post-employment benefits are calculated as follows: At 31 December 2020 Financial expenses Payments made Tax effect At 31 December 2021
1,929 Financial assumptions
4
31.12.2021
31.12.2020
Discount rate
0.40%
0.23%
Inflation
1.30%
1.00%
(150) (3) 1,780
Actuarial gains or losses are recognised immediately in the comprehensive income statement (“Other comprehensive income”) under the item “Actuarial income and losses”. Demographic theory 31.12.2021
31.12.2020
Mortality rate
IPS55 ANIA
IPS55 ANIA
Disability rate
INPS 2000
INPS 2000
Staff turnover
7%
6%
2% per year
5% per year
pursuant to legislation in force at 31 December 2021
pursuant to legislation in force on 31 December 2020
Advance payouts Retirement age
207
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
17. PROVISIONS FOR RISKS AND CHARGES 31.12.2020
Provisions
Utilisation
31.12.2021
Provision for agents’ indemnities
218
28
(1)
245
Product guarantee fund
60
-
-
60
-
500
-
500
Provision for legal risks
576
-
(530)
46
Total
854
528
(531)
851
Provision for tax risks
The provision for agents’ indemnities covers amounts payable to agents if the Company terminates the agency relationship. The product guarantee fund covers the risk of returns or charges by customers for products already sold and, if necessary, is adjusted at the end of the financial year on the basis of analyses carried out and past experience. The fund was adjusted at the end of the year, on the basis of analyses conducted and past experience. At 31 December 2021, a provision of €500 thousand was recognised in the provisions for tax, expressing the best estimate of the probable
liability following the results of a tax audit on the Company for the years from 2016 to 2018. With regard to the provision for legal risks, note that, at the end of the 2020 financial year, a provision of €500 thousand had been recognised in relation to a patent dispute, for which a settlement was reached with the counterparty at the beginning of 2021. During 2021, the corresponding use of the provision was therefore recognised, against payment. The provisions for risks, which represent the estimate of future payments made based on historical experience, have not been discounted because the effect is considered negligible.
18. TRADE PAYABLES
Total
31.12.2021
31.12.2020
Change
33,678
26,204
7,474
The increase in trade payables is related to higher production volumes of the year. Average payment terms did not change versus the previous year.
At 31 December 2021, there were no overdue payables of a significant amount and the Company did not receive any injunctions for overdue payables.
19. TAX PAYABLES 31.12.2021
31.12.2020
Change
2,703
1,433
1,270
To subsidiaries for income tax
55
276
(221)
To inland revenue for IRPEF tax deductions
616
676
(60)
-
74
(74)
3,374
2,459
915
To inland revenue for income tax
Other tax payables Total
Payables to inland revenue for income tax are related to IRES for €2,383 thousand and IRAP for €320 thousand.
income taxes refer to tax advances received from the subsidiary CGD s.r.l..
In the 2020 financial year, the Company has been part of the national tax consolidation scheme pursuant to Articles 117/129 of the Unified Income Tax Law. At 31 December 2021, payables to subsidiaries for
Payables for IRPEF tax deductions, relating to employment and selfemployment, were duly paid at maturity.
208
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
20. OTHER CURRENT PAYABLES 31.12.2021
31.12.2020
Change
To employees
5,095
4,259
836
To social security institutions
2,238
2,094
144
Advances from customers
1,200
858
342
To agents
216
231
(15)
Other current payables
652
415
237
9,401
7,857
1,544
Total
At the beginning of 2022, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates. Other current payables include accrued liabilities and deferred income.
21. DEFERRED TAX ASSETS AND LIABILITIES 31.12.2021
31.12.2020
Deferred tax assets
3,323
3,892
Deferred tax liabilities
(324)
(230)
Net position
2,999
3,662
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their changes during the year and the previous year.
Amortisation and leasing
Provisions and value adjustments
Fair value of derivative instruments
Goodwill
Tax loss
Actuarial evaluation of post-employment benefit
Other temporary differences
Total
At 31 December 2019
(476)
896
65
1,417
419
168
53
2,542
Through profit or loss
1,403
(18)
(20)
(177)
(419)
-
343
1,112
-
-
-
-
-
8
-
8
At 31 December 2020
927
878
45
1,240
0
176
396
3,662
Through profit or loss
(184)
(131)
(10)
(177)
-
-
(160)
(662)
-
-
-
-
-
(1)
-
(1)
743
747
35
1,063
0
175
236
2,999
To shareholders’ equity
To shareholders’ equity At 31 December 2021
Deferred tax assets relating to goodwill refer to the exemption of the value of the investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Law Decree 98/2011, deductible in ten instalments starting in 2018.
209
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
22. TOTAL FINANCIAL DEBT As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company’s net financial debt is as follows: 31.12.2021
31.12.2020
Change
8
9
(1)
29,725
1,586
28,139
-
-
-
29,733
1,595
28,138
E. Current financial receivables
1,173
1,360
(187)
F. Current bank payables (Note 14)
1,841
10,567
(8,726)
G. Current portion of non-current debt (Note 14)
17,169
13,430
3,739
H. Other current financial payables (Note 15)
1,394
1,560
(166)
I. Current financial debt (F+G+H)
20,404
25,557
(5,153)
J. Net current financial debt (I-D-E)
(10,502)
22,602
(33,104)
K. Non-current bank payables (Note 14)
82,515
26,891
55,624
L. Other non-current financial payables
-
-
-
M. Non-current financial debt (K+L)
82,515
26,891
55,624
N. Net financial debt (J+M)
72,013
49,493
22,520
A. Cash (Note 11) B. Positive balances of unrestricted bank accounts (Note 11) C. Other cash equivalents D. Liquidity (A+B+C)
The statement of cash flows, which shows the changes in cash and cash equivalents (letter D. of this statement), describes in detail the cash flows that led to the change in the net financial position.
COMMENTS ON KEY INCOME STATEMENT ITEMS 23. REVENUE In 2021, sales revenue totalled €144,033,787, up 40.4% from €102,583,189 in 2020.
REVENUE BY GEOGRAPHICAL AREA 2021
%
2020
%
% Change
Europe (excluding Turkey)
48,788
33.9%
38,724
37.7%
+26.0%
Turkey
35,496
24.6%
25,607
25.0%
+38.6%
North America
10,088
7.0%
7,792
7.6%
+29.5%
South America
20,688
14.4%
13,711
13.4%
+50.9%
Africa and Middle East
16,930
11.8%
10,415
10.2%
+62.6%
Asia and Oceania
12,044
8.4%
6,334
6.2%
+90.1%
144,034
100%
102,583
100%
+40.4%
2021
%
2020
%
% Change
Valves and thermostats
60,006
41.7%
45,784
44.6%
+31.1%
Burners
63,959
44.4%
42,798
41.7%
+49.4%
Accessories and other revenues
20,069
13.9%
14,001
13.6%
+43.3%
Total
144,034
100%
102,583
100%
+40.4%
Total
REVENUE BY PRODUCT FAMILY
210
SABAF . 2021 ANNUAL REPORT
In 2021, demand was solid in all markets, with particularly high peaks in the first half of the year. The increase in sales was very strong in all geographical areas, with peaks in Asia, Africa and the Middle
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
East, indicating an increasingly global presence. Average sales prices in 2021 were 1.5% higher compared with 2020.
24. OTHER INCOME 2021
2020
Change
Sale of trimmings
2,696
1,147
1,549
Services to subsidiaries
1,295
1,150
145
Royalties to subsidiaries
213
126
87
Contingent income
307
891
(584)
Rental income
123
121
2
1
15
(14)
Other income
1,560
2,197
(637)
Total
6,195
5,647
548
Use of provisions for risks and charges
Services to subsidiaries refer to administrative, commercial and technical services provided within the scope of the Group. Other income includes €638 in revenue from the sale of moulds and
equipment and €106 thousand in benefits granted as a tax credit for investments made in 2021 (Law 160/2019 paragraphs 184 to 196).
25. MATERIALS 2021
2020
Change
Commodities and outsourced components
66,870
39,462
27,408
Consumables
5,252
3,809
1,443
Total
72,122
43,271
28,851
In 2021, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average higher than in 2020, with a negative impact of 5.8% of sales.
26. COSTS FOR SERVICES 2021
2020
Change
Outsourced processing
12,701
7,831
4,870
Electricity and natural gas
6,092
2,616
3,476
Maintenance
4,975
3,827
1,148
Advisory services
2,421
1,832
589
Transport and export expenses
2,475
1,420
1,055
Directors’ fees
477
419
58
Insurance
541
536
5
Commissions
770
573
197
Travel expenses and allowances
136
122
14
Waste disposal
539
469
70
Canteen
325
251
74
Temporary agency workers
487
211
276
2,315
2,102
213
34,254
22,209
12,045
Other costs Total
211
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The main outsourced processing carried out by the Company include aluminium die-casting, hot moulding of brass and some mechanical processing and assembly. The increase in costs for outsourced processing reflects the higher levels of activity compared to the previous year. The increase in energy costs resulted, in addition to the increase in production volumes, from the extraordinary and sudden increase in electricity and gas prices in the second half of the year.
2021
2020
Change
Salaries and wages
20,670
18,744
1,926
Social Security costs
6,433
5,718
715
Temporary agency workers
5,229
2,002
3,227
Post-employment benefit and other costs
1,643
1,446
197
805
657
148
34,780
28,567
6,213
Total
2021
2020
Change
Interest paid to banks
322
543
(221)
Banking expenses
177
141
36
Other financial expense
31
34
(3)
530
718
(188)
Total
Interest paid to banks includes IRS spreads payable that hedge interest rate risks.
27. PERSONNEL COSTS
Stock Grant plan
29. FINANCIAL EXPENSES
Average of the Company headcount at 31 December 2021 totalled 473 employees (335 blue-collars, 125 white-collars and supervisors, 13 managers), compared with 480 in 2020 (345 blue-collars, 124 whitecollars and supervisors, 11 managers). The number of temporary staff with temporary work contract was 115 at 31 December 2021 (82 at the end of 2020). The item “Stock Grant Plan” included the measurement at 31 December 2021 of the fair value of the options to the allocation of Sabaf shares to employees. For details of the Stock Grant Plan, refer to Note 43.
30. EXCHANGE RATE GAINS AND LOSSES In 2021, the Company reported net foreign exchange profit of €427 thousand (net loss of €399 thousand in 2020) due to the gradual strengthening of the dollar against the euro during the year.
31. PROFITS AND LOSSES FROM EQUITY INVESTMENTS 2021
2020
Change
-
500
(500)
Dividends received from Okida Elektronik
176
109
67
Total
176
609
(433)
Dividends received from Faringosi Hinges Srl
This item includes dividends received from investee companies.
32. INCOME TAXES 28. OTHER OPERATING COSTS Current taxes
2021
2020
Change
2,961
934
2,027
2021
2020
Change
-
558
(558)
Deferred tax assets and liabilities
662
(1,112)
1,774
Non-income related taxes and duties
375
413
(38)
Taxes related to previous financial years
36
(89)
125
Losses and write-downs of trade receivables
100
89
11
-
146
(146)
Contingent liabilities
53
36
17
Taxes on foreign dividends
24
15
9
Other provisions
28
26
2
Provision for tax risks
500
-
500
Other operating expenses
172
185
(13)
4,183
(106)
4,289
Total
728
1,307
(579)
Provisions for risks
Non-income taxes mainly include IMU, TASI and the tax for the disposal of urban solid waste. Other provisions refer to the allocations to provisions for risks described in Note 17.
212
Substitute tax
Total
Current taxes for 2021 are related to IRAP (€759 thousand) and IRES (€2,202 thousand). With regard to the provision for tax risks, please refer to Note 17.
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table: 2021
2020
3,414
1,513
Taxes related to previous financial years
28
(127)
Tax effect of dividends from investee companies
(16)
(124)
“Iper and Superammortamento” tax benefit
(641)
(694)
Realignment between carrying values and tax values of properties
-
(1,360)
Substitute tax on realignment of property values
-
146
74
172
-
2
Tax credit on sanitisation costs
(14)
(28)
Provision for tax risks
500
-
IRES (current and deferred)
3,345
(500)
IRAP (current and deferred)
838
394
4,183
(106)
Theoretical income tax
Permanent tax differences Other differences
Total
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 24%, to the pre-tax result. IRAP is not taken into account for the purpose of reconciliation because, as it is
a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
33. DIVIDENDS
34. SEGMENT REPORTING
On 2 June 2021, shareholders were paid an ordinary dividend of €0.55 per share (total dividends of €6,172 thousand). The Directors have recommended payment of a dividend of €0.60 per share this year. This dividend is subject to approval of shareholders in the annual Shareholders’ Meeting and was not included under liabilities in these financial statements. The dividend proposed is scheduled for payment on 1 June 2022 (ex-date 30 May and record date 31 May).
Within the Sabaf Group, the Company operates exclusively in the gas parts segment for household cooking. The information in the consolidated financial statements is divided between the various segments in which the Group operates.
35. INFORMATION ON FINANCIAL RISK
Categories of financial instruments
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IFRS 9. 31.12.2021
31.12.2020
Cash and cash equivalents
29,733
1,595
Trade receivables and other receivables
46,991
46,972
Non-current loans
10,708
5,537
1,173
1,360
-
127
Financial assets
Amortised cost
Other financial assets
Hedge Accounting Derivatives cash flow hedges (on currency)
213
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
31.12.2021
31.12.2020
149
327
101,525
50,887
1,173
1,233
33,545
26,204
71
-
Financial liabilities
Fair Value through profit or loss Derivatives cash flow hedges (on interest rates)
Amortised cost Loans Other financial liabilities Trade payables
Hedge Accounting Derivatives cash flow hedges (on currency)
The Company is exposed to financial risks related to its operations, mainly: • credit risk, with special reference to normal trade relations with customers; • market risk, relating to the volatility of prices of commodities, foreign exchange and interest rates; • liquidity risk, which can be expressed by the inability to find financial resources necessary to ensure Company operations. It is part of Sabaf’s policies to hedge exposure to changes in prices, exchange rates and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Company does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Credit risk management
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Company assesses the creditworthiness of all its
customers at the start of supply and systemically at least on an annual basis. After this assess ment, each customer is assigned a credit limit. The Company factors receivables with factoring companies based on without recourse agreements, thereby transferring the related risk. A credit insurance policy is in place, which guarantees cover for approximately 38% of trade receivables. Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
Forex risk management
The main exchange rate to which the Company is exposed is the euro/ USD in relation to sales made in dollars (mainly in North America) and, to a lesser extent, to some purchases (mainly from Asian manufacturers). Sales in US dollars represented 13.1% of total turnover in 2021, while purchases in dollars represented 4.3% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts. At 31 December 2021, the Group had in place forward sales contracts of USD 3 million, maturing in December 2022 at an average exchange rate of 1.1658. With reference to these contracts, the Company applies hedge accounting, checking compliance with IFRS 9.
The table below shows the balance sheet and income statement effects of forward sales contracts recognised under hedge accounting. Company
Sabaf S.p.A.
214
Counterparty
Unicredit
Instrument
Forward
Maturity
Value date
Notional
28/03/2022
1,000,000
27/06/2022
500,000
28/06/2022
USD
500,000
27/09/2022
500,000
27/12/2022
500,000
Fair value hierarchy
2
SABAF . 2021 ANNUAL REPORT
Sensitivity analysis With reference to financial assets and liabilities in US dollars at 31 December 2021, a hypothetical and immediate revaluation of 10% of euro against the dollar would have led to a loss of €466 thousand.
Interest rate risk management
Owing to the current trend in interest rates, the Company favours fixed-rate indebtedness: medium to long-term loans originated at a
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
variable rate are converted to a fixed rate by entering into interest rate swaps (IRS) at the same time as the loan is opened. At 31 December 2021, IRS totalling €33.4 million were in place, mirrored in mortgages with the same residual debt, through which the Company transformed the floating rate of the mortgages into fixed rate. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the “fair value through profit or loss” method.
The following table shows the characteristics of the derivative financial instruments described in the previous paragraph. Company
Sabaf S.p.A.
Counterparty
Instrument
Maturity
Value date
Notional
MPS
30/06/2023
1,500,000
Intesa Sanpaolo
15/06/2024
6,000,000
Intesa Sanpaolo
IRS
15/06/2024
EUR
1,850,000
Crédit Agricole
30/06/2025
9,000,00
Mediobanca
28/04/2027
15,000,000
Sensitivity analysis Considering the IRS in place, at the end of 2021 almost all of the Company’s financial debt was at a fixed rate. Therefore, at 31 December 2021 no sensitivity analysis was carried out in that the exposure to interest rate risk, linked to a hypothetical increase (decrease) in interest rates, is not significant.
Commodity price risk management
A significant portion of the Company’s purchase costs is represented by aluminium, steel and brass. Metal prices rose sharply during 2021, forcing the Company to renegotiate sales prices several times to compensate for the increase in costs. Based on market conditions and contractual agreements, the Company may not be able to pass on changes in raw material prices to customers in a timely and/ or complete manner, with consequent effects on margins. The Company also protects itself from the risk of changes in the price of aluminium, steel and brass with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2021 and 2020, the Company did not use financial derivatives on commodities.
Fair value hierarchy
2
Liquidity risk management
The management of liquidity and financial debt is coordinated at Group level. The Group operates with a debt ratio considered physiological (net financial debt/shareholders’ equity at 31 December 2021 of 55.2%, net financial debt/EBITDA of 1.25) and has unused short-term lines of credit. To minimise the risk of liquidity, the Administration and Finance Department: • maintains a correct balance of net financial debt, financing investments with capital and with medium to long-term debt; • verifies systematically that the short-term accrued cash flows (amounts received from customers and other income) are expected to accommodate the deferred cash flows (short-term financial debt, payments to suppliers and other outgoings); • regularly assesses expected financial needs in order to promptly take any corrective measures.
215
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
An analysis by expiry date of financial payables at 31 December 2021 and 31 December 2020 is shown below. Carrying value
Contractual cash flows
Within 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Unsecured loans and leases
70,035
71,469
1,819
15,830
47,984
5,836
Bond issue
29,649
34,440
-
555
2,220
31,665
Short-term bank loans
2,062
2,062
2,062
-
-
-
Payables to C.M.I. shareholders
1,173
1,173
-
1,173
-
-
Total financial payables
102,919
109,144
3,881
17,558
50,204
37,501
Trade payables
33,678
33,678
30,896
2,782
-
-
Total
136,597
142,822
34,777
20,340
50,204
37,501
Carrying value
Contractual cash flows
Within 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
Unsecured loans and leases
40,320
40,832
1,874
11,777
27,174
7
Short-term bank loans
10,567
10,567
10,567
-
-
-
Payables to A.R.C. shareholders
60
60
-
60
-
-
Payables to C.M.I. shareholders
1,173
1,173
-
1,173
-
-
Total financial payables
52,120
52,632
12,441
11,837
27,174
7
Trade payables
26,204
26,204
23,548
2,656
-
-
Total
78,324
78,836
35,989
14,493
27,174
7
At 31 December 2021
At 31 December 2020
The various due dates are based on the period between the end of the reporting period and the contractual expiry date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period and increased by the spread set forth in each contract.
Hierarchical levels of fair value assessment
The revised IFRS 7 requires that financial instruments reported in the statement of financial position at fair value be classified based on a hierarchy that reflects the significance of the input used in determining the fair value. IFRS 7 makes a distinction between the following levels: • Level 1 – quotations found on an active market for assets or liabilities subject to assessment; • Level 2 - input other than prices listed in the previous point, which can be observed directly (prices) or indirectly (derived from prices) on the market; • Level 3 – input based on observable market data.
The following table shows the assets and liabilities valued at fair value at 31 December 2021, by hierarchical level of fair value assessment. Level 1
Level 2
Level 3
Total
Other financial liabilities (interest rate derivatives)
-
149
-
149
Total assets and liabilities at fair value
-
149
-
149
216
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
36. RELATIONS BETWEEN GROUP COMPANIES AND WITH RELATED PARTIES The table below illustrates the impact of all transactions between Sabaf S.p.A. and other related parties on the balance sheet and income statement items and related parties, with the exception of the directors’ fees, auditors and key management personnel which is stated in the Report on Remuneration.
IMPACT OF RELATED PARTY TRANSACTIONS OR POSITIONS ON STATEMENT OF FINANCIAL POSITION ITEMS Total 2021
Subsidiaries
Other related parties
Total related parties
Impact on the total
Non-current financial assets
10,708
10,708
-
10,708
100%
Trade receivables
45,194
15,211
-
15,211
33.66%
Tax receivables
1,463
767
-
767
52.43%
Trade payables
33,678
1,533
4
1,537
4.56%
Tax payables
3,374
55
-
55
1.63%
Total 2020
Subsidiaries
Other related parties
Total related parties
Impact on the total
5,537
5,537
-
5,537
100%
45,025
16,048
-
16,048
35.64%
Tax receivables
1,254
316
-
316
25.20%
Trade payables
26,204
1,075
4
1,079
4.12%
Tax payables
2,459
351
-
351
14.27%
Non-current financial assets Trade receivables
IMPACT OF RELATED PARTY TRANSACTIONS ON INCOME STATEMENT ITEMS Total 2021
Subsidiaries
Other related parties
Total related parties
Impact on the total
144,034
20,212
-
20,212
14.03%
Other income
6,195
2,030
-
2,030
32.77%
Materials
72,122
3,316
-
3,316
4.60%
Services
34,254
447
21
468
1.37%
Capital gains on non-current assets
238
155
-
155
65.13%
Financial income
318
255
-
255
80.19%
Total 2020
Subsidiaries
Other related parties
Total related parties
Impact on the total
102,583
15,221
-
15,221
14.84%
Other income
5,647
1,647
-
1,647
29.17%
Materials
43,271
1,935
-
1,935
4.47%
Services
22,209
458
21
479
2.16%
Capital gains on non-current assets
965
723
-
723
74.92%
Write-downs of non-current assets
761
620
-
620
81.47%
Financial income
202
176
-
176
87.13%
Revenue
Revenue
Relations with subsidiaries mainly consist of: • trade relations, relating to the purchase and sale of semi-processed goods or finished products; • sales of machinery, which generated the capital gains highlighted; • charging for the provision of intra-group technical, commercial and administrative services;
• charging for intra-group royalties; • intra-group loans; • tax consolidation scheme. Related party transactions are regulated by specific contracts regulated at arm’s length conditions.
217
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
37. SIGNIFICANT NON-RECURRING EVENTS AND TRANSACTIONS Pursuant to CONSOB memorandum of 28 July 2006, the following section describes and comments on significant non-recurring events, the consequences of which are reflected in the economic, equity and financial results for the year:
Shareholders’ equity
Net Profit
Net financial debt
Cash flows
114,409
10,044
72,013
28,138
Provision for tax risks
500
500
-
-
Total non-recurring operations (B)
500
500
-
-
114,909
10,544
72,013
28,138
Financial statement values (A)
Financial statement notional value (A + B)
In these separate financial statements, the Company recognised a provision for tax risks of €500 thousand against potential tax liabilities (Note 17 and Note 28).
38. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD The recent conflict between Ukraine and Russia led to a sudden change in the global economic scenario. Although the Company has a non-significant direct exposure to the markets of Russia, Belarus and Ukraine, it is exposed to indirect effects on the price trends of raw materials, electricity and gas, the supply chain and final demand. To date, these effects are not quantifiable as they are related to future developments in the conflict, the outcome of which cannot be determined.
39. ATYPICAL AND/OR UNUSUAL TRANSACTIONS Pursuant to CONSOB memorandum of 28 July 2006, the Company declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2021.
40. SECONDARY OFFICES AND LOCAL UNITS The Company has two other active local units in addition to the registered office in Ospitaletto (Brescia): • Lumezzane (Brescia); • Busto Arsizio (Varese).
41. COMMITMENTS Guarantees issued Sabaf S.p.A. also issued sureties to guarantee mortgage loans granted by banks to employees for a total of €3,443 thousand (€3,632 thousand at 31 December 2020).
42. FEES TO DIRECTORS, STATUTORY AUDITORS AND EXECUTIVES WITH STRATEGIC RESPONSIBILITIES Fees to directors, statutory auditors and executives with strategic responsibilities are described in the Report on Remuneration that will be presented to the shareholders’ meeting called to approve these separate financial statements.
218
43. SHARE-BASED PAYMENTS Two stock grant plans are in place, namely the 2018 - 2020 Stock Grant Plan and the 2021 - 2023 Stock Grant Plan. The Plans aim to promote and pursue the involvement of the beneficiaries whose activities are considered relevant for the implementation of the contents and the achievement of the objectives set out in the Business Plan, foster loyalty development and motivation of managers, by increasing their entrepreneurial approach as well as align the interests of management with those of the Company’s shareholders more closely, with a view to encouraging the achievement of significant results in the economic and asset growth and sustainability of the Company and of the Group. 2018 – 2020 Stock Grant Plan The Plan was approved by the Shareholders’ Meeting on 8 May 2018 and the related Regulations by the Board of Directors on 15 May 2018, subsequently amended as on 14 May 2019.
Subject matter The subject-matter of the Plan is the free allocation to the Beneficiaries of a maximum of 370,000 Options, each of which entitles them to receive free of charge, under the terms and conditions provided for by the Regulations of the relevant Plan, 1 Sabaf S.p.A. Share. The free allocation of Sabaf S.p.A. shares is conditional, among other things, on the achievement, in whole or in part of the business objectives related to the ROI, EBITDA and TSR indicators and, for a share not exceeding 30%, of individual objectives, on a progressive basis. Beneficiaries The Plan is intended for persons who hold or will hold key positions in the Company and/or its Subsidiaries, with reference to the implementation of the contents and the achievement of the objectives of the 2018 - 2020 Business Plan. The Beneficiaries were divided into two groups: • Cluster 1: beneficiaries identified in the Plan or who will be identified by the Board of Directors by 30 June 2018 and to whom 185,600 rights have been allocated; • Cluster 2: beneficiaries identified by the Board of Directors from 1 July 2018 to 30 June 2019 and to whom 184,400 rights have been allocated.
SABAF . 2021 ANNUAL REPORT
Deadline The 2018 - 2020 Plan expires on 31 December 2022. Rights accrued and allocation of shares With reference to Cluster 1, based on the level of achievement of the objectives and the other conditions set out in the Plan, 34,946 rights accrued, therefore 34,946 shares have been allocated to the Beneficiaries during 2021. With regard to Cluster 2, based on the level of achievement of the objectives set out in the Plan, 114,074 rights accrued. The allocation of the relevant shares will be made during 2022 and is conditional on the continuation of the employment relationship with the Beneficiaries at the date of approval of the financial statements for the year 2021 of Sabaf S.p.A.. Accounting impacts and Fair Value measurement methods The Company’s shareholders’ equity includes the Stock Grant reserve (Note 13), which includes €896 thousand for the fair value measurement of the Rights assigned to Cluster 2 beneficiaries. Please see the explanatory notes to the consolidated financial statements at 31 December 2020 for an explanation of how to determine the fair value of these rights. 2021 – 2023 Stock Grant Plan The plan was approved by the Shareholders’ Meeting on 6 May 2021 and the related Regulations by the Board of Directors on 13 May 2021.
Subject matter The subject-matter of the Plan is the free allocation to the Beneficiaries of a maximum of 260,000 Options, each of which entitles them to receive free of charge, under the terms and conditions provided for by the Regulations of the relevant Plan, 1 Sabaf S.p.A. Share.The free allocation of Sabaf S.p.A. shares is conditional on the achievement, in whole or in part, with progressiveness, of the business targets related to the ROI and EBITDA and social and environmental targets. Beneficiaries The Plan is intended for persons who hold or will hold key positions in the Company and/or its Subsidiaries, with reference to the implementation of the contents and the achievement of the objectives of the 2021 - 2023 Business Plan. A total of 226,000 Rights were allocated to the Beneficiaries already identified. Deadline The 2021 - 2023 Plan expires on 31 December 2024.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
In line with the date on which the beneficiaries became aware of the assignment of the rights and terms of the plan, the grant date was set at 13 May 2021. The main assumptions made at the beginning of the vesting period and the methods for determining the fair value at the end of the reporting period are illustrated below. The following economic and financial parameters were taken into account in determining the fair value per share at the start of the vesting period: Share price on grant date adjusted for dividends
23.09
Dividend yield
2.60% 28%
Expected volatility per year
-0.40%
Interest rate per year
Based on the exercise right at the different dates established by the Plan Regulations and on the estimate of the expected probability of achieving the objectives for each reference period, the unitary fair value at 31 December 2021 was determined as follows: Rights relating to business objectives measured on ROI Total value on ROI
15.82
Rights on ROI
35%
fair value
5.54
Rights relating to business objectives measured on EBITDA Total value on EBITDA
16.43
Rights on EBITDA
40%
fair value
6.57
Rights relating to ESG objectives measured on personell training Total value on “Personell training” Rights on “Personell training”
20.41 5%
fair value
1.02
Rights relating to ESG objectives measured on safety indicator Total value on “Safety indicator”
7.82
Rights on “Safety indicator”
5%
fair value
0.39
Rights relating to ESG objectives measured on emissions reduction Total value on “Emissions reduction”
20.41
Rights on “Emissions reduction”
15%
Fair value per share
fair value
3.06
16.58
Accounting impacts and Fair Value measurement methods In connection with this Plan, €805 thousand (Note 27) were recognised in personnel costs during the year, an equity reserve of the same amount (Note 13) was recognised as a balancing entry.
219
SABAF . 2021 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
Summary of public grants pursuant to Art. 1, paragraphs 125-129, Law no. 124/2017 In compliance with the requirements of transparency and publicity envisaged pursuant to Law no. 124 of 4 August 2017, article 1, paragraphs 125-129, which imposed on companies the obligation to indicate in the explanatory notes “grants, contributions, and in any case economic advantages of any kind”, the following are the details of the relative amounts, accounted for “on a cash basis”, in addition to what has already been published in the National State Aid Register transparency of individual aid. Statutory References
Contribution value
Disbursing Subject
Super/Iper ammortamento (Super/ Hyper amortisation)
641
Italian State
Energy-intensive contributions
485
Italian State
Sanitisation credit
14
Italian State
Total
1,196
Iperammortamento (Hyper amortisation): it allows an over-estimation for tax purposes of capital equipment to which “Industry 4.0” benefits are applicable, which differs according to the year of acquisition. The reference regulations are included in the Budget Laws from the year 2017 to the year 2020 and Budget Law 2021, Law 178/2020. Super ammortamento (Super amortisation): it allows an overestimation for tax purposes of 130% or 140% of investments in new capital equipment; the reference regulations are contained in Law no. 205 of 27 December 2017. Energy-intensive contributions: Accessible grants for companies that consume a lot of electricity, whose regulatory reference is the MISE Decree of 21 December 2017. Tax credit for sanitisation and the purchase of personal protective equipment: tax credit equal to 60% of the expenses incurred in June, July and August 2021 with reference to Art. 32 of Law Decree no. 73 of 25 May 2021.
LIST OF EQUITY INVESTMENTS IN SUBSIDIARIES1 Registered offices
Share capital at 31 December 2021
Shareholders
% of ownership
Shareholders’ equity at 31 December 2021
2021 profit (loss)
Faringosi Hinges s.r.l.
Ospitaletto (BS)
EUR 90,000
Sabaf S.p.A.
100%
EUR 8,461,977
EUR 1,102,439
Sabaf do Brasil Ltda
Jundiaì (Brazil)
BRL 53,348,061
Sabaf S.p.A.
100%
BRL 99,168,885
BRL 8,840,503
Sabaf US Corp.
Plainfield (USA)
USD 200,000
Sabaf S.p.A.
100%
USD 179,369
USD 46,748
Sabaf Appliance Components (Kunshan) Co., Ltd.
Kunshan (China)
EUR 7,900,000
Sabaf S.p.A.
100%
CNY 10,461,803
CNY -3,349,677
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
Manisa (Turkey)
TRY 80,000,000
Sabaf S.p.A.
100%
TRY 212,728,107
TRY -35,165,181
A.R.C. s.r.l.
Campodarsego (PD)
EUR 45,000
Sabaf S.p.A.
100%
EUR 7,665,156
EUR 883,555
Sabaf S.p.A.
30%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
70%
TRY 156,217,914
TRY 77,149,853
Company name
Okida Elektronik Sanayi ve Tickaret A.S.
Istanbul (Turkey)
TRY 5,000,000
Sabaf Mexico Appliance Components
San Louis Potosì (Mexico)
USD 3,650,000
Sabaf S.p.A.
100%
PESOS 71,264,460
PESOS -3,511,040
C.M.I s.r.l.
Valsamoggia (BO)
EUR 1,000,000
Sabaf S.p.A.
100%
EUR 15,503,588
EUR 3,962,079
C.G.D. s.r.l.
Valsamoggia (BO)
EUR 26,000
C.M.I s.r.l.
100%
EUR 1,050,145
EUR 234,316
Sabaf India Private Limited
Bangalore (India)
INR 153,833,140
Sabaf S.p.A.
100%
INR 148,278,330*
INR -5,554,810*
Handan (China)
RMB 3,000,000
A.R.C. s.r.l.
51%
RMB 1,860,639
RMB -68,027
Handan A.R.C. Burners Co., Ltd.
* The values shown for Sabaf India Private Limited refer to 31 March 2021, the local reporting date.
OTHER SIGNIFICANT EQUITY INVESTMENTS None.
1
Values taken from the separate financial statements of subsidiaries, prepared in accordance with locally applicable accounting standards.
220
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
ORIGIN, POSSIBILITY OF UTILISATION AND AVAILABILITY OF RESERVES Amount
Possibility of utilisation
Available share
Amount subject to taxation for the company in the case of distribution
10,002
A, B, C
10,002
0
Revaluation reserve, Law 413/91
42
A, B, C
42
42
Revaluation reserve, Law 342/00
1,592
A, B, C
1,592
1,592
Legal reserve
2,307
B
0
0
Other retained earnings
72,912
A, B, C
72,912
0
Revaluation reserve, Law Decree 104/20
4,873
A, B
4,873
4,727
Description Capital reserves: Share premium reserve
Retained earnings:
Valuation reserve: Post-employment benefit actuarial provision
(526)
0
0
Reserve for Stock Grant plan
1,701
0
0
Hedge accounting reserve
(71)
0
0
92,832
89,421
6,361
Total
Key: A: for share capital increase B: to hedge losses C: for distribution to shareholders
STATEMENT OF REVALUATIONS OF EQUITY ASSETS AT 31 DECEMBER 2021
Investment property
Plant and equipment
Gross value
Cumulative depreciation
Net value
Law 72/1983
137
(137)
0
1989 merger
516
(501)
15
Law 413/1991
17
(17)
0
1994 merger
1,320
(1,063)
257
Law 342/2000
2,870
(2,712)
158
4,860
(4,430)
430
Law 576/75
180
(180)
0
Law 72/1983
2,180
(2,180)
0
1989 merger
6,140
(6,140)
0
1994 merger
6,820
(6,820)
0
15,320
(15,320)
0
Industrial and commercial equipment
Law 72/1983
161
(161)
0
Other assets
Law 72/1983
50
(50)
0
20,391
(19,961)
430
Total
221
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
GENERAL INFORMATION Sabaf S.p.A. is a company organised under the legal system of the Republic of Italy. Registered and administrative office
Via dei Carpini, 1 - 25035 Ospitaletto (Brescia)
Contacts
Tel: +39 030 - 6843001
Tax Code 03244470179
Fax: +39 030 - 6848249
VAT Number 01786910982
Tax information R.E.A. Brescia 347512
E-mail: info@sabaf.it Web site: www.sabafgroup.com
APPENDIX
Information as required by Art. 149-duodecies of the CONSOB Issuers’ Regulation The following table, prepared pursuant to Art. 149-duodecies of the CONSOB Issuers’ Regulation, shows fees relating to 2021 for auditing services and for services other than auditing provided by the Independent Auditors. No services were provided by entities belonging to the network.
Party providing the service
Fees pertaining to the 2021 financial year
Audit
EY S.p.A
35
Certification services
EY S.p.A
-
Other audit services
EY S.p.A
332
(€/000)
Total
2
Auditing procedures agreement relating to interim management reports.
222
68
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
CERTIFICATION OF SEPARATE FINANCIAL STATEMENTS pursuant to Art. 154-bis of Legislative Decree 58/98
Pietro Iotti, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Art. 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify: • the adequacy, in relation to the business characteristics and • the actual application of the administrative and accounting procedures for the formation of the separate financial statements during the 2021 financial year. They also certify that: • the separate financial statements: - were prepared in accordance with the international accounting policies recognised in the European Community in accordance with EC regulation 1606/2002 of the European Parliament and Council of 19 July 2002 and with the measures issued in implementation of Art. 9 of Legislative Decree 38/2005; - are consistent with accounting books and records; - provide a true and fair view of the financial position and performance of the issuer; • the report on operations contains a reliable analysis of the performance and results of operations and the situation at the issuer, along with a description of the key risks and uncertainties to which it is exposed.
Ospitaletto, 22 March 2022
Chief Executive Officer
The Financial Reporting Officer
Pietro Iotti
Gianluca Beschi
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224
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
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227
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
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REPORT OF THE BOARD OF STATUTORY AUDITORS TO THE SHAREHOLDERS’ MEETING OF SABAF S.P.A. in accordance with Art. 2429, paragraph 2 of the Italian Civil Code and Art. 153 of Legislative Decree no. 58/1998
To the Shareholders’ Meeting of the Company SABAF S.p.A.
INTRODUCTION The Board of Statutory Auditors of SABAF S.p.A. (hereinafter also “SABAF” or “Company”), pursuant to Art. 153 of Legislative Decree no. 58 of 1998 (hereinafter also T.U.F.) and Art. 2429, paragraph 2 of the Italian Civil Code, is called upon to report to the Shareholders’ Meeting called to approve the Financial Statements on the supervisory activity carried out during the financial year in the performance of its duties on any omissions and reprehensible facts found and on the results of the financial year, as well as to formulate proposals regarding the Financial Statements, the approval thereof and matters falling within its competence. First of all, note that the Board of Directors called the Shareholders’ Meeting for the approval of the Financial statements for the year 2021 on 28 April 2022 and, therefore, within the term of one hundred and twenty days pursuant to Article 2364 of the Italian Civil Code. Note that the financial statement report is made available to the public in accordance with the terms of Art. 154-ter of the T.U.F.. During the year ended 31 December 2021 and up to date, the Board of Statutory Auditors carried out its supervisory activities in compliance with Law provisions, Rules of Behaviour of the Board of Statutory Auditors of listed companies issued by the Italian Board of Certified Public Accountants and Bookkeepers, the CONSOB provisions on corporate controls, the new Corporate Governance Code, as well as by the provisions contained in Art. 19 of Legislative Decree 39/2010. The financial statements of SABAF were prepared in accordance with the IAS/IFRS international accounting standards issued by the International Accounting Standards Board (IASB) and approved by the European Union, as well as in accordance with the provisions issued by CONSOB in implementation of Art. 9, paragraph 3, of Legislative Decree 38/2005. The Financial Statements are also in XHTML - ESEF format in compliance with Legislative Decree No. 25 of 15 February 2016 implementing EU Directive 2013/50. The Company’s Financial Statements were prepared in accordance with the law and accompanied by the documents required by the Italian Civil Code and the T.U.F.. Moreover, in accordance with law provisions, the Company prepared the Consolidated financial statements and the consolidated disclosure of non-financial information for the year 2021. The Board of Statutory Auditors acquired the information necessary for the performance of the supervisory duties assigned to it by attending the meetings of the Board of Directors and the Board Committees, the hearings of the Company’s and the Group’s management, the information acquired from the competent company structures, as well as through the additional control activities carried out.
APPOINTMENT AND INDEPENDENCE OF THE BOARD OF STATUTORY AUDITORS The Board of Statutory Auditors in office at the date of this Report was appointed by the Shareholders’ Meeting of 6 May 2021 in the persons of Alessandra Tronconi (Chairman), Maria Alessandra Zunino de Pignier (Statutory Auditor), Mauro Giorgio Vivenzi (Statutory Auditor), as well as Christian Carini and Federico Pozzi (Alternate Auditors). The control body will remain in office for three financial years and will expire on the date of the Shareholders’ Meeting called to approve the Financial Statements for the year 2023. The appointment was made on the basis of two lists submitted by the Shareholders Cinzia Saleri S.A.p.A and Quaestio Capital SGR S.p.A. respectively, in compliance with the applicable law, regulatory and statutory provisions. The composition of the Board of Statutory Auditors complies with the gender distribution criterion set forth in Art. 148 of the T.U.F.. At the time of its appointment, the Board of Statutory Auditors checked the existence of the independence requirement as part of the broader process of self-assessment of the control body pursuant to Standard Q.1.1 of the Rules of Behaviour of listed companies; the check was carried out on the basis of the criteria envisaged by the aforesaid Standards and by the provisions of the Corporate Governance Code applicable to independent directors. This assessment was carried out again on 10 March 2022 and consequently communicated to the Board of Directors, which disclosed it in the Report prepared pursuant to Art. 123-bis of the T.U.F..
SUPERVISION AND CONTROL OF THE BOARD OF STATUTORY AUDITORS Supervisory activity on compliance with the law and articles of association
In carrying out its duties, the Board of Statutory Auditors carried out the supervisory activities required by Art. 2403 of the Italian Civil Code, Art. 149 of the T.U.F., Art. 19 of Legislative Decree No. 39/2010, CONSOB recommendations on corporate controls and the activities of the Board of Statutory Auditors and referring to the indications contained in the new Corporate Governance Code, as well as the Rules of Behaviour of the Board of Statutory Auditors of listed companies. In particular, the Board of Statutory Auditors notes that the Shareholders’ Meeting of 6 May 2021 appointed, according to the list voting system set forth in Article 12 of the Company’s Articles of Association, the new Board of Directors composed of Claudio Bulgarelli, Pietro Iotti, Gianluca Beschi, Alessandro Potestà, Cinzia Saleri, and the independent directors Nicla Picchi, Carlo Scarpa, Stefania Triva and Daniela Toscani. The Shareholders’ Meeting also 229
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
set: (i) the total annual remuneration of the Board of Directors at €198,000.00, excluding the remuneration due to Directors holding special offices pursuant to Art. 2398, paragraph 3, of the Italian Civil Code, the determination of which was delegated to the Board of Directors, and (ii) the duration of the Board of Directors fixed until the date of approval of the Financial statements for the year ending 31 December 2023. Following the appointment of the new Board of Directors, the latter met on the same date to appoint Bulgarelli as Chairman, Picchi as Vice Chairman and Lead Independent Director, Iotti as Chief Executive Officer, with broad powers and proxies, and Beschi as Chief Executive Officer with proxies and powers mainly in the financial area, and to assess the independence of the independent directors pursuant to the T.U.F. and the Corporate Governance Code. At that meeting, the Board also appointed: (a) Giuseppe Saleri as Honorary Chairman until his revocation or resignation, (b) pursuant to Article 154-bis of the T.U.F., Gianluca Beschi as the Financial Reporting Officer, (c) pursuant to Legislative Decree No. 231/2001, the Supervisory Body composed of Nicla Picchi (Chairman) and Giuseppe Garzillo, defining the annual remuneration due to each of them as €15,000.00 and the annual expense fund as €20,000.00, and (d) the following committees in accordance with the Corporate Governance Code: • the Control, Risk and Sustainability Committee, which also plays the role of Committee for Related Party Transactions, composed of independent directors Nicla Picchi (Chairman), Carlo Scarpa and Daniela Toscani, defining its tasks and functions and the annual expense fund of €20,000.00; • the Remuneration and Nomination Committee, composed of Daniela Toscani (Chairman), Alessandro Potestà and Stefania Triva, defining its tasks and functions and the annual expense fund of €20,000.00. During the Board of Directors’ meeting of 13 May 2021 convened to resolve, among other things, on the determination of the remuneration for the office of Chairman, Vice Chairman and Chief Executive Officer and attendance at Committee meetings, the Board of Statutory Auditors, pursuant to Art. 2389, paragraph 3 of the Italian Civil Code, expressed its favourable opinion on the proposal prepared by the Remuneration and Nomination Committee. Moreover, as part of its functions, the Board of Statutory Auditors: • attended the meetings of the Shareholders and Board of Directors, monitoring compliance with the statutory, legislative and regulatory provisions regulating the operation of the Company’s bodies as well as compliance with the principles of proper management; • supervised, for what of direct concern, the adequacy of the Company’s organisational structure and compliance with the principles of proper management, through direct observation, gathering information from heads of the corporate functions and meetings with the Independent auditors to exchange data and information; • assessed and supervised the adequacy of the internal control system and the administrative and accounting system, as well as its reliability in providing a fair presentation of operational transactions, through the information of the heads of the respective functions, 230
the examination of company documents and the analysis of the results of the work carried out by the Independent Auditors; • since its appointment (6 May 2021), held 4 meetings lasting approximately 2 hours and 30 minutes each, and also attended all the meetings of the Board of Directors, as well as of the board committees (Control and Risk Committee, Remuneration and Nomination Committee); • supervised the adequacy of the reciprocal flow of information between SABAF and its subsidiaries pursuant to Art. 114, paragraph 2, of the T.U.F. in the light of the instructions issued by the Company’s management to Group companies; • supervised compliance with the rules of “Market abuse”, “Protection of savings” and “Internal Dealing”, with a special reference to the processing of inside information and the procedure for the dissemination of statements and information to the public. Moreover, the Board: • obtained from the Directors adequate information on the business carried on and major economic and financial operations carried out by the Company and its subsidiaries pursuant to Art. 150, paragraph 1 of the T.U.F.. In this regard, the Board of Statutory Auditors paid special attention to the fact that the transactions approved and implemented complied with the law and the Articles of Association and were not imprudent or risky, in contrast with the resolutions adopted by the Shareholders’ Meeting, in potential conflict of interest or such as to compromise the integrity of the Company’s assets; • held meetings with representatives of the Independent Auditors pursuant to Art. 150, paragraph 3 of the T.U.F. during which there were no significant data and/or information to be reported; • had exchanges of information with corresponding control bodies (if any) of the companies directly or indirectly controlled by SABAF pursuant to Art. 151, paragraph 1 and 2 of the T.U.F.; • supervised the procedures for effective implementation of the corporate governance rules envisaged in the Corporate Governance Code complied with, as adequately represented in the Report on Corporate Governance and Ownership Structures, in compliance with Art. 124-ter of the T.U.F. and Art. 89-bis of the Issuers’ Regulations; • checked, in relation to the periodic assessment to be carried out pursuant to Recommendation 6 of the Corporate Governance Code, as part of the supervision of the procedures for effective implementation of the corporate governance rules and in accordance with Q. Rec. 6(2) of “The Q&A functional to the application of the Corporate Governance Code”, the correct application of the assessment criteria and procedures adopted by the Board of Directors, with regard to the positive assessment of the independence of the Directors. As required by Recommendation 19 of the Corporate Governance Code, with the support of the Remuneration and Nomination Committee, the Board of Directors expressed its assessment of the size and composition of the Board and its operation, as well as the size, composition and operation of the board committees. The assessment - carried out on the basis of the results of a selfassessment questionnaire filled in by all the members of the Board of Directors - used the assessment criteria already adopted in the previous year. The Board also acknowledges that it has issued its consent, pursu-
SABAF . 2021 ANNUAL REPORT
ant to Art. 5, paragraph 4, of Regulation (EU) 2014/537, to the provision by the Independent Auditors EY S.p.A. of services other than the external audit to C.M.I. S.r.l. belonging to the SABAF Group. The Board of Statutory Auditors also gave its consent, pursuant to Art. 2426, paragraph 1, number 5, of the Italian Civil Code, to the recognition in the financial statements of development costs with a multi-year use of €1,679,000.
Supervisory activity on the adequacy of the administrative and accounting system and the auditing activity Pursuant to Art. 19 of Legislative Decree 39/2010 (Consolidated External Audit Act), the Board of Statutory Auditors is required to supervise: • the financial reporting process; • the effectiveness of the internal control and risk management systems; • the External audit of annual accounts and consolidated accounts; • the independence of the Independent Auditors, specifically as far as the provision of non-audit services is concerned. The Board of Statutory Auditors carried out its activities in collaboration with the Control and Risk Committee in order to coordinate their responsibilities and avoid overlapping of activities.
Financial reporting process The Board of Statutory Auditors supervised the existence of rules and procedures relating to the process of formation and dissemination of financial information. In this regard, it should be noted that the Report on Corporate Governance and Ownership Structures illustrates how the Group defined its Internal Control and Risk Management System in relation to the financial reporting process at the consolidated level. The Financial Reporting Officer is Gianluca Beschi. The Financial Reporting Officer is supported by the Internal Audit Department to check the operation of the administrative and accounting procedures through control testing. The Board of Statutory Auditors acknowledges that it has received adequate information on the monitoring of business processes with an administrative and accounting impact within the Internal Control System, carried out both during the year in relation to the regular management reports, and during the closing of the accounts for the preparation of the Financial Statements, in compliance with the monitoring and certification requirements to which SABAF is subject pursuant to Law no. 262/2005. In particular, the Board of Statutory Auditors acknowledged the Risk Assessment for 2021, as well as the periodic update on testing activities pursuant to Law no. 262/2005. The Board of Statutory Auditors also received adequate information regarding the impact of the COVID-19 health emergency on the business of the Company and its subsidiaries. In this regard, it is acknowledged that the Italian plants of the SABAF Group adopted the control measures envisaged by the regulations in force from time to time for access to workplaces, such as the monitoring of body temperature and the control of COVID-19 green certification, known as “Green Pass”. The adequacy of the administrative and accounting system was also assessed through the acquisition of information from the heads of the respective departments and the analysis of the results of the work carried out by the Independent Auditors. No particular critical issues
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
or elements hindering the issue of the certification by the Financial Reporting Officer and by the Chief Executive Officer concerning the adequacy of the administrative and accounting procedures for the preparation of the Financial statements of SABAF and the Consolidated Financial Statements for the year 2021 emerged. The Board of Statutory Auditors supervised compliance with the regulations related to the preparation and publication of the Half-Yearly Report and the Interim Management Reports, as well as the settings given to them and the correct application of the accounting standards, also using the information obtained from the Independent Auditors. Furthermore, it is acknowledged that: • the Independent Auditors appointed to carry out the external audit currently in office, EY S.p.A., were appointed for the 20182026 period at the Shareholders’ Meeting held on 8 May 2018: the procedure for the appointment was carried out in compliance with the provisions of Art. 16 of Regulation (EU) 2014/537. The Board of Statutory Auditors in office at that time submitted to the Board of Directors a reasoned recommendation containing the name of two Independent Auditors suitable to replace the one that is due to expire, expressing preference for one of them. This recommendation was developed at the end of a detailed selection procedure that was carried out in compliance with the provisions contained in Regulation (EU) 2014/537; • the Independent Auditors appointed to audit the company illustrated to the Board of Statutory Auditors the checks carried out and did not report any findings in the periodic meetings with the Board of Statutory Auditors; • the Board of Statutory Auditors supervised the auditing of the annual and consolidated financial statements, obtaining information and periodically discussing with the Independent Auditors. In particular, all the main phases of the audit activity were illustrated to the Board of Statutory Auditors, including the identification of the risk areas, with a description of the related audit procedures adopted; moreover, the main accounting principles applied by SABAF have been followed. The Board also acknowledges that the Independent Auditors EY S.p.A. issued their opinions on the Consolidated Financial Statements and the Separate Financial Statements on 4 April 2022 and also issued on the same date the Additional Report to the Internal Control and Audit Committee pursuant to Art. 11 of Regulation (EU) 2014/537. The reports on the Separate financial statements and the Consolidated financial statements do not give rise to any observations or requests for information. It is also acknowledged that the Independent Auditors expressed, in the reports mentioned above, a positive opinion with regard to consistency with the financial statements and compliance with the law with reference: • to the Report on operations; • to the information referred to in Art.123-bis, paragraph 4, Legislative Decree 58/98 contained in the Report on corporate governance and ownership structures. In the audit work, a special attention was paid to the key aspects relating to the impairment test. Moreover, the reports issued by the Independent Auditors do not reveal any significant shortcomings in the Company’s internal control system for financial information and accounting system. 231
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
The Board of Statutory Auditors supervised the independence of the Independent Auditors EY S.p.A., verifying the type and extent of services other than auditing with reference to SABAF and its subsidiaries and obtaining explicit confirmation from the Independent Auditors that the independence requirement was met. The statement on independence has been included, pursuant to Art. 11, paragraph 2, letter a), of Regulation (EU) 2014/537, in the above-mentioned Additional Report. The fees paid by the SABAF Group to the Independent Auditors and to the companies belonging to the network of the Independent Auditors themselves are as follows: ASSETS Audit Certification services
AMOUNT €/000 130 -
Other services
37
Total
167
In the light of the above, the Board of Statutory Auditors considers that the Independent Auditors EY S.p.A. meet the requirement of independence.
Supervisory activity on the adequacy of the internal control system and the organisational structure The Board of Statutory Auditors assessed and supervised the adequacy of internal control and the effectiveness of the internal control and risk management systems. The Board of Statutory Auditors acknowledges that it has verified the most significant activities carried out by the overall internal control and risk management system by attending the meetings of the Control and Risk Committee (also with functions of Committee for related party transactions) attended by: • members of the Control and Risk Committee; • members of the Board of Statutory Auditors; • the Chief Executive Officer and director in charge of the internal control and risk management system; • the Internal Audit department and its Head; • the Financial Reporting Officer. The Board of Statutory Auditors also acknowledges that it attended the periodic meetings among the Company’s control bodies attended by: • • • •
members of the Control and Risk Committee; members of the Board of Statutory Auditors; the Independent Auditors; the Chief Executive Officer and Director in charge of the internal control system; • the Financial Reporting Officer; • the Internal Audit department and its Head; • the Supervisory Body. In particular, as part of these activities, the Board of Statutory Auditors acknowledges that it has received and examined: • the periodic reports on the activities carried out, prepared by the 232
Control and Risks Committee and the Internal Audit department; • the reports drawn up at the end of the verification and monitoring activities by the Internal Audit department, with the relative results, the recommended actions and the controls on the implementation of the aforesaid actions also in order to represent the management events and impacts of the COVID-19 emergency; • periodic updates on the development of the risk management process, the outcome of the monitoring and assessment activities carried out by Internal Audit and the objectives achieved. The Board of Statutory Auditors then reviewed every six months the periodic reports on the activities carried out by the Supervisory Body and examined the activity plan and the budget allocated for 2021. Similarly, the Board of Statutory Auditors acknowledged the compliance with the provisions of Legislative Decree no. 231/2001 and the activity plan for 2021, examining and agreeing with the amendments made during the year to the Organisation and Management Model pursuant to Legislative Decree no. 231/2001. Following the activities carried out during the 2021 financial year, as detailed above, the Board of Statutory Auditors shared the positive assessment expressed by the Control and Risk Committee with regard to the adequacy of the Internal Control and Risk Management System.
Supervisory activity on compliance the principles of proper management The main transactions carried out by the Company during 2021, with respect to which the Board of Statutory Auditors monitored compliance with the principles of proper management, are summarised below. On 12 October 2021, the Company completed the purchase of 30% of the capital of A.R.C. S.r.l. from Loris Gasparini, in performance of the agreement that had been signed between the parties in 2016, when Sabaf had acquired 70% of A.R.C. S.r.l. The price for the acquisition of this equity investment was €1,650,000; as a result of this acquisition, the Company holds 100% of the share capital of A.R.C. S.r.l.. On 2 November 2021, the Company completed the purchase of 15.75% of the share capital of C.M.I. S.r.l., by the minority shareholder Starfire Industrial Engineering S.r.l. The purchase price was €4,743,000. As a result of this acquisition, the Company now holds 100% of the share capital of C.M.I. s.r.l.. Moreover, during the 2021 financial year, the Company implemented an important operation aimed at providing new resources to support the development objectives it intends to pursue. To this end, in December 2021, the Company completed the placement of a senior, unsecured, non-convertible and non-subordinated bond loan for a value of €30 million fully subscribed by PRICOA Private Capital Group (one of the leading operators in the international private placement market). The bonds were issued in a single tranche, have a maturity of 10 years and an average life of 8 years. The fixed coupon is 1.85%. With reference to this transaction, the Board of Statutory Auditors certified, pursuant to and for the purposes of Art. 2412 of the Italian Civil Code, compliance with the limit indicated in Article 2412, paragraph 1,
SABAF . 2021 ANNUAL REPORT
of the Italian Civil Code. Note that, in the second half of December 2021, the Company learned of the erroneous enforcement of a decision to seize - with registration of the Treasury Shares in the name of the Fondo Unico di Giustizia (Asset forfeiture fund) - concerning 311,802 treasury shares (corresponding to 2.703% of the Company’s share capital) in pursuance of a criminal sentence of which the Company has no knowledge. Therefore, the Company carried out the checks required and started any appropriate legal action, in acceptance of the application for an enforcement review, the recognition by order pronounced inaudita altera parte on 22 January 2022 of the unlawfulness of the enforcement of the seizure of the Treasury Shares and the revocation of such seizure, with the consequent order to return the treasury shares to the Company. On 1 March 2022, SABAF recovered the full availability of 311,802 treasury shares. In terms of ordinary operations, SABAF’s activities continued in line with previous years and consisted of industrial activities, strategic and management coordination of the Group, the search for the optimisation of the Group’s financial flows, as well as the search and selection of equity investments with the aim of accelerating the Group’s growth. Following the supervision and control activities carried out during the year, the Board of Statutory Auditors can certify that: • during the course of the activity carried out, no omissions, irregularities or reprehensible or significant facts that would require reporting to the control bodies or mention in this Report emerged; • no reports were received by the Board of Statutory Auditors pursuant to Art. 2408 of the Italian Civil Code, nor has it received any complaints from third parties; • no transactions have been identified with third parties, intra-group and/or related parties such as to highlight atypical and/or unusual profiles, in terms of content, nature, size and timing; • all the transactions and management choices adopted are inspired by the principle of proper management and reasonableness, and comply with the 2021-2023 Business Plan approved by the Board of Directors on 23 March 2021.
Supervisory activity on implementation of the corporate governance rules The Board of Statutory Auditors, during the financial year ended 31 December 2021, assessed the application of the corporate governance rules set out in the Corporate Governance Code and the relative level of compliance, also by analysing the Report on corporate governance and ownership structures and comparing its contents with what emerged during the general supervisory activity carried out during the year. The Board also acknowledges that, on 16 December 2021, the Company’s Board of Directors adopted the Corporate Governance Manual setting out the principles, rules and operating procedures to enable the Company to implement the recommendations of the Corporate Governance Code. Moreover, compliance with the obligation on the part of SABAF to inform the market in its Report on corporate governance and ownership structures of its level of compliance with the Code itself was assessed, also in accordance with the provisions of Art. 123-bis of
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
the T.U.F.. The Board of Statutory Auditors is of the opinion that the Report on corporate governance was prepared in accordance with the provisions of Art. 123-bis of the T.U.F. and the Corporate Governance Code and following the format made available by the Corporate Governance Committee of Borsa Italiana S.p.A.
Supervisory activities in relation to the Financial Statements, the Consolidated financial statements and the Consolidated disclosure of non-financial information With regard to the Separate financial statements for the year ended 31 December 2021, the Consolidated financial statements for the year ended on the same date and the related Report on operations, note the following: • the Board of Statutory Auditors ascertained, through direct audits and information obtained from the Independent Auditors, compliance with law provisions regulating their formation, the layout of the Financial statements, the Consolidated financial statements and the Report on Operations, and the financial statement formats adopted, certifying the correct use of the accounting standards described in the explanatory notes and the Report on operations. In particular, the Board of Statutory Auditors analysed the results of the impairment test carried out by independent experts, in accordance with IAS 36, on the individual CGUs that coincide with the equity investments in Faringosi Hinges S.r.l., A.R.C. S.r.l., C.M.I. S.r.l. and Okida Elektronik (“Hinges” CGU for Faringosi Hinges S.r.l.; “Professional burners” CGU for A.R.C. S.r.l.; “C.M.I.” CGU for C.M.I. S.r.l. and “electronic components” CGU for Okida Elektronik). In this regard, note that the Independent Auditors, in their report, accurately described the audit procedures carried out with reference to the impairment tests, as “key aspects of the audit” and to which, therefore, the Board of Statutory Auditors refers. Therefore, the Board of Statutory Auditors supports the procedures adopted with reference to the impairment tests carried out on goodwill and on the equity investments above mentioned; • in pursuance of CONSOB Communication 6064293 of 28 July 2006, the effects of the related party transactions are expressly indicated in the financial statements. In pursuance of this Communication in the Explanatory Notes, it is specified that during the year no transactions deriving from atypical and/or unusual operations were carried out, whereas there were significant nonrecurring events, the consequences of which are reflected in the economic, equity and financial results for the year. In particular, in the Consolidated financial statement the Company’s Directors acknowledged that the Group recognised under income taxes a) a non-recurring income of €801 thousand following the revaluation for tax purposes of the tangible assets of the Group’s Turkish companies; the exercise of the revaluation option results in a substitute tax of €73 thousand, which is accounted for in current taxes for the year; b) a non-recurring income of €1,963 thousand relating to the tax benefits arising from investments made in Turkey; c) a provision for tax risks of €500 thousand against potential tax liabilities; • the Financial statements are in keeping with the facts and information of which the Board of Statutory Auditors has become aware within its supervisory duties and its control and inspection powers; • as far as the Board of Statutory Auditors is aware, the Directors, 233
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
when preparing the financial statements, did not depart from the law provisions pursuant to Art. 2423, paragraph 5 of the Italian Civil Code; • the Chief Executive Officer and the Financial Reporting Officer issued the certificate, pursuant to Art. 81-ter of CONSOB Regulation no. 11971/1999 as amended and Art. 154-bis of the T.U.F.; • the Report on Operations complies with legal requirements and is consistent with the data and results of the Financial Statements; it provides the necessary information on the activities and significant transactions of which the Board of Statutory Auditors was informed during the year, on the main risks of the Company and its subsidiaries, on intra-group and related party transactions, as well as on the process of adapting the corporate organisation to the principles of corporate governance, in accordance with the Corporate Governance Code for listed companies; • pursuant to the provisions of Art. 123-ter of the T.U.F., the Remuneration Report is presented to the Shareholders’ Meeting (to resolve on the second section pursuant to Art. 123-ter, paragraph 6, of the T.U.F.) and the Board of Statutory Auditors examined and approved the approach followed in preparing it. In relation to the presentation of the Consolidated disclosure of non-financial information, the Board of Statutory Auditors, in compliance with Legislative Decree no. 254 of 30 December 2016, supervised compliance with the provisions set out in the decree itself and in CONSOB resolution no. 20267 of 18 January 2018 for the preparation of the disclosures in question, also acquiring the certification issued by the appointed auditor EY S.p.A. on 4 April 2022. This activity did not reveal any facts that could be reported in this report.
Supervisory activity on relationships with Subsidiaries The Board of Statutory Auditors supervised the adequacy of the instructions given by the Company to the subsidiaries, in accordance with Art. 114, paragraph 2 of the T.U.F.. Periodic meetings with the management and the company in charge of Internal Audit did not reveal any critical elements to be reported in this report. Finally, we acknowledged that to date no communications have been received from the Control Bodies of the Subsidiaries containing findings to be noted in this report.
Supervisory activity on related party transactions In relation to the provisions of Art. 2391 bis of the Italian Civil Code, the Board of Statutory Auditors acknowledges that the Board of Directors adopted a procedure for the regulation of Related Party Transactions, whose main objective is to define the guidelines and criteria for identifying related party transactions and setting out roles, responsibilities and operating methods so as to guarantee, for such transactions, adequate information transparency and the related procedural and substantial correctness. That procedure was prepared in compliance with what was established by the CONSOB Regulation on Related Parties (no.17221 dated 12 March 2010 as amended) and was last updated by the Board of Directors on 3 August 2021 in order to implement the amendments made to the aforementioned Regulation by CONSOB Resolution No. 21624/2020. The Board of Statutory Auditors supervised the effective application 234
of the rules by the Company and has no observations to make in this regard in this Report
RISKS RELATED TO THE COVID-19 PANDEMIC With reference to the Covid-19 pandemic, note that in the Explanatory Notes it is stated that the “Management has reviewed the Company’s exposure to the effects of the COVID-19 pandemic and its impact on the Company’s financial position, results and cash flows, especially with regard to the recoverability of the value of intangible assets, the measurement of receivables, the measurement of inventories and the management of financial risks, with a special reference to credit and liquidity risks. The analysis carried out did not reveal any critical situations and the factors related to the COVID-19 pandemic did not have a significant impact on the opinions and estimates used in preparing these Separate Financial Statements.” Note that the Explanatory Notes state that “on 31 March 2021, the IASB issued the document “Covid-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)” by which it extends by one year the period of application of the amendment to IFRS 16, issued in 2020, relating to the accounting for facilities granted to lessees due to Covid-19. These changes that apply as from 1 April 2021 had no impact on the Group’s separate financial statements.” Also note that, in the context of the Covid-19 pandemic, in order to mitigate the risks of contagion, all Group companies promptly adopted preventive measures and strict protocols, which are currently in force and constantly adapted based on best practice. The Notes to the Financial Statements acknowledge that “the Group assessed that it is a going concern in accordance with paragraphs 25 and 26 of IAS 1, also due to the strong competitive position, high profitability and solidity of the financial structure.” The Board of Statutory Auditors paid particular attention to the assessment carried out by the Company, both with regard to the existence of the going concern requirement and to the adequacy of the internal control system.
RISKS RELATED TO THE RUSSIAN-UKRAINIAN CONFLICT Russia’s military invasion of Ukraine starting on 24 February 2022, together with the economic and financial sanctions adopted by the European Union and other countries against Russia and Belarus, appear to be leading to a situation of macroeconomic uncertainty that could negatively impact the global economy. In line with Consob’s request in its warning notice of 18 March 2022, the Company’s Directors acknowledged the risks related to the ongoing conflict in the Report on Operations, highlighting that the Group has a non-significant direct exposure to the markets of Russia, Belarus and Ukraine, it is exposed to indirect effects on the price trends of raw materials, electricity and gas, the supply chain and final demand. Also in line with Consob’s request in its warning notice of 18 March
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2022, the Board of Statutory Auditors also acknowledges that the Company has put in place organisational control units on cybersecurity both within the procedures and protocols envisaged by the Organisation and Management Model pursuant to Legislative Decree no. 231/2001, and within its own internal control system, as well as a specific insurance policy aimed at protecting the Company from the risk of security breaches and violation of the confidentiality of personal data.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2021
PROPOSAL TO THE SHAREHOLDERS’ MEETING On 22 March 2022, the Board of Directors decided to propose to the Shareholders’ Meeting that the Company’s 2021 profit be allocated as follows: • a dividend of €0.60 per share to be paid to shareholders as from 1 June 2022; • the remainder to the Extraordinary Reserve. The Board of Statutory Auditors expresses its favourable opinion for the approval of the Separate financial statements at 31 December 2021 and has no objections to make to the draft resolution presented by the Board of Directors as formulated in the Explanatory Notes and in the Directors’ Report on Operations.
Ospitaletto, 5 April 2022 The Board of Statutory Auditors Chairman Alessandra Tronconi Statutory Auditor Maria Alessandra Zunino de Pignier Statutory Auditor Mauro Vivenzi
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REPORT ON REMUNERATION pursuant to Art. 123-ter of the T.U.F. and Art. 84-quater of the Issuers’ Regulations
Section I - Remuneration policy 240 Section II - Remuneration paid 248
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SECTION I - REMUNERATION POLICY Introduction to the General Remuneration Policy Duration and changes introduced Sabaf S.p.A.’s General Remuneration Policy (hereinafter also “remuneration policy”), approved by the Board of Directors on 22 December 2011, later updated on 20 March 2013, 4 August 2015, 26 September 2017, 24 March 2020 and 23 March 2021, defines the criteria and guidelines for the remuneration of members of the Board of Directors, Executives with strategic responsibilities and members of the Board of Statutory Auditors. The remuneration policy was prepared: • following the recommendations of the Corporate Governance Code for Listed Companies, approved in January 2020; • in line with Recommendations 2004/913/EC and 2009/385 and with Art. 9-bis of Directive 207/36/EC, introduced by EU Directive 2017/828, which were incorporated into law with Art. 123-ter of the Consolidated Finance Act (T.U.F.), as last amended by Legislative Decree no. 49/19, and by Art. 84-quater of Consob Regulation no. 11971/19 (Issuers’ Regulation), as last amended by Consob Resolution no. 21623/20. The remuneration policy lasts three years.
1. Corporate bodies and persons involved in preparing, approving and implementing the remuneration policy SHAREHOLDERS’ MEETING • Determines the remuneration due to the members of the Board of Directors; • resolves remuneration plans based on the allocation of financial instruments with regard to directors and employees; • it casts a binding vote on the first section of the Report on remuneration policy and remuneration paid to the Board of Directors, to Executives with strategic responsibilities and, without prejudice to the provisions of Art. 2402 of the Italian Civil Code, to the members of the Board of Statutory Auditors, and a non-binding vote on the second paragraph of that Report. BOARD OF DIRECTORS • At the suggestion of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors, determines the fee for Directors holding specific positions; • defines the remuneration policy of Executives with strategic responsibilities; • after obtaining the opinion of the Remuneration and Nomination Committee, resolves to sign Non-competition agreements with regard to the Chief Executive Officer and to executives; • at the suggestion of the Remuneration and Nomination Committee, defines incentive plans based on short- and long-term variable remuneration to be assigned to the Chief Executive Officer and to the Executives with strategic responsibilities; • at the suggestion of the Chief Executive Officer, defines the incentive plans based on short-term variable remuneration for company Management and other employees; 240
• at the suggestion of the Remuneration and Nomination Committee, resolves to assign non-monetary benefits to executives; • makes proposals to the Shareholders’ Meeting on remuneration plans based on the allocation of financial instruments with regard to directors and employees; • prepares the Report on Remuneration pursuant to Art. 123-ter of the Consolidated Law on Finance and Art. 84-quater of the Issuers’ Regulations; • ensures that the remuneration paid and accrued is consistent with the principles and criteria defined in the remuneration policy, in the light of the results achieved and other circumstances relevant to its implementation; • on termination of office and/or termination of the relationship with the Chief Executive Officer, with Directors holding specific positions or with a General Manager, discloses in a press release to the market at the end of internal processes leading to the allocation or recognition of any allowance and/or other benefits, detailed information concerning: a) the allocation or recognition of allowances and/or other benefits, the circumstances justifying their accrual and the deliberative procedures followed for this purpose within the company; b) the total amount of the allowance and/or other benefits, the related components (including non-monetary benefits, the maintenance of rights related to incentive plans, the fee for non-competition commitments or any other remuneration allocated for any reason and in any form) and the timing of their payment (distinguishing the part paid immediately from the part subject to deferral mechanisms); c) the application of any claw-back or malus clause of part of the sum; d) the compliance of the elements indicated in letters a), b) and c) above with what is indicated in the remuneration policy, with a clear indication of the reasons and the deliberative procedures followed in the event of even partial non-compliance with the policy; e) information on any procedures that have been or will be followed for the replacement of the executive director or general manager no longer in office. The Board of Directors is responsible for properly implementing the remuneration policy. REMUNERATION AND NOMINATION COMMITTEE • Makes proposals to the Board of Directors, in the absence of the persons directly concerned, for remuneration of the Chief Executive Officer and Directors holding specific positions; • examines, with the support of the Human Resources Department, the policy for the remuneration of executives, with a special attention to Executives with strategic responsibilities; • makes suggestions and proposals to the Board of Directors concerning the setting of objectives on which the annual variable component and long-term incentives for the Chief Executive Officer, Directors holding specific positions and Executives with strategic responsibilities should be dependent, in order to ensure alignment with shareholders’ long-term interests and the company’s strategy; • monitors the actual application of the remuneration policy and assesses the level of achievement of the short- and long-term variable incentive objectives of Directors and executives;
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• prepares the proposals to the Board of Directors of remuneration plans based on financial instruments; • assesses the adequacy, actual application and consistency of the remuneration policy, also with reference to the actual company performance, making suggestions and proposals for change; • follows the development of the regulatory framework of reference and best market practices on remuneration, getting inspired by them for formulating the remuneration policy and identifying aspects for improving the Report on Remuneration; The Remuneration and Nomination Committee currently in office comprises three non-executive members, the majority of them independent (Daniela Toscani, Stefania Triva, e Alessandro Potestà), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors. Minutes of the Committee meetings are taken and signed by the chairman of the meeting and the secretary - are kept in chronological order together with the relevant documentation. The Chairman of the Committee reports to the Board of Directors during the meeting immediately after with regard to the activities
2. Purposes of the remuneration policy and its contribution to the pursuit of the corporate strategy The Company’s intention is that the Remuneration Policy: • ensures the competitiveness of the company on the labour market and attracts, motivates and increases the loyalty of persons with appropriate professional expertise; • protects the principles of internal equity and diversity; • brings the interests of the management into line with those of the shareholders; • favours the creation of sustainable value for shareholders in the medium to long term, and maintains an appropriate level of competitiveness for the company in the sector in which it operates; • pursues the sustainable success of the company and takes into account the need to have, retain and motivate people with the competence and professionalism required by their role in the company. The remuneration policy envisages the structuring of the remuneration of executive directors and Executives with Strategic Responsibilities in such a way that it is significantly made up of variable remuneration, including financial instruments: (i) whose payment is conditional on the achievement of common objectives (in particular, Group EBITDA and EBIT) and individual objectives, not only of an economic-financial nature, but also of a technicalproductive and/or socio-environmental nature; (ii) subject, in part, to adequate retention and deferral mechanisms.
REPORT ON REMUNERATION
carried out by the Committee. No further rules on the methods of operation of the Committee are currently envisaged. BOARD OF STATUTORY AUDITORS • The Board of Statutory Auditors expresses the opinions required by the regulations in force on proposals for remuneration of Directors holding specific positions; • the Board of Statutory Auditors, i.e. the Chairman of the Board of Statutory Auditors or another Statutory Auditor designated by him/her can attend the meetings of the Remuneration and Nomination Committee. HUMAN RESOURCES DEPARTMENT Actually enacts what is decided upon by the Board of Directors. INDEPENDENT CONSULTANTS AND EXPERTS No independent expert took part in the preparation of the remuneration policy. The Company availed itself of the legal advice of Studio Trifirò & Partners in Milan.
Attracts, motivates and increases the loyalty of persons with appropriate professional expertise
Brings the interests of the management into line with those of the shareholders
Favours the creation of sustainable value for shareholders in the medium to long term
Protects the principles of internal equity and diversity
The objectives to which the disbursement of significant portions of variable remuneration is conditioned are structured in such a way as to prevent them from being achieved through short-term management choices that would potentially undermine the sustainability and/or the Company’s ability to generate profit in the long term. In this context, the policy aims to encourage the achievement of the strategic objectives set out in the pro tempore business plans in force and to create long-term value for stakeholders, also in line with the principles of corporate social responsibility.
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3. Remuneration policy guidelines and instruments The principles and characteristics of the remuneration package regulated by the remuneration policy for the persons to whom the policy applies follow the same approach for determining, in general, the remuneration packages offered to employees. In defining each remuneration package proposed by Sabaf to its personnel, the following points are considered as priority elements for assessment: i. the comparison with the external market and the internal equity of the Company; ii. the characteristics of the position, the responsibilities assigned and the skills of the persons, taking care to avoid any form of discrimination; iii. the pursuit of Sabaf’s growth strategy and the strengthening of the Company’s long-term interests and sustainability based on the principles of fairness, sustainability, equal opportunities, meritocracy and competitiveness in relation to the market. In preparing the remuneration package referred to in this remuneration policy, account was therefore taken of the fact that employees are generally offered remuneration that includes, in addition to the pay envisaged by the National Collective Labour Contract for the metal and engineering industry, supplemented by second-level negotiations, an individual fixed component and variable components based on the achievement of common or individual objectives. The training opportunities provided and access to the company welfare platform are also part of the remuneration, incentive and enhancement system. Sabaf also aims to establish and maintain effective and efficient working partnerships, aimed at the pursuit of general and individual objectives and, in this perspective, also to encourage - where possible - the development of smart working conditions, including through the use of technologies that ensure continuous value for the company and for individuals and that improve work-life balance.
The definition of a fair and sustainable remuneration package takes into account three main tools: • fixed remuneration; • variable remuneration (short- and medium- to long-term); • benefits. Each remuneration component is analysed below. FIXED ANNUAL COMPONENT The fixed component of the Directors’ remuneration is such that it is able to attract and motivate individuals with appropriate expertise for the roles entrusted to them within the Board, and is set with reference to the remuneration awarded for the same positions by other listed Italian industrial groups of a similar size. The Shareholders’ Meeting determines the fixed remuneration paid to the members of the Board of Directors. With regard to the remuneration for Directors holding special offices, the Board of Directors, at the suggestion of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors, determines the additional fixed remuneration. Directors who sit on committees formed within the Board (Control, Risk and Sustainability Committee, Remuneration and Nomination Committee) are paid fixed remuneration intended to reward the commitment required of them. Executives with strategic responsibilities are paid a fixed annual remuneration, determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the objectives. The members of the Board of Statutory Auditors are paid a fixed remuneration, the amount of which is determined by the Shareholders’ Meeting, at the time of their appointment.
CORPORATE OFFICES COMPONENTS OF THE REMUNERATION
Executive Directors Fixed remuneration for the office of Director
FIXED COMPONENTS
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Fixed remuneration for Directors holding special positions
Non-Executive Directors
Members of committees within the BoD
Executives with strategic responsibilities
Statutory Auditors
Fixed remuneration for the office of Director
Fixed remuneration for Directors members of Committees within the BoD
Collective National Contract for Industrial Managers
Fixed remuneration
SABAF . 2021 ANNUAL REPORT
SHORT-TERM VARIABLE COMPONENT (ANNUAL) The Board of Directors, at the suggestion of the Remuneration and Nomination Committee and in accordance with the budget, defines an MBO plan, for the benefit of: • executives with strategic responsibilities; • other persons, identified by the Chief Executive Officer, among the managers who report directly to him or who report to the aforementioned managers. This plan sets a common objective (Group EBIT, which is considered to be the Group’s main indicator of financial performance) and quantifiable and measurable individual objectives economicfinancial, technical-productive and/or socio-environmental in nature. Some individual objectives refer to technical (e.g. efficiency and quality), management (e.g. meeting deadlines for completion of relevant projects) and sustainability (e.g. environmental performance) parameters. A variable portion of between 30% and 40% of the variable remuneration under the MBO plan is normally related to the common EBIT objective. The plan in question envisages, with regard to the EBIT objective, the payment of remuneration according to the objective achievement range. There is an entry threshold if 80% of the target is reached, entitling the employee to 70% of the variable remuneration, and an extra bonus if the target is exceeded by more than 15%, entitling the employee to a bonus of between 2.1% and 2.8% of gross annual remuneration. For the portion of the variable component of the MBO plan, the payment of which is linked to the achievement of the other objectives, no ranges are routinely provided according to the level of achievement of the target. The MBO plan includes malus and/or claw back clauses in the event that the objectives of the plan were achieved on the basis of data that later proved to be incorrect. The allocation of the variable component under the MBO plan is conditional on continued employment until the end of the vesting period. The objectives of the Chief Executive Officer and of the Executives with strategic responsibilities are decided by the Board of Directors, at the suggestion of the Remuneration and Nomination Committee, in accordance with the budget. The objectives of the other beneficiaries of the incentive plans are defined by the Chief Executive Officer, in accordance with the budget. The Board of Directors, at the proposal of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors in the cases referred to in Art. 2389 of the Italian Civil Code, may decide to pay a one-off bonus to Directors holding specific positions and/or to Executives with strategic responsibilities. The resolution must be motivated and justified by exceptional circumstances, consistent with the objectives of the remuneration policy and, in particular, with that of pursuing the sustainable success of the company. In no case may the one-off bonus exceed 50% of the fixed annual component of the remuneration of the Director holding specific positions or the Executive with strategic responsibilities concerned. Non-executive directors are not paid any variable remuneration.
REPORT ON REMUNERATION
LONG-TERM VARIABLE COMPONENT The remuneration policy envisages the adoption of long-term incentive plans based on financial instruments. The beneficiaries, if not already identified in the incentive plan, are identified by the Board of Directors among the members of the Board of Directors and/or among the managers of the Company or its Subsidiary companies who hold or will hold key positions in the implementation of the Business Plan. In the case of the Chief Executive Officer and/or Executives with strategic responsibilities of the Company, the identification is made on the suggestion of the Remuneration and Nomination Committee. The Board of Directors identifies the total number of rights to be assigned to each beneficiary (within the limits set by the Shareholders’ Meeting). The incentive plan normally provides for a multi-year vesting period, with subsequent allocation of the financial instruments. On the basis of the remuneration policy, the total or partial allocation of financial instruments is made by the Board of Directors; for the Chief Executive Officer and Executives with strategic responsibilities, the allocation is made at the suggestion of the Remuneration and Nomination Committee. The allocation of financial instruments is related to predetermined financial and non-financial performance targets measurable (also year by year) and linked to the creation of value for shareholders over a long-term horizon, based on business plans approved by the Board of Directors. The incentive plan envisages a lock-up period, lasting at least one year, of a portion of the financial instruments allocated to each beneficiary, normally not less than 40% of the total. The allocation of the shares related to a specific performance target is not envisaged, not even partially, in case of failure to achieve the performance target, within a minimum threshold set by the Board of Directors, which is normally not less than 80%. The plan can contain catch-all clauses that allow, if the average or cumulative objective or the objective for the last year of the plan is achieved, the allocation of the shares - related to that objective envisaged for all periods of measurement of that objective set out in the plan. The allocation of the shares is conditional on the continuation of the employment and/or collaboration and/or administration relationship between the beneficiary and the company at the date of approval of the financial statements for the year in which the allocation is envisaged, according to the criteria established by the incentive plan. The incentive plan provides for malus and/or claw back clauses in the following cases: a. the Beneficiary has engaged in fraudulent or grossly negligent behaviour that has caused damage to the assets or image of the Company or its Subsidiaries or the Group; b. the beneficiary has affected, by its own fraudulent or grossly negligent behaviour, the achievement of the objectives of the plan; c. the objectives of the plan were achieved based on data that later proved to be manifestly incorrect.
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Following the Shareholders’ Meeting of 6 May 2021, at the suggestion of the Remuneration and Nomination Committee, and after obtaining the opinion of the Board of Statutory Auditors, on 13 May 2021, the Board of Directors approved the regulation of a long-term sharebased incentive plan (Stock Grants) related to performance targets for the three-year period 2021 to 2023. The incentive plan includes the
following objectives: an objective based on the Group’s EBITDA, to the achievement of which 40% of the attributable shares are linked; an objective based on Return on Investments (ROI), to the achievement of which 35% of the attributable shares are linked; social and environmental sustainability objectives, to the achievement of which 25% of the attributable shares are linked.
ANNUAL MBO
STOCK GRANT PLAN
RELATED TO THE BUDGET FOR YEAR
RELATED TO THE BUSINESS PLAN
BENEFICIARIE
BENEFICIARIE
• EXECUTIVE DIRECTORS (excluding the Chairman)
• CHIEF EXECUTIVE OFFICER
• EXECUTIVES WITH STRATEGIC RESPONSIBILITIES
• CFO
• OTHER MANAGERS PROPOSED BY THE CHIEF EXECUTIVE OFFICER
• OTHER MANAGERS IDENTIFIED BY THE BoD WHO HOLD OR WILL HOLD KEY POSITIONS IN THE IMPLEMENTATION OF THE BUSINESS PLAN
OBJECTIVES
OBJECTIVES
• COMMON OBJECTIVE: GROUP EBIT
• FINANCIAL PERFORMANCE TARGETS
• INDIVIDUAL OBJECTIVES: ECONOMIC/FINANCIAL AND TECHNICAL AND PRODUCTION
• NON-FINANCIAL PERFORMANCE TARGETS
CORPORATE OFFICES COMPONENTS OF THE REMUNERATION
SHORT-TERM VARIABLE COMPONENT VARIABLE COMPONENTS
LONG-TERM VARIABLE COMPONENT
ALLOWANCE FOR EARLY TERMINATION OF EMPLOYMENT The current Chief Executive Officer entered into a permanent employment contract with the Company, effective as from 12 September 2017. The managerial employment relationship is regulated by the National Collective Bargaining Agreement for Managers of Companies producing goods and services. In case of early termination of employment at the Company’s initiative not due to just cause, a fixed allowance for termination of employment shall be paid, as a redundancy incentive, equal to twice the remuneration including the fixed component and the short-term variable component (MBO). The same allowance is also envisaged in case of resignation for just cause from the office of chief executive officer or from the executive position. There are no specific provisions linking the payment of the termination allowance and the performance of the Company. Without prejudice to the relationships already in place, the 244
Executive directors and other executives with strategic responsibilities
Other persons identified by the CEO/BoD
Annual MBO plan based on achieving a common objective and individual objectives
Annual MBO plan based on achieving a common objective and individual objectives
Possible one-off bonus
Possible one-off bonus
Stock Grant Plan based on achieving financial and non-financial performance targets (and possibly individual objectives)
Stock Grant Plan based on achieving financial and non-financial performance targets
remuneration policy envisages, as a general rule, that the contractual termination-of-employment allowances for the Chief Executive Officer shall not exceed, as a general rule, a maximum of 24 months of the total gross remuneration (including both the gross remuneration as an executive and any gross remuneration for the management position) paid to the chief executive officer, without prejudice to more favourable provisions of any applicable collective bargaining agreement. The remuneration policy also envisages that future agreements with chief executive officers will specify the portion of the termination-of-employment allowance based on the fixed component of remuneration and the portion of the termination-of-employment allowance based on the Company’s performance, and provide for specific cases of exclusion of the payment of the termination-ofemployment allowance due to the failure to achieve, within predefined minimum thresholds, the objectives of the business plan.
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There are no agreements for other Directors or other Executives with strategic responsibilities regulating ex ante the economic part concerning the early termination of the employment relationship. In case of termination of the relationship for reasons other than just cause or justified reasons by the employer, the Company’s remuneration policy allows for consensual agreements to end the relationship in compliance with legal and contractual obligations. These agreements must be approved by the Board of Directors at the suggestion of the Remuneration and Nomination Committee. The Company does not provide Directors other than the Chief Executive Officer with benefits subsequent to the end of their service. Non-competition agreements concerning employment relationships are entered into by the Company in accordance with Art. 2125 of the Italian Civil Code. The Chief Executive Officer in office is bound, as a manager, by a postcontractual non-competition agreement for a period of 12 months following the termination of his employment, which provides for a fixed annual fee paid during the term of employment in monthly instalments, with a fixed guaranteed minimum threshold equal in total to slightly less than half of the gross annual fee paid to the Chief Executive Officer as a manager. The non-competition agreement is protected by a fixed penalty for breach, without prejudice to the possibility of compensation
REPORT ON REMUNERATION
for greater damages. There is no link between the corporate performance and the payment of the fee for the non-competition agreement. Based on the remuneration policy, non-competition agreements are also envisaged with certain Executives with strategic responsibilities, the terms of which were approved by the Board of Directors, after obtaining the opinion of the Remuneration and Nomination Committee. These agreements have a duration of 24 months following the termination of the employment relationship and provide for annual fees, paid during the employment relationship in monthly instalments, equal to 10% of the gross annual remuneration. There is no link between the corporate performance and the payment of fees for non-competition agreements. The termination of the employment or collaboration relationship with the Chief Executive Officer, the other Directors and the Executives with Strategic Responsibilities - if they are beneficiaries of incentive plans based on financial instruments - determines the effects indicated above under “LONG-TERM VARIABLE COMPONENT”. The remuneration policy does not envisage the assignment or maintenance of non-monetary benefits, nor the signing of consultancy contracts, for periods after the termination of the relationship with the Chief Executive Officer, other Directors or Executives with Strategic Responsibilities.
CORPORATE OFFICES COMPONENTS OF THE REMUNERATION
ALLOWANCE FOR EARLY TERMINATION OF EMPLOYMENT
Executive Directors
Non-Executive Directors
Members of committees within the BoD
Executives with strategic responsibilities
Statutory Auditors
Remuneration for non-competition agreement (only for Chief Executive Officer)
N/A
N/A
Remuneration for non-competition agreement
N/A
NON-MONETARY BENEFITS Third-party civil liability insurance policy: the Company has taken out a third-party civil liability insurance policy in favour of directors, statutory auditors and executives for unlawful acts committed in the carrying-out of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders’ Meeting. Life insurance policy and cover for medical expenses: the Company also provides a life insurance policy and cover for medical expenses (FASI) for executives, as established by the Collective National Contract for Industrial Managers; moreover, it has taken out an additional policy to cover medical expenses not covered by FASI reimbursements. Company cars: at the suggestion of the Remuneration and Nomination Committee, the Board of Directors also assigns company cars to executives. Accommodation costs: at the suggestion of the Remuneration and Nomination Committee, the Board of Directors can provide for
housing to be made available to executives, for the possibility to reimburse the rent of the house or for the temporary reimbursement of the costs of accommodation in a hotel. ENTRY BONUS With the aim of attracting highly professional individuals, the Board may decide to give entry bonuses to newly hired executives. CLAW BACK AND MALUS CLAUSES As from 2018, the Company established mechanisms for the ex-post adjustment of the variable remuneration component or claw back clauses to demand the return of all or part of the variable components of remuneration paid out (or to withhold deferred sums), which were determined on the basis of data subsequently found to be clearly incorrect. In this regard, please see item “SHORT-TERM VARIABLE COMPONENT” and “LONG-TERM VARIABLE COMPONENT” of the remuneration policy.
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REPORT ON REMUNERATION
REMUNERATION FOR OFFICES IN SUBSIDIARIES Directors and other executives with strategic responsibilities may be paid remuneration – exclusively as a fixed amount – for offices held in subsidiaries. In addition to the approval of the subsidiaries’ corporate bodies, this remuneration is subject to the favourable opinion of the Remuneration and Nomination Committee. RATIOS BETWEEN FIXED AND VARIABLE COMPONENT AND BETWEEN SHORT-TERM AND LONG-TERM VARIABLE COMPONENT Based on the remuneration policy, where a variable component is recognised due to the total achievement of objectives, the overall remuneration is structured as follows:
i. the gross annual fixed component of 1 remuneration varies between a minimum of 44% and a maximum of 59%, with an average incidence of 51.5%; ii. the short-term variable component varies between a minimum of 11% and a maximum of 14%, with an average incidence of 12.5%; iii. the long-term variable component, in the event of achieving the highest of the expected performance targets, varies between a minimum of 30% and a maximum of 42%, with an average incidence of 36%.
CORPORATE OFFICES COMPONENTS OF THE REMUNERATION
Executive Directors
Non-Executive Directors
Executives with strategic responsibilities
Statutory Auditors
Third-party liability insurance policy
BENEFITS AND OTHER COMPONENTS
NON-MONETARY BENEFITS
Third-party liability insurance policy
Third-party liability insurance policy
Life insurance policy to cover medical expenses (FASI), supplementary medical expenses
Third-party liability insurance policy
Company cars OFFICES IN SUBSIDIARIES
Fixed remuneration for offices in subsidiaries
N/A
Fixed remuneration for offices in subsidiaries
N/A
4. Remuneration of the Board of Directors, Chairman and Vice Chairmen of the Board of Directors, Chief Executive Officer, Executives with strategic responsibilities and Board of Statutory Auditors REMUNERATION OF THE BOARD OF DIRECTORS The Shareholders’ Meeting is responsible for determining the annual gross remuneration (maximum amount) due to the Directors, which consists of a fixed amount. The members of the Board of Director are covered by a third-party civil liability insurance policy for unlawful acts committed in the exercise of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders’ Meeting. There are no specific remuneration schemes for independent directors. There is an additional fixed remuneration for directors participating in committees. REMUNERATION OF THE CHAIRMAN OF THE BOARD OF DIRECTORS, OF THE VICE CHAIRMAN AND OF THE HONORARY CHAIRMAN No variable remuneration is paid to the Chairman and Vice Chairman of the Board of Directors, but only fixed remuneration in addition to those of directors for special offices held. There is a fixed remuneration set by the Board of Directors for the Honorary Chairman.
1
REMUNERATION OF THE CHIEF EXECUTIVE OFFICER The remuneration of the Chief Executive Officer includes the following components: Fixed remuneration for the office of Director: the Chief Executive Officer is the recipient of the fixed remuneration for the office of Director (pursuant to Art. 2389 paragraph I Italian Civil Code) and an additional fixed remuneration for the office held. Third-party civil liability insurance policy: the Company has taken out a third-party civil liability insurance policy for unlawful acts committed in the carrying-out of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders’ Meeting. Long-term variable component: the long-term incentive is dependent on the achievement of performance targets, proposed by the Remuneration and Nomination Committee to the Board of Directors, and extends over three years, coinciding with the mandate of the Board of Directors.
To be intended as the result of the sum of the fixed component established by the remuneration policy (including the remuneration in case of director and/or gross annual remuneration for employees), fringe benefits, remuneration for offices held in subsidiaries and annual payments for non-competition agreements.
246
SABAF . 2021 ANNUAL REPORT
If the Chief Executive Officer is also assigned an executive management role within the Sabaf Group, the Board decides on the assignment of the following additional remuneration instruments: • Fixed annual gross salary: the fixed remuneration is determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the objectives. • Non-competition agreement: assignment of a fixed annual remuneration against the signing of a Non-competition Agreement with the Company. • Short-term variable component: annual incentive, dependent on the achievement of the objectives envisaged by the MBO plan, approved by the Board of Directors at the suggestion of the Remuneration and Nomination Committee. On the occasion of the annual approval, the Board of Directors decides on the maximum amount of the annual variable component, the methods and timing for its payment. The Chief Executive Officer may be paid a oneoff bonus under the conditions and within the limits set out in the remuneration policy. • Benefits: the benefits envisaged for the management of the Company can be assigned: Life insurance policy and cover for medical expenses, assignment of company car; reimbursement of the rent for the house. REMUNERATION OF EXECUTIVES WITH STRATEGIC RESPONSIBILITIES Fixed annual gross remuneration: Employment relationships with Executives with strategic responsibilities are regulated by the CollectiveNationalContractforIndustrialManagers.Inthisregard,fixed remuneration is determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach the objectives. Short- and long-term variable components: Executives with strategic responsibilities are the recipients of short- and long-term incentive plans (cf. paragraph 3). At the time of approval of shortand long-term incentive plans, the Board of Directors is responsible for setting the maximum amounts of variable remuneration, the methods and timing for the payment of this remuneration. Executives with strategic responsibilities can be paid a one-off bonus under the conditions and within the limits set out in the remuneration policy. Benefits: Executives with strategic responsibilities receive the benefits envisaged for the executives of the Company (Life insurance policy and cover for medical expenses); assignment of company car) and are covered by an occupational risk policy.
REPORT ON REMUNERATION
5. Departures from the remuneration policy Pursuant to Art. 123-ter (3)-bis of the T.U.F., in the presence of exceptional circumstances (as defined below), the company may temporarily depart from the remuneration policy, with regard to the provisions concerning long-term variable remuneration and allowance for early termination of employment, referred to in paragraph 4 of the remuneration policy. The departure may only be made in compliance with the procedures of Consob Regulation no. 17221 of 12 March 2010 (Related party Transactions). Exceptional circumstances are only situations where the departure from the remuneration policy is required to pursue the longterm interests and sustainability of the company as a whole or to ensure its ability to stay in the market (such as, for example, the need to attract and/or retain key management figures or the need to incentivise key management figures in office with regard to specific industrial objectives that, in contingent conditions, are of particular importance).
6. Further details of the remuneration policy The remuneration of the directors, both executive and non-executive, and of the members of the control body was defined taking into account the remuneration practices of industrial companies of similar size listed on the STAR segment, including in particular the following: Reno De Medici S.p.A., La Doria S.p.A., Aquafil S.p.A., Retelit S.p.A., GEDI S.p.A., Elica S.p.A., Massimo Zanetti Beverage Group S.p.A., Aeffe S.p.A., Prima Industrie S.p.A., B&C Speakers S.p.A., Emak S.p.A., Openjobmetis S.p.A., Landi Renzo S.p.A., Gefran S.p.A.. The current remuneration policy was approved by the Shareholders’ Meeting on 6 May 2021 and will last three years. No changes were made to the version submitted to this Shareholders’ Meeting during 2021.
REMUNERATION OF THE BOARD OF STATUTORY AUDITORS The amount of remuneration for Statutory Auditors is set by the Shareholders’ Meeting, which establishes a fixed amount for the Chairman and the other Standing Auditors. The members of the Board of Statutory Auditors are covered by a third-party civil liability insurance policy for unlawful acts committed in the exercise of their respective duties, in violation of obligations established by law and the Articles of Association, with the sole exclusion of deliberate intent. The taking-out of this policy is approved by the Shareholders’ Meeting. The commitment required of the Board of Statutory Auditors for the performance of its duties can be inferred from the Report on the Corporate Governance System to which reference should be made.
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SABAF . 2021 ANNUAL REPORT
REPORT ON REMUNERATION
SECTION II – REMUNERATION PAID This section, by name of Directors and Statutory Auditors: • describes each of the items that make up the remuneration, showing their consistency with the remuneration policy of Sabaf and the ways in which remuneration contributes to the Company’s long-term results; • analytically illustrates the remuneration paid in the financial year under review (2021), for any reason and in any form, by the Company or by subsidiaries or affiliates, identifying any components of this remuneration that relate to activities undertaken in previous years to the year under review.
FIRST PART
The components of the remuneration paid to directors for 2021
The Directors in office for the year 2021 have been paid a fixed annual gross remuneration of €22,000 per unit. The following additional remuneration was also paid for the offices held or attendance to Committees set up within the Board: • €80,000 to the Chairman Claudio Bulgarelli; • €10,000 to the Vice Chairman Nicla Picchi; • €8,000 to the Chief Executive Officer Pietro Iotti; • €21,000 to each member of the Control, Risk and Sustainability Committee (Nicla Picchi, Carlo Scarpa and Daniela Toscani); • €16,000 to each member of the Remuneration and Nomination Committee (Daniela Toscani, Alessandro Potestà and Stefania Triva). A fixed remuneration component for employment and a fixed remuneration for offices in subsidiaries are paid to executive directors appointed as executives. With reference to variable components, which are intended only for executive directors, the following is pointed out: a) in relation to the annual variable incentive plan established for 2020, remuneration of €94,721 accrued in the previous financial year (and disbursed in 2021). Specifically: - the Chief Executive Officer, Pietro Iotti, accrued variable remuneration of €70,000 for the partial achievement of the objectives of the 2020 MBO plan. The business objective, represented by the budget EBIT, was achieved in the 100% range of the budget accruing remuneration equal to 100% of the total EBIT component; individual objectives were achieved at 50%. - The Director, Gianluca Beschi, accrued variable remuneration of €24,721 for the partial achievement of the objectives of the 2020 MBO plan. The business objective, represented by the budget EBIT, was achieved in the 100% range of the budget accruing remuneration equal to 100% of the total EBIT component; individual objectives were achieved at 50%. b) With reference to the annual variable incentive plan established for 2021, remuneration of €130,900 accrued in 2021. Specifically: - the Chief Executive Officer, Pietro Iotti, accrued variable remuneration of €86,800 for the partial achievement of the objectives of the 2021 MBO plan. The business objective, represented by the budget EBIT, was achieved in the highest range (exceeding the budget by more than 15%), individual objectives were achieved at 33.33%. 248
- The Director, Gianluca Beschi, accrued variable remuneration of €44,100 for the partial achievement of the objectives of the 2021 MBO plan. The business objective, represented by the budget EBIT, was achieved in the highest range (exceeding the budget by more than 15%), individual objectives were achieved at 33.33%. c) With reference to the 2018-2020 Stock Grant plan, whose beneficiaries include the Chief Executive Officer and Director Gianluca Beschi, following the partial achievement of the objectives and the verification of the existence of the conditions set out in the Regulations of the plan, in May 2021 the shares were allocated to the beneficiaries of Cluster 1. d) With reference to the 2021-2023 stock incentive plan, whose beneficiaries include the Chief Executive Officer and Director Gianluca Beschi, rights to receive shares have been assigned, the allocation of which is subject to the achievement of company targets (based on EBITDA, ROI and sustainability targets) over the three-year period 2021 to 2023 consistent with the objectives of the Business Plan. For further details, please refer to the information contained in the Information Document prepared pursuant to Art. 114-bis of Legislative Decree no. 58 of 24 February 1998, of Art. 84bis of Consob resolution no. 11971/99, submitted to the Shareholders’ Meeting on 6 May 2021. In compliance with point no. 3 of the remuneration policy, the Board of Directors, at the suggestion of the Remuneration Committee, resolved to award a one-off bonus of €142,400 to the Chief Executive Officer Pietro Iotti and €79,400 to director Gianluca Beschi for their efforts to limit the impact of the pandemic crisis and for achieving results that far exceeded targets. The proportion of fixed and variable remuneration paid during the 2021 financial year within the total remuneration of executive directors is as follows: • Chief Executive Officer Pietro Iotti: fixed remuneration 89%, variable remuneration 11%; • Director Gianluca Beschi: fixed remuneration 93%, variable remuneration 7%. For details of the elements included in this calculation, please refer to the Tables contained in the second part of this Report. Note that, during 2021, with regard to executive directors: • no indemnity and/or other benefits were granted for the transfer of office or termination of employment; • no ex-post correction mechanisms were applied to the variable remuneration component; • there were no departures from the remuneration policy.
Remuneration to the Honorary Chairman for 2021
On 6 May 2021, the Board of Directors appointed Giuseppe Saleri, the founder and historical Chairman of the Company, as permanent Honorary Chairman, awarding him a gross annual remuneration of €70,000.
SABAF . 2021 ANNUAL REPORT
Remuneration of Statutory Auditors for 2021
The remuneration paid to the Statutory Auditors consists of a fixed remuneration determined by the Shareholders’ Meeting of 6 May 2021, amounting to a total of €77,000, 8/12 of which accrued during the first year of office (€51,333). For the first four-month period, the remuneration accrued by the Statutory Auditors in office until 6 May 2021 was €23,517.
The remuneration of other executives with strategic responsibilities for 2021
The remuneration of other executives with strategic responsibilities (Technical Director and two Sales Managers) consists of a fixed remuneration for employment totalling €420,743, and following variable remuneration: a. with reference to the variable incentive plan (MBO) of 2020, during 2021, remuneration totalling €76,359 was paid for the partial achievement of the objectives of the 2020 MBO plan. The business objective, represented by the budget EBIT, was achieved in the 100% range of the budget accruing remuneration equal to 100% of the total; individual objectives were achieved on average by 80%; b. with reference to the variable incentive plan (MBO) for 2021, remuneration totalling €110,584 accrued for the partial achievement of the objectives of the 2021 MBO plan. Its payment is deferred and dependent upon the continuation of the employment relationship. The business objective, represented by the budget EBIT, was achieved in the highest range (exceeding the budget by more than 15%), individual objectives were achieved on average by 93%; c. with reference to the 2018-2020 Stock Grant plan, whose beneficiaries include the Executives with Strategic Responsibilities, following the partial achievement of the objectives and the verification of the existence of the conditions set out in the Regulations of the Plan, in May 2021 the shares were allocated to the beneficiaries of Cluster 1;
REPORT ON REMUNERATION
d.with reference to the 2021-2023 stock incentive plan, whose beneficiaries include the Executives with Strategic Responsibilities, rights to receive shares have been assigned, the allocation of which is subject to the achievement of company targets (based on EBITDA, ROI and sustainability targets) over the three-year period 2021 to 2023 consistent with the objectives of the Business Plan. For further details, please refer to the information contained in the Information Document prepared pursuant to Art. 114-bis of Legislative Decree no. 58 of 24 February 1998, of Art. 84-bis of Consob resolution no. 11971/99, submitted to the Shareholders’ Meeting on 6 May 2021. In compliance with point no. 3 of the remuneration policy, the Board of Directors, at the suggestion of the Remuneration Committee, during 2021 resolved to award a one-off bonus to Executives with. strategic responsibilities amounting to €74,200 for their efforts to limit the impact of the pandemic crisis on the Group’s results. Remuneration totalling €93,500 was also disbursed by subsidiaries. The proportion of fixed and variable remuneration paid during the 2021 financial year within the total remuneration is as follows; fixed remuneration 89%, variable remuneration 11%. For details of the elements included in this calculation, please refer to the Tables contained in the second part of this Report. Note that, during 2021, with regard to Executives with Strategic Responsibilities: • no indemnity and/or other benefits were granted for the termination of employment; • no ex-post correction mechanisms were applied to the variable remuneration component; • there were no departures from the remuneration policy.
Comparison with previous years % Change 2020 vs. 2019
% Change 2021 vs. 2020
Chief Executive Officer Pietro Iotti Total remuneration (a)
+6.8%
+24.8%
Director Gianluca Beschi Total remuneration (b)
+17.9%
+22.3%
Executives with strategic responsibilities Total remuneration (c)
+10.1%
+5.8%
Sabaf Group turnover
+18.6%
+42.4%
Sabaf S.p.A. turnover
+8.1%
+40.4%
Sabaf Group EBITDA
+37.2%
+45.9%
Sabaf S.p.A. EBITDA
+20.5%
+45.9%
Sabaf Group EBIT
+68.9%
+86.7%
Sabaf S.p.A. EBIT
+124.2%
+109.3%
Sabaf Group Profit
+40.8%
+71.2%
Sabaf S.p.A. Profit
+67.7%
+56.7%
Average gross annual remuneration of employees
+0.1%
+10.3%
(excluding persons marked with a), b), and c) in this table)
249
SABAF . 2021 ANNUAL REPORT
REPORT ON REMUNERATION
2021 Shareholders’ voting
The Ordinary Shareholders’ Meeting, held on 6 May 2021, approved the second section of the Report on remuneration policy and remuneration paid for 2020, with an advisory vote pursuant to and for the purposes of Art. 123 paragraph 6 of Legislative Decree No. 58/1998, as amended by Legislative Decree 49/19.
Result of the voting
2021
For
84.8%
Against
15.2%
Abstention
0%
Non-voters
0%
There were no indications from Shareholders to be considered for the purposes of this Report.
SECOND PART For a breakdown of the remuneration paid in 2021, please refer to the tables below (Table 1, Table 2 and Table 3), which contain remuneration paid to Directors and Statutory Auditors, and, at the aggregate level, to other executives with strategic responsibilities, taking into account any office held for a fraction of a year. Remuneration received from subsidiaries and/or affiliates, with the exception of that waived or paid back to the Company, is also indicated separately. With particular reference to Table 1, the column: • “Fixed remuneration” shows, for the portion attributable to 2021, the fixed remuneration approved by the Shareholders’ meeting (and distributed with resolution of the Board of Directors), including the remuneration received for the carrying-out of special offices (pursuant to Art. 2389, paragraph 3, Italian Civil Code. attendance fees as approved by the Board of Directors; employee salaries due for the year gross of social security contributions and income taxes owed by the employee; • “Remuneration for attendance at Committee meetings”, shows, for the portion relating to 2021, the remuneration due to directors who attended the meetings of the Committees set up within the Board and the related attendance fees; • “Bonus and other incentives” includes the variable remuneration accrued during the year, for monetary incentive plans. This value corresponds to the sum of the amounts provided in Table 3 in the “Bonus for the year - payable/paid”, “Bonus of previous years payable/paid” and “Other bonuses” columns; • “Non-monetary benefits” shows, according to accrual and tax liability criteria, the value of outstanding insurance policies and the company cars assigned; • “Other remuneration” shows, for the portion attributable to 2021, any other remuneration resulting from other services provided; • “Total” shows the sum of the amounts provided under the previous items. For a breakdown of other items, see attachment 3A, statement 7-bis and 7-ter of Consob Regulation 11971 of 14 May 1999. Table 2 shows the information relating to the Stock Grant plan approved by the Shareholders’ Meeting and aimed at the Group’s executive directors and executives who hold or will hold key positions in the implementation of the Business Plan. Specifically, the column: • “Financial instruments assigned in previous financial years not vested during the financial year” shows the financial instruments assigned in previous years and not vested during the year, indicating the vesting period; • “Financial instruments assigned during the financial year” shows the 250
financial instruments assigned during the year, indicating the fair value at the assignment date, the vesting period, the assignment date and the market price at the assignment; • “Financial instruments vested during the year and not assigned” shows the number and type of instruments vested during the financial year and not assigned; • “Financial instruments vested during the year and attributable” contains information on instruments vested during the financial year of reference and attributable, indicating the value at the vesting date. “Vesting period” means the period between the time when the right to participate in the incentive scheme is assigned and the time when the right accrues. Financial instruments vested during the financial year and not assigned are financial instruments for which the vesting period ended during the financial year and which were not assigned to the recipient for failure to meet the conditions under which the assignment of the instrument was conditional (for example, failure to meet performance targets). The value at the vesting date is the value of the financial instruments accrued, even if not yet paid (for example, due to the presence of lock up clauses), at the end of the vesting period. For a breakdown of other items, see attachment 3A, statement 7-bis and 7-ter of Consob Regulation 11971 of 14 May 1999. Table 3 contains information on monetary incentive plans for members of the administration body and other executives with strategic responsibilities; in particular, it shows: For the section “Bonus for the year” • In the column “payable/paid”, the bonus accrued for the year for the objectives reached during the year and paid or payable because not subject to further conditions (known as upfront fee). • The column “Deferred” shows the bonus dependent on the objectives to be reached during the year but not payable because subject to further conditions (known as deferred bonus). For the section “Bonus of previous years” • The column “No longer payable” shows the sum of bonuses deferred in previous years still to be paid at the beginning of the financial year and no longer payable for failure to meet the conditions to which they are subject. • The column “Payable/Paid” shows the sum of bonuses deferred in previous years still to be paid at the beginning of the financial year and paid during the year or payable. • The column “Still deferred” shows the sum of bonuses deferred in previous years still to be paid at the beginning of the financial year and still deferred.
SABAF . 2021 ANNUAL REPORT
Lastly, the column “Other bonuses” shows the bonuses for the year not explicitly included in specific ex ante defined plans. Finally, pursuant to Art. 84-quater, paragraph four of the Consob Issuers’ Regulations, Table 4 shows shareholdings in Sabaf S.p.A. held by directors and executives with strategic responsibilities, as well as their non-separated spouses and dependent children, directly or
REPORT ON REMUNERATION
through subsidiaries, trust companies or third parties, as shown in the shareholder register, communications received and other information acquired from the same parties. This includes all persons who held office during the year, even for only part of the year. The number of shares held is shown by individual director and in aggregate form for executives with strategic responsibilities.
TAB. 1 - REMUNERATION PAID TO MEMBERS OF THE BOARD OF DIRECTORS AND BOARD OF STATUTORY AUDITORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES IN 2021 (figures in euro)
BOARD OF DIRECTORS
Name and surname
Claudio Bulgarelli
Office
Chairman
Period of office
Expiry of office
1 Jan - 31 Dec 2021
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
Fixed remuneration
Remuneration for attendance at Committee meetings
Variable remuneration (non equity) Bonus and other incentives
Profit sharing
Non-monetary benefits
Other remuneration
Total
Fair Value of equity remuneration
Allowance for end of office or termination of employment
102,000(a)
0
0
0
0
0
102,000
0
0
0
0
0
0
0
0
0
0
0
102,000
0
0
0
0
0
102,000
0
0
32,000(a)
21,000(b)
0
0
0
15,000
68,000
0
0
of which €22,000 as director and €80,000 as Chairman
Nicla Picchi
Vice Chairman
1 Jan - 31 Dec 2021
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
0
0
0
0
0
5,000
5,000
0
0
32,000
21,000
0
0
0
20,000(c)
73,000
0
0
(a)
of which €22,000 as director and €10,000 as Vice Chairman of which €21,000 as a member of the Control, Risk and Sustainability Committee (c) of which €15,000 as member of the Sabaf S.p.A. Supervisory Body and €5,000 as member of the Supervisory Body of the subsidiary Faringosi Hinges s.r.l. (b)
Pietro Iotti
Chief Executive Officer
1 Jan - 31 Dec 2021
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
380,000(a)
0
70,000
0
9,966
142,400
602,366
0
0
60,000
0
0
0
0
0
60,000
0
0
440,000
0
70,000
0
9,966
142,400
662,366
0
0
of which €22,000 as director, €8,000 as Chief Executive Officer, and €350,000 as General Manager (including €30,000 relating to Remuneration for non-competition agreement)
Gianluca Beschi
Director
1 Jan - 31 Dec 2021
Approval of 2023 financial statements 222,000(a)
0
24,721
0
5,189
79,400
331,310
0
0
(II) Remuneration from subsidiaries and affiliates
74,000
0
0
0
0
0
74,000
0
0
(III) Total
296,000
0
24,721
0
5,189
79,400
405,310
0
0
(I) Remuneration at Sabaf S.p.A.
(a)
of which €22,000 as director and €200,000 as CFO
251
SABAF . 2021 ANNUAL REPORT
REPORT ON REMUNERATION
(figures in euro)
BOARD OF DIRECTORS
Name and surname
Office
Period of office
Carlo Scarpa
Director
1 Jan - 31 Dec 2021
Expiry of office
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
Variable remuneration (non equity)
Fixed remuneration
Remuneration for attendance at Committee meetings
22,000(a)
21,000(b)
0
0
0
0
0
0
22,000
21,000
0
0
0
Bonus and other incentives
Profit sharing
Non-monetary benefits
Fair Value of equity remuneration
Allowance for end of office or termination of employment
Other remuneration
Total
0
0
43,000
0
0
0
0
0
0
0
0
43,000
0
0
(a)
of which €22,000 as director (b) of which €21,000 as a member of the Control, Risk and Sustainability Committee
Alessandro Potestà (C)
Director
1 Jan - 31 Dec 2021
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A. (I) Remuneration from subsidiaries and affiliates (III) Total
22,000(a)
16,000(b)
0
0
0
0
38,000
0
0
0
0
0
0
0
0
0
0
0
22,000
16,000
0
0
0
0
38,000
0
0
0
0
0
22,000
0
0
(a)
of which €22,000 as director of which €16,000 as a member of the Remuneration and Nomination Committee (c) the remuneration paid to the Director Alessandro Potestà is paid to the company Quaestio Capital Management SGR S.p.A. (b)
Cinzia Saleri
Director
1 Jan - 31 Dec 2021
Approval of 2023 financial statements 22,000(a)
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
0
0
0
0
0
0
0
0
0
0
0
22,000
0
0
0
0
0
22,000
0
0
22,000(a)
37,000(b)
0
0
0
0
59,000
0
0
of which €22,000 as director
Daniela Toscani
Director
1 Jan - 31 Dec 2021
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a) (b)
Director
1 Jan - 31 Dec 2021
0
0
0
0
0
0
0
0
0
0
0
59,000
0
0
0
38,000
0
0
Approval of 2023 financial statements 22,000(a)
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (b)
0 37,000
of which €22,000 as director of which €21,000 as a member of the Control, Risk and Sustainability Committee and €16,000 as a member of the Remuneration and Nomination Committee
Stefania Triva
(a)
0 22,000
16,000(b)
0
0
0
0
0
0
0
0
0
0
0
0
22,000
16,000
0
0
0
0
38,000
0
0
0
0
0
of which €22,000 as director of which €16,000 as a member of the Remuneration and Nomination Committee
DIRECTORS NO LONGER IN OFFICE DURING THE YEAR UNDER REVIEW Giuseppe Saleri
Chairman
1 Jan - 6 May 2021
(I) Remuneration at Sabaf S.p.A.
Approval of 2020 financial statements 0
0
0
0
0
0
(II) Remuneration from subsidiaries and affiliates
0
0
0
0
0
0
0
0
0
(III) Total
0
0
0
0
0
0
0
0
0
252
SABAF . 2021 ANNUAL REPORT
REPORT ON REMUNERATION
(figures in euro)
BOARD OF STATUTORY AUDITORS
Fixed remuneration
Remuneration for attendance at Committee meetings
(I) Remuneration at Sabaf S.p.A.
32,000
(II) Remuneration from subsidiaries and affiliates
9,000
(III) Total
Name and surname
Alessandra Tronconi
Mauro Giorgio Vivenzi
Office
Chairman
Statutory Auditor
Period of office
Expiry of office
1 Jan - 31 Dec 2021
Approval of 2023 financial statements
1 Jan - 31 Dec 2021
Non-monetary benefits
Other remuneration
Total
Fair Value of equity remuneration
Allowance for end of office or termination of employment
0
0
0
32,000
0
0
0
0
0
9,000
0
0
0
0
0
0
41,000
0
0
0
0
0
0
0
21,333
0
0
0
0
0
0
0
0
0
0
21,333
0
0
0
0
0
21,333
0
0
14,667
0
0
0
0
0
14,667
0
0
Bonus and other incentives
Profit sharing
0
0
0
0
41,000
0
21,333 0
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
Maria Alessandra Zunino de Pignier
Statutory Auditor
1 Jan - 31 Dec 2021
Variable remuneration (non equity)
Approval of 2023 financial statements
(I) Remuneration at Sabaf S.p.A..
0
0
0
0
0
0
0
0
0
14,667
0
0
0
0
0
14,667
0
0
6,850
0
0
(II) Remuneration from subsidiaries and affiliates (III) Total
AUDITORS NO LONGER IN OFFICE DURING THE YEAR UNDER REVIEW Luisa Anselmi
Statutory Auditor
1 Jan - 6 May 2021
Approval of 2020 financial statements 6,850
(I) Remuneration at Sabaf S.p.A.
0
0
0
0
0
0
0
0
0
0
0
0
0
6,850
0
0
0
0
0
6,850
0
0
(II) Remuneration from subsidiaries and affiliates (III) Total
0
(figures in euro)
OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES
Fixed remuneration
Remuneration for attendance at Committee meetings
420,743(a)
(II) Remuneration from subsidiaries and affiliates
93,500
(III) Total
514,243
Name and surname
Office
Other executives with strategic responsibilities (3)
Period of office
Expiry of office
1 Jan - 31 Dec 2021
n/a
(I) Remuneration at Sabaf S.p.A.
(a)
Variable remuneration (non equity)
Non-monetary benefits
Other remuneration
Total
Fair Value of equity remuneration
Allowance for end of office or termination of employment
0
14,866
72,400
584,368
0
0
0
0
0
93,500
0
0
0
14,866
72,400
677,868
0
0
Bonus and other incentives
Profit sharing
0
76,359
0
0
0
76,359
remuneration including €44,613 related to Remuneration for non-competition agreement
253
SABAF . 2021 ANNUAL REPORT
REPORT ON REMUNERATION
TAB. 2 - INCENTIVE PLANS BASED ON FINANCIAL INSTRUMENTS, OTHER THAN STOCK OPTIONS, FOR MEMBERS OF THE BOARD OF DIRECTORS, GENERAL MANAGERS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES (figures in euro) FINANCIAL INSTRUMENTS
Name and surname
Pietro Iotti
Office
Financial Financial instruments Financial instruments vested instruments vested during during financial year and pertaining to financial year and assigned the financial not assigned year
Financial instruments assigned during financial year
Number and type of financial instruments
Vesting period
Number and type of financial instruments
Fair Value at the assignment date
Vesting period
Assignment date
Market price on assignment
Number and Number and type of financial type of financial instruments instruments
Value at vesting date
Fair value
2018 Stock Grant Plan (May 2018)
0
-
-
-
-
-
-
99,478 rights 10,545 rights corresponding to corresponding 99,478 shares to 10,545 shares
233,814
-
2021 Stock Grant Plan (May 2021)
0
-
62,000 rights corresponding to 62,000 shares
932,480
3 years
13/05/2021
€23.60 / share
-
222,019
2018 Stock Grant Plan (May 2018)
0
-
-
-
-
-
-
140,289
-
2021 Stock Grant Plan (May 2021)
0
-
30,000 rights corresponding to 30,000 shares
451,200
3 years
13/05/2021
€23.60 / share
-
107,429
2018 Stock Grant Plan (May 2018)
0
-
-
-
-
-
-
225,433
-
2021 Stock Grant Plan (May 2021)
0
-
45,000 rights corresponding to 45,000 shares
676,800
3 years
13/05/2021
€23.60 / share
-
161,143
599,536
490,591
Chief Executive Officer
Remuneration at Sabaf S.p.A.
Gianluca Beschi
Plan
Financial instruments assigned in previous financial years not vested during the financial year
0
0
Director
Remuneration at Sabaf S.p.A.
59,687 rights 6,327 rights corresponding to corresponding 59,687 shares to 6,327 shares
0
0
Other executives with strategic responsibilities (3)
Remuneration at Sabaf S.p.A.
Total
254
2,060,480
95,925 rights 10,167 rights corresponding to corresponding 95,925 shares to 10,167 shares
0
0
SABAF . 2021 ANNUAL REPORT
REPORT ON REMUNERATION
TAB. 3 - MONETARY INCENTIVE PLANS FOR MEMBERS OF THE ADMINISTRATION BODY AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES (figures in euro) Bonus for the year
Name and surname
Office
Pietro Iotti
Chief Executive Officer
Plan
Payable/Paid
Deferred
Remuneration at Sabaf S.p.A.
2020 MBO Plan (March 2021)
0
0
Remuneration at Sabaf S.p.A.
2021 MBO Plan (March 2022)
0
86,800
Remuneration at Sabaf S.p.A.
2020 MBO Plan (March 2021)
0
0
Remuneration at Sabaf S.p.A.
2021 MBO Plan (March 2022)
0
44,100
Remuneration at Sabaf S.p.A.
2020 MBO Plan (March 2021)
0
0
Remuneration at Sabaf S.p.A.
2021 MBO Plan (March 2022)
0
110,584
0
241,484
Gianluca Beschi
Bonus of previous years Deferment period
March 2022
Other bonuses
No longer payable
Payable/Paid
Still deferred
0
70,000
0
0
0
0
0
0
0
24,721
0
0
0
0
0
0
0
76,359
0
0
0
0
0
0
0
171,080
0
0
Executive Director
March 2022
Other executives with strategic responsibilities (3)
Total
March 2022
TAB. 4 - SHAREHOLDINGS OF MEMBERS OF THE ADMINISTRATION AND CONTROL BODIES AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES Office
Type of Ownership
Investee Company
No. shares held at 31 December 2020
No. shares acquired
No. shares sold
No. shares held at 31 December 2021
Iotti Pietro
Chief Executive Officer
Indirect through the subsidiary Petrae s.r.l.
Sabaf S.p.A.
122,300
1,000
-
123,300
Direct
Sabaf S.p.A.
23,700
12,945
-
36,365
Toscani Daniela
Director
Indirect through spouse
Sabaf S.p.A.
2,419
-
-
2,419
Direct
Sabaf S.p.A.
498
-
-
498
Bulgarelli Claudio
Director
Indirect through the company Fintel s.r.l.
Sabaf S.p.A.
868,827
9,124
-
877,951
Direct
Sabaf S.p.A.
1,567
-
-
1,567
Vivenzi Mauro Giorgio
Statutory Auditor
Indirect through spouse
Sabaf S.p.A.
600
-
-
600
Beschi Gianluca
Director
Direct
Sabaf S.p.A.
-
6,327
-
6,327
Direct
Sabaf S.p.A.
-
10,167
6,000
4,167
Surname and name
No. 3 Executives with Strategic Responsibilities
255
CONCEPT AND GRAPHIC DESIGN: ALL CREATIVE - ALLCREATIVE.AGENCY
PRINT: K.L.Z. 2000 SRL
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