2020 ANNUAL REPORT
CREATIVE CONCEPT 2020 turned out to be a difficult year that truly put everyone to the test. As such, for this Annual Report, we have decided to present an entirely new graphic proposal - a necessary change, to be considered an evolution in a very specific, modern and cutting-edge direction: Growth. The proposal focuses on the concept of “aiming high”, an idea that Sabaf constantly pursues in expansion of both the Group and product range. The work on the lettering of the title expresses this dynamic concept through its graphic virtuosity. The change is also being expressed through the introduction of green which, whilst it may seem to be a new colour, is actually a blend of the two official colours of Sabaf: blue and yellow. This new hue suggests a bold and clear link with the concepts of Sustainability and the Environment, which have always been central values for the company. All Creative
The circle echoes the Sabaf logo, whilst the graphic lines soaring upwards are redolent of the concept of expansion and energy.
The word ‘UP’ is emphasised in order to reinforce the concepts of Growth and Aiming High.
2020
CONTENTS 08
INTRODUCTION TO THE ANNUAL REPORT
11
Summary of Key Performance Indicators (KPIs)
18
Products and markets
24
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
26
Methodological note
27
Letter from the Chief Executive Officer to stakeholders
29
Business model, strategic approach and sustainable creation of value
29
Strategic approach and creation of value
29 Sustainable value creation 29 Values, vision and mission 30 Covid and social responsibility 32
Business model
41
Materiality analysis
44
Corporate Governance, Risk Management and Compliance
44
Corporate governance
57
Risk Management
59
Compliance
63
Sabaf and employees
63
Risks
64
Personnel management policy
66
The people of the Sabaf Group
70
Recruitment policy
77
Personnel training
78
Internal communication
78
Diversity and equal opportunities
80
Remuneration, incentive and enhancement systems
83
Occupational health and safety and working environment
85
Industrial relations
86
Disciplinary measures and disputes
87
Sabaf and environment
87
Risks
87
Health and safety, environmental and energy policy
88
Environmental impact
92
Environmental investments
92
Disputes
93
Sabaf, the management of product quality and customer relations
93
Risks
93
Quality management policy
95
Sabaf and supply chain management
95
Risks
95
Supply chain management policy
97
Sabaf, Public Administration and Community
100 Sabaf and shareholders 102 Sabaf and lenders 103 Sabaf and competitors 105 GRI Content Index 109 Independent auditors’ report on the consolidated disclosure
of non-financial information
112 REPORT ON OPERATIONS 124 CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020 170 SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020 222 REPORT ON REMUNERATION
INTRODUCTION TO THE ANNUAL REPORT SABAF . 2020 ANNUAL REPORT
8
INTRODUCTION TO THE ANNUAL REPORT
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
Summary of Key Performance Indicators (KPIs)
11
Products and markets
18
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
The publication of the Annual Report of the Sabaf Group, now in its sixteenth 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 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 fourth 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 2020, 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. The Group’s commitment was also confirmed by the “Oscar di Bilancio” award over the years (2004, 2013, 2017 and 2018), historic contest promoted and organised by the Italian Public Relations Federation (Federazione Relazioni Pubbliche Italiana, FERPI), which for over fifty years has been awarding prizes to the most virtuous businesses in financial reporting and in dealing with all stakeholders.
SUSTAINABLE G ROW TERM G N TH LO
STRATEGY
ECONOMIC PERFORMANCE
10
GOVERNANCE
SOCIAL PERFORMANCE
ENVIRONMENTAL PERFORMANCE
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
Summary of Key Performance Indicators (KPIs) ECONOMIC CAPITAL
2020
2019
2018
SALES REVENUES
€/000
184,906
155,923
150,642
EBITDA
€/000
37,097
27,033
29,959
EBIT
€/000
20,093
11,896
16,409
PRE-TAX PROFIT
€/000
14,509
9,776
20,960
NET PROFIT
€/000
13,961
9,915
15,614
WORKING CAPITAL
€/000
52,229
49,693
59,730
INVESTED CAPITAL
€/000
174,129
176,233
172,870
SHAREHOLDERS’ EQUITY
€/000
117,807
121,105
119,346
NET FINANCIAL DEBT
€/000
56,322
55,128
53,524
%
11.5
6.8
9.5
€/000
3,924
6,060
6,071
ROCE (RETURN ON CAPITAL EMPLOYED) DIVIDENDS PAID OUT
Net Profit
2020
€/000
2019
20,000
13,961
€/000
9,915
2018
20,000
€/000
20,000
15,614
11
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
HUMAN CAPITAL
TOTAL EMPLOYEES
no.
%
AVERAGE AGE OF PERSONNEL
LEVEL OF EDUCATION
(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) %
%
2020
1,168 62.0 38.0
39.3
61.6
11.5
9.7
2019
1,035 63.5 36.5
39.8
59.1
10.2
7.1
66.6 33.4
39.7
59.6
11.1
9.1
2018
760
HOURS OF TRAINING PER EMPLOYEE
INVESTMENTS IN TRAINING/TURNOVER
HOURS OF STRIKE FOR INTERNAL CAUSES
h
%
h
2020
10.8
0.19
0
2019
15.3
0.25
0
2018
22.3
0.33
0
INJURY LOST DAY RATE
JOBS CREATED (LOST)
(hours of training/average employees at 31.12)
TOTAL INJURY RATE
(number of injuries x 1,000,000/ total hours worked)
(days of absence x 1,000/total hours worked)
no.
12
2020
16.10
0.11
133
2019
10.57
0.17
15
2018
23.49
0.17
4
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
RELATIONAL CAPITAL
2020
VALUE OF GOODS AND SERVICES OUTSOURCED
2019
2018
AVERAGE TURNOVER BY CUSTOMER (total turnover/number of customers)
€/000
€/000
10,670
465
8,190
388
9,560
353 0
5,000
10,000
0
PERCENTAGE OF TOP 10 CUSTOMERS
500
1,000
PERCENTAGE OF TOP 20 CUSTOMERS
%
%
50
70
47
66
45
65 0
50
100
0
TURNOVER FROM CERTIFIED SUPPLIERS
50
100
NUMBER OF ANALYSTS WHO FOLLOW THE SECURITY CONTINUOUSLY
(turnover from certified suppliers/purchases) %
no.
65
1
74
2
72
2 0
50
100
5
10
0
5
10
LAWSUITS FILED AGAINST GROUP COMPANIES no.
2 6 3 0
13
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
PRODUCTIVE CAPITAL
2020
FIXED ASSETS
TOTAL NET INVESTMENTS
€/000
€/000
2019
2018
IT BUDGET1 (investments + current expenditure)/TURNOVER %
150,000
20,000
1
10,000
0.5
0.9 0
QUANTITIES SOLD OF LIGHT ALLOY VALVES ON TOTAL VALVES AND THERMOSTATS
QUANTITIES SOLD OF HIGH ENERGY EFFICIENCY BURNERS ON TOTAL BURNERS
%
%
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.
21.9
23.1
25
23.3
50
90.1
5
91.7
50
91.3
100
0
14
0.9
0.8 0
10
7.5
7.4
11,467
0
%
9.0
12,014
50,000
REAL INVESTMENT/ TURNOVER
1
17,296
119,527
138,506
131,543
100,000
0
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
ENVIRONMENTAL CAPITAL
2020
2019
2018
Materials used t
Steel
0
7,861
0
21,881
5,000
50,000
26,046
500
7,831
10,000
6,476
1,000
9,188
789
481
Aluminium alloys
638
Brass
Electricity consumption
Natural gas consumption
Energy intensity
MWh
m x1,000
(kWh/turnover)
3
25,000
0
kWh/€
From renewable sources
From non-renewable sources
200
50,000
5,000
0.5
100
25,000
2,500
0.25
0.460
0.426
0
0.436
3,918
3,740
0
4,478
30,225
28,526
0
35,220
-
50
158
0
15
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
2020
2019
2018
Waste2 t
Non-hazardous
5,000
0
Total waste/Generated economic value kg in €/000
0
6,008
5,000
6,164
250
8,132
10,000
2,434
10,000
1,631
500
2,256
186
Hazardous
225
291
Similar to urban
CO2 emissions
Water consumption
tCO2eq
m3
100
25,000
200,000
20,000
15,000 50
100,000 10,000
5,000
0
2
The indicator does not include data relating to C.M.I. Poland.
16
139,840
91,925
0
78,357
18,520
17,772
21,407
54
50
56
0
0
SABAF . 2020 ANNUAL REPORT
INTELLECTUAL CAPITAL
Capitalised investments in research and development
Hours dedicated to the development of new products/hours worked3
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
Values of waste/turnover (production waste/turnover)
Impact of quality costs/turnover
(charges and returns from customers/turnover)
Number of samples for customers
3
INTRODUCTION TO THE ANNUAL REPORT
2020
2019
2018
€/000
€/000
€/000
465
460
340
%
%
%
3.3
1.0
1.3
%
%
%
2.6
2.2
2.5
%
%
%
0.6
0.7
0.4
%
%
%
0.48
0.47
0.60
%
%
%
0.13
0.14
0.09
n.
n.
n.
5,034
6,184
1,244
The 2019 data does not include the C.M.I. Group and Okida.
17
SABAF . 2020 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 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 2018-2022 BUSINESS PLAN On 13 February 2018, the BoD of Sabaf S.p.A. approved the 20182022 Business Plan. The underlying objective of the Plan is to undertake a renewed path of growth, both organic and through acquisitions: an acquisition policy that can also increase the product range in sectors adjacent to the current ones, taking full advantage of the potential of the Sabaf Group.
With regard to the organic component, the Plan set an annual growth target for revenue ranging from 4% to 6%, with the aim of achieving a turnover target of €180-200 million in 2022. The Group also assesses growth opportunities through acquisitions, which, based on the objectives of the Business Plan, could generate additional revenues ranging from €70 to €100 million at the end of the five-year period.
As a whole, the Business Plan defines a revenue target ranging from €250 to €300 million, accompanied by a gross profitability (EBITDA%) of more than 20% and supported by an investment plan of up to €230 million.
GROWTH
SALES
ORGANIC
€ 200 - 230 mn by 2020
CAGR between 4% and 6% (€ 180 – 200 mn sales by 2022)
BY ACQUISITIONS
€ 250 - 300 mn by 2022
(€ 70 – 100 mn sales by 2022)
65% AND 100% (2022 COMPARED TO 2017)
0
of sales
200
>20%
100
ESTIMATED SALES GROWTH BETWEEN
300
EBITDA MARGIN
2017 18
2020
2022
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
THE PRODUCT RANGE HINGES
GAS PARTS
They allow movement and balancing when opening and closing the oven door, washing machine door or dishwasher door.
Valves: they regulate the flow of gas to the covered (of the oven or grill) or uncovered burners. Burners: by mixing the gas with air and burning the gases used, they produce one or more flame rings.
ELECTRONIC COMPONENTS
Accessories: include spark plugs, microswitches, injectors and other components to complete the range.
Electronic control boards, timers and display and power units for ovens, refrigerators, freezers, hoods and other products.
SALES BY DIVISION (€/000)
122,554
120,000
141,318
136,169
122,205
160,000
129,834
200,000
8,424
8,905
4,037
10,436
9,944
13,746
40,000
23,774
41,326
80,000
0
2020
2019
GAS PARTS
2018 HINGES
2017
2016
ELECTRONIC COMPONENTS 19
SABAF . 2020 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 € 102.6 MILLION 562 EMPLOYEES
CMI POLAND
SABAF TURKEY
REVENUE € 10 MILLION 48 EMPLOYEES
REVENUE € 26.9 MILLION 202 EMPLOYEES
Dishwasher hinges
Standard burners
REVENUE € 10.6 MILLION 55 EMPLOYEES
OKIDA ELEKTRONIK
A.R.C. S.R.L.
Professional burners
Electronics for household appliances
REVENUE € 4.1 MILLION 21 EMPLOYEES
REVENUE € 14 MILLION 173 EMPLOYEES
C.M.I. ITALY Oven hinges Dishwasher hinges REVENUE € 28.8 MILLION 144 EMPLOYEES
A.R.C. HANDAN JV
SABAF DO BRASIL
Professional wok burners
SABAF CHINA Wok burners
REVENUE € 1.1 MILLION 8 EMPLOYEES
Standard burners Special burners
REVENUE € 12.3 MILLION 118 EMPLOYEES
€
184.9 million
2020 GROUP TURNOVER 4
Including temporary workers and trainees.
20
1,331 employees
EMPLOYEES OF THE GROUP AT 31.12.20204
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
2020
2019
2018
COUNTRIES AND CUSTOMERS5
COUNTRIES
CUSTOMERS
(no.)
(no.) 70
500
60
400
50
300
40
10
400
20
402
200
399
56
55
64
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 32 customers with annual sales of more
0
than €1 million (as in 2019). The distribution by class of turnover is as follows:
2020
2019
2018
> 5,000,000 euro
10
7
7
from 1,000,001 to 5,000,000 euro
22
25
25
from 500,001 to 1,000,000 euro
24
16
20
from 100,001 to 500,000 euro
64
75
64
< 100,000 euro
279
279
284
Total customers
399
402
400
(no.)
Data processed considering customers with sales above €1,000. In the last 5 years, the Sabaf Group’s share of sales in international markets (excluding Italy and Western Europe, areas where Sabaf has a consolidated presence) increased from 64.7% in 2015 to 74.9% in 2020.
5
21
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
SABAF’S INTERNATIONAL DEVELOPMENT: CHALLENGES AND OPPORTUNITIES PERFORMANCE DATA6
ANALYSIS OF THE SCENARIO
ITALY In the last ten years, the production of household appliances in Italy has been strongly reduced: some players left the sector and others relocated part of their activities to Turkey and Eastern Europe. There are still manufacturers focused mainly on the up-market or on special products, strongly dedicated to exports, which continue to show excellent results.
35,260 | 19.1%
2020
31,161 | 20.0%
2019
The importance of the Italian market for Sabaf is consequently lower than in the past. The majority (estimated at approximately 80%) of Sabaf’s sales in Italy are destined for household appliances exported by our customers.
31,579 | 21.0%
36,523 | 24.3%
36,365 | 27.8%
2018
2017
2016
WESTERN EUROPE The same trend that characterised Italy was also seen in the other Western European countries: in Western
Europe, up-market products remain high, where Sabaf is increasing its share.
11,103 | 6.0%
12,277 | 7.9%
12,337 | 8.2%
11,678 | 7.8%
8,553 | 6.5%
2020
2019
2018
2017
2016
EASTERN EUROPE AND TURKEY Turkey is now the state where the largest number of household appliances are produced. In this context, the opening of a production plant in Turkey and the acquisition of Okida Elektronik (September 2018) are key elements in support of the growth strategy. Sabaf estimates that about 75% of sales in Turkey are exported by our customers (mainly in Europe); however, the Turkish domestic market is of increasing importance: the average age of the population, the number of new households and the increase in income are converging
68,061 | 36.8%
2020
6
Sales by geographical area (€/000) and percentage incidence on Group sales.
22
55,059 | 35.3%
2019
indicators of a growing demand for durable goods. Contingent factors such as the currency crisis of 2018 can lead to temporary reversals of this trend in 2019. The Group’s strategy is to further develop its activities in Turkey in the coming years. The Group is also active in other Eastern European markets, where it has recently concluded new commercial agreements.
46,301 | 30.7%
2018
42,824 | 28.5%
2017
34,123 | 26.1%
2016
SABAF . 2020 ANNUAL REPORT
INTRODUCTION TO THE ANNUAL REPORT
ANALYSIS OF THE SCENARIO
PERFORMANCE DATA6
NORTH AMERICA AND MEXICO Sabaf’s presence in North America is relatively recent, but sales and market share have been growing steadily in recent years. Future plans also include the development of
22,700 | 12.3%
2020
products co-designed with major customers and a more direct coverage on the market, also through a production site in Mexico.
17,727 | 11.4%
15,071 | 10.0%
12,735 | 8.5%
11,304 | 8.6%
2019
2018
2017
2016
SOUTH AMERICA For future development, Sabaf can count on a consolidated production presence (a plant in Brazil has been operating since 2001). The Sabaf Group believes that the development potential of this area is still extremely interesting, considering the significant size of the market and the demographic growth trends.
27,639 | 14.9%
2020
23,451 | 15.0%
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.
25,461 | 16.9%
2019
2018
22,938 | 15.3%
20,847 | 15.9%
2017
2016
MIDDLE EAST AND AFRICA Sabaf has a long-standing presence and reputation in the Middle East and Africa. These are areas where social and political developments can lead to high volatility.
The Group considers the Middle East and Africa among the most promising markets in the medium term, also in view of demographic trends and the growing rate of urbanisation.
12,040 | 6.5%
7,050 | 4.5%
12,303 | 8.2%
13,009 | 8.6%
11,698 | 8.9%
2020
2019
2018
2017
2016
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, aware that it offers high quality products that are increasingly competitive compared to those supplied by local competitors, aims to establish long-term partnerships with the main Chinese hob manufacturers. Another market with great potential is the Indian market,
8,103 | 4.4%
9,198 | 5.9%
2020
2019
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 2021. 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.
7,590 | 5.0%
2018
10,516 | 7.0%
8,088 | 6.2%
2017
2016
23
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
(prepared pursuant to Article 4 of Legislative Decree 254/2016)
24
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Methodological note
26
Letter from the Chief Executive Officer to stakeholders
27
Business model, strategic approach and sustainable creation of value
29
Corporate Governance, Risk Management and Compliance
44
Sabaf and employees
63
Sabaf and environment
87
Sabaf, the management of product quality and customer relations
93
Sabaf and supply chain management
95
Sabaf, Public Administration and Community
97
Sabaf and shareholders 100 Sabaf and lenders 102 Sabaf and competitors 103 GRI Content Index 105 Independent auditors’ report on the consolidated disclosure 109 of non-financial information
SABAF . 2020 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 Non-Financial 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 2020 and includes all companies consolidated on a line-by-line basis. 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. 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 23 March 2021 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.
26
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 2020.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Letter from the Chief Executive Officer to stakeholders Dear shareholders and stakeholders, It is with great satisfaction that we can now note that the uncertainties of early 2020 due to the outbreak of the pandemic turned into a record year for Sabaf in terms of growth and revenues at the end of the year. The coronavirus pandemic presented our Group - like all organisations - with new challenges, requiring resilience and immediate reaction to unpredictable and rapidly changing scenarios. In the first half of 2020, with the rapid and global spread of health emergencies, our priorities were to protect the health and safety of people: to this end, all Sabaf Group companies adopted every preventive measure useful to mitigate the risks of contagion. Aware of the strategic importance of our role in the household appliance chain, we have also taken all possible measures to ensure continuity of supply even during the period in which some Group companies were forced to temporarily stop production. Since the second half of the year, the allocation of a greater share of consumer budgets to household goods has led to a significant increase in the final demand for household appliances in all geographical areas from which the Sabaf Group is also benefiting. The Sabaf Group was prepared for all these new developments. Its solid structure, product diversification, internationalisation, the acquisition of new companies, the extraordinary dedication of all the personnel, and its competence and availability even in the face of difficult situations enabled us not only to intercept a varied demand, but also in some cases to anticipate the guidelines of change, directing it to our advantage and increasing our credibility with the partner groups whose components we supply.
The 8.4% increase in revenue volume (2020 figures compared to 2019 figures, on a like-for-like basis; +18.6% in absolute terms, compared to €155.9 million in the previous year) is the result of our efforts in three product areas: gas cooking parts, electronic components and hinges. Each of these divisions significantly increased: in 2020, the electronic components division grew by 38% compared to 2019, carving out an overall share that now exceeds 7% of the Group’s total turnover. Further 25% increase is expected by 2021. The hinges in turn increased their volumes by 50% (+7% on a like-for-like basis) and now account for 22% of Sabaf’s total turnover. Our aim is to position ourselves on the economic scene as a global supplier, also by continuing and strengthening the M&A process undertaken in recent years. This strategy allowed us to add electronics to the traditional mechanical field, in which our know-how is recognised internationally: technological displays and timers for programming ovens, electronic hobs and refrigerators, as well as boards for controlling hoods. Moreover, we have the potential to develop new applications that can electronically control the operation of appliances outside the large household appliances sector. We want to be recognised as an all-round creator and producer of cutting-edge solutions in the world of smart appliances: the world of cooking is our main ground for comparison. We work on technology, innovation, rapid response to changing markets and we have always done this by putting people and safety at the heart of our projects: sustainability for us means training, investment in knowledge but also the manufacture of eco-efficient products, burners that reduce fuel consumption (methane or other gases) and emissions to users (particularly carbon dioxide and carbon monoxide). We are constantly looking
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for a lower energy impact in the manufacturing process. There is no tomorrow without caring for people at work and the environment. Geographical diversification also allows us to be present in many strategic areas of the world, whose different rates of development allow us to envisage wide margins of growth in the years to come. Today, Sabaf has over 1,300 employees in ten production units, five in Italy and five abroad. The historical head is always the one in Ospitaletto, repository of high-profile know-how and guarantee of competence and quality. Over time, it has been joined by plants in Brazil, Turkey, China and Poland, securing fast-growing markets and the ability to closely meet the needs of the most demanding customers. In the near future, a new production unit will also be set up in India, which when fully operational will produce gas cooking parts with a total turnover of around €5 million per year, and another plant will be set up in Mexico to serve North America. These factories, which will soon be joined by another one in Turkey, not only allow us a closer connection with our customers, but also save on logistics and material transport costs in many cases. I would also like to point out that the organisation of our supply chain also allows us to overcome any difficulties that may arise at local level. We are able to guarantee our customers that we will deliver, even if a production unit has to be shut down or experiences different kinds of difficulties. We have a structure that has enabled
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us to enter into long-term contracts with the biggest manufacturers in the market. This makes us confident that we will be able to continue at a steady pace in the coming months and that we can expect further increases in turnover and good profitability. The basis of our confidence is also our financial strength, which allows us to continue to invest every year in new projects, plants, production and commercial solutions: in 2020 Sabaf, despite a complicated financial year, was able to distribute a dividend to shareholders and at the same time invested more than 17 million against 12 million in the previous year. Most of these investments are aimed at industrialising new products, designed to significantly increase shares with certain strategic customers. We want to continue to aim high: with the new 20212023 business plan, we expect to increase further and significantly our turnover, develop new products and strengthen our position alongside the major global players. The ability to promptly meet the new needs of our customers and the ability to adapt to a constantly changing world will be the basis for our growth in the future.
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 growth over time. The Sabaf Group is aware that sustainable growth 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 growth of business in the long term. Sustainable growth, 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 activi-
ties 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.
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SABAF . 2020 ANNUAL REPORT
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Covid and social responsibility The health emergency experienced in 2020 has confronted us all with a new, unimaginable scenario. Sabaf’s headquarters and main plants were unfortunately in the centre of one of the most affected areas in the world; nevertheless, since the beginning of the emergency, we have worked to manage the impacts on our activities. For companies that, like Sabaf, place sustainability at the heart of their business model, it was more than ever the time to adopt responsible choices towards all stakeholders: it is especially in highly critical circumstances such as those experienced that corporate values must be transformed into concrete actions. The highest priority is the protection of the health and safety of people: to this end, all Group companies adopted every preventive measure useful to mitigate the risks of contagion. It was also important to provide employees with financial peace of mind: Sabaf S.p.A. approved a contribution of a net amount of €200, granted to employees and personnel with temporary work contracts, for the benefit of approximately 650 employees. Employees also benefited from pandemic insurance coverage, which was renewed for 2021.
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With regard to its suppliers, Sabaf considered it its duty to continue to meet its commitments in full compliance with the contractual terms established in order to avoid further aggravating the difficult situations that many of them have had to face. Therefore, the Sabaf Group immediately joined the #iopagoifornitori initiative launched by AIB (Associazione Industriale Bresciana), with the aim of encouraging companies to comply with the payment terms agreed with suppliers and, more generally, to promote transparent and efficient practices. Despite the legislative measures that led to the temporary halt in operations in March and April, Sabaf has taken every possible initiative to ensure the continuity of supplies to customers, aware of the consequences that delays in deliveries can cause. Lastly, support for the local community was not neglected, with a significant donation being made to the Fondazione Spedali Civili di Brescia in the early days of the emergency, in support of one of the healthcare facilities most affected in the area.
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Table summarising the Policies of the Sabaf Group with reference to the contents of Legislative Decree 254/2016 as amended 1
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 • Manual of the Social Responsibility Management System in compliance with SA8000 Standard
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 • Manual of the Social Responsibility Management System in compliance with SA8000 Standard
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
1
• Charter of Values
The Group intends to gradually extend its reference policies to the most recently acquired companies (Okida and C.M.I.). For 2020, the Group’s policies are applied in Okida and C.M.I. only to the extent that they are explained in the individual sections of this Disclosure.
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The Charter of Values and the Anti-corruption Policy are applied and disseminated in all Group companies. Sabaf S.p.A. adopts a Social Responsibility Management System certified and compliant with the SA8000 standard and an integrated management system of Health and Safety, Environment and Energy certified and compliant with ISO 45001, ISO 14001 and ISO 50001 standards.
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. In any case, the ISO 14001, ISO 45001, ISO 50001 and SA8000 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 Health and Safety at Work, by C.G.D. s.r.l..
VISION
MISSION
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.
Consolidate the technological and market leadership in the design, production and distribution of the entire range of components for household gas cooking 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.
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
32
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.
SABAF . 2020 ANNUAL REPORT
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.
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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.
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.
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.
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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 34
INTELLECTUAL CAPITAL
Electronic components
INTELLECTUAL CAPITAL
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ECONOMIC CAPITAL
1
· Net financial debt €56,322,000 · Shareholders’ Equity €117,807,000 · Invested capital €174,129,000 · Market capitalisation at 31 December/ Shareholders’ Equity 1.49
· Sales revenue +18.6% · EBITDA as a percentage of sales 20.1%
HUMAN CAPITAL
2
· Employees 1,331 (including temporary workers and trainees) · Advanced education: employees with a degree or diploma 61.6% · Training hours by employee 10.8 · Investments in training on turnover 0.19%
· No. of new employees 259 · Leaving turnover 10.79% · Strike hours on hours worked 0.06% · Recordable injury rate 16.10 · Injury severity index 0.11
RELATIONAL CAPITAL · Turnover from the top 10 customers 50% · No. customers (with sales over €1,000) 399
3
· Average turnover by customer €465,000 · Lawsuits filed against Group companies 2 · No. of samples for customers 5,034
PRODUCTIVE CAPITAL
4
· Production sites 11 · Real investment on turnover 9% · Value of property, plant and equipment €79,760,000
· Burners sold No. of Parts 35,789,868 · High efficiency burners 23.3% · Valves and thermostats sold No. of Parts 18,305,560 · Light alloy valves and thermostats sold 91.3%
ENVIRONMENTAL CAPITAL
5
· Brass 638 t · Aluminium alloys 9,188 t · Steel 26,046 t · Electricity consumed 35,378 MWh (of which 158 MWh from renewable sources) · Natural gas consumed 4,478,000 m3 · Water used 78,357 m3
· Waste (kg) on economic value generated by the Group (€/1,000) 56 · CO2 emissions 21,407 tCO2eq
INTELLECTUAL CAPITAL
6
· Hours dedicated to the development of new products 3.3% · Hours dedicated to process engineering 2.6%
· No. of Patents 88 · Capitalised investments in research and development €465,000
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SABAF . 2020 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
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).
2020
2019
Change
ECONOMIC VALUE GENERATED BY THE GROUP
190,001
160,095
29,906
Revenue
184,906
155,923
28,983
Other income
7,184
3,556
3,628
Financial income
1,366
638
728
Value adjustments
1,502
1,859
(357)
Bad debt provision
(118)
(509)
391
(4,811)
(1,379)
(3,432)
Income/expenses from the sale of property, plant and equipment and intangible assets
105
46
59
Value adjustments to property, plant and equipment and intangible assets
(141)
0
(141)
8
(39)
47
ECONOMIC VALUE DISTRIBUTED BY THE GROUP
161,995
140,762
21,233
Remuneration of suppliers
112,014
96,626
15,388
Remuneration of employees
43,700
37,103
6,597
Remuneration of lenders
2,146
1,339
807
Remuneration of shareholders
3,924
6,060
(2,136)
Remuneration of the Public Administration2
150
(408)
558
External perks
61
42
19
ECONOMIC VALUE RETAINED BY THE GROUP
28,006
19,333
8,673
Depreciations and amortisation
16,968
15,183
1,785
Provisions
612
91
521
Use of provisions
(10)
(64)
54
10,436
4,123
6,313
(€/000)
Exchange rate differences
Profits/losses from equity investments
Reserves
2
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.
Stakeholder engagement initiatives undertaken
Employee satisfaction survey and climate analysis Meetings with employees Meetings with trade unions
EMPLOYEES CUSTOMERS
Customer Satisfaction Survey
SUPPLIERS
S TA
KEHOLDE
R
Questionnaire 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 economic, social and environmental performance achieved during the year.
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-
Dialogue with current and potential investors Comparison with proxy advisors Dialogue with financial analysts Multi-stakeholder meetings Dialogue with universities
Regular dialogue
-
The initiatives for involving each stakeholder that are carried out periodically are described below (generally every two or three years). In 2020, 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 2020 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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CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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.
With respect to the 2019 results, the recent materiality analysis points out: • 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 activities3 (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 matrix 4 1. Use of raw materials and materials
VERY SIGNIFICANT
3. Protection of Human and Workers’ Rights 4. Remuneration and incentive policy 5. Development of resources and skills 6. Health and safety of personnel and contractors
1
8
14
3 6 12
2
10
4
7
5
13
SIGNIFICANT
SIGNIFICANCE FOR STAKEHOLDER
2. Emissions into the atmosphere, waste and management of environmental impacts
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”. 4 Only the topics considered relevant by the organisation and subject matter of reporting are represented. 3
41
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
MATERIAL TOPICS Scope Legislative Decree 254/16
ID
Material topic
Importance of the topic for Sabaf
Link to GRI Standards
Internal 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
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.
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.
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
42
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 protected categories.
External impacts (*)
GRI 302: Energy GRI 305: Emissions
Sabaf
Suppliers
Sabaf
Suppliers
Sabaf
Trade union org.
GRI 306: Effluents and waste
GRI 406: Nondiscrimination GRI 414: Supplier Social Assessment
GRI 202: Market Presence GRI 404: Training and education
GRI 401: Employment GRI 404: Training and education
Sabaf
GRI 403: Occupational Health and Safety
Sabaf
GRI 405: Diversity and equal opportunity
Sabaf
Suppliers
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
MATERIAL TOPICS Scope Legislative Decree 254/16
ID
8
Material topic
Management of relations with suppliers, supplier assessment and contractual conditions
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.
Link to GRI Standards
Internal impacts
External impacts (*)
GRI 414: Supplier Social Assessment
Sabaf
Suppliers
Trade union org.
Sharing corporate values with suppliers. Sabaf defines minimum criteria for the creation of a lasting relationship with suppliers, based on the principles of social responsibility.
SOCIAL
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
Sabaf
11
Customer satisfaction and customer support
Ability to respond effectively to customer expectations, at all stages of the relationship (from design to aftersales service).
GRI 416: Customer Health and Safety
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
Sabaf
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
GRI 402: Labor management relations
Sabaf
Customers
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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SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Corporate Governance, Risk Management and Compliance CORPORATE GOVERNANCE OVERVIEW The corporate governance model of Sabaf has always 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 system of governance aligned
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 Notes and Studies “Corporate Governance in Italy: self-discipline, remuneration and compliance-or-explain”, published in February 2021 and concerning the Corporate Governance reports for the 2019 financial year of 220 listed Italian companies. The bench-
44
with the recommendations and best practice. The Company has welcomed the new Corporate Governance Code, fully agrees with its innovations and is evaluating whether any changes should be made to its model to fully implement the Code.
mark 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 similar data from the main European and non-European countries, based on data published by Spencer Stuart in the analysis “Boards around the world”.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
SABAF S.p.A. 100%
100%
Faringosi Hinges s.r.l.
Sabaf do Brasil Ltda
(Italy)
A.R.C. s.r.l.
(Brazil)
70%
100%
(Italy)
(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 U.S. Corp. (USA)
100%
Sabaf Appliance Components Ltd
84.25%
(Italy)
(China)
100% 97.5%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
C.G.D. s.r.l (Italy)
100% 2.5%
Sabaf India Private Limited (India)
C.M.I. Polska Sp Zoo (Poland)
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; • C.M.I. Group.
Sabaf S.p.A., valves and burners; Sabaf do Brasil, burners; Sabaf Turkey, burners; Sabaf Appliance Components, burners; A.R.C. s.r.l. and A.R.C. Handan5, professional burners; • Sabaf India, valves and burners (start of production scheduled for 2021).
5
Measured at equity.
45
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
THE GOVERNANCE STRUCTURE Sabaf adopted a traditional model of management and control, characterised by the presence of: • Shareholders’ Meetings (ordinary and extraordinary) called to pass resolutions pursuant to the laws in force and the Company’s Articles of Association; • 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.
This model is supplemented, in accordance with the provisions of the Corporate Governance Code the Company complied with, by: 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 and Risk 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
SHAREHOLDERS’ MEETING
BOARDS OF DIRECTORS SUPERVISORY BODY
REMUNERATION AND NOMINATION COMMITTEE
INTERNAL AUDIT DEPARTMENT
COMMITTEE FOR CONTROL AND RISKS (also Related-Party Committee)
OUTSOURCING
CHIEF EXECUTIVE OFFICER Director in charge of the Internal Control System
KEY
46
Organisational carry-overs
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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.
47
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
BOARD OF DIRECTORS The Board of Directors currently in office is composed of 9 members6, including: • 3 executive directors; • 2 non-executive directors; • 4 non-executive and independent directors.
EXECUTIVE DIRECTORS OFFICE
MEMBERS
Chairman
Giuseppe Saleri
COMPOSITION OF THE BOARD OF DIRECTORS
SABAF Chief Executive Officer
Pietro Iotti
Executive Director
Gianluca Beschi
44.5%
NON-EXECUTIVE DIRECTORS
Vice Chairman
45.3%
MEMBERS
Nicla Picchi
LEAD INDEPENDENT DIRECTOR
Director
Daniela Toscani
Director
Stefania Triva
Director
Carlo Scarpa
Director
Alessandro Potestà
Director
Claudio Bulgarelli
INDEPENDENT DIRECTORS pursuant to T.U.F. and/or Code
OFFICE
2020 ASSONIME AVERAGE
22.2%
33.3%
28.4%
26.3%
Executive Directors
6
The Curriculum Vitae of each Member is available on the Group’s website.
48
Non-Executive Directors Independent Directors pursuant to T.U.F. and/or Code
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
COMPOSITION OF THE BOARD OF DIRECTORS
GIUSEPPE SALERI Chairman
NICLA PICCHI Vice Chairman
Founder of Sabaf, of which he acquired full ownership in 1993. Promoter of listing on the stock exchange in 1998.
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.
CLAUDIO BULGARELLI 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.
Degree in Mechanical Engineering, entrepreneur, chairman of Fintel srl, joined the BoD of Sabaf in 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 . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
AVERAGE AGE OF DIRECTORS
NUMBER OF MEETINGS (2018-2020)
33%
45%
22%
11
50-55
56-60
over 60
10.3
2018
10.5 9
10.4 8
2019
2020
Overall average age
Sabaf 62 years old vs Assonime 56.7 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 (62 vs 56.7 years old).
In 2020, the Board of Sabaf met on 8 occasions (below the Assonime average), with an average attendance rate of 88%. 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.
AVERAGE ATTENDANCE AT THE MEETINGS (2018-2020) 7
96%
92%
90% 93%
88%
93%
The meetings were attended by the Board of Statutory Auditors and occasionally - the managers of Sabaf, who were invited to attend and report on specific issues on the agenda. 2018
2019
SABAF
7
Assonime panel including financial companies.
50
2020
ASSONIME AVERAGE
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
AVERAGE SIZE OF THE BoD
AVERAGE NUMBER OF MEETINGS OF THE BoD
15 10.28 average
AVERAGE AGE OF NON-EXECUTIVE DIRECTORS
USA
SWEDEN
NORWAY
FINLAND
DENMARK
NETHERLANDS
SPAIN
GERMANY
% OF WOMEN IN THE BoD
59 average
60
FRANCE
ITALY
0
9.6 average
SABAF
USA
UK
SWEDEN
NORWAY
FINLAND
DENMARK
NETHERLANDS
SABAF
0
SPAIN
5
GERMANY
5
FRANCE
10
ITALY
10
UK
15
50% 35% average
40% 30%
40
20%
20
USA
UK
SWEDEN
NORWAY
FINLAND
DENMARK
NETHERLANDS
SPAIN
GERMANY
FRANCE
ITALY
0
SABAF
UK
SWEDEN
NORWAY
FINLAND
DENMARK
NETHERLANDS
SPAIN
GERMANY
FRANCE
0
ITALY
SABAF
10%
% OF INDEPENDENT DIRECTORS IN THE BoD
100% 80%
The comparison was made using data published by Spencer Stuart in the analysis “Boards around the world” 8.
65% average
60% 40%
SABAF
SOUTH EUROPE
NORTH EUROPE
ANGLO-SAXON COUNTRIES
USA
UK
SWEDEN
NORWAY
FINLAND
DENMARK
NETHERLANDS
SPAIN
GERMANY
FRANCE
ITALY
0
SABAF
20%
During the financial year, 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 17 December 2020.
Source: Spencer Stuart Boards Around the World 2020 www.spencerstuart.com/research-and-insight/boards-around-the-world?category=all-board-composition&topic=all-topics
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SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
BOARD OF STATUTORY AUDITORS The Board of Statutory Auditors, appointed by the Shareholders’ Meeting on 8 May 2018 for the period 2018 to 2020, is composed of 3 members9 with an average age of 54 years old (lower than the Assonime average, 56.2 years old). All members of the Board of Statutory Auditors are between 50 and 60 years old. The Chairman of the Board of Statutory Auditors is the expression of the minority list. OFFICE
MEMBERS
Chairman
Alessandra Tronconi
Statutory Auditor
Mauro Vivenzi
Statutory Auditor
Luisa Anselmi
NUMBER OF MEETINGS (2018-2020)
10
9
2018
12.2
11.7
11 11
2019
2020
AVERAGE AGE OF STATUTORY AUDITORS AVERAGE ATTENDANCE AT THE MEETINGS (2018-2020) 10
0%
100%
0%
97%
40-50
51-60
over 60
Overall average age
Sabaf 54 years old vs Assonime 56.2 years old The Board of Statutory Auditors of Sabaf met on average 10 times in the last three years (10 meetings in 2020), a number of times slightly lower than the average number of meetings of the Assonime sample (11.6 meetings on average). The average attendance of members at meetings was 99% in the period 2018 to 2020 (100% in 2020), 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 and Risk 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. 9 10
The Curriculum Vitae of each statutory auditor is available on the Group’s website. Assonime panel including financial companies.
52
96%
2018
SABAF
100% 97%
100% 97%
2019
2020
ASSONIME AVERAGE
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
CONTROL AND RISK COMMITTEE The Control and Risk Committee currently in office, set up within the Board, is composed of 3 members, in line with the vast majority of cases in the Assonime sample (3 members, 72% in cases). In line with the choice made by about 65% of the Assonime panel, the CRC of Sabaf is made up exclusively of independent directors. The Committee was also assigned the functions pertaining to the Related-Party Committee. OFFICE
MEMBERS
Chairman
Nicla Picchi
Member
Daniela Toscani
Member
Carlo Scarpa
The Committee met on average 6.3 times in the last three years (5 meetings in 2020), a number of times slightly lower than the average number of meetings of the Assonime sample (7.1 meetings on average).
NUMBER OF MEETINGS (2018-2020)
7
6.6
7
7.6
7.1 5
2018
2019
2020
ASSONIME AVERAGE
SABAF
In 2020, 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 2020 and the consequent 2021 Audit Plan Proposal; • analysed the results of the Internal Audit operations carried out during the year.
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 40% 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
Member
Alessandro Potestà
In the last three years, the Committee met a number of times higher than the Assonime average (6.3 vs 4.4). In particular, during the last financial year, the Committee met six times. In 2020, the Committee among other things: • examined the 2019 draft Report on Remuneration; • examined the results of the 2019 short-term incentive plan and made proposals for the 2020 MBO plan; 11
NUMBER OF MEETINGS (2018-2020) 11
7
6 4.1
2018
6 4.5
2019
SABAF
4.7
2020
ASSONIME AVERAGE
• made proposals concerning the composition of the boards of directors of certain subsidiaries; • analysed and shared proposals for updating the Policy on the composition of corporate bodies in the light of the new Corporate Code.
Assonime panel referred only to the Remuneration Commitee.
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SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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 3 August 2017, which, among other things, granted powers to executive directors following the appointment of the new Chief Executive Officer, it was confirmed that the criteria for implementing Corporate Social Responsibility (“CSR”) are the responsibility of the Board itself.
In order to show the commitment with regard to sustainability topics, Sabaf has been jointly publishing its economic, social and environmental sustainability performance in its Annual Report since 2005. All Sabaf employees, as part of their responsibilities and competences, are required to implement CSR every day in the performance of their activities.
CORPORATE SOCIAL RESPONSIBILITY
DEVELOPMENT INTANGIBLE ASSETS ECONOMIC SUSTAINABILITY
ENVIRONMENTAL SUSTAINABILITY
SOCIAL SUSTAINABILITY
INTERDEPENDENCE
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SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
INTERNAL AUDIT AND SUPERVISORY BODY INTERNAL AUDIT On 8 May 2018, the Board of Directors renewed the engagement of an independent external company that provides Internal Audit services, Protiviti s.r.l., to carry out the functions of the Internal Audit Department for the three-year period from 2018 to 2020. It then identified Emma Marcandalli, the company’s Managing Director, as Head of that department. This decision has been made because the professional resources to establish such a function are not available internally and also taking into account the greater skills and efficiency that a specialist outside firm can offer with regard to internal control given the size of Sabaf. Following the resignation of Emma Marcandalli from her position as member of the Supervisory Body and Head of 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, subject to the
favourable opinion of the Control and Risk Committee, 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. The Head of the Internal Audit department is responsible for verifying that the Internal Control and Risk Management System is working properly and is not responsible for any operational areas and remains in office for the entire term of the Board of Directors which appointed him/her. The Head of the Internal Audit department reports to the Board of Directors, which approves the Internal Audit Plan, as well as the appointment, and also defines the termination of the engagement.
SUPERVISORY BODY The Supervisory Body (in office for the three-year period 2018 to 2020) comprises Nicla Picchi, independent director and Vice Chairman of the Company (Chairman) and Giuseppe Garzillo, Head of
the Internal Audit Department, appointed on 25 June 2019 following the resignation of Emma Marcandalli.
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 2020, the Supervisory Body of Sabaf met 4 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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SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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 internal
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 CRC 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)
COMMITTEE FOR CONTROL AND RISKS
CHIEF EXECUTIVE OFFICER Continuously
Director in charge of the Internal Control System
At each meeting of CRC
KEY Organisational carry-overs Information flows
56
At each meeting of CRC
REMUNERATION AND NOMINATION COMMITTEE
Every 6 months, through a Report
At each meeting of CRC
SUPERVISORY BODY
Information on activities carried out (at least once a year)
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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.
RISK CATALOGUE
RISK ASSESSMENT SCALE
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 2020.
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The identification of risks was carried out according to a structured approach that involved the following steps: • 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 and Risk Committee; • approval of the Board of Directors. 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
MINOR
MODERATE
1
2
< €0.5 million
€0.5 million - €1.5 million
€1.5 million - €4 million
> €4 million
HSE
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)
REPUTATIONAL
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
OPERATIONAL
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) relations with customers other than keyaccounts
Significant impacts on: i) efficiency/continuity of one or more key business processes and/or ii) relations with key customers (keyaccounts)
Critical impacts on: i) efficiency/continuity of business and/or ii) relations with key customers (keyaccounts)
SEVERITY DRIVERS
ECONOMIC AND FINANCIAL (EBIT)
SIGNIFICANT
3
CATASTROPHIC
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, procedure and/or operating instructions. However, room for improvement is still to be evaluated
Processes are not structured and rely on the ability/competencies of involved individuals
Lack of controls, policies, procedures and organisational structures aimed at managing and addressing risks/opportunities
90%
75%
50%
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. 58
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COMPLIANCE INTEGRATED COMPLIANCE INTERNAL CONTROL SYSTEM
OR ND C
Corporate Governance Manual Operating guidelines Model 231
FR
Accounting Control Model
NT Y ME ET ON SAF VIR D EN H AN T AL
AU DA
Charter of Values
Internal Audit Department and Director in charge HE
RU PT ION
QUALITY
Organisational Model Data Protection Quality Management System
RT Y
Integrated Management System of Health and Safety, Environment and Energy
RO EC TU AL P
Training and business information
INT
EL L
CY IVA
PR
Body of procedures
PE
System for the management of Social Responsibility
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:
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.).
• 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.
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.
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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 Manual12 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 and updated from September 2018, 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.
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
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 231/200113, 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, C.G.D. s.r.l. adopted its own Model 231, limited to the management of issues related to health and safety at work.
The latest version of the document in accordance with the provisions of the Corporate Governance Code, approved by the Board of Directors on 25 September 2018, is available on the Group website, at www.sabafgroup.com under the Investors - Corporate Governance section. 13 The latest version of the document, approved by the Board of Directors on 25 September 2018, is available on the Group website, at www.sabafgroup.com under the Investors - Corporate Governance section. 12
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Activities carried out in 2020 In 2020, 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; • carried out specific investigation activities regarding the occupational health and safety management processes, also with regard to the control units and anti-contagion measures taken to manage the Covid-19 pandemic emergency; • held periodic consultation meetings with Company management in order to analyse certain environmental and occupational health and safety matters, as well as issues subject to audits during the year; • carried out informational and training exercises aimed at employees with respect to several protocols governed by the Model, as well as training sessions on Legislative Decree no. 231/01.
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.).
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.
There were no cases of corruption for the three-year period from 2018 to 2020. 61
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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
s
sm
e
o nt
e f ad
quacy
and effecti
ve a
pp
lic
at
io
ols
as ic
CONTROL ENVIRONMENT
ntr
iod
co
Pe r
n of
se
RISK ASSESSMENT RELATED TO ECONOMIC, EQUITY AND FINANCIAL REPORTING.
ADMINISTRATIVE AND ACCOUNTING PROCEDURES Internal certifications of completeness and correctness of information
AUDIT ACTIVITY
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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 With the rapid and global spread of the health emergency, the priority for the Sabaf Group has been the protection of people’s health and safety. In the first phase of the emergency, when uncertainties were at their highest and protective instruments were not yet sufficiently available, the plants in Ospitaletto (Brescia) and Bareggio (Milan), areas that were strongly affected by the first wave of the contagion in Italy, suspended production in advance of the law measures that subsequently imposed a lockdown throughout Italy. Strict protocols to mitigate contagion risks were immediately adopted in all companies and have been continuously adapted based on relevant best practices. 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 work commitments. An insurance policy was taken out for all employees of the Italian companies and a one-off bonus was awarded as a form of financial support and a token of their commitment in such a delicate period. It is precisely the extraordinary dedication of all the personnel, their competence and willingness, even in difficult situations, that enabled them to react promptly and to adapt the level of activity to violent fluctuations in demand.
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PERSONNEL MANAGEMENT POLICY THE SOCIAL RESPONSIBILITY AND HEALTH AND SAFETY MANAGEMENT SYSTEM 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.
• adopt criteria of merit and competence in employment relationships, based also on the achievement of collective and personal objectives;
The Group is committed to pursuing the following objectives, which are also set out in the Charter of Values:
• enhance the contribution of human capital in decision-making processes, encouraging continuous learning, professional growth and knowledge sharing;
• 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;
64
• avoid all forms of harassment of workers;
• 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. For this reason, Sabaf S.p.A. adopted and maintains a Social Responsibility Management System that, by integrating with the other management systems operating in the company (health, safety, environment and energy and quality), constitutes an effective means for constant risk reduction. This objective is achieved through the following instruments: • maintaining full compliance with applicable laws, directives, current local regulations and voluntarily agreed standards (Global Compact, Code of Conduct of APPLiA Europe); • the full implementation of the Charter of Values; • the prior assessment of human rights, health and safety aspects; • the development of a process based on people being given a sense of responsibility within shared rules of behaviour.
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Sabaf S.p.A. and the SA8000 Standard Sabaf S.p.A. has been using a Social Responsibility Management System certified and compliant with the SA8000 standard since March 2009. In order that the main stakeholders can actively participate in the implementation of the Social Responsibility System, particular attention was paid to their involvement in the methods described below. To Sabaf S.p.A. workers through specific training sessions. Understanding the importance of adopting a Social Responsibility System is also facilitated by sharing information material on company electronic noticeboards, on the HR PORTAL workers’ portal, on the network and on the company website. To the trade unions: through awareness and the convinced involvement of trade union workers’ representatives is fundamental for the full implementation of the System.
To customers, by committing themselves within the household appliance industry to support ethical and fair behaviour, also through compliance with the Code of Conduct of APPLiA Europe. To the institutions, through the commitment to carry out its activities in order to overcome mere compliance with the law. To the community: complying with the Global Compact, the United Nations initiative for companies that commit to upholding and promoting the ten principles: human rights, labour, environmental protection and anti-corruption. 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.
To suppliers, sub-suppliers and sub-contractors, through the signing of a commitment to comply with the requirements of the Standard, an integral part of contracts. Audits are also carried out on suppliers.
During 2020, 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.
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THE PEOPLE OF THE SABAF GROUP The Sabaf Group had 1,168 employees at 31 December 2020 compared to 1,035 at the end of 2019. The increase in the number of employees compared to the previous year was 133 (+12.85%). 31.12.2020
31.12.2019
31.12.2018
(no.) Sabaf S.p.A. (Ospitaletto, Brescia - Italy)
312
168
480
318
170
488
329
174
503
Faringosi Hinges s.r.l. (Bareggio, Milano - Italy)
23
23
46
23
21
44
22
21
43
A.R.C. s.r.l. (Campodarsego, Padua - Italy)
15
5
20
16
5
21
15
4
19
C.M.I. s.r.l. (Loc. Crespellano – Valsamoggia, Bologna – Italy)
31
51
82
33
52
85
n/a
n/a
n/a
C.G.D. s.r.l. (Loc. Crespellano – Valsamoggia, Bologna – Italy)
35
3
38
34
4
38
n/a
n/a
n/a
C.M.I. Polska SP ZOO (Myszków, Poland)
19
25
44
18
29
47
n/a
n/a
n/a
Sabaf do Brasil (Jundiaí, São Paulo - Brazil)
74
13
87
69
13
82
70
17
87
Sabaf Turkey (Manisa - Turkey)
129
69
198
84
42
126
64
36
100
Okida14 (Esenyurt/Istanbul – Turkey)
80
85
165
56
40
96
n/a
n/a
n/a
Sabaf Appliance Components (Kunshan) Co., Ltd. (Kunshan, Jiangsu Province – China)
6
2
8
6
2
8
6
2
8
724
444
1,168
657
378
1,035
506
254
760
GROUP TOTAL
As regards the types of contract adopted, at 31 December 2020, there are 1,143 employees with permanent contracts (97.9%) and 25 with fixedterm contracts (2.1%).
GROUP 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
711
432
1,143
621
369
990
487
247
734
Fixed term
13
12
25
36
9
45
19
7
26
724
444
1,168
657
378
1,035
506
254
760
GROUP TOTAL
Sabaf S.p.A. 31.12.2020
31.12.2019
31.12.2018
(no.)
14
Permanent
306
166
472
312
167
479
326
171
497
Fixed term
6
2
8
6
3
9
3
3
6
In September 2018, Okida joined the Sabaf Group. The company was included in the reporting boundary as from 2019.
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Faringosi Hinges s.r.l. 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
23
23
46
23
21
44
22
21
43
Fixed term
0
0
0
0
0
0
0
0
0
A.R.C. s.r.l. 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
15
5
20
16
5
21
15
4
19
Fixed term
0
0
0
0
0
0
0
0
0
C.M.I. s.r.l. 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
28
51
79
30
51
81
n/a
n/a
n/a
Fixed term
3
0
3
3
1
4
n/a
n/a
n/a
C.G.D. s.r.l. 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
34
3
37
33
4
37
n/a
n/a
n/a
Fixed term
1
0
1
1
0
1
n/a
n/a
n/a
C.M.I. Poland 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
19
25
44
17
29
46
n/a
n/a
n/a
Fixed term
0
0
0
1
0
1
n/a
n/a
n/a
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SABAF . 2020 ANNUAL REPORT
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Sabaf do Brasil 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
74
13
87
65
13
78
70
17
87
Fixed term
0
0
0
4
0
4
0
0
0
Sabaf Turkey 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
128
59
187
65
37
102
51
32
83
Fixed term
1
10
11
19
5
24
13
4
17
Okida 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
80
85
165
56
40
96
n/a
n/a
n/a
Fixed term
0
0
0
0
0
0
n/a
n/a
n/a
Sabaf China 31.12.2020
31.12.2019
31.12.2018
(no.) Permanent
4
2
6
4
2
6
3
2
5
Fixed term
2
0
2
2
0
2
3
0
3
PERSONNEL WITH TEMPORARY WORK CONTRACT OR SIMILAR AND TRAINEES (no.) Temporary workers Trainees
68
31.12.2020
31.12.2019
31.12.2018
155
42
57
8
2
3
SABAF . 2020 ANNUAL REPORT
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BREAKDOWN OF PERSONNEL BY AGE 31.12.2020
31.12.2019
31.12.2018
< 30 years old
18.9
17.2
13.9
31 – 40 years old
34.5
35.1
39.9
41 – 50 years old
31.6
31.8
31.8
over 50 years old
15.0
15.9
14.4
100.0
100.0
100.0
(%)
TOTAL
The low average age of Group employees (39.3 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, 18 years old for Turkey, 16 years old for Brazil and 31 years old for China.
BREAKDOWN OF THE PERSONNEL BY LENGTH OF SERVICE 31.12.2020
31.12.2019
31.12.2018
44.5
37.2
26.7
6 – 10 years
9.0
12.3
12.9
11 – 20 years
31.9
36.6
46.7
over 20 years
14.6
13.9
13.7
TOTAL
100.0
100.0
100.0
(%) < 5 years
Sabaf is aware of the fundamental importance of having a stable and qualified workforce that is a key factor in maintaining its competitive advantage.
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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 31.12.2020
31.12.2019
31.12.2018
Degree
15.4
14.9
14.1
High school leaving diploma
46.2
44.2
45.5
Middle school leaving certificate
36.5
39.7
40.1
1.9
1.2
0.3
100.0
100.0
100.0
(%)
Elementary school leaving certificate TOTAL
CHANGE IN PERSONNEL IN THE THREE-YEAR PERIOD BY AGE AND GENDER HIRES 2020
2019
2018
< 30 years old
52
18
11
31-40 years old
37
9
8
41-50 years old
20
6
0
> 50 years old
0
0
1
109
33
20
< 30 years old
72
46
24
31-40 years old
50
25
41
41-50 years old
21
3
4
> 50 years old
7
2
1
TOTAL MEN
150
76
70
TOTAL
259
109
90
(no.)
TOTAL WOMEN
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SABAF . 2020 ANNUAL REPORT
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EMPLOYEE TURNOVER 2020
2019
2018
< 30 years old
19
9
7
31-40 years old
7
9
13
41-50 years old
10
8
2
> 50 years old
7
1
4
43
27
26
< 30 years old
27
32
34
31-40 years old
32
19
17
41-50 years old
8
10
6
> 50 years old
16
6
3
TOTAL MEN
83
67
60
TOTAL
126
94
86
(no.)
TOTAL WOMEN
RATE OF EMPLOYEE HIRE BY GEOGRAPHICAL AREA, AGE GROUP AND GENDER GROUP 2020
2019
2018
< 30 years old
11.71
4.76
4.33
31-40 years old
8.33
2.38
3.15
41-50 years old
4.50
1.59
0.00
> 50 years old
0.00
0.00
0.39
24.54
8.73
7.87
< 30 years old
9.94
7.00
4.74
31-40 years old
6.91
3.81
8.10
41-50 years old
2.90
0.46
0.79
> 50 years old
0.97
0.30
0.20
TOTAL MEN
20.72
11.57
13.83
TOTAL
22.17
10.53
11.84
(%)
TOTAL WOMEN
71
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
ITALY (SABAF S.P.A., FARINGOSI, A.R.C., C.M.I., C.G.D.) 2020
2019
2018
< 30 years old
0.00
1.59
1.01
31-40 years old
1.60
0.00
1.01
41-50 years old
1.20
0.40
0.00
> 50 years old
0.00
0.00
0.50
2.80
1.98
2.51
< 30 years old
0.48
0.71
1.09
31-40 years old
0.96
1.18
0.55
41-50 years old
0.96
0.00
0.27
> 50 years old
0.96
0.47
0.27
TOTAL MEN
3.36
2.36
2.19
TOTAL
3.15
2.22
2.30
2020
2019
2018
< 30 years old
0.00
0.00
n/a
31-40 years old
0.00
10.34
n/a
41-50 years old
0.00
6.90
n/a
> 50 years old
0.00
0.00
n/a
0.00
17.24
n/a
< 30 years old
10.53
11.11
n/a
31-40 years old
0.00
0.00
n/a
41-50 years old
0.00
0.00
n/a
> 50 years old
0.00
0.00
n/a
TOTAL MEN
10.53
11.11
n/a
TOTAL
4.55
14.89
n/a
(%)
TOTAL WOMEN
POLAND (C.M.I. POLAND) (%)
TOTAL WOMEN
72
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
BRAZIL (SABAF DO BRASIL) 2020
2019
2018
< 30 years old
0.00
0.00
5.88
31-40 years old
15.38
7.69
5.88
41-50 years old
7.69
0.00
0.00
> 50 years old
0.00
0.00
0.00
23.07
7.69
11.76
< 30 years old
14.86
8.70
2.86
31-40 years old
14.86
7.25
38.57
41-50 years old
2.70
1.45
1.43
> 50 years old
2.70
0.00
0.00
TOTAL MEN
35.12
17.40
42.86
TOTAL
33.33
15.85
36.78
2020
2019
2018
< 30 years old
33.77
17.07
22.22
31-40 years old
20.13
6.10
13.89
41-50 years old
10.39
3.66
0.00
> 50 years old
0.00
0.00
0.00
64.29
26.83
36.11
< 30 years old
27.27
25.00
28.13
31-40 years old
16.75
10.71
18.75
41-50 years old
7.18
1.43
3.13
> 50 years old
0.48
0.00
0.00
TOTAL MEN
51.68
37.14
50.00
TOTAL
57.02
33.33
45.00
(%)
TOTAL WOMEN
TURKEY (SABAF TURKEY AND OKIDA) (%)
TOTAL WOMEN
73
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
CHINA (SABAF CHINA) 2020
2019
2018
< 30 years old
0.00
0.00
0.00
31-40 years old
0.00
0.00
0.00
41-50 years old
0.00
0.00
0.00
> 50 years old
0.00
0.00
0.00
0.00
0.00
0.00
< 30 years old
0.00
0.00
0.00
31-40 years old
0.00
0.00
0.00
41-50 years old
0.00
0.00
0.00
> 50 years old
0.00
0.00
0.00
TOTAL MEN
0.00
0.00
0.00
TOTAL
0.00
0.00
0.00
(%)
TOTAL WOMEN
TURNOVER RATE BY GEOGRAPHICAL AREA, AGE GROUP AND GENDER GROUP 2020
2019
2018
< 30 years old
4.28
2.38
2.76
31-40 years old
1.58
2.38
5.12
41-50 years old
2.25
2.12
0.79
> 50 years old
1.58
0.26
0.39
9.69
7.14
9.06
< 30 years old
3.73
4.87
6.32
31-40 years old
4.42
2.89
3.36
41-50 years old
1.10
1.52
1.19
> 50 years old
2.21
0.91
0.20
TOTAL MEN
11.46
10.19
11.07
TOTAL
10.79
9.08
10.39
(%)
TOTAL WOMEN
74
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
ITALY (SABAF S.P.A., FARINGOSI, A.R.C., C.M.I., C.G.D.) 2020
2019
2018
< 30 years old
0.40
0.51
0.00
31-40 years old
0.00
1.53
1.52
41-50 years old
0.80
1.53
0.51
> 50 years old
2.40
0.51
0.51
3.60
4.08
2.53
< 30 years old
0.00
0.56
0.54
31-40 years old
1.68
1.40
1.63
41-50 years old
0.48
1.96
1.09
> 50 years old
3.13
0.84
0.27
TOTAL MEN
5.29
4.76
3.54
TOTAL
4.65
4.52
3.19
2020
2019
2018
< 30 years old
4.00
3.45
n/a
31-40 years old
0.00
3.45
n/a
41-50 years old
8.00
0.00
n/a
> 50 years old
4.00
0.00
n/a
16.00
6.90
n/a
< 30 years old
5.26
5.56
n/a
31-40 years old
0.00
0.00
n/a
41-50 years old
0.00
0.00
n/a
> 50 years old
0.00
0.00
n/a
TOTAL MEN
5.26
5.56
n/a
TOTAL15
11.36
6.38
n/a
(%)
TOTAL WOMEN
POLAND (C.M.I. POLAND) (%)
TOTAL WOMEN
15
2019 data modified compared to the 2019 Annual Report due to a publication error.
75
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
BRAZIL (SABAF DO BRASIL) 2020
2019
2018
< 30 years old
0.00
7.60
0.00
31-40 years old
15.38
15.38
5.88
41-50 years old
7.69
15.38
0.00
> 50 years old
0.00
0.00
0.00
23.07
38.46
5.88
< 30 years old
17.57
7.25
17.14
31-40 years old
8.11
7.25
7.14
41-50 years old
2.70
4.35
2.86
> 50 years old
0.00
0.00
0.00
TOTAL MEN
28.38
18.85
27.14
TOTAL
27.59
21.95
22.99
2020
2019
2018
< 30 years old
11.04
7.32
19.44
31-40 years old
3.25
3.66
25.00
41-50 years old
3.25
3.66
2.78
> 50 years old
0.00
0.00
0.00
17.54
14.64
47.22
< 30 years old
6.22
16.43
28.13
31-40 years old
9.09
6.43
9.38
41-50 years old
1.91
0.00
0.00
> 50 years old
1.44
1.43
0.00
TOTAL MEN
18.66
24.29
37.50
TOTAL
18.18
20.72
41.00
(%)
TOTAL WOMEN
TURKEY (SABAF TURKEY AND OKIDA) (%)
TOTAL WOMEN
76
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
CHINA (SABAF CHINA) 2020
2019
2018
< 30 years old
0.00
0.00
0.00
31-40 years old
0.00
0.00
0.00
41-50 years old
0.00
0.00
0.00
> 50 years old
0.00
0.00
0.00
0.00
0.00
0.00
< 30 years old
0.00
0.00
0.00
31-40 years old
0.00
0.00
0.00
41-50 years old
0.00
0.00
0.00
> 50 years old
0.00
0.00
0.00
TOTAL MEN
0.00
0.00
0.00
TOTAL
0.00
0.00
0.00
(%)
TOTAL WOMEN
The significant increase in the levels of activity in the second half of the year led to a sharp rise in the rate of employee hire, which was twice as high in 2020 as in the previous two years. Particularly significant was the increase in the number of employees in the Group’s Turkish companies, following the strong development of business in that Country.
The policies put in place in recent years allowed a significant reduction in the employee turnover rate even in areas such as Turkey where the Group had experienced the greatest difficulties in personnel retention.
PERSONNEL TRAINING Within the Sabaf Group, the professional growth of employees is supported by continuous training. The Group Human Resources Department, having consulted the
relevant 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.
2020
2019
2018
(hours) Training for new employees, apprentices, training contracts
1,615
546
2,161
2,340
1,302
3,642
4,363
1,299
5,662
Technical training and information systems
2,393
823
3,216
2,316
117
2,433
2,121
704
2,824
Quality, safety, environment, energy and social responsibility
3,963
1,095
5,058
3,079
878
3,957
3,649
1,040
4,689
Administration and organisation
434
106
540
683
545
1,228
724
554
1,278
Foreign languages
470
268
738
1,234
540
1,774
1,339
420
1,759
Other (e.g. lean philosophy/production/office)
675
267
942
2,036
767
2,803
256
496
752
TOTAL HOURS OF TRAINING RECEIVED
9,550
3,105
12,655
11,688
4,149
15,837
12,452
4,513
16,963
Hours of training provided by internal trainers 16
4,306
946
5,252
979
284
1,263
7,239
1,915
9,154
TOTAL
13,856
4,051
17,907
12,667
4,433
17,100
19,691
6,428
26,119
In 2020, 12,655 hours of training were provided to employees. In addition to this, 5,725 hours of training were received by employees with temporary work contract. 16
Including training given to employees with temporary work contract.
77
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
AVERAGE HOURS OF TRAINING PER CAPITA RECEIVED BY CATEGORY 2020
2019
2018
(hours) Blue Collars
11.6
4.4
8.7
18.2
10.0
15.1
23.7
15.2
20.8
White collars and Middle Managers
16.9
18.2
17.3
16.9
15.2
16.3
29.8
24.4
27.9
Managers
24.7
4.0
22.6
11.6
3.5
10.8
16.2
51.5
18.5
TOTAL
13.2
7.0
10.8
17.8
11.0
15.3
24.8
17.5
22.3
In 2020, the total cost incurred for training activities of Group personnel was approximately €360,000 (approximately €390,000 in 2019). In addition, there are training costs for temporary personnel, which in 2020 were around €123,000 (around €28,000 in 2019).
The preventive measures taken in the face of the health emergency affected the levels of training provided during 2020. Due to the restrictions introduced to contain the pandemic, many of the inperson training activities had to be suspended for most of the year and some training projects had to be postponed.
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.
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.
DIVERSITY AND EQUAL OPPORTUNITIES Sabaf is constantly committed to ensuring equal opportunities for women employees, who currently represent 38% of the workforce (36.5% in 2019).
PERCENTAGE DISTRIBUTION OF EMPLOYMENT BY GENDER 31.12.2020
TOTAL
78
31.12.2019
31.12.2018
no.
%
no.
%
no.
%
724
62.0
657
63.5
506
66.6
444
38.0
378
36.5
254
33.4
1,168
100.0
1,035
100.0
760
100.0
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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.
31.12.2020 no.
%
722
61.8
387
31.12.2018 %
no.
%
651
62.9
504
66.3
33.1
327
31.6
208
27.4
1,109
94.9
978
94.5
712
93.7
2
0.2
6
0.6
2
0.3
57
4.9
51
4.9
46
6.0
59
5.1
57
5.5
48
6.3
1,168
100.0
1,035
100.0
760
100.0
Full-time
Part-time
TOTAL
31.12.2019 no.
PERCENTAGE DISTRIBUTION OF EMPLOYMENT BY CATEGORY, AGE AND GENDER 31.12.2020
31.12.2019
31.12.2018
(%)
Managers
White collars and Middle Managers
Blue Collars
TOTAL
< 30 years old
0
0
0
0
0
0
0
0
0
from 30 to 50 years old
1
0
1
1
0
1
1
0
1
over 50 years old
1
0
1
1
0
1
1
0
1
TOTAL
2
0
2
2
0
2
2
0
2
< 30 years old
2
1
3
1
2
3
2
2
4
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
14
7
21
13
8
21
14
8
22
< 30 years old
10
4
14
10
3
13
8
2
10
from 30 to 50 years old
29
22
51
31
22
53
35
21
56
over 50 years old
7
4
11
7
4
11
8
2
10
TOTAL
46
30
76
48
29
77
51
25
76
< 30 years old
12
6
18
10
5
15
10
4
14
from 30 to 50 years old
40
27
67
42
27
69
46
26
72
over 50 years old
10
5
15
11
5
16
11
3
14
TOTAL
62
38
100
63
37
100
67
33
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.
79
SABAF . 2020 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. In addition to economic incentives, the incentive system includes company agreements for access to goods or services on favourable terms for all employees, regardless of the type of contract. The Group believes that a fundamental element of the incentive system is represented by the training opportunities provided.
LONG-TERM INCENTIVE (LTI) 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. The Plan aims 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 2018-2022 Business Plan, foster loyalty development and mo-
tivation 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 of the Company and of the Group. The operating mechanisms of the LTI system are described in the Remuneration Report.
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 2020, this incentive
80
system involved 43 employees of the Group (39 men and 4 women). The operating mechanisms of the LTI system are described in the Remuneration Report.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
The “premio produciamo qualità (PPQ)” (literally, “We produce quality prize”) 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 2020, improvement targets in these areas were set for 116 people involved in relevant business processes. (no.)
TOTAL
White Collars
Blue Collars
TOTAL
44
64
108
2
6
8
46
70
116
In addition to being a tool for steering towards challenging objectives (489 objectives were assigned, achieved or exceeded in 54% of cases), the PPQ 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. Also in 2020, the VPB could be enjoyed in the form of company welfare.
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 2020 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.
81
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
RATIO OF MINIMUM MONTHLY SALARY LAID DOWN BY COLLECTIVE LABOUR AGREEMENTS TO MINIMUM SALARY PAID BY GROUP COMPANIES17
2020
MINIMUM SALARY UNDER COLLECTIVE LABOUR AGREEMENT
MINIMUM SALARY PAID
MINIMUM INCREASE (%)
(in €) Sabaf S.p.A.
1,629
1,629
1,677
2,200
3%
35%
Faringosi Hinges s.r.l.
1,629
1,629
1,676
1,676
3%
3%
A.R.C. s.r.l.
1,628
1,628
1,656
1,628
2%
0%
C.G.D. s.r.l.
1,643
1,969
1,694
2,680
3%
36%
C.M.I. Poland
432
432
450
450
4%
4%
Sabaf Turkey
261
261
299
299
14%
14%
Okida
261
261
261
261
0%
0%
Sabaf do Brasil
247
247
279
279
13%
13%
Sabaf China
428
428
1,270
1,136
197%
165%
18
2019
MINIMUM SALARY UNDER COLLECTIVE LABOUR AGREEMENT
MINIMUM SALARY PAID
MINIMUM INCREASE (%)
(in €) Sabaf S.p.A.
1,617
1,617
1,630
2,044
1%
26%
Faringosi Hinges s.r.l.
1,617
1,617
1,664
1,798
3%
11%
A.R.C. s.r.l.
1,617
1,617
1,644
1,617
2%
0%
C.G.D. s.r.l.
1,498
1,795
1,533
2,063
2%
15%
C.M.I. Poland
389
389
465
465
20%
20%
Sabaf Turkey
288
288
329
329
14%
14%
Okida
288
288
288
288
0%
0%
Sabaf do Brasil
320
320
362
362
13%
13%
Sabaf China
380
380
1,292
1,155
240%
204%
2018
MINIMUM SALARY UNDER COLLECTIVE LABOUR AGREEMENT
MINIMUM SALARY PAID
MINIMUM INCREASE (%)
(in €) Sabaf S.p.A.
1,605
1,605
1,664
1,884
4%
17%
Faringosi Hinges s.r.l.
1,605
1,605
1,785
1,785
11%
11%
A.R.C. s.r.l.
1,605
1,605
1,644
1,705
2%
6%
Sabaf Turkey
254
254
290
290
14%
14%
Sabaf do Brasil
313
313
353
353
13%
13%
Sabaf China
259
259
348
1,145
34%
341%
The Group has procedures in place to systematically check the regular contribution of suppliers and contractors and the correct hiring of their employees. 17 18
Values converted into euro at the annual average exchange rate. Data not available for C.M.I. s.r.l.
82
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
RATIO OF AVERAGE SALARY OF FEMALE PERSONNEL TO AVERAGE SALARY OF MALE PERSONNEL19 2020
2019
2018
White-collars, middle managers and managers
78%
83%
71%
Blue Collars
79%
82%
77%
(%)
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). In 2020, as a result of the pandemic, the inherent risk of contagion became particularly relevant. The Group is also exposed to the risk of 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. During 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.
19
• 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. In order to mitigate the risks of contagion, all Group companies promptly adopted preventive measures and strict protocols, which are 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. and C.G.D. s.r.l., the health and safety management system has been certified according to ISO 45001 since 2017 and 2020, respectively; in Faringosi Hinges s.r.l., it has been certified according to the OHSAS 18001 standard since 2012; the transition to the new ISO 45001 standard is planned for 2021. 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 do Brasil, 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.
Calculated on basic salary.
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2020
2019
2018
1,801,120
1,513,620
1,234,369
Near misses/Medical treatments without lost days
103
39
37
Recordable injuries (absence < 6 months) - excluding fatalities
29
15
29
0
0
2
Accidents with serious consequences (absence > 6 months) excluding fatalities
0
1
0
of which injuries while travelling to/from work
0
0
0
Deaths as a result of injuries
0
0
0
0
0
0
Days lost due to injury
194
260
210
Total injuries - including fatalities
29
16
29
0
0
2
INJURY RATE (number of injuries x 1,000,000/hours worked)
2020
2019
2018
Recordable injury rate
16.10
9.91
23.49
High-consequence injury rate
0.00
0.66
0.00
Fatality rate as a result of injuries
0.00
0.00
0.00
Total injury rate
16.10
10.57
23.49
INJURY LOST DAY RATE (days of absence x 1,000/hours worked)
2020
2019
2018
0.11
0.17
0.17
NUMBER AND DURATION OF INJURIES 20 Hours worked
21
of which injuries while travelling to/from work
22
of which injuries while travelling to/from work
of which injuries while travelling to/from work
Rate based on recordable and high-consequence injuries
Most of the injuries recorded in 2020 were minor, involving bruises and superficial cuts and burns. No serious injuries were reported; the injury lost day rate shows a significant improvement over previous years. On the other hand, the injury rate in 2020 was higher than in 2019, affected by a higher than average number of injuries in Sabaf Turkey. This company promptly planned additional and more focused training activities, aimed at increasingly developing a safety culture in line with that of the Parent Company.
Lastly, with regard to external workers, in 2020, against 201,761 hours worked, there was only one injury at Group level that did not have serious consequences, with an injury rate of 4.96 (11.64 in 2019). No cases of occupational disease were reported at Group level in 2020. 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.
Please note that the 2018 data was calculated according to the requirements of the 2016 version of the GRI Standard on Health and Safety. 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. 22 Only if transport has been organised by the organisation and the transfers have taken place within working hours. 20 21
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Sabaf, a health-promoting workplace At the beginning of 2016, Sabaf S.p.A. 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 2002/95/EC (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 key points of this agreement are set below: • 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);
23
• 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. In the Group companies, at 31 December 2020, 164 employees, or 14.0% of the total, were members of trade unions (in 2019, 125 employees, or 14.5%, were members) 23. Hours of participation in trade union activities during 2020 amounted to 0.12% of the hours worked (0.36% in 2019).
The 2019 data does not include the C.M.I. Group, over which Sabaf acquired control on 31 July 2019.
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2020
2019
Number of hours
209
2,373
Percentage over hours worked
0.01
0.16
Number of hours per capita
0.2
2.3
Number of hours
1,009
1,579
Percentage over hours worked
0.06
0.10
Number of hours per capita
0.9
1.5
Number of hours
1,017
1,459
Percentage over hours worked
0.06
0.10
Number of hours per capita
0.9
1.4
2,235
5,410
Percentage over hours worked
0.12
0.36
Number of hours per capita
1.9
5.2
PARTICIPATION IN TRADE UNION ACTIVITIES
BENCHMARK24
Meeting
Leave for trade union duties
Strike
TOTAL Number of hours
All strikes called in 2020 are related to public issues and never to specific company issues.
During the first half of 2020, when the health emergency had the greatest impact on the Group’s activities, the Italian companies made use of the temporary unemployment fund for a total of 66,574 hours and the solidarity contract for 416 hours.
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 2020, 3 disputes were pending (all with former employees), 2 of which were started in 2020.
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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.
reporting requirements with respect to these topics or the change in consumer preferences - the Group has not identified any significant risks to date.
Risks of external 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 possible impacts related to climate change - both physical, such as the increase in global temperatures, sea level and the increase in extreme weather events, and transitional, such as the increase in
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. 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.
PROCESS INNOVATION AND ENVIRONMENTAL SUSTAINABILITY 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. 87
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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).
LIGHT ALLOY VALVES 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 92% of the valves produced by the Sabaf Group.
HIGH EFFICIENCY BURNERS For many years, the Sabaf Group has been at the forefront in offering 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 flame-spreader 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 23% of the total burners produced.
ENVIRONMENTAL IMPACT
Aware of the value of complete and transparent disclosure, in 2020 Sabaf joined the Climate Change and Water programmes of CDP (formerly the Carbon Disclosure Project), an international non-profit 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.
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. 2020 consumption
2019 consumption
2018 consumption
638
481
789
9,188
6,476
7,831
10
11
33
26,046
21,881
7,861
Cast Iron
96
142
137
Enamel
246
193
189
Bronze
0
1
-
Copper
8
-
-
103
116
-
Cardboard
706
397
454
Plastic
220
136
140
Wood
683
479
503
(t) RAW MATERIALS Brass Aluminium alloys Zamak Steel
Stainless steel PACKAGING MATERIALS
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85% of brass and about 50% of aluminium alloys used are produced by scrap recycling; the remaining 50% of aluminium alloys and about 80% of steel are produced from ore. 43% of the cardboard and about 66% of the plastic comes from recycling. Cardboard and wood are renewable materials. The increases in raw material and packaging consumption in 2020 reflect the Group’s higher production levels compared to the previous year. Sabaf products fully comply with the requirements of Directive 2002/95/EC (RoHS Directive) which tends to limit the use of hazardous substances such as lead in the production of electrical and electronic equipment.
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
Moreover, Sabaf products fully comply with the requirements of Directive 2000/53/EC (End of Life 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.
ENERGY SOURCES25 2020 consumption
2019 consumption
2018 consumption
MWh
158
50
-
MWh
35,220
28,526
30,225
m x1,000
4,478
3,740
3,918
Diesel oil
lx1,000
57
51
21
Petrol
lx1,000
17
10
-
GPL
lx1,000
0
0.09
-
GJ
290,125
238,887
249,866
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 40% 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 60% of total energy requirements.
Sabaf S.p.A., Sabaf do Brasil 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)
2020
2019
2018
Energy intensity
0.436
0.426
0.460
The trend in energy consumption is closely related to production levels; consumption is substantially stable in relation to sales revenues.
25
Measures to improve the energy efficiency of installations are ongoing.
Updated factors published in 2018, 2019 and 2020, respectively, by the Department for Environment, Food and Rural Affairs (DEFRA) were used to calculate consumption.
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WATER (m3)
2020
2019
2018
from waterworks
50,682
56,409
110,655
of which freshwater
50,682
56,409
110,665
of which other water
0
0
0
27,675
35,516
29,185
of which freshwater
27,675
35,516
29,185
of which other water
0
0
0
78,357
91,925
139,840
from well
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 concentration plants that have significantly reduced the quantities of water required and waste produced. During 2019, a concentration
plant was also started up at the Brazilian production site, which allowed a further reduction in consumption also in 2020. At the Ospitaletto plant, there is a plant for the collection of rainwater intended for use in industrial activities. Currently, the volume of rainwater collected is not reported; however, its increased use (due to increased rainfall) has led to a significant reduction in withdrawals from wells.
WASTE Trimmings and waste from the production process are identified and collected separately for recycling or disposal. The risers deriving
2020 (t)
Incidence (%)
2019 (t)
Incidence (%)
Similar to urban
291
2.7
225
2.8
Total hazardous
2,256
21.1
1,631
20.3
142
1.3
92
1.2
5
0.1
1
0.0
- incineration
1,135
10.6
746
9.3
- other
863
8.1
733
9.1
111
1.0
59
0.7
Total non-hazardous
8,132
76.2
6,164
76.9
- reuse
3,882
36.3
2,370
29.6
- recycling
2,068
19.4
747
9.3
- recovery
70
0.7
111
1.4
- incineration
690
6.5
1,359
17.0
- other
88
0.8
870
10.8
- temporary and/or last year's storage
1,334
12.5
707
8.8
Total waste
10,679
100.0
8,020
100.0
- reuse - recycling
27
- temporary and/or last year’s storage
26 27
from aluminium die-casting are intended for direct reuse. The waste, broken down by type and method of disposal, is summarised below26.
Following a completion of the data collection system, the disposal methods for 2019 and 2020 present a more detailed classification. Data does not include C.M.I. Poland. Includes landfill disposal.
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2018 (t)
Incidence (%)
Similar to urban
186
2.2
Total hazardous
2,434
28.2
- disposal
992
11.5
- recovery
1,442
16.7
Total non-hazardous
6,008
69.6
- disposal
1,722
20.0
- recovery
4,286
49.6
Total waste
8,628
100.0
2020
2019
2018
190,001
160,095
160,054
Total hazardous waste/Generated economic value (kg in €/000)
12
10
15
Total waste/Generated economic value (kg in €/000)
56
50
54
Economic value generated by the Group (€/000)
The increase in the volume of waste generated in 2020 is related to higher production levels. The incidence of waste on the economic value generated by the Group remained in line with 2019. The Group continues its efforts to reduce the production of special hazardous 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 2020.
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 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 purification systems is ensured through their regular maintenance and the regular monitoring of all emissions. Monitoring in 2020 showed that all emissions complied with the limits imposed by the law.
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CO2 EMISSIONS 28
2020
2019
2018
Scope 1 (direct emissions)
tCO2eq
9,409
7,793
8,022
from refrigerant gases
tCO2eq
162
59
-
from fuel consumption
tCO2
9,247
7,734
8,022
Scope 2 (indirect emissions) - location based
tCO2
11,998
9,979
10,498
Scope 2 (indirect emissions) - market based
tCO2
14,969
12,484
13,133
Total emissions Scope 1+2 (location based)
tCO2eq
21,407
17,772
18,520
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 (R22), which is managed in compliance with the reference standards.
ENVIRONMENTAL INVESTMENTS In 2019, the Group made two major environmental investments: • the concentration plant of enamelling wastewater at the Brazilian plant;
• the plant for the chemical-physical treatment of enamelling waste at the Ospitaletto plant. No major environmental investments were made in 2020.
DISPUTES Over the three-year period from 2018 to 2020, the Group did not suffer any sanctions related to environmental compliance and no dispute is pending.
28 The factors used for calculating emissions are: ∙ year 2018: Scope 1 fuels: Defra 2018 - Scope 2 Location-based: Terna 2016 - Scope 2 market-based: AIB 2017, where available, otherwise Terna 2016; ∙ 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. Following the completion of the data collection system, direct emissions (scope 1) for the years 2019 and 2020 also include refrigerants used in air conditioners. The increase in refrigerant gas emissions in 2020 was due to the recharging 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.
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.
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.
Business continuity risks: risk of non-delivery to customers due to stoppages for reasons of force majeure (total or partial lockdowns, lack of transport services, production stoppages or delays). This risk, which in the past could be classified with a low probability of occurrence and low value, takes on higher probability and impact assessments in the current context.
Legal and compliance risks, relating to non-compliance with product regulations: Sabaf operates in international markets that adopt
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. During the period in which the health emergency forced the suspension of operations at some plants, the contribution of production from the Group’s other plants was crucial. Even in the second half of the year, when demand reached unpredictable peaks, the
mutual support between the various plants made it possible to respond to customers’ needs in the best possible way. Moreover, the saturation levels of production capacity were carried to the maximum everywhere, with extensive use of third shifts and work on public holidays and on days before a holiday. 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.
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. 93
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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 do Brasil
2008
Sabaf Turkey
2015
During 2020, 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 2020, a total of 26 functional areas of offices and production departments were checked at the Ospitaletto plant, 14 at Sabaf do Brasil and 14 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 2020 at all certified plants, with the exception of the plant in Brazil, for which the next inspection is scheduled for 2021. 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.
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 latest survey, carried out in 2019 through an online survey, confirmed the positive opinion of customers whose strong points included the quality of products and timeliness, professionalism and competence in technical and commercial assistance.
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;
DISPUTES There is no dispute with customers. 94
• customer feedback through 8D reports (quality management tool that enables a cross-functional team to determine the causes of problems and provide effective solutions).
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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. 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.
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, derives from a risk assessment that takes into account the type of process, product or service provided and the geographical location of the supplier. Operational risks: including continuity of supplies, assessed also by referring to the financial sustainability of the suppliers.
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.
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.
Maximum punctuality in meeting payments within the agreed deadline was always ensured. Sabaf immediately joined the #iopagoifornitori initiative promoted by Confindustria Brescia.
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. As things stand, the management of relations with suppliers in Sabaf S.p.A., Sabaf do Brasil, Sabaf Turkey, Sabaf China and Faringosi Hinges s.r.l. is conducted on the basis of uniform procedures. For the most recently acquired companies (A.R.C., Okida and C.M.I.) the general policies are shared, with a special reference to the management of the risks exposed above, and possible synergies are identified and fulfilled.
29
With regard to the management by suppliers of quality, environment and social responsibility, if the law in force already requires Sabaf to meet the minimum requirements, the risk is considered to be lower, otherwise periodic audits are carried out on the management of these aspects. In 2019, class A and B suppliers were analysed to cover 95% of the expenditure29. This analysis revealed 34 cases of suppliers considered potentially critical, following which 25 audits were carried out from which no critical non-conformities were found but only observations. In connection with non-critical noncompliances, the suppliers were asked to take appropriate action. During 2020, the health emergency led to the need to temporarily suspend supplier audits, which will be resumed as soon as the situation returns to normal.
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.
95
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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 2020, the turnover of suppliers of the Sabaf Group with a Certified Quality System was equal to 65% of the total (74% in 2019).
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 companies30.
Total 2020 purchases (€/000)
% domestic purchases
Total 2019 purchases (€/000)
% domestic purchases
Sabaf S.p.A.
71,882
75%
56,466
79%
Faringosi Hinges s.r.l.
8,102
100%
8,331
99%
A.R.C. s.r.l.
2,483
85%
3,466
83%
C.M.I. Group
20,391
98%
24,916
71%
Sabaf Turkey
12,506
55%
10,242
72%
Okida
7,917
72%
5,537
68%
Sabaf do Brasil
12,341
84%
7,491
95%
542
97%
534
98%
Sabaf China
DISPUTES No disputes with suppliers have arisen in the last three years.
30
The data in the table does not take account of intercompany supplies. Values converted into euro at the annual average exchange rate. The 2019 data of the C.M.I. Group refers to the full year.
96
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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.
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.
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.
97
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
REPORTING BY COUNTRY31
(€/000)
ITALY
BRAZIL
TURKEY
CHINA
U.S.A.
INDIA
POLAND
TOTAL BEFORE CONSOLIDATION
CONSOLIDATION ADJUSTMENTS
TOTAL CONSOLIDATED FINANCIAL STATEMENTS
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
Number of employees
666
87
363
8
-
-
44
1,168
-
1,168
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
Permanent tax differences (D)
233
6
(265)
-
-
-
-
(26)
-
(26)
Other changes (E)
(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
Theoretical income tax (C) = (A)+(B)
31
The names and main activities carried out by Group companies are listed in the paragraph “Corporate Governance, Risk Management and Compliance” of this document.
98
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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 2019, Sabaf S.p.A. joined the Fondazione Spedali Civili of Brescia to which it made a donation during 2020, as part of the fundraising set up to deal with the Covid emergency. 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.
DISPUTES There are no significant disputes with Public Bodies or other representatives of the community.
99
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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 preparation of this Disclosure (23
March 2021), a total of 3,556,690 shares had acquired voting rights (two votes for each share).
NUMBER OF SHARES MAKING UP THE SHARE CAPITAL
NUMBER OF VOTING RIGHTS
11,533,450
15,090,140
ordinary shares IT0001042610
7,976,760
7,976,760
ordinary shares with increased vote IT0005253338
3,556,690
7,113,380
TOTAL of which:
The shareholders entered in the shareholders’ register at 26 February 2021 were 1,948, of whom: • 1,649 own up to 1,000 shares; • 211 own 1,001 to 5,000 shares;
• 29 own 5,001 to 10,000 shares; • 59 own over 10,000 shares. 29.31% of the share capital is held by shareholders resident abroad.
RELEVANT SHAREHOLDERS SHAREHOLDER
NUMBER OF SHARES
% OF SHARE CAPITAL
VOTING RIGHTS
% HELD
CINZIA SALERI S.a.p.A.
2,415,644
20.94%
2,415,644
16.01%
QUAESTIO CAPITAL MANAGEMENT SGR S.p.A.
2,306,690
20.00%
4,613,380
30.57%
FINTEL s.r.l.
883,394
7.66%
1,733,394
11.49%
FIDELITY PURITAN TRUST
400,000
3.47%
800,000
5.30%
PALOMA RHEEM INVESTMENTS. INC.
570,345
4.95%
570,345
3.78%
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 attributed strategic importance to financial communication. Sabaf’s financial communication policy 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. During 2020, the company participated in the Star Conferences in March and October, Sustainability Week in July and the Small & Mid Cap Conference in December, events that were held in virtual format due to the health emergency.
REMUNERATION OF SHAREHOLDERS AND SHARE PERFORMANCE In 2020, the Sabaf share recorded the highest official price on 8 December (€15.725) and lowest on 30 March (€9.476). The average
100
volume traded was 9,627 shares per day, equal to an average value of €121,764 (€71,894 in 2019).
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
2020 PERFORMANCE OF SABAF SHARES (PRICE AND VOLUMES TRADED)
PRICE
15
12.5
10
7.5
VOLUMES 200 k
0k Jan 20
May 20
Mar 20
July 20
Sept 20
Nov 20
Jan 21
SABAF VS. FTSE ITALIA STAR INDEX
FTSE Italian STAR Index Sabaf S.p.A. 10%
0%
-10%
-20%
-30%
-40% Jan 20
May 20
Sept 20
Dec 20
101
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
The Shareholders’ Meeting of 4 May 2020, in accordance with the proposal made by the Board of Directors, resolved to allocate the entire 2019 net profit to reserves. This proposal was made, on a prudential basis, in view of the uncertainties of the period that was then experiencing its most critical phase. The reassuring results at
30 June 2020 and the positive business trend in the following months subsequently allowed the distribution of a dividend of €0.35 per share (total dividends of approximately €3.9 million), approved by the shareholders’ meeting on 29 September and paid on 14 October.
SOCIALLY RESPONSIBLE INVESTMENTS Sabaf shares have frequently been analysed by analysts and managers of SRI funds, who have also invested in Sabaf on several occasions.
DISPUTES There is no dispute with shareholders.
Sabaf and lenders RELATIONS WITH CREDIT INSTITUTIONS The 2018-2022 Business Plan envisages the financing of growth also through greater use of financial debt, which is expected to remain within the parameters of absolute security (net financial debt to EBITDA ratio below 2). At 31 December 2020, the net financial debt was €56.3 million, compared with €55.1 million on 31 December 2019; the ratio between
the net financial debt and the pro-forma EBITDA32 was 1.52 versus 1.86 at 31 December 2019. 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.
DISPUTES There is no dispute with the lenders.
32
The pro-forma EBITDA is calculated taking into account, for companies acquired and entering the scope of consolidation during the year, the EBITDA for the entire year.
102
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
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%.
Defendi is an Italian company, acquired in 2013 by the German group EGO, and is mainly active in the production of burners in Italy and Brazil.
The main competitors of the Sabaf on the international market are Copreci, Defendi and Robertshaw.
Robertshaw is the leading producer of gas parts for the North American market.
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.
Main Italian and international competitors
VALVES AND THERMOSTATS
BURNERS
HINGES
ELECTRONIC COMPONENTS
SABAF GROUP
Copreci (Spain)
Defendi Italy (Italy)
Robertshaw (U.S.A.)
Somipress (Italy)
Nuova Star (Italy)
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SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
2018 and 2019 economic data of the main Italian competitors33
2019
2018
(€/000)
SALES
EBIT
NET RESULT
SALES
EBIT
NET RESULT
SABAF GROUP
155,923
11,896
9,915
150,642
16,409
15,614
Defendi Italy
41,407
(1,521)
(4,237)
50,383
(98)
577
Somipress Group
35,670
3,555
2,752
36,456
2,162
1,824
Nuova Star
35,294
406
259
35,485
366
321
No further information is available on competitors due to the difficulty of finding the data. 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 2020: • there is a dispute pending against a competitor following an alleged violation of one of our patents;
33
Sabaf processing from the financial statements of the various companies. Latest available data.
104
• there is a dispute pending brought by a competitor for alleged infringement of a patent, which was closed in early 2021 with a settlement agreement.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
GRI Content Index GRI STANDARD
PAGE (or direct reference)
DISCLOSURE
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. 18-21
102-3
Location of headquarters
Via dei Carpini, 1 25035 Ospitaletto (Brescia)
102-4
Location of operations
pp. 20-23
102-5
Ownership and legal form
pp. 44-46; 100
102-6
Markets served
pp. 20-23
102-7
Scale of the organisation
pp. 11-23
102-8
Information on employees and other workers
pp. 66-69
102-9
Supply chain
pp. 95-96
102-10
Significant changes to the organization and its supply chain
p. 26
102-11
Precautionary Principle or approach
pp. 37; 57-58
102-12
External initiatives
pp. 29-30; 39-40
102-13
Membership of associations
p. 99
Statement from senior decision-maker (Chairman and CEO)
pp. 27-28
Strategy 102-14
Ethics and integrity 102-16
Values, principles, standards and norms of behaviour
pp. 29-32
102-18
Governance structure
pp. 44-56
102-22
Composition of the highest governance body and its committees
pp. 46-51
Governance
GRI 102: General disclosures 2016
Stakeholder engagement 102-40
List of stakeholder groups
p. 38
102-41
Collective bargaining agreements
pp. 80-83
102-42
Identifying and selecting stakeholders
p. 38
102-43
Approach to stakeholder engagement
p. 38
102-44
Key topics and concerns raised
p. 38
Reporting practice 102-45
Entities included in the consolidated financial statements
pp. 20; 26; 45
102-46
Defining report content and topic Boundaries
pp. 26; 41
102-47
List of material topics
pp. 41-43
102-48
Restatements of information
pp. 26; 75
102-49
Changes in reporting
pp. 26; 41
102-50
Reporting period
p. 26
102-51
Date of most recent report
Year 2019
102-52
Reporting cycle
p. 26
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. 26
102-55
GRI Content Index
pp. 105-108
102-56
External assurance
pp. 109-111
105
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
GRI STANDARD
PAGE (or direct reference)
DISCLOSURE
Material topics GRI 200 Economic Standards Series Economic performance
GRI 103: Management approach 2016 GRI 201: Economic performance 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58
103-3
Evaluation of the management approach
pp. 57-58
201-1
Direct economic value generated and distributed
p. 36
Market presence
GRI 103: Management approach 2016
GRI 202: Market Presence 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 63-65; 80-83
103-3
Evaluation of the management approach
pp. 57-58; 63-65; 80-83
202-1
Ratios of standard entry level wage by gender compared to local minimum wage
p. 82
Anti-corruption
GRI 103: Management approach 2016 GRI 205: Anti-corruption 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58
103-3
Evaluation of the management approach
pp. 57-58
205-3
Confirmed incidents of corruption and actions taken
p. 61
Anti-competitive behaviour
GRI 103: Management approach 2016 GRI 206: Anticompetitive behaviour 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 103-104
103-3
Evaluation of the management approach
pp. 57-58; 103-104
206-1
Legal actions for anti-competitive behaviour, anti-trust, and monopoly practices
p. 104
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 97-98
103-3
Evaluation of the management approach
pp. 57-58; 97-98
207-1
Approach to tax
p. 97
207-2
Tax governance, control and risk management
p. 97
207-3
Stakeholder engagement and management of concerns related to tax
p. 97
207-4
Country-by-Country reporting
p. 98
Tax
GRI 103: Management approach 2016
GRI 207: Tax 2019
106
OMISSION
SABAF . 2020 ANNUAL REPORT
GRI STANDARD
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
PAGE (or direct reference)
DISCLOSURE
OMISSION
GRI 300 Environmental Standards Series Materials
GRI 103: Management approach 2016 GRI 301: Materials 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 87-89
103-3
Evaluation of the management approach
pp. 57-58; 87-89
301-1
Materials used by weight or volume
pp. 88-89
Explanation of the material topic and its Boundary
pp. 41-43
Energy
GRI 103: Management approach 2016 GRI 302: Energy 2016
103-1 103-2
The management approach and its components
pp. 57-58; 87-88; 89
103-3
Evaluation of the management approach
pp. 57-58; 87-88; 89
302-1
Energy consumption within the organisation
p. 89
302-3
Energy intensity
p. 89
Explanation of the material topic and its Boundary
pp. 41-43
Emissions
GRI 103: Management approach 2016 GRI 305: Emissions 2016
103-1 103-2
The management approach and its components
pp. 57-58; 87-88; 91-92
103-3
Evaluation of the management approach
pp. 57-58; 87-88; 91-92
305-1
Direct (Scope 1) GHG emissions
p. 92
305-2
Energy indirect (Scope 2) GHG emissions
p. 92
Effluents and waste
GRI 103: Management approach 2016 GRI 306: Effluents and waste 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 87-88; 90-91
103-3
Evaluation of the management approach
pp. 57-58; 87-88; 90-91
306-2
Waste by type and disposal method
p. 90-91
Environmental compliance
GRI 103: Management approach 2016 GRI 307: Environmental compliance 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 87-88; 92
103-3
Evaluation of the management approach
pp. 57-58; 87-88; 92
307-1
Non-compliance with environmental laws and regulations
p. 92
GRI 400 Social Standards Series Employment
GRI 103: Management approach 2016 GRI 401: Employment 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 63-65; 77
103-3
Evaluation of the management approach
pp. 57-58; 63-65; 77
401-1
New employee hires and employee turnover
pp. 70-77
Industrial relations 103-1
GRI 103: Management approach 2016 GRI 402: Labour management relations 2016
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 63-65; 85-86
103-3
Evaluation of the management approach
pp. 57-58; 63-65; 85-86
402-1
Minimum notice periods regarding operational changes
p. 85
Health and safety
GRI 103: Management approach 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 83-85
103-3
Evaluation of the management approach
pp. 57-58; 83-85
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SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
GRI STANDARD
PAGE (or direct reference)
DISCLOSURE 403-1
Occupational health and safety management system
pp. 83-85
403-2
Hazard identification, risk assessment, and incident investigation
pp. 83-85
Occupational health services
pp. 83-85
Worker participation, consultation, and communication on occupational health and safety
pp. 83-85
403-3
GRI 403: Occupational 403-4 Health and Safety 403-5 2018
Worker training on occupational health and safety
pp. 83-85
403-6
Promotion of worker health
pp. 83-85
403-7
Prevention and mitigation of occupational health and safety impacts directly linked by business relationships
pp. 83-85
403-9
Work-related injuries
p. 84
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. 41-43
103-2
The management approach and its components
pp. 57-58; 63-65; 77-78
103-3
Evaluation of the management approach
pp. 57-58; 63-65; 77-78
404-1
Average hours of training per year per employee
p. 78
Diversity and equal opportunities 103-1
GRI 103: Management approach 2016 GRI 405: Diversity and equal opportunity 2016
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 47; 57-58; 63-65; 78-79
103-3
Evaluation of the management approach
pp. 47; 57-58; 63-65; 78-79
405-1
Diversity of governance bodies and employees
pp. 48-53; 79
Non-discrimination
GRI 103: Management approach 2016 GRI 406: Nondiscrimination 2016
103-1
Explanation of the material topic and its Boundary
pp. 41-43
103-2
The management approach and its components
pp. 57-58; 63-65
103-3
Evaluation of the management approach
pp. 57-58; 63-65
406-1
Incidents of discrimination and corrective actions taken
p. 65
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. 41-43
103-2
The management approach and its components
pp. 57-58; 95-96
103-3
Evaluation of the management approach
pp. 57-58; 95-96
414-2
Negative social impacts in the supply chain and actions taken
pp. 95-96
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. 41-43
103-2
The management approach and its components
pp. 57-58; 93-94
103-3
Evaluation of the management approach
pp. 57-58; 93-94
416-1
Assessment of the health and safety impacts of product and service categories
p. 94
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. 41-43
103-2
The management approach and its components
pp. 57-58; 93-94
103-3
Evaluation of the management approach
pp. 57-58; 93-94
416-2
Incidents of non-compliance concerning the health and safety impacts of products and services
p. 94
Topics not covered by specific standards Partnership with multinational groups
GRI 103: Management approach 2016
108
103-1
Explanation of the material topic and its Boundary
pagg. 41-43
103-2
The management approach and its components
pagg. 32-33; 57-58
103-3
Evaluation of the management approach
pagg. 32-33; 57-58
OMISSION
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
109
SABAF . 2020 ANNUAL REPORT
110
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED DISCLOSURE OF NON-FINANCIAL INFORMATION
111
REPORT ON OPERATIONS
SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
Impacts from the COVID-19 pandemic 114 Business and Financial situation of the Group 115 Risk Factors 118 Research and Development 119 Consolidated Disclosure of Non-Financial Information 120 Personnel 120 Environment 120 Corporate Governance 120 Internal Control System on Financial Reporting 120 Model 231 120 Personal data protection 120 Derivative financial instruments 120 Atypical or unusual transactions 120 Management and coordination 120 Intra-group transactions and related-party transactions 120 Business outlook 120 Business and financial situation of Sabaf S.p.A. 121 Reconciliation between parent company and consolidated shareholders’ equity 122 and net profit for the period Use of the longer time limit for calling the shareholders’ meeting 122 Proposal for allocation of 2020 profit 123
SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
IMPACTS FROM THE COVID-19 PANDEMIC The coronavirus pandemic presented our Group - like all organisations - with new challenges, requiring resilience and immediate reaction to unpredictable and rapidly changing scenarios.
The Group did not avail itself of the liquidity support measures for Italian companies provided for in the legislative decrees issued by the Government during the year.
In the first half of 2020, with the rapid and global spread of health emergencies, our priorities were to protect the health and safety of people: to this end, all Sabaf Group companies adopted every preventive measure useful to eliminate the risks of contagion. Aware of the strategic importance of our role in the household appliance chain, we have also taken all possible measures to ensure continuity of supply even during the period in which some Group companies were forced to temporarily stop production.
The Shareholders’ Meeting of 4 May 2020, in accordance with the proposal made by the Board of Directors, resolved to allocate the entire 2019 net profit to reserves. This proposal was made, on a prudential basis, in view of the uncertainties of the period that was then experiencing its most critical phase. The reassuring results at 30 June 2020 and the positive business trend in the following months subsequently allowed the distribution of a dividend of €0.35 per share (total dividends of approximately €3.9 million), approved by the shareholders’ meeting on 29 September and paid on 14 October.
Since the second half of the year, the allocation of a greater share of consumer budgets to household goods has led to a significant increase in the final demand for household appliances in all geographical areas from which the Sabaf Group is also benefiting. Such a rapid rebound in consumption once again required us to react without delay and with maximum flexibility: in the last part of the year, all plants were called upon to operate at full capacity. Overall, we believe that we have demonstrated the ability to take the right decisions in a timely manner and to activate the management leverage to deal with such an extraordinary period. As described in detail in the following sections of this report, the Group ended the year with excellent results, both in terms of growth, profitability and financial management. We confirmed our strategy of further expanding our international presence and carried out all the organic investments that had been planned for 2020, investing a total of more than €17 million. For 2021, total investments were planned in line with those made in 2020. Due in part to restrictions on mobility, we did not conclude any transactions in 2020 aimed at developing the business through acquisitions, but these remain an integral part of our strategy for future growth. After a temporary increase in working capital during the second quarter caused by some delays in the collection of trade receivables, the situation gradually normalised during the year. With regard to suppliers, the Group continued always to meet its commitments in full compliance with the established contractual terms. At the end of the financial year, the ratio of working capital to revenue is entirely physiological and in line with the figure for the end of 2019. The Group incurred higher costs estimated at approximately €700,000 for protection devices, sanitisation activities and oneoff economic support paid to employees. The public contributions obtained were not significant.
114
The Group took into account the uncertainties related to the current situation when making estimates for the purposes of preparing this annual report, especially with regard to the recoverability of the value of intangible assets and the evaluation of receivables and inventories. The evaluations carried out did not result in significant write-downs or incremental provisions. Details for each financial statement item are provided in the Explanatory Notes. Demand volatility is likely to remain high with the consequent need to respond quickly to rapidly changing operating environments. The Sabaf Group believes that its business model - oriented towards longterm sustainability and characterised by a high level of verticalization of production and production facilities close to the main markets - is adequate to face future challenges and new scenarios.
SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
BUSINESS AND FINANCIAL SITUATION OF THE GROUP
2020
%
2019
%
2020-2019 change
% change
Sales revenue
184,906
100%
155,923
100%
28,983
+18.6%
EBITDA
37,097
20.1%
27,033
17.3%
10,064
+37.2%
EBIT
20,093
10.9%
11,896
7.6%
8,197
+68.9%
Pre-tax profit
14,509
7.8%
9,776
6.3%
4,733
+48.4%
Profit attributable to the Group
13,961
7.6%
9,915
6.4%
4,046
+40.8%
Basic earnings per share (€)
1.240
0.895
0.345
+38.5%
Diluted earnings per share (€)
1.240
0.895
0.345
+38.5%
(€/000)
The 2020 financial year ended with revenues 18.6% higher than in 2019 (+8.4% on a like-for-like basis, considering that C.M.I. contributed to 2019 revenues only for the period from August to December). The pandemic resulted in very high volatility of sales revenues during 2020. After an encouraging start to the year, from March onwards the Group’s activities slowed down significantly, firstly due to the temporary interruption of activities at the Italian plants (on average for 3 weeks) and then due to the general reduction in production levels by our customers. As from July, there was a marked recovery in demand in all geographical areas, which accelerated further in the latter part of the year when the favourable market situation was accompanied by the start of new supplies of burners on a global scale to strategic customers and cross-selling between the gas and electronics divisions.
Average sales prices in 2020 were 1.8% lower than in 2019, partially offset by a reduction in average purchase prices of the main raw materials (aluminium alloys, steel and brass). Higher business volumes in the second half of the year and a favourable trend in the sales mix supported profitability: EBITDA was €37.1 million (20.1% of turnover), up 37.2% compared to €27 million last year (17.3% of turnover) and EBIT was €20.1 million (10.9% of turnover) with a 68.9% increase compared to €11.9 million in 2019. The net profit for 2020 was €14 million, up by 40.8% compared to the figure of €9.9 million in 2019.
The subdivision of sales revenues by product line is shown in the table below:
2020
%
2019
%
% change
129,834
70.2%
122,205
78.4%
+6.2%
Hinges
41,326
22.3%
23,774
15.2%
+73.8%
Electronic components
13,746
7.4%
9,944
6.4%
+38.2%
184,906
100%
155,923
100%
+18.6%
(€/000) Gas parts
Total
The increase in sales of electronic components, which is benefiting from cross-selling with the traditional products in the Group’s portfolio and from the strong drive to develop new components, is of particular importance.
The contribution from the acquisition of C.M.I. resulted in a sharp increase in sales of hinges; on a like-for-like basis, the increase in sales of hinges was 7.3%.
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SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
The geographical breakdown of revenues is shown below:
(€/000)
2020
%
2019
%
% change
Italy
35,260
19.1%
31,161
20.0%
+13.2%
Western Europe
11,103
6.0%
12,277
7.9%
-9.6%
Eastern Europe
68,061
36.8%
55,059
35.3%
+23.6%
Middle East and Africa
12,040
6.5%
7,050
4.5%
+70.8%
Asia and Oceania
8,103
4.4%
9,198
5.9%
-11.9%
South America
27,639
14.9%
23,451
15.0%
+17.9%
North America and Mexico
22,700
12.3%
17,727
11.4%
+28.1%
Total
184,906
100%
155,923
100%
+18.6%
The impact of labour cost on sales decreased from 23.8% in 2019 to 23.6% in 2020.
Turkish lira (€1.4 million of negative forex differences were recognised in 2019).
The ratio of net financial expenses to turnover remained low, equal to 0.5% of turnover, unchanged compared to 2019. During the year, the Group recorded in the income statement negative forex differences of €4.8 million, mainly due to fluctuations in exchange rates with the
In 2020, the Group recognised positive income taxes of €0.1 million 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: 31.12.2020
31.12.2019
131,543
138,506
108,246
88,189
(56,017)
(38,496)
Working capital
52,229
49,693
Provisions for risks and charges, Post-employment benefits, deferred taxes
(9,643)
(11,966)
Net invested capital
174,129
176,233
Short-term net financial position
(24,169)
(3,698)
Medium/long-term net financial position
(32,153)
(51,430)
Net financial debt
(56,322)
(55,128)
117,807
121,105
(€/000)
2020
2019
Opening liquidity
18,687
13,426
Operating cash flow
25,067
40,932
Cash flow from investments
(17,296)
(12,014)
7,771
28,918
Cash flow from financing activities
(8,133)
(13,347)
Acquisitions
(3,063)
(10,792)
Foreign exchange differences
(1,944)
482
Cash flow for the period
(5,369)
5,261
Closing liquidity
13,318
18,687
(€/000) Non-current assets Short-term assets
2
Short-term liabilities
3
4
Shareholders’ equity
Cash flows for the financial year are summarised in the table below:
Free cash flow
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
116
SABAF . 2020 ANNUAL REPORT
In 2020, the Group generated free cash flow of €7.8 million (€28.9 million in 2019). The higher levels of activity in the second half of the year led to an increase in working capital, which stood at €52.2 million at 31 December 2020, compared to €49.7 million at the end of 2019: moreover, its impact on turnover decreased to 28.2% compared to 28.7% pro-forma in 2019.
REPORT ON OPERATIONS
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. During the financial year, the Group paid dividends for €3.9 million and purchased treasury shares for €2.1 million.
In 2020, Sabaf Group carried out organic investments of €17.3 million: the main investments for the year were aimed at industrialising new
At 31 December 2020, the net financial debt was €56.3 million, compared with €55.1 million on 31 December 2019. The change in net financial debt during the year is summarised in the table below:
(55,128)
Net financial debt at 31 December 2019
7,771
Free cash flow Dividends paid out
(3,924)
Buy-back of shares
(2,073)
Fair value adjustment of financial liabilities for put options on minority interests
456 (1,706)
Financial liabilities IFRS 16 - new contracts entered into in 2020
247
Hedge accounting for currency derivatives
(1,965)
Foreign exchange differences and other changes
(56,322)
Net financial debt at 31 December 2020
At 31 December 2020, shareholders’ equity amounted to €117.8 thousand; the ratio between the net financial debt and the shareholders’ equity was 0.48 versus 0.46 in 2019.
ECONOMIC AND FINANCIAL INDICATORS 2020
2019 pro forma
pro forma5
5
Change in turnover
+3.5%
-8.9%
11.5%
6.8%
7.1%
Net debt/EBITDA
1.52
2.04
1.86
Net debt/equity ratio
48%
46%
Market capitalisation (31/12)/equity ratio
1.49
1.28
ROCE (return on capital employed)
+18.6%
+8.4%
Please refer to the introductory part of the Annual Report for a detailed examination of other key performance indicators.
5
The change in pro-forma turnover is calculated ma: on a like-for-like basis. The return on capital employed and the pro-forma net debt/EBITDA ratio are calculated considering, for the companies acquired and included in the scope of consolidation during the year, the EBIT and EBITDA for the entire year.
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SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
RISK FACTORS RISKS RELATED TO CORONAVIRUS PANDEMIC The coronavirus pandemic, which so deeply affected the world in 2020, presented all organisations with new challenges. The Sabaf Group believes that, in the current scenario, the following risks have emerged or become more significant: • risks related to the health of people; • the risk arising from possible local or national 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. The Group promptly implemented several counteracting and mitigating actions to minimise the impact on the business. All control units continue to be activated, as well as the constant monitoring of any element that may modify the risk factors related to the development of the pandemic and its direct and indirect effects on business activities. As part of its periodic risk assessment process, the Group also identified and assessed the following main risks:
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 medium-term performance, including, for example, risks related to low profitability of certain product lines 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.
118
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; • 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
SABAF . 2020 ANNUAL REPORT
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. Turkey represents approximately 15% of the Group’s production and 23% of its total sales. The social and political tensions in Turkey over the last few years had no effect on the production activities of the Sabaf Group, which continued normally. 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 induction), 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 (Okida, C.M.I.). Moreover, the Group is analysing the opportunity to enter the induction hob market, verifying its technical and commercial feasibility. Finally, the development of new gas cooking components able to satisfy the needs that lead some consumers to prefer induction continues (aesthetic factors, practicality and ease of cleaning, technological integration with 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. Sale prices of products are generally renegotiated annually; as a result, the Group is unable to pass on to customers any changes in the
REPORT ON OPERATIONS
prices of commodities during the year, which has an impact on margins. • 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 about 16% 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). • 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. 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 The most important research and development projects carried out in 2020 were as follows: Gas parts • new customised burner versions were developed; • a new multi-ring burner was developed; • the study of an electronic ignition microswitch was launched; • some versions of valves for special applications are nearing completion. Hinges • the development of motorised hinges for built-in ovens continued; • a new soft-close hinge for the oven door is being developed; • a modular hinge model for the oven door is being developed; • a dual soft hinge model for large oven doors is being developed; • a new hinge for various flap sizes is being developed; • an automatic opening system for the dishwasher door is being developed. Electronic components • new platforms were developed to extend the range of electronic controls for pyrolytic ovens; • new IOT hood controls that can communicate with other appliances via WiFi and Bluetooth are being developed; • development of innovative electronic control solutions for gas cooking. 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 €465,000 were capitalised, as all the conditions set by international accounting standards were met; in other cases, they were charged to the income statement.
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SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
CONSOLIDATED 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 Consolidated 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 2020, 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 Consolidated Disclosure of Non-Financial Information.
ENVIRONMENT
In 2020 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 Consolidated Disclosure of Non-Financial 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 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 120
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 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 2020.
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.
BUSINESS OUTLOOK In the first half of 2021, sales and orders will remain at the high levels of the end of 2020, considering that all markets continue to show very strong demand. This trend is expected to continue in the third quarter, fuelled, for the Sabaf Group, by the supply contracts launched in 2020 and the business plans in progress. Therefore, for the whole of 2021, it is believed that it will be possible
SABAF . 2020 ANNUAL REPORT
to achieve revenues of more than €210 million, up 14% on 2020. Furthermore, it is expected that the diversification of the Group’s offer, the favourable trend in sales prices and the full utilisation of the production capacity will be able to balance the increase in the cost of raw materials and a possible unfavourable exchange rate trend, allowing the Group to maintain an operating profitability (EBITDA %) of at least 20% of sales.
REPORT ON OPERATIONS
These forecasts assume a macroeconomic scenario not affected by unpredictable events. If the scenario were to change significantly, actual figures might diverge from forecasts.
BUSINESS AND FINANCIAL SITUATION OF SABAF S.P.A. 2020
2019
Change
% change
Sales revenue
102,583
94,899
7,684
+8.1%
EBITDA
15,820
13,127
2,693
+20.5%
EBIT
6,610
2,948
3,662
+124.2%
Pre-tax profit (EBT)
6,304
3,691
2,613
+70.8%
Net Profit
6,410
3,822
2,588
+67.7%
(€/000)
The reclassification based on financial criteria is illustrated below: 31.12.2020
31.12.2019
123,679
120,147
Non-current financial assets
5,537
5,340
Short-term assets
69,738
50,750
(36,520)
(22,751)
Working capital 9
33,218
27,999
Provisions for risks and charges, Post-employment benefits, deferred taxes
(3,013)
(4,862)
Net invested capital
159,421
148,624
Short-term net financial position
(22,602)
(3,149)
Medium/long-term net financial position
(26,891)
(36,719)
Net financial position
(49,493)
(39,868)
Shareholders’ equity
109,928
108,755
2020
2019
Opening liquidity
8,343
2,169 10
Operating cash flow
9,590
27,682
Cash flow from investments
(13,381)
(17,903)
Free cash flow
(3,791)
9,779
Cash flow from financing activities
(2,957)
(3,605)
Cash flow for the period
(6,748)
6,174
1,595
8,343
(€/000) Non-current assets 6
7
Short-term liabilities
8
Cash flows for the financial year are summarised in the table below: (€/000)
Closing liquidity
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 The value of cash and cash equivalents refers to the pro-forma financial statements at 31 December 2018 including Sabaf Immobiliare s.r.l.. 6 7
121
SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
Net financial debt and the net short-term financial position shown in the tables above are defined in compliance with the net financial position detailed in Note 22 of the separate financial statements, as required by the CONSOB memorandum of 28 July 2006. The 2020 financial year ended with a turnover 8.1% higher than in 2019, benefiting from increased portions on certain strategic customers and a generalised recovery in demand during the second half of the year. In 2020, Sabaf S.p.A. invested around €4 million (net of divestments) in machinery and equipment, mainly aimed at improving production processes and industrialising new burners. The company also invested approximately €9 million in its subsidiaries as a capital increase or to increase its shareholding.
At 31 December 2020, working capital stood at €33.2 million compared with €283 million at the end of the previous year: its percentage impact on turnover stood at 32.4% from 29.5% at the end of 2019. The net financial debt was €49.5 million, compared with €39.9 million at 31 December 2019. At the end of the year, shareholders’ equity amounted to €109.9 million, compared with €108.8 million in 2019. The ratio between the net financial debt and the shareholders’ equity was 45%; it was 36.7% at the end of 2019.
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 2020 financial year and Group shareholders’ equity at 31 December 2020 with the same values of the parent company Sabaf S.p.A. is given below: 31.12.2020
31.12.2019
Profit for the year
Shareholders’ equity
Profit for the year
Shareholders’ equity
Profit and shareholders’ equity of parent company Sabaf S.p.A.
6,410
109,928
3,822
108,755
Equity and consolidated company results
8,734
90,566
7,833
105,637
Derecognition of the carrying value of consolidated equity investments
620
(73,816)
580
(81,502)
Put options on minorities
456
(6,831)
168
(10,350)
(1,758)
(1,778)
(2,189)
(931)
Other adjustments
(103)
(262)
(31)
(124)
Minority interests
(398)
(4,809)
(268)
(7,077)
Profit and shareholders’ equity attributable to the Group
13,961
112,998
9,915
114,408
Description
Intercompany eliminations
USE OF THE LONGER TIME LIMIT FOR CALLING THE SHAREHOLDERS’ MEETING Pursuant to the second paragraph of Article 2364 of the Italian Civil Code, in consideration of the need to consolidate the financial statements of Group companies and to prepare all supporting documentation, the directors intend to use the longer time limits granted to companies required to prepare the consolidated financial statements for calling the ordinary shareholders’ meeting to approve
122
the 2020 financial statements. The shareholders’ meeting must also resolve on the election of the members of the administration and control bodies and must therefore be convened at least 40 days in advance pursuant to Article 125-bis of the T.U.F.. The Shareholders’ Meeting will be convened (single call) on 6 May 2021.
SABAF . 2020 ANNUAL REPORT
REPORT ON OPERATIONS
Proposal for allocation of 2020 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 2020, with the proposal to allocate the profit for the year of €6,409,674 in the following manner: • a dividend of €0.55 per share to be paid to shareholders as from 2 June 2021 (ex-date 31 May 2021 and record date 1 June 2021). With regard to treasury shares, we invite 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, 23 March 2021 The Board of Directors
123
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020 SABAF . 2020 ANNUAL REPORT
124
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Group Structure and corporate bodies 126 Consolidated statement of financial position 127 Consolidated income statement 128 Consolidated statement of comprehensive income 129 Statement of changes in consolidated shareholders’ equity 129 Consolidated statement of cash flows 130 Explanatory Notes 131 Certification of the Consolidated Financial Statements 164 Report on the Audit of the Consolidated Financial Statements 165
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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.
C.M.I. s.r.l.
Sabaf do Brasil Ltda.
Sabaf US Corp.
C.G.D. s.r.l.
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey)
A.R.C. s.r.l.
C.M.I. Polska Sp. Zoo.
100%
100%
100%
100%
100%
84.25% 84.25%
70%
84.25%
Sabaf India Private Limited
100%
Sabaf Appliance Components (Kunshan) Co., Ltd.
100%
Companies measured at equity Handan A.R.C. Burners Co., Ltd.
35.7%
Board of Directors Chairman
Giuseppe Saleri
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
Claudio Bulgarelli
Board of Statutory Auditors
Independent Auditors
Chairman
Alessandra Tronconi
Statutory Auditor
Luisa Anselmi
Statutory Auditor
Mauro Vivenzi
126
* independent directors
EY S.p.A.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF FINANCIAL POSITION Notes
31.12.2020
31.12.2019
Property, plant and equipment
1
76,507
75,885
Investment property
2
3,253
3,976
Intangible assets
3
43,017
51,668
Equity investments
4
173
115
Non-current financial assets
10
0
60
Non-current receivables
5
518
297
Deferred tax assets
21
8,075
6,505
131,543
138,506
(€/000) ASSETS NON-CURRENT ASSETS
TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories
6
39,224
35,343
Trade receivables
7
63,436
46,929
Tax receivables
8
2,419
4,458
Other current receivables
9
3,167
1,459
Current financial assets
10
1,495
1,266
Cash and cash equivalents
11
13,318
18,687
TOTAL CURRENT ASSETS
123,059
108,142
ASSETS HELD FOR SALE
0
0
254,602
246,648
TOTAL ASSETS
SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital
12
11,533
11,533
Retained earnings, Other reserves
13
87,504
92,580
Profit for the year
13,961
9,915
Total equity interest of the Group
112,998
114,028
Minority interests
4,809
7,077
TOTAL SHAREHOLDERS’ EQUITY
117,807
121,105
NON-CURRENT LIABILITIES Loans
14
32,153
44,046
Other financial liabilities
15
0
7,383
Post-employment benefit and retirement provisions
16
3,513
3,698
Provisions for risks and charges
17
1,433
995
Deferred tax liabilities
21
4,697
7,273
41,796
63,395
TOTAL NON-CURRENT LIABILITIES CURRENT LIABILITIES Loans
14
30,493
19,015
Other financial liabilities
15
8,489
4,637
Trade payables
18
41,773
27,560
Tax payables
19
3,287
1,802
Other payables
20
10,957
9,134
TOTAL CURRENT LIABILITIES
94,999
62,148
LIABILITIES HELD FOR SALE
0
0
254,602
246,648
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
127
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CONSOLIDATED INCOME STATEMENT Notes
2020
2019
Revenue
23
184,906
155,923
Other income
24
7,194
3,621
192,100
159,544
(82,966)
(57,464)
6,406
(8,617)
(€/000) INCOME STATEMENT COMPONENTS OPERATING REVENUE AND INCOME
TOTAL OPERATING REVENUE AND INCOME OPERATING COSTS Materials
25
Change in inventories Services
26
(34,264)
(29,488)
Personnel costs
27
(43,700)
(37,103)
Other operating costs
28
(1,981)
(1,698)
Costs for capitalised in-house work
1,502
1,859
(155,003)
(132,511)
37,097
27,033
(16,968)
(15,183)
Capital gains on disposals of non-current assets
105
46
Value adjustments of non-current assets
(141)
0
20,093
11,896
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
EBIT Financial income
29
1,366
638
Financial expenses
30
(2,146)
(1,339)
Exchange rate gains and losses
31
(4,812)
(1,380)
Profits and losses from equity investments
4
8
(39)
14,509
9,776
(149)
407
14,360
10,183
399
268
13,961
9,915
Base
€1.240
€0.895
Diluted
€1.240
€0.895
PROFIT BEFORE TAXES Income taxes
32
PROFIT FOR THE YEAR of which: Minority interests PROFIT ATTRIBUTABLE TO THE GROUP
EARNINGS PER SHARE (EPS)
128
33
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (€/000)
2020
2019
PROFIT FOR THE YEAR
14,360
10,183
Actuarial evaluation of post-employment benefit
16
(26)
Tax effect
(3)
6
13
(20)
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
(12,564)
(3,323)
TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR
(12,551)
(3,343)
1,809
6,840
399
268
8
0
1,402
6,572
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 2018
Share capital
Share premium reserve
11,533
10,002
Legal Treasury Translation reserve shares reserve
2,307
(6,868)
(16,134)
Postemployment benefit discounting reserve
Other reserves
Profit for the year
Total Group shareholders' equity
Minority interests
Total shareholders’ equity
(526)
101,774
15,614
117,702
1,644
119,346
(6,060)
(6,060)
(6,060)
681
681
681
208
4,808
4,808
Allocation of 2018 profit - dividends paid out - carried forward
9,554
IFRS 2 measurement stock grant plan 4,600
Sale of treasury shares Change in the scope of consolidation C.M.I. Group put option Other changes
518
Total profit at 31 December 2019
Balance at 31 December 2019
11,533
10,002
2,307
(2,268)
(3,323)
(20)
(18,939)
(546)
(9,554)
(981)
(981)
(8,700)
(8,700)
5,165
(8,700)
4,184
(512)
6
6
9,915
6,572
268
6,840
102,024
9,915
114,028
7,077
121,105
9,915
(9,915)
Allocation of 2019 profit - carried forward IFRS 2 measurement stock grant plan
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)
658 7
(12,564)
5
(31,503)
(541)
247 (2,073)
2,657
2,657
(3,924)
(3,924)
10
10
(25)
(15)
13,961
1,402
407
1,809
13,961
112,998
4,809
117,807
111,580
(2,657) (3,924)
129
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CONSOLIDATED STATEMENT OF CASH FLOWS (€/000)
2020
2019
Cash and cash equivalents at beginning of year
18,687
13,426
Profit for the year
14,360
10,183
16,968
15,183
141
0
- Realised gains/losses
(105)
(46)
- Valuation of the stock grant plan
658
681
- Profits and losses from equity investments
(8)
39
- Net financial income and expenses
780
701
- Income tax
149
(407)
Change in post-employment benefit
(180)
300
Change in risk provisions
438
270
Change in trade receivables
(16,507)
10,148
Change in inventories
(3,881)
9,090
Change in trade payables
14,213
(2,901)
Change in net working capital
(6,175)
16,337
2,115
1,344
Payment of taxes
(2,999)
(2,952)
Payment of financial expenses
(1,235)
(1,339)
Collection of financial income
160
638
25,067
40,932
- intangible
(1,097)
(1,016)
- tangible
(16,623)
(11,510)
- financial
(50)
0
474
512
(17,296)
(12,014)
7,771
28,918
Repayment of loans
(18,413)
(29,682)
Raising of loans
16,216
18,271
60
978
Adjustments for: - Depreciations and amortisation - Write-downs of non-current assets
Change in other receivables and payables, deferred taxes
Cash flows from operations
Investments in non-current assets
Disposal of non-current assets Cash flow absorbed by investments Free Cash Flow
Short-term financial assets Purchase/sale of treasury shares
(2,073)
3,146
Payment of dividends
(3,924)
(6,060)
Cash flow absorbed by financing activities
(8,133)
(13,347)
0
(317)
C.M.I. acquisition
(3,063)
(10,475)
Foreign exchange differences
(1,944)
482
Net cash flows for the year
(5,369)
5,261
Cash and cash equivalents at end of year (Note 10 and 11)
13,318
18,687
Acquisition of Okida Elektronik
130
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Explanatory Notes ACCOUNTING STANDARDS STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION The consolidated financial statements of the Sabaf Group for the 2020 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 Article 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 2020 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. • Okida Elektronik Sanayi ve Ticaret A.S. • Sabaf U.S. • Sabaf India Private Limited • C.M.I. s.r.l.
• C.G.D. s.r.l. • C.M.I. Polska Sp. Zoo Handan A.R.C. Burners Co. Ltd., an associate company, is consolidated using the equity method. Compared to the consolidated financial statements at 31 December 2019, Sabaf India, in which Sabaf made a capital contribution of €1,770,000 during 2020, is consolidated on a line-by-line basis. In September 2020, 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 first put option by the minority shareholder Starfire s.r.l. (Guandong Xingye Investment group). As a result of the transaction, Sabaf S.p.A. now holds 84.25% of the share capital of C.M.I. s.r.l.. For the remaining 15.75% of C.M.I., still held by Starfire s.r.l., there are put and call options exercisable after the approval of the 2020 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; 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. 131
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 31.12.2020
2020 average exchange rate
Exchange rate in effect at 31.12.2019
2019 average exchange rate
Brazilian real
6.3735
5.8929
4.5157
4.4151
Turkish lira
9.1131
8.0548
6.6843
6.3486
Chinese renminbi
8.0225
7.8664
7.8205
7.7336
Polish Zloty
4.5597
4.4431
4.2568
4.3123
Indian Rupee
89.6605
84.6382
-
-
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.
ACCOUNTING POLICIES The accounting standards and policies applied for the preparation of the consolidated financial statements at 31 December 2020, unchanged versus the previous year, are shown below:
Property, plant and equipment
These are recorded 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
4–10
Furniture
8
Electronic equipment
5
Vehicles and other transport means
132
4–5
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.
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. Assets are depreciated on a straight-line basis from the starting date of the agreement until the end of the lease agreement or until the end of the useful life of the asset, 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. In adopting IFRS 16, the Group 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 straightline basis for the duration of the respective agreements. The following table shows the main characteristics of the agreements that have been the subject matter of the above exemptions:
SABAF . 2020 ANNUAL REPORT
Subject-matter of the agreement
Applied exemption
Value of the agreement (amounts in €/000)
Printers
Low-value asset
4
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 2.52% on 31 December 2020 and 7.56% on 31 December 2019. 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).
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
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 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.
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CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 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”. 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 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 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 recorded at fair value plus, in the case of a financial asset not at fair value recognised in the income statement, transaction costs.
134
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 through profit 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 Group) when:
SABAF . 2020 ANNUAL REPORT
• 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, 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 Italian 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 recorded immediately under “Other total profits/(losses)”.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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.
135
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 and the latter are not measured at fair value with posting of related gains and losses in the income statement. 136
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 recorded 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.
Dividends Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
SABAF . 2020 ANNUAL REPORT
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 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 recorded 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.
Earnings per share
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.
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Use of estimates
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 write-downs, 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. 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.
137
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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. Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
New accounting standards Accounting standards, amendments and interpretations applicable from 1 January 2020 • Amendments to IFRS 3 “Definition of a Business”. The amendments were introduced to support entities in determining whether or not a set of assets acquired constitutes a business. To be considered a business, an integrated set of assets and goods must include at least one input and one underlying process that contribute significantly to the ability to create an output. Moreover, a business can exist without including all of the inputs and processes needed to create outputs. These changes had no impact on the Group’s consolidated financial statements but could have an impact on future financial years should the Group carry out business combinations. • Amendments to IFRS 7, IFRS 9 and IAS 39 “Interest rate benchmark reform”. The amendments to the standards provide a number of practical expedients that apply to hedging relationships that are directly affected by the interest rate benchmark reform. A hedging relationship is affected 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 have no impact on the Group’s consolidated financial statements.
138
• Amendments to IAS 1 and IAS 8 “ Definition of Material”. The amendments provide a new definition of materiality, which states that information is material if, as a result of its omission, or as a result of its incorrect or incomprehensible presentation, one could reasonably expect to influence the decisions that the main users of the financial statements would make on the basis of the financial information contained therein. These amendments had no impact on the consolidated financial statements and are not expected to have any future impact on the Group. • Amendment to IFRS 16 Covid-19-Related Rent Concessions. On 28 May 2020, the IASB published an amendment to IFRS 16, which allows a lessee not to apply the requirements in IFRS 16 on the accounting effects of contractual changes for lease reductions granted by lessors as a direct result of the Covid-19 outbreak. The amendment introduces a practical expedient whereby a lessee may choose not to assess whether a reduction in lease payments constitutes a contractual change. A lessee that chooses to use this expedient recognises these reductions as if they were not contractual changes for the purpose of IFRS 16. These changes had no impact on the Group’s consolidated financial statements.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
COMMENTS ON SIGNIFICANT BALANCE SHEET ITEMS 1. PROPERTY, PLANT AND EQUIPMENT Property
Plant and equipment
Other assets
Assets under construction
Total
51,507
194,516
43,257
4,688
293,968
Increases
236
3,946
3,932
3,282
11,396
Disposals
-
(1,224)
(767)
-
(1,991)
362
-
1,035
-
1,397
Change in the scope of consolidation
2,900
15,183
6,034
137
24,254
Reclassifications
1,376
3,742
91
(4,850)
359
Forex differences
(307)
(532)
(154)
(93)
(1,086)
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
19,603
165,018
38,582
-
223,203
1,681
8,168
2,339
-
12,188
-
(1,593)
(159)
-
(1,752)
Change in the scope of consolidation
1,314
12,334
5,301
-
18,949
Reclassifications
256
49
28
-
333
Forex differences
(75)
(312)
(122)
-
(509)
22,779
183,664
45,969
-
252,412
2,321
8,696
2,909
-
13,926
Derecognition due to disposal
-
(1,422)
(81)
-
(1,503)
Change in the scope of consolidation
-
-
-
-
-
Reclassifications
(530)
184
(43)
-
(389)
Forex differences
(423)
(2,184)
(1,116)
-
(3,723)
24,147
188,938
47,638
-
260,723
At 31 December 2020
33,079
30,654
8,239
4,535
76,507
At 31 December 2019
33,295
31,967
7,459
3,164
75,885
COST At 31 December 2018
First-time adoption of IFRS 16
At 31 December 2019
ACCUMULATED DEPRECIATIONS At 31 December 2018 Depreciations for the year Derecognition due to disposal
At 31 December 2019 Depreciations for the year
At 31 December 2020
NET CARRYING VALUE
The breakdown of the net carrying value of Property was as follows: 31.12.2020
31.12.2019
Change
7,675
6,659
1,016
Industrial buildings
25,404
26,636
(1,232)
Total
33,079
33,295
(216)
Land
139
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Changes in property, plant and equipment resulting from the application of IFRS 16 are shown below:
Property
Plant and equipment
Other assets
Total
1 January 2020
1,776
513
781
3,070
Increases
1,377
74
333
1,784
Depreciations
(634)
(247)
(288)
(1,169)
Foreign exchange differences
(72)
-
-
(72)
2,447
340
826
3,613
At 31 December 2020
The main investments in the financial year were aimed at 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 no longer in use. In the 2020 financial year, the increase in property, plant and equipment as a result of the change in the scope of consolidation reflects the first-time consolidation of Sabaf India, a newly formed
company, which acquired an industrial property where production will start in 2021. Assets under construction include machinery under construction and advance payments to suppliers of capital equipment. At 31 December 2020, 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 2018
12,918
Increases
-
Disposals
(1,191)
First-time adoption of IFRS 16
109
Changes in investment property resulting from the application of IFRS 16 are shown below: INVESTMENT PROPERTY 1 January 2020
73
11,836
Increases
-
Increases
-
Decreases
-
Disposals
(552)
Depreciations
At 31 December 2020
11,284
Foreign exchange differences
At 31 December 2019
At 31 December 2020
(35) 38
DEPRECIATIONS AND WRITE-DOWNS At 31 December 2018
8,515
Depreciations for the year
430
Write-downs for the year
-
Derecognition due to disposal
(1,085)
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
NET CARRYING VALUE At 31 December 2020
3,253
At 31 December 2019
3,976
140
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 of non-significant amount. At 31 December 2020, 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.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
3. INTANGIBLE ASSETS
Goodwill
Patents and software
Development costs
Other intangible assets
Total
29,410
7,204
5,653
12,779
55,046
Increases
292
356
460
200
1,308
Decreases
-
(8)
(102)
(11)
(121)
3,680
1,425
717
13,664
19,486
Reclassifications
(24)
-
-
(643)
(667)
Forex differences
(1,743)
(15)
-
(1,030)
(2,788)
At 31 December 2019
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
4,563
6,559
3,408
1,462
15,992
Amortisation for the year
-
296
371
1,048
1,715
Decreases
-
-
-
-
-
Change in the scope of consolidation
-
1,337
559
1,337
3,233
Reclassifications
(17)
-
-
(250)
(267)
Forex differences
-
(13)
-
(64)
(77)
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
At 31 December 2020
22,568
828
2,161
17,460
43,017
At 31 December 2019
27,069
783
2,390
21,426
51,668
COST At 31 December 2018
Change in the scope of consolidation
AMORTISATION/WRITE-DOWNS At 31 December 2018
At 31 December 2019
At 31 December 2020
NET CARRYING VALUE
Goodwill
Goodwill recognised at 31 December 2020 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 €12.704 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.
Due to its intensity and unpredictability, the COVID-19 pandemic is for all companies an external factor of potential presumption of loss of value; therefore, the recoverability of goodwill allocated to the “Hinges”, “Professional burners”, “Electronic components” and “C.M.I. Hinges” CGUs was checked in the light of a specific analysis of the impact of the crisis on the value of fixed assets and based on a business plan updated at the beginning of 2021. The European Securities and Market Authority (ESMA) draws attention to the need to account for the increasing level of uncertainty through: • the possible use of multi-scenario techniques in determining plans;
141
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
• alternatively, adjustments to the rates used for discounting the flows; • updating the assumptions underlying the impairment tests at 31 December 2020 compared to the previous tests. Compared to the previous test carried out with reference to 30 June 2020, the management has more knowledge about the development of future forecasts. In particular, the availability of data on business performance in the second half of 2020 and on orders in the first half of 2021 allows for a more reliable measurement of the effects of the pandemic on the business. On these bases, management defined a plan single (approved by the Board of Directors) for each CGU that represents the normal and expected scenario, with reference to the period from 2021 to 2025, and which was used to develop the impairment tests. 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. The management subsequently prepared a Group business plan for the years from 2021 to 2023 using the plans referred to in the previous paragraphs as a starting point and revising the values contained therein with a view to improving them, following updated favourable prospects. In the light of the above, it was therefore decided to confirm the results of the impairment tests already prepared.
Goodwill allocated to the Hinges CGU During 2020, the Hinges CGU recorded a slight decrease in 2020 revenues due to the pandemic. However, the fourth quarter of 2020 and the first quarter of 2021 show a consistent recovery, in line with the Group’s figures. At 31 December 2020, 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 2021 to 2025 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 8.62% (9.54% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2019) and a growth rate (g) of 2%, unchanged from the 2019 impairment test. The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €13.681 million, compared with a carrying value of the assets allocated to the Hinges unit of €11.744 million; consequently, the value recorded for goodwill at 31 December 2020 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%
7.62%
15,183
15,753
16,373
17,050
17,794
8.12%
13,924
14,401
14,916
15,475
16,083
8.62%
12,845
13,248
13,681
14,149
14,654
9.12%
11,908
12,253
12,622
13,018
13,443
9.62%
11,089
11,387
11,704
12,042
12,404
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
13,681
11,646
9,611
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 recorded pandemic effects on the 2020 financial year opposite to the rest of the Group, following the closures of restaurant and hotel premises during 2020. At 31 December 2020, 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 142
plan drafted at the beginning of 2021. Cash flows for the period from 2021 to 2025 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 6.76% (6.07% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2019) and a growth rate (g) of 2% (1.50% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2019), 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 €9.394 million, compared with a carrying value of the assets allocated to the Professional burners unit of €5.696 million (including minority interests); consequently, the value recorded for goodwill at 31 December 2020 was deemed recoverable.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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%
5.76%
10,840
11,487
12,220
13,058
14,023
6.26%
9,571
10,076
10,640
11,275
11,994
6.76%
8,545
8,949
9,394
9,891
10,445
7.26%
7,699
8,028
8,389
8,785
9,223
7.76%
6,991
7,263
7,560
7,883
8,236
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA According to the plan
-10%
-20%
9,394
7,926
6,456
(€/000)
Goodwill allocated to the Electronic components CGU The Electronic Components CGU performed extremely well in 2020, outperforming the Group as a whole. At 31 December 2020, 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
expected future cash flow in the forward plan drafted by the management. Cash flows for the period from 2021 to 2025 were augmented by the so-called 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 14.18% (12.92% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2019) and a growth rate (g) of 2.50%, unchanged from the 2019 impairment test. The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €28.471 million, compared with a carrying value of the assets allocated to the Electronic components unit of €20.968 million; consequently, the value recorded for goodwill at 31 December 2020 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%
13.18%
30,332
30,837
31,367
31,922
32,504
13.68%
28,924
29,378
29,853
30,350
30,870
14.18%
27,632
28,043
28,471
28,917
29,384
14.68%
26,444
26,816
27,203
27,607
28,027
15.18%
25,348
25,086
26,037
26,403
26,783
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
28,471
25,130
21,790
Goodwill allocated to the C.M.I. Hinges CGU In 2020, the Hinges C.M.I. CGU recorded an overall stable turnover compared to the previous year, while in the last quarter of 2020, there
was a significant increase in sales volumes. This positive trend was also confirmed by the volume of orders collected in the first months of the new financial year. At 31 December 2020, 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 2021 to 2025 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the third year to infinity and determined based on
143
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
the perpetual income. The value of use was calculated based on a discount rate (wacc) of 9.87% (10.49% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2019) and a growth rate (g) of 2% (1.15% in the impairment test carried out while preparing the consolidated financial statements at 31 December 2019), 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 €44.519 million, compared with a carrying value of the assets allocated to the C.M.I. Hinges unit of €26.557 million; consequently, the value recorded for goodwill at 31 December 2020 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%
8.87%
48,657
50,084
51,615
53,262
55,038
9.37%
45,288
46,514
47,824
49,225
50,728
9.87%
42,327
43,389
44,519
45,723
47,009
10.37%
39,704
40,631
41,614
42,657
43,767
10.87%
37,365
38,180
39,041
39,951
40,916
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA According to the plan
-10%
-20%
44,519
37,572
30,625
(€/000)
Other intangible assets
The other intangible assets recorded 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 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).
Development costs
31.12.2020
31.12.2019
Change
Customer Relationship
8,775
11,355
(2,580)
Brand
4,459
5,055
(596)
503
933
(430)
3,498
3,960
(462)
Other
225
123
102
Total
17,460
21,426
(3,966)
Know-how
The main investments in the year relate to the development of new products, including special burners and personalised burners for some customers (research and development activities carried out during the year are set out in the Report on Operations). With regard to patents, software and development costs, no internal and external indicators that would necessitate an impairment test were identified.
Patents
At 31 December 2020, 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.
4. EQUITY INVESTMENTS 31.12.2020
31.12.2019
Changes
Handan A.R.C. Burners Co.
89
81
8
Other equity investments
84
34
50
Total
173
115
58
Handan A.R.C. Burners Co. Ltd. is a Chinese joint venture with the aim to produce and market in China burners for professional cooking. The Group’s share is 35.7%, held through A.R.C. s.r.l. - which owns a 51% interest in the share capital. The change shown in the table is related to the consolidation using the equity method of the joint venture, whose pro-rata result contributed negatively to the Group’s result by €8,000. 144
The change of €50,000 related to Other equity investments concerns the purchase of a minority shareholding in the start-up Matchplat s.r.l. by the Parent Company Sabaf S.p.A.. Internal and external indicators that would necessitate an impairment test on equity investments were not identified.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
5. NON-CURRENT RECEIVABLES 31.12.2020
31.12.2019
Change
Tax receivables
392
183
209
Guarantee deposits
112
98
14
Other
14
16
(2)
Total
518
297
221
31.12.2020
31.12.2019
Change
Raw Materials
16,859
14,792
2,067
Semi-processed goods
10,414
9,025
1,389
Finished products
15,056
14,849
207
Provision for inventory write-downs
(3,105)
(3,323)
218
Total
39,224
35,343
3,881
Tax receivables relate to indirect taxes expected to be recovered after 31 December 2021.
6. INVENTORIES
The value of final inventories at 31 December 2020 increased compared to the end of the previous year to meet the higher volumes of activity. 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: 31.12.2019
3,323
Provisions
675
Utilisation
(898)
Forex differences
5
31.12.2020
3,105
7. TRADE RECEIVABLES 31.12.2020
31.12.2019
Change
Total trade receivables
64,525
48,463
16,062
Bad debt provision
(1,089)
(1,534)
445
Net total
63,436
46,929
16,507
Trade receivables at 31 December 2020 were higher than the balance at the end of 2019 subsequent to higher sales in the second half of the 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 €23.9 million in insured
receivables (€25.3 million at 31 December 2019). 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.
31.12.2020
31.12.2019
Change
Current receivables (not past due)
58,143
39,789
18,354
Outstanding up to 30 days
3,278
3,718
(440)
Outstanding from 30 to 60 days
1,249
2,102
(853)
Outstanding from 60 to 90 days
438
1,261
(823)
Outstanding for more than 90 days
1,417
1,593
(176)
64,525
48,463
16,062
Total
145
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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:
31.12.2019
1,534
Provisions
118
Utilisation
(541)
Forex differences
(22)
31.12.2020
1,089
8. TAX RECEIVABLES 31.12.2020
31.12.2019
Change
For income tax
1,179
2,563
(1,384)
For VAT and other sales taxes
1,195
1,708
(513)
45
187
(142)
2,419
4,458
(2,039)
Other tax credits Total
At 31 December 2020, income tax receivables include • €427,000 (€607,000 at 31 December 2019) for the residual amount of the receivable originating from the full deduction from IRES of IRAP relating to expenses incurred for employees and similar for the period from 2006 to 2011 (Italian Decree Law 201/2011). During 2020, the Group received a partial refund of €180,000;
• €433,000 relating to the tax credit for investments in capital goods referred to in Italian law Decree 160/2019; • €172,000 deriving from higher IRES advances paid.
9. OTHER CURRENT RECEIVABLES 31.12.2020
31.12.2019
Change
669
141
528
1,032
384
648
Accrued income and prepaid expenses
487
536
(49)
Other
979
398
581
Total
3,167
1,459
1,708
Credits to be received from suppliers Advances to suppliers
Credits to be received from suppliers mainly refer to bonuses paid to the Group for the attainment of purchasing objectives, which were achieved in 2020 to a greater extent than in the previous year.
Other receivables include €347,000 paid as a deposit to guarantee provisional duties on raw material purchases.
10. FINANCIAL ASSETS 31.12.2020
31.12.2019
Current
Non-current
Current
Non-current
Restricted bank accounts
1,233
-
1,233
60
Currency derivatives
262
-
33
-
1,495
0
1,266
60
Total
At 31 December 2020, the following were taken out: • a term deposit of €60,000, due by 30 June 2021, for the portion of the price not yet paid to the sellers of the A.R.C. equity investment (Note 15); • a term deposit of €1,173,000, due by 2021, for the portion of the price not yet paid to the sellers of the C.M.I. equity investment and 146
deposited as collateral in accordance with the terms of the C.M.I. acquisition agreement (Note 15). Currency derivatives refer to forward sales contracts recognised using hedge accounting. These financial instruments are broken down in Note 36 - Forex risk management.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
11. CASH AND CASH EQUIVALENTS The item Cash and cash equivalents, equal to €13,318,000 at 31 December 2020 (€18,687,000 at 31 December 2019) refers to bank current account balances of approximately €12.8 million.
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 2020, the structure of the share capital is shown in the table below. No. of shares
% of share capital
Rights and obligations
Ordinary shares
7,976,760
69.16%
-
Ordinary shares with increased vote
3,556,690
30.84%
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 During the financial year Sabaf S.p.A. acquired 176,873 treasury shares at an average unit price of €11.72; there have been no sales. At 31 December 2020, the Parent Company held 346,748 treasury shares, equal to 3.01% of share capital, recorded in the financial statements as an adjustment to shareholders’ equity at a unit value of €12.52 (the market value at year-end was €15.23). There were 11,186,702 outstanding shares at 31 December 2020 (11,363,575 at 31 December 2019).
Stock grant reserve Item “Retained earnings, other reserves” of €87,504,000 included, at 31 December 2020, the stock grant reserve of €1,660,000, which included the measurement at 31 December 2020 of fair value of options assigned to receive shares of the Parent Company. 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. Opening value at 31 December 2019
-
Change during the period
247
Value at 31 December 2020
247
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.
Extraordinary reserve With reference to Article 110 of Italian Law Decree No. 104 of 14 August 2020 (known as Agosto Decree), converted into Law No. 126 of 13 October 2020, the Group realigned the differences between the carrying values and tax values of certain properties. As a result of this operation, the extraordinary reserve in respect of which tax has been deferred amounted to €4,874,000. The tax effects of this realignment are discussed in Note 32.
14. LOANS 31.12.2020
31.12.2019
Current
Non-current
Total
Current
Non-current
Total
Leases
1,390
3,506
4,896
1,050
3,478
4,528
Unsecured loans
15,801
28,647
44,448
14,653
40,568
55,221
Short-term bank loans
8,630
-
8,630
1,783
-
1,783
Advances on bank receipts or invoices
4,668
-
4,668
1,523
-
1,523
4
-
4
6
-
6
30,493
32,153
62,646
19,015
44,046
63,061
Interest payable Total
147
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
During the year, the Group took out new unsecured loans for a total of €3.9 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. 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 2020 equal to €19.8 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 2020 equal to €31.2 million)
widely complied with at 31 December 2020 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 €32.4 million and expiry until 31 December 2025. 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 1 January 2019
2,671
Change in the scope of consolidation (31 July 2019)
2,398 298
New agreements signed during 2019
(804)
Repayments during 2019
(35)
Forex differences Lease liabilities at 31 December 2019
4,528
New agreements signed during 2020
1,706 (1,400)
Repayments during 2020 Forex differences
(64)
Lease liabilities at 31 December 2020
4,896
Note 36 provides information on financial risks, pursuant to IFRS 7.
15. OTHER FINANCIAL LIABILITIES 31.12.2020
31.12.2019
Current
Non-current
Current
Non-current
Option on A.R.C. minorities
1,581
-
-
1,650
Option on C.M.I. minorities
5,250
-
4,200
4,500
Payables to A.R.C. shareholders
60
-
60
60
Payables to C.M.I. shareholders
1,173
-
-
1,173
Derivative instruments on interest rates
425
-
377
-
8,489
-
4,637
7,383
Total
As part 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 July 2019, call/put options, i.e. options to purchase by Sabaf and to sell by the minority shareholders, were subscribed for the remaining shares of the share capital at contractually defined strike prices on the basis of final income and financial parameters reported by the subsidiaries. Specifically: • as regards the remaining shares, equal to 30%, of A.R.C., an agreement was signed with Loris Gasparini (current minority shareholder) that provides for the options to be exercised as from 24 June 2021; • Sabaf subscribed with the Chinese group Guandong Xingye Investment, seller of C.M.I., purchase and sale options for the
148
remaining 31.5% of the share capital, which can be exercised in two equal tranches following approval of the C.M.I. financial statements at 31 December 2019 and at 31 December 2020. In September 2020, 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 first put option by the minority shareholder. The consideration amounted to €3,063,000 and the difference compared to the carrying value of the portion of shareholders’ equity acquired of €406,000 was recognised as a decrease of the shareholders’ equity attributable to the Group. As a result of the transaction, Sabaf S.p.A. now holds 84.25% of the share capital of C.M.I. s.r.l.
SABAF . 2020 ANNUAL REPORT
Pursuant to the provisions of IAS 32, the assignment of an option to sell (put option) in the terms described above required the recording of a liability corresponding to the estimated redemption value, expected at the time of any exercise of the option: to this end, a financial liability of €1.650 million was recognised in the consolidated financial statements at 31 December 2019 with reference to the option to purchase the remaining 30% of A.R.C. The Group revalued the outlay estimate based on the results achieved by A.R.C. in the current year and, in accordance with IAS 39, reduced the liability by €69,000, recording financial income as a balancing entry. As regards C.M.I., in the consolidated financial statements at 31 December 2019, the financial liability relating to the exercise of the
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
second option to purchase the remaining 15.75% of C.M.I. amounted to €4.5 million. As required by IAS 39, the Group revalued the outlay estimate based on the results achieved by C.M.I. in the current year increasing the liability by €750,000 and recording financial expenses as a balancing entry. The payables to A.R.C.’s shareholders, equivalent to €60,000 at 31 December 2020, and the payables to C.M.I.’s shareholders, equivalent to €1,173,000 at 31 December 2020, both due by 2021, are related to the part of the price not yet paid to the sellers, deposited on a noninterest-bearing restricted account and will be released in favour of the sellers in accordance with the contractual agreements and the guarantees issued by the sellers.
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 recorded immediately in the comprehensive income statement (“Other comprehensive income”) under the item “Actuarial income and losses”.
Post-employment benefit 3,698
At 31 December 2019 Provisions
117
Financial expenses
15
Post-employment benefits are calculated as follows:
(242)
Payments made
(16)
Tax effect
Financial assumptions
-
Change in the scope of consolidation
31.12.2020
31.12.2019
Forex differences
(59)
Discount rate
0.23%
0.40%
At 31 December 2020
3,513
Inflation
1.00%
1.20%
Demographic theory 31.12.2020
31.12.2019
Mortality rate
IPS55 ANIA
IPS55 ANIA
Disability rate
INPS 2000
INPS 2000
Staff turnover
3% - 6%
3% - 6%
5% - 6% per year
5% - 7% per year
Pursuant to legislation in force on 31 December 2020
pursuant to legislation in force on 31 December 2019
Advance payouts Retirement age
17. PROVISIONS FOR RISKS AND CHARGES 31.12.2019
Provisions
Utilisation
Exchange rate differences
31.12.2020
Provision for agents’ indemnities
205
26
(10)
-
221
Product guarantee fund
60
9
(9)
-
60
Provision for legal risks
482
576
(75)
(13)
970
Other provisions for risks and charges
248
-
-
(66)
182
Total
995
611
(94)
(79)
1,433
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. The fund was adjusted at the end of the year, on the basis of analyses conducted and past experience. The provision for legal risks was adjusted to reflect the outstanding disputes. The 2020 appropriation was entered in the amount of
€500,000 for a patent dispute for which a settlement was reached with the counterparty at the beginning of 2021. The remainder of the provision refers to smaller disputes. Note also that following the allocation process of 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 €348,000 was recorded. 149
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Other provisions for risks and charges, recognised as part of the Purchase Price Allocation following the acquisition of Okida Elektronik, reflect the fair value of the potential liabilities of the acquired entity.
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
31.12.2020
31.12.2019
Change
41,773
27,560
14,213
Total
The increase in trade payables is related to higher production volumes in the latter part of the year. Average payment terms did not change versus the previous year. At 31 December 2020, there were no overdue payables of a significant amount and the Group did not receive any injunctions for overdue payables.
31.12.2020
31.12.2019
Change
For income tax
1,923
506
1,417
Withholding taxes
1,029
923
106
Other tax payables
335
373
(38)
3,287
1,802
1,485
Total
The income tax payables refer to the taxes for the year, for the portion exceeding the advances paid.
20. OTHER CURRENT PAYABLES 31.12.2020
31.12.2019
Change
To employees
5,848
5,016
832
To social security institutions
2,679
2,403
276
To agents
286
231
55
Advances from customers
1,210
411
799
Other current payables
934
1,073
(139)
10,957
9,134
1,823
Total
At the beginning of 2021, 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 31.12.2020
31.12.2019
Change
Deferred tax assets
8,024
6,505
1,519
Deferred tax liabilities
(4,697)
(7,273)
2,576
3,377
(768)
4,145
Net position
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
(5,763)
1,481
66
1,417
954
586
213
278
(768)
Through profit or loss
1,833
(58)
(20)
(177)
2,201
(169)
-
649
4,259
In shareholders' equity
-
32
-
-
-
-
(5)
-
27
470
(58)
-
-
(510)
(21)
-
(21)
(140)
(3,461)
1,397
46
1,240
2,645
396
208
668
3,377
31.12.2019
Forex differences 31.12.2020
150
SABAF . 2020 ANNUAL REPORT
Following the realignment between the carrying value and the tax value of certain properties, in pursuance of Italian Law Decree no. 104 of 14 August 2020 (known as August Decree), converted into Law 126 of 13 October 2020, deferred tax liabilities of €1,360,000 have been released to the income statement in these consolidated financial statements, which have been recognised in the changes in the income statement under “Non-current tangible and intangible assets”. The exercise of the realignment option results in a substitute tax of approximately €163,000, which is accounted for in current
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
taxes for the year and will be paid in equal instalments over the threeyear period from 2021 to 2023. 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 Italian 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. NET FINANCIAL POSITION As required by the CONSOB memorandum of 28 July 2006, we disclose that the Group’s net financial position is as follows: 31.12.2020
31.12.2019
Change
13
19
(6)
12,789
18,590
(5,801)
516
79
437
D. Liquidity (A+B+C)
13,318
18,687
(5,369)
A. Cash (Note 11) B. Positive balances of unrestricted bank accounts (Note 11) C. Other cash equivalents (Note 11)
E. Current financial receivables (Note 10)
1,495
1,266
229
F. Current bank payables (Note 14)
13,297
3,313
9,984
G. Current portion of non-current debt (Note 14)
15,801
14,653
1,148
H. Other current financial payables (Note 15)
9,884
5,686
4,198
I. Current financial debt (F+G+H)
38,982
23,652
15,330
J. Net current financial debt (I-D-E)
24,169
3,698
20,471
K. Non-current bank payables (Note 14)
28,647
40,569
(11,922)
L. Other non-current financial payables (Note 14)
3,506
10,861
(7,355)
M. Non-current financial debt (K+L)
32,153
51,430
(19,277)
N. Net financial debt (J+M)
56,322
55,128
1,194
The consolidated 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 2020, sales revenue totalled €184,906,000, up by €28,983,000 (+18.6%) compared with 2019. On a like-for-like basis, considering the contribution of the C.M.I Group (acquired during 2019) for the months of August to December 2020 only, revenues increased by 8.4%.
REVENUE BY GEOGRAPHICAL AREA 2020
%
2019
%
% change
Italy
35,260
19.1%
31,161
20.0%
+13.2%
Western Europe
11,103
6.0%
12,277
7.9%
-9.6%
Eastern Europe
68,061
36.8%
55,059
35.3%
+23.6%
Middle East and Africa
12,040
6.5%
7,050
4.5%
+70.8%
Asia and Oceania
8,103
4.4%
9,198
5.9%
-11.9%
South America
27,639
14.9%
23,451
15.0%
+17.9%
North America and Mexico
22,700
12.3%
17,727
11.4%
+28.1%
Total
184,906
100%
155,923
100%
+18.6% 151
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
REVENUE BY PRODUCT FAMILY 2020
%
2019
%
% change
129,834
70.2%
122,205
78.4%
+6.2%
Hinges
41,326
22.3%
23,774
15.2%
+73.8%
Electronic components
13,746
7.4%
9,944
6.4%
+38.2%
184,906
100%
155,923
100%
+18.6%
Gas parts
Total
The pandemic resulted in very high volatility of sales revenues during 2020. After an encouraging start to the year, from March onwards the Group’s activities slowed down significantly, firstly due to the temporary interruption of activities at the Italian plants (on average for 3 weeks) and then due to the general reduction in production levels by our customers. As from July, there was a marked recovery in demand in all geographical areas, which accelerated further in
the latter part of the year when the favourable market situation was accompanied by the start of new supplies of burners on a global scale to strategic customers and cross-selling between the gas and electronics divisions.
24. OTHER INCOME
25. MATERIALS 2020
2019
Change
2,909
2,072
837
Contingent income
999
336
663
Rental income
121
118
3
Use of provisions for risks and charges
94
64
30
Other income
3,071
1,031
2,040
Total
7,194
3,621
3,573
Sale of trimmings
Average sales prices in 2020 were 1.8% lower compared with 2019.
Commodities and outsourced components Consumables Total
2020
2019
Change
75,443
52,241
23,202
7,523
5,223
2,300
82,966
57,464
25,502
In 2020, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average lower than in 2019, with a positive impact of 1.3% of sales.
Contingent assets include €796,000 collected as a distribution to unsecured creditors from the extraordinary administration procedure of a former customer, the related receivable having been fully written down in previous years. Other income includes €972,000 in insurance compensation received following a fire that occurred in May 2019, as well as revenue from the sale of moulds and equipment of €795,000 and Turkish government grants of €285,000, referring to incentives for hiring personnel in Turkey.
26. COSTS FOR SERVICES 2020
2019
Change
Outsourced processing
11,094
8,659
2,435
Natural gas and power
4,380
4,425
(45)
Maintenance
5,920
4,375
1,545
Transport
2,986
2,182
804
Advisory services
2,320
2,384
(64)
Travel expenses and allowances
219
740
(521)
Commissions
835
765
70
Directors’ fees
693
723
(30)
Insurance
694
568
126
Canteen
560
437
123
4,563
4,230
333
34,264
29,488
4,776
Other costs Total
152
The main outsourced processing carried out by the Group’s Italian companies include 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 higher levels of activity compared to the previous year. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
SABAF . 2020 ANNUAL REPORT
27. PERSONNEL COSTS
28. OTHER OPERATING COSTS
2020
2019
Change
29,048
25,080
3,968
Social Security costs
8,831
7,905
Temporary agency workers
2,869
Post-employment benefit and other costs
Salaries and wages
Stock grant plan Total
2020
2019
Change
Non-income taxes
692
501
191
926
Other operating expenses
524
496
28
1,394
1,475
Contingent liabilities
36
101
(65)
2,294
2,043
251
Losses and write-downs of trade receivables
118
509
(391)
658
681
(23)
Provisions for risks
576
74
502
43,700
37,103
6,597
Other provisions
35
17
18
1,981
1,698
283
The number of Group employees was 1,168 at 31 December 2020 (1,035 at 31 December 2019). The number of temporary staff was 155 at 31 December 2020 (42 at 31 December 2019). The item “Stock Grant Plan” included the measurement at 31 December 2020 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 2019
Change
Exercise of the C.M.I. first option (Note 15)
1,137
-
1,137
Adjustment to the fair value of the A.R.C. option (Note 15)
69
168
(99)
Interest from bank current accounts
155
388
(233)
5
82
(77)
1,366
638
728
Total
Total
Non-income taxes chiefly relate to property tax. Provisions refer to the allocations described in Note 17.
30. FINANCIAL EXPENSES
2020
Other financial income
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
2020
2019
Change
Interest paid to banks
969
890
79
Interest paid on finance lease contracts
112
102
10
Banking expenses
251
275
(24)
Adjustment to the fair value of the C.M.I. option (Note 15)
750
-
750
Other financial expense
31
72
(41)
2,113
1,339
774
Total
Financial income includes €1,137,000 related to the difference between the carrying value of the first put option related to the purchase of a 15.75% interest in C.M.I. and the consideration actually paid in September 2020, when the purchase was completed (Note 15).
Interest paid to banks includes IRS spreads payable that hedge interest rate risks (Note 36).
31. EXCHANGE RATE GAINS AND LOSSES
32. INCOME TAXES
In 2020, the Group reported net foreign exchange losses of €4,812,000 (net losses of €1,380,000 in 2019). The main portion of 2020 foreign exchange losses was recorded by Sabaf Turkey, refers to financial payables in euro and reflects the devaluation of the Turkish lira during the current financial year.
2020
2019
Change
3,641
2,694
947
(4,259)
(1,967)
(2,292)
Taxes related to previous financial years
767
(1,135)
1,902
Total
149
(408)
557
Current taxes for the year Deferred tax assets and liabilities
153
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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: 2020
2019
Theoretical income tax
3,735
2,386
Permanent tax differences
(192)
(216)
Taxes related to previous financial years
767
(1,135)
Tax effect from different foreign tax rates
97
23
Effect of non-recoverable tax losses
150
137
-
(306)
(812)
(653)
Realignment between carrying values and tax values of properties (Note 21)
(1,360)
-
Tax incentives for investments in Turkey
(2,432)
(709)
Other differences
(441)
(206)
Income taxes booked in the accounts, excluding IRAP and withholding taxes (current and deferred)
(488)
(680)
IRAP (current and deferred)
518
272
Substitute tax on realignment of property values
163
0
Tax credit on sanitisation costs
(44)
0
Total
149
(408)
“Patent box” tax benefit “Super and Iperammortamento” tax benefit
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 €812,000 (€653,000 in 2019); • the tax benefits deriving from the investments made in Turkey amounting to €2,432,000 (€709,000 in 2019);
Taxes relating to previous financial years include for €897,000 the negative effect of the unfavourable outcome in the second instance of a tax dispute in Turkey. At 31 December 2020, 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 additional charges for the Group with respect to what has already been recognised in these consolidated financial statements, while a favourable outcome would result in a benefit of approximately 7.2 million Turkish lira (€793,000 at the end of 2020 exchange rate).
33. EARNINGS PER SHARE Basic and diluted EPS are calculated based on the following data: EARNINGS
(€/000)
2020
2019
Profit for the year
13,961
9,915
2020
2019
11,260,791
11,081,396
-
-
11,260,791
11,081,396
(€)
2020
2019
Basic earnings per share
1.240
0.895
Diluted earnings per share
1.240
0.895
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 346,748 in 2020 (169,875 in 2019). 154
Diluted earnings per share are calculated taking into account any shares approved but not yet subscribed, of which there were none in 2020 and 2019.
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
34. DIVIDENDS On 14 October 2020, shareholders were paid a dividend of €0.35 per share (total dividends of €3,924,000). The Directors have recommended payment of a dividend of €0.55 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 2 June 2021 (exdate 31 May and record date 1 June).
35. INFORMATION BY BUSINESS SEGMENT Information by business segment for 2020 and 2019 is provided below. 2020 FISCAL YEAR 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
2019 FISCAL YEAR Gas parts (household and professional)
Hinges
Electronic components
Total
Sales
122,223
23,779
9,921
155,923
Ebit
8,364
1,879
1,653
11,896
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: 31.12.2020
31.12.2019
Cash and cash equivalents
13,318
18,687
Term bank deposits
1,233
1,293
Trade receivables and other receivables
67,121
48,685
-
33
262
-
62,646
63,061
Other financial liabilities
1,233
1,293
Trade payables
41,773
27,560
A.R.C. put option (Note 15)
1,581
1,650
C.M.I. put option (Note 15)
5,250
8,700
425
377
Financial assets
Amortised cost
Fair Value through profit or loss Derivatives to hedge cash flows
Hedge accounting Derivatives to hedge cash flows Financial liabilities
Amortised cost Loans
Fair Value through profit or loss
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;
• 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. 155
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
It is part of the Sabaf Group’s policies to hedge exposure to changes in prices and to 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 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 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 17% of total turnover in 2020, while purchases in dollars represented 4.6% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts. At 31 December 2020, the Group had in place forward sales contracts of USD 9.6 million, maturing in December 2021 at an average exchange rate of 1.1895. 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. 2020
(amounts in €/000) Current financial assets
262
Cash Flow Hedge reserve (equity reserve for hedging instruments)
247 15
Value realised and recognised as an increase in revenue in 2020
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
Counterparty
Instrument
Maturity
Value date
29/03/2021 Unicredit
Forward
Sabaf S.p.A. MPS
Faringosi Hinges s.r.l.
C.M.I. s.r.l.
UBI Banca
BPER Banca
Forward
Forward
Forward
28/06/2021
Notional (in thousands) 800
USD
800
27/09/2021
800
21/12/2021
800
29/03/2021
400
28/06/2021
USD
400
28/09/2021
400
21/12/2021
400
22/03/2021
700
21/06/2021 20/09/2021
USD
700 700
07/01/2021
500
06/07/2021 06/10/2021
USD
2
700
15/12/2021
06/04/2021
Fair value hierarchy
500 500 500
Sensitivity analysis With reference to financial assets and liabilities in US dollars at 31 December 2020, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of €1,214,000.
156
SABAF . 2020 ANNUAL REPORT
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 2020, IRS totalling €32.4 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.
Sensitivity analysis Considering the IRS in place, at the end of 2020 almost all of the Group’s financial debt was at a fixed rate. Therefore, at 31 December 2020 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 Group’s purchase costs is represented by aluminium, steel and brass. Sale prices of products are generally renegotiated annually; as a result, the Group is unable to pass on to customers any changes in the prices of commodities during the year. The Group protects itself from the risk of changes in the price of aluminium, steel and brass with supply contracts signed with
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2020 and 2019, the Group did not use financial derivatives on commodities. To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
Liquidity risk management
The Group operates with a debt ratio considered physiological (net financial debt/shareholders’ equity at 31 December 2020 of 47.8%, net financial debt/EBITDA of 1.52) 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. An analysis by expiry date of financial payables at 31 December 2020 and 31 December 2019 is shown below:
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
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
3,689
3,689
3,689
-
-
-
Unsecured loans
55,221
56,474
2,073
13,048
40,126
1,227
Finance leases
4,528
4,898
352
895
3,088
563
Payables to A.R.C. shareholders
120
120
-
60
60
-
Payables to C.M.I. shareholders
1,173
1,173
-
-
1,173
-
A.R.C. option
1,650
1,650
-
-
1,650
-
C.M.I. option
8,700
8,700
-
4,200
4,500
-
Total financial payables
75,081
76,704
6,114
18,203
50,597
1,790
Trade payables
27,560
27,560
25,993
1,567
-
-
Total
102,641
104,264
32,107
19,770
50,597
1,790
Finance leases
Total
At 31 December 2019
157
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS 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 financial assets and liabilities valued at fair value at 31 December 2020, by hierarchical level of fair value assessment. Level 1
Level 2
Level 3
Total
Other financial assets (currency derivatives)
-
262
-
262
Total assets
-
262
-
262
Other financial liabilities (interest rate derivatives)
-
425
-
425
Other financial liabilities (A.R.C. and C.M.I. put options)
-
-
6.831
6.831
Total liabilities
-
425
6.831
7.256
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 2020
Non-consolidated subsidiaries
Other related parties
41,773
-
4
Total 2019
Non-consolidated subsidiaries
Other related parties
27,560
-
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 2020
Non-consolidated subsidiaries
Other related parties
(34,264)
-
(22)
Total 2019
Non-consolidated subsidiaries
Other related parties
(29,488)
-
(21)
Transactions are regulated by specific contracts regulated at arm’s length conditions. 158
Total related parties Impact on the total (22)
0.06%
Total related parties Impact on the total (21)
0.07%
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Fees to directors, statutory auditors and executives with strategic responsibilities Please see the 2020 Report on Remuneration for this information.
38. SHARE-BASED PAYMENTS In order to adopt a medium and long-term incentive instrument for directors and employees of the Sabaf Group, on the proposal of the Remuneration and Nomination Committee, the Board of Directors of Sabaf S.p.A. prepared a specific free allocation plan of shares (the “Plan”) with the characteristics described below. 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 resolved by the Board of Directors on 14 May 2019.
Purpose of the plan The Plan aims 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 of the Company. Beneficiaries of the plan 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 are divided into two groups: • Cluster 1: Beneficiaries already identified in the Plan or identified by the Board of Directors by 30 June 2018 on the Shareholders’ Meeting authority. • Cluster 2: Beneficiaries identified by the Board of Directors from 1 July 2018 to 30 June 2019 on the Shareholders’ Meeting authority.
The Board of Directors, in its meeting of 15 May 2018, identified the Beneficiaries of Cluster 1 of the Plan to whom a total of 185,600 options were assigned; and in its meeting of 14 May 2019, identified the Beneficiaries of Cluster 2 of the Plan to whom a total of 184,400 options were assigned.
Subject-matter of the plan 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 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, with progressiveness, of the business objectives related to the ROI, EBITDA, TSR indicators and Individual objectives, i.e. performance targets of each beneficiary determined by the Board of Directors at the suggestion of the Remuneration and Nomination Committee. Deadline of the Plan The Plan expires on 31 December 2022 (or on a different subsequent date set by the Board of Directors). Fair Value measurement methods Considering the allocation mechanism described above, it was necessary to measure at fair value the options assigned to receive shares of the Parent Company. In line with the date of assignment of the options and terms of the plan, the grant date was set at 15 May 2018 for Cluster 1 and 14 May 2019 for Cluster 2. The main assumptions made at the beginning of the vesting period and the determination of fair value at the end of the reporting period are illustrated below.
159
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CLUSTER 1 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI
2018
2019
2020
2018-2020
Share prices at the start of the vesting period
19.48
19.48
19.48
19.48
Expected probability of business objective achievement
35%
0%
35%
0%
Total value on ROI
3.07
Fair Value
1.03
33.40%
Rights on ROI
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA
2018
2019
2020
Share prices at the start of the vesting period
19.48
19.48
19.48
Expected probability of business objective achievement
35%
0%
0%
Total value on EBITDA
1.70
Fair Value
33.30%
Rights on EBITDA
0.57
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR
2018
2019
2020
2018-2020
20.2
14.9
12.44
20.2
-0.28%
-0.30%
-0.38%
-0.38%
Expected volatility
31%
18%
29%
29%
Dividend yield
0%
0%
0%
0%
Strike Price
22.61
17.39
14.51
28.34
Total value on TSR
7.57
Fair Value
2.52
Share prices at the start of the vesting period Risk free rate
Rights on TSR
33.30%
Fair value per share
160
4.11
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CLUSTER 2 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI
2019
2020
2019-2020
13.66
13.66
13.66
Expected probability of business objective achievement
0%
35%
0%
Total value on ROI
1.96
Share prices at the start of the vesting period
Fair Value
23.38%
Rights on ROI
0.46
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA
2019
2020
13.66
13.66
Expected probability of business objective achievement
0%
0%
Total value on EBITDA
0.00
Share prices at the start of the vesting period
Rights on EBITDA
Fair Value
23.31%
0.00
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR
2019
2020
2019-2020
14.9
12.44
14.9
-0.30%
-0.38%
-0.38%
Expected volatility
18%
29%
29%
Dividend yield
0%
0%
0%
Strike Price
17.39
14.51
22.86
Total value on TSR
2.53
Share prices at the start of the vesting period Risk free rate
Fair Value
23.31%
Rights on TSR
0.59
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON INDIVIDUAL OBJECTIVES
2019
2020
Share prices at the start of the vesting period
13.66
13.66
Expected probability of business objective achievement
93%
93%
Total value on individual objectives
12.70
Rights on individual objectives
30.00%
Fari Value per share
Fair Value
3.81
4.86
In connection with this Plan, €658,000 were recognised in personnel costs during the year (Note 27). At 31 December 2020, a reserve of €1,660,000 was recorded in the item “Retained earnings, Other reserves” under shareholders’ equity (Note 13). 161
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 banks 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 2020 and 2019, 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
Financial statement values (A)
112,998
13,961
56,322
(5,369)
Realignment of carrying values and tax values of properties (a)
(1,214)
(1,214)
-
-
Recognition of tax benefits on investments made in Turkey (b)
(2,432)
(2,432)
-
-
Recovery of a previously written-down trade receivable (c)
(796)
(796)
796
(796)
Settlement of a patent dispute (d)
500
500
-
-
Total non-recurring operations (B)
(3,942)
(3,942)
796
(796)
Tax effect on operations c) and d)
52
52
-
-
109,108
10,071
57,118
(6,165)
Financial statement notional value (A + B)
In these consolidated financial statements, the Group recognised: a. under income taxes, a non-recurring income of €1,214,000 following the realignment, carried out in accordance with Article 110 of Italian Law Decree No. 104 of 14 August 2020, of the differences between the carrying values and tax values of certain properties resulting from the merger of Sabaf Immobiliare, a transaction that took place in 2019. The total amount of €1,214,000 is the difference between the release of related deferred tax liabilities of €1,360,000 and the recognition of substitute tax of €146,000 (Note 31); b. under income taxes, a non-recurring income of €2,432,000 relating to the tax benefits arising from investments made in Turkey (Note 31);
c. among other revenues, a non-recurring income of €704,000 collected as a distribution to unsecured creditors from the extraordinary administration procedure of a former customer, the related receivable having been fully written down in previous years (Note 24); d. among other operating revenues, a provision for legal risks of €500,000 for a patent dispute for which a settlement was reached with the counterparty at the beginning of 2021 (Note 17 and Note 28).
41. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD After the reporting period and up to the date of this report, no events occurred that need to be mentioned.
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 2020.
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 €3,632,000 (€4,024,000 at 31 December 2019). 162
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
44. SCOPE OF CONSOLIDATION AND SIGNIFICANT EQUITY INVESTMENTS COMPANIES CONSOLIDATED USING THE FULL LINE-BY-LINE CONSOLIDATION METHOD Registered offices
Share capital
Shareholders
Ownership %
Ospitaletto (BS)
EUR 90,000
Sabaf S.p.A.
100%
Jundiaí - São Paulo (Brazil)
BRL 38,328,261
Sabaf S.p.A.
100%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey)
Manisa (Turkey)
TRY 28,000,000
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.
70%
C.M.I. Cerniere Meccaniche Industriali s.r.l
Valsamoggia (BO)
EUR 1,000,000
Sabaf S.p.A.
84.25%
C.G.D. s.r.l.
Valsamoggia (BO)
EUR 26,000
C.M.I. s.r.l.
100%
PLN 40,000
C.M.I. s.r.l. C.G.D. s.r.l.
97.5% 2.5%
Company name Faringosi Hinges s.r.l. Sabaf do Brasil Ltda
Sabaf India Private Limited A.R.C. s.r.l.
C.M.I. Polska sp. z.o.o.
Myszków (Poland)
COMPANIES CONSOLIDATED USING THE EQUITY METHOD Company name Handan A.R.C. Burners Co., Ltd.
Registered offices
Share capital
Shareholders
ownership %
holding %
Handan (China)
RMB 3,000,000
A.R.C. s.r.l.
51%
35.7%
45. GENERAL INFORMATION ON THE PARENT COMPANY Tax R.E.A. Brescia 347512 information
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
E-mail: info@sabaf.it Website: www.sabafgroup.com
APPENDIX
Information as required by Article 149-duodecies of the CONSOB Issuers’ Regulation The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers’ Regulation, shows fees relating to 2020 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
EY S.p.A.
Parent company
47
EY S.p.A.
Italian subsidiaries
49
EY network
Foreign subsidiaries
56
EY S.p.A.
Parent company
411
Total 1
Fees pertaining to the 2020 financial year
193
Auditing procedures agreement relating to interim management reports; limited review of the Disclosures of Non-Financial Information.
163
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CERTIFICATION OF THE CONSOLIDATED FINANCIAL STATEMENTS in accordance with Article 154 bis of Italian 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 Article 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 2020 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 Article 9 of Italian 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, 23 March 2021
164
Chief Executive Officer
The Financial Reporting
Pietro Iotti
Gianluca Beschi
Officer
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
165
SABAF . 2020 ANNUAL REPORT
166
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
167
SABAF . 2020 ANNUAL REPORT
168
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
SABAF . 2020 ANNUAL REPORT
CONSOLIDATED FINANCIAL STATEMENTS AT 31 DECEMBER 2020
169
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Corporate bodies 172 Statement of financial position 173 Income statement 174 Comprehensive income statement 175 Statement of changes in shareholders’ equity 175 Statement of Cash Flows 176 Explanatory notes 177 Comments on the main items of the statement of financial position 183 Comments on key income statement items 197 Certification of Separate financial statements 211 Report on the Audit of the Financial Statements 212 Report of the Board of Statutory Auditors to the Shareholders’ Meeting of SABAF S.p.A. 217
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Corporate bodies Board of Directors Chairman
Giuseppe Saleri
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
Claudio Bulgarelli
Board of Statutory Auditors
Independent Auditors
Chairman
Alessandra Tronconi
Statutory Auditor
Luisa Anselmi
Statutory Auditor
Mauro Vivenzi
172
* Independent directors
EY S.p.A.
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
STATEMENT OF FINANCIAL POSITION Notes
31.12.2020
31.12.2019
Property, plant and equipment
1
48,662,264
51,470,506
Investment property
2
3,252,696
3,975,991
(in €) ASSETS NON-CURRENT ASSETS
Intangible assets
3
2,315,819
2,452,857
Equity investments
4
65,524,289
57,950,775
Non-current financial assets
5
5,537,324
5,340,310
- of which from related parties
35
5,537,324
5,280,310
31,421
19,871
3,891,955
4,276,366
129,215,768
125,486,676
Non-current receivables Deferred tax assets
21
TOTAL NON-CURRENT ASSETS CURRENT ASSETS Inventories
6
21,512,333
19,862,180
Trade receivables
7
45,024,596
28,563,314
- of which from related parties
35
16,048,130
9,094,290
Tax receivables
8
1,254,041
1,736,169
- of which from related parties
35
316,208
0
Other current receivables
9
1,947,372
588,494
Current financial assets
10
1,359,993
2,832,998
- of which from related parties
35
0
1,600,000
Cash and cash equivalents
11
1,594,861
8,343,105
72,693,196
61,926,260
TOTAL CURRENT ASSETS ASSETS HELD FOR SALE
0
0
201,908,964
187,412,936
11,533,450
11,533,450
Retained earnings, Other reserves
91,985,093
93,399,901
Profit for the year
6,409,674
3,821,876
109,928,218
108,755,227
26,891,000
35,485,756
TOTAL ASSETS SHAREHOLDERS’ EQUITY AND LIABILITIES SHAREHOLDERS’ EQUITY Share capital
12
TOTAL SHAREHOLDERS’ EQUITY NON-CURRENT LIABILITIES Loans
14
Other financial liabilities
15
0
1,233,000
Post-employment benefit and retirement provisions
16
1,929,190
2,064,001
Provisions for risks and charges
17
853,650
1,064,482
Deferred tax liabilities
21
TOTAL NON-CURRENT LIABILITIES
230,450
1,733,755
29,904,290
41,580,994
CURRENT LIABILITIES Loans
14
23,996,484
13,994,308
Other financial liabilities
15
1,560,111
331,505
Trade payables
18
26,204,071
15,734,266
- of which to related parties
35
1,074,716
761,431
Tax payables
19
2,458,942
695,008
- of which to related parties
35
350,721
74,375
Other payables
20
7,856,847
6,321,628
TOTAL CURRENT LIABILITIES
48,646,143
37,076,715
LIABILITIES HELD FOR SALE
0
0
201,908,964
187,412,936
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY
173
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
INCOME STATEMENT Notes
2020
2019
Revenue
23
102,583,189
94,899,421
- of which from related parties
35
15,221,230
13,984,435
Other income
24
5,647,168
4,045,581
108,230,357
98,945,002
(43,270,717)
(32,805,599)
1,650,153
(6,765,674)
(in €) INCOME STATEMENT COMPONENTS OPERATING REVENUE AND INCOME
TOTAL OPERATING REVENUE AND INCOME OPERATING COSTS Materials
25
Change in inventories Services
26
(22,208,703)
(20,124,041)
- of which by related parties
35
(457,769)
(1,698,535)
Personnel costs
27
(28,567,152)
(26,785,293)
Other operating costs
28
(1,307,048)
(926,250)
1,293,579
1,588,760
(92,409,888)
(85,818,097)
15,820,469
13,126,905
(9,414,020)
(9,808,641)
964,788
130,018
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
(761,407)
(500,000)
- of which by related parties
(620,000)
(500,000)
EBIT
6,609,830
2,948,282
Financial income
201,591
211,324
- of which from related parties
176,889
199,308
Financial expenses
29
(717,703)
(816,612)
Exchange rate gains and losses
30
(398,970)
(10,015)
Profits and losses from equity investments
31
- of which from related parties
PROFIT BEFORE TAXES Income taxes
PROFIT FOR THE YEAR
174
32
609,252
1,357,665
609,252
1,357,665
6,304,001
3,690,644
105,674
131,232
6,409,674
3,821,876
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
COMPREHENSIVE INCOME STATEMENT (in €) PROFIT FOR THE YEAR
2020
2019
6,409,674
3,821,876
(31,418)
(63,367)
7,540
15,208
(23,878)
(48,159)
6,385,796
3,773,717
Total profits/losses that will not be subsequently reclassified under profit (loss) for the year Actuarial evaluation of post-employment benefit Tax effect TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR TOTAL PROFIT
STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY (€/000)
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
Balance at 31 December 2018
11,533
10,002
2,307
(6,868)
(457)
67,482
8,040
92,039
1,980
(8,040)
(6,060)
2019 dividend payment Sale of treasury shares
4,600
208
4,808
Stock grant plan (IFRS 2)
680
680
Sabaf Immobiliare merger
13,514
13,514
(48)
3,822
3,774
83,864
3,822
108,755
Allocation of 2019 profit
3,822
(3,822)
0
2020 dividend payment
(3,924)
Total profit at 31 December 2019
Balance at 31 December 2019
11,533
10,002
2,307
(2,268)
(505)
(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
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
STATEMENT OF CASH FLOWS 2020 FY
2019 FY
Cash and cash equivalents at beginning of year
8,343
2,169 1
Profit for the year
6,410
3,822
- Depreciations and amortisation
9,414
9,809
- Realised gains
(965)
(130)
761
500
(609)
(1,358)
- Valuation of the stock grant plan
657
681
- Net financial income and expenses
516
605
- Non-monetary foreign exchange differences
(199)
34
- Income tax
(106)
(131)
Change in post-employment benefit
(166)
(94)
Change in risk provisions
569
(24)
Change in trade receivables
(16,461)
6,610
Change in inventories
(1,650)
6,766
Change in trade payables
10,470
185
Change in net working capital
(7,642)
13,561
Change in other receivables and payables, deferred taxes
1,599
1,325
Payment of taxes
(141)
(339)
Payment of financial expenses
(710)
(790)
Collection of financial income
201
211
9,590
27,682
(383)
(494)
- tangible
(7,652)
(6,622)
- financial
(8,974)
(12,314)
(€/000)
Adjustments for:
- Write-downs of non-current assets - Profits and losses from equity investments
Cash flows from operations
Investments in non-current assets - intangible
Disposal of non-current assets
3,628
1,527
Cash flow absorbed by investments
(13,381)
(17,903)
Free Cash Flow
(3,791)
9,779
Repayment of loans
(11,982)
(17,376)
Raising of loans
12,811
13,057
Change in financial assets
1,602
2,270
Purchase/Sale of treasury shares
(2,073)
3,146
Payment of dividends
(3,924)
(6,060)
Collection of dividends
609
1,358
Cash flow absorbed by financing activities
(2,957)
(3,605)
Total cash flows
(6,748)
6,174
1,595
8,343
Cash and cash equivalents at end of year (Note 11)
1
The value of cash and cash equivalents refers to the sum of the data of Sabaf S.p.A. and Sabaf Immobiliare s.r.l.
176
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Explanatory notes ACCOUNTING STANDARDS STATEMENT OF COMPLIANCE AND BASIS OF PRESENTATION The separate financial statements of Sabaf S.p.A. for the financial year 2020 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 2020.
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 2020, unchanged versus the previous year, are shown below:
Property, plant and equipment
These are recorded 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 2020 and on 31 December 2020. 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.
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 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 178
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 recorded 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 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.
SABAF . 2020 ANNUAL REPORT
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 through profit 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. 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
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 Italian 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 definedcontribution plans. Actuarial gains or losses are recorded 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. 179
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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. 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. 180
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 recognized 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 recognized 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 recorded on an accrual basis.
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 recorded 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.
SABAF . 2020 ANNUAL REPORT
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 recorded 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.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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. Provisions for inventory obsolescence 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. 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. 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 181
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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. Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
New accounting standards Accounting standards, amendments and interpretations applicable from 1 January 2020 • Amendments to IFRS 3 “Definition of a Business”. The amendments were introduced to support entities in determining whether or not a set of assets acquired constitutes a business. To be considered a business, an integrated set of assets and goods must include at least one input and one underlying process that contribute significantly to the ability to create an output. Moreover, a business can exist without including all of the inputs and processes needed to create outputs. • Amendments to IFRS 7, IFRS 9 and IAS 39 “Interest rate benchmark reform”. The amendments to the standards provide a number of practical expedients that apply to hedging relationships that are directly affected by the interest rate benchmark reform. A hedging relationship is affected 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 have no impact on the Company’s financial statements. • Amendments to IAS 1 and IAS 8 “ Definition of Material”. The amendments provide a new definition of materiality, which states that information is material if, as a result of its omission, or as a result of its incorrect or incomprehensible presentation, one could reasonably expect to influence the decisions that the main users of the financial statements would make on the basis of the financial information contained therein. These amendments had no impact on the separate financial statements and are not expected to have any future impact on the Company. • Amendment to IFRS 16 Covid-19 Related Rent Concessions. On 28 May 2020, the IASB published an amendment to IFRS 16, which allows a lessee not to apply the requirements in IFRS 16 on the accounting effects of contractual changes for lease reductions granted by lessors as a direct result of the Covid-19 outbreak. The amendment introduces a practical expedient whereby a lessee may choose not to assess whether a reduction in lease payments constitutes a contractual change. A lessee that chooses to use this expedient recognises these reductions as if they were not contractual changes for the purpose of IFRS 16. These amendments had no impact on the Company’s separate financial statements.
182
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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
6,570
166,456
34,068
2,647
209,741
152
3,132
1,723
1,893
6,900
35,896
4,723
367
-
40,986
IFRS 16 assets
-
-
878
-
878
Disposals
-
(1,998)
(642)
-
(2,640)
706
3,073
53
(2,323)
1,509
43,324
175,386
36,447
2,217
257,374
Increases
85
3,566
2,225
2,717
8,593
IFRS 16 assets
259
-
256
-
515
Disposals
-
(4,908)
(1,129)
-
(6,037)
Reclassification
-
1,449
260
(2,412)
(703)
43,668
175,493
38,059
2,522
259,742
At 31 December 2018
3,244
144,717
31,282
-
179,243
Depreciations for the year
1,210
6,131
1,479
-
8,820
Sabaf Immobiliare merger
13,613
4,198
367
-
18,178
-
(1,642)
(44)
-
(1,686)
464
884
-
-
1,348
At 31 December 2019
18,531
154,288
33,084
-
205,903
Depreciations for the year
1,212
5,758
1,526
-
8,496
Derecognition due to disposal
-
(3,391)
(69)
-
(3,460)
Write-downs
-
141
-
-
141
19,743
156,796
34,541
-
211,080
At 31 December 2020
23,925
18,697
3,518
2,522
48,662
At 31 December 2019
24,793
21,098
3,363
2,217
51,471
COST At 31 December 2018 Increases Sabaf Immobiliare merger
Reclassification At 31 December 2019
At 31 December 2020
ACCUMULATED DEPRECIATION
Derecognition due to disposal Reclassification
At 31 December 2020
NET CARRYING VALUE
The breakdown of the net carrying value of Property was as follows: 31.12.2020
31.12.2019
Change
Land
5,404
5,404
-
Industrial buildings
18,521
19,389
(868)
Total
23,925
24,793
(868)
183
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Changes in property, plant and equipment resulting from the application of IFRS 16 are shown below:
Property
Plant and equipment
Other assets
Total
1 January 2020
73
-
660
733
Increases
259
-
256
515
Depreciations
(39)
-
(251)
(290)
-
-
-
-
293
-
665
958
Foreign exchange differences At 31 December 2020
The main investments in the financial year were aimed at 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 2020, 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 2018 Increases Sabaf Immobiliare merger IFRS 16 assets Disposals At 31 December 2019
6,675 5,052
INVESTMENT PROPERTY
108
1 January 2020
73
-
Depreciations
(35)
At 31 December 2020
38
11,835
Increases
-
Disposals
(552)
At 31 December 2020
11,283
ACCUMULATED DEPRECIATIONS At 31 December 2018
5,413
Depreciations for the year
429
Sabaf Immobiliare merger
2,017
At 31 December 2019
7,859
Depreciations for the year
420
Derecognition due to disposal
(249)
At 31 December 2020
8,030
NET CARRYING VALUE At 31 December 2020
3,253
At 31 December 2019
3,976
184
Changes in investment property resulting from the application of IFRS 16 are shown below:
This item includes non-operating buildings owned by the Company. Disposals during the period resulted in a capital gain of approximately €56,000. At 31 December 2020, 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.
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
3. INTANGIBLE ASSETS
Patents, know-how and software
Development costs
Other intangible assets
Total
6,756
5,489
2,458
14,703
Increases
34
460
-
494
Decreases
-
-
(11)
(11)
Reclassifications
-
(101)
(1,812)
(1,913)
6,790
5,848
635
13,273
Increases
269
413
6
688
Decreases
(85)
-
-
(85)
-
(241)
-
(241)
6,974
6,020
641
13,635
6,321
3,400
1,888
11,609
187
367
5
559
Decreases
-
-
-
-
Reclassifications
-
-
(1,348)
(1,348)
6,508
3,767
545
10,820
156
342
1
499
-
-
-
-
6,664
4,109
546
11,319
At 31 December 2020
310
1,911
95
2,316
At 31 December 2019
282
2,081
90
2,453
COST At 31 December 2018
At 31 December 2019
Reclassifications At 31 December 2020
AMORTISATION AND WRITE-DOWNS At 31 December 2018 Amortisation
At 31 December 2019 Amortisation Decreases At 31 December 2020
NET CARRYING VALUE
Intangible assets have a finite useful life and, as a result, are amortised throughout their life. The main investments in the year relate to the development of new products, mainly related to the expansion of the range of burners (research and development activities carried out during the financial year are set out in the Report on Operations).
At 31 December 2020, 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
31.12.2020
31.12.2019
Change
65,441
57,917
7,524
83
34
49
65,524
57,951
7,573
185
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
The change in equity investments in subsidiaries is broken down in the table below: Sabaf Immobiliare
Faringosi Hinges
Sabaf do Brasil
Sabaf U.S.
Sabaf Appliance Components (China)
Sabaf A.C. Kunshan (China)
Sabaf Turkey
A.R.C. s.r.l.
Okida
C.M.I s.r.l.
Sabaf India
Total
31.12.2018
13,475
10,329
8,469
139
4,400
200
12,005
4,800
8,698
-
-
62,515
Purchase
-
-
-
-
-
-
-
-
84
13,392
-
13,476
Share capital increase
-
-
-
-
500
-
-
-
-
-
-
500
Liquidation
-
-
-
-
-
(200)
-
-
-
-
-
(200)
(13,475)
-
-
-
-
-
-
-
-
-
-
(13,475)
31.12.2019
0
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
0
10,329
9,561
139
7,900
0
12,005
4,800
8,782
16,455
1,770
71,741
31.12.2018
0
0
0
0
4,400
0
0
0
0
0
0
4,400
Write-downs
-
-
-
-
500
-
-
-
-
-
-
500
31.12.2019
0
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
0
6,300
0
0
0
0
0
0
6,300
31.12.2020
0
10,329
9,561
139
1,600
0
12,005
4,800
8,782
16,455
1,770
65,441
31.12.2019
0
10,329
8,469
139
0
0
12,005
4,800
8,782
13,392
0
57,916
HISTORICAL COST
Merger
PROVISION FOR WRITE-DOWNS
NET CARRYING VALUE
PORTION OF SHAREHOLDERS’ EQUITY (CALCULATED IN COMPLIANCE WITH IFRS) 31.12.2020
0
7,462
10,561
108
1,597
0
19,534
4,349
3,294
7,763
1,671
56,339
31.12.2019
0
7,319
11,524
(51)
(772)
0
25,109
3,965
1,785
5,103
0
53,982
DIFFERENCE BETWEEN SHAREHOLDERS’ EQUITY AND CARRYING VALUE 31.12.2020
0
(2,867)
1,000
(31)
(3)
0
7,529
(451)
(5,488)
(8,692)
(99)
(9,102)
31.12.2019
0
(3,010)
3,055
(190)
(772)
0
13,104
(835)
(6,997)
(8,289)
0
(3,934)
Faringosi Hinges s.r.l. During 2020, the Faringosi Hinges recorded a slight decrease in revenues due to the pandemic. However, the fourth quarter of 2020 and the first quarter of 2021 show a consistent recovery. The 20212025 forward plan, drafted at the beginning of 2021, envisages a further increase in sales. At 31 December 2020, 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. The management has not prepared a multi-scenario analysis in that it believes it has sufficient evidence to develop future forecasts. In particular, the trend in sales during 2020 and orders portfolio data for 2021 allow a reliable assessment of the effects of the pandemic on the business. On these bases, management defined a single plan for each CGU that represents the normal and expected scenario, with reference to the period from 2021 to 2025. 186
Cash flows for the period from 2021 to 2025 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 value of use was calculated based on a discount rate (WACC) of 8.62% (9.54% in the impairment test carried out while preparing the separate financial statements at 31 December 2019) and a growth rate (g) of 2%, unchanged from the 2019 impairment test. The recoverable amount calculated on the basis of the abovementioned assumptions and valuation techniques is €13.726 million, compared with a carrying value of the equity investment of €10.329 million; consequently, the amount recorded for equity investment at 31 December 2020 was deemed recoverable.
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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%
7.62%
15,218
15,797
16,417
17,095
17,839
8.12%
13,969
14,445
14,960
15,519
16,128
8.62%
10,889
13,292
13,726
14,193
14,699
9.12%
11,953
12,298
12,667
13,062
13,488
9.62%
11,134
11,431
11,748
12,087
12,449
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
13,726
11,961
9,656
Sabaf do Brasil
In 2020, 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. A share capital increase of €3,000,000 was made during the year to rebalance the company’s capital structure; the shareholding was written down by €620,000 against the loss in 2020.
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki (Sabaf Turkey)
Sabaf Turkey achieved extremely satisfactory results in 2020 as well. The shareholders’ equity remains well above the carrying value of the equity investment.
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. A.R.C. s.r.l. recorded negative effects as a result of the pandemic on the 2020 financial year due to the closures of restaurant and hotel premises in 2020, but managed to maintain a positive economic result. At 31 December 2020, 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 at the beginning of 2021. The management has not prepared a multi-scenario analysis in that it believes it has sufficient evidence to develop future forecasts. In particular, the trend in sales during 2020 and orders portfolio data for 2021 allow a reliable assessment of the effects of the pandemic on the business. On these bases, management defined a single plan for each CGU that represents the normal and expected scenario, with reference to the period from 2021 to 2025. Cash flows for the period from 2021 to 2025 were augmented by the terminal value, which expresses the operating flows that the investee is expected to generate from the fourth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 6.76% (6.07% in the impairment test carried out while preparing the Separate financial statements at 31 December 2019) and a growth rate (g) of 2% (1.50% in the impairment test carried out while preparing the separate financial statements at 31 December 2019). 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 €8.796 million (70% of total recoverable amount), compared with a carrying value of the equity investment of €4.8 million; consequently, the carrying value recorded for equity investment at 31 December 2020 was deemed recoverable.
187
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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%
5.76%
9,808
10,261
10,774
11,360
12,036
6.26%
8,919
9,272
9,668
10,112
10,615
6.76%
8,201
8,483
8,796
9,143
9,531
7.26%
7,609
7,839
8,092
8,369
8,676
7.76%
7,113
7,304
7,511
7,737
7,985
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA
(€/000)
According to the plan
-10%
-20%
8,796
7,767
6,739
As part of the acquisition of 70% of A.R.C. s.r.l., Sabaf S.p.A. signed with Loris Gasparini (current minority shareholder by 30% of A.R.C.) an agreement that aimed to regulate Gasparini’s right to leave A.R.C. and the interest of Sabaf to acquire 100% of the shares after expiry of the term of five years from the signing of the purchase agreement of 24 June 2016, by signing specific option agreements. Therefore, the agreement envisaged specific options to purchase (by Sabaf) and sell (by Gasparini) exercisable as from 24 June 2021, the remaining shares of 30% of A.R.C., with strike prices contractually defined on the basis of final income parameters from A.R.C. at 31 December 2020. The option for the purchase of the residual 30% of A.R.C. represents a derivative instrument; since the strike price defined by contract was considered representative of the fair value of the portion that can be potentially acquired, no value was recorded in the separate financial statements at 31 December 2020.
188
emerged. The table below shows the changes in recoverable amount depending on changes in the WACC discount rate and growth factor g:
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 2020. At 31 December 2020, the Company tested - with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount by discounting expected future cash flows in the forward plan drafted at the beginning of 2021. The management has not prepared a multi-scenario analysis in that it believes it has sufficient evidence to develop future forecasts. In particular, the trend in sales during 2020 and orders portfolio data for 2021 allow a reliable assessment of the effects of the pandemic on the business. On these bases, management defined a single plan for each CGU that represents the normal and expected scenario, with reference to the period from 2021 to 2025. Cash flows for the period from 2021 to 2025 were augmented by the terminal value, which expresses the operating flows that the company 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 14.18% (12.92% in the impairment test carried out while preparing the separate financial statements at 31 December 2019) and a growth rate (g) of 2.50%, unchanged from the 2019 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 €10.054 million (30% of total equity value), compared with a carrying value of the equity investment of €8.782 million; consequently, the carrying value recorded for equity investment at 31 December 2020 was deemed recoverable.
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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%
11.92%
10,667
10,833
11,007
11,190
11,381
12.42%
10,203
10,352
10,509
10,672
10,844
12.92%
9,778
9,913
10,054
10,201
10,354
13.42%
9,387
9,509
9,636
9,769
9,908
13.92%
9,026
9,137
9,253
9,373
9,498
The table below shows the change in recoverable amount as EBITDA changes according to the plan. EBITDA According to the plan
-10%
-20%
10,054
8,954
7,854
(€/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. In September 2020, 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 first put option by the minority shareholder. The fee was €3,063,000. As a result of the transaction, Sabaf S.p.A. now holds 84.25% of the share capital of C.M.I. s.r.l. In 2020, C.M.I. s.r.l. recorded an overall stable turnover compared to the previous year, while in the last quarter of 2020, there was a significant increase in sales volumes. This positive trend was also confirmed by the volume of orders collected in the first months of the new financial year. At 31 December 2020, the Company tested
- with the support of independent experts - the carrying value of the equity investment for impairment, determining its recoverable amount by discounting expected future cash flows in the forward plan drafted by the management. The management has not prepared a multi-scenario analysis in that it believes it has sufficient evidence to develop future forecasts. In particular, the trend in sales during 2020 and orders portfolio data for 2021 allow a reliable assessment of the effects of the pandemic on the business. On these bases, management defined a single plan for each CGU that represents the normal and expected scenario, with reference to the period from 2021 to 2025. Cash flows for the period from 2021 to 2025 were augmented by the terminal value, which expresses the operating flows that the company 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 6.76% (10.49% in the impairment test carried out while preparing the Separate financial statements at 31 December 2019) and a growth rate (g) of 2% (1.15% in the impairment test carried out while preparing the separate financial statements at 31 December 2019). 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 €35.440 million (84.25% of total equity value), compared with a carrying value of the equity investment of €16.455 million; consequently, the carrying value recorded for equity investment at 31 December 2020 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%
2.00%
1.75%
2.00%
8.87%
38,927
40,130
41,420
42,807
44,303
9.37%
36,089
37,122
38,225
39,406
40,672
9.87%
33,594
34,489
35,440
36,455
37,538
10.37%
31,384
32,165
32,993
33,872
34,807
10.87%
29,414
30,100
30,825
31,593
32,406 189
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
The table below shows the change in recoverable amount as EBITDA changes according to the plan.
During the 2020 financial year, a new company was set up in India with the aim of starting the production of gas parts for the local market by 2021, where strong growth is expected in the coming years.
EBITDA
(€/000)
According to the plan
-10%
-20%
35,440
29,588
23,735
Sabaf India Private Limited
The option for the purchase of the residual 15.75% of C.M.I. represents a derivative instrument; since the strike price defined by contract was considered representative of the fair value of the portion that can be potentially acquired, no value was recorded in the separate financial statements at 31 December 2020.
With regard to investments subject to impairment testing, note that management subsequently prepared a Group business plan for the years from 2021 to 2023 using the plans referred to in the previous paragraphs as a starting point and revising the values contained therein with a view to improving them, following updated favourable prospects. In the light of the above, it was therefore decided to confirm the results of the impairment tests already prepared.
5. NON-CURRENT FINANCIAL ASSETS
Financial receivables from subsidiaries Restricted bank account Total
31.12.2020
31.12.2019
Change
5,537
5,280
257
0
60
(60)
5,537
5,340
197
At 31 December 2020, financial receivables from subsidiaries consist of: • an interest-bearing loan of USD 2.5 million (€2.037 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 2021;
• an interest-bearing loan of €3.5 million to the subsidiary Sabaf Turkey, disbursed during 2018 as part of the coordination of the Group’s financial management, with maturity in August 2021. These loans were classified as non-current assets in these separate financial statements in that the Company considers it probable that they will be renewed at maturity.
6. INVENTORIES 31.12.2020
31.12.2019
Change
Raw Materials
9,062
7,248
1,814
Semi-processed goods
6,812
6,071
741
Finished products
7,374
7,833
(459)
Provision for inventory write-downs
(1,736)
(1,290)
(446)
Total
21,512
19,862
1,650
The value of final inventories at 31 December 2020 increased compared to the end of the previous year to meet the higher volumes of activity. The provision for write-downs is 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 €514,000, semi-finished products for €306,000 and finished products for €916,000. The following table
190
shows the changes in the Provision for inventory write-downs during the current financial year: 31.12.2019
1,290
Provisions
466
Utilisation
(20)
31.12.2020
1,736
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
7. TRADE RECEIVABLES 31.12.2020
31.12.2019
Change
Trade receivables from third parties
29,477
20,319
9,158
Trade receivables from subsidiaries
16,048
9,094
6,954
Bad debt provision
(500)
(850)
350
45,025
28,563
16,462
Net total
At 31 December 2020, trade receivables included balances totalling USD 5,372,000, booked at the EUR/USD exchange rate in effect on 31 December 2020, equal to 1.2271. The amount of trade receivables recognised in the financial statements includes approximately €17 million in insured receivables (€15 million at 31 December 2019). Trade receivables at 31 December 2020 were higher than the balance at the end of 2019 subsequent to higher sales in the second half of the year.
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: 31.12.2020
31.12.2019
Change
Current receivables (not past due)
27,784
17,395
10,389
Outstanding up to 30 days
1,026
1,275
(249)
Outstanding from 30 to 60 days
315
513
(198)
Outstanding from 60 to 90 days
100
568
(468)
Outstanding for more than 90 days
252
568
(316)
29,477
20,319
9,158
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
31.12.2019
Provisions
Utilisation
31.12.2020
850
89
(439)
500
8. TAX RECEIVABLES 31.12.2020
31.12.2019
Change
For income tax
1,119
1,323
(204)
For VAT
135
413
(278)
1,254
1,736
(482)
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 2020, income tax receivables include: • €427,000 (€607,000 at 31 December 2019) for the residual amount of the receivable originating from the full deduction from IRES of IRAP relating to expenses incurred for employees and similar for the period from 2009 to 2011 (Italian Decree Law 201/2011). During 2020, the Company received a partial refund of €180,000
• the receivable from the subsidiary C.M.I. s.r.l. amounting to €316,000, relating to the balance of the 2020 income taxes transferred by the subsidiary 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 contracts entered into between the parties. Income tax receivables also include payments on account on 2020 income, for the part exceeding the tax to be paid.
191
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
9. OTHER CURRENT RECEIVABLES 31.12.2020
31.12.2019
Change
Credits to be received from suppliers
658
127
531
Advances to suppliers
431
104
327
Due from INAIL
42
31
11
Other
816
326
490
Total
1.947
588
1.359
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 2020 to a greater extent than in the previous year.
Other receivables include €347,000 paid as a deposit to guarantee provisional duties on raw material purchases.
10. CURRENT FINANCIAL ASSETS
Financial receivables from subsidiaries Restricted bank accounts Currency derivatives Total
31.12.2020
31.12.2019
Change
-
1,600
(1,600)
1,233
1,233
-
127
-
127
1,360
2,833
(1,473)
At 31 December 2020, the following were taken out: • a term deposit of €60 thousand, due by 30 June 2021, for the portion of the price not yet paid to the sellers of the A.R.C. equity investment; • a term deposit of €1.173 million, due in 2021, 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.
Currency derivatives refer to forward sales contracts recognised using hedge accounting. These financial instruments are broken down in Note 35 - Forex risk management.
11. CASH AND CASH EQUIVALENTS The item Cash and cash equivalents, equal to €1,595,000 at 31 December 2020 (€8,343,000 at 31 December 2019), 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 2020, the structure of the share capital is shown in the table below. No. of shares
% of share capital
Rights and obligations
Ordinary shares
7,976,760
69.16%
--
Ordinary shares with increased vote
3,556,690
30.84%
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. 192
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
13. TREASURY SHARES AND OTHER RESERVES During the financial year, Sabaf S.p.A. acquired 176,873 treasury shares. At 31 December 2020, the Company held 346,748 treasury shares, equal to 3.01% of share capital (169,875 treasury shares at 31 December 2019), reported in the financial statements as an adjustment to shareholders’ equity at a unit value of €12.52 (the market value at year-end was €15.23). There were 11,186,702 outstanding shares at 31 December 2020 (11,363,575 at 31 December 2019). Items “Retained earnings, other reserves” of €91,985,000 included, at 31 December 2020: • the stock grant reserve of €1,660,000 thousand, which included the measurement at 31 December 2020 of fair value of options assigned to receive Sabaf shares. For details of the Stock Grant Plan, refer to Note 43; • 13,514,000 for the merger surplus resulting from the merger of Sabaf Immobiliare s.r.l.;
• the hedge accounting reserve of €127,000. 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 2019
-
Change during the period
127
Value at 31 December 2020
127
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 31.12.2020
31.12.2019
Current
Non-current
Total
Current
Non-current
Total
161
990
1,152
297
1,750
2,047
Unsecured loans
13,269
25,900
39,169
11,904
33,736
45,640
Short-term bank loans
10,567
-
10,567
1,793
-
1,793
Total
23,997
26,890
50,887
13,994
35,486
49,480
Leases
During the year, the Company took out a new unsecured loan of €3 million. All loans are signed with an original maturity of ranging from 5 to 6 years and are repayable in instalments. 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 2020 equal to €14 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 2020 equal to €25.4 million)
widely complied with at 31 December 2020 and for which, according to the Company’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 separate financial statements include the negative fair value of the IRSs hedging rate risks of unsecured loans pending, for residual notional amounts of approximately €26.4 million and expiry until 30 June 2025. Financial expenses were recognised in the income statement with a balancing entry.
The following table shows the reconciliation between commitments for operating leases at 31 December 2019 and liabilities relating to leases at 31 December 2020: Operating lease liabilities at 1 January 2019 New agreements signed during 2019
2,150 297
Repayments during 2019
(400)
Lease liabilities at 31 December 2019
2,047
New agreements signed during 2020
515
Repayments during 2020
(455)
Lease liabilities at 31 December 2020
2,107
Note 36 provides information on financial risks, pursuant to IFRS 7. 193
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
15. OTHER FINANCIAL LIABILITIES 31.12.2020
31.12.2019
Current
Non-current
Current
Non-current
Payables to A.R.C. shareholders
60
-
60
60
Payables to C.M.I. shareholders
1,173
-
-
1,173
Derivative instruments on interest rates
327
-
271
-
1,560
-
331
1,233
Total
The payable to the A.R.C. shareholders of €60,000 at 31 December 2020 is related to the part of the price still to be paid to the sellers, which was deposited on a restricted account (Note 5) and will be released in favour of the sellers by 2021, in accordance with contractual agreements and guarantees issued by the sellers.
The payable to C.M.I. shareholders of €1,173,000 at 31 December 2020, maturing during 2021, 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.
16. POST-EMPLOYMENT BENEFIT At 31 December 2019
8
Financial expenses
Financial assumptions
(174)
Payments made
31.12.2020
31.12.2019
Discount rate
0.23%
0.40%
Inflation
1.00%
1.20%
31
Tax effect At 31 December 2020
Post-employment benefits are calculated as follows:
2,064
1,929
Actuarial gains or losses are recorded immediately in the comprehensive income statement (“Other comprehensive income”) under the item “Actuarial income and losses”.
Demographic theory 31.12.2020
31.12.2019
Mortality rate
IPS55 ANIA
IPS55 ANIA
Disability rate
INPS 2000
INPS 2000
Staff turnover
6%
6%
5% per year
5% per year
pursuant to legislation in force on 31 December 2020
pursuant to legislation in force on 31 December 2019
Advance payouts Retirement age
17. PROVISIONS FOR RISKS AND CHARGES 31.12.2019
Provisions
Utilisation
31.12.2020
Provision for agents’ indemnities
198
26
(6)
218
Product guarantee fund
60
8
(8)
60
Provision for risks on equity investments
780
-
(780)
-
Provision for legal risks
26
550
-
576
1.064
584
(794)
854
Total
The provision for agents’ indemnities covers amounts payable to agents if the Company terminates the agency relationship.
194
The product guarantee fund covers the risk of returns or charges by customers for products already sold. The fund was adjusted at the end of the year, on the basis of analyses conducted and past experience.
SABAF . 2020 ANNUAL REPORT
The provision for risks on equity investments set aside in previous years against the negative shareholders’ equity of the Chinese subsidiary Sabaf Appliance Components was reduced to zero following the capital increase carried out in 2020 (Note 4). The provision for legal risks was adjusted to reflect the outstanding disputes. The 2020 appropriation was entered in the amount of €500,000 for a patent dispute for which a settlement was reached with the counterparty at the beginning of 2021. The remaining amount set aside refers to smaller disputes. 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.
19. TAX PAYABLES 31.12.2020
31.12.2019
Change
1,433
-
1,433
To subsidiaries for income tax
276
-
276
To inland revenue for IRPEF tax deductions
676
621
55
Other tax payables
74
74
-
2,459
695
1,764
To inland revenue for income tax
Total
Payables to inland revenue for income tax are related to IRES for €1,149,000 and IRAP for €284,000.
18. TRADE PAYABLES
Total
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
31.12.2020
31.12.2019
Change
26,204
15,734
10,470
Average payment terms did not change versus the previous year. At 31 December 2020, there were no overdue payables of a significant amount and the Company did not receive any injunctions for overdue payables. The increase in trade payables is due to the strong increase in production activity that the Company recorded in the last part of the year.
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 2020, payables to subsidiaries for income taxes refer to tax advances received from subsidiaries (€163,000 from Faringosi Hinges s.r.l., €65,000 from CGD s.r.l., €48,000 from A.R.C. s.r.l.). Payables for IRPEF tax deductions, relating to employment and selfemployment, were duly paid at maturity.
20. OTHER CURRENT PAYABLES 31.12.2020
31.12.2019
Change
To employees
4,259
3,697
562
To social security institutions
2,094
1,806
288
Advances from customers
858
165
693
To agents
231
193
38
Other current payables
415
461
(46)
7,857
6,322
1,535
Total
At the beginning of 2021, 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 31.12.2020
31.12.2019
Deferred tax assets
3,892
4,276
Deferred tax liabilities
(230)
(1,734)
Net position
3,662
2,542
195
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 2018
416
874
55
1,771
-
153
96
3,365
Through profit or loss
219
22
10
(354)
419
-
(43)
273
To shareholders’ equity
(1,111)
-
-
-
-
15
-
(1,096)
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
927
878
45
1,240
0
176
396
3,662
To shareholders’ equity At 31 December 2020
Following the realignment between the carrying value and the tax value of certain properties, in pursuance of Italian Law Decree no. 104 of 14 August 2020 (known as August Decree), converted into Law 126 of 13 October 2020, deferred tax liabilities of €1,360,000 have been released to the income statement in these separate financial statements, which have been recognised in the changes in the income statement under “Amortisation and leasing”. The exercise of the realignment
option results in a substitute tax of approximately €146,000, which is accounted for in current taxes for the year and will be paid in equal instalments over the three-year period from 2021 to 2023. 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 Italian law Decree 98/2011, deductible in ten instalments starting in 2018.
22. NET FINANCIAL POSITION As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company’s net financial position is as follows: 31.12.2020
31.12.2019
Change
9
8
1
1,586
8,335
(6,749)
-
-
-
D. Liquidity (A+B+C)
1,595
8,343
(6,748)
E. Current financial receivables
1,360
2,833
(1,473)
F. Current bank payables (Note 14)
10,567
1,793
8,774
G. Current portion of non-current debt (Note 14)
13,430
12,201
1,229
H. Other current financial payables (Note 15)
1,560
331
1,229
I. Current financial debt (F+G+H)
25,557
14,325
11,232
J. Net current financial debt (I-D-E)
22,602
3,149
19,453
K. Non-current bank payables (Note 14)
26,890
35,486
(8,596)
L. Other non-current financial payables
-
1,233
(1,233)
M. Non-current financial debt (K+L)
26,890
36,719
(9,829)
N. Net financial debt (J+M)
49,492
39,868
9,624
A. Cash (Note 11) B. Positive balances of unrestricted bank accounts (Note 11) C. Other cash equivalents
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.
196
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
COMMENTS ON KEY INCOME STATEMENT ITEMS 23. REVENUE In 2020, sales revenue totalled €102,583,189, up 8.1% from €94,899,421 in 2019.
REVENUE BY GEOGRAPHICAL AREA 2020
%
2019
%
% change
23,242
22.7%
22,053
23.2%
5.4%
Western Europe
7,952
7.8%
8,661
9.1%
(8.2%)
Eastern Europe and Turkey
33,129
32.3%
30,690
32.3%
7.9%
Asia and Oceania (excluding Middle East)
6,334
6.2%
7,808
8.2%
(18.9%)
Central and South America
13,719
13.4%
11,389
12%
20.5%
Middle East and Africa
10,415
10.2%
6,070
6.4%
71.6%
North America and Mexico
7,792
7.6%
8,228
8.7%
(5.3%)
102,583
100%
94,899
100%
8.1%
Italy
Total
The pandemic resulted in very high volatility of sales revenues during 2020. After an encouraging start to the year, from March onwards the Company’s activities slowed down significantly, firstly due to the temporary interruption of activities (for 3 weeks) and then due to the general reduction in production levels by our customers. As
from July, there was a marked recovery in demand in all geographical areas, which accelerated further in the last part of the year when the favourable market situation was accompanied by the start of new supplies of burners on a global scale to strategic customers.
REVENUE BY PRODUCT FAMILY 2020
%
2019
%
% change
Valves and thermostats
45,784
42.2%
40,003
42.2%
14.5%
Burners
42,798
45.6%
43,304
45.6%
(1.2%)
Accessories and other revenues
14,001
12.2%
11,592
12.2%
20.8%
102,583
100%
94,899
100%
8.1%
Total
Average sales prices in 2020 were 1.6% lower compared with 2019.
24. OTHER INCOME 2020
2019
Change
Sale of trimmings
1,147
912
235
Services to subsidiaries
1,150
1,332
(182)
Royalties to subsidiaries
126
97
29
Contingent income
891
317
574
Rental income
121
118
3
Use of provisions for risks and charges
15
64
(49)
Other income
2,197
1,205
992
Total
5,647
4,045
1,602
Services to subsidiaries refer to administrative, commercial and technical services provided within the scope of the Group. Contingent assets include €704,000 collected as a distribution to unsecured creditors from the extraordinary administration procedure of a former customer, the related receivable having been fully written down in previous years. Other income includes €972,000 in insurance compensation received following a fire that occurred in May 2019 and €318,000 for the benefits granted as a tax credit for investments made in 2020 (Italian Law 160/2019 paragraphs 184 to 196).
197
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
25. MATERIALS 2020
2019
Change
Commodities and outsourced components
39,462
29,860
9,602
Consumables
3,808
2,945
863
Total
43,271
32,805
10,465
In 2020, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average lower than in 2019, with a positive impact of 1.5% of sales.
26. COSTS FOR SERVICES 2020
2019
Change
Outsourced processing
7,831
6,674
1,157
Electricity and natural gas
2,616
2,800
(184)
Maintenance
3,827
3,020
807
Advisory services
1,832
2,020
(188)
Transport and export expenses
1,420
1,091
329
Directors’ fees
419
482
(63)
Insurance
536
466
70
Commissions
573
565
8
Travel expenses and allowances
122
402
(280)
Waste disposal
469
368
101
Canteen
251
260
(9)
Temporary agency workers
211
111
100
2,102
1,865
237
22,209
20,124
2,085
Other costs Total
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.
27. PERSONNEL COSTS 2020
2019
Change
18,744
17,996
748
Social Security costs
5,718
5,764
(46)
Temporary agency workers
2,002
972
1,030
Post-employment benefit and other costs
1,446
1,373
73
657
680
(23)
28,567
26,785
1,782
Salaries and wages
Stock grant plan Total
Average of the Company headcount at 31 December 2020 totalled 480 employees (345 blue-collars, 124 white-collars and supervisors, 11 managers), compared with 488 in 2019 (360 blue-collars, 118 whitecollars and supervisors, 10 managers). The number of temporary staff with temporary work contract was 82 at 31 December 2020 (18 at the end of 2019). 198
The item “Stock Grant Plan” included the measurement at 31 December 2020 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.
28. OTHER OPERATING COSTS 2020
2019
Change
Provisions for risks
558
74
484
Non-income related taxes and duties
413
400
13
Losses and write-downs of trade receivables
89
42
47
Contingent liabilities
36
99
(63)
Other provisions
26
97
(71)
Other operating expenses
185
214
(29)
1,307
926
381
Total
Non-income taxes mainly include IMU, TASI and the tax for the disposal of urban solid waste. Provisions for risks and other provisions relate to sums set aside for the risks described in Note 17.
29. FINANCIAL EXPENSES 2020
2019
Change
Interest paid to banks
543
592
(49)
Banking expenses
141
173
(32)
Other financial expense
34
52
(18)
Total
718
817
(99)
Interest paid to banks includes IRS spreads payable that hedge interest rate risks.
30. EXCHANGE RATE GAINS AND LOSSES In 2020, the Company reported net foreign exchange losses of €399,000 (net loss of €10,000 in 2019) due to the gradual weakening of the dollar against the euro during the year.
31. PROFITS AND LOSSES FROM EQUITY INVESTMENTS 2020
2019
Change
Dividends received from Sabaf Kunshan Trading
-
47
(47)
Dividends received from Faringosi Hinges s.r.l.
500
996
(496)
Dividends received from Okida Elektronik
109
315
(206)
Total
609
1,358
(749)
This item includes dividends received from investee companies.
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
32. INCOME TAXES 2020
2019
Change
934
127
807
(1,112)
(273)
(893)
Taxes related to previous financial years
(89)
(29)
(60)
Substitute tax
146
-
146
Taxes on foreign dividends
15
44
(29)
(106)
(131)
25
Current taxes Deferred tax assets and liabilities
Total
Current taxes for the 2020 financial year are related to IRAP for €374,000 and IRES for €588,000, net of the tax credit for sanitisation amounting to €28,000. Following the realignment between the carrying value and the tax value of certain properties, in pursuance of Italian Law Decree no. 104 of 14 August 2020 (known as August Decree), converted into Law 126 of 13 October 2020, deferred tax liabilities of €1,360,000 have been released to the income statement in these separate financial statements. The exercise of the realignment option results in a substitute tax of approximately €146,000, which is accounted for in current taxes for the year and will be paid in equal instalments over the three-year period from 2021 to 2023.
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: 2020
2019
Theoretical income tax
1,513
886
Taxes related to previous financial years
(127)
(25)
Tax effect of dividends from investee companies
(124)
(265)
-
(306)
(694)
(581)
(1,360)
-
Substitute tax on realignment of property values (Note 21)
146
-
Permanent tax differences
172
4
2
(4)
(28)
-
IRES (current and deferred)
(500)
(291)
IRAP (current and deferred)
394
160
Total
(106)
(131)
“Patent box” tax effect “Iper and Superammortamento” tax benefit Realignment between carrying values and tax values of properties (Note 21)
Other differences Tax credit on sanitisation costs
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. No tax disputes were pending at 31 December 2020.
33. DIVIDENDS
34. SEGMENT REPORTING
On 14 October 2020, shareholders were paid a dividend of €0.35 per share (total dividends of €3,924,000). The Directors have recommended payment of a dividend of €0.55 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 2 June 2021 (exdate 31 May and record date 1 June).
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.
199
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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. 31.12.2020
31.12.2019
1,595
8,343
Trade receivables and other receivables
46,972
29,152
Non-current loans
5,537
5,340
-
1,600
1,360
1,293
127
-
327
271
50,887
49,480
1,233
1,293
26,204
15,734
Financial assets
Amortised cost Cash and cash equivalents
Current loans Other financial assets
Hedge accounting Derivatives cash flow hedges (on currency)
Financial liabilities
Fair Value through profit or loss Derivatives cash flow hedges (on interest rates)
Amortised cost Loans Other financial liabilities Trade payables
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 and to 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 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 assessment, 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 36% of trade receivables.
200
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% of total turnover in 2020, while purchases in dollars represented 5% of total turnover. During the year, operations in dollars were partially hedged through forward sales contracts. At 31 December 2020, the Company had in place forward sales contracts of USD 4.8 million, maturing in December 2021 at an average exchange rate of 1.1910. With reference to these contracts, the Company applies hedge accounting, checking compliance with IFRS 9.
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
The table below shows the balance sheet and income statement effects of forward sales contracts recognised under hedge accounting.
Counterparty
Instrument
Maturity
Value date
Notional (in thousands)
29/03/2021 Unicredit
MPS
Forward
Forward
28/06/2021
800 USD
800
27/09/2021
800
21/12/2021
800
29/03/2021
400
28/06/2021
USD
400
21/12/2021
400
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 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 2020, IRS totalling €26.4 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.
2
400
28/09/2021
Sensitivity analysis With reference to financial assets and liabilities in US dollars at 31 December 2020, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of €568,000.
Fair value hierarchy
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 2020 of 47.8%, net financial debt / pro-forma EBITDA2 of 1.52) 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. An analysis by expiry date of financial payables at 31 December 2020 and 31 December 2019 is shown below.
Sensitivity analysis Considering the IRS in place, at the end of 2020 almost all of the Company’s financial debt was at a fixed rate. Therefore, at 31 December 2020 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. Sales prices of products are generally renegotiated annually; as a result, the Company is unable to immediately pass on to customers any changes in the prices of commodities during the year. The Company 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 2020 and 2019, the Company did not use financial derivatives on commodities. To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
2
The return on capital employed and the pro-forma net debt/EBITDA ratio are calculated considering, for the companies acquired and included in the scope of consolidation during the year, the EBIT and EBITDA for the entire year.
201
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS 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
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
Carrying value
Contractual cash flows
Within 3 months
From 3 months to 1 year
From 1 to 5 years
More than 5 years
47,687
48,588
1,723
11,009
33,251
2,605
1,793
1,793
1,793
-
-
-
Payables to A.R.C. shareholders
120
120
-
60
60
-
Payables to C.M.I. shareholders
1,173
1,173
-
-
1,173
-
Total financial payables
50,773
51,674
3,516
11,069
34,484
2,605
Trade payables
15,734
15,734
15,707
27
-
-
Total
66,507
67,408
19,223
11,096
34,484
2,605
At 31 December 2020
At 31 December 2019 Unsecured loans and leases Short-term bank loans
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 2020, by hierarchical level of fair value assessment. Level 1
Level 2
Level 3
Total
Other financial liabilities (interest rate derivatives)
-
(327)
-
(327)
Options on A.R.C. and C.M.I. minorities
-
-
-
-
Total assets and liabilities at fair value
-
(327)
-
(327)
202
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 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%
Total 2019
Subsidiaries
Other related parties
Total related parties
Impact on the total
Non-current financial assets
5,340
5,280
-
5,280
98.88%
Trade receivables
28,563
9,676
-
9,676
33.88%
Current financial assets
3,421
1,600
-
1,600
46.77%
Trade payables
15,734
765
4
769
4.89%
Non-current financial assets Trade receivables
IMPACT OF RELATED-PARTY TRANSACTIONS ON INCOME STATEMENT ITEMS 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
20,124
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%
Total 2019
Subsidiaries
Other related parties
Total related parties
Impact on the total
Revenue
94,899
11,820
-
11,820
12.46%
Other income
4,045
1,760
-
1,760
43.51%
Materials
32,806
1,852
-
1,852
5.65%
Services
20,124
465
21
486
2.42%
Capital gains on non-current assets
130
90
-
90
69.23%
Other operating costs
926
80
-
80
8.64%
Write-downs of non-current assets
500
500
-
500
100%
Financial income
211
175
-
175
82.94%
Revenue
Relations with subsidiaries mainly consist of: • trade relations, relating to the purchase and sale of semi-processed goods or finished products with Sabaf do Brasil, Faringosi Hinges, Sabaf Turkey, Okida and Sabaf Kunshan; • sales of machinery to Sabaf do Brasil and Sabaf Turkey, 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.
203
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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
109,928
6,410
49,493
(6,748)
Realignment of carrying values and tax values of properties (a)
(1,214)
(1,214)
-
-
Recovery of a previously written-down trade receivable (c)
(796)
(796)
796
(796)
Settlement of a patent dispute (d)
500
500
-
-
Total non-recurring operations (B)
(1,510)
(1,510)
796
(796)
52
52
-
-
108,470
4,952
50,289
(7,544)
Financial statement values (A)
Tax effect
Total net of the tax effect Financial statement notional value (A + B)
In these separate financial statements, the Company recognised: a. under income taxes a non-recurring income of €1,214,000 following the realignment, carried out in accordance with Article 110 of Italian Law Decree No. 104 of 14 August 2020, of the differences between the carrying values and tax values of certain properties resulting from the merger of Sabaf Immobiliare, a transaction that took place in 2019. The total amount of €1,214,000 is the difference between the release of related deferred tax liabilities of €1,360,000 and the recognition of substitute tax of €146,000 (Note 21 and Note 32). b. among other revenues, a non-recurring income of €704,000 collected as a distribution to unsecured creditors from the extraordinary administration procedure of a former customer, the related receivable having been fully written down in previous years (Note 24) c. among other operating revenues, a provision for legal risks of €500,000 for a patent dispute for which a settlement was reached with the counterparty at the beginning of 2021 (Note 17 and Note 28).
38. SIGNIFICANT EVENTS AFTER THE REPORTING PERIOD After the reporting period and up to the date of this report, no events occurred that need to be mentioned.
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 2020.
40. SECONDARY OFFICES AND LOCAL UNITS The company has two other active local units in addition to Ospitaletto: • Lumezzane (Brescia); • Busto Arsizio (Varese).
204
41. COMMITMENTS Guarantees issued Sabaf S.p.A. also issued sureties to guarantee mortgage loans granted by banks to employees for a total of €3,632,000 (€4,024,000 at 31 December 2019).
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.
43. SHARE-BASED PAYMENTS In order to adopt a medium and long-term incentive instrument for directors and employees of the Sabaf Group, on the proposal of the Remuneration and Nomination Committee, the Board of Directors prepared a specific free allocation plan of shares (the “Plan”) with the characteristics described below. 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 resolved by the Board of Directors on 14 May 2019.
Purpose of the plan The Plan aims 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 of the Company and of the Group.
SABAF . 2020 ANNUAL REPORT
Beneficiaries of the plan 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 are divided into two groups: • Cluster 1: Beneficiaries already identified in the Plan or who will be identified by the Board of Directors by 30 June 2018 on the Shareholders’ Meeting authority. • Cluster 2: Beneficiaries who will be identified by the Board of Directors from 1 July 2018 to 30 June 2019 on the Shareholders’ Meeting authority. The Board of Directors, in its meeting of 15 May 2018, identified the Beneficiaries of Cluster 1 of the Plan to whom a total of 185,600 options were assigned; and the Board of Directors in its meeting of 14 May 2019, identified the Beneficiaries of Cluster 2 of the Plan to whom a total of 184,400 options were assigned.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Deadline of the Plan The Plan expires on 31 December 2022 (or on a different subsequent date set by the Board of Directors). Fair Value measurement methods Considering the allocation mechanism described above, it was necessary to measure at fair value the options assigned to receive shares of the company. In line with the date of assignment of the options and terms of the plan, the grant date was set at 15 May 2018 for Cluster 1 and 14 May 2019 for Cluster 2. The main assumptions made at the beginning of the vesting period and the determination of fair value at the end of the reporting period are illustrated below.
Subject-matter of the plan 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 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, with progressiveness, of the business objectives related to the ROI, EBITDA and TSR indicators and Individual objectives, i.e. performance targets of each beneficiary determined by the Board of Directors at the suggestion of the Remuneration and Nomination Committee.
205
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CLUSTER 1 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI
2018
2019
2020
2018-2020
Share prices at the start of the vesting period
19.48
19.48
19.48
19.48
Expected probability of business objective achievement
35%
0%
35%
0%
Total value on ROI
3.07
Fair Value
1.03
33.40%
Rights on ROI
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA
2018
2019
2020
Share prices at the start of the vesting period
19.48
19.48
19.48
Expected probability of business objective achievement
35%
0%
0%
Total value on EBITDA
1.70
Fair Value
33.30%
Rights on EBITDA
0.57
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR
2018
2019
2020
2018-2020
20.2
14.9
12.44
20.2
-0.28%
-0.30%
-0.38%
-0.38%
Expected volatility
31%
18%
29%
29%
Dividend yield
0%
0%
0%
0%
Strike Price
22.61
17.39
14.51
28.34
Total value on TSR
7.57
Fair Value
2.52
Share prices at the start of the vesting period Risk free rate
Rights on TSR
33.30%
Fair value per share
206
4.11
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CLUSTER 2 FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON ROI
2019
2020
2019-2020
13.66
13.66
13.66
Expected probability of business objective achievement
0%
35%
0%
Total value on ROI
1.96
Share prices at the start of the vesting period
Fair Value
23.38%
Rights on ROI
0.46
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON EBITDA
2019
2020
13.66
13.66
Expected probability of business objective achievement
0%
0%
Total value on EBITDA
0.00
Share prices at the start of the vesting period
Rights on EBITDA
Fair Value
23.31%
0.00
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON TSR
2019
2020
2019-2020
14.9
12.44
14.9
-0.30%
-0.38%
-0.38%
Expected volatility
18%
29%
29%
Dividend yield
0%
0%
0%
Strike Price
17.39
14.51
22.86
Total value on TSR
2.53
Share prices at the start of the vesting period Risk free rate
Fair Value
23.31%
Rights on TSR
0.59
FAIR VALUE MEASUREMENT METHODS - RIGHTS RELATING TO OBJECTIVES MEASURED ON INDIVIDUAL OBJECTIVES
2019
2020
Share prices at the start of the vesting period
13.66
13.66
Expected probability of business objective achievement
93%
93%
Total value on individual objectives
12.70
Rights on individual objectives
30.00%
Fari Value per share
Fair Value
3.81
4.86
In connection with this Plan, €658,000 were recognised in personnel costs during the year (Note 27). At 31 December 2020, a reserve of €1,660,000 was recorded in the item “Retained earnings, Other reserves” under shareholders’ equity (Note 13). 207
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
Summary of public grants pursuant to Article 1, paragraphs 125-129, Italian Law no. 124/2017 In compliance with the requirements of transparency and publicity envisaged pursuant to Italian 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)
694
Italian State
Energy-intensive contributions
493
Italian State
Sanitisation credit
9
Italian State
Total
1,196
Iperammortamento (Hyper amortisation): it allows an overestimation 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. 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 Italian 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 2020 with reference to Article 125 of Italian law Decree no. 34 of 19 May 2020, known as Decreto Rilancio (Relaunch Decree).
LIST OF INVESTMENTS WITH ADDITIONAL INFORMATION REQUIRED BY CONSOB (COMMUNICATION DEM6064293 OF 28 JULY 2006) IN SUBSIDIARIES3 Registered offices
Share capital at 31 December 2020
Shareholders
Ownership %
Shareholders’ equity at 31 December 2020
2020 profit (loss)
Faringosi Hinges s.r.l.
Ospitaletto (BS)
EUR 90,000
Sabaf S.p.A.
100%
EUR 7,461,839
EUR 576,761
Sabaf do Brasil Ltda
Jundiaì (Brazil)
BRL 38,328,261
Sabaf S.p.A.
100%
BRL 67,308,582
BRL 8,937,131
Sabaf US Corp.
Plainfield (USA)
USD 200,000
Sabaf S.p.A.
100%
USD 132,621
USD 89,447
Sabaf Appliance Components (Kunshan) Co., Ltd.
Kunshan (China)
EUR 7,900,000
Sabaf S.p.A.
100%
CNY 18,540,605
CNY -4,750,113
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
Manisa (Turkey)
TRY 28,000,000
Sabaf S.p.A.
100%
TRY 148,246,949
TRY -6,817,642
A.R.C. s.r.l.
Campodarsego (PD)
EUR 45,000
Sabaf S.p.A.
70%
EUR 6,781,600
EUR 400,180
Sabaf S.p.A.
30%
Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki
70%
TRY 74,882,699
TRY 37,650,029
Company name
Okida Elektronik Sanayi ve Ticaret A.S.
Istanbul (Turkey)
TRY 5,000,000
C.M.I s.r.l.
Valsamoggia (BO)
EUR 1,000,000
Sabaf S.p.A.
84.25%
EUR 9,204,302
EUR 1,709,751
C.G.D. s.r.l.
Valsamoggia (BO)
EUR 26,000
C.M.I s.r.l.
100%
EUR 815,828
EUR 51,690
C.M.I. Polska sp. z.o.o.
Myszków (Poland)
PLN 40,000
C.M.I s.r.l. C.G.D. s.r.l.
97.5% 2.5%
PLN 8,871,334
PLN 2,615,164
Sabaf India Private Limited
Bangalore (India)
INR 153,833,140
Sabaf S.p.A.
100%
INR 149,767,657
INR -4,035,483
Registered offices
Share capital at 31 December 2020
Shareholders
Ownership %
Shareholders’ equity at 31 December 2020
2020 profit (loss)
Handan (China)
RMB 3,000,000
A.R.C. s.r.l.
51%
RMB 1,414,660
RMB -657,278
OTHER SIGNIFICANT EQUITY INVESTMENTS Company name Handan A.R.C. Burners Co., Ltd.
3
Values taken from the separate financial statements of subsidiaries, prepared in accordance with locally applicable accounting standards.
208
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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
71,910
A, B, C
71,910
0
Revaluation reserve, Italian Law Decree 104/20
4,873
A, B, C
4,873
4,727
Description Capital reserves: Share premium reserve
Retained earnings:
Valuation reserve: Post-employment benefit actuarial provision
(528)
0
0
Reserve for stock grant plan
1,660
0
0
127
0
0
91,985
88,419
6,361
Hedge accounting reserve Totale
Key: A. for share capital increase B. to hedge losses C. for distribution to shareholders
STATEMENT OF REVALUATIONS OF EQUITY ASSETS AT 31 DECEMBER 2020
Investment property
Plant and machinery
Gross value
Cumulative depreciation
Net value
Law 72/1983
137
(137)
0
1989 merger
516
(486)
30
Law 413/1991
47
(45)
2
1994 merger
1,483
(1,181)
302
Law 342/2000
2,870
(2,626)
244
5,053
(4,475)
578
Law 576/75
205
(205)
0
Law 72/1983
2,219
(2,219)
0
1989 merger
6,140
(6,140)
0
1994 merger
6,820
(6,820)
0
15,384
(15,384)
0
Industrial and commercial equipment
Law 72/1983
161
(161)
0
Other assets
Law 72/1983
50
(50)
0
20,648
(20,070)
578
Total
209
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
GENERAL INFORMATION Sabaf S.p.A. is a company organised under the legal system of the Republic of Italy. Tax R.E.A. Brescia 347512 information
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
E-mail: info@sabaf.it Website: www.sabafgroup.com
APPENDIX
Information as required by Article 149-duodecies of the CONSOB Issuers’ Regulation The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers’ Regulation, shows fees relating to 2020 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 2020 financial year
Audit
EY S.p.A
47
Certification services
EY S.p.A
-
Other services
EY S.p.A
424
(€/000)
Total
4
Auditing procedures agreement relating to interim management reports.
210
89
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
CERTIFICATION OF SEPARATE FINANCIAL STATEMENTS pursuant to Article 154-bis of Italian 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 Article 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 2020 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 Article 9 of Italian 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, 23 March 2021
Chief Executive Officer
The Financial Reporting Officer
Pietro Iotti
Gianluca Beschi
211
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212
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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213
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214
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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215
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216
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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, also in the capacity of “internal control and audit committee”, 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. Note, first of all, that the Board of Directors decided to make use of the longer term envisaged in Art. 2364 of the Italian Civil Code and Art. 8 of the Articles of Association for the call of the Shareholders’ Meeting to approve the 2020 financial statements, owing to the existence of the relative conditions. The financial statements report is in any case made available to the public in full within the terms of Art. 154-ter of the T.U.F. (within four months from the end of the financial year). The decision was taken by the Board, as explained in the Report on Operations, as SABAF is required to prepare the consolidated financial statements, in consideration of requirements related to the relevant obligations and fulfilments. In any case, note that, due to the situation regarding the spread of the health emergency related to COVID-19, pursuant to Art. 106 of Decree Law no.18 of 2020 “the ordinary shareholders’ meeting is convened within one hundred and eighty days from the end of the reporting period”, as an exception to the ordinary rules on the subject. During the year ended 31 December 2020 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 Corporate Governance Code and, as from the beginning of the 2021 financial year by 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 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 2020.
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 8 May 2018 in the persons of Alessandra Tronconi (Chairman), Luisa Anselmi (Statutory Auditor), Mauro Giorgio Vivenzi (Statutory Auditor), as well as Paolo Guidetti and Stefano Massarotto (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 2020. The appointment was made on the basis of two lists submitted by the Shareholders Giuseppe Saleri S.A.p.A and Quaestio Capital SGR S.p.A. respectively, in compliance with the applicable law, regulatory and statutory provisions. The Chairman of the Board of Statutory Auditors and one Alternate Auditor were drawn from the list that obtained the lowest number of votes. The composition of the Board of Statutory Auditors complies with the gender distribution criterion set forth in Art. 148 of Legislative Decree no. 58 of 1998. 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 Corporate Governance Code applicable to independent directors. The outcome of the check was communicated (pursuant to Art. 144-novies, paragraph 1-ter of CONSOB Regulation no. 11971 of 1999, Art. 8.C.1 of the Corporate Governance Code and Standard Q.1.1 of the Rules of Behaviour of listed companies) to the Board of Directors, which issued the relevant press release on 26 June 2018. This assessment was carried out again on 12 March 2019, 17 March 2020 and 16 March 2021 and consequently communicated to the Board of Directors, which disclosed it in the Report prepared pursuant to Art. 123bis of the T.U.F. of the financial years of reference.
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 Legislative Decree No. 58 of 1998, Art. 19 of Legis217
SABAF . 2020 ANNUAL REPORT
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
lative 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 Code of Self-Discipline and in the new Corporate Governance Code, as well as the Rules of Behaviour of the Board of Statutory Auditors of listed companies.
Code, as part of the supervision of the procedures for effective implementation of the corporate governance rules, 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.
Therefore, 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, the examination of company documents and the analysis of the results of the work carried out by the Independent Auditors; • held 10 meetings during the year, lasting approximately 2 hours, 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 Legislative Decree no. 58 of 1998, ensured by 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. The adjustment of the procedure adopted by the Company for the management of inside relevant information, drawn up in the light of CONSOB Guidelines no. 1/2017, was monitored.
As required by Application Principle 1.C.1, letter g) of the Corporate Governance Code, 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 self-assessment questionnaire filled in by all the members of the Board of Directors - used the assessment criteria already adopted in the previous year.
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. and 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 S.p.A. 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 Application Principle 3.C.5 of the Corporate Governance 218
The Board also acknowledges that it has issued its consent, pursuant 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 Sabaf do Brasil Ltda and 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 €413,000.
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 S.p.A. is subject pursuant to Law no. 262/2005. In particular, the Board of Statutory Auditors acknowledged the Risk Assessment for 2020, as well as the periodic update on testing activities pursuant to Law no. 262/2005.
SABAF . 2020 ANNUAL REPORT
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 suspended production (Ospitaletto and Bareggio from 16 March 2020, the others from 23 March 2020), as provided for by the emergency regulations in force, and will gradually resume operations from 31 March 2020. 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 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 S.p.A. and the Consolidated Financial Statements for the year 2020 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.
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
sistency 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. 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) 152 -
Other services
41
TOTAL
193
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
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 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 also acknowledges that the Independent Auditors EY S.p.A. issued their opinions on the Consolidated Financial Statements and the Separate Financial Statements today 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 con-
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. 219
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SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
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 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 2020. Similarly, the Board of Statutory Auditors acknowledged the compliance with the provisions of Legislative Decree no. 231/2001 and the activity plan for 2020, 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 2020 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 2020, with respect to which the Board of Statutory Auditors monitored compliance with the principles of proper management, are summarised below. On 10 September 2020, the Company completed the acquisition of 15.75% of the share capital of C.M.I. s.r.l., following the exercise of the first put option by the minority shareholder Starfire Industrial Engineering S.r.l. The purchase price was €3,063,000. As a result of the transaction, the Company now holds 84.25% of the share capital of C.M.I. s.r.l. Moreover, SABAF put in place an important transaction aimed at achieving growth for the Group: as described in the Report on Operations, in 2020, a new company was set up in India - Sabaf India Private Limited - with the aim of starting the production of gas parts for the local market by 2021, where strong growth is expected in the coming years. 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; 220
• 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 2018-2022 Business Plan approved by the Board of Directors.
Supervisory activity on implementation of the corporate governance rules The Board of Statutory Auditors, during the financial year ended 31 December 2020, 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. 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 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. It is acknowledged that at the date of this Report, the Company complied with the provisions of the new Corporate Governance Code.
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 2020, 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, 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 reports, 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 and the results obtained, which show values in use that are significantly higher than the carrying values of the equity investments and assets; • in pursuance of CONSOB Resolution 15519/2006, the effects of transactions with related parties are expressly indicated in
SABAF . 2020 ANNUAL REPORT
•
•
•
•
•
the financial statements. In pursuance of this Resolution in the Explanatory Notes, it is specified that during the year there were no significant non-recurring events or operations and no transactions deriving from atypical and/or unusual operations were carried out; 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, 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 (for approval in its first section, for reporting purposes in its second section): the Board of Statutory Auditors examined and agreed with the approach followed in preparing this report at a joint meeting with the Remuneration Committee.
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 statements in question, also acquiring the certification issued by the appointed auditor EY S.p.A. today. 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 Legislative Decree 58/1998. 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
SEPARATE FINANCIAL STATEMENTS AT 31 DECEMBER 2020
12 March 2010 as amended) and was last updated by the Board of Directors on 25 September 2018. The Board of Statutory Auditors supervised the effective application 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 In the Report on Operations, the Company highlighted the initiatives taken to contain the impact on the Company of the worldwide spread of the pandemic caused by the COVID-19 virus, as required by Consob Warning Notice no. 1/2021. The SABAF Group set up a dedicated task force to deal with this emergency situation and implemented mitigation actions to reduce the economic consequences while safeguarding the safety and health of workers. 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. In 2020, given the uncertainty that marked the first half of the year in particular, the Shareholders’ Meeting of 4 May 2020, in accordance with the proposal made by the Board of Directors, resolved to allocate the entire 2019 net profit to reserves. This proposal was made, on a prudential basis, in view of the uncertainties of the emergency period. However, the reassuring results at 30 June 2020 and the positive business trend in the following months subsequently allowed the distribution of a dividend of €0.35 per share (total dividends of approximately €3.9 million), approved by the shareholders’ meeting on 29 September 2020 and paid on 14 October 2020. On 23 March 2021, the Board of Directors decided to propose to the Shareholders’ Meeting that the Company’s 2020 profit be allocated as follows: • a dividend of €0.55 per share to be paid to shareholders as from 3 June 2021; • the remainder to the Extraordinary Reserve.
PROPOSAL TO THE SHAREHOLDERS’ MEETING The Board of Statutory Auditors expresses its favourable opinion for the approval of the Separate financial statements at 31 December 2020 and has no objections to make to the draft resolution presented by the Board of Directors as formulated in the Directors’ Report on Operations. Ospitaletto, 2 april 2021 The Board of Statutory Auditors Chairman Alessandra Tronconi Statutory Auditor Luisa Anselmi Statutory Auditor Mauro Vivenzi 221
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pursuant to Art. 123-ter of the T.U.F. and Art. 84-quater of the Issuers’ Regulations
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Section I - Remuneration policy 224 Section II – Remuneration paid 232
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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. With respect to the remuneration policy submitted to shareholders at the shareholders’ meeting of 4 May 2020, the following should be noted: • the adjustments required by the regulations and the recommendations of the Corporate Governance Code; • the specification of the characteristics of the long-term incentive (LTI) plans based on financial instruments (stock grant) and the introduction of a new stock grant plan, the approval of which is referred to the shareholders’ meeting of 6 May 2021, pursuant to Art. 114-bis of the T.U.F.. The characteristics of the plan are described in section 4 below under the heading “LONG-TERM VARIABLE COMPONENT”; • the elimination of attendance fees as an element of the fixed annual component of the remuneration reserved for the members of the Board of Directors and the members of the Committees within the Board of Directors.
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.
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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; • 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.
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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; • 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
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 technical-productive and/or socio-environmental nature; (ii) subject, in part, to adequate retention and deferral mechanisms.
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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 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. 225
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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 (Internal Control and Risk 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
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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. In particular, in compliance with the Shareholders’ Meeting authorising resolution, pursuant to Art. 114-bis T.U.F., at the suggestion of the Remuneration and Nomination Committee, and after obtaining the opinion of the Board of Statutory Auditors, the Board of Directors will determine the regulation of a long-term share-based incentive plan (stock grants) related to performance targets for the three-year period 2021 to 2023. 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 based on performance targets for the three-year period 2021 to 2023, measured year by year, 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. 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
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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 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 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.
ANNUAL MBO
STOCK GRANTS PLAN
RELATED TO THE BUDGET FOR THE YEAR
RELATED TO THE BUSINESS PLAN
BENEFICIARES
BENEFICIARES
• EXECUTIVE DIRECTORS (EXCLUDING THE CHAIRMAN)
• CHIEF EXECUTIVE OFFICER
• EXECUTIVES WITH STRATEGIC RESPONSIBILITIES
• CFO
• OTHER MANAGERS PROPOSED BY THE CHIEF EXECUTIVE OFFICIER
• 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: (i) in case of removal from the position of Chief Executive Officer, not for just cause, prior to the approval of the financial statements for the year 228
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
2020; (ii) in case of failure to re-appoint as Chief Executive Officer for the following period; (iii) 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 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
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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-of-employment allowance due to the failure to achieve, within pre-defined minimum thresholds, the objectives of the business plan. 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 post-contractual 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
REPORT ON REMUNERATION
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 noncompetition agreement is protected by a fixed penalty for breach, without prejudice to the possibility of compensation 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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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 achievement of objectives, the overall remuneration is structured as follows:
i. the gross annual fixed component1 of 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.
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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 Collective National Contract for Industrial Managers. In this regard, 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 long-term 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..
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. 231
SABAF . 2020 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 (2020), 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 2020
The remuneration paid to directors for 2020 consisted of the following components: • an annual fixed remuneration, approved by the Shareholders’ meeting of 8 May 2018 that the Board of Directors decided to divide, in compliance with the maximum limit of €400,000.00 established by the Shareholders’ Meeting, as follows: - €20,000 assigned to each director without distinction; - €10,000 assigned to each member of the committees set up within the Board itself (Internal Control and Risk Committee and Remuneration and Nomination Committee); - additional remuneration of €160,000 divided among the Chairman of the Board of Directors, Vice Chairman and Chief Executive Officer as detailed in the table below; • an attendance fee of €1,000, due to non-executive directors only, for every occasion on which they attend Board of Directors’ meetings and the meetings of committees formed within the Board. 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 (excluding the Chairman), the following is pointed out: a. In relation to the annual variable incentive plan established for 2019, remuneration of €60,892 accrued in the previous financial year (and disbursed in 2020). Specifically: - the Chief Executive Officer, Pietro Iotti, accrued variable remuneration of €45,000 for the partial achievement of the objectives of the 2019 MBO plan. The business objective, represented by the budget EBIT, was not achieved and no remuneration accrued; the individual objectives were achieved by 75%; - the Director, Gianluca Beschi, accrued variable remuneration of €15,892 for the partial achievement of the objectives of the 2019 MBO plan. The business objective, represented by the budget EBIT, was not achieved and no remuneration accrued; the individual objectives were achieved by 75%. b. With reference to the annual variable incentive plan established for 2020, remuneration of €94,721 accrued in 2020. 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 232
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%. In implementation of the Policy in 2018, Sabaf introduced a stock grant plan aimed at the Group’s executive directors and executives who hold or will hold key positions in the implementation of the Business Plan. Beneficiaries already identified in the Plan include the Chief Executive Officer and Director Gianluca Beschi. The assignment of shares is subject to the achievement of company objectives (based on ROI, TSR and EBITDA) and individual objectives over the three-year period 2018 to 2020, 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 8 May 2018. The proportion of fixed and variable remuneration paid during the 2020 financial year within the total remuneration of executive directors is as follows: • Chief Executive Officer Pietro Iotti: fixed remuneration 91%, variable remuneration 9%; • Director Gianluca Beschi: fixed remuneration 95%, variable remuneration 5%. For details of the elements included in this calculation, please refer to the Tables contained in the second part of this Report.
Remuneration of Statutory Auditors for 2020
The remuneration paid to the Statutory Auditors for 2020 consists of a fixed remuneration determined by the Shareholders’ Meeting of 8 May 2018, amounting to a total of €70,000.
The remuneration of other executives with strategic responsibilities for 2020 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: • With reference to the variable incentive plan (MBO) of 2019, during 2020, remuneration totalling €50,890 was paid for the partial achievement of the objectives of the 2019 MBO plan. The business objective, represented by the budget EBIT, was not achieved and no remuneration accrued; the individual objectives were achieved on average by 82%. • With reference to the variable incentive plan (MBO) for 2020, remuneration totalling €76,359 accrued for the partial achievement of the objectives of the 2020 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 100% range of the budget accruing remuneration
SABAF . 2020 ANNUAL REPORT
equal to 100% of the total; individual objectives were achieved on average by 80%. • In compliance with point no. 3 of the remuneration policy, the Board of Directors, at the suggestion of the Remuneration Committee, during 2020 resolved to award a one-off bonus to Executives with strategic responsibilities amounting to €60,000 for the achievement, in 2019, of important commercial agreements. Remuneration totalling €94,500 was also disbursed by subsidiaries. The three executives with strategic responsibilities are among the Beneficiaries of the stock grant plan, approved in 2018, in implementation of the Remuneration Policy. For further details,
REPORT ON REMUNERATION
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 8 May 2018. The proportion of fixed and variable remuneration paid during the 2020 financial year within the total remuneration is as follows; fixed remuneration 83%, variable remuneration 17%. For details of the elements included in this calculation, please refer to the Tables contained in the second part of this Report.
Comparison with previous years 2020
2019
Change
% change
Chief Executive Officer Pietro Iotti Total remuneration (a)
488
457
31
+6.8%
Director Gianluca Beschi Total remuneration (b)
310
263
47
+17.9%
Executives with strategic responsibilities Total remuneration (c)
641
582
59
+10.1%
Sabaf Group turnover
184,906
155,923
28,983
+18.6%
Sabaf S.p.A. turnover
102,583
94,899
7,684
+8.1%
Sabaf Group EBITDA
37,097
27,033
10,064
+37.2%
Sabaf S.p.A. EBITDA
15,820
13,127
2,693
+20.5%
Sabaf Group EBIT
20,093
11,896
8,197
+68.9%
Sabaf S.p.A. EBIT
6,610
2,948
3,662
+124.2%
Sabaf Group Net profit
13,961
9,915
4,046
+40.8%
Sabaf S.p.A. Net profit
6,410
3,822
2,588
+67.7%
Average gross annual remuneration of employees
35.28
35.23
0.05
+0.1%
(amounts in €/000)
(excluding persons marked with a), b), and c) in this table)
2020 Shareholders’ voting
The Ordinary Shareholders’ Meeting, held on 4 May 2020, approved the second section of the Report on remuneration policy and remuneration paid for 2019, 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
2020
For
85.5%
Against
13.9%
Abstention
0.1%
Non-voters
0.5%
In considering and evaluating the updates and improvements made to this document, the voting results at the 2020 Shareholders’ Meeting were taken into account.
233
SABAF . 2020 ANNUAL REPORT
REPORT ON REMUNERATION
SECOND PART For a breakdown of the remuneration paid in 2020, 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 2020, 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 2020, 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 2020, 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 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.
234
“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. 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 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.
SABAF . 2020 ANNUAL REPORT
REPORT ON REMUNERATION
TAB. 1 - REMUNERATION PAID TO MEMBERS OF THE BOARD OF DIRECTORS AND BOARD OF STATUTORY AUDITORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES IN 2020 (figures in euro)
BOARD OF DIRECTORS
Name and surname
Giuseppe Saleri
Office
Period of office
Expiry of office
Chairman
1 Jan - 31 Dec 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
Profit sharing
Non-monetary benefits
Other remuneration
Total
Fair Value of equity remuneration
Allowance for end of office or termination of employment
0
0
0
0
160,000
0
0
0
0
0
0
0
0
0
0
0
0
0
0
160,000
0
0
33,000(a)
12,000(b)
0
0
0
15,000
60,000
0
0
0
0
0
0
0
5,000
5,000
0
0
33,000
12,000
0
0
0
20,000
65,000
0
0
434,929
0
0
Fixed remuneration
Remuneration for attendance at Committee meetings
160,000(a) 0
Variable remuneration (non equity) Bonus and other incentives
0 0
160,000
of which €20,000 as Director and €140,000 as Chairman
Nicla Picchi
Vice Chairman
1 Jan - 31 Dec 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
(c)
(a)
of which €20,000 as director, €10,000 as Vice Chairman and €3,000 as board meeting attendance fees (b) of which €10,000 as a member of the Internal Control and Risk Committee and €2,000 in Committee meeting attendance fees (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.
Pietro Iotti
Chief Executive Officer
1 Jan - 31 Dec 2020
Approval of 2020 financial statements 380,000(a)
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
45,000
0
9,929
0
53,000
0
0
0
0
0
53,000
0
0
433,000
0
45,000
0
9,929
0
487,929
0
0
of which €20,000 as director, €10,000 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 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
0
220,000(a)
0
15,892
0
5,182
0
241,074
0
0
69,000
0
0
0
0
0
69,000
0
0
289,000
0
15,892
0
5,182
0
310,074
0
0
23,000(a)
11,000(b)
0
0
0
0
34,000
0
0
0
0
0
0
0
0
0
0
0
23,000
11,000
0
0
0
0
34,000
0
0
of which €20,000 as director and €200,000 as CFO
Carlo Scarpa
Director
1 Jan - 31 Dec 2020
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
Approval of 2020 financial statements
(a)
of which €20,000 as director and €3,000 as BoD meeting attendance fees (b) of which €10,000 as a member of the Internal Control and Risk Committee and €1,000 in Committee meeting attendance fees
235
SABAF . 2020 ANNUAL REPORT
REPORT ON REMUNERATION
(figures in euro)
BOARD OF DIRECTORS
Name and surname
Alessandro Potestà (C)
Office
Director
Period of office
Expiry of office
1 Jan - 31 Dec 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (I) Remuneration from subsidiaries and affiliates (III) Total
Fixed remuneration
Remuneration for attendance at Committee meetings
21,000(a)
10,000(b)
Variable remuneration (non equity) Bonus and other incentives
Profit sharing
0
0
Non-monetary benefits
Other remuneration
0
0
Total
Fair Value of equity remuneration
Allowance for end of office or termination of employment
31,000
0
0
0
0
0
0
0
0
0
0
0
21,000
10,000
0
0
0
0
31,000
0
0
(a)
of which €20,000 as director and €1,000 as BoD meeting attendance fees €10,000 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)
Claudio Bulgarelli
Director
1 Jan - 31 Dec 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a)
22,000(a)
0
0
0
0
0
22,000
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)
23,000(b)
0
0
0
0
55,000
0
0
of which €20,000 as director and €2,000 as BoD meeting attendance fees
Daniela Toscani
Director
1 Jan - 31 Dec 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (a) (b)
Director
1 Jan - 31 Dec 2020
0
0
0
0
0
0
0
0
0
0
0
55,000
0
0
0
0
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total (b)
0 23,000
of which €20,000 as director and €2,000 as BoD meeting attendance fees of which €10,000 as a member of the Internal Control and Risk Committee, €10,000 as a member of the Remuneration and Nomination Committee and €3,000 as Committee meeting attendance fees
Stefania Triva
(a)
0 22,000
of which €20,000 as director and €2,000 as BoD meeting attendance fees €10,000 as a member of the Remuneration and Nomination Committee
236
22,000(a)
10,000(b)
0
0
0
0
32,000
0
0
0
0
0
0
0
0
0
22,000
10,000
0
0
0
0
32,000
0
0
SABAF . 2020 ANNUAL REPORT
REPORT ON REMUNERATION
(figures in euro)
BOARD OF STATUTORY AUDITORS
Name and surname
Alessandra Tronconi
Office
Chairman
Period of office
Expiry of office
1 Jan - 31 Dec 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A.
Fixed remuneration
Remuneration for attendance at Committee meetings
30,000
0
Variable remuneration (non equity) Bonus and other incentives
Profit sharing
0
0
Non-monetary benefits
Other remuneration
0
0
Total
Fair Value of equity remuneration
Allowance for end of office or termination of employment
30,000
0
0
(II) Remuneration from subsidiaries and affiliates
9,000
0
0
0
0
0
9,000
0
0
(III) Total
39,000
0
0
0
0
0
39,000
0
0
20,000
0
0
0
0
0
20,000
0
0
Luisa Anselmi
Standing Auditor
1 Jan - 31 Dec 2020
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
Mauro Vivenzi
Standing Auditor
1 Jan - 31 Dec 2020
0
0
0
0
0
0
0
0
0
20,000
0
0
0
0
0
20,000
0
0
20,000
0
0
0
0
0
20,000
0
0
Approval of 2020 financial statements
(I) Remuneration at Sabaf S.p.A. (II) Remuneration from subsidiaries and affiliates (III) Total
0
0
0
0
0
0
0
0
0
20,000
0
0
0
0
0
20,000
0
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
94,500
(III) Total
515,243
Name and surname
Office
Other executives with strategic responsibilities (3)
Period of office
Expiry of office
1 Jan - 31 Dec 2020
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
Bonus and other incentives
Profit sharing
0
110,890
0
14,971
0
546,604
0
0
0
0
0
0
0
94,500
0
0
0
110,890
0
14,971
0
641,104
0
0
remuneration including €44,613 related to Remuneration for non-competition agreement
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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
Vested during financial year and not assigned
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
2018 Stock Grant Plan (May 2018)
110,023 rights corresponding to 110,023 shares
3 years
0
-
-
-
-
0
2018 Stock Grant Plan (May 2018)
66,014 rights corresponding to 66,014 shares
3 years
0
-
-
-
-
2018 Stock Grant Plan (May 2018)
106,092 rights corresponding to 106,092 shares
3 years
0
-
-
-
-
Vested during financial year and assigned
Number Number and Market price on and type of type of financial assignment financial ininstruments struments
Pertaining to the financial year
Value at vesting date
Fair Value
0
-
-
0
0
-
-
0
0
-
-
-
-
Chief Executive Officer
Remuneration at Sabaf S.p.A.
Gianluca Beschi
Plan
Assigned in previous financial years not vested during the financial year
Director
Remuneration at Sabaf S.p.A.
Other executives with strategic responsibilities (3) Remuneration at Sabaf S.p.A.
TOTAL
238
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SABAF . 2020 ANNUAL REPORT
REPORT ON REMUNERATION
TAB. 3 - MONETARY INCENTIVE PLANS FOR MEMBERS OF THE BOARD OF DIRECTORS AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES (figures in euro) Bonus for the year Name and surname
Pietro Iotti
Office
Plan
Payable / Paid
Deferred
Bonus of previous years Deferment period
No longer payable
Payable / Paid
Still deferred
Other bonuses
0
45,000
0
0
0
0
0
0
0
15,891
0
0
0
0
0
0
0
50,890
0
0
0
0
0
0
0
111,781
0
0
Chief Executive Officer
Remuneration at Sabaf S.p.A.
2019 MBO Plan (March 2020)
0
0
Remuneration at Sabaf S.p.A.
2020 MBO Plan (March 2021)
0
70,000
Remuneration at Sabaf S.p.A.
2019 MBO Plan (March 2020)
0
0
Remuneration at Sabaf S.p.A.
2020 MBO Plan (March 2021)
0
24,721
Remuneration at Sabaf S.p.A.
2019 MBO Plan (March 2020)
0
0
Remuneration at Sabaf S.p.A.
2020 MBO Plan (March 2021)
0
76,359
0
171,080
Gianluca Beschi
March 2021
Executive Director
March 2021
Other executives with strategic responsibilities (3)
Total
March 2021
TAB. 4 - SHAREHOLDINGS OF MEMBERS OF THE ADMINISTRATION AND CONTROL BODIES AND OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES Surname and Name
Saleri Giuseppe(a)
Iotti Pietro
Type of Ownership
Investee Company
No. shares held at 31 Dec 2019
No. shares acquired
No. shares sold
No. shares held at 31 Dec 2020
Chairman
Indirect through the company Giuseppe Saleri S.a.p.A.
Sabaf S.p.A.
2,535,644
N/A
N/A
-
Indirect through the company Petrae S.r.l.
Sabaf S.p.A.
-
122,300
-
122,300
Direct
Sabaf S.p.A.
17,700
6,000
-
23,700
Indirect through spouse
Sabaf S.p.A.
2,419
-
-
2,419
Direct
Sabaf S.p.A.
498
-
-
498
Indirect through the company Fintel s.r.l.
Sabaf S.p.A.
850,000
18,827
-
868,827
Direct
Sabaf S.p.A.
1,567
-
-
1,567
Indirect through spouse
Sabaf S.p.A.
600
-
-
600
Chief Executive Officer
Toscani Daniela
Director
Bulgarelli Claudio
Director
Vivenzi Mauro Giorgio
(a)
Office
Statutory Auditor
As at 31 December 2020, Giuseppe Saleri no longer exercises control over the Company Giuseppe Saleri S.a.p.A.
239
CONCEPT AND GRAPHIC DESIGN: ALL CREATIVE - ALLCREATIVE.AGENCY
PRINT: K.L.Z. 2000 SRL
Printed on paper Fedrigoni Sirio Pearl e Favini Biancoflash Master
C O P Y R I G H T 2 0 2 1 - S A B A F S . P. A . - A L L R I G H T S R E S E R V E D
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