Environmental & Social Information • Feb 25, 2020
Environmental & Social Information
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Observations for a better world
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OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
| SUSTAINABLE BUSINESS PRACTICES | |
|---|---|
| Reporting principles, policies, | |
| and due diligence | 48 |
| Environment | 49 |
| Personnel | 55 |
| Occupational health and safety | 58 |
| Ethics and compliance | 59 |
| Responsible supply chains | 61 |
| UN global compact | 63 |
| Signatures | 64 |
| Independent assurance report | 65 |
| GRI content index | 67 |
| Corporate Governance Statement | 75 |
|---|---|
| Risk management | 84 |
| Board of Directors | 88 |
| Management Group | 90 |
| Information for shareholders | 92 |
| FINANCIALS | |
|---|---|
| Key figures | 94 |
| Board of Directors' Report | 95 |
| Financial statements 2019 | 109 |
| Auditor's report | 173 |
| Contacts | 177 |
About this report: In its annual report, Vaisala applies the Integrated Reporting Framework, as defined by the International Integrated Reporting Council (IIRC). The primary purpose of an Integrated Report is to describe how a company creates value over time. We started our work towards this goal in 2016: this Vaisala annual report is the fourth one to apply the international
operations through exploring the different types of value Vaisala creates for its stakeholders. Thus, this comprehensive report includes information about Vaisala's sustainability, governance and financials, as well as value creation. Vaisala has published standalone sustainability reports since 2008.
This report caters also to those who gather data from GRI (Global Reporting Initiative) reports. You can find the GRI
content index at the end of the Sustainable business practices section together with an Independent assurance report. Disclosure of non-financial information in accordance with Finnish Accounting Act chapter 3 a is presented in the Sustainable business practices section as well as in the Business model and Dashboard chapters included in the Creating value section and the Risk management chapter included in the Governance section.
Read more about this topic
Vaisala is a global leader in weather, environmental, and industrial measurement. Building on over 80 years of experience, Vaisala provides its customers with reliable measurement solutions and services for better decision-making, safety, and efficiency. Vaisala is headquartered in Finland, and Vaisala's A shares are listed on the Nasdaq Helsinki stock exchange.
41.1 operating result MEUR
30+ offices
Weather and Environment business area serves selected weather-dependent markets where accurate, real-time, uninterrupted, and reliable weather data is essential to run efficient operations.
Main markets: meteorology, aviation, ground transportation, and renewable energy
Industrial Measurements business area serves a wide range of industrial customers. It offers a broad range of accurate and reliable measurement instruments that help our customers optimize their processes, improve efficiency, minimize energy consumption, and ensure the high quality of their end products.
Main markets: high-end humidity and carbon dioxide measurements, continuous monitoring systems, power, and high-end liquid measurements
NET SALES BY BUSINESS AREA 2019
65% Weather and Environment business area 261.3 MEUR
35% Industrial Measurements business area 142.3 MEUR
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OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Chairman and CEO's message
A year of sustainable innovations and growth
Creating observations for a better world through science-based and sustainable innovations has always been at the core of Vaisala. In 2019, we continued our work addressing the most pressing environmental and societal challenges of our time.
Climate change is undeniably a key global challenge today, making Vaisala's science-based innovations ever more relevant. Operating since 1936, we are committed to creating solutions that help tackle many of the most crucial challenges of our time. We do this by providing reliable, accurate, and high-quality means to observe and act on weather and environmental phenomena and their impacts as well as developing more sustainable industrial processes.
Visible outcomes of the changing climate are the increasing extreme weather events, Hurricane Dorian being one key example from the past year. In 2016, the Bahamas decided to invest in a new meteorology network by Vaisala to improve its weather forecasting capabilities. As Dorian struck in September 2019, Vaisala's solutions aided the island nation in sending out accurate and timely alerts. Thanks to these alerts, thousands of people were able to seek shelter in time.
Vaisala has similar capacity building projects ongoing in Vietnam and soon also in Ethiopia. In October, we signed a new and important contract for a project that will bring better weather services to the
CEO's message
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Ethiopian people and accelerate local economic growth in important weather-sensitive sectors. The project is estimated to start in 2020 and run for two years.
Through our work, we address also several other global megatrends, such as urbanization, digitalization, well-being and health, as well as resource efficiency and circular economy. Here our industrial measurement business plays a key role. With our industrial solutions, customers gain better visibility into their processes and thus are able to save energy and natural resources, improve quality and productivity, and reduce waste.
In addition to our commitment to the UN Global Compact, we have identified and committed ourselves to the UN Sustainable Development Goals that hold the highest relevancy for Vaisala. Our business is entwined with most of the goals, as the contribution of our products and solutions reaches from incubators at hospitals to optimizing processes, measuring air quality, and enabling safe transportation on the ground, at sea, and in the air. Going forward, we want to strengthen this linkage and work actively to reach the goals. Furthermore, our customers can develop the sustainability of their own operations with the help of our products.
The UN Sustainable Development Goals are also important in our own operations and business practices, where we aim to adhere to the highest standards of sustainability. We monitor and address topics ranging from energy efficiency to the environmental footprint of our products. We are also committed to respecting human rights, promoting diversity and equality, ensuring occupational health and safety, and preventing corruption, both in our own operations and in our global partner network.
2019 was a great year for Vaisala. All business areas and geographic markets performed well and many also above our expectations.
In addition to good organic growth, we saw the first positive results from the acquisitions made in late 2018. Both the French
With the increasing requirements for transparency and thorough understanding of the world's pressing phenomena, it is becoming more important than ever to base decisions of verifiable, comparable, and accurate data.
Leosphere, supplying remote wind sensing lidar instruments, and the Finnish K-Patents, a leader in liquid measurements, contributed to our growth and opened up many new business opportunities.
Vaisala has been a pioneer in science-based innovations throughout its history, and we continued on this path in 2019, bringing new products to the market. A key highlight of the year came in January, as we launched the world's first in situ 3-in-1 biogas measurement instrument for measuring methane, carbon dioxide, and humidity in demanding environments. The launch marked a new market entry for us and expands our expertise into the field of biogas measurements.
In 2019, we also stepped up our efforts in the digital sphere. In August, we added an important piece to our digital puzzle by acquiring the professional business-to-business weather services from the Finnish weather forecast services company Foreca. Going forward, we will focus on developing digital solutions for transportation, renewable energy, lightning, and data-driven operations, supporting customers in making reliable decisions in weather-critical operations.
To ensure the best possible environment for state-of-the-art research and innovation, we have invested into building new premises in connection with our head office in Vantaa, Finland.
During the year, the construction work of our new R&D building proceeded well, and we look forward to finalizing the new premises towards the end of 2020.
Throughout our history, Vaisala has been a key link in the chain for a well-functioning and safe society. With the increasing requirements for transparency and thorough understanding of the world's pressing phenomena, it is becoming more important than ever to base decisions on verifiable, comparable, and accurate data.
At Vaisala, we aim to build upon our position as the global market leader providing the world's most accurate and reliable measurements. We are committed to keeping up our high investments into research and innovation and working actively with our partners and the scientific community to find new solutions to make our planet safe and sustainable for generations to come.
We would like to sincerely thank our employees, customers, partners, and other stakeholders for their valuable contribution and close collaboration in 2019. Already for 83 years, Vaisala has been working towards its mission to create observations for a better world, and we look forward to continuing this journey together with you in the year 2020 and beyond.
Raimo Voipio Chairman of the Board of Directors
Kjell Forsén President and CEO
Q1
We launched a groundbreaking solution for the biogas industry. Vaisala MGP261 is the world's first instrument that measures methane, carbon dioxide, and humidity inside biogas process line.
Read more on page 39 and vaisala.com/annualreport
Vaisala's viewLinc monitoring system received the international Quality Innovation Award for its usability and reliable system design which utilizes the latest technologies in an innovative way.
Read more vaisala.com/annualreport
We started the deliveries of 13 next-generation Vaisala AUTOSONDE® AS41 automatic sounding systems to the Australian Bureau of Meteorology, which is the world's largest single order of such systems. Later in the year, we received an additional order of 12 more systems.
Read more vaisala.com/annualreport
Read more on page 32 and vaisala.com/annualreport
Q2
We merited five of our suppliers with Supplier Awards in six
categories. The awards were given out in the two-day Supplier Day 2019 event. The awarded suppliers were DHL Express Finland, Enics, PakkausÖhman, Plastoco, and Scanfil.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Highlights of the year
We acquired the professional B2B weather services from the Finnish weather forecast services company Foreca Oy. The business was transferred to the renewed Vaisala Digital business line, serving weather-critical professional customers in transportation, energy, and industry segments.
Read more on page 38 and vaisala.com/annualreport
September 28, 2019 marked the 130th birthday of Vaisala's founder Professor Vilho Väisälä. To honor the day, we donated 130 Heureka Science Centre tickets to disadvantaged children in order to inspire curious youngsters into the field of science.
Read more on page 44 and vaisala.com/annualreport
We informed that Vaisala will modernize Ethiopia's weather and climate observation and forecasting systems, helping Ethiopia improve its weather services and adapt to the impacts of climate change. The value of the project is 13 million euros.
Read more vaisala.com/annualreport
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Strategy
Our customer value is built on reliability, science-based technology leadership, industry expertise, engaged and talented employees, as well as strong partnerships. We drive excellence also in the future by focusing on great leadership, continuous learning, and Lean thinking.
*Our 300 product families include approximately 9,000 products.
• Asset-light business model • Capital expenditure EUR 27 million
Material costs EUR 111.6 million
frequency technologies
Reliable, high-quality measurements and observations for decisionmaking, safety, and efficiency
Global technology and market leader in weather and industrial measurements
Excellence in high-mix, low-volume businesses
Solid dividend payer
Wide customer base covering public and private sector customers
Meteorology Aviation Ground transportation Renewable energy
High-end humidity and high-end carbon dioxide Continuous monitoring systems Power High-end liquid measurements
Products: 69% of total sales Projects: 18% of total sales Services: 13% of total sales
Net sales MEUR 403.6 EBIT MEUR 41.1
EMEA 33% AMERICAS 37%
Customers in over 150 countries
APAC 30%
We create value in continuous interaction with our stakeholders. The focus of our value creation is to provide our customers with solutions that help them make reliable decisions and improve their productivity and processes in the areas of weather and environment as well as industrial measurements. This way we are also able to have an impact on current challenges, related to different megatrends, and contribute to the United Nations' Sustainable Development Goals by increasing awareness, resource efficiency, and safety in societies.
| Our fundamentals | Topic | Performance 2019 | Target |
|---|---|---|---|
| Reliability | On-time delivery accuracy* | 94.8% (94.5%) | 96% |
| Vaisala Production System Partnerships |
Product and delivery nonconformity rate | 1.7% (1.2%) | Continuous reduction |
| Engaged and talented | Employee engagement index | 4.12/5 (4.05/5) | > 4.00/5 |
| people | Learning index | 3.84/5 (3.84/5) | > 4.00/5 |
| Science-based technology leadership Application expertise |
R&D investments, % of net sales | 13.1% (13.0%) | Over 10% of net sales |
| Net sales growth year-on-year | 16% (5%) | > 5% growth year-on-year | |
| Strong financial position | EBIT % of net sales | 10.2% (11.1%) | > 12% |
| Return on equity (ROE) | 17.7% (16.0%) | ||
| Earnings per share (EPS), euros | 0.94 (0.82) | ||
| Greenhouse gas emissions (Scope 1–3) in relation to net sales | 47.1 tonnes CO2e/MEUR (53.2 tonnes CO2e/MEUR) | Continuous reduction | |
| Carbon footprint reduction, Scope 2 | -90% from 2014 baseline (-90%) | > 90% by 2020 | |
| Renewable energy of group consumption | 93% (94%) | 100% by 2020 | |
| Sustainability | Waste recycling rate | 53% (59%) | Continuous improvement |
| Total recordable injuries rate (TRI) | 2.6 injuries per million working hours (3.2) | Continuous reduction | |
| Suppliers scored for ESG metrics, % of spend | 82% (93%) | Continuous improvement |
* Does not include Leosphere, acquired in the fall of 2018.
In 2019, we identified the most relevant UN Sustainable Development Goals for Vaisala. Solutions that are beneficial for society and the environment have always been at the core of our business. By integrating the goals to our strategy work, we can better assess our impacts on sustainable development and get inspiration for developing new business and sustainable business practices.
Weather and Environment
| UN Sustainable | |
|---|---|
| Development Goal (SDG) |
The most relevant UN SDG targets for Vaisala |
Vaisala's solutions | Read more |
|---|---|---|---|
| 13.1 Strengthen resilience and adaptive capacity to climate-related hazards and natural disasters in all countries 13.3 Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning |
Reliable weather measurements Weather infrastructure development/capacity building projects Measuring hurricanes with dropsondes |
Megatrends: Climate change Value for society and environment: Better informed societies, Safety |
|
| 7.2 By 2030, increase substantially the share of renewable energy in the global energy mix 7.3 By 2030, double the global rate of improvement in energy efficiency |
Optimizing wind and solar power production |
Megatrends: Renewable energy, Smart energy production and utilization Value for customers: Reliable decisions |
|
| 11.2 By 2030, provide access to safe, affordable, accessible, and sustainable transport systems for all 11.6 By 2030, reduce the adverse per capita environmental impact of cities, including by paying special attention to air quality |
Improving safety of transport systems Air quality measurement networks |
Megatrends: Resource efficiency and circular economy, Urbanization, Future of mobility, Digitalization Value for customers: Quality Value for society and environment |
| UN Sustainable Development Goal (SDG) |
The most relevant UN SDG targets for Vaisala |
Vaisala's solutions | Read more |
|---|---|---|---|
| 9.4 By 2030, upgrade infrastructure and retrofit industries to make them sustainable, with increased resource-use efficiency and greater adoption of clean and environmentally sound technologies and industrial processes |
Improving resource efficiency with indus trial measurement solutions |
Megatrends: Climate change, Resource efficiency and circular economy Value for customers: Reliable decisions, Productivity Value for society and environ ment: Resource efficiency |
|
| 7.2 By 2030, increase substantially the share of renewable energy in the global energy mix 7.3 By 2030, double the global rate of improvement in energy efficiency |
Improving energy efficiency in industrial processes Improving energy efficiency in buildings by optimizing air conditioning Biogas process optimization |
Megatrends: Resource effi ciency and circular economy, Renewable energy, Smart ener gy production and utilization, Urbanization, Digitalization Value for customers: Reliable decisions, Productivity Value for society and environment |
|
| 3.8 Achieve universal health coverage, including financial risk protection, access to quality essential health-care services, and access to safe, effective, quality, and affordable essential medicines and vaccines for all |
Monitoring of conditions in medicine manufacturing and supply chains Monitoring of condi tions in hospitals and laboratories |
Megatrends: Well-being and health, Digitalization Value for customers: Reliable decisions Value for society and environment: Better-informed societies |
UN Sustainable Development Goals
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
| UN Sustainable Development Goal (SDG) |
The most relevant UN SDG targets for Vaisala |
Vaisala's business practices |
Indicators | Read more | UN Sustainable Development Goal (SDG) |
The most relevant UN SDG targets for Vaisala |
Vaisala's business practices |
Indicators | Read more |
|---|---|---|---|---|---|---|---|---|---|
| 12.2 By 2030, achieve the sustainable management and efficient use of natural resources 12.4 Achieve the environmentally sound management of chemicals and all wastes throughout their life cycle, in accordance with agreed international frameworks, and significantly reduce their release to air, water, and soil in order to minimize their adverse impacts on human health and the environment 12.5 By 2030, substantially reduce waste generation through prevention, reduction, recycling, and reuse |
Design for environment and long product life cycles Enabling the safe use and end-of-life processing of products Increasing the recycling rate |
% of employees working on ISO 14001 certified sites Recycling rate |
Environment: Environmen tal manage ment, Waste, Water con sumption, Products |
8.1 Sustain per capita economic growth in accordance with national circumstances 8.7 Take immediate and effective measures to eradicate forced labour, end modern slavery and human trafficking, and by 2025 end child labor in all its forms 8.8 Protect labour rights and promote safe and secure working environments for all workers |
Positive economic impact on communities through employment and taxes, both directly and through supply chain Upholding labor standards and occupational health and safety as well as managing human rights risks in our own operations and partner network |
Economic value generated and distributed % of suppliers rated with ESG metrics and suppliers that have signed the Supplier Code of Conduct Total Recordable Injuries rate (TRI), Proactive reports, Employees in H&S committees |
Value for society and environment: Economic value Ethics and compliance: Respect for human rights, Conflict minerals Responsible supply chains Occupational health and safety |
||
| 7.2 By 2030, increase substantially the share of renewable energy in the global energy mix 7.3 By 2030, double the global rate of improvement in energy efficiency |
Using renewable energy Improving energy efficiency in our facilities |
% of renewable electricity Energy use and energy intensity Scope 2 emissions |
Environment: Energy and emissions |
10.3 Ensure equal opportunity and reduce inequalities of outcome, including by eliminating discriminatory laws, policies, and practices and promoting appropriate legislation, policies, and action in this regard |
Promoting diversity and providing equal opportunities , for example, in recruitment and development opportunities |
Gender distribution (All/ Supervisor/ Management/ Board) Equality in remuneration |
Personnel: Diversity, equality, and inclusiveness |
||
| 13.3 Improve education, awareness-raising, and human and institutional capacity on climate change mitigation, adaptation, impact reduction, and early warning |
Decreasing indirect emissions for example from commuting Raising awareness of climate change and encouraging personnel's climate friendly choices |
Scope 3 emissions |
Environment: Environmen tal manage ment, Energy and emissions |
16.5 Substantially reduce corruption and bribery in all their forms |
Ensuring compliance with our International Anti Corruption Policy |
% of employees completed the Code of Conduct training |
Ethics and compliance: Prevention of corruption and bribery |
The global megatrends are transformational shifts that provide both a source for inspiration and opportunities for growth for Vaisala. We constantly assess markets and technologies to find new ways to engage with these megatrends. Together with our customers, we can create solutions to the pressing societal and environmental needs and challenges posed by these trends.
Climate change increases extreme weather, for example, and creates a chain of societal, environmental, and economic effects. The importance of reliable observations and forecasts to protecting lives and infrastructure is constantly increasing due to the impacts brought on by climate change. Mitigating climate change calls for more actions from the industry to optimize processes and decrease emissions.
Vaisala helps its customers to establish weather observation networks and build up capabilities that improve their capacity to predict extreme weather. Our aim is to help nations to become more resilient to climate change through state-of-the-art environmental observations, forecasting, and early warning systems. We also support the scientific community in its efforts to increase knowledge of climate change. Additionally, Vaisala's instruments can be used to measure soil carbon flux.
With Vaisala's measurement instruments, our industrial customers get better visibility into their processes. Measurement data enables them to make decisions that enhance the efficiency of production processes as well as decrease emissions and thus also the carbon footprint of end-products.
In a resource efficient business, less is more, as raw materials are used in an economical and sustainable manner. Circular economy focuses on the reuse and reintroduction of materials back into the value chain instead of turning them into waste.
Vaisala's measurement instruments help make production processes more efficient, improve productivity, save natural resources, and decrease loss of materials in industrial processes. Our instruments are durable, have long life cycles, and enable our customers to optimize their industrial processes, resource efficiency, and end-product quality.
With Vaisala's road weather solutions, road transportation customers can plan and allocate maintenance resources, such as maintenance routes and de-icing during winter, as well as optimize the need for road network pavement repairs.
Various forms of clean and renewable energy are becoming increasingly competitive and common as well as help mitigate climate change. The variable nature of renewable energy sources highlights the importance of site selection, real-time forecasting capabilities, and continuous monitoring as ways to ensure stable energy production.
Vaisala's measurement technologies help developers and owners to get more out of their wind power plants. With the help of reliable measurements, our customers can select the optimal site for their wind parks, for example, as well as monitor, predict, and plan operations. Vaisala's devices can also be utilized to optimize hydroelectric power plants.
Biogas provides significant opportunities. Vaisala's measurement solution for the biogas process optimization enables customers to generate more value from waste by decreasing production costs and increasing the efficiency of the biogas plant. Vaisala's products also support hydrogen economy, helping optimize the performance of fuel cells.
Megatrends
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Weather and Environment Industrial Measurements
The increased global demand for energy is an inevitable result of the expanding population and growth in digitalization and industrialization. To meet the future energy needs, production and consumption of energy need to become more efficient.
Vaisala's measurement technologies improve energy efficiency by optimizing the control of many industrial processes. We help customers in a multitude of energy intensive industries to improve their energy efficiency and operations. Additionally, for instance accurate dew point measurements optimize product quality efficiently in many drying processes. The energy efficiency of buildings can also be optimized with measurements of humidity, carbon dioxide, and temperature, as indoor air is adjusted as needed. In power production, Vaisala supports smart electricity grids with online condition monitoring of power transformers.
With Vaisala's devices and precision weather forecasts, energy demand can be assessed and anticipated, enabling further optimization of energy distribution and production.
As cities grow, the number of people subjected to the environmental conditions in urban areas continues to grow. On the other hand, the concentration of population, traffic, and industrial processes brings on changes in weather and environmental conditions, such as air quality. Air pollution is a threat to the health and well-being of people. The World Health Organization (WHO) evaluates that poor air quality causes over four million deaths annually (January 14, 2020).
Vaisala provides reliable instruments, systems, and digital solutions to measure air quality and road weather as well as urban weather and microclimates. This helps smart cities to overcome their challenges with urbanization and make informed decisions regarding sustainability, economic growth, safety, and well-being.
As industrial automation evolves, we offer diverse and advanced measurement technologies needed in buildings as well as industrial environments and processes that require precise and constant monitoring. Such environments include, for example, smart buildings, subway networks, industrial hubs, and large manufacturing facilities.
Automation, digitalization, and innovative energy sources will change traffic and the modes of transportation. Autonomous vehicles require ever more accurate environmental observations. Observations and analyses on the environment and road state enhance the safety and efficiency of traffic in different conditions. At the same time, the environmental impacts of fossil fuels have increased the need to find alternatives.
Vaisala provides solutions that combine measurement technologies, computer vision, forecasts, and open data, thus providing transportation authorities with relevant information. Based on that data, they can make informed decisions and ensure the safety and efficiency of road, rail, sea, and air transport. Also drones and autonomous vehicles, for example, depend on reliable weather data.
Vaisala's solutions also help to further develop and enhance the use of fuel cells, lithium batteries, and biogas as the energy source of vehicles.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Megatrends
Weather and Environment Industrial Measurements
People are increasingly interested in their health and conscious about their surrounding environments. Environmental monitoring of indoor and outdoor conditions helps to secure people's health and well-being. Authorities are also tightening requirements on the safety of medicines and pharmaceutical supply chains.
Vaisala's solutions help to ensure safe and healthy living, working, and production conditions inside buildings. Accurate and reliable monitoring of conditions is particularly important, for example, in laboratories and hospitals as well as in the refrigerators and incubators in these buildings. Our solutions also help to monitor the conditions in pharmaceutical manufacturing and supply chains. Vaisala's ambient air quality sensors monitor urban environments and provide data for better decision-making to improve health and quality of life.
Digitalization changes the behavior and operation of consumers and companies. The Internet of Things (IoT) makes it possible to connect devices through cloud services. Data can also be utilized and combined in new ways, enabling the creation of new kinds of digital services.
Vaisala's weather observation networks provide data for governmental organizations, research organizations, and the public. Our air quality and weather sensors can be connected seamlessly to the needs of smart cities, new data sources, and IoT technologies. Vaisala's computer vision application helps to optimize road maintenance and provides accurate data for autonomous vehicles.
In industrial measurements, we provide interfaces for our customers' systems, enabling reliable data transfer between systems and smooth process control. For example in the strictly regulated pharmaceutical industry, digital records and reporting provide substantial improvements for our customers' operations. Vaisala's instruments monitor also the conditions and energy efficiency of data centers that maintain our whole digital environment.
Vaisala provides its customers with a wide offering of products and services for better decision-making, increased productivity, and improved safety and quality.
We have decades of experience in manufacturing measurement instruments. Our instruments are used for measuring weather-related phenomena and environmental conditions in industrial processes.
Business areas
The Weather and Environment business area drives profitability and growth through expanding its product and decision support system offering.
Meteorology Aviation
Ground transportation
Renewable energy
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Partners
Renewable energy becomes more and more competitive, and it plays an even more important role in mitigating climate change.
Jarkko Sairanen EVP, Weather and Environment
| MEUR | Meteorology | Transportation | Renewable energy |
Ambient air quality |
|---|---|---|---|---|
| Market size* | 450–500 | 300–500 | 330–380 | 150–200 |
| Market growth p.a. ** | 0% | 0–5% | > 10% | > 5 % |
| Vaisala market share 2019 | High | High | Mid | Low |
| Market size total | ~1,300 MEUR / ~20% market share |
Market share indication: Low < 10%, Mid 10–25%, High > 25%
* Vaisala estimate of the size of the market that is addressable currently or with organic development of the business ** Market growth rounded to nearest of 0%, 5%, or 10%
Business areas
Vaisala's industry-leading weather observation technologies, instruments, and solutions lay the foundation for the Weather and Environment business area's strategy, enabling our customers to improve their ability to measure and forecast weather and weather phenomena.
In 2019, the implementation of the Weather and Environment business area's strategy progressed well. The order book increased significantly over the year, and the Transportation segment broke records with its largest orders of all time. In accordance with our strategy, we increased our investments in research and development compared to 2018. Large part of the growth came from remote wind sensing, as we acquired a wind lidar business at the end of 2018.
One of the main milestones of our research and development work was the announcement of an advanced X-band radar that we will bring to the market. It is ideal for airports, fills in gaps in weather radar networks located in difficult terrain, and improves reliable detection of snow, rain, and other weather events. Another milestone was the first deliveries of our Forward Scatter FD70 Series: these industry-leading instruments set new standards for measuring visibility, present weather, and precipitation. The feedback from our customers has been very positive.
In the future, weather will have an even bigger impact on the movement of people and goods. Based on this, we set a new direction for our data and decision support business and established Vaisala Digital in the fall of 2019. The mission and objective of the business is to complement Vaisala's ability to provide our customers' weather-critical operations with industryleading decision support systems, where the services work seamlessly with Vaisala's instruments. Vaisala Digital's new office in Finland is located in Keilaniemi, Espoo, which maximizes synergies with the strong software development community in the area.
To strengthen the development of Vaisala Digital, we acquired the business-to-business weather services from Foreca in August 2019. We foresee that these acquired skills bring significant opportunities to seamlessly provide authorities, contractors, and connected vehicle drivers with detailed insights of prevailing and forecasted road surface state along entire routes. Such data benefits also autonomous vehicles in the future.
In 2019, we significantly progressed with solutions driving sustainable development. These solutions help developing countries to better understand the risks of extreme weather events, adapt to them, and improve the weather forecasting and early warning preparedness. We have a unique and wide offering and capability to deliver system projects globally.
The project to further develop Ethiopia's weather infrastructure and weather forecasting capabilities, published in October 2019, is a great example of this. This project supports reliable observation and forecasting of local weather, thus minimizing the harms of extreme weather events and climate change. Further, this project improves the reliability of the weather-related early warning and forecasting services in Ethiopia.
Renewable energy becomes more and more competitive, and it plays an even more important role in mitigating climate change. Our remote wind sensing solutions help wind park developers and operators to optimize wind energy production. This is one of our
wide-range product areas that support our customers in mitigating climate change in different fields – in accordance with Vaisala's mission "Observations for a better world".
EVP, Weather and Environment
The Industrial Measurements business area has a strong position in its flagship markets in high-end humidity and high-end carbon dioxide measurement offering. Industrial Measurements accelerates growth through a product leadership strategy based on continuous investment in research and development according to customer needs. The strategic priority is to achieve a strong foothold in the growth markets: power, continuous monitoring systems, and liquid measurements. Additionally, we seek to accelerate growth by identifying new growth markets.
High-end humidity and high-end carbon dioxide measurements High-end liquid measurements
Continuous monitoring systems
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Business areas
Sampsa Lahtinen EVP, Industrial Measurements
| MEUR | Industrial instruments |
Continuous monitoring systems |
Power | Liquid measurements |
|---|---|---|---|---|
| Market size* | 600–700 | 150–200 | 200–250 | 80–100 |
| Market growth p.a.** | 5% | 10% | 10% | 5% |
| Vaisala market share 2019 | Mid | Mid | Low | Mid |
| Market size total | ~1,200 MEUR / ~10% market share |
Market share indication: Low < 10%, Mid 10–25%, High > 25%
* Vaisala estimate of the size of the market that is addressable currently or with organic development of the business ** Market growth rounded to nearest of 0%, 5%, or 10%
Business areas
Environmental awareness and action for a better tomorrow are the hottest topics on the table today and for a good reason. In many industries, measurements are an important tool to decrease emissions and waste as well as to save energy. When industrial processes and conditions are measured reliably, it provides support for their sustainable development and a way to conserve both energy and natural resources.
The Industrial Measurements business area provides customers with visibility into these processes. Accurate and reliable measurement data enables them to control their activities conveniently and efficiently. Process optimization can help to reduce waste, energy consumption, and emissions, save resources, and improve product quality, which creates us a clear role in fighting climate change and minimizing its effects, for example. Indeed, Vaisala's mission "Observations for a better world" is at the core of all our operations.
The past year was a significant and successful one for us in many ways. The Industrial Measurements business area was able to implement its growth strategy according to plan, and we have six years of continuous growth behind us.
We introduced several new products to both the flagship and
growth markets, such as the modular Indigo probes for demanding industrial applications. In addition, we introduced product innovations to life science applications, among others. We also launched our revolutionary measurement solution for optimizing biogas quality, which has been received well by our partners and customers. The product launches clearly demonstrate how our investment in research and product development yields results.
The year 2019 was also eventful in the area of liquid measurements. At the end of 2018, we expanded our expertise by acquiring K-Patents, a company specialized in liquid measurements. During the past year, the integration process progressed according to plan. The operations of K-Patents were fully transferred to Vaisala, and the acquired business became its own Liquid Measurements product area.
Our Life Cycle Services business was also refined in order to reflect the important role product lifecycle services, such as training, repair, and calibration services as well as field support, carry in our offering. We will continue to renew our service and product portfolio to provide our customers with better and more reliable measurements in the future as well.
Renewal and curiosity, Vaisala's cornerstones, are vital to us in Industrial Measurements, as our operating environment and the measurement challenges of our customers are constantly changing. We also need to evolve continuously to find new and better solutions to our customers' needs, and that's why we invest heavily in research and development. Curiosity is also a key prerequisite for identifying new measurement challenges.
The ongoing development of our operating environment is a positive challenge for us. It is becoming increasingly demanding for the manufacturers to produce new products amid ever tightening regulations. At the same time, the industrial operators strive to achieve better results in terms of both quality and productivity. This all requires better and more reliable measurements, which is the area where Vaisala excels. Thus, our position in the market is favorable, as the demands for measurements grow stricter.
In addition to the development of our operating environment, the main reasons behind our success are found within our organization.
Our product leadership strategy is clear and working, and our foundation is solid: we have great technology combined with the right know-how, skills, and the will to tackle new challenges.
EVP, Industrial Measurements
Americas region remained the biggest geographical area in net sales. Both orders received and net sales increased compared to the previous year. Vaisala signed an order for delivering weather observing systems to 31 airports in Argentina. Large projects in the Bahamas and in Alaska proceeded according to plan.
EMEA Both orders received and net sales were very strong. Net sales grew by 31% compared to the previous year. Vaisala signed a contract for delivering a road weather station network to Sweden. Vaisala acquired the B2B weather services from the Finnish weather services company Foreca in order to strengthen the digital offering for weather-critical operations. Shanghai a production facility 33% 1,344 13 of net sales employees offices APAC Orders received and net sales increased compared to the previous year. Vaisala opened a new factory for wind lidar manufacturing in Shanghai, China. Large projects in Vietnam and Australia proceeded according to plan. 30% 163 11 of net sales employees offices Helsinki (Vantaa) head office two production facilities Paris (Saclay) a production facility Boulder (Louisville, CO) a production facility
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
The foundation for Operations is the Vaisala Production System, which incorporates a Lean management system, systematic improvement, and standardized ways of working. In addition, Operations' strategy is guided by strategic choices: in-house manufacturing of key technologies and partnership-based sourcing.
The strategic development areas in 2019 were:
Our strategic objectives are to enable sales growth through an efficient supply chain and to be a great place to work.
Operations
In 2019, we drove our strategic development projects further. Overall, Operations' year was cost-efficient and our productivity improved excellently.
During the past year, our productivity increased by over six percentage points and exceeded our target of 64% in Finland. Our renewed practices played a part in this: we expanded our Lean program and renewed daily management practices.
Lean methods were applied in the collaboration between Operations and product development in order to speed up projects, gain more visibility into project status, and react faster to changes. In the Intelligent Factory project, we introduced automatic storage machines, a collaboration robot, and a software robot. We also explored the possibilities of utilizing artificial intelligence and automatic material transportation in Operations.
The integration of Leosphere and K-Patents, Vaisala's acquisitions from 2018, affected Operations in 2019. We transferred processes and best practices of the Vaisala Production System to Leosphere's factories in France and China, and K-Patents' operations moved to Vaisala's facilities.
The command of a large product portfolio has always been Vaisala's core strength. We manufacture products with short lead times and fast deliveries without compromising quality. The basis lies in Vaisala's threefold Production System:
1) Continuous and systematic improvement involves all personnel. 2) Standardized processes and ways of working ensure a smooth production flow.
3) Lean leadership spans the whole organization, which was one focus area in 2019.
The daily management practices were renewed: we standardized both team leaders' routines and the critical parameters to be reviewed regularly. Updated visual management methods afford us with better visibility into operations and enable timely action on deviations.
We continued training Lean and sharing good practices throughout Vaisala – also in teams where these methods were not used before. Trainings increased our problem-solving skills, and we also implemented cross-functional practices.
The renewals brought concrete benefits into our everyday work. They have enhanced clarity, made our operations faster, and improved the production flow even further. As a result, we saw the great increase in productivity.
Supplier relationships are exceedingly important for our delivery capability, as we always manufacture orders per need without endproduct storage.
Selected suppliers are involved in our product development processes. Suppliers have deep knowledge and expertise of their technology, helping us with superior product design. The product becomes easier to manufacture, more cost-efficient, more high-end, and more sustainable.
To honor these relationships, Vaisala organized its second Supplier Day event in the summer of 2019. The event was successful, generated inspiring discussions, enhanced collaboration, and provided our suppliers with a window to Vaisala's business. In these kinds of events, we can learn about our suppliers' capabilities and communicate the focus areas and future plans in Vaisala.
Global sustainability challenges call for increasingly sustainable and efficient operations. We have always invested in sustainability and productivity: we have, for example, a systematized process to ramp down products, generating less excess material. Our recycling rate has always been on a good level, and our business model ensures that we have small inventories and thus generate minimal waste.
In the new decade, the role of Lean in Vaisala will grow. We keep on focusing on continuous improvement and improving our problem-solving skills. We strengthened these capabilities in 2019, which gave us a great foundation to master complexity. The world is becoming ever more complex, and along with new products and acquisitions, also our business will change. With the Vaisala Production System, we can guarantee efficient, timely, and faultless customer deliveries now and in the future.
EVP, Operations
As our stakeholders influence the future of our business, we believe in a transparent and open relationship with them.
We identify and evaluate our stakeholders as part of our sustainability management and preparatory work for strategy reviews. The stakeholder analysis and materiality assessments are typically done at the beginning of the fourth quarter each year. The process can be an internally conducted update, or it can involve surveying or interviewing key stakeholders.
We determine the impact of various stakeholders on the company and analyze how our actions in turn affect them. We actively seek partnerships and joint opportunities with customers, suppliers, academia, research institutes, and other parties. We maintain a constant dialogue with our most important stakeholders.
The latest update to our stakeholder review and materiality assessment was done in the fall of 2019 based on feedback from our stakeholders. A more in-depth study was commissioned in 2016, when an external consultancy carried out a survey by interviewing investors, customers, employees, research partners, and Vaisala management. The results provided insight into our strategy, sustainability issue management, and reporting. Some of the key takeaways were how Vaisala should present value creation of its business to stakeholders, how this value creation should be discussed with them, and how it should be integrated into strategy, processes, and operations.
| Description | Main activities | |
|---|---|---|
| Customers | Thousands of private and public sector customers in more than 150 countries |
• Continuous customer relationship development and management, e.g. in online channels, meetings, events, and exhibitions |
| Distributors in more than 100 countries | • Ongoing online surveys on customer training and field services operations as well as on technical support and services |
|
| Employees | Over 1,800 professionals in more than 30 | • Learning and career development opportunities |
| locations in 18 countries | • Monitoring employee satisfaction and well-being |
|
| • Active internal communications |
||
| Society and environment |
Universities and research collaborators, meteorological institutes, manufacturing |
• Partnerships and collaboration with academic and scientific institutions |
| partners and suppliers, governments and | • Scholarships and donations |
|
| regulators, local communities, the media, the public, and the environment |
• Close cooperation with our global supply chain |
|
| • Sharing expertise with external organizations and decision-makers |
||
| • Raising awareness of environmental issues among experts and the public |
||
| • Press releases, activity in social media, and continuous improvement of media relations |
||
| Investors | Major shareholders include descendants of the founder Professor Vilho Väisälä, |
• Quarterly result presentations and Q&A for investors, analysts, and media |
| Novametor Oy, Finnish pension funds and | • Annual General Meeting |
|
| other financial institutions, the Finnish Academy of Science and Letters, and private |
• Stock exchange releases |
|
| households. Ownership outside Finland and | • Roadshows, investor and analyst meetings and |
|
| nominee registrations amounted to 17.53% of shares on December 31, 2019. |
conference calls |
Vaisala's technologies and solutions help safeguard life and property, while enabling critical decision-making that facilitates productive, efficient, and high-quality operations. The common denominator is that by measuring the environment or a process accurately, our customers can make more reliable decisions and ensure more efficient, safer, and more sustainable operations in any application area.
In 2019, we invested especially in the cyber security of our products to guarantee that our customers can trust the operation of our solutions also in the future. Likewise, we continue developing Vaisala's internal and external Information Security Management System going forward.
Vaisala's automated weather observing system
In March 2019, Vaisala signed a contract with the Argentine Air Navigation Service Provider (EANA), a state-owned company under Argentina's Ministry of Transport, for AviMet® Automated Weather Observing Systems (AWOS) including Runway Visual Range Systems to 31 airports across Argentina. The airports benefit
from the state-of-the-art weather observing system: based on accurate and reliable data, they are able to prepare properly for weather-related situations.
AviMet is an airport weather system that collects, processes, and visualizes meteorological data in compliance with the International
Read more: vaisala.com/annualreport
We enable our customers to make reliable decisions based on accurate environmental observations. For example, investments in wind energy production are based on reliable data on wind conditions and wind field behavior. Our remote wind sensing solutions as well as our data and expert services help customers to make profitable investments and decisions. With our solutions, they are able to select the best possible location for efficient wind energy production as well as measure and plan the operation and profitability of their wind park.
With Vaisala's measurement instruments, industrial customers gain better visibility into their processes. For example in many industrial drying applications, reliable humidity measurement data helps to adjust the drying conditions to be as energy efficient as possible and thus ensure end-product quality. With carbon dioxide measurements, the carbon dioxide levels of different applications – such as greenhouses, incubators, and indoor air – can be optimized as needed. For example, the combined effect of humidity, temperature, and carbon dioxide is a vital factor in the cell cultures in incubators.
The high quality and long life cycles of our products enable superior total cost of ownership. Vaisala's solutions improve the cost efficiency of our customers' operations as well as increase productivity. For instance, Vaisala's innovative instrument for the optimization of biogas process enables biogas plants to generate more value out of waste by measuring humidity, methane, and carbon dioxide directly from the production process. With the measurement data, customers can improve biogas quality as well as protect the CHP engine and the active carbon filters. This decreases the total costs, making biogas production more profitable.
Vaisala's history.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Value for customers
Vaisala's new automatic sounding systems enable flexible remote soundings, reducing costs. The systems make it possible to carry out automatic soundings for one month at a time, relieving resources for critical weather forecasts. Thanks to these sounding systems, national weather services can extend the coverage of their upper-air networks to geographically remote and hard-to-reach locations and thus develop a more comprehensive synoptic upper-air program. Vaisala's automatic sounding and other observational systems can be connected to Vaisala's Observation Network Manager NM10 tool: its automatic data collection and device management enhance productivity further.
High-quality products and services have always been at the core of Vaisala, but it is equally important to us that our customers can ensure the quality of their own end-products and operations with the help of our technologies and expertise. For example, Vaisala's state-ofthe-art weather observing systems provide reliable and comparable observations that likewise support reliable weather forecasts and climatology. Local air quality monitoring networks, on the other hand, help authorities to pinpoint and manage the problem areas, especially in cities, and make important decisions concerning air quality.
Accurate monitoring of industrial processes and test conditions helps to guarantee high-quality products. Since the expansion to the liquid measurement market, Vaisala has served industrial customers also in measuring liquid concentrations. For instance in food and beverage production as well as the pharmaceutical industry, concentrations need to be measured in every batch and in each factory to ensure even quality. The process refractometer, developed for industrial liquid measurements, provides our customers with accurate digital data on the liquid concentration and thus indicates end-product quality. Also the semiconductor industry uses Vaisala's refractometers to monitor chemical concentrations in silicon wafer production.
The measurement of refractive index (RI) is employed by a wide variety of industries to determine the level of dissolved solids in liquids. This is a particularly important measurement in developing and manufacturing active pharmaceutical ingredients (APIs). Constant measurements become ever more important when industries are moving from batch production to continuous manufacturing.
When the pharmaceutical manufacturers monitor RI, it provides them with a deeper understanding of the process conditions. Based on this information, they are able to reduce the time used in product development, increase production capacity and stability, improve product quality, and demonstrate compliance with regulations.
Vaisala offers versatile opportunities for talented and motivated professionals who value work with a purpose and the possibility to develop at work. Being at the forefront of solving the most difficult challenges of our time makes it exciting to work for Vaisala. We want to improve the well-being of our employees and make sure they have the chance to develop and continuously learn something new.
Vaisala's products and solutions have true positive influence on the environment, societies, businesses, and individuals. Our employees value the opportunity to have an impact on some of the most critical challenges today. Sustainable and ethical behavior is an integral part of the values of both Vaisala and our employees. For example, we invest significantly in R&D, which guarantees that we can continue to respond to the issues of our time also in the future as well as grow our business sustainably. This increases the meaningfulness of working in Vaisala.
Vaisala strives for annual growth. In addition to the R&D investments, we support this growth by recruiting especially professionals from the fields of software development as well as sales and marketing, for instance.
We focus on good and motivating leadership, and we support supervisors and experts systematically in developing their leadership skills by organizing different training programs and courses. Our annual employee survey was conducted in January 2020. The Leadership Index remained on a good level and was 4.13 on a scale of 1–5. The key strenghts of Vaisala managers are being fair and objective as well as having a positive attitude towards initiatives. The employee survey had a response rate of 87%, with answers from 1,610 employees.
At Vaisala, well-being at work is regarded as a whole, including the work community, leadership, the company, and the individuals themselves. Thus well-being consists of good leadership, motivating work community, balanced workload, meaningful work, as well as a safe working environment. As preventive measures, Vaisala supports wellbeing and energy at work by supporting sports and recovery, providing occupational healthcare, and preventing problems early on.
With these preventive measures, we aim to support our professionals in managing their work, ensuring recovery, and maintaining a healthy lifestyle. In Finland, we provide our personnel with sports and recreational clubs, well-being weeks, trainings on time management and recovery, as well as the opportunity to participate in a well-being analysis on stress and quality of sleep. In the United States, the Vaisala FIT program supports the wellbeing of employees.
Value for employees
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Employee well-being is measured regularly in Vaisala employee surveys. The results show that Vaisala employees find their work meaningful and they feel that they are appreciated. There is some room for development in ensuring that workloads are manageable. In 2019, Vaisala Well-Being Index score was 3.97 on a scale of 1–5 and increased a little compared to 2018.
Vaisala's competitive strength stems from our talented, motivated, and engaged personnel. Changes in the business environment, technologies, working methods, and tools require our employees to learn and take in new things continuously. Likewise, the acquisitions from 2018 as well as the acquisition of Foreca's B2B weather services in the fall of 2019 have enriched Vaisala with new competences and enable interpersonal learning. We support and encourage the whole personnel to actively develop and keep up their knowledge and expertise.
During 2019, we launched a new Learning Management System that supports our personnel in their development endeavors in multiple ways. In the new, user-friendly learning system, we have increased especially the amount of e-learning courses and the possibilities to document one's trainings.
Vaisala's Learning Landscape depicts principles and methods for learning. It is the foundation for all learning activities and initiatives in Vaisala. Through this framework, we emphasize every employee's responsibility for their own learning and development. Managers play an important role in enabling and supporting learning, and it is the responsibility of all managers to plan development and learning activities together with their teams. Developing expertise and knowledge is always in line with Vaisala's values as well as our business needs and objectives. Defining competence development needs is part of the annual People Forum process.
In 2019, Vaisala Learning Index, derived from the
personnel survey, was 3.84 on a scale of 1–5. Employee training costs amounted to EUR 1.89 million and averaged EUR 1,026 per employee in 2019.
In 2019, Vaisala's performance leadership model was renewed so that employees and supervisors are encouraged to discuss employees' performance and needs multiple times a year. The aim of these discussions is to enable employees to openly bring forth their wishes and needs regarding learning and development, for example. Also mutual feedback is encouraged. Yearround performance is evaluated and discussed in a more comprehensive development discussion, held once a year.
We bring value to societies through accurate and reliable environmental measurements as well as decision-making support for national and local authorities and businesses. This way we help societies become betterinformed, more resource efficient, and safer. In addition, we create value through significant investments in R&D and collaboration with the scientific community.
Value for society
and environment
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Vaisala renewed the Vaisala Digital unit and its focus areas, which included also the acquisition of the B2B weather services from the Finnish weather forecast services company Foreca Oy in the fall of 2019. Vaisala Digital offers scientifically and statistically validated observation, forecast, and intelligence information to enable better decisions and innovations on how we work in a changing environment. Vaisala Digital focuses initially on transportation, renewable energy, lightning, and data-driven operations. Accurate and reliable weather intelligence is an integral part of ensuring safe traffic during winter, for example.
In addition, Vaisala Digital develops industryleading digital solutions to support its customers to make best decisions in weather-critical operations, such as winter maintenance. In addition to the B2B weather services, Vaisala Digital builds up enhanced competences in machine learning and artificial intelligence, which gain ever more importance in the future of developing weather critical information. Already now Vaisala's RoadAI gathers data on the condition of the Finnish road network, installed for example in postal delivery as well as maintenance vehicles, or offers route optimization for gritters operating in snow belt countries.
Read more: vaisala.com/annualreport
Vaisala works together with nearly all meteorological institutes in the world, supporting them in providing accurate, real-time information and forecasts on weather all around the globe. The data provided by Vaisala's products is also used to increase weather awareness in different systems and services of society. We also collaborate with international funding agencies and weather experts to build capacity for weather observing networks and competence in developing economies. This way we help them to be better prepared for extreme weather and its impacts on different levels of society and economy.
Health services are also one of the foundation pillars of an informed society, and for example hospitals require accurate and reliable condition monitoring of their various activities. Vaisala's viewLinc Continuous Monitoring System monitors, among other spaces, blood and tissue banks that handle, store, and distribute human tissues. The critical parameters in blood and tissue banks require continuous monitoring, which ensures that these delicate and valuable materials are preserved and remain viable. Our solutions are also widely used to monitor the manufacture and supply chains of different medicines, thus ensuring their reliability and patient safety.
Vaisala's measurement technologies improve resource efficiency in various industrial production processes. Accurate measurements enable our customers to optimize their production as well as reduce their energy consumption and material loss. Additionally, digitalization plays a part in the resource efficiency of societies: for example, large data centers maintain the Internet, the global information highway, consuming a lot of energy. With the data from Vaisala's measurement instruments, the air conditioning in data centers can be optimized energy efficiently.
Vaisala's road weather stations and MD30 mobile detectors provide real-time data that, combined with road weather model, heat maps, and information systems, help to optimize road winter maintenance. Timely decisions on anti-icing, de-icing, and snow ploughing increase safety and resource efficiency as well as reduce the environmental effects of chemicals used in road maintenance. Computer vision solutions extend Vaisala's offering also to collecting and managing data on road
and environment
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
surface condition. Identifying damages on the road surface, combined with observed and modeled data on weather conditions, enable us to provide high-quality data services also to developers creating technologies for autonomous vehicles. When damages are identified, they can also be fixed in a timely manner, which increases safety and makes sure that resources are used efficiently.
Our technologies help our customers maintain safe operating environments in many parts of society. Extreme weather, such as hurricanes, can have devastating consequences on local economies and livelihoods. Vaisala's hurricane-tracking dropsondes can make in situ measurements inside a hurricane, providing essential information for forecasting its path and intensity. This advance information helps to safeguard both lives and infrastructure. Weather also affects traffic safety: the aviation industry is dependent on accurate weather information to minimize delays and ensure safe operations; road authorities can mitigate accidents with roadside weather warnings; railway operators benefit from wind warnings; and also the maritime sector depends on weather forecasts. Even missions to space require safe weather conditions during launches.
The essential institutions in society, such as hospitals and production facilities, consume electricity to guarantee safe operations. Our solutions make it easy to maintain and monitor the devices that are critical for power production and distribution, such as high voltage transformers. Continuous transformer condition monitoring supports smart power grids, where electricity consumption is controlled and adjusted as needed. With reliable online monitoring, operators can move from reactive operations to preventive maintenance, which enables them to detect faults in time and thus prevent power outages that would risk the safety and operation of society.
The biogas industry plays an important role in finding solutions for global waste management issues. Biogas production is an organic process which can be optimized to gain the best gas quality and profitability. Biogas is a flammable and corrosive gas, which has made the process optimization difficult. The three gases – humidity, methane, and carbon dioxide – have previously failed to be measured simultaneously directly from the production process. Especially the humidity levels of the gas have caused problems for the biogas plants.
To improve the biogas quality and production efficiency, Vaisala released the MGP261 measurement instrument in January 2019. It is the world's first instrument to measure the humidity, methane, and carbon dioxide optically and directly from the process. It is an ideal solution for biogas production processes, such as anaerobic digestion of waste from various sources, and utilization of landfill gas. The measurement data provided by the MGP261 can be used to optimize the production process, which leads to reduced costs and improved efficiency. MGP261 enables more value from waste.
Value for society and environment
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
| MEUR | 2019 | 2018 | 2017 | 2016 | 2015 |
|---|---|---|---|---|---|
| Net sales | 403.6 | 348.8 | 332.6 | 319.1 | 318.5 |
| Operating costs | -181.9 | -166.2 | -152.8 | -144.8 | -143.9 |
| Employee wages and benefits | -157.7 | -133.6 | -129.9 | -128.4 | -130.0 |
| Payments to providers of capital* | -21.1 | -40.2 | -17.8 | -17.1 | -16.4 |
| Payments to governments** | -8.4 | -8.4 | -8.7 | -7.9 | -7.2 |
| Community investments (donations) | -0.2 | -0.1 | -0.1 | -0.7 | -0.5 |
| Economic value retained | 34.2 | 0.3 | 23.2 | 20.2 | 20.5 |
* Includes dividends and interest of borrowings
** Includes income taxes
Vaisala has a positive impact on local communities through employment and taxes, both directly and through its supply chain. Responsible business practices and use of local suppliers create indirect benefits to local communities.
Vaisala's head office is located in Vantaa, Finland. Vaisala has established subsidiaries and branches in 16 countries. Our group structure is simple, and we have companies only in countries where we do business.
In addition to the tax data published in the financial statement, Vaisala provides here more information on its approach to tax, tax management, and global tax footprint.
Vaisala values are the basis of all our activities, both within Vaisala and with our partners and customers. We value integrity; we are honest, respectful, and reliable. We promote sustainable and ethical behavior.
Vaisala is committed to ensuring that it follows local and international tax rules and regulations in all jurisdictions where it conducts its business. We only engage in tax transactions that have a sound business rationale. We do not operate in tax haven countries for tax reasons. We comply with OECD transfer pricing guidelines and local legislations in relation to all of our intercompany transactions.
Tax team within centralized Finance & Control unit is responsible for managing and monitoring tax matters at Vaisala group level. Important matters of principle are presented and approved by Vaisala's Audit Committee.
Vaisala group has outsourced a large part of its foreign recurring tax compliance work to a few professional service providers to ensure competences and resources in complying with the local rules and regulations. Vaisala Finance & Control regularly monitors the transparency, quality, and outputs of these outsourcing engagements.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS Value for society
and environment
To ensure focus on process implementation and comparable data collection, Vaisala has decided to start its tax footprint initiative by reporting paid corporate income taxes, value added taxes, payroll taxes, excise taxes, and property taxes for the financial year 2019 and comparable figures for 2018. The principle of materiality has been observed in the collection and presentation of figures.
Vaisala benefits from R&D tax credits in the United States, Canada, and France. In addition, Vaisala has prior year tax losses in its subsidiaries located in the United States, Canada, and France, which reduced their corporate income tax payments in 2019. The tax contribution of the parent company in Finland totaled 26.2 (25.4) million euros.
| 0% Electricity Tax Tax (0%) |
Paid in 2019 (MEUR) | Paid in 2018 (MEUR) |
|---|---|---|
| Corporate Income Tax (CIT) | 9.0 | 7.7 |
| Value Added Tax (VAT) | 10.8 | 9.8 |
| Payroll Tax | 28.9 | 25.9 |
| Property Tax | 0.5 | 0.5 |
| Electricity Tax | 0.1 | 0.1 |
| Total | 49.3 | 44.0 |
Value for society and environment
In addition to its own research and development work, Vaisala is an active player in the scientific community. Scientific collaboration strengthens our position as an industry pioneer and an innovative technology leader. Vaisala continues to be a contributor to many organizations, advancing technological development in several fields of study.
We collaborate with the leading research institutes and universities to advance studies related to environmental and industrial measurements across various scientific and technological fields. Our collaboration partners also include the International Civil Aviation Organization (ICAO) as well as a number of national meteorological offices around the world. We also collaborate actively with researchers around the world in a wide variety of application areas, including volcanic lightning, field campaigns measuring detailed properties of lightning discharges, and extreme weather events.
Vaisala is an active participant in United Nations' World Meteorological Organization (WMO). WMO coordinates the study of the state and behavior of the Earth's atmosphere, including the weather and climate. It also facilitates its members' observational networks and free, unrestricted exchange of data and information. In addition, WMO supports research to optimize the production of weather-, climate-, and water-related services worldwide.
The Commission for Instruments and Methods of Observation (CIMO) is part of WMO. Vaisala's experts are actively involved in several CIMO expert teams focusing on the development of industry practices and standards related to meteorological measurements.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Value for society and environment
Vaisala is also a member of the Association of Hydro-Meteorological Equipment Industry© (HMEI), acknowledged by WMO. The association represents private industry providers of products and services in the meteorological, hydrological, environmental, and related fields. Its goal is to facilitate interaction between its members and a broad range of governmental and private organizations. As a member of HMEI, Vaisala's representatives participate in the expert teams of WMO's Commission for Basic Systems (CBS) in order to help to advance the improvement of environmental observations and weather forecasts worldwide.
Vaisala supports the Global Climate Observing System (GCOS) Reference Upper Air Network (GRUAN) in characterizing radiosonde data for climatological use. Vaisala's radiosonde experts are also in regular contact with European Centre for Medium-Range Weather Forecasts' (ECMWF) data assimilation experts in order to help ensure full use of radiosonde data in global numerical weather prediction models. Between 2015 and 2018 Vaisala co-funded a study by ECMWF that eventually led to an improvement of the radiosonde data use in the global Integrated Forecasting System of ECMWF.
We also participate in various industry standards development work in fields that are important to us. Vaisala is, for example, a member of ETSI (European Telecommunications Standards Institute), and we take active part in different committees and groups of International Electrotechnical Commission (IEC). Vaisala has participated and contributed also in the working groups of CIGRE (Conseil International des Grands Réseaux Électriques): the documentation created in these groups forms, for the most part, the basis for IEC's standards on assets of electricity transmission and distribution.
Our collaboration partners include the National Oceanic and Atmospheric Administration (NOAA). Vaisala supports space-based lightning detection systems both in NOAA and around the world. From 2016–2017, we have collaborated with NOAA in the calibration and validation of the Geostationary Lightning Mapper (GLM), which was the first technology to map lightning from geostationary orbit. Vaisala's lightning data continues to be used as an important reference to validate the performance of the GLM.
Our other partners are, among others, the National Center for Atmospheric Research (NCAR), Pacific Northwest National Laboratory (PNNL), Colorado State University (CSU), and New Mexico Institute of Mining and Technology (NMT).
Vaisala is also a strong contributor and corporate sponsor to the American Meteorological Society (AMS) that is a leading scientific organization dedicated to atmospheric, oceanic, and hydrologic sciences. In addition to sponsorships, Vaisala representatives contribute to the AMS through a number of activities, including scientific committee memberships, reviewing and editing journals and articles, and actively sharing scientific advancements during its annual meeting and through a variety of topical conferences.
We have also collaborated with the United States Department of Energy (DOE) through the Office of Renewable Energy and Efficiency since 2015. Vaisala led a large multi-institution research team as part of the Wind and Water Power program's Wind Forecast Improvement Project 2 during 2015–2018. The research team consisted of collaborators from multiple institutions, such as NOAA and NCAR, and the project has resulted in numerous publications in AMS Journals. We now continue helping the atmospheric modeling community to develop state-of-theart weather prediction. In 2019, we partnered with PNNL, NOAA, and NCAR to improve cloud and solar irradiance modeling in support of the US DOE's SunShot Initiative.
In China, Vaisala has collaborated with the University of Nanjing (NJU) in the Nanjing Air Quality Testbed project. In the project, a dense air quality observation network and a predictive model is built in the city of Nanjing, providing data for decision-making related to air quality improvement.
In Germany, Vaisala has a research collaboration agreement with the Fraunhofer Institute for microsensor technology development.
In Finland, Vaisala operates in close cooperation with various scientific stakeholders, including for example the Finnish Meteorological Institute (FMI), VTT Technical Research Centre of Finland Ltd., the
University of Helsinki, the Tampere University, and Aalto University. We are also collaborating with the University of Jyväskylä to develop novel measurement methods and to utilize the University's expertise in material analysis.
Vaisala is a partner in the BC Footprint project, coordinated by the Tampere University and FMI. The project aims to create a novel concept and metrics that can be used to quantify black carbon emissions and their climate effects.
In the LuxTurrim 5G project, coordinated by Nokia Bell Labs, Vaisala has integrated air quality and weather sensors into smart light poles, enabling smart cities to roll out dense observation networks co-located with 5G mobile networks. The solutions have been piloted in the Nokia Campus in Espoo, Finland, and will next be tested in the Kera region likewise in Espoo.
In October 2019, Vaisala started cooperation with Technology Academy Finland TAF as a Millennium Technology Prize partner. The partnership will boost dialogue and cooperation between the industry, academic world, and public organizations on the topics of innovations and sustainable development.
Vaisala also has representation in the Technology Industries of Finland organization and in the International Chamber of Commerce (ICC) Finland, which promotes international trade and investment worldwide. Vaisala is also a member in FIBS, Finland's leading corporate responsibility network, and in the Climate Leadership Coalition (CLC). The purpose the CLC is to improve the competitiveness of Finnish businesses and research organizations and their ability to respond to the threats posed by climate change.
Vaisala is a shareholder and research partner of CLIC Innovation Oy, an open innovation cluster with the mission to create breakthrough solutions in bioeconomy, energy, and cleantech by facilitating joint research between industry and academia in Finland. Vaisala is also a project partner in the CITYZER project that ended at the end of 2019. The project developed new digital services and products to support decision-making processes related to weather and air quality in cities. The results were utilized in the Helsinki Metropolitan Air Quality Testbed (HAQT) project in which a dense air quality observation network and predictive model were built in cooperation with the University of Helsinki, FMI, and the Helsinki Region Environmental Services Authority HSY.
Value for society and environment
In Vaisala, we are building a world in which environmental and industrial observations improve daily lives. As a global leader in measurement technology and as an active member of society, we support our stakeholders, promote higher education and research, and help new generations learn more about science.
Vaisala provides charitable donations with products, funding, or services to non-profit organizations as part of its community outreach activities. Our overall objective is to support organizations and projects that advance environmental awareness and science education. All our outreach activities are in line with our values and resonate well with topical issues close to our business, such as climate, weather, environmental and industrial measurements, and environmental sciences. Vaisala does not donate funds to political parties, causes, or campaigns.
Within science education, Vaisala aims to increase understanding of natural sciences, innovation, and the environment by supporting universities, scientists, and researchers focusing on these fields. Scholarships paid in the form of salary are outside the scope of Vaisala's community outreach activities.
Another focus are non-profit organizations working for environmental disaster prevention and recovery. Furthermore, impartial humanitarian organizations that provide protection and assistance to people affected by disasters are within the scope of possible donations.
In 2019, donations amounted to EUR 200,000 globally.
Vaisala funds the Professor Dr. Vilho Väisälä Award, established in 1985 to encourage and stimulate interest in research in the field of environmental measurement instruments and observation methods. The award is administered by the World Meteorological Organization (WMO), which selects winners every second year.
In 2004, the WMO Executive Council decided to establish a second Professor Dr. Vilho Väisälä Award. The main focus of this award is meteorological instrument work in developing countries and countries with economies in transition. Both awards carry a cash prize of USD 10,000, and they are granted in connection with the CIMO TECO conference. Next awards will be granted in 2020.
In September 2019, 130 years had passed since the birth of Professor Vilho Väisälä, Vaisala's founder. The impact of Väisälä's invaluable innovations can be seen all over the world, becoming ever more relevant in the time of global challenges, such as extreme weather and climate change.
Vaisala has always valued education, especially that of science, which is why we honored Väisälä's 130th birthday in 2019 by donating 130 Heureka tickets to underprivileged children. Heureka is the biggest science center in Finland.
Read more: vaisala.com/annualreport
Vaisala is a stable, globally operating company based in Finland. The company's series A shares have been quoted on Nasdaq Helsinki stock exchange since 1994. Vaisala's target is to maintain high solvency and to pay a stable dividend which will increase in line with net profit development.
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Value for investors
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7
Technology leader and
• Leading technologies in environmental and industrial sensing with most accurate and reliable instruments, algorithms, and software
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5
Solid dividend payer
yield of share 3.9%
• Aim to distribute a stable dividend which will increase in line with net profit development
• Dividend per share for the last five years paid at the average rate of 87% on earnings and the average effective dividend
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OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Disclosure of non-financial information in accordance with the Finnish Accounting Act chapter 3 a is presented in the Sustainable business practices section, in chapters Business model and Dashboard included in the Creating value section, and in the Risk management chapter in the Governance section. The Sustainable business practices section includes information on environmental matters, social and employee matters, respecting human rights, as well as anti-corruption and antibribery compliance.
We endorse the United Nations Global Compact strategic initiative for sustainable business practices and follow the Global Compact's Ten Principles, which cover the areas of human rights, labor, environment, and anti-corruption. These ten principles are reflected in Vaisala's Code of Conduct, and we report on the implementation of the principles on an annual basis as part of our sustainability reporting.
The Code of Conduct guides our actions and operations and reflects Vaisala values: Integrity, Strong together, Innovation and renewal, and Customer focus. We expect all our employees and partners, such as distributors and representatives, to comply with our Code of Conduct in all their actions. We have a separate Supplier Code of Conduct that sets standards for our suppliers and subcontractors. We comply with all applicable laws and regulations in the countries in which we operate. Where differences exist between regulatory requirements and Vaisala's Code of Conduct, we strive to apply whichever sets the highest standard. We respect and comply with international conventions, such as the United Nations Declaration of Human Rights and the International Labour Organization's (ILO) Declaration on Fundamental Principles and Rights at Work.
Our Code of Conduct includes guidance on environmental matters, social aspects and employment matters, human rights, and anti-bribery and anti-corruption. Moreover, Vaisala Board of Directors has approved
more detailed policies, such as the International Anti-Corruption Policy and the Quality, Environment, and Health and Safety (QEHS) Policy. The QEHS Policy is implemented through our global management system that includes our ISO 14001 certified Environmental Management System and ISO 45001 certified Health and Safety Management System.
We train our entire personnel regularly on the contents of the Code of Conduct and aim to bring up new angles on the matters in the trainings. In addition, separate trainings are organized on various topics, such as environment, health and safety, anti-corruption and bribery, and human rights risks management, some of which are mandatory for the entire personnel, and others are tailored to specific employee groups based on need.
Each Vaisala employee is responsible for complying with the Code of Conduct, and each manager monitors and supervises compliance with the Code of Conduct. Any suspected action against or violation of Code of Conduct should be escalated either anonymously to our whistleblowing channel or directly to the legal department. We also monitor that our suppliers and other business partners comply with our Code of Conduct, for example through self-assessments and audits.
To maintain transparency and consistency in our sustainability reporting, we apply the Global Reporting Initiative's (GRI) reporting guidelines. This report has been prepared in accordance with the GRI Standards: Core option. The GRI reference index can be found on pages 67–73 of this report.
Apart from the environmental data, our sustainability data is reported for the entire group and for all locations, which include also the operations of the companies acquired in the end of 2018. Our carbon footprint includes offices with more than 20 employees or otherwise
significant operations as well as indirect sources. The indicators related to energy and water consumption as well as waste are reported from the most significant manufacturing sites, which are located in Finland, the United States, and France.
According to our reporting process, we seek assurance for the report from a third-party assurance provider. An independent third party, Deloitte Oy, has at Vaisala management's request externally assured the contents and indicators of the Sustainable business practices section on pages 48–63 as well as indicator 201-1 on page 40. Independent assurance report can be found on pages 65–66.
Vaisala's management reviews the material aspects, stakeholders, value creation model, and megatrends annually as part of the reporting process. The material issues are included in the Creating value and Sustainable business practices sections of the annual report. The GRI content index includes indicators that have been determined material to Vaisala in the materiality review process.
Our environmental responsibility work is guided by our Global Quality, Environment, and Health and Safety (QEHS) Policy and our ISO 14001 certified environmental management system, which covers our biggest manufacturing sites and offices. At the moment, 85% of our employees work in ISO 14001 certified locations. All of our certified locations are audited by an independent third party as part of our audit program.
Our environmental management system helps us to identify the most significant environmental impacts in each location and set environmental targets locally and for the entire company. Many of our locations have voluntary green teams that promote measures necessary for achieving the environmental targets.
We listen to our personnel in environmental matters and encourage them to make environmentally friendly choices. In 2019, we organised two climate change-related information and discussion events, opened a channel for personnel's suggestions related to climate action, as well as campaigned for sustainable workplace lunches and commuting. We also conducted a commuting survey which was answered by 27% of our staff globally. Based on the development ideas received from the survey, we have created a plan for promoting sustainable commuting.
We regularly assess our environmental impacts as part of our environmental management system and aim to continuously reduce the environmental impact of our product portfolio, business operations, and supply chain. The most significant environmental aspects related to our operations are energy consumption, waste, water consumption, the materials our products contain, and indirect emissions. Such emissions arise, for example, from purchased products and services, business travel, logistics, commuting, and energy consumption during product use.
The most significant environmental risks of our operations are related to potential emergency situations that can lead to local contamination. These risks are controlled, for example, as part of our emergency preparedness and management processes for hazardous substances.
Emissions from 2014 baseline (Scope 2)
Renewable electricity
-90% (2018: -90%) Target 2020: -90%
93% (2018: 94%) Target 2020: 100%
Waste recycling rate* Employees working on ISO 14001 certified sites
53% (2018: 58%)
85% (2018: 91%)
*Recycling rate includes reuse, material recycling, and composting.
We believe in a future in which societies are powered by renewable energy. Vaisala is a member of RE100, a global initiative encouraging the world's most influential companies to make a 100% renewable energy commitment within a clear timeframe. To minimize our own impact on climate, we are committed to using 100% renewable electricity in our facilities by 2020. Even though our manufacturing sites in Finland and the United States are already using solar panels to produce clean energy, we still need to purchase most of our electricity from local energy companies.
93% of the electricity we consumed in 2019 came from renewable sources, mainly from wind power. The increased use of renewable electricity has reduced our energy consumption emissions by 90% compared to 2014 (Scope 2, market-based). In 2019, we also started to purchase data center services powered by renewable energy.
In the end of 2018, our production site in Finland joined the Finnish energy efficiency agreement for industries. According to the goals of the agreement, we improved our energy efficiency in 2019 by upgrading our HVAC system and building a heat recovery system to our cleanroom. However, our total energy consumption increased due to our new buildings that are being constructed in Finland and the USA as well as the acquisition of Leosphere SAS.
In 2019, our market-based Scope 2 emissions (calculated with supplier-specific emission factors) were 681 metric tons of CO2e (2018: 667 CO2e). Our location-based Scope 2 emissions (calculated with country-specific average emission factors) were 3,332 metric tons of CO2e (2018: 3,545 CO2e).
* Our Scope 3 emissions calculation has become more accurate for outgoing logistics, and therefore also the figures from the previous years are larger than reported previously.
51
* As a change to previous years, waste electrical and electronic equipment (WEEE) have been calculated as part of hazardous waste, and therefore also the hazardous waste amounts from the previous years are larger than reported previously. The total waste amount does not include the temporary waste from our construction sites.
On our main manufacturing site in Finland, waste is sorted into 14 categories to enable its efficient processing and use. In 2019, we conducted a study on the current state and development opportunities of waste management on our Finnish site. The aim was to find new ways to reduce the amount of waste and increase the recycling rate, for example by increasing material reuse and material recycling of waste. The study found some small improvement opportunities that we will pay attention to in 2020. All in all, the waste management was deemed to be functioning well, and for the time being, new ways to significantly increase the recycling rate were not found.
We use only municipal water, and our water consumption has remained steady for years. The sensor manufacturing process in our Finnish factory is our only water-intensive manufacturing process. Our own water cleaning facility purifies municipal water to be used in our cleanroom. After the cleanroom, all process water is treated before it is directed to municipal wastewater treatment.
Most of our group's energy consumption, water consumption, and waste generation can be attributed to our manufacturing locations in Finland, the United States, and France, hence these key indicators are reported for these three locations. The energy consumption of these manufacturing locations does not include the fuel consumption of fieldservice vehicles due to the low number of such vehicles.
To calculate our carbon footprint, we collect data more extensively from those locations with more than 20 employees or otherwise significant operations. Vaisala's carbon footprint includes various parts of the company's value chain. Our reported carbon footprint is divided into three levels (Scope 1–3) in line with the GHG Protocol Corporate Accounting and Reporting Standard. Scope 1 includes field-service vehicles owned by Vaisala. Purchased-energy emissions (Scope 2) includes purchased power and heat. Other indirect emissions (Scope 3) includes business travel (flights, train travel, and rental cars), inbound and outbound logistics, the energy consumption of installed weather radars, commuting, and waste management (only in Finland, where 76% of the group's waste is generated). We have also identified purchased goods and services as a relevant category of scope 3 emissions, but for the time being, we don't have adequate data on our supply chain emissions to be able to include this category in our Scope 3 emissions.
Energy, water, and waste data are collected from various sources. In addition to having our own monitoring systems on sites, we collect data from the systems and invoices of our service providers.
For Scope 3 emissions calculation, we collect business travel data from our travel agency, outgoing logistics data from our logistics partners, and waste management data from our waste management service providers. For the incoming logistics and the energy consumption of weather radars, we use data from our internal systems, and for commuting, we use data from the commuting survey that was renewed in 2019.
The environmental figures for 2019 are estimates based on data that was available at the time of the publication of the report for the first 10–12 months of the year. For the missing part, the figures for
November and December 2019 are estimates based on actual data for the past 12 months. There is no reason to assume that there are significant differences between the estimates and the actual figures for 2019.
The data on waste and water consumption on our production site in France is based on estimations while accurate data is still missing for the time being.
Greenhouse gas emissions are calculated using the best available conversion factors. These emission factors mainly come from the DEFRA database and GHG Protocol calculation tools. Certain emission factors come from other sources, such as our logistics partners, local energy companies, and vehicle manufacturers. For flights, we use DEFRA's emission factor with radiative forcing that takes into account also the non-CO2 climate change effects of aviation.
To determine our Scope 2 carbon footprint, we primarily use the market-based calculation method, which takes our purchased-energy specific emissions into account. In this calculation, locations using 100% renewable energy use 0.0 g CO2e / kWh as their emission factor. In addition, we report our location-based Scope 2 emissions, which are based on average country-specific emissions from energy production.
Our carbon footprint includes all greenhouse gases converted into carbon dioxide using global warming potential (GWP-100). With the further development and expansion of our footprint calculation, we have calculated our footprint retrospectively to ensure comparability between reporting periods.
A significant portion of the environmental impacts generated by our products arise during their use. Our industrial products and solutions help our customers improve their environmental performance, and our weather measurement solutions support decision-making in society by providing a wide range of critical information.
The environmental footprint generated by products over their life cycle can be affected during the product design phase. Our product development process includes environmental requirements, and many of the required product qualities, such as energy efficiency, maintainability, and recyclability, are beneficial for the environment. The updateability and modular design of many of our products, combined with our field services, extend the product life cycle, which typically ranges from a year to over 20 years. However, we are aware that the global scarcity of resources and rapidly developing environmental requirements call for us to improve our product design process continuously. In 2019, we have continued the development work in order to respond to new environmental requirements and to advance environmentally sound design.
To ensure that our products are safe for people and the environment, we set strict requirements during the product design process for the materials used in our products. Components are analyzed early on in the new product development process to ensure compliance. We systematically collect information about substances that REACH* legislation has defined to be of very high concern as well as about compliance with RoHS** legislation. We do this in order to enable the safe use and end-of-life treatment of products. We also select new suppliers carefully and ensure that they meet our strict requirements. At the end of product life cycle, we advise customers to recycle the products in accordance with local best practices for electronics recycling or to return them to Vaisala for recycling.
* REACH = Registration, Evaluation, Authorisation, and Restriction of Chemicals ** RoHS = Restriction of Hazardous Substances in electrical and electronic equipment
Personnel
The total number of employees at the end of 2019 was 1,837; and the average number of personnel employed during the year was 1,829. The average age of personnel was 43 years. At the end of the year, 95% of employees were permanent and 5% temporary.
During 2019, 193 permanent employees were recruited and 194 permanent employees left the company, out of whom 21 retired. The turnover rate for permanent employees was 11%, and the recruitment rate was 11%.
On October 1, 2019 Vaisala closed the acquisition of professional business-to-business weather services from the Finnish weather forecast services company Foreca Oy. This acquisition strengthens Vaisala's digital offering for weather-critical operations by bringing valuable skills and a technology platform for weather forecasting, modelling, and impact analysis. Following the acquisition, nine Foreca employees joined Vaisala.
In August, Vaisala announced a refocus and reorganization of its digital business' operations. At the same time, the name of Digital Solutions business line was renamed to Vaisala Digital. While a new team for co-located transportation solutions development, including road, airport, and ports, will be ramped up in Finland, 21 employees in the United States were made redundant.
Vaisala recognizes Technology Industries of Finland as its trade union. Vaisala's employees in Finland are covered by three collective agreements: the collective agreement for employees in technology industries, the collective agreement for salaried employees in technology industries, and the collective agreement for senior salaried employees in technology industries.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Personnel
PERSONNEL BY REGION AND CONTRACT
Americas: North and South America EMEA: Europe, Middle-East, and Africa APAC: Asia-Pacific
| Recruitments by age group | ||
|---|---|---|
| –19 | 20–29 | 30–39 | 40–49 | 50–59 | 60– | Total | ||
|---|---|---|---|---|---|---|---|---|
| Male | 14 | 88 | 67 | 36 | 18 | 1 | 224 | |
| Female | 7 | 46 | 24 | 13 | 10 | 0 | 100 | |
| Total | 21 | 134 | 91 | 49 | 28 | 1 | 324 |
| –19 | 20–29 | 30–39 | 40–49 | 50–59 | 60– | Total | |
|---|---|---|---|---|---|---|---|
| Male | 11 | 78 | 31 | 41 | 30 | 16 | 207 |
| Female | 4 | 36 | 20 | 14 | 13 | 16 | 103 |
| Total | 15 | 114 | 51 | 55 | 43 | 32 | 310 |
| Finland | Americas | EMEA | APAC | Total | |
|---|---|---|---|---|---|
| Permanent | 88 | 44 | 24 | 37 | 193 |
| Temporary | 99 | 2 | 26 | 4 | 131 |
| Total | 187 | 46 | 50 | 41 | 324 |
| Finland | Americas | EMEA | APAC | Total | |
|---|---|---|---|---|---|
| Permanent | 65 | 84 | 31 | 14 | 194 |
| Temporary | 87 | 4 | 24 | 1 | 116 |
| Total | 152 | 88 | 55 | 15 | 310 |
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OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Personnel
Salaries and wages paid by the company are based on local collective and individual agreements, individual performance, and the requirements of each position. The base salaries are supplemented by a performance-based bonus system, which covers all Vaisala personnel.
We aim to treat all our employees and applicants equally in all recruitment, hiring, training, and development. Equality and fairness are also important elements of Vaisala's compensation policy. We do not distinguish between gender or other non-professional attributes in employee compensation or benefits plans.
According to the Finnish Non-Discrimination Act, an employer must create a plan to advance equality. The aim of our equality plan is that Vaisala's personnel, jobseekers, and the subcontractors operating within Vaisala's guidance and offices as well as leased personnel will be treated equally, independently of their attributes. Furthermore, our goal is that our employees work within a safe, caring, communal, and accessible operating environment. In accordance with the Finnish Equality Act, we promote gender equality in a target-oriented and systematic manner. As part of preparing our equality plan, we conducted a wage survey that found the wage equality between genders to be on an excellent level, as women's wage was, on average, 100.8% of men's wage on the same job requirement level.
In North America, Vaisala Inc. is an Equal Opportunity Employer (EOE). All qualified applicants are considered for employment without regard to age, race, color, religion, gender, marital status, national origin, sexual orientation, disability, or veteran status.
Also Leosphere SAS that Vaisala acquired in late 2018 aims to promote diversity. Moreover, the French law protects employees from discrimination in recruitment, remuneration, and career development, for example.
Our occupational health and safety management and development is guided by our Global Quality, Environment, and Health and Safety (QEHS) Policy and our occupational health and safety system, which received the ISO 45001 certification in 2019.
We invest in health and safety training for employees and ensure that people working in risk-prone environments or jobs – such as working at heights, electrical work, and work involving chemicals or gases – have the necessary qualifications. Our new e-learning system streamlined organizing health and safety trainings globally. During 2019, our health and safety e-training, which was introduced in Finland in 2018, was expanded to other locations in English and in French.
In 2019, we conducted a safety survey for the first time in Vaisala. The purpose of the survey was to find out the state of our safety culture and identify possible development areas. 23% of our staff answered the survey. The results showed that work-related risks are generally well known, employees interfere with colleagues' risktaking, and people know how to carry out their work safely. On the other hand, safety was not visible enough in daily management or in teams' targets. In the future, we will focus our efforts on this area by increasing the visible participation of management in safety culture development, for example.
We encourage our employees and contractors to proactively report any health and safety risks in the workplace and make suggestions to improve the safety of working conditions and methods. To prevent injuries, harmful exposure, and the recurrence of incidents, reported deviations and their causes are investigated. After the investigation, corrective measures are implemented without delay. A globally consistent reporting procedure and database improve the efficiency and transparency of monitoring health and safety performance.
Our goal for 2019 was to double the frequency of proactive reporting (risks, near misses, and suggestions for improvement) compared to the previous year. However, the reporting frequency was only 8.55 reports per 100 employees, and we fell far behind our target. We aim to increase the reporting frequency in the future by continuing to focus on education and increasing the understanding of the importance of proactive reporting.
We have increased collaboration between employees and the employer by establishing Health and Safety Committees in several locations. At the moment, active Health and Safety Committees are operating in Finland, Canada, Germany, the United States, the United Kingdom, Japan, and China.
These committees meet at least four times a year. The representatives on the Health and Safety Committees currently make up 3.7% of all employees and represent 86.4% of the personnel. Our goal is to have at least one in three non-managerial employees on each committee.
A total of nine injuries occurred in 2019, and out of them six occurred at work. The injury rate was 2.59 injuries per million hours worked, and we did not reach our goal for 2019, which was 1.0 accidents per million hours worked. We continue to work towards our long-term goal of zero injuries and occupational diseases, and we believe we can achieve this goal through continuous improvement.
The Code of Conduct reflects Vaisala's values: Integrity, Strong together, Innovation and renewal, and Customer focus. All of our employees, partners, distributors, and agents must comply with the Code of Conduct under all circumstances.
All Vaisala employees must complete the Code of Conduct training at regular intervals and confirm their commitment to the Code and the International Anti-Corruption Policy. The mandatory Code of Conduct training was renewed in late 2019. Of all employees, 96% had completed the training by January 20, 2020. All new employees commit to complying with the Code of Conduct and the International Anti-Corruption Policy as part of their employment contracts as well as participate in induction training on the operating principles and procedures of the company. Violations of the Code of Conduct or the International Anti-Corruption Policy may lead to disciplinary action, including termination of employment.
Vaisala has a zero tolerance policy towards all forms of corruption. Our International Anti-Corruption Policy strictly forbids offering, giving, soliciting, arranging, demanding, or accepting bribes, whether directly or through third parties. The Policy includes detailed guidelines on acceptable hospitality and entertainment. Periodical training for employees on the Code of Conduct also covers aspects related to the International Anti-Corruption Policy. In addition, a more specific Anti-Corruption Policy training has been tailored to employees who according to risk analysis might face challenging situations in their work.
To serve its customers as efficiently as possible, Vaisala conducts business through a network of partners: with distributors, agents, and resellers in more than 100 countries. Our business operations cover a large geographical area, meaning that we also operate in countries with a demanding business environment. For this reason, we pay special
attention to selecting our business partners. An initial study is usually followed by a more profound due diligence process carried out by Vaisala employees or external consultants. Our agreements with our partners typically include strict requirements concerning immediate termination if a partner violates any aspects of our Code of Conduct or International Anti-Corruption Policy, both of which are attached to the agreements we sign with partners.
The Supplier Code of Conduct reflects Vaisala's values and operating principles and is based on principles created by the International Labor Organization (ILO), the United Nations Global Compact initiative, and the Responsible Business Alliance (formerly EICC). In addition, the Supplier Code of Conduct includes requirements concerning standards and procedures in line with the Business Social Compliance Initiative (BSCI) and Social Accountability International (SAI).
In addition, Vaisala's suppliers must take proper precautions to ensure that they do not source any minerals originating from conflict areas, in accordance with Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. Such minerals include tin, tungsten, tantalum, and gold mined in the Democratic Republic of Congo (DRC) or its neighboring countries, for example.
Compliance with the Code of Conduct and other guidelines is continuously monitored by regional and business area managers and immediate supervisors as well as by means of internal audits. If any Vaisala employee knows or suspects that the Code of Conduct or the International Anti-Corruption Policy is being violated, they must report the incident. Vaisala provides a whistleblowing channel for its employees and external stakeholders for reporting violations. In
addition to reporting suspected violations, they may communicate other concerns through the channel. The channel can be used via email or regular mail, and messages can be sent anonymously.
Vaisala has a Compliance Committee, which monitors compliance with the Code of Conduct and other guidelines as well as processes reports of suspected non-compliance. The Committee consists of members from the Legal Department, Finance & Control, and Human Resources and is headed by the Senior Vice President for Compliance and Risk Management.
In 2019, the Committee became aware of two suspected violations of the Code of Conduct. One of the cases was not considered relevant, while the other case did not contain enough information to lead to further action after the initial investigation.
There were no confirmed complaints or sanctions by the authorities during 2019. No incidents of corruption, anti-competitive behavior, anti-trust or monopoly practices, or any other violations of laws or regulations were confirmed during 2019. Furthermore, there were no violations of human rights, labor rights, or environmental legislation or concerns related to these in the immediate supply chain.
Vaisala is committed to respecting human rights as defined in the United Nations' Universal Declaration of Human Rights and endorses ILO's Declaration of Fundamental Principles and Rights at Work. Vaisala does not condone violations of human rights or labor laws in any part of its supply chain. The company takes appropriate measures to ensure that the risk of violations of its Code of Conduct or Supplier Code of Conduct is minimized in its immediate supply chain.
Vaisala's internal supply chain risk assessment suggests that the risk of human rights violations is the highest beyond the third tier of suppliers. Typical issues are the same as in other electronics manufacturing supply chains, including unpaid or excessive overtime,
Ethics and compliance
dangerous working conditions, bonded labor, and low wages. Risks in Vaisala's supply chain are mitigated by carefully choosing preferred suppliers and working closely with first-tier suppliers, insisting on policies that go beyond the requirements of local laws.
Another area where we have identified a high need to understand and manage human rights risks is our global project subcontractor network, where we need to ensure, for example, that our partners follow adequate health and safety standards. Therefore, we have started to give concrete safety instructions to our subcontractors, in addition to the requirements in the Supplier Code of Conduct. We also focus on increasing the ability of our personnel to identify and manage human rights risks while operating with potential or selected subcontractors.
Read more about Vaisala's policies: vaisala.com/standards-and-policies Vaisala Whistleblowing Channel can be reached at [email protected]
In its supply chain, Vaisala seeks to promote innovation and a competitive advantage responsibly through cooperation. Our business operations are based on a wide selection and low volumes, and this special expertise depends on the effective management of hundreds of suppliers and selected strategic partners. To deliver on our customer promise and meet stakeholder expectations, we must have a reliable and responsible supply chain. We set strict requirements for our suppliers, and we cooperate with them closely over the long term, which enables both parties to further develop their operations.
Vaisala's direct suppliers are generally located close to its product development operations and manufacturing sites. We purchase subassemblies, components, and mechanical parts mainly from Finland and other European countries as well as the United States. Our upstream supply chains resemble other typical supply chains in the global electronics manufacturing industry.
Vaisala's supplier management model has four categories: potential, approved, preferred, and strategic suppliers. In addition to these categories, suppliers may be, for example, in phase-out when their contracts are being discontinued gradually or on watch-list when they are monitored closely due to serious issues experienced over the long term. The classification defines the relationship between Vaisala and the supplier and outlines the management model for each category. All suppliers are expected to meet certain requirements before they can be approved and categorized. The requirements for suppliers are based on the classification, risk assessment, and spend. Suppliers must also commit to the Supplier Code of Conduct.
Responsible supply chains
28 (2018: 32)
We use a Supplier Sustainability Self-Assessment Questionnaire (SAQ) as part of supplier development in all categories in order to assess environmental, social, and governance (ESG) risks. The questionnaire exposes risks related to environmental management, occupational safety, social responsibility, governance, and supply chain management. If a supplier's score in the assessment does not meet Vaisala's requirements, the supplier is expected to implement corrective measures to improve their sustainability as part of their comprehensive development plan, and any weaknesses are addressed in cooperation with the supplier
As part of supplier management, we also audit our suppliers to check aspects related to quality and sustainability, such as their knowledge and application of our Supplier Code of Conduct, labor and human rights, occupational safety, environmental management, product safety (RoHS and REACH), and conflict mineral management.
In 2019, our direct supplier base grew by over 100 new suppliers, most of which came through the acquisitions made in late 2018. Integration of the new suppliers into the sustainability management processes of Vaisala's supply chain started in late 2019, and the work will be continued during the next years, prioritizing the suppliers based on risk and spend. By the end of the reporting period, no ESG risk evaluations had been made for the new suppliers, and most of the new suppliers had not signed Vaisala's Supplier Code of Conduct yet. Therefore, our supply chain sustainability management indicators went down compared to the previous year.
Read more Read more about supplier management at Vaisala: vaisala.com/suppliers
Key figures of Vaisala's direct supply chain*
suppliers audited during the year
82% (2018: 93%) of purchases
(based on spend) were made from suppliers rated on ESG metrics
87% (2018: 91%) of purchases (based on spend) were made from suppliers who had signed the Supplier Code
of Conduct
* By direct suppliers, we mean suppliers related to our products, which includes manufacturing partners as well as mechanics and component suppliers.
Vaisala joined the UN Global Compact in 2008 and has committed to following the ten guiding principles of the initiative. These ten principles are reflected in Vaisala's Code of Conduct, and we report on the implementation of the principles on an annual basis as part of our sustainability reporting. Our sustainability reports have qualified for the Global Compact Advanced differentiation level since its introduction in 2010.
Principle 1: Businesses should support and respect the protection of internationally proclaimed human rights. Principle 2: Make sure that they are not
p. 59–60 Ethics and compliance p. 59–60 Ethics and compliance
| Environment | |
|---|---|
| Principle 7: Businesses should support a precautionary approach to environmental challenges. |
p. 49 Environmental impacts |
| Principle 8: Undertake initiatives to promote greater environmental responsibility. |
p. 49 Environmental management, p. 51 Energy and emissions, p. 52 Waste |
| Principle 9: Encourage the development and diffusion of environmentally friendly technologies. |
p. 54 Products |
complicit in human rights abuses.
| Principle 3: Businesses should uphold the freedom of association and the effective recognition of the right to collective bargaining. |
p. 55 Collective agreements and trade unions |
|---|---|
| Principle 4: The elimination of all forms of forced and compulsory labor. |
p. 59–60 Ethics and compliance |
| Principle 5: The effective abolition of child labor. | p. 59–60 Ethics and compliance |
| Principle 6: The elimination of discrimination in respect of employment and occupation. |
p. 57 Diversity, equality, and inclusiveness; p. 59–60 Ethics and compliance |
| Principle 10: Businesses should work | p. 59–60 Ethics and compliance |
|---|---|
| against corruption in all its forms, including | |
| extortion and bribery. |
Anti-corruption
Disclosure of non-financial information in accordance with Finnish Accounting Act is presented in the annual report's Sustainable business practices section, chapters Business model and Dashboard included in the Creating value section, as well as in the Risk management chapter included in the Governance section.
Vantaa February 12, 2020
Petri Castrén Petra Lundström Jukka Rinnevaara Kaarina Ståhlberg Tuomas Syrjänen Pertti Torstila Raimo Voipio Ville Voipio Kjell Forsén Chairman of the Board Vice Chairman of the Board President and CEO
We have been engaged by Vaisala Oyj (hereafter Vaisala) to provide a limited assurance on Vaisala's corporate responsibility information and GRI indicators disclosed in the Vaisala's annual report for the reporting period of January 1, 2019 to December 31, 2019. The scope of the assurance was the content of the Sustainable business practices section and indicators on pages 48–63 and the indicator 201-1 on page 40 of the report.
Management is responsible for the preparation of the Sustainability Information in accordance with the Reporting criteria as set out in Vaisala's reporting principles on page 48 of the Non-Financial Information report and the Sustainability Reporting Standards 2016 (Core) of the Global Reporting Initiative. This responsibility includes: designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the Sustainability Information that are free from material misstatement, whether due to fraud or error, selecting and applying appropriate criteria, and making estimates that are reasonable in the circumstances.
Our responsibility is to express a limited assurance conclusion on the Responsibility Information based on our engagement. We conducted our assurance engagement in accordance with International Standard on Assurance Engagements (ISAE) 3000 (Revised) to provide limited assurance on performance data and statements within the Responsibility Information.
ISAE 3000 standard requires that we comply with ethical requirements and plan and perform the assurance engagement to obtain limited assurance whether any matters come to our attention that cause
us to believe that the Responsibility Information has not been prepared, in all material respects, in accordance with the Reporting criteria.
We did not perform any assurance procedures on the prospective information, such as targets, expectations, and ambitions, disclosed in the Responsibility Information. Consequently, we draw no conclusion on the prospective information. Our assurance report is made in accordance with the terms of our engagement with Vaisala. We do not accept or assume responsibility to anyone other than Vaisala for our work, for this assurance report, or for the conclusions we have reached.
A limited assurance engagement with respect to responsibility related data involves performing procedures to obtain evidence about the Responsibility Information. The procedures performed depend on the practitioner's judgment, but their nature is different from, and their extent is less than, a reasonable assurance engagement. It does not include detailed testing of source data or the operating effectiveness of processes and internal controls, and consequently they do not enable us to obtain the assurance necessary to become aware of all significant matters that might be identified in a reasonable assurance engagement.
Our procedures on this engagement included:
data reporting process as well as to test the data collected for responsibility reporting purposes on a sample basis;
We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
We complied with Deloitte's independence policies which address and, in certain cases, exceed the requirements of the International Federation of Accountants Code of Ethics for Professional Accountants in their role as independent assurance providers and in particular preclude us from taking financial, commercial, governance, and ownership positions which might affect, or be perceived to affect, our independence and impartiality, and from any involvement in the preparation of the report. We have maintained our independence and objectivity throughout the year, and there were no events or prohibited services provided which could impair our independence and objectivity.
Deloitte Oy applies International Standard on Quality Control 1 and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards, and applicable legal and regulatory requirements. This engagement was conducted by a multidisciplinary team including assurance and sustainability expertise with professional qualifications. Our team is experienced in providing sustainability reporting assurance.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Independent limited assurance
report
On the basis of the procedures we have performed, nothing has come to our attention that causes us to believe that the information subject to the assurance engagement is not prepared, in all material respects, in accordance with the Sustainability Reporting Standards (Core) of the Global Reporting Initiative or that the Responsibility Information is not reliable, in all material respects, with regard to the Reporting criteria.
Our assurance statement should be read in conjunction with the inherent limitations of accuracy and completeness for responsibility information.
Helsinki 12.2.2020 Deloitte Oy
Merja Itäniemi Lasse Ingström Authorized Public Accountant Authorized Public Accountant
The Global Reporting Initiative (GRI) content index is provided to assist the reader in navigating through the annual report and to compare it to the GRI Standards Guidelines. For more information about the guidelines, please see globalreporting.org.
| Indicator # | References and reasons for omissions |
|---|---|
| 102-1 | Vaisala Oyj |
| 102-2 | 3–4 Vaisala in brief |
| 102-3 | Vantaa, Finland |
| 102-4 | 3–4 Vaisala in brief, 27 Global markets, 48 Boundaries, |
| 151 Consolidated financial statements: Note 27. Subsidiaries | |
| 102-5 | 107 Board of Directors' report: Ownership structure |
| 102-6 | 3–4 Vaisala in brief (main markets), 12 Business model |
| 102-7 | 3–4 Vaisala in brief (net sales, number of offices, number of employees), 28 Operations (number of products), 111 Consolidated statement of financial position |
| 102-8 | 56 Personnel by area and contract |
| Gender distribution of temporary and part-time employees is not reported separately due to the small amount of such employees. Work performed by workers who are not employees is not reported due to the small amount of such work. |
|
| 102-9 | 61–62 Responsible supply chains |
| 102-10 | 55 Major changes during the reporting period, 61–62 Supplier management, 141 Consolidated financial statements: Capital structure |
| 102-11 | 54 Products, 84 Risk management |
| 102-12 | 42–43 Collaboration in the scientific community, 63 UN Global Compact |
| 102-13 | 42–43 Collaboration in the scientific community, 55 Collective agreements and trade unions |
| Content | Indicator # | References and reasons for omissions |
|---|---|---|
| 2. Strategy | ||
| Statement from senior decision-maker | 102-14 | 6–7 Chairman and CEO's message |
| Key impacts, risks, and opportunities | 102-15 | 13 Value creation model, 14 Dashboard, 15–16 UN Sustainable Development Goals, 17–19 Megatrends, 84–87 Risk management |
| 3. Ethics and integrity | ||
| Values, principles, standards, and norms of behavior | 102-16 | 11 Strategy, 59–60 Ethics and compliance |
| Mechanisms for advice and concerns about ethics | 102-17 | 59–60 Ethics and compliance |
| 4. Governance | ||
| Governance structure | 102-18 | 75–83 Corporate Governance Statement |
| Nominating and selecting the highest governance body | 102-24 | 76 Selection criteria, diversity, and the independence of the members |
| Highest governance body's role in sustainability reporting | 102-32 | The Board of Directors approves the sustainability information included in the annual report. |
| 5. Stakeholder engagement | ||
| List of stakeholder groups | 102-40 | 30 Stakeholder engagement |
| Collective bargaining agreements | 102-41 | 70% of employees are covered by collective bargaining agreements. |
| Identifying and selecting stakeholders | 102-42 | 30 Stakeholder engagement |
| Approach to stakeholder engagement | 102-43 | 30 Stakeholder engagement |
| Key topics and concerns raised | 102-44 | 30 Stakeholder engagement |
| 6. Reporting practice | ||
| Entities included in the consolidated financial statements | 102-45 | 151 Consolidated financial statements: Note 27. Subsidiaries |
| Defining report content and topic boundaries | 102-46 | 48 Reporting principles |
| List of material topics | 102-47 | 13 Value creation model, 15–16 UN Sustainable Development Goals, 49–54 Environment, 55–57 Personnel, |
| 58 Occupational health and safety, 59–60 Ethics and compliance, 61–62 Responsible supply chains |
| Content | Indicator # | References and reasons for omissions |
|---|---|---|
| Restatements of information | 102-48 | 51 Carbon footprint, 52 Waste |
| Changes in reporting | 102-49 | 48 Boundaries |
| The reporting boundary for carbon footprint was set to include sites with at least 20 employees, as a change to the previous 15. This change did not have a significant impact on the reported figures. |
||
| Reporting period | 102-50 | Calendar year 2019 |
| Date of most recent report | 102-51 | 27.2.2019 |
| Reporting cycle | 102-52 | Annually |
| Contact point for questions regarding the report | 102-53 | 177 Contacts |
| Claims of reporting in accordance with the GRI Standards | 102-54 | This report has been prepared in accordance with the GRI Standards: Core option. |
| GRI content index | 102-55 | |
| External assurance | 102-56 | 48 Independent assurance, 65 Independent limited assurance report |
| ECONOMIC PERFORMANCE | ||
| GRI 103: MANAGEMENT APPROACH 2016 | 103-1-3 | 40 Economic value |
| GRI 201: ECONOMIC PERFORMANCE 2016 | ||
| Direct economic value generated and distributed | 201-1 | 40 Direct economic value generated and distributed |
| Figures are reported on Group level. We consider the regional level reporting of these figures proprietary information. | ||
| Defined benefit plans and obligations and other retirement plans | 201-3 | 122–124 Consolidated financial statements: Note 6. Pension obligations |
| Percentage of salary contributed and participation level are not reported. |
| Content | Indicator # | References and reasons for omissions |
|---|---|---|
| ENVIRONMENT | ||
| GRI 103: MANAGEMENT APPROACH 2016 | 103-1-3 | 49–54 Environment |
| GRI 302: ENERGY 2016 | ||
| Energy consumption within the organization | 302-1 | 51 Energy and emissions, 53 Scope of environmental reporting, 53 Data sources and assumptions |
| Fuel consumption or sold energy are not considered material, as Vaisala does not consume process fuels or sell electricity in any significant quantities. |
||
| Energy intensity | 302-3 | 51 Energy and emissions |
| GRI 303: WATER 2016 | ||
| Water withdrawal by source | 303-1 | 52 Water consumption, 53 Scope of environmental reporting, 53 Data sources and assumptions |
| GRI 305: EMISSIONS 2016 | ||
| Direct (Scope 1) GHG emissions | 305-1 | 51 Energy and emissions, 53 Scope of environmental reporting, 53 Data sources and assumptions, 53 Emission factors |
| Energy indirect (Scope 2) GHG emissions | 305-2 | 51 Energy and emissions, 53 Scope of environmental reporting, 53 Data sources and assumptions, 53 Emission factors |
| Other indirect (Scope 3) GHG emissions | 305-3 | 51 Energy and emissions, 53 Scope of environmental reporting, 53 Data sources and assumptions, 53 Emission factors |
| GHG emissions intensity | 305-4 | 51 Energy and emissions |
| Reduction of GHG emissions | 305-5 | 51 Energy and emissions |
| GRI 306: EFFLUENTS AND WASTE 2016 | ||
| Waste by type and disposal methods | 306-2 | 52 Waste, 53 Scope of environmental reporting, 53 Data sources and assumptions |
| PERSONNEL | ||
| GRI 103: MANAGEMENT APPROACH 2016 | 103-1-3 | 34–36 Value to employees, 55–57 Personnel |
| GRI 401: EMPLOYMENT 2016 | ||
| New employee hires and employee turnover | 401-1 | 55 Turnover |
| Content | Indicator # | References and reasons for omissions |
|---|---|---|
| GRI 402: LABOR/MANAGEMENT RELATIONS 2016 | ||
| Minimum notice periods regarding operational changes | 402-1 | The personnel in Finland (62% of Vaisala's personnel) is covered by collective agreements of technology industries, which specify the minimum notice period. For other countries, the notice periods vary depending on legislation. |
| GRI 404: TRAINING AND EDUCATION 2016 | ||
| Percentage of employees receiving regular performance and career development reviews | 404-3 | 36 Learning and development |
| As all of our employees are offered the opportunity to have annual development discussions, regional and gender distribution are not considered relevant to report for this indicator. The figure excludes long-term absent and recently recruited employees. |
||
| GRI 405: DIVERSITY AND EQUAL OPPORTUNITY 2016 | ||
| Diversity of governance bodies and employees | 405-1 | 57 Diversity, equality, and inclusiveness; 77 Composition of the Board of Directors Dec 31, 2019 (Board members' years of birth); 79 Members of the Management Group Dec 31, 2019 (Management Group members' years of birth) |
| GRI 406: NON-DISCRIMINATION 2016 | ||
| Incidents of discrimination and corrective actions taken | 406-1 | No incidents of discrimination |
| EMPLOYEE WELL-BEING | ||
| Well-Being Index | Non-GRI | 35–36 Well-being |
| OCCUPATIONAL HEALTH AND SAFETY | ||
| GRI 103: MANAGEMENT APPROACH 2016 | 103-1-3 | 58 Occupational health and safety |
| GRI 403: OCCUPATIONAL HEALTH AND SAFETY 2016 | ||
| Workers representation in formal joint management-worker health and safety committees | 403-1 | 58 Collaboration |
| Types of injury and rates of injury, occupational diseases, lost days and absenteeism, and number of work-related fatalities |
403-2 | 58 Injuries |
| Occupational disease rate, absentee rate, and lost day rate are not considered material in Vaisala. Data for contractors is too limited for reporting. |
| Content | Indicator # | References and reasons for omissions |
|---|---|---|
| ETHICS AND COMPLIANCE | ||
| GRI 103: MANAGEMENT APPROACH 2016 | 103-1-3 | 59–60 Ethics and compliance |
| GRI 205: ANTI-CORRUPTION 2016 | ||
| Communication and training about anti-corruption policies and procedures | 205-2 | 59 Vaisala Code of Conduct, 59 Prevention of corruption and bribery |
| Confirmed incidents of corruption and actions take | 205-3 | 59 Compliance monitoring and violations (no incidents) |
| GRI 206: ANTI-COMPETITIVE BEHAVIOR 2016 | ||
| Legal actions for anti-competitive behavior, anti-trust, and monopoly practices | 206-1 | 59 Compliance monitoring and violations (no incidents) |
| GRI 307: ENVIRONMENTAL COMPLIANCE 2016 | ||
| Non-compliance with environmental laws and regulations | 307-1 | 59 Compliance monitoring and violations (no incidents) |
| GRI 412: HUMAN RIGHTS ASSESSMENT 2016 | ||
| Employee training on human rights policies or procedures | 412-2 | Vaisala's Code of Conduct training that is organized annually includes also topics related to human rights. |
| GRI 416: CUSTOMER HEALTH AND SAFETY 2016 | ||
| Incidents of non-compliance concerning the health and safety impacts of products and services |
416-2 | 59 Compliance monitoring and violations (no incidents) |
| GRI 417: MARKETING AND LABELING 2016 | ||
| Incidents of non-compliance concerning product and service information and labeling | 417-2 | 59 Compliance monitoring and violations (no incidents) |
| GRI 419: SOCIOECONOMIC COMPLIANCE 2016 | ||
| Non-compliance with laws and regulations in the social and economic area | 419-1 | 59 Compliance monitoring and violations (no incidents) |
| Content | Indicator # | References and reasons for omissions |
|---|---|---|
| RESPONSIBLE SUPPLY CHAINS | ||
| GRI 103: MANAGEMENT APPROACH 2016 | 103-1-3 | 61–62 Responsible supply chains |
| GRI 308: SUPPLIER ENVIRONMENTAL ASSESSMENT 2016 | ||
| New suppliers that were screened using environmental criteria | 308-1 | 61–62 Responsible supply chains |
| GRI 414: SUPPLIER SOCIAL ASSESSMENT 2016 | ||
| New suppliers that were screened using social criteria | 414-1 | 61–62 Responsible supply chains |
| GRI 407: FREEDOM OF ASSOCIATION AND COLLECTIVE BARGAINING 2016 | ||
| Operations and suppliers in which the right to freedom of association and collective bargaining may be at risk |
407-1 | 59–60 Respect for human rights, 61–62 Responsible supply chains |
| The topic is material only in some parts of the supply chain, not in Vaisala's own operations. | ||
| GRI 408: CHILD LABOR 2016 | ||
| Operations and suppliers at significant risk for incidents of child labor | 408-1 | 59–60 Respect for human rights, 61–62 Responsible supply chains |
| The topic is material only in some parts of the supply chain, not in Vaisala's own operations. | ||
| GRI 409: FORCED OR COMPULSORY LABOR 2016 | ||
| Operations and suppliers at significant risk for incidents of forced or compulsory labor | 409-1 | 59–60 Respect for human rights, 61–62 Responsible supply chains |
| The topic is material only in some parts of the supply chain, not in Vaisala's own operations. |
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Vaisala's corporate governance is based on and complies with the laws of Finland and Vaisala's Articles of Association. Consolidated financial statements and other financial reports are prepared according to the International Financial Reporting Standards (IFRS), approved by the EU. The company complies with the rules, regulations, and guidelines for listed companies issued by Nasdaq Helsinki Ltd and Finnish Supervisory Authority as well as Finnish Corporate Governance Code 2015 published by the Securities Market Association.
Vaisala Board of Directors has approved this Corporate Governance Statement in its meeting on February 12, 2020. Deloitte Oy, Audit Firm, the company's auditor, has verified that the statement has been issued and that the general description of internal audit and risk management systems associated with the financial reporting process conforms to the same in financial statements.
The term of the members of Vaisala's Board of Directors deviates from the Recommendation 6 of Corporate Governance Code, which recommends a term of one year. The term of Vaisala's member of the Board of Directors is determined in accordance with its Articles of Association. Under the Articles of Association, a member's term is three years, beginning at the close of the General Meeting in which the member is elected and ending at the close of the third subsequent Annual General Meeting.
A longer term of office of the Board members is justified by the long-term development of Vaisala's business as well as by the nature of the business. The practice has worked well, and Vaisala's shareholders are committed to it.
The General Meeting, the Board of Directors, and the President and CEO, assisted by the Management Group, are responsible for the governance of the Vaisala Corporation.
This Corporate Governance Statement has been drawn up as a document independent of the Board of Director's Report and is available on the company's website at vaisala.com/investors. The Finnish Corporate Governance Code is available on website at cgfinland.fi/en.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Statement
The General Meeting is the supreme decision-making body of Vaisala, in which all the shareholders of the company can participate in the supervision and control of the company and exercise their right to vote, speak, and ask questions. The Annual General Meeting is held once a year before the end of June on a date determined by the Board of Directors. It decides on the matters stipulated in the Finnish Limited Liability Companies Act and the Articles of Association. The decisions are mainly made with simple majority of votes.
The Chairman of the Board of Directors, members of the Board of Directors, and the President and CEO are present at the Annual General Meeting. The auditor is present at the Annual General Meeting. Board member candidates are present at the Annual General Meeting where they are elected. If the above-mentioned person or persons fail to attend the Annual General Meeting, Vaisala notifies the General Meeting of such non-attendance. The members of the Management Group participate in the Annual General Meeting, if possible.
Participation in the General Meeting requires that the shareholder is registered in Vaisala's shareholder register, maintained by Euroclear Finland Ltd, on the record date of the meeting, and that he/she registers for the meeting by the date mentioned in the meeting notice.
Shareholders are entitled to have an issue placed on the agenda of the Annual General Meeting, provided that the issue can be decided upon by the Annual General Meeting according to the Limited Liability Companies Act. The request must be submitted in writing to the Board of Directors early enough that the issue can be included in the meeting notice. The company announces the date by which the shareholder must notify the Board of Directors of an issue to be added to the agenda of the Annual General Meeting on its website. The date is available by the end of the previous financial year.
Vaisala publishes a notice of the Annual General Meeting no more than two months before the record date and no less than three weeks before the meeting on the company's website or in any other way that may be decided by the Board of Directors, or Vaisala may deliver it directly to shareholders when required by law. In addition, Vaisala publishes a meeting notice as a stock exchange release after the Board of Directors has decided on the convening of the Annual General Meeting. Agenda of the Annual General Meeting, proposals on decisions, and meeting documents are available on the company's website at least three weeks
prior to the meeting. Documents of the Annual General Meeting will be held on the company's website for at least five years from the time of the meeting. Minutes of a meeting will be published on the company's website within two weeks of the meeting.
Minutes of the meetings and other documents related to the General Meetings can be found on the company's website at vaisala.com/investors.
The Board of Directors is responsible for the administration and the proper organization of the operations of the company. The Board acts in accordance with the Articles of Association and the applicable legislation as well as the instructions and recommendations of the Financial Supervisory Authority and Nasdaq Helsinki Ltd. In accordance with the Articles of Association, Vaisala Corporation Board of Directors comprises at least four and maximum eight members. The Annual General Meeting elects all Board members. The Board of Directors elects a Chairman and a Vice Chairman from among its members. Under the Articles of Association, the term of the Board members is three years. The term begins at the close of the General Meeting in which the member is elected and ends at the close of the third subsequent Annual General Meeting following the member's election.
The primary goal in Board member election is to gather to the Board of Directors capability, expertise, and experience from various technologies, international relations, global business, and strategically significant industries. The Board should be considered as a whole that is capable of managing its tasks and duties in the best possible way. The goal of the election of the members of the Board of Directors is to ensure that the Board supports the development of the company's current and future business. In addition, the Board should consist of members of both genders and the members should have the chance to allocate a sufficient amount of time to managing their tasks. The goal is that at least 25% of
Board members are always men and women. Vaisala Board of Directors in 2019 represents adequate expertise and experience as well as diversity on the established goals.
The majority of the Board members must be independent of the company, and at least two members in this majority must be independent of the company's major shareholders. The Board of Directors evaluates the independence of the members annually based on overall evaluation. This evaluation of a member takes into account information and analysis provided by the member himself/herself.
The Board of Directors convenes at least eight times a year and if otherwise needed. The President and CEO and the Chief Financial Officer also attend Board meetings. The other members of the Management Group attend Board meetings as required on the invitation of the Board of Directors. The Board of Directors may, on the basis of the Chairman's decision, establish working groups from among its members in individual cases to prepare the matters allocated for it in order to ensure the effective organization of the Board of Directors' work.
The Board of Directors operates in accordance with an approved written charter, published on the company's website. Meetings may, if necessary, be held as conference calls or e-mail meetings. Minutes of meetings are compiled in English, with annually running numbering. The General Counsel acts as the Secretary of the Board of Directors.
A member of the Board of Directors is not allowed to participate if he/ she is biased in that issue between him/her and the company or between the company and a third party when there is possibility to achieve essential advantage to him/her, which may conflict with the company's interest.
The members of the Board of Directors are bound by obligations related to commercial and trade secrets as well as by the restrictions and requirements of the Market Abuse Regulation (EU) N:o 596/2014 (MAR) and the restrictions and obligations of Vaisala's Insider Policy. In their decision-making and other activities, the Board and its members must act in accordance with the interest of the company and all its shareholders as well as in accordance with the principles of due care and data protection.
The Board will have a quorum when more than half of the members are present. Decisions are made on a simple majority basis, and when the votes are even, the Chairman has the casting vote. When the votes for election of the Chairman are even, the Chairman is elected by drawing lots.
Statement
Corporate Governance
The President and CEO is responsible for the execution of the Board of Directors' decisions and reports to the Board on deficiencies or problems observed during the execution.
In January 1–March 26, 2019 the Board of Directors comprised eight members. The Chairman of the Board of Directors was Raimo Voipio, the Vice Chairman was Yrjö Neuvo, and the members were Petri Castrén, Petra Lundström, Mikko Niinivaara, Kaarina Ståhlberg, Pertti Torstila, and Ville Voipio. The Board of Directors' secretary was General Counsel Katriina Vainio.
Composition of the Board of Directors Dec 31, 2019
| Member | Member since | End of term |
Born | Education | Nationality | Main occupation | Shareholding Dec 31, 2019 |
|---|---|---|---|---|---|---|---|
| 1989 | |||||||
| Raimo Voipio | Chairman since | 570,002 (A share) | |||||
| Chairman | 1994 | 2020 | 1955 | M.Sc. (Eng.) | Finnish | Board professional | 454,296 (K share) |
| Ville Voipio | 396,087 (A share) | ||||||
| Vice Chairman | 2015 | 2021 | 1974 | D.Sc. (Tech.) | Finnish | CTO, Si-Tecno Oy | 96,712 (K share) |
| LL.M., MBA | |||||||
| Petri Castrén | 2017 | 2022 | 1962 | (University of Connecticut) |
Finnish | CFO, Kemira Oyj | 2,401 (A share) |
| M.Sc. | Vice President, Nuclear Services, Fortum Power |
||||||
| Petra Lundström | 2014 | 2021 | 1966 | (Tech. Physics) | Finnish | and Heat Oy | 5,801 (A share) |
| Jukka Rinnevaara | 2019 | 2020 | 1961 | M.Sc. (Econ.) | Finnish | President and CEO, Teleste Corporation |
720 (A share) |
| LL.M (Helsinki and Columbia |
General Counsel and M&A, Posti |
||||||
| Kaarina Ståhlberg | 2016 | 2022 | 1966 | Universities) | Finnish | Group Oyj | 5,201 (A share) |
| Tuomas Syrjänen | 2019 | 2022 | 1976 | M.Sc. (El. Eng.) | Finnish | Program Director – AI Renewal, Futurice Oy |
2,070 (A share) |
| Pertti Torstila | 2014 | 2020 | 1946 | M.Sc. (Pol.) | Finnish | Board professional | 5,801 (A share) |
| 988,083 (A share) 551,008 (K share) |
Total
Shareholdings include also shares held by the Board of Directors' controlled organizations.
In accordance with the recommendation 10, all Board members are independent of the company and of significant shareholders of the company.
1,539,091 (Total)
Statement
The Annual General Meeting held on March 26, 2019 confirmed that the number of Board members is eight. Petri Castrén, Petra Lundström, Kaarina Ståhlberg, Pertti Torstila, Raimo Voipio, and Ville Voipio continued as members of the Board of Directors. Jukka Rinnevaara and Tuomas Syrjänen started as new members of the Board. The Chairman of the Board of Directors is Raimo Voipio, and the Vice Chairman is Ville Voipio. The Board of Directors' secretary is General Counsel Katriina Vainio.
| Attendance/ | ||
|---|---|---|
| Member | number of meetings | Attendance % |
| Raimo Voipio (Chairman) | 18/18 | 100 |
| Yrjö Neuvo (Vice Chairman until March 26, 2019) |
3/4 | 75 |
| Petri Castrén | 18/18 | 100 |
| Petra Lundström | 17/18 | 94 |
| Mikko Niinivaara | 4/4 | 100 |
| Jukka Rinnevaara | 14/14 | 100 |
| Kaarina Ståhlberg | 18/18 | 100 |
| Tuomas Syrjänen | 13/14 | 93 |
| Pertti Torstila | 18/18 | 100 |
| Ville Voipio (Vice Chairman as of March 26, 2019) |
18/18 | 100 |
The Board of Directors has two permanent committees: Audit Committee and Remuneration and HR Committee. The members and the chairs of the Committees are appointed annually from among the members of the Board of Directors in accordance with the charter of the respective committee.
The Audit Committee assists the Board of Directors in supervising the company's accounting and asset management, risk management, as well as in organizing internal controls and external and internal audit. The Audit Committee manages its tasks in accordance with the charter approved by the Board of Directors, the Securities Market Association's Finnish Corporate Governance Code, as well as the applicable laws and regulations. The Audit Committee's charter is published as part of the charter of the Board of Directors on the company's website. The Audit Committee reports regularly about its meetings to the Board of Directors.
The Audit Committee comprises at least three members, appointed annually by the Board of Directors from among its members. The members of the committee must be independent of the company, and at least one member must also be independent of significant shareholders of the company. A member of the Audit Committee may not participate in the company's or its group company's daily management.
The Remuneration and HR Committee is responsible for preparing human resources matters pertaining to the compensation of the President and CEO as well as top management, evaluation of the performance of the President and CEO and the Management Group, and to remuneration and incentive plans. Additionally, the Remuneration Committee oversees the performance evaluation and successor planning of top management. The Remuneration and HR Committee's charter is available as part of the charter of the Board of Directors on the company's website. The Audit Committee reports regularly about its meetings to the Board of Directors.
The Remuneration and HR Committee comprises at least three members, appointed annually by the Board of Directors from among its members. The majority of the members of the committee must be independent of the company.
| Committee | Members | Attendance/ number of meetings Attendance % |
|
|---|---|---|---|
| Audit Committee |
Kaarina Ståhlberg (Chair) |
5/5 | 100 |
| Petri Castrén | 5/5 | 100 | |
| Mikko Niinivaara (until March 26, 2019) |
1/1 | 100 | |
| Jukka Rinnevaara (as of March 26, 2019) |
3/4 | 75 | |
| Ville Voipio (as of March 26, 2019) |
4/4 | 100 | |
| Remuneration and HR |
Raimo Voipio (chair until March 26, 2019) |
1/1 | 100 |
| Committee | Ville Voipio (chair as of March 26, 2019) |
4/4 | 100 |
| Petri Castrén | 5/5 | 100 | |
| Petra Lundström (as of March 26, 2019) |
4/4 | 100 | |
| Mikko Niinivaara (until March 26, 2019) |
1/1 | 100 |
All members of the Audit Committee as well as the Remuneration and HR Committee are independent both of the company and of significant shareholders.
Corporate Governance Statement
The Board of Directors appoints the President and CEO. The President and CEO is responsible for the day-to-day management of the company in accordance with the guidelines and instructions given by the Board of Directors and informs the Board of Directors of the development of the company's business and financial situation. The President and CEO is responsible for ensuring that the company's accounting is legally compliant and that its financial affairs have been arranged in a reliable manner. Kjell Forsén has been the President and CEO of Vaisala as well as the Chairman of Vaisala Management Group since 2006. He was born in 1958 and holds a licentiate's degree in technology.
The President and CEO is the Chairman of the Management Group. The Management Group comprises seven members. The Management Group meets at least once a month to assist the President and CEO in developing and implementing the strategy, managing operational business, as well as preparing matters handled by the Board. The Management Group draws up annual operational and financial plans as well as targets related to these plans, monitors the implementation of the plans, and prepares major investments and acquisitions. The President and CEO is responsible for the decisions made by the Management Group. Members of the Management Group are responsible for implementing the decisions in their own areas of responsibility.
Members of the Management Group are the Executive Vice Presidents of both business areas, the Chief Financial Officer, the Executive Vice President of Operations, the Executive Vice President of Human Resources, as well as the Group General Counsel. The General Counsel acts as secretary to the Management Group.
| Director | Member since | Born | Education | Nationality | Position at Vaisala | Shareholding Dec 31, 2019 |
|---|---|---|---|---|---|---|
| Lic.Sc. | ||||||
| Kjell Forsén | 2006 | 1958 | (Tech.) | Finnish | President and CEO | 49,132 (A share) |
| Mari Heusala | 2019 | 1966 | M.Sc. (Econ.) | Finnish | EVP, Human Resources | - |
| M.Sc. | EVP, Industrial Measurements | |||||
| Sampsa Lahtinen | 2013 | 1963 | (El. Eng.) | Finnish | business area | 15,206 (A share) |
| Kaarina Muurinen | 2011 | 1958 | M.Sc. (Econ.) | Finnish | CFO | 29,096 (A share) |
| Vesa Pylvänäinen | 2011 | 1970 | M.Sc. (Econ.) | Finnish | EVP, Operations | 15,212 (A share) |
| M.Sc. (Ind. | ||||||
| Eng.), MBA | EVP, Weather and | |||||
| Jarkko Sairanen | 2016 | 1963 | (INSEAD) | Finnish | Environment business area | 14,776 (A share) |
| Katriina Vainio | 2017 | 1967 | LL.M. | Finnish | EVP, Group General Counsel | 7,888 (A share) |
| Total | 131,310 (A share) |
Shareholdings include also shares held by the Management Group's controlled organizations.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Corporate Governance Statement
The Annual General Meeting decides on the remuneration of the Chairman, Vice Chairman, and Board members as well as on the remuneration of the auditor.
The objective of remuneration is to encourage employees as individuals and as team members to achieve the financial and operational targets set. In determining the remuneration, Vaisala takes into account its financial performance, job grade classification commonly used by peer companies, and external remuneration references. All employees are included in an incentive (STI) plan that promotes the development of net sales and operating result.
Compensation of key executives includes a competitive salary and employee benefits according to local market practices as well as shortterm incentive plans (STI) based on predefined annual performance indicators. Incentive plans promote development of net sales and operating result. The key executives also participate in long-term sharebased incentive plans (LTI), which are based on the development of the company's profitability and total shareholder return (TSR).
The Board of Directors approves the company's incentive plans and their target groups annually. The Board of Directors also decides on the compensation of the President and CEO and approves the compensation of the direct reports of the President and CEO.
The Annual General Meeting held on March 26, 2019 decided that the annual fee payable to the Board members for the term until the close of the Annual General Meeting in 2020 is: the Chairman of the Board of Directors EUR 45,000 and each Board member EUR 35,000. Approximately 40 percent of the annual remuneration will be paid in Vaisala Corporation's series A shares acquired from the market and the rest in cash.
In addition, the Annual General Meeting decided that the compensation fee per attended meeting for the Chairman of the Audit Committee is EUR 1,500 and EUR 1,000 for each member of the Audit Committee, the Chairman and each member of the Remuneration and HR Committee, and any other committee established by the Board of Directors for the term until the close of the Annual General Meeting in 2020. The meeting fees will be paid in cash.
| EUR 1,000 | 2019 | 2018 |
|---|---|---|
| Petri Castrén | 44 | 43 |
| Petra Lundström | 39 | 35 |
| Yrjö Neuvo (until March 26, 2019) | 35 | |
| Mikko Niinivaara (until March 26, 2019) | 2 | 43 |
| Jukka Rinnevaara (as of March 26, 2019) | 37 | |
| Kaarina Ståhlberg | 41 | 43 |
| Tuomas Syrjänen (as of March 26, 2019) | 35 | |
| Pertti Torstila | 35 | 35 |
| Raimo Voipio | 46 | 48 |
| Ville Voipio | 42 | 35 |
| Total | 321 | 317 |
The Board of Directors decides on the remuneration of the President and CEO. The overall compensation consists of a monthly salary, fringe benefits, a pension plan, and an incentive plan (STI) as well as the payment of share-based incentive plan LTI 2016. The maximum annual incentive is limited to 72 percent of the President and CEO's annual salary. The President and CEO belongs to a voluntary pension plan, which defines the retirement age as 62 years.
The notice period is 6 months for the President and CEO and 12 months for the employer. Severance pay and conditions of other severance payments are equal to the respective salary.
The Board of Directors approves the compensation of the direct reports of the President and CEO. Overall compensation of the Management Group members consists of a monthly salary, fringe benefits, pension plan, and an incentive plan (STI) as well as the payment of share-based incentive plan LTI 2016. The maximum annual incentive (STI) is limited
| EUR 1,000 | 2019 | 2018 |
|---|---|---|
| Salary | 515 | 515 |
| Bonuses | 263 | 302 |
| Share-based payment | 514 | 502 |
| Obligatory pension | 135 | 146 |
| Voluntary pension | 120 | 120 |
| Total | 1,547 | 1,586 |
| Total | 3,616 | 3,929 |
|---|---|---|
| Voluntary pension | 242 | 235 |
| Obligatory pension | 342 | 360 |
| Share-based payment | 1,061 | 1,319 |
| Bonuses | 478 | 622 |
| Salary | 1,492 | 1,393 |
| EUR 1,000 | 2019 | 2018 |
to 60 percent of the annual salary. The Management Group members belong to a voluntary pension plan, which defines the optional retirement age as 62 years.
The share issue without payment approved by Vaisala's Annual General Meeting on April 10, 2018 doubled the total number of series K and A shares. All share-related figures have been adjusted to reflect the increased number of shares. Until the end of 2017, the cost of the
Statement
Corporate Governance
share part of the share-based payments corresponded to the value of Vaisala's series A share closing price on the effective date of the incentive plan, and the cash-settled part of the share-based payments was valued at the closing price of the share. As of January 1, 2018, the cost of the share part of the share-based payments as well as the cash-settled (cash) part of the share-based payments correspond to the value of Vaisala's series A share closing price on the effective date of the incentive plan.
On December 16, 2015, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2016. The reward payment corresponded to 49% of the maximum target. On March 5, 2019, a total of 88,452 company's series A shares were conveyed without consideration to the 30 key employees participating in this incentive plan. The rest of the reward was paid in cash. Closing price of Vaisala's series A share was EUR 11.57 on the effective date of the incentive plan. A total expense of EUR 2.3 million was recognized of this plan in 2016–2019.
On December 15, 2016, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2017. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2020. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 400,000 series A shares and the reward payment will correspond to 65% of the maximum target. No reward will be paid if a key employee's employment or service ends before the reward payment date. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2017 to March 2020. Closing price of Vaisala's series A share was EUR 17.90 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 35 persons and the maximum reward payable totals to 237,900 Vaisala's series A shares, including the cash portion.
On February 7, 2018, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the
development of group's profitability in calendar year 2018. The reward will be paid partly in Vaisala's series A shares and partly in cash in
spring 2021. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 320,000 series A shares, and the reward payment will correspond to 55% of the maximum target. No reward will be paid if a key employee's employment or service ends before the reward payment date. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2018 to March 2021. Closing price of Vaisala's series A share was EUR 22.10 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 30 persons and the maximum reward payable totals to 168,970 Vaisala's series A shares, including the cash portion.
On February 12, 2019, the Board of Directors resolved for approximately 45 group key employees a share-based incentive plan that is based on the development of the total shareholder return (TSR) and profitability in 2019–2021. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2022. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 330,000 series A shares. No reward will be paid if a key employee's employment or service ends before the reward payment date. In addition, Vaisala's Board of Directors requires that the President and CEO and each member of the Management Group retains his/her ownership of shares received under this plan until the value of his/her ownership in Vaisala corresponds to at least his/her annual gross base salary. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2019 to March 2022. Closing price of Vaisala's series A share was EUR 19.06 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 45 persons.
On June 28, 2019, Vaisala had conveyed a total of 2,195 company's series A shares without consideration to a person participating in the share-based incentive plans 2017 and 2018.
| MEUR | 2015 | 2016 | 2017 | 2018 | 2019 |
|---|---|---|---|---|---|
| Share-based incentive plan 2015 | 0.5 | 1.1 | 1.6 | -0.1 | |
| Share-based incentive plan 2016 | 0.7 | 1.2 | 0.6 | 0.2 | |
| Share-based incentive plan 2017 | 1.1 | 1.3 | 1.5 | ||
| Share-based incentive plan 2018 | 0.6 | 1.2 | |||
| Share-based incentive plan 2019 | 0.6 | ||||
| Total | 0.5 | 1.8 | 3.9 | 2.5 | 3.5 |
Internal control seeks to ensure the company's compliance with applicable laws, regulations, Code of Conduct, and with other recommendations as well as the reliability of financial and operational reporting. Furthermore, internal control seeks to safeguard the the assets of the company and to ensure overall effectiveness and efficiency of operations to meet strategic, operational, and financial targets. Internal control practices are aligned with the risk management process. The goal of the risk management is to support strategy and achievement of targets by anticipating and reacting to potential business threats and opportunities.
Vaisala's operating model of internal control and risk management related to financial reporting aims to provide sufficient assurance regarding the reliability of financial reporting and that the financial statements have been prepared in accordance with the applicable laws and regulations, accepted accounting principles (IFRS), and other requirements for listed companies. The principal components of internal control are control environment, risk assessment, control activities, communications, and monitoring.
Corporate Governance Statement
The Board of Directors has the overall responsibility for the internal control of financial reporting. The Board of Directors has established a written charter that clarifies its responsibilities and regulates the internal distribution of work of the Board of Directors and its committees. The Board of Directors has appointed the Audit Committee whose task is to ensure that established principles for financial reporting, risk management, and internal control are followed by and to enable appropriate external audit. The President and CEO is responsible for organizing an effective control environment and ongoing work on internal control as regards financial reporting. The internal audit reports all relevant issues to the Audit Committee and the President and CEO.
Internal audit focuses on developing and enhancing controls related to financial reporting by proactively assessing on internal control environment and by monitoring the effectiveness of the control design. Most important internal steering instruments for financial reporting comprise the Code of Conduct, Approval Policy, Treasury Policy, Credit Policy, Disclosure Policy, accounting policies, and other reporting instructions.
Risk assessment as regards financial reporting aims to identify and evaluate most significant threats at the levels of Vaisala, reporting segments, functions, and processes. As a result of risk assessment, the company defines control targets through which it seeks to ensure that the fundamental requirements placed on financial reporting are fulfilled. Information on the development of essential risk areas as well as reactions to the risks are communicated regularly to the Audit Committee.
The President and CEO is operationally responsible for internal controls. Internal control related to financial activities as well as to control of the business and the management has been integrated into Vaisala's business processes. The company has defined and documented significant internal control activities related to its financial statements reporting process as part of business processes. Approval mechanisms, access rights, segregation of duties, authorizations, verifications,
reconciliations, and follow-up of financial reporting are essential internal activities. All business units have their own defined controller function whose representatives participate in planning and evaluating the unit's performance. They ensure that monthly and quarterly financial reporting follows the company's policies and instructions and that all financial reporting is delivered on time. The management follows up the achievement of targets through monthly management reporting routines. The Chief Financial Officer regularly reports the results of the internal control work and the efficiency of the control activities to the Audit Committee.
Vaisala seeks to ensure that the internal and external communication of the company is open, transparent, accurate, and timely. The Disclosure Policy defines how and when information should be given and by whom it is given. It also defines the accuracy and comprehensiveness of the information in order to fulfil the communication obligations. Code of Conduct, Approval Policy, Treasury Policy, Credit Policy, accounting policies, and reporting instructions as well as Disclosure Policy and Insider Policy are available on the company's intranet.
The Board of Directors, the Audit Committee, the President and CEO, and internal audit monitor the effectiveness of internal control related to financial reporting. The monitoring includes follow-up of monthly financial reports, review of the rolling forecasts and plans, as well as reports from internal audit and auditors. Internal audit assesses the effectiveness of operations and adequacy of risk management and reports the risks and weaknesses related to the internal control processes. Internal audit compiles an annual audit plan and reports the status of the plan and findings regularly to the Audit Committee and the Management Group. Furthermore, the Chief Financial Officer, the General Counsel, internal audit, and auditor coordinate audit planning and monitoring regularly.
In 2019, internal audit focused on sales process, contract management, sourcing process, and integration process of acquired companies. The audit confirmed that the reviewed sales process works reliably. Following the integration of the 2018 acquisitions, internal audit verified the effectiveness of the integration process and recommended some improvements to future acquisitions and integrations. Other audits provided suggestions for continuously improving processes and internal controls. Harmonization of the control environment in Vaisala's recent acquisitions was one of the priorities of internal controls, and it will continue during 2020.
Vaisala has defined principles for monitoring and assessing related party transactions as well as keeps a record of related parties. The Board of Directors resolves on all related party transactions that are not made in the ordinary course of business and implemented under arms-length terms.
Vaisala reports related party transactions in a note to financial statements. Vaisala has currently no related party transactions which would be material and in conflict with the ordinary course of business and not implemented under arms-length terms.
The company has one auditor, who must be a public accountant or an audit firm authorized by the Finland Chamber of Commerce. If an audit firm is not chosen to perform the auditing, a deputy auditor must be elected as well. Auditor's term of office covers the current fiscal year and expires at the close of the following Annual General Meeting. Annual General Meeting elects the auditor and decides on the compensation paid to them.
The Annual General Meeting held on March 26, 2019 re-elected Deloitte Oy, Audit Firm, as the Auditor for a term of one year. APA Merja Itäniemi has acted as an auditor with the principal responsibility of the company since March 26, 2014.
Corporate Governance Statement
| EUR 1,000 | 2019 | 2018 |
|---|---|---|
| Audit | 488 | 423 |
| Tax advice | 30 | 22 |
| Statements | 16 | 1 |
| Other fees | 50 | 141 |
| Total | 584 | 587 |
Vaisala maintains project- or event-specific insider lists when needed. 30-day closed window applies to the managers defined by the company before publishing Interim Reports, Half Year Financial Report, Financial Statement Release, and Financial Statements. Closed window ends on the day following the publication day. Closed window also applies to the persons engaged in preparation of those reports. The managers subject to transaction notification obligations comprise the Board of Directors, the President and CEO, as well as members of the Management Group. The company's legal department is responsible for insider management, training, creation and maintenance of project- and event-specific insider lists, and monitoring of the same.
The President and CEO, Chief Financial Officer, and/or the General Counsel, two together, can decide, based on an evaluation of the conditions set out in the Market Abuse Regulation being met, to delay publication of insider information. When the company makes a decision on delay of disclosure, a project- or event-based insider list regarding the inside information will be established. Persons, to whom project- or event-specific inside information is disclosed, are entered into the project- or event-specific insider list.
The objective of Vaisala's risk management is to identify and manage material risks related to strategy implementation and business operations. Vaisala has a Risk Management Policy, which has been approved by the Board of Directors and which covers the company's strategic, operational, hazard, and financial risks. The policy aims to ensure the safety of the company's personnel, operations, and products as well as the continuity and compliance of business operations.
The Board of Directors defines and approves risk management principles and policies and assesses the effectiveness of risk management. The Audit Committee reviews compliance with Risk Management Policy and processes. Vaisala's Risk Management Steering Group comprises key internal stakeholders. The Steering Group is responsible for the operational oversight of the risk management process and for assuring that all significant risks are identified and reported and that risks are acted upon on all necessary organizational levels and in all geographical locations.
Risk management is integrated into key business processes and operations. This is accomplished by incorporating applicable risk identification, assessment, management, and risk reporting actions into the core processes. The most significant risks are reported to the Vaisala Management Group quarterly and to the Audit Committee annually.
Vaisala's strategy and business operations are subject to various risks, which may have an adverse effect on the company. The list on the next page explains some of the risks with their potential impacts and how Vaisala manages those risks today. Risk likelihoods and impacts provided here are estimates, provided by a small group of subject area experts. No quantitative methods have been applied to assess either likelihoods or impacts.
We assess environmental risks as part of our environmental management system. The most significant environmental risks of our operations are related to potential emergency situations that can lead to local contamination. These risks are controlled, for example, as part of our emergency preparedness and our management process for hazardous substances.
Climate change impacts on risks have been assessed. Climate change increases the likelihood of certain risks (H4 Natural disaster, epidemic, civil unrest, terrorism and O1 Business continuity risks related to suppliers). On the other hand, exceptional weather conditions, increasingly disastrous storms, floods, and drought may also provide Vaisala with new business opportunities.
On an individual level, personnel risks relate to occupational health and occupational accidents. On corporate level, the risks are related to the company's ability to retain and attract new talents. These risks are controlled through Vaisala's occupational health and safety system and its continuous development. We also support the well-being of our employees, provide purposeful work, learning opportunities, and an equal work environment, as well as monitor employee satisfaction.
Risks related to human rights violations as well as corruption and bribery impact corporate reputation, brand, and the company's ability to attract the best talent. Other potential consequences of these risks are judicial processes, penalties, contract cancellations, and exclusion from tenders. These risks are managed through recurring and compulsory Code of Conduct trainings as well as audits. Our suppliers sign the Supplier Code of Conduct that sets the requirement level for their operation. Our other core partners, such as distributors and agents, commit to complying with our Code of Conduct, which compliance is assessed and monitored.
| Key risks 2019 | Impact / Likelihood | |
|---|---|---|
| Strategic risks | ||
| S1 | Industry consolidation, increased competition, loss of market leader and price premium position |
medium/high |
| S2 | Lack of success in winning large projects in weather business | medium/medium |
| S3 | Failing to grow new business | medium/medium |
| S4 | The competitive situation of remote wind sensing in China and its slow adoption in aviation applications |
medium/high |
| S5 | Political, legislative, or regulatory changes | medium/medium |
| S6 | Continuation of the weak market situation in weather radar business | low/high |
| H1 | Long disruption in the cleanroom's operation | very high/very low |
|---|---|---|
| H2 | Field service personnel accident caused by working conditions | very high/low |
| H3 | Critical failure of infrastructure supporting digital solutions | low/low |
| H4 | Natural disaster, epidemic, civil unrest, terrorism | very low/medium |
| H5 | Long disruption in radiosonde production | high/very low |
| O1 | Business continuity risks related to suppliers | high/low |
|---|---|---|
| O2 | Cyber risk | high/low |
| O3 | Long unavailability of IT systems | high/low |
| O4 | Delay in a significant product launch | low/medium |
| O5 | Significant reduction in the profitability of a large delivery project | medium/low |
IMPACT
| Financial risks | |||||
|---|---|---|---|---|---|
| F1 | Credit risk | very low/high | |||
| F2 | Liquidity and refinancing risk | very low/very low | |||
| F3 | Financial credit and interest rate risk | very low/very low | |||
| F4 | Currency risk | very low/high | |||
Vaisala is a market leader in many businesses. Loss of that position would lead to a significant reduction in profitability. Competitor mergers into larger companies are taking place especially in the weather business area, which will affect the competitive situation.
Large infrastructure projects have a significant impact on net sales.
Slow growth of Digital Solutions within Weather and Environment business area and Liquid Measurements within Industrial Measurements business area.
The market for lidar technology, used for remote wind sensing, is very competitive in China. The expansion of the applications into aviation business is slow.
Managing risk
Changes in market environment and growing protectionism can lead to loss of market potential or increased cost of accessing the market.
Managing risk
The demand for weather radars remains weak and the market very competitive.
Managing risk
Long disruption of cleanroom operations would have a major impact on
the delivery capability of both business areas. Potential causes could include fire, contamination, or breakdown of key equipment.
A serious accident caused by hazardous working conditions, for example when working at roadsides, in tall towers, or in extreme temperatures.
Service unavailability due to, for example, a communications or software failure or power outage, causing significant harm to customers.
Managing risk
Impaired business environment caused by external events.
Managing risk
Monitoring of the business environment
Risk assessment of business opportunities
A long disruption in production can result in loss of long-term customers.
Managing risk
Long disruption in the operations of strategic suppliers, for example due to a natural disaster, an accident, or bankruptcy.
Managing risk
Interruptions to operations or digital services, financial loss, loss of trade secrets or personal data.
Managing risk
Unavailability of systems leads quickly to interruptions in operations, especially in manufacturing.
Managing risk
A product development project may be delayed due to technical or resource-related issues, leading to additional costs and delayed profit.
Managing risk
The profitability of a project can decrease, for example, due to technical difficulties, misunderstood assumptions during sales, or unfavorable contractual terms.
Managing risk
Managing risk
• Secured terms of payment
F2 Liquidity and refinancing risk Managing risk
• Sustainable capital structure
Managing risk
• Currency hedging
| RAIMO VOIPIO Chairman of the Board of Directors |
VILLE VOIPIO Vice Chairman of the Board of Directors, Member of the Audit |
PETRI CASTRÉN Member of the Audit Committee, Member of |
PETRA LUNDSTRÖM Member of the Remuneration |
|---|---|---|---|
| Committee, Chairman of the Remuneration and HR Committee | the Remuneration and HR Committee | and HR Committee | |
| b. 1955, Finnish citizen, M.Sc. (Engineering) | b. 1974, Finnish citizen, Doctor of Science in Measurement Technology | b. 1962, Finnish citizen, LL.M, MBA (University of Connecticut, USA) |
b. 1966, Finnish Citizen, M.Sc (Technical Physics) |
| Independent member of the Vaisala Board of Directors since 1989 and Chairman since 1994 End of term 2020 |
Independent member of the Vaisala Board of Directors since 2015 End of term 2021 Main occupation: CTO, Si-Tecno Oy, R&D and strategy management |
Independent member of the Vaisala Board of Directors since 2017 End of term 2022 |
Independent member of the Vaisala Board of Directors since 2014 End of term 2021 |
| Main occupation: Board professional | Main occupation: Chief Financial Officer, Kemira Oyj | Main occupation: Vice President, Nuclear Services, Fortum Power and Heat Oy |
|
| Vaisala shares held | Vaisala shares held | Vaisala shares held | Vaisala shares held |
| Dec 31, 2019: 570,002 A shares | Dec 31, 2019: 396,087 A shares | Dec 31, 2019: 2,401 A shares | Dec 31, 2019: 5,801 A shares |
| and 454,296 K shares | and 96,712 K shares | Dec 31, 2018: 1,681 A shares | Dec 31, 2018: 5,081 A shares |
| Dec 31, 2018: 569,076 A shares and 454,296 K shares |
Dec 31, 2018: 395,367 A shares and 96,712 K shares |
||
| JUKKA RINNEVAARA Member of the Audit Committee |
KAARINA STÅHLBERG Chairman of the Audit Committee |
TUOMAS SYRJÄNEN Member of the Board of Directors |
PERTTI TORSTILA Member of the Board of Directors |
| b. 1961, Finnish citizen, M.Sc. (Econ.) | b. 1966, Finnish citizen, LL.M. (Helsinki University and Columbia University, NY) |
b. 1976, Finnish citizen, M.Sc. (El. Eng.) | b. 1946, Finnish citizen, M.Sc. (Political Sciences) |
| Independent member of the Vaisala Board of Directors since 2019 |
Independent member of the Vaisala Board of Directors since 2016 End of term 2022 |
Independent member of the Vaisala Board of Directors since 2019 |
Independent member of the Vaisala Board of Directors since 2014 |
| End of term 2020 Main occupation: President and CEO, Teleste Corporation |
Main occupation: General Counsel and M&A, Member of the Executive Board, Posti Group Oyj |
End of term 2022 Main occupation: Program Director – AI Renewal, Futurice Oy |
End of term 2020 Main occupation: Board professional |
| Vaisala shares held | Vaisala shares held | Vaisala shares held | Vaisala shares held |
| Dec 31, 2019: 720 A shares | Dec 31, 2019: 5,201 A shares | Dec 31, 2019: 2,070 A shares | Dec 31, 2019: 5,801 A shares |
| Dec 31, 2018: - | Dec 31, 2018: 4,481 A shares | Dec 31, 2018: - | Dec 31, 2018: 5,081 A shares |
Shareholdings include direct holdings and shares held by interest parties and controlled organizations. Read full CV information on the company's website at vaisala.com.
Board of Directors
| KJELL FORSÉN President and CEO, Chairman of Management Group since 2006 |
MARI HEUSALA Executive Vice President, Human Resources since 2019 |
SAMPSA LAHTINEN Executive Vice President, Industrial Measurements since 2013 |
KAARINA MUURINEN Chief Financial Officer since 2011 |
|---|---|---|---|
| b. 1958, Finnish citizen, Lic.Sc. (Tech.) | b. 1966, Finnish citizen, M.Sc. (Econ.) | b. 1963, Finnish citizen, M.Sc. (El. Eng.) | b. 1958, Finnish Citizen, M.Sc. (Econ.) |
| Vaisala shares held Dec 31, 2019: 49,132 A shares Dec 31, 2018: 34,552 A shares |
Vaisala shares held Dec 31, 2019: - Dec 31, 2018: - |
Vaisala shares held Dec 31, 2019: 15,206 A shares Dec 31, 2018: 7,430 A shares |
Vaisala shares held Dec 31, 2019: 29,096 A shares Dec 31, 2018: 21,320 A shares |
| VESA PYLVÄNÄINEN | JARKKO SAIRANEN | KATRIINA VAINIO |
|---|---|---|
| Executive Vice President, | Executive Vice President, | Executive Vice President, |
| Operations since 2011 | Weather and Environment since 2016 | Group General Counsel since 2017 |
| b. 1970, Finnish citizen, M.Sc. (Econ.) | b. 1963, Finnish citizen, M.Sc. (Ind. Eng.), MBA (INSEAD) | b. 1967, Finnish citizen, LL.M. |
| Vaisala shares held | Vaisala shares held | Vaisala shares held |
| Dec 31, 2019: 15,212 A shares | Dec 31, 2019: 14,776 A shares | Dec 31, 2019: 7,888 A shares |
| Dec 31, 2018: 11,324 A shares | Dec 31, 2018: 7,000 A shares | Dec 31, 2018: 4,972 A shares |
Shareholdings include also shares held by the Management Groups' controlled organizations. Read full CV information on the company's website at vaisala.com.
Vaisala Corporation's Annual General Meeting will be held on Tuesday, April 7, 2020 at 6:00 p.m. Finnish time at Vaisala Corporation's head office, Vanha Nurmijärventie 21, 01670 Vantaa, Finland. The reception of persons who have registered for the meeting will commence at 5:00 p.m.
A shareholder, who wishes to participate in the Annual General Meeting, may register for the Meeting by giving a prior notice of participation no later than on April 2, 2020 at 4:00 p.m.
A prior notice of participation can be given:
Possible proxy documents should be delivered in originals to Vaisala Oyj, Päivi Aaltonen, PL 26, 00421 Helsinki, Finland or by email to [email protected] before the end of the registration time.
The Board of Directors proposes to the Annual General Meeting a dividend of EUR 0.61 per share for the fiscal year 2019 to be paid. The dividend would be paid to shareholders registered in the Register of Shareholders held by Euroclear Finland Ltd on the record date of the dividend distribution, April 9, 2020. The Board of Directors proposes that the dividend will be paid on April 20, 2020.
Vaisala's shareholders are kindly requested to report written changes of address to the bank where they have their book entry account.
Vaisala Corporation has two classes of shares: the listed series A shares and the non-listed series K shares. The Vaisala series A shares are listed on the Nasdaq Helsinki and are registered at Euroclear Finland Ltd.
Vaisala Corporation publishes financial information in Finnish and English. All materials are available on Vaisala's website at vaisala.com.
The printed Finnish annual report will only be mailed upon request. The company's mailing list for financial reports can be joined on Vaisala's website at vaisala.com.
Silent period begins 30 calendar days before the publishing of the Interim Reports, Half Year Financial Report, and Financial Statement Release and lasts until the publishing of the Interim Reports, Half Year Financial Report, and Financial Statement Release. Exceptions to this rule are the Annual General Meeting (if held during the silent period) and the publishing of a stock exchange release regarding a significant business event and the related communication. During silent periods, Vaisala's spokespersons refrain from discussing and commenting on issues related to the company's financial performance or meeting with capital market representatives.
Comprehensive investor relations pages and investor relations contact information can be found at vaisala.com/investors.
Key figures Board of Directors' Report Financial statements 2019 Auditor's report 94 95 109 173
93
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Americas: North and South America APAC: Asia Pacific Americas: North and South America APAC: Asia Pacific EMEA: Europe, Middle-East and Africa
| 2019 | 2018 | 2017 | 2016 | 2015 | |
|---|---|---|---|---|---|
| Net sales, MEUR | 403.6 | 348.8 | 332.6 | 319.1 | 318.5 |
| Exports and international operations, % | 98.0 | 98.0 | 97.0 | 98.0 | 98.0 |
| Gross profit, % | 54.8 | 53.1 | 52.3 | 51.6 | 51.1 |
| Operating result, MEUR | 41.1 | 38.9 | 40.9 | 22.3 | 29.6 |
| % of net sales | 10.2 | 11.1 | 12.3 | 7.0 | 9.3 |
| Result before taxes, MEUR | 40.2 | 37.5 | 38.1 | 22.1 | 33.0 |
| % of net sales | 10.0 | 10.8 | 11.5 | 6.9 | 10.4 |
| Result, MEUR | 33.6 | 29.5 | 27.2 | 18.8 | 27.5 |
| % of net sales | 8.3 | 8.5 | 8.2 | 5.9 | 8.6 |
| Research and development costs, MEUR | 52.8 | 45.4 | 39.6 | 38.0 | 36.1 |
| % of net sales | 13.1 | 13.0 | 11.9 | 11.9 | 11.3 |
| Depreciation, amortization and impairment, MEUR | 23.5 | 12.1 | 9,7 | 24.1 | 15.1 |
| 2019 | 2018 | 2017 | 2016 | 2015 | |
|---|---|---|---|---|---|
| Cash and cash equivalents, MEUR | 56.4 | 72.7 | 91.3 | 72.4 | 59.2 |
| Equity, MEUR | 198.3 | 182.9 | 185.4 | 178.5 | 181.3 |
| Statement of financial position total, MEUR | 361.5 | 334.4 | 273.8 | 255.0 | 264.0 |
| Return on equity, % | 17.7 | 16.0 | 15.0 | 10.5 | 15.7 |
| Solvency ratio, % | 55.7 | 55.6 | 68.9 | 71.1 | 69.7 |
| Interest-bearing liabilities, MEUR | 51.5 | 40.5 | - | 0.0 | 0.0 |
| Gearing, % | -2.4 | -17.6 | -49.2 | -40.6 | -32.6 |
| Capital expenditure, MEUR | 26.8 | 14.5 | 8.5 | 7.7 | 8.3 |
| % of net sales | 6.6 | 4.2 | 2.5 | 2.4 | 2.6 |
| Cash flow from operating activities, MEUR | 40.8 | 48.3 | 49.2 | 41.8 | 38.8 |
| Orders received, MEUR | 419.4 | 334.2 | 346.3 | 311.3 | 320.0 |
| Order book Dec 31, MEUR | 139.0 | 120.6 | 124.8 | 118.0 | 129.2 |
| Personnel expenses, MEUR | 157.7 | 133.6 | 129.9 | 128.4 | 130.0 |
| Employees, average | 1,829 | 1,678 | 1,592 | 1,590 | 1,611 |
| Employees Dec 31 | 1,837 | 1,816 | 1,608 | 1,569 | 1,588 |
| 2019 | 2018 | 2017 | 2016 | 2015 | |
|---|---|---|---|---|---|
| Earnings/share (EPS), EUR | 0.94 | 0.82 | 0.76 | 0.53 | 0.76 |
| Earning/share (EPS), diluted, EUR | 0.93 | 0.81 | 0.75 | 0.52 | 0.76 |
| Cash flow from business operations/share, EUR |
1.14 | 1.35 | 1.38 | 1.17 | 1.08 |
| Shareholders equity/share, EUR | 5.52 | 5.11 | 5.20 | 5.00 | 5.03 |
| Dividend/share, EUR | *0.61 | 0.58 | 1.05 | 0.50 | 0.48 |
| Dividend/earnings, % | **65.2 | 70.7 | 138.2 | 95.2 | 62.5 |
| Effective dividend yield, % | **1.92 | 3.51 | 4.72 | 2.97 | 4.01 |
| Price/earnings (P/E) | 33.78 | 20.12 | 29.28 | 32.10 | 15.75 |
| A share trading | |||||
| highest price, EUR | 32.80 | 23.90 | 24.45 | 18.48 | 13.51 |
| lowest price, EUR | 15.95 | 15.85 | 15.94 | 10.91 | 10.71 |
| volume weighted average price, EUR | 23.56 | 20.14 | 20.13 | 14.14 | 12.17 |
| closing price, EUR | 31.75 | 16.50 | 22.25 | 16.85 | 11.97 |
| 2019 | 2018 | 2017 | 2016 | 2015 | |
|---|---|---|---|---|---|
| Market capitalization on Dec 31***, MEUR | 1,139.2 | 590.5 | 794.1 | 601.6 | 431.6 |
| A shares traded | |||||
| pieces | 3,442,439 | 3,710,610 | 4,298,504 | 4,062,272 | 5,015,344 |
| % of total series | 11.6 | 12.5 | 14.5 | 13.7 | 16.9 |
| Number of shares, pieces | 36,436,728 | 36,436,728 | 36,436,728 | 36,436,728 | 34,436,728 |
| A shares, pieces | 29,685,330 | 29,658,066 | 29,658,066 | 29,658,026 | 29,658,026 |
| K shares, pieces | 6,751,398 | 6,778,662 | 6,778,662 | 6,778,702 | 6,778,702 |
| Outstanding shares Dec 31***, pieces | 35,880,739 | 35,790,092 | 35,692,000 | 35,702,974 | 36,053,628 |
* Proposal by the Board of Directors
** Calculated according to the proposal by the Board of Directors
*** Including series A and K shares, excluding treasury shares. Series K shares are valued using the closing price for the series A share on the last trading day of December.
The share issue without payment approved by Vaisala's Annual General Meeting on April 10, 2018 doubled the total number of series K and A shares. All share related figures in this Board of Directors' Report have been adjusted to reflect the increased number of shares.
Trading information is based on Nasdaq Helsinki Ltd. statistics.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Board of Directors' Report 2019
| Earnings/share, EUR | = | Result for the period +/- non-controlling interest Average number of shares outstanding |
|---|---|---|
| Cash flow from business operations/share, EUR |
= | Cash flow from business operations Number of shares outstanding at the end of the period |
| Equity/share, EUR | = | Total equity attributable to owners of parent company Number of shares outstanding at the end of the period |
| Dividend/share, EUR | = | Tilikaudelta jaettava osinko Ulkona olevien osakkeiden lukumäärä kauden lopussa |
| Dividend/earnings, % | = | Dividend x 100 Result for the period +/- non-controlling interest |
| Effective dividend yield, % | = | Dividend / share x 100 Closing price for the series A share at the end of the period |
| Price/earnings (P/E) | = | Closing price for the series A share at the end of the period Earnings / share |
| Market capitalization, MEUR | = | Closing price for the series A share x number of shares shares outstanding |
Vaisala presents in its financial reporting alternative performance measures, which describe businesses' financial performance and its development as well as investments and return on equity. In addition to accounting measures which are defined or specified in IFRS, alternative performance measures complement and explain presented information. Vaisala presents in its financial reporting the following alternative performance measures:
| Net sales with comparable exchange rates |
= Net sales converted to euros with exchange rates used during comparison period |
|---|---|
| Gross margin, % | = Net sales - Cost of sales x 100 Net sales |
| Operating result | = Result before income taxes, financial income and expenses, and share of result in associated company as presented in Consolidated Statement of Income. Operating result describes profitability and development of business areas' performance. |
| Result before taxes | = Result before taxes as presented in Consolidated Statement of Income. |
| Return on equity (ROE), % | = Result for the period x 100 Total equity (average) |
| Solvency ratio, % | = Total equity x 100 Statement of financial position total – advances received |
| Investmets | = Gross investments in non-current intangible assets as well as property, plant and equipment |
| Order book | = Undelivered customer orders at the end of the period |
| Gearing, % | = Interest-bearing liabilities – cash and cash equivalents x 100 Total equity |
| MEUR | 2019 | 2018 | Change | FX* |
|---|---|---|---|---|
| Orders received | 419.4 | 334.2 | 26% | 23% |
| Order book, end of period | 139.0 | 120.6 | 15% |
* Change with comparable exchange rates
In 2019, orders received increased by 26% compared to previous year and totaled EUR 419.4 (334.2) million. Orders received increased in both business areas and in all geographical areas following evenly strong order flow throughout the year. Growth was strongest in EMEA. Orders received growth was mainly generated by acquired businesses as well as increase in medium-sized and large orders in Weather and Environment Business Area. Growth of orders received without currency impact and acquisitions was 12%.
At the end of December 2019, order book amounted to EUR 139.0 (120.6) million and increased by 15% compared to previous year. Majority of order book growth came from Weather and Environment Business Area in Europe. EUR 13 million weather infrastructure project order with the National Meteorology Agency in Ethiopia, announced in October 2019, is not included in order book, as the order will be booked after the ratification by the Ethiopian Parliament. EUR 101.4 (91.0) million of the order book is scheduled to be delivered in 2020.
| MEUR | 2019 | 2018 | Change | FX** |
|---|---|---|---|---|
| Net sales | 403.6 | 348.8 | 16% | 13% |
| Products | 278.5 | 230.5 | 21% | |
| Projects | 73.2 | 70.0 | 5% | |
| Services | 51.9 | 48.3 | 7% | |
| Gross margin, % | 54.8 | 53.1 | ||
| Operating expenses | 177.3 | 148.3 | 20% | |
| R&D expenditure | 52.8 | 45.4 | 16% | |
| % of net sales | 13.1 | 13.0 | ||
| Amortization* | 9.6 | 3.8 | ||
| Operating result | 41.1 | 38.9 | ||
| % of net sales | 10.2 | 11.1 | ||
* Amortization of intangible assets related to the acquired businesses ** Change with comparable exchange rates
In 2019, net sales grew by 16% compared to previous year and were EUR 403.6 (348.8) million. Operations outside Finland accounted for 98 (98) % of net sales. Foreign currency translation impact on net sales growth was EUR 8 million, evenly distributed between business areas. Net sales grew in both business areas and in all geographical areas, EMEA growing strongest by 31%. Growth of net sales was strong in product business due to the acquired businesses, but also organic growth was strong. Growth of net sales without currency impact and acquisitions was 4%.
| MEUR | 2019 | 2018 | Change |
|---|---|---|---|
| Americas | 149.7 | 136.8 | 9% |
| APAC | 119.6 | 109.6 | 9% |
| EMEA | 134.3 | 102.3 | 31% |
| Total | 403.6 | 348.8 | 16% |
In 2019, gross margin improved to 54.8 (53.1) % as a result of net sales growth and related economies of scale obtained in product business. In 2019, operating result increased from previous year and was EUR 41.1 (38.9) million, 10.2 (11.1) % of net sales. Net sales growth and improved gross margin increased operating result. Growth required also increase in operating expenses. Operating expenses included EUR 9.6 (3.8) million of non-cash amortization of intangible assets. Operating result declined due to costs in other operating income and expenses of EUR -2.7 (2.1) million. These costs included costs related to Vaisala's digital business refocus and reorganization, one-off expense related to a lease contract termination, and expenses related to termination of a product line in the US.
In 2019, financial income and expenses were EUR -1.1 (-1.5) million. This was mainly a result of USD currency hedging. Income taxes were EUR 6.6 (8.0) million and effective tax rate 16.3 (21.4) %. The low effective tax rate is especially result of a reassessment of deferred tax assets arising from unused tax losses carried forward in the companies acquired in 2018. Result before taxes was EUR 40.2 (37.5) million and result for the period EUR 33.6 (29.5) million. Earnings per share was EUR 0.94 (0.82).
Vaisala's financial position remained strong in 2019. Cash and cash equivalents decreased to EUR 56.4 (72.7) million at the end of December. Dividend payment amounted to EUR 20.8 (37.6) million in the second quarter. At the end of December, statement of financial position totaled EUR 361.5 (334.4) million. As a result of IFRS 16 Leases implementation, total assets increased by EUR 12.3 million and total liabilities by EUR 11.3 million.
In 2019, cash flow from operating activities totaled EUR 40.8 (48.3) million. Increase of EUR 7.5 million in inventories and EUR 8.0 million in receivables increased net working capital, which offset positive cash flow development of increased operating result.
On December 31, 2019, Vaisala had interest-bearing loans from financial institutions totaling EUR 40.2 (40.5) million, of which EUR 40.0 million related to utilized revolving credit facility. In addition, interest-bearing lease liabilities totaled EUR 11.3 (0.0) million.
In 2019, capital expenditure in intangible assets and property, plant and equipment totaled EUR 26.8 (14.5) million. Capital expenditure was mainly related to investments in machinery and equipment to develop and maintain Vaisala's production and service operations as well as to building projects in Vantaa, Finland and Louisville, Colorado US. On December 31, 2019, commitments related to Vantaa and Louisville building projects totaled EUR 9 (1) million.
Depreciation, amortization and impairment were EUR 23.5 (12.1) million. This included EUR 9.5 (3.8) million of amortization of identified intangible assets related to the acquired businesses.
On October 1, 2019 Vaisala closed acquisition of professional business-to-business weather services from a Finnish weather forecast services company Foreca Oy. This acquisition strengthens Vaisala's digital offering for weather-dependent operations by bringing valuable skills and assets in data analytics, forecasting, and impact analysis. Nine employees joined Vaisala.
In August, Vaisala announced refocus and reorganization of its digital business' operations. At the same time, Digital Solutions business line was renamed to Vaisala Digital. To drive business performance and innovation speed, Vaisala Digital focuses on transportation, renewable energy, lightning and data-driven operations by building up enhanced competences in machine learning and artificial intelligence and by consolidating its data centers into two locations. While a new team for co-located transportation solutions development, including roads, airports and ports, will be ramped up in Finland, 21 employees in the US were made redundant. These measures are estimated to bring an annual saving of some EUR 3 million from 2020 onwards. Related to these measures, Vaisala booked EUR 1.1 million of reorganization costs during the second half of 2019.
The average number of personnel employed in 2019 was 1,829 (1,678). At the end of December 2019, the number of employees was 1,837 (1,816). 74 (73) % of employees were located in EMEA, 16 (19) % in Americas and 9 (8) % in APAC. 62 (61) % of employees were based in Finland.
| Dec 31, 2019 |
Dec 31, 2018 |
Change | |
|---|---|---|---|
| Finland | 1,142 | 1,102 | 40 |
| EMEA (excluding Finland) | 224 | 225 | -1 |
| Americas | 297 | 339 | -42 |
| APAC | 174 | 150 | 24 |
| Total | 1,837 | 1,816 | 21 |
| Dec 31, 2019 |
Dec 31, 2018 |
Change | |
|---|---|---|---|
| Sales and marketing | 449 | 459 | -10 |
| R&D | 407 | 399 | 8 |
| Operations | 441 | 423 | 18 |
| Services | 347 | 347 | 0 |
| Administration | 193 | 188 | 5 |
| Total | 1,837 | 1,816 | 21 |
Number of employees in Finland increased mainly as a result of expansion of R&D activities and acquisition of professional businessto-business weather services from Foreca Oy. In Americas, number of employees declined due to termination of a product line and reorganization of Vaisala Digital. Number of employees in APAC increased and 19 of the new employees joined Vaisala's new factory in Shanghai, China.
In 2019, personnel expenses totaled EUR 157.7 (133.6) million.
The share issue without payment approved by Vaisala's Annual General Meeting on April 10, 2018 doubled the total number of series K and A shares. All share-related figures have been adjusted to reflect the increased number of shares. Until the end of 2017, the cost of the share part of the share-based payments corresponded to the value of Vaisala's series A share closing price on the effective date of the incentive plan, and the cash-settled part of the share-based payments was valued at the closing price of the share. As of January 1, 2018, the cost of the share part of the share-based payments as well as the cash-settled (cash) part of the share-based payments correspond to the value of Vaisala's series A share closing price on the effective date of the incentive plan.
On December 18, 2014, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2015. The reward payment corresponded to 74% of the maximum target. On March 12, 2018, a total of 95,092 company's series A shares were conveyed without consideration to the 27 key employees participating in this incentive plan. The rest of the reward was paid in cash. Closing price of Vaisala's series A share was EUR 12.08 on the effective date of the incentive plan. A total expense of EUR 3.2 million was recognized of this plan in 2015–2018.
On December 16, 2015, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2016. The reward payment corresponded to 49% of the maximum target. On March 5, 2019, a total of 88,452 company's series A shares were conveyed without consideration to the 30 key employees participating in this incentive plan. The rest of the reward was paid in cash. Closing price of Vaisala's series A share was EUR 11.57 on the effective date of the incentive plan. A total expense of EUR 2.3 million was recognized of this plan in 2016–2019.
On February 10, 2016, the Board of Directors resolved for a sharebased incentive plan, in which the earning criteria was uninterrupted employment of certain group employees for a defined number of years. This share-based incentive plan ended in March 2018, and the remaining reward, corresponding to 3,000 Vaisala's series A shares including the cash portion, was conveyed without consideration to the key employees participating in this incentive plan. The rest of the reward was paid in cash. A total expense of EUR 0.3 million was recognized of this plan in 2016–2018.
On December 15, 2016, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2017. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2020. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 400,000 series A shares and the reward payment will correspond to 65% of the maximum target. No
reward will be paid if a key employee's employment or service ends before the reward payment date. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2017 to March 2020. Closing price of Vaisala's series A share was EUR 17.90 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 35 persons and the maximum reward payable totals to 237,900 Vaisala's series A shares, including the cash portion.
On February 7, 2018, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2018. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2021. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 320,000 series A shares, and the reward payment will correspond to 55% of the maximum target. No reward will be paid if a key employee's employment or service ends before the reward payment date. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2018 to March 2021. Closing price of Vaisala's series A share was EUR 22.10 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 30 persons and the maximum reward payable totals to 168,970 Vaisala's series A shares, including the cash portion.
On February 12, 2019, the Board of Directors resolved for approximately 45 group key employees a share-based incentive plan that is based on the development of the total shareholder return (TSR) and profitability in 2019–2021. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2022. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 330,000 series A shares. No reward will be paid if a key employee's employment or service ends before the reward payment date. In addition, Vaisala's Board of Directors requires that the President and CEO and each member of the Management Group retains his/her ownership of shares received under this plan until the value of his/her ownership in Vaisala corresponds to at least his/her annual gross base
salary. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2019 to March 2022. Closing price of Vaisala's series A share was EUR 19.06 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 45 persons.
On June 28, 2019, Vaisala conveyed a total of 2,195 company's series A shares without consideration to a person participating in the sharebased incentive plans 2017 and 2018.
| EUR million | 2015 | 2016 | 2017 | 2018 | 2019 |
|---|---|---|---|---|---|
| Share-based incentive plan 2015 |
0.5 | 1.1 | 1.6 | -0.1 | |
| Share-based incentive plans 2016 |
0.7 | 1.2 | 0.6 | 0.2 | |
| Share-based incentive plan 2017 |
1.1 | 1.3 | 1.5 | ||
| Share-based incentive plan 2018 |
0.6 | 1.2 | |||
| Share-based incentive plan 2019 |
0.6 |
| MEUR | 2019 | 2018 | Change | FX** |
|---|---|---|---|---|
| Orders received | 276.2 | 215.2 | 28% | 27% |
| Order book, end of period | 122.3 | 104.9 | 17% | |
| Net sales | 261.3 | 232.3 | 12% | 11% |
| Products | 149.0 | 125.4 | 19% | |
| Projects | 73.2 | 70.0 | 5% | |
| Services | 39.1 | 36.9 | 6% | |
| Gross margin, % | 49.9 | 48.6 | ||
| Operating expenses | 113.0 | 96.7 | 17% | |
| R&D expenditure | 34.0 | 30.5 | 12% | |
| of net sales, % | 13.0 | 13.1 | ||
| Amortization* | 6.8 | 3.8 | ||
| Operating result | 17.7 | 17.7 | ||
| of net sales, % | 6.8 | 7.6 |
* Amortization of intangible assets related to the acquired businesses ** Change with comparable exchange rates
Weather and Environment Business Area's 2019 orders received increased by 28% compared to previous year and totaled EUR 276.2 (215.2) million. Growth of orders received was exceptionally strong in all regions, Europe growing strongest by 35%. Orders received of mediumsized and large orders increased. Orders included e.g. a EUR 15 million order for weather observation systems for 31 airports in Argentina, a EUR 7 million order for a new road weather station network in Sweden, and a large order for autosondes from Australia. Growth of orders received without currency impact and acquisitions was 15%.
At the end of December 2019, Weather and Environment Business Area's order book amounted to EUR 122.3 (104.9) million and increased by 17% compared to previous year. Order book for transportation customer segment increased especially in Europe and in Americas. In meteorology customer segment, order book for capacity building projects declined following deliveries of ongoing projects. EUR 13 million weather infrastructure project order with the National Meteorology Agency in Ethiopia, announced in October 2019, is not included in order book, as the order will be booked after the ratification by the Ethiopian Parliament. EUR 86.6 (76.8) million of the order book is scheduled to be delivered in 2020.
Weather and Environment Business Area's 2019 net sales grew by 12% compared to previous year and were EUR 261.3 (232.3) million. Net sales grew in all regions and growth was around 20% in Asia Pacific, Middle East and Africa region and in Europe. Net sales growth was strong in product business. Large multi-year projects in Vietnam, Bahamas, Argentina, Sweden, Australia and Alaska in the US, generated around 18 million net sales in 2019. Growth of net sales without currency impact and acquisitions was 2%. Net sales growth and related economies of scale obtained in product business increased gross margin to 49.9 (48.6) %. Gross margin in project business improved slightly and in services business gross margin was stable.
Weather and Environment Business Area's 2019 operating result was at previous year's level and totaled EUR 17.7 (17.7) million, 6.8 (7.6) % of net sales. Operating expenses increased in all cost categories mainly due to the acquired businesses and included EUR 6.8 (3.8) million of amortization of intangible assets related to the acquired businesses.
| MEUR | 2019 | 2018 | Change | FX** |
|---|---|---|---|---|
| Orders received | 143.2 | 119.0 | 20% | 17% |
| Order book, end of period | 16.8 | 15.7 | 7% | |
| Net sales | 142.3 | 116.4 | 22% | 18% |
| Products | 129.5 | 105.1 | 23% | |
| Services | 12.8 | 11.4 | 13% | |
| Gross margin, % | 63.9 | 62.1 | ||
| Operating expenses | 63.4 | 48.5 | 31% | |
| R&D expenditure | 18.8 | 14.9 | 26% | |
| of net sales, % | 13.2 | 12.8 | ||
| Amortization* | 2.8 | 0.0 | ||
| Operating result | 26.1 | 23.9 | ||
| of net sales, % | 18.4 | 20.5 |
* Amortization of intangible assets related to the acquired businesses
** Change with comparable exchange rates
Industrial Measurements Business Area's 2019 orders received increased by 20% compared to previous year and totaled EUR 143.2 (119.0) million. Growth of orders received was strong in all regions. Growth of orders received without currency impact and acquisitions was 6%.
At the end of December 2019, Industrial Measurements Business Area's order book amounted to EUR 16.8 (15.7) million and increased by 7% compared to previous year. Order book increased in continuous monitoring systems and in services business. EUR 14.8 (14.3) million of the order book is scheduled to be delivered in 2020.
Industrial Measurements Business Area's 2019 net sales grew by 22% compared to previous year and were EUR 142.3 (116.4) million. Net sales grew strongly in all regions. Instruments generated one fourth of net sales growth and half of the growth was generated by acquisition of liquid measurements business. Growth of net sales without currency
impact and acquisitions was 8%. Gross margin improved to 63.9 (62.1) % as a result of net sales growth and related economies of scale obtained in product business as well as positive currency impact. In addition, gross margin in services business developed positively.
Industrial Measurements Business Area's 2019 operating result increased compared to previous year and was EUR 26.1 (23.9) million, 18.4 (20.5) % of net sales. Net sales growth and gross margin improvement increased operating result. However, operating expenses increased in all cost categories and more than half of the increase came from the acquired business. Operating expenses included EUR 2.8 (0.0) million of amortization of intangible assets related to the acquired business. In addition, operating result included one-off expense related to a lease contract termination.
Vaisala's headquarters are located in Vantaa, Finland. On December 31, 2019, Vaisala had subsidiaries in Australia, Brazil, Canada, China, Finland, France, Germany, India, Japan, Kenya, Malaysia, Mexico, United Kingdom and United States. The parent company has branches in Argentina and Colombia. In addition, Vaisala has permanent establishments and offices in South Korea, Sweden and United Arab Emirated. K-Patents Oy and Janesko Oy were merged into Vaisala Corporation on August 31, 2019.
The Annual General Meeting held on March 26, 2019 confirmed that the number of the Board members is eight.
Members of the Board of Directors on December 31, 2019
During the second quarter, Vaisala's Board of Directors approved strategy for 2019–2023 and updated long-term financial targets. Fundamentals of profitable growth are reliable products and solutions that are based on leading technologies, perform with superb quality, create value for our customers and optimize total cost of ownership.
Industrial Measurements Business Area drives profitable growth through product leadership strategy in gas and liquid measurement technologies. In addition to Business Area's flagship markets, high-end humidity and high-end carbon dioxide, growth is sought from liquid measurements, continuous monitoring systems and power industry applications. Target is to exceed Vaisala's average growth. Objective is to win by most reliable measurements, best customer experience, fast delivery as well as excellent sales and service capabilities.
Industrial Measurements Business Area met its objective to exceed Vaisala's average growth with 22% of net sales growth. Business area's flagship markets, high-end humidity and high-end carbon dioxide, generated one fourth of business area's net sales growth in 2019 and half of the growth was generated by acquisition of liquid measurements business. During the year, continuous monitoring systems reached 30% growth compared to previous year. In industrial measurements, power industry applications had the highest growth. K-Patents in Finland was merged, and its production was moved to Vaisala's premises in Vantaa. During the year, sales and marketing, research and development and support functions of K-Patents were integrated to Vaisala's operative units and are now fully operating as part of Vaisala. Expansion of production to liquid measurements products was a demanding project, however, delivery capability remained on target level.
Industrial Measurements Business Area launched a disruptive biogas measurement instrument, which simultaneously measures methane, carbon dioxide and humidity in demanding environments. This equipment is optimized for biogas production processes.
Industrial Measurements Business Area also launched new humidity, dew point and moisture in oil probes to Indigo product family. These new options for humidity, dew point and moisture in oil measurements bring more possibilities for industries to save energy, optimize processes, and improve product quality. They will improve customers' process efficiencies by providing accurate and reliable measurement data. In addition, Industrial Measurements Business Area released version
5.1 of viewLinc continuous monitoring system with several new features. These include extended interoperability with other computerized systems, easy and cost-effective integration of third-party devices and more flexible alarming with mobile devices and local devices. The business area also released temperature measurement probes for wireless data logger, which is intended as a data collection point in a viewLinc monitoring system. The temperature measurement range covers wide range of various temperatures in life science applications including -200°C liquified nitrogen containers and higher range up to incubators and stability chambers. In early 2019, Vaisala's wireless viewLinc continuous monitoring system won the annual Global Quality Innovation Award 2018. viewLinc was awarded for its usability and reliable system design, which is utilizing the latest technologies in an innovative way.
Weather and Environment Business Area's strategic intent is to remain undisputable global leader for weather observations. Business Area's strategy has four pillars: offer industry-leading products for weather observations, strive for excellence in large system project deliveries, develop digital solutions for selected weather critical operations, and expand into environmental measurements with urban air quality as spearhead. Objective is to win by focusing R&D in instrument and weather radar offering renewal, driving growth of wind lidar business, and developing innovative digital solutions targeted to intelligent transportation market.
Weather and Environment Business Area made excellent progress in large system project deliveries. Large multi-year projects in Vietnam, Bahamas, Argentina, Sweden, Australia and Alaska in the US generated one fourth of business area's project net sales in 2019. During the year, Vaisala refocused and reorganized its digital business' operations to bring annual savings of some EUR 3 million from 2020 onwards. Implementation of changes was completed, and impacts were already visible in the fourth quarter results. Leopshere's wind lidar business, which was acquired in late 2018, generated more than 10% of business area's net sales and about one third of the growth. Integration of Leosphere was focusing on sales and marketing, improvements in production and supply chain, and implementation of ERP and other IT applications. ERP implementation was completed during the second quarter.
Weather and Environment Business Area delivered the first forward scatter, a unique 3-in-1 device that includes a state-of-art visibility,
present weather and precipitation quantification sensor. This forward scatter introduced Vaisala's latest security platform to prevent unauthorized access and running of unauthorized software. It has encrypted and secured communication, unique device activation code and secure remote software update capability.
Weather and Environment Business Area expanded its weather radar offering to include X-band radars. Smaller size and lower cost of X-band radar makes it an ideal gap filler. It is also suitable for airports. In difficult terrain, it improves capability to reliably detect snow, rain, and other weather activity.
In addition, Weather and Environment Business Area introduced a solution to transportation customer segment, which combines road surface data from a mobile sensor and computer vision both installed in vehicles. The solution provides customers with timely, accurate, easily accessible, and critical data in order to operate more efficiently and safely.
Weather and Environment Business Area also expanded its offering with a buoy-ready Windcube system to enable enhanced offshore wind resource assessment, even in harsh environments. The ability to measure wind speeds and direction from a floating lidar solution has been essential to accelerating the pace of offshore development.
Vaisala Operations manufactures products for both business areas and develops operational excellence in high mix low volume supply chain through Vaisala Production System. Strategic programs are productivity improvement, early involvement to product creation, as well as scouting and deploying latest smart factory technologies.
Operations met objectives set for direct labor productivity improvement and was participating in multiple product development projects together with business areas in order to ensure good producibility and timely production ramp-up. Integration of production of liquid measurements products required implementation of new technologies. The project was completed according to plan and without interruptions in production.
In 2019, Vaisala identified the most relevant UN Sustainable Development Goals (SDG). Solutions that are beneficial for society and the environment have always been at the core of the company's business. By integrating the goals to strategy work, Vaisala can better drive its impacts on sustainable development and get inspiration for developing new business and sustainable business practices.
Regarding Vaisala's sustainable business practices, the most relevant goals for Vaisala are SDG 12 – Responsible consumption and production as well as SDG 8 – Decent work and economic growth. Target of Vaisala's product development is to reduce footprint and maximize handprint of the products during their entire lifecycles by including design for environment in development projects. Long product lifecycles and minimization of service needs have significant impact on handprint. Global business has a positive economic impact on communities through employment, partner network and supplier network. Vaisala also promotes fulfillment of labor standards and occupational health and safety in its own operations and partner network.
For Weather and Environment Business Area, the most relevant goal is SDG 13 – Climate action. Reliable weather measurements enable science behind climate change, and for example, weather infrastructure development projects help to improve weather forecasting and early warning capabilities when severe weather events become common. For Industrial Measurements Business Area, the most relevant goal is SDG 9 – Industry, innovation and infrastructure. Industrial measurement solutions help Vaisala's customers to improve their resource efficiency and promote deployment of clean and environmentally friendly technologies and production processes.
Based on strategic objectives Vaisala expects net sales growth during the strategy period. Growth will require new capabilities and resources in R&D, sales and marketing. In addition, amortization and depreciation expenses will increase following acquisitions and investments.
Vaisala's long-term financial targets are an average annual growth exceeding 5% and operating profit margin (EBIT) exceeding 12%.
Vaisala does not consider the long-term financial targets as market guidance for any given year.
On December 31, 2019, Vaisala's Management Group members were • Kjell Forsén, President and CEO, Chairman of the Management Group
The objective of Vaisala's risk management is to identify and manage material risks related to strategy implementation and business operations. Vaisala has a risk management policy, which has been approved by the Board of Directors and which covers the company's strategic, operational, hazard, and financial risks. The policy aims at ensuring the safety of the company's personnel, operations, and products, as well as the continuity and compliance of business operations.
The Board of Directors defines and approves risk management principles and policies and assesses the effectiveness of risk management. The Audit Committee reviews compliance with risk management policy and processes.
Vaisala's Risk Management Steering Group comprises key internal stakeholders. The Steering Group is responsible for the operational oversight of the risk management process and for assuring that all significant risks are identified and reported, and risks are acted upon on all necessary organizational levels and in all geographical locations.
Risk management is integrated into key business processes and operations. This is accomplished by incorporating applicable risk identification, assessment, management, and risk reporting actions into the core processes. The most significant risks are reported to the Vaisala Management Group quarterly and to the Audit Committee annually.
Vaisala is exposed to a number of financial risks in its operations of which key ones are interest rate risk, currency risk, refinancing and liquidity risks as well as financial credit and trade receivables
credit risks. Vaisala's objective is to limit the impact of these risks on statement of income, statement of financial position and cash flow statement. The management of financial risks is based on the treasury and credit policies approved by the Board of Directors.
Interest rate risk refers to the uncertainty in statement of income, statement of financial position and cash flow statement arising from interest rate changes. The group is exposed to cash flow interest rate risk, if it has floating rate liabilities. At the end of the financial year all interest-bearing liabilities and loans were at fixed rates and totaled to EUR 51.5 (40.5) million. EUR 11.3 million of interest-bearing liabilities and loans related to lease liabilities. As the group does not have floating rate loans, the group is not exposed to interest rate risk arising from changes in interest rates.
Currency risk refers to the uncertainty in statement of income, statement of financial position and cash flow statement arising from exchange rate fluctuations. Vaisala's business is global and is exposed to transaction and translation risks in multiple currencies. The transaction risk is related to the currency flows of sales and expenses. The translation risk arises from net investments in entities outside the euro area.
Vaisala's sales are denominated in various currencies. In 2019, 47% of the group's sales was in EUR, 33% in USD, 7% in CNY, 5% in JPY and 3% in GBP. Expenses and purchases occur mostly in EUR and USD. The group's policy is to hedge foreign currency positions which consists of the order book, purchase commitments and net receivables, using foreign exchange forwards. Vaisala does not hedge forecasted cash flows that are not in the order book. Vaisala does not apply hedge accounting in accordance with IFRS and changes in fair value are recognized in the statement of income.
Intercompany loans and deposits are mainly initiated in subsidiaries' local currencies. Vaisala does not hedge intercompany loans, deposits or equities of subsidiaries. Translation of subsidiaries' equities into euros caused translation difference of EUR 0.5 (1.0) million. The most significant translation risk exposures are in USD.
The IFRS 7 currency risk sensitivity analysis is based on the group companies' foreign currency receivables, cash and cash equivalents and liabilities. The calculation does not include internal loans, order book or forecasted cash flows, but includes foreign exchange forwards in their nominal value. The effect of a 10% appreciation in all open net currency positions on Vaisala's result after taxes and equity would have been EUR -0.5 (-0.1) million. Three largest foreign exchange net exposures in euro and their sensitivity analysis based on a 10% change (before taxes) are presented in the following table:
| 2019 | 2018 | ||
|---|---|---|---|
| USD | -7,9 | USD | -8,8 |
| SEK | -3,5 | INR | 1,8 |
| SGD | -2,3 | CAD | 0,9 |
Refinancing and liquidity risk refers to the uncertainty in the ability to maintain liquidity. In order to ensure liquidity, cash and cash equivalents and availability of credit facilities are maintained at a sufficient level.
Vaisala's cash and cash equivalents amounted to EUR 56.4 (72.7) million.
On October 5, 2018, Vaisala signed a EUR 50 million unsecured revolving credit facility. The committed credit facility agreement matures in 5 years from the signing and it has no financial covenants. On December 31, 2019, Vaisala had interest-bearing liabilities totaling EUR 51.5 (40.5) million, of which EUR 40 (40) million related to utilized revolving credit facility, which matures on April 14, 2020. Group has no loans that would mature after five years or more. In addition, Vaisala has a domestic commercial paper program amounting to EUR 150 million that was not utilized as of December 31, 2019.
Financial credit risk refers to the uncertainty about the counterparty's ability to assume the obligations related to the financing. Vaisala is exposed to financial credit risk in respect of cash and cash equivalents and derivative financial instruments. Vaisala's cash and cash equivalents amounted to EUR 56.4 (72.7) million and the nominal value of derivative financial instruments to EUR 33.8 (26.9) million. Vaisala deposits its assets and concludes derivative financial contracts with counterparties with good creditworthiness and approved by the Board of Directors. The creditworthiness of banks is constantly assessed.
Trade receivables credit risk means the customer-related uncertainty about the collectability of receivables. These trade receivables credit risks are managed by using letter of credit, advance payments and bank guarantees as payment terms. Additionally, trade receivables credit risk is managed by utilizing credit risk insurance and by monitoring customer liquidity. Management estimates that the group does not have significant credit risk concentrations because, due to its globally distributed customer base, no single customer or a group of customers constitutes a significant risk. During the financial year, credit losses and related reversals for trade receivables recognized in the statement of income amounted to EUR -0.2 (-0.6) million. Credit loss is recognized once it has been officially declared that the receivable will not be paid as a result of liquidation or bankruptcy.
Further information about risk management is available in the Annual Report's sections Governance/Risk Management and on the company's website at vaisala.com.
Vaisala Corporation's Annual General Meeting was held on March 26, 2019. The meeting approved the financial statements and discharged the members of the Board of Directors and the President and CEO from liability for the financial period January 1–December 31, 2018.
The Annual General Meeting decided a dividend of EUR 0.58 per share. The record date for the dividend payment was March 28, 2019 and the payment date April 4, 2019.
The Annual General Meeting confirmed that the number of Board members is eight. Petri Castrén, Petra Lundström, Kaarina Ståhlberg, Pertti Torstila, Raimo Voipio and Ville Voipio will continue as members of the Board of Directors. Jukka Rinnevaara and Tuomas Syrjänen were elected as new members of the Board of Directors.
The Annual General Meeting confirmed that that the annual remuneration payable to the Chairman of the Board of Directors is EUR 45,000 and each Board member EUR 35,000 per year. Approximately 40% of the annual remuneration will be paid in Vaisala Corporation's series A shares acquired from the market and the rest in cash. In addition, the Annual General Meeting confirmed that the meeting fee for the Chairman of the Audit Committee would be EUR 1,500 per attended meeting and EUR 1,000 for each member of the Audit Committee and Chairman and each member of the Remuneration and HR Committee and any other committee established by the Board of Directors for a term until the close of the Annual General Meeting in 2020. The meeting fees are paid in cash.
The Annual General Meeting re-elected Deloitte Oy as the auditor of the company and APA Merja Itäniemi will act as the auditor with the principal responsibility. The Auditors are reimbursed according to invoice presented to the company.
The Annual General Meeting authorized the Board of Directors to resolve on the directed repurchase of a maximum of 300,000 of the company's own series A shares in one or more instalments by using company's unrestricted equity. The authorization is valid until the closing of the next Annual General Meeting, however, no longer than September 26, 2020.
The Annual General Meeting authorized the Board of Directors to resolve on the issuance of a maximum of 769,732 company's own series A shares. The issuance of own shares may be carried out in deviation from the shareholders' pre-emptive rights (directed issue). The authorization entitles the issuance of treasury series A shares as a directed issue without payment as part of the company's share-based incentive plan. The subscription price of the shares can instead of cash also be paid in full or in part as contribution in kind. The authorization is valid until September 26, 2020. The authorization for the company's incentive program shall however be valid until March 26, 2023.
At its organizing meeting held after the Annual General Meeting, the Board elected Raimo Voipio to continue as the Chairman of the Board of Directors and Ville Voipio as the Vice Chairman.
Kaarina Ståhlberg was elected as the Chairman and Petri Castrén, Jukka Rinnevaara and Ville Voipio as members of the Audit Committee. Ville Voipio was elected as the Chairman and Petri Castrén and Petra Lundström as members of the Remuneration and HR Committee. The Chairman and all members of the Audit Committee as well as the Remuneration and HR Committee are independent both of the company and of significant shareholders.
Vaisala's share capital totaled EUR 7,660,808 on December 31, 2019. Vaisala has 36,436,728 shares, of which 6,751,398 are series K shares and 29,685,330 series A shares. During the second quarter, number of series K shares decreased by 27,264 and number of series A shares increased by 27,264 as the Board of Directors decided that 27,264 series K shares were converted to series A shares. This conversion was registered into the Trade Register on May 27, 2019. The series K shares, and series A shares are differentiated by the fact that each series K share entitles its owner to 20 votes at a General Meeting of Shareholders while each series A share entitles its owner to 1 vote. The series A shares represented 81.5% of the total number of shares and 18.0% of the total votes. The series K shares represented 18.5% of the total number of shares and 82.0% of the total votes.
In 2019, a total of 3,442,439 series A shares with a value totaling EUR 81.0 million were traded on the Nasdaq Helsinki Ltd. During the year, the share price increased by 92% while OMX Helsinki Cap index increased by 15%. The closing price of the series A share on the Nasdaq Helsinki stock exchange was EUR 31.75. Shares registered a high of EUR 32.80 and a low of EUR 15.95. Volume-weighted average share price was EUR 23.56.
The market value of series A shares on December 31, 2019 was EUR 924.9 million, excluding company's treasury shares. Valuing the series K shares – which are not traded on the stock market – at the rate of the series A share's closing price on the last trading day of December, the total market value of all the series A and series K shares together was EUR 1,139.2 million, excluding company's treasury shares.
In March 2019, a total of 88,452 of treasury shares were conveyed without consideration to the 30 key employees participating in the Share-based incentive plan 2016 under the terms and conditions of the plan. This directed share issue was based on an authorization given by the Annual General Meeting held on April 10, 2018.
In June 2019, a total of 2,195 of treasury shares were conveyed without consideration to an employee participating in the Share-based incentive plans 2017 and 2018 under the terms and conditions of the plans. This directed share issue was based on an authorization given by the Annual General Meeting held on March 26, 2019.
Following these directed share issues, the number of series A treasury shares is 555,989, which represents 1.9% of series A shares and 1.5% of total shares.
| A shares | K shares | Total | % of shares | % of votes | |
|---|---|---|---|---|---|
| Novametor Oy | 2,778,000 | 998,358 | 3,776,358 | 10.36 | 13.81 |
| Finnish Academy of Science and Letters | 373,072 | 1,757,760 | 2,130,832 | 5.85 | 21.57 |
| Nordea Nordic Small Cap Fund | 1,824,551 | 0 | 1,824,551 | 5.01 | 1.11 |
| Mandatum Life Insurance Company Ltd. | 1,192,100 | 274,800 | 1,466,900 | 4.03 | 4.06 |
| Weisell-säätiö | 1,440,000 | 0 | 1,440,000 | 3.95 | 0.87 |
| Voipio Mikko | 666,000 | 602,312 | 1,268,312 | 3.48 | 7.72 |
| Ilmarinen Mutual Pension Insurance Company | 1,131,486 | 0 | 1,131,486 | 3.12 | 0.69 |
| Caspers Anja | 406,560 | 562,936 | 969,496 | 2.66 | 7.08 |
| Voipio Raimo* | 514,002 | 454,296 | 968,298 | 2.66 | 5.83 |
| Odin Norden Fund | 944,055 | 0 | 944,055 | 2.59 | 0.57 |
| Voipio Tauno | 591,520 | 315,304 | 906,824 | 2.49 | 4.19 |
| Voipio Lauri | 561,692 | 83,376 | 645,068 | 1.77 | 1.35 |
| Voipio Riitta | 561,692 | 83,376 | 645,068 | 1.77 | 1.35 |
| Vaisala Oyj | 555,989 | 0 | 555,989 | 1.53 | 0.34 |
| Voipio Ville | 396,087 | 96,712 | 492,799 | 1.35 | 1.41 |
| Total | 13,936,806 | 5,229,230 | 19,166,036 | 52.62 | 71.95 |
| Nominee registered shares** | 5,396,675 | 0 | 5,396,675 | 14.81 | 3.28 |
* In addition to direct share ownership, Raimo Voipio's controlled organization IMAR Oy owned 56,000 series A shares.
** Includes 1,310,853 series A shares owned by Lannebo Fonder, which represented 3.60% of all shares and 0.80% of all votes (according to Lannebo's notification).
| Shares | % of shares | |
|---|---|---|
| Households | 14,803,830 | 40.63 |
| Nominee registered and outside Finland |
6,387,474 | 17.53 |
| Private companies | 4,923,821 | 13.51 |
| Financial and insurance institutions | 4,997,841 | 13.72 |
| Non-profit organizations | 3,988,370 | 10.95 |
| Public sector organizations | 1,335,392 | 3.67 |
| Total | 36,436,728 | 100.00 |
| Share | % of share | % of | ||
|---|---|---|---|---|
| holders | holders | Shares | shares | |
| 1–100 | 3,782 | 39.89 | 188,761 | 0.52 |
| 101–500 | 3,615 | 38.13 | 991,590 | 2.72 |
| 501–1 000 | 1,019 | 10.75 | 768,661 | 2.11 |
| 1 001–5 000 | 830 | 8.75 | 1,770,432 | 4.86 |
| 5 001–10 000 | 95 | 1.00 | 668,710 | 1.84 |
| 10 001–50 000 | 87 | 0.92 | 1,742,642 | 4.78 |
| 50 001–100 000 | 18 | 0.19 | 1,221,463 | 3.35 |
| 100 001–500 000 | 19 | 0.20 | 5,082,582 | 13.95 |
| 500 001– | 16 | 0.17 | 24,001,887 | 65.87 |
| Total | 9,481 | 100.00 | 36,436,728 | 100.00 |
| Nominee registered | 9 | 5,396,675 | 14.81 |
The Board of Directors is not aware of any agreements concerning the ownership of the company's shares and the use of their voting rights.
On December 31, 2019, the Board of Directors held and controlled 988,083 (980,767) series A shares. These shares accounted for 3.3 (3.3) % of series A shares and 2.7 (2.7) % of total shares. The number of series K shares held and controlled by the Board was 551,008 (551,010). Total votes attached to the series A and K shares held and controlled by the Board were 12,008,243 (12,007,048), which accounted for 7.3 (7.3) % of the total votes of all shares.
On December 31, 2019 the President and CEO held and controlled 49,132 (34,552) series A shares. The President and CEO did not hold nor control any series K shares. Other Management Group members held and controlled 82,178 (67,896) series A shares but none series K shares.
Corporate Governance Statement includes more details on the shareholdings of the Board of Directors and the Management Group.
More information about Vaisala's shares and shareholders are presented on the company's website at vaisala.com/investors.
In September 2019, Hurrican Dorian hit the Bahamas and caused catastrophic damage. To help the country to recover for the severe disaster, Vaisala donated three new automated weather observation systems for airports.
Disclosure of non-financial information in accordance with Finnish Accounting Act chapter 3 a is presented in the Sustainability section as well as in the Business model and Dashboard chapters, included in the Creating value section, and the Risk management chapter, included in the Governance section.
Corporate Governance Statement is published as a part of the Annual Report as well as a separate report on the company's website at vaisala.com/investors.
Recent coronavirus outbreak in China has affected Vaisala's capability to deliver products to China and may impact customers' demand for Vaisala's products. It is impossible to estimate duration of the situation as well as impacts on business and financial performance.
Uncertainties in international trade policies, political situation and governmental customers' budgetary constraints or changes in their sourcing criteria may reduce or delay demand for Vaisala's products and services.
Increasing competition or customers' preference for local manufacturing may reduce demand for Vaisala's products and services. Prolonged ramp-up, market acceptance, sales channel development, or regulatory certification of new products and services may postpone realization of Vaisala's growth and profitability plans. Customers' budgetary constraints, complex decision-making processes, changes in scope, and financing arrangements may postpone closing of infrastructure contracts in Weather and Environment Business Area.
Long interruption in production or disruption in suppliers' and subcontractors' delivery capability or product quality may impact significantly Vaisala's net sales and profitability. Cyber risk and downtime of IT systems may impact operations and delivery of digital solutions.
Vaisala's capability to successfully complete investments, acquisitions, divestments and restructurings on a timely basis and to achieve related financial and operational targets includes uncertainties and risks, which may negatively impact net sales and profitability.
Further information about risk management and risks are available in Annual Report and on the company website at vaisala.com/investors.
Climate change and severe weather events drive need for continued replacement and enhancement of weather observation and forecasting capabilities. Related meteorology infrastructure market is expected to be stable or somewhat grow. Timing of projects may cause some annual volatility.
In transportation, market for weather observation systems is expected to be stable or somewhat grow. Airports market is expected to be stable driven by replacements as well as construction of new airport capacity, especially in China. Ground transportation and road surface state modelling market is expected to grow modestly, partly driven by new applications for automotive industry and smart cities.
Renewable energy market is expected to continue to grow and expectation for solar growth is higher than wind. Investments in new renewable energy capacity are expected to continue globally and highest investment volumes are expected in APAC.
In industrial measurements, increasing focus on energy and operations efficiency, longer product life cycles as well as increasing regulations and requirements for high-quality and security drive need for high-end industrial instruments and systems. Industrial instruments and liquid measurements markets are expected to continue to grow. Continuous monitoring systems and power industry markets' growth is expected to continue to exceed growth of industrial instruments.
Vaisala estimates its full-year 2020 net sales to be in the range of EUR 400–425 million and its operating result (EBIT) to be in the range of EUR 38–48 million.
The parent company's distributable earnings amount to EUR 170,520,851.66, of which the result for the period is EUR 30,885,350.86.
The Board of Directors proposes to the Annual General Meeting that dividend of EUR 0.61 per share be paid out of distributable earnings totaling approximately EUR 21.9 million and the rest to be carried forward in the shareholders' equity. No dividend will be paid for treasury shares held by the company.
There have been no significant changes in the company's financial position since the close of the financial period. According to the Board of Directors, the proposed dividend distribution does not endanger the company's financial standing.
Vaisala's Annual General Meeting will be held on Tuesday, April 7, 2020 at 6:00 p.m. at Vaisala Corporation's head office, Vanha Nurmijärventie 21, 01670 Vantaa.
Vantaa, February 12, 2020
Vaisala Corporation Board of Directors
The forward-looking statements in this release are based on the current expectations, known factors, decisions and plans of Vaisala's management. Although the management believes that the expectations reflected in these forward-looking statements are reasonable, there is no assurance that these expectations would prove to be correct. Therefore, the results could differ materially from those implied in the forward-looking statements, due to for example changes in the economic, market and competitive environments, regulatory or other government-related changes, or shifts in exchange rates.
15. Provisions 132
31. Application of new and revised standards and interpretations in issue but not yet effective 154
| 9. Other receivables | 168 |
|---|---|
| 10. Deferred assets | 168 |
| 11. Deferred tax assets and | |
| liabilities | 169 |
| 12. Provisions | 169 |
| 13. Shareholders' equity | 169 |
| 14. Non-current liabilities | 170 |
| 15. Loans from financial | |
| institutions | 170 |
| 16. Accrued expenses and | |
| deferred income | 170 |
| 17. Receivables and liabilities | |
| from other companies in | |
| Vaisala group | 171 |
| 18. Contingent liabilities and | |
| pledges given | 171 |
| 19. Auditor's fees | 171 |
| SIGNING OF THE BOARD OF | |
| DIRECTOR'S REPORT AND | |
| FINANCIAL STATEMENTS | 172 |
| AUDITOR'S REPORT | 173 |
The audited financial statements comprise the consolidated statement of income, consolidated statement of comprehensive income, consolidated statement of financial position, consolidated cash flow statement, consolidated statement of changes in equity and notes to the consolidated financial statements, as well as the parent company income statement, parent company balance sheet, parent company cash flow statement and notes to the parent company financial statements.
| Jan 1–Dec 31, | Jan 1–Dec 31, | ||
|---|---|---|---|
| EUR million | Note | 2019 | 2018 |
| Net sales | 1, 2, 3 | 403.6 | 348.8 |
| Cost of goods sold | 5, 13, 16 | -182.4 | -163.7 |
| Gross profit | 221.2 | 185.0 | |
| Sales, marketing and administrative costs | 5, 7, 16 | -124.5 | -102.8 |
| Research and development costs | 5, 7, 8, 16 | -52.8 | -45.4 |
| Other operating income and expenses | 4 | -2.7 | 2.1 |
| Operating result | 41.1 | 38.9 | |
| Share of result in associated company | 28 | 0.1 | 0.1 |
| Financial income and expenses | 9 | -1.1 | -1.5 |
| Result before taxes | 40.2 | 37.5 | |
| Income taxes | 10 | -6.6 | -8.0 |
| Result for the financial year | 33.6 | 29.5 | |
| Attributable to | |||
| Owners of the parent company | 33.5 | 29.5 | |
| Non-controlling interests | 0.1 | - | |
| Result for the financial year | 33.6 | 29.5 | |
| Earnings per share for result attributable to the equity holders | |||
| of the parent company | 11 | ||
| Earnings per share, EUR | 0.94 | 0.82 | |
| Diluted earnings per share, EUR | 0.93 | 0.81 |
| Jan 1–Dec 31, | Jan 1–Dec 31, | ||
|---|---|---|---|
| EUR million | Note | 2019 | 2018 |
| Items that will not be reclassified to profit or loss (net of taxes) | |||
| Actuarial profit (loss) on post-employment benefits | 6 | 0.2 | 0.2 |
| Total | 0.2 | 0.2 | |
| Items that may be reclassified subsequently to profit or loss | |||
| Translation differences | 0.5 | 1.0 | |
| Total | 0.5 | 1.0 | |
| Total other comprehensive income | 0.7 | 1.2 | |
| Comprehensive income for the financial year | 34.3 | 30.7 | |
| Attributable to | |||
| Owners of the parent company | 34.2 | 30.7 | |
| Non-controlling interests | 0.1 | - | |
| Comprehensive income for the financial year | 34.3 | 30.7 |
The notes are an essential part of the financial statements.
| EUR million | Note | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | 16 | 72.7 | 74.1 |
| Property, plant and equipment | 16 | 63.4 | 46.3 |
| Right-of-use assets | 17 | 12.3 | - |
| Investments in shares | 0.1 | 0.1 | |
| Investment in associated company | 28 | 1.1 | 1.0 |
| Non-current receivables | 20 | 0.9 | 2.1 |
| Deferred tax assets | 10 | 9.8 | 9.8 |
| Total non-current assets | 160.3 | 133.2 | |
| Current assets | |||
| Inventories | 13 | 39.6 | 32.0 |
| Trade and other receivables | 12 | 77.3 | 74.7 |
| Contract assets | 3 | 25.0 | 17.8 |
| Income tax receivables | 2.8 | 0.9 | |
| Cash and cash equivalents | 23 | 56.4 | 72.7 |
| Total current assets | 201.1 | 198.0 | |
| Assets classified as held for sale | 26 | - | 3.1 |
| Total assets | 361.5 | 334.4 |
| EUR million | Note | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|---|
| Equity and liabilities | |||
| Equity | 18 | ||
| Share capital | 7.7 | 7.7 | |
| Other reserves | 7.0 | 6.1 | |
| Translation differences | 1.3 | 0.8 | |
| Treasury shares | -7.9 | -9.0 | |
| Retained earnings | 190.0 | 177.3 | |
| Total equity attributable to owners of parent company | 198.0 | 182.9 | |
| Non-controlling interests | 0.3 | - | |
| Total equity | 198.3 | 182.9 | |
| Non-current liabilities | |||
| Interest-bearing loans from financial institutions | 21 | - | 0.2 |
| Interest-bearing lease liabilities | 17 | 8.3 | - |
| Post-employment benefits | 6 | 2.4 | 2.7 |
| Deferred tax liabilities | 10 | 8.1 | 9.4 |
| Provisions | 15 | 0.1 | 0.2 |
| Other non-current liabilities | 21 | 4.3 | 5.6 |
| Total non-current liabilities | 23.3 | 18.0 |
| EUR million | Note | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|---|
| Current liabilities | |||
| Interest-bearing loans from financial institutions | 21 | 40.2 | 40.3 |
| Interest-bearing lease liabilities | 17 | 3.0 | 0.0 |
| Trade and other payables | 14 | 64.5 | 57.2 |
| Contract liabilities | 3 | 27.3 | 30.2 |
| Income tax liabilities | 1.7 | 1.4 | |
| Provisions | 15 | 3.2 | 3.2 |
| Total current liabilities | 139.8 | 132.3 | |
| Liabilities directly associated with assets classified as held for sale | 26 | - | 1.1 |
| Total liabilities | 163.1 | 151.5 | |
| Total equity and liabilities | 361.5 | 334.4 |
The notes are an essential part of the financial statements.
| Jan 1–Dec 31, | Jan 1–Dec 31, | ||
|---|---|---|---|
| EUR million | Note | 2019 | 2018 |
| Cash flow from operating activities | |||
| Cash receipts from customers | 1, 2, 3 | 391.5 | 346.7 |
| Cash paid to suppliers and employees | -339.4 | -289.3 | |
| Financial items paid | 9 | -2.3 | -0.4 |
| Income taxes paid | 10 | -9.0 | -8.7 |
| Cash flow from operating activities | 40.8 | 48.3 | |
| Cash flow from investing activities | |||
| Acquisition of subsidiaries, net of cash acquired | 25 | -7.3 | -51.7 |
| Capital expenditure on intangible assets and property, plant and equipment |
16 | -26.8 | -14.5 |
| Proceeds from sale of intangible assets and property, plant and equipment |
0.5 | 0.1 | |
| Cash flow from investing activities | -33.6 | -66.1 | |
| Cash flow from financing activities | |||
| Dividends paid | 18 | -20.8 | -37.6 |
| Change in loan receivables | 0.1 | 0.0 | |
| Proceeds from borrowings | 21 | 80.0 | 40.0 |
| Repayment of borrowings | 21 | -80.5 | -2.6 |
| Principal payments of lease liabilities | 17 | -4.1 | - |
| Cash flow from financing activities | -25.4 | -0.1 |
| Jan 1–Dec 31, | Jan 1–Dec 31, | ||
|---|---|---|---|
| EUR million | Note | 2019 | 2018 |
| Change in cash and cash equivalents, increase (+) / decrease (-) | -18.1 | -17.9 | |
| Cash and cash equivalents at the beginning of the financial year | 72.7 | 91.3 | |
| Change in cash and cash equivalents | -18.1 | -17.9 | |
| Cash and cash equivalents classifed as assets held for sale | - | -1.1 | |
| Transfer of cash and cash equivalents classified as assets held for | |||
| sale to continuing operations | 1.1 | - | |
| Effect from changes in exchange rates | 0.7 | 0.4 | |
| Cash and cash equivalents at the end of the financial year | 23 | 56.4 | 72.7 |
The notes are an essential part of the financial statements.
| Equity | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| attributable to | |||||||||
| Translation | Retained | owners of the | Non-controlling | ||||||
| EUR million | Note | Share capital | Other reserves | differences | Treasury shares | earnings | parent company | interests | Total |
| Equity at Dec 31, 2017 | 7.7 | 3.0 | -0.2 | -10.1 | 185.1 | 185.4 | 185.4 | ||
| Adjustments to opening balance | |||||||||
| Effect of IFRS 2 amendment | 3.9 | 3.9 | 3.9 | ||||||
| Effect of IFRS 9 transition, net of taxes | -0.2 | -0.2 | -0.2 | ||||||
| Effect of IFRS 15 transition, net of taxes | 0.3 | 0.3 | 0.3 | ||||||
| Equity at Jan 1, 2018 | 7.7 | 6.8 | -0.2 | -10.1 | 185.2 | 189.3 | 189.3 | ||
| Result for the financial year | 18 | 29.5 | 29.5 | 29.5 | |||||
| Other comprehensive income | 18 | 0.0 | 1.0 | 0.2 | 1.2 | 1.2 | |||
| Dividend distribution | 18 | -37.6 | -37.6 | -37.6 | |||||
| Share-based payments | 7, 18 | -0.7 | 1.1 | 0.4 | 0.4 | ||||
| Equity at Dec 31, 2018 | 7.7 | 6.1 | 0.8 | -9.0 | 177.3 | 182.9 | 182.9 | ||
| Result for the financial year | 18 | 33.5 | 33.5 | 0.1 | 33.6 | ||||
| Other comprehensive income | 18 | 0.0 | 0.5 | 0.2 | 0.7 | 0.7 | |||
| Dividend distribution | 18 | -20.8 | -20.8 | -20.8 | |||||
| Share-based payments | 7, 18 | 0.8 | 1.1 | 1.9 | 1.9 | ||||
| Transfer between items | 18 | 0.0 | -0.0 | 0.0 | 0.0 | ||||
| Changes in non-controlling interests that did not result in changes in control |
-0.2 | -0.2 | 0.2 | 0.0 | |||||
| Equity at Dec 31, 2019 | 7.7 | 7.0 | 1.3 | -7.9 | 190.0 | 198.0 | 0.3 | 198.3 |
Vaisala is a global leader in weather, environmental and industrial measurement. With more than 80 years of experience, Vaisala provides a comprehensive range of innovative observation and measurement products and services for chosen weather-related and industrial markets.
The parent company, Vaisala Corporation, is a Finnish public limited company, domiciled in Vantaa, Finland. The registered address is Vanha Nurmijärventie 21, FI-01670 Vantaa, Finland (P.O. Box 26, FI-00421 Helsinki). The company's Business ID is 0124416-2.
These financial statements have been approved for publication by the Board of Directors of Vaisala Corporation on February 12, 2020. Under the Finnish Companies Act, shareholders have the right to approve, reject or make changes to the financial statements in the Annual General Meeting to be held after the publication. A copy of the consolidated financial statements is available on the company's website at vaisala.com/investors or at the parent company head office at the address Vanha Nurmijärventie 21, FI-01670 Vantaa, Finland (P.O. Box 26, FI-00421 Helsinki).
The consolidated financial statements of Vaisala have been prepared in accordance with International Financial Reporting Standards (IFRS) approved for adoption by the European Union, including International Accounting Standards (IAS) and the SIC and IFRIC Interpretations valid on December 31, 2019. In the Finnish Accounting Act and ordinances based on the provisions of the Act, IFRS refer to the standards and their interpretations adopted in accordance with the procedures laid down in regulation (EC) No. 1606/2002 of the European Parliament and of the Council. The notes to the consolidated financial statements are also in accordance with the Finnish accounting and corporate law.
The consolidated financial statements are presented in millions of euros, if not otherwise stated. All presented figures have been rounded and consequently the sum of individual figures may deviate from the presented sum. Financial statements are based on original acquisition costs, if not otherwise stated in the accounting principles. In the text sections figures from previous years are presented in parenthesis. Calculation of key figures and alternative performance measures are presented in the Board of Directors' Report.
The consolidated financial statements include the parent company Vaisala Corporation and those subsidiaries in which the group has control. The group has control of an entity when it is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Subsidiaries, acquired or founded during the financial period, are consolidated from the date on which control is transferred to the group and are no longer consolidated from the date that control ceases.
Business combinations are accounted for using the acquisition method. The consideration transferred is the fair value of transferred assets, issued equity interests and liabilities incurred to former owners. Any contingent consideration is recognized at fair value at the acquisition date and classified as a liability or equity. Contingent considerations classified as a liability are measured at fair value on each reporting date with changes recognized in consolidated statement of income. Identifiable assets acquired as well as assumed liabilities and contingent liabilities are measured initially at their fair values on the date of acquisition without deducting non-controlling interest. The amount by which the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition date fair value of any previous equity interest exceeds the fair value of identifiable net assets is recognized as goodwill. If the consideration transferred is lower than the acquired net assets, the gain is recognized in the consolidated statement of income on the acquisition date. All acquisition-related costs, except for the costs to issue debt or equity securities, are expensed in the periods in which the costs are incurred and the services are received.
The non-controlling interests' share of the result and of the comprehensive income for the financial year are presented in the consolidated statement of income and in the consolidated statement of comprehensive income. The non-controlling interests' share of the equity is presented as a separate item in the consolidated statement of financial position.
The group's intercompany transactions, unrealized margins on internal deliveries, receivables and liabilities as well as dividends are eliminated. Unrealized losses on internal transactions are also eliminated unless costs are not recoverable or the loss results from an impairment. The consolidated financial statements are prepared applying consistent accounting principles to similar transactions and other events under equal conditions.
The share of results of associated companies, i.e. companies of which Vaisala owns 20–50% or over which it otherwise has significant influence, are included in the consolidated financial statements applying the equity method. If Vaisala's share of an associated company's losses exceeds the carrying amount of the investment, the investment is recognized in the consolidated statement of financial position at zero value
and further losses are not recognized unless the group has incurred obligations on behalf of the associated company. Unrealized gains on transactions between the group and its associated companies have been eliminated to the extent of the group's interest in the associated companies.
The group's share of associated companies' results is presented in the consolidated statement of income as a separate item before 'financial income and expenses'. Investments in associated companies are initially recognized at cost and the carrying amount is increased or decreased by the share of postacquisition results. Distribution of profit received from an investment reduces the carrying amount of the investment.
Items relating to the consolidated result and financial position are measured using the currency of the primary economic environment in which the entity operates ("the functional currency"). The consolidated financial statements have been presented in euros, which is the parent company's functional and presentation currency.
Transactions in foreign currencies are recorded in the functional currency using the exchange rate on the date of transaction. Receivables and payables in foreign currency have been valued at the rates quoted by European Central Bank on the last trading date of the financial year. Exchange rate differences resulting from the settlement of monetary items or from the presentation of items in the financial statements at different exchange rates from which they were originally recognized during the financial period or presented in the previous financial statements, are recognized as financial income or expenses in the financial period in which they arise.
Statements of financial position of subsidiaries in other functional currency than euro have been translated into euros using the rates quoted by European Central Bank on the last trading date of the financial year. Translating statements of income monthly average exchange rates have been used. Translating net income for the financial year using different exchange rates in the consolidated statements of income and in the consolidated statement of financial position, results in a translation difference, which is recognized in other comprehensive income. Translation differences arising from the elimination of the acquisition cost of foreign subsidiaries and the translation of the accumulated equity items after the acquisition are recognized in other comprehensive income. When a foreign subsidiary or associated company is disposed of or partly disposed of, the translation difference is recognized in the consolidated statement of income as part of the gain or loss on the sale.
Goodwill or fair value adjustments arising from the acquisition of a foreign entity are treated as assets and liabilities in the functional currency of the foreign entity and are translated at the rate of the last trading date of the financial year.
| Key exchange rates | |||
|---|---|---|---|
| -- | -- | -------------------- | -- |
| Average rates | Period end rates | |||
|---|---|---|---|---|
| 2019 | 2018 | Dec 31, 2019 | Dec 31, 2018 | |
| USD | 1.1213 | 1.1838 | 1.1234 | 1.1450 |
| CNY | 7.7282 | 7.8097 | 7.8205 | 7.8751 |
| JPY | 122.29 | 130.77 | 121.94 | 125.85 |
| GBP | 0.8795 | 0.8853 | 0.8508 | 0.8945 |
The following new or revised IFRSs have been adopted from January 1, 2019 in these consolidated financial statements:
In 2019, Vaisala has applied IFRS 16 Leases which is effective for a financial year that begins on or after January 1, 2019.
IFRS 16 provides a comprehensive model for the identification of lease arrangements and their treatment in the financial statements for both lessors and lessees. IFRS 16 superseded the lease guidance including IAS 17 Leases and the related Interpretations.
In contrast to lessee accounting, IFRS 16 substantially carries forward the lessor accounting requirements in IAS 17.
The group made use of the practical expedient available on transition to IFRS 16 not to reassess whether a contract is or contains a lease. Accordingly, the definition of a lease in accordance with IAS 17 and IFRIC 4 continued to apply to those leases entered or modified before January 1, 2019.
The change in definition of a lease mainly relates to the concept of control. IFRS 16 distinguishes between leases and service contracts on the basis of whether the use of an identified asset is controlled by the customer. Control is considered to exist if the customer has:
Vaisala applies the definition of a lease and related guidance set out in IFRS 16 to all lease contracts entered into or modified on or after January 1, 2019 (whether it is a lessor or a lessee in the lease contract). The new definition in IFRS 16 did not change significantly the scope of contracts that meet the definition of a lease for the group.
IFRS 16 changed how Vaisala accounts for leases previously classified as operating leases under IAS 17, and which were off-balance sheet.
On initial application of IFRS 16, for all leases (except as noted below), Vaisala:
Lease incentives (e.g. rent-free period) are recognized as part of the measurement of the right-of-use assets and lease liabilities whereas under IAS 17 they resulted in the recognition of a lease liability incentive, amortized as a reduction of rental expenses on a straight-line basis.
Under IFRS 16, right-of-use assets are tested for impairment in accordance with IAS 36 Impairment of Assets. This replaces the previous requirement to recognize a provision for onerous lease contracts.
Vaisala does not apply the practical expedient as permitted by IFRS 16 not to recognize right-of-use asset and corresponding lease liability for short-term leases (lease term of 12 months or less) and leases of low-value assets. Right-of-use assets recognized in the statement of financial position consist of offices, other premises, land area, apartments and cars.
Majority of Vaisala's lease arrangements are fixed-term arrangements without one-sided extension or termination options and thus lease term is defined based on the duration of the arrangement. If an arrangement includes such conditions, management needs to estimate the likely lease term for each arrangement. Significant judgment needs to be exercised when making these estimates.
As at December 31, 2018, the group had non-cancellable operating lease commitments of EUR 16.6 million. The assessment indicated that EUR 12 million of these arrangements related to leases, which management estimated to be material and thus were recognized in the statement of financial position as a result of application IFRS 16. Additionally, lease term of a contract related to an operating lease commitment amounting to EUR 4 million was to start in the future. Rest of the arrangements were considered immaterial. The group recognized a right of use asset of EUR 12 million and a corresponding lease liability of EUR 11 million as of January 1, 2019. The weighted average lessee's incremental borrowing rate applied to lease liabilities recognized in the statement of financial position at the date of initial application was 2.8%.
As of December 31, 2019 the amount of right-of-use assets totaled EUR 12.3 million and the amount of lease liability EUR 11.3 million. The amount of depreciation related to right-of-use assets totaled EUR 4.1 million and interest expense related to lease liability EUR 0.3 million for the period January–December 2019. If the financial statements 2019 had been prepared according to IAS 17, rent costs would have been EUR 4.5 million for the period January-December 2019. Rent costs included in the consolidated statement of income in January–December 2018 totaled EUR 4.4 million.
| Operating lease commitments, Dec 31, 2018 | 16.6 |
|---|---|
| Lease agreement starting in the future | -4.2 |
| Lease agreements considered insignificant | -0.2 |
| Other adjustments | 0.1 |
| Lease liability before discounting, Jan 1, 2019 | 12.3 |
| Discounting | -1.5 |
| Lease liability, Jan 1, 2019 | 10.8 |
Under IAS 17, all lease payments on operating leases were presented as part of cash flows from operating activities. Under IFRS 16, lease payments are presented as part of cash flows from financing activities. In January–December 2019 principal payments of lease liabilities in cash flow from financing activities amounted to EUR 4.1 million and interest expenses in the cash flow from operating activities amounted to EUR 0.3 million. The amount of rent costs included in the cash flow from operating activities in January– December 2018 totaled EUR 4.4 million.
Vaisala applied IFRS 16 retrospectively with the cumulative effect of initial application recognized as of January 1, 2019 without adjusting equity. Comparative information was not restated.
As the group does not act as lessor, implementation of IFRS 16 has had no impact on the amounts recognized in the consolidated financial statements in this regard.
In 2019, in addition to IFRS 16, the group has applied a number of amendments to IFRS Standards and Interpretations issued by the International Accounting Standards Board (IASB) that are effective for a financial year that begins on or after January 1, 2019. Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.
The preparation of financial statements in accordance with IFRS requires management to make estimates and judgment in the application of the accounting policies. The financial statements are based on estimates and assumptions concerning the future, the outcome of which may differ from the estimates and assumptions made. The estimates and judgments made are based on past experience and other factors, such as assumptions about future events that may reasonably be expected to occur in the circumstances. Estimates and assumptions are reviewed on a regular basis.
Estimates and judgment have been used in particular in the following areas for which significant accounting policies and accounting estimates and judgments have been described in the accompanying notes:
Other estimates are related mainly to environmental, litigation, warranty, credit and tax risks, the determination of pension obligations as well as the utilization of deferred tax assets against future taxable income.
Vaisala has two operating and reportable segments; Weather and Environment Business Area and Industrial Measurements Business Area. Reportable segments are based on the type of business operations. Operating segments have not been aggregated to build the reportable segments.
Operating segments are based on the management reports reviewed by Vaisala Management Group, which is the chief operating decision-maker. Vaisala Management Group is responsible for allocating resources and assessing performance of the operating segments. Vaisala Management Group assesses the performance of the operating segment based on the operating result. The reporting provided to Vaisala Management Group is prepared in consistency with the principles of IFRS consolidated financial statements. Restructuring and M&A activities related costs as well as discontinued operations are not allocated to operating segments and are presented in Other operations. Transfer pricing between segments is based on arm's length principle.
Weather and Environment Business Area serves selected weather-dependent markets where accurate, real-time, uninterrupted, and reliable weather data is essential to run efficient operations. Main markets are meteorology, ground transportation, aviation, railway, maritime, safety and security, renewable energy, and ambient air quality.
Industrial Measurements Business Area serves a wide range of industrial customers. It offers a broad range of measurement instruments to ensure operational quality and productivity. Main markets are highend humidity and carbon dioxide measurements, life science, and power industry.
Revenue recognition principles are presented in note 3, Revenue from contracts with customers.
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Consolidated financial statements
| 2019 | Weather and | Industrial | Other | |
|---|---|---|---|---|
| EUR million | Environment | Measurements | operations | Vaisala total |
| Products | 149.0 | 129.5 | 278.5 | |
| Projects | 73.2 | 73.2 | ||
| Services | 39.1 | 12.8 | 51.9 | |
| Net sales | 261.3 | 142.3 | 0.0 | 403.6 |
| Revenue recognition at a point in time | 168.6 | 140.0 | 308.6 | |
| Revenue recognition over time | 92.7 | 2.3 | 95.0 | |
| Net sales | 261.3 | 142.3 | 0.0 | 403.6 |
| Operating result | 17.7 | 26.1 | -2.7 | 41.1 |
| Share of result in associated company | 0.1 | |||
| Financial income and expenses | -1.1 | |||
| Result before taxes | 40.2 | |||
| Income taxes | -6.6 | |||
| Result for the financial year | 33.6 |
| Reportable segments | ||||
|---|---|---|---|---|
| 2018 | Weather and | Industrial | Other | |
| EUR million | Environment | Measurements | operations | Vaisala total |
| Products | 125.4 | 105.1 | 230.5 | |
| Projects | 70.0 | 70.0 | ||
| Services | 36.9 | 11.4 | 48.3 | |
| Net sales | 232.3 | 116.4 | 0.0 | 348.8 |
| Revenue recognition at a point in time | 144.1 | 107.5 | 251.7 | |
| Revenue recognition over time | 88.2 | 8.9 | 97.1 | |
| Net sales | 232.3 | 116.4 | 0.0 | 348.8 |
| Operating result | 17.7 | 23.9 | -2.7 | 38.9 |
| Share of result in associated company | 0.1 | |||
| Financial income and expenses | -1.5 | |||
| Result before taxes | 37.5 | |||
| Income taxes | -8.0 | |||
| Result for the financial year | 29.5 |
Vaisala's reportable segments operate in geographical areas which are Americas, APAC and EMEA.1)
| 2019 EUR million |
Net sales, by destination country2) |
Net sales, by location country3) |
Non-current assets3) |
|---|---|---|---|
| Americas | 149.7 | 137.1 | 32.1 |
| of which United States | 120.1 | 129.5 | 31.7 |
| APAC | 119.6 | 63.9 | 3.5 |
| EMEA | 134.3 | 341.7 | 115.0 |
| of which Finland | 9.8 | 275.2 | 104.7 |
| Eliminations | -139.1 | ||
| Total | 403.6 | 403.6 | 150.6 |
| 2018 EUR million |
Net sales, by destination country2) |
Net sales, by location country3) |
Non-current assets3) |
|---|---|---|---|
| Americas | 136.8 | 124.0 | 23.0 |
| of which United States | 103.7 | 117.0 | 22.8 |
| APAC | 109.6 | 50.4 | 1.7 |
| EMEA | 102.3 | 283.9 | 98.8 |
| of which Finland | 7.8 | 241.5 | 95.2 |
| Eliminations | -109.5 | ||
| Total | 348.8 | 348.8 | 123.5 |
1) Americas: North and South America, APAC: Asia Pacific, EMEA: Europe, Middle East and Africa
2) Sales to external customers have been presented as net sales by destination country
3) Net sales and non-current assets have been presented according to the group's and associated companies' countries
Vaisala's net sales consist of revenue recognized from contracts with customers. Net sales are divided into products, projects and services. Indirect taxes and discounts have been deducted from sales revenue. Exchange rate differences are recognized in the financial income and expenses.
Product net sales include revenue from products, spare parts and system deliveries. A system delivery contains a standard product delivery with limited amount of configuration. Each distinct product delivery is a performance obligation under IFRS 15. Revenue from the sale of product is recognized at a point in time when the control is transferred to the customer according to the delivery terms used.
Projects are integrated projects, in which observation solutions, consisting of products, services and software, are delivered. Solutions are integrated to customer systems according to customer specifications. Therefore, one project is one performance obligation under IFRS 15. Revenue for all projects is recognized over time using percentage of completion method. Progress is measured by cost-to-cost method, comparing incurred costs and forecasted costs, as it best describes the satisfaction of a performance obligation by transferring the promised asset to a customer. Projects meet the over-time revenue recognition criteria, either by creating an asset without an alternative use and Vaisala having an enforceable right to payment for performance completed to date and/or by creating an asset under customer control.
Services are divided into service contracts and one off service deliverables. Services may include maintenance, calibration and repair, modernization, extended warranties and data based solutions supporting decisions in weather-dependent operations. Service contracts are continuous services including for example extended warranty, availability of customer support and availability of spare part delivery. One service contract or one service deliverable is one performance obligation. Service contracts are recognized over time or at a point of time depending on the nature of the service and content of a contract. In case of one-off request services, the revenue is recognized at a point in time when the service has been rendered.
Standard warranty period for products is one year and 2, 5 or 10 years for selected products. Standard warranty period for services is 6 or 12 months. Extended warranty is a separately sold and priced service over a separately agreed period. Revenue for extended warranty is recognized over time starting at the time of standard warranty expiration. Provision for warranty costs is recognized as described in Note 15, Provisions.
Revenue recognition over time under IFRS 15 requires management judgment related to cost throughout the project delivery. When the outcome of a project cannot be estimated reliably, project costs are recognized as expenses in the same period when they arise and project revenues only to the extent of project costs incurred where it is probable that those costs will be recoverable. When it is probable that total costs necessary to complete the project will exceed total project revenue, the expected loss is recognized as an expense immediately.
Disaggregation of revenue is presented in Note 1, Reportable segments and Note 2, Geographical segments.
Payment terms vary based on geographical areas. In product and service business, the standard payment term is 30 days net, but in some areas prepayments are commonly used. Project invoicing is based on milestones and typically follows the general project delivery terms where 30% is advance payment, 60% against delivery documents and 10% after site acceptance test. In project business the most common payment terms are letter of credit or as per contract.
Vaisala takes advantage of IFRS 15 practical expedient related to the significant financing component. In those cases, in which Vaisala expects, at contract inception, that the period between when Vaisala transfers a promised good or service to a customer and when the customer pays for that good or service will be one year or less, Vaisala does not adjust the promised amount of consideration for the effects of a significant financing component. Additionally, financing component is considered only if significant prepayment is received over one year in advance before related delivery.
The following table provides information about receivables, contract assets and contract liabilities from contracts with customers included in the statement of financial position.
| EUR million | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| Trade receivables | 65.0 | 62.6 |
| Contract assets | 25.0 | 17.8 |
| Contract liabilities | 27.3 | 30.2 |
Contract assets include the balance of project and service revenue recognized but not yet invoiced.
In general, most of project revenue is recognized after the product manufacturing as percentage of completion increases and most of the performance obligation is satisfied. According to general project delivery terms, majority of project is invoiced before the delivery. Therefore, amount of contract assets is typically at its highest between product manufacturing phase of the project and delivery of the product to the customer. For services, which are satisfied over time, the customer is mainly invoiced in advance and only in some cases in arrears after the customer has received or consumed the service. Arrears invoicing generates contract asset balance as revenue is recognized before invoicing.
Contract liabilities include the balance of projects, services and products invoiced but revenue not yet recognized as well as customer payments related to contracts not yet invoiced. Project-related contract
liabilities often arise in the early stages of a project, when the prepayment has been invoiced, but the project is only at an early stage and there is none or little revenue recognized under percentage of completion method. Services, which are recognized over time, are often invoiced in advance and therefore contract liability is generated in the beginning of service period. For products and services, which are recognized at a point in time, contract liability is generated when customer has been invoiced, but performance obligation has not been satisfied and consequently revenue has not been recognized.
In 2019, Vaisala recognized EUR 17 (20) million revenue that was included in the contract liability balance at the beginning of the financial year.
At the end of 2019, the performance obligations that are unsatisfied or partially unsatisfied, that is the order book, amounted to EUR 139.0 (120.6) million. Of the order book EUR 101.4 (91.0) million is estimated to be recognized as revenue in 2020 and EUR 37.6 (29.6) million is estimated to be recognized later.
Other operating income and expenses comprise income and expenses that do not directly relate to the operating activity of business.
| EUR million | 2019 | 2018 |
|---|---|---|
| Gain on the disposal of tangible assets | 0.3 | 0.1 |
| Gain on items related to business combinations | 0.1 | 1.5 |
| Indemnities | 0.0 | 0.1 |
| Other | 0.5 | 0.4 |
| Total | 0.9 | 2.1 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Loss on the disposal of tangible assets | - | 0.0 |
| Restructuring expenses | 2.2 | 0.0 |
| Expenses related to termination of a contract | 1.5 | - |
| Total | 3.6 | 0.0 |
| Other operating income and expenses, net | -2.7 | 2.1 |
Personnel expenses
| EUR million | 2019 | 2018 |
|---|---|---|
| Salaries | 126.6 | 108.2 |
| Share-based payments | 3.5 | 2.4 |
| Social costs | 12.2 | 9.4 |
| Pensions | ||
| Defined benefit plans | 0.1 | 0.0 |
| Defined contribution plans | 15.3 | 13.6 |
| Total | 157.7 | 133.6 |
| Total | 157.7 | 133.6 |
|---|---|---|
| Research and development | 40.3 | 34.6 |
| Sales, marketing and administration | 69.2 | 55.0 |
| Procurement and production | 48.2 | 44.0 |
| EUR million | 2019 | 2018 |
| Persons | 2019 | 2018 |
|---|---|---|
| Weather and Environment | 797 | 719 |
| Industrial Measurements | 390 | 329 |
| Other operations | 642 | 630 |
| Total | 1,829 | 1,678 |
| Persons | 2019 | 2018 |
|---|---|---|
| Americas | 321 | 345 |
| APAC | 163 | 144 |
| EMEA (excluding Finland) | 225 | 131 |
| Finland | 1,119 | 1,058 |
| Total | 1,829 | 1,678 |
Information on share-based payments is disclosed in Note 7, Share-based payments. Information on key management compensation is disclosed in Note 29, Related party transactions.
The group has several pension plans around the world based on local practices. These pension schemes are classified either as defined contribution or as defined benefit plans. In defined contribution plans expenses are recognized in the statement of income on an accrual basis. TyEL pensions managed in insurance companies are defined contribution plans.
In defined benefit pension plans, liability to be recognized is the net amount of the present value of the defined benefit obligation in the end of the financial year and the fair value of the plan assets adjusted by the unamortized portion of unrecognized past service cost. The defined benefit obligation is calculated by actuaries independent of Vaisala and it is based on the projected unit credit method in which the estimated future cash flows are discounted to their present value using the interest rates approximating high quality corporate bonds. Pension costs are recognized in the statement of income on an accrual basis over years of service. Actuarial gains and losses are recognized in statement of comprehensive income.
122
The defined benefit plans are in the parent company. The additional pension coverage of parent company personnel was arranged by Vaisala Pension Fund that was closed on January 1, 1983. The pension fund liability was transferred to a pension insurance company on December 31, 2005 and the fund was dissolved in 2006. The company retains, however, an obligation under IAS 19 for future index and salary increases in terms of individuals covered by the Pension Fund who are employed by the company.
| EUR million | 2019 | 2018 |
|---|---|---|
| Fair value of funded obligations | 4.9 | 5.0 |
| Fair value of assets | -4.3 | -4.3 |
| Net liability in the statement of financial position at Dec 31 | 0.6 | 0.7 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Current service cost | 0.0 | 0.0 |
| Interest | 0.0 | 0.0 |
| Expense recognized in the statement of income | 0.0 | 0.0 |
| Net actuarial gain and loss | -0.2 | -0.3 |
| Total recognized in the statement of income and the statement of other comprehensive income |
-0.2 | -0.3 |
Pension costs in the statement of income have been recognized in sales, marketing and administrative costs.
| EUR million | 2019 | 2018 |
|---|---|---|
| Changes in the present value of obligation | ||
| Present value of obligation Jan 1 | 5.0 | 5.7 |
| Current service cost | 0.0 | 0.0 |
| Interest cost | 0.1 | 0.1 |
| Remeasurements | ||
| Actuarial gain (-) / loss (+) arising from changes in | ||
| financial assumptions | 0.3 | -0.3 |
| Experience adjustment | -0.2 | -0.2 |
| Benefits paid | -0.3 | -0.3 |
| Present value of obligation Dec 31 | 4.9 | 5.0 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Fair value of plan assets Jan 1 | 4.3 | 4.9 |
| Interest income on assets | 0.1 | 0.1 |
| Net return on plan assets | 0.4 | -0.2 |
| Benefits paid | -0.3 | -0.3 |
| Contributions | -0.1 | -0.1 |
| Fair value of plan assets Dec 31 | 4.3 | 4.3 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Liabilities Jan 1 | 0.7 | 0.8 |
| Expense (+) / income (-) recognized in statement of income | 0.0 | 0.0 |
| Total recognized in other comprehensive income | -0.2 | -0.3 |
| Contributions paid | 0.1 | 0.1 |
| Liabilities Dec 31 | 0.6 | 0.7 |
| 2019 | 2018 | |
|---|---|---|
| Discount rate, % | 0.58 | 1.58 |
| Rate of salary increase, % | 2.05 | 2.39 |
| Rate of inflation, % | 1.09 | 1.43 |
| Annual adjustments to pensions, % | 1.33 | 1.67 |
| Change in | Increase in | Decrease in | |
|---|---|---|---|
| Assumption | assumption | assumption | assumption |
| Discount rate | 0.25% | 2.37% decrease | 2.48% increase |
| Salary increase rate | 0.25% | 0.12% increase | 0.12% decrease |
| Pension increase rate | 0.25% | 21.33% increase | 20.82% decrease |
| Assumption | Increase by one year | Decrease by one year |
|---|---|---|
| Life expectancy at birth | 5.03% increase | 4.79% decrease |
The sensitivity analyses presented above are based on the assumption that if one assumption changes, all other assumptions remain unchanged. In practice, this is unlikely, and changes in some assumptions may correlate with each other. The sensitivity of defined benefit obligation to changes in significant actuarial assumptions has been calculated using the same method as that used to calculate the pension liability recognized in the statement of financial position.
Group's share-based payments are related to share-based incentive plans. Share-based payments are recognized as costs during the vesting period. The costs are based on an estimate of the amount of shares to be paid at the end of vesting period. Assumptions, on which estimates are based, are updated whenever changes occur and the effect of changes in assumptions are recognized in the statement of income.
As of January 1, 2018, the cost of the share part of the share-based payments as well as the cash part of the share-based payments correspond to the value of share closing price on the grant date of the incentive plan. Until the end of 2017, the cost of the equity-settled part of the share-based payments corresponded to the value of share closing price on the grant date of the share-based incentive plan, and the cashsettled part of the share-based payments was valued at the closing price of the share in the end of the financial year.
| EUR million | 2015 | 2016 | 2017 | 2018 | 2019 | Total |
|---|---|---|---|---|---|---|
| Share-based incentive plan 2015 | 0.5 | 1.1 | 1.6 | -0.1 | - | 3.2 |
| Share-based incentive plans 2016 | 0.7 | 1.2 | 0.6 | 0.2 | 2.7 | |
| Share-based incentive plan 2017 | 1.1 | 1.3 | 1.5 | 3.9 | ||
| Share-based incentive plan 2018 | 0.6 | 1.2 | 1.8 | |||
| Share-based incentive plan 2019 | 0.6 | 0.6 | ||||
| Total | 0.5 | 1.8 | 3.9 | 2.5 | 3.5 | 12.2 |
The share issue without payment approved by Vaisala's Annual General Meeting on April 10, 2018 doubled the total number of series K and A shares. All share-related figures have been adjusted to reflect the increased number of shares.
On December 18, 2014, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2015. The reward payment corresponded to 74% of the maximum target. On March 12, 2018, a total of 95,092 company's series A shares were conveyed without consideration to the 27 key employees participating in this incentive plan. The rest of the reward was paid in cash. Closing price of Vaisala's series A share was EUR 12.08 on the effective date of the incentive plan. A total expense of EUR 3.2 million was recognized of this plan in 2015–2018.
On December 16, 2015, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2016. The reward payment corresponded to 49% of the maximum target. On March 5, 2019, a total of 88,452
company's series A shares were conveyed without consideration to the 30 key employees participating in this incentive plan. The rest of the reward was paid in cash. Closing price of Vaisala's series A share was EUR 11.57 on the effective date of the incentive plan. A total expense of EUR 2.3 million was recognized of this plan in 2016–2019.
On February 10, 2016, the Board of Directors resolved for a share-based incentive plan, in which the earning criteria was uninterrupted employment of certain group employees for a defined number of years. This share-based incentive plan ended in March 2018, and the remaining reward, corresponding to 3,000 Vaisala's series A shares including the cash portion, was conveyed without consideration to the key employees participating in this incentive plan. The rest of the reward was paid in cash. A total expense of EUR 0.3 million was recognized of this plan in 2016–2018.
On December 15, 2016, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2017. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2020. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 400,000 series A shares and the reward payment will correspond to 65% of the maximum target. No reward will be paid if a key employee's employment or service ends before the reward payment date. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2017 to March 2020. Closing price of Vaisala's series A share was EUR 17.90 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 35 persons and the maximum reward payable totals to 237,900 Vaisala's series A shares, including the cash portion.
On February 7, 2018, the Board of Directors resolved for the group key employees a share-based incentive plan that was based on the development of group's profitability in calendar year 2018. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2021. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 320,000 series A shares, and the reward payment will correspond to 55% of the maximum target. No reward will be paid if a key employee's employment or service ends before the reward payment date. The expenses of this share-based incentive plan are accrued over the term of the plan from April 2018 to March 2021. Closing price of Vaisala's series A share was EUR 22.10 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 30 persons and the maximum reward payable totals to 168,970 Vaisala's series A shares, including the cash portion.
On February 12, 2019, the Board of Directors resolved for approximately 45 group key employees a share-based incentive plan that is based on the development of the total shareholder return (TSR) and profitability in 2019–2021. The reward will be paid partly in Vaisala's series A shares and partly in cash in spring 2022. The cash proportion will cover taxes and tax-related costs arising from the reward to a key employee. The maximum amount of this plan originally corresponded to 330,000 series A shares. No reward will be paid if a key employee's employment or service ends before the reward payment date. In addition, Vaisala's Board of Directors requires that the President and CEO and each member of the
Management Group retains his/her ownership of shares received under this plan until the value of his/her ownership in Vaisala corresponds to at least his/her annual gross base salary. The expenses of this sharebased incentive plan are accrued over the term of the plan from April 2019 to March 2022. Closing price of Vaisala's series A share was EUR 19.06 on the effective date of the incentive plan. On December 31, 2019, this share-based incentive plan was directed to approximately 45 persons.
On June 28, 2019, Vaisala conveyed a total of 2.195 company's series A shares without consideration to a person participating in the share-based incentive plans 2017 and 2018.
Research and development expenditure is recognized as costs in the financial year in which they incur, except for machinery and equipment acquired for research and development purposes, which are capitalized and depreciated on a straight-line basis.
According to IAS 38, an intangible asset is recognized in the statement of financial position only when it is probable that the expected future economic benefits will flow to the entity. Costs related to the development of new products and processes have not been capitalized as their future returns will not be realized until the products enter the market. According to IAS 38 no intangible asset arising from research shall be recognized and if an entity cannot distinguish the research phase from the development phase of an internal project, the entity treats the expenditure as if it were incurred in research phase only. It is typical for the industry that it is not possible to distinguish the research phase of an internal project that aims to create an asset from its development phase.
The statement of income includes research and development costs of EUR 52.8 (45.4) million in 2019.
Exchange rate differences resulting from settlement of monetary items or from presentation of items in the financial statements at different exchange rates from which they were originally recognized during the financial period or presented in the previous financial statements, are recognized as financial income or expenses in the financial period in which they arise.
All derivative financial contracts are initially recognized at cost and subsequently remeasured at their fair value. Derivative financial contracts are valued at their fair value using the market prices of derivative financial contracts at the closing date of the financial year. Unrealized and realized gains and losses arising from changes in the fair value are recognized in the statement of income in 'financial income and expenses" in the period in which they arise.
| EUR million | 2019 | 2018 |
|---|---|---|
| Interest and financial income | 0.3 | 0.3 |
| Gains arising from changes in fair values of derivative financial contracts | 1.3 | 1.6 |
| Foreign exchange gains | 3.0 | 4.1 |
| Total | 4.6 | 6.0 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Interest expenses | ||
| Current and non-current liabilities | 0.3 | 0.1 |
| Interest expenses on lease liabilities | 0.3 | - |
| Other financial expenses | 0.3 | 0.2 |
| Losses arising from changes in fair values of derivative financial contracts | 2.5 | 4.1 |
| Foreign exchange losses | 2.3 | 3.0 |
| Total | 5.7 | 7.4 |
| Financial income and expenses, net | -1.1 | -1.5 |
Foreign exchange gains and losses include gains and losses mainly from revaluation of cash and cash equivalents, trade and other receivables, internal loans as well as trade and other payables.
The group tax expense includes taxes of group companies based on taxable profit for the financial year, tax adjustments for previous years and changes in deferred taxes. Taxes are recognized in the consolidated statement of income except when they are related with items recognized in other comprehensive income or directly in shareholder's equity. Current taxes are calculated on the taxable income based on the tax rates enacted or substantively enacted for each country by the end of the financial year. Taxes are adjusted for the taxes of previous financial periods, if applicable.
Deferred taxes are calculated for all temporary differences between the carrying amount of an asset or a liability and its tax base, and those are measured with enacted or substantively enacted tax rates by the end of the financial year. Main temporary differences arise from depreciation and amortization, accruals for share-based incentive plans and tax losses carried forward. Other temporary timing differences consist mainly of provisions, accruals of operating expenses and revenue related accruals. Deferred tax assets are recognized to the extent that it is probable that these can be utilized against future taxable profits.
| EUR million | 2019 | 2018 |
|---|---|---|
| Tax based on taxable income for the financial year | 9.1 | 8.7 |
| Taxes from previous financial years | -0.6 | -0.3 |
| Change in deferred tax assets and liabilities | -1.9 | -0.4 |
| Total | 6.6 | 8.0 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Result before taxes | 40.2 | 37.5 |
| Taxes calculated at the Finnish tax rate | 8.0 | 7.5 |
| Effect of foreign subsidiaries' tax rates | 0.8 | 0.9 |
| Non-deductible expenses and tax-free revenue | 0.1 | 0.2 |
| Taxes from previous financial years | -0.6 | -0.3 |
| Other direct taxes | 0.1 | 0.1 |
| Reassessment of deferred tax assets | -1.9 | -0.4 |
| Other | 0.1 | 0.0 |
| Total | 6.6 | 8.0 |
| Effective tax rate | 16.3% | 21.4% |
Vaisala had in total of EUR 4.5 (16.4) million tax losses carried forward for which no deferred tax assets have been recognized as of December 31, 2019. Additionally, deferred tax liabilities in total of EUR 0.8 (9.3) million was recognized for intangible assets (including technology-based and customer related intangible assets) identified in business combinations.
| EUR million | 2019 | 2018 |
|---|---|---|
| Deferred tax assets | 9.8 | 9.8 |
| Deferred tax liabilities | -8.1 | -9.4 |
| Total | -1.7 | 0.4 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Deferred taxes Jan 1 | 0.4 | 7.1 |
| Items recognized in the statement of income | 1.9 | 0.4 |
| Effect of business combinations | -0.8 | -7.4 |
| Translation differences | 0.0 | 0.2 |
| Items recognized in the equity | 0.2 | 0.1 |
| Items recognized in the statement of comprehensive income | -0.0 | -0.1 |
| Deferred taxes Dec 31 | 1.7 | 0.4 |
| EUR million | Jan 1, 2019 | Recognized in the statement of income |
Effect of business combinations |
Translation differences |
Recognized in equity |
Recognized in the statement of comprehensive income |
Dec 31, 2019 |
|---|---|---|---|---|---|---|---|
| Deferred tax assets | |||||||
| Internal margin of inventories and tangible and intangible assets | 0.7 | 0.1 | 0.0 | 0.8 | |||
| Employee benefits and share-based payments | 1.9 | 0.2 | 0.0 | 0.0 | 2.0 | ||
| Unused tax losses | 2.8 | 1.2 | 0.0 | 4.0 | |||
| Timing difference of amortization on intangible assets | 2.2 | -0.1 | 2.0 | ||||
| Other temporary timing differences | 2.2 | -1.3 | 0.0 | 1.0 | |||
| Total | 9.8 | 0.0 | 0.0 | 0.0 | 9.8 | ||
| Deferred tax liabilities | |||||||
| Timing difference of amortization on intangible assets | 9.1 | -1.9 | 0.8 | 8.1 | |||
| Other | 0.3 | 0.0 | -0.2 | 0.0 | |||
| Total | 9.4 | -1.9 | 0.8 | -0.2 | 8.1 | ||
| Deferred tax assets, net | 0.4 | 1.9 | -0.8 | 0.0 | 0.2 | -0.0 | 1.7 |
| EUR million | Jan 1, 2018 | Recognized in the statement of income |
Effect of business combinations |
Translation differences |
Recognized in equity |
Recognized in the statement of comprehensive income |
Dec 31, 2018 |
|---|---|---|---|---|---|---|---|
| Deferred tax assets | |||||||
| Internal margin of inventories and tangible and intangible assets | 0.6 | 0.1 | 0.7 | ||||
| Employee benefits and share-based payments | 2.1 | -0.1 | -0.1 | 1.9 | |||
| Unused tax losses | 2.4 | -0.3 | 0.6 | 0.2 | 2.8 | ||
| Timing difference of amortization on intangible assets | 0.3 | 0.2 | 1.7 | 2.2 | |||
| Other temporary timing differences | 2.2 | -0.2 | 0.1 | 0.0 | 0.1 | 2.2 | |
| Total | 7.6 | -0.4 | 2.4 | 0.2 | 0.1 | -0.1 | 9.8 |
| Deferred tax liabilities | |||||||
| Timing difference of amortization on intangible assets | 0.5 | -0.7 | 9.3 | 9.1 | |||
| Other | 0.0 | -0.1 | 0.4 | 0.0 | 0.3 | ||
| Total | 0.5 | -0.8 | 9.7 | 0.0 | 9.4 | ||
|---|---|---|---|---|---|---|---|
| Deferred tax assets, net | 7.1 | 0.4 | -7.4 | 0.2 | 0.1 | -0.1 | 0.4 |
Earnings per share is calculated by dividing the result for the period attributable to the parent company's shareholders by weighted average number of issued shares during the financial year. Diluted earnings per share is calculated by adjusting the weighted average number of shares outstanding during the financial year with the diluted effect of potential shares from the share-based payments.
The Annual General Meeting held on April 10, 2018 resolved to issue new shares to the shareholders without payment in proportion to their holdings that one new share was issued for each share (split). After the split Vaisala has 36,436,728 shares. The change in the number of shares has been adjusted retrospectively in the per share calculations.
| 2019 | 2018 | |
|---|---|---|
| Result attributable to the shareholders of the parent company, EUR million | 33.5 | 29.5 |
| Weighted average number of shares outstanding, 1,000 pcs | 35,864 | 35,772 |
| Effect of share-based incentive plans, 1,000 pcs | 269 | 603 |
| Weighted average diluted number of shares, 1,000 pcs | 36,133 | 36,376 |
| Earnings per share, EUR | 0.94 | 0.82 |
| Diluted earnings per share, EUR | 0.93 | 0.81 |
Accounting principles related to trade receivables and other receivables are presented in Note 21, Financial assets and liabilities.
| EUR million | 2019 | 2018 |
|---|---|---|
| Trade receivables | 65.0 | 62.6 |
| Loan receivables | 0.0 | 0.0 |
| Advances paid | 0.9 | 1.4 |
| Value-added tax receivables | 4.1 | 4.5 |
| Other receivables | 0.9 | 0.6 |
| Derivative financial contracts | 0.3 | 0.0 |
| Other prepaid expenses and accrued income | 6.2 | 5.6 |
| Total | 77.3 | 74.7 |
The fair value of trade and other receivables is, in all material respects, equivalent to their carrying amounts.
| Trade receivables, | Credit loss | Trade receivables, | |
|---|---|---|---|
| Dec 31, 2019 | gross amount | allowance | net amount |
| Current | 38.4 | 0.1 | 38.2 |
| Due less than 90 days | 16.4 | 0.1 | 16.3 |
| Due 91–180 days | 1.3 | 0.2 | 1.1 |
| Due over 180 days | 1.6 | 0.7 | 0.9 |
| Credit loss allowance other than those based on age analysis |
9.5 | 1.0 | 8.5 |
| Total | 67.1 | 2.0 | 65.0 |
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Consolidated financial statements
| Expected credit losses of trade receivables | ||
|---|---|---|
| Dec 31, 2018 | Trade receivables, gross amount |
Credit loss allowance |
Trade receivables, net amount |
|---|---|---|---|
| Current | 46.2 | 0.1 | 46.0 |
| Due less than 90 days | 14.3 | 0.0 | 14.3 |
| Due 91–180 days | 1.0 | 0.2 | 0.8 |
| Due over 180 days | 1.7 | 0.7 | 1.0 |
| Credit loss allowance other than those based on age analysis |
1.7 | 1.1 | 0.5 |
| Total | 64.8 | 2.2 | 62.6 |
| Jan 1, 2018 (on adoption of IFRS 9) | Trade receivables, gross amount |
Credit loss allowance |
Trade receivables, net amount |
|---|---|---|---|
| Current | 41.1 | 0.1 | 41.0 |
| Due less than 90 days | 16.7 | 0.1 | 16.7 |
| Due 91–180 days | 1.4 | 0.2 | 1.2 |
| Due over 180 days | 1.6 | 0.8 | 0.9 |
| Credit loss allowance other than those based on age analysis |
1.1 | 0.7 | 0.5 |
| Total | 62.0 | 1.8 | 60.2 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Credit loss allowance on Dec 31 - calculated in accordance with IAS 39 | - | 1.6 |
| Amounts restated through opening balance of retained earnings | - | 0.2 |
| Opening balance for credit loss allowance on Jan 1 - calculated in accordance with IFRS 9 |
2.2 | 1.8 |
| Change in credit loss allowance recognized in profit or loss during the financial year |
0.2 | 0.6 |
| Receivables recognized as final credit losses during the financial year due to uncollectability |
-0.7 | -0.2 |
| Business combinations | - | 0.2 |
| Assets held for sale | 0.3 | -0.3 |
| Exchange rate differences | 0.0 | 0.0 |
| Total | 2.0 | 2.2 |
Credit losses and related reversals arising from trade receivables recognized for the financial year amounted to EUR -0.2 (-0.6) million.
| EUR million | 2019 | 2018 |
|---|---|---|
| EUR | 31.3 | 29.7 |
| USD | 21.3 | 23.3 |
| GBP | 3.7 | 2.7 |
| JPY | 5.1 | 4.3 |
| AUD | 0.8 | 1.1 |
| CNY | 1.3 | 0.6 |
| CAD | 0.8 | 1.1 |
| Others | 0.7 | 0.0 |
| Total | 65.0 | 62.6 |
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Consolidated financial statements
Inventories are stated at the lower of standard cost and net realizable value. Inventory cost includes the cost of purchase (including mainly purchase price, import duties and transport), direct labor and a proportion of production overhead. An allowance is recognized for excess inventory and obsolescence.
Allowance for inventory is recognized for possible excess, obsolescence and decrease in net realizable value below inventory cost. Estimates and judgment are required in determining the value of the allowance for excess and obsolete inventory. Management analyses estimates of demand and determines allowance for excess and obsolete inventory. Possible changes in the assumptions may cause revaluation of inventory valuation in the future periods.
| EUR million | 2019 | 2018 |
|---|---|---|
| Materials, supplies and finished goods | 39.6 | 32.0 |
| Total | 39.6 | 32.0 |
The cost of inventories recognized in the statement of income as an expense corresponding to net sales was EUR 111.6 (97.2) million.
Write-offs and excess and obsolescence allowances for slow moving and obsolete inventory recognized during the financial year amounted to EUR 2.4 (1.9) million.
Trade payables are recognized on an accrual basis and due to short maturity the carrying amount is considered to be the fair value. Trade and other payables are classified as current liabilities if they are due within 12 months from the balance sheet date or are to be settled within the normal operating business cycle. Accounting principles for derivative financial contracts are presented in note 21, Financial assets and liabilities.
| EUR million | 2019 | 2018 |
|---|---|---|
| Trade payables | 18.0 | 14.9 |
| Personnel cost accruals | 32.2 | 25.7 |
| Derivative financial contracts | 0.4 | 1.0 |
| Other accrued expenses and deferred income | 6.6 | 8.9 |
| Other current liabilities | 7.3 | 6.9 |
| Total | 64.5 | 57.2 |
Trade payables arise from ordinary course of business and they relate to purchases of inventories, intangible and tangible assets and other goods and services. Personnel cost accruals are mainly related to bonuses and unused vacations.
A provision is recognized when group has a legal or constructive obligation as a result of a prior event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate of the amount can be made. The amount recognized as a provision is the best estimate of the expenditure required to settle the present obligation at the end of reporting period. If the effect of the time value of money is material, the amount of provision is the present value of the expenditure expected to be required to settle the obligation. The discount factor used in calculating the present value is selected so that it reflects the market view of the time value of money and the risks related to the obligations at the time of examination.
Where some or all of the expenditure required to settle a provision is expected to be reimbursed by third party, the reimbursement is recognized as a separate asset but only when the reimbursement is virtually certain. The amount of provisions is reviewed at end of each reporting period and the amount is adjusted to reflect the current best estimate. A provision is reversed when the probability of financial settlement has been removed. A change in provision is recognized in the same item of the statement of income in which the provision was originally recognized.
Provisions can relate to restructuring of operations, loss-making contracts, warranties, legal disputes and other commitments.
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Restructuring provision is recognized when a detailed and appropriate plan for restructuring has been prepared and the company has started to implement the plan or has announced it to those affected by it. Restructuring provisions include mainly lease termination penalties and redundancy payments.
A provision for a loss-making contract is recognized when unavoidable costs of meeting the obligation exceed the economic benefits expected to be received from the contract.
A warranty provision covers the cost of repairing or replacing the products. The warranty provision is based on past experience and an estimate of future costs.
| EUR million | 2019 | 2018 |
|---|---|---|
| Provisions Jan 1 | 0.2 | 0.2 |
| Increase in provisions | 0.0 | 0.0 |
| Tranferred to current provisions | -0.0 | -0.0 |
| Exchange rate differences | 0.0 | 0.0 |
| Provisions Dec 31 | 0.1 | 0.2 |
Current provisions
| EUR million | 2019 | 2018 |
|---|---|---|
| Provisions Jan 1 | 3.2 | 1.3 |
| Increase in provisions | 1.3 | 2.3 |
| Transferred from non-current provisions | 0.0 | - |
| Used provisions | -1.3 | -0.5 |
| Provisions Dec 31 | 3.2 | 3.2 |
In 2019 and 2018 provisions related to warranties, restructuring, loss-making contracts and other contractual commitments.
Goodwill represents the excess of the consideration transferred of an acquisition over the fair value of the group's share of the net assets of the acquired entity at the date of acquisition. Goodwill is calculated in the currency of the operating environment of the acquired entity. If the consideration transferred is lower than the net asset value of the acquired entity, the difference is recognized in the statement of income. Goodwill is not amortized, but tested annually for possible impairment and whenever there is an indication that the value may be impaired. For this purpose goodwill has been allocated to cash-generating units. Vaisala's total goodwill is allocated to the cash-generating unit formed by the Weather and Environment Business Area. Goodwill is valued at acquisition cost less impairment losses. Impairment losses are recognized in the statement of income.
Intangible assets identified in connection with acquisitions are measured at the fair value at the acquisition date. In business combinations consideration transferred has been allocated to technology-based and customer related intangible assets. Initial measurement of technology-based and customer related intangible assets has been prepared by applying income and cost approach method. Intangible assets identified in connection with acquisitions are amortized over their delivery times or estimated useful lifetimes.
Other intangible assets include mainly patents, trademarks and (software) licenses. Other intangible assets are recognized initially at acquisition cost and amortized using the straight-line method over their useful lifetime. Intangible assets that have an indefinite useful lifetime are not amortized, but are tested annually for impairment. The carrying amount of these intangible assets is not material.
133
| Technology-based intangible assets | 7–8 years |
|---|---|
| Customer related intangible assets | 1–5 years |
| Intangible rights | 3–20 years |
| Software licenses | 3–5 years |
| Other intangible assets | 3–5 years |
Property, plant and equipment comprise mainly land and buildings as well as machinery and equipment. The carrying amount of assets are based on original acquisition cost less accumulated depreciation as well as possible impairment losses. The cost of self-constructed assets includes materials and direct labor as well as a proportion of overhead costs attributable to construction labor. If a tangible asset consists of several parts which have different useful lifetimes, these parts are treated as separate assets. Accordingly, expenses relating to the renewal of a part are capitalized and the remaining part is recognized as an expense. Otherwise, expenditures that incur later are included in the carrying amount of the tangible assets only if it is probable that the future economic benefit connected with the asset is for the benefit of group and that the acquisition cost can be reliably determined. Other repair and maintenance expenses are recognized in the statement of income when realized.
Depreciation is calculated using the straight-line method and is based on the estimated useful lifetime of the asset. Land is not depreciated. Estimated useful lifetimes for assets are:
| Buildings and structures | 5–40 years |
|---|---|
| Machinery and equipment | 3–8 years |
| Other tangible assets | 3–8 years |
The residual values, depreciation methods and useful lifetimes of the assets are reviewed, and adjusted if necessary, in connection with each financial statement to reflect changes in the expectations of future economic benefit. Gains and losses on disposals are determined by comparing the disposal proceeds with the carrying amount of the asset and are included in the operating result.
Public grants received for investments are recognized as a reduction in the carrying amounts of tangible assets. Thus, grants are recognized in the form of lower depreciation over the useful lifetime of the asset.
In the end of each reporting period, the group reviews assets for any indication of impairment. The need for impairment is reviewed at cash-generating unit level, i.e. at the lowest level of units which is mainly independent of other units and whose cash flows are separate and highly independent from the cash flows of other corresponding units. If there is an indication of impairment, the recoverable amount of the asset is assessed. Additionally, the recoverable amount is assessed annually for the following assets irrespective
of whether there is indication of impairment: goodwill, intangible assets which have an indefinite useful lifetime, as well as incomplete intangible assets.
The recoverable amount is the higher of the asset's fair value less the cost arising from disposal and its value in use. In determining value in use, the estimated future cash flows are discounted to their present value using discount rates that reflect the average pre-tax cost of capital for the respective country and industry (WACC = weighted average cost of capital). The special risks associated with these assets are also taken into account in the discount rates. For an individual asset that does not independently generate future cash flows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
An impairment loss is recognized as an expense when the carrying amount of the asset is greater than its recoverable amount. An impairment loss is reversed if there has been a change in the circumstances that led to the estimates and the recoverable amount of the asset has changed since the impairment loss was recognized. An impairment loss is not reversed more than the carrying amount of the asset (less depreciation) without an impairment loss recognized. Impairment losses recognized for goodwill are not reversed under any circumstances.
In business combinations, IFRS 3 requires the acquirer to recognize an intangible asset separately from goodwill, if the recognition criteria are met. Recognition of an intangible asset at fair value requires management estimates of future cash flows. To the extent possible, management has used available market values as the basis for allocating costs to determine fair values. When this is not possible, which is typical especially for intangible assets, valuation is mainly based on the historical profits or costs of the asset and its intended use in the business. Valuations are based on discounted cash flows and estimated disposal and replacement costs and require management's estimates and assumptions about the future use of the assets and their effect on the financial position of the company. Changes in the focus and direction of the company's business operations may, in the future, result in changes in the original valuation. Group tests goodwill annually for impairment and assesses indications of impairment of property, plant and equipment and intangible assets as described above. The recoverable amounts of cash-generating units are determined using value in use calculations. Although management believes that the assumptions used are appropriate, the estimated recoverable amounts might differ materially from that realized in the future.
| EUR million | Goodwill | Technology-based intangible assets |
Customer related intangible assets |
Other intangible assets | Advance payments and construction in progress |
Total |
|---|---|---|---|---|---|---|
| Acquisition cost Jan 1, 2019 | 25.2 | 37.3 | 11.8 | 33.1 | 0.4 | 107.8 |
| Translation difference | 0.3 | 0.0 | 0.1 | 0.0 | 0.4 | |
| Increases | -0.0 | 0.2 | 0.1 | 0.4 | ||
| Business combinations | 4.3 | 1.8 | 2.3 | 8.4 | ||
| Decreases | -0.0 | -0.7 | -0.7 | |||
| Transfers between items | 0.1 | -0.1 | 0.0 | |||
| Acquisition cost Dec 31, 2019 | 29.8 | 39.1 | 14.1 | 32.9 | 0.4 | 116.3 |
| Accumulated amortization and impairment Jan 1, 2019 | 1.4 | 2.3 | 30.0 | 33.7 | ||
| Translation difference | 0.0 | 0.1 | 0.1 | |||
| Accumulated amortization of decreases and transfers | -0.0 | -0.7 | -0.7 | |||
| Amortization for the financial year | 5.4 | 4.0 | 1.1 | 10.5 | ||
| Impairment for the financial year | 0.0 | 0.0 | ||||
| Accumulated amortization and impairment Dec 31, 2019 | 6.7 | 6.3 | 30.5 | 43.6 | ||
| Carrying amount Dec 31, 2019 | 29.8 | 32.4 | 7.8 | 2.4 | 0.4 | 72.7 |
| EUR million | Goodwill | Technology-based intangible assets |
Customer related intangible assets |
Other intangible assets | Advance payments and construction in progress |
Total |
|---|---|---|---|---|---|---|
| Acquisition cost Jan 1, 2018 | 16.2 | 2.3 | 0.1 | 35.9 | 54.5 | |
| Translation difference | 0.7 | -0.0 | 0.4 | 1.0 | ||
| Increases | 1.1 | 0.1 | 1.2 | |||
| Business combinations | 8.3 | 35.0 | 11.7 | 0.5 | 0.0 | 55.6 |
| Decreases | -0.0 | -5.0 | -5.0 | |||
| Transfers between items | 0.2 | 0.2 | 0.4 | |||
| Acquisition cost Dec 31, 2018 | 25.2 | 37.3 | 11.8 | 33.1 | 0.4 | 107.8 |
| Accumulated amortization and impairment Jan 1, 2018 | 0.1 | 0.0 | 33.8 | 33.9 | ||
| Translation difference | 0.1 | 0.2 | 0.3 | |||
| Accumulated amortization of decreases and transfers | -0.0 | -5.0 | -5.0 | |||
| Amortization for the financial year | 1.2 | 2.3 | 0.9 | 4.4 | ||
| Accumulated amortization and impairment Dec 31, 2018 | 1.4 | 2.3 | 30.0 | 33.7 | ||
| Carrying amount Dec 31, 2018 | 25.2 | 36.0 | 9.5 | 3.1 | 0.4 | 74.1 |
Vaisala assesses the value of goodwill, intangible assets which have an indefinite useful lifetime, as well as incomplete intangible assets for impairment annually and whenever there is an indication that the unit may be impaired. The recoverable amount of the cash-generating unit is based on value in use calculations and cash flows are based on four year forecasts approved by Vaisala management. Vaisala's total goodwill is allocated to the cash-generating unit formed by Weather and Environment Business Area.
In Weather and Environment Business Area cash-generating unit the recoverable amount exceeds the carrying amount by EUR 310 million. Weather and Environment Business Area sales are expected to grow in average 2% next four years. Terminal growth rate is 2% and Weighted Average Cost of Capital is 8.8%. Calculations indicate that assuming other assumptions remain unchanged, the cash-generating unit will not be impaired if net sales do not decrease by more than 12%, profitability decrease by more than 7% or discount rate increase by more than 16%.
In impairment testing the impact of the acquisition of Vaisala Digital Oy has been taken into account in the amount of goodwill, intangible assets and in cash flows generated by cash generating unit. Goodwill related to Vaisala Digital Oy has been allocated to the segment consisting of Weather and Environment Business Area.
| Advance payments and | ||||||
|---|---|---|---|---|---|---|
| EUR million | Land and waters | Buildings and structures | Machinery and equipment | Other tangible assets | construction in progress | Total |
| Acquisition cost Jan 1, 2019 | 4.6 | 56.1 | 73.3 | 0.1 | 7.0 | 141.2 |
| Translation difference | 0.0 | 0.1 | 0.4 | 0.0 | 0.5 | |
| Increases | 1.0 | 5.8 | 19.3 | 26.2 | ||
| Decreases | -0.0 | -2.8 | -2.8 | |||
| Transfers between items | 0.3 | 2.8 | -2.7 | 0.4 | ||
| Acquisition cost Dec 31, 2019 | 4.7 | 57.5 | 79.5 | 0.1 | 23.7 | 165.4 |
| Accumulated depreciation and impairment Jan 1, 2019 | 38.1 | 56.8 | 94.9 | |||
| Translation difference | 0.1 | 0.3 | 0.4 | |||
| Accumulated depreciation of decreases and transfers | 0.0 | -2.2 | -2.2 | |||
| Depreciation for the financial year | 2.5 | 6.0 | 8.6 | |||
| Impairment for the financial year | 0.0 | 0.4 | 0.4 | |||
| Accumulated depreciation and impairment Dec 31, 2019 | 40.8 | 61.2 | 102.0 | |||
| Carrying amount Dec 31, 2019 | 4.7 | 16.8 | 18.2 | 0.1 | 23.7 | 63.4 |
On December 31, 2019, the carrying amount of machinery and equipment used in production was EUR 11.9 (10.7) million.
| Advance payments and | ||||||
|---|---|---|---|---|---|---|
| EUR million | Land and waters | Buildings and structures | Machinery and equipment | Other tangible assets | construction in progress | Total |
| Acquisition cost Jan 1, 2018 | 2.9 | 55.2 | 72.0 | 0.1 | 4.1 | 134.2 |
| Translation difference | 0.1 | 0.3 | 0.7 | 0.0 | 0.0 | 1.1 |
| Increases | 1.6 | 0.3 | 4.1 | 6.9 | 12.8 | |
| Business combinations | 0.0 | 0.9 | 0.0 | 0.2 | 1.1 | |
| Decreases | -0.3 | -6.4 | 0.0 | -6.7 | ||
| Transfers between items | 0.7 | 2.1 | -4.1 | -1.3 | ||
| Acquisition cost Dec 31, 2018 | 4.6 | 56.1 | 73.3 | 0.1 | 7.0 | 141.2 |
| Accumulated depreciation and impairment Jan 1, 2018 | 35.9 | 58.0 | 93.9 | |||
| Translation difference | 0.1 | 0.6 | 0.7 | |||
| Accumulated depreciation of decreases and transfers | -0.3 | -7.1 | -7.4 | |||
| Depreciation for the financial year | 2.4 | 5.2 | 7.6 | |||
| Impairments for the financial year | 0.0 | 0.0 | 0.1 | |||
| Accumulated depreciation and impairment Dec 31, 2018 | 38.1 | 56.8 | 94.9 | |||
| Carrying amount Dec 31, 2018 | 4.6 | 18.0 | 16.5 | 0.1 | 7.0 | 46.3 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Procurement and production | 4.0 | 3.9 |
| Sales, marketing and administration | 14.3 | 7.5 |
| Research and development | 1.2 | 0.7 |
| Total | 19.4 | 12.1 |
| Depreciation | |||
|---|---|---|---|
| and | |||
| EUR million | amortization | Impairment | Total |
| Technology-based intangible assets | 1.1 | 0.0 | 1.1 |
| Customer related intangible assets | 5.4 | 5.4 | |
| Other intangible assets | 4.0 | 4.0 | |
| Buildings and structures | 2.5 | 0.0 | 2.5 |
| Machinery and equipment | 6.0 | 0.4 | 6.4 |
| Total | 19.0 | 0.4 | 19.4 |
| Depreciation | |||
|---|---|---|---|
| EUR million | and amortization |
Impairment | Total |
| Technology-based intangible assets | 1.2 | 1.2 | |
| Customer related intangible assets | 2.3 | 2.3 | |
| Other intangible assets | 0.9 | 0.9 | |
| Buildings and structures | 2.4 | 0.0 | 2.4 |
| Machinery and equipment | 5.2 | 0.1 | 5.3 |
| Total | 12.0 | 0.1 | 12.1 |
Vaisala acts as a lessee and its lease contracts consist mainly of offices, other premises, land area, apartments and cars.
Majority of Vaisala's lease contracts are fixed-term arrangements without one-sided extension or termination options and thus the lease term is defined based on the duration of the contract. If an arrangement includes extension, termination or purchase option management estimates the probable lease term for each arrangement based on an understanding of the business needs.
A contract may include both a lease component and other components (such as a service fee), for which the contract consideration is allocated on the basis of relative separate prices. Other components are excluded from IFRS 16 calculation, except for service fees for car leases, which are included in the lease component.
For leases, right-of-use asset and corresponding lease liability are recognized in the statement of financial position.
The cost of initial measurement of the right-of-use asset comprise the following items:
Right-of-use assets are tested for impairment as described in Note 16, Intangible and tangible assets.
Subsequently right-of-use asset is measured at cost less accumulated depreciation and impairment losses, adjusted for any remeasurement of the lease liability.
The lease liability is initially measured at the present value of the future lease payments discounted by incremental borrowing rate. Incremental borrowing rate is the rate of interest that Vaisala would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment.
Lease liabilities include the net fair value of the following leases:
Leases based on extension options that are reasonably certain to be exercised are also included in the liability. Subsequently, the amount of lease liability is affected by, among other things, the interest accrued by the lease liability, the leases paid, the index increases in leases and the effects of changes in contract.
Depreciation of right-of-use assets, interest on lease liabilities and items arising from contractual changes are recognized in the consolidated statement of income.
The application of IFRS 16 requires management to consider the duration of the lease term if there is an option for extension, termination or purchase. When evaluating the likelihood of the option being exercised and, therefore, the duration of the lease term, management takes into account all known facts and circumstances that create a financial incentive to exercise, or not to exercise, the option on a contractual basis.
Management's estimates of the business needs and hence the likelihood of the exercise of various options are based on known short- and long-term strategies and action plans and on the possible reorganization plans and investment decisions based on them. When evaluating the likelihood of the exercise of options, the decision is also influenced by, among other things, the purpose of the use of the premises and the extent of the investments made.
| EUR million | 2019 |
|---|---|
| Land and waters | 1.3 |
| Buildings and structures | 10.3 |
| Machinery and equipment | 0.7 |
| Total | 12.3 |
Additions to the right-of-use assets during the financial year 2019 were EUR 4.0 million.
| EUR million | 2019 |
|---|---|
| Non-current | 8.3 |
| Current | 3.0 |
| Total | 11.3 |
Maturity of lease liabilities is presented in note 21, Financial assets and liabilities. Future cash outflows from leases not yet commenced at the end of the financial year is presented in note 24, Contingent liabilities and pledges given.
| EUR million | 2019 |
|---|---|
| Buildings and structures | 3.7 |
| Machinery and equipment | 0.5 |
| Total | 4.1 |
| EUR million | 2019 |
|---|---|
| Interest expense on lease liabilities | 0.3 |
The total cash outflow for leases in 2019 was EUR 4.4 million.
Share capital and reserves
Consolidated financial statements
The group's equity consists of share capital, reserve fund, fund of invested non-restricted equity, translation differences and retained earnings.
Shares issued by the parent company are presented as share capital. Expenses related to the share issues or acquisition of own shares are presented as a reduction of equity. If the company acquires back its own shares, the consideration paid including direct costs is deducted from the equity.
The Board of Directors' proposal for dividend distribution is not recognized in the financial statements. The dividends are recognized only after the Annual General Meetings' approval.
The Annual General Meeting held on April 10, 2018 resolved to issue new shares to the shareholders without payment in proportion to their holdings to that one new share was issued for each share (split). On April 24, 2019 Board of Directors of Vaisala Corporation decided to convert 27,264 series K share to series A shares. This conversion was registered into the Trade Register on May 27, 2019. After this Vaisala Corporation has 36,436,728 shares, of which 6,751,398 are series K shares and 29,685,330 series A shares. The shares do not have nominal value. The series K shares and A shares are differentiated by the fact that each series K share entitles its owner to twenty (20) votes at General Meeting of Shareholders while each series A share entitles its owner to one (1) vote. The shares have the same rights to dividend. Series K shares can be converted to series A shares according to specific rules stated in the Articles of Association.
On December 31, 2019 and 2018, the fully paid and registered share capital of Vaisala Corporation amounted to EUR 7,660,807.86. The Annual General Meeting held on April 10, 2018 resolved to delete stipulations in Articles of Association on minimum and maximum share capital.
| EUR million | Number of shares 1,000 |
Share capital | Other reserves | Treasury shares |
Total |
|---|---|---|---|---|---|
| Dec 31, 2017 | 17,846 | 7.7 | 3.0 | -10.1 | 0.6 |
| Adjustment to opening balance - IFRS 2 amendment |
3.9 | 3.9 | |||
| Jan 1, 2018 | 17,846 | 7.7 | 6.8 | -10.1 | 4.4 |
| Share-based compensation |
49 | -0.7 | 1.1 | 0.4 | |
| Share issue without payment |
17,895 | ||||
| Translation difference | 0.0 | 0.0 | |||
| Dec 31, 2018 | 35,790 | 7.7 | 6.1 | -9.0 | 4.8 |
| Share-based compensation |
91 | 0.8 | 1.1 | 1.9 | |
| Transfers between items |
0.0 | 0.0 | |||
| Translation difference | 0.0 | 0.0 | |||
| Dec 31, 2019 | 35,881 | 7.7 | 7.0 | -7.9 | 6.8 |
| Own shares held by the company |
556 | ||||
| Total | 36,437 |
Other reserves consist of reserve fund and invested non-restricted equity. Share-based payments are also recognized in other reserves. The reserve fund, EUR 0.5 (0.4) million, includes items based on local rules of subsidiaries. Eligibility of the reserve fund is subject to restrictions based on local regulations. Invested non-restricted equity includes funds transferred from the share premium fund. On December 31, 2019 the amount of other reserves totaled to EUR 0.1 (0.1) million.
Own shares
Own shares (treasury shares) include the acquisition cost of own shares held by the group and are presented as a deduction from retained earnings.
| Number of shares |
Purchase price EUR million |
|
|---|---|---|
| Treasury shares Dec 31, 2017 | 372,364 | 10.1 |
| Distribution of treasury shares to key employees | -49,046 | -1.1 |
| Purchase of treasury shares | 323,318 | - |
| Treasury shares Dec 31, 2018 | 646,636 | 9.0 |
| Distribution of treasury shares to key employees | -90,647 | -1.1 |
| Treasury shares Dec 31, 2019 | 555,989 | 7.9 |
On December 31, 2019 the company held 555,989 (646,636) series A shares representing 1.5% (1.8) of the total number of shares and 0.3% (0.4) of the voting rights. The consideration paid for the shares held by the company was EUR 7.9 million.
Treasury shares can be used as consideration in possible acquisitions or in other business related arrangements, to finance investments, as part of the company's incentive program, or be retained, conveyed, or cancelled by the company.
Translation differences include the translation differences arising from the elimination of the acquisition cost of non-euro area group companies and from post-acquisition equity items, and the translation differences arising from translation of profit or loss for the period. The group has not hedged any equity denominated in foreign currency.
The result for the financial year is recognized in retained earnings.
For the financial year 2018 a dividend of EUR 0.58 per share was paid, totaling to EUR 20.8 million.
The Board of Directors proposes to the Annual General Meeting to be held on April 7, 2020 that a dividend of EUR 0.61 per share to be paid for the financial year 2019, representing a total dividend of approximately EUR 21.9 million. The proposed dividend has not been recognized as a dividend liability in these financial statements.
Vaisala is exposed to a number of financial risks in its operations of which key ones are interest rate risk, currency risk, refinancing and liquidity risks as well as financial credit and trade receivables credit risks. Vaisala's objective is to limit the impact of these risks on statement of income, statement of financial position and cash flow statement. The management of financial risks is based on the treasury and credit policies approved by the Board of Directors.
Interest rate risk refers to the uncertainty in statement of income, statement of financial position and cash flow statement arising from interest rate changes. The group is exposed to cash flow interest rate risk, if it has floating rate liabilities. At the end of the financial year all interest-bearing liabilities and loans were at fixed rates and totaled to EUR 51.5 (40.5) million. EUR 11.3 million of interest-bearing liabilities and loans related to lease liabilities. As the group does not have floating rate loans, the group is not exposed to interest rate risk arising from changes in interest rates.
Currency risk refers to the uncertainty in statement of income, statement of financial position and cash flow statement arising from exchange rate fluctuations. Vaisala's business is global and is exposed to transaction and translation risks in multiple currencies. The transaction risk is related to the currency flows of sales and expenses. The translation risk arises from net investments in entities outside the euro area.
Vaisala's sales are denominated in various currencies. In 2019, 47% of the group's sales was in EUR, 33% in USD, 7% in CNY, 5% in JPY and 3% in GBP. Expenses and purchases occur mostly in EUR and USD. The group's policy is to hedge foreign currency positions which consists of the order book, purchase commitments and net receivables, using foreign exchange forwards. Vaisala does not hedge forecasted cash flows that are not in the order book. Vaisala does not apply hedge accounting in accordance with IFRS and changes in fair value are recognized in the statement of income.
Intercompany loans and deposits are mainly initiated in subsidiaries' local currencies. Vaisala does not hedge intercompany loans, deposits or equities of subsidiaries. Translation of subsidiaries' equities into euros caused translation difference of EUR 0.5 (1.0) million. The most significant translation risk exposures are in USD.
The IFRS 7 currency risk sensitivity analysis is based on the group companies' foreign currency receivables, cash and cash equivalents and liabilities. The calculation does not include internal loans, order book or forecasted cash flows, but includes foreign exchange forwards in their nominal value. The effect of a 10% appreciation in all open net currency positions on Vaisala's result after taxes and equity would have been EUR -0.5 (-0.1) million. Three largest foreign exchange net exposures in euro and their sensitivity analysis based on a 10% change (before taxes) are presented in the following table:
| 2019 | 2018 | ||||
|---|---|---|---|---|---|
| EUR million | Net position | Sensitivity | EUR million | Net position | Sensitivity |
| USD | -7.9 | +/- 0.8 | USD | -8.8 | +/- 0.9 |
| SEK | -3.5 | +/- 0.3 | INR | 1.8 | +/- 0.2 |
| SGD | -2.3 | +/- 0.2 | CAD | 0.9 | +/- 0.1 |
Refinancing and liquidity risk refers to the uncertainty in the ability to maintain liquidity. In order to ensure liquidity, cash and cash equivalents and availability of credit facilities are maintained at a sufficient level.
Vaisala's cash and cash equivalents amounted to EUR 56.4 (72.7) million.
On October 5, 2018, Vaisala signed a EUR 50 million unsecured revolving credit facility. The committed credit facility agreement matures in 5 years from the signing and it has no financial covenants. On December 31, 2019, Vaisala had interest bearing liabilities totaling EUR 51.5 (40.5) million, of which EUR 40 (40) million related to utilized revolving credit facility, which matures on April 14, 2020. Group has no loans that would mature after five years or more. In addition, Vaisala has a domestic commercial paper program amounting to EUR 150 million that was not utilized as of December 31, 2019.
Financial credit risk refers to the uncertainty about the counterparty's ability to assume the obligations related to the financing. Vaisala is exposed to financial credit risk in respect of cash and cash equivalents and derivative financial instruments. Vaisala's cash and cash equivalents amounted to EUR 56.4 (72.7) million and the nominal value of derivative financial instruments to EUR 33.8 (26.9) million. Vaisala deposits its assets and concludes derivative financial contracts with counterparties with good creditworthiness and approved by the Board of Directors. The creditworthiness of banks is constantly assessed.
Trade receivables credit risk means the customer-related uncertainty about the collectability of receivables. These trade receivables credit risks are managed by using letter of credit, advance payments and bank guarantees as payment terms. Additionally, trade receivables credit risk is managed by utilizing credit risk insurance and by monitoring customer liquidity. Management estimates that the group does not have significant credit risk concentrations because, due to its globally distributed customer base, no single customer or a group of customers constitutes a significant risk. During the financial year, credit losses and related reversals for trade receivables recognized in the statement of income amounted to EUR -0.2 (-0.6) million. Credit loss is recognized once it has been officially declared that the receivable will not be paid as a result of liquidation or bankruptcy.
| 2019 carrying | 2018 carrying | |||
|---|---|---|---|---|
| EUR million | amounts | Fair values | amounts | Fair values |
| Non-current rent deposits | 0.9 | 0.9 | 0.8 | 0.8 |
| Advance payment for lease agreement* | - | - | 1.0 | 1.0 |
| Other non-current receivables | 0.0 | 0.0 | 0.2 | 0.2 |
| Total | 0.9 | 0.9 | 2.1 | 2.1 |
* As a result of implementation of IFRS 16 Leases, advance payments for lease agreements are no longer recognized in non-current receivables as of January 1, 2019, instead those are recognized as part of a right-of-use asset.
Financial assets are classified into following categories: at amortized cost and at fair value through profit and loss. Financial assets are measured on the basis of the entity's business model for managing the financial assets and the contractual cash flow characteristics of the financial assets or by applying fair value option in connection with the original acquisition. All purchases and sales of financial assets are recognized on the clearance date.
Financial assets measured at amortized cost are held to maturity date within a business model to collect contractual cash flows and these cash flows consist solely of payments of principal and interest on the principal amount outstanding. Financial assets measured at amortized cost include mainly trade receivables, prepaid income, accrued income and other receivables.
In initial recognition of financial asset classified as at amortized cost, the asset is measured at fair value including transaction costs that are directly attributable to the acquisition. Due to their nature current trade receivables' and other receivables' carrying amount approximates to its fair value. Interest income related to these financial assets is measured with the effective interest rate method and is included in the financial income. Financial assets are derecognized from the statement of financial position when the contractual rights to the cash flows from the financial asset expire or the entity substantially transfers the risks and rewards outside the group. Profit or loss related to the derecognition of financial assets from the statement of financial position is recognized in the statement of income. Impairment losses are recognized in the statement of income.
Financial assets recognized at fair value through profit and loss are financial assets that are held for trading purposes such as derivative financial instruments for which Vaisala does not apply hedge
accounting according to IFRS 9. Realized and unrealized gains and losses arising from changes in fair value are recognized in the statement of income in the period in which they arise. Financial assets held for trading as well as those maturing within 12 months are included in current assets.
Credit loss allowance for trade receivables and contract assets is measured applying simplified approach according to IFRS 9 as no significant financing component is included in those assets. Lifetime expected credit losses are determined based on the provision matrix, utilizing different credit risk across different receivable groups. The groupings are based on aging buckets, geographical regions, existence of collaterals and insolvency proceedings or other evidence of an increased credit risk of the receivables. Expected credit loss risks for different receivable groups are based on historical loss rates and management estimates. Changes in the credit loss allowance based on lifetime expected credit losses as well as final credit losses are recognized in the statement of income.
Cash and cash equivalents are recognized in the statement of financial position at original cost. Cash and cash equivalents consist of cash on bank accounts and bank deposits.
Financial liabilities are classified into following categories: at amortized cost and at fair value through profit and loss. Financial liabilities are initially measured at fair value based on the original consideration received. Transaction costs are included in the original carrying amount of the financial liabilities. Subsequently all financial liabilities, except for derivative financial instruments, are measured applying the effective interest method at amortized cost. Financial liabilities are included both in current and non-current liabilities and those may be both interest-bearing and non-interest-bearing. Liabilities maturing in less than 12 months are presented in current liabilities. Financial liabilities are derecognized from statement of financial position when the obligation specified in the contract is discharged, cancelled or expires.
The group's all derivative financial contracts are foreign exchange forward contracts. The group has sales in a number of foreign currencies, of which the most significant are the USD, CNY, JPY and GBP. All derivative financial contracts are classified at fair value through profit and loss and are initially measured at fair value on the closing date of the derivative financial contract. Derivative financial contracts are subsequently measured at fair value through profit and loss at the end of each reporting date. The fair value of a foreign exchange forward contract is measured at the present value of the future cash flows. Unrealized and realized gains and losses arising from changes in the fair value are recognized in the statement of income in financial income and expenses in the period in which they arise. Derivatives are included in the statement of financial position in other receivables and payables. The group does not apply hedge accounting under IFRS 9 to foreign exchange forward contracts.
The fair value of the derivative financial contracts is based on information that is observable for the assets or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices). In addition to the quoted prices, Vaisala prepares own assessment using commonly acceptable valuation techniques. Hence Vaisala's derivative financial contracts belong to the level 2 in fair value hierarchy. There were no transfers between the hierarchy levels in 2018 or 2019.
The group has a number of investments in foreign subsidiaries whose net assets are exposed to currency risk. The group does not hedge the currency risk related to subsidiaries' net assets.
A non-current asset (or disposal group) is classified as held for sale if its carrying amount will be recovered principally through a sale transaction rather than through continuing use and a sale is considered highly probable. A sale is considered highly probable when Group Management is committed to a plan to sell the asset, the asset can be sold immediately in its current condition with general and common terms and the sale will be completed within one year from the date of classification.
Non-current assets held for sale are measured at the lower of their carrying amount and fair value less cost to sell. Depreciation of these assets is ceased on the date of classification. The result of discontinued operations is presented as a separate item in the consolidated statement of income. Non-current assets classified as held for sale, groups of disposed items, items which relate to assets held for sale recognized in statement of comprehensive income as well as liabilities included in the groups of disposed items are presented separately from other items in the consolidated statement of financial position.
| Classification of financial assets and liabilities as of December 31, 2019 | |||||
|---|---|---|---|---|---|
| -- | -- | -- | -- | ---------------------------------------------------------------------------- | -- |
| Total | 0.4 | 77.2 | 77.6 | 77.6 | |
|---|---|---|---|---|---|
| Trade payables and other liabilities |
0.4 | 21.7 | 22.0 | 22.0 | 14 |
| Interest-bearing current liabilities |
0.2 | 0.2 | 0.2 | 21 | |
| Interest-bearing current lease liabilities |
3.0 | 3.0 | 3.0 | 17 | |
| Interest-bearing current loans from financial institutions |
40.0 | 40.0 | 40.0 | 21 | |
| Other non-current liabilities |
4.0 | 4.0 | 4.0 | 21 | |
| Interest-bearing non current lease liabilities |
8.3 | 8.3 | 8.3 | 17 | |
| Financial liabilities | |||||
| Total | 0.3 | 123.0 | 123.3 | 123.3 | |
| Cash and cash equivalents |
56.4 | 56.4 | 56.4 | 23 | |
| Trade receivables and other receivables |
0.3 | 65.8 | 66.1 | 66.1 | 12 |
| Non-current receivables | 0.9 | 0.9 | 0.9 | 20 | |
| Financial assets | |||||
| EUR million | and loss | cost | position items | Fair value | Note |
| Fair value through profit |
Amortized | statement of financial |
|||
| amount of | |||||
| Carrying |
| Total | 1.0 | 63.3 | 64.2 | 64.2 | |
|---|---|---|---|---|---|
| Trade payables and other liabilities |
1.0 | 17.5 | 18.4 | 18.4 | 14 |
| Interest-bearing current liabilities |
0.2 | 0.2 | 0.2 | 21 | |
| Interest-bearing current loans from financial institutions |
40.1 | 40.1 | 40.1 | 21 | |
| Other non-current liabilities |
5.3 | 5.3 | 5.3 | 21 | |
| Interest-bearing non-current loans from financial institutions |
0.2 | 0.2 | 0.2 | 21 | |
| Financial liabilities | |||||
| Total | 0.0 | 138.0 | 138.0 | 138.0 | |
| Cash and cash equivalents |
72.7 | 72.7 | 72.7 | 23 | |
| Trade receivables and other receivables |
0.0 | 63.2 | 63.3 | 63.3 | 12 |
| Non-current receivables | 2.1 | 2.1 | 2.1 | 20 | |
| Financial assets | |||||
| EUR million | Fair value through profit and loss |
Amortized cost |
Carrying amount of statement of financial position items |
Fair value | Note |
| Classification of financial assets and liabilities as of December 31, 2018 |
On October 5, 2018, Vaisala signed a EUR 50 million unsecured revolving credit facility. The committed credit facility agreement matures in 5 years from the signing and it has no financial covenants. The facility will be used for working capital needs, for financing of acquisitions and for general corporate purposes. On December 31, 2019, Vaisala had interest-bearing liabilities totaling EUR 51.5 (40.5) million, of which EUR 40 (40) million related to utilized revolving credit facility, which matures on April 14, 2020. Vaisala has no loans that would mature after five years or more.
Nominal value of derivative financial contracts in currencies
Consolidated financial statements
| EUR million | 2020 | 2021–2024 | 2025–2029 | 2030–2033 | Interest rates |
|---|---|---|---|---|---|
| Revolving credit facility | 40.0 | 0.65% | |||
| Other interest-bearing loans |
0.2 | 1% | |||
| Lease liabilities | 3.3 | 4.9 | 2.2 | 2.7 | 0.5–11.67% |
| Yhteensä | 43.5 | 4.9 | 2.2 | 2.7 |
| EUR million | 2019 | 2020 | 2021 | Interest rates |
|---|---|---|---|---|
| Revolving credit facility | 40.0 | 0.65% | ||
| Loans from financial institutions |
0.1 | 0.1 | 0.1 | 2.39–4.96% |
| Other interest-bearing loans |
0.0 | 0.2 | 1% | |
| Total | 40.1 | 0.3 | 0.1 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Nominal value of derivative financial contracts made to hedge against exchange rate risk |
||
| Foreign exchange forwards | 33.8 | 26.9 |
| Nominal value, total | 33.8 | 26.9 |
| 2019 | 2018 | |||
|---|---|---|---|---|
| currency million | EUR million | currency million | EUR million | |
| USD | 23.5 | 20.7 | 26.0 | 21.6 |
| AUD | - | - | 1.2 | 0.7 |
| CNH | 19.0 | 2.4 | 20.0 | 2.5 |
| GBP | 1.3 | 1.5 | - | - |
| JPY | 350.0 | 2.9 | 270.0 | 2.1 |
| SEK | 43.0 | 4.0 | - | - |
| SGD | 3.5 | 2.2 | - | - |
| Total | 33.8 | 26.9 |
| Total | 33.8 | 26.9 |
|---|---|---|
| Over 180 days and less than 360 days | 11.8 | 3.8 |
| Over 120 days and less than 180 days | 8.5 | 8.2 |
| Over 90 days and less than 120 days | 5.3 | 2.9 |
| Less than 90 days | 8.2 | 12.1 |
| EUR million | 2019 | 2018 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Foreign exchange forwards | -0.1 | -0.9 |
| Cash flow | Non-cash | ||||
|---|---|---|---|---|---|
| EUR million | Dec 31, 2018 | Jan 1, 2019 | effect | changes | Dec 31, 2019 |
| Loans from financial institutions |
0.2 | -0.2 | - | ||
| Credit facility | 40.0 | 0.0 | 40.0 | ||
| Lease liabilities* | - | 10.8 | -4.1 | 4.6 | 11.3 |
| Other interest-bearing liabilities |
0.2 | -0.0 | 0.0 | ||
| Exchange rate differences |
-0.3 | ||||
| Total | 40.5 | 10.8 | -4.6 | 4.6 | 51.5 |
* As a result of implementation of IFRS 16 Leases, lease liabilities were generated as of January 1, 2019.
| Cash flow | Business | |||
|---|---|---|---|---|
| EUR million | Dec 31, 2017 | effect | combinations | Dec 31, 2018 |
| Loans from financial institutions |
- | -2.6 | 2.9 | 0.2 |
| Credit facility | - | 40.0 | 40.0 | |
| Other interest-bearing liabilities |
- | 0.2 | 0.2 | |
| Total | - | 37.4 | 3.1 | 40.5 |
Accounting principles related to cash and cash equivalents are presented in Note 21, Financial Assets and Liabilities.
| EUR million | 2019 | 2018 |
|---|---|---|
| Cash and cash equivalents | 56.4 | 72.7 |
The fair values of cash and cash equivalents are equivalent to their carrying amounts.
| EUR million | 2019 | 2018 |
|---|---|---|
| For own loans/commitments | ||
| Bank guarantees issued for obligations | 16.7 | 19.5 |
| Pledges given | - | 0.8 |
| Rental and leasing contracts* | - | 16.6 |
| Total | 16.7 | 36.8 |
* As a result of implementation of IFRS 16 Leases, rental and leasing commitments are not generated as of January 1, 2019.
In the end of the financial year, Vaisala was committed to a lease contracts for which the lease term had not yet started. Payments related to those contracts are estimated to be EUR 1.8 million.
Group had commitments related to Vantaa and Louisville building projects in total of EUR 9 (1) million as of December 31, 2019. In addition, Vaisala had other commitments related to intangible and tangible assets for EUR 2 (3) million.
Group had purchase commitments totaling to EUR 15 (12) million. Additionally, group had commitments under the purchase agreements totaling a maximum of EUR 18 (18) million, if realized.
On October 1, 2019 Vaisala acquired all the shares in Vaisala Digital Oy offering business-to-business weather services from Foreca Oy. Foreca's professional business-to-business weather services strengthens the offering and development of the Vaisala Digital product line for highly weather-dependent customers by bringing new expertise to the team, as well as industry leading technology platform for forecasting, modeling and weather impact analysis. Vaisala Digital Oy serves weather-dependent professional customers in transportation, energy, and industry segments.
Vaisala Digital Oy was established on September 1, 2019 as a result of demerger of Foreca Oy. Therefore, no information on net sales for 2018 is available.
Net sales of the acquired company between October 1, 2019 and December 31, 2019 were EUR 0.4 million and operating result EUR 0.0 million. If the acquisition had occurred on January 1, 2019, management estimates consolidated net sales would have been EUR 406 million and operating result EUR 41 million for the financial year 2019.
The preliminary consideration transferred was EUR 7 million.
Goodwill was preliminarily recognized for EUR 3.8 million and allocated to Weather and Environment Business Area cash-generating unit. Goodwill reflects the synergies which Vaisala expects to realize especially from the access gained to automotive market. Vaisala also expects to realize synergies from possibilities to develop new epoch-making solutions by combining Vaisala's competencies together with acquired competencies and expertise.
Acquisition related costs were immaterial.
As the acquisition was finished during the last quarter of the financial year, the assets acquired, liabilities assumed and consideration transferred related to the business combination have been recognized provisionally.
The preliminary amounts of the assets acquired and liabilities assumed recognized and the cash flow from the acquisition were as follows:
| EUR thousand | Fair value recognized on acquisition |
|---|---|
| Goodwill | 3,764 |
| Technology-based intangible assets | 1,807 |
| Customer related intangible assets | 2,253 |
| Brand | 24 |
| Non-current receivables | 2 |
| Trade receivables and other receivables | 250 |
| Cash and cash equivalents | 139 |
| Total assets | 8,238 |
| Deferred tax liabilities | 817 |
| Current liabilities | 421 |
| Total liabilities | 1,238 |
| Net assets | 7,000 |
| Purchase price paid in cash | -7,000 |
| Cash and cash equivalents acquired | 139 |
| Total net cash outflow on acquisition | -6,861 |
On October 10, 2018 Vaisala acquired all the shares in Leosphere SAS, a French company specializing in developing, manufacturing and servicing turnkey wind lidar (light detection and ranging) instruments for wind energy, aviation, meteorology and air quality. The acquisition supports Vaisala's Weather and Environment Business Area's strategy to drive industry leadership and growth through strengthening its position as a global leader providing remote wind sensing technologies, which are relevant for several Vaisala's key customer segments.
In 2017, Leosphere's net sales were EUR 27 million.
Net sales of the acquired company between October 11, 2018 and December 31, 2018 were EUR 9.9 million and operating result EUR 3.2 million. If the acquisition had occurred on January 1, 2018, management estimates consolidated net sales would have been EUR 367 million and operating profit EUR 34 million for the financial year 2018.
The consideration transferred was EUR 54 million. The consideration transferred includes EUR 3.8 million contingent consideration to be paid on the basis of the financial performance after the acquisition. The range of the outcome of the contingent consideration is from EUR 1 to 6.6 million.
Goodwill was recognized for EUR 8.6 million and allocated to Weather and Environment Business Area cash-generating unit. Goodwill of this acquisition reflects the synergies for Vaisala expected to arise especially from faster access to markets utilizing laser based technology in their measurements and the possibilities for Vaisala group related to know-how and expertise obtained in the acquisition.
During the measurement period, provisionally recognized assets and liabilities have been adjusted to reduce the amount of inventory by EUR 0.8 million and to increase the corresponding amount of deferred tax liabilities by EUR 0.2 million in the purchase price allocation. As a result, the amount of goodwill increased by EUR 0.6 million from the provisionally recognized amount.
Acquisition related costs amounted to EUR 1.6 million and those have been included in the consolidated statement of income for 2018.
The amounts of the assets acquired and liabilities assumed recognized and the cash flow from the acquisition were as follows:
| EUR thousand | Fair value recognized on acquisition |
|---|---|
| Goodwill | 8,849 |
| Technology-based intangible assets | 27,321 |
| Customer related intangible assets | 7,123 |
| Other intangible assets | 215 |
| Tangible assets | 771 |
| Non-current receivables | 1,299 |
| Deferred tax assets | 2,327 |
| Inventory | 7,677 |
| Trade receivables and other receivables | 13,289 |
| Cash and cash equivalents | 10,672 |
| Total assets | 79,543 |
| Deferred tax liabilities | 7,050 |
| Non-current liabilities | 2,262 |
| Provisions | 357 |
| Current liabilities | 16,328 |
| Total liabilities | 25,997 |
| Net assets | 53,546 |
| Purchase price paid in cash | -49,747 |
| Cash and cash equivalents acquired | 10,672 |
| Total net cash outflow on acquisition | -39,075 |
On December 31, 2018 Vaisala acquired all the shares in K-Patents Oy and Janesko Oy (K-Patents). K-Patents develops, manufactures and services in-line liquid measurements instruments for industrial applications. The acquisition broadens Industrial Measurements Business Area's product offering to liquid measurements and strengthens its position in the industrial measurement market.
In 2017, K-Patent's net sales were EUR 11.4 million.
The consideration transferred was EUR 15 million.
Acquisition related costs were immaterial.
The amounts of the assets acquired and liabilities assumed recognized and the cash flow from the acquisition were as follows:
| EUR thousand | Fair value recognized on acquisition |
|---|---|
| Technology-based intangible assets | 7,718 |
| Customer related intangible assets | 4,556 |
| Other intangible assets | 320 |
| Tangible assets | 332 |
| Other financial assets | 50 |
| Deferred tax assets | 32 |
| Inventory | 1,996 |
| Trade receivables and other receivables | 2,032 |
| Cash and cash equivalents | 2,548 |
| Total assets | 19,584 |
| Deferred tax liabilities | 2,460 |
| Non-current liabilities | 37 |
| Current liabilities | 2,087 |
| Total liabilities | 4,584 |
| Net assets | 15,000 |
|---|---|
| Purchase price paid in cash | -15,000 |
Cash and cash equivalents acquired 2,548
Total net cash outflow on acquisition -12,452
A contingent consideration liability relating to prior acquisitions totaling EUR 0.2 (0.2) million was paid in 2019. The remaining contingent consideration related to prior acquisitions was EUR 4.0 (4.2) million in the end of financial year 2019. Additionally, reversal of contingent consideration liability amounting to EUR 0.1 (1.0) million was recognized in the financial year 2019 as other operating income based on the financial performance after the acquisition.
Vaisala had classified Weather and Environment Business Area's renewable energy digital solutions business as non-current assets held for sale in the financial year 2018. The liabilities related to non-current assets classified as held for sale were EUR 1.1 million. This business is no longer meeting the criteria of non-current assets held for sale and classification of those assets as non-current assets held for sale was ceased accordingly as of September 30, 2019.
| EUR million | 2019 | 2018 |
|---|---|---|
| Tangible assets | - | 0.1 |
| Receivables | - | 1.8 |
| Cash and cash equivalents | - | 1.1 |
| Total | - | 3.1 |
| Group | Group | ||
|---|---|---|---|
| Name | Country | ownership %, Dec 31, 2019 |
ownership %, Dec 31, 2018 |
| Vaisala Holding Oy | Finland | 100 | 100 |
| Vaisala Limited | United Kingdom | 100 | 100 |
| Vaisala Pty Ltd | Australia | 100 | 100 |
| Vaisala GmbH | Germany | 100 | 100 |
| Vaisala KK | Japan | 100 | 100 |
| Vaisala Inc. | United States | 100 | 100 |
| Vaisala China Ltd | China | 100 | 100 |
| Vaisala Canada Inc | Canada | 100 | 100 |
| Vaisala SAS | France | 100 | 100 |
| Vaisala Sdn Bhd | Malaysia | 100 | 100 |
| Vaisala Servicos De Marketing Ltda | Brazil | 100 | 100 |
| 3TIER R&D India Pvt Ltd | India | 100 | 100 |
| Vaisala East Africa Limited | Kenya | 100 | 100 |
| Vaisala Mexico Limited, S. de R.L. de C.V. | Mexico | 100 | 100 |
| Leosphere SAS | France | 92.53 | 100 |
| Upwind SAS | France | 100 | 100 |
| SCI Septentrion | France | 100 | 100 |
| Minas Ltd | China | - | 100 |
| K-Patents Oy | Finland | - | 100 |
| K-Patents Inc. | United States | 100 | 100 |
| K-Patents (Shanghai) Co.,Ltd. | China | 100 | 100 |
| Janesko Oy | Finland | - | 100 |
| Vaisala Shanghai Sensors Ltd | China | 100 | - |
| Vaisala Digital Oy | Finland | 100 | - |
On August 31, 2019 K-Patents Oy and Janesko Oy were merged into Vaisala Corporation. On October 1, 2019 Vaisala Corporation acquired all the shares in Vaisala Digital Oy.
UK based subsidiary Vaisala Limited (register number 01487125) will apply for exemption from auditing of local financial statements under local law (section 479A of the Companies Act 2006).
Accounting principles related to associated companies are presented in Consolidation principles.
The group has one associated company, SAS Meteorage. SAS Meteorage is a French company, which maintains lightning detection networks and sells information related to lightning strikes. Ownership in Meteorage supports Vaisala's role in the global lightning detection community.
| Place of incorporation and | |||
|---|---|---|---|
| Company name | principal place of business | Share of ownership | Measurement method |
| SAS Meteorage | France | 35% | Equity method |
| EUR million | 2019 | 2018 |
|---|---|---|
| Non-current assets | 2.3 | 2.2 |
| Current assets | 3.3 | 2.4 |
| Liabilities | 2.6 | 1.9 |
| Net assets | 3.0 | 2.7 |
| Vaisala's share of net assets | 1.1 | 1.0 |
| Net sales | 3.9 | 3.5 |
| Result for the financial year | 0.4 | 0.3 |
The information presented in the table is based on the latest available financial information.
| EUR million | 2019 | 2018 |
|---|---|---|
| Carrying amount at Jan 1 | 1.0 | 0.9 |
| Share of result | 0.1 | 0.1 |
| Dividend received | -0.1 | -0.0 |
| Exchange rate differences | 0.0 | 0.0 |
| Carrying amount at Dec 31 | 1.1 | 1.0 |
The carrying value of the associated company does not include goodwill.
| EUR million | 2019 | 2018 |
|---|---|---|
| Sales | 0.6 | 0.1 |
| Receivables | 0.1 | 0.0 |
Related parties of Vaisala group are the parent company, subsidiaries, associated company, members of Board of Directors and Vaisala Management Group. Related party transactions are based on market prices of goods and services and on common market terms. Only transactions that are not eliminated in the consolidated financial statements are disclosed as related party information.
The subsidiaries are presented in note 27, Subsidiaries and the associated company in note 28, Associated company. Transactions with the associated company as well as receivables and liabilities are presented in note 28, Associated company.
| EUR 1,000 | 2019 | 2018 |
|---|---|---|
| Salary and bonuses of the President and CEO (payment basis) | ||
| Forsén Kjell | ||
| Salary | 515 | 515 |
| Bonuses | 263 | 302 |
| Share-based payments | 514 | 502 |
| Obligatory pension | 135 | 146 |
| Voluntary pension | 120 | 120 |
| Total | 1,547 | 1,586 |
| Remuneration of the members of Vaisala Management Group (excl. the President and CEO) (payment basis) |
||
| Salaries | 1,492 | 1,393 |
| Bonuses | 478 | 622 |
| Share-based payments | 1,061 | 1,319 |
| Obligatory pensions | 342 | 360 |
| Voluntary pensions | 242 | 235 |
| Total | 3,616 | 3,929 |
The retirement age of the President and CEO is 62 years. The President and CEO has a voluntary compensation based retirement plan. Compensation equal to 12 months' salary is paid to the President and CEO, if employer terminates the CEO agreement. In case the President and CEO resigns, compensation equal to 6 months' salary is paid.
| Remuneration of the Board of Directors 2019 (payment basis) | Compensation, | ||||
|---|---|---|---|---|---|
| Compensation, Audit | Remuneration and Human | ||||
| EUR 1,000 | Annual remuneration | Committee | Resources Committee | Total | |
| Castrén Petri | Member of the Board | 35 | 4 | 5 | 44 |
| Lundström Petra | Member of the Board | 35 | 4 | 39 | |
| Niinivaara Mikko (until March 26th) | Member of the Board | 1 | 1 | 2 | |
| Rinnevaara Jukka (since March 26th) | Member of the Board | 35 | 2 | 37 | |
| Ståhlberg Kaarina | Member of the Board | 35 | 6 | 41 | |
| Syrjänen Tuomas (since March 26th) | Member of the Board | 35 | 35 | ||
| Torstila Pertti | Member of the Board | 35 | 35 | ||
| Voipio Raimo | Chairman of the Board | 45 | 1 | 46 | |
| Voipio Ville | Vice Chairman of the Board (since March 26th 2019) | 35 | 3 | 4 | 42 |
| Total | 290 | 16 | 15 | 321 |
| Remuneration of the Board of Directors 2018 (payment basis) | Compensation, | ||||
|---|---|---|---|---|---|
| Compensation, Audit | Remuneration and Human | ||||
| EUR 1,000 | Annual remuneration | Committee | Resources Committee | Total | |
| Castrén Petri | Member of the Board | 35 | 5 | 3 | 43 |
| Lundström Petra | Member of the Board | 35 | 35 | ||
| Neuvo Yrjö | Vice Chairman of the Board | 35 | 35 | ||
| Niinivaara Mikko | Member of the Board | 35 | 5 | 3 | 43 |
| Ståhlberg Kaarina | Member of the Board | 35 | 8 | 43 | |
| Torstila Pertti | Member of the Board | 35 | 35 | ||
| Voipio Raimo | Chairman of the Board | 45 | 3 | 48 | |
| Voipio Ville | Member of the Board | 35 | 35 | ||
| Total | 290 | 18 | 9 | 317 |
To the President and CEO and the members of the Board have not been granted loans nor have guarantees or commitments been given on their behalf.
| EUR million | 2019 | 2018 |
|---|---|---|
| Audit | 0.4 | 0.4 |
| Tax advice | 0.0 | 0.0 |
| Statements | 0.0 | 0.0 |
| Other fees | 0.0 | 0.1 |
| Total | 0.5 | 0.5 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Audit | 0.1 | 0.1 |
| Other fees | 0.0 | 0.0 |
| Total | 0.1 | 0.1 |
Other work than audit services given by the principal auditor Deloitte Oy during the year 2019 were EUR 0.1 (0.1) million.
IASB published the following new or revised standards which the group has not yet adopted and which may have an effect on the consolidated financial statements of the group. The group will adopt each standard as from the effective date, or if the effective date is other than the first day of the financial year, from the beginning of the next financial year after the effective date.
At the date of authorisation of these financial statements, the group has not applied the following new and revised IFRS Standards that have been issued but are not yet effective and had not yet been adopted by the EU (marked with*):
The management does not expect that the adoption of the standards listed above will have a material impact on the financial statements of the group in future periods.
The new standard establishes the principles for the recognition, measurement, presentation and disclosure of insurance contracts and supersedes IFRS 4 Insurance Contracts. The standard is effective for a financial year beginning on or after January 1, 2021, with early application permitted. It is applied retrospectively unless impracticable, in which case the modified retrospective approach or the fair value approach is applied. An exposure draft Amendments to IFRS 17 addresses concerns and implementation challenges that were identified after IFRS 17 was published. One of the main changes proposed is the deferral of the date of initial application of IFRS 17 by one year to a financial year beginning on or after January 1, 2022. The application of the standard in the future is not anticipated to have an impact on the group's consolidated financial statements as the group does not hold any insurance contracts.
The amendments to IFRS 10 and IAS 28 deal with situations where there is a sale or contribution of assets between an investor and its associate or joint venture. The effective date of the amendments has yet to be set by the IASB; however, earlier application of the amendments is permitted. The application of these amendments may have an impact on the group's consolidated financial statements in future periods should such transactions arise.
The amendments clarify that while businesses usually have outputs, outputs are not required for an integrated set of activities and assets to qualify as a business. To be considered a business an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs.
Additional guidance is provided that helps to determine whether a substantive process has been acquired.
The amendments introduce an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. Under the optional concentration test, the acquired set of activities and assets is not a business if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar assets.
The amendments are applied prospectively to all business combinations and asset acquisitions for which the acquisition date is on or after the first financial year beginning on or after January 1, 2020.
The application of these amendments may have an impact on the group's consolidated financial statements in future periods should such transactions arise.
The amendments are intended to make the definition of material in IAS 1 easier to understand and are not intended to alter the underlying concept of materiality in IFRS standards. The concept of 'obscuring' material information with immaterial information has been included as part of the new definition.
The threshold for materiality influencing users has been changed from 'could influence' to 'could reasonably be expected to influence'.
The definition of material in IAS 8 has been replaced by a reference to the definition of material in IAS 1. In addition, the IASB amended other Standards and the Conceptual Framework that contain a definition of material or refer to the term 'material' to ensure consistency.
The amendments are applied prospectively for a financial year beginning on or after January 1, 2020. Vaisala will revise its materiality assessment principles to reflect the new definition, but the adoption of the amendments is not expected to have an impact on the consolidated financial statements in future periods.
The amendments will affect entities that apply the hedge accounting requirements of IFRS 9 or IAS 39 to hedging relationships directly affected by the interest rate benchmark reform. The amendments modify specific hedge accounting requirements, so that entities would apply those hedge accounting requirements assuming that the interest rate benchmark is not altered as a result of the reform. The amendments are effective for a financial year beginning on or after January 1, 2020. The application of the standard in the future is not anticipated to have an impact on the group's consolidated financial statements as the group does not apply hedge accounting.
The amendments provide a more general approach to the classification of liabilities under IAS 1 based on the contractual arrangements in place at the reporting date. They affect only the presentation of liabilities in the statement of financial position.
The amendments clarify that the classification of liabilities as current or non-current should be based on rights that are in existence at the end of the reporting period and align the wording in all affected paragraphs to refer to the "right" to defer settlement by at least twelve months and make explicit that only rights in place "at the end of the reporting period" should affect the classification of a liability.
The classification is unaffected by expectations about whether an entity will exercise its right to defer settlement of a liability. The amendments also make clear that settlement refers to the transfer to the counterparty of cash, equity instruments, other assets or services.
The amendments are applied retrospectively for a financial year beginning on or after January 1, 2022. Vaisala will revise the classification of liabilities as current and non-current, but the adoption of the amendment is not expected to have an impact on the consolidated financial statements for future periods.
| EUR | Note | Jan 1–Dec 31, 2019 |
Jan 1– Dec 31, 2018 |
|---|---|---|---|
| Net sales | 2 | 266,326,391.86 | 241,898,219.10 |
| Cost of production and procurement | 4, 5 | -128,260,380.19 | -121,681,321.66 |
| Gross profit | 138,066,011.67 | 120,216,897.44 | |
| Cost of sales and marketing | 4, 5 | -29,477,713.41 | -26,298,091.69 |
| Cost of administration | |||
| Research and development costs | 4, 5 | -39,747,647.97 | -36,526,100.55 |
| Other administrative costs | 4, 5 | -32,397,308.76 | -27,830,244.73 |
| Other operating income | 3 | 397,981.41 | 330,137.53 |
| Operating result | 36,841,322.94 | 29,892,598.00 | |
| Financial income and expenses | 6 | 1,658,532.38 | 5,231,588.24 |
| Result before appropriations and taxes | 38,499,855.32 | 35,124,186.24 | |
| Result before taxes | 38,499,855.32 | 35,124,186.24 | |
| Direct taxes | 7 | -7,614,504.46 | -6,385,321.15 |
| Result for the financial year | 30,885,350.86 | 28,738,865.09 |
*The parent company financial statements are prepared in accordance with the principles of Finnish Accounting Standards (FAS).
OUR YEAR CREATING VALUE SUSTAINABILITY GOVERNANCE FINANCIALS
Parent company financial statements
| EUR | Note | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|---|
| Assets | |||
| Non-current assets | |||
| Intangible assets | 8 | ||
| Intangible rights | 1,571,161.36 | 1,647,438.34 | |
| Other intangible assets | 12,194,377.05 | 3,241,104.78 | |
| Advance payments and intangible assets in progress | 268,587.21 | 247,574.08 | |
| Total intangible assets | 14,034,125.62 | 5,136,117.20 | |
| Property, plant and equipment | 8 | ||
| Land and waters | 2,904,868.22 | 2,904,868.22 | |
| Buildings | 19,625,625.01 | 21,409,923.55 | |
| Machinery and equipment | 14,282,026.94 | 12,583,934.58 | |
| Other tangible assets | 74,417.51 | 69,212.81 | |
| Advance payments and construction in progress | 16,816,177.51 | 5,845,826.82 | |
| Total property, plant and equipment | 53,703,115.19 | 42,813,765.98 | |
| Investments | 8 | ||
| Holdings in group undertakings | 81,329,965.75 | 89,333,080.51 | |
| Other shares and holdings | 111,714.29 | 100,000.00 | |
| Total investments | 81,441,680.04 | 89,433,080.51 | |
| Total non-current assets | 149,178,920.85 | 137,382,963.69 |
| Total assets | 304,467,847.52 | 290,207,257.26 | |
|---|---|---|---|
| Total current assets | 155,288,926.67 | 152,824,293.57 | |
| Cash and cash equivalents | 45,525,976.64 | 52,082,989.57 | |
| Total current receivables | 83,841,637.87 | 80,837,813.65 | |
| Prepaid expenses and accrued income | 10, 17 | 19,605,675.93 | 16,784,205.68 |
| Other receivables | 9, 17 | 3,008,205.05 | 2,777,712.86 |
| Loan receivables | 17 | 22,444,428.94 | 26,255,750.84 |
| Trade receivables | 17 | 38,783,327.95 | 35,020,144.27 |
| Current receivables | |||
| Total inventories | 25,882,341.23 | 19,882,874.35 | |
| Materials, consumables and finished goods | 25,882,341.23 | 19,882,874.35 | |
| Inventories | |||
| Total long-term receivables | 38,970.93 | 20,616.00 | |
| Other receivables | 38,970.93 | 20,616.00 | |
| Non-current receivables | |||
| Current assets | |||
| EUR | Note | Dec 31, 2019 | Dec 31, 2018 |
| EUR | Note | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|---|
| Shareholders´ equity and liabilities | |||
| Shareholders´ equity | 13 | ||
| Share capital | 7,660,807.86 | 7,660,807.86 | |
| Fund of invested non-restricted equity | 422,034.34 | 414,924.89 | |
| Retained earnings | 139,213,466.46 | 130,403,020.97 | |
| Result for the financial year | 30,885,350.86 | 28,738,865.09 | |
| Total shareholders´ equity | 178,181,659.52 | 167,217,618.81 | |
| Provisions | 12 | 97,119,25 | 97,119.25 |
| Liabilities | |||
| Non-current | |||
| Other non-current liabilities | 14 | 3,659,468.77 | 4,399,779.08 |
| Current | |||
| Advances received | 2,509,216.85 | 2,126,806.46 | |
| Trade payables | 17 | 15,291,117.22 | 12,212,804.97 |
| Loans from financial institutions | 15 | 40,000,000.00 | 40,000,000.00 |
| Other current loans | 17 | 10,904,795.08 | 16.795,874.93 |
| Other current liabilities | 17 | 4,060,266.18 | 2,083,242.52 |
| Provisions | 12 | 1,731,381.81 | 1,733,728.50 |
| Accrued expenses and deferred income | 16, 17 | 48,032,822.84 | 43,540,282.74 |
| Current liabilities total | 122,529,599.98 | 118,492,740.12 | |
| Total liabilities | 126,286,188.00 | 122,989,638.45 | |
| Total shareholders´ equity and liabilities | 304,467,847.52 | 290,207,257.26 |
| Jan 1–Dec 31, | Jan 1–Dec 31, | ||
|---|---|---|---|
| EUR thousand | Note | 2019 | 2018 |
| Cash flow from operating activities | |||
| Cash receipts from customers | 256,804 | 247,706 | |
| Cash paid to suppliers and employees | -214,372 | -201,849 | |
| Cash flow from operating activities before financial items and taxes |
42,432 | 45,857 | |
| Paid financial items, net | 6 | 785 | 746 |
| Dividend received from business operations | 6 | 1,658 | 4,392 |
| Income taxes paid | -6,660 | -6,912 | |
| Cash flow from operating activities | 38,215 | 44,082 | |
| Cash flow from investing activities | |||
| Investments in shares | 8 | -7,772 | -66,469 |
| Investments in intangible assets | 8 | -540 | -840 |
| Investments in property, plant and equipment | 8 | -16,822 | -10,678 |
| Divestments | 8 | 300 | 37 |
| Loans granted | 17 | -2,165 | - |
| Repayments on loan receivables | 17 | 6,454 | 1,111 |
| Cash flow from investing activities | -20,545 | -76,839 |
| Jan 1–Dec 31, | Jan 1–Dec 31, | ||
|---|---|---|---|
| EUR thousand | Note | 2019 | 2018 |
| Cash flow from financing activities | |||
| Proceeds from short-term borrowings | 14 | 80,000 | 42,203 |
| Repayment of short-term borrowings | 14 | -85,965 | - |
| Dividend paid | 13 | -20,810 | -37,580 |
| Cash flow from financing activities | -26,775 | 4,623 | |
| Change in cash and cash equivalents increase (+) / decrease (-) | -9,105 | -28,134 | |
| Cash and cash equivalents at Jan 1 | 52,083 | 79,874 | |
| Change in cash and cash equivalents increase (+) / decrease (-) | -9,105 | -28,134 | |
| Cash received in merger | 2,548 | 343 | |
| Cash and cash equivalents at Dec 31 | 45,526 | 52,083 |
159
The financial statements of the parent company Vaisala Corporation have been prepared according to the Finnish Accounting Standards (FAS). Financial statement data are based on original acquisition costs or nominal value, less possible impairment, if not otherwise stated in the accounting principles outlined below.
The parent company's net sales consist of revenue recognized from contracts with customers. Net sales are divided into products, projects and services. Indirect taxes and discounts have been deducted from sales revenue. Exchange rate differences are recognized in the financial income and expenses.
Product net sales include revenue from products, spare parts and system deliveries. A system delivery contains a standard product delivery with limited amount of configuration. Revenue from the sale of product is recognized at a point in time when the control is transferred to the customer according to the delivery terms used.
Projects are integrated projects, in which observation solutions, consisting of products, services and software, are delivered. Solutions are integrated to customer systems according to customer specifications. Revenue for all projects is recognized over time using percentage of completion method. Progress is measured by cost-to-cost method, comparing incurred costs and forecasted costs. Projects meet the over-time revenue recognition criteria, either by creating an asset without an alternative use and Vaisala having an enforceable right to payment for performance completed to date and/or by creating an asset under customer control. The applied revenue recognition principles fulfill the Finnish Accounting Standard requirement related to the predictability of project margin.
Services are divided into service contracts and one-off service deliverables. Services may include maintenance, calibration and repair, modernization, extended warranties and data-based solutions supporting decisions in weather-dependent operations. Service contracts are continuous services including for example extended warranty, availability of customer support and availability of spare part delivery. Service contracts are recognized over time or at a point in time depending on the nature of the service and content of a contract. In case of one-off request services, the revenue is recognized at a point in time when the service has been rendered.
Standard warranty period for products is one year and 2, 5 or 10 years for selected products. Standard warranty period for services is 6 or 12 months. Extended warranty is a separately sold and priced service over a separately agreed period. Revenue for extended warranty is recognized over time starting at the time of standard warranty expiration. Provision for warranty costs is recognized in the balance sheet.
Other operating income and expenses include income and expenses, which are not directly attributable to operational activities.
Other operating income consists mainly of gains on the disposal of assets as well as income other than revenue from contracts with customers, such as reversal of contingent liabilities related to acquisitions and indemnities. Other operating expenses consist mainly of losses on disposal of assets.
Research and development expenses are booked as cost in the financial period in which they occur.
Parent company's share-based payments are related to share-based incentive plans. Share-based payments are recognized as costs in the income statement and as accrued expenses in the balance sheet during the vesting period. The costs are based on an estimate of the amount of shares to be paid at the end of the vesting period. Assumptions, on which the estimates are based, are updated whenever changes occur and the effects of changes in assumptions are recognized in the statement of income.
As of January 1, 2018, the cost of the share part of the share-based payments as well as the cash part of the share-based payments correspond to the value of share closing price on the grant date of the incentive plan.
The parent company's statutory pension insurance and voluntary pension plans are managed by external pension insurance companies. The pensions are all defined contribution plans and the contributions are expensed to the statement of income as incurred.
The additional pension coverage of parent company personnel was arranged by Vaisala Pension Fund that was closed on January 1, 1983. The pension fund liability was transferred to a pension insurance company on December 31, 2005 and the fund was dissolved in 2006. The pension liability of the fund is fully covered.
Tax expense includes taxes based on taxable profit for the financial year and tax adjustments for previous years. Current taxes are calculated on the taxable income on the basis of the tax rates enacted by the end of the financial year.
Non-current assets consist of intangible assets, property, plant and equipment as well as investments. Carrying amounts of non-current assets are measured at cost less accumulated depreciation, amortization and impairment and plus revaluations. Depreciation and amortization according to plan is calculated on a straight-line basis over the expected useful lifetime of the asset. Land and investments are not depreciated. The cost of assets produced for own use includes also overhead costs attributable to the production work.
No interest is capitalized in non-current assets. Estimated useful lifetimes for assets are:
| Intangible rights | 3–10 years |
|---|---|
| Buildings and structures | 5–40 years |
| Machinery and equipment | 3–8 years |
| Other tangible assets | 3–8 years |
Other intangible assets include assets that have an indefinite useful lifetime and are not amortized. Additionally, merger losses have been allocated to other intangible assets and their useful lifetime is 6 years.
Inventories are stated at the lower of standard cost and net realizable value. Inventory cost includes the cost of purchase (including mainly purchase price, import duties and transport), direct labor and a proportion of production overhead. An allowance is recorded for excess inventory and obsolescence.
Provisions are future expenditure and losses arising from obligations, for which the company is committed and for which it is not certain or likely that revenue will be generated in the future and which are likely to occur. A change in the provision is recognized in the same item of the income statement in which the provision was originally recognized.
Provisions can relate to restructuring of operations, loss-making contracts, warranties, legal disputes and other commitments.
All parent company's derivative financial contracts are foreign exchange forward contracts. The parent company has sales in a number of foreign currencies, of which the most significant are USD, JPY and GBP. All derivative financial contracts are initially measured at fair value on the closing date of the derivative financial contract. Derivative financial contracts are subsequently measured at fair value through profit and loss at the end of the financial year. The fair value of a foreign exchange forward contract is measured at the present value of the future cash flows. Unrealized and realized gains and losses arising from changes in the fair value are recognized in the income statement in financial income and expenses in the period in which they arise. Derivative financial contracts are included in the balance sheet in prepaid and accrued expenses. The parent company does not apply hedge accounting.
Transactions in foreign currencies are recorded using the exchange rate on the date of transaction. Receivables and payables in foreign currency have been valued at the rates quoted by European Central Bank on the last trading date of the financial year. Foreign exchange gains and losses arising from revaluation of cash and cash equivalents, trade and other receivables, loan receivables as well as trade and other payables are recognized as financial income and expense in the income statement.
Disaggregation of revenue
Net sales by market area
| Total | 266,326 | 241,898 |
|---|---|---|
| of which Finland | 8,959 | 7,657 |
| EMEA | 105,139 | 84,973 |
| APAC | 82,637 | 82,190 |
| of which United States | 55,444 | 46,956 |
| Americas | 78,551 | 74,735 |
| EUR thousand | 2019 | 2018 |
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Weather and Environment | ||
| Products | 64,142 | 56,409 |
| Projects | 48,446 | 52,046 |
| Services | 5,871 | 5,073 |
| Total | 118,459 | 113,528 |
| Industrial Measurements | ||
| Products | 27,387 | 24,331 |
| Services | 1,952 | 2,486 |
| Total | 29,340 | 26,817 |
| Net sales from subsidiaries | 118,527 | 101,554 |
| Total | 266,326 | 241,898 |
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Revenue recognized at a point in time | 94,440 | 83,782 |
| Revenue recognized over time | 53,359 | 56,562 |
| Net sales from subsidiaries | 118,527 | 101,554 |
| Total | 266,326 | 241,898 |
Net sales from subsidiaries are mainly recognized at a point in time.
Payment terms vary based on geographical areas. In product and service business, the standard payment term is 30 days net, but in some areas prepayments are commonly used. Project invoicing is based on milestones and typically follows the general project delivery terms where 30% is advance payment, 60% against delivery documents and 10% after site acceptance test. In project business the most common payment terms are letter of credit or as per contract.
The following table provides information about receivables and liabilities from contracts with customers included in the balance sheet.
| EUR thousand | Dec 31, 2019 | Dec 31, 2018 |
|---|---|---|
| Trade receivables | 38,783 | 35,020 |
| Accrued revenue | 15,451 | 11,089 |
| Advances received | 2,509 | 2,127 |
| Deferred revenue | 14,762 | 18,509 |
Accrued revenue includes the balance of project and service revenue recognized but not yet invoiced. In general, most of project revenue is recognized after the product manufacturing as percentage of completion increases and most of the performance obligation is satisfied. According to general project delivery terms, majority of a project is invoiced before the delivery. Therefore, the amount of accrued revenue is typically at its highest between product manufacturing phase of the project and delivery of the product to the customer. For services, which are satisfied over time, the customer is mainly invoiced in advance and only in some cases in arrears after the customer has received or consumed the service. Arrears invoicing generates accrued revenue as the revenue is recognized before invoicing.
Advances received are customer payments related to contracts not yet invoiced.
Deferred revenue includes the balance of projects, services and products invoiced but revenue not yet recognized.
Project-related contract liabilities often arise in the early stages of a project, when the prepayment has been invoiced, but the project is only at an early stage and there is none or little revenue recognized under percentage of completion method. Services, which are recognized over time, are often invoiced in advance and therefore deferred revenue is generated in the beginning of the service period. For products and services, which are recognized at a point in time, deferred revenue is generated when customer has been invoiced, but performance obligation has not been satisfied and consequently revenue has not been recognized.
In the financial year 2019, the parent company recognized EUR 9 (16) million revenue that was included in the deferred revenue balance at the beginning of the period.
On December 31, 2019, the order book amounted to EUR 68.4 (50.1) million. Of the order book, EUR 49.8 (36.9) million is scheduled to be recognized as revenue in 2020 (2019) and EUR 18.6 (13.2) million is scheduled to be recognized later.
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Gains on disposal of assets | 293 | 10 |
| Other operating income | ||
| Reversal of contingent consideration | 91 | 143 |
| Indemnities and other | 14 | 177 |
| Total | 398 | 330 |
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Wages and salaries | 72,753 | 65,055 |
| Pension costs | 12,078 | 11,284 |
| Other personnel costs | 2,088 | 2,117 |
| Total | 86,919 | 78,457 |
| Persons | 2019 | 2018 |
|---|---|---|
| In Finland | 1,086 | 1,050 |
| Outside Finland | 7 | 6 |
| Total | 1,093 | 1,056 |
| Personnel Dec 31 | ||
| Persons | 2019 | 2018 |
| In Finland | 1,135 | 1,049 |
| Outside Finland | 8 | 7 |
| Total | 1,143 | 1,056 |
| Salary and remunerations of the President and CEO (payment basis) | ||
| EUR thousand | 2019 | 2018 |
| Forsén Kjell | ||
| Salary | 515 | 515 |
Bonus 263 302 Share-based payment 514 502 Obligatory pension 135 146 Voluntary pension 120 120 Total 1,547 1,586
The retirement age of the President and CEO is 62 years. The President and CEO has a voluntary compensation based retirement plan. Compensation equal to 12 months' salary is paid to the President and CEO, if employer terminates the CEO agreement. In case the President and CEO resigns, compensation equal to 6 months' salary is paid.
| Compensation, | |||||
|---|---|---|---|---|---|
| Compensation, | Remuneration and Human |
||||
| Annual | Audit | Resources | |||
| EUR thousand | remuneration | Committee | Committee | Total | |
| Castrén Petri | Member of the Board | 35 | 4 | 5 | 44 |
| Lundström Petra | Member of the Board | 35 | 4 | 39 | |
| Niinivaara Mikko (until March 26th) |
Member of the Board | 1 | 1 | 2 | |
| Rinnevaara Jukka (since March 26th) |
Member of the Board | 35 | 2 | 37 | |
| Ståhlberg Kaarina | Member of the Board | 35 | 6 | 41 | |
| Syrjänen Tuomas (since March 26th) |
Member of the Board | 35 | 35 | ||
| Torstila Pertti | Member of the Board | 35 | 35 | ||
| Voipio Raimo | Chairman of the Board | 45 | 1 | 46 | |
| Vice Chairman of the Board |
|||||
| Voipio Ville | (since March 26th) | 35 | 3 | 4 | 42 |
| Total | 290 | 16 | 15 | 321 |
| Remuneration of the Board of Directors 2018 (payment basis) | |||
|---|---|---|---|
| Compensation, Remuneration |
|||||
|---|---|---|---|---|---|
| EUR thousand | Annual remuneration |
Compensation, Audit Committee |
and Human Resources Committee |
Total | |
| Castrén Petri | Member of the Board | 35 | 5 | 3 | 43 |
| Lundström Petra | Member of the Board | 35 | 35 | ||
| Neuvo Yrjö | Vice Chairman of the Board | 35 | 35 | ||
| Niinivaara Mikko | Member of the Board | 35 | 5 | 3 | 43 |
| Ståhlberg Kaarina | Member of the Board | 35 | 8 | 43 | |
| Torstila Pertti | Member of the Board | 35 | 35 | ||
| Voipio Raimo | Chairman of the Board | 45 | 3 | 48 | |
| Voipio Ville | Member of the Board | 35 | 35 | ||
| Total | 290 | 18 | 9 | 317 |
To the President and CEO and the members of the Board have not been granted loans nor have guarantees or commitments been given on their behalf.
| Total | 7,765 | 6,476 |
|---|---|---|
| Impairment of tangible assets | 85 | 123 |
| Depreciation of property, plant and equipment | 5,919 | 5,496 |
| Amortization of intangible assets | 1,761 | 857 |
| EUR thousand | 2019 | 2018 |
In the financial year 2019 amortization of intangible assets included amortization EUR 1.1 (0.1 million) related to merger losses included in other intangible assets.
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Dividend income | ||
| From group companies | 1,658 | 4,392 |
| Other interest and financial income | ||
| From group companies | 904 | 2,353 |
| From others | 1,498 | 1,841 |
| Write-down of loan receivables | -89 | -88 |
| Interest and other financial expenses | ||
| To group companies | -253 | -210 |
| To others | -2,903 | -4,328 |
| Foreign exchange gains and losses | 843 | 1,271 |
| Total | 1,659 | 5,232 |
| Taxes from the financial year | ||
|---|---|---|
| 7,700 | 6,417 | |
| EUR thousand | 2019 | 2018 |
| Carrying value Dec 31, 2019 | 1,571 | 12,194 | 269 | 14,034 |
|---|---|---|---|---|
| Accumulated amortization and write-downs Dec 31, 2019 |
28,185 | 1,234 | 29,419 | |
| Amortization and write-downs for the financial year |
688 | 1,099 | 1,787 | |
| Accumulated amortization of decreases and transfers |
-390 | -390 | ||
| Accumulated amortization and write downs Jan 1, 2019 |
27,887 | 135 | 28,023 | |
| Acquisition cost Dec 31, 2019 | 29,756 | 13,428 | 269 | 43,453 |
| Transfers between items | 97 | -78 | 19 | |
| Decreases | -390 | -390 | ||
| Transferred in merger | 270 | 3 | 272 | |
| Increases | 245 | 10,050 | 99 | 10,393 |
| Acquisition cost Jan 1, 2019 | 29,535 | 3,376 | 248 | 33,158 |
| EUR thousand | Intangible rights |
Other intangible assets |
assets in progress |
Total |
| intangible | ||||
| payments and | ||||
| Advance |
| Advance | ||||
|---|---|---|---|---|
| payments and | ||||
| intangible | ||||
| Intangible | Other intangible | assets in | ||
| EUR thousand | rights | assets | progress | Total |
| Acquisition cost Jan 1, 2018 | 33,285 | 134 | 33,418 | |
| Increases | 338 | 3,242 | 102 | 3,682 |
| Decreases | -4,287 | -4,287 | ||
| Transfers between items | 199 | 146 | 345 | |
| Acquisition cost Dec 31, 2018 | 29,535 | 3,376 | 248 | 33,158 |
| Accumulated amortization and write | ||||
| downs Jan 1, 2018 | 31,452 | 0 | 31,452 | |
| Accumulated amortization of | ||||
| decreases and transfers | -4,287 | -4,287 | ||
| Amortization and write-downs for | ||||
| the financial year | 722 | 135 | 857 | |
| Accumulated amortization and write-downs Dec 31, 2018 |
27,887 | 135 | 28,023 | |
| Carrying value Dec 31, 2018 | 1,648 | 3,241 | 248 | 5,136 |
| Machinery and | Advance payments and | |||||
|---|---|---|---|---|---|---|
| EUR thousand | Land and waters | Buildings | equipment | Other tangible assets | construction in progress | Total |
| Acquisition cost Jan 1, 2019 | 2,820 | 49,309 | 55,464 | 69 | 5,846 | 113,509 |
| Increases | 122 | 3,654 | 13,064 | 16,840 | ||
| Transferred in merger | 279 | 5 | 284 | |||
| Decreases | -0 | -1,513 | -1,513 | |||
| Transfers between items | 66 | 1,778 | -2,093 | -249 | ||
| Acquisition cost Dec 31, 2019 | 2,820 | 49,497 | 59,663 | 74 | 16,816 | 128,871 |
| Accumulated depreciation and write-downs Jan 1, 2019 | 33,517 | 42,881 | 76,398 | |||
| Accumulated depreciation of decreases and transfers | 0 | -1,505 | -1,506 | |||
| Depreciation for the financial year | 1,973 | 3,946 | 5,919 | |||
| Write-downs | 0 | 59 | 59 | |||
| Accumulated depreciation and write-downs Dec 31, 2019 | 35,489 | 45,381 | 80,870 | |||
| Revaluation | 84 | 5,618 | 5,702 | |||
| Carrying value Dec 31, 2019 | 2,905 | 19,626 | 14,282 | 74 | 16,816 | 53,703 |
| Machinery and | Advance payments and | |||||
|---|---|---|---|---|---|---|
| EUR thousand | Land and waters | Buildings | equipment | Other tangible assets | construction in progress | Total |
| Acquisition cost Jan 1, 2018 | 1,193 | 48,520 | 53,536 | 69 | 3,686 | 107,004 |
| Increases | 1,627 | 107 | 3,045 | 5,899 | 10,678 | |
| Decreases | -3,815 | -14 | -3,829 | |||
| Transfers between items | 681 | 2,699 | -3,725 | -345 | ||
| Acquisition cost Dec 31, 2018 | 2,820 | 49,309 | 55,464 | 69 | 5,846 | 113,509 |
| Accumulated depreciation and write-downs Jan 1, 2018 | 31,581 | 43,015 | 74,596 | |||
| Accumulated depreciation of decreases and transfers | -3,817 | -3,817 | ||||
| Depreciation for the financial year | 1,936 | 3,561 | 5,496 | |||
| Write-downs | 123 | 123 | ||||
| Accumulated depreciation and write-downs Dec 31, 2018 | 33,517 | 42,881 | 76,398 | |||
| Revaluation | 84 | 5,618 | 5,702 | |||
| Carrying value Dec 31, 2018 | 2,905 | 21,410 | 12,584 | 69 | 5,846 | 42,814 |
On December 31, 2019, the carrying amount of machinery and equipment used in production was EUR 9.4 (8.9) million.
| EUR thousand | Holdings in group undertakings |
Other shares and holdings |
Total |
|---|---|---|---|
| Acquisition cost Jan 1, 2019 | 89,333 | 100 | 89,433 |
| Increases | 7,112 | 7,112 | |
| Transferred in merger | 125 | 12 | 137 |
| Decreases | -15,240 | -15,240 | |
| Carrying value Dec 31, 2019 | 81,330 | 112 | 81,442 |
In the financial year 2019, additions include acquisition costs of the shares of Vaisala Digital Oy. The decrease relates to K-Patents Oy's and Janesko Oy's merger into the parent company on August 31, 2019.
In the financial year 2018, additions include acquisition costs of the shares of Leosphere SAS, K-Patents Oy and Janesko Oy. The decrease relates to Vionice Oy's merger into the parent company on September 28, 2018.
| Holdings in group | Other shares and | ||
|---|---|---|---|
| EUR thousand | undertakings | holdings | Total |
| Acquisition cost Jan 1, 2018 | 22,668 | 100 | 22,768 |
| Increases | 70,364 | 70,364 | |
| Decreases | -3,699 | -3,699 | |
| Carrying value Dec 31, 2018 | 89,333 | 100 | 89,433 |
| Total | 3,008 | 2,778 |
|---|---|---|
| Other | 385 | 58 |
| Value added tax receivables | 2,070 | 2,588 |
| Advances paid | 554 | 132 |
| EUR thousand | 2019 | 2018 |
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Tax receivables | 507 | 531 |
| Deferred revenue | 15,451 | 11,089 |
| Derivative financial contracts | 280 | 29 |
| Deferred interests | 159 | 2.287 |
| Other deferred assets | 3,208 | 2,848 |
| Total | 19,606 | 16,784 |
| EUR million | 2019 | 2018 | ||
|---|---|---|---|---|
| Nominal value of derivative financial contracts made to hedge against exchange rate risk |
||||
| Foreign exchange forwards | 33.8 | 26.9 | ||
| Nominal value, total | 33.8 | 26.9 | ||
| Nominal value of | 2019 | 2018 | ||
| derivative financial | ||||
| contracts in currencies | Currency million | EUR million | Currency million | EUR million |
| USD | 23.5 | 20.7 | 26.0 | 21.6 |
| AUD | - | - | 1.2 | 0.7 |
| CNH | 19.0 | 2.4 | 20.0 | 2.5 |
| GBP | 1.3 | 1.5 | - | - |
| JPY | 350.0 | 2.9 | 270.0 | 2.1 |
| SEK | 43.0 | 4.0 | - | - |
| SGD | 3.5 | 2.2 | - | - |
| Total | 33.8 | 26.9 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Less than 90 days | 8.2 | 12.1 |
| Over 90 days and less than 120 days | 5.3 | 2.9 |
| Over 120 days and less than 180 days | 8.5 | 8.2 |
| Over 180 days and less than 360 days | 11.8 | 3.8 |
| Total | 33.8 | 26.9 |
| EUR million | 2019 | 2018 |
|---|---|---|
| Foreign exchange forwards | -0.1 | -0.9 |
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Deferred depreciation and amortization | 258 | 223 |
| Share-based payments | 1,255 | 1,052 |
| Provisions | 324 | 366 |
| Bad debt provision | - | 69 |
| Total | 1,966 | 1,710 |
Deferred tax assets and liabilities have not been recognized in the parent company's balance sheet. Deferred tax liabilities arising from revaluation have not been taken into account. If realized, the tax effect of revaluation would be EUR 1.1 million at the current tax rate of 20%. Other deferred tax liabilities were not material.
| Non-current provisions | ||
|---|---|---|
| EUR thousand | 2019 | 2018 |
| Provisions Jan 1 | 97 | 97 |
| Provisions Dec 31 | 97 | 97 |
| Current provisions | ||
| EUR thousand | 2019 | 2018 |
| Provisions Jan 1 | 1,734 | 852 |
| Increases | 832 | 900 |
| Decreases | -835 | -18 |
The provisions in the financial years 2019 and 2018 include warranty provision, loss-making project provisions and other contractual provisions.
The parent company's shares are divided into series K shares and series A shares. The Annual General Meeting held on April 10, 2018 resolved to issue new shares to the shareholders without payment in proportion to their holdings so that one new share was issued for each share (split). Vaisala Corporation's Board of Directors decided in its meeting on April 24, 2019, that 27,264 series K shares will be converted to series A shares. This conversion was registered into the Trade Register on May 27, 2019. Consequently, Vaisala Corporation has 36,436,728 shares, of which 6,751,398 are series K shares and 29,685,330 are series A shares. The shares do not have nominal value. The series K shares and A shares are differentiated by the fact that each series K share entitles its owner to 20 votes at a General Meeting of Shareholders while each series A share entitles its owner to 1 vote. The shares have the same rights to dividend. Series K shares can be converted to series A shares according to specific rules stated in the Articles of Association.
On December 31, 2019 and 2018, the fully paid and registered share capital of Vaisala Corporation amounted to EUR 7,660,807.86. The Annual General Meeting held on April 10, 2018 resolved to delete stipulations in Articles of Association on minimum and maximum share capital.
169
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Share capital Jan 1 | 7,661 | 7,661 |
| Share capital Dec 31 | 7,661 | 7,661 |
| Fund of invested non-restricted equity Jan 1 | 415 | 297 |
| Gain on transfer of treasury shares | 7 | 118 |
| Fund of invested non-restricted equity Dec 31 | 422 | 415 |
| Retained earnings Jan 1 | 159,142 | 166,929 |
| Effect of change in accounting principles | - | -40 |
| Dividend paid | -20,810 | -37,580 |
| Distribution of treasury shares | 1,082 | 1,093 |
| Loss on transfer of treasury shares | -201 | - |
| Retained earnings Dec 31 | 139,213 | 130,403 |
| Result for the financial year | 30,885 | 28,739 |
| Total equity | 178,182 | 167,218 |
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Retained earnings | 139,213 | 130,403 |
| Result for the financial year | 30,885 | 28,739 |
| Fund of invested non-restricted equity | 422 | 415 |
| Total | 170,521 | 159,557 |
For the financial year 2018 a dividend of EUR 0.58 per share was paid, a total of EUR 20.8 million.
On December 31, 2019, the parent company had non-current non-interest-bearing liabilities in total of EUR 3.7 (4.4) million. Liabilities consist of contingent considerations related to acquisition of subsidiaries, and they will mature in 2021-2022. During the financial year 2019, non-current liabilities related to acquisition of subsidiaries in total of EUR 0.1 million were reversed and recognized in other operating income. At the end of the financial year, the parent company had no non-current liabilities that will mature after five years.
On October 5, 2018, Vaisala signed a EUR 50 million unsecured revolving credit facility. The committed credit facility agreement matures in 5 years from the signing and it has no financial covenants. The facility will be used for working capital needs, for financing of acquisitions and for general corporate purposes. On December 31, 2019, the parent company had interest-bearing liabilities totaling to EUR 40.2 (40.2) million, of which EUR 40 million related to utilized revolving credit facility, which matures on April 14, 2020. At the end of the financial year, Vaisala had no loans that would mature after five years or a longer period of time.
| Total | 48,033 | 43,540 |
|---|---|---|
| Other accrued expenses and deferred income | 5,189 | 4,047 |
| Direct tax accruals | 838 | 5 |
| Derivative financial contracts | 360 | 955 |
| Deferred revenue | 14,762 | 18,509 |
| Personnel expense accruals | 26,884 | 20,024 |
| EUR thousand | 2019 | 2018 |
Notes related to derivative financial contracts are presented in Note 10, Deferred assets.
| EUR thousand | 2019 | 2018 |
|---|---|---|
| Reveivables | ||
| Current loan receivables | 22,445 | 26,256 |
| Trade receivables | 16,826 | 12,272 |
| Other receivables | 6 | 6 |
| Prepaid expenses and accrued income | 2,222 | 5,541 |
| Total receivables | 41,499 | 44,075 |
| Liabilities | ||
| Current loans | 10,702 | 16,630 |
| Trade payables | 1,163 | 634 |
| Other liabilities | 1 | 1 |
| Accrued expenses and deferred income | 3,568 | 4,369 |
| Total liabilities | 15,433 | 21,633 |
| EUR thousand | 2019 | 2018 |
|---|---|---|
| For own debt or liability | ||
| Bank guarantees issued for obligations | 16,285 | 18,942 |
| For group companies | ||
| Guarantees | 67 | 358 |
| Leasing commitments | ||
| Payable during the following financial year | 197 | 180 |
| Payable later | 97 | 130 |
| Total leasing liabilities | 294 | 309 |
| Total contingent liabilities and pledges given | 16,646 | 19,609 |
On December 31, 2019, the parent company had commitments related to Vantaa building project in total of EUR 3 (1) million. In addition, the parent company had other commitments related to intangible and tangible assets for EUR 2 (3) million.
On December 31, 2019, the parent company had purchase commitments totaling to EUR 10 (10) million.
| Total | 422 | 442 |
|---|---|---|
| Other fees | 39 | 141 |
| Tax advice | 11 | 10 |
| Statements | 16 | 1 |
| Audit | 357 | 290 |
| EUR thousand | 2019 | 2018 |
Vantaa, February 12, 2020
| Petri Castrén | Petra Lundström | Jukka Rinnevaara |
|---|---|---|
| Kaarina Ståhlberg | Tuomas Syrjänen | Pertti Torstila |
| Raimo Voipio Chairman of the Board |
Ville Voipio Vice Chairman of the Board |
Kjell Forsén President and CEO |
(Translation of the Finnish original)
To the Annual General Meeting of Vaisala Oyj
We have audited the financial statements of Vaisala Oyj (business identity code 0124416-2) for the year ended 31 December 2019. The financial statements comprise the consolidated income statement, statement of comprehensive income, balance sheet, statement of cash flows, statement of changes in equity and notes, including a summary of significant accounting policies, as well as the parent company's income statement, balance sheet, statement of cash flows and notes.
In our opinion
Our opinion is consistent with the additional report submitted to the Audit Committee.
We conducted our audit in accordance with good auditing practice in Finland. Our responsibilities under good auditing practice are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report.
We are independent of the parent company and of the group companies in accordance with the ethical requirements that are applicable in Finland and are relevant to our audit, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
In our best knowledge and understanding, the non-audit services that we have provided to the parent company and group companies are in compliance with laws and regulations applicable in Finland regarding these services, and we have not provided any prohibited non-audit services referred to in Article 5(1) of regulation (EU) 537/2014. The non-audit services that we have provided have been disclosed in note 30 to the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have also addressed the risk of management override of internal controls. This includes consideration of whether there was evidence of management bias that represented a risk of material misstatement due to fraud.
Auditor's report
Refer to Notes 1,2 and 3
Refer to Note 13
This matter is a significant risk of material misstatement referred to in EU Regulation No 537/241, point (c) of Article 10(2).
Our audit procedures included an assessment of Vaisala inventory process and assessment of controls relating inventory valuation.
The Board of Directors and Chief Executive Officer are responsible for the preparation of consolidated financial statements that give a true and fair view in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU, and of financial statements that give a true and fair view in accordance with the laws and regulations governing the preparation of financial statements in Finland and comply with statutory requirements. The Board of Directors and Chief Executive Officer are also responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Board of Directors and Chief Executive Officer are responsible for assessing the parent company's and the group's ability to continue as going concern, disclosing, as applicable, matters relating to going concern and using the going concern basis of accounting. The financial statements are prepared using the going concern basis of accounting unless there is an intention to liquidate the parent company or the group or cease operations, or there is no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance on whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with good auditing practice will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with good auditing practice, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:
Conclude on the appropriateness of the Board of Directors' and Chief Executive Officer's use of the going concern basis of accounting and based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the parent company's or the group's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause the parent company or the group to cease to continue as a going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events so that the financial statements give a true and fair view.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor's report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
Auditor's report
We were first appointed as auditors by the Annual General Meeting on March 26, 2014 and our appointment represents a total period of uninterrupted engagement of 6 years.
The Board of Directors and Chief Executive Officer are responsible for the other information. The other information comprises the Board of Directors' Report and the information included in the Annual Report, but does not include the financial statements and our auditor's report thereon. Our opinion on the financial statements does not cover the other information
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. With respect to the Board of Directors' Report, our responsibility also includes considering whether the Board of Directors' Report has been prepared in accordance with the applicable laws and regulations.
In our opinion, the information in the Board of Directors' Report is consistent with the information in the financial statements and the Board of Directors' Report has been prepared in accordance with the applicable laws and regulations.
If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
We support that the financial statements should be adopted. The proposal by the Board of Directors regarding the treatment of distributable funds is in compliance with the Limited Liability Companies Act. We support that the Board of Directors of the parent company and the Chief Executive Officer should be discharged from liability for the financial period audited by us.
Vantaa, February 12, 2020
Deloitte Oy Audit Firm
Merja Itäniemi Authorised Public Accountant (KHT)
Kaarina Muurinen Chief Financial Officer [email protected]
Paula Liimatta Business Controller and Head of Investor Relations [email protected]
Nina Eklund Director, Corporate Communications and Brand [email protected]
Marjo Hietapuro Sustainability Manager [email protected]
Vaisala Corporation P.O. Box 26 FI–00421 Helsinki, Finland
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Vaisala Corporation P.O. Box 26 FI-00421 Helsinki, Finland B211913EN
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