Governance Information • May 3, 2017
Governance Information
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CORPORATE GOVERNANCE, RISK MANAGEMENT, COMPLIANCE AND GENERAL REMUNERATION POLICY
The corporate governance model adopted by Sabaf is based on the decision to strictly separate the interests and choices of the reference shareholder – the Saleri family – from those of the Company and the Group, and therefore assign corporate management to managers who are distinct from the reference shareholder.
Expansion of the shareholder base following listing on the stock exchange, admission to the STAR segment (with the voluntary acceptance of stricter transparency and disclosure rules), and the desire to comply consistently with best practice in relation to corporate governance, represent the subsequent steps taken by Sabaf towards compliance of its corporate governance system with a model whose benchmark is that directors act in the Company's interests and create value for shareholders and other stakeholders.
As a further step along this path, Sabaf's management believes that ethics founded on the centrality of the individual and respect for common values, set at the head of the creation of value, are able to help take decisions that are in line with the corporate culture and significantly contribute to assuring the Company's sustainable long-term growth. For this purpose, Sabaf has prepared and published a Charter of Values, in accordance with the existing national and international regulatory principles, guidelines and documents with regard to human rights, corporate social responsibility and corporate governance.
The document is the governance tool through which the Board of Directors clearly explains the Company's values, standards of conduct and commitments in respect of all stakeholders – shareholders, employees, customers, suppliers, investors, the Public Administration, the community and the environment.
The Charter of Values was approved by the Board of Directors on 11 February 2014 and is available on the website www.sabaf.it under the section "Sustainability".
This section of the report highlights the decisions taken by Sabaf and the special features of its governance system, reviewed in the light of the new measures introduced by the Corporate Governance Code. Where possible, a comparison is also provided with other listed companies, using information taken from Assonime in its report "Corporate Governance in Italy: Corporate Governance, Remuneration and comply-or-explain", published in November 2016 and based on the 2015 Corporate Governance reports (available on 15 July 2016) of 227 listed Italian companies, of which 92% (212 companies) have formally chosen to adhere to the Corporate Governance Code. The benchmark used below takes into account a panel of only "non-financial" companies, where available. A further comparison is provided of the composition and functioning of the Board of Directors, using data from the Italia Board Index Observatory 2016, published by Spencer Stuart, which analyses the characteristics and functioning of the Boards of Directors of the top 100 (industrial and financial) listed companies in Italy in order of capitalisation as at 11 March 2016, as well as a comparison with major European and non-European countries.
The information below is a summary and does not replace the "Report on Corporate Governance and Ownership Structures", prepared by the Issuer pursuant to article 123-bis of the Consolidated Law on Finance (TUF) for 2016 and available in the Investors/Corporate Governance section of the website www.sabaf.it.
The Group operates through production and sales companies in Italy and abroad.
Specifically:
a) Production is carried out by:
Sabaf has adopted a traditional management and control model, consisting of:
This model is supplemented, pursuant to the provisions of the Corporate Governance Code to which the Company adheres, by:
Finally, the Group's administration and control model is completed by the presence of the Supervisory Committee, set up following the adoption by Sabaf in 2006 of the Organisational Management and Control Model pursuant to Legislative Decree 231/2001.
The Board of Directors currently in office is composed of the following twelve (12) members: (i) 6 executive, (ii) 1 non-executive and (iii) 5 non-executive and independent (including one appointed by the minority list, consistent with 43% of the sample analysed by Assonime in 2016).
50% of the serving Board members are aged between 50 and 60; the average age is in line with the average of the sample analysed by Assonime (56.4 vs. 57.2 years). In the last three years the Board has met fewer times than the average of the sample analysed by Assonime (9 Sabaf BoD meetings in 2016) and with members' attendance always higher than 90%, which is in line with the other companies in the study (95% in 2016).
The meetings were attended by the Board of Statutory Auditors and – in turn – Sabaf executives, invited to attend and discuss specific subjects on the agenda.
Number of meetings (2014-2016) Average attendance to Meetings (2014-2016)1
an Independent Director of Sabaf in May 2015.
he is also the Chairman of the Supervisory Committee (pursuant to Legislative Decree 231) of Sabaf S.p.A. and of the subsidiary Faringosi-Hinges. Since 2015, he has been
Chairman of the Control and Risk Committee.
has held management positions in the field of investments and Corporate Development. Currently the Senior Portfolio Manager at Quaestio Capital Management SGR S.p.A.
The comparison is made using data from the Italia Board Index Observatory 2016, published by Spencer Stuart, which analyses the characteristics and functioning of the Boards of Directors of the top 100 (industrial and financial) listed companies in Italy in order of capitalisation as at 11 March 2016, as well as a comparison with major European and non-European countries.
During the financial year, the Board of Directors carried out a review of the size, membership (including professional competences, managerial skills and seniority) and activities of the Board of Directors and its Committees, opting for self-assessment by individual directors, coordinated by the Lead Independent Director.
The results of the evaluation were generally positive and were discussed in the Board of Directors' meeting of 20 December 2016.
Average Age of Directors
Average number of independent directors
Average number of meetings of the Board
% of women in the Board of Directors
Source: Spencer Stuart - Italia Board Index 2016
The Board of Statutory Auditors, appointed by the Shareholders' Meeting on 5 May 2015 for the period 2015-2017, has 3 members, with an average age of 65 (above the Assonime average of 55.9), and 2 alternate auditors. The Chairman of the Board of Statutory Auditors was chosen by the minority shareholders.
Over the last three years, Sabaf's Board of Auditors has met fewer times than the average of the meetings of the Assonime sample (9.9 meetings on average in 2016).
Members' attendance at the meetings was, on average, around 96% in the period 2014-2016 (94% in 2016), and in line with the other companies assessed in the study.
In general, as well as conducting checks and attending the regular meetings pursuant to the laws in force, all members of the Sabaf Board of Statutory Auditors must attend the meetings of the Board of Directors and the Control and Risk Committee, the half-yearly collective meetings with the supervisory bodies and the individual meetings with the statutory auditing firm.
The serving Control and Risk Committee, formed within the Board, is composed entirely of 3 independent directors, in line with the majority of cases of the Assonime sample (3 members in 76% of cases).
The Committee has also been allocated the relevant functions of the Related Parties Committee.
The Committee met 5 times in 2016 (Assonime average: 6.5 meetings). In the last three years, the number of meetings and the attendance of the directors to the committees was on average in line with Assonime's sample.
The Remuneration and Nomination Committee, set up within the Board, has 4 non-executive and in majority independent members (Assonime average: 3 members), with knowledge and experience of accounting, finance and remuneration policies, deemed suitable by the Board and of which 1 (Alessandro Potestà) appointed during 2016.
In the last three years the Committee has met more times than the Assonime average (except in 2014).
In particular, in the last year, the Committee met 5 times with the purpose, among others, to prepare the incentive plan for 2016, assess the appointment of directors of the newly acquired company ARC srl and to determine their fees.
On 5 May 2015, the Board of Directors, subject to the favourable opinion of the Control and Risk Committee and having heard the Board of Statutory Auditors, renewed the appointment of Protiviti S.r.l., an external company, to carry out the internal audit activity for the period 2015-2017, appointing Emma Marcandalli, Managing Director of the company, as the Manager in charge. The decision is based on the greater skills and efficiency that an external consultant specialised in internal control can guarantee, also taking into account the size of the Sabaf Group.
The Internal Audit Manager is responsible for verifying that the internal control and risk management system is adequate and operates properly. He/she reports to the Board of Directors, is not responsible for any operating area and remains in office for the entire term of the Board that appointed him/her.
The appointment of the Supervisory Board was confirmed on 5 May 2015 by the Sabaf Board of Directors for the 2015-2017 period; it consists of a non-executive and independent member, and an external member.
Sabaf's Supervisory Committee met 7 times in 2016, requesting the attendance of the Company's Management at the meetings in order to perform an in-depth review of specific topics.
5 Assonime panel including financial companies .
Sabaf's management and control model operates through a network of information flows, which are regular and systematic, between the various company bodies. Each body, according to the time frames and procedures defined by the By-laws, the Governance Model and other internal documents, reports to the functionally superior body regarding the activities conducted during the time period in question and those planned for the subsequent period, noting any observations and suggested actions.
In recent years Sabaf has progressively explored the concepts of risk assessment and risk management in order to develop a structured and regular process of risk identification, assessment and management, defined and formalised in Guidelines contained in the Company's Corporate Governance Manual.
The guidelines define the roles and responsibilities for risk assessment and risk management processes, indicating the parties to be involved, process frequency and assessment scales.
| RATING SCALES | 1 | 2 | 3 | 4 | |
|---|---|---|---|---|---|
| Economic and financial losses | 1% Ebit | 1% - 2.5% Ebit | 2.5% - 10% Ebit | 10% Ebit | |
| IMPACT | Bodily injury | Limited health effects | Medium health consequences |
Serious health risks | Non-reversable effects |
| Damage to image | Effects at the local level |
Effects at the national level |
Effects at the international level |
||
| Frequency of occurrence | Once every 3 years or more often |
Once every 2 years | Once every 1 year | Several times each year | |
| PROBABILITY | Qualitative indications | Unlikely/Remote | Likely | Very likely | |
| RISK MANAGEMENT LEVEL | Unsatisfactory | Needs Improvement | Adequate (with limited room for improvement) |
Optimal |
In the final quarter of 2016, the Internal Audit Function conducted the periodic risk assessment process to identify and assess Group risks, calling for the involvement of some Heads of Function at the Parent Company, also in their capacity as representatives for the Subsidiaries, each for their respective areas:
The results of Sabaf's 2016 risk assessment highlight, among other things, the following 7 main risks, selected for their importance and consistency with the issues covered in this document:
For more information on the Group's financial risks, including those not mentioned here owing to their lack of relevance, please see Chapter 5 – Report on Operations.
3
The Sabaf Group operates in the white goods industry, which is characterized by the following trends:
a) Continual concentration of the target market, following extraordinary transactions (mergers and acquisitions) among the players.
b) Decrease of demand in mature markets in favour of volume growth in the emerging markets, however, characterized by different sales conditions, and an unstable macro-economic environment.
c) Increased competition which requires aggressive pricing policies.
To cope with this situation, the Group aims to retain and reinforce its leadership position wherever possible through:
The current organizational structure requires extensive involvement in the decision-making process of the first-line management, which is therefore considered "key." If one of these resources leaves the Company, it could be temporarily difficult for Sabaf to manage some critical activities.
In some areas of the company, where the centralization of skills is more marked, such a risk may also exist at lower levels of the structure (those that report to the first-line management).
Also the impact resulting from the loss of key resources in one of the foreign subsidiaries would be significant, since the local management structures are smaller, and skills are more centralised.
Some years ago, the Group has started employee retention initiatives, including granting benefits to employees and signing non-competition and retention agreements with key figures.
4
The Sabaf Group has undertaken an internationalization process (sales and production), particularly focused on the emerging countries. There is in this regard the risk that political, economic, fiscal, or legislative instability may impact the Group's sales and the related profitability.
2
To counter this risk, the Group has adopted a policy of monitoring the economic and social integration of target countries for the Group, in order to ensure awareness in taking strategic and investment decisions in terms of exposure to risks.
The Group has also made it feasible to make all the components manufactured at the Group's foreign plants at the Ospitaletto site so that, in the event of interruption of production in a developing country, there is a possibility of activating back-up solutions in Italy.
For the future, the Group's strategy envisions Sabaf's growth through acquisitions, so it can go ahead with its continuous expansion into international markets and/or diversify its production lines.
Therefore, there are the following risks:
The Group is considering the opportunity to develop new tools for the evaluation of potential acquisitions and for the analysis and support of integration processes.
The foreign expansion policy, undertaken by Sabaf by setting up manufacturing and commercial branches, increases the complexity of the context in which the Group operates.
This increasing complexity could make it difficult and inefficient to manage business processes, due to lack of clarity on the roles and responsibilities of the Parent Company management vs. local management (i.e.: lack of coordination between the Group's companies to achieve the growth targets; concentration of responsibilities and critical company knowledge within a few individuals, etc.).
To support this expansion process, the Sabaf Group is working to define the appropriate safeguards that include, among other things, centralising within the management of corporate departments of the parent company, the main business functions, the establishment of ongoing and formalized relations with operating subsidiaries on financial issues, the implementation of SAP in all of the operating companies, and thorough analysis of how powers are delegated within the Group.
In particular, the Group is continuing to implement a single governance system of for purchasing management and is considering setting up operational teams at the Parent Company with a coordinating role in respect of foreign companies to ensure the alignment of the the procedures and practices used by foreign branches compared those used by Sabaf.
6
Considering the high concentration of Sabaf's sales upon a small number of customers, in the event of their insolvency, there is the risk that they may be unable to meet their payment obligations to Sabaf.
This risk is particularly felt in times of economic crisis (such as the current one) and in countries characterized by instability and uncertainty.
The risk is constantly monitored through the preliminary assessment of customers and checks that agreed payment terms are met. A credit insurance policy was taken out which covers approximately 60% of the credit risk.
A further portion is partly guaranteed through letters of credit issued by major banks in favour of customers.
7
protect product exclusivity in the markets where the Group operates
Some Sabaf products are protected by patents.
There is a risk that third parties (competitors) may infringe these patents and/or that the markets in which those patents are infringed do not adequately protect the holder of the patent.
Doing business in countries where it is difficult to enforce rights over patents, exposes the Group to a greater risk of protection of its products.
Sabaf has structured processes in place to manage innovation and protect intellectual property.
In addition, the Group periodically monitors present/future patenting strategies on the basis of cost/opportunity assessments.
Key – Change compared to RA 2015:
For the purposes of meeting company objectives, the risk management activities conducted by Sabaf also take compliance requirements into account.
The internal control system governing this activity is based on the following elements:
Specifically, Sabaf has an integrated risk-based Audit Plan, which is set out according to specific control objectives (e.g. operational risks, compliance with Legislative Decree 262/2005 and Legislative Decree 231/2001, the security and profiling of corporate information systems, etc.).
The implementation of measures is outsourced to a single structure, Internal Audit, which is in turn responsible for reporting the results of the activities conducted to the delegated supervisory bodies.
All this translates into a culture and set of tools based on integrated compliance
Following adherence to the Borsa Italiana Corporate Governance Code and in order to integrate the good governance practices set out in this sponsored document into its own processes, Sabaf adopted a Corporate Governance Manual* which governs principles, regulations and operational procedures.
This Manual, adopted by Board resolution of 19 December 2006, has been updated several times over the years, in order to reflect changes in laws and regulations regarding Corporate Governance, as well as best practices adopted by the Company.
The Manual contains certain operating guidelines, which were approved by the Board of Directors and updated most recently in September 2016. These guidelines were issued to ensure that the management and control bodies of Sabaf properly carry out their duties.
In 2006 Sabaf S.p.A. adopted the Organisational and Management Model pursuant to Legislative Decree 231/2001, designed to prevent the commission of criminal offences by employees and/or outside staff in the Company's interest.
Thereafter, the Company, through the supervision of the Supervisory Committee, has responded promptly to the need to adapt the Model and the control structure to changes in legislation that have occurred over time.
The Company tasks the Supervisory Committee with assessing the adequacy of the Model (i.e. its real ability to prevent offences), as well as with supervising the functioning and compliance of the protocols adopted.
Sabaf considers the internal control and risk management system for financial information an integral part of its risk management system.
In this regard, since 2008, Sabaf has integrated activities relating to the management of
the internal control system on financial reporting into its Audit and Compliance process. The Group has established an Accounting Control Model, approved by the Board of Directors for the first time on 12 February 2008, and subsequently revised and updated.
In accordance with regulation on remuneration, the Board of Directors approved the "General Remuneration Policy" on 22 December 2011, and subsequently updated it on 20 March 2013 and 4 August 2015.
The policy defines the criteria and guidelines to fix the remuneration of: (i) members of the Board of Directors, (ii) members of the Board of Statutory Auditors, (iii) executives with strategic responsibilities.
For more details on the above policy, see the complete text on the Company's website.
See also the Remuneration Report for specific information on remuneration earned and paid out in 2016.
On the basis of a proposal of the Board of Directors, and after obtaining the opinion of the Remuneration and Nomination Committee, it determines an overall maximum amount that includes a fixed amount and attendance fees, for the:
• All members of the Board of Directors
On the proposal of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors, the Board of Directors determines, within the amount indicated above, additional remuneration for:
• Directors vested with special powers
On the proposal of the Remuneration and Nomination Committee, the Board of Directors
BoD
• executive directors (excluding the Chairman and Deputy Chairmen)
On the proposal of the Remuneration and Nomination Committee and in line with the budget, the Board of Directors defines an MBO plan, for:
Long-term:
approves the long-term financial incentive for:
• other executives with strategic responsibilities
The short-term variable component may not exceed 25% of the fixed annual gross salary; it may be only partially granted in the event that the objectives are not completely met. 75% is paid out in the April of the following year, and 25% in the January of the second subsequent year.
The annual variable component is linked to an MBO plan.
This plan sets a common objective (Group EBIT, which is considered to be the Group's main indicator of financial performance) and individual objectives, quantifiable and measurable, both economic-financial and technical-productive in nature.
The total long-term variable component for the three years may not exceed 50% of the fixed annual gross salary; it may be only partially granted in the event that the objectives are not completely met.
It is paid in full following the approval of the financial statements of the third year to which the incentive relates.
The variable component is linked to a three-year MBO.
This plan involves setting three targets (Group EBIT, Average Share Value and Group consolidated Free Cash Flow).
In the event that 10% of the objectives assigned are met, an increase on 5% of the gross fixed annual salary and fees may be granted, weighted according to the target.
| COMPONENTS OF REMUNERATION |
CORPORATE ROLE | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| EXECUTIVE NON-EXECUTIVE DIRECTORS DIRECTORS |
EXECUTIVES WITH STRATEGIC RESPONSIBILITIES |
MEMBERS OF BOARD COMMITTEES |
STATUTORY AUDITORS |
|||||||||
| FIXED ANNUAL REMUNERATION |
> Fixed remuneration for role of Director > Fixed remuneration for Directors with powers |
> Fixed remuneration for role of Director > Fixed remuneration for Directors members of Committees |
> CCNL (national collective bargaining agreement) for Industrial Managers |
> Fixed remuneration for Directors with positions on Board committees |
> Fixed emoluments | |||||||
| FIXED COMPONENTS | POSITIONS IN SUBSIDIARIES |
> Fixed remuneration for positions in subsidiaries |
N/A | > Fixed remuneration for positions in subsidiaries |
N/A | N/A |
| ATTENDANCE FEE N/A |
> Board of Directors attendance fee |
N/A | > Board committee attendance fee |
N/A | ||
|---|---|---|---|---|---|---|
| VARIABLE COMPONENTS | VARIABLE ANNUAL REMUNERATION |
> Annual variable remuneration relating to MBO * |
> Annual variable remuneration relating to MBO |
N/A | N/A | |
| LONG-TERM INCENTIVES |
> three-year MBO * | N/A | > three-year MBO | N/A | N/A |
|--|
FREE CASH FLOW
share value at the end of the relevant industrial plan
| EBIT | ||
|---|---|---|
| > ebit threshold on budget for year |
||
| INDIVIDUAL OBJECTIVES |
60% | |
business / financial
technical manufacturing
25%
consolidated group fcf (equal to sum of fcf for the relevant
consolidated group ebitda understood as the sum for the relevant three years
three years)
| SABAF and collaborators | 65 |
|---|---|
| SABAF and shareholders | 83 |
| SABAF and customers | 85 |
| SABAF and suppliers | 87 |
| SABAF and lenders | 89 |
| SABAF and competitors | 89 |
| SABAF, Public Administration and Society | 91 |
| SABAF and the environment | 92 |
| Limited assurance report on the social report | 98 |
| GRI index | 101 |
Sabaf S.p.A.'s system of social responsibility is compliant with the requirements of the SA8000 standard, for which the company obtained the certification in 2005, renewed most recently in March 2015 for a further three years. The decision to certify the system is consequent to the belief in the importance of human assets and is particularly aimed at raising awareness among management, suppliers, employees and external collaborators on the full respect of the Social Responsibility principles established in the Standard.
Through the implementation of SA8000, Sabaf S.p.A. has analysed and monitored the main ethical-social risk factors linked to issues of child labour, forced labour, health and safety, freedom of association and the right to collective bargaining, discrimination, disciplinary procedures, working hours and wages.
During the year, a dialogue has been maintained between the Management Representatives and the Workers' Representatives on the concrete application of the SA8000 Standard.
The social responsibility management system was verified by IMQ / IQ NET in March 2016. During the audit, significant evidence was obtained of the company's commitment to supporting the System of Social Responsibility and no non-conformities were identified.
At 31 December 2016 there were 736 employees of the Sabaf Group, compared to 759 in late 2015 (-3.0%).
| 31/12/2016 | 31/12/2015 | 31/12/2014 | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Sabaf S.p.A. (Ospitaletto, Brescia - Italy) | 353 | 180 | 533 | 367 | 185 | 552 | 370 | 186 | 556 |
| Faringosi Hinges (Bareggio, Milan - Italy) | 21 | 21 | 42 | 20 | 23 | 43 | 22 | 24 | 46 |
| Sabaf do Brasil (Jundiaì, San Paolo - Brazil) | 49 | 17 | 66 | 45 | 14 | 59 | 47 | 17 | 64 |
| Sabaf Turkey (Manisa – Turkey) | 52 | 34 | 86 | 57 | 38 | 95 | 32 | 28 | 60 |
| Sabaf Appliance Components (kunshan) Co., Ltd. | 7 | 2 | 9 | 6 | 4 | 10 | - | - | - |
| TOTAL | 482 | 254 | 736 | 495 | 264 | 759 | 471 | 255 | 726 |
As regards the contractual types adopted, there are 715 permanent employees (97.1%) and 21 temporary, job placement and apprenticeship employees (2.9%).
| 31.12.2016 | 31.12.2015 | ||||||
|---|---|---|---|---|---|---|---|
| Permanent | 464 | 251 | 715 | 460 | 235 | 695 | |
| Job placement or apprenticeship |
3 | 0 | 3 | 4 | 0 | 4 | |
| Temporary | 15 | 3 | 18 | 31 | 29 | 60 | |
| TOTAL | 482 | 254 | 736 | 495 | 264 | 759 |
During 2016 4 formerly temporary workers were recruited into the Sabaf Group (12 in 2015). In 2016 Sabaf hosted 6 young people on internships, 2 students on university courses and 4 secondary school pupils (11 in 2015).
Sabaf thereby offers to some students of schools in the province of Brescia with industrial curricula an initial direct contact with the world of work, with the opportunity to witness the technical skills they have learned in the classroom being applied "in the field".
| 31/12/15 | RECRUITS | LEAVERS | PROMO TIONS |
31/12/16 | |||
|---|---|---|---|---|---|---|---|
| Executives | 9 | 0 | 0 | 0 | 0 | 0 | 9 |
| Employees and managers |
112 | 3 | 0 | 6 | 1 | 0 | 108 |
| Labourers and equivalent |
431 | 3 | 0 | 14 | 4 | 0 | 416 |
| TOTAL | 552 | 6 | 0 | 20 | 5 | 0 | 533 |
SABAF S.p.A.
| 31/12/15 | RECRUITS | LEAVERS | PROMO TIONS |
31/12/16 | |||
|---|---|---|---|---|---|---|---|
| Executives | 0 | 0 | 0 | 0 | 0 | 0 | 0 |
| Employees and managers |
9 | 0 | 1 | 0 | 0 | 0 | 10 |
| Labourers and equivalent |
50 | 20 | 6 | 16 | 4 | 0 | 56 |
| TOTAL | 59 | 20 | 7 | 16 | 4 | 0 | 66 |
| 31/12/15 | RECRUITS | LEAVERS | PROMO TIONS |
31/12/16 | |||
|---|---|---|---|---|---|---|---|
| Executives | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Employees and managers |
14 | 0 | 0 | 0 | 1 | 0 | 13 |
| Labourers and equivalent |
28 | 1 | 0 | 0 | 1 | 0 | 28 |
| TOTAL | 43 | 1 | 0 | 0 | 2 | 0 | 42 |
| 31/12/15 | RECRUITS | LEAVERS | PROMO TIONS |
31/12/16 | |||
|---|---|---|---|---|---|---|---|
| Executives | 3 | 0 | 0 | 0 | 0 | 0 | 3 |
| Employees and managers |
13 | 0 | 1 | 0 | 2 | 0 | 12 |
| Labourers and equivalent |
79 | 33 | 9 | 39 | 11 | 0 | 71 |
| TOTAL | 95 | 33 | 10 | 39 | 13 | 0 | 86 |
| 31/12/15 | RECRUITS | LEAVERS | PROMO TIONS |
31/12/16 | |||
|---|---|---|---|---|---|---|---|
| Executives | 1 | 0 | 0 | 0 | 0 | 0 | 1 |
| Employees and managers |
6 | 1 | 0 | 1 | 0 | 0 | 6 |
| Labourers and equivalent |
3 | 2 | 0 | 1 | 2 | 0 | 2 |
| TOTAL | 10 | 3 | 0 | 2 | 2 | 0 | 9 |
GROUP TOTAL
| 31/12/15 | RECRUITS | LEAVERS | PROMO TIONS |
31/12/16 | |||
|---|---|---|---|---|---|---|---|
| Executives | 14 | 0 | 0 | 0 | 0 | 0 | 14 |
| Employees and managers |
154 | 4 | 2 | 7 | 4 | 0 | 149 |
| Labourers and equivalent |
591 | 59 | 15 | 70 | 24 | 0 | 573 |
| TOTAL | 759 | 63 | 17 | 77 | 26 | 0 | 736 |
New recruits broken down by age bracket and gender
| DESCRIPTION | 2016 | 2015 | |||||
|---|---|---|---|---|---|---|---|
| up to 20 years | 0 | 1 | 1 | 2 | 2 | 4 | |
| from 21 to 30 years |
32 | 10 | 42 | 88 | 32 | 120 | |
| from 31 to 40 years |
19 | 4 | 23 | 50 | 24 | 74 | |
| from 41 to 50 years |
12 | 2 | 14 | 6 | 1 | 7 | |
| over 50 years | 0 | 0 | 0 | 3 | 1 | 4 | |
| TOTAL | 63 | 17 | 80 | 149 | 60 | 209 |
Resigned during year, by age bracket and gender
| DESCRIPTION | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| up to 20 years | 1 | 0 | 1 | 1 | 1 | 2 |
| from 21 to 30 years |
35 | 11 | 46 | 69 | 25 | 94 |
| from 31 to 40 years |
21 | 7 | 28 | 49 | 22 | 71 |
| from 41 to 50 years |
15 | 5 | 20 | 4 | 2 | 6 |
| over 50 years | 5 | 3 | 8 | 6 | 2 | 8 |
| TOTAL | 77 | 26 | 103 | 129 | 52 | 181 |
| DESCRIPTION | EMPLOYEES AND MANAGERS |
LABOURERS | TOTAL |
|---|---|---|---|
| Resignations | 5 | 42 | 47 |
| Retirement | 0 | 5 | 5 |
| End of contract | 1 | 2 | 3 |
| Dismissal | 5 | 42 | 47 |
| Failed trial period | 0 | 1 | 1 |
| TOTAL | 11 | 92 | 103 |
| DESCRIPTION | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| up to 30 years | 0.53% | 0.00% | 0.35% | 0.78% | 0.00% | 0.50% |
| from 31 to 40 years |
0.80% | 0.50% | 0.70% | 1.81% | 0.00% | 1.18% |
| from 41 to 50 years |
2.41% | 1.00% | 1.91% | 0.52% | 0.96% | 0.67% |
| over 50 years | 1.07% | 0.00% | 0.70% | 0.26% | 0.00% | 0.17% |
| TOTAL | 4.81% | 1.49% | 3.65% | 3.36% | 0.96% | 2.52% |
Brazil
China
| DESCRIPTION | 2016 | 2015 | |||||
|---|---|---|---|---|---|---|---|
| up to 30 years | 22.45% | 11.76% | 19.70% | 28.89% | 21.43% | 27.12% | |
| from 31 to 40 years |
6.12% | 5.88% | 6.06% | 11.11% | 14.29% | 11.86% | |
| from 41 to 50 years |
4.08% | 5.88% | 4.55% | 2.22% | 0.00% | 1.69% | |
| over 50 years | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | |
| TOTAL | 32.65% 23.53% 30.30% 42.22% 35.71% 40.68% |
| DESCRIPTION | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| up to 30 years | 42.31% | 20.59% | 33.72% 87.72% | 60.53% | 76.84% | |
| from 31 to 40 years |
25.00% | 14.71% | 20.93% | 64.91% | 52.63% | 60.00% |
| from 41 to 50 years |
5.77% | 2.94% | 4.65% | 1.75% | 0.00% | 1.05% |
| over 50 years | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| TOTAL | 73.08% 38.24% 59.30% 154.39% 113.16% 137.89% |
| DESCRIPTION | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| up to 30 years | 7.26% | 4.33% | 6.25% | 14.14% | 9.90% | 12.65% |
| from 31 to 40 years |
4.36% | 2.76% | 3.80% | 9.85% | 8.33% | 9.35% |
| from 41 to 50 years |
2.90% | 1.57% | 2.45% | 0.81% | 0.75% | 0.79% |
| over 50 years | 0.83% | 0.00% | 0.54% | 0.20% | 0.00% | 0.13% |
| TOTAL | 15.35% | 8.66% | 13.04% 25.05% 18.94% 22.92% |
| DESCRIPTION | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| up to 30 years | 0.00% | 100% | 22.22% | 80.00% | 0.00% | 40.00% |
| from 31 to 40 years |
28.57% | 0.00% | 22.22% | 0.00% | 0.00% | 0.00% |
| from 41 to 50 years |
0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| over 50 years | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% |
| TOTAL | 28.57% | 100% | 44.44% 80.00% | 0.00% | 40.00% |
In 2016 the turnover significantly reduced compared to 2015. At Sabaf Turkey the Group experienced the greatest difficulties in retaining personnel, also because we operate in an area, that of Manisa, which is undergoing strong industrial development and where new employment opportunities are constantly being offered.
The policies implemented, which include both monetary incentives and greater benefits, have in any case led to a higher loyalty level even in Turkey.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| up to 30 years | 16.8% | 21.9% |
| from 31 to 40 years | 42.4% | 42.9% |
| from 41 to 50 years | 29.8% | 29.0% |
| over 50 years | 11.0% | 6.2% |
| TOTAL | 100% | 100% |
The low average age of the Group's employees (38.6 years) confirms the strategy of recruiting young workers, favouring training and internal growth over the acquisition of skills externally, also in view of the specific nature of Sabaf's business model.
The minimum age of personnel in the Group's workforce is 24 years for Italy, 20 years for Turkey, 16 years for Brazil and 28 years for China.
TOTAL
| AREA | 2016 | 2015 | ||||
|---|---|---|---|---|---|---|
| Production | 289 | 170 | 459 | 305 | 175 | 480 |
| Quality | 43 | 31 | 74 | 42 | 33 | 75 |
| Research and Development | 66 | 2 | 68 | 67 | 2 | 69 |
| Logistics | 25 | 1 | 26 | 20 | 1 | 21 |
| Administration | 9 | 23 | 32 | 9 | 23 | 32 |
| Sales | 10 | 13 | 23 | 10 | 14 | 24 |
| Services | 17 | 8 | 25 | 18 | 10 | 28 |
| Purchases | 6 | 4 | 10 | 6 | 4 | 10 |
| Other | 17 | 2 | 19 | 18 | 2 | 20 |
| TOTAL | 482 | 254 | 736 | 495 | 264 | 759 |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| up to 5 years | 22.0% | 24.6% |
| from 6 to 10 years | 26.6% | 29.1% |
| from 11 to 20 years | 41.3% | 37.2% |
| over 20 years | 10.1% | 9.1% |
| TOTAL | 100% | 100% |
Sabaf is aware of the fundamental importance of having a stable and qualified workforce that represents a key factor for preserving its competitive advantage.
In order to attract the best resources, the recruitment policy intends to guarantee equal opportunities to all candidates, avoiding any type of discrimination. The selection procedure involves, inter alia:
The evaluation of candidates is based upon skills, training, previous experience, expectations and potential, according to the specific business needs.
New recruits of the Group are given the Charter of Values. At Sabaf S.p.A. a copy of the SA8000 Standard, for which the Company is certified, is also provided.
| LEVEL OF EDUCATION |
2016 | 2015 | ||||||
|---|---|---|---|---|---|---|---|---|
| Degree | 67 | 24 | 91 | 12.4% | 65 | 26 | 91 | 12.0% |
| Higher diploma |
232 | 98 | 330 | 44.8% | 232 | 100 | 332 | 43.7% |
| Middle school diploma |
181 | 130 | 311 | 42.3% | 196 | 136 | 332 | 43.8% |
| Primary school diploma |
2 | 2 | 4 | 0.5% | 2 | 2 | 4 | 0.5% |
| TOTAL | 482 | 254 | 736 | 100% | 495 | 264 | 759 | 100% |
In the Sabaf Group, professional growth of employees is supported by a continuous training path. The Personnel Department, having liaised with the relevant managers, develops on an annual basis a training plan on the basis of which the specific courses to be provided are scheduled.
| 2016 | 2015 | ||||||
|---|---|---|---|---|---|---|---|
| Training to new recruits, apprentices, job placements |
3,187 | 1,222 | 4,409 | 5,728 | 727 | 6,455 | |
| IT systems | 83 | 123 | 206 | 130 | 11 | 141 | |
| Technical training | 321 | 29 | 350 | 636 | 13 | 649 | |
| Safety, environment and social responsibility |
3,112 | 983 | 4,094 | 2,661 | 830 | 3,491 | |
| Administration and organisation | 510 | 379 | 888 | 387 | 466 | 853 | |
| Foreign languages | 966 | 283 | 1,249 | 1,172 | 300 | 1,472 | |
| Lean Philosophy/ Production/Office |
81 | 29 | 110 | - | - | - | |
| Other | - | - | - | 60 | - | 60 | |
| TOTAL TRAINING HOURS RECEIVED |
8,260 | 3,046 | 11,306 | 10,774 | 2,347 | 13,121 | |
| Training hours provided by internal trainers |
4,709 | 1,317 | 6,026 | 3,511 | 465 | 3,976 | |
| TOTAL | 12,969 | 4,363 | 17,332 | 14,285 | 2,812 | 17,097 |
The hours provided by internal trainers also include training given to collaborators on agency employment contracts (equal to 3,942 hours in 2016).
| 2016 | 2015 | ||||||
|---|---|---|---|---|---|---|---|
| Labourers | 15.1 | 9.0 | 12.9 | 21.6 | 5.7 | 15.9 | |
| Employees and managers | 26.1 | 23.4 | 25.2 | 21.1 | 21.4 | 21.2 | |
| Executives | 34.7 | 70.5 | 37.3 | 37.9 | 82.8 | 41.1 | |
| TOTAL | 17.8 | 12.1 | 15.9 | 21.9 | 9.2 | 17.5 |
In 2016 the total cost incurred for staff training activities of the Group was approximately 296,000 Euro (approximately 429,000 Euro in 2015). These costs are supplemented by the costs of training temporary staff, which in 2016 were approximately 62,000 Euro (roughly 23,000 Euro in 2015).
With the aim of developing continuous dialogue between the company and its collaborators, Sabaf publishes twice a year a Magazine which sets out the main information concerning the life of the Company and discusses issues of common interest.
The Personnel Department has institutionalised two weekly time slots in which it is available to meet with collaborators for support and advice, even on topics not strictly related to the relationship between employee and employer, such as, for example, information on tax and social security regulations.
During 2016 the Personnel Department at Sabaf S.p.A. held 1,078 appointments with collaborators for problems related to the employment relationship or personal issues.
Sabaf S.p.A. uses the HR PORTAL software, through which each worker, with personalised access, can consult the documents and information published by the company (payslips, tax and contribution details, etc.). There are also collective communications and company conventions.
Sabaf is constantly committed to providing equal opportunities to its female members of staff, who currently represent 34.5% of the workforce (34.8% in 2015).
The Group, in line with its organisational and production requirements, is attentive to the family requirements of its collaborators. Currently, the majority of requests for reduction of working hours made by workers are met.
In 2016 the Group companies granted in total 34 part-time contracts (to 2 employees, 31 female labourers and 1 male labourer), equal to 4.6% of the total (33 contracts in 2015).
25 disabled persons work in the Italian companies of the Group, of which 15 are parttime. The Group aims to encourage the insertion and integration of disabled persons into normal production processes. A convention is in place with a social solidarity cooperative for the insertion of personnel belonging to protected categories.
| 2016 | 2015 | ||||
|---|---|---|---|---|---|
| NUMBER | % | NUMBER | % | ||
| 482 | 65.5 | 495 | 65.2 | ||
| 254 | 34.5 | 264 | 34.8 | ||
| TOTAL | 736 | 100 | 759 | 100 |
LABOURERS and EQUIVALENT
EXECUTIVES
The managers of all offices of the Group originate from a geographical area close to the sites at which they work, except for the production director at Sabaf China, who has, however, lived in China for many years.
| 2016 | 2015 | BENCHMARK 2 | |
|---|---|---|---|
| Non-EU workers | 32 | 48 | |
| Percentage on total workers |
5.6% | 8.1% | 3.10% |
At 31 December 2016 there are 14 different nationalities present in the Italian companies of the Group.
Employees of Sabaf S.p.A. are positioned according to the rules of the National Collective Labour Agreement for the engineering industry, supplemented by second level agreements, which includes:
The components of personnel costs are detailed in the explanatory notes to the consolidated financial statements.
The incentive system includes economic incentives and numerous other benefits (guarantees provided by the Company in favour of employees against mortgages, sale or rental of apartments at subsidised values, company agreements for access to goods and services at favourable conditions). The Group believes that an essential element of the incentive system is represented by the training opportunities provided to collaborators, including the possibility of participating free of charge in numerous activities organised onsite and offsite.
An incentive system is in place linked to collective and individual objectives (MBO), which in 2016 involved 36 employees of the Group. The maximum incidence of the variable component is 25% of fixed remuneration. The MBO mechanisms are described in the Remuneration Report.
Sabaf S.p.A. introduced in 2016, at experimental level, an incentive system linked to objectives of production quality and efficiency. Quality improvement (reduction of waste and re-processing) and productivity objectives were assigned to 68 people involved in relevant business processes not included in the MBO system.
The initiative was received very positively: as well as representing a tool to address challenging objectives (216 objectives were assigned, achieved and exceeded in 72% of cases), the WPQB stimulated team work and encouraged the sharing at all company levels of short and medium to long-term development plans.
The good results in terms of quality and productivity have been reflected in the business profitability which was maintained at satisfactory levels even in a year of reduction of sales volumes.
In addition, the variable result bonus (VRB), provided by the company's supplementary contract for all employees and also benchmarked to quality and productivity indicators, benefited from it: for 2016 a variable result bonus of 1,184 Euro was granted, higher by 28% compared to 2015.
The success of the project means it will be implemented again in 2017, involving a higher number of collaborators (80).
The social security forms in place for all employees of the Group are those required by the rules in force in the various countries in which the Group operates.
1 The figure refers only to the Italian companies of the Group.
2 FEDERMECCANICA, The metalworking industry in figures (June 2016) - Non-EU workers (2014) [L'industria metalmeccanica in cifre (gugno 2016) - Lavoratori extracomunitari (2014) http://www.federmeccanica.it].
| 2015 | COLLECTIVE CONTRACT MINIMUM WAGE |
MINIMUM WAGE PAID | MINIMUM INCREASE % | ||||
|---|---|---|---|---|---|---|---|
| VALUES IN EURO | |||||||
| Sabaf Spa | 1,588.63 | 1,588.63 | 1,811.84 | 2,116.79 | 14% | 33% | |
| Faringosi Hinges | 1,588.63 | 1,588.63 | 1,760.69 | 1,760.69 | 11% | 11% | |
| Turkey | 286.61 | 286.61 | 314.81 | 314.81 | 10% | 10% | |
| Brazil | 256.99 | 256.99 | 295.56 | 295.56 | 13% | 13% | |
| China | 257.76 | 257.76 | 375.31 | 375.31 | 46% | 46% |
| 2016 | MINIMUM WAGE | COLLECTIVE CONTRACT | MINIMUM WAGE PAID | MINIMUM INCREASE % | |||
|---|---|---|---|---|---|---|---|
| VALUES IN EURO | |||||||
| Sabaf Spa | 1,588.63 | 1,588.63 | 1,811.84 | 2,167.41 | 14% | 36% | |
| Faringosi Hinges | 1,588.63 | 1,588.63 | 1,769.34 | 1,769.34 | 11% | 11% | |
| Turkey | 317.37 | 317.37 | 355.80 | 355.80 | 12% | 12% | |
| Brazil | 355.36 | 355.36 | 400.23 | 400.23 | 13% | 13% | |
| China | 248.63 | 248.63 | 362.02 | 362.02 | 46% | 46% |
| 2016 | 2015 | |
|---|---|---|
| Italy | 4.7 | 4.7 |
| Turkey | 11.5 | 11.9 |
| Brazil | 8.9 | 9.3 |
| China | 8.0 | 10.5 |
| 2016 | 2015 | |
|---|---|---|
| Employees, managers and executives | 64% | 64% |
| Labourers | 86% | 83% |
The indicators were determined as the ratio between the average gross annual wage of female employees and that of male employees for the individual Group companies. The Group indicator was determined by weighting the indicators of the individual companies by the number of employees of each one.
The weekly duration of standard work is fixed at 40 hours for the Italian companies and for Sabaf China and 44 hours for Sabaf do Brasil, spread across 5 working days, from Monday to Friday. For Sabaf Turkey, the duration is 45 weekly hours spread across 6 working days.
| Overtime | 2016 | 2015 | BENCHMARK 4 | ||||
|---|---|---|---|---|---|---|---|
| Employees | Labourers | Employees | Labourers | Employees | Labourers | ||
| Average monthly number of workers who performed overtime |
107 | 358 | 76 | 264 | - | - | |
| Number of overtime hours | 9,714 | 21,554 | 12,520 | 35,343 | - | - | |
| Annual number of hours per capita 5 | 65 | 38 | 81 | 60 | 50 | 61 |
| Total hours of absence | 2016 | BENCHMARK 6 | |||||
|---|---|---|---|---|---|---|---|
| Total hours of annual absence | 39,650 | 46,661 | 86,311 | 31,550 | 36,412 | 67,962 | - |
| Percentage hours of absence on workable hours |
3.9% | 9.2% | 5.7% | 3.1% | 6.9% | 4.4% | - |
| Average hours of absence per capita | 81.0 | 181.5 | 115.6 | 63.7 | 136.8 | 89.2 | 104.8 |
| Hours of sick leave | 2016 | BENCHMARK7 | ||||||
|---|---|---|---|---|---|---|---|---|
| Total hours of sickness per annum | 31,603 | 18,099 | 49,702 | 27,833 | 17,823 | 45,656 | - | |
| Percentage hours of sickness on workable hours |
3.1% | 3.6% | 3.3% | 2.7% | 3.4% | 2.9% | - | |
| Per capita hours of sick leave | 64.6 | 70.4 | 66.6 | 56.2 | 67.0 | 59.9 | 48.6 |
| Hours for maternity/ | 2016 | 2015 | BENCHMARK 8 | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| paternity leave | ||||||||||
| Total annual hours of maternity/ paternity leave |
4,224.5 | 26,566.5 | 30,791 | 481 | 17,403 | 17,884 | - | |||
| Percentage of maternity leave on workable hours |
0.4% | 5.2% | 2.0% | 0.0% | 3.3% | 1.1% | - | |||
| Per capita hours of maternity leave | 8.6 | 103.3 | 41.3 | 1.0 | 65.4 | 23.5 | 16.8 |
The high number of hours of to maternity leave compared to the industry average reflects a higher percentage of female staff.
| TYPE OF LEAVE | 2016 | 2015 | ||||||
|---|---|---|---|---|---|---|---|---|
| % of workers in labour force after 12 months |
||||||||
| Mandatory maternity leave | 0 | 14 | 14 | 0 | 10 | 10 | 100% | |
| Early maternity leave | 0 | 14 | 14 | 0 | 8 | 8 | 100% | |
| Optional maternity/paternity leave | 6 | 20 | 26 | 1 | 17 | 18 | 100% | |
| Breastfeeding leave | 0 | 4 | 4 | 0 | 6 | 6 | 100% | |
| Assistance to disabled relatives (Law 104) |
20 | 12 | 32 | 27 | 10 | 37 | 100% | |
| OTHER LEAVE | ||||||||
| Blood donation | 7 | 0 | 7 | 6 | 0 | 6 | - | |
| Extended leave | 4 | 2 | 6 | 3 | 1 | 4 | 100% | |
| Extraordinary leave | 1 | 0 | 1 | 2 | 1 | 3 | 100% |
| 2016 | 2015 | |
|---|---|---|
| Number of CIG hours | 35,583 | 16,612 |
| Average number of annual hours per capita | 60.8 | 30.0 |
During the year the Italian group companies made recourse to the Temporary Redundancy Fund (Cassa Integrazione Guadagni Ordinaria), in periods characterised by low production requirements.
Given the relevant market situation, which still does not allow for the full use of the production plants in Ospitaletto, also given the streamlining of some processes and the increased automation, in late 2016 Sabaf S.p.A. agreed with the trade unions upon the activation for 2017 of the solidarity contract, which involves a maximum reduction of working hours of 9.79%.
The Group's commitment towards safeguarding the health and safety of its employees is total: the system of managing problems relating to health and safety in the workplace is in line with the OHSAS 18001 standard and, as well as guaranteeing compliance with existing laws and regulations, it is aimed at continuously improving the working conditions.
Since February 2012 the management system on the health and safety of workers at Faringosi Hinges has been certified in accordance with the OHSAS 18001 standard. The system was audited for re-certification by the body TUV NORD in February 2015. The last supervision audit, performed by the Certification Body TUV NORD in March 2016, certified the conformity of the system with the relevant rules; there were, in fact, no nonconformities but only suggestions for improvement.
| 2016 | BENCHMARK 11 | ||||||
|---|---|---|---|---|---|---|---|
| - | |||||||
| Accidents at work | 8 | 3 | 11 | 12 | 5 | 17 | - |
| Accidents while commuting | 1 | 0 | 1 | 2 | 0 | 2 | - |
| Average duration of absences for accidents at work (days) |
5.25 | 1.33 | 4.18 | 33.17 | 23 | 30.18 | - |
| Average duration of absences for accidents while commuting (days) |
2.00 | 0 | 2.00 | 33.5 | 0 | 33.5 | - |
| Total hours of absence for accidents |
329.5 | 39.5 | 369 | 2,840 | 844 | 3,684 | - |
| Per capita hours of absence from work due to accident 12 |
0.67 | 0.15 | 0.49 | 5.73 | 3.17 | 4.84 | 4.9 |
11 FEDERMECCANICA, The metalworking industry in figures (June 2016) - Per capita hours of absence from work (2014) [L'industria metalmeccanica in cifre (gugno 2016) – Ore pro-capite di assenza dal lavoro (2014) http://www.federmeccanica.it]. 12 The calculation is based on the average annual workforce.
Accident frequency index Number of accidents (excluding commuting accidents)
x 1,000,000 / hours worked
| 2016 | 2015 | |||||
|---|---|---|---|---|---|---|
| Index | 10.01 | 7.58 | 9.21 | 14.31 | 12.52 | 13.73 |
Accident severity index Days of absence (excluding commuting accidents) x 1,000 / hours worked
During 2016 no accidents of particular severity occurred. The training and awarenessraising activities on the use of personal protective equipment and safety devices continued in all plants of the Group.
In compliance with existing laws, the Group companies have prepared and implement medical supervision plans for employees, with health checks targeted at the specific risks of the working activity performed.
In particular, in 2016, 2,664 health checks were performed (2,707 in 2015).
| IN THOUSANDS OF EURO | 2016 | 2015 |
|---|---|---|
| Plant, equipment, materials | 74 | 42 |
| Personal protective equipment | 89 | 77 |
| External training | 25 | 27 |
| Consultancy | 85 | 134 |
| Workplace analysis | 9 | 24 |
| Health checks (including pre-recruitment examinations) |
40 | 44 |
| Software and database | 5 | 0 |
| TOTAL | 327 | 348 |
| IN THOUSANDS OF EURO | 2016 | 2015 |
|---|---|---|
| Plant, equipment, materials | 81 | 62 |
| TOTAL | 81 | 62 |
In early 2016 Sabaf S.p.A. joined the WHP (Workplace Health Promotion) programme, to implement good practice in the field of workplace health promotion. Sabaf thus undertakes not only to implement all measures to prevent accidents and occupational diseases but also to offer to its workers opportunities to improve their health, reducing general risk factors and in general those mostly involved in the genesis of chronic diseases.
Workplace health promotion is the result of joint efforts of employers, workers and the company. The following are contributory factors:
The central idea is simple: Sabaf aims to build, through a participatory process, a context that encourages the adoption of positive behaviours and choices for health.
The WHP Programme involves developing activities (good practice) in 6 themed areas and requires the gradual implementation, year after year, of a minimum number of good practices in the different themed areas.
To plan actions more coherent with the company context, as well as to assess the improvements achieved, Sabaf deemed it important to identify "from the outset" the existing situation with respect to the behaviours (health determinants and risk factors) of its workers. To that end, all workers were asked to complete an anonymous questionnaire. Based upon what emerged, the activities were planned for 2016.
| SOME SUGGESTIONS BY WORKERS | INTERVENTIONS MADE IN 2016 |
|---|---|
| Clinic with nutritionist | An agreement has been activated with a nutritionist at more favourable prices for Sabaf collaborators. An impedance scale has been purchased which measures weight, body fat, lean mass and basal metabolic rate. At each periodic medical examination, the personal values can be monitored. |
| Indication of calories and fats for each portion in canteen | On the canteen counter for each dish, in addition to the colour corresponding to the ideal combination, the calorie counts are provided. |
| More varied and healthier menu, more variability of fruit and vegetables and availability of wholemeal foods |
During 2016 the menu offered in the canteen was gradually expanded. The very varied offer currently includes every day even wholemeal pasta and bread. In addition to the seasonal menu, the variant of wholemeal products and, on a weekly basis, a special dish inspired by other culinary cultures has been introduced. The menu has been designed and suggested by a nutritionist. At each meal, it is possible to choose between at least 3 starters, 3 mains, 3 sides with fresh and cooked vegetables. As an alternative, yogurt and fruit are always available. |
| Change the vending machines menu. Ban unhealthy products | The automatic vending machines have been enhanced by more types of products, leaving the user the possibility to choose. |
| Free distribution of water in canteen | In the canteen, as well as the 0.5l bottle available with every meal, a water dispenser has been installed. Throughout the plant there are already 50 water dispensers, in addition to the hot and cold drink vending machines. |
| Information | There have been many informative interventions: place mats and notice boards with the food pyramid, menus and tables with the colours of food. The "Health Profile" magazine is distributed for free. |
Only materials that fully satisfy the requirements of Directive 2002/95/EC (RoHS Directive) are used for production; this aims to restrict the use of hazardous substances such as lead, mercury, cadmium and hexavalent chromium.
There are three internal trade unions at Sabaf S.p.A.: FIOM, FIM and UILM. In the Group companies, in December 2016 there were 145 employee members, amounting to 19.7% of the total (in 2015, 142 employees were members, equal to 18.7%).
The relationships between Management and the Trade Unions are based upon transparency and mutual fairness. During the year in Sabaf S.p.A. 11 meetings took place between Management and the Trade Unions. The main subjects addressed were:
The hours of participation in trade union activities during 2016 amounted to 0.69% of the workable hours.
| 2016 | 2015 | BENCHMARK 13 | |||||
|---|---|---|---|---|---|---|---|
| SHAREHOLDERS' MEETING | |||||||
| N° hours | 2,891 | 2,708 | - | ||||
| Percentage of workable hours | 0.19 | 0.17 | - | ||||
| N° hours per capita | 3.9 | 3.6 | - | ||||
| TRADE UNION LEAVE | |||||||
| N° hours | 2,046 | 1,499 | - | ||||
| Percentage of workable hours | 0.14 | 0.09 | - | ||||
| N° hours per capita | 2.7 | 2.0 | - | ||||
| STRIKES | |||||||
| N° hours | 5,452 | 798 | - | ||||
| Percentage of workable hours | 0.36 | 0.05 | - | ||||
| N° hours per capita | 7.3 | 1.0 | - | ||||
| TOTAL | |||||||
| N° hours | 10,389 | 5,005 | - | ||||
| Percentage of workable hours | 0.69 | 0.31 | - | ||||
| N° hours per capita | 13.92 | 6.57 | 8.3 |
During 2016 at Sabaf S.p.A. a total 26 hours of strikes were called, for problems of national nature. At Faringosi Hinges, Sabaf do Brasil, Sabaf Turkey and Sabaf Kunshan no strikes were called.
Sabaf S.p.A. has signed an agreement with a credit institution for the granting of mortgage loans under particularly favourable conditions, providing a surety guarantee in favour of its employees: at 31/12/2016 59 employees benefit from the agreement.
The Company has rented to employees some apartments close to the Ospitaletto site. It
has also built a residential complex of 54 units, used as a priority and under favourable conditions for employees, who have purchased 29 of them.
Various agreements have also been signed with commercial businesses for the purchase of products and services at special prices.
During 2016 136 disciplinary measures were taken against employees of the Group, broken down as follows:
The main reasons for the disciplinary measures are unjustified absence, failure to respect working hours, lack of respect of rules regarding sickness absence and justified objective reasons.
At 31 December 2016 there were no disputes in place with collaborators. Some disputes are in place with some former employees relating mainly to the challenge of dismissal measures.
2,210 shareholders were registered in the shareholders' book at 10 March 2017, of which:
45% of the capital is held by shareholders resident abroad.
The presence of institutional investors in the capital is very significant (estimated at around 90% of the free float).
Since the Stock Market listing (1998) the Company has considered financial communication to be strategically important.
Sabaf's financial communication policy is based upon principles of correctness, transparency and continuity, in the belief that that approach allows investors correctly to assess the Company. In that perspective, Sabaf guarantees the utmost openness to dialogue with financial analysis and institutional investors.
During 2016 the Company met the institutional investors at roadshows organised in Milan, Florence and London. Some investors, in addition, had meetings with management at the company headquarters in Ospitaletto, taking the opportunity to visit the production plants.
During 2016, the Sabaf stock recorded its maximum official price on 5 January (11.483 Euro) and its minimum on 28 November (8.700 Euro). The average traded volumes amounted to 5,254 shares per day, equal to an average equivalent value of 50,750 Euro (133,000 Euro in 2015).
The dividend policy adopted by Sabaf is aimed at ensuring the valid remuneration of shareholders also by way of the annual dividend, maintaining a ratio between dividend and profit above 50%.
Frequently, the Sabaf stock has been subject to analysis also by analysts and managers of SRI funds, which on a number of occasions have also invested in Sabaf.
There are no disputes in place with shareholders.
| 2016 | 2015 | |
|---|---|---|
| Countries | 54 | 52 |
| Customers 14 | 293 | 288 |
See the Management Report for the analysis of the breakdown of revenues by product family and by geographic area.
In coherence with the commercial policies followed, a large part of the active commercial relationships is characterised by relationships consolidated in the long-term.
There are 31 Customers with annual sales of over one million Euro (34 in 2015). The distribution by classes of sales is the following:
| 2016 | 2015 | |
|---|---|---|
| < 1,000 Euro | 50 | 43 |
| from 1,001 to 50,000 Euro | 176 | 174 |
| from 50,001 to 100,000 Euro | 23 | 26 |
| from 100,001 to 500,000 Euro | 50 | 43 |
| from 500,001 to 1,000,000 Euro | 13 | 11 |
| from 1,000,001 to 5,000,000 Euro | 26 | 26 |
| > 5,000,000 Euro | 5 | 8 |
In addition to the management structure at the Ospitaletto site, the sales network is based on the subsidiary companies in Brazil, Turkey, the USA and China and on the representative office in Poland. There are 11 active agency relationships, mainly relating to non-European markets.
The quality management system is integrated with the environmental and workplace safety management systems, and it is aimed at allowing for the following objectives to be achieved:
| IN THOUSANDS OF EURO | 2016 | 2015 |
|---|---|---|
| Product certification | 129 | 91 |
| Quality system certification and management |
26 | 27 |
| Equipment and measuring devices (purchase) |
103 | 84 |
| Equipment and measuring devices (calibration) |
30 | 47 |
| Technical rules, software and magazines |
5 | 2 |
| Training | 0 | 0 |
| Tests at external laboratories | 16 | 6 |
| TOTAL | 309 | 257 |
| IN THOUSANDS OF EURO | 2016 | 2015 |
|---|---|---|
| Equipment and measuring devices (purchase) |
131 | 74 |
| TOTAL | 131 | 74 |
| 1993 | 2008 |
|---|---|
| Sabaf S.p.A | Sabaf do Brasil |
| 2001 | 2015 |
| Faringosi Hinges | Sabaf Turkey |
During the year 2016, Sabaf's Quality System was constantly monitored and maintained to ensure the correct implementation and respect of the requirements of the standard. The plan of internal inspection audits, defined both for the site of Ospitaletto and for the production plant in Brazil, was done and the results did not identify any system criticalities which, therefore, fully satisfies the standard.
In relation to third party audits on the quality management system, CSQ (Certification system of IMQ) performed the annual supervision inspection at the site of Ospitaletto in June 2016, and at the plant in Turkey in May 2016, confirming the adequacy of the system. The verification was carried out by sample at the Italian site and confirmed the quality system also for the Turkish plant. During 2017 all plants will be visited by the certification body for the renewal of the certificate.
In the month of October 2016 the Certification Body TUV NORD performed the periodic supervision audit on the quality management system of Faringosi Hinges s.r.l. The check confirmed the adequate implementation of the system. No non-conformities were identified.
During 2017 training and update courses are scheduled to investigate the new EN ISO 9001:2015 standard so as to prepare to adjust the system to the revision of the standard.
The customer satisfaction survey, conducted on a twice yearly basis, falls within the activities of stakeholder engagement which Sabaf undertakes in order to constantly improve the quality level of the services offered and to meet the expectations of customers.
The last survey, done in February 2015, confirmed the positive opinion of customers, emphasising among the strengths the promptness, professionalism and expertise in commercial assistance.
Another analysis has been planned for the month of March 2017.
Sabaf has some initiatives in place to warn some producers against the counterfeiting of components and of cookers and cooker tops, which are promoting or selling devices having components that infringe our patents and trademarks.
In 2005 Sabaf S.p.A. obtained the certification of conformity to the requirements of the SA8000 standard (Social Accountability 8000) and, therefore, the Company requires from its suppliers compliance, in all their activities, with the principles of the standard, as a minimum criterion for establishing a lasting relationship based upon principles of social responsibility. The supply contracts include a clause of ethical nature inspired by the SA8000 Standard, which binds suppliers to guarantee respect of human and social rights and in particular: to avoid employing persons aged below the age established by the standard, to guarantee to workers a safe workplace, to protect trade union freedoms, to respect the legislation on working hours, to guarantee to workers respect of the legal minimum wage.
Any lack of compliance or lack of acceptance of the principles of the SA8000 Standard may determine the interruption of the supply relationships. During 2016, 13 audits were carried out at suppliers (19 in 2015), relating to the management of quality, environment and social responsibility, which did not identify any critical noncompliance. Against the non-critical non-compliance, the suppliers were asked to make the appropriate interventions.
The Sabaf Group aims to encourage the development of the territory in which it operates and, therefore, when selecting its suppliers, it favours local companies:
excluding intergroup relationships, the purchases made in Lombardy by Italian companies of the Group represent 48% of the total, the purchases by Sabaf do Brasil from Brazilian suppliers amount to 83% of the total, the purchases by Sabaf Turkey from Turkish suppliers is 77.3% of the total and the purchases of Sabaf Kunshan from Chinese suppliers is 95.5% of the total.
The turnover achieved outside the European Union originates for the most part from suppliers situated in China. Chinese suppliers have signed the clause to comply with the principles of the SA8000 standard.
| Territorial distribution of suppliers | |
|---|---|
| 2016 | 2015 | |||
|---|---|---|---|---|
| IN THOUSANDS OF EURO | TURNOVER | % | TURNOVER | % |
| Province of Brescia | 30,814 | 36.2 | 27,995 | 28.8 |
| Italy | 28,061 | 32.9 | 38,104 | 39.3 |
| UE | 10,246 | 12.0 | 11,000 | 11.3 |
| Brazil | 5,208 | 6.1 | 4,269 | 4.4 |
| Turkey | 5,578 | 6.5 | 5,339 | 5.5 |
| China | 4,282 | 5.0 | 6,908 | 7.1 |
| Non-EU - Others | 978 | 1.1 | 3,437 | 3.5 |
| TOTAL | 85,167 | 100 | 97,011 | 100 |
Sabaf do Brasil and Sabaf Turkey purchase the materials required for production mainly from local suppliers. The main machines used (die-casting islands, transfer and assembly lines) are, on the other hand, imported from Italy to guarantee homogeneous production processes at Group level, particularly in terms of quality and safety.
The relationships with suppliers are based upon long-term collaboration and focused upon contractual fairness, integrity and business correctness and the sharing of strategies of growth.
To encourage the sharing with suppliers of the basic values of its business model, Sabaf has broadly distributed the Charter of Values.
Sabaf guarantees absolute impartiality in its choice of suppliers and undertakes strictly to comply with the agreed payment terms.
Sabaf requires from its suppliers the ability to renew themselves technologically, so as always to be able to offer the best quality/price ratios, and it favours the choice of suppliers that have obtained or are obtaining certifications of quality and environmental systems.
In 2016 the turnover of suppliers of the Sabaf Group with the certified quality system was 68.1% of the total (61.9% in 2015).
| 2016 | 2015 | |||
|---|---|---|---|---|
| IN THOUSANDS OF EURO | TURNOVER | % | TURNOVER | % |
| Raw materials | 18,952 | 22.3 | 26,056 | 26.9 |
| Components | 28,394 | 33.3 | 28,027 | 28.9 |
| Capital goods | 11,465 | 13.5 | 11,581 | 11.9 |
| Services and other purchases | 26,356 | 30.9 | 31,347 | 32.3 |
| TOTAL | 85,167 | 100 | 97,011 | 100 |
Very short payment timescales are agreed with craftsman suppliers and those that are less structured (mainly at 30 days).
There are no disputes in place with suppliers.
The Group operates with a low debt ratio (net debt / shareholders' equity at 31 December 2016 of 0.21; net debt / EBITDA of 0.92) and it has ample unused short-term credit lines.
At 31 December 2016 the net debt amounted to 23.5 million Euro - compared to the 25.9 million Euro of 31 December 2015.
The relationships with banks are always characterised by the utmost transparency. Relationships are always favoured with those institutions able to support the Group in all its financial requirements and to promptly propose solutions against specific requirements.
There are no disputes in place with lenders.
In Italy and in Europe Sabaf estimates that it holds a market share of over 50% in each product segment and it is the only company that provides the complete range of components for gas cooking appliances, while its competitors produce only part of the product range.
Sabaf's main competitors on the international market are Copreci, Burner System International and Defendi.
Copreci is a cooperative located in Spain in the Basque Country, part of Mondragon Cooperative Corporation and with Sabaf it is the main manufacturer of taps and thermostats in Europe.
Burner Systems International (BSI) is a US group that acquired control of the French manufacturer Sourdillon, a longstanding competitor of Sabaf, and Harper Wyman, the leading manufacturer of components for gas cooking appliances for the North American market.
Defendi is an Italian company, acquired in 2013 by the German group EGO, and it is mainly active in the production of burners in Italy, Brazil and Mexico.
| TAPS | THERMOSTATS | BURNERS | HINGES | |
|---|---|---|---|---|
| SABAF | X | X | X | X |
| Burner Systems International (U.S.A) | X | X | X | |
| CMI (Italy) | X | |||
| Copreci (Spain) | X | X | ||
| Defendi Italy (Italy) | X | X | ||
| Nuova Star (Italy) | X | |||
| Somipress (Italy) | X |
| 2015 | 2014 | |||||
|---|---|---|---|---|---|---|
| IN THOUSANDS OF EURO | SALES | OPERATING INCOME |
NET PROFIT | SALES | OPERATING INCOME |
NET PROFIT |
| CMI | 20,922 | 1,163 | 646 | 19,828 | 1,146 | 612 |
| DEFENDI ITALY | 53,608 | 1,006 | 1,087 | 54,694 | 2,930 | 2,257 |
| NUOVA STAR | 27,966 | 252 | 79 | 27,793 | 449 | 95 |
| SOMIPRESS GROUP | 40,946 | 3,417 | 2,046 | 40,072 | 3,160 | 1,720 |
| SABAF GROUP | 138,003 | 14,091 | 8,998 | 136,337 | 13,175 | 8,338 |
No further information is available on competitors, due to the difficulty in obtaining the data.
A dispute is in progress brought against a competitor following and alleged infringement of one of our patents.
In line with the relevant policies, Sabaf's relationships with the Public Administration and the Treasury are based upon the utmost transparency and fairness.
Locally, Sabaf has sought to establish an open dialogue with the various authorities to create harmonious industrial development. In that perspective, the Company systematically provides to the Municipality of Ospitaletto a copy of the analyses relating to atmospheric emissions caused by production at its plants.
The amount of donations in 2016 was around 36,000 Euro (44,000 Euro in 2015), mainly aimed at supporting initiatives of social and humanitarian nature locally.
Sabaf supports the Association of Volunteers in International Service (AVSI), a nongovernmental and not for profit organisation working on international projects of development aid. The donations are aimed at supporting at a distance twenty children who live in various countries of the world.
Sabaf systematically organises company visits with groups of students and contributes its knowledge of best practices in relation to social responsibility to major conventions in various cities in Italy.
Sabaf is one of the founders of CECED Italia, the association that develops and coordinates in Italy study activities promoted at European level by Ceced (European Committee of Domestic Equipment Manufacturers) with the related scientific, legal and institutional implications in the domestic appliances sector.
Since 2014 Sabaf S.p.A. has been a member of the Brescia Industrial Association (AIB), which is part of the Confindustria system.
There are no significant disputes with public institutions or with other representatives of the community.
The protection of the Health and Safety of Workers, the Environment and the efficient and rational use of Natural and Energy resources are for SABAF part of its strategic commitments. As part of the processes for the production of components for gas cookers, it is, for our Organisation, now a continuous challenge to achieve standards of work that guarantee the health and maximum safety of our staff and those who work on our behalf. The reduction of environmental impacts and the reduction in the use of natural and energy resources are an integral part of this challenge, starting with the product design process, through the different phases of its creation, in a perspective that looks at the whole operating life of that product.
For this reason SABAF has adopted and keeps active an Integrated System for the Management of Health, Safety and the Environment, and Energy (EHS&En) which, integrating with the other Management Systems operating in the company, constitutes an effective means for pursuing the constant reduction of risks, environmental impacts and energy consumption through the following instruments:
SABAF undertakes to pursue the following objectives:
Since 2003 the environmental management system of the Ospitaletto production site (which covers about 80% of the Group's total production) has been certified in accordance with the ISO14001 standard.
During the year 2016, Sabaf's Environmental Management System has been constantly monitored and maintained to guarantee the correct implementation and respect of the requirements of the standard.
In relation to third party audits on the system, CSQ performed the supervision inspection, at the Ospitaletto site in July 2016, confirming the adequacy of the system.
Sabaf S.p.A. obtained in 2008 the issuance by the Lombardy Region of the Integrated Environmental Authorisation in accordance with Italian Legislative Decree 18 February 2005, no. 59.
In 2015 the Ospitaletto site was certified in accordance with the ISO 50001 Standard, with a view to reducing the environmental impacts and containing the use of natural and energy resources. The supervision inspection, held in December 2016, confirmed the adequacy of the system.
The Group has for some time promoted the dissemination of information regarding lower environmental impacts deriving from the use of gas in cookers rather than electricity: the use of combustible gas for heat production in fact provides much higher yields than those obtainable with electric cookers. In addition, the market of cookers worldwide increasingly requires high power and numerous hobs to rapidly cook meals. Cooker hobs powered electrically lead to an increase in peak energy consumptions, typically at mealtimes, further fuelling the demand for electricity which is already difficult to satisfy.
In the production process of taps, it is essential in a number of phases to proceed with the washing of metals. Traditionally, the washing of metals was done through systems that involved the use of chlorine-based solvents.
From 2013 Sabaf began to assess alternatives that can guarantee equal or superior washing quality, at the same time minimizing the environmental impact and management costs. The identified solution involves the insertion into the production process of machines that use a washing system based upon modified alcohol, a solvent that, due to its properties, can be re-distilled (and therefore is recyclable).
With an investment of over one million Euro, the replacement process involved the complete replacement of all washing systems present both in Italy and in Brazil.
The environmental impact and the management costs have been substantially zeroed.
The existing rules require a series of distinctive characteristics to be indicated on products. Traditionally, the printing was always done with an inkjet system: the system only allows for three lines to be printed, for a predefined number of characters for each line, with an annual operating cost of about 60,000 Euro for ink, solvents and maintenance. Sabaf has decided to opt for a fibre optic laser writing system which allows for all necessary characters to be printed on products, without limitation. In recent years, with an investment of about 250,000 Euro, all inkjet systems have been replaced with fibre optic laser writing systems, zeroing the operating costs.
The production of aluminium alloy taps has several advantages compared to the production of brass taps: elimination of the phase of hot moulding the brass, lower lead content in the product, lower weight and consequent reduction in consumption for packaging and transportation. In 2016 the process of replacing brass taps with lightalloy taps, which now represent over 80% of the taps produced, continued.
For many years Sabaf has been at the cutting-edge in marketing burners that are characterised by significantly higher yields than standard ones. After the launch of Series III, AE and AEO, from 2012 Sabaf introduced a new family of high efficiency burners, the HE burners, able to reach a yield of up to 68%. HE burners are also characterised by almost total interchangeability with Series II burners. Recently, the DCC range of special burners was completed, which is characterised by energy efficiency exceeding 60%, the highest currently available on the market for burners with multiple rings. Specifically for the Chinese market, then, DCC burners have been created with brass gas ring and efficiency greater than 65%, at the top of what is currently available on that market. High efficiency burners already represent 14.5% of the total burners produced.
Sabaf's main product lines - taps, thermostats and burners for gas cooking appliances for domestic use - are characterised by a high energy efficiency and by optimal use of natural resources. The use of combustible gas for heat production allows, in fact, for much higher yields than those that can be obtained with electrical cooking appliances. Sabaf's products can also be easily recycled, as they are almost entirely constituted by brass, alloys of aluminium, copper and steel.
Sabaf also recycles its paper/cardboard, glass, cans and plastic. In 2016 recycling allowed for the recovery of paper/cardboard and of plastic packaging of 96,450 Kg.
| MATERIALS USED |
2016 CONSUMPTION (t) |
2015 CONSUMPTION (t) |
|---|---|---|
| Brass | 697 | 1,025 |
| Aluminium alloy | 6,703 | 7,431 |
| Zamak | 82 | 77 |
| Steel | 7,250 | 6,790 |
100% of the brass and around 65% of the aluminium alloys used are produced by way of scrap recovery; 35% of the aluminium alloys and 100% of the steel are, on the other hand, produced from mineral sources.
The ever reducing consumption of brass is linked to the gradual replacement of brass taps with aluminium alloy taps.
Sabaf's products fully satisfy the requirements of Directive 2002/95/EC (RoHS Directive) which aims to limit the use of hazardous substances, such as lead, in the production of electrical and electronic devices, a category that includes all domestic appliances, including gas cooking appliances (which are equipped with electronic ignition).
In addition, Sabaf's products are fully compliant with the requirements of Directive 2000/53/EC (End of Life Vehicles), i.e. the content of heavy metals (lead, mercury, cadmium, hexavalent chromium) is lower than the limits imposed by the Directive.
In relation to the REACH Regulation (Regulation no. 1907/2006 dated 18.12.2006), Sabaf S.p.A. is classified as a downstream user of substances and preparations. The products supplied by Sabaf are classified as articles that do not give rise to the intentional issuance of substances during normal use; therefore, the registration of the substances contained in them is not required. Sabaf has contacted its suppliers in order to ensure that they fully comply with the REACH Regulation and to obtain confirmation of the fulfilments of the pre-registration and registration obligations of substances or preparations used by them. Sabaf also performs constant monitoring of legislative changes in relation to the REACH Regulation in order to identify and manage any new fulfilments in that regard.
| ELECTRICITY | 2016 CONSUMPTION (Mwh) |
2015 CONSUMPTION (Mwh) |
|---|---|---|
| TOTAL | 27,189 | 29,384 |
| METHANE | 2016 CONSUMPTION (m3 X 1000) |
2015 CONSUMPTION (m3 X 1000) |
| TOTAL | 3,432 | 3,376 |
Sabaf S.p.A. and Sabaf do Brasil use methane as an energy source for the casting of aluminium and for the firing of enamelled covers. The production of Faringosi Hinges does not use methane as an energy source.
| ENERGY INTENSITY |
2016 CONSUMPTION | 2015 CONSUMPTION |
|---|---|---|
| KWh on turnover | 0.483 | 0.470 |
During 2015 Sabaf S.p.A. and Faringosi Hinges s.r.l. carried out an energy diagnosis, aimed at obtaining in-depth knowledge of the energy consumption profile of their activities and identifying and quantifying the energy saving opportunities.
The main sources used are:
The production processes that absorb the most energy are the foundry (54% of the process total) and the glazing line (15% of the process total).
The energy requirement of the auxiliary services is mainly attributable to the production of compressed air (70% of the auxiliary services total) and to the waste treatment systems of the foundry and glazing line (20% of the auxiliary services total).
The energy requirement of the general services relates mostly to heating and lighting.
| WATER | 2016 CONSUMPTION (m3) | 2015 CONSUMPTION (m3) |
|---|---|---|
| From aqueducts | 46,879 | 50,187 |
| From wells | 46,640 | 38,894 |
| TOTAL | 93,519 | 89,081 |
All water used in the production processes by the Group companies is later disposed of: there are, as a result, no discharges of industrial type water. The water used in the die-casting and enamelling processes in Italy, recovered by way of a rainwater collection system or taken from wells, downstream of the production processes, is treated in concentration plants that have significantly reduced the quantities of water necessary and the waste produced.
The environmental improvement targets set for 2017 include optimising processes that involve the use of water.
Swarfs and waste deriving from the production process are identified and collected separately, only then to be taken for recovery or disposal. Sprues from the die-casting of aluminium are directly re-used.
The waste destined for disposal and recovery is summarised below:
| WASTE (t) | 2016 | 2015 |
|---|---|---|
| URBAN | 152 | 166 |
| Non-hazardous (disposal) | 1,474 | 1,286 |
| Non-hazardous (recovery) | 3,980 | 4,287 |
| TOT. NON-HAZARDOUS | 5,453 | 5,573 |
| Hazardous (disposal) | 1,188 | 1,531 |
| Hazardous (recovery) | 1,021 | 865 |
| TOT. HAZARDOUS | 2,209 | 2,396 |
It is noted that during 2016 no significant spills occurred.
A good part of the Sabaf's Group's atmospheric emissions derive from activities defined as "producing negligible pollution".
Three production processes are performed at Sabaf S.p.A.:
The level of efficiency of the purification systems is guaranteed through their regular maintenance and periodic monitoring of all emissions. The monitoring performed during 2015 and 2016 highlighted the conformity with legal limits of all emissions.
| CO2 EMISSIONS (t) 16 |
2016 | 2015 |
|---|---|---|
| From methane consumption |
6,563 | 6,600 |
| From electricity consumption |
9,978 | 10,784 |
| TOTAL CO2 EMISSIONS |
16,541 | 17,384 |
The use of methane gas for fuelling the smelt furnaces involves the emission into the atmosphere of NOX and SOX ; however, these emissions are not very significant. Using a relatively clean fuel such as methane makes Sabaf's contribution to greenhouse gas emissions negligible.
There is no emission of CH4 , N2 O, HFCS, SF6 , greenhouse gases. At Sabaf there are currently no substances harmful to the ozone layer, except for the refrigerant fluid used in some conditioners (R22) which is managed in compliance with the relevant regulations.
| IN THOUSANDS OF EURO |
2016 | 2015 |
|---|---|---|
| Waste disposal | 453 | 449 |
| Consultancy | 78 | 75 |
| Emissions analysis | 14 | 17 |
| Training | 2 | 6 |
| Systems, equipment, materials |
12 | 12 |
| TOTAL | 559 | 559 |
| IN THOUSANDS OF EURO |
2016 | 2015 |
|---|---|---|
| Systems, equipment, materials |
690 | 650 |
| TOTAL | 690 | 650 |
Environmental investments in the year 2016 were made for the vat washing systems introduced to replace the old washing systems.
There are no significant pending disputes on environmental matters.
16 Calculations made on the basis of the following emission factors: 367 g/KWh for electricity 2015, 367 g/KWh for electricity 2016 (source: TERNA); 1,955 x 1000 m3 for methane 2015, 1,955 x1000 m3 for methane 2016 (source: MINISTRY OF THE ENVIRONMENT).
KPMG S.p.A. has carried out a "limited assurance engagement" on the Sabaf 2016 Social Report and provides its overall conclusions therein. As far as the scope of activities and procedures are concerned, please refer to the Statement released by the independent auditor on pages 98-100.
| GENERAL STANDARD DISCLOSURE |
Indicator description | PAGE (or direct reference) | Principle of Global Compact |
EXTERNAL ASSURANCE |
|---|---|---|---|---|
| STRATEGY AND ANALYSIS | ||||
| G4-1 | Statement from the CEO and Board President | 4 | ✓ | |
| G4-2 | Key impacts, risks and opportunities | 6, 27, 35-37, 53-55 | ✓ | |
| ORGANIZATIONAL PROFILE | ||||
| G4-3 | Name of the organization | Before the cover page | ✓ | |
| G4-4 | Primary brands, products and services | 33-34 | ✓ | |
| G4-5 | Location of the headquarter | 33, 190 | ✓ | |
| G4-6 | Countries where the organization operates | 33, 35-36 | ✓ | |
| G4-7 | Nature of ownership and legal form | 41, 83 | ✓ | |
| G4-8 | Markets served | 32, 34-35 | ✓ | |
| G4-9 | Scale of the organization | 10-15, 34-36 | ✓ | |
| G4-10 | Total number of employees by employment con tract and gender, region and employment type |
65-66 | 6 | ✓ |
| G4-11 | Percentage of total employees covered by collective bargaining agreements |
72 | 3 | ✓ |
| G4-12 | Description of the organization's supply chain | 87-88 | ✓ | |
| G4-13 | Significant changes | 4-5 | ✓ | |
| G4-14 | Precautionary approach or principle application modes |
28, 51-55 | ✓ | |
| G4-15 | Endorsement of externally developed economic, environmental and social charters and principles |
8, 41 | ✓ | |
| G4-16 | Memberships in industry associations | 91 | ✓ | |
| IDENTIFIED MATERAIL ASPECTS AND BOUNDARIES | ||||
| G4-17 | List of entities included in the organization's consolidated financial statements and those non included in the sustainability report |
5, 65 | ✓ | |
| G4-18 | Process for defining the report content | 5, 29 | ✓ | |
| G4-19 | Material Aspects identified | 6-7 | ✓ | |
| G4-20 | For each material Aspect, report the Aspect Boundary within the organization |
7 | ✓ | |
| G4-21 | For each material Aspect, report the Aspect Boundary outside the organization |
7 | ✓ | |
| G4-22 | Effect of any restatements of information provided in previous reports, and the reasons for such restatements. |
5 | ✓ | |
| G4-23 | Significant changes from previous reporting periods |
5 | ✓ |
| GENERAL STANDARD DISCLOSURE |
Indicator description | PAGE (or direct reference) |
Principle of Global Compact |
EXTERNAL ASSURANCE |
|---|---|---|---|---|
| STAKEHOLDER ENGAGEMENT | ||||
| G4-24 | List of stakeholder groups engaged by the organization |
29 | ✓ | |
| G4-25 | Basis for identification and selection of stakeholders with whom to engage |
29 | ✓ | |
| G4-26 | Approach to stakeholder engagement | 29, 86 | ✓ | |
| G4-27 | Key topics and concerns that have been raised through stakeholder engagement and the related responses |
5, 86 | ✓ | |
| REPORT PROFILE | ||||
| G4-28 | Reporting period | 5 | ✓ | |
| G4-29 | Date of most recent previous report | 5 | ✓ | |
| G4-30 | Reporting cycle | 5 | ✓ | |
| G4-31 | Contact point for questions regarding the report or its contents |
152 | ✓ | |
| G4-32 | GRI content index and the 'in accordance' option the organization has chosen |
5, 101 | ✓ | |
| G4-33 | External Assurance | 98-100 | ✓ | |
| GOVERNANCE | ||||
| G4-34 | Governance structure of the organization, including committees of the highest governance body |
42-50, 109-116, 121 | ✓ | |
| G4-38 | Composition of the highest governance body | 42-50 | ✓ | |
| G4-39 | Report whether the Chair of the highest governance body is also an executive officer |
59 | ✓ | |
| ETHICS AND INTEGRITY | ||||
| G4-56 | Organization's values, principles, standards and norms of behaviour such as codes of conduct and codes of ethics. |
8-9, 58 | 10 | ✓ |
| SPECIFIC STANDARD DISCLOSURES Material Aspects, DMA and Indicators |
Indicator Description | PAGE (or direct reference) |
Principle of Global Compact |
EXTERNAL ASSURANCE |
|---|---|---|---|---|
| CATEGORY: ECONOMIC | ||||
| Material aspect: Economic Performance | ||||
| G4-DMA | 16 | ✓ | ||
| G4-EC1 | Direct economic value created and distributed | 16 | ✓ | |
| Material aspect: Market Presence | ||||
| G4-DMA | 6-7, 33-37 | ✓ | ||
| G4-EC5 | Ratios of standard entry level wage by gender compared to local minimum wage at significant locations of operation |
73 | 6 | ✓ |
| SPECIFIC STANDARD DISCLOSURES Material Aspects, DMA and Indicators |
Indicator Description | PAGE (or direct reference) |
Principle of Global Compact |
EXTERNAL ASSURANCE |
|---|---|---|---|---|
| CATEGORY: ENVIRONMENTAL | ||||
| Material aspect: Materials | ||||
| G4-DMA | 5-6, 92-93 | ✓ | ||
| G4-EN1 | Materials used | 93 | 7, 8 | ✓ |
| G4-EN2 | Recycled input materials | 93 | 8 | ✓ |
| Material aspect: Energy | ||||
| G4-DMA | 5-6, 92, 94 | ✓ | ||
| G4-EN3 | Energy consumption within the organization | 94 | 7, 8 | ✓ |
| G4-EN5 | Energy intensity | 94 | 8 | ✓ |
| Material aspect: Water | ||||
| G4-DMA | 5-6, 96 | ✓ | ||
| G4-EN8 | Total water withdrawal by source | 96 | 7, 8 | ✓ |
| G4-EN9 | Water sources significantly affected by withdrawal of water |
Group business processes do not imply such water withdrawals which could significantly affect water sources balance |
8 | ✓ |
| G4-EN10 | Percentage and total volume of water recycled and reused |
96 | 8 | ✓ |
| Material aspect: Emissions | ||||
| G4-DMA | 5-6, 97 | ✓ | ||
| G4-EN15 | Direct greenhouse gas emissions | 97 | 7, 8 | ✓ |
| G4-EN16 | Indirect greenhouse gas emissions | 97 | 7, 8 | ✓ |
| G4-EN20 | Emissions of ozone-depleting substances | 97 | 7, 8 | ✓ |
| G4-EN21 | NOx, SOx and other significant air emissions | 97 | 7, 8 | ✓ |
| Material aspect: Effluents and Waste | ||||
| G4-DMA | 5-6, 96 | ✓ | ||
| G4-EN22 | Water discharge | 96 | 8 | ✓ |
| G4-EN23 | Weight of waste and disposal method | 96 | 8 | ✓ |
| G4-EN24 | Total number and volume of significant spills | 96 | 8 | ✓ |
| Material aspect: Products and Services | ||||
| G4-DMA | 5-6, 93 | ✓ | ||
| G4-EN27 | Initiatives aimed at mitigation of environmental impacts of products and services |
93, 95 | 7, 8, 9 | ✓ |
| Material aspect: Overall | ||||
| G4-DMA | 5-6 | ✓ | ||
| G4-EN31 | Environmental protection expenditures and investments |
97 | 7, 8, 9 | ✓ |
| SPECIFIC STANDARD DISCLOSURES Material Aspects, DMA and Indicators |
Indicator Description | PAGE (or direct reference) |
Principle of Global Compact |
EXTERNAL ASSURANCE |
|---|---|---|---|---|
| CATEGORY: LABOR PRACTICES AND DECENT WORK | ||||
| Material aspect: Employment | ||||
| G4-DMA | 5-6, 65 | ✓ | ||
| G4-LA1 | Total number and rates of new employee hires and employee turnover by age group, gender and region |
64-66 | 6 | ✓ |
| G4-LA2 | Benefits provided to full-time employees that are not provided to temporary or part-time employees |
72, 199-200 | ✓ | |
| G4-LA3 | Return to work and retention rates after parental leave |
75 | 6 | ✓ |
| Material aspect: Occupational Health and Safety | ||||
| G4-DMA | 5-6, 76-77 | ✓ | ||
| G4-LA6 | Type of injury and rates of injury, occupational diseases, lost days, and absenteeism, and total number of work-related fatalities |
12, 76-77 | ✓ | |
| G4-LA7 | Workers with hight incidence or risk of diseases related to their occupation |
77 | ✓ | |
| G4-LA8 | Health and safety topics covered in formal agreements with trade unions |
80 | ✓ | |
| Material aspect: Training and Education | ||||
| G4-DMA | 5-6, 70 | ✓ | ||
| G4-LA9 | Empoloyees training | 70 | 6 | ✓ |
| G4-LA11 | Percentage of employees receiving regular performance and career development reviews, by gender |
72 | 6 | ✓ |
| Material aspect: Diversity and Equal Opportunity | ||||
| G4-DMA | 5-6, 71 | ✓ | ||
| G4-LA12 | Composition of governance bodies and breakdown of employees per employee category according to gender, age group, minority group membership and other indicators of diversity |
44-45, 71 | 6 | ✓ |
| Material aspect: Equal Remuneration for Women and Men | ||||
| G4-DMA | 5-6, 73 | ✓ | ||
| G4-LA13 | Ratio of basic salary and remuneration of women to men by employee category |
73 | 6 | ✓ |
| Material aspect: Supplier Assessment for Labor Practices | ||||
| G4-DMA | 5-6, 87 | ✓ | ||
| G4-LA14 | Percentage of new suppliers that were screened using labor practices criteria |
87 | ✓ |
| SPECIFIC STANDARD DISCLOSURES Material Aspects, DMA and Indicators |
Indicator Description | PAGE (or direct reference) |
Principle of Global Compact |
EXTERNAL ASSURANCE |
|---|---|---|---|---|
| CATEGORY: HUMAN RIGHTS | ||||
| Material aspect: Non-discrimination | ||||
| G4-DMA | 5-6, 65, 70 | ✓ | ||
| G4-HR3 | Number of incidents of discrimination and corrective actions taken |
No incidents of discrimination have been detected |
6 | ✓ |
| Material aspect: Freedom of Association and Collective Bargaining | ||||
| G4-DMA | 5-6 | ✓ | ||
| G4-HR4 | Operations and suppliers identified in which the right to exercise freedom of association and collective bargaining may be at significant risk |
65, 87 | 3 | ✓ |
| Material aspect: Child Labor | ||||
| G4-DMA | 5-6 | ✓ | ||
| G4-HR5 | Operations and suppliers identified as having significant risk for incidents of child labor |
65, 87 | 5 | ✓ |
| Material aspect: Forced or Compulsory Labor | ||||
| G4-DMA | 5-6 | ✓ | ||
| G4-HR6 | Operations and suppliers identified as having significant risk for incidents of forced or compulsory labor |
65, 87 | 4 | ✓ |
| Material aspect: Assessment | ||||
| G4-DMA | 5-6 | ✓ | ||
| G4-HR9 | Total number and percentage of operations that have been subject to human rights reviews or impact assessments |
65, 87 | 1 | ✓ |
| Material aspect: Supplier Human Rights Assessment | ||||
| G4-DMA | 5-6 | ✓ | ||
| G4-HR10 | Percentage of new suppliers that were screened using human rights criteria |
8, 87 | 2 | ✓ |
| CATEGORY: PRODUCT RESPONSIBILITY | ||||
| Material aspect: Customer Health and Safety | ||||
| G4-DMA | 5-6, 85 | ✓ | ||
| G4-PR1 | Health and safety impacts of products and services |
85-86 | ✓ | |
| Material aspect: Product and Service Labeling | ||||
| G4-DMA | 5-6, 86 | ✓ | ||
| G4-PR5 | Results of surveys measuring customer satisfaction |
86 | ✓ |
| IN THOUSANDS OF EURO | 2016 | % | 2015 | % | 2016-2015 CHANGE |
% CHANGE |
|---|---|---|---|---|---|---|
| Sales revenue | 130,978 | 100% | 138,003 | 100% | (7,025) | -5.1% |
| EBITDA | 25,365 | 19.4% | 26,172 | 19.0% | (807) | -3.1% |
| EBIT | 12,530 | 9.6% | 14,091 | 10.2% | (1,561) | -11.1% |
| Pre-tax profit | 12,446 | 9.5% | 13,473 | 9.8% | (1,027) | -7.6% |
| Net Profit | 9,009 | 6.9% | 8,998 | 6.5% | 11 | +0.1% |
| Basic earnings per share (€) | 0.792 | - | 0.781 | - | 0.011 | +1.4% |
| Diluted earnings per share (€) | 0.792 | - | 0.781 | - | 0.011 | +1.4% |
In 2016, the Sabaf Group booked a 5.1% drop in sales; taking into consideration the same scope of consolidation, they decreased by 6.7%. Despite the drop in sales volumes, the Group managed to maintain satisfactory income-related performances and to achieve a % EBITDA better than 2015: 2016 EBITDA was equal to 19.4% of sales, compared with 19% in 2015, whereas, due to the greater impact of amortisation/ depreciation, EBIT stood at 9.6% of sales compared with 10.2% in 2015. Net profit of 2016, equal to € 9 million, was mainly unchanged in absolute terms, whereas in percentage terms it reached 6.9% of sales (6.5% in 2015).
The families of more mature products (brass valves and thermostats) were those most affected by the downturn because mainly intended for markets (North Africa and Middle East) that experienced a year of crisis. Burners suffered a moderate fall whereas in 2016 the increase in sales of hinges was still confirmed, thanks to the consolidation of important supply contracts and to the increased importance of the new special models.
The geographical breakdown of revenues is shown below:
The subdivision of sales revenues by product line is shown in the table below:
| IN THOUSANDS OF EURO |
2016 | % | 2015 | % | % CHANGE |
|---|---|---|---|---|---|
| Italy | 36,365 | 27.8% | 41,244 | 29.9% | -11.8% |
| Western Europe | 8,553 | 6.5% | 7,438 | 5.4% | +15.0% |
| Eastern Europe | 34,123 | 26.1% | 35,125 | 25.5% | -2.9% |
| Middle East and Africa | 11,698 | 8.9% | 16,759 | 12.1% | -30.2% |
| Asia and Oceania | 8,088 | 6.2% | 7,019 | 5.0% | +15.2% |
| South America | 20,847 | 15.9% | 20,815 | 15.1% | +0.2% |
| North America and Mexico | 11,304 | 8.6% | 9,603 | 7.0% | +17.7% |
| TOTAL | 130,978 | 100% | 138,003 | 100% | -5.1% |
The crisis in the Middle Eastern and African markets (mainly Egypt), related exclusively to external factors (such as low oil price and shortage of strong currency), resulted in a drop in direct sales of more than € 5 million and also affected the sales of the Group in Italy, since our Italian customers are strong exporters to the Middle East. The positive trend of the other international markets, most notably the steady growth in North America, only partially offset the decline in sales in the Middle East, Africa and Italy.
Average sales prices in 2016 were around 1.5% lower compared with 2015.
The average effective purchase prices of the main raw materials (brass, aluminium alloys and steel) decreased allowing a 0.9% savings in sales. Consumption (purchases plus change in inventories) as a percentage of sales was 36.7% in 2016, compared with 38.7% in 2015; the deviation was also affected by the different mix of products sold.
The impact of labour cost on sales increased from 23.6% to 24.5% due to the increased impact of overhead costs.
Operating cash flow (net profit plus depreciation and amortisation) stood at € 21.9 million, equivalent to 16.7% of sales (€ 21.2 million and 15.3%, respectively in 2015).
The impact of net financial expenses on sales remained very low (0.5% compared with 0.4% in 2015), due to the low level of debt and low interest rates.
The 2016 tax rate was 26.9% (33.2% in 2015) and benefited from tax incentives on investment of € 0.4 million.
The Group's statement of financial position, reclassified based on financial criteria, is illustrated below:
| IN THOUSANDS OF EURO | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Non-current assets | 93,967 | 92,797 |
| Short-term assets 1 | 72,908 | 75,370 |
| Short-term liabilities 2 | (26,824) | (27,207) |
| Working capital 3 | 46,084 | 48,163 |
| Short-term financial assets | 0 | 69 |
| Provisions for risks and charges, Post-employment benefits, deferred taxes |
(4,284) | (4,081) |
| NET INVESTED CAPITAL | 135,767 | 136,948 |
| Short-term net financial position | (2,804) | (19,520) |
| Medium/long-term net financial position |
(20,654) | (6,388) |
| NET FINANCIAL DEBT | (23,458) | (25,908) |
| SHAREHOLDERS' EQUITY | 112,309 | 111,040 |
Cash flows for the financial year are summarised in the table below:
| IN THOUSANDS OF EURO | 2016 | 2015 |
|---|---|---|
| Opening liquidity | 3,991 | 3,675 |
| Operating cash flow | 25,931 | 19,131 |
| Cash flow from investments | (11,762) | (12,079) |
| Free cash flow | 14,169 | 7,052 |
| Cash flow from financing activities |
(2,894) | (5,392) |
| A.R.C. acquisition | (2,614) | 0 |
| Foreign exchange differences due to translation |
(509) | (1,344) |
| CASH FLOW FOR THE PERIOD | 8,152 | 316 |
| Closing liquidity | 12,143 | 3,991 |
Net financial debt and liquidity shown in the tables above are defined in compliance with the net financial position detailed in Note 22 of the consolidated financial statements, as required by CONSOB memorandum of 28 July 2006.
At 31 December 2016, working capital stood at € 46.1 million compared with € 48.2 million at the end of the 2015: its impact on sales was 35.2% (34.9% in 2015).
Also to take advantage of interest rates at historical lows, during the financial year, the Group reformulated the average duration of its loans, entering into unsecured loan agreements totalling € 19.8 million repayable in 5 years and reducing the short-term bank exposure.
At 31 December 2016, the short-term financial position was negative by just € 2.8 million, so the Group considered the liquidity risk negligible.
In 2016, the Sabaf Group made net investments of € 11.8 million. The main investments in the financial year were aimed at increasing production capacity in Turkey and Brazil and the further automation of production of light alloy valves. Investments were also made to improve production processes as well as maintenance and replacement investments designed to keep the capital equipment constantly updated.
The controlling share of A.R.C. s.r.l. was also acquired by investing € 4.8 million (€ 2.6 million net of the financial position of the acquired company). The purposes of this transaction are closely examined in the next paragraph of this report.
The free cash flow (operating cash flow less investments) was € 14.2 and benefited from an improved trend in working capital compared with € 7.1 million in 2015.
During the financial year, the Group paid out dividends of € 5.5 million and purchased treasury shares for € 1.7 million; the net financial debt was € 23.5 million, versus € 25.9 million in 31 December 2015.
Shareholders' equity totalled € 112.3 million at 31 December 2016; the ratio between the net financial debt and the shareholders' equity was 0.21 versus 0.23 in 2015.
| 2016 | 2015 | |
|---|---|---|
| ROCE (return on capital employed) |
9.2% | 10.3% |
| Dividends per share (€) | 0.48 4 | 0.48 |
| Net debt/equity ratio | 21% | 23% |
| Market capitalisation (31/12)/equity ratio |
1.07 | 1.19 |
| Change in sales | -5.1% | +1.2% |
Please refer to the introductory part of the Annual Report for a detailed examination of other key performance indicators.
In June 2016, the Group acquired the controlling share (70%) of A.R.C. s.r.l., leading company in the production of burners for professional cooking. The transaction allowed the Sabaf Group to enter into a new sector, contiguous with the traditional sector of components for household gas cooking appliances, and to enhance the consolidated international presence of the Group. Loris Gasparini, holding a 30% share in A.R.C., will manage the company as chief executive officer for a period of 5 years, at the end of which, a call option in favour of Sabaf for the residual 30% of the share capital and at the same time a put option in favour of Loris Gasparini can be exercised.
A.R.C., which was consolidated starting from 1 July 2016, ended the 2016 financial year with sales of € 5.1 million (€ 4.4 million in 2015), EBITDA of € 1.1 million (€ 0.9 million in 2015) and a net profit of € 0.7 million (€ 0.6 million in 2015).
The Group's financial position, results and cash flows are affected by several factors, such as gross domestic product, consumer and business confidence, interest rate trend, the cost of raw materials, the unemployment rate and the ease of access to credit.
The protracted nature of the European crisis, which has become systematic over the years, has had an impact on the transformation of the white goods industry, the sector in which the Sabaf group operates. Indeed, the continuous contraction of demand on mature markets has been accompanied by a further concentration of end markets, a steady increase of sales volumes in emerging markets and, finally, tougher competition, phenomena that require aggressive policies in setting sales prices.
To cope with this situation, the Group aims to retain and reinforce its leadership position wherever possible through:
The Group uses metals and alloys in its production processes, chiefly brass, aluminium alloys and steel. The sales prices of products are generally renegotiated semi-annually or annually; as a result, Group companies may not be able to immediately pass on to customers changes in the prices of commodities that occur during the year, which has an impact on profitability. The Group protects itself from the risk of changes in the price of brass and aluminium with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments.
At the date of this report, the Sabaf Group has already fixed purchase prices for about 50% of its expected requirement for aluminium, steel and brass for 2017.
Any further increase in the price of commodities not hedged could have negative effects on expected profits.
For more information, see Note 35 of the consolidated financial statements as regards disclosure for the purposes of IFRS 7.
The Sabaf Group operates primarily in euro. However, transactions also take place in other currencies, such as the U.S. dollar, the Brazilian real, the Turkish lira and the Chinese renminbi.
Since sales in US dollars accounted for about 16% of consolidated sales, the possible depreciation against the euro and the real could lead to a loss in competitiveness on the markets in which sales are made in that currency (mainly South and North America). At 31 December 2016, the Group had forward sales contracts for a total of 7.5 million dollars, maturing until 31 December 2017. The Administration and Finance Department constantly monitors forex exposure, the trend in exchange rates and the operational management of related activities.
For more information, see Note 35 of the consolidated financial statements as regards disclosure for the purposes of IFRS 7.
Sabaf products carry a high intrinsic risk in terms of safety. The Group's great attention to product quality and safety has made it possible to avoid incidents caused by product defects. Despite this, it is not possible to automatically exclude incidents of this nature. In order to transfer the risk of third-party liability damage arising from malfunctioning of its products, Sabaf has signed insurance policies with a deductible of up to € 10 million per individual claim.
There is a risk that some Group products, although patented, will be copied by competitors; the opening up of trade in countries in which it is difficult to enforce industrial patent rights exposes the Group to a greater risk of protection of its own products. Sabaf's business model therefore bases the protection of product exclusivity mainly on design capacity and the internal production of special machines used in manufacturing processes, which result from its unique know-how that competitors would find difficult to replicate.
In any case, Sabaf has structured processes in place to manage innovation and protect intellectual property. In addition, the Group periodically monitors the patent strategies adopted/to be adopted based on the assessments of cost/opportunity.
The Group is characterised by a strong concentration in its sales, with 50% arising from revenue achieved with its ten biggest customers. Relations with customers are usually stable and over long periods, albeit usually regulated by agreements of less than one year, which can be renewed and with no guaranteed minimum levels.
At the date of this report, there was no reason for the Group to foresee the loss of any significant customers in the coming months.
The high concentration of sales to a small number of customers, described in the previous section, generates a concentration of the respective trade receivables, with a resulting increase in the negative impact on economic and financial results in the event of insolvency of a customer. In particular, given the structural difficulties of the household appliance sector in mature markets, it is possible that situations of financial difficulty and insolvency among customers could arise.
The risk is constantly monitored through the preliminary assessment of customers and checks that agreed payment terms are met. There is a credit insurance policy covering approximately 70% of the credit risk. A further portion is partly guaranteed through letters of credit issued by major banks in favour of customers. The remainder of the receivable risk is covered by a bad debt provision considered appropriate.
For more information, see Note 35 of the consolidated financial statements, as regards disclosure for the purposes of IFRS 7.
Today, Turkey represents the main production hub of household appliances at the European level. The strong competitiveness of the local industry attracted heavy foreign investments and favoured the growth of important local situations that are gaining a position of increasing importance on the international scenario. In this context, the Sabaf Group started a factory in Turkey at the end of 2012 where it realises today more than 10% of total production. The Turkish market represented in 2016 22% of total sales of the Group (a significant share of Sabaf components are assembled by customers on finished products then exported from Turkey). The recent social and political tensions in Turkey had no effect on the activities of the Sabaf Group, which continued normally. On the other hand, in consideration of the strategic importance of this Country for the sector and for the Group, the management assessed the risks that could arise from the impossibility to operate in Turkey as a result of dramatic events, even if considered unlikely today. In particular, we note that all the products made in Turkey today can be manufactured also in Italy, albeit at higher costs, in such a way as to ensure in this way the continuity of supplies to customers.
40% of Sabaf Group sales are made on markets outside Europe. Furthermore, products sold in Italy can be exported by customers in international markets, making the percentage of sales earned directly and indirectly from emerging economies more significant.
The Group's main markets outside Europe include North Africa, the Middle East and South America. Any embargoes or major political or economic instability, or changes in the regulatory and/or local law systems, or new tariffs or taxes imposed in the future could affect a portion of Group sales and the related profitability.
To combat this risk, the Group has adopted a policy of diversifying investments at international level, setting different strategic priorities that, as well as business opportunities, also consider the different associated risk profiles. In addition, the Group monitors the economic and social performance of the target countries, also through a local network, in order to make strategic and investment decisions fully aware of the exposure to associated risks.
The strategy of the Group also provides for the possibility of growth through acquisitions, also in related sectors; the acquisition of control of A.R.C. during 2016 represented a step in that direction. The directors are aware that growth through acquisitions entails specific risk profiles, both during assessment and in the integration process. To this end, the Group intends to develop instruments for the construction of business cases and tools for analysing and supporting the integration processes.
Group results depend to a large extent on the work of executive directors and management. The loss of a key staff member for the Group without an adequate replacement and the inability to attract new resources could have negative effects on the future of the Group and on the quality of financial and economic results. To mitigate this risk, the Group has launched policies to strengthen the most critical internal organisational structures and loyalty schemes, including the signing of noncompetition agreements with key figures.
On 23 January 2017, the Chief Executive Officer Alberto Bartoli resigned effective as from the date of the Shareholders' Meeting scheduled for 27 April 2017, for strictly personal reasons. The Board of Directors entrusted the Remuneration and Nomination Committee with the task of outlining the professional profile fit for holding the position of Chief Executive Officer to continue the strategy, aimed at pursuing a longterm sustainable growth in the segment of gas cooking components and in related segments. The Board will place on the agenda of the next Shareholders' Meeting the appointment of a director to replace Bartoli.
The most important research and development projects conducted in 2016 were as follows:
The improvement in production processes continued throughout the Group, accompanied by the development and internal production of machinery, tools and presses.
Development costs to the tune of € 314,000 were capitalised, as all the conditions set by international accounting standards were met; in other cases, they were charged to the income statement.
Since 2005, Sabaf has drawn up an Annual Report on its economic, social and environmental sustainability performance. In 2005, this was a pioneering and almost experimental move, but today the trend suggests that integrated reporting unquestionably represents best practice.
With reference to Italian Legislative Decree no. 254 of 30 December 2016, which implemented directive 2014/95/EU on reporting obligations on non-financial information for the 2017 financial year, the Group is considering the need to establish or update existing policies and procedures for the preparation of the information required. Moreover, the Group already provides in the Annual Report almost all of the information required by the new regulations.
The Sabaf Group had 754 employees at 31 December 2016 (759 at 31 December 2015). In 2016, the Sabaf Group suffered no on-the-job deaths or serious accidents that led to serious or very serious injuries to staff for which the Group was definitively held responsible, nor was it held responsible for occupational illnesses of employees or former employees, or causes of mobbing.
For more information, see the "Sabaf and employees" section of the Annual Report.
In 2016 there was no:
For more information, see the "Sabaf and employees" section of the Annual Report.
For a complete description of the corporate governance system of the Sabaf Group, see the report on corporate governance and ownership structure, available in the Investor Relations section of the company website.
The internal control system on financial reporting is described in detail in the report on corporate governance and ownership structure.
With reference to the "conditions for listing shares of parent companies set up and regulated by the law of states not belonging to the European Union" pursuant to articles 36 and 39 of the Market Regulations, the Company and its subsidiaries have administrative and accounting systems that can provide the public with the accounting situations prepared for drafting the consolidated report of the companies that fall within the scope of this regulation and can regularly supply management and the auditors of the Parent Company with the data necessary for drafting the consolidated financial statements. The Sabaf Group has also set up an effective information flow to the independent auditor and continuous information on the composition of the company officers of the subsidiaries, together with information on the roles covered, and requires the systematic and centralised gathering and regular updates of the formal documents relating to the articles of association and granting of powers to company officers. The conditions exist as required by article 36, letters a), b) and c) of the Market Regulations issued by CONSOB. In the course of the financial year, no acquisitions were made of companies in countries not belonging to the European Union which, considered independently, would have a significant relevance for the purposes of the regulation in question.
The Organisation, Management and Control Model, adopted pursuant to Legislative Decree 231/2001, is described in the report on company governance and ownership structure, which should be reviewed for reference.
With reference to Legislative Decree 196 of 30 June 2003, in 2016 the Group continued its work to ensure compliance with current regulations.
For the comments on this item, please see Note 35 of the consolidated financial statements.
Sabaf Group companies did not execute any unusual or atypical transactions in 2016.
Neither Sabaf S.p.A. nor its subsidiaries have secondary operating offices.
Although Sabaf S.p.A. is actually controlled by the parent company, Giuseppe Saleri S.a.p.A., it is not subject to management and co-ordination of the parent company, since the Board of Directors of Sabaf S.p.A. enjoys complete operating autonomy and does not have to justify its actions to the parent company, except at the annual Shareholders' Meeting held to approve the separate financial statements and, obviously, in the event of violation of the law and/or the Articles of Association. It should also be noted that the Articles of Association of the parent company explain that it does not exercise management and coordination activities with regard to Sabaf S.p.A.
Sabaf S.p.A. exercises management and coordination activities over its Italian subsidiaries, Faringosi Hinges s.r.l., Sabaf Immobiliare s.r.l. and A.R.C. s.r.l.
The relationships between the Group companies, including those with the parent company, are regulated under market conditions, as well as the relationships with related parties, defined in accordance with the accounting standard IAS 24. The details of the intra-group transactions and other related-party transactions are given in Note 36 of the consolidated financial statements and in Note 36 of the separate financial statements of Sabaf S.p.A.
Until the 2015 financial year, Italian companies of the Group have been part of the national tax consolidation scheme pursuant to articles 117/129 of the Unified Income Tax Law. In this scheme, Giuseppe Saleri S.a.p.A., the parent company of Sabaf S.p.A., acted as the consolidating company. In 2016, the conditions for the preparation of the tax consolidation scheme fell short, which consequently was discontinued.
2017 got off to a positive start and sales in the first quarter are expected to increase with a double-digit growth compared with 2016, which was marked by a very weak start. Although there are uncertainties on some of the main markets in which Sabaf operates, for the whole of 2017, the Group expects to be able to reach sales of around € 140 million and increasing operating margins compared with 2016.
If the economic situation were to change significantly, actual figures might diverge from forecasts.
| IN THOUSANDS OF EURO | 2016 | 2015 | CHANGE | CHANGE % |
|---|---|---|---|---|
| Sales revenue | 101,523 | 113,962 | (12,439) | -10.9% |
| EBITDA | 13,525 | 16,123 | (2,598) | -16.1% |
| EBIT | 4,070 | 8,847 | (4,777) | -54.0% |
| Pre-tax profit (EBT) | 3,593 | 8,159 | (4,566) | -56.0% |
| NET PROFIT | 2,460 | 5,642 | (3,182) | -56.4% |
The reclassification based on financial criteria is illustrated below:
| IN THOUSANDS OF EURO | 31/12/2016 | 31/12/2015 |
|---|---|---|
| Non-current assets 5 | 89,258 | 86,088 |
| Short-term assets 6 | 54,475 | 60,493 |
| Short-term liabilities 7 | (22,441) | (24,932) |
| Working capital 8 | 32,034 | 35,561 |
| Financial assets | 3,197 | 2,906 |
| Provisions for risks and charges, Post-employment benefits, deferred taxes |
(2,888) | (3,003) |
| NET INVESTED CAPITAL | 121,601 | 121,552 |
| Short-term net financial position |
(12,556) | (20,686) |
| Medium/long-term net financial position |
(17,521) | (4,632) |
| NET FINANCIAL POSITION | (30,077) | (25,318) |
| SHAREHOLDERS' EQUITY | 91,524 | 96,234 |
Cash flows for the period are summarised in the table below:
| IN THOUSANDS OF EURO | 2016 | 2015 |
|---|---|---|
| Opening liquidity | 1,090 | 1,366 |
| Operating cash flow | 15,205 | 14,531 |
| Cash flow from investments | (12,591) | (9,035) |
| Free cash flow | 2,614 | 5,496 |
| Cash flow from financing activities |
(1,907) | (5,772) |
| CASH FLOW FOR THE PERIOD |
707 | (276) |
| Closing liquidity | 1,797 | 1,090 |
Net financial debt and the net short-term financial position shown in the tables above are defined in compliance with the net financial position detailed in Note 22 of the separate financial statements, as required by the CONSOB memorandum of 28 July 2006.
The 2016 financial year ended with a decrease in sales of 10.9% compared with 2015. The product family of valves and thermostats was weaker, while sales of burners recorded a moderate decline. The reduction in sales had a negative impact on gross operating profitability: EBITDA was € 13.5 million, or 13.3% of sales (€ 16.1 million in 2015, or 14.1%).
EBIT in 2016 was € 4.1 million, or 4% of sales (€ 8.8 million in 2015, or 7.8%), and net profit was € 2.5 million, or 2.4% of sales (€ 5.6 million in 2015, or 5%).
The impact of the labour costs on sales increased from 24.5% to 26%. Net finance expense as a percentage of sales was minimal, at 0.4% (substantially unchanged), given the low level of financial debt and the low interest rates.
Operating cash flow (net profit plus depreciation and amortisation) decreased from €16.9 million to €11.5 million, with an impact on sales of 11.3% (vs. 12.6% in 2015).
In 2016, Sabaf S.p.A. invested over € 7 million in plant and equipment. The main investments in the financial year were aimed at the further automation of production of light alloy valves and maintenance of fleet of machines constantly updated and fully efficient. Moreover, € 4.8 million were invested for the acquisition of the 70% share of A.R.C. s.r.l.
At 31 December 2016, working capital stood at € 32 million compared with € 35.6 million the previous year: its percentage impact on sales stood at 31.6% from 31.2% at the end of 2015.
Self-financing generated by operating cash flow was € 15.2 million, compared with € 14.5 million in 2015, thanks to the increase in working capital.
The net financial debt was € 30.1 million, compared with € 25.3 million on 31 December 2015.
At the end of the year, the shareholders' equity amounted to € 91.5 million, compared with € 96.2 million in 2015. The net financial debt/shareholders' equity ratio was 33%, 26% at the end of 2015.
5 Excluding Financial assets.
6 Sum of Inventories, Trade receivables, Tax receivables and Other current receivables.
8 Difference between short-term assets and short-term liabilities.
Pursuant to the CONSOB memorandum of 28 July 2006, a reconciliation statement of the result of the 2016 financial year and Group shareholders' equity at 31 December 2016 with the same values of the parent company Sabaf S.p.A. is given below:
| 31.12.2016 | 31.12.2015 | ||||
|---|---|---|---|---|---|
| DESCRIPTION | Profit for the year | Shareholders' equity | Profit for the year | Shareholders' equity | |
| Profit and shareholders' equity of parent company Sabaf S.p.A. |
2,460 | 91,524 | 5,642 | 96,234 | |
| Equity and consolidated company results | 6,175 | 66,276 | 4,775 | 56,427 | |
| Elimination of the carrying value of consolidated equity investments |
521 | (49,900) | (1,303) | (45,616) | |
| Goodwill | 0 | 6,422 | 0 | 4,445 | |
| Put option on A.R.C. minorities | 0 | (1,522) | 0 | 0 | |
| Intercompany eliminations | (60) | (491) | (116) | (450) | |
| Minority interests | (87) | (1,296) | 0 | 0 | |
| PROFIT AND SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP |
9,009 | 111,013 | 8,998 | 111,040 |
As we thank our employees, the Board of Statutory Auditors, the Independent Auditor and the supervisory authorities for their invaluable cooperation, we would kindly ask the shareholders to approve the financial statements ended 31 December 2016 with a profit for the year of € 2,459,688.
The Board of Directors proposes to distribute an ordinary dividend of € 0.48 per share to the shareholders, with the exclusion of the treasury shares on the ex-date, by distributing the entire profit for 2016 and, for the residual part, by distributing a portion of the extraordinary reserve. The dividend is scheduled for payment on 31 May 2017 (ex-date 29 May and record date 30 May 2017).
Ospitaletto, 20 March 2017 The Board of Directors
| Group structure and corporate bodies |
|---|
| Consolidated statement of financial position |
| Consolidated income statement |
| Consolidated statement of comprehensive income |
| Statement of changes in consolidated shareholders' equity |
| Consolidated cash flow statement |
| Explanatory Notes |
| Certification of the Consolidated Financial Statements |
| Auditors' Report on the Statutory Financial Statements |
SABAF S.p.A.
Deloitte & Touche S.p.A.
| IN THOUSANDS OF EURO | NOTES | 31.12.2016 | 31.12.2015 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 1 | 73,064 | 73,037 |
| Investment property | 2 | 6,270 | 6,712 |
| Intangible assets | 3 | 9,284 | 7,525 |
| Equity investments | 4 | 306 | 204 |
| Non-current receivables | 5 | 262 | 432 |
| Deferred tax assets | 21 | 4,781 | 4,887 |
| TOTAL NON-CURRENT ASSETS | 93,967 | 92,797 | |
| Current assets | |||
| Inventories | 6 | 31,484 | 31,009 |
| Trade receivables | 7 | 36,842 | 40,425 |
| Tax receivables | 8 | 3,163 | 2,489 |
| Other current receivables | 9 | 1,419 | 1,447 |
| Current financial assets | 10 | 0 | 69 |
| Cash and cash equivalents | 11 | 12,143 | 3,991 |
| TOTAL CURRENT ASSETS | 85,051 | 79,430 | |
| Assets held for sale | 0 | 0 | |
| TOTAL ASSETS | 179,018 | 172,227 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | |||
| Share capital | 12 | 11,533 | 11,533 |
| Retained earnings, other reserves | 90,471 | 90,509 | |
| Profit for the year | 9,009 | 8,998 | |
| Total equity interest of the Parent Company | 111,013 | 111,040 | |
| Minority interests | 1,296 | 0 | |
| TOTAL SHAREHOLDERS' EQUITY | 112,309 | 111,040 | |
| Non-current liabilities | |||
| Loans | 14 | 18,892 | 6,388 |
| Other financial liabilities | 15 | 1,762 | 0 |
| Post-employment benefit and retirement reserves | 16 | 3,086 | 2,914 |
| Provisions for risks and charges | 17 | 434 | 395 |
| Deferred tax liabilities | 21 | 764 | 772 |
| TOTAL NON-CURRENT LIABILITIES | 24,938 | 10,469 | |
| Current liabilities | |||
| Loans | 14 | 14,612 | 23,480 |
| Other financial liabilities | 15 | 335 | 31 |
| Trade payables | 18 | 18,977 | 19,450 |
| Tax payables | 19 | 1,190 | 1,219 |
| Other payables | 20 | 6,657 | 6,538 |
| TOTAL CURRENT LIABILITIES | 41,771 | 50,718 | |
| Liabilities held for sale | 0 | 0 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 179,018 | 172,227 |
| IN THOUSANDS OF EURO | NOTES | 2016 | 2015 |
|---|---|---|---|
| INCOME STATEMENT COMPONENTS | |||
| Operating revenue and income | |||
| Revenue | 23 | 130,978 | 138,003 |
| Other income | 24 | 2,819 | 3,758 |
| TOTAL OPERATING REVENUE AND INCOME | 133,797 | 141,761 | |
| Operating costs | |||
| Materials | 25 | (47,346) | (54,366) |
| Change in inventories | (754) | 1,025 | |
| Services | 26 | (27,983) | (29,759) |
| Payroll costs | 27 | (32,112) | (32,526) |
| Other operating costs | 28 | (1,078) | (1,193) |
| Costs for capitalised in-house work | 841 | 1,230 | |
| TOTAL OPERATING COSTS | (108,432) | (115,589) | |
| OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/LOSSES, AND WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS |
25,365 | 26,172 | |
| Depreciation and amortisation | 1, 2, 3 | (12,853) | (12,185) |
| Capital gains on disposals of non-current assets | 18 | 104 | |
| EBIT | 12,530 | 14,091 | |
| Financial income | 101 | 67 | |
| Financial expenses | 29 | (620) | (596) |
| Exchange rate gains and losses | 30 | 435 | (89) |
| PROFIT BEFORE TAXES | 12,446 | 13,473 | |
| Income tax | 31 | (3,350) | (4,475) |
| Minority interests | (87) | 0 | |
| PROFIT FOR THE YEAR | 9,009 | 8,998 | |
| EARNINGS PER SHARE (EPS) | 32 | ||
| Base | 0.792 euro | 0.781 euro | |
| Diluted | 0.792 euro | 0.781 euro |
| IN THOUSANDS OF EURO | 2016 | 2015 |
|---|---|---|
| PROFIT FOR THE YEAR | 9,009 | 8,998 |
| Total profits/losses that will not be subsequently reclassified under profit (loss) for the year: | ||
| Actuarial post-employment benefit reserve evaluation | (41) | 49 |
| Tax effect | 10 | (14) |
| (31) | 35 | |
| Total profits/losses that will be subsequently reclassified under profit (loss) for the year: | ||
| Forex differences due to translation of financial statements in foreign currencies | (340) | (3,400) |
| TOTAL OTHER PROFITS/(LOSSES) NET OF TAXES FOR THE YEAR | (371) | (3,365) |
| TOTAL PROFIT | 8,638 | 5,633 |
| IN THOUSANDS OF EURO |
Share capital |
Share premium reserve |
Legal reserve |
Treasury shares |
Translation reserve |
Post-em ployment benefit discounting reserve |
Other reserves |
Profit for the year |
Total Group sharehol ders' equity |
Minority interests |
Total sharehol ders' equity |
|---|---|---|---|---|---|---|---|---|---|---|---|
| BALANCE AT 31 DEC 2014 |
11,533 | 10,002 | 2,307 | (5) | (3,648) | (616) | 82,827 | 8,338 | 110,738 | 0 | 110,738 |
| Allocation of 2014 profit | |||||||||||
| • dividends paid out |
(4,613) | (4,613) | (4,613) | ||||||||
| • carried forward |
3,725 | (3,725) | 0 | 0 | |||||||
| purchase of treasury shares |
(718) | (718) | (718) | ||||||||
| Total profit at 31 dec 2015 |
(3,400) | 35 | 8,998 | 5,633 | 5,633 | ||||||
| BALANCE AT 31 DEC 2015 |
11,533 | 10,002 | 2,307 | (723) | (7,048) | (581) | 86,552 | 8,998 | 111,040 | 0 | 111,040 |
| Allocation of 2015 profit | |||||||||||
| • dividends paid out |
(5,467) | (5,467) | (5,467) | ||||||||
| • carried forward |
3,531 | (3,531) | 0 | 0 | |||||||
| ARC acqui sition and consolidation |
1,210 | 1,210 | |||||||||
| ARC option | (1,522) | (1,522) | (1,522) | ||||||||
| Purchase of treasury shares |
(1,676) | (1,676) | (1,676) | ||||||||
| Total profit at 31 dec 2016 |
(340) | (31) | 9,009 | 8,638 | 86 | 8,724 | |||||
| BALANCE AT 31 DEC 2016 |
11,533 | 10,002 | 2,307 | (2,399) | (7,388) | (612) | 88,561 | 9,009 | 111,013 | 1,296 | 112,309 |
| 12M 2016 | 12M 2015 | |
|---|---|---|
| Cash and cash equivalents at beginning of year | 3,991 | 3,675 |
| Profit for the year | 9,009 | 8,998 |
| Adjustments for: | ||
| • Depreciation and amortisation | 12,853 | 12,185 |
| • Realised gains | (18) | (104) |
| • Net financial income and expenses | 519 | 529 |
| • Income tax | 3,350 | 4,475 |
| Change in post-employment benefit reserve | (184) | (129) |
| Change in risk provisions | 39 | (210) |
| Change in trade receivables | 5,107 | 107 |
| Change in inventories | 416 | (170) |
| Change in trade payables | (1,286) | (58) |
| Change in net working capital | 4,237 | (121) |
| Change in other receivables and payables, deferred tax | 1,363 | (72) |
| Payment of taxes | (4,762) | (5,931) |
| Payment of financial expenses | (576) | (556) |
| Collection of financial income | 101 | 67 |
| CASH FLOW FROM OPERATIONS | 25,931 | 19,131 |
| Investments in non-current assets | ||
| • intangible | (477) | (781) |
| • tangible | (11,465) | (11,581) |
| • financial | 5 | (26) |
| Disposal of non-current assets | 175 | 309 |
| CASH FLOW ABSORBED BY INVESTMENTS | (11,762) | (12,079) |
| Repayment of loans | (33,141) | (19,480) |
| Raising of loans | 37,321 | 19,488 |
| Short-term financial assets | 69 | (69) |
| Purchase of treasury shares | (1,676) | (718) |
| Payment of dividends | (5,467) | (4,613) |
| CASH FLOW ABSORBED BY FINANCING ACTIVITIES | (2,894) | (5,392) |
| A.R.C. acquisition | (2,614) | 0 |
| Foreign exchange differences | (509) | (1,344) |
| NET FINANCIAL FLOWS FOR THE YEAR | 8,152 | 316 |
| Cash and cash equivalents at end of year (Note 10) | 12,143 | 3,991 |
| Current financial debt | 14,947 | 23,511 |
| Non-current financial debt | 20,654 | 6,388 |
| NET FINANCIAL DEBT (NOTE 22) | 23,458 | 25,908 |
The consolidated financial statements of the Sabaf Group for the financial year 2016 have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and endorsed by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS). The financial statements have been prepared in euro, the current currency in the economies in which the Group mainly operates, rounding amounts to the nearest thousand, and are compared with consolidated financial statements for the previous year, prepared according to the same standards. The report consists of the statement of financial position, the income statement, the statement of changes in shareholders' equity, the cash flow statement, and these explanatory notes. The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. The Company found that, despite the difficult economic and business climate, there were no significant uncertainties (as defined by paragraphs 25 and 26 of IAS 1) regarding the continuity of the Company, also due to the strong competitive position, high profitability and solidity of the financial structure.
The Group has adopted the following formats:
Use of these formats permits the most meaningful representation of the Group's operating results, financial position and cash flows.
The scope of consolidation at 31 December 2016 comprises the parent company Sabaf S.p.A. and the following companies controlled by Sabaf S.p.A.:
The participation in the controlled company A.R.C. s.r.l., acquired during the financial year, was consolidated starting from the date of acquisition and therefore for the period from 1 July 2016 to 31 December 2016.
Sabaf U.S. is not consolidated since it is irrelevant for the purposes of the consolidation. Handan A.R.C. Ltdd, Chinese company in which the Group holds a 35% share, was measured at cost in that at 31 December 2016 it has not yet started its activity and therefore it is considered irrelevant.
The companies in which Sabaf S.p.A. simultaneously possesses the following three elements are considered subsidiaries: (a) power over the company; (b) exposure or rights to variable returns resulting from involvement therein; (c) ability to affect the size of these returns by exercising power. If these subsidiaries exercise a significant influence, they are consolidated as from the date in which control begins until the date in which control ends so as to provide a correct representation of the Group's operating results, financial position and cash flows.
The data used for consolidation have been taken from the income statements and statements of financial position prepared by the directors of the individual subsidiary companies. These figures have been appropriately amended and restated, when necessary, to align them with international accounting standards and with uniform group-wide classification criteria.
The criteria applied for consolidation are as follows:
Starting from these consolidated financial statements, A.R.C. s.r.l., company active in the production of burners for professional cooking of which the Group acquired control at the end of June 2016, was consolidated.
The evaluation of A.R.C. in accordance with IFRS 3 revised, namely recognising the fair value of assets, liabilities and contingent liabilities at the acquisition date, is to be considered temporary for the moment, in that, in accordance with IFRS 3 revised, the evaluation becomes final within 12 months from the acquisition date.
The effects of this operation are shown in the following table:
| ORIGINAL VALUES | |
|---|---|
| NON-CURRENT ASSETS | |
| Property, plant and equipment and intangible assets | 303 |
| Financial fixed assets | 107 |
| Non-current receivables and deferred tax assets | 145 |
| CURRENT ASSETS | |
| Inventories | 891 |
| Trade receivables | 1,525 |
| Other receivables | 234 |
| Cash and cash equivalents | 2,186 |
| TOTAL ASSETS | 5,391 |
| NON-CURRENT LIABILITIES | |
| Post-employment benefit reserve | (238) |
| CURRENT LIABILITIES | |
| Trade payables | (813) |
| Sundry payables | (308) |
| TOTAL LIABILITIES | (1,359) |
| FAIR VALUE OF NET ASSETS ACQUIRED | 4,032 |
| - % pertaining to Sabaf (70%) (a) | 2,823 |
| Total cost of acquisition (b) | 4,800 |
| Goodwill deriving from acquisition (b-a) (Note 3) | 1,977 |
| Acquired cash and cash equivalents (c) | 2,186 |
| Total cash outlay (b-c) | 2,614 |
Separate financial statements of each company belonging to the Group are prepared in the currency of the country in which that company operates (functional currency). For the purposes of the consolidated financial statements, the financial statement of each foreign entity is expressed in euro, which is the Group's functional currency and the reporting currency for the consolidated financial statements.
Balance sheet items in accounts expressed in currencies other than euro are converted by applying current end-of-year exchange rates. Income statement items are converted at average exchange rates for the year.
Foreign exchange differences arising from the comparison between opening shareholders' equity converted at current exchange rates and at historical exchange rates, together with the difference between the net result expressed at average and current exchange rates, are allocated to "Other Reserves" in shareholders' equity. The exchange rates used for conversion into euro of the financial statements of the foreign subsidiaries, prepared in local currency, are shown in the following table:
| DESCRIPTION OF CURRENCY |
EXCHANGE RATE IN EFFECT AT 31/12/2016 |
AVERAGE EXCHANGE EXCHANGE RATE IN RATE 2016 EFFECT AT 31/12/2015 |
AVERAGE EXCHANGE RATE 2015 |
|
|---|---|---|---|---|
| Brazilian real | 3.4305 | 3.8576 | 4.3117 | 3.7004 |
| Turkish lira | 3.7072 | 3.3435 | 3.1765 | 3.0255 |
| Chinese renminbi | 7.3202 | 7.3512 | 7.0608 | 6.9714 |
| 31.12.2016 | 31.12.2015 | |||
|---|---|---|---|---|
| DESCRIPTION | Profit for the year | Shareholders' equity |
Profit for the year | Shareholders' equity |
| Profit and shareholders' equity of parent company Sabaf S.p.A. |
2,460 | 91,524 | 5,642 | 96,234 |
| Equity and consolidated company results | 6,175 | 66,276 | 4,775 | 56,427 |
| Elimination of consolidated equity investments' carrying value | 521 | (49,900) | (1,303) | (45,616) |
| Goodwill | 0 | 6,422 | 0 | 4,445 |
| Put option on A.R.C. minorities | 0 | (1,522) | 0 | 0 |
| Intercompany eliminations | (60) | (491) | (116) | (450) |
| Minority interests | (87) | (1,296) | 0 | 0 |
| PROFIT AND SHAREHOLDERS' EQUITY ATTRIBUTABLE TO THE GROUP |
9,009 | 111,013 | 8,998 | 111,040 |
The Group's Operating segments in accordance with IFRS 8 - Operating Segment are identified in the business segments that generate revenue and costs, whose results are periodically reassessed by top management in order to assess performance and decisions regarding resource allocation. The Group operating segments are the following:
The accounting standards and policies applied for the preparation of the consolidated financial statements at 31 December 2016, unchanged versus the previous year, are shown below:
These are recorded at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers. Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life, in years, is as follows:
| Buildings | 33 |
|---|---|
| Light constructions | 10 |
| General plants | 10 |
| Specific plant and machinery | 6 – 10 |
| Equipment | 4 – 10 |
| Furniture | 8 |
| Electronic equipment | 5 |
| Vehicles and other transport means | 4 – 5 |
Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer. Land is not depreciated.
Assets acquired via finance lease contracts are accounted for using the financial method and are reported with assets at their purchase value, less depreciation. Depreciation of such assets is reflected in the consolidated annual financial statements applying the same policy followed for Company-owned property, plant and equipment. Set against recognition of such assets, the amounts payable to the financial lessor are posted among short- and medium-/long-term payables. In addition, financial charges pertaining to the period are charged to the income statement.
Goodwill is the difference between the purchase price and fair value of investee companies' identifiable assets and liabilities on the date of acquisition.
As regards acquisitions completed prior to the date of IFRS adoption, the Sabaf Group has used the option provided by IFRS 1 to refrain from applying IFRS 3 – concerning business combinations – to acquisitions that took place prior to the transition date. Consequently, goodwill arising in relation to past acquisitions has not been recalculated and has been posted in accordance with Italian GAAPs, net of amortisation reported up to 31 December 2003 and any losses caused by a permanent value impairment.
After the transition date, goodwill – as an intangible asset with an indefinite useful life – is not amortised but subjected annually to impairment testing to check for value loss, or more frequently if there are signs that the asset may have suffered impairment (impairment test).
As established by IAS 38, other intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably. If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained.
Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life.
The useful life of projects for which development costs are capitalised is estimated to be 10 years.
The SAP management system is amortised over five years.
At each end of reporting period, the Group reviews the carrying value of its tangible and intangible assets to determine whether there are signs of impairment of the value of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate recoverable value individually, the Group estimates the recoverable value of the cash generating unit (CGU) to which the asset belongs.
In particular, the recoverable value of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use. The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects fair market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Group prepares operating cash flow forecasts based on the most recent budgets approved by the Board of Directors of the consolidated companies, draws up the forecasts for the coming years and determines the terminal value (current value of perpetual income), which expresses the medium and long term operating flows in the specific sector.
If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or of the cash-generating unit) - with the exception of goodwill - is increased to the new value resulting from the estimate of its recoverable value, but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised in the income statement.
As allowed by IAS 40, non-operating buildings and constructions are assessed at cost net of depreciation and losses due to cumulative impairment of value. The depreciation criterion applied is the asset's estimated useful life, which is considered to be 33 years. If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or CGU) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised as income in the income statement.
Equity investments not classified as held for sale are stated in the accounts at cost, reduced for impairment. The original value is written back in subsequent years if the reasons for write-down cease to exist.
Non-current receivables are stated at their presumed realisable value.
Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products – calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are eliminated in subsequent years if the reasons for such write-downs cease to exist.
Receivables are recognised at their presumed realisable value. Their face value is adjusted to a lower realisable value via specific provisioning directly reducing the item based on in-depth analysis of individual positions. Trade receivables assigned without recourse, despite being transferred legally, continue to be stated with "Trade receivables" until they are collected, which is never prior to the due date. Trade receivables past due and nonrecoverable assigned without recourse are recorded under "Other current receivables".
Financial assets held for trading are measured at fair value, allocating profit and loss effects to finance income or expense.
Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future financial flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
The post-employment benefit reserve (TFR) is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, post-employment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unit-credit method. The regulations of this fund were amended by Italian Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007 In the light of these changes, and, in particular, for companies with at least 50 employees, post-employment benefits must now be considered a defined-benefit plan only for the portions accruing before 1 January 2007 (and not yet paid at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans. Actuarial gains or losses are recorded immediately under "Other total profits/(losses)".
Payables are recognised at face value; the portion of interest included in their face value and not yet payable at period-end is deferred to future periods.
Loans are initially recognised at cost, net of related costs of acquisition. This value is subsequently adjusted to allow for any difference between initial cost and repayment value over the loan's duration using the effective interest rate method.
Loans are classified among current liabilities unless the Group has the unconditional right to defer discharge of a liability by at least 12 months after the reference date.
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date. At year-end, assets and liabilities expressed in foreign currencies, with the exception of non-current items, are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a nondistributable reserve until it is effectively realised.
The Group's business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The company uses derivative instruments (mainly forward contracts on currencies and commodity options) to hedge risks stemming from changes in foreign currencies relating to irrevocable commitments or to planned future transactions.
Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates.
Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Group's contractual commitments and planned transactions are recognised directly in shareholders' equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place.
For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement. Gains and losses stemming from the derivative's valuation are also posted in the income statement.
Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur.
Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place. If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year's income statement.
Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts and the latter are not measured at fair value with posting of related gains and losses in the income statement.
Revenue is reported net of return sales, discounts, allowances and bonuses, as well as of the taxes directly associated with sale of goods and rendering of services.
Sales revenue is reported when the company has transferred the significant risks and benefits associated with ownership of the goods and the amount of revenue can be reliably measured.
Revenues of a financial nature are recorded on an accrual basis.
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recorded in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses.
Income taxes include all taxes calculated on the Group's taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity. Other taxes not relating to income, such as property taxes, are included among operating expenses. Deferred taxes are provisioned in accordance with the global liability provisioning method.
They are calculated on all temporary differences emerging between the taxable base of an asset and liability and its book value in the consolidated financial statements, with the exception of goodwill that is not tax-deductible and of differences stemming from investments in subsidiaries for which cancellation is not envisaged in the foreseeable future. Deferred tax assets on unused tax losses and tax credits carried forward are recognised to the extent that it is probable that future taxable income will be available against which they can be recovered. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable, according to the respective regulations of the countries where the Group operates, in the years when temporary differences will be realised or settled.
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares are booked as a reduction of shareholders' equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders' equity.
Basic EPS is calculated by dividing the profit or loss attributable to the direct parent company's shareholders by the weighted average number of ordinary shares outstanding during the year. Diluted EPS is calculated by dividing the profit or loss attributable to the direct parent company's shareholders by the weighted average number of shares outstanding, adjusted to take into account the effects of all potential ordinary shares with a dilutive effect.
Preparation of the financial statements and notes in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities as of the end of the reporting period.
Actual results might differ from these estimates.
Estimates are used to measure tangible and intangible assets subject to impairment testing, as described earlier, as well as to measure provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset write-downs, employee benefits, taxes, and other provisions.
Specifically:
The procedure for determining impairment of value of tangible and intangible assets described in "Impairment of value" implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees' management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated.
Receivables are adjusted by the related bad debt provision to take into account their recoverable value. To determine the size of the write-downs, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer's solvency, as well as experience and historical payment trends.
Warehouse inventories subject to obsolescence and slow turnover are systematically valued, and written down if their recoverable value is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates. Any change in the above-mentioned assumptions might have significant effects on liabilities for pension benefits.
The Group is subject to different bodies of tax legislation on income. Determining liabilities for Group taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets.
When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Group in litigation. These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions.
Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
Accounting standards and amendments applicable from 1 January 2016 The following IFRS accounting standards, amendments and interpretations were applied by the Group for the first time on 1 January 2016:
Finally, as part of the annual process of improvement of the standards, on 12 December 2013 the IASB published the document "Annual Improvements to IFRSs: 2010-2012 Cycle" (including IFRS 2 Share Based Payments – Definition of vesting condition, IFRS 3 Business Combination – Accounting for contingent consideration, IFRS 8 Operating segments – Aggregation of operating segments and Reconciliation of total of the reportable segments' assets to the entity's assets, IFRS 13 Fair Value Measurement – Short-term receivables and payables) and on 25 September 2014 the document "Annual Improvements to IFRSs: 2012-2014 Cycle" (including: IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 – Financial Instruments: Disclosure and IAS 19 – Employee Benefits) which partially integrate the existing standards.
• Standard IFRS 15 – Revenue from Contracts with Customers (published on 28 May 2014 and supplemented with further clarifications published on 12 April 2016), which is scheduled to replace IAS 18 – Revenue and IAS 11 – Construction Contracts, as well as interpretations IFRIC 13 – Customer Loyalty Programmes, IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers and SIC 31 – Revenues-Barter Transactions Involving Advertising
Services. The standard establishes a new revenue recognition model, which will apply to all contracts signed with customers except those falling within the application of other IAS/IFRS standards, such as leases, insurance contracts and financial instruments. The fundamental passages for the recognition of revenues according to the new model are:
The principle applies from 1 January 2018, but early application is permitted. Although the systematic analysis of the case and in particular a detailed analysis of the contracts with the customers have not yet been completed, the directors do not expect that the application of IFRS 15 can have a significant impact on the amounts recorded for the revenues and on the related disclosures in the Group's consolidated financial statements.
• Final version of IFRS 9 – Financial Instruments (published on 24 July 2014). The document includes the results of the phases relating to the classification and valuation, Impairment and Hedge accounting, of the IASB project designed to replace IAS 39. The new standard, which replaces the previous versions of IFRS 9, should be applied by financial statements from 1 January 2018 onwards. The directors do not expect that the application of IFRS 9 can have a significant impact on the amounts and on the disclosures in the Group's consolidated financial statements. However, it is not possible to provide a reasonable estimate of the effect as long as the Group has not completed a detailed analysis.
On the reporting date of these consolidated financial statements, the competent bodies of the European Union have not yet concluded the approval process necessary for the adoption of the amendments and principles described below.
• On 13 January 2016, the IASB published the standard IFRS 16 – Leases, which will replace the standard IAS 17 – Leases, as well as interpretations IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset in order to distinguish the leasing contracts from the service contracts, identifying the discriminatory ones: the identification of the asset, the right of replacement of the same, the right to obtain substantially all of the economic benefits deriving from the use of the asset and the right to direct the use of the asset underlying the contract. The standard establishes a single model of recognition and measurement of the lease agreements for the lessee which requires the recognition of the asset to be leased (operating lease or otherwise) in assets offset by a financial debt, while also providing the opportunity not to recognise as leases the agreements whose subject matter are "low-value assets" and leases with a contract duration equal to or less than 12 months. By contrast, the Standard does not include significant changes for the lessors. The standard applies beginning on 1 January 2019 but early application is permitted, only for Companies that opted for early application of IFRS 15 - Revenue from Contracts with Customers. The directors do not expect that the application of IFRS 16 can have a significant impact on the accounting of the leasing contracts and on the related disclosures in the Group's consolidated financial statements.
| PROPERTY | PLANT AND EQUIPMENT |
OTHER ASSETS | ASSETS UNDER CONSTRUCTION |
TOTAL | |
|---|---|---|---|---|---|
| COST | |||||
| AT 31 DECEMBER 2014 | 52,177 | 168,178 | 35,891 | 3,850 | 260,096 |
| Increases | 119 | 8,574 | 1,753 | 1,135 | 11,581 |
| Disposals | - | (1,173) | (93) | (14) | (1,280) |
| Change in scope of consolidation | - | 112 | 160 | - | 272 |
| Reclassifications | - | 2,750 | 105 | (2,899) | (44) |
| Forex differences | (1,071) | (1,912) | (667) | (13) | (3,663) |
| AT 31 DECEMBER 2015 | 51,225 | 176,529 | 37,149 | 2,059 | 266,962 |
| Increases | 95 | 8,417 | 2,275 | 1,101 | 11,888 |
| Disposals | (1) | (3,075) | (312) | - | (3,388) |
| Change in scope of consolidation | - | 1,335 | 584 | - | 1,919 |
| Reclassifications | 1 | 875 | 177 | (1,476) | (423) |
| Forex differences | (52) | 657 | 430 | 86 | 1,121 |
| AT 31 DECEMBER 2016 | 51,268 | 184,738 | 40,303 | 1,770 | 278,079 |
| ACCUMULATED DEPRECIATIONS | |||||
| AT 31 DECEMBER 2014 | 14,178 | 140,932 | 30,503 | - | 185,613 |
| Depreciations for the year | 1,450 | 7,277 | 2,421 | - | 11,148 |
| Eliminations for disposals | - | (1,101) | (108) | - | (1,209) |
| Change in scope of consolidation | - | 1 | 20 | - | 21 |
| Reclassifications | 5 | 35 | 20 | - | 60 |
| Forex differences | (163) | (1,085) | (460) | - | (1,708) |
| AT 31 DECEMBER 2015 | 15,470 | 146,059 | 32,396 | - | 193,925 |
| Depreciations for the year | 1,442 | 7,961 | 2,328 | - | 11,731 |
| Eliminations for disposals | - | (3,066) | (231) | - | (3,297) |
| Change in scope of consolidation | - | 1,145 | 492 | - | 1,637 |
| Reclassifications | 5 | 40 | 21 | - | 66 |
| Forex differences | 59 | 588 | 306 | - | 953 |
| AT 31 DECEMBER 2016 | 16,976 | 152,727 | 35,312 | - | 205,015 |
| NET CARRYING VALUE | |||||
| AT 31 DECEMBER 2016 | 34,292 | 32,011 | 4,991 | 1,770 | 73,064 |
| AT 31 DECEMBER 2015 | 35,755 | 30,470 | 4,753 | 2,059 | 73,037 |
The breakdown of the net carrying value of Property was as follows:
| 31.12.2016 | 31.12.2015 | VAR. | |
|---|---|---|---|
| Land | 6,688 | 6,624 | 64 |
| Industrial buildings | 27,604 | 29,131 | (1,527) |
| TOTAL | 34,292 | 35,755 | (1,463) |
The net carrying value of industrial property includes an amount of € 2,211,000 (€ 2,297,000 at 31 December 2015) relating to industrial buildings held under finance leases.
The main investments in the financial year were aimed at increasing production capacity in Turkey and Brazil and the further automation of production of light alloy valves. Investments were also made to improve production processes as well as maintenance and replacement investments designed to keep the capital equipment constantly updated. Decreases mainly relate to the disposal of machinery no longer in use. Assets under construction include machinery under construction and advance payments to suppliers of capital equipment.
At 31 December 2016, the Group found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| COST | |||
|---|---|---|---|
| AT 31 DECEMBER 2014 | 13,257 | ||
| Increases | - | ||
| Disposals | (121) | ||
| AT 31 DECEMBER 2015 | 13,136 | ||
| Increases | - | ||
| Disposals | - | ||
| AT 31 DECEMBER 2016 | 13,136 |
| AT 31 DECEMBER 2014 | 6,029 |
|---|---|
| Depreciations for the year | 442 |
| Eliminations for disposals | (47) |
| AT 31 DECEMBER 2015 | 6,424 |
| Depreciations for the year | 442 |
| Eliminations for disposals | - |
| AT 31 DECEMBER 2016 | 6,866 |
| NET CARRYING VALUE | |
|---|---|
| AT 31 DECEMBER 2016 | 6,270 |
| AT 31 DECEMBER 2015 | 6,712 |
This item includes non-operating buildings owned by the Group: these are mainly properties for residential use, held for rental or sale.
At 31 December 2016, the Group found no endogenous or exogenous indicators of
impairment of its investment property. As a result, the value of investment property was not submitted to impairment testing.
| GOODWILL | PATENTS, SOFTWARE AND KNOW-HOW |
DEVELOPMENT COSTS |
OTHER INTANGIBLE ASSETS |
TOTAL | |
|---|---|---|---|---|---|
| COST | |||||
| AT 31 DECEMBER 2014 | 9,008 | 5,980 | 4,318 | 644 | 19,950 |
| Increases | - | 193 | 414 | 155 | 762 |
| Reclassifications | - | 66 | (47) | - | 19 |
| Decreases | - | - | - | - | - |
| Forex differences | - | (8) | - | - | (8) |
| AT 31 DECEMBER 2015 | 9,008 | 6,231 | 4,685 | 799 | 20,723 |
| Increases | - | 155 | 314 | 18 | 487 |
| Change in the scope of consolidation | 1,977 | 13 | - | 19 | 2,009 |
| Reclassifications | - | 62 | (44) | (30) | (12) |
| Decreases | - | - | - | (15) | (15) |
| Forex differences | - | 6 | - | - | 6 |
| AT 31 DECEMBER 2016 | 10,985 | 6,467 | 4,955 | 791 | 23,198 |
| AT 31 DECEMBER 2014 | 4,563 | 5,528 | 2,011 | 489 | 12,591 |
|---|---|---|---|---|---|
| 2015 Amortisation | - | 209 | 336 | 67 | 612 |
| Decreases | - | - | - | - | - |
| Forex differences | - | (5) | - | - | (5) |
| AT 31 DECEMBER 2015 | 4,563 | 5,732 | 2,347 | 556 | 13,198 |
| 2016 Amortisation | - | 266 | 352 | 98 | 716 |
| Change in the scope of consolidation | - | 3 | - | 8 | 11 |
| Decreases | - | - | - | (15) | (15) |
| Forex differences | - | 4 | - | - | 4 |
| AT 31 DECEMBER 2016 | 4,563 | 6,005 | 2,699 | 647 | 13,914 |
| AT 31 DECEMBER 2016 | 6,422 | 462 | 2,256 | 144 | 9,284 |
|---|---|---|---|---|---|
| AT 31 DECEMBER 2015 | 4,445 | 499 | 2,338 | 243 | 7,525 |
Goodwill recognised at 31 December 2016 is allocated:
In the course of 2016, the Hinges CGU achieved better results, both in terms of sales development and profitability, which turned out to be greater than the budget. The 2017- 2021 forward plan, drafted at the end of 2016, plans a further gradual improvement of sales and the maintaining of profitability, to be considered as durably acquired also in a future perspective. At 31 December 2016, the Group tested the carrying value of its CGU Hinges for impairment, determining its recoverable value, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan drafted by the management. Cash flows for the period from 2017 to 2021 were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 7.76% (8.45% in the impairment test conducted while preparing the consolidated financial statements at 31 December 2015) and a growth rate (g) of 1.50%, which is in line with historical data.
The recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 12,851 million, compared with a carrying value of the assets allocated to the Hinges unit of € 7,279 million; consequently, the value recorded for goodwill at 31 December 2016 was deemed recoverable.
At 31 December 2016, the Group tested the carrying value of its Professional burners CGU for impairment, determining its recoverable value, considered to be equivalent to its usable value, by discounting expected future cash flow in the forward plan prepared during the acquisition of the equity investment in A.R.C. and adjusted at the end of 2016 on the basis of further elements known. Cash flows for the 2017-2019 period were augmented by the so-called terminal value, which expresses the operating flows that the CGU is expected to generate from the fourth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 5.79% and a growth rate (g) of 1.50%.
The recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 7,396 million, compared with a carrying value of the assets allocated to the Professional burners unit of € 3,246 million (including minority interests); consequently, the value recorded for goodwill at 31 December 2016 was deemed recoverable.
The Group verifies the ability to recover goodwill at least once a year or more frequently if there are indications of value impairment. Recoverable value is determined through value of use, by discounting expected cash flows.
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| IN THOUSANDS OF EURO |
GROWTH RATE | ||||
|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% |
| 6.76% | 14,247 | 14,779 | 15,363 | 16,004 | 16,713 |
| 7.26% | 13,077 | 13,518 | 13,998 | 14,520 | 15,093 |
| 7.76% | 12,081 | 12,451 | 12,851 | 13,284 | 13,754 |
| 8.26% | 11,222 | 11,536 | 11,874 | 12,237 | 12,629 |
| 8.76% | 10,474 | 10,743 | 11,031 | 11,340 | 11,671 |
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| IN THOUSANDS OF EURO |
GROWTH RATE | ||||
|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% |
| 4.79% | 8,517 | 9,103 | 9,778 | 10,565 | 11,492 |
| 5.29% | 7,472 | 7,922 | 8,431 | 9,011 | 9,680 |
| 5.79% | 6,645 | 7,000 | 7,396 | 7,842 | 8,346 |
| 6.29% | 5,974 | 6,261 | 6,578 | 6,929 | 7,322 |
| 6.79% | 5,419 | 5,655 | 5,913 | 6,197 | 6,511 |
Software investments include the application development of the Group's management system (SAP) and CAD development.
The main investments in the year relate to the development of new products, including special burners in brass and personalised burners for some customers (research and development activities conducted over the year are set out in the Report on Operations).
| 31.12.2015 | CHANGE IN SCOPE OF CONSOLIDATION |
OTHER CHANGES |
31.12.2016 | |
|---|---|---|---|---|
| Sabaf US | 139 | - | - | 139 |
| ARC Handan Burners Co. | - | 101 | - | 101 |
| Other equity investments | 65 | 6 | (5) | 66 |
| TOTAL | 204 | 107 | (5) | 306 |
The subsidiary Sabaf U.S. operates as a commercial base for North America. The carrying value of the investment is deemed recoverable taking into consideration expected developments on the North American market.
Handan ARC Burners Co. is a Chinese joint venture built at the end of 2015, in which A.R.C. s.r.l. holds 50% (therefore, the Group's share is 35%). The aim of Handan ARC Burners is to produce and market in China burners for professional cooking; the first machineries were installed during 2016 and the start of production is expected for the beginning of 2017.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Tax receivables | 225 | 395 | (170) |
| Guarantee deposits | 37 | 35 | 2 |
| Other | - | 2 | (2) |
| TOTAL | 262 | 432 | (170) |
Tax receivables relate to indirect taxes expected to be recovered after 2017.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Commodities | 9,740 | 10,407 | (667) |
| Semi-processed goods | 10,893 | 10,564 | 329 |
| Finished products | 13,308 | 12,155 | 1,153 |
| Obsolescence provision | (2,457) | (2,117) | (340) |
| TOTAL | 31,484 | 31,009 | 475 |
The value of final inventories at 31 December 2016 remained substantially unchanged compared with the end of the previous year. The obsolescence provision reflects the improved estimate of the obsolescence risk, based on specific analyses conducted at the end of the year on slow-moving and non-moving products.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Total trade receivables | 37,576 | 41,439 | (3,863) |
| Bad debt provision | (734) | (1,014) | 280 |
| NET TOTAL | 36,842 | 40,425 | (3,583) |
At 31 December 2016, trade receivables included balances totalling USD 5,658,000, booked at the EUR/USD exchange rate in effect on 31 December 2016, i.e. 1.0541. The amount of trade receivables recognised in the financial statements includes € 1.1 million of receivables assigned without recourse to factoring companies (€ 2.3 million at 31 December 2015) and approximately € 22.4 million in insured receivables (€ 23.5 million at 31 December 2015).
The bad debt provision was adjusted to the better estimate of the credit risk at the end of the reporting period.
The reduction in trade receivables is attributable not only to the decline in sales but also to lower receivables past due compared to the previous year, as shown in the following table:
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Current receivables (not past due) | 32,616 | 35,497 | (2,881) |
| Outstanding up to 30 days | 3,296 | 2,498 | 798 |
| Outstanding from 30 to 60 days | 218 | 570 | (352) |
| Outstanding from 60 to 90 days | 136 | 812 | (676) |
| Outstanding for more than 90 days | 1,310 | 2,062 | (752) |
| TOTAL | 37,576 | 41,439 | (3,863) |
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| From Giuseppe Saleri SapA for IRES | 1,158 | 1,204 | (46) |
| From inland revenue for income tax | 1,028 | 614 | 414 |
| From inland revenue for VAT | 533 | 70 | 463 |
| Other tax receivables | 444 | 601 | (157) |
| TOTAL | 3,163 | 2,489 | 674 |
Until the 2015 financial year, Italian companies of the Group have been part of the national tax consolidation scheme pursuant to articles 117/129 of the Unified Income Tax Law. In this scheme, Giuseppe Saleri S.a.p.A., the parent company of Sabaf S.p.A., acted as the consolidating company. In 2016, the conditions for the preparation of the tax consolidation scheme fell short, which consequently was discontinued.
The receivable from Giuseppe Saleri S.a.p.A. recognised at 31 December 2016 derives from the full deductibility of IRAP from IRES relating to the expenses incurred for employees for the 2006-2011 period (Italian Legislative Decree 201/2011), for which the consolidating company presented an application for a refund and which will revert to the Sabaf Group companies for the share pertaining to them as soon as it is refunded.
Other tax receivables mainly refer to receivables in respect of indirect Brazilian and Turkish taxes.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Credits to be received from suppliers |
706 | 865 | (159) |
| Advances to suppliers |
168 | 170 | (2) |
| Other | 545 | 412 | 133 |
| TOTAL | 1,419 | 1,447 | (28) |
At 31 December 2016 Credits to be received from suppliers included € 411,000 related to the relief due to the parent company as an energy-intensive business (so-called "energy-intensive bonuses") for the years 2014 and 2015, of which € 194,000 received at the beginning of 2017.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Currency derivatives |
- | 69 | (69) |
| TOTAL | 0 | 69 | (69) |
Cash and cash equivalents, which amounted to € 12,143,000 at 31 December 2016 (€ 3,991,000 at 31 December 2015) consisted of bank current account balances of approximately € 8.4 million and sight deposits of approximately € 3.7 million.
The parent company's share capital consists of 11,533,450 shares with a par value of € 1.00 each. The share capital paid in and subscribed did not change during the year.
During the financial year Sabaf S.p.A. acquired 171,061 treasury shares at an average unit price of € 9,794; there have been no sales.
At 31 December 2016, the parent company Sabaf S.p.A. held 233,139 treasury shares, equal to 2.021% of share capital (62,078 treasury shares at 31 December 2015), reported in the financial statements as an adjustment to shareholders' equity at a unit value of € 10,289 (the market value at year-end was € 10.4).
There were 11,300,311 outstanding shares at 31 December 2016 (11,471,372 at 31 December 2015).
| 31.12.2016 | 31.12.2015 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT |
CURRENT | NON CURRENT |
|
| Property leasing | 145 | 1,611 | 142 | 1,756 |
| Property mortgages |
- | - | 934 | - |
| Unsecured loans | 6,656 | 17,281 | 2,707 | 4,632 |
| Short-term bank loans |
7,802 | - | 13,666 | - |
| Advances on bank receipts or invoices |
2 | - | 5,988 | - |
| Interest payable | 7 | - | 43 | - |
| TOTAL | 14,612 | 18,892 | 23,480 | 6,388 |
During the financial year, the Group reformulated the average duration of its loans, entering into 4 unsecured loan agreements totalling € 19.8 million repayable in five years in quarterly fixed instalments, with rates ranging from 0.60% to 1%.
Only one of the outstanding unsecured loans of € 5 million at 31 December 2016 has covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below:
All outstanding bank loans are denominated in euro, with the exception of a short-term loan of USD 2 million and a short-term loan of 1.5 million Turkish lira. Note 35 provides information on financial risks, pursuant to IFRS 7.
| 31.12.2016 | 31.12.2015 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT |
CURRENT | NON CURRENT |
|
| Option on minorities |
- | 1,522 | - | - |
| Payables to A.RC. shareholders |
60 | 240 | - | - |
| Currency derivatives |
238 | - | 17 | - |
| Derivative instruments on interest rates |
37 | - | 14 | - |
| TOTAL | 335 | 1,762 | 31 | 0 |
In June 2016, as part of the acquisition of 70% of A.R.C. S.r.l., Sabaf signed with Loris Gasparini (current minority shareholder by 30% of A.R.C.) an agreement that aimed to regulate Gasparini's right to leave A.R.C. and the interest of Sabaf to acquire 100% of the shares after expiry of the term of five years from the signing of the purchase agreement of 24 June 2016, by signing specific option agreements. Therefore, the agreement envisaged specific option rights to purchase (by Sabaf) and sell (by Gasparini) exercisable as from 24 June 2021, the remaining shares of 30% of A.R.C., Pursuant to the provisions of IAS 32, the assignment of an option to sell (put option) in the terms described above required the initial recording of a liability corresponding to the estimated redemption value, expected at the time of any exercise of the option: to this end, a non-current financial liability of € 1.522 million was recognised in these consolidated financial statements. Note that, during the subsequent periods until the date the option is exercised, the Group will be obliged to evaluate as and when the outlay estimate and to determine the adjustment to the recorded liability, opting for the application of the fair value measurement criteria in compliance with IAS 39.
The payable to the A.R.C. shareholders of € 300,000 at 31 December 2016 is related to the part of the price still to be paid to the sellers, which was deposited on an escrow account and will be released in favour of the sellers at constant rates in 5 years, in accordance with contractual agreements and guarantees issued by the sellers.
Other financial liabilities also included:
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Post employment benefit reserve |
2,961 | 2,914 | 47 |
| Retirement reserve |
125 | - | 125 |
| TOTAL | 3,086 | 2,914 | 172 |
Following the revision of IAS 19 - Employee benefits, from 1 January 2013 all actuarial gains or losses are recorded immediately in the comprehensive income statement ("Other comprehensive income") under the item "Actuarial income and losses".
Post-employment benefits are calculated as follows:
| FINANCIAL ASSUMPTIONS |
31.12. 2016 | 31.12.2015 |
|---|---|---|
| Discount rate | 1.15% | 1.60% |
| Inflation | 1.75% | 2.00% |
| DEMOGRAPHIC THEORY | 31.12. 2016 | 31.12.2015 |
|---|---|---|
| Mortality rate | ISTAT 2010 M/F | ISTAT 2010 M/F |
| Disability rate | INPS 1998 M/F | INPS 1998 M/F |
| Staff turnover | 3% - 6% | 3% - 6% |
| Advance payouts | 5% - 7% per year | 5% - 7% per year |
| Retirement age | pursuant to legisla tion in force on 31 December 2016 |
pursuant to legisla tion in force on 31 December 2016 |
| 31.12.2015 | PROVISIONS | UTILISATIONW | RELEASE OF EXCESS PORTION |
EXCHANGE RATE DIFFERENCES |
31.12.2016 | |
|---|---|---|---|---|---|---|
| Reserve for agents' indemnities |
297 | - | - | (66) | - | 231 |
| Product guarantee fund | 60 | 35 | (35) | - | - | 60 |
| Reserve for legal risks | 38 | 100 | (10) | - | 15 | 143 |
| TOTAL | 395 | 135 | (45) | (66) | 15 | 434 |
The reserve for agents' indemnities covers amounts payable to agents if the Group terminates the agency relationship.
The product guarantee fund covers the risk of returns or charges by customers for products already sold. The fund was adjusted at the end of the year, on the basis of analyses conducted and past experience.
The reserve for legal risks, set aside for moderate disputes, was adjusted to reflect the outstanding disputes.
The provisions booked to the provision for risks, which represent the estimate of future payments made based on historical experience, have not been time-discounted because the effect is considered negligible.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| TOTAL | 18,977 | 19,450 | (473) |
Average payment terms did not change versus the previous year. At 31 December 2016, there were no overdue payables of a significant amount and the Group did not receive any injunctions for overdue payables.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| To Giuseppe Saleri SapA for income tax |
- | 157 | (157) |
| To inland revenue for income tax |
361 | - | 361 |
| Withholding taxes | 788 | 844 | (56) |
| Other tax payables | 41 | 218 | (177) |
| TOTAL | 1,190 | 1,219 | (29) |
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| To employees | 3,965 | 4,032 | (67) |
| To social security institutions | 2,139 | 2,022 | 117 |
| To agents | 268 | 317 | (49) |
| Advances from customers | 181 | 103 | 78 |
| Other current payables | 104 | 64 | 40 |
| TOTAL | 6,657 | 6,538 | 119 |
At the beginning of 2017, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Deferred tax assets | 4,781 | 4,887 |
| Deferred tax liabilities | (764) | (772) |
| NET POSITION | 4,017 | 4,115 |
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their movements during the year and the previous year.
| Depreciation and amortisation and leasing |
Provisions and value adjustments |
Fair value of derivative instruments |
Goodwill | Tax incentives |
Actuarial post-em ployment benefit reser ve evaluation |
Other temporary differences |
TOTAL | |
|---|---|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2015 | (26) | 1,014 | (14) | 1,771 | 843 | 200 | 327 | 4,115 |
| To the income statement | 48 | 6 | 81 | - | (141) | - | (31) | (37) |
| To shareholders' equity | - | - | - | - | - | 10 | - | 10 |
| Forex differences | 1 | 20 | - | - | (107) | - | (7) | (93) |
| Change in scope of consolidation |
- | 22 | - | - | - | - | - | 22 |
| AT 31 DECEMBER 2016 | 23 | 1,062 | 67 | 1,771 | 595 | 210 | 289 | 4,017 |
Deferred tax assets relating to goodwill, equal to € 1,771,000, refer to the exemption of the value of the equity investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Italian law Decree 98/2011. The future tax benefit can be made in ten annual portions starting in 2018.
Deferred tax assets relating to tax incentives are commensurate to investments made in Turkey, for which the Group benefited from reduced taxation recognised on income generated in Turkey.
As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company's net financial position is as follows:
| 31.12.2016 | 31.12.2015 | CHANGE | ||
|---|---|---|---|---|
| A. | Cash (Note 11) | 12 | 11 | 1 |
| B. | Positive balances of unrestricted bank accounts (Note 11) |
8,376 | 3,822 | 4,554 |
| C. | Other cash equivalents | 3,755 | 158 | 3,597 |
| D. | LIQUIDITY (A+B+C) | 12,143 | 3,991 | 8,152 |
| E. | Current bank payables (Note 14) | 7,811 | 19,697 | (11,886) |
| F. | Current portion of non-current debt (Note 14) | 6,801 | 3,783 | 3,018 |
| G. | Other current financial payables (Note 15) | 335 | 31 | 304 |
| H. | CURRENT FINANCIAL DEBT (E+F+G) | 14,947 | 23,511 | (8,564) |
| I. | NET CURRENT FINANCIAL DEBT (H-D) | 2,804 | 19,520 | (16,716) |
| J. | Non-current bank payables (Note 14) | 17,281 | 4,632 | 12,649 |
| K. | Other non-current financial payables (Note 14) | 3,373 | 1,756 | 1,617 |
| L. | NON-CURRENT FINANCIAL DEBT (J+K) | 20,654 | 6,388 | 14,266 |
| M. | NET FINANCIAL DEBT (I+L) | 23,458 | 25,908 | (2,450) |
The consolidated cash flow statement shows changes in cash and cash equivalents (letter D of this schedule).
In 2016, sales revenues totalled € 130,978,000, down by € 7,025,000 (-5.1%) compared with 2015. Taking into consideration the same scope of consolidation (i.e. excluding the contribution of A.R.C.), the drop in revenues was 6.7%.
| 2016 | % | 2015 | % | % CHANGE | |
|---|---|---|---|---|---|
| Brass valves | 9,007 | 6.9% | 12,689 | 9.2% | -29.0% |
| Light alloy valves | 32,393 | 24.7% | 33,784 | 24.5% | -4.1% |
| Thermostats | 7,699 | 5.9% | 10,596 | 7.7% | -27.3% |
| Standard burners | 37,338 | 28.5% | 37,789 | 27.4% | -1.2% |
| Special burners | 21,215 | 16.2% | 21,622 | 15.7% | -1.9% |
| Accessories | 12,613 | 9.6% | 13,577 | 9.8% | -7.1% |
| Household gas parts | 120,265 | 91.8% | 130,057 | 94.3% | -7.5% |
| Professional gas parts | 2,289 | 1.8% | 0 | 0.0% | n.a. |
| Hinges | 8,424 | 6.4% | 7,946 | 5.7% | +6.0% |
| TOTAL | 130,978 | 100% | 138,003 | 100% | -5.1% |
| 2016 | % | 2015 | % | % CHANGE | |
|---|---|---|---|---|---|
| Italy | 36,365 | 27.8% | 41,244 | 29.9% | -11.8% |
| Western Europe | 8,553 | 6.5% | 7,438 | 5.4% | +15.0% |
| Eastern Europe | 34,123 | 26.1% | 35,125 | 25.5% | -2.9% |
| Middle East and Africa | 11,698 | 8.9% | 16,759 | 12.1% | -30.2% |
| Asia and Oceania | 8,088 | 6.2% | 7,019 | 5.0% | +15.2% |
| South America | 20,847 | 15.9% | 20,815 | 15.1% | +0.2% |
| North America and Mexico | 11,304 | 8.6% | 9,603 | 7.0% | +17.7% |
| TOTAL | 130,978 | 100% | 138,003 | 100% | -5.1% |
The 2016 sales performance was negatively affected by the crisis of the Middle East and African markets (mainly Egypt), which recorded a downturn in direct sales of more than € 5 million. The crisis in the Middle Eastern and African markets (mainly Egypt) also affected the sales of the Group in Italy, since our Italian customers are strong exporters to the Middle East. The positive trend of the other international markets, most notably the steady growth in North America, only partially offset the decline in sales in the Middle East, Africa and Italy.
The analysis by product family shows a sharp decline in more mature products (brass valves and thermostats), mainly intended for markets in crisis. A good increase in sales of hinges was confirmed also in 2016, thanks to the positive trend of the North American market and to the launch of new supply contracts.
Average sales prices in 2016 were around 1.5% lower compared with 2015.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Sale of trimmings | 1,684 | 2,822 | (1,138) |
| Contingent income |
146 | 263 | (117) |
| Rental income | 85 | 117 | (32) |
| Use of provisions for risks and charges |
67 | 69 | (2) |
| Other income | 837 | 487 | 350 |
| TOTAL | 2,819 | 3,758 | (939) |
Lower revenues from the sale of trimmings were determined by a revision of production processes, which allowed to increase their re-utilisation as an alternative to sales.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Commodities and outsourced components |
42,540 | 49,431 | (6,891) |
| Consumables | 4,806 | 4,935 | (129) |
| TOTAL | 47,346 | 54,366 | (7,020) |
In 2016, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average lower than in 2015, allowing a saving of 0.9% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 36.7% in 2016, compared with 38.7% in 2015.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Outsourced processing | 8,435 | 9,823 | (1,388) |
| Natural gas and power | 4,622 | 4,902 | (280) |
| Maintenance | 4,071 | 3,556 | 515 |
| Transport | 1,848 | 2,059 | (211) |
| Advisory services | 1,639 | 1,670 | (31) |
| Directors' fees | 1,181 | 1,101 | 80 |
| Travel expenses and allowances | 693 | 884 | (191) |
| Insurance | 675 | 506 | 169 |
| Commissions | 648 | 651 | (3) |
| Canteen | 395 | 430 | (35) |
| Temporary agency workers | 125 | 164 | (39) |
| Other costs | 3,651 | 4,013 | (362) |
| TOTAL | 27,983 | 29,759 | (1,776) |
The lower costs for outsourced processing were related to lower production volumes in Italy. The increase in maintenance costs was due to activities in progress for the ongoing adaptation of plants, machinery and equipment at the premises of all the factories of the Group. Other costs included expenses for the registration of patents, waste disposal, cleaning, leasing third-party assets and other minor charges.
Costs for advisory services related to technical (€ 437,000), sales (€ 375,000) and legal, administrative and general (€ 827,000) services.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Salaries and wages | 22,284 | 21,974 | 310 |
| Social Security costs | 7,088 | 7,110 | (22) |
| Temporary agency workers |
1,216 | 1,340 | (124) |
| Post-employment benefit reserve and other costs |
1,524 | 2,102 | (578) |
| TOTAL | 32,112 | 32,526 | (414) |
Average Group headcount in 2016 totalled 755 employees (588 blue-collars, 153 whitecollars and supervisors, 14 managers), compared with 748 in 2015 (590 blue-collars, 145 white-collars and supervisors, 13 managers). The average number of temporary staff was 40 in 2016 (72 in 2015).
During the financial year, the Group made use of the temporary lay-off scheme in periods characterised by low production requirements: this allowed savings in personnel costs of € 689,000 (€ 333,000 in 2015).
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Non-income taxes | 488 | 498 | (10) |
| Other operating expenses |
205 | 127 | 78 |
| Contingent liabilities | 69 | 163 | (94) |
| Losses and write-downs of trade receivables |
189 | 356 | (167) |
| Provisions for risks | 127 | 18 | 109 |
| Other provisions | - | 31 | (31) |
| TOTAL | 1,078 | 1,193 | (115) |
Non-income taxes chiefly relate to property tax. Provisions refer to the allocations to the reserves described in Note 17.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Interest paid to banks | 243 | 260 | (17) |
| Interest paid on finance lease contracts |
22 | 29 | (7) |
| IRS spreads payable | 37 | 14 | 23 |
| Banking expenses | 264 | 237 | 27 |
| Other financial expense | 55 | 55 | 0 |
| TOTAL | 621 | 595 | 26 |
In 2016, the Group reported net foreign exchange gains of € 435,000, versus net losses of € 89,000 in 2015.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Current taxes | 3,454 | 3,935 | (481) |
| Deferred tax liabilities | 73 | 611 | (538) |
| Balance of previous FY | (176) | (71) | (105) |
| TOTAL | 3,351 | 4,475 | (1,124) |
The current income taxes include the IRES of € 2,078,000, the IRAP of € 452,000 and foreign income taxes of € 924,000 (€ 2,616,000, € 1,177,000 and € 538,000 respectively in 2015).
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table:
| 2016 | 2015 | |
|---|---|---|
| Theoretical income taxes | 3,280 | 3,705 |
| Permanent tax differences | 202 | 51 |
| Taxes related to previous years | (138) | (44) |
| Tax effect from different foreign tax rates | (109) | (114) |
| Effect of non-recoverable tax losses | 162 | 149 |
| Booking of tax incentives for investments in Turkey |
(408) | (165) |
| Adjustment of the deferred taxation for a change in the IRES rate |
- | 425 |
| Other differences | (71) | (55) |
| Income taxes booked in the accounts, excluding IRAP and withholding taxes (current and deferred) |
2,918 | 3,952 |
| IRAP (current and deferred) | 433 | 523 |
| TOTAL | 3,351 | 4,475 |
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 27.50%, to the pre-tax result. IRAP is not taken into account for the purpose of reconciliation because, as it is a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
No significant tax disputes were pending at 31 December 2016.
Basic and diluted EPS are calculated based on the following data:
| EARNINGS | 2016 | 2015 |
|---|---|---|
| Euro '000 | Euro '000 | |
| Profit for the year | 9,009 | 8,998 |
| NUMBER OF SHARES | 2016 | 2015 |
| Weighted average number of ordinary shares for determining basic earnings per share |
11,376,320 | 11,523,219 |
| Dilutive effect from potential ordinary shares | - | - |
| Weighted average number of ordinary shares for determining diluted earnings per share |
11,376,320 | 11,523,219 |
| EARNINGS PER SHARE (€) | 2016 | 2015 |
| Basic earnings per share | 0.792 | 0.781 |
| Diluted earnings per share | 0.792 | 0.781 |
Basic earnings per share are calculated on the average number of outstanding shares minus treasury shares, equal to 157,130 in 2016 (10,231 in 2015). Diluted earnings per share are calculated taking into account any shares approved but not yet subscribed, of which there were none in 2016 and 2015.
On 25 May 2016, shareholders were paid an ordinary dividend of € 0.48 per share (total dividends of € 5,467,000).
The Directors have recommended payment of an unchanged dividend of € 0.48 per share this year. This dividend is subject to approval of shareholders in the annual Shareholders' Meeting and was not included under liabilities.
The dividend proposed is scheduled for payment on 31 May 2017 (ex-date 29 May and record date 30 May).
Below is the information by business segment for 2016 and 2015.
| 2016 FY | 2015 FY | |||||
|---|---|---|---|---|---|---|
| Gas parts (household and professional) |
Hinges | TOTAL | Gas parts (household and professional) |
Hinges | TOTAL | |
| Sales | 122,636 | 8,342 | 130,978 | 130,048 | 7,955 | 138,003 |
| Ebit | 11,643 | 887 | 12,530 | 13,493 | 598 | 14,091 |
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39.
| FINANCIAL ASSETS | 31.12.2016 | 31.12.2015 |
|---|---|---|
| Amortised cost | ||
| • Cash and cash equivalents | 12,143 | 3,991 |
| • Trade receivables and other receivables |
38,261 | 41,872 |
| Income statement fair value | ||
| • Derivative to hedge cash flows | - | 69 |
| FINANCIAL LIABILITIES | 31.12.2016 | 31.12.2015 |
| Amortised cost | ||
| • Loans | 33,504 | 29,868 |
| • Other financial liabilities | 1,822 | - |
| • Trade payables | 18,977 | 19,450 |
| Income statement fair value |
The Group is exposed to financial risks related to its operations, mainly:
It is part of the Sabaf Group's policies to hedge exposure to changes in prices and in fluctuations in exchange and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Group does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Company assesses the creditworthiness of all its customers at the start of supply and systemically on at least an annual basis. After this assessment, each customer is assigned a credit limit.
A credit insurance policy is in place, which guarantees cover for approximately 60% of trade receivables.
Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
The key currencies other than the euro to which the Group is exposed are the US dollar, the Brazilian real and the Turkish lira, in relation to sales made in dollars (chiefly on some Asian and American markets) and the production units in Brazil and Turkey. Sales in US dollars represented 16% of total revenue in 2016, while purchases in dollars represented 2% of total revenue. Transactions in dollars were partly hedged by these derivative financial instruments: at 31 December 2016, the Group had in place forward sales contracts for a total of 7,500,000 dollars, maturing on 31 December 2017.
With reference to financial assets and liabilities in US dollars at 31 December 2016, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 331,000, without considering the pending forward sale contracts.
At 31 December 2016, gross financial debt of the Group was at a floating rate for approximately 70% and at a fixed rate for approximately 30%; to reach an optimum mix of floating and fixed rates in the structure of the loans, the Group also used derivative financial instruments. At 31 December 2016, three interest rate swap (IRS) contracts totalling € 13 million were in place, mirrored in mortgages with the same residual debt, through which the Group transformed the floating rate of the mortgages into fixed rate. Considering the IRS in place, at the end of 2016, the fixed-rate portion amounted to approximately 70% of the total financial debt. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the "income statement fair value" method.
With reference to financial assets and liabilities at variable rate at 31 December 2016 and 31 December 2015, a hypothetical increase (decrease) in the interest rate of 100 base points versus the interest rates in effect at the same date – all other variables being equal - would lead to the following effects:
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| FINANCIAL EXPENSES |
FINANCIAL EXPENSES |
|
| Increase of 100 base points |
20 | 116 |
| Decrease of 100 base points |
- | (116) |
A significant portion of the Group's acquisitions is represented by brass, steel and aluminium alloys. Sale prices of products are generally renegotiated annually; as a result, the Group is unable to pass on to customers any changes in the prices of commodities during the year. The Group protects itself from the risk of changes in the price of brass and aluminium with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2016 and 2015, the Group did not use financial derivatives on commodities. To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
The Group operates with a low debt ratio (net financial debt / shareholders' equity at 31 December 2016 of 21%, net financial debt / EBITDA of 0.92) and has unused short-term lines of credit.
To minimise the risk of liquidity, the Administration and Finance Department:
Below is an analysis by expiration date of financial payables at 31 December 2016 and 31 December 2015:
| CARRYING VALUE |
CONTRACTUAL FINANCIAL FLOWS |
WITHIN 3 MONTHS |
FROM 3 MONTHS TO 1 YEAR |
FROM 1 TO 5 YEARS |
MORE THAN 5 YEARS |
|
|---|---|---|---|---|---|---|
| Short-term bank loans | 7,811 | 7,811 | 5,811 | 2,000 | - | - |
| Unsecured loans | 23,937 | 24,388 | 1709 | 5,129 | 17,550 | - |
| Finance leases | 1,756 | 2,007 | 47 | 141 | 754 | 1,065 |
| Payables to ARC shareholders | 300 | 300 | - | 60 | 240 | - |
| ARC option | 1,522 | 1,522 | - | - | 1,522 | - |
| TOTAL FINANCIAL PAYABLES | 35,326 | 36,028 | 7,567 | 7,330 | 20,066 | 1,065 |
| Trade payables | 18,977 | 18,977 | 18,340 | 637 | - | - |
| TOTAL | 54,303 | 55,005 | 25,907 | 7,967 | 20,066 | 1,065 |
| CARRYING VALUE |
CONTRACTUAL FINANCIAL FLOWS |
WITHIN 3 MONTHS |
FROM 3 MONTHS TO 1 YEAR |
FROM 1 TO 5 YEARS |
MORE THAN 5 YEARS |
|
|---|---|---|---|---|---|---|
| Short-term bank loans | 19,697 | 19,697 | 17,697 | 2,000 | - | - |
| Unsecured loans | 7,339 | 7,506 | 700 | 2,099 | 4,707 | - |
| Property mortgages | 934 | 942 | - | 942 | - | - |
| Finance leases | 1,898 | 2,195 | 47 | 141 | 754 | 1,253 |
| TOTAL FINANCIAL PAYABLES | 29,868 | 30,340 | 18,444 | 5,182 | 5,461 | 1,253 |
| Trade payables | 19,450 | 19,450 | 18,350 | 1,100 | - | - |
| TOTAL | 49,318 | 49,790 | 36,794 | 6,282 | 5,461 | 1,253 |
The various due dates are based on the period between the end of the reporting period and the contractual expiration date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period and increased by the spread set forth in each contract.
The revised IFRS 7 requires that financial instruments reported in the statement of financial position at fair value must be classified based on a hierarchy that reflects the significance of the input used in determining the fair value. IFRS 7 makes a distinction between the following levels:
The following table shows the assets and liabilities valued at fair value at 31 December 2016, by hierarchical level of fair value assessment.
| LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |
|---|---|---|---|---|
| Other financial liabilities (currency derivatives) |
- | 238 | - | 238 |
| Other financial liabilities (derivatives on interest rates) |
- | 37 | - | 37 |
| Other financial liabilities (ARC put option) |
- | - | 1,522 | 1,522 |
| TOTAL LIABILITIES | 0 | 275 | 1,522 | 1,797 |
Transactions between consolidated companies were eliminated from the consolidated financial statements and are not reported in these notes. The table below illustrates the impact of all transactions between the Group and other related parties on the balance sheet and income statement.
| TOTAL 2016 | PARENT COMPANY |
NON CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Trade receivables | 36,842 | - | 221 | - | 221 | 0.60% |
| Tax receivables | 3,163 | 1,158 | - | - | 1,158 | 36.61% |
| Trade payables | 18,977 | - | - | 2 | 2 | 0.01% |
| TOTAL 2015 | PARENT COMPANY |
NON CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Trade receivables | 40,425 | - | 39 | - | 39 | 0.10% |
| Tax receivables | 2,489 | 1,204 | - | - | 1,204 | 48.37% |
| Trade payables | 1,219 | 157 | - | - | 157 | 12.88% |
| TOTAL 2016 | PARENT COMPANY |
NON CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Other income | 2,819 | 10 | - | - | 10 | 0.35% |
| Services | (27,983) | - | (181) | (22) | (203) | 0.73% |
| TOTAL 2015 | PARENT COMPANY |
NON CONSOLIDATED SUBSIDIARIES |
OTHER RELATED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
| Other income | 3,758 | 10 | - | - | 10 | 0.27% |
| Services | (29,759) | - | (180) | (34) | (214) | 0.72% |
Transactions with the parent company, Giuseppe Saleri S.a.p.A., comprise:
• administration services provided by Sabaf S.p.A. to the parent company;
Transactions are regulated by specific contracts regulated at arm's length conditions. Transactions with non-consolidated subsidiaries were solely of a commercial nature.
• transactions as part of the domestic tax consolidation scheme, which generated the payables and receivables shown in the tables (Note 8).
Please see the 2016 Report on Remuneration for this information.
At 31 December 2016, there were no equity-based incentive plans for the Group's directors and employees.
Pursuant to CONSOB memorandum of 28 July 2006, no events or significant non-recurring transactions occurred during 2016.
Pursuant to CONSOB memorandum of 28 July 2006, the Group declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2016.
The Sabaf Group has issued sureties to guarantee consumer and mortgage loans granted by banks to Group employees for a total of € 5,510,000 (€ 6,010,000 at 31 December 2015).
| COMPANY NAME | REGISTERED OFFICES | SHARE CAPITAL | SHAREHOLDERS | OWNERSHIP % |
|---|---|---|---|---|
| Faringosi Hinges s.r.l. | Ospitaletto (BS) | EUR 90.000 | Sabaf S.p.A. | 100% |
| Sabaf Immobiliare s.r.l. | Ospitaletto (BS) | EUR 25.000 | Sabaf S.p.A. | 100% |
| Sabaf do Brasil Ltda | Jundiaì (SP, Brazil) | BRL 24.000.000 | Sabaf S.p.A. | 100% |
| Sabaf Beyaz Esya Parcalari Sanayi Ve Ticaret Limited Sirteki |
Manisa (Turkey) | TRK 28.000.000 | Sabaf S.p.A. | 100% |
| Sabaf Appliance Components Trading Ltd. |
Kunshan (China) | EUR 200.000 | Sabaf S.p.A. | 100% |
| Sabaf Appliance Components Ltd. | Kunshan (China) | EUR 4.400.000 | Sabaf S.p.A. | 100% |
| A.R.C. s.r.l. | Campodarsego (PD) - Italy | EUR 45.000 | Sabaf S.p.A. | 70% |
| COMPANY NAME | REGISTERED OFFICES |
SHARE CAPITAL | SHAREHOLDERS | OWNERSHIP % | HOLDING % |
|---|---|---|---|---|---|
| Sabaf US Corp. | Plainfield (USA) | USD 100.000 | Sabaf S.p.A. | 100% | 100% |
| Handan ARC Burners Co., Ltd. | Handan (China) | RMB 7.000.000 | A.R.C. s.r.l. | 50% | 35% |
Registered and administrative office: Via dei Carpini, 1 25035 Ospitaletto (Brescia)
Contacts: Tel.: +39 030 - 6843001 Fax: +39 030 - 6848249 E-mail: [email protected] Website: web: www.sabaf.it Tax information: R.E.A. Brescia: 347512 Tax Code: 03244470179 VAT number: 01786910982
The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers' Regulation, shows fees relating to 2016 for auditing and for services other than auditing provided by the Independent Auditor and its network.
| IN THOUSANDS OF EURO | PARTY PROVIDING THE SERVICE | RECIPIENT | FEES PERTAINING TO THE 2016 FINANCIAL YEAR |
|---|---|---|---|
| Audit | Deloitte & Touche S.p.A. | Parent company | 57 |
| Deloitte & Touche S.p.A. | Italian subsidiaries | 28 | |
| Deloitte network | Sabaf do Brasil | 24 | |
| Deloitte network | Sabaf Turkey | 22 | |
| Certification services | Deloitte & Touche S.p.A. | Parent company | 2 1 |
| Deloitte & Touche S.p.A. | Italian subsidiaries | 1 1 | |
| Other services | Deloitte & Touche S.p.A. | Parent company | 14 2 |
| Deloitte network | Sabaf do Brasil | 2 3 | |
| TOTAL | 150 |
1 Signing of Unified Tax Return, IRAP and 770 forms
2 Audit agreed upon procedures relating to interim management reports, auditing of statements and training activities.
3 Tax assistance regarding transfer pricing.
Alberto Bartoli, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify
of the administrative and accounting procedures for the formation of the consolidated financial statements during the 2016 financial year.
They also certify that:
Ospitaletto, 20 March 2017
Chief Executive Officer
Alberto Bartoli
The Financial Reporting Officer
Gianluca Beschi
| Corporate bodies | 159 |
|---|---|
| Statement of financial position | 160 |
| Income statement | 161 |
| Comprehensive income statement | 162 |
| Statement of changes in shareholders' equity | 162 |
| Cash flow Statement | 163 |
| Explanatory notes | 164 |
| Certification of Separate Financial Statements | 191 |
| Auditors' Report on the Separate Financial Statements | 192 |
| Board of Statutory Auditors' Report Shareholders' Meeting | 194 |
| Chairman | Antonio Passantino |
|---|---|
| Statutory Auditor | Luisa Anselmi |
| Statutory Auditor | Enrico Broli |
Deloitte & Touche S.p.A.
| IN EURO | NOTES | 31.12.2016 | 31.12.2015 |
|---|---|---|---|
| ASSETS | |||
| Non-current assets | |||
| Property, plant and equipment | 1 | 31,092,204 | 31,939,736 |
| Investment property | 2 | 1,645,412 | 1,837,259 |
| Intangible assets | 3 | 3,095,000 | 3,197,864 |
| Equity investments | 4 | 50,098,459 | 45,819,480 |
| Non-current financial assets | 5 | 2,137,353 | 1,837,054 |
| of which from related parties | 36 | 1,897,353 | 1,837,054 |
| Non-current receivables | 11,621 | 9,183 | |
| Deferred tax assets | 21 | 3,315,263 | 3,284,696 |
| TOTAL NON-CURRENT ASSETS | 91,395,312 | 87,925,272 | |
| Current assets | |||
| Inventories | 6 | 23,492,840 | 24,674,840 |
| Trade receivables | 7 | 27,465,436 | 32,870,713 |
| of which from related parties | 36 | 1,191,581 | 2,008,185 |
| Tax receivables | 8 | 2,477,294 | 1,749,451 |
| of which from related parties | 36 | 1,083,666 | 1,113,702 |
| Other current receivables | 9 | 1,039,324 | 1,197,919 |
| Current financial assets | 10 | 1,060,000 | 1,069,431 |
| of which from related parties | 36 | 1,000,000 | 1,000,000 |
| Cash and cash equivalents | 11 | 1,796,980 | 1,089,671 |
| TOTAL CURRENT ASSETS | 57,331,874 | 62,652,025 | |
| Assets held for sale | 0 | 0 | |
| TOTAL ASSETS | 148,727,186 | 150,577,297 | |
| SHAREHOLDERS' EQUITY AND LIABILITIES | |||
| Shareholders' equity | |||
| Share capital | 12 | 11,533,450 | 11,533,450 |
| Retained earnings, other reserves | 77,530,764 | 79,058,252 | |
| Profit for the year | 2,459,688 | 5,642,123 | |
| TOTAL SHAREHOLDERS' EQUITY | 91,523,902 | 96,233,825 | |
| Non-current liabilities | |||
| Loans | 14 | 17,281,379 | 4,631,730 |
| Other financial liabilities | 15 | 240,000 | 0 |
| Post-employment benefit and retirement reserves | 16 | 2,435,538 | 2,527,275 |
| Provisions for risks and charges | 17 | 322,979 | 326,140 |
| Deferred tax liabilities | 21 | 129,289 | 150,017 |
| TOTAL NON-CURRENT LIABILITIES | 20,409,185 | 7,635,162 | |
| Current liabilities | |||
| Loans | 14 | 14,054,604 | 21,762,487 |
| Other financial liabilities | 15 | 298,161 | 13,610 |
| Trade payables | 18 | 16,010,381 | 18,202,899 |
| of which to related parties | 36 | 104,142 | 852,935 |
| Tax payables | 19 | 641,944 | 787,676 |
| Other payables | 20 | 5,789,009 | 5,941,638 |
| TOTAL CURRENT LIABILITIES | 36,794,099 | 46,708,310 | |
| Liabilities held for sale | 0 | 0 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | 148,727,186 | 150,577,297 |
| IN EURO | NOTES | 2016 | 2015 | |||||
|---|---|---|---|---|---|---|---|---|
| INCOME STATEMENT COMPONENTS | ||||||||
| Operating revenue and income | ||||||||
| Revenue | 23 | 101,523,407 | 113,962,039 | |||||
| of which from related parties | 36 | 6,680,209 | 7,274,762 | |||||
| Other income | 24 | 2,278,649 | 2,733,344 | |||||
| TOTAL OPERATING REVENUE AND INCOME | 103,802,056 | 116,695,383 | ||||||
| Operating costs | ||||||||
| Materials | 25 | (36,875,454) | (43,860,895) | |||||
| Change in inventories | (1,182,000) | (402,180) | ||||||
| Services | 26 | (26,031,824) | (28,750,556) | |||||
| of which by related parties | 36 | (4,151,074) | (4,162,137) | |||||
| Payroll costs | 27 | (26,382,450) | (27,967,750) | |||||
| Other operating costs | 28 | (647,178) | (821,303) | |||||
| Costs for capitalised in-house work | 841,526 | 1,230,058 | ||||||
| TOTAL OPERATING COSTS | (90,277,380) | (100,572,626) | ||||||
| OPERATING PROFIT BEFORE DEPRECIATION AND AMORTISATION, CAPITAL GAINS/ LOSSES, WRITE-DOWNS/WRITE-BACKS OF NON-CURRENT ASSETS |
13,524,676 | 16,122,757 | ||||||
| Depreciations and amortisation | 1,2,3 | (9,020,829) | (8,736,191) | |||||
| Capital gains/(losses) on disposals of non-current assets | 87,113 | 157,965 | ||||||
| Write-downs/write-backs of non-current assets | 29 | (521,021) | 1,302,841 | |||||
| of which by related parties | 36 | (521,021) | 1,302,841 | |||||
| EBIT | 4,069,939 | 8,847,372 | ||||||
| Financial income | 84,559 | 73,091 | ||||||
| Financial expenses | 30 | (512,872) | (500,483) | |||||
| Exchange rate gains and losses | 31 | (48,356) | (260,920) | |||||
| PROFIT BEFORE TAXES | 3,593,270 | 8,159,060 | ||||||
| Income tax | 32 | (1,133,582) | (2,516,937) | |||||
| PROFIT FOR THE YEAR | 2,459,688 | 5,642,123 |
| IN EURO | 2016 | 2015 |
|---|---|---|
| PROFIT FOR THE YEAR | 2,459,688 | 5,642,123 |
| Total profits/losses that will not be subsequently reclassified under profit (loss) for the year: | ||
| • Actuarial post-employment benefit reserve evaluation | (35,894) | 37,619 |
| • Tax effect | 8,615 | (8,114) |
| Total other profits/(losses) net of taxes for the year | (27,279) | 29,505 |
| TOTAL PROFIT | 2,432,409 | 5,671,628 |
| IN THOUSANDS OF EURO |
Share capital |
Share premium reserve |
Legal reserve |
Treasury shares |
Cash flow hedge reserve |
Actuarial post-em ployment be nefit reserve evaluation |
Other reserves |
Profit for the year |
Total shareholders' equity |
|---|---|---|---|---|---|---|---|---|---|
| BALANCE AT 31 DEC 2014 |
11,533 | 10,002 | 2,307 | (5) | 0 | (535) | 64,714 | 7,878 | 95,894 |
| Allocation of 2014 profit | |||||||||
| • dividends paid out |
(4,613) | (4,613) | |||||||
| • to reserve | 3,265 | (3,265) | |||||||
| Purchase of treasury shares |
(718) | (718) | |||||||
| Total profit at 31 December 2015 |
29 | 0 | 5,642 | 5,671 | |||||
| BALANCE AT 31 DEC 2015 |
11,533 | 10,002 | 2,307 | (723) | 0 | (506) | 67,979 | 5,642 | 96,234 |
| Allocation of 2015 profit | |||||||||
| • dividends paid out |
(5,467) | (5,467) | |||||||
| • to reserve | 175 | (175) | |||||||
| Purchase of treasury shares |
(1,676) | (1,676) | |||||||
| Total profit at 31 December 2016 |
(27) | 0 | 2,460 | 2,433 | |||||
| BALANCE AT 31 DEC 2016 |
11,533 | 10,002 | 2,307 | (2,399) | 0 | (533) | 68,154 | 2,460 | 91,524 |
| IN THOUSANDS OF EURO | 2016 | 2015 | |
|---|---|---|---|
| Cash and cash equivalents at beginning of year | 1,090 | 1,366 | |
| Profit for the year | 2,460 | 5,642 | |
| Adjustments for: | |||
| • Depreciation and amortisation | 9,021 | 8,736 | |
| • Realised gains | (87) | (158) | |
| • Write-downs/write-backs of non-current assets | 521 | (1,303) | |
| • Net financial income and expenses | 428 | 427 | |
| • Non-monetary foreign exchange differences | (60) | 281 | |
| • Income tax | 1,133 | 2,517 | |
| Change in post-employment benefit reserve | (131) | (149) | |
| Change in risk provisions | (3) | (189) | |
| Change in trade receivables | 5,405 | 1,825 | |
| Change in inventories | 1,182 | 402 | |
| Change in trade payables | (2,192) | 630 | |
| Change in net working capital | 4,395 | 2,857 | |
| Change in other receivables and payables, deferred tax | 367 | 75 | |
| Payment of taxes | (2,450) | (3,814) | |
| Payment of financial expenses | (474) | (465) | |
| Collection of financial income | 85 | 73 | |
| CASH FLOW FROM OPERATIONS | 15,205 | 14,531 | |
| Investments in non-current assets | |||
| • intangible | (735) | (646) | |
| • tangible | (7,298) | (9,601) | |
| • financial | (4,800) | (1,394) | |
| Disposal of non-current assets | 242 | 2,606 | |
| CASH FLOW ABSORBED BY INVESTMENTS | (12,591) | (9,035) | |
| Repayment of loans | (19,077) | (7,834) | |
| Raising of loans | 24,243 | 8,463 | |
| Change in financial assets | 69 | (1,069) | |
| Sale of treasury shares | (1,675) | (719) | |
| Payment of dividends | (5,467) | (4,613) | |
| CASH FLOW ABSORBED BY FINANCING ACTIVITIES | (1,907) | (5,772) | |
| TOTAL FINANCIAL FLOWS | 707 | (276) | |
| Cash and cash equivalents at end of year (Note 11) | 1,797 | 1,090 | |
| Current financial debt | 14,353 | 21,776 | |
| Non-current financial debt | 17,521 | 4,632 | |
| NET FINANCIAL DEBT (NOTE 22) | 30,077 | 25,318 |
The separate financial statements of Sabaf S.p.A. for the financial year 2016 have been prepared in compliance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB) and adopted by the European Union. Reference to IFRS also includes all current International Accounting Standards (IAS).
The separate financial statements are drawn up in euro, which is the currency in the economy in which the Company operates. The income statement, the comprehensive income statement and the statement of financial position schedules are prepared in euro, while the cash flow statement, the statement of changes in shareholders' equity and the values reported in the explanatory notes are in thousands of euro.
The financial statements have been prepared on a historical cost basis except for some revaluations of property, plant and equipment undertaken in previous years, and are considered a going concern. The Company found that, despite the difficult economic and business climate, there were no significant uncertainties (as defined by paragraphs 25 and 26 of IAS 1) regarding the continuity of the Company, also due to the strong competitive position, high profitability and solidity of the financial structure.
Sabaf S.p.A., as the Parent Company, also prepared the consolidated financial statements of the Sabaf Group at 31 December 2016.
The Company has adopted the following formats:
Use of these formats permits the most meaningful representation of the Company's capital, business and financial status.
The accounting standards and policies applied for the preparation of the separate financial statements at 31 December 2016, unchanged versus the previous year, are shown below:
These are recorded at purchase or manufacturing cost. The cost includes directly chargeable ancillary costs. These costs also include revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers.
Depreciation is calculated according to rates deemed appropriate to spread the carrying value of tangible assets over their useful working life. Estimated useful working life, in years, is as follows:
| Buildings | 33 |
|---|---|
| Light constructions | 10 |
| General plant | 10 |
| Specific plant and machinery | 6 - 10 |
| Equipment | 4 |
| Furniture | 8 |
| Electronic equipment | 5 |
| Vehicles and other transport means | 5 |
Ordinary maintenance costs are expensed in the year in which they are incurred; costs that increase the asset value or useful working life are capitalised and depreciated according to the residual possibility of utilisation of the assets to which they refer. Land is not depreciated.
Investment property is valued at cost, including revaluations undertaken in the past based on monetary revaluation rules or pursuant to company mergers.
The depreciation is calculated based on the estimated useful life, considered to be 33 years.
If the recoverable amount of the investment property – determined based on the market value of the properties – is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or cash generating unit) is increased to the new value stemming from the estimate of its recoverable amount – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised in the income statement.
As established by IAS 38, intangible assets acquired or internally produced are recognised as assets when it is probable that use of the asset will generate future economic benefits and when asset cost can be measured reliably. If it is considered that these future economic benefits will not be generated, the development costs are written down in the year in which this is ascertained.
Such assets are measured at purchase or production cost and - if the assets concerned have a finite useful life - are amortised on a straight-line basis over their estimated useful life. The useful life of projects for which development costs are capitalised is estimated to be 10 years. The SAP management system is amortised over five years.
Equity investments not classified as held for sale are booked at cost, reduced for impairment. Non-current receivables are stated at their presumed realisable value.
At each end of the reporting period, Sabaf S.p.A. reviews the carrying value of its property, plant and equipment, intangible assets and equity investments to determine whether there are signs of impairment of the value of these assets. If there is any such indication, the recoverable amount of said assets is estimated so as to determine the total of the write-down. If it is not possible to estimate the recoverable value individually, the Company estimates the recoverable value of the cash generating unit (CGU) to which the asset belongs. In particular, the recoverable value of the cash generating units (which generally coincide with the legal entity to which the capitalised assets refer) is verified by determining the value of use.
The recoverable amount is the higher of the net selling price and value of use. In measuring the value of use, future cash flows net of taxes, estimated based on past experience, are discounted to their present value using a pre-tax rate that reflects fair market valuations of the present cost of money and specific asset risk. The main assumptions used for calculating the value of use concern the discount rate, growth rate, expected changes in selling prices and cost trends during the period used for the calculation. The growth rates adopted are based on future market expectations in the relevant sector. Changes in the sales prices are based on past experience and on the expected future changes in the market. The Company prepares operating cash flow forecasts based on the most recent budgets approved by the Boards of Directors of the investees, draws up four-year forecasts and determines the terminal value (current value of perpetual income), which expresses the medium and long term operating flows in the specific sector.
Furthermore, the Company checks the recoverable value of its investees at least once a year when the separate financial statements are prepared.
If the recoverable amount of an asset (or CGU) is estimated to be lower than its carrying value, the asset's carrying value is reduced to the lower recoverable amount, recognising impairment of value in the income statement.
When there is no longer any reason for a write-down to be maintained, the carrying value of the asset (or of the cash-generating unit) is increased to the new value stemming from the estimate of its recoverable value – but not beyond the net carrying value that the asset would have had if it had not been written down for impairment of value. Reversal of impairment loss is recognised in the income statement.
Inventories are measured at the lower of purchase or production cost – determined using the weighted average cost method – and the corresponding fair value represented by the replacement cost for purchased materials and by the presumed realisable value for finished and semi-processed products – calculated taking into account any manufacturing costs and direct selling costs yet to be incurred. Inventory cost includes accessory costs and the portion of direct and indirect manufacturing costs that can reasonably be assigned to inventory items. Inventories subject to obsolescence and low turnover are written down in relation to their possibility of use or realisation. Inventory write-downs are eliminated in subsequent years if the reasons for such write-downs cease to exist.
Receivables are recognised at their presumed realisable value. Their face value is adjusted to a lower realisable value via specific provisioning directly reducing the item based on in-depth analysis of individual positions. Trade receivables assigned without recourse, despite being transferred legally, continue to be stated with "Trade receivables" until they are collected. Advance payments obtained with regard to the sale of trade receivables are recognised under current loans.
Financial assets held for trading are measured at fair value, allocating profit and loss effects to finance income or expense.
Provisions for risks and charges are provisioned to cover losses and debts, the existence of which is certain or probable, but whose amount or date of occurrence cannot be determined at the end of the year. Provisions are stated in the statement of financial position only when a legal or implicit obligation exists that determines the use of resources with an impact on profit and loss to meet that obligation and the amount can be reliably estimated. If the effect is significant, the provisions are calculated by updating future financial flows estimated at a rate including taxes such as to reflect current market valuations of the current value of the cash and specific risks associated with the liability.
The post-employment benefit reserve (TFR) is provisioned to cover the entire liability accruing vis-à-vis employees in compliance with current legislation and with national and supplementary company collective labour contracts. This liability is subject to revaluation via application of indices fixed by current regulations. Up to 31 December 2006, post-employment benefits were considered defined-benefit plans and accounted for in compliance with IAS 19, using the projected unit-credit method. The regulations of this fund were amended by Italian Law no. 296 of 27 December 2006 and subsequent Decrees and Regulations issued during the first months of 2007 In the light of these changes, and, in particular, for companies with at least 50 employees, post-employment benefits must now be considered a defined-benefit plan only for the portions accruing before 1 January 2007 (and not yet paid as at the end of the reporting period). Conversely, portions accruing after that date are treated as defined-contribution plans. Actuarial gains or losses are recorded immediately under "Other total profits/(losses)".
Payables are recognised at face value; the portion of interest included in their face value and not yet payable at period-end is deferred to future periods.
Loans are initially recognised at cost, net of related costs of acquisition. This value is subsequently adjusted to allow for any difference between initial cost and repayment value over the loan's duration using the effective interest rate method. Loans are classified among current liabilities unless the Company has the unconditional right to defer discharge of a liability by at least 12 months after the reference date.
Receivables and payables originally expressed in foreign currencies are converted into euro at the exchange rates in force on the date of the transactions originating them. Forex differences realised upon collection of receivables and payment of payables in foreign currency are posted in the income statement. Income and costs relating to foreign-currency transactions are converted at the rate in force on the transaction date. At year-end, assets and liabilities expressed in foreign currencies are posted at the spot exchange rate in force at the end of the reporting period and related foreign exchange gains and losses are posted in the income statement. If conversion generates a net gain, this value constitutes a non-distributable reserve until it is effectively realised.
The Company's business is exposed to financial risks relating to changes in exchange rates, commodity prices and interest rates. The Company may decide to use derivative financial instruments to hedge these risks.
Derivatives are initially recognised at cost and are then adjusted to fair value on subsequent closing dates.
Changes in the fair value of derivatives designated and recognised as effective for hedging future cash flows relating to the Company's contractual commitments and planned transactions are recognised directly in shareholders' equity, while the ineffective portion is immediately posted in the income statement. If the contractual commitments or planned transactions materialise in the recognition of assets or liabilities, when such assets or liabilities are recognised, the gains or losses on the derivative that were directly recognised in equity are factored back into the initial valuation of the cost of acquisition or carrying value of the asset or liability. For cash flow hedges that do not lead to recognition of assets or liabilities, the amounts that were directly recognised in equity are included in the income statement in the same period when the contractual commitment or planned transaction hedged impacts profit and loss – for example, when a planned sale actually takes place.
For effective hedges of exposure to changes in fair value, the item hedged is adjusted for the changes in fair value attributable to the risk hedged and recognised in the income statement. Gains and losses stemming from the derivative's valuation are also posted in the income statement.
Changes in the fair value of derivatives not designated as hedging instruments are recognised in the income statement in the period when they occur.
Hedge accounting is discontinued when the hedging instrument expires, is sold or is exercised, or when it no longer qualifies as a hedge. At this time, the cumulative gains or losses of the hedging instrument recognised in equity are kept in the latter until the planned transaction actually takes place. If the transaction hedged is not expected to take place, cumulative gains or losses recognised directly in equity are transferred to the year's income statement.
Embedded derivatives included in other financial instruments or contracts are treated as separate derivatives when their risks and characteristics are not strictly related to those of their host contracts and the latter are not measured at fair value with posting of related gains and losses in the income statement.
Revenue reporting
Revenue is reported net of return sales, discounts, allowances and bonuses, as well as of the taxes directly associated with sale of goods and rendering of services.
Sales revenue is reported when the company has transferred the significant risks and benefits associated with ownership of the goods and the amount of revenue can be reliably measured.
Revenues of a financial nature are recorded on an accrual basis.
Finance income includes interest receivable on funds invested and income from financial instruments, when not offset as part of hedging transactions. Interest income is recorded in the income statement at the time of vesting, taking effective output into consideration.
Financial expenses include interest payable on financial debt calculated using the effective interest method and bank expenses.
Income taxes include all taxes calculated on the Company's taxable income. Income taxes are directly recognised in the income statement, with the exception of those concerning items directly debited or credited to shareholders' equity, in which case the tax effect is recognised directly in shareholders' equity. Other taxes not relating to income, such as property taxes, are included among operating expenses. Deferred taxes are provisioned in accordance with the global liability provisioning method. They are calculated on all temporary differences that emerge from the taxable base of an asset or liability and its book value. Current and deferred tax assets and liabilities are offset when income taxes are levied by the same tax authority and when there is a legal right to settle on a net basis. Deferred tax assets and liabilities are measured using the tax rates that are expected to be applicable in the years when temporary differences will be realised or settled.
Dividends are posted on an accrual basis when the right to receive them materialises, i.e. when shareholders approve dividend distribution.
Treasury shares are booked in a specific reserve as a reduction of shareholders' equity. The carrying value of treasury shares and revenues from any subsequent sales are recognised in the form of changes in shareholders' equity.
Preparation of the separate financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the carrying values of assets and liabilities and the disclosures on contingent assets and liabilities at the end of the reporting period. Actual results might differ from these estimates. Estimates are used to measure tangible and intangible assets and investments subject to impairment testing, as described earlier, as well as to measure the ability to recover prepaid tax assets, provisions for bad debts, for inventory obsolescence, depreciation and amortisation, asset write-downs, employee benefits, taxes, other provisions and reserves. Specifically:
The procedure for determining impairment of value of tangible and intangible assets described in "Impairment of value" implies – in estimating the value of use – the use of the Business Plans of investees, which are based on a series of assumptions relating to future events and actions of the investees' management bodies, which may not necessarily come about. In estimating market value, however, assumptions are made on the expected trend in trading between third parties based on historical trends, which may not actually be repeated.
Receivables are adjusted by the related bad debt provision to take into account their recoverable value. To determine the size of the write-downs, management must make subjective assessments based on the documentation and information available regarding, among other things, the customer's solvency, as well as experience and historical payment trends.
Warehouse inventories subject to obsolescence and slow turnover are systematically valued, and written down if their recoverable value is less than their carrying value. Write-downs are calculated based on management assumptions and estimates, resulting from experience and historical results.
The current value of liabilities for employee benefits depends on a series of factors determined using actuarial techniques based on certain assumptions. Assumptions concern the discount rate, estimates of future salary increases, and mortality and resignation rates. Any change in the above-mentioned assumptions might have an effect on liabilities for pension benefits.
Determining liabilities for Company taxes requires the use of management valuations in relation to transactions whose tax implications are not certain at the end of the reporting period. Furthermore, the valuation of deferred taxes is based on income expectations for future years; the valuation of expected income depends on factors that might change over time and have a significant effect on the valuation of deferred tax assets.
When estimating the risk of potential liabilities from disputes, the Directors rely on communications regarding the status of recovery procedures and disputes from the lawyers who represent the Company in litigation. These estimates are determined taking into account the gradual development of the disputes, considering existing exemptions.
Estimates and assumptions are regularly reviewed and the effects of each change immediately reflected in the income statement.
Accounting standards and amendments applicable from 1 January 2016 The following IFRS accounting standards, amendments and interpretations were applied for the first time by the Company from 1 January 2016:
Finally, as part of the annual process of improvement of the standards, on 12 December 2013 the IASB published the document "Annual Improvements to IFRSs: 2010- 2012 Cycle" (including IFRS 2 Share Based Payments – Definition of vesting condition, IFRS 3 Business Combination – Accounting for contingent consideration, IFRS 8 Operating segments – Aggregation of operating segments and Reconciliation of total of the reportable segments' assets to the entity's assets, IFRS 13 Fair Value Measurement – Short-term receivables and payables) and on 25 September 2014 the document "Annual Improvements to IFRSs: 2012-2014 Cycle" (including: IFRS 5 – Non-current Assets Held for Sale and Discontinued Operations, IFRS 7 – Financial Instruments: Disclosure and IAS 19 – Employee Benefits) which partially integrate the existing standards.
• Standard IFRS 15 – Revenue from Contracts with Customers (published on 28 May 2014 and supplemented with further clarifications published on 12 April 2016), which is scheduled to replace IAS 18 – Revenue and IAS 11 – Construction Contracts, as well as interpretations IFRIC 13 – Customer Loyalty Programmes,
IFRIC 15 – Agreements for the Construction of Real Estate, IFRIC 18 – Transfers of Assets from Customers and SIC 31 – Revenues-Barter Transactions Involving Advertising Services. The standard establishes a new revenue recognition model, which will apply to all contracts signed with customers except those falling within the application of other IAS/IFRS standards, such as leases, insurance contracts and financial instruments. The fundamental passages for the recognition of revenues according to the new model are:
The principle applies from 1 January 2018, but early application is permitted. Although the systematic analysis of the case and in particular a detailed analysis of the contracts with the customers have not yet been completed, the directors do not expect that the application of IFRS 15 can have a significant impact on the amounts recorded for the revenues and on the related disclosures in the Company's separate financial statements.
• Final version of IFRS 9 – Financial Instruments (published on 24 July 2014). The document includes the results of the phases relating to the classification and valuation, Impairment and Hedge accounting, of the IASB project designed to replace IAS 39. The new standard, which replaces the previous versions of IFRS 9, should be applied by financial statements from 1 January 2018 onwards. The directors do not expect that the application of IFRS 9 can have a significant impact on the amounts and on the disclosures in the Company's separate financial statements. However, it is not possible to provide a reasonable estimate of the effect as long as the Company has not completed a detailed analysis of the related contract.
On the reporting date of these separate financial statements, the competent bodies of the European Union have not yet concluded the approval process necessary for the adoption of the amendments and principles described below.
• On 13 January 2016, the IASB published the standard IFRS 16 – Leases, which will replace the standard IAS 17 – Leases, as well as interpretations IFRIC 4Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases—Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease. The new standard provides a new definition of lease and introduces a criterion based on the control (right of use) of an asset in order to distinguish the leasing contracts from the service contracts, identifying the discriminatory ones: the identification of the asset, the right of replacement of the same, the right to obtain substantially all of the economic benefits deriving from the use of the asset and the right to direct the use of the asset underlying the contract. The standard establishes a single model of recognition and measurement of the lease agreements for the lessee which requires the recognition of the asset to be leased (operating lease or otherwise) in assets offset by a financial debt, while also providing the opportunity not to recognise as leases the agreements whose subject matter are "low-value assets" and leases with a contract duration equal to or less than 12 months. By contrast, the Standard does not include significant changes for the lessors. The standard applies beginning on 1 January 2019 but early application is permitted, only for Companies that opted for early application of IFRS 15 - Revenue from Contracts with Customers. The directors do not expect that the application of IFRS 16 can have a significant impact on the accounting of the leasing contracts and on the related disclosures in the Company's separate financial statements.
| PROPERTY | PLANT AND EQUIPMENT |
OTHER ASSETS | ASSETS UNDER CONSTRUCTION |
TOTAL | |
|---|---|---|---|---|---|
| COST | |||||
| AT 31 DECEMBER 2014 | 6,208 | 147,785 | 29,579 | 3,709 | 187,281 |
| Increases | 67 | 7,802 | 1,038 | 749 | 9,656 |
| Disposals | - | (2,891) | (106) | - | (2,997) |
| Reclassification | - | 2,668 | 63 | (2,786) | (55) |
| AT 31 DECEMBER 2015 | 6,275 | 155,364 | 30,574 | 1,672 | 193,885 |
| Increases | 53 | 5,325 | 1,462 | 758 | 7,598 |
| Disposals | (1) | (2,982) | (236) | - | (3,219) |
| Reclassification | - | 684 | 19 | (1,003) | (300) |
| AT 31 DECEMBER 2016 | 6,327 | 158,391 | 31,819 | 1,427 | 197,964 |
| AT 31 DECEMBER 2014 | 2,535 | 127,774 | 25,579 | 0 | 155,888 |
|---|---|---|---|---|---|
| Depreciations for the year | 176 | 5,847 | 1,841 | - | 7,864 |
| Eliminations for disposals | - | (1,701) | (106) | - | (1,807) |
| AT 31 DECEMBER 2015 | 2,711 | 131,920 | 27,314 | 0 | 161,945 |
| Depreciations for the year | 176 | 6,200 | 1,702 | - | 8,078 |
| Eliminations for disposals | - | (2,973) | (178) | - | (3,151) |
| AT 31 DECEMBER 2016 | 2,887 | 135,147 | 28,838 | 0 | 166,872 |
| AT 31 DECEMBER 2016 | 3,440 | 23,244 | 2,981 | 1,427 | 31,092 |
|---|---|---|---|---|---|
| AT 31 DECEMBER 2015 | 3,564 | 23,444 | 3,260 | 1,672 | 31,940 |
The breakdown of the net carrying value of Property was as follows:
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Land | 1,291 | 1,291 | - |
| Industrial buildings | 2,149 | 2,273 | (124) |
| TOTAL | 3,440 | 3,564 | (124) |
The main investments in the financial year were aimed at the further automation of production of light alloy valves. Investments were also made to improve production processes as well as maintenance and replacement investments designed to keep the capital equipment constantly updated.
Decreases mainly relate to the disposal of obsolete machinery.
Assets under construction include machinery under construction and advance payments to suppliers of capital equipment.
At 31 December 2016, the Company found no endogenous or exogenous indicators of impairment of its property, plant and equipment. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| COST | |
|---|---|
| AT 31 DECEMBER 2014 | 6,675 |
| Increases | - |
| Disposals | - |
| AT 31 DECEMBER 2015 | 6,675 |
| Increases | - |
| Disposals | - |
| AT 31 DECEMBER 2016 | 6,675 |
| ACCUMULATED DEPRECIATIONS | |
| AT 31 DECEMBER 2014 | 4,646 |
| Depreciations for the year | 192 |
| AT 31 DECEMBER 2015 | 4,838 |
| Depreciations for the year | 192 |
| AT 31 DECEMBER 2016 | 5,030 |
| NET CARRYING VALUE | |
| AT 31 DECEMBER 2016 | 1,645 |
| AT 31 DECEMBER 2015 | 1,837 |
This item includes non-operating buildings owned by the Group. During the year this item did not undergo any changes except for depreciation and amortisation for the year. At 31 December 2016, the Company found no endogenous or exogenous indicators of impairment of its investment property. As a result, the value of investment property was not submitted to impairment testing.
| PATENTS, KNOW-HOW AND SOFTWARE |
DEVELOPMENT COSTS |
OTHER INTANGIBLE ASSETS |
TOTAL | |
|---|---|---|---|---|
| COST | ||||
| AT 31 DECEMBER 2014 | 5,855 | 4,308 | 1,786 | 11,949 |
| Increases | 192 | 414 | 21 | 627 |
| Reclassifications | 66 | (46) | - | 20 |
| Decreases | - | - | - | - |
| AT 31 DECEMBER 2015 | 6,113 | 4,676 | 1,807 | 12,596 |
| Increases | 108 | 313 | 53 | 474 |
| Reclassifications | 54 | (87) | 207 | 174 |
| Decreases | - | - | - | - |
| AT 31 DECEMBER 2016 | 6,275 | 4,902 | 2,067 | 13,244 |
| AT 31 DECEMBER 2014 | 5,416 | 2,011 | 1,290 | 8,717 |
|---|---|---|---|---|
| 2015 amortisation | 203 | 336 | 142 | 681 |
| Decreases | - | - | - | - |
| AT 31 DECEMBER 2015 | 5,619 | 2,347 | 1,432 | 9,398 |
| 2016 amortisation | 254 | 350 | 147 | 751 |
| Decreases | - | - | - | - |
| AT 31 DECEMBER 2016 | 5,873 | 2,697 | 1,579 | 10,149 |
| AT 31 DECEMBER 2016 | 402 | 2,205 | 488 | 3,095 |
|---|---|---|---|---|
| AT 31 DECEMBER 2015 | 494 | 2,329 | 375 | 3,198 |
Intangible assets have a finite useful life and, as a result, are amortised throughout their life. The main investments in the year relate to the development of new products, mainly related to the expansion of the range of burners (research and development activities carried out during the financial year are set out in the Report on Operations). Software investments include the application development of the management system (SAP) and CAD development. Other intangible assets refer, in the main, to improvements to third-party leased assets.
At 31 December 2016, the Company found no endogenous or exogenous indicators of impairment of its intangible assets. As a result, the value of property, plant and equipment was not submitted to impairment testing.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| In subsidiaries | 50,039 | 45,760 | 4,279 |
| Other equity investments | 59 | 59 | - |
| TOTAL | 50,098 | 45,819 | 4,279 |
The change in equity investments in subsidiaries is broken down in the table below:
| SABAF IMMOBI LIARE |
FARINGOSI HINGES |
SABAF DO BRASIL |
SABAF MEXICO |
SABAF U.S. | SABAF APPLIANCE COMPO NENTS (CHINA) |
SABAF A.C. TRADING (CHINA) |
SABAF TURKEY |
A.R.C. S.R.L. |
TOTAL | |
|---|---|---|---|---|---|---|---|---|---|---|
| HISTORICAL COST | ||||||||||
| AT 31 DEC 2014 | 13,475 | 10,329 | 8,469 | 548 | 139 | 3,400 | 200 | 13,351 | 0 | 49,911 |
| Increases/reductions of capital |
- | - | - | - | - | 1,000 | - | (1,346) | - | (346) |
| Equity investment liquidation |
- | - | - | (548) | - | - | - | - | - | (548) |
| AT 31 DEC 2015 | 13,475 | 10,329 | 8,469 | 0 | 139 | 4,400 | 200 | 12,005 | 0 | 49,017 |
| Purchase of equity investments |
- | - | - | - | - | - | - | - | 4,800 | 4,800 |
| AT 31 DEC 2016 | 13,475 | 10,329 | 8,469 | 0 | 139 | 4,400 | 200 | 12,005 | 4,800 | 53,817 |
| PROVISION FOR WRITE-DOWNS | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|
| AT 31 DEC 2014 | 0 | 1,882 | 0 | 548 | 0 | 2,683 | 0 | 0 | 0 | 5,113 |
| Write-downs (write-backs) (Note 28) |
- | (1,882) | - | - | - | 574 | - | - | - | (1,308) |
| Equity investment liquidation |
- | - | - | (548) | - | - | - | - | - | (548) |
| AT 31 DEC 2015 | 0 | 0 | 0 | 0 | 0 | 3,257 | 0 | 0 | 0 | 3,257 |
| Write-downs (write-backs) (Note 28) |
- | - | - | - | - | 521 | - | - | - | 521 |
| AT 31 DEC 2016 | 0 | 0 | 0 | 0 | 0 | 3,778 | 0 | 0 | 0 | 3,778 |
| AT 31 DEC 2016 | 13,475 | 10,329 | 8,469 | 0 | 139 | 622 | 200 | 12,005 | 4,800 | 50,039 |
|---|---|---|---|---|---|---|---|---|---|---|
| AT 31 DEC 2015 | 13,475 | 10,329 | 8,469 | 0 | 139 | 1,143 | 200 | 12,005 | 0 | 45,760 |
| PORTION OF SHAREHOLDERS' EQUITY (CALCULATED IN COMPLIANCE WITH IAS/IFRS) | |
|---|---|
| AT 31 DEC 2016 | 30,027 | 5,546 | 10,628 | 0 | (25) | 683 | 266 | 14,805 | 3,025 | 64,955 |
|---|---|---|---|---|---|---|---|---|---|---|
| AT 31 DEC 2015 | 28,679 | 4,922 | 7,145 | 0 | (32) | 1,302 | 293 | 14,085 | 0 | 56,394 |
| AT 31 DEC 2016 | 16,552 | (4,783) | 2,159 | 0 | (164) | 61 | 66 | 2,800 | (1,775) | 14,916 |
|---|---|---|---|---|---|---|---|---|---|---|
| AT 31 DEC 2015 | 15,204 | (5,407) | (1,324) | 0 | (171) | 159 | 93 | 2,080 | - | 10,634 |
In the course of 2016, the Faringosi Hinges achieved better results, both in terms of sales development and profitability, which turned out to be greater than the budget. The 2017-2021 forward plan, drafted at the end of 2016, plans a further gradual improvement of sales and the maintaining of profitability, to be considered as durably acquired also in a future perspective. At 31 December 2016, Sabaf S.p.A. tested the carrying value of the equity investment for impairment, determining its recoverable value, considered to be equivalent to its usable value plus available liquidity, by discounting expected future cash flows in the forward plan drafted by the management. Cash flows for the period from 2017 to 2021 were augmented by the so-called terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 7.76% (8.45% in the impairment test conducted while drafting the separate financial statements at 31 December 2015) and a growth rate (g) of 1.50%, which is in line with historical data. The recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 12.700 million, compared with a carrying value of the equity investment of € 10.329 million; consequently, the value recorded for equity investment at 31 December 2016 was deemed recoverable.
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| IN THOUSANDS OF EURO | GROWTH RATE | |||||||
|---|---|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% | |||
| 6.76% | 14,086 | 14,619 | 15,202 | 15,844 | 16,553 | |||
| 7.26% | 12,922 | 13,363 | 13,842 | 14,365 | 14,937 | |||
| 7.76% | 11,930 | 12,300 | 12,700 | 13,133 | 13,603 | |||
| 8.26% | 11,076 | 11,390 | 11,727 | 12,091 | 12,483 | |||
| 8.76% | 10,332 | 10,601 | 10,889 | 11,198 | 11,529 |
In 2016, Sabaf do Brasil continued to obtain positive results, which improved compared with 2015. The increase in shareholders' equity (converted into euros at the end-of-year exchange rate) also benefits from the revaluation of the Brazilian real.
The subsidiary Sabaf U.S. operates as a commercial support for North America. The difference between the carrying value and the shareholders' equity of the investee is attributable to the non-durable losses taking into consideration expected development on the North American market.
Sabaf Appliance Components (Kunshan) Co., Ltd. has been producing burners for the Chinese market since 2015. Furthermore, the company has performed the function as distributor on the Chinese market of Sabaf products manufactured in Italy and Turkey. Low production volumes have enabled the company to reach the break-even point in 2016. At 31 December 2016, the value of the equity investment decreased by € 521,000, adjusting it to the shareholders' equity at the end of the year, in that the loss was considered permanent.
Sabaf Appliance Components Trading (Kunshan) Co., Ltd., was founded during 2012 in order to perform the function as distributor. During 2015, this activity was centralised at Sabaf Appliance Components; however, the company went into liquidation; the process of liquidation will end in 2017.
Sabaf Turkey achieved extremely satisfactory results in 2016 as well. The conversion into euro of the shareholders' equity at the end of the financial year was affected by the strong devaluation of the Turkish lira at the end of 2016; however, the shareholders' equity remains higher than the carrying value of the equity investment.
In June 2016, the Company acquired the controlling share (70%) of A.R.C. s.r.l., leading company in the production of burners for professional cooking. The transaction allowed Sabaf to enter into a new sector, contiguous with the traditional sector of components for household gas cooking appliances, and to enhance the consolidated international presence of the Sabaf Group.
At 31 December 2016, the Company tested the carrying value of the equity investment for impairment, determining its recoverable value, considered to be equivalent to its usable value plus available liquidity, by discounting expected future cash flows in the forward plan prepared during the acquisition of the equity investment in A.R.C. and adjusted at the end of 2016 on the basis of further elements known.
Cash flows for the period from 2017 to 2019 were augmented by the so-called terminal value, which expresses the operating flows that the investee is expected to generate from the sixth year to infinity and determined based on the perpetual income. The value of use was calculated based on a discount rate (WACC) of 5.79% and a growth rate (g) of 1.50%.
The portion pertaining to Sabaf S.p.A. of the recoverable value calculated on the basis of the above-mentioned assumptions and valuation techniques is € 6.938 million, compared with a carrying value of the equity investment of € 4.8 million; consequently, the carrying value recorded for equity investment at 31 December 2016 was deemed recoverable.
The table below shows the changes in recoverable value depending on changes in the WACC discount rate and growth factor g:
| IN THOUSANDS OF EURO | GROWTH RATE | |||||||
|---|---|---|---|---|---|---|---|---|
| DISCOUNT RATE | 1.00% | 1.25% | 1.50% | 1.75% | 2.00% | |||
| 4.79% | 7,718 | 8,129 | 8,601 | 9,152 | 9,801 | |||
| 5.29% | 6,989 | 7,304 | 7,660 | 8,067 | 8,535 | |||
| 5.79% | 6,413 | 6,661 | 6,938 | 7,250 | 7,603 | |||
| 6.29% | 5,945 | 6,146 | 6,368 | 6,614 | 6,889 | |||
| 6.79% | 5,559 | 5,724 | 5,905 | 6,104 | 6,323 |
As part of the acquisition of 70% of A.R.C. S.r.l., Sabaf S.p.A. signed with Loris Gasparini (current minority shareholder by 30% of A.R.C.) an agreement that aimed to regulate Gasparini's right to leave A.R.C. and the interest of Sabaf to acquire 100% of the shares after expiry of the term of five years from the signing of the purchase agreement of 24 June 2016, by signing specific option agreements. Therefore, the agreement envisaged specific option rights to purchase (by Sabaf) and sell (by Gasparini) exercisable as from 24 June 2021, the remaining shares of 30% of A.R.C., with strike prices contractually defined on the basis of final income parameters from A.R.C. at 31 December 2020.
The option for the purchase of the residual 30% of A.R.C. represents a derivative instrument; since the exercise price defined by contract was considered representative of the fair value of the portion that can be potentially acquired, no value was recorded in the separate financial statements ended 31 December 2016.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Financial receivables from subsidiaries | 1,897 | 1,837 | 60 |
| Fixed bank account | 240 | - | 240 |
| TOTAL | 2,137 | 1,837 | 300 |
At 31 December 2016 and at 31 December 2015, financial receivables from subsidiaries consist of an interest-bearing loan of USD 2 million, maturing in March 2017, granted to the subsidiary Sabaf do Brasil with the aim of optimising the Group's exposure to foreign exchange rate risk.
As part of the acquisition of 70% of A.R.C., Sabaf S.p.A. paid to a fixed bank account the total amount of € 300,000, of which € 240,000 falling due after 12 months. This amount was deducted from the consideration agreed to guarantee the commitments assumed by the sellers and is payable in equal instalments over five years. (Note 15)
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Commodities | 7,455 | 8,758 | (1,303) |
| Semi-processed goods | 9,310 | 9,326 | (16) |
| Finished products | 8,773 | 8,461 | 312 |
| Provision for inventory write-downs | (2,045) | (1,870) | (175) |
| TOTAL | 23,493 | 24,675 | (1,182) |
The value of final inventories at 31 December 2016 was lower than the previous year as a result of the decline in production and sales volumes. The obsolescence provision, which refers € 470,000 to commodities, € 645,000 to semi-processed goods and € 930,000 to finished products, reflects the improved estimate of the risk of obsolescence, based on specific analyses conducted at the end of the year on slow-moving and nonmoving articles.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Total trade receivables | 28,065 | 33,821 | (5,756) |
| Bad debt provision | (600) | (950) | 350 |
| NET TOTAL | 27,465 | 32,871 | (5,406) |
At 31 December 2016, trade receivables included balances totalling USD 2,925,000, booked at the EUR/USD exchange rate in effect on 31 December 2016, i.e. 1.0541. The amount of trade receivables recognised in the financial statements includes € 1.1 million of receivables assigned without recourse to factoring companies (€ 2.3 million at 31 December 2015) and approximately € 14 million in insured receivables (€ 13.9 million at 31 December 2015). The bad debt provision was adjusted to the better estimate of the credit risk at the end of the reporting period.
The reduction in trade receivables is attributable not only to the decline in sales but also to lower receivables past due compared to the previous year, as shown in the following table:
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Current receivables (not past due) | 24,378 | 28,280 | (3,902) |
| Outstanding up to 30 days | 2,242 | 2,233 | 9 |
| Outstanding from 31 to 60 days | 184 | 415 | (231) |
| Outstanding from 61 to 90 days | 64 | 730 | (666) |
| Outstanding for more than 90 days | 1,197 | 2,163 | (966) |
| TOTAL | 28,065 | 33,821 | (5,756) |
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| From Giuseppe Saleri SapA for IRES |
1,083 | 1,114 | (31) |
| From inland revenue for income tax |
992 | 605 | 387 |
| From inland revenue for VAT |
402 | 30 | 372 |
| TOTAL | 2,477 | 1,749 | 728 |
Until the 2015 financial year, Sabaf S.p.A. has been part of the national tax consolidation scheme pursuant to Articles 117/129 of the Unified Income Tax Law. In this scheme, Giuseppe Saleri S.a.p.A., the parent company of Sabaf S.p.A., acted as the consolidating company. In 2016, the conditions for the preparation of the tax consolidation scheme fell short, which consequently was discontinued.
The receivable from Giuseppe Saleri S.a.p.A. recognised at 31 December 2016 derives from the full deductibility of IRAP from IRES relating to the expenses incurred for employees for the 2006-2011 period (Italian Legislative Decree 201/2011), for which the consolidating company presented an application for a refund and which will revert to Sabaf as soon as it is refunded.
The tax receivable for income taxes is generated by the higher tax payments on account paid in during the year compared with the tax due.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Credits to be received from suppliers |
678 | 857 | (179) |
| Advances to suppliers | 54 | 33 | 21 |
| Due from INAIL | 58 | 32 | 26 |
| Other | 249 | 276 | (27) |
| TOTAL | 1,039 | 1,198 | (159) |
At 31 December 2016, credits to be received from suppliers included € 411,000 related to the relief due to the Company as an energy-intensive business (so-called "energyintensive bonuses") for the years 2014 and 2015, of which € 194,000 received at the beginning of 2017.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Financial receivables from subsidiaries |
1,000 | 1,000 | - |
| Fixed bank account (Note 5) |
60 | - | 60 |
| Currency derivatives | - | 69 | (69) |
| TOTAL | 1,060 | 1,069 | (9) |
At 31 December 2016 and at 31 December 2015, financial receivables from subsidiaries consist of an interest-bearing loan of € 1 million to Sabaf Appliance Components Co., Ltd. to support the Chinese subsidiary's working capital. The loan has a term of 12 months and was renewed in December 2016 for the same period.
The item Cash and cash equivalents, equal to € 1,797,000 at 31 December 2016 (€ 1,090,000 at 31 December 2015) refers almost exclusively to bank current account balances.
At 31 December 2016 the parent company's share capital consists of 11,533,450 shares with a par value of € 1.00 each. The share capital paid in and subscribed did not change during the year.
During the financial year, Sabaf S.p.A. acquired 171,061 treasury shares at an average unit price of € 9.794; there have been no sales.
At 31 December 2016, the Company held 233,139 treasury shares, equal to 2.021% of share capital (62,078 treasury shares at 31 December 2015), reported in the financial statements as an adjustment to shareholders' equity at a unit value of € 10.289 (the market value at year-end was € 10.4).
There were 11,300,311 outstanding shares at 31 December 2016 (11,471,372 at 31 December 2015).
| 31.12.2016 | 31.12.2015 | ||||
|---|---|---|---|---|---|
| CURRENT | NON CURRENT |
CURRENT | NON CURRENT |
||
| Unsecured loans | 6,656 | 17,281 | 2,707 | 4,632 | |
| Short-term bank loans |
7,397 | - | 13,194 | - | |
| Advances on bank receipts or invoices |
2 | - | 5,825 | - | |
| Interest payable | - | - | 36 | - | |
| TOTAL | 14,055 | 17,281 | 21,762 | 4,632 |
During the financial year, the Company reformulated the average duration of its loans, entering into 4 unsecured loan agreements totalling € 19.8 million repayable in five years in quarterly fixed instalments, a rates ranging from 0.60% to 1%.
Only one of the outstanding unsecured loans of € 5 million at 31 December 2016 has covenants, defined with reference to the consolidated financial statements at the end of the reporting period, as specified below:
All outstanding bank loans are denominated in euro, with the exception of a short-term loan of USD 2 million.
Note 35 provides information on financial risks, pursuant to IFRS 7.
| 31.12.2016 | 31.12.2015 | |||
|---|---|---|---|---|
| CURRENT | NON CURRENT |
CURRENT | NON CURRENT |
|
| Payables to A.RC. shareholders |
60 | 240 | - | - |
| Currency derivatives | 201 | - | 17 | - |
| Derivative instruments on interest rates |
37 | - | 14 | - |
| TOTAL | 298 | 240 | 31 | 0 |
The payable to the A.R.C. shareholders of € 300,000 at 31 December 2016 is related to the part of the price still to be paid to the sellers, which was deposited on an fixed account (Note 5) and will be released in favour of the sellers at constant rates in 5 years, in accordance with contractual agreements and guarantees issued by the sellers.
Other financial liabilities also include:
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| Post-employment benefit reserve |
2,436 | 2,527 | (91) |
| TOTAL | 2,436 | 2,527 | (91) |
Following the revision of IAS 19 - Employee benefits, from 1 January 2013 all actuarial gains or losses are recorded immediately in the comprehensive income statement ("Other comprehensive income") under the item "Actuarial income and losses".
Post-employment benefits are calculated as follows:
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Discount rate | 1.15% | 1.60% |
| Inflation | 1.75% | 2.00% |
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Mortality rate | ISTAT 2010 M/F | ISTAT 2010 M/F |
| Disability rate | INPS 1998 M/F | INPS 1998 M/F |
| Staff turnover | 6% | 6% |
| Advance payouts | 5% per year | 5% per year |
| Retirement age | pursuant to legislation in force on 31 December 2016 |
pursuant to legislation in force on 31 December 2015 |
| 31.12.2015 | PROVISIONS | UTILISATION | RELEASE OF EXCESS PORTION |
31.12.2016 | |
|---|---|---|---|---|---|
| Reserve for agents' indemnities | 266 | - | - | (53) | 213 |
| Product guarantee fund | 60 | 35 | (35) | - | 60 |
| Reserve for legal risks | - | 50 | - | - | 50 |
| TOTAL | 326 | 85 | (35) | (53) | 323 |
The reserve for agents' indemnities covers amounts payable to agents if the Company terminates the agency relationship.
The product guarantee fund covers the risk of returns or charges by customers for products already sold.
The reserve for legal risks is allocated for disputes of a modest size.
The provisions booked to the provisions for risks, which represent the estimate of future payments made based on historical experience, have not been discounted because the effect is considered negligible.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| TOTAL | 16,010 | 18,203 | (2,193) |
The decrease in trade payables compared to the previous financial year is related to lower purchase volumes; average payment terms did not change versus the previous year. The amount of trade payables in currencies other than the euro is not significant. At 31 December 2016, there were no overdue payables of a significant amount and the Company did not receive any injunctions for overdue payables.
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| To inland revenue for IRPEF tax deductions | 642 | 788 | (146) |
| TOTAL | 642 | 788 | (146) |
| 31.12.2016 | 31.12.2015 | CHANGE | |
|---|---|---|---|
| To employees | 3,472 | 3,658 | (186) |
| To social security institutions | 1,937 | 1,861 | 76 |
| Advances from customers | 108 | 88 | 20 |
| To agents | 241 | 281 | (40) |
| Other current payables | 31 | 54 | (23) |
| TOTAL | 5,789 | 5,942 | (153) |
At the beginning of 2017, payables due to employees and social security institutions were paid in accordance with the scheduled expiry dates.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| Deferred tax assets | 3,315 | 3,285 |
| Deferred tax liabilities | (129) | (150) |
| NET POSITION | 3,186 | 3,135 |
The table below analyses the nature of the temporary differences that determine the recognition of deferred tax liabilities and assets and their movements during the year and the previous year.
| Amortisation and leasing |
Provisions and value adjustments |
Fair value of derivative instruments |
Goodwill | Actuarial post employment benefit reserve evaluation |
Other temporary differences |
TOTAL | |
|---|---|---|---|---|---|---|---|
| AT 31 DECEMBER 2014 | 353 | 933 | 0 | 1,993 | 203 | 94 | 3,576 |
| To the income statement | - | (140) | (19) | (222) | (25) | (27) | (433) |
| To shareholders' equity | - | - | - | - | (8) | - | (8) |
| AT 31 DECEMBER 2015 | 353 | 793 | (19) | 1,771 | 170 | 67 | 3,135 |
| To the income statement | 40 | (23) | 76 | - | - | (50) | 43 |
| To shareholders' equity | - | - | - | - | 8 | - | 8 |
| AT 31 DECEMBER 2016 | 393 | 770 | 57 | 1,771 | 178 | 17 | 3,186 |
Deferred tax assets relating to goodwill refer to the exemption of the value of the investment in Faringosi Hinges s.r.l. made in 2011 pursuant to Italian law Decree 98/2011. The future tax benefit can be made in ten annual portions starting in 2018.
As required by the CONSOB memorandum of 28 July 2006, we disclose that the Company's net financial position is as follows:
| 31.12.2016 | 31.12.2015 | CHANGE | ||
|---|---|---|---|---|
| A. | Cash (Note 11) | 4 | 6 | (2) |
| B. | Positive balances of unrestricted bank accounts (Note 11) | 1,793 | 1,084 | 709 |
| C. | Other cash equivalents | 0 | 0 | 0 |
| D. | LIQUIDITY (A+B+C) | 1,797 | 1,090 | 707 |
| E. | Current bank payables (Note 14) | 7,399 | 19,055 | (11,656) |
| F. | Current portion of non-current debt (Note 14) | 6,656 | 2,707 | 3,949 |
| G. | Other current financial payables (Note 15) | 298 | 14 | 284 |
| H. | CURRENT FINANCIAL DEBT (E+F+G) | 14,353 | 21,776 | (7,423) |
| I. | NET CURRENT FINANCIAL POSITION (H-D) | 12,556 | 20,686 | (8,130) |
| J. | Non-current bank payables (Note 14) | 17,281 | 4,632 | 12,649 |
| K. | Other non-current financial payables | 240 | 0 | 240 |
| L. | NON-CURRENT FINANCIAL DEBT (J+K) | 17,521 | 4,632 | 12,889 |
| M. | NET FINANCIAL DEBT (I+L) | 30,077 | 25,318 | 4,759 |
The cash flow statement shows changes in cash and cash equivalents (letter D of this schedule).
In 2016, sales revenue totalled € 101,523,000, down by € 12,439,000 (-10.9%) compared with 2015.
| 2016 | % | 2015 | % | % CHANGE | |
|---|---|---|---|---|---|
| Italy | 31,431 | 30.9% | 38,081 | 33.4% | -17.5% |
| Western Europe | 6,868 | 6.8% | 6,481 | 5.7% | +6.0% |
| Eastern Europe and Turkey | 27,365 | 26.9% | 28,322 | 24.8% | -3.4% |
| Asia and Oceania (excluding Middle East) |
7,064 | 7.0% | 6,347 | 5.6% | +11.3% |
| Central and South America | 10,373 | 10.2% | 11,991 | 10.5% | -13.5% |
| Middle East and Africa | 11,254 | 11.1% | 16,479 | 14.5% | -31.7% |
| North America and Mexico | 7,168 | 7.1% | 6,261 | 5.5% | +14.5% |
| TOTAL | 101,523 | 100% | 113,962 | 100% | -10.9% |
| 2016 | % | 2015 | % | % CHANGE | |
|---|---|---|---|---|---|
| Brass valves | 9,002 | 8.9% | 12,673 | 11.1% | -29.0% |
| Light alloy valves | 32,406 | 31.9% | 33,663 | 29.6% | -3.7% |
| Thermostats | 7,690 | 7.6% | 10,513 | 9.2% | -26.9% |
| TOTAL VALVES AND THERMOSTATS |
49,098 | 48.4% | 56,849 | 49.9% | -13.6% |
| Standard burners | 21,483 | 21.2% | 22,983 | 20.2% | -6.5% |
| Special burners | 19,438 | 19.1% | 20,773 | 18.2% | -6.4% |
| TOTAL BURNERS | 40,921 | 40.3% | 43,756 | 38.4% | -6.5% |
| Accessories and other revenues | 11,504 | 11.3% | 13,357 | 11.7% | -13.9% |
| TOTAL | 101,523 | 100.0% | 113,962 | 100% | -10.9% |
The 2016 sales performance was negatively affected by the crisis of the Middle East and African markets (mainly Egypt), which recorded a downturn in direct sales of more than € 5 million. The crisis in these markets also affected the sales realised in Italy, since our Italian customers are strong exporters to the Middle East. The positive trend of the other international markets, most notably the steady growth in North America, only partially offset the decline in sales in the Middle East, Africa and Italy.
The analysis by product family shows a sharp decline in more mature products (brass valves and thermostats), mainly intended for markets in crisis. Average sales prices in 2016 were around 1.3% lower compared with 2015.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Sale of trimmings | 958 | 1,403 | (445) |
| Services to subsidiaries |
154 | 280 | (126) |
| Contingent income | 136 | 260 | (124) |
| Rental income | 85 | 116 | (31) |
| Use of provisions for risks and charges |
88 | 158 | (70) |
| Services to parent company |
10 | 10 | - |
| Other income | 848 | 506 | 342 |
| TOTAL | 2,279 | 2,733 | (454) |
Lower income from the sale of trimmings is due to the recovery in the production process of a greater portion of generated trimmings.
Services to subsidiaries and to the parent company refer to administrative, commercial and technical services within the scope of the Group.
Other income includes the charge to customers for sharing the development and industrialisation of new products.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Outsourced processing |
7,587 | 9,202 | (1,615) |
| Property rental | 3,995 | 4,032 | (37) |
| Electricity and natural gas |
3,526 | 3,874 | (348) |
| Maintenance | 2,813 | 2,661 | 152 |
| Advisory services | 1,377 | 1,488 | (111) |
| Transport and export expenses |
1,134 | 1,392 | (258) |
| Directors' fees | 1,061 | 1,049 | 12 |
| Insurance | 562 | 443 | 119 |
| Commissions | 545 | 574 | (29) |
| Travel expenses and allowances |
478 | 674 | (196) |
| Waste disposal | 352 | 364 | (12) |
| Canteen | 282 | 315 | (33) |
| Temporary agency workers |
99 | 145 | (46) |
| Other costs | 2,221 | 2,538 | (317) |
| TOTAL | 26,032 | 28,751 | (2,719) |
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Commodities and outsourced components |
33,692 | 40,279 | (6,587) |
| Consumables | 3,183 | 3,582 | (399) |
| TOTAL | 36,875 | 43,861 | (6,986) |
In 2016, the effective purchase prices of the main raw materials (aluminium alloys, steel and brass) were on average lower than in 2015, allowing a saving of 1.1% of sales. Consumption (purchases plus change in inventories) as a percentage of sales was 37.5% in 2016, compared with 38.8% in 2015.
The fall in outsourced processing costs was due to the partial insourcing of certain phases of burner production.
The reduction in energy costs results from lower production volumes and, to a lesser extent, from the reduction in the price of electrical energy and gas (on average -3% compared with 2015). Moreover, during the financial year, steps were taken to improve energy efficiency (installation of LED lighting systems, repair of compressed air leaks). The change in maintenance costs is linked to the normal cyclic nature of maintenance operations; the maintenance policies, aimed at guaranteeing constant efficiency of all the production plants, did not register any changes.
Costs for advisory services related to technical (€ 343,000), sales (€ 374,000) and legal, administrative and general (€ 660,000) services. Other costs included expenses for the registration of patents, leasing third-party assets, cleaning costs, costs related to the research and development activity and other minor charges.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Salaries and wages | 18,322 | 18,767 | (445) |
| Social Security costs |
5,959 | 6,131 | (172) |
| Temporary agency workers |
845 | 1,182 | (337) |
| Post-employment benefit reserve and other costs |
1,256 | 1,888 | (632) |
| TOTAL | 26,382 | 27,968 | (1,586) |
Average of the Company headcount in 2016 totalled 543 employees (424 blue-collars, 110 white-collars and supervisors, 9 managers), compared with 552 in 2015 (428 bluecollars, 115 white-collars and supervisors, 9 managers). The average number of temporary staff, with supply contract, was 26 in 2016 (32 in 2015).
During the financial year, the Company used the temporary lay-off scheme in periods characterised by low production requirements: this allowed savings in personnel costs of € 689,000 (€ 333,000 in 2015).
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Losses and write-downs of trade receivables |
171 | 360 | (189) |
| Non-income related taxes and duties |
181 | 179 | 2 |
| Contingent liabilities | 56 | 159 | (103) |
| Reserves for risks | 85 | 8 | 77 |
| Other provisions | - | 31 | (31) |
| Other operating expenses |
154 | 84 | 70 |
| TOTAL | 647 | 821 | (174) |
Non-income taxes mainly include IMU, TASI and the tax for the disposal of urban solid waste. Provisions for risks and other provisions relate to sums set aside for the risks described in Note 17.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Write-back of Faringosi Hinges |
- | 1,882 | (1,882) |
| Write-down of Sabaf Appliance Components |
(521) | (574) | 53 |
| Write-down of other equity investments |
- | (5) | 5 |
| TOTAL | (521) | 1,303 | (1,824) |
The write-down of the equity investment in Sabaf Appliance Components is commented in Note 4, to which reference is made.
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Interest paid to banks | 241 | 248 | (7) |
| Banking expenses | 229 | 210 | 19 |
| Other financial expense |
43 | 42 | 1 |
| TOTAL | 513 | 500 | 13 |
During the 2016 financial year, the Company reported net foreign exchange losses of € 48,000 (net loss of € 261,000 in 2015).
| 2016 | 2015 | CHANGE | |
|---|---|---|---|
| Current taxes | 1,314 | 2,126 | (812) |
| Deferred tax assets and liabilities |
(43) | 433 | (476) |
| Taxes related to previous financial years |
(137) | (42) | (95) |
| TOTAL | 1,134 | 2,517 | (1,383) |
Current taxes include IRES of € 1,034,000 and IRAP of € 280,000 (€ 1,734,000 and € 392,000 respectively in 2015).
Reconciliation between the tax burden booked in the financial statements and the theoretical tax burden calculated according to the statutory tax rates currently in force in Italy is shown in the following table:
| 2016 | 2015 | |
|---|---|---|
| Theoretical income tax | 988 | 2,244 |
| Permanent tax differences | 4 | (496) |
| Taxes related to previous financial years | (131) | (37) |
| Adjustment of the deferred taxation for a change in the IRES rate (Note 21) |
- | 390 |
| Other differences | 7 | 16 |
| IRES (CURRENT AND DEFERRED) | 868 | 2,117 |
| IRAP (current and deferred) | 266 | 400 |
| TOTAL | 1,134 | 2,517 |
Theoretical taxes were calculated applying the current corporate income tax (IRES) rate, i.e. 27.50%, to the pre-tax result. IRAP is not taken into account for the purpose of reconciliation because, as it is a tax with a different assessment basis from pre-tax profit, it would generate distorting effects.
No significant tax disputes were pending at 31 December 2016.
On 25 May 2016, shareholders were paid an ordinary dividend of € 0.48 per share (total dividends of € 5,467,000).
The Directors have recommended payment of an unchanged dividend of € 0.48 per share this year. This dividend is subject to approval of shareholders in the annual Shareholders' Meeting and was not included under liabilities in these financial statements.
The dividend proposed is scheduled for payment on 31 May 2017 (ex-date 29 May and record date 30 May).
Within the Sabaf Group, the Company operates exclusively in the gas parts segment for household cooking. The information in the consolidated financial statements is divided between the various segments in which the Group operates.
In accordance with IFRS 7, a breakdown of the financial instruments is shown below, among the categories set forth in IAS 39.
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| FINANCIAL ASSETS | ||
| Income statement fair value | ||
| • Derivative cash flow hedges (on currency) |
- | 69 |
| AMORTISED COST | ||
| • Cash and cash equivalents | 1,797 | 1,090 |
| • Trade receivables and other receivables |
28,505 | 34,069 |
| • Non-current loans | 1,897 | 1,837 |
| • Current loans | 1,000 | 1,000 |
| • Other financial assets | 300 | - |
Income statement fair value
| • Derivative cash flow hedges (on currency) |
201 | - |
|---|---|---|
| • Derivative cash flow hedges (on interest rates) |
37 | 14 |
| AMORTISED COST | ||||||
|---|---|---|---|---|---|---|
| • Loans | 31,336 | 26,394 | ||||
| • Other financial liabilities | 300 | - | ||||
| • Trade payables | 16,010 | 18,203 |
The Company is exposed to financial risks related to its operations, mainly:
It is part of Sabaf's policies to hedge exposure to changes in prices and in fluctuations in exchange and interest rates via derivative financial instruments. Hedging is done using forward contracts, options or combinations of these instruments. Generally speaking, the maximum duration covered by such hedging does not exceed 18 months. The Company does not enter into speculative transactions. When the derivatives used for hedging purposes meet the necessary requisites, hedge accounting rules are followed.
Trade receivables involve producers of domestic appliances, multinational groups and smaller manufacturers in a few or single markets. The Company assesses the creditworthiness of all its customers at the start of supply and systemically on at least an annual basis. After this assessment, each customer is assigned a credit limit.
A credit insurance policy is in place, which guarantees cover for approximately 50% of trade receivables.
Credit risk relating to customers operating in emerging economies is generally attenuated by the expectation of revenue through letters of credit.
The main exchange rate to which the Company is exposed is the euro/USD in relation to sales made in dollars (mainly in North America) and, to a lesser extent, to some purchases (mainly from Asian manufacturers). Sales in US dollars represented 10.6% of total revenue in 2016, while purchases in dollars represented 2.7% of total revenue. The operations in dollars were partially hedged through forward sales contracts. At 31 December 2016, there were forward sales of dollars, maturing on 31 December 2017, for a total of USD 6 million.
With reference to financial assets and liabilities in US dollars at 31 December 2016, a hypothetical and immediate revaluation of 10% of the euro against the dollar would have led to a loss of € 210,000, without considering the pending forward sale contracts.
At 31 December 2016, gross financial debt of the Company was at a floating rate for approximately 70% and at a fixed rate for approximately 30%; to reach an optimum mix of floating and fixed rates in the structure of the loans, the Company also used derivative financial instruments. At 31 December 2016, three interest rate swap (IRS) contracts totalling € 13 million were in place, mirrored in mortgages with the same residual debt, through which the Company transformed the floating rate of the mortgages into fixed rate. Considering the IRS in place, at the end of 2016, the fixed-rate portion amounted to approximately 70% of the total financial debt. The derivative contracts were not designated as a cash flow hedge and were therefore recognised using the "income statement fair value" method.
With reference to financial assets and liabilities at variable rate at 31 December 2016 and 31 December 2015, a hypothetical increase (decrease) in the interest rate of 100 base points versus the interest rates in effect at the same date – all other variables being equal - would lead to the following effects:
| 31.12.2016 | 31.12.2015 | |
|---|---|---|
| FINANCIAL EXPENSES |
FINANCIAL EXPENSES |
|
| Increase of 100 base points |
20 | 80 |
| Decrease of 100 base points |
- | (80) |
A significant portion of the purchase costs of the company is represented by brass and aluminium alloys. Sales prices of products are generally renegotiated annually; as a result, the Company is unable to immediately pass on to customers any changes in the prices of commodities during the year. The Company protects itself from the risk of changes in the price of brass and aluminium with supply contracts signed with suppliers for delivery up to twelve months in advance or, alternatively, with derivative financial instruments. In 2016 and 2015, the Company did not use financial derivatives on commodities. To stabilise the rising costs of commodities, Sabaf preferred to execute transactions on the physical market, fixing prices with suppliers for immediate and deferred delivery.
The Group operates with a low debt ratio (net financial debt / shareholders' equity at 31 December 2016 of 32.9%, net financial debt / EBITDA of 2.22) and has unused shortterm lines of credit. To minimise the risk of liquidity, the Administration and Finance Department:
Below is an analysis by expiration date of financial payables at 31 December 2016 and 31 December 2015:
| AT 31 DECEMBER 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| CARRYING VALUE |
CONTRACTUAL FINANCIAL FLOWS |
WITHIN 3 MONTHS |
FROM 3 MONTHS TO 1 YEAR |
FROM 1 TO 5 YEARS |
MORE THAN 5 YEARS |
||||
| Unsecured loans | 23,937 | 24,388 | 1,709 | 5,129 | 17,550 | - | |||
| Short-term bank loans | 7,399 | 7,399 | 5,399 | 2,000 | - | - | |||
| Payables to ARC shareholders | 300 | 300 | - | 60 | 240 | - | |||
| TOTAL FINANCIAL PAYABLES | 31,636 | 32,087 | 7,108 | 7,189 | 17,790 | 0 | |||
| Trade payables | 16,010 | 16,010 | 15,373 | 637 | - | - | |||
| TOTAL | 47,646 | 48,097 | 22,481 | 7,826 | 17,790 | 0 |
| AT 31 DECEMBER 2015 | ||||||||
|---|---|---|---|---|---|---|---|---|
| CARRYING VALUE |
CONTRACTUAL FINANCIAL FLOWS |
WITHIN 3 MONTHS |
FROM 3 MONTHS TO 1 YEAR |
FROM 1 TO 5 YEARS |
MORE THAN 5 YEARS |
|||
| Unsecured loans | 7,339 | 7,506 | 700 | 2,099 | 4,707 | - | ||
| Short-term bank loans | 19,055 | 19,055 | 17,055 | 2,000 | - | - | ||
| TOTAL FINANCIAL PAYABLES | 26,394 | 26,561 | 17,755 | 4,099 | 4,707 | 0 | ||
| Trade payables | 18,203 | 18,203 | 17,232 | 971 | - | - | ||
| TOTAL | 44,597 | 44,764 | 34,987 | 5,070 | 4,707 | 0 |
The various due dates are based on the period between the end of the reporting period and the contractual expiration date of the commitments, the values indicated in the table correspond to non-discounted cash flows. Cash flows include the shares of principal and interest; for floating rate liabilities, the shares of interest are determined based on the value of the reference parameter at the end of the reporting period increased by the spread set forth in each contract.
The revised IFRS 7 requires that financial instruments reported in the statement of financial position at fair value must be classified based on a hierarchy that reflects the significance of the input used in determining the fair value. IFRS 7 makes a distinction between the following levels:
The following table shows the assets and liabilities valued at fair value at 31 December 2016, by hierarchical level of fair value assessment.
| LEVEL 1 | LEVEL 2 | LEVEL 3 | TOTAL | |
|---|---|---|---|---|
| Other financial liabilities (currency derivatives) | - | 201 | - | 201 |
| Other financial liabilities (derivatives on interest rates) |
- | 37 | - | 37 |
| Option on minorities A.R.C. | - | - | 0 | 0 |
| TOTAL LIABILITIES | 0 | 238 | 0 | 238 |
The table below illustrates the impact of all transactions between Sabaf S.p.A. and other related parties on the balance sheet and income statement items and related parties, with the exception of the directors' fees, auditors and key management personnel which is stated in the Report on Remuneration.
| TOTAL 2016 | SUBSIDIARIES | PARENT COMPANY |
OTHER RELA TED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Non-current financial assets | 2,137 | 1,897 | - | - | 1,897 | 88.77% |
| Trade receivables | 27,465 | 1,192 | - | - | 1,192 | 4.34% |
| Tax receivables | 2,477 | - | 1,084 | - | 1,084 | 43.76% |
| Current financial assets | 1,060 | 1,000 | - | - | 1,000 | 94.34% |
| Trade payables | 16,010 | 104 | - | 2 | 106 | 0.66% |
| TOTAL 2015 | SUBSIDIARIES | PARENT COMPANY |
OTHER RELA TED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Non-current financial assets | 1,837 | 1,837 | - | - | 1,837 | 100% |
| Trade receivables | 32,871 | 2,008 | - | - | 2,008 | 6.11% |
| Tax receivables | 1,749 | - | 1,114 | - | 1,114 | 63.69% |
| Current financial assets | 1,069 | 1,000 | - | - | 1,000 | 93.55% |
| Trade payables | 18,203 | 853 | - | - | 853 | 4.69% |
| TOTAL 2016 | SUBSIDIARIES | PARENT COMPANY |
OTHER RELA TED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Revenue | 101,523 | 6,680 | - | - | 6,680 | 6.58% |
| Other income | 2,279 | 399 | 10 | - | 409 | 17.95% |
| Materials | 36,895 | 916 | - | - | 916 | 2.48% |
| Services | 26,032 | 4,129 | - | 22 | 4,151 | 15.95% |
| Capital gains on non-current assets |
87 | 66 | - | - | 66 | 75.86% |
| Write-downs of non-current assets |
521 | 521 | - | - | 521 | 100% |
| Financial income | 85 | 82 | - | - | 82 | 96.47% |
| TOTAL 2015 | SUBSIDIARIES | PARENT COMPANY |
OTHER RELA TED PARTIES |
TOTAL RELATED PARTIES |
IMPACT ON THE TOTAL |
|
|---|---|---|---|---|---|---|
| Revenue | 113,962 | 7,275 | - | - | 7,275 | 6.38% |
| Other income | 2,733 | 400 | 10 | - | 410 | 15.00% |
| Materials | 43,861 | 727 | - | - | 727 | 1.66% |
| Services | 28,751 | 4,162 | - | 34 | 4,196 | 14.59% |
| Capital gains on non-current assets |
158 | 100 | - | - | 100 | 63.29% |
| Write-downs of non-current assets |
1,303 | 1,303 | - | - | 1,303 | 100% |
| Financial income | 73 | 73 | - | - | 73 | 100% |
Relations with subsidiaries mainly consist of:
Relations with the parent company Giuseppe Saleri S.a.p.A., which does not exercise management or coordination activities pursuant to Article 2497 of the Italian Civil Code, consist of provision of administrative services.
Related-party transactions are regulated by specific contracts regulated at arm's length conditions.
Pursuant to CONSOB memorandum of 28 July 2006, no events or significant nonrecurring transactions occurred during 2016.
Pursuant to CONSOB memorandum of 28 July 2006, the Company declares that no atypical and/or unusual transactions as defined by the CONSOB memorandum were executed during 2016.
Sabaf S.p.A. also issued sureties to guarantee mortgage loans granted by banks to employees for a total of € 5,510,000 (€ 6,010,000 at 31 December 2015).
Fees to directors, statutory auditors and executives with strategic responsibilities are described in the Report on Remuneration that will be presented to the shareholders' meeting called to approve these separate financial statements.
At 31 December 2016, there were no equity-based incentive plans for the Company's directors and employees.
| COMPANY NAME | REGISTERED OFFICES |
SHARE CAPITAL AT 31 DECEMBER 2016 |
SHAREHOLDERS | OWNERSHIP % |
SHAREHOLDERS' EQUITY AT 31 DECEMBER 2016 |
2016 PROFIT (LOSS) |
|---|---|---|---|---|---|---|
| Faringosi Hinges s.r.l. | Ospitaletto (BS) | EUR 90,000 | Sabaf S.p.A. | 100% | EUR 5,546,105 | EUR 629,046 |
| Sabaf Immobiliare s.r.l. | Ospitaletto (BS) | EUR 25,000 | Sabaf S.p.A. | 100% | EUR 23,409,330 | EUR 1,517,481 |
| Sabaf do Brasil Ltda | Jundiaì (Brazil) | BRL 24,000,000 | Sabaf S.p.A. | 100% | BRL 36,458,354 | BRL 5,649,678 |
| Sabaf US Corp. | Plainfield (USA) | USD 100,000 | Sabaf S.p.A. | 100% | USD -26,387 | USD 8,564 |
| Sabaf Appliance Compo nents (Kunshan) Co., Ltd. |
Kunshan (China) | EUR 4,400,000 | Sabaf S.p.A. | 100% | CNY 5,335,695 | CNY -4,015,644 |
| Sabaf Beyaz Esya Par calari Sanayi Ve Ticaret Limited Sirteki |
Manisa (Turkey) | TRY 28,000,000 | Sabaf S.p.A. | 100% | TRY 52,641,491 | TRY 10,977,294 |
| Sabaf Appliance Compo nents Trading (Kunshan) Co., Ltd. in liquidazione |
Kunshan (China) | EUR 200,000 | Sabaf S.p.A. | 100% | CNY 1,950,327 | CNY -136,963 |
| A.R.C. s.r.l. | Campodarsego (PD) |
EUR 45,000 | Sabaf S.p.A. | 70% | EUR 4,321,471 | EUR 667,167 |
| DESCRIPTION | AMOUNT | POSSIBILITY OF UTILISATION |
AVAILABLE SHARE |
AMOUNT SUBJECT TO TAXATION FOR THE COMPANY IN THE CASE OF DISTRIBUTION |
|---|---|---|---|---|
| CAPITAL RESERVE: | ||||
| Share premium reserve | 10,002 | A, B, C | 10,002 | 0 |
| Revaluation reserve, Law 413/91 | 42 | A, B, C | 42 | 42 |
| Revaluation reserve, Law 342/00 | 1,592 | A, B, C | 1,592 | 1,592 |
| RETAINED EARNINGS: | ||||
| Legal reserve | 2,307 | B | 0 | 0 |
| Other retained earnings | 65,769 | A, B, C | 65,425 | 0 |
| VALUATION RESERVE: | ||||
| Post-employment benefit actuarial reserve | (532) | 0 | 0 | |
| TOTAL | 79,180 | 77,061 | 1,634 |
KEY A: for share capital increase B: to hedge losses
C: for distribution to shareholders
| GROSS VALUE | CUMULATIVE DEPRECIATION |
NET VALUE | ||
|---|---|---|---|---|
| Law 72/1983 | 137 | (137) | 0 | |
| 1989 merger | 516 | (433) | 83 | |
| Investment property | Law 413/1991 | 47 | (41) | 6 |
| 1994 merger | 1,483 | (1,001) | 482 | |
| Law 342/2000 | 2,870 | (2,282) | 588 | |
| 5,053 | (3,894) | 1,159 | ||
| Law 576/75 | 205 | (205) | 0 | |
| Law 72/1983 | 2,224 | (2,224) | 0 | |
| Plants and machinery | 1989 merger | 6,140 | (6,140) | 0 |
| 1994 merger | 6,820 | (6,820) | 0 | |
| 15,389 | (15,389) | 0 | ||
| Industrial and commercial equipment | Law 72/1983 | 161 | (161) | 0 |
| Other assets | Law 72/1983 | 50 | (50) | 0 |
| TOTAL | 20,653 | (19,494) | 1,159 |
Sabaf S.p.A. is a company organised under the legal system of the Republic of Italy.
Via dei Carpini, 1 25035 Ospitaletto (Brescia)
Tax information: R.E.A. Brescia: 347512
Tax Code: 03244470179 VAT Number: 01786911082
The following table, prepared pursuant to Article 149-duodecies of the CONSOB Issuers' Regulation, shows fees relating to 2016 for auditing services and for services other than auditing provided by the Independent Auditor. No services were provided by entities belonging to the network.
| IN THOUSANDS OF EURO | PARTY PROVIDING THE SERVICE | FEES PERTAINING TO THE 2016 FINANCIAL YEAR |
|---|---|---|
| Audit | Deloitte & Touche S.p.A. | 57 |
| Certification services | Deloitte & Touche S.p.A. | 2 2 |
| Other services | Deloitte & Touche S.p.A. | 14 3 |
| TOTAL | 73 |
2 Signing of Unified Tax Return, IRAP and 770 forms.
3 Audit agreed upon procedures relating to interim management reports, auditing of statements and training activities.
Alberto Bartoli, the Chief Executive Officer, and Gianluca Beschi, the Financial Reporting Officer of Sabaf S.p.A., have taken into account the requirements of Article 154-bis, paragraphs 3 and 4, of Legislative Decree 58 of 24 February 1998 and can certify
of the administrative and accounting procedures for the formation of the separate financial statements during the 2016 financial year.
They also certify that:
Ospitaletto, 20 March 2017
Chief Executive Officer
Alberto Bartoli
The Financial Reporting Officer Gianluca Beschi
in accordance with Art. 2429, 2nd Paragraph of the Italian Civil Code and Art. 153 of Italian Legislative Decree no. 58/1998
We hereby report to you on the supervisory activity performed during the 2016 financial year. This report is drafted in accordance with Art. 2429, 2nd Paragraph of the Italian Civil Code and Art. 153 of Italian Legislative Decree no. 58/1998, in light of the CONSOB recommendations, the Rules of Conduct of the Board of Statutory Auditors of listed companies issued by CNDCEC and the indications contained in the Self-Regulation Code of Borsa Italiana, which applies to your Company. We note below the activity performed.
During the 2016 financial year, the Board met on six occasions and attended nine meetings of the Board of Directors, five meetings of the Control and Risks Committee and two meetings of the Company's Control Bodies (Board of Statutory Auditors, Control and Risks Committee, Supervisory Body, Appointed Executive, Head of the Internal Audit Function, Independent Auditing Company). During the Board of Directors' meetings, the Board of Statutory Auditors obtained information on the general management performance, on its outlook, as well as on the most significant economic, financial and capital operations performed by the Company and by its subsidiaries.
In that regard, it is noted that, during 2016:
The Board of Statutory Auditors has expressed its favourable opinion with reference to the work plan prepared by the Head of the Internal Audit Function.
In conclusion, based upon the activity performed, we have not identified any violations of the law and/or the articles of association or any manifestly imprudent or risky operations or operations in potential conflict of interest or such as to compromise the integrity of the company's finances.
The Board has overseen the existence of an adequate organisational structure in relation to the company's dimensions.
In that regard, it is noted that the Company has for some time now adopted an Organisation Model compliant with the provisions of Italian Legislative Decree 231/2001, recently updated in relation to the latest organisational and regulatory changes.
During the financial year, the Board of Statutory Auditors maintained a constant information flow with the Supervisory Body.
The information acquired has not identified any criticalities with respect to the correct implementation of the organisation model that must be highlighted in this report.
With reference to the adequacy of the internal control system, the Board expresses its positive assessment and acknowledges that there are no findings to be reported to the Shareholders' Meeting. The information sources based upon which the Board has been able to express its assessment are the following:
As already highlighted by the Directors in the Management Report, it is worth noting that on 23 January 2017, the Managing Director submitted his resignation commencing from the shareholders' meeting convened to approve the financial statements (27 April 2017). The Board has been informed that activities are in progress with a view to identifying the new Managing Director.
The Board has overseen the adequacy of the administrative-accounting system, as well as the reliability of the latter correctly to represent the management facts, by way of:
Based upon the information gathered, no findings have emerged.
The Managing Director and the Appointed Executive have certified with a specific report attached to the 2016 financial statements:
A similar declaration has been made with reference to the consolidated financial statements.
With reference to the statutory auditing activity, it is noted that the same was entrusted, by resolution of the shareholders' meeting dated 28 April 2009, to Deloitte & Touche S.p.A. for the period 2009/2017.
During the financial year, the Board held periodic meetings with representatives of the Independent Auditing Company during which no significant data and information emerged that requires a mention in this report.
The procedures adopted in relation to the work plan submitted by the Independent Auditing Company have been examined. We have also received the technical information requested in relation to the accounting standards applied, as well as the accounts representation criteria of the most significant economic, capital and financial facts.
It is also noted that the Independent Auditing Company submitted on 5 April 2017 the report referred to in Art. 19, 3rd paragraph of Italian Legislative Decree 39/2010, which does not highlight any fundamental issues found during the audit or any significant deficiencies identified in the internal control system in relation to the financial reporting process.
The Independent Auditing Company, in accordance with the provisions of Art. 17, 9th Paragraph of Italian Legislative Decree 39/2010, has confirmed its independence to the Board of Statutory Auditors and has communicated the overall fees for the auditing and other services rendered by the same, and by other entities belonging to the same network, to the Company and to the subsidiaries, as set out in the appendices to the separate and consolidated financial statements.
The Board of Statutory Auditors confirms that in the financial year just ended and up to today's date no critical profile has emerged in relation to the independence of the Independent Auditing Company. Finally, it is acknowledged that the supervisory activity described in this paragraph and in the paragraph above has allowed the Board of Statutory Auditors to fulfil its internal control and statutory audit committee function, pursuant to Art. 19 of Italian Legislative Decree 39/2010, with respect to which it has no findings to report.
The Company drafted the 2016 financial statements in accordance with international accounting standards (IAS/IFRS). The separate Financial Statements show a financial year profit of Euro 2,459,688 and a shareholders' equity of Euro 91,523,902. Those financial statements were audited by the Company Deloitte & Touche Spa which issued its report dated 5 April 2017 without findings or information requests. The financial statements, together with the management report, were made available to us within the legal timescales and we have no particular comments to report.
The Company has also drafted the 2016 consolidated financial statements of the Sabaf Spa Group. The consolidated financial statements show a net financial year profit of Euro/thousand 9,009 and shareholders' equity of Euro/thousand 112,309.
Those financial statements have also been subject to statutory audit by Deloitte & Touche Spa which issued its report on 5 April 2017 without findings or information requests.
It is also acknowledged that the Independent Auditing Company has expressed, in the reports set out above, a positive opinion with reference to the coherence of the management report and the information contained in the corporate governance report and ownership structure indicated in Art. 123 bis of Italian Legislative Decree 58/98, both with respect to the separate financial statements and the consolidated financial statements.
Insofar as the Board is responsible, we have overseen the general layout of the separate financial statements and the consolidated financial statements, verifying their compliance with the law and the relevant accounting standards.
In particular, the outcomes of the impairment test conducted with reference to the value of the investments held in the subsidiaries, Faringosi Hinges S.r.l. and the newly acquired A.R.C. S.r.l., indicated in the separate financial statements, and the goodwill value recorded with reference to the same in the consolidated financial statements, have been assessed.
The test, conducted by external professionals specifically instructed based upon the provisional plans developed by the Board of Directors of the subsidiary, led:
In that regard, the Board has no comments to make. Finally, we acknowledge that no derogations have been made from the accounting standards adopted.
Your Company has accepted the Self-Regulation Code approved by the Corporate Governance Committee of listed companies.
In the annual Report on Corporate Governance and Ownership Structures, drafted in accordance with Art. 123 bis of Italian Legislative Decree 58/1998, the Board of Directors acknowledges the acceptance of the Self-Regulation Code and the methods of concrete implementation of the corporate governance rules adopted by the Company, in accordance with Art. 123 bis, 2nd paragraph, letter a).
During the financial year, the Board has overseen the methods of concrete application of the corporate governance rules adopted by the Company and, in that regard, it believes that the same have been effectively and correctly applied.
Insofar as we are aware, we inform you of the following:
The Board has overseen the adequacy of the instructions imparted by the Company to the subsidiaries, in accordance with Art. 114, 2nd Paragraph of Italian Legislative Decree 58/1998.
In that regard, it is noted that the Company, by way of the Managing Director, the Administration, Finance and Control Director and the other managers with strategic responsibilities, performs constant control over the operations of the subsidiaries, also due to the use, by the same, of a common accounting and management system (SAP), which is constantly accessible to management of the parent company.
From the periodic meetings with management and the Company assigned the Internal Audit no elements of criticality have emerged which require a mention in this report.
Finally, it is acknowledged that, at today's date, no communications have been received from the Control Bodies of the subsidiary and/or parent companies containing findings to be noted in this report.
In relation to the provisions of Art. 2391 bis of the Italian Civil Code, we acknowledge that the Board has adopted a procedure for the regulation of Operations with Related Parties, whose main objective is to define the guidelines and criteria for identifying Operations with Related Parties and structuring the roles, responsibilities and operating methods so as to guarantee, for those operations, adequate information transparency and the respective procedural and substantial correctness.
That procedure has been prepared in compliance with what was established by the Consob Regulation on Related Parties (no. 17221 dated 12 March 2010 as amended and supplemented) and it has recently been updated.
The Board has overseen the effective application of the rules by the Company and it has no comments in that regard.
During the supervisory activity conducted during the financial year, no omissions, censurable facts, irregularities or circumstances that require reporting to the Supervisory Authority or a mention herein were identified.
It is also acknowledged that the Board has not received reports in accordance with Art. 2408 of the Italian Civil Code, nor has it become aware of cases and/or lawsuits to be noted in this report. With reference to the financial statements, the Board has acknowledged the resolution proposals submitted by the Board of Directors, both with reference to the approval of the draft financial statements and to the proposal of distribution of the dividend. In that regard, it is noted that the dividend that the Board proposes to distribute, albeit in a higher amount than the financial year profit emerging from the separate financial statements, amounts to approximately 60% of the group's consolidated profit, a result towards which the subsidiary companies greatly contributed.
Ospitaletto, 5 April 2017
Dott. Antonio Passantino
Statutory Auditor Dott. Enrico Broli
Statutory Auditor Dott.ssa Luisa Anselmi
pursuant to Article 123-ter of the TUF and Article 84-quater of the Issuers' Regulations
Sabaf S.p.A.'s General Remuneration Policy (hereinafter also "remuneration policy"), approved by the Board of Directors on 22 December 2011 and updated on 20 March 2013 and 4 August 2015, defines the criteria and guidelines for the remuneration of members of the Board of Directors, executives with strategic responsibilities and members of the Board of Statutory Auditors.
The remuneration policy was prepared:
This Policy, applied from the date of approval by the Board of Directors, was fully implemented as of 2012 following the appointment of the corporate bodies.
With the introduction of the Policy, the remuneration system was extended to include a long-term incentive component, which was previously not provided for.
The General Remuneration Policy was approved by the Board of Directors on 22 December 2011 and updated on 20 March 2013 and 4 August 2015, at the proposal of the Remuneration Committee, as explained in the paragraphs below.
No independent experts or advisors contributed to the preparation of the policy, nor were the remuneration policies of other companies used for reference purposes. Specifically, it is the responsibility:
• of the Remuneration and Nomination Committee:
The Remuneration and Nomination Committee currently in office comprises four nonexecutive members, the majority of them independent (Fausto Gardoni, Giuseppe Cavalli and Renato Camodeca and Alessandro Potestà), with the knowledge and experience in accounting, finance and remuneration policies that is deemed adequate by the Board of Directors.
The Company's intention is that the General Remuneration Policy:
term, and maintains an appropriate level of competitiveness for the company in the sector in which it operates.
At the proposal of the Board of Directors, having obtained the opinion of the Remuneration and Nomination Committee, the shareholders determine a maximum total for the remuneration of all members of the Board, including a fixed amount and attendance fees.
In accordance with this maximum total, at the proposal of the Remuneration and Nomination Committee and subject to the opinion of the Board of Statutory Auditors, the Board of Directors determines additional remuneration for directors vested with special powers.
The fixed component is such that it is able to attract and motivate individuals with appropriate expertise for the roles entrusted to them within the Board, and is set with reference to the remuneration awarded for the same positions by other listed Italian industrial groups of a similar size.
It is the practice of Sabaf S.p.A. to appoint exponents of the Saleri family, controlling shareholder of the Company through the Company Giuseppe Saleri S.a.p.A., as Chairman and Vice Chairmen. To these directors, although executives, are not recognised variable compensations, but only additional compensations to those as directors for the particular offices held.
Directors who sit on committees formed within the Board (Internal Control and Risk Committee, Remuneration and Nomination Committee) are granted remuneration that includes a fixed salary and attendance fees intended to reward the commitment required of them.
Employment relationships with other executives with strategic responsibilities are governed by the Collective National Contract for Industrial Managers. In this regard, fixed remuneration is determined so that it is sufficient in itself to guarantee an appropriate basic salary level, even in the event that the variable components are not paid owing to a failure to reach objectives.
The amount of remuneration for Auditors is set by the Shareholders' Meeting, which establishes a fixed amount for the Chairman and the other Statutory Auditors.
The Chief Executive Officer, other executives with strategic responsibilities and other managers identified by the CEO from amongst managers who report directly to him or who report to the above-mentioned managers, are granted annual variable remuneration related to an MBO plan.
This plan sets a common objective (Group EBIT, which is considered to be the Group's main indicator of financial performance) and quantifiable and measurable individual objectives, both economic-financial and technical-productive in nature. All objectives are set by the Board of Directors, at the proposal of the Remuneration and Nomination Committee, in accordance with the budget.
The variable component may not exceed 25% of the fixed annual gross salary; it may be only partially granted in the event that the objectives are not completely met.
75% of the variable component is paid out in the April of the following year, and 25% in the January of the second subsequent year.
Non-executive directors are not granted any variable remuneration.
A long-term financial incentive dependent on measurable and predetermined performance targets relating to the creation of value for shareholders over the long term has been established.
The incentive extends over three years (2015-2017) and is exclusively aimed at the Chief Executive Officer and executives with strategic responsibilities.
The performance targets, set in accordance with the three-year business plan, are proposed by the Remuneration and Nomination Committee to the Board of Directors, as the body responsible for approving the long-term financial incentive.
The targets that set the parameters for the long-term incentive (consolidated Group EBITDA, share value and consolidated Group free cash flow) were defined by the Board of Directors on 4 August 2015, on the recommendation of the Remuneration and Nomination Committee.
The total long-term variable component for three years may not exceed 50% of the fixed annual gross salary; it may be only partially granted in the event that the objectives are not completely met. In the event that the objectives assigned are exceeded by more than 10%, an increase of 5% of the fixed annual gross salary and remuneration is granted, weighted based on the weight of the objective.
The variable component is paid in full following the approval of the financial statements of the third year to which the incentive relates (2017).
At the date of this report for the two executives with strategic responsibilities identified as such by the Board of Directors on 4 August 2016 a long-term incentive was not instituted.
The remuneration policy in force does not provide for the use of incentives based on financial instruments (stock options, stock grants, phantom stocks or others).
Directors and other executives with strategic responsibilities may be granted remuneration – exclusively as a fixed amount – for offices held in subsidiaries. As well as the approval of the subsidiaries' corporate bodies, this remuneration is subject to the favourable opinion of the Remuneration and Nomination Committee.
The Company has taken out a third-party civil liability insurance policy in favour of directors, statutory auditors and executives for unlawful acts committed in the exercise of their respective duties, in violation of obligations established by law and the Bylaws, with the sole exclusion of deliberate intent. The stipulation of this policy was approved by the Shareholders' Meeting.
The Company also provides a life insurance policy and cover for medical expenses (FASI) for executives, as established by the Collective National Contract for Industrial Managers; moreover, it has stipulated an additional policy to cover medical expenses not covered by FASI reimbursements.
Lastly, at the proposal of the Remuneration and Nomination Committee, and having consulted with the CEO, the Board of Directors also assigns company cars to executives.
There are no agreements for directors or other executives with strategic responsibilities governing ex ante financial settlements following the early termination of the employment relationship.
For the end of the relationship for reasons other than just cause or justified reasons provided by the employer, it is the Company's policy to pursue consensual agreements to end the employment relationship, in accordance with legal and contractual obligations.
The Company does not provide directors with benefits subsequent to the end of their mandate.
The Company has entered into a non-competition agreement with the CEO and with certain executives who report to him, the terms of which were approved by the Board of Directors, after obtaining the opinion of the Remuneration and Nomination Committee.
The Company has decided not to establish mechanisms for the ex-post adjustment of the variable remuneration component or claw back clauses to demand the return of all or part of the variable components of remuneration paid out (or to withhold deferred sums), which were determined on the basis of data subsequently found to be clearly incorrect.
This decision was made as the variable incentive plans are based on pre-established, quantifiable and measurable performance data, both economic-financial and technicalproductive in nature, the achievement of which is verified in advance.
The company reserves the unilateral right to include claw back clauses in future annual and/or long-term variable incentive plans.
This section, which details remuneration paid to directors and statutory auditors:
The remuneration granted to directors for 2016, in accordance with the Policy described in Section I, consisted of the following components:
With regard to the variable incentive plan established for 2015, the remuneration that accrued and was paid out during the year with regard to the CEO, Alberto Bartoli, and the remuneration accrued by the Director Gianluca Beschi was an overall €79,993.
With reference to the MBO 2016 plan, given the failure to achieve the objectives assigned, a compensation has not been accrued.
There are no incentive plans based on financial instruments, or compensation for termination of employment.
The Company has entered into a non-competition agreement with the CEO and with certain executives who report to him, the terms of which were approved by the Board of Directors, after obtaining the opinion of the Remuneration and Nomination Committee.
The remuneration granted to the Statutory Auditors for 2016 consists of a fixed payment determined by the Shareholders' Meeting of 5 May 2015.
The executive with strategic responsibilities (three persons, two of whom are already directors at Sabaf, identified as strategic directors by the Board of Directors on 4 August 2016) receives a fixed remuneration component for employment totalling €379,426, and a variable component totalling €67,150, disbursed in 2016 in relation to the 2015 variable incentive plan (MBO).
Other remuneration totalling €91,500 was also disbursed by subsidiaries.
In 2016, overall variable remuneration of €33,050 was accrued for the achievement of some of the objectives of the 2016 MBO plan. Its payment is deferred and dependent upon the continuation of the employment relationship.
There are no incentive plans based on financial instruments outstanding.
For details on the fees paid in the 2016 financial year, please refer to the tables below (Tab. 1 and Tab. 2), which contain remuneration paid to directors and statutory auditors, listed by name, and, at the aggregate level, other executives with strategic responsibilities currently in office, taking into account any roles held for less than the entire year. Remuneration received from subsidiaries and/or affiliates, with the exception of that waived or paid back to the Company, is also indicated separately.
With particular reference to Table 1, the column:
For a breakdown of other items, see attachment 3A, statement 7-bis and 7-ter of Consob Regulation 11971 of 14 May 1999.
Finally, pursuant to Article 84-quater, paragraph four of the Consob Issuers' Regulations, Table 3 shows shareholdings in Sabaf S.p.A. held by directors and executives with strategic responsibilities, as well as their non-separated spouses and dependent children, directly or through subsidiaries, trust companies or third parties, as shown in the shareholder register, communications received and other information acquired from the same parties. This includes all persons who held office during the year, even for only part of the year. The number of shares held is shown by individual director and in aggregate form for executives with strategic responsibilities.
FIGURES IN EURO
| Name and surname |
Office | Period of office |
Expiry of office |
Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination employment relationship |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing |
|||||||||||
| BOARD OF DIRECTORS | ||||||||||||
| Giuseppe Saleri |
Chairman | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 120,000 (a) | 0 | 0 | 0 | 0 | 0 | 120,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 8,000 | 0 | 0 | 0 | 0 | 0 | 8,000 | 0 | 0 | |||
| (III) TOTAL | 128,000 | 0 | 0 | 0 | 0 | 0 | 128,000 | 0 | 0 |
(a) Of which €15,000 as Director and €105,000 as Chairman.
| Ettore Saleri |
Vice Chairman |
1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 140,000 (a) | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 8,000 | 0 | 0 | 0 | 0 | 0 | 8,000 | 0 | 0 | |||
| (III) TOTAL | 148,000 | 0 | 0 | 0 | 0 | 0 | 148,000 | 0 | 0 |
(a) Of which €15,000 as Director and €125,000 as Vice Chairman.
| Cinzia Saleri |
Vice Chairman |
1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 140,000 (a) | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 140,000 | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 |
(a) Of which €15,000 as Director and €125,000 as Vice Chairman.
| Name and surname |
Office | Period of office |
Expiry of office |
Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination employment relationship |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing |
|||||||||||
| Roberta Forzanini |
Vice Chairman |
1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 140,000 (a) | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 140,000 | 0 | 0 | 0 | 0 | 0 | 140,000 | 0 | 0 |
(a) Of which €15,000 as Director and €125,000 as Vice Chairman.
| Alberto Bartoli |
CEO | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 290,000 (a) | 0 | 0 (b) | 0 | 0 | 0 | 290,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 11,000 | 0 | 0 | 0 | 0 | 0 | 11,000 | 0 | 0 | |||
| (III) TOTAL | 301,000 | 0 | 0 | 0 | 0 | 0 | 301,000 | 0 | 0 |
(a) Of which €15,000 as Director and €275,000 as Chief Executive Officer.
(b) Compensation accrued in the 2016 financial year in reference to the MBO plan – for details, please refer to what is reported in Tab. 2.
| Gianluca Beschi |
Director | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 159,499 (a) | 0 | 0 (b) | 0 | 14,371 | 0 | 173,870 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 40,000 | 0 | 0 | 0 | 0 | 0 | 40,000 | 0 | 0 | |||
| (III) TOTAL | 199,499 | 0 | 0 | 0 | 14,371 | 0 | 213,870 | 0 | 0 |
(a) Of which €15,000 as director and €144,499 as Administration, Finance and Control Director.
(b) Compensation accrued in the 2016 financial year in reference to the MBO plan – for details, please refer to what is reported in Tab. 2.
| Renato Camodeca |
Director | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 24,000 (a) | 28,000 (b) | 0 | 0 | 0 | 0 | 52,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 24,000 | 28,000 | 0 | 0 | 0 | 0 | 52,000 | 0 | 0 |
(a) Of which €15,000 as director and €9,000 in board meeting attendance fees. (b) Of which €20,000 as a member of the Internal Control and Risk Committee and the Remuneration and Nomination Committee (i.e., €10,000 each) and €8,000 in Committee meeting attendance fees.
| Giuseppe Cavalli |
Director | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 23,000 (a) | 27,000 (b) | 0 | 0 | 0 | 0 | 50,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 23,000 | 27,000 | 0 | 0 | 0 | 0 | 50,000 | 0 | 0 |
(a) Of which €15,000 as director and €8,000 in board meeting attendance fees.
(b) Of which €20,000 as a member of the Internal Control and Risk Committee and the Remuneration and Nomination Committee (i.e., €10,000 each) and €7,000 in Committee meeting attendance fees.
| Name and surname |
Office | Period of office |
Expiry of office |
Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination employment relationship |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing |
|||||||||||
| Fausto Gardoni |
Director | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 24,000 (a) | 15,000 (b) | 0 | 0 | 0 | 0 | 39,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 24,000 | 15,000 | 0 | 0 | 0 | 0 | 39,000 | 0 | 0 |
(b) Of which €10,000 as a member of the Remuneration and Nomination Committee and €5,000 in Committee meeting attendance fees.
| Nicla Picchi |
Director | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 23,000 (a) | 13,000 (b) | 0 | 0 | 0 | 15,000 | 51,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 5,000 | 5,000 | 0 | 0 | |||
| (III) TOTAL | 23,000 | 13,000 | 0 | 0 | 0 | 20,000 (c) | 56,000 | 0 | 0 |
(a) Of which €15,000 as director and €8,000 in board meeting attendance fees.
(b) Of which €10,000 as a member of the Internal Control and Risk Committee and €3,000 in Committee meeting attendance fees.
(c) Of which €15,000 as member of the Sabaf S.p.A. Supervisory Body and €5,000 as member of the Supervisory Body of the subsidiary Faringosi Hinges S.r.l.
| Anna Pendoli |
Director | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 24,000 (a) | 0 | 0 | 0 | 0 | 0 | 24,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 24,000 | 0 | 0 | 0 | 0 | 0 | 24,000 | 0 | 0 |
| Alessandro Potestà |
Director | 28 Apr - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 15,000 | 0 | 0 | 0 | 0 | 0 | 15,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 15,000 | 0 | 0 | 0 | 0 | 0 | 15,000 | 0 | 0 |
| Name and surname |
Office | Period of office |
Expiry of office |
Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination employment relationship |
|
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus and other incentives |
Profit sharing |
|||||||||||
| BOARD OF STATUTORY AUDITORS | ||||||||||||
| Antonio Passantino |
Chairman | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 24,000 | 0 | 0 | 0 | 0 | 0 | 24,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 24,000 | 0 | 0 | 0 | 0 | 0 | 24,000 | 0 | 0 | |||
| Luisa Anselmi |
Chairman | 1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
| (I) Remuneration at Sabaf S.p.A. | 16,000 | 0 | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 | |||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 16,000 | 0 | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 | |||
| Enrico Broli |
Statutory Auditor |
1 Jan - 31 Dec 2016 |
Approval of 2017 F.S. |
|||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| (I) Remuneration at Sabaf S.p.A. | 0 | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 | ||||
| (II) Remuneration from subsidiaries and affiliates | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | |||
| (III) TOTAL | 16,000 | 0 | 0 | 0 | 0 | 0 | 16,000 | 0 | 0 |
| Name and surname |
Office | Period of office |
Expiry of office |
Fixed remuneration |
Remuneration for attendance at Committee meetings |
Variable remuneration (non equity) |
Non monetary benefits |
Other remuneration |
Total | Fair Value of equity remunera tion |
Indemnity for end of office or termination employment relationship |
|---|---|---|---|---|---|---|---|---|---|---|---|
| Bonus Profit and other |
incentives
sharing
| OTHER EXECUTIVES WITH STRATEGIC RESPONSIBILITIES | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Other executives with 1 Jan - strategic responsibilities N/A 31 Dec 2016 (n° 3) (a) |
||||||||||||
| (I) Remuneration at Sabaf S.p.A. | 379,426 | 0 | 33,050(b) | 0 | 49,781 | 0 | 462,257 | 0 | 41,713 | |||
| (II) Remuneration from subsidiaries and affiliates | 94,000 | 0 | 0 | 0 | 0 | 0 | 94,000 | 0 | 0 | |||
| (III) TOTAL | 473,426 | 0 | 33,050 | 0 | 49,781 | 0 | 556,257 | 0 | 41,713 |
(a) Of which 2 have been identified as strategic managers by the Board of Directors on 4 August 2016 (and already executives at Sabaf). (b) Compensation accrued in the 2016 financial year in reference to the MBO plan – for details, please refer to what is reported in Tab. 2.
FIGURES IN EURO
| Name and surname |
Office | Plan | Payable / Paid | Deferred | Deferment period |
No longer payable |
Payable / Paid | Still Deferred |
Other bonuses |
|---|---|---|---|---|---|---|---|---|---|
| Bonus for the year | Bonus of previous years | ||||||||
| Alberto Bartoli |
CEO | ||||||||
| Remuneration at Sabaf S.p.A. | 2015 MBO Plan (March 2015) |
- | - | 0 | 0 | 54,000 | 0 | ||
| 2016 MBO Remuneration at Sabaf S.p.A. Plan (March 2016) |
0 | 0 | 75% 17 Mar 25% 17 Dec |
- | - | - | 0 | ||
| TOTAL | 0 | 0 | - | 0 | 54,000 | 0 | 0 |
| Gianluca Beschi |
Executive Director |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| Remuneration at Sabaf S.p.A. | 2015 MBO Plan (March 2015) |
- | - | - | 0 | 25,993 | 0 | 0 | |
| Remuneration at Sabaf S.p.A. | 2016 MBO Plan (March 2016) |
0 | 0 | 75% 17 Mar 25% 17 Dec |
- | - | - | 0 | |
| TOTAL | 0 | 0 | - | 0 | 25,993 | 0 | 0 |
| Other executives with strategic responsibilities (n° 3) |
||||||||
|---|---|---|---|---|---|---|---|---|
| Remuneration at Sabaf S.p.A. | 2015 MBO Plan (March 2015) |
- | - | - | 0 | 67,150 | 0 | 0 |
| Remuneration at Sabaf S.p.A. | 2016 MBO Plan (March 2016) |
0 | 33,050 | 75% 17 Mar 25% 17 Dec |
- | - | - | 0 |
| TOTAL | 0 | 33,050 | - | 0 | 67,150 | 0 | 0 |
| Surname and Name |
Office | Type of Ownership |
Investee Company |
No. shares held at 31 Dec 2015 |
No. shares acquired |
No. shares sold |
No. shares held at 31 Dec 2016 |
|---|---|---|---|---|---|---|---|
| Saleri Giuseppe | Chairman | Indirect through the subsidiary Giuseppe Saleri S.a.p.A. |
Sabaf S.p.A. | 5,850,003 | - | 2,306,690 | 3,543,313 |
| Roberta Forzanini | Vice Chairman | Direct | Sabaf S.p.A. | 4,051 | - | 2,080 | 1,971 |
| Direct | 7,500 | 7,500 | |||||
| Bartoli Alberto | CEO | Indirect through spouse |
Sabaf S.p.A. | 1,000 | - | - | 1,000 |
| Cavalli Giuseppe | Independent Director |
Indirect through spouse |
Sabaf S.p.A. | 5,000 | - | - | 5,000 |
| Anna Pendoli | Director | Direct | Sabaf S.p.A. | 450,000 | - | - | 450,000 |
| Executives with strategic responsibilities (n° 3) |
- | Direct | Sabaf S.p.A. | 4,300 | - | - | 4,300 |
|---|---|---|---|---|---|---|---|
| ------------------------------------------------------------ | --- | -------- | -------------- | ------- | --- | --- | ------- |
CONCEPT AND GRAPHIC DESIGN: ALL CREATIVE AGENCY
PHOTO: STUDIO 22 - NICOLA TIRELLI
PRINT: GRAPHIC CENTER
Printed on paper Fedrigoni Sirio Color and Fedrigoni Splendorgel
COPYRIGHT 2017 - SABAF S.P.A. - ALL RIGHTS RESERVED
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