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Rapala VMC Oyj Remuneration Information 2021
3287_rns_2021-03-02_cd20aa66-932e-4803-a8b3-999e85213e90.pdf
Remuneration Information
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RAPALA REMUNERATION REPORT 2020
This Remuneration Report sets out how Rapala VMC Corporation (the "Company", "Rapala") has implemented its Remuneration Policy in 2020. This report includes information concerning remuneration of the Board of Directors ("Board") and the President and CEO of Rapala between 1 January 2020 and 31 December 2020.
The Report has been reviewed by the remuneration committee of Rapala's Board of Directors ("Remuneration Committee") and approved by the Board of Directors. The Annual General Meeting 2021 makes a consultative decision as to whether it approves this Remuneration Report.
OVERVIEW OF REMUNERATION IN 2020
Remuneration of the Rapala governing bodies is based on the Remuneration Policy that was presented for a consultative decision at the Annual General Meeting held on 26 March 2020. The policy will be applied until the Annual General Meeting 2024, unless the Board decides to bring it for an advisory decision at an earlier General Meeting.
The decision-making process on remuneration, as defined in the Remuneration Policy, has been followed in the remuneration decision-making in 2020. No temporary deviations from Remuneration Policy were applied in 2020. Furthermore, the Board did not observe any circumstances or activities that would have resulted in a need to apply claw-back clauses applicable to the President and CEO's variable remuneration in 2020.
Business review 2020
2020 was an exceptional and two-folded year for the Group due to the COVID-19 pandemic. During the first half of the year, trading conditions were significantly weakened by the pandemic and the restrictions that followed. In the ramp-up period starting in June, however, trading conditions recovered quickly and the demand for fishing tackle products, as for many other outdoor products, was particularly high.
The Group's net sales for the year were 5.1% below last year with reported translation exchange rates. With comparable translation exchange rates, net sales were organically down by 2.5% from the comparison period. As expected, sales were decreased by the termination of Shimano and certain other Third Party distribution agreements. On the other hand, Group Products sales grew from 2019 despite the difficult first half of the year impacted by the COVID-19 pandemic.
Comparable (excluding mark-to-market valuations of operative currency derivatives and other items affecting comparability) operating profit increased by 3.7 MEUR from the comparison period. The change in translation exchange rates was negative and with comparable translation exchange rates comparative operating profit increased by 4.3 MEUR. Reported operating profit decreased by 2.7 MEUR from the previous year and the items affecting comparability had a negative impact of 10.8 MEUR (4.4) on reported operating profit.
Financial result and performance 2020
Comparable operating profit margin was 8.2% (6.5) for the year. The increased profitability was driven by improved gross margin as the share of higher margin Group Products sales of total sales increased. Furthermore, decreased operating expenses had a significant impact on the profitability improvement from the previous year. During the first half of the year, the Group quickly reacted to the COVID-19 pandemic by implementing a forceful COVID-19 mitigation plan. The Group continued the tight cost control during the second half of the year even though the demand and sales increased to higher levels. As a result of the successful implementation and execution of the mitigation plan, operating expenses substantially decreased from the comparison period.
Reported operating profit margin was 4.1% (4.9) for the year. Reported operating profit included impact of mark-to-market valuation of operative currency derivatives of -0.1 MEUR (-0.4). Net expenses of other items affecting comparability included in the reported operating profit were -10.7 MEUR (-4.0). Other items affecting comparability consisted mainly of expenses related to the restructuring of European business and ramp down of Asian lure manufacturing operations in Batam. In Europe, several distribution sites were closed or downsized as the centralized Pärnu distribution centre was set up. Furthermore, cost structure was streamlined in Europe following the Shimano exit for non-JV countries and exit of hunting business.
Total financial (net) expenses were 4.2 MEUR (3.6) for the year. Net interest and other financing expenses were 3.2 MEUR (2.5) and (net) foreign exchange expenses were 1.0 MEUR (1.1). Net profit for the year decreased by 0.7 MEUR and was 3.4 MEUR (4.1) and earnings per share were 0.04 EUR (0.10). The share of non-controlling interest in net profit increased compared to previous year and totalled 1.0 MEUR (-0.4).
In line with the Remuneration Policy, remuneration in 2020 has aimed to contribute to positive development of shareholder value, enhance competitiveness and long-term financial success and the fulfilment of the Company's strategy. The President and CEO's remuneration has consisted of fixed salary and a performance-based short-term incentive scheme that has had a direct link to the Company's strategy execution and financial performance. The Board of Directors resolved on the earning opportunities and performance targets for the short-term incentive at the beginning of the financial year. The performance metrics for 2020 were based on organic sales growth, return on operative capital and execution of the Company's strategic plan.
Due to COVID-19 pandemic, the Board resolved on amendments to the performance criteria during the year to emphasize the importance of cash flow and profitability in the extraordinary operating environment with several risks.
Thanks to our relatively strong performance despite challenging environment, the criteria outcome in the short-term incentive plan 2020 was close to the target level set by the Board. See application of performance criteria in more detail in section "Remuneration of the President and CEO". Total Compensation paid to the President and CEO in 2020 was 292 897 €.
DEVELOPMENT OF FINANCIAL PERFORMANCE AND REMUNERATION
5-year Development of Financial Performance
Rapala VMC's net sales in the past years has been impacted by decreasing 3rd Party Products sales, whereas the Group Product's sales continued to increase in 2020. As a result of strong strategy execution and restructurings, the comparable EBIT has been on an increasing trend and this continued in 2020. Future strategy is based on growth in Group Products business and increasing operational performance.
NET SALES, EUR MILLION
COMPARABLE EBIT, EUR MILLION
ROCE %
SHARE PRICE DEVELOPMENT 2016-2020, EUR DIVIDENDS PER SHARE 0,20€ IN TOTAL
5-year Development of Remuneration
DEVELOPMENT OF PRESIDENT AND CEO COMPENSATION (PAID)
| EUR | 2016* | 2017 | 2018 | 2019** | 2020 |
|---|---|---|---|---|---|
| Base salary + benefits*** | 324 867 | 265 259 | 282 557 | 287 697 | 292 897 |
| Short-term incentive (sti) | 74 384 | 58 420 | 61 155 | 133 925 | - |
| Total compensation | 399 251 | 323 679 | 343 712 | 421 622 | 292 897 |
| Development, president & ceo | |||||
| Base salary + benefits | -9% | -18% | 7% | 2% | 2% |
| Total compensation | -14% | -19% | 6% | 23% | -31% |
*In 2016, 315 251€ was paid to Jorma Kasslin and 84 000€ to Jussi Ristimäki
** In 2019, 235 897 € was paid to Jussi Ristimäki and 51 800 € to Louis d'Alançon
*** In 2020, 61 623 € was paid to Louis d'Alançon and 231 273 € to Nicolas Warchalowski
*** Including supplementary pension policies
DEVELOPMENT OF BOARD REMUNERATION
| EUR, 000 | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Chairman annual fee | 80 000 | 80 000 | 80 000 | 80 000 | 80 000 |
| Development | 0 % | 0 % | 0 % | 0 % | |
| Board member annual fee | 30 000 | 30 000 | 30 000 | 30 000 | 30 000 |
| Development | 0 % | 0 % | 0 % | 0 % |
DEVELOPMENT OF AVERAGE EMPLOYEE SALARY
| EUR, 000 | 2016 | 2017 | 2018 | 2019 | 2020 |
|---|---|---|---|---|---|
| Total salary costs* | 62 631 | 62 493 | 63 915 | 66 836 | 65 054 |
| Number of employees | 1 584 | 1 539 | 1 626 | 1 631 | 1 595 |
| Average salary costs | 40 | 41 | 39 | 41 | 41 |
| Development | 3% | -3% | 4% | 0% |
- Excluding Indonesia manufacturing unit, which was discontinued at the end of 2020.
The Graph presents remuneration paid to the President and CEO in the corresponding financial year. For example in 2020:
- Fixed Salaries 1-12/2020.
- Short-Term Incentive earned in 2019 and paid in 2020, had there been incentives earned in 2019.
DEVELOPMENT OF CEO COMPENSATION (PAID)
- Fixed Salary
- Short-Term Incentive
REMUNERATION OF THE BOARD OF DIRECTORS IN 2020
| DIRECTOR | FIXED FEES | MEETING FEES | TOTAL |
|---|---|---|---|
| Louis D'Alançon (Chairman) | 80 000 | 11 000 | 91 000 |
| Jorma Kasslin | 30 000 | 12 000 | 42 000 |
| Emmanuel Viellard | 30 000 | 13 000 | 43 000 |
| Marc Speeckaert | 30 000 | 14 000 | 44 000 |
| Julia Aubertin | 30 000 | 10 000 | 40 000 |
| Vesa Luhtanen 1) | 30 000 | 2 000 | 32 000 |
| Eero Makkonen 2) | - | 7 000 | 7 000 |
1) From 26 March 2020
2) Until 26 March 2020
Shareholders resolved on the Board Remuneration in the Annual General Meeting of 2020 as follows.
Annual Fees
- EUR 80,000 to Chairman and
- EUR 30,000 to members.
Meeting Fees
- For Board and Committee meetings: EUR 1,000 per meeting
Board Remuneration is paid fully in cash.
The Chairman of the Board Louis d'Alancon acted as the Company's temporary President and CEO between 27 September 2019 and 1 March 2020. His remuneration for the role of acting President and CEO has been reported in the section Remuneration of the President and CEO.
REMUNERATION OF THE PRESIDENT AND CEO
Application of Performance Criteria in 2020
In 2020, the President and CEO Nicolas Warchalowski was offered a performance-based short-term incentive. The short-term incentive scheme may be based on the result of the Group or other criteria decided by the Board. The objective of the long-term incentive scheme is to encourage the President and CEO to manage the Company over a long period of time in order to achieve the targets and strategy set by the Company, promoting the Company's long-term financial success and competitiveness.
For short-term incentive 2020, organic sales growth of own products on comparable currency basis, return on operative capital and a successful execution of the strategic plan were set as the performance criteria, and the maximum earning opportunity for the President and CEO was set at 100% of annual fixed salary. Based on the criteria achievement, the total outcome of the short-term incentive in 2020 did lead to an earned reward of 230 000 €. The reward is due payment in early 2021.
The Chairman of the Board Louis d'Alancon was not offered any variable pay plans during his tenure as acting President and CEO.
The President and CEO's Share-Based Incentives in 2020
The President and CEO was not offered any share-based incentive schemes during 2020.
Remuneration Paid to the President and CEO in 2020
| BASE SALARY | ADDITIONAL PENSION PAYMENT | SHORT-TERM INCENTIVE | LONG-TERM INCENTIVE | TOTAL PAID COMPENSATION IN 2020 | |
|---|---|---|---|---|---|
| Louis d'Alançon 1) | 61 623 € | 0 € | - | 0 € | 61 623 € |
| Nicolas Warchalowski 2) | 231 273 € | 0 € | 0 € 3) | 0 € | 231 273 € |
1) Louis d'Alançon acted as the President and CEO until 1 March 2020.
2) Nicolas Warchalowski started as the President and CEO 1 March 2020.
3) Earned 230 000 € in 2020, paid in 2021
STRUCTURE OF PAID COMPENSATION 2020 LOUIS D'ALANÇON
- Fixed Salary
- Short-Term Incentive
- Long-Term Incentive
- Additional Pension
STRUCTURE OF PAID COMPENSATION 2020 NICOLAS WARCHALOWSKI
- Fixed Salary
- Short-Term Incentive
- Long-Term Incentive
- Additional Pension