sustainabilitymatrixmontagetechnikmkc102

Economic performance

SFS’ long-term goal is steady value creation. According to its current mid-term targets, it expects to generate annual sales growth of 3%–6% in local currency. Fiscal year 2020 was heavily impacted by the coronavirus pandemic and net economic value generated decreased by –10.7% compared to 2019. SFS’ well-balanced positioning cushioned the overall decline somewhat. Despite the economic uncertainty in connection with further global waves of COVID-19 infections, SFS expects to show an increase in economic value generated for 2021.

GRI 103: MANAGEMENT APPROACH 2016

GRI 103-1 Explanation of the material topic and its boundary
SFS’ economic performance and the value it generates for all stakeholders is at the center of its business operations and decisions. The value it creates on behalf of its stakeholder groups – customers, suppliers, employees, investors and the state or political communities in which the company is active – is reflected in the form of salaries, dividends and tax revenues. SFS refrains from harmful tax practices and arrangements, and it pays taxes in the jurisdictions where it generates economic value. SFS Group has reported the taxes it has paid in foreign countries to the Swiss Federal Tax Administration since 2017 within the framework of country-by-country reports. Information on unusual fluctuations in tax expense are disclosed in the Financial Report (“Information for shareholders”, p. 108 et seq.) SFS expects its future effective tax rate to be about 17.5%.

GRI 103-2 The management approach and its components
Sustainable and mutually beneficial partnerships are important to SFS. Maintaining a fair and balanced distribution of economic value generated among the various stakeholder groups is therefore vitally important.

Although SFS’ net economic value generated increased by 12.1% during the period from 2015 to 2019, fiscal year 2020 – due to the pandemic and the measures taken to contain the outbreak – posed major challenges to SFS Group. After plunging to very low levels during the first half of the year, demand in several end markets and regions recovered from the summer months onward. This led to a year-on-year decline of –10.7% in overall net economic value generated in 2020.

The relative shares of net economic value distributed to the individual stakeholder groups declined similarly due to the repercussions of the COVID-19 pandemic. The share of net economic value distributed to employees, for example, declined by –10.1% in 2020 compared with the prior year due to voluntary salary cuts and temporary measures taken to reduce capacity.

The distribution to shareholders was an exception, as a 10% reduction in the dividend payout had already been proposed at the Annual General Meeting 2020 as a gesture of solidarity in connection with the COVID-19 pandemic. This was subsequently approved by an overwhelming majority of the votes cast. In view of the robust earnings, the very solid balance sheet and the guardedly optimistic outlook for future business activity, the Board of Directors proposed an unchanged dividend of CHF 1.80 per share at this year’s Annual General Meeting. Therefore, the share of net economic value distributed to investors/shareholders remained unchanged over the 2019–2020 period.

In congruence with SFS Group’s financial policy, the distribution to shareholders will range from 35% to 50% of consolidated net income. On a comparable basis, the payout ratio ranged from 37.5% to 36.5% of consolidated net income during 2016–2020.

In addition to qualitative parameters, key financial targets were also defined during the formulation of the medium-term business plan for 2020–2025. Despite the currently challenging general environment, SFS expects its sales to grow by 3–6% p.a. (in local currencies, including changes in the scope of consolidation) in the coming years, thanks to its healthy and attractive project pipeline.

With an EBIT margin target of 13–16% for the period, SFS is aiming for further steady value generation in future. Every stakeholder group’s share of value generated should remain relatively stable throughout the period.

GRI 103-3 Evaluation of the management approach
An above-average growth rate over the long term is in the interests of all SFS stakeholders. Adherence to the principles of good corporate governance while achieving that growth will ensure the necessary transparency and an adequate balance between management and control. Strategic control is in the hands of the Board of Directors, and operational management is the responsibility of the Group Executive Board. SFS publishes financial reports every half year. The consolidated financial statements are examined every fiscal year by external auditors in accordance with Swiss GAAP FER.

GRI 201: ECONOMIC PERFORMANCE 2016

GRI 201-1 Direct economic value generated and distributed
SFS generates sustainable value for its stakeholders. SFS stakeholders are its customers, suppliers, shareholders, employees and the states or political communities in which the company operates. Although part of the economic value generated is distributed directly to the various stakeholders, the company retains some of the value generated to ensure the ongoing development of new innovations and technologies, and to finance acquisitions or investments.

The following table provides an overview of the economic value generated during the past five years and the share distributed to the various to stakeholders as a percentage of net economic value generated:

Development and distribution of added value
in CHF million
2020 2019 2018 2017 2016
Value added gross
s % of net sales
817.9
47.9%
899.4
50.5%
858.2
49.4%
818.9
50.1%
730.7
50.9%
Depreciation/amortization
As % of net sales
–100.2
–5.9%
–95.4
–5.4%
–89.7
–5.2%
–125.8
–7.7%
–146.4
–10.2%
Value added net
As % of net sales
717.7
42.0%
804.0
45.1%
768.5
44.2%
693.1
42.4%
584.3
40.7%
Development and distribution of added value
in CHF million
2020 2019 2018 2017 2016
Employees
Personnel expenses
69.0*
495.1
68.5%
550.4
67.6%
519.3
69.3%
480.6
70.5%
411.8
Government
Current income tax excl. deffered taxes**
Public charges
5.0%*
31.3
4.6
5.3%
37.7
4.6
6.6%
46.4
4.6
7.0%
44.2
4.3
7.7%
40.9
3.8
Capital provider
Dividends to shareholders
Interest expenses
9.7%*
67.5
1.9
9.0%
67.5
4.8
10.3%
75.0
4.3
11.0%
71.3
4.9
11.7%
65.6
3.0
Company
Retained earnings
16.3%*
117.3
17.3%
139.0
15.5%
118.9
12.7%
87.8
10.1%
59.2

*in % of net added value
**According to GRI 201, deferred taxes are not taken into account in payments to the state.

Development and distribution of added value
in CHF million
2020 2019 2018 2017 2016
Total Income 1'724.5 1'814.7 1'756.7 1'657.9 1'462.1
To Suppliers 906.6 915.3 898.5 839.0 731.4
Value added gross 817.9 899.4 858.2 818.9 730.7

Further indicators for value creation and distribution in accordance with the GRI requirements can also be found in the financial report.