New topics added under sustainable developmentt
The financial year just ended saw important progress made on the path toward a more sustainable development. Contributing factors included the updated materiality analysis in accordance with the new guidelines of the Global Reporting Initiative (GRI) 2021 and the resultant new topics and corresponding objectives. SFS focuses on the following content in its 2022 Sustainability Report planned for publication in late May 2023:
- Energy & emissions
- Sustainable solutions
- Employee promotion & engagement
- Occupational health and safety
The inclusion of Hoffmann is also proceeding very well in the area of sustainability, meaning that it will already be possible to present the first non-financial indicators in the 2022 Sustainability Report.
Renewable energy and energy autonomy are topics that have been driving SFS for some time already. The Electronics division installed large-scale photovoltaic modules that are expected to produce around 6 GWh of electricity per year at the sites in Malaysia and Nantong. Plans to set up the company’s own wind turbine on the grounds of the production facility at Heerbrugg became more concrete with the erection of a wind measurement mast.
Potential risks evaluated
The Group Executive Board and the Board of Directors regularly assess the main business risks to which SFS Group is exposed. A comprehensive risk assessment is conducted at least once a year in which the relevant risks are systematically classified according to the likelihood of occurrence and the severity of the potential consequences. Potential risks and actions to contain these risks were examined once again during the year under review. The review focused on ensuring the energy supply, how to deal with higher energy and raw material prices, data breaches and business interruptions due to cyberattacks, warranty risks arising from product recalls, geopolitical instabilities, company exposure to the global economic environment as well as compliance risks and currency-related risks.
Capital increase to partially finance the purchase price of Hoffmann
To partially finance the Hoffmann SE transaction, a portion of the purchase price was paid in the form of 1,400,000 new shares and 200,000 existing shares on the day of closing. The share capital of SFS Group AG now amounts to CHF 3,890,000 and is divided into 38,900,000 registered shares with a nominal value of CHF 0.10 each.
In connection with the share capital increase, the premium on the issuance of shares of around CHF 169 million took the form of a statutory capital reserve. This means that in the next few years, a portion of the dividends can be distributed to private individuals resident in Switzerland free of withholding and income tax.
On May 18, 2022, two fixed-rate bonds with terms of three (CHF 250 million) and five years (CHF 150 million) were successfully placed; the settlement date was June 8, 2022. The coupon rates for the two bonds are 1.00% and 1.45% respectively. The proceeds of the placement are being used to refinance the Hoffmann transaction. In advance of this placement, SFS received a good rating (BBB+) from Zürcher Kantonalbank and Credit Suisse (outlook “stable”). The borrowing at attractive rates reduces the weighted average cost of capital (WACC).
Changes in the Group Executive Board
With the closing of the Hoffmann transaction, Martin Reichenecker joined the Group Executive Board in his role as CEO of Hoffmann.
Furthermore, the Board of Directors appointed Susanne Jung as Chief Human Resources Officer (CHRO). Susanne Jung strengthens and broadens the HR organization. She joined the Group Executive Board on January 1, 2023, as she took on her new role.
In the interests of early succession planning, the Board of Directors appointed Thomas Jung as the future head of the Construction division. He will replace Arthur Blank and join the Group Executive Board on January 1, 2024.
Changes in the Board of Directors
Shareholders elected Thomas Oetterli as Chairman of the Board of Directors at the Annual General Meeting on April 27, 2022. He succeeded Heinrich Spoerry, who retired from the Board of Directors after reaching the age limit as defined in the Articles of Association. Thomas Oetterli has been a member of the SFS’s Board of Directors since 2011.
The motion to elect Peter Bauschatz was also accepted at the Annual General Meeting on April 27, 2022. Peter Bauschatz is the Chairman of the Supervisory Board of Hoffmann SE, which became a part of the SFS Group upon completion of the transaction.
30th Annual General Meeting on April 26, 2023
For the first time following a three-year interruption, the Annual General Meeting of SFS Group AG will be held with the physical presence of shareholders at Sportzentrum Aegeten in Widnau on April 26, 2023. Further information will follow together with the invitation, which will be sent out until the end of March 2023.
As part of the long-term succession plan set up by the Stadler/ Tschan family shareholders, Bettina Stadler will not stand for re-election to the Board of Directors at the 2023 Annual General Meeting. Consequently, the Board of Directors proposes that Fabian Tschan be appointed as a new member. He will ensure continuity in his capacity as a representative of the family shareholders. The Board of Directors would like to thank Bettina Stadler for her many years of service on the Board of Directors and as a member of the Audit Committee.
In view of the good earnings situation and the completed transaction with Hoffmann, the Board of Directors proposes that a dividend of CHF 2.50 per share be distributed.
Outlook for the financial year 2023
Performance will continue to be shaped by considerable uncertainty as a result of macroeconomic and geopolitical developments. Regional restrictions in supply chains will impact the course of business in individual end markets also over the course of the 2023 financial year. Safeguarding business processes, ongoing efforts to pursue forward-looking innovation projects and sharpening the Group’s customer focus take top priority in this volatile environment. We want to identify the chances and opportunities that go hand-in-hand with the current changes and seize them in a systematic way.
The targeted inclusion of Hoffmann is highly relevant from a strategic perspective. Further synergy potential is to be utilized in all areas of the business over the course of the current year and planning of long-term growth potential will be further developed. Investments in the selective expansion of production capacity and thus the implementation of ambitious growth projects will continue. Major projects during the current financial year include the expansion of the production platform in Nantong and the ramp-up of production activities in the new production facility at Heerbrugg. The focus on expanding the global production platform for medical device products and applications remains unchanged.
SFS expects in the 2023 financial year sales of CHF 3.2–3.3 billion, including the first time consolidation of Hoffmann for the full year. With this, SFS expects – before consolidation effects – sales growth along the mid-term guidance of 3–6%. For SFS Group as a whole, including Hoffmann, an EBIT margin along the mid-term guidance of 12–15% is expected. The outlook is based on the assumption that there will be no significant deterioration in the underlying economic conditions or geopolitical, energy or pandemic-related restrictions.
A big thank-you goes to all employees of SFS Group whose motivation, commitment, expertise and enormous passion for innovation made the encouraging performance of SFS during the year under review possible.
We thank our customers and business partners for the collaborative partnership we share. The trust they place in us lays the foundation for our joint efforts to develop solutions that generate lasting added value.
We would also like to thank our shareholders for their loyality and trust in SFS. They give SFS Group stability and thus contribute to its sustainable development.