Annual Report 2015

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Key Figures

Sales (million CHF)

(Sales 2015: 3 640 million CHF)

Sales 2015 by division (in %)

(100% = 3 640 million CHF)


EBIT and Net profit (million CHF)

(EBIT 2015: 296 million CHF)
(Net profit 2015: 198 million CHF)

Free cash flow before acquisitions/divestitures (million CHF)

(Free cash flow before acquisitions/divestitures 2015: 190 million CHF)


Sales 2015 by region (in %)

(100% = CHF 3,64 billion)

Gross value added 2015 by region (in %)

(100% = CHF 1,35 billion)


Employees 2015 by region (in %)

(100% = 14 424)


Key figures 2015

CHF million 2015 2014 2013
Order intake
3 662 3 836
3 795
Sales
3 640 3 795
3 766
EBITDA 422 399
380
EBIT 296 274
251
EBIT before one-off effects 294 274 251
Net profit 198
195 145
Free cash flow before acquisitions/divestitures 190
110 174
Return on sales (EBIT margin) % 8.1 7.2
6.7
Return on sales (EBIT margin) before one-off effects % 8.1
7.2
6.7
Return on invested capital (ROIC) % 18.9
17.9 16.7
Number of employees
14 424 14 140
14 066

Our Corporation


GF comprises three divisions: GF Piping Systems, GF Automotive, and GF Machining Solutions. Founded in 1802, the Corporation is headquartered in Switzerland and is present in 32 countries with 121 companies, 45 of them production facilities. Its approximately 14 400 employees generated sales of CHF 3.64 billion in 2015. GF is the preferred partner of its customers for the safe transport of liquids and gases, lightweight casting components in vehicles, and high-precision manufacturing technologies.

GF Executive Committee The GF Executive Committee at the GF Automotive plant in Suzhou (China). From left to right: Pascal Boillat (Head of GF Machining Solutions), Roland Abt (CFO), Yves Serra (CEO), Pietro Lori (Head of GF Piping Systems), and Josef Edbauer (Head of GF Automotive).

GF Piping Systems

GF Piping Systems is a leading supplier of piping systems made of plastics and metal. The division focuses on system solutions and high-quality components for the safe transport of water and gas in industry, utilities, and building technology. Its product range includes fittings, valves, pipes, automation and jointing technologies and covers all applications throughout the water cycle.


GF Piping Systems supports its customers in over 100 countries through its own sales companies and representative offices. The division is present in
Europe, Asia, and the Americas with more than 30 manufacturing sites and research and development centers, which also support energy-saving use of raw materials and resources.

Sales (million CHF)

(Sales 2015: CHF 1 417 million)

Key figures GF Piping Systems
CHF million 2015 2014
Order intake 1 429 1 493
Sales 1 417 1 476
EBITDA 193 190
EBIT 143 142
EBIT before one-off effects 149
142
Return on sales (EBIT margin) % 10.1 9.6
Return on sales (EBIT margin) before one-off effects % 10.5
9.6
Return on invested capital (ROIC) % 18.0 17.1
Number of employees 6 237 6 086

GF Automotive

GF Automotive is a technologically pioneering development partner and manufacturer of light weight cast components and systems made of ductile iron, aluminum, and magnesium for the global automotive industry as well as a variety of other industrial applications. The highly complex lightweight components contribute to making modern vehicles lighter and reduce their CO2 emissions.

GF Automotive manufactures at nine production plants in Germany, Austria, and China. In those countries as well as in Switzerland, Korea, and Japan it also operates sales offices. The lightweight research and development competency is in Schaff hausen (Switzerland) and Suzhou (China).

Sales (million CHF)

(Sales 2015: CHF 1 321 million)

Key figures GF Automotive
CHF million 2015 2014
Order intake 1 331 1 412
Sales 1 321 1 415
EBITDA 148 154
EBIT 89 93
EBIT before one-off effects 95
93
Return on sales (EBIT margin) % 6.7 6.6
Return on sales (EBIT margin) before one-off effects % 7.2
6.6
Return on invested capital (ROIC) % 22.1 21.8
Number of employees 5 037 4 898

GF Machining Solutions

GF Machining Solutions provides milling and electrical discharge machines (EDM), additive manufacturing solutions, laser texturing, automation, tooling, and spindles. These complete solutions make the division one of the world’s leading provider to the tool- and mold-making industry and to manufacturers of precision components. The most important customer segments are the aerospace industry, ICT, and the automotive sector.

GF Machining Solutions operates its own sales companies in more than 50 countries to provide customer services locally. Production facilities as well as research and development centers are located in Switzerland, Sweden, and China.

Sales (million CHF)

(Sales 2015: CHF 902 million)

Key figures GF Machining Solutions
CHF million 2015 2014
Order intake 902 932
Sales 902 905
EBITDA 92 65
EBIT 78 53
EBIT before one-off effects 64
53
Return on sales (EBIT margin) % 8.6 5.9
Return on sales (EBIT margin) before one-off effects % 7.1
5.9
Return on invested capital (ROIC) % 21.9 16.9
Number of employees 3 003 3 008
  

Letter to the Shareholders

Strong results, strategy objectives achieved

Dear shareholders

Thanks to a strong second half-year, 2015 ended up better than it started, allowing GF to reach profitability levels not seen since 2006 and meet the 2011–2015 strategy targets published early 2011.

Owing to the Swiss franc’s sharp appreciation of January 2015, sales decreased 4% to CHF 3 640 million. In local currencies and adjusted for acquisitions and divestments, turnover was up 1%.

The operating result (EBIT) rose to CHF 296 million, up 8% compared to previous year. Adjusted for one-off effects, the EBIT stood at CHF 294 million, resulting in an EBIT margin (ROS) of 8.1% against 7.2% in 2014, in line with the strategy objective of 8%. The total one-off effect of CHF 2 million consists, on one hand, of the profit of CHF 18 million generated by the sale of an administrative building of GF Machining Solutions in Geneva and, on the other hand, of the CHF 10 million negative one-off impact of the Swiss franc’s appreciation in January 2015, as well as of a provision of CHF 6 million taken for the closing of two older molding lines of GF Automotive in Germany.

The return on invested capital (ROIC) also increased to 18.9%, well inside the strategy objective range of 16 to 20%. All three divisions generated ROICs clearly higher than previous year, significantly above their cost of capital.

Total net profit amounted to CHF 198 million, resulting in earnings per share of CHF 46, up 2%. Free cash flow substantially rose by 73% to CHF 190 million. Given the improved results, the Board of Directors proposes to the Annual Shareholders’ Meeting an increased dividend of CHF 18 per share (previous year: CHF 17).

Yves Serra, President and CEO and Andreas Koopmann, Chairman of the Board of Directors.Yves Serra, President and CEO (left), and Andreas Koopmann, Chairman of the Board of Directors, at the GF Piping Systems plant in Schaffhausen.

Proactive countermeasures mitigated the Swiss franc’s appreciation

The negative effect of the large and sudden Swiss franc’s appreciation in January 2015 amounted to CHF 245 million on the top-line and CHF 28 million on the operating result, of which CHF 10 million one-offs on the net working capital sheet. Most of the profitability impact was borne by GF Piping Systems on account of its exposure to the euro and, to a lower extent, by GF Machining Solutions. The quick countermeasures, taken as of February 2015, including the increase of working time to 44 hours per week for all Swiss employees as well as additional supply chain cost reductions certainly helped mitigate the impact.

GF Piping Systems

GF Piping Systems generated sales of CHF 1 417 million, down 4% from previous year. Ad­just­ed for currency effects, sales stood at previous year’s level. The second half-year was clearly stronger than the first, especially regarding industrial applications worldwide. Sales in China also picked up and market share in Turkey has been steadily increased.

It is to be noted that plastic raw material prices went down by ca. 20% in 2015 resulting in lower pipe prices, for a negative impact of approx. 2% on the turnover of GF Piping Systems.
The operating result increased to CHF 143 million bringing the ROS back to double-digit levels at 10.1%, well above previous year (9.6%). Plants remained by and large well-loaded and the measures taken to improve profitability at GF Hakan in Turkey contri­buted significantly to the result.

GF Automotive

At GF Automotive, turnover was down 7% in Swiss francs to CHF 1 321 million, but adjusted for currency effects as well as for acquisitions and divestments, sales were up 2%. The car market remained overall robust in Europe and China and the truck-related demand recovered well after the first quarter 2015.

The operating result stood at CHF 89 million for a ROS of 6.7%, up from 6.6% in 2014. In particular the load of most light metal plants was consistently high and the German die casting mold maker Meco Eckel, acquired in 2014, performed very well. In order to ensure a better load at our European iron casting plants, two molding lines will be mothballed resulting in a one-off charge of CHF 6 million.

In China, all plant extensions proceeded according to plan in a country which now accounts for 15% of the turnover of GF Automotive. In the US, GF Automotive has entered into a joint venture with Linamar, a leading machining specialist, to establish a new light metal foundry in the south-east of the country. Completion is expected for the end of 2017.

GF Machining Solutions

GF Machining Solutions generated sales of CHF 902 million basically on a par with previous year. In local currencies and adjusted for acquisitions, growth reached 2%. Strong orders in the aerospace sector worldwide and in the ICT (Information and Communication Technology) sector in Asia underpinned the good sales performance and maintained the backlog at a very high level.

The operating result rose 47% to CHF 78 million of which CHF 18 million came from the one-off profit from the sale of an administrative building in Geneva. Most plants were well-loaded and the natural hedge of the division helped to compensate the Swiss franc’s appreciation.

At the major machine-tool exhibition (EMO), which took place in Milano early October, GF Machining Solutions presented numerous novelties in products and services, attracting a large customer audience, certainly a positive sign for the future. The company Liechti, acquired in 2014, recorded a strong year and the division entered in 2015 the 3D printing machine business through a strategic partnership with Germany-based EOS, the world leader in the field.

Strategic and financial objectives 2011–2015 achieved

During the past five years, GF steadily improved its profitability and significantly lessened its cyclicity. The Corporation reduced its dependence on Europe to less than 60% of its turnover. The share of GF Piping Systems has been lifted up to 40% of the total turnover. GF Machining Solutions moved towards less cyclical sectors and GF Automotive focused on its most promising technologies. As a result, despite serious currency headwinds and volatile market conditions, GF reached an 8.1% EBIT margin (ROS) in 2015, in line with the financial objective of the 2011–2015 strategy.

Strategy 2020 – profitable expansion

The 2020 strategy calls for profitable expansion at all three divisions by leveraging the successful path of the last five years and by adding significant novelties to its offering as well as acting on its global footprint. By 2020 the Corporation aims at reaching a turnover in the range of CHF 4.5 to CHF 5.0 billion (at constant exchange rates) for an average growth of 3 to 5% per year, whilst achieving profitability levels of 18 to 22% for the ROIC and 8 to 9% for the ROS. This would bring the earnings per share well above CHF 50, compared to an average of CHF 40 in the past five years.

In order to reach these goals, GF will first continue to optimize productivity in Europe. At the same time, the Corporation will keep expanding its activities in the growth markets of Asia and America, reinforced through selected acquisitions and joint ventures. The aim is to generate in those two regions more than 50% of its global turnover and thus better balance its geographical sales mix.

Secondly, all three divisions will shift their portfolio towards higher margin businesses. GF Piping Systems will increase the share of higher-end products like sensors, valves, and automation as well as develop the promising service business. GF Automotive will further invest in the value chain as customers call for ready-to-mount components and enlarge the scope of its non-automotive businesses. GF Machining Solutions will keep strengthening its presence in less cyclical sectors like medtech, aerospace, and ICT as well as widen its technology portfolio.

Outlook for 2016

The economic environment remains demanding and volatile. The momentum observed during the second semester of 2015 is however positive. The backlog of both GF Automotive and GF Machining Solutions stands at high levels. The secular trends underpinning all three divisions of GF remain positive and their well-balanced geographical presence should foster profitable growth as well as a better stability of earnings. The outlook in our markets in China remains quite stable despite the current uncertainties. Based on today’s evaluation of the economic environment, we therefore expect in 2016 a result in line with our strategic goals 2016–2020.

Changes in GF’s Board of Directors

At the Annual Shareholders’ Meeting of March 2015, Rudolf Huber (60) and Isabelle Welton (52) did not stand for re-election. We thank very much Rudolf Huber and Isabelle Welton for their very valuable contributions to our company. Rudolf Huber was elected in 2006 and became Chairman of the Audit Committee in 2012. Isabelle Welton was elected in 2013. We wish both of them all the best for the future.

Upon proposal by the Board of Directors, shareholders agreed to reduce Board size from 7 to 10 to 6 to 9 members. At the same meeting, Eveline Saupper has been elected as a new Board member. We warmly welcome Eveline Saupper, long-term partner at the Homburger law firm of Zurich and board member of Syngenta, Baloise Insurance, and Flughafen Zürich AG. We wish her much satisfaction as member of the GF Board.

Success thanks to the dedication of our employees – appreciation for our stakeholders

Despite turbulent markets and the Swiss franc shock of January 2015, we were able to reach our objectives. Our heartfelt gratitude goes to all our employees for their dedication and team spirit. We specially commend all our Swiss-based employees who readily accepted to work longer hours to help compensate the appreciation of the Swiss currency. It gave us time to enact measures to enhance productivity, reduce our costs, and secure the competitiveness of our Swiss production sites. Such a constructive social partnership is certainly a key factor behind our decision to continue investing in Switzerland, in particular in a CHF 100 million new GF Machining Solutions plant in Biel.

Our customers also deserve our special thanks. Their feedback and cooperation guide our innovation efforts and spur our efforts to always improve our service. Finally, we are very much honored by the continuing trust that our investors, shareholders, and banks place in our company.

Signature by Andreas Koopmann

Andreas Koopmann
Chairman of the Board of Directors

Signature by Yves Serra

Yves Serra
President and CEO


Milestones 2011–2015

 
Crucial steps were taken in all three divisions during the strategy cycle 2011 to 2015. Targeted acquisitions and cooperations have improved the company’s long-term profitability, its global footprint and reduced its dependence on the economic cycles.

Milestones 2015
Milestones 2011-2015

GF Machining Solutions plans a new modern machine tool facility in Biel (Switzerland) to meet strong customer demand for high-speed milling machines.

Milestones 2011-2015

GF Automotive enters the North American automotive market and starts a joint venture with Canada-based Linamar Corp., a specialist in precision processing. GF Linamar LLC invest in a new light metal foundry.

 

 

Milestones 2011-2015

GF Machining Solutions enters the industrial 3D printing business with a strategic cooperation agreement with German-based EOS.

Milestones 2011-2015

GF Machining Solutions has sold 100 000 machines.

Milestones 2011-2015

The manufacturing footprint of GF Automotive in China is increased by 50% to meet the growing demand for locally produced lightweigth structure and powertrain components.

Milestones 2014
Milestones 2011-2015

GF Piping Systems generates sales of CHF 1 476 million and becomes GF's largest division for the first time.

Milestones 2011-2015

Partnership with mold maker Meco Eckel (Germany), enhances the competitiveness of lightmetal offering at GF Automotive.

Milestones 2011-2015

GF Machining Solutions acquires Swiss-based Liechti Engineering and expands its presence in the promising aerospace market sector.

Milestones 2011-2015

GF Automotive focuses on its core activities of iron sand casting and light metal high-pressure die-casting. Gravity die-casting business in Austria is divested.

Milestones 2013
Milestones 2011-2015

GF AgieCharmilles changes its name to GF Machining Solutions. The change underscores the fact that GF is a unified company with three divisions.

Milestones 2011-2015

4th Technology Day: The three divisions present to analysts and media a large number of innovative solutions.

Milestones 2011-2015

GF Piping Systems acquires Hakan Plastik, the leading provider of plastic piping systems in Turkey.

Milestones 2012
Milestones 2011-2015

GF Automotive starts the state-of-the-art production facility for lightweight components in Mettmann (Germany).

Milestones 2011-2015

The 50/50 joint venture Chinaust becomes the biggest company of GF.

Milestones 2011-2015

Acquisition of Independent Pipe Products Inc. (IPP) strengthens market position of GF Piping Systems in North America.

Milestones 2011-2015

For the first time in history, China is the biggest market for two divisions: GF Machining Solutions and GF Piping Systems.

Milestones 2011-2015

Entry into new market segments, e.g. shipbuilding, accelerates GF Piping Systems' growth.

Milestones 2011
Milestones 2011-2015

GF Piping Systems acquires Harvel Plastics Inc., the US market leader for industrial piping systems.

Milestones 2011-2015

GF Automotive focuses its activities on lightweight components.

Milestones 2011-2015

The new strategy defines sustainability targets to the end of 2015.

Milestones 2011-2015

With its Strategy 2011–2015, GF focuses on performance, reducing cyclicality, and enhancing the corporation's global footprint.

“Our strategy 2020 is geared towards profitable expansion”

With the strategy 2015, GF wanted to increase its profitability and reduce its cyclicity. Has the strategy worked out?

We wanted GF Piping Systems to become the largest division of GF because GF Piping Systems is less cyclical and more profitable. This was achieved already in 2014. We also wanted GF Automotive to focus on its more promising and profitable technologies and GF Machining Solutions to develop in less cyclical sectors. This has also been done. Finally we aimed at a balanced presence worldwide to better absorb local ups and downs, with Asia and America making up more than 40% of our sales from 30% in 2010. We also made this shift happen.

Yves Serra, President and CEO Yves Serra, President and CEO

How about the financial targets of the 2015 strategy?


Despite the sudden appreciation of the Swiss currency, we increased our profitability almost every year and reached the ambitious objectives we set for ourselves in 2010, that is a return on sales in the 8% range and a return on invested capital between 16 and 20%. At constant currencies, we also would have reached sales of CHF 4.5 to 4.7 billion, not far from our original CHF 5 billion goal.

Let us now look into the future. What are the main goals of the strategy 2020?


Our strategy 2020 is geared towards profitable expansion. We aim at growing to CHF 4.5 billion, that is an increase of 20% compared to 2015 at constant exchange rates. With acquisitions, our objective is CHF 5 billion at constant currencies. In addition we aim at a high profitability of 18-22% for the return on invested capital (ROIC) and 8-9% for the return on Sales (ROS). This would bring our earnings per share well above CHF 50 from CHF 40 in average during the last five years.

Which measures allow GF to reach these goals?


We have identified three main strategic thrusts: first, we will expand again in the growth markets of Asia and the Americas whilst continuing to optimize productivity in Europe. Second, we will shift our portfolio towards businesses where we can generate higher margins and third, we will drive sales proficiency and innovation excellence throughout the organization.

Why do you want to further expand in Asia and Americas?


We must be strong where the markets are. Furthermore, a balanced presence worldwide reduces the impact of regional crisis. For all three divisions of GF, that means expanding in Asia and Americas. At GF Automotive, we will build our first light-metal casting plant in the US together with our joint venture partner Linamar. In China we will expand our manufacturing footprint at all three divisions. We will rapidly develop our presence in India and in South Asia, especially at GF Piping Systems.

How do you intend to optimize productivity in Europe?


In Switzerland, we will invest to bring together our milling activities in a new, modern facility in Biel. In Germany, we are heavily investing to automatize our iron foundries in order to enhance efficiency and competitiveness. These are a few examples to illustrate how we foster productivity in Europe.

Yves Serra, President and CEO“We must be strong where the markets are.” Yves Serra, President and CEO

What does it mean for your homebase in Switzerland?


Although we must and will invest in growth markets, we will keep our core technologies in Switzerland. Here is the heart of GF. As a Swiss company we must be able to offer competitive high-end products. That means continuously automatizing our processes and optimizing our productivity.

Each company tries to identify higher-margin businesses. Where can GF find these segments?


At GF Piping Systems we will increase the share of high-end products like sensors, valves, and automation as well as enter the promising service sector. At GF Automotive we will invest more in machining to offer ready-to-mount components. We will also enlarge our die casting mold activity to contribute earlier to our customers’ designs. GF Machining Solutions will keep strengthening its presence in promising sectors like aerospace and ICT. The division will also differentiate itself by offering integrated automation solutions in line with the needs of its premium customers for self-improving systems and by enlarging its technology portfolio for example in laser texturing as well as 3D printing machines.

The third main strategic thrust is to drive sales proficiency and innovation excellence. What will this initiative bring?


As a Swiss based company, we certainly cannot count on a weak home currency but we can continuously hire and develop talents in order to make a difference in the eyes of our customers. To support our drive towards highermargin businesses, we will optimize the skills of our sales force and quicken our innovation pace. We will also continue to systematically train all our companies on collaborative skills, the basic ingredient to work effectively together across cultures and on execution excellence to involve everyone in setting up goals and measures in each of our companies.

Where are the challenges for GF over the next years?


Like in the past, we know that unforeseen events may impact our company. We need therefore to stay flexible to accommodate those changes if and when they occur and quickly identify opportunities wherever they are.

Organization of GF


Georg Fischer Ltd, the Holding Company of the GF Corporation, is organized under Swiss law. It is headquartered in Schaffhausen (Switzerland), and listed on the SIX Swiss Exchange.

Board of Directors //

The nine members of the Board of Directors, elected individually by the Shareholders’ Meeting, are responsible for determining the Corporation’s strategic direction, the design of accounting, financial controlling, and financial planning. It appoints the Executive Committee and has ultimate responsibility for supervising and monitoring the management of Georg Fischer Ltd. All members of the Board of Directors are non-executive.

Executive Committee //

The Chief Executive Officer is responsible for the management of the Corporation. Under his leadership, the Executive Committee addresses all issues of relevance to the Corporation, takes decisions within its remit, and submits proposals to the Board of Directors. The Heads of the Divisions and the Corporate Staff Units are responsible for drafting and achieving their business objectives and for managing their units autonomously.

Corporate structure //

GF Corporation is organized in the three divisions GF Piping Systems, GF Automotive, and GF Machining Solutions and the two Corporate Staff Units Finance & Controlling and Corporate Development. The Heads of the Divisions and the Corporate Staff Units are responsible for managing their businesses and for achieving their business objectives.

Corporate Center //

The CEO and the CFO form the Corporate Center in the narrower sense. The Corporate Center is closely involved in management, planning, IT, communications, finance, management development, and corporate culture and is supported in these tasks by a team of about 50 people. The Corporate Center ensures that risk management, transparency, corporate governance, sustainability, and compliance practices meet the requirements of the owners and the public, and it supports the Board of Directors in meeting its responsibilities.

Finances //

Corporate Finance & Controlling uses powerful information systems to ensure the time-critical financial management of the Corporation. A standardized system of financial reporting is used throughout the entire Corporation, guaranteeing immediate and complete transparency. Currency, interest-rate, and credit risks are monitored and managed at Corporation level.

Management development //

Strategically important competencies and information are shared and made avail­able throughout the Corporation. Considerable importance is attached to internal training and to the focused nurturing and development of leaders and managers.

Communication //

The Corporation has a strong brand with GF, which has been built up and strengthened consistently over many years. The rebranding and alignment of its brand architecture, a new Corporate Design included, has been successfully completed with the harmonization of the presentations at exhibitions and the intranets through all divisions. The Corporation builds confidence in its products and services with an open and active communication policy to customers, employees, media, analysts, and shareholders.

Corporate values //

The sustainable development of the Corporation is supported by shared corporate values. They are put down in writing in the Code of Conduct and are becoming increasingly important with the spread of globalization.

Corporate Governance //

For detailed information about the Corporate Governance of GF, see pages here.

Download Organigram of GF

Sustainability

Sustainability

Taking responsibility

GF places a major emphasis on sustainable business management and responsible operations. Global compliance with standards and codes is as much a part of the company as the establishing of cross-divisional management systems. All production facilities are certified in accordance with ISO 9001 (Quality Management), ISO 14001 (Environmental Management) and OHSAS 18001 (Occupational Health and Safety Assessment Series). New locations must become certified within three years. Energy-intensive production sites must also be certified in accordance with ISO 50001 (energy management). Currently, these are eight locations.

As a pioneer in the area of sustainability, GF has been systematically recording and analyzing its key environmental figures since 1997. The worldwide reporting system was expanded in 2005 to include social key figures and the Sustainability Information System (SIS) was enlarged. In 2015, the SIS was integrated into the financial reporting of the company.

To underscore the importance of CSR (Corporate Social Responsibility) in the company, in 2015 GF became a member of the UN Global Compact, the world’s largest sustainability network for companies and organizations.

Sustainability objectives 

As an international corporation  with operations in more than 30 countries, GF strives to embed the issue of sustainability in all its companies. The Executive Committee sets objectives every five years, and these are the central guidelines for implementing the economical, ecological, and social targets in the divisions. 

The results of the 2011-2015 cycle and the objectives for the upcoming period to 2020 will be addressed in the next in-depth sustainability report that will be published in mid-2016. The reporting takes place annually and is based on the principles of the GRI (Global Reporting Initiative).

Economic Targets

  • Target: 8% EBIT margin
    Results 2015: From 7.2% to 8.1% in 2015. The abolishment of the peg of CHF 1.20 Swiss francs per euro had a negative impact on sales and EBIT. The 8–9% EBIT margin target defined in the Strategy 2011–2015 was achieved in the year under review.
    Status as at 31 December 2015: Target achieved
  • Target: 16-20% Return on invested capital (ROIC)
    Results 2015:
    The return on invested capital of 18.9% in 2015 is one percentage point above the previous year’s level (17.9%). All three divisions contributed significantly to value generation and achieved returns twice as high as the cost of capital (WACC).
    Status as at 31 December 2015: Target achieved
  • Target: Investment in growth markets
    Results 2015:
    GF has successfully increased its presence in Asia and America. GF Automotive has started a joint venture with  machining specialist Linamar to enter the US market; GF Machining Solutions  has entered the 3D printing business with EOS.
    Status as at 31 December 2015:
    Target achieved

Social Targets

  • Target: 15% Reduce accident rate
    Results 2015: The accident rate could continue to be reduced in 2015. This could be achieved by establishing global safety standards and by organizing targeted campaigns and trainings.
    Status as at 31 December 2015: Target achieved
  • Target: 10% Reduce absence rate
    Results 2015:
    The absence rate in 2015 remained at around the same level as in the previous years.
    Status as at 31 December 2015: Target not achieved yet
  • Target: 100% Introduce management system for occupational and health safety
    Results 2015:
    As per 31 December 2015 all production sites were certified. Newly established or acquired production sitesmust have obtained OHSAS 18001 certification after three years at the latest.
    Status as at 31 December 2015:
    Target achieved

Ecological Targets

  • Target: 10% Reduce the volume of waste in production
    Results 2015: The waste volume and hazardous waste are at a comparable level to the previous year.
    Status as at 31 December 2015: Target not achieved yet
  • Target: 20% Reduce CO2 emissions from production
    Results 2015:
    Through the procurement of water electricity certificates the CO2 emissions could be reduced significantly. The substitution of oil with natural gas and electricity contributed to the reduction of CO2 emissions.
    Status as at 31 December 2015: Target achieved
  • Target: 10% Increase energy-efficiency in production
    Results 2015:
    Energy efficiency in production could be further increased in 2015. Energy efficient machines as well as demand- based controls systems contributed to the rise in efficiency.
    Status as at 31 December 2015:
    Target achieved
Social aspects

Safety at work and health protection //

In all our production facilities, occupational health and safety protection have the highest priority. The goal was to lower the accident rate throughout the Corporation by 15% by 2015. To achieve this goal, GF has established global standards, implemented campaigns to raise awareness, and organized specific trainings. Against this backdrop, new safety standards were defined and published for all locations worldwide.

Training and development of young talents // 

Apprenticeships have a long-standing tradition at GF. There is a broad range of training opportunities spanning a variety of technical and commercial professions. In 2015, GF offered a total of 509 training positions, of which 203 were in Switzerland. GF also offers proven career entry routes through thesis projects and internships. In addition, GF collaborates on joint research and development projects with the key universities located in the main markets.

Management development and further education //

In 2015, approximately 70% of all open positions in senior management at GF were filled with internal candidates. This is the result of the Group’s management development process, which has been very well established for some years now.

Training and education are a key focus of management development at GF. Training courses are designed and conducted by the GF Academy, which makes a significant contribution through its courses to the future of the company. In 2015, approximately 200 managers from throughout the world attended training courses at the Klostergut Paradies training center.

On the basis of a program by Franklin Covey, GF also implements initiatives throughout the Corporation on management issues and collaboration. The training units are for all employees of GF. In addition, the three divisions have their own training programs that are geared specifically to the operations of their businesses.

Pay and social benefits //

In 2015 GF generated net added value of CHF 1.21 billion. About 77% of this amount was paid out as salaries to employees.

GF operates a modern and transparent remuneration system for employees, which is fair and non-discriminatory. Where appropriate, GF offers a performance-related variable component and allows employees to share in the success of the Corporation.

Stakeholder dialog //

GF maintains an intensive dialog with its external and internal stakeholders. Whether employees, clients, suppliers, representatives of universities and research centers, analysts, journalists, or representatives of NGOs – GF is in regular contact with various stakeholder groups.

The Corporation promotes an active, open, and prompt communication. And this communication is done appropriately in terms of the needs of the internal and external stakeholders. In addition to the Annual Report, Mid-Year Report, and Sustainability Report, Corporate news and events such as trade fairs, specialist symposia, and conferences are the main GF communication channels. In addition, the company has a major presence online and is active in Social Media. In 2015, GF boosted its internal communication by introducing a new intranet globally for all employees.

Environmental aspects

Reducing emissions //

The challenges of the future include climate change, the finite nature of fossil fuels, and a steep increase in the demand for energy. As a globally active industrial company with production sites in emerging markets, GF can make an important contribution in these areas. For this reason, GF set itself the goal of reducing greenhouse gas emissions from production by 20% by 2015. In 2013, GF generated about 713 000 tons of CO2 emissions, while in 2014 it was only 594 000 tons. This reduction was achieved in part through the use of new, environmentally friendly technologies, as well as by promoting sustainable energy projects and the use of CO2-neutral hydropower.

Energy efficiency //

The consumption of energy represents, along with emissions, the greatest environmental burden. A few years ago, GF set itself the goal of increasing energy efficiency at all production sites globally by 10%. Specifically, all divisions are to make a contribution to systematically lowering energy consumption with their products, processes, and solutions. Detailed information can be found in the Sustainability Report 2015.

Resource efficiency //

In addition to energy, other important resources are also becoming scarcer. Against this backdrop, GF places a high priority on processes for resource-efficient innovation (bionic design, eco-design, life cycle assessment, etc.). These processes help ensure that product-related sustainability and resource efficiency issues are taken into account as early as the development stage of new products. Developers take the product’s entire life cycle into consideration, from the selection of raw materials and suppliers to the production and customer’s use of the products to their reuse once their life cycle has expired.

In addition, GF is also emphasizing the reduction of waste in production in order to cut back on the use of resources. The wise consumption of resources plays as big a role as the recycling of industrial waste. GF Automotive, for example, uses around 500 000 tons of recycled material in its foundries annually. Detailed information on the environmental goals, activities, and key figures of GF are published in the Sustainability Report 2015.
 

Commitments

Contributing to the common good //

True to its fundamental values, GF promotes and supports cultural and social programs at its various corporate locations, as well as activities that contribute to the common good. In 2015, around CHF 2 million was spent at Corporation level on social involvement activities. In addition to this, some 30 GF companies support local activities, making substantial contributions.

Foundations //

The most significant contributions in 2015 went to GF’s three foundations: Klostergut Paradies, Iron Library, and Clean Water.

The Klostergut Paradies Foundation, with the former Clarissan convent as a heritage site, houses not only important collections, but it also serves as a training center for the Corporation. The Iron Library Foundation has the largest private collection of books on the subject of iron. Together with the Corporate archive, it is the center of competence for caring for the historical and cultural heritage of GF.

Through its Clean Water Foundation, GF has been supporting clean drinking water projects worldwide since 2002. To date, the Corporation has invested nearly CHF 9 million and has improved the lives of more than 250 000 people with a sustainably improved access to clean drinking water.

At the end of 2015, GF renewed its existing partnership with Caritas Switzerland, which has been in place since 2012, for another four years. In addition, GF again donated CHF 1 million to Caritas to help implement the aid organization’s clean water projects. Within the scope of the partnership, GF also provides know-how and technical expertise.

Clean Water projects worldwide

Awards and rankings //

In 2015, GF again received numerous awards and was given a positive rating by leading agencies. For example, the renowned company Oekom Research AG increased GF’s rating by one notch to C+. GF is now rated as a prime investment.

GF’s good position in the annual climate protection ranking of the Carbon Disclosure Project (CDP) is another indication that the Corporation is on the right path with respect to sustainability. In 2015, GF received an award as sector leader “industry,” placing it as one of the ten best industrial firms in Germany, Austria, and Switzerland. In addition, the independent Belgian agency Ethibel once again placed GF on its Ethibel Sustainability Index (ESI) Excellence Europe.

A professionally conducted stakeholder dialog is very important for GF. A testament to this is the high quality of the internal magazine “Globe,” which was named the best employee magazine in Switzerland in 2015 for the second year in a row. Another testament is the excellent rating that GF received in the best recruiter study. GF captured the top spot in Switzerland in the category of industry, and it was 10th out of the 500 largest companies in Switzerland.
Selection of further awards: GF Automotive won the first prize at the Newcast Award 2015 in the category “Best Substitution of another Production Process” with a console for a truck cabin suspension. In addition, for the third year in a row, GF Automotive was awarded the Design Award of the International Magnesium Association in the category “Casting Component Design”. The winner was the seat back made of a magnesium die-cast for the Mercedes SLK. Not only are the products of GF Automotive winning awards, but the processes are, too. In 2015, for example, GF Automotive received for the first time the ABB Sustainability Award for Suppliers.

GF Machining Solutions received two awards in 2015 at CMIT, Asia’s largest trade fair for machine tools. The company was named one of the top 30 machine manufacturing companies, and the high-speed milling machine Mikron HEM 700U received a prize as one of the top 20 most innovative products.

Distribution of net value added 2015 (in %)


(100% = CHF 1.21 billion)

Employees 2015 by region (in %)


(100% = 14 424)

Corporate Governance


The Board of Directors and the Executive Committee of GF attach great importance to good Corporate Governance in the interest of shareholders, customers, business partners, and employees. The imple­mentation and ongoing improvement of the generally accepted principles of Corporate Governance ensure the necessary transparency to enable investors to judge the quality of the Corporation. This Report provides information on structures and processes, areas of responsibility and decision-making procedures, control mechanisms, as well as the rights and obligations of the various stake­holders.

Contents //

The present publication fulfills all obligations of the relevant SIX Swiss Exchange directive on information relating to Corporate Governance in terms of content and order and is based on the Swiss Code of Best Practice for Corporate Governance of Economiesuisse, the Swiss Business Federation. The Compensation Report is presented in a separate chapter. All data and information apply to the cutoff date of 31 December 2015, unless otherwise noted. Any changes occurring before the editorial deadline on 19 February 2016 are listed at the end of this chapter. Any changes occurring after the editorial deadline can be found on our website. GF also publishes the Articles of Association of Georg Fischer Ltd, the internal Organization and Business Rules, and more information online.

Compensation Report

Introduction by the Chairman of the Compensation Committee

Dear shareholder

On behalf of the Board of Directors of GF and of the Compensation Committee, I am pleased to present the 2015 compensation report.

Thanks to a strong second half-year, 2015 ended up better than it started, allowing GF to reach profitability levels not seen since 2006 and meet the 2011–2015 strategy targets published early 2011.

The Committee has approved the fine-tuning of the short-term incentive system for the Executive Committee, designed to fit with GF’s Strategy 2016–2020. In addition, the Committee approved a new long-term share-based incentive plan as detailed on page 54 and 55. Both new plans are effective as per 1 January 2016.

The new long-term incentive remuneration is focusing on long-term sustainable value creation for employees, customers, and shareholders and is measured by one key performance indicator, Earnings per Share (EPS), over a prospective three years’ period. This ensures alignment with company’s and shareholders’ interests, allows to participate in the long-term success of GF and fosters and supports a high-performance culture.

At the upcoming Annual Shareholders’ Meeting, we will ask you to approve prospectively in a binding vote the maximum amounts of compensation for the Board of Directors until the next Annual Shareholders’ Meeting (§22.5 of the Articles of Association of Georg Fischer Ltd, available for download at About Georg Fischer), and for the next business year, the maximum amount of compensation for the Executive Committee (§23c.7 of the Articles of Association of Georg Fischer Ltd). Accordingly, the Annual Shareholders’ Meeting 2016 will be asked to approve the compensation for the Board of Directors until the Annual Shareholders’ Meeting 2017 and the maximum compensation for the Executive Committee for the financial year 2017. In addition, we will also ask you to vote on a consultative basis on the compensation report 2015.

Looking ahead, the Committee will continue to review and fine-tune the compensation programs, in order to ensure that they remain aligned with market levels and the business strategy of GF as well as the long-term interests of our shareholders, while of course being compliant with the various regulations.

We always welcome comments on our compensation systems and we trust that you will find this report interesting and informative.

Sincerely

Ulrich Graf

Ulrich Graf, Chairman of the Compensation Committee

Contents //

The compensation report provides information about the compensation policy, the compensation programs, and the process of determination of compensation applicable to the Board of Directors and to the Executive Committee of GF. It also includes details on the compensation payments related to 2015. This report is written in accordance to the Swiss Ordinance against excessive pay in stock exchange listed companies, the standards related to information on Corporate Governance issued by the SIX Swiss Exchange and the principles of the Swiss Code of Best Practice for Corporate Governance of Economiesuisse.

Compensation policy 2015

Overarching principles //

For the Board of Directors, the compensation policy is designed to ensure their independence in exercising their supervisory duties and foresees a fixed compensation only.

For the Executive Committee, the compensation policy is designed to attract, retain, and motivate talented individuals, along the following principles:

  • Fairness and transparency
  • Pay for performance
  • Long-term orientation and alignment to shareholders’ interests
  • Market competitiveness

Compensation principles 2015

Compensation principles 2015
Compensation Governance

Compensation Committee //

The Compensation Committee consists of three non-executive Board members who are elected yearly and individually by the Annual Shareholders’ Meeting for a one-year period until the next Annual Shareholders’ Meeting. At the Annual Shareholders’ Meeting 2015, Ulrich Graf (Chairman), Eveline Saupper and Jasmin Staiblin were elected as members of the Compensation Committee. The Committee supports the Board of Directors in setting the compensation policy at the highest corporate level and regularly reviews the guidelines governing compensation of the executives. The Committee also proposes the amount of compensation to be paid to the Board of Directors, to the Chief Executive Officer, and to the other members of the Executive Committee, and prepares the related motions for the Annual Shareholders’ Meeting.

The Compensation Committee convenes as often as necessary, but at least twice per year. In 2015, the Committee held four meetings of approximately one hour and a half each:

  • In the February meeting, the Committee evaluated the business performance in the previous business year against the preset objectives, and prepared a proposal to the Board of Directors on the short-term incentive to be paid to the Chief Executive ­Officer and to the Executive Committee members. In the same meeting, the Committee determined the business objectives for the 2015 business year for the Chief Executive Officer and reviewed those of the Executive Committee members, before submitting them to the Board of Directors for approval.
  • In the June meeting, the Committee elaborated the basis for an adapted short-term incentive model as well as set the parameters for a revised long-term incentive plan for the Chief Executive Officer and the members of the Executive Committee, ­focusing to reflect on the long-term company’s and shareholders’ interests.
  • In the September meeting, the Compensation Committee reviewed both, the new short-term as well as the long-term incentive plan and fine-tuned the models to best fit with the Strategy 2016–2020. In the same meeting, the Committee reviewed the benchmarking analysis of the compensation of the Board of Directors, the Chief Executive Officer, and the members of the ­Executive Committee.
  • In the December meeting, the Committee determined the new short-term and long-term incentive plans and submitted them to the Board of Directors for approval; in the same meeting, the Compensation Committee reviewed and approved the target compensation for the following business year for the members of the Executive Committee based on a proposal from the Chief Executive Officer. The Committee determined the target compensation of the Chief Executive Officer for the next business year based on a proposal from the Chairman of the Board and prepared a proposal to submit to the Board of Directors for approval.

Overview of meetings’ schedule

Overview of meetings’ schedule

In 2015, with two exceptions, all Committee members attended all meetings. The CEO and the Head of Corporate Human Resources attended the Committee meetings in advisory capacity. The CEO did not attend the meeting when his own compensation or performance was discussed. The Chairman of the Committee reported to the Board of Directors after each meeting on the activities of the Committee. The minutes of the Committee meetings are available to all members of the Board of Directors.

The compensation proposals and decisions are made based on the following levels of authority:

Levels of authority

Levels of authority

On behalf of the Board of Directors, Internal Audit annually reviews the compliance of the compensation decisions made with the compensation regulations for the Executive Committee and the Board of Directors, the Organizational Rules, and the Articles of Association.

The Committee may call in external compensation specialists to obtain independent advice and/or to get benchmarking compensation data. In the year under review, no external compensation specialists have been mandated.

Method of determination of compensation //

The elements and levels of the compensation of the Board of Directors and the Executive Committee are reviewed regularly and are tailored to the relevant sector and labor market in which GF competes for talent. For the purpose of comparison, the Compensation Committee relies on compensation surveys published by independent consulting firms and on publicly available information, such as compensation disclosures from comparable companies. Comparable companies are defined as companies with similar size in terms of market capitalization, sales, number of employees, and geographic scope, which operate in similar business segments and are headquartered in Switzerland.

For compensation benchmarking purposes, a group of companies, all Swiss multinational companies of the industry sector listed on the Swiss stock exchange (SIX), has been selected. The group consists of Autoneum, Bucher Industries, Dätwyler, Geberit, Kaba, Oerlikon, Rieter, SGS, Sika, Sonova, and Sulzer.

The Compensation Committee also takes into consideration the effective business and individual performance while determining the compensation amounts to be paid to the Chief Executive Officer and to the other members of the Executive Committee. Individual performance is assessed through the annual Management By Objectives (MBO) process, where individual objectives are defined at the beginning of the year and the achievement against those objectives is evaluated at the end of the year. The objective setting and the performance assessment of the members of Executive Committee are conducted by the Chief Executive Officer and are approved by the Chairman of the Board. The Chairman of the Board determines the objectives and evaluates the performance of the Chief Executive Officer.

Architecture of compensation

Compensation of the Board of Directors //

The compensation regulation applicable to the Board of Directors is reviewed periodically based on competitive market practice and retains its validity for several years.

In order to guarantee the independence of the members of the Board of Directors in executing their supervisory duties, their compensation is fixed and does not contain any performance-related component. The annual overall compensation for each member of the Board of Directors depends on the responsibilities carried out in the year under review. The compensation is partially delivered in cash (fee) and in restricted shares.

Responsibility Fee Restricted shares
Basis fee
   
Board Membership CHF 70 000
150 shares
Additional fees    
Board Chairmanship CHF 200 000 150 shares
Board Vice-Chairmanship CHF 22 500  
Audit Committee Chairmanship
CHF 80 000  
Audit Committee Membership CHF 30 000  
Other Committee Chairmanship CHF 40 000  
Other Committee Membership
CHF 20 000  

Members of the Board receive a fixed fee and additional fees for special tasks such as committee chairmanship, vice-chairmanship or membership. The fees are paid in cash in January for the previous calendar year. Actual expenditures will be reimbursed.

In addition, each member of the Board receives a fixed number of GF shares. The value of the share-based compensation is calculated on the basis of the closing share price on the last trading day of the reporting year. Those shares are granted in January for the previous calendar year and are restricted for a period of five years.

The compensation of the Board of Directors is subject to regular social security contributions and is not pensionable.

Compensation of the Executive Committee //

The principles of compensation of the Executive Committee members, as described above in the section “Principles of compensation” are set out in a regulation and retain their validity for several years. They were last reviewed by the Compensation Committee in 2012.

The compensation of the Executive Committee includes the following elements:

  • Fixed base salary in cash
  • Performance-related short-term incentive in cash
  • Share-based remuneration (long-term incentive)
  • Benefits such as pension and social insurance funds

Compensation model Executive Committee

Compensation model Executive Committee

Fixed base salary //

The fixed base salary is determined primarily on the basis of the following factors:

  • Scope and complexity of the role, as well as the skills required to perform the role;
  • Skills, experience, and performance of the individual in the role;
  • External market value of the role. 

Fixed base salaries of the Executive Committee members are reviewed every year on the basis of those factors and adjustments are made according to market developments and to the company’s affordability.

Short-term incentive //

The short-term incentive is a variable incentive designed to reward the achievement of business objectives of the Corporation and its divisions, as well as the fulfillment of individual performance objectives as defined within the MBO process, over a time horizon of one year.

The business objectives are set by the Board of Directors in accordance with the long-term strategy. They include absolute financial figures and are set for a period of several years in order to ensure sustainable and long-term performance. Currently, the business objectives are: organic sales growth (excluding acquisitions and divestitures), EBIT margin (EBIT in relation to sales), Return on Invested Capital (ROIC), and asset turnover (sales in relation to average net operating assets). For each objective, the Board of Directors sets a threshold level of achievement under which there is no payout, and a ceiling above which the payout is capped. The payout factor for achievement levels between the threshold and the ceiling is calculated by linear interpolation. While the thresholds and the ceilings are valid for a period of several years, the achievement against those is measured on a yearly basis and leads to a payout factor for this portion of the variable incentive. The threshold for the ROIC is set on a level clearly over the average cost of capital of the Corporation.

The individual objectives are set within the MBO process at the beginning of the year. They are clearly measurable. At the end of the year, the achievement against each individual objective is assessed and leads to a payout factor for this portion of the variable short-term incentive.

The weighting of the business and individual objectives for the Chief Executive Officer and the other Executive Committee members is described in the following chart:

Weighting of the business and individual objectives (maximum level of performance/payout factor)

  CEO Head Division Staff Functions
Business objectives      
Corporation level      
Organic sales growth (20%) 22% 6% 12%
EBIT margin (30%) 33% 9% 18%
ROIC (30%) 33% 9% 18%
Asset turnover (20%) 22% 6% 12%
Division level      
Organic sales growth (20%)   6%  
EBIT margin (30%)   9%  
ROIC (30%)   9%  
Asset turnover(20%)   6%  
Individual objectives      
MBO 40% 30% 30%
Total weight (at maximum) in % of annual fixed base salary
150% 90% 90%

Thresholds and ceilings for the business objectives (valid for corporate and divisional objectives)

Business objectives Hurdle (minimum threshold) Cap (maximum threshold) Mid-term targets 2015
Organic sales growth 1.0% 7.0% not disclosed1
EBIT margin 3.5% 12.0% 8-9%
ROIC 10.0% 22.0% 16-20%
Asset turnover 2.0 3.0 not disclosed1

1 For competitive reasons

The maximum short-term incentive is expressed as a percentage of the annual fixed base salary and amounts to 150% for the Chief Executive Officer and 90% for the other members of the Executive Committee. The expected level of target performance (fulfillment of the multi-year business objectives and of the individual objectives) corresponds to a short-term incentive payout of approximately 60% of the maximum short-term incentive.

Based on the Business Strategy 2016–2020 the short-term incentive plan has been fine-tuned to reward the achievement of strategic targets. The new short-term incentive model is explained in the section “Changes to the short-term incentive model in 2016” and is effective for 2016.

Share-based remuneration (long-term incentive) //

The purpose of the share-based remuneration is to align the interest of the Executive Committee with the shareholders’ interests. The Chief Executive Officer receives 850 restricted shares and each of the other Executive Committee members receives 300 restricted shares. The shares are granted in January of the following year and are subject to a blocking period of five years. The grant value of the share is based on the closing share price on the last trading day of the reported business year. The shares are automatically unblocked in case of termination, liquidation, or change of control. The shares of the share-based compensation program are either treasury shares or are repurchased on the market.

The share-based remuneration plan has been replaced on the basis of the review conducted in 2015. The new long-term incentive model is explained in the section “Changes to the long-term incentive model in 2016” and is effective for 2016.

Benefits //

Benefits consist primarily of retirement and insurance plans that are designed to provide reasonable retirement remuneration as well as a reasonable level of protection against risks such as death and disability. All members of the Executive Committee have a Swiss employment contract and participate in the pension fund of GF offered to all Swiss-based employees, in which only the fixed base salary is insured. The pension fund exceeds the minimum legal requirement of the Swiss Federal Law on Occupational Retirement, Survivors and Disability Pension Plans (BVG) and is in line with commensurate market practice. For top management positions, including the members of the Executive Committee, an early retirement plan is in place. The plan is entirely financed by the employer and is administered by a Swiss foundation. Beneficiaries may opt for early retirement from the age of 60, provided that they are enrolled with the Swiss social security and have been employed by GF at least for ten years.

Members of Executive Management do not receive any special benefits. They are entitled to a representation lump-sum allowance and to reimbursement of business expenses in accordance to the expense rules applicable to all employees at management levels employed in Switzerland. The expense regulation has been approved by the relevant cantonal tax authorities.

Contractual terms //

The contractual agreements with the Chief Executive Officer and the Executive Committee members foresee a notice period of maximum twelve months. There are no entitlements to severance payments.

Remuneration for the 2015 business year

Board of Directors //

The members of the Board of Directors received cash compensation of CHF 1.175 million in the year under review. In addition, a total of 1 534 GF registered shares with a total market value of CHF 1.042 million were allocated as share-based compensation. In the previous year, the allocation had been 1 650 GF registered shares, equivalent to a total market value of CHF 1.038 million. Together with other benefits, the total compensation paid to the Board of Directors in the year under review amounted to CHF 2.331 million (previous year: CHF 2.034 million). The detailed disclosure of compensation to the Board of Directors is as follows:

Compensation paid to the members of the Board of Directors 2015

  Cash
compen-
sation1
Number
of shares
Share-
based
compen-
sation2
Other
benefits3
Total
compen-
sation
2015
4
Total
compen-
sation
20144
Andreas Koopmann            
Chairman Board of Directors
           
Chairman Nomination Committee 270 300 204 25 499 448
Hubert Achermann            
Chairman Audit Committee 139 150 102 13 254 132
Gerold Bührer            
Vice Chairman Board of Directors            
Member Audit Committee 123 150 102 10 235 194
Roman Boutellier            
Member Nomination Committee 90 150 102 9
201 155
Ulrich Graf
           
Chairman Compensation Committee 110 150 102 10 222 161
Rudolf Huber 5            
Chairman Audit Committee 33 33 22 3 58 206
Roger Michaelis            
Member Audit Committee
116 150 102 12 230 192
Eveline Saupper 6            
Member Compensation Committee 71 118 80 8 159  
Jasmin Staiblin            
Member Compensation Committee 90 150 102 10 202 155
Isabelle Welton 7            
Member Compensation Committee 20 33 22 2 44 155
Zhiqiang Zhang            
Member Nomination Committee 113 150 102 12 227 198
Rounding           2
Total 1 175 1 534 1 042 114 2 331 1 998*

(all in CHF 1 000: except column “Number of shares”)

* The total compensation in 2014 amounted to CHF 2.034 million, including a compensation for Kurt E. Stirnemann (member Audit Committee until Annual Shareholders’ Meeting 2015) of CHF 36 000.

1 The Cash compensation includes reimbursements for international travel amounting to CHF 45 000.
2 The share-based compensation consists in the allocation of a fixed number of shares. The amount of the share-related compensation is calculated on the basis of the full value of the shares at the year-end price of CHF 679 on 31 December 2015.
3 The other benefits represent employer contributions to social insurance funds.
4 The total compensation encompasses the cash compensation, the share-based compensation and the other benefits.
5 Member of the Board of Directors and Chairman Audit Committee until 18 March 2015.
6 Member of the Board of Directors and member Compensation Committee since 18 March 2015.
7 Member of the Board of Directors and member Compensation Committee until 18 March 2015.

The compensation paid to the Board of Directors for the year 2015 was above that of the previous year. The increase is explained by the following factors:

  • Based on the review conducted in 2014, the applicable compensation model has been adapted to be aligned with the relevant market levels.
  • The value of the shares increased from CHF 629 in 2014 to CHF 679 in 2015.

Other benefits reflect the social security contributions.

In the year under review, Mr. Rudolf Huber, Chairman of the Audit Committee, and Ms. Isabelle Welton, member of the Compensation Committee, were remunerated until the Annual Shareholders’ Meeting of 18 March 2015. Ms. Eveline Saupper, member of the Compensation Committee, was compensated for the time 18 March through 31 December 2015. Both Mr. Roger Michaelis and Mr. Zhiqiang Zhang received each CHF 22 500 for international travel time spent; these reimbursements are included in the cash compensation. No further compensation was paid to members of the Board of Directors. No compensation was paid to parties closely related to members of Board of Directors.

Executive Committee //

The members of the Executive Committee received cash, share-based compensation, social security and pension contributions amounting to CHF 7.736 million for the year under review (previous year: CHF 6.630 million). 2 050 GF registered shares with a total value of CHF 1.392 million, based on a share price of CHF 679 at year-end 2015, were allocated to members of the Executive Committee for the year under review (previous year: 2 050 GF registered shares with a total value of CHF 1.289 million).

The detailed disclosure of compensation to the Executive Committee in accordance with the Ordinance against excessive pay in stock exchange listed companies is as follows:

Compensation paid to the members of the Executive Committee 2015

  Fixed salary in cash
Short-term incentive
in cash1
Number of shares
Share-
based compen-
sation2
Pension and social insurance funds3 Total compen-
sation 20154
Total compen-
sation 20144
Executive Committee 2 860 2 274 2 050 1 392 1 210 7 736 6 630
Of whom Yves Serra, CEO (highest individual compensation)
869 938 850 577 397 2 781 2 286

(all in CHF 1 000: except column “Number of shares”)

1 The short-term incentive is based on the short-term incentive plan. The amount is determined by the fulfillment of personal performance objectives and by the financial results of the divisions and the Corporation. The short-term incentive for the 2015 financial year was approved by the Board of Directors on
19 February 2016. Payment will be made in 2016.
2 The share-based remuneration is based on the long-term incentive plan. Each year a fixed number of GF shares is allocated. These shares are blocked for five years. The amount of the share-based compensation is calculated on the basis of the full value of the shares at the year-end price of CHF 679 on
31 December 2015. All shares are transferred in 2016.
3 The pension and social insurance fund expenses include employer contributions to social security and to pension funds.
4 The total compensation is comprised of the fixed salary, the short-term incentive, the share-based remuneration and the social and pension contributions.

The total compensation for the Chief Executive Officer and the other members of the Executive Committee in 2015 was higher than in 2014. The increase is explained by the following factors:

  • The short-term incentive related to the financial results of the Corporation and the divisions and to the individual performance was clearly better in 2015 compared to 2014, especially as the objectives of the Strategy 2011–2015 have been achieved. Consequently, the overall short-term incentive percentage ranges from 66.2% to 68.3% of the base salary for the Executive Committee members and amounts to 108% of the base salary for the Chief Executive Officer.
  • The value of the shares increased from CHF 629 in 2014 to CHF 679 in 2015.
  • The maximum short-term incentive level for the Chief Executive Officer was increased from 110% to 150% of the fixed base salary in order to be aligned with relevant market practice.
  • The fixed salary was slightly adjusted in order to keep competitive levels in line with the market practice of our industrial sector.
  • The employer’s contributions to social security and to company retirement plans have increased following the adjustments of fixed salary. Please note that a significant portion of the social security payments of the employer to the Swiss social security system represents a solidarity payment as the individuals will not get any return or benefit due to these payments.

In the year under review, no compensation was paid to former members of the Executive Committee. No compensation was paid to parties closely related to members of the Executive Committee.

Shareholdings of the members of the Board of Directors and of the Executive Committee //

The information on shareholdings of the members of the Board of Directors and of the Executive Committee is included on page 110 and 111 of the Notes to the Financial Statements of Georg Fischer Ltd.

Loans to members of governing bodies //

Neither Georg Fischer Ltd nor its Corporate Companies granted any guarantees, loans, advances, or credit facilities to members of the Board of Directors or the Executive Committee or related parties in the year under review. As of 31 December 2015, no loans were outstanding.

Changes to the short-term incentive model in 2016

In 2015, a review of the short-term incentive model applicable to the members of the Executive Committee has been conducted reflecting the Business Strategy 2016–2020. The following changes became effective 1 January 2016:

  • The short-term incentives are expressed as a target in % of Annual Fixed Base Salary.
  • The maximum short-term incentive amounts to 150% of the target short-term incentive.
  • The achievement for each objective is capped at 150%.
  • The highest weighting is on the organization the executive is responsible for.
  • The hurdles and caps are defined on a divisional level to reflect the difference in businesses.

Short-term incentive in % of annual fixed base salary


The maximum in % of annual fixed base salary remains unchanged.

  Target Minimum Maximum
CEO 100% 0% 150%
Executive Committee 60% 0% 90%

Weighting of the business and individual objectives (target level of performance / payout factor)

  CEO Head Division Staff Functions
Business objectives      
Corporation level      
Organic sales growth (20%) 15% 5% 15%
EBIT margin (40%) 30% 10% 30%
ROIC (40%) 30% 10% 30%
Division level      
Organic sales growth (20%)   10%  
EBIT margin (40%)   20%  
ROIC (40%)   20%  
Individual objectives      
MBO 25% 25% 25%
Total
100% 100% 100%

Thresholds and targets for the corporate business objectives

Business objectives Hurdle1 Strategy targets 2016-2020
Organic sales growth (at constant currencies) 1.00% 3-5%
EBIT margin 4.00% 8-9%
ROIC 10.00% 18-22%

1 Achievements below the hurdle result in zero payout for the respective business objective.

Changes to the long-term incentive model in 2016

The metrics of the new long-term incentive plan have been designed to fit with GF’s Strategy 2016–2020, focusing on long-term sustainable value creation for the company, customers and shareholders. The incentive is based on one Key Performance Indicator, Earnings per Share (EPS), measured over a prospective three years’ performance period, in order to:

  • Align the interests with those of GF’s shareholders,
  • Allow management to participate in the long-term success of GF,
  • Foster and support a high-performance culture.

GF has renounced to measure performance against an artificially defined peer group of companies as it would require the definition of peer groups on divisional levels to adequately reflect the differences in businesses GF operates in. The aggregation of such disparate peers would not lead to a clear correlation between performance and long-term incentive. The Key Performance Indicator, EPS, is measured over a prospective three years’ performance period in relation to the last 10 years’ average value; this ensures that full business cycles are taken into account when measuring the achievement levels.

The Grant is expressed as a number of shares, based on the length of employment in the year x (pro-rated based on twelve months). The number of granted shares will be divided into a number of restricted shares (RS) and a number of performance-restricted shares (PS), as follows:

Restricted and Performance-restricted shares

  RS
Restricted shares
PS
Performance-restricted shares
Total
number of shares
CEO 425 0-850 425-1 275
EC 150 0-300 150-450

CEO = Chief Executive Officer; EC = Executive Committee

RS will be blocked for 5 years, PS for 2 years after the vesting period of 3 years.

For the year x, the RS and PS are granted on 1 January, year x+1 (Grant Date). The RS vest immediately; the vesting of the PS is subject to meeting the following performance criteria: 

  • Should the average EPS value over the 3 years’ vesting period be equal to the average EPS value of the previous 10 years, 100% of the granted PS will vest at the Vesting Date. 
  • Should the average EPS value over the 3 years’ vesting period be above 150% of the average EPS value of the previous 10 years, 150% of the granted PS will vest at the Vesting Date (cap).
  • Should the average EPS value over the 3 years’ vesting period be below 50% of the average EPS value of the previous 10 years, all granted PS will forfeit (hurdle).
  • For achievements in between 50% and 150% the calculation is linear.

Whereas the Vesting Date of the granted PS is defined 3 years after the Grant Date and five working days after the official disclosure of the EPS value of the relevant business year.

Long-term incentive model in 2016

The long-term incentive plan came into effect 1 January 2016.

For the long-term incentive plan year x, the total number of RS and PS vesting can be derived as follows:

Number of shares: Members of the EC

Number of shares: Members of the EC

For the CEO the target is 850 shares with a maximum of 1 275 shares and a floor of 425 shares.