2021 ANNUAL
FINANCIAL REPORT
TABLE OF CONTENTS
01 REPORT ON OPERATIONS
16 SABAF GROUP CONSOLIDATED FINANCIAL STATEMENTS at 31 December 2021
78 SABAF S.p.A. SEPARATE FINANCIAL STATEMENTS at 31 December 2021
1
SABAF GROUP
REPORT ON OPERATIONS
2
Business and Financial situation of the Group
(
€
/000)
2021
%
2020
%
2021-2020
change
% change
Sales revenue
263,259
100%
184,906
100%
78,353
+42.4%
EBITDA
54,140
20.6%
37,097
20.1%
17,043
+45.9%
EBIT
37,508
14.2%
20,093
10.9%
17,415
+86.7%
Pre-tax profit
29,680
11.3%
14,509
7.8%
15,171
+104.6%
Profit attributable to the Group
23,903
9.1%
13,961
7.6%
9,942
+71.2%
Basic earnings per share (€)
2.132
1.240
0.892
+71.9%
Diluted earnings per share (€)
2.132
1.240
0.892
+71.9%
The Sabaf Group ended the 2021 financial year with a record high revenue of €263 million, up
42.4% from €184.9 million in 2020.
The Group is successfully pursuing ahead of schedule the organic growth strategy outlined in
the 2021-2023 Business Plan, which focuses on strengthening technical and commercial
relations with some of the major global players, increasing internationalisation and exploiting
synergies with the most recently acquired companies.
In 2021, demand was solid in all markets, with particularly high peaks in the first half of the
year. In a highly dynamic environment, the Sabaf Group was able to react promptly and
always guarantee the continuity and reliability of supplies to customers.
Average sales prices in 2021 were 3% higher than in 2020, largely offsetting considerable
increases in the purchase prices of the main raw materials (aluminium alloys, steel and brass),
electricity and gas.
Higher volumes and a high level of capacity utilisation further improved profitability: EBITDA
was €54.1 million (20.6% of turnover), up 45.9% compared to €37.1 million last year (20.1% of
turnover) and EBIT was €37.5 million (14.2% of turnover) with an 86.7% increase compared to
€20.1 million in 2020. The net profit for 2021 was €23.9 million, up by 71.2% compared to the
figure of €14 million in 2020.
3
The subdivision of sales revenues by product line is shown in the table below:
2021
%
2020
%
% change
182,468
69.3%
129,834
70.2%
+40.5%
58,375
22.3%
41,326
22.3%
+41.3%
22,416
7.4%
13,746
7.4%
+63.1%
263,259
100%
184,906
100%
+42.4%
In 2021, the increase in sales of electronic components was also particularly significant,
continuing to benefit from cross-selling with the traditional products in the Group's portfolio
and from the strong drive to develop new components.
The geographical breakdown of revenues is shown below:
2021
%
2020
%
% change
92,935
35.3%
69,618
37.7%
+33.5%
65,526
24.9%
44,806
24.2%
+46.2%
30,472
11.6%
22,700
12.3%
+34.2%
39,589
15.0%
27,639
14.9%
+43.2%
19,614
7.5%
12,177
6.6%
+61.1%
15,123
5.7%
7,966
4.3%
+89.8%
263,259
100%
184,906
100%
+42.4%
The increase in sales was very strong in all geographical areas, with peaks in Asia, Africa and
the Middle East, indicating an increasingly global presence of our Group.
The impact of labour cost on sales decreased from 23.6% in 2020 to 20.5% in 2021.
Net finance expense as a percentage of turnover was extremely minimal, also in view of the
low interest rates. During the year, the Group recognised in the income statement negative
forex differences of €7.4 million, mainly due to fluctuations in exchange rates with the Turkish
lira (€4.8 million of negative forex differences were recognised in 2020).
In 2021, the Group recognised positive income taxes of €5 million with a tax rate of 16.8%.
The main impacts on the tax rate are shown in Note 32 to the consolidated financial
statements.
4
The Group’s statement of financial position, reclassified based on financial criteria, is
illustrated below
1
:
(
€
/000)
31/12/2021
31/12/2020
Non-current assets
130,093
131,543
Short-term assets
2
141,494
108,246
Short-term liabilities
3
(72,863)
(56,017)
Working capital
4
68,631
52,229
Provisions for risks and charges, Post-employment
benefits, deferred taxes
(8,681)
(9,643)
Net invested capital
190,043
174,129
Short-term net financial position
18,897
(24,169)
Medium/long-term net financial position
(86,504)
(32,153)
Net financial debt
(67,607)
(56,322)
Shareholders’ equity
122,436
117,807
Cash flows for the financial year are summarised in the table below:
(
€
/000)
2021
2020
Opening liquidity
13,318
18,687
Operating cash flow
23,216
25,067
Cash flow from investments
(23,752)
(17,296)
Free cash flow
(536)
7,771
Cash flow from financing activities
41,233
(8,133)
Acquisitions
(6,296)
(3,063)
Foreign exchange differences
(4,070)
(1,944)
Cash flow for the period
30,331
(5,369)
Closing liquidity
43,649
13,318
In 2021, the Group generated an operating cash flow of €23.2 million (€25.1 million in 2020).
The higher levels of activity and the increase in the price of materials led to an increase in
working capital, which stood at €68.6 million at 31 December 2021, compared to €52.2 million
at the end of 2020: moreover, its impact on turnover decreased to 26.1% compared to 28.2%
in 2020.
1
Net financial debt and liquidity shown in the tables below are defined in compliance with the net financial
position detailed in Note 22 of the consolidated financial statements, as required by CONSOB memorandum of
28 July 2006
2
Sum of Inventories, Trade receivables, Tax receivables and Other current receivables
3
Sum of Trade payables, Tax payables and Other liabilities
4
Difference between short-term assets and short-term liabilities
5
In 2021, the Sabaf Group made net organic investments of €23.8 million (€17.3 million in
2020). During the period, key investments were made:
▪ in Turkey, where the production capacity of the Electronics Division was doubled and
production lines for gas valves and hinges for dishwashers were set up;
▪ in India, where the production of gas components (valves and burners) is about to
start);
▪ in Mexico, where work began on the construction of a new plant in San Luis de
Potosi.
During the financial year, the Group paid dividends for €6.2 million, no treasury shares were
purchased.
At 31 December 2021, the net financial debt was €67.6 million, compared with €56.3 million
on 31 December 2020. The change in net financial debt during the year is summarised in the
table below:
Net financial debt at 31 December 2020
(56,322)
Free cash flow
(536)
Dividends paid out
(6,172)
Buy-back of shares
-
Put options on minority interests – outlay lower than the recognised
financial liabilities
438
Financial liabilities IFRS 16 - new contracts entered into in 2021
(954)
Change in fair value of derivative financial instruments
(83)
Change in the scope of consolidation
97
Foreign exchange differences and other changes
(4,075)
Net financial debt at 31 December 2021
(67,607)
At 31 December 2021, shareholders' equity amounted to €122.4 thousand; the ratio between
the net financial debt and the shareholders’ equity was 0.55 versus 0.48 in 2020.
Economic and financial indicators
2021
2020
pro-forma
1
pro-forma
1
Change in turnover
+42.4%
+42.3%
+18.6%
+8.4%
ROCE (return on capital employed)
19.7%
11.5%
Net debt/EBITDA
1.25
1.52
Net debt/equity ratio
55%
48%
Market capitalisation (31/12)/equity ratio
2.26
1.49
Please refer to the introductory part of the Annual Report for a detailed examination of other
key performance indicators.
1
The change in pro-forma turnover is calculated on a like-for-like basis.
6
Risk Factors
Risks related to coronavirus pandemic
In 2021, the coronavirus pandemic continued to directly and indirectly affect the company's
activities. Since the outbreak of the pandemic, the Group Sabaf has promptly implemented
several counteracting and mitigating actions to minimise the impact on the business. Although
the most critical phase of the pandemic now seems to be over, all controls continue to be
activated, and any elements that may change the following risk factors are constantly
monitored:
- risks related to the health of people;
- the risk arising from possible local or national new lockdowns, with the consequent
impossibility of guaranteeing the continuity of the company's activities;
- the risk arising from a temporary reduction in personnel availability;
- risks related to supplier reliability and possible interruptions in the supply chain;
- risks related to violent fluctuations in demand and failure to comply with contractual
agreements with customers.
Risks related to the conflict between Russia and Ukraine
In relation to the recent conflict between Ukraine and Russia, note that the Group has an
insignificant direct exposure to the markets of Russia, Belarus and Ukraine. However, these
are markets supplied by some of the Sabaf Group's customers, who are exposed to varying
degrees in terms of market access and changes in consumer behaviour.
The outbreak of the conflict immediately led to severe tensions in the prices of electricity, gas
and raw materials used by the Group. Should the situation not be resolved rapidly, these
factors could significantly affect demand and, more generally, the performance of the sector in
which the Group operates, especially in Europe.
The repercussions on the macroeconomic system are not quantifiable in that they are related
to future developments of the conflict, which are currently unpredictable.
As part of its periodic risk assessment process, the Group identified and assessed the following
main risks:
Risks of external context
Risks deriving from the external context in which Sabaf operates, which could have a negative
impact on the economic and financial sustainability of the business in the medium/long-term.
The most significant risks in this category are related to general economic conditions, trend in
demand and product competition.
Strategic risks
Strategic risks that could negatively impact Sabaf's medium-term performance, including, for
example, risks related to low profitability of certain product lines, the risks arising from the
mismatch between market needs and product innovation and the loss of business
opportunities in the Chinese market.
7
Operational risks
Risks of suffering losses due to inadequate or malfunctioning processes, human resources and
information systems. This category includes financial risks (e.g. losses deriving from the
volatility of the price of raw materials and from fluctuations in exchange rates), risks related to
production processes (e.g. product liability, saturation level of production capacity),
organisational risks (e.g. loss of key staff and expertise and/or the difficulty of replacing them)
and Information Technology risks.
Legal and compliance risks
Risks related to Sabaf's contractual liabilities and compliance with the regulations applicable to
the Group, including: Legislative Decree 231/2001, Law 262/2005, HSE regulations,
regulations applicable to listed companies, tax regulations, labour regulations, international
trade regulations and intellectual property regulations.
The main risks are described in detail below as well as the relevant risk management actions
that are currently being implemented.
Performance of the sector
The Group’s financial position, results and cash flows are affected by several factors related to
the performance of the sector, including:
▪ general macro-economic performance: the household appliance market is affected by
macro-economic factors such as gross domestic product, consumer and business
confidence, interest rate trend, the cost of raw materials, the unemployment rate and
the ease of access to credit;
▪ concentration of the end markets: as a result of mergers and acquisitions, customers
have acquired bargaining power;
▪ stagnation of demand in mature markets (i.e. Europe) in favour of growth in emerging
Countries, characterised by different sales conditions and a more unstable macro-
economic environment;
▪ increasing competition, which in some cases imposes aggressive pricing policies.
To cope with this situation, the Group aims to retain and reinforce its leadership position
wherever possible through:
▪ the maintenance of high quality and safety standards, which make it possible to
differentiate the product through the use of resources and implementation of
production processes that are not easily sustainable by competitors;
▪ development of new products characterised by superior performance compared with
market standards, and tailored to the needs of the customer;
▪ strengthening of business relations with the main players in the sector;
▪ diversification of commercial investments in growing and emerging markets with local
commercial and productive investments;
▪ entry into new segments / business sectors.
Instability of Emerging countries in which the Group operates
The Group is exposed to risks related to (political, economic, tax, regulatory) instability in
some emerging countries where it produces or sells. Any embargoes or major political or
economic instability, or changes in the regulatory and/or local law systems, or new tariffs or
taxes imposed could negatively affect a portion of Group turnover and the related profitability.
8
Sabaf has taken the following measures to mitigate the above risk factors:
▪ diversifying investments at international level, setting different strategic priorities that,
in addition to business opportunities, also consider the different associated risk profiles;
▪ monitoring of the economic and social performance of the target countries, also
through a local network of agents and collaborators;
▪ timely assessment of (potential) impacts of any business interruption on the markets of
Emerging countries;
▪ adoption of contractual sales conditions that protect the Group (e.g. insuring business
loans or advance payments).
The presence of Sabaf in Turkey, the country that represents the main production hub of
household appliances at European level, is of particular importance: over the years, local
industry attracted heavy foreign investments and favoured the growth of important
manufacturers. In this context, the Sabaf Group created a production plant in Turkey in 2012
that realises today 10% of total production. In 2018, the Group also acquired 100% of Okida
Elektronik, a leader in Turkey in the design, manufacture and sale of electronic control boards
for household appliances. In 2021 the Group opened a new plant in Turkey. In 2021, Turkey
represented 18% of the Group's production and 25% of its total sales. The Turkish market is
estimated to represent around 5% of the final destination of Sabaf components. In
consideration of the strategic importance of this Country, the management assessed the risks
that could arise from any difficulties/impossibilities of operating in Turkey and envisaged
actions to mitigate this risk.
Product competition
The Sabaf Group is mainly active in the production of gas cooking components (valves and
burners); therefore, there is the risk of not correctly assessing the threats and opportunities
deriving from the competition of alternative products (such as electric cooking), with the
consequence of not adequately making use of any market opportunities and/or suffering from
negative impacts on margins and turnover.
In recent years, the Group carried out strategic operations aimed at reducing the dependence
of its business on the gas cooking sector, concluding significant acquisitions of companies
operating in related sectors.
The Group has recently undertaken a strategic development plan to extend its product range,
setting up a dedicated project team in Italy. Research and development also benefits from the
expertise derived from the acquisition of Okida, a Turkish leader in electronic components.
Loss of business opportunities in the Chinese market
With a production of over 20 million hobs per year, China is one of the world's most important
markets. After many years of commercial presence only, in 2015 Sabaf started a small
production unit, which still does not guarantee an adequate economic return.
The Group is reviewing its strategy for approaching the Chinese market and intends to:
▪ implement shortly a plan suitable for using growth opportunities offered by the local
market;
▪ continue to develop product lines in accordance with the needs of the Chinese market
and in compliance with local regulations;
9
▪ adopt and maintain a quality-price mix in line with the expectations of potential local
customers.
Financial risks
The Sabaf Group is exposed to a series of financial risks, due to:
▪ Commodity price volatility: A significant portion of the Group’s purchase costs is
represented by aluminium, steel and brass. Metal prices rose sharply during 2021,
forcing the Group to renegotiate sales prices several times to compensate for the
increase in costs. Based on market conditions and contractual agreements, the Group
may not be able to pass on changes in raw material prices to customers in a timely
and/or complete manner, with consequent effects on margins.
▪ Increase in energy costs: Some of the Group's production processes, such as the die-
casting of aluminium parts and the enamelling of burner covers, use gas as an energy
source. Other production facilities absorb significant electricity consumption. The
increase in energy costs can significantly affect margins. In order to mitigate this risk,
the Group is constantly evaluating possible actions to contain energy consumption,
including by improving the efficiency of the most energy-intensive plants.
▪ Exchange rate fluctuation: The Group carries out transactions primarily in euro;
however, transactions also take place in other currencies, such as the U.S. dollar, the
Brazilian real, the Turkish lira and the Chinese renminbi. in particular, since turnover in
US dollars accounted for 18.6% of consolidated turnover, the possible depreciation
against the euro and the real could lead to a loss in competitiveness on the markets in
which sales are made in that currency (mainly South and North America). Moreover,
the net value of assets and liabilities in foreign subsidiaries constitutes an investment in
foreign currency, which generates a translation difference on consolidation of the
Group, with an impact on the comprehensive income statement and the financial
position.
▪ Trade receivable: The high concentration of turnover on a small number of
customers generates a concentration of the respective trade receivables, with a
resulting increase in the negative impact on economic and financial results in the event
of insolvency of any one of them.
For more information on financial risks and the related management methods, see Note 36 of
the consolidated financial statements as regards disclosure for the purposes of IFRS 7.
Research and Development
In 2021, the Sabaf Group set up a dedicated team to develop new solutions for home cooking,
with the aim of creating innovative products that meet the needs of manufacturers of
household appliances and new consumer trends.
The most innovative projects in 2021 include the development and prototyping of burners
capable of operating with 100% hydrogen (replacing methane), both in domestic cooking
appliances and for the professional sector. In this context, the Sabaf Group is participating as a
strategic supplier in the Hy4Heat project, funded by BEIS (Department for Business, Energy &
Industrial Strategy), the UK Department for Business, Energy and Industrial Strategy. The
Hy4Heat project aims to determine whether it is technically possible, safe and cost-effective to
replace natural gas (methane) with 100% hydrogen in residential and commercial buildings
and gas appliances.
10
The other most important research and development projects carried out in 2021 were as
follows:
Gas parts
▪ the study for a 4kw multi-cone burner, based on the existing platform, was launched
▪ burners for the US market and new customised burners were developed
▪ two special versions of mini triple ring burners were developed for the South American
market
▪ a new snap-in catenary was developed and industrialised
▪
premium flame taps were developed
for kitchens
Hinges
▪ the development of motorised hinges for built-in ovens continued;
▪ new hinge platforms for dishwashers were developed for strategic customers.
▪ a new hidden hinge for oven doors (in standard and dual soft versions) was designed
for the global platform of a major customer
▪ a soft-close hinge for top-loading washing machines was industrialised
Electronic components
▪ a control platform for gas cookers with a touch interface was developed;
▪ controls were developed for glass ceramic cooking with class B certification;
▪ a timer platform compatible with North American market regulations was developed.
The improvement in production processes continued throughout the Group, also in order to
minimise set-up times and make production more flexible. The Group also develops and
manufactures its own machinery, equipment and moulds.
Development costs to the tune of €1,770,000 were capitalised, as all the conditions set by
international accounting standards were met; in other cases, they were charged to the income
statement.
Disclosure of non-financial information
Starting from 2017, the Sabaf Group publishes the consolidated disclosure of non-financial
information required by Legislative Decree no. 254/2016 in a report separate from this Report
on Operations. The disclosure of non-financial information provides all the information needed
to ensure understanding of the Group's activities, performance, results and impact, with
particular reference to environmental, social and personnel issues, respect for human rights
and the fight against active and passive corruption, which are relevant considering the Group's
activities and characteristics.
The disclosure of non-financial information is included in the same file in which the report on
operations, the consolidated financial statements, the separate financial statements of the
parent company Sabaf S.p.A. and the remuneration report are published.
It should be noted that since 2005, the Sabaf Group has drawn up an Annual Report on its
economic, social and environmental sustainability performance.
Personnel
In 2021, the Sabaf Group suffered no on-the-job deaths or serious accidents that led to serious
or very serious injuries to staff for which the Group was definitively held responsible, nor was
11
it held responsible for occupational illnesses of employees or former employees, or causes of
mobbing.
For all other information, please refer to the Disclosure of non-financial information.
Environment
In 2021 there was no:
▪ damage caused to the environment for which the Group was held definitively
responsible;
▪ definitive fines or penalties imposed on the Group for environmental crimes or damage.
For all other information, please refer to the Disclosure of non-financial information.
Corporate Governance
For a complete description of the corporate governance system of the Sabaf Group, see the
report on corporate governance and on the ownership structure, available in the Investor
Relations section of the company website.
Internal Control System on Financial Reporting
The internal control system on financial reporting is described in detail in the report on
corporate governance and on ownership structure.
With reference to the "conditions for listing shares of parent companies set up and regulated
by the law of states not belonging to the European Union" pursuant to articles 36 and 39 of the
Market Regulations, the Company and its subsidiaries have administrative and accounting
systems that can provide the public with the accounting situations prepared for drafting the
consolidated report of the companies that fall within the scope of this regulation and can
regularly supply management and the auditors of the Parent Company with the data necessary
for drafting the consolidated financial statements. The Sabaf Group has also set up an effective
information flow to the independent auditor as well as continuous information on the
composition of the corporate bodies of the subsidiaries, together with information on the
offices held, and requires the systematic and centralised gathering as well as regular updates of
the formal documents relating to the articles of association and granting of powers to
corporate bodies. The conditions exist as required by article 36, letters a), b) and c) of the
Market Regulations issued by CONSOB.
Model 231
The Organisation, Management and Control Model, adopted pursuant to Legislative Decree
231/2001, is described in the report on company governance and on the ownership structure,
which should be reviewed for reference.
Personal data protection
Sabaf S.p.A. has an Organisational Model for the management and protection of personal data
consistent with the provisions of European Regulation 2016/679 (General Data Protection
Regulation - GDPR). Specific projects are implemented or are being implemented for all Group
companies for which the GDPR is applicable.
Derivative financial instruments
For the comments on this item, please see Note 36 of the consolidated financial statements.
12
Atypical or unusual transactions
Sabaf Group companies did not execute any unusual or atypical transactions in 2021.
Management and coordination
Sabaf S.p.A. is not subject to management and coordination by other companies.
Sabaf S.p.A. exercises management and coordination activities over its Italian subsidiaries,
Faringosi Hinges s.r.l., A.R.C. s.r.l., C.M.I. s.r.l. and C.G.D. s.r.l.
Intra-group transactions and related-party transactions
The relationships between the Group companies, including those with