Annual Report - SIG Combibloc

54 SIG values
“ Our value-based mindset
benefits more than just
the shareholders”
Value creation for all stakeholders
In our corporate principles, we have committed ourselves to conducting our activities in a
sustainable manner. We strive for sustainable growth rather than short-term corporate value.
This aligns the objectives of our shareholders and the other important stakeholders.
Everybody shall benefit equally from the long-term orientation of our management decisions.
Sustainable value-based management for our shareholders
We create value if the profit we generate is higher than the cost of financing our capital
employed. The long-term weighted average cost of capital (wacc) is reviewed within
a periodic process. The method used to calculate our cost of equity is the Capital Asset
Pricing Model (capm), whereby we apply objective benchmarks to determine the parameters.
In the period under review, SIG calculated with a wacc of 7.5%. On the one hand, the wacc
is the hurdle rate for all investment decisions. Only when the internal profitability of the
planned investment is higher than the wacc are such investments realized.
In order to create value for our shareholders, the nopat (Net Operating Profit after Taxes)
needs to be higher than the cost of the capital employed in the planning period. nopat is
determined by first adding the amortized goodwill back to the operating profit (ebit).
Subsequently, this figure is brought with the average tax rate of the Group (30%) to an
after-tax basis.
Measuring value creation requires financial transparency throughout the Group. In this
respect, SIG is able to benefit from its efforts in the internal reporting sector and the
acceleration of its reporting processes. For example, the reporting and consolidation
software is accessible to all authorized specialists via the Intranet. On the third working
day of each month, management is in possession of indicators on net sales, order intake
and backlog as well as gross margins. The monthly report, available at the latest on the twelfth
working day, also includes a complete set of figures, including a profit and loss statement,
cash flow statement and balance sheet.
Our value-based management is reflected in the compensation system for SIG executives
which is directly linked to the results. The bonus is divided into personal objectives (30%)
and achieving the financial budget targets (70%). Financial targets themselves are derived
equally from the performance of the executive’s own department and the results of the unit
to which it reports. Personal objectives are linked directly to the initiatives of the Balanced
Scorecard. This direct link facilitates the implementation of such measures. With regard to
incentives, SIG currently focuses on net sales, ebita and roce. In future, there will be
more emphasis on economic value added.
Management’s share plan is long-term oriented to underline the importance of a sustainable
corporate policy. The number of shares granted depends on the performance of the SIG
share against the spi index over a period of three years.