Growing opportunities
Annual Integrated Report 2021
Holding robotics arms in a precise position
In the medical industry, our brakes prevent robotics arms
from straying, ensuring patient safety during surgery.
Ensuring optimal use of wind energy
Integrated into the azimuth drive of a wind turbine, our
electromagnetic brakes hold the nacelle into the wind,
optimizing energy capture.
Keeping autonomous vehicles on the move 24/7
Our smart distribution system for sensor cleaning keeps
optical sensors clean and autonomous vehicles on the
move, in all weather conditions.
Supporting a comfortable dentist appointment
Our solutions for dental applications allow dentists to
deliver patients the best possible experience, using low-
noise instruments and pneumatic chairs.
Driving passenger safety and comfort
Our products for suspension systems guarantee the
highest level of passenger safety and comfort in tomorrow’s
vehicles, under different driving and road conditions.
HOW OUR PRODUCTS IMPACT EVERYDAY LIFE
Safe material transport even with heavy loads
Our electromagnetic brakes stop electric-driven warehouse
vehicles promptly in emergency situations, keeping staff
safe and material in pristine condition.
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Supporting emission-free industrial heating processes
Our inductive heating systems provide manufacturers a
precise, green, and future-proof solution for a wide variety
of industrial heating processes.
Securing safety in demanding applications
With a 1,600+ N holding force and a shock resistance up
to 100 g, our solenoid door locks provide optimal safety in
extreme applications, such as laboratory centrifuges.
Optimizing passenger and freight safety
Providing locking with signal feedback, our strongest
solenoids help optimize safety in tough transport
environments, such as intelligent freight wagons.
Continuously monitoring the AGV’s position and speed
Our safety controllers for AGV trigger an emergency stop
when an object enters the AGV environment safely
reducing or increasing its speed again.
Ensuring turnstile safety in the event of a power failure
In the event of a power failure, our brakes release locking
in automated turnstile entry systems, allowing turnstile
arms to be pushed aside.
Keeping road users safe with a vehicle alert system
Our E/E architecture-ready components and sound
systems enable manufacturers to create a unique alert
sound identity for their vehicles.
HOW OUR PRODUCTS IMPACT EVERYDAY LIFE
3
Annual Integrated Report 2021
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
This document is the PDF version of the 2021 Annual Integrated Report of Kendrion N.V. and has been prepared for ease of use.
The European Single Electronic Format (ESEF) reporting package is available on the company’s website at www.kendrion.com.
In case of discrepancies or ambiguities between this PDF version and the ESEF reporting package, the latter prevails.
2 How our products impact everyday
life
5 Profile
6 Organization
7 Preface Joep van Beurden, CEO
9 Facts and figures
11 World map
12 Strategy and financial objectives
16 Enabling energy transition
23 Share and shareholder information
26 Members of the Executive Board
26 Report of the Executive Board
27 Industrial activities
30 Automotive activities
33 Financial review
39 Sustainability
59 People & Culture
66 Outlook
68 Risk management
75 Corporate Governance Report
81
Members of the Supervisory Board
83 Preface Frits van Hout,
Chairman of the Supervisory Board
84 Report of the Supervisory Board
91 Remuneration Report
107 Financial statements
186 Other information
186 Provisions in the Articles of Association
governing the appropriation of profit
187 Independent auditor’s report financial statements
200 Limited assurance report non-financial information
203
Five-year summary
204 Principal subsidiaries
206 About the Sustainability Report
CONTENTS
PHOTOGRAPHY
AND IMAGES
Wessel de Groot Fotografie
Kendrion N.V.
Shutterstock
iStock
A digital version of this Report
is available on the websites
www.kendrion.com and
annualreport.kendrion.com
along with other publications
such as press releases.
Annual Integrated Report 2021
4
Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statementsCONTENTS
PROFILE
Kendrion designs, manufacturers and delivers
intelligent actuators that help advance the global
push towards electrification and sustainable
energy.
Precision. Safety. Motion.
Enabling energy transition
Today, these compact and connected actuators can be found
in wind power, robots, factory automation, electric vehicles,
energy distribution and industrial heating processes and
industrial heating processes, where they support our OEM
customers around the world to transition to safer and cleaner
forms of energy.
As a technology pioneer and innovator, building on a foundation
of over 100 years of experience, we are driven by a desire to
explore creative solutions for the engineering challenges of
tomorrow. Our modular product design approach and agile way
of working enable us to create complex products and
customized systems that save our customers time and costs.
This has made Kendrion the trusted partner of some of the
world’s market leaders in the automotive and industrial
segments.
We take broad responsibility for how we source, manufacture,
and conduct business. Sustainable business practices are
integrated in our processes and embedded in our culture.
Rooted in Germany, headquartered in the Netherlands, and
listed on the Amsterdam stock exchange, our footprint extends
across Europe to the Americas and Asia.
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Annual Integrated Report 2021
Contents Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statementsPROFILE
ORGANIZATION
AUTOMOTIVE
We develop innovative solutions for passenger cars and commercial
vehicles focused on advanced valve technology, smart actuation and
control technology to enable the transformation to Autonomous,
Connected, Electric and Shared (ACES) mobility.
INDUSTRIAL
BRAKES
We are full-line provider of
electromagnetic brakes for
electromotors in industrial end
markets.
INDUSTRIAL
ACTUATORS AND CONTROLS
We focus on customized solutions
for industrial applications based
on electromagnetic actuators,
control technology and fluid
technology.
INDUSTRIAL AUTOMOTIVE
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PREFACE
Strong performance in an unpredictable environment
Standing tall amidst global supply chain
disruption
The business climate in 2021 was tough, but for different
reasons than in 2020 when the COVID pandemic first struck.
In short, we moved from a crisis of demand to a crisis of
supply. Shortages in many of our raw materials such as
semiconductors, steel, certain plastics and even labor put
serious pressure on our customers, our production flexibility,
and our people. Nevertheless, we can close the year with
positive results thanks to the hard work of our entire global
team. We look forward with confidence as a financially sound
and innovative actuator company with a keen focus on
actuators that help enable the global energy transition.
Fostering the broad energy transition
As a global actuator company, all our Business Groups focus
on delivering smart actuator products that support the broad
energy transition away from oil, natural gas, and coal, towards
cleaner forms of energy. Pursuing a leading role in this global
transition provides us with a strong proposition today and for
the future.
Our industrial brakes are used in applications such as robotics,
wind power, intra-logistics solutions (such as AGVs and electric
forklift trucks), and more. For instance, our Industrial Actuators
and Controls (IAC) Business Group produces modular,
electrified induction heating systems that aim to deliver similar
benefits on an industrial scale to those you see in home
appliances. In Automotive, our smart actuators for ACES
(Autonomous, Connected, Electric and Shared) vehicles help
enable electrified and autonomous driving.
The challenge of 2021: From ‘demand’ to ‘supply’ crisis
In many ways, the business climate in 2021 was even tougher
than in 2020, especially in Automotive. In 2020, we faced
a ‘demand’ crisis: during COVID lockdown, consumers were
hesitant to spend money on items like a new car, and
corporations kept investment low. Car sales and industrial
demand dropped sharply. Despite the sharp drop, demand
patterns remained somewhat predictable, and governments
supported companies with measures such as flexible working
hours and grants.
In 2021, on the other hand, demand returned. In fact, as
lockdowns lifted, it skyrocketed. But this sudden change drove
us from one crisis into another: this time based on supply
chain-related issues. Unlike the demand crisis, the supply chain
crisis is highly unpredictable. Despite full order books we
cannot rely on timely delivery of raw materials such as
semiconductors, steel, plastic, gas, and even labor.
Impressive results despite unpredictability
In this business environment we delivered good results.
I am proud of what we have achieved as a team in these
extraordinary and unpredictable circumstances.
Joep van Beurden
CEO
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As a group, we increased our revenue by 17% to
EUR 464 million compared to 2020. Our normalized EBITDA
grew by 25% to EUR 55.8 million and our normalized net profit
before amortization increased by 76% to EUR 20.6 million.
In Industrial, we grew by a strong 22% as the demand for
actuators for electrification applications in almost all the
markets we are active in accelerated. Industrial revenue is
now more than 9% higher than in 2019, with INTORQ and 3T
pro-forma included. I am excited about our prospects in
Industrial, as we are only at the start of what is a broad energy
transition away from fossil fuels to cleaner forms of energy.
In Automotive, we grew by 13%. This means we are still some
10% behind the pre-COVID revenue of 2019 but given
a contraction in the global passenger cars production of around
15%, we did benefit from our strong pipeline as the high
nominated business wins over the past years started to
generate revenue. Here too, our prospects are good, as the
level of nominations related to ACES continues to grow. In
2021 we added EUR 305 million in nominations; a book-to-bill
ratio of 1.32. This means a positive book-to-bill for the fourth
consecutive year, adding to our already healthy order pipeline.
Growth strategy continues
We continued to drive our growth strategy with the acquisition
of 3T, a leading electronics and embedded systems developer
in the Netherlands. 3T offers us significant strategic and
operational benefits in three areas. Firstly, it supports our drive
to help enable the global energy transition with our actuator
expertise. Merging 3T into the control business segment of our
Industrial Actuators and Controls Business Group substantially
increases our footprint in this growth segment. Secondly, 3T’s
more than 40 years of experience in highly reliable, high-quality
hardware and software systems will enable us to strengthen our
product offering in Automotive, where the need for electronics
and smart solutions as part of our automotive actuators is
increasing. And finally, 3T’s locations in Enschede and
Eindhoven bring us closer to leading technical universities and
institutions of higher technical education. This will give us
access to talented software and electronics engineers we need
to support our long-term sustainable growth.
Long-term financial targets
In 2020, we set ourselves an ambitious growth target of 5% per
year between 2019-2025, with 2019 as reference year,
including INTORQ pro forma. Achieving this means reaching
well over EUR 600 million in revenue in 2025. We also
committed to an EBITDA margin of at least 15% and a ROIC of
at least 25% by 2025. Now, two tough COVID-disrupted years
later, we are well on our way to achieving our goals.
I would like to thank our customers for their trust, our suppliers,
and our shareholders for their support in tough times and
specifically highlight the unyielding efforts and support of
everyone within Kendrion. And even though 2022 will no doubt
be still influenced by the global pandemic, I am confident that
we will realize our financial goals as set in the fall of 2020.
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PREFACE
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
1
Normalized for one-off costs and benefits. The bridge from reported to normalized figures can be found on page 38.
2
Invested capital excluding intangibles arising from acquisitions.
Revenue
1
(EUR million)
17%
463.6
2020 396.4
EBITA
1
(EUR million)
69%
31.9
2020 18.9
Net profit before
amortization
1
(EUR million)
76%
20.6
2020 11.7
EBITDA margin
1
0.7%
12.0%
2020 11.3%
ROI
1,2
(in %)
4.8%
15.6%
2020 10.8%
FACTS AND FIGURES
Free cash flow
1
(EUR million)
89%
3.5
2020 31.5
Solvency
2.0%
45.4%
2020 47.4%
Net debt / EBITDA
1
0%
2.3
2020 2.3
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Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
Total number of
employees (FTE)
(at 31 December)
11.1%
2,728
2020 2,456
Total number
of employees
by gender
(in % F vs M)
48/52
2020 50/50
Illness rate
(in %)
0.3%
4.7%
2020 4.4%
Accidents
(per 1,000 FTE)
73.6%
9.2
2020 5.3
Lost Time
Injuries
(in days)
32.6%
509
2020 384
Relative energy
consumption (in
tonnes kWh/million
added value)
8.0%
173.5
2020
1
188.5
Relative CO
2
emission
(in tonnes kWh/
million added value)
17.8%
28.8
2020
1
35.1
Number of
CSR supplier
audits
7.1%
26
2020 28
10
Annual Integrated Report 2021
Please refer to the section ‘About the sustainability report’ on pages 206 and 207 of this Annual Integrated Report for reporting periods, definitions, scope and limited assurance review.
1
2020 energy consumption figures restated.
FACTS AND FIGURES
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
WORLD MAPWORLD MAP
Revenue (in EUR million) segmented by customer location
FTE segmented by region
70.0
15%
Kendrion
business
location
1
Including other countries with revenue of EUR 2.3 million.
2
Normalized for one-off costs and benefits. The bridge from reported to normalized figures can be found on page 38.
3
Invested capital excluding intangibles arising from acquisitions.
73.9
16%
319.7
69%
45% 55%
271
48% 52%
2,182
55% 45%
275
EUROPE
THE AMERICAS
ASIA
1
FINANCIAL RESULTS
EUR million Net profit before
Revenue
2
EBITA
2
amortization
2
EBITDA
2
% ROI
2, 3
Total FTE
463.6 31.9 20.6 12.0% 15.6% 2,728
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STRATEGIC INTENT
AUTOMOTIVE
CHINA
INDUSTRIAL
BRAKES
CHINA
ACTUATORS
AND
CONTROLS
CHINA
THE KENDRION WAY
STRATEGY AND FINANCIAL OBJECTIVES
As the global pandemic endures, Kendrion
continues its focus on realizing sustainable
growth driven by the broad and accelerating
energy transition towards electrification and other
forms of clean energy. We significantly simplified
our organization, focused our investments, and
strengthened our product portfolio through the
acquisitions of INTORQ in 2020 and 3T in 2021.
This has resulted in a solid financial performance,
and a firm step forward towards our 2025
financial targets, despite the unpredictable
economic environment.
Progress in an unpredictable environment
Our strategy
Kendrion focuses its resources and capital on areas that are
driven by the powerful and accelerating global push towards
clean energy that offer the biggest opportunities for
sustainable profitable growth. These include:
■ Industrial Brakes: wind power, robotics & automation,
and intra-logistics;
■ Industrial Actuators and Controls: electricity distribution,
control technology, industrial locks, nuclear power, and
inductive heating technology;
■ Automotive: actuators such as sound, suspension and
sensor cleaning systems that help enable Autonomous,
Connected, Electric and Shared mobility, also known as
‘ACES’;
■ China: Kendrion has identified significant opportunities
for its technologies in a range of industrial and automotive
applications, also focused on enabling the energy
transition.
We are confident we can meet our financial target of 5%
organic growth per year between 2019 and 2025 with
an EBITDA of at least 15% and an ROIC of at least 25%,
based on the progress we made in 2021, and the product
pipeline development in all growth areas.
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Contents Profile Report of the Executive Board Outlook Report of the Supervisory Board Financial statementsSTRATEGY
The priority of Industrial Actuators and Controls (IAC) continues to be to realize profitability
and cash flow, enabling us to invest in selected sustainable growth opportunities.
The broad, global transition towards cleaner forms of energy provides many opportunities
for IAC products such as our inductive heating system for industrial processes, safety
valves for nuclear power plants, and solenoids for high voltage circuit breakers and
industrial locks. Consistent with Group strategy, IAC is investing in these opportunities.
Kendrion expects IAC to generate sustainable, above average.
In September 2021, we announced the acquisition of 3T, a leading electronics and
embedded systems developer in the Netherlands, which was merged into IAC.
In combination with the control technology activities of IAC, we expect the acquisition
to offer significant growth potential. 3T also strengthens our software and electronics
development capabilities, benefiting our Automotive Group, specifically the development
of our sensor cleaning and sound actuation platforms. Finally, 3T’s locations in Enschede
and Eindhoven bring us closer to leading technical universities and institutions of higher
technical education. This will give us access to talented software and electronics
engineers we need to support our long-term growth.
Industrial Actuators and Controls
STRATEGY AND FINANCIAL OBJECTIVES
Industrial Brakes
Kendrion is a leading player in the markets for permanent magnet brakes and spring-
applied brakes. As the brakes from both technology types are closely integrated with
an electromotor, the accelerating transition towards electrification offers Industrial Brakes
a sizeable opportunity in a fast-growing market. Industrial Brakes’ full range of high-quality
products is sold across the globe, from Europe to China, the US, and India.
In 2021, we realized strong growth in almost all the segments Industrial Brakes serves.
Firstly, the ongoing automation of global industrial manufacturing processes is advancing
the adoption of industrial and collaborative robots across industries. Secondly, in brakes
for wind turbines, where investments in green energy are accelerating across the world.
And finally, in the internal logistics sector where, for example, automated guided vehicles
(AGVs) and electric forklift trucks proliferate in increasingly automated warehouses for
e-commerce and other delivery services.
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China
Over the past few years, Kendrion has significantly increased its revenue in China and
is confident that the Chinese market offers a great opportunity for future sustainable
growth. To accommodate this growth, we are building a new 28,000m
2
production facility
at the renowned Suzhou Industrial Park (SIP), allowing us to more than double our
production capacity. Our Suzhou and Shanghai operations will be integrated in the new
building.
The sustainable growth opportunities in China are similar to those in Europe and the US,
as the energy transition is a global phenomenon. In 2021, Kendrion China again generated
a lot of new business, especially in Industrial Brakes, and the plant’s pipeline is expected
to drive the continuation of above average growth in the coming years.
The automotive industry is going through a fundamental disruption driven by four mutually
reinforcing trends: Autonomous driving, Connected vehicles, Electrification of the
powertrain and Shared mobility, also known as ‘ACES’. Kendrion expects that, on
aggregate, ACES will increase the actuator content per car and drive above-average
growth. We believe that, thanks to our long experience in developing smart actuation
technology, we are well positioned to benefit from these trends.
Our innovative product platforms are specifically targeted at ACES. They include systems
and components for active suspension, Acoustic Vehicle Alerting Systems (AVAS) for
electric vehicles, and a turnkey sensor cleaning solution, developed in a close and
exclusive partnership with a leading Tier 1 automotive supplier. As the transition to
electrified and smarter vehicles accelerates, we will further increase our focus on these
projects.
Automotive
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STRATEGY AND FINANCIAL OBJECTIVES
Contents Profile Report of the Executive Board Outlook Report of the Supervisory Board Financial statementsSTRATEGY
Financial targets
In 2021, demand for our products increased significantly in all
Business Groups. At the same time, the COVID-19 pandemic
continued, and the second half of the year we experienced
significant disruption of global supply chains in all segments.
The automotive passenger car market specifically was hit hard
by semiconductor and other material shortages. Despite all
this, 2021 normalized revenue increased by 17% from
EUR 396.4 million in 2020 to EUR 463.6 million in 2021.
We increased our EBITDA margin by 70 basis points to 12.0%
(2020: 11.3%). Return on investment came to 15.6%
(2020: 10.8%).
ACTUAL
15.6%
ACTUAL
16%
TARGET 2025
25%
TARGET 2019-2025
5%
ACTUAL
12%
TARGET 2025
15%
ACTUAL
50%
TARGET
35-50%
Return on
investment
1, 2
Average
organic growth
EBITDA margin
2
Dividend pay-out
STRATEGY AND FINANCIAL OBJECTIVES
Against the backdrop of the impact of the COVID-19 pandemic
on end-markets and economies in general, we outlined four
ambitious medium-term financial objectives for 2025 at
Capital Markets Day on 10 September 2020:
■ Average organic growth of 5% between 2019 and 2025
■ Return on investment of at least 25% by 2025
1
■ EBITDA margin of at least 15% by 2025
2
■ Dividend pay-out: 35-50% of normalized net profit before
amortization
In 2021, we made good progress on our strategy. We are
confident that we will be able to meet our 2025 targets.
1
Invested capital excluding intangibles arising from acquisitions.
2
Normalized for one-off cost, benefits and balance sheet items. The bridge from reported to normalized figures can be found on page 38.
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Contents Profile Report of the Executive Board Outlook Report of the Supervisory Board Financial statementsSTRATEGY
ENABLING ENERGY TRANSITION
Kendrion focuses on sustainable growth,
by developing intelligent actuators that
help drive the global transition towards
electrification and other forms of clean
energy. Whether for wind power,
autonomous vehicles, supporting factory
process efficiencies, or optimizing industrial
heating processes, our smart, compact,
and connected actuators are helping our
customers to migrate to safer and cleaner
forms of energy.
In 2021, we continued to push the
boundaries of the possible by focusing
investment on six cutting-edge products
to help advance the next-generation of
Autonomous, Connected, Electrified and
Shared (ACES) vehicles, robotics, and
industrial manufacturing.
Our modular R&D approach gives us
a great competitive advantage. We create
customized products quickly and in high
volumes – without recurring R&D investments
– and we also respond quickly to changing
demands and product opportunities.
Products that
help drive the
energy
transition
16
Annual Integrated Report 2021
Contents Report of the Executive Board Outlook Report of the Supervisory Board Financial statementsProfile Strategy
This safety brake brings moving masses
to a stop, keeps loads in position and prevent
humans and material assets from being affected.
Diverse brake portfolio meets the
needs of emerging AGV market
Autonomous logistics technologies – from
warehouse automation to augmented reality and
automated guided vehicles (AGVs) – are
revolutionizing how manufacturers move goods,
increase efficiency and safety while reducing
environmental footprints. While initially developed
to increase operational efficiency and safety in
warehouse logistics, next-generation AGVs are
finding new roles in more sectors, including
e-commerce, automotive, agriculture, and
semiconductors.
Kendrion offers a perfect blend of brakes including the
necessary integration experience that can help both
starting and more established AGV manufacturers
succeed in this emerging market.
A braking solution for every application
Our portfolio of highly customizable electromagnetic
brakes meets all the needs of this up-and-coming
industry. Built into the AGV’s drive unit, they enable
safe stopping and holding of the vehicle. Our brakes
have already proven themselves in numerous AGV
applications worldwide, including warehouse and
airport operations.
In fact, we have a braking solution for all electric-
powered vehicles on the market, from small AGVs,
through heavy load forklifts, to huge transport systems
for containers and special applications.
Conquering the compact AGV market
In warehouses, compact AGVs help companies
optimize their warehouse logistics. For this application,
where every square meter counts, Kendrion offers
special small or flat brakes for drive trains in all torque
ranges.
The global AGV market is expected to reach
USD 3.72 billion by 2028, increasing at a Compound
Annual Growth Rate (CAGR) of 9.3%.
*
By taking
the experience we have built up by working with major
brands in the industrial truck industry and with
innovative start-ups developing new generation AGVs,
we are confident we can capture major opportunities
in this emerging and growing market.
*
Source: www.fortunebusinessinsights.com/press-release/
automated-guided-vehicle-agv-market-9525
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ENABLING ENERGY TRANSITION
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
Brakes used in the robot joints offer high
reliability, have a compact design, allow highly
accurate positioning, and operate without wear.
In manufacturing processes, robots represent
a great opportunity for improving efficiency of
existing manufacturing processes. In the medical
industry, they have a big impact as they optimize
patient comfort and surgeon time. For critical
applications such as robot-assisted surgery, the
robot’s performance also directly impacts the
patient’s safety. Kendrion’s approach gives start-
ups and established manufacturers in this sector
all they need to design high-precision and safe
robots – and get them to market quickly.
Safe, precise, and flexible
Designing robots for medical applications is
exceptionally challenging: engineers need to ensure
precise positioning, consistent holding in a specific
position, low-noise operation, and high-power density.
Kendrion’s all-round expertise provides the experience,
flexibility, and products that robot manufacturers need
to market precise and safe medical robots. Our
products meet the highest standards and demands
of the medical industry. Their modular design, in
combination with our agile way of working enable us
to tailor our brakes to any medical application,
Robotics brakes for intelligent,
safe automation in healthcare
supporting both start-ups and mature designers
to explore new applications.
Medical miniaturization trend
As surgical robots evolve, they become ever more
compact, precise, and manoeuvrable. Kendrion has
the right technologies to support this. Flatter and
lighter than comparable brakes on the market, they are
also highly customizable. The large inner diameter is
a unique design feature which ensures that the cables
of the application are comfortably run through the
center of the application – improving the overall
aesthetic. In 2021, Industrial Brakes developed
a customized Slim Line emergency brake for a start
up’s new surgical robot.
For more than a decade, Kendrion has successfully
supplied electromagnetic brakes for the global medical
industry. Thanks to the growing scope of applications,
and the platform approach, it is expected this will
continue in 2022.
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ENABLING ENERGY TRANSITION
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
Our customized induction heating systems
are designed precisely to specific heating
requirements.
Induction heating is an increasingly popular
alternative to gas and oil and Kendrion is keen to
help drive this green change. Our brand-new
induction system development platform allows us
to explore new horizons in this emerging area, with
manufacturers of smaller industrial equipment.
We can provide them with a more sustainable and
efficient alternative for their manufacturing
processes, while contributing to a greener
economy.
The technology itself – i.e., the process of heating
electrically conductive materials like metals by
electromagnetic induction – is not new. In fact,
Kendrion has successfully developed inductive heating
systems, consisting of an induction generator and coil,
for 20 years. Today, more than 70,000 Kendrion
heating systems are driving textile, food preparation
and printing processes globally.
Inductive heating systems help
drive greener manufacturing
processes
However, with our product development platform, we
can make an even bigger impact in more industries.
Built on years of experience in the field, it gives us the
flexibility and ability to reconfigure our products to
specific needs without significant investments, lead
times or production line changes.
Our customer successes in 2021
In 2021, we began working with a new customer
for a novel application: a waffle baking machine.
The customer has put in an additional order for
its largest machine, for delivery in 2023. We also won
the contract for a customized heating system for
an automotive battery manufacturing machine.
Our focus for 2022
In early 2022, we aim to deliver the initial batch of
samples for the first waffle baking machine and ship
the first delivery of the automotive battery
manufacturing machine system.
Thanks to the growing scope of applications, we are
confident that the ROI of our new platform will be
substantial.
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ENABLING ENERGY TRANSITION
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
By distributing cleaning fluid to all relevant
systems, the sensor cleaning keeps the vehicle
on the move, in all weather conditions.
Sensor cleaning distribution
system drives safety in eco-friendly
autonomous vehicles
Sensor cleaning distribution system drives safety
in eco-friendly autonomous vehicles. Autonomous
vehicles are driving the need for advanced sensor
cleaning systems with ever-greater urgency.
In 2021, we introduced an intelligent sensor
cleaning distribution system delivering a single,
easy-to-integrate cleaning strategy for vehicles.
Comprehensive, compact, and flexible, the system
helps OEMs market safe, eco-friendly vehicles
quickly and without major R&D efforts.
The automotive revolution: perspective towards 2030
The automotive industry transformation is speeding up.
By 2030, its revenue could increase to $6.7 trillion,
driven by four technology-driven trends: diverse
mobility, electrification, connectivity, and autonomous
driving (ACES). As sensor cleaning is a safety-critical
feature in autonomous cars, designing a comprehensive
cleaning system has been a key priority for us.
Comprehensive, compact cleaning intelligence
To build a unique, intelligent system, we partnered with
cleaning technology experts Kautex. The resulting
system combines the best of their expertise and ours:
smart actuation and systems technology.
Functioning as the brain behind the car’s automated
sensor cleaning strategy, the system distributes
cleaning fluid and air to all optical sensors, including
LiDAR, and cameras. Integrated electronics enable
intelligent features for position detection, selection
of operation modes, and status reporting.
Key components include hardware and software,
a valve block, a connector, and input and output
nozzles. Featuring just one connector, integrating
it in a compact design is easy and cost effective.
Limitless application flexibility
Our modular design offers limitless application flexibility.
We can add connectors and outlets and adjust valve
types and the interface to meet individual needs. OEMs
that are new to sensor cleaning get everything they
need in a single solution, while those familiar with the
technology can ‘take what they require’.
In 2022, we will deliver the first samples to key
customers for testing in self-driving vehicle designs.
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ENABLING ENERGY TRANSITION
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
Kendrion’s one-box AVAS solution can be
easily programmed and built into different
vehicle designs.
Phantone Sound Platform
increasing electric vehicle safety,
inside and out
In hybrid and battery-electric vehicles (BEVs),
internal and external noise are a major concern for
vehicle OEMs. Sound regulations are strict, and
passengers’ expectations high.
Our Phantone Sound Platform enables OEMs to make
their BEV vehicles safer and more marketable. By using
our comprehensive, ready-to-use and customizable
products they can meet external sound regulations
(AVAS), while offering passengers the ultimate
‘soundscape’ experience.
Interior sound enhancement
Paradoxically, the lack of combustion engine in electric
cars has exposed certain undesirable sounds
previously masked by the engine’s noise. According to
drivers, it has also reduced their sense of speed,
safety, and control. This has kicked off a new trend:
‘soundscaping’; the auditory experience of the 21
st
century. Intelligent sound systems combine noise
cancellation techniques with acoustic modifications to
create an emotionally appealing, multi-sensory
experience.
Our Phantone Sound Platform offers OEMs all they
need to build an intelligent sound system, from
a complete AVAS solution, to speakers, a sound
control unit, sound designer software, and engineering
support. This is ideal for both more mature OEMs
– who can take what they require –, and OEMs new
to the technology.
What we did in 2021
Throughout 2021, we redefined the Phantone roadmap
to better match customer feedback. This included
delivering a new sound control unit with our
SoundDesigner software to a starting US car brand,
and a leading US car manufacturer for the Chinese
market.
Our focus for 2022
In 2022, we will create a roadmap for US and Asian
customers. Further ahead, we will explore more
intelligent sound distribution; for example, emitting
sound only where needed.
By 2027, 12.5 million AVAS sound systems are
expected to be on the road worldwide. We are
confident that our flexible platform and upcoming
innovations will help shape the future of soundscapes
in electric vehicles.
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ENABLING ENERGY TRANSITION
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
The active damping valve eliminates body
roll and pitch variation while cornering,
accelerating, and braking.
While autonomous and conventional vehicles may
differ in power source, sound and looks, they share
a feature that is gaining in popularity: active
suspension. In fact, the push for increased vehicle
comfort and safety in both types of vehicles is
expected to drive demand for active suspension
systems. Our brand-new product platform for
external continuous damping valves (eCDVs) gives
vehicle OEMs and systems designers a ready-
made solution for their vehicles of today and
tomorrow.
Active suspension systems improve a vehicle’s comfort,
safety and driving dynamics. While they are now mainly
found in premium car models, their increasing use in
mid-range cars and in particular battery electric car
platforms support increased growth over the next five
years. The longer-term is also bright: active chassis will
be key for autonomous vehicles, as drivers will no
longer be continuously looking at the road.
With our eCDV platform, we are ready for today,
tomorrow and the future. We can produce multiple
variants and higher volumes, more quickly and with
less R&D resources.
Active damping valves: driving
dynamics for tomorrow’s vehicles
What we did in 2021
In 2021, we delivered B samples of our eCDVs
including a patented failsafe option to various
customers. Working closely with key automotive
customers on the platform in both Europe and China,
we laid the foundation for future nominations.
Our focus for 2022
In 2022 we look forward to seeing those nominations
come in. We expect to start C sample production and
will prepare serial production for all customers. Our
new factory in Suzhou, China will be up and running,
ready to meet the anticipated growing demand there.
And we will explore further development of internal
continuous damping valves (iCDV) for limited space
and more compact vehicles.
22
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ENABLING ENERGY TRANSITION
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
SHARE AND SHAREHOLDER INFORMATION
Movements in the number of outstanding shares
Shares entitled
to dividend
Shares owned
by Kendrion
Total number of
issued shares
At 1 January 2021 14,766,481 167,503 14,933,984
Issued shares (share dividend) 69,634 (68,883) 751
Issued registered shares (share plan) 3,913 (3,913) –
Delivered shares 1,044 (1,044) –
At 31 December 2021
14,841,072 93,663 14,934,735
Other information
EUR, unless otherwise stated 2021 2020 2019
3
Number of shares x 1,000 at 31 December 14,935 14,934 14,934
Market capitalization at 31 December (EUR million) 314.4 247.9 312.9
Enterprise value (EV) (EUR million) 445.0 351.1 360.3
Highest share price in the financial year 24.65 21.35 23.60
Lowest share price in the financial year 16.90 8.63 15.62
Share price on 31 December 21.05 16.60 20.95
Average daily ordinary share volume 14,129 24,203 15,959
EBITDA multiple (EV / EBITDA)
1
7.97 7.86 8.22
Result per share 0.97 0.29 0.61
Normalized result per share
2
1.39 0.79 0.94
Share price earnings ratio
2
15.13 21.01 22.29
Major shareholders as at 31 December 2021
4
Interest in % Date of report
Teslin Participaties Coöperatief U.A. 15.14 At 14 June 2019
Kempen Capital Management N.V. 10.07 At 26 May 2020
Cross Options Beheer B.V. 5.37 At 8 May 2017
T. Rowe Price Group, Inc. 4.97 At 5 May 2017
FIL Limited 6.84 At 18 May 2021
Invesco Limited 5.42 At 15 May 2020
Midlin N.V. 3.08 At 11 December 2020
Total
59.01%
1
Normalized for one-off costs and benefits. The bridge from reported to normalized figures can be found on page 38.
2
Normalized for one-off costs, benefits and amortization of intangibles arising from acquisitions.
3
Restated for retrospective correction of inventory.
4
On the basis of the information in the register of the AFM and listed on the website at www.afm.nl.
Share capital
The authorized share capital of Kendrion N.V. as at
31December 2021 amounts to EUR 80,000,000 and is
divided into 40,000,000 ordinary shares with a nominal value of
EUR 2.00 each. At year-end 2021, the total number of ordinary
shares issued was 14,934,735. There is one class of ordinary
shares and no depositary receipts for shares have been issued.
Kendrion’s ordinary shares are listed on NYSE Euronext
Amsterdam Small Cap Index (AScX).
Movements in the share price
from 4 January 2021 to 31 December 2021
Kendrion N.V. share
AEX
ASCX
AMX
Index
31 December 20214 January 2021
0
30
20
10
40
50
23
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Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
Treasury shares
As at 31 December 2021, Kendrion N.V. holds 93,663 ordinary
shares in its own capital, representing 0.6 % of the total issued
share capital. The ordinary shares held by Kendrion N.V. in its
own capital are non-voting, do not have any dividend
entitlement, and are held in treasury for payment of future stock
dividends and share-based incentive plans. This means that as
per year-end 2021, 14,841,072 ordinary shares hold voting
rights and dividend entitlement.
Dividend policy
Kendrion endeavours to realize an attractive return for
shareholders supported by a suitable dividend policy. In view of
safeguarding a healthy financial position, consideration is also
SHARE AND SHAREHOLDER INFORMATION
The total amount of dividend is EUR 10.3 million. It will be
proposed that payment of the dividend be made in cash,
or at the option of shareholders, in the form of ordinary shares
charged to the share premium reserve with any remaining
fraction being settled in cash.
Major shareholders
Any person holding or acquiring an interest of 3% or more in
a Dutch publicly listed company is bound, based on the
Financial Supervision Act (Wet op het Financieel Toezicht), to
disclose such a holding to the Dutch Authority for the Financial
Markets (AFM). The disclosure is recorded in the register of the
AFM and listed on the website at www.afm.nl/en.
Participation
Kendrion maintains a share-based incentive plan for its senior
management and certain key employees. Up to 2018, senior
management and certain key employees were eligible to apply
for the conversion of a maximum of half of the cash amount of
their annual net cash bonus into Kendrion shares. Under this
share-based incentive plan, Kendrion offered to double the
number of shares after three years, provided the participant
concerned is still employed by Kendrion and still holds the
shares purchased. Pursuant to this share-based incentive plan,
a total of 3,913 ordinary shares were allocated to employees
from the balance of treasury shares in 2021.
given to the amount of profit to be retained to support the
company’s medium and long-term strategic plans and to
maintaining a solvency ratio of at least 35%. Kendrion strives to
distribute dividends representing between 35% and 50% of its
normalized net profit before amortization.
In principle, Kendrion offers shareholders an opportunity to opt
for dividends in cash or in the form of ordinary shares in
Kendrion N.V.’s capital.
Kendrion will propose a dividend of EUR 0.69 per share,
representing a payment of dividend of 50% of normalized
net profit before amortization for 2021 at the Annual General
Meeting of Shareholders on 11 April 2022.
On 8 September 2022, Kendrion will hold
a Capital Markets Day for the analysts, investors
and shareholders communities.
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Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
SHARE AND SHAREHOLDER INFORMATION
long-term incentive plan for the Management Team
(i.e. performance period 2019 through 2021), 14,177
conditional performance were granted. Of the 14,177
conditional performance shares granted to the Management
Team, a total of 2,835 shares have vested.
In 2021, conditional performance shares have been granted to
the members of the Executive Board pursuant to the Executive
Board long-term incentive plan. More information about
(conditional performance) shares granted to the members of
the Executive Board is set out on page
165. A comprehensive
description of the long-term incentive plan is included in the
‘Remuneration Report’ section on pages
91-106.
Effective as of 2019, members of the Management Team are
eligible for a grant of conditional performance shares and
effective as of 2021 participation in the share based incentive
program has been extended to members of Kendrion's senior
leadership team. In 2021, 78,212 conditional performance
shares were granted to the Management Team and the
leadership team under the applicable long-term incentive plans.
The conditional performance shares granted will vest upon
achievement of performance measured over a three-year
period. The actual number of shares that will be allocated upon
expiry of the three-year vesting period is subject to the
realization of predefined performance criteria. Under the 2019
Analysts
The following stock exchange analysts actively monitor the Kendrion share:
Berenberg Axel Stasse
Degroof Petercam Frank Claassen
ING Bank N.V. Tijs Hollestelle
The Idea-Driven Equities Analyses Company Maarten Verbeek
Edison Group Johan van den Hooven
Financial calendar
Friday, 25 February 2022 Publication annual results 2021
Monday, 14 March 2022 Record date General Meeting of Shareholders
Monday, 11 April 2022 General Meeting of Shareholders
Wednesday, 13 April 2022 Ex-dividend date
Thursday, 14 April 2022 Dividend record date
Friday, 15 April – Monday, 2 May 2022, 3 pm Dividend election period (stock and/or cash)
Tuesday, 3 May 2022 Determination stock dividend exchange ratio
Tuesday, 3 May 2022 Publication first quarter results 2022
Thursday, 5 May 2022 Cash dividend made payable and delivery stock dividend
Wednesday, 24 August 2022 Publication half-year results 2022
Thursday, 8 September 2022 Capital Markets Day
Tuesday, 8 November 2022 Publication third quarter results 2022
Regulations to prevent insider trading
Kendrion has regulations covering securities transactions by
members of the Executive Board, members of the Supervisory
Board, members of the Management Team and other
designated employees. The Insider Trading Code is published
on the corporate website at www.kendrion.com. The Insider
Trading Code is intended to ensure the avoidance of insider
trading or the appearance thereof, and any mixing of business
and private interests.
Investor relations
Kendrion attaches great importance to appropriate
communications with financial stakeholders such as investors,
debt capital providers and analysts to provide them with good
insight into the developments at Kendrion. Transparency is
intended to lead to healthy pricing, and to support liquidity.
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MEMBERS OF THE EXECUTIVE BOARD
J. H. Hemmen
Position Chief Financial Officer
Year of birth 1973
Nationality Dutch
Joined Kendrion 1 June 2005
Appointment to position 1 July 2019 (EGM 7 June 2019)
J.A.J. van Beurden
Position Chief Executive Officer
Year of birth 1960
Nationality Dutch
Appointment to position 1 December 2015
Second term 1 December 2019 – 1 December 2023 (AGM 8 April 2019)
Member of the Supervisory Board of Adyen
Member of the Supervisory Board of the University of Twente
Member of the Advisory Board of PlantLab
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Annual Integrated Report 2021
Contents Profile Strategy Outlook Report of the Supervisory Board Financial statementsREPORT OF THE EXECUTIVE BOARD
OUR PRODUCTS ARE USED IN
Energy generation and distribution
Food and beverage machinery
Industrial automation
Intralogistics
Medical equipment
Robotics
Textile machinery
Wind power
OUR CUSTOMERS INCLUDE
ASML
Collins Aerospace
Eaton Corporation
Euchner
Fresenius
Lenze
Oerlikon
Schindler
Siemens
ST Drives
TOTAL INDUSTRIAL REVENUE
(in EUR)
231.5 million
2020 190.3 million
Industrial activities
Europe
72%
Asia and
Rest of the world
21%
The Americas
7%
INDUSTRIAL ACTUATORS AND CONTROLS
Customized solutions for industrial applications
based on electromagnetic actuators, control
technology and uid technology.
INDUSTRIAL BRAKES
Full-line provider of electromagnetic brakes for
electromotors in industrial end markets.
Kendrion locations with regional revenue breakdown
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Contents Profile Strategy Outlook Report of the Supervisory Board Financial statementsREPORT OF THE EXECUTIVE BOARD
Prole
Kendrion’s industrial activities focus on developing and
manufacturing electromagnetic brakes, actuators and control
units for a wide range of industrial applications including
industrial automation, robotics, wind power, intralogistics,
energy distribution, medical equipment, aerospace, and
inductive heating.
These activities are carried out in two Business Groups:
Industrial Brakes (IB) and Industrial Actuators and Controls
(IAC). Industrial Brakes specializes in the development and
manufacture of electromagnetic brakes for electromotors used
in various industrial end markets. Industrial Actuators and
Controls focuses on the development and production of
customized electromagnetic actuator technology, gas and fluid
control valves, and control technology.
Application expertise and engineering skills are our main
differentiators; they enable us to design high-performance
products of unparalleled quality. The Industrial activities have
research & development centres and production facilities in
Germany, Romania, China, the US and India. Products are
marketed via an own sales organization in Germany, Austria,
Sweden, China and the US. A worldwide sales distribution
network is dedicated to standard and application-specific
components. Industrial employs 1,261 FTE of which 107 in
research & development.
Market and market position
IB serves a number of global markets we expect will continue
to offer above average opportunities for growth, including
industrial automation, robotics, wind power, and intralogistics.
These growth opportunities are driven by the industry-wide
energy transformation that will increase demand for
electromotors for which IB offers a wide range of braking
solutions. Kendrion is one of the leaders in the global industrial
brake market and the only industrial brake company that has a
leading position in both spring-applied and permanent magnet
brake technology.
IAC serves a large number of industrial end markets including
aerospace, railway, energy generation and distribution, medical
equipment, industrial appliances, logistics, access control, food
& beverage machinery and textile machinery. As with IB, IAC is
active in niches that offer significant growth opportunities driven
by the global energy transformation, such as inductive heating
of industrial appliances and machinery, energy distribution, and
valves for nuclear power plants. IAC generally prioritizes
profitability and cash flow over growth by selectively choosing
niches in which it can earn above average returns.
Growth through sustainability
opportunities
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Annual Integrated Report 2021
INDUSTRIAL ACTIVITIES
REPORT OF THE EXECUTIVE BOARDContents Profile Strategy Outlook Report of the Supervisory Board Financial statements
Our Industrial Business Groups compete in a market with many
small and mid-sized producers predominantly with a regional
focus. The main market for our Industrial activities continues to
be Germany, with its advanced and globally leading mechanical
engineering and automation industries, followed by China.
Other key markets are the US, the Benelux, Switzerland,
Austria, Italy, France, and Sweden.
Developments in 2021
Kendrion’s combined Industrial activities generated a revenue
of EUR 231.5 million in 2021 (2020: EUR 190.3 million).
After the revenue decrease in FY 2020 caused by the
COVID-19 pandemic, we saw a powerful and industry-wide
demand rebound in 2021. Both Industrial groups recorded
revenue levels that significantly exceeded those of 2019 before
the pandemic. Global supply chain shortages and raw material
price increases affected both IB and IAC, but by showing great
flexibility and agility both groups were able to fully capitalize
on the positive demand development.
Throughout the year, IB added a number of new large clients
to its customer portfolio and benefitted from an increase in
applications for its brakes, including collaborative robots,
surgical robots, and automated guided vehicles (AGVs).
To further benefit from the sizeable growth opportunities in
China, IB continued to invest in the localization of production
lines and research & development capabilities in its facilities in
Suzhou and Shanghai. IB also closed its small sales and
service office in the UK and integrated its activities into its
existing operation in Germany.
The acquisition of 3T enhances Kendrion’s ability
to further build a talented team of software and
electronics developers.
In September 2021, Kendrion acquired the embedded software
and electronics developer 3T. 3T employs around 80 FTE,
generates around EUR 12 million in annual revenue and has
development locations in Enschede and Eindhoven in the
Netherlands. 3T has been integrated in IAC and offers a strong
strategic fit with its control technology activities. 3T’s highly
skilled employees and proximity to leading technical universities
and other institutions of higher education enhance Kendrion’s
ability to further build and manage a talented team of software
and electronics developers. The acquisition became effective
on 21 September. Already, 3T has contributed EUR 3.4 million
in revenue to the Industrial Group in 2021. IAC divested its
30% share in Newton CFV, a company specialized in the
development and marketing of dispensing valves, resulting in
a EUR 0.6 million book profit. As part of the agreement,
Kendrion retained an exclusive manufacturing agreement for
production of valves in its Mishawaka, Indiana plant.
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Annual Integrated Report 2021
INDUSTRIAL ACTIVITIES
REPORT OF THE EXECUTIVE BOARDContents Profile Strategy Outlook Report of the Supervisory Board Financial statements
Innovative solutions for passenger cars and
commercial vehicles focused on advanced valve
technology, smart actuation and control technology
to enable the transformation to Autonomous,
Connected, Electric and Shared (ACES) mobility.
OUR PRODUCTS ARE USED IN
Active suspension systems
Fuel systems
Mobile hydraulics
Acoustic vehicle alerting systems
Thermal management
Sensor cleaning systems
Transmission systems
OUR CUSTOMERS INCLUDE
Continental
Daimler Group
Danfoss
FCA
Ford
Great Wall Motors
Hyundai Kia
KYB
Marelli
ThyssenKrupp Bilstein
Volkswagen Group
ZF Friedrichshafen
TOTAL AUTOMOTIVE REVENUE
(in EUR)
232.1 million
2020 206.1 million
The Americas
25%
Europe
66%
Asia and
Rest of the world
9%
Automotive activities
Kendrion locations with regional revenue breakdown
30
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Contents Profile Strategy Outlook Financial statementsContents Profile Strategy Outlook Report of the Supervisory Board Financial statementsREPORT OF THE EXECUTIVE BOARD
Prole
The Kendrion Automotive Group (KAG) develops,
manufactures, and markets innovative, high-quality
electromagnetic actuators and control units for customers in
the automotive industry worldwide. Customers include major
OEMs and Tier 1 suppliers in the global markets for passenger
cars, commercial vehicles, and off-highway vehicles.
KAG focuses on advanced valve technology, smart actuation,
and control technology specifically designed to enable the
transformation towards Autonomous, Connected, Electric and
Shared mobility, known as “ACES”. Applications enabling this
transformation include sound systems (AVAS), active
suspension valves, and sensor cleaning valve blocks. These
currently make up some one third of the KAG revenue and
Kendrion expects this percentage to grow significantly over the
next few years. Other KAG applications include transmission
systems and fuel systems for passenger cars, hydraulic
solenoids for agricultural equipment, and thermal management
systems for commercial vehicles.
KAG has a global presence with research & development
centres and manufacturing facilities in Germany, Rumania,
Czech Republic, Austria, the US, and China. Products are
developed and designed to meet customers’ specific needs,
placing great emphasis on performance, quality, and reliability.
KAG employs 1,467 FTE of which 142 FTE in R&D.
Accelerated transformation
Market and market position
The accelerating electrification in automotive, and the rise of
electric and autonomous vehicles, are expected to significantly
transform the overall automotive market. By 2025, 40% of cars
sold are expected to by either fully electric or hybrid, and 90%
of cars are expected to be equipped with level 3 autonomous
driving technology. The market for Kendrion’s sound system
(AVAS) platform will grow as legislation across the globe
requires electric cars to emit a sound below a certain speed.
The market for active suspension is expected to continue its
fast-paced growth as more heavy electric vehicles are being
equipped with active suspension systems. Sensor cleaning
applications will become more common as cars are expected
to become increasingly more autonomous and dependent on
sensors in the near future.
The KAG competes in a market with a number of mid-sized
competitors, mainly based in Germany. Europe continues to be
Kendrion’s largest automotive market, with Germany being the
largest buyer. Kendrion’s market position in China has further
improved thanks to Kendrion China winning several new
projects over the last few years.
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Annual Integrated Report 2021
AUTOMOTIVE ACTIVITIES
REPORT OF THE EXECUTIVE BOARDContents Profile Strategy Outlook Report of the Supervisory Board Financial statements
Developments in 2021
Revenue for the KAG amounted to EUR 231.1 million in 2021
(2020: EUR 206.1 million). As the automotive industry gradually
recovered from the COVID-19 pandemic-induced demand
fallout in 2020, it was affected in 2021 by significant supply
chain shortages and sharply increasing material prices.
Shortages occurred in all areas, including steel, copper, and
plastics, but the industry was mostly impacted by shortages in
semi-conductors. KAG revenue was indirectly affected by these
significant semi-conductor shortages which analysts have
assessed to have reduced global car production by around
10 million cars in 2021.
While global car production showed a modest 2% growth,
KAG was able to grow its revenue by 13% as recent projects
ramped up or entered the production phase in 2021.
KAG added a further EUR 305 million (2020: EUR 350 million)
in lifetime revenue to its long-term order book, indicating
a positive book-to-bill of 1,32 times 2021 revenue. More than
60% of the projects relate to suspension or sound applications
with start of production planned between 2021 and 2024.
The transformation towards ACES is
expected to increase Kendrion’s content
per car.
In September 2021, Kendrion acquired software and
electronics development company 3T. While 3T has been
integrated in Industrial Actuators and Controls, its extensive
experience in software and electronics development is
expected to also be of strategic importance to the KAG, where
the increasing content of leading-edge electronic components
in passenger cars and commercial vehicles offers a significant
growth opportunity.
As KAG continues to streamline its operations, it has initiated
closure of the manufacturing facility in Eibiswald, Austria by
mid-2022. In 2021, various production lines have been
relocated to facilities in Rumania and Germany with the
remaining transfer of production lines planned for the first half
of 2022. The Eibiswald facility employed 75 FTE as per the end
of 2021.
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AUTOMOTIVE ACTIVITIES
REPORT OF THE EXECUTIVE BOARDContents Profile Strategy Outlook Report of the Supervisory Board Financial statements
FINANCIAL REVIEW
Group performance
In 2021, we experienced a strong recovery in demand across
our Business Groups, after the economic slowdown in 2020
as a result of the COVID-19 pandemic. Although the pandemic
loosened its grip, new challenges emerged; as demand
increased, so did supply chain shortages, increasing raw
material prices and demand volatility. Our Business Groups
successfully navigated these challenges, which resulted in
an organic revenue increase of 16% with a normalized group
revenue of EUR 463.6 million. Our normalized EBITDA
increased by 25% to EUR 55.8 million, our EBITDA margin
improved with 70 basis points to 12.0%, and our net profit
before acquisition-related amortization charges increased
by 76% to EUR 20.6 million. Normalized free cash flow came
in at EUR 3.5 million.
Revenue growth on a nominal basis was 17%, including 1%
growth following the acquisition of 3T. Currency effects had
a negligible effect on group revenue. All three Business Groups
contributed to the organic revenue growth. Revenue in
Industrial Brakes (IB) increased by 21% to EUR 127.5 million,
driven by a strong increase in demand for electromagnetic
brakes for electromotors in end markets such as intralogistics,
warehouse automation, and robotics. The broad trend towards
electrification and automation of industrial processes, combined
with IB’s unique product range enabled us to fully capitalize on
the many growth opportunities. Organic IB revenue exceeded
2019, pre-pandemic levels by 15%. Industrial Actuators
and Controls (IAC) revenue increased by 18%, arriving at
EUR 104.0 million, thanks to strong demand for IAC’s products
in electrical automation and energy generation and distribution.
IAC revenue exceeded 2019, pre-pandemic levels by 3%.
The Automotive Group (KAG) revenue increased by 13% to
EUR 232.1 million, despite the modest 2% increase in global
car production caused by significant shortages in semiconductors.
A significant number of project nominations won in recent years
started, or ramped up, production in 2021, resulting in higher
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Contents Profile Strategy Report of the Supervisory Board Financial statementsOutlookREPORT OF THE EXECUTIVE BOARD
Key figures
In millions of EUR unless otherwise stated 2021 2020
Revenue 464.0 396.4
Organic growth 16% (17%)
Added value 225.8 191.0
as a % of production value 48.3% 48.5%
EBITDA 51.7 40.2
as a % of revenue 11.1% 10.1%
EBITA 27.8 14.5
as a % of revenue 6.0% 3.7%
Net profit 14.4 4.3
Normalized revenue
1
463.6 396.4
Normalized added value
1
225.8 191.0
as a % of production value 48.3% 48.5%
Normalized operating expenses
1
170.0 146.4
as a % of revenue 36.7% 36.9%
Normalized EBITDA
1
55.8 44.6
as a % of revenue 12.0% 11.3%
EBITA
1
31.9 18.9
as a % of revenue 6.9% 4.8%
Earnings per share (in EUR) 0.97 0.29
Normalized earnings per share (in EUR)
1,2
1.39 0.79
Dividend per share (in EUR)
3
0.69 0.40
Invested capital
1
205.2 174.4
Return on invested capital
1,4
15.6% 10.8%
Shareholders equity 223.0 203.4
Net debt 130.6 103.2
Working capital
1
64.9 41.4
Normalized free cash flow
1
3.5 31.5
as a % of EBITA 11% 167%
1
For a reconciliation to the most comparable IFRS financial measure see the table reconciliation of non IFRS financial measures.
2
Earnings per share before amortization of intangibles arising from acquisitions.
3
The 2021 dividend per share will be to the Annual General Meeting of Shareholders on 11 April 2022.
4
Invested capital excluding goodwill and other intangibles arising from acquisitions.
revenue from especially interior sound solutions and suspension
systems. The persistent semiconductor shortages increased
demand volatility. This impacted KAG revenue indirectly, as
customers were forced to temporarily shut down production
facilities or cancel orders. Europe continues to be our most
important market with EUR 319.7 million (2020: 273.3 million)
revenue, followed by the Americas with EUR 73.9 million
(2020: EUR 58.0 million) and Asia with EUR 70.0 million
(2020: EUR 65.1 million).
Despite the significant increase in input prices, our added value
as a percentage of the production value remained relatively
stable at 48.3%, 20 basis points lower than in the previous
year. An increase in average sales prices and a positive sales
mix effect almost offset the negative impact from increasing
raw material prices. Normalized operating expenses increased
by 15% compared with the previous year, excluding the
acquisition of 3T. Total operating expenses amounted to
EUR 170.0 million and is broken down into EUR 51.7 million
(2020: EUR 41.3 million) staff costs for direct labor,
EUR 85.0 million (2020: EUR 76.7 million) staff costs for indirect
labor and EUR 33.3 million (2020: EUR 28.4 million) for other
operating expenses. Previous year’s staff costs were
significantly reduced through temporary COVID-19-related
cost measures, including short-time work in our manufacturing
locations and a voluntary salary reduction of 15% by senior
management. These temporary cost measures were gradually
abolished towards the end of 2020, as customer demand in all
Business Groups started to recover. Total staff cost as a
percentage of revenue decreased by 30 basis points to 29.5%.
Staff costs for direct labor were negatively affected by the high
demand volatility, especially in Automotive, and increased by
70 basis points to 11.1% of our revenue. Indirect staff costs
benefited from operational leverage and fell by 110 basis points
to 18.3% of our revenue. Other operating expenses as
a percentage of revenue were stable at to 7.1%.
Positive operational leverage in most other operating cost
items was offset by increased costs for legal and professional
services and repair and maintenance. Costs for legal and
professional services included increased outsourcing of
research and development in Automotive to increase
development capacity for software and electronics.
The increase in costs for repair and maintenance was caused
by a number of factors, including outsourcing basic IT services,
and a gradual transition from capitalized on-premise software
to cloud-based software applications.
In 2021, normalized EBITDA came in at EUR 55.8 million
(2020: EUR 44.6 million). EBITDA as a percentage of revenue
increased by 70 basis points to 12.0% (2020: 11.3%), a
positive step up towards our long-term financial target of 15.0%
by 2025. Depreciation charges as a percentage of revenue fell
by 130 basis points to 5.2% (2020: 6.5%). This was caused by
operational leverage from the higher revenue level, the relatively
low investment program in 2020, and the transition from
on-premise capitalized software to cloud-based software
applications as mentioned above. As a result, our EBITA
increased by 69% to EUR 31.9 million (2020: EUR 18.9 million).
Return on sales increased by 210 basis points to 6.9%.
Amortization of acquisition-related intangibles dropped to
EUR 3.9 million (2020: EUR 4.4 million). The completion of the
acquisition of 3T on 21 September 2021 added EUR 0.3 million
amortization charges, which was more than offset by the end
of the economic lifetime of certain capitalized intangibles from
previous acquisitions. Normalized net financing costs increased
by EUR 0.2 million compared with the previous year to
EUR 3.7 million due to a higher average debt level and credit
markup. The normalized effective tax rate was 26.8 % (2020:
22.0%); primarily a reflection of the average statutory rates in
the jurisdictions of our operations.
Normalized free cash flow before acquisitions came in at
EUR 3.5 million (2020: EUR 31.5 million). EUR 57.2 million cash
generation from EBITDA and share based payments was
partially offset by EUR 17.5 million investments in working
capital (2020: EUR 7.3 million reduction), EUR 7.2 million
interest and tax payments (2020: EUR 4.4 million) and
EUR 28.9 million investments (2020: EUR 16.5 million).
The increased working capital was triggered by the higher
revenue levels as well as by a higher necessity for buffer stocks
caused by material shortages and increased demand volatility.
The build-up of buffer stock to enable the transfer of production
lines related to the planned closure of the Automotive
manufacturing facility in Eibiswald, Austria – resulted in
a temporary increase of EUR 2.0 million in stocks. Normalized
working capital as a percentage of revenue was 14.0%
(2020: 10.4%). Capital expenditure included EUR 5.9 million
investments for the construction of a new 28.000 m
2
production facility in Suzhou, China. We expect the existing
operations in Suzhou and Shanghai to relocate to the new
facility in the second half of 2022.
Total net debt increased by EUR 27.4 million to EUR 130.6 million.
Normalized cash flow of EUR 3.5 million, EUR 3.3 million
proceeds for the sale of the 30% interest in Newton CFV, and
EUR 1.1 million positive currency results on cash were offset
by EUR 23.2 million payments for the acquisition of 3T,
EUR 4.3 million cash dividend, EUR 3.9 million payments for
cost items normalized in the results, EUR 3.4 million lease
payments, and a EUR 0.5 million increase in lease liabilities.
The leverage ratio per 31 December 2021 was 2.3 (2020: 2.3)
and we continued to operate well within the 3.25 financial
covenant level as agreed in the groups’ main credit facility.
Solvency as per the end of 2021 stood at 45.4% (2020:
47.4%).
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Total invested capital per 31 December 2021 was
EUR 367.9 million (2020: EUR 320.5 million), of which
EUR 171.2 million (2020: EUR 150.4 million) related to goodwill
and other intangibles arising from acquisitions. Invested
capital adjusted for normalized balance sheet items was
EUR 205.2 million (2020: EUR 174.4 million). Return on
invested capital, defined as EBITA divided by the invested
capital excluding goodwill and other intangibles arising from
acquisitions, was 15.6% (2020: 10.8%), a good step towards
our long-term target of 25% by 2025.
Earnings per share and dividend
Normalized net profit before the amortization of acquisition-
related intangibles increased by 76% to EUR 20.6 million (2020:
EUR 11.7 million). Normalized earnings per share arrived at
EUR 1.39 (2020: EUR 0.79). Reported net profit increased to
EUR 14.4 million (2020: EUR 4.3 million) with basic earnings
per share of EUR 0.97 (2020: EUR 0.29). We will propose
a dividend of EUR 0.69 per share (2020: EUR 0.40),
representing a pay-out of 50% of the normalized net profit
before amortization, at the Annual General Meeting of
Shareholders on 11 April 2022. It will be proposed that
payment of the dividend be made in cash, or at the option
of shareholders, in the form of ordinary shares charged to
the share premium reserve with any remaining fraction being
settled in cash. The total proposed dividend amounts to
EUR 10.3 million (2020: EUR 5.9 million).
Alternative performance measures –
adjustments to prot
In this Annual Integrated Report we present certain financial
measures that are not measures of financial performance under
IFRS. These non-IFRS measures (also known as non-GAAP
or alternative performance measures) are presented because
management considers them to be important supplemental
measures of our performance and believes that they are widely
used as a means of evaluating a company’s operating
performance. These measures include normalized revenue,
normalized EBIT(D)A, normalized net profit before amortization
of acquisition-related intangibles, and normalized free cash
flow. Normalized revenue and EBIT(D)A exclude certain items
of a non-recurring nature, including restructuring costs,
impairment charges and costs related to M&A activities.
Normalized free cash excludes cash flows related to cost and
revenue items that have been normalized in EBIT(D)A and net
profit.
A detailed bridge between normalized and reported figures
is provided in the table “reconciliation of non IFRS financial
measures” on page 38 of this annual report. In 2021,
normalized EBIT(D)A exceeded reported EBIT(D)A by
EUR 4.1 million (2020: EUR 4.4 million). The net of tax
normalized amount was EUR 3.3 million (2020: EUR 4.1 million).
Normalized cost items included EUR 1.5 million restructuring
costs, a EUR 3.4 million impairment of fixed assets,
EUR 0.2 million acquisition related costs and EUR 0.4 million
inventory write off.
Normalized benefits include EUR 0.8 million (customer)
compensation payments and the EUR 0.6 million book profit
on the Newton CFV sale. Restructuring costs related primarily
to the planned closure of the Automotive facility in Eibiswald,
Austria, the closure of a small sales office in Bradford, UK, and
the integration of our Industrial Magnetic Systems and Industrial
Control Systems business units into the Industrial Actuators
and Controls (IAC) business group. The impairment charges
relate to the cancellation of an automotive project. Discussions
for compensation are continuing and part of an agreed
compensation includes the nomination of a new project that
will start production in 2024.
Liquidity position
Kendrion’s liquidity position exists of freely available cash
balances and undrawn facilities. Cash balances on
31 December 2021 amounted to EUR 18.6 million (2020:
EUR 13.0 million). In addition, Kendrion had EUR 39.8 million
(2020: EUR 65.2 million) available under undrawn credit
facilities. Kendrion’s main credit facility is the EUR 162.5 million
facility agreement with a banking syndicate consisting of
HSBC Bank, ING Bank, and Deutsche Bank. The facility
agreement runs until 27 July 2023. Certain covenants apply
including a maximum leverage ratio of 3.25, with a possible
temporary spike up to 3.75 under certain conditions.
Research & Development
EUR 32.6 million (2020: EUR 28.9 million) costs for R&D are
included in the operating expenses, of which EUR 20.9 million
(2020: EUR 18.6 million) staff costs. An amount of
EUR 1.1 million in R&D expenses (2020: EUR 0.7 million) has
been capitalized as R&D on the balance sheet. Costs for R&D
as a percentage of revenue were 7.0% (2020: 7.3%). 3T’s R&D
costs are excluded as these relate to services that directly
generate external revenue. Kendrion Group employed 249 FTE
R&D employees. R&D activities primarily focused on: modifying
existing electromagnetic brake technology for growth markets
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such as AGVs and surgical robots; developing safety control
units for collaborative robots and AGVs, inductive heating
technology for industrial processes, the AVAS sound platform
and customer specific applications, a smart valve block
platform for sensor cleaning, and a new generation suspension
valve platform.
Acquisitions and divestments
On 21 September 2021 Kendrion completed the acquisition of
3T, a developer of electronics and embedded software in the
Netherlands. 3T has been integrated in the Business Group
Industrial Actuators and Controls (IAC). 3T has added
EUR 3.4 million revenue and EUR 0.5 million to the 2021
operating result. The acquisition price of EUR 23.2 million was
funded entirely from existing debt facilities and in addition has
led to EUR 1.9 million additional IFRS 16 lease liabilities.
The opening balance sheet of 3T further included
EUR 2.3 million fixed assets, EUR 2.0 million net working
capital and EUR 8.4 million allocated intangibles according to
the purchase price allocation. Residual goodwill amounts to
EUR 14.8 million.
In November 2021, Kendrion disposed of its 30% interest in
Newton CFV, a company operating from Florida, USA. Newton
CFV develops and markets valve technology designed
specifically for the beverage dispensing market. Kendrion
acquired the 30% share in 2018 and the company was part
of the IAC business group. The divestment has led to
EUR 3.3 million cash proceeds and a reported book profit
of EUR 0.6 million. Kendrion has retained an exclusive
manufacturing agreement for production of Newton CFV valves
from the IAC facility in Mishawaka, Indiana.
Developments per segment
Industrial
Key figures Industrial
In milllions of EUR
unless otherwise stated
2021 2020
Revenue from third parties 231.5 190.3
Organic growth 20% (11%)
EBITDA 37.4 26.3
as a % of revenue 16.2% 13.8%
EBITA 29.2 17.8
as a % of revenue 12.6% 9.3%
Normalized EBITDA 39.0 29.1
as a % of revenue 16.8% 15.3%
Normalized EBITA 30.8 20.7
as a % of revenue 13.3% 10.9%
Capital investments 5.1 4.6
Total assets 267.3 219.6
Number of employees (in FTE) 1,261 1,058
Our Industrial activities generated EUR 231.5 million (2020:
EUR 190.3 million) of revenue in 2021, 50% of the group’s
revenue. Normalized EBITDA increased by 34% to
EUR 39.0 million (2020: EUR 29.1 million) and EBITDA as a
percentage of revenue improved by 150 basis points to 16.8%.
Normalized EBITA increased by 49% to EUR 30.8 million
(2020: EUR 20.7 million). The acquisition of 3T added
EUR 3.4 million revenue and EUR 0.6 million EBITDA.
Industrial revenue increased by 20% on an organic basis and
nominal revenue increased by 22%. The activity level in
Industrial continued to increase throughout the year causing
revenue levels to increase quarter over quarter. The industrial
Business Groups faced supply chain shortages during most of
the year, but not as severe as the automotive sector.
Although the order backlog at year end was somewhat higher
than usual, both industrial Business Groups were able to largely
fulfil the increased customer demand. Overall, Industrial Brakes
(IB) benefited from the general demand recovery in industrial
end markets, as well as from the broad energy transformation
which involves increasingly electrified and automated industrial
processes. Industrial Actuators and Controls (IAC) saw revenue
increases in most customer segments, with strong demand in
electrical automation and the energy generation and distribution
segments.
The Industrial Business Groups have increased their average
sales prices to offset the increasing raw material prices, but
some delay in passing on the higher input prices did negatively
affect the Industrial added value margin in 2021. Operating
costs as a percentage of revenue fell by 230 basis points to
37.8%. Operational leverage from higher revenues, and the
additional EUR 2.3 million impact from cost synergies related to
the acquisition of INTORQ and the integration of IAC realized in
the previous year, also contributed to the increase in profitability.
Non-recurring cost items that have been normalized in the
Industrial results amounted to EUR 1.6 million in 2021 (2020:
EUR 2.9 million). Normalizations mainly relate to restructuring
costs incurred for the integration of the IAC business group and
the closure of a small Industrial Brakes sales office in Bradford,
UK. The sales activities of the UK office have been integrated in
the IB facility in Villingen, Germany.
Industrial cash investments amounted to EUR 5.1 million (2020:
EUR 4.6 million), below the depreciation level of EUR 8.2 million.
The majority of these investments covered increasing
production capacity and enhancing testing capabilities in IB.
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Automotive
Key figures Automotive
In milllions of EUR
unless otherwise stated
2021 2020
Revenue from third parties 232.1 206.1
Organic growth 13% (20%)
EBITDA 14.3 13.9
as a % of revenue 6.1% 6.7%
EBITA (1.4) (3.3)
as a % of revenue (0.6%) (1.6%)
Normalized EBITDA 16.8 15.5
as a % of revenue 7.2% 7.5%
Normalized EBITA 1.1 (1.8)
as a % of revenue 0.5% (0.8%)
Capital investments 23.2 11.0
Total assets 223.5 209.5
Number of employees (in FTE) 1,467 1,398
The Kendrion Automotive Group (KAG) realized 13% organic
growth, resulting in its revenue increasing to EUR 232.1 million
(2020: EUR 206.1 million). This accounts for 50% of group
revenue. Normalized EBITDA amounted to EUR 16.8 million
(2020: EUR 15.5 million) and EBITDA as a percentage of
revenue was 7.2% (2020: 7.5%). Normalized EBITA increased
to EUR 1.1 million (2020: negative EUR 1.8 million).
KAG started the year well, but revenue came increasingly under
pressure in the second half of the year due to supply chain
shortages. In particular shortage in semi-conductors had a
significant negative impact on global production levels of
passenger cars as many car manufacturers had to shut down
or significantly reduce production during 2021. Because of
semiconductor shortages, global car production only increased
moderately compared with the 75 million cars produced in
2020, when car production halted during large parts of the year
due to the COVID-19 pandemic induced lockdowns.
The revenue increase in KAG was mainly driven by the start,
or ramp up, of production of customer projects – especially
suspension valves and interior sound systems – won in
previous years.
Despite significantly increased input prices, KAG realized
a slightly improved added value margin in 2021 due to
increased average sales prices and customer contributions for
engineering activities. Operating costs as a percentage of
revenue increased by 110 basis points to 35.6%. The supply
chain shortages and consequent increases in customer order
volatility had a negative effect on the operating efficiency within
KAG. Operating costs were also impacted by increased costs
for research and development in 2021. The increased R&D
activities mainly involved the development of product platforms
and application engineering for exterior AVAS sound systems
and suspension valves.
Cash investments in KAG amounted to EUR 23.2 million
(2020: EUR 11.0 million), compared to a depreciation level of
EUR 15.7 million. The construction of new production facilities
in Suzhou, China is recorded in the Automotive Group and
added EUR 5.9 million to the total investments. The majority of
the investments related to newly won project nominations, such
as equipment and production lines for suspension valves and
AVAS sound systems.
Management statement
In accordance with article 5:25c of the Financial Supervision
Act (Wet op het Financieel Toezicht), the Executive Board
confirms, to the best of its knowledge, that: (i) the consolidated
financial statements give a true and fair view of the assets,
liabilities, financial position, and profit and loss of Kendrion N.V.
and its consolidated companies; (ii) the Annual Integrated
Report gives a true and fair view of the position as at
31 December 2021 and the developments during the financial
year of Kendrion N.V. and its group companies included in the
consolidated financial statements; and (iii) the Annual Integrated
Report describes the main risks Kendrion is facing.
The members of the Executive Board have signed the
consolidated financial statements to comply with its statutory
obligation pursuant to article 2:101, paragraph 2 of the Dutch
Civil Code and article 5:25c of the Financial Supervision Act.
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Reconciliation of non IFRS financial measures
EUR million 2021 2020
Reported result before net finance costs 23.9 10.1
Reported amortization 3.9 4.4
Reported operating result before amortization (EBITA)
27.8 14.5
One-off costs related to restructuring measures in staff costs 1.4 1.5
One-off costs related to restructuring measures in other
operating expenses 0.1 0.7
One-off costs related to acquisition costs in other operating
expenses 0.2 0.6
One-off costs related to impairment capitalized R&D 3.4 1.6
One-off costs related to revised calculation inventories 0.4 –
One-off benefits related to tax claim receipt (0.4) –
One-off benefits related to compensation costs prior years (0.4) –
One-off benefits related to sale of non consolidated investment (0.6) –
Normalized EBITA
31.9 18.9
Reported amortization (3.9) (4.4)
Reported net finance costs (3.7) (4.1)
One-off costs related to tax audits in finance expense (0.0) 0.6
One-off costs related to acquisition costs in finance expense – 0.0
Reported share profit or loss of an associate (0.1) (0.3)
Normalized profit before income tax
24.2 10.7
Reported income tax expense (5.7) (1.4)
One-off costs related to tax audits in income tax expense 0.4 –
One-off costs related to simplifying measures in income tax
expenses – 0.2
Impact one-off costs and benefits on income tax expense (1.2) (1.1)
Amortization after tax 2.9 3.3
Normalized net profit for the period before amortization
20.6 11.7
EUR million 2021 2020
Reported free cash flow (21.0) (52.4)
Acquisitions of subsidiaries 23.2 77.7
Proceeds from disposal of associate (3.3) –
Non-recurring items net of tax paid 4.6 6.2
Normalized free cash flow
3.5 31.5
Invested capital at 31 December
EUR million 2021 2020
Property, plant and equipment 121.9 118.7
Intangible assets
1
183.4 159.1
Net working capital 61.7 39.1
Other fixed assets 0.9 3.6
Invested capital
367.9 320.5
Goodwill and other intangibles related to acquisitions
1
171.2 150.4
Operating invested capital
196.7 170.1
Impact one-off costs and benefits on invested capital 8.5 4.3
Normalized invested capital
205.2 174.4
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
Net working capital at 31 December
EUR million 2021 2020
Inventories 79.7 61.7
Trade and other receivables, tax receivable 68.0 54.8
Less: Trade and other payables, tax payables, current
provisions 86.0 77,4
Net working capital
61.7 39.1
Impact one-off costs and benefits on working capital 3.2 2.3
Normalized working capital
64.9 41.4
As % of revenue 14.0% 10.4%
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VALUE CREATION
Natural
Capital
Social
and Human
Capital
Responsible
Business
Conduct
CONCRETE, MEASURABLE AND TIME-BOUND TARGETS
Climate change is one of the greatest social
challenges of our time. We are committed to
taking action to reduce the negative impact of
climate change and to address other
sustainability and social issues. By increasing
energy efficiency and use of renewable energy,
reducing emissions, providing healthy, safe, and
high-quality workplaces, and by ensuring our
suppliers and other business relations uphold our
environmental and social standards, we are
striving to contribute to a more sustainable
future. Adequate transparency about our
sustainability, strategy and objectives and the
progress made, are key to determining
environmental performance and translating such
performance into our business and product
strategies.
Sustainability
Sustainable contributions
Introduction
Our global sustainability program reflects Kendrion’s mission
and commitment to contribute to fighting climate change and
other sustainability and social issues. Our leadership team puts
sustainable development to the forefront in addressing,
monitoring, and managing sustainability themes. We believe
that innovation and technological developments can drive
sustainable growth opportunities. Our teams are dedicated to
further transition our product portfolio and expand our
contribution to the accelerating trend of electrification and
renewable energy.
The adverse effects of climate change also drive our
commitment to reduce the impact of our operations by
increasing energy efficiency and use of renewable energy for
our manufacturing processes and facilities. We have reduced
the relative CO
2
emissions from energy by our production
facilities by 54% compared with 2015 and are finding ways to
further replace fossil fuels with renewable energy sources. In
China, for example, we started building a new sustainable
manufacturing facility at the renowned Suzhou Industrial Park
(abbreviated as SIP). Solar panels will be installed on the
28,000m
2
manufacturing facility in Suzhou, which will
significantly reduce our CO
2
emissions. We preserve a high-
quality, safe, and inclusive work environment for our employees.
In our supply chain we maintain transparency and our suppliers
and other business partners must commit to our environmental
and social standards. We will also continue to engage with our
stakeholders to gain a better understanding of their
expectations relevant to the environment in which we operate,
including market developments and cultural dynamics.
Kendrion’s global sustainability program forms an integral part
of our strategic plan and objectives. In addition to financial and
economic considerations, our strategic decisions take account
of a range of non-financial considerations such as
environmental and social aspects. We constantly seek to strike
the right balance between long-term value creation and playing
a meaningful role in addressing climate change threats and
other key social issues. This means that sustainability objectives
are cascaded to our Business Groups and made an explicit
component of Kendrion’s performance-based remuneration
schemes. Personal targets set for senior management include
sustainability criteria. The short-term variable remuneration and
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the long-term variable remuneration of the Executive Board
also include sustainability performance criteria (e.g., energy
efficiency and reduction of CO
2
emissions) and social
performance criteria (e.g., diversity, company culture, leadership
development). Reference is made to the Remuneration Report
on pages 91-92. for detailed information about the application
of the Remuneration Policy for the Executive Board and the
actual performance in 2021 against the predefined performance
criteria.
Stakeholder dialogue
Our business operations and products have an impact on the
environment and influence the interests of our stakeholders.
The actions and expectations of our stakeholders influence the
way in which we develop, implement, and execute our strategy
to realize long-term value. We therefore seek to engage in an
open and ongoing dialogue with our stakeholders about
sustainability themes to deepen our insights into the needs and
expectations of our stakeholders. This regular engagement
helps us to continue advancing and innovating our global
sustainability program, not only in design but also in
management and execution. In engaging with our stakeholders,
we aim to build trust, exchange positions, identify trends and
address critical issues, including the implications of climate
change for our business operations and products as well as
the impact of our operations on the environment and society.
The dialogue with our stakeholders is advantageous to
assessing our environmental risk profile and establishing what
mitigation plans are required or expected of Kendrion to make
a meaningful contribution to a sustainable future. Moreover,
by engaging in a dialogue, we provide transparency about our
plans and actions to reduce the negative impact of climate
change and to address other social issues. Input from our
stakeholders is always considered when developing strategies
and mitigation plans.
To facilitate the interactions with our different stakeholder
groups, communication resources and channels are
consistently determined. Systematic identification and
prioritization of relevant stakeholder groups and their respective
themes of interest are furthermore key to ensuring an effective
and open dialogue. Our key stakeholder groups include:
customers, suppliers, employees, shareholders, local
communities and technical universities and institutions of higher
technical education. For each group, Kendrion’s stakeholder
engagement varies and includes formal and informal channels
that are applied with varying degrees of regularity. The key
stakeholder groups are described on pages 56-57 of this
Annual Integrated Report. Key themes addressed during our
stakeholder dialogues in 2021 include:
■ climate change, decarbonization and energy efficiency
and renewables;
■ supply chain management, raw material sourcing and
ensuring respect for human rights and environmental
standards in the supply chain;
■ sustainable production and product portfolio,
contributing to climate mitigation objectives.
Although our stakeholder dialogue continues as part of regular
engagement and communications with our customers,
suppliers, shareholders, and employees, Kendrion is committed
to conducting a structured in-depth stakeholder engagement
process every two years. Kendrion previously conducted
in-depth stakeholder engagement processes in 2018 and in
2020. These stakeholder engagement processes included a
structured sustainability survey among internal and external
stakeholders and separate sustainability sessions with certain
stakeholder groups. In addition to the regular and ongoing
dialogues, we plan to perform a structured stakeholder
engagement process in 2022 consistent with our established
formats with a view to meeting stakeholders’ reasonable needs
to discuss topical themes relevant to various aspects of
sustainability.
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Materiality analysis and materiality matrix
For a focused strategic approach, aimed at a healthy balance
between stakeholder expectations and business aspirations,
we identify and assess the material topics that are most
relevant to Kendrion’s activities. To this end, Kendrion uses
a materiality analysis to gain insight into the relevance and
importance of topics for both Kendrion and our stakeholder
groups. Although material topics may remain the same over
time, their relevance for internal and external stakeholders may
vary and is subject to change.
In furtherance of the materiality analysis carried out in 2018,
Kendrion commissioned and completed the performance of
a subsequent materiality assessment in 2020. Together with
a specialized consultancy firm, a tailored approach was
developed to assess materiality and the results of the internal
and external stakeholder consultation.
Compared with the materiality assessment performed in 2018,
the 2020 assessment did not reveal significant movements in
the ranking of individual themes. The outcome of the
assessments is a refined number of material themes structured
in a materiality matrix around Kendrion’s three pillars of value
creation that form the basis of the global sustainability program:
Natural Capital, Social and Human Capital and Responsible
Business Conduct.
The materiality matrix shows an enhanced classification and
organization of material themes with a view to maintaining
continued focus on those themes where Kendrion can have the
most impact.
Kendrion’s materiality matrix shows the material topics along
two axes: significance to stakeholders and significance to
Kendrion.
Materiality matrix
SIGNIFICANCE TO STAKEHOLDERS
SIGNIFICANCE TO KENDRION
Water management
Customer engagement
Energy management & emissions
Community involvement
Material & waste
management
Customer privacy &
data security
Economic performance
Responsible & innovative products
Business
ethics & Integrity
Employee development
Inclusive workplace
Strategic partnerships & co creation
Responsible procurement
Human rights
Employee health & safety
Natural capital Social and human capital Responsible business conduct
The outcome of the 2018 and 2020 materiality analysis both
formed an important input for Kendrion’s sustainability program
and the 2019-2023 target framework as well as the further
development and execution thereof. In support of the
development of a sustainability target framework for the period
beyond 2023, a new materiality assessment will be prepared.
While this Annual Integrated Report generally covers topics in
the above materiality matrix, Kendrion has not set measurable
sustainability targets for each material topic.
Kendrion reports against the 2019-2023 target framework and
related commitments.
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2019-2023 TARGET FRAMEWORK
Please refer to the section ‘About the sustainability report’ on pages 206 and 207 of this Annual Integrated Report for reporting
periods, definitions, scope and limited assurance review.
Kendrion reports only on the most relevant material topics.
The most relevant material topics are: economic performance,
anti-corruption, energy efficiency, carbon emissions,
occupational health and safety, training and education, non-
discrimination, and equal opportunities. Kendrion reports
according to the GRI reference claims, which are described
on pages 206 and 207 in the section ‘About the Sustainability
Report’.
Recurring annual improvement
of health & safety figures
number of accidents per 1,000 FTE,
lost time injury rate per 1,000 FTE,
group-wide illness rate
The establishment of a
Global Diversity Committee,
responsible for advancing diversity
The implementation of a global
company culture campaign
Rewarding 10 community
investment initiatives per year
through Together@Kendrion
Maintain a responsible
product portfolio
Products that Keep you Safe, Products
that Reduce Climate Impact and Products
that Improve Health
Sustainable sourcing
Sourcing only from approved suppliers
and conducting at least 25 implementation
audits annually
Continuous improvement
and strengthening of
the Global Legal Compliance
and Governance Framework
to secure responsible business conduct
Natural Capital
Social and Human Capital
Responsible Business Conduct
15%
Relative reduction
of energy
consumption
Implementation of the waste
management hierarchy
in global waste management practices
15%
Relative reduction
of CO
2
emission
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Please refer to the section 'About the sustainability report' on pages 206 and 207 of this Annual Integrated Report for reporting periods, definitions, scope and limited assurance review.
Energy efciency, renewable energy and
CO
2
emission
Sustainability objective 2019-2023 target framework: 15%
relative reduction of energy consumption and CO
2
emission by
the end of 2023
Climate change imposes a fundamental threat to the world.
We are therefore committed to reducing the impact of our
business operations on the environment and consistently strive
to increase energy efficiency and use of renewable energy and
reduce emissions of CO
2
in the development and manufacture
of our products. Reducing our environmental impact is a key
objective and we encourage our employees to be actively
engaged in pursuing this objective.
Strategically relevant and sustainable
opportunities
We respond to the increasing environmental awareness of
society and our stakeholders by focusing our resources on the
development of sustainable products. With our product
portfolio we contribute to creating a sustainable future as we
are being part of the increasing demand for clean energy and
the accelerating development of electrification of industrial
processes and mobility. These key trends in electrification
particularly drive the demand for our products in wind power,
automated warehouses, inductive heating technology and
electric vehicles that support the transition from fossil fuel
enabled processes to electrical solutions.
Our Business Groups Industrial Brakes and Industrial Actuators
and Controls are expected to benefit from these developments
and their strategic plans are accordingly directed at these
sustainable segments. The acquisition of INTORQ in 2020 has
2021 ACTUAL
17.9%
Relative reduction
of CO
2
emission
Waste management
REALIZED
■ 5.5% reduction total waste
■ Recycling rate increased
from 82% to 83%
■ Distribution hazardous
waste (9%) and non-
hazardous waste (91%)
REALIZED IN 2021
■ Enhanced focus on the development
of sustainable products and expansion
of relevant capabilities
■ Reduction relative CO
2
emissions from
energy by production plants
by 54% compared to 2015
■ Completed review on decarbonization
strategies and mitigation plans
2021 ACTUAL
8%
TARGET 2023
15%
Relative reduction of
energy consumption
2019-2023 TARGET FRAMEWORK
TARGET 2023
15%
NATURAL CAPITAL
The Natural Capital pillar focuses on reducing the
negative impacts of climate change by increasing
energy efficiency and use of renewable energy,
reducing CO
2
emissions and strengthening
waste management practices.
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strengthened the market position of Industrial Brakes and
allows us to better pursue sizeable and fast-growing
sustainable opportunities. The recent acquisition of 3T –
a Dutch based developer of electronics and embedded
systems – offers great potential for the control technology
activities of our Business Group Industrial Actuators and
Controls.
Decarbonization and digitalization are both topical themes in
the public and political debate. These themes coincide to
a certain extent as technologies offer opportunities to make
mobility more efficient and thereby less intrusive to the
environment. Also encouraged by the political debate and the
increased environmental awareness of society, the disruption of
the automotive industry continues at an accelerating pace. With
our smart actuation technology, we are helping to take mobility
into the sustainable dimension of Autonomous, Connected,
Electric and Shared driving (abbreviated as ‘ACES’). These
developments come with an increasing demand for software and
electronics that control our actuators and the safety and comfort
of electric vehicles. The acquisition of 3T adds important
software and electronics development capabilities. This enables
the Automotive Group to enhance its focus on products that
benefit from the transition to ACES and pursue these strategically
relevant and sustainable growth opportunities.
Energy consumption
2021 2020
Δ %
2021 / 2020
Power kWh 24,610,300 22,283,253 10.4%
Fuel oil kWh 614,130 452,370 35.8%
Natural gas kWh 13,132,173 12,325,417 6.5%
38,356,603 35,061,040 9.4%
Energy consumption per EUR million added value 2021 2020
Δ %
2021 / 2020
Power kWh 111,344 119,829 -7.1%
Fuel oil kWh 2,778 2,433 14.2%
Natural gas kWh 59,414 66,280 -10.4%
173,536 188,541 -8.0%
Energy consumption 2021 2020
Δ %
2021 / 2020
Absolute consumption, kWh 38,356,603 35,061,040 9.4%
Relative consumption, kWh / million EUR added value 173,536 188,541 -8.0%
CO
2
emissions
3
2021 2020
Δ %
2021 / 2020
Absolute emissions, tonnes 6,368 6,529 -2.5%
Relative emissions, tonnes / million EUR added value 28.8 35.1 -17.9%
1
Please refer to the section ‘About the sustainability report’ on pages 206 and 207 of this Annual Integrated Report for reporting
periods, definitions, scope and limited assurance review.
2
2020 energy consumption figures restated.
3
Scope 1 and 2 of the Greenhouse Gas Protocol.
2
Energy and Emissions
1
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WINDPOWER AND AUTOMATED WAREHOUSES INDUCTIVE HEATING AND ENERGY DISTRIBUTION ELECTRIC VEHICLES
ENVIRONMENTALLY SUSTAINABLE ECONOMIC ACTIVITIES
INDUSTRIAL BRAKES
INDUSTRIAL ACTUATORS AND CONTROLS
AUTOMOTIVE
PRODUCTS THAT KEEP YOU SAFE
Products that keep you safe • Products that keep you healthy • Products that reduce climate impact
PRODUCTS THAT KEEP YOU HEALTHY PRODUCTS THAT REDUCE CLIMATE IMPACT
RESPONSIBLE PRODUCT PORTFOLIO
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EU Taxonomy
As we recognize that climate change is one of the most
pressing global challenges, Kendrion is committed to taking
responsibility to help decarbonization and put in place
mitigation plans conducive to the key objectives of the Paris
Climate Agreement and the European green deal. The adoption
of new laws and regulations, such as the classification system
establishing a list of environmentally sustainable economic
activities introduced under the EU taxonomy, make an
important contribution towards combating climate change
by imposing disclosure requirements on the proportion of
environmentally sustainable economic activities. The basis for
the EU taxonomy is recorded in the Taxonomy Regulation.
1
Eligibility of economic activities under the EU taxonomy is an
indication that the activity makes a substantial contribution
to the environmental objectives of the EU taxonomy
2
.
EU taxonomy alignment implies that an economic activity
complies with the technical criteria and other requirements
described specifically for the activity under the so-called
delegated acts supplementing the EU taxonomy.
For the assessment of Kendrion’s taxonomy eligible activities,
relevant key performance indicators are the proportion
of Kendrion’s taxonomy eligible economic activities as
a percentage of group revenue, total capital expenditure and
a subset of the group’s operational expenditures. Informative
climate reporting requires a transformation of internal reporting
systems and data collection. The assessment and determination
of Kendrion’s taxonomy eligible activities is based on current
insights and best judgement in the absence of certain data that
is not yet in full obtainable through existing reporting systems.
The implementation of certain changes to existing reporting
systems are anticipated with a view to continue meeting
applicable statutory disclosure requirements.
Total
(mEUR)
Taxonomy
eligible
Taxonomy
non-eligible
Revenue 464.0 6% 94%
Capital expenditure 28.9 37% 63%
Operating expenses 42.5 15% 85%
Revenue KPI
We have assessed the relevant taxonomy-eligible economic
activities based on the activities of our Industrial Business
Groups and the Automotive Group and have subsequently
assigned them to taxonomy eligible economic activities in line
with the EU Taxonomy Climate Delegated Acts covering climate
change mitigation and climate change adaptation
3
. Based on
the assessment we have included electromagnetics brakes for
wind power turbines, components and subsystems for electric
vehicles, components and subsystems for inductive heating
and components for nuclear power plants as taxonomy-eligible
economic activities. The table below gives a breakdown of the
economic activities mentioned above and the applicable EU
taxonomy reference.
Eligible activity Description
3.1 Manufacture of renewable
energy technology
Electromagnetic Brakes
for windpower turbines
3.3 Manufacture of low carbon
technologies for transport
Components and
subsystems for electric
vehicles
3.6 Manufacture of other low
carbon technologies
Components and
subsystems for inductive
heating
3.6 Manufacture of other low
carbon technologies
Components for nuclear
power plants
Consistent with current guidance, where eligible economic
activities could cover both the 'climate change mitigation' and
the 'climate change adaptation' environmental objective of the
EU taxonomy, economic activities have been allocated to the
EU taxonomy environmental objective 'climate change
mitigation' as the contribution to 'climate change adaptation' is
considered less significant, and double-counting is not
permitted under the EU taxonomy. Our consolidated net
turnover can be reconciled to our consolidated financial
statements, cf. income statement on page 109 of this Annual
Integrated Report.
Capital expenditure KPI
Total capital expenditure consists of all additions to tangible and
intangible fixed assets during the financial year, before
depreciation, amortization, and any other re-measurements.
Additions resulting from business combinations are also
included, with the exception of goodwill. Taxonomy-eligible
capital expenditure includes capital expenditure directly related
to the taxonomy-eligible economic activities as well as certain
individual measures that enable activities to become low carbon
or lead to greenhouse gas reductions, such as energy efficient
buildings (e.g. investments relevant to the new 28,000m
2
facility
in China) and the installation of energy efficiency equipment.
1
Regulation (EU) 2020/852 of the European Parliament and of the
Council of 18 June 2020 on the establishment of a framework to
facilitate sustainable investment, and amending Regulation (EU)
2019/2088.
2
The six environmental objectives of the EU taxonomy: (i) climate
change mitigation, (ii) climate change adaptation, (iii) sustainable
use and protection of water and marine resources, (iv) the transition
to a circular economy, (v) pollution prevention and control,
(vi) protection and restoration of biodiversity and ecosystems.
3
Commission Delegated Regulations on climate change mitigation
and climate change adaptation adopted by the European
Commission on 4 June 2021 for review by co-legislators.
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Our total capital expenditure can be reconciled to our
consolidated financial statements, notes 1-3 of the financial
statements in this Annual Integrated Report.
Operational expenditures KPI
Total operational expenditures consists of direct non capitalized
costs that related to research and development, building
renovation measures, repair and maintenance and any other
direct expenditure relating to the day-to-day servicing of assets
of property, plant and equipment. This includes research and
development expenditure recognized as an expense during
the reporting period in our income statement, as referred to in
note 25 of the financial statements in this Annual Integrated
Report. Maintenance and repair and other direct expenditures
relating to the day-to-day servicing of assets of property, plant
and equipment were determined based on expenses that are
recorded as repair and maintenance and housing costs,
including in different line items as other operating expenses in
note 25 of the financial statements in this Annual Integrated
Report. For the taxonomy-eligible operational expenditures we
refer to the statements made with respect to capital
expenditure.
Consistent with the statutory requirements to increase
transparency and report about the extent to which our activities
are associated with economic activities that qualify as
environmentally sustainable under the EU taxonomy, we have
intensified our focus on the expansion of our responsible
product portfolio, which includes the category ‘Products that
reduce climate impact’. We systematically take account of the
different aspects of sustainable product development with
a view to enhancing Kendrion’s environmentally sustainable
economic activities, whilst recognizing that we are part of
a larger chain of links that make the supply chain of the
industries in which we operate. Our responsible product
portfolio also covers the categories: ‘Products that keep you
safe’ and ‘Products that improve health’.
The product roadmaps of our Business Groups are directed at
all three categories of the responsible product portfolio.
The visual on page 45 provides a summary overview of
the products of which we consider the development,
manufacturing, and marketing to qualify as environmentally
sustainable economic activities. The visual on page 45 and the
table on page 46 have been prepared based on our current
insights relevant to the EU taxonomy and does not purport to
give an indication as to the extent to which the products are
associated with economic activities that meet or are likely to
meet the technical screening criteria and other requirements
described in the EU Taxonomy Climate Delegated Acts
covering climate change mitigation and climate change
adaptation
3
. The latter also in view of the current formal status
of the EU Taxonomy Climate Delegated Acts covering climate
change mitigation and climate change adaptation, and the
absence of EU Taxonomy Delegated Acts covering the other
four environmental objectives of the EU taxonomy
2
. Aside from
the technical statutory requirements, our strategy is directed at
the consistent intensification of our focus on the accelerated
expansion of our responsible product portfolio, specifically on
those categories of products that contribute to the energy
transition.
The current proportion of our activities that are associated with
economic activities that qualify as environmentally sustainable
comprises close to 6% of total revenue in 2021.
We anticipate the development of strategies aimed at the
increase of the proportion of environmentally sustainable
economic activities on the share of our economic activities that
are not conducive to one or more of the environmental
objectives of the EU taxonomy. This is also exemplified by the
acquisition of 3T, which significantly increased our software and
electronics capabilities enabling us to intensify our resources on
products that contribute to the transition to sustainable mobility.
Decarbonization strategies and mitigation
plans
Under our 2019-2023 sustainability target framework we
committed to realizing a 15% relative reduction of energy
consumption and CO
2
emissions by the end of 2023. In 2019
we developed a five-year roadmap including energy efficiency
and emission mitigation measures. The degree of realizing
meaningful reductions was pushed to the forefront in the
original design of the five-year energy and CO
2
reduction
roadmap. The roadmap has subsequently been subject to
annual reviews to ensure continued effectiveness of measures
implemented and to allow for possible adjustments to the initial
approach as the public and political debate about climate
change progressed. In 2021, a consultancy firm was retained
to perform a comprehensive assessment and provide us with
an outside-in perspective on decarbonization strategies and
plans. Following through on the recommendations made by the
consultancy firm, concrete and validated decarbonization
propositions have been developed which will be implemented
in support of the realization of our 2019-2023 sustainability
target framework and the subsequent development of an
ambitious sustainability target framework for the period beyond
2023. The in-depth review that is required for the development
of a sustainability target framework for the period beyond 2023
that is consistent with the reasonable expectations of our
stakeholders and the increased environmental awareness of
society will continue, and it is anticipated to make an
announcement in 2023 about our revised decarbonization
strategy and mitigation plans.
Our initiatives to improve energy efficiency and the use of
renewable energy include energy modelling during the design
phase of new manufacturing facilities or the renovation of
existing manufacturing facilities. In Suzhou, China we started
the development of a new sustainable manufacturing facility at
the renowned Suzhou Industrial Park. Solar panels will be
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installed on the 28,000m
2
manufacturing facility, which will
significantly reduce our CO
2
emissions. The procurement of
renewable energy from energy providers has been a consistent
practice for most of our European manufacturing facilities. It is
anticipated to expand the procurement of renewable energy
beyond Europe and to those European manufacturing facilities
that currently do not already procure renewable energy.
Environmental reporting system and
certication
Kendrion applies an environmental reporting system that tracks
the CO
2
emissions and energy consumption of all the
production plants. Year-over-year, Kendrion focuses on
improving the production processes with the overall objective of
reducing the environmental footprint of the production plants.
The global certification ISO 50001 Energy Management System
supports the production plants in their efforts to use energy
more efficiently by developing and maintaining an energy
management system. Kendrion’s environmental management
systems are in accordance with ISO 14001. ISO 14001
Environmental Management Systems specify requirements for
an environmental management system to enhance
environmental performance. Kendrion’s largest production
plants are ISO 50001 certified and ISO 14001 certified.
Waste management: waste disposal and
recycling
We consistently undertake action to improve our management
practices by focusing on the development and implementation
of waste reduction and utilization strategies. Our efforts are
structured along the long-recognized hierarchy of management
of waste, in order of the following preference: prevention, reuse,
recycling, other recovery and (landfill) disposal.
TAKING RESPONSIBILITY
Prevention
Reuse
Recycling
Other recovery
Disposal
WASTE MANAGEMENT HIERARCHY
Kendrion’s ISO 14001 certified manufacturing facilities maintain
effective records of their production and processing of all waste
and work with certified waste processing companies when this
is required by local regulation. New waste reduction measures
must be implemented each year as part of the ISO 14001
certification process.
The collection of waste data has been centralized, and the data
collection process has been strengthened with the introduction
of uniform waste data collection sheets and waste registers
using consistent waste definitions. The standardization of
internal reporting and control processes enable comprehensive
reviews of the different categories of waste generated by the
Kendrion manufacturing facilities as well as differences is local
waste management practices that are driven by – for example –
variances in production processes or regulatory requirements.
The outcome of the most recent waste data analysis shows
a 5.5% reduction of total waste compared to the prior year
and the overall recycling rate increased from 82% to 83%.
The distribution of hazardous waste (9%, prior year 8%) and
non-hazardous waste (91%, prior year 92%) slightly shifted,
indicating that the reduction in overall waste was predominantly
realized in the non-hazardous waste category. Likewise, the
top-three of hazardous and non-hazardous materials remained
unchanged, with cooling fluid, solvent, old oil, and packaging of
hazardous substances comprising the top-three of hazardous
materials and iron and steel, commercial waste and cardboard
dominating the top-three of non-hazardous materials.
A consultancy firm was retained with a view to expand our
horizon with respect to the present-day landscape and scope
of waste management. A comprehensive analysis was carried
out covering a review of key characteristics of our
manufacturing processes that vary among the different
production facilities and the various categories of waste
reported through the uniform data collection sheets and waste
register. Our enhanced insight into waste management and
waste reporting standards form the solid foundation for the
further development of indicators and monitoring parameters
that are supportive to our long-term objectives. By reference to
the recommendations issued by the consultancy firm retained,
our dedicated waste management task force including waste
management and quality professionals of all Business Groups
commenced a further analysis to establish the feasibility of
indicators and monitoring parameters in the following areas:
zero landfill waste; recycling, specifically recycling of critical raw
materials (i.e. the so-called CRMs) and waste per unit sale (kg).
It is contemplated that qualitative and quantitative waste
indicators will become part of the sustainability target
framework for the period beyond 2023, about which we intend
to make an announcement in 2023.
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SOCIAL AND HUMAN CAPITAL
The Social and Human Capital pillar concerns
the preservation of the health and safety of our
employees by providing a high-quality work
environment and maintaining a culture consistent
with the norms and values underlying The
Kendrion Way and our Code of Conduct. Fair
labor practices and recognition of human rights
are other material themes of the Social and
Human Capital pillar.
Sustainability objective 2019-2023 target framework:
recurring annual improvement of health and safety figures
Health and Safety
To preserve the health and safety and the performance of our
employees, we provide a high-quality work environment where
the norms and values underlying The Kendrion Way and our
Code of Conduct are acknowledged and respected. Health and
safety are always given the highest priority in every aspect of
Kendrion’s operations. We apply the most stringent quality and
safety standards to avoid any potential risks to people,
communities, and the environment. Kendrion’s employees are
periodically trained to implement the best sustainability
practices. The health and safety of employees are essential to
the successful conduct of our business and are in the best
interest of all our stakeholders.
The Kendrion Health Task Force monitors our global health and
safety figures and coordinates the implementation of structural
improvement measures in all our facilities.
Day-to-day responsibility for health and safety is concentrated
within the Business Groups in which health and safety are
managed systematically and in a standardized manner with
clear rules and procedures based on recognized industry
standards and best practices that are laid down in Health,
Safety & Environmental (HSE) policies. Each production plant
further implements initiatives to enhance its HSE standards
depending on plant-specific needs, production lines and
technologies. HSE audits are performed to assess,
implementation and compliance with HSE policies at regular
intervals. All employees are required to adhere to local health
and safety procedures and practices, which include the
participation in training programs. Specific and measurable
performance targets for Kendrion’s business units and local
2021 TARGET
Diversity@Kendrion
39 nationalities,
10 countries,
48% female workforce
A culture in line with the norms
and values of our Code of
Conduct and The Kendrion Way
2021 ACTUAL
509
2021 ACTUAL
9.2
2021 ACTUAL
4.7%
5.3
2021 TARGET
4.4%
Illness rate
2021 TARGET
384
STRATEGIC INTENT
AUTOMOTIVE
CHINA
INDUSTRIAL
BRAKES
CHINA
ACTUATORS
AND
CONTROLS
CHINA
THE KENDRION WAY
Accidents
(per 1,000 FTE)
Lost Time Injuries
(in days)
Please refer to the section 'About the sustainability report' on pages 206 and 207 of this Annual Integrated Report for reporting periods, definitions, scope and limited assurance review.
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management include health and safety metrics, which are
determined by the number of accidents per 1,000 FTE, Lost
Time Injury (LTI) rates and illness rates.
The COVID pandemic continued to impact the lives of people
around the world. Protecting our employees and their families
against the risks of infection remained a priority during 2021.
With the persistent application of hygiene protocols and strict
operating procedures, we have been able to continue
production in a safe and responsible manner and in line with
applicable measures imposed by the authorities, including
compliance with mandatory entry requirements to facilities and
offices. Remote or hybrid working models have become a new
reality for many of our employees and the necessary
adjustments facilitating this reality have been made as and
where appropriate. Certain of our manufacturing facilities
experienced an increased number of reported COVID infections
and precautionary self-isolations. No noticeable divergent trend
in the number of reported COVID infections within our
organization has been observed compared to the general
COVID trend within the regions concerned.
5S methodology
Due to the continued focus on the safety of the production
processes, Kendrion achieved good safety results across its
production plants. Certain production plants apply the 5S
methodology, which aims for the continuous improvement of a
safe working environment and working conditions. The
production plants that have implemented the 5S approach
apply a systematic process to optimize their production lines
and periodically perform 5S audits to verify compliance with the
methodology.
We undertake to consistently comply with the applicable
occupational health and safety regulations at all our locations
and in addition set own standards for improving occupational
safety. Our health and safety procedures contribute to the
advancement of selected UN Sustainable Development Goals
(SDGs), towards SDG 3 (Good health and well-being) and 8
(Decent work and economic growth).
Fair labor practices and human rights
Preserving the health and safety of our employees coincides
with our acknowledgement and endorsement of fair labor
practices and human rights as described in the Ten Principles
of the United Nations Global Compact. Acknowledging and
respecting fair labor practices and human rights are an
essential component of conveying and practicing sustainable
business standards. We do not tolerate any form of forced or
involuntary labor and respect children’s rights to education and
development. We consider ourselves a responsible corporate
citizen and take responsibility for the living conditions and
career opportunities at our locations and maintain strong ties to
the communities in which we operate. Intercultural
understanding and respect, fair working conditions, career
development, (gender) diversity and employee representation
are some of the focal points of our corporate citizenship
initiatives. These are also areas in which we aim to contribute to
the advancement of selected UN Sustainable Development
Promoting and maintaining a culture consistent with the norms
and values underlying The Kendrion Way and our Code of
Conduct are key to enabling long-term employment. The
Kendrion Way forms the solid foundation of our strategy that is
symbolically captured in a strategic house. Our culture and the
underlying values underpin all the work we do and contribute to
creating an open and inclusive atmosphere. Our Code of
Conduct provides further guidance about our cultural norms
and values, particularly the value integrity. Reference is made
to pages 61-62 (People and Culture) for more information about
The Kendrion Way and our Code of Conduct.
Goals (SDGs), towards SDG 5 (Gender equality)
and 8 (Decent work and economic growth).
With an international workforce and facilities across three
continents, we take a specific interest in promoting respect and
tolerance for different cultures, beliefs, and other characteristics
such as religion and gender. We have recorded the value of
equal opportunities and equal treatment in our Code of
Conduct. Our larger locations develop education projects that
facilitate young people’s first acquaintance with the labor
market and career development. These projects also aim to
encourage young talented (female) students to take an interest
in Science, Technology, Engineering and Mathematics (STEM)
related studies, as for Kendrion the demand for technical and
STEM skills is high.
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RESPONSIBLE BUSINESS CONDUCT
The Responsible Business Conduct pillar
focuses on business conduct and integrity,
accountability, and transparency. Material themes
for the Responsible Business Conduct pillar
include sustainable sourcing and ethical
behavior.
Sustainable sourcing
We are consistently looking for ways to increase efficiency and
transparency in our supply chain and to ensure we source our
materials in an environmentally friendly and socially viable
manner. Our understanding of sustainability and our pursuit of
long-term sustainability goals are not limited to our gaining of
energy efficiencies and reducing our carbon footprint. Our
sustainability commitments and efforts are directed at other
parts of the value chain as well. In our supply chain we do our
utmost to maintain a high level of transparency, and we are
dedicated to further enhance the current level of transparency.
At Kendrion, sustainable sourcing represents our ambition to
work with suppliers that act responsibly and with integrity.
Kendrion selects suppliers based on various sustainability
criteria and requires suppliers to sign and adhere to the
Kendrion Supplier Code of Conduct. Our Supplier Code of
Conduct includes specific requirements relevant to the
recognition of human rights, commitments to a safe working
environment, environmental protection, and responsible
business practices.
Kendrion operates as part of a supply chain with a central
focus on product development and manufacturing processes.
Kendrion and other parties forming part of the supply chain are
collectively responsible for maintaining the quality and
sustainability of the products in the supply chain. All parties
forming part of the supply chain play a role in addressing major
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issues that affect the supply chain. Kendrion intends to play
a meaningful role in the supply chain in which it is active.
To achieve meaningful results, it is of great importance that
Kendrion continues to engage in dialogue with its suppliers and
continues to consider performance with respect to sustainability
in its supplier selection and assessment.
The sourcing of certain minerals such as tantalum, tin,
tungsten, and gold (i.e. so-called conflict minerals) has been
linked to human rights abuses or widespread violence. We
perform an inquiry into our supply chain to confirm that
materials supplied are conflict-free and that suppliers are not
aware of non-compliance in their supplier base. We do not
source any tantalum, tin, tungsten, or gold. We request our
suppliers to complete a conflict mineral reporting template or
similar material statement to evidence compliance. We also
expect our suppliers to adhere to the principles and standards
included in our Supplier Code of Conduct, which also contains
restrictions on the use of conflict minerals.
Permanent magnets are used in some of Kendrion’s products.
The volumes of these magnets used by Kendrion are limited,
but Kendrion cannot avoid the use of permanent magnets
altogether, as the use of permanent magnets in products
increases their functionality and certain product specifications,
such as the torque for industrial brakes. A category of
permanent magnets contains several rare earth metals. The
mining and of refining of rare earth metals is energy intensive.
Kendrion strives to use as little of these permanent magnets.
Our facilities are supported by an extensive supplier network.
Frequently used materials are steel, aluminum, copper, and
plastics. In many cases, semi-finished products are purchased
based on specifications of Kendrion’s customers. Kendrion
used 1,761 tons of copper (best estimate) in the manufacture
of its products in 2021 (2020: 1,428).
Supplier Code of Conduct and audits
We are committed to ensuring that our responsible sourcing
standards, compliance with laws and regulations as well as
environmental and social standards are maintained along our
supply chain. To minimize compliance, environmental and social
risks in our supply chain, we apply a standardized due diligence
process, including completion of (material) compliance
statements and use of other checks and validations. All new
suppliers are also required to adhere to the principles and
standards of our Supplier Code of Conduct, which explicitly
includes the right for Kendrion to carry out an audit at the
supplier’s site to verify compliance with the standards and
principles of our Supplier Code of Conduct.
Kendrion regularly conducts audits to review whether suppliers
comply with the standards and principles of the Supplier Code
of Conduct. The supplier audits are internal audits by Kendrion
employees based on an internal procedure that prescribes the
collection of CR documentation of the relevant supplier in the
case the supplier is ISO certified and the use of standardized
self-assessment questionnaires in the case the supplier is not
ISO certified. Audits that reveal that a supplier does not meet
the requirements of the Supplier Code of Conduct are followed
by a meeting to ask the supplier to prepare a remediation plan.
Failure to adequately follow up the remediation plan may result
in the termination of the relationship with the relevant supplier.
The results of the 26 (2020: 28) supplier audits conducted in
2021 have been encouraging, like in 2020 there were no
suppliers that did not fulfil the recommended requirements for
compliance with the Supplier Code of Conduct.
Through the approach and initiatives set out above, Kendrion
actively encourages its suppliers to take responsibility in
addressing issues that affect the supply chain.
Ethical behavior
Kendrion believes it is important that all activities are conducted
with integrity and in a transparent manner. To this end, Kendrion
fosters a culture in which shared norms, universal ethical values
and behaviors are the standard. Shared norms, ethical values
and expected behaviors are laid down in a set of internal
policies and procedures. In addition to setting norms, values
and expected behaviors, Kendrion’s policies and procedures
are aimed at ensuring compliance with applicable laws and
regulations.
Sales &
Distribution
Industrial
markets
Automotive
markets
Manufacturing/
Assembly
Sourcing parts
& materials
(machined
parts, copper,
steel, aluminium,
plastics)
Design &
Engineering
R&D
Simplified supply chain overview Kendrion:
Customers
(Tier 1/OEM and
after markets)
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Key internal policies and procedures include: Code of Conduct,
Anti-Bribery and Anti-Corruption Policy, Speak-up procedure,
Competition Compliance Manual, Insider Trading Code, Data
Protection Governance Guidelines, Personal Data Breach
Reporting Procedure, Supplier Code of Conduct and related
internal policies and procedures.
Our Code of Conduct builds upon the values of The Kendrion
Way, particularly the value integrity. The Code of Conduct is
about bringing together over 2,700 people with 39 different
nationalities from multiple Kendrion locations around the globe
that operate under The Kendrion Way and together form the
Kendrion brand. The Code of Conduct provides unity and sets
guidance for business decisions and principles of ethical
behavior. It is about consciousness and taking the right
decisions in our everyday business lives. We expect all our
employees to do what is ethically right and legal, and to not
only live by and respect the principles set forth in the Code of
Conduct, but to also convey the message underlying the Code
of Conduct. Education, training and providing concrete
examples of expected behaviors, dilemmas and actions are key
to ensuring continued compliance with our values.
Kendrion does not tolerate bribery or any form of corruption.
Bribery may involve the offering, promising, or giving of
payments or other benefits to any person (including
government officials or public officials) to improperly influence
a business outcome, but it also means accepting payment or
benefits offered to improperly influence a business outcome.
Integrity of financial reporting is also a key principle.
The Kendrion Anti-Bribery and Anti-Corruption Policy
specifically addresses these matters.
Kendrion considers it essential that every employee
understands, complies with, and conveys the shared norms
and universal ethical values and behaviors as laid down in the
internal policies and procedures. Our policies and procedures
are fundamental to ensuring responsible business conduct. It is
the responsibility of senior management to lead by example
and to ensure that all Kendrion employees are aware of and
behave in accordance with the spirit and the letter of Kendrion’s
policies and procedures.
Taxes
Our tax policy is based on the core values embedded in the
Code of Conduct and aligned with our strategy and the notion
of responsible business conduct.
Taxable profits are recognized in jurisdictions in which value is
created, in accordance with the applicable tax regulations and
standards, including the OECD Guidelines for Multinational
Enterprises and local transfer-pricing and other applicable tax
regulations. Kendrion does not seek to establish aggressive tax
driven structures that are not compliant with the letter and spirit
of applicable tax regulations. This means that Kendrion does
not pursue any aggressive tax planning or establishment of
entities in tax haven jurisdictions solely for tax optimization
purposes and without commercial substance. Reference is
made to pages 79-80 (Corporate Governance Report) for more
information about our tax policy.
The Code of Conduct is about bringing together over
2,700 people with 39 different nationalities from multiple
Kendrion locations around the globe that operate under
The Kendrion Way and together form the Kendrion brand.
Year
Be discrete
Be safe
& respectful
Be careful
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Sustainable development goals
Kendrion aims to contribute to the advancement of several
selected SDGs.
Kendrion previously conducted a review on where it can best
contribute to the advancement of SDGs. This involved careful
consideration of all SDGs, while taking account of dialogues
with stakeholders and findings of the sustainability survey
performed in 2018. The outcome of the materiality assessment
performed in 2020, which also included a sustainability survey,
did require nor justify substantive amendments to Kendrion’s
prior determination that SDGs 3 (Good health and well-being),
12 (Responsible consumption and production) and 13 (Climate
action) are the SDGs on which Kendrion can have the greatest
positive impact.
Kendrion will continue developing best practices and standards
– and where appropriate qualitative and quantitative targets –
that support the advancement of the selected SDGs.
SDG 3 – Good health and well-being
Kendrion has strong HSE policies within its
organization and each production plant implements
tailored initiatives to further enhance their HSE standards
depending on plant-specific needs, production lines and
SDG 12 – Responsible consumption and
production
For all its production processes, Kendrion is
committed to minimizing waste and disposing of waste in an
environmentally responsible manner. Kendrion’s environment
management systems are in accordance with the global
certification ISO 14001 (all production plants except for
technologies. Through Kendrion’s Responsible Product
Portfolio (which includes Products that Improve Health,
Products that Reduce Climate Impact and Products that Keep
you Safe), Kendrion contributes the advancement of healthier
lives and improvement of well-being for all.
Mishawaka are ISO 14001 certified). As part of the ISO 14001
certification process, new waste reduction measures must be
implemented each year. Through the implementation of a waste
management hierarchy in harmonized waste management
practices, Kendrion is committed to contributing to the
advancement of sustainable production patterns.
SDG 13 – Climate action
Kendrion has established strategies and plans to
increase energy efficiency and use of renewable
energy and reduce CO
2
emission. Concrete and measurable
targets support the strategies and plans. To mitigate the effects
of climate change, Kendrion focusses resources on the
development of sustainable products and the improvement of
manufacturing processes. With a diverse product portfolio
Kendrion contributes to creating a sustainable future as it is
part of the increasing demand for clean energy and the
accelerating development of electrification of industrial
processes. These key trends in electrification particularly drive
the demand for Kendrion’s products in wind power, automated
warehouses, and inductive heating technology that support the
transition for certain oil and/or gas enabled industrial processes
to electrical solutions. Kendrion’s smart actuation technology,
supports the transition to sustainable mobility (i.e. Autonomous,
Connected, Electric and Shared driving). Kendrion’s largest
production plants maintain energy management systems in
accordance with ISO 50001.
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Reporting principles and external verication
Being transparent and accountable is fundamental to the way
in which Kendrion operates. Our approach to reporting
enhances discipline to our sustainability and responsible
business practices. It ensures that we are aligning our activities
with our strategic objectives and business values. Our
sustainability reporting shows whether our activities and
initiatives meet our 2019-2023 sustainability target framework.
The scope of Kendrion’s non-financial reporting is based on
the information requirements of our key stakeholder groups.
To ensure that Kendrion meets its information requirements
towards its stakeholders, Kendrion performs materiality
analyses at regular intervals. The most recent materiality
analysis was carried out in 2020 as further described on
page 41 of this Annual Integrated Report.
Kendrion adheres to a solid validation and reporting process
supported by an appropriate control framework to safeguard
the quality and accuracy of the non-financial data collected.
Selected sustainability performance targets are subject to a
limited assurance review by Deloitte Accountants B.V. Please
refer to pages 206 and 207 of this Annual Integrated Report for
reporting periods, definitions, scope and limited assurance
review.
Kendrion’s Executive Board expresses its continued support for
the UN Global Compact and Kendrion’s ongoing commitment
to the initiative. This Annual Integrated Report provides
a description of actions that Kendrion has taken and the
measures Kendrion intends to take to implement the
Ten Principles of the UN Global Compact in each of the four
areas (human rights, labor, environment, anti-corruption).
Our approach to reporting enhances discipline to our
sustainability and responsible business practices.
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Stakeholders
Local communities
Kendrion is making a positive
contribution to the reduction of social
and economic gaps. Kendrion
appreciates the importance of
maintaining constructive and
appropriate contacts with local
communities and authorities.
Suppliers
Kendrion is consistently looking for
ways to increase transparency in the
supply chain and expects its suppliers
to adhere to the standards of the
Kendrion Supplier Code of Conduct and
follows a consistent approach towards
the performance of supplier audits to
verify compliance. These efforts
contribute to a continuous improvement
in compliance with the Supplier Code of
Conduct.
Customers
Kendrion’s customer base comprises
industrial companies that use our
components to manufacture a range of
industrial applications as well as Tier 1
suppliers and OEMs in the automotive
sector. Kendrion’s customers are
increasingly implementing sustainability
requirements for their suppliers.
Kendrion focuses on consistent
compliance with these requirements.
Technical universities and
institutions of higher
technical education
Active engagement with students is key
to understanding their views and
observations on sustainability and forms
a valuable platform for the exchange of
knowledge and experiences. Dialogues
with students are often inspirational and
stimulate the formulation of innovative
sustainability goals and ambitions,
including our ambition to encourage
young talented female students to take
an interest in Science, Technology,
Engineering and Mathematics (STEM)
related studies. These dialogues also
raise awareness among students about
sustainability and its importance.
Employees
Our talented and highly skilled
employees play a crucial role in the way
in which Kendrion operates its business.
Kendrion fosters a culture that
empowers its employees to reach their
full potential and to achieve the best
results. As reflected in ‘The Kendrion
Way’ and the Code of Conduct we
create an open and inclusive culture to
recruit, motivate and retain a highly
diverse workforce that reflects the
communities in which we operate. An
engaged and committed workforce
contributes to the achievement of
Kendrion’s financial and non-financial
targets.
Shareholders
The endorsement of sustainable
development and addressing
environmental, social and governance
(ESG) related issues is becoming
increasingly important for Kendrion’s
shareholders. Kendrion engages with its
major shareholders and financiers, not
only concerning Kendrion’s global
sustainability program and its material
topics and objectives, but also with
respect to the ESG policies and
activities of its major shareholders and
financiers. Kendrion provides adequate
transparency towards its shareholders
and financiers about climate change
and reducing the negative impact of
climate change and addressing other
social issues, strategy and financial
performance.
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Local communities
Communication resources and channels
Local meetings, Kendrion websites, open days
Engagement with local communities takes place at regular intervals
Topics discussed
Communities’ participations and investments
Relevance to Kendrion’s global sustainability program
Community connection, involvement and participation
Suppliers
Communication resources and channels
Supplier Code of Conduct, supplier sustainability and quality audits,
Kendrion websites, supplier and contract meetings
Engagement with suppliers takes place at regular intervals
Topics discussed
Quality of products and services, Kendrion’s global sustainability
program and objectives, management of supply chain risks (e.g.
material shortages) and joint pursuit of improvements in the supply
chain, responsible business conduct, Supplier Code of Conduct,
waste, energy, water use, use of rare earth materials, conict minerals
Relevance to Kendrion’s global sustainability program
Obtain views and observations concerning sustainability from the
supplier’s perspective (incl. the improvement of transparency in the
supply chain), further insight into supplier needs and expectations,
sharing experiences and best practices, continuous improvement
and development of sustainability contributions
Customers
Communication resources and channels
Customer and sales meetings, Kendrion websites, contract
meetings, press releases
Engagement with customers takes place at regular intervals
Topics discussed
Quality of products and services, Kendrion’s global sustainability
program and objectives, customer satisfaction, waste, energy, water
use, use of rare earth materials, conict minerals, responsible
business conduct, ISO and IATF certication
Relevance to Kendrion’s global sustainability program
Obtain views and observations concerning sustainability from the
customer’s perspective, further insight into customer needs and
expectations, sharing experiences and best practices, continuous
improvement, and development of sustainability contribution
Technical universities and
institutions of higher technical
education
Communication resources and channels
Presence at fairs, organization of student events, projects and
internships engagement with universities, schools and institutes
takes place at regular intervals
Topics discussed
Kendrion’s global sustainability program and objectives (incl.
advancement of gender diversity), also with a view to creating
awareness and stressing the importance and relevance of
sustainability
Relevance to Kendrion’s global sustainability program
Obtain views and observations concerning sustainability of new
generation and raise awareness
Employees
Communication resources and channels
Works Council meetings, meetings with employee representatives,
employee satisfaction and culture surveys, workshops, training
courses, intranet, internal personnel magazine, e-mail newsletters,
feedback meetings, staff and townhall meetings
Engagement with employees takes place on a daily basis
Topics discussed
Kendrion’s global sustainability program and objectives, particularly
regarding health and safety, employability, training and development,
employee satisfaction and company culture, responsible business
conduct, compliance and ethical behavior
Relevance to Kendrion’s global sustainability program
Obtain views and observations concerning sustainability from the
employee’s perspective, further insight into employees’ capabilities
and motivations, strengthening business sustainability culture,
enhancing employee commitment, participation, and awareness
Shareholders
Communication resources and channels
General Meeting of Shareholders, analyst and investor meetings,
conferences, Capital Markets Day, press releases, Kendrion’s
corporate website
Engagement with shareholders takes place at least on a quarterly
basis
Topics discussed
Kendrion’s global sustainability program and objectives
Relevance to Kendrion’s global sustainability program
Obtain views and observations concerning sustainability from the
investor’s perspective (incl. climate change and reducing the
negative impact of climate change and addressing other social
issues), further insight into shareholders needs and expectations,
sharing experiences and best practices, continuous improvement,
and development of sustainability contributions
The table below describes the communication resources and channels per stakeholder and their relevance to Kendrion’s global sustainability program.
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Value creation model
1
Normalized for one-off costs and benefits. The bridge from reported to normalized figures can be found on page 38.
2
Invested capital excluding intangibles arising from acquisitions.
Value creation model
Business output¹
Revenue
EBITA
463.6 mln
31.9 mln
20.6 mln
€
€
€
OUTPUT
Relative decrease of energy
consumption compared
to 2020
Relative decrease
of CO
2
emissions
compared to 2020
17.9%
8.0%
Natural Capital
Number of CSR
supplier audits
26
Responsible Business Conduct
Accidents
9.2 accidents per 1,000 FTE
509 LTI (days)
Illness rate
4.7%
Social and Human Capital
ENTERPRISE
RISK
MANAGEMENT
GLOBAL
LEGAL
COMPLIANCE
AND
GOVERNANCE
FRAMEWORK
REDUCED
CLIMATE IMPACT
INCREASED SAFETY
AND MOBILITY
INCREASED
COMFORT
INCREASED
HEALTH
OUTCOME
Net working capital
Invested capital
2
3.5 mln
64.9 mln
205.2 mln
€
€
€
Financial capital¹
Power
Fuel oil
Natural gas
Copper
24,610,300 kWh
614,130 kWh
13,132,173 kWh
1,761 tons
Natural capital
Solutions and products
> 10,000
Manufactured capital
2,728
Human capital
FTEs
INPUT
Net prot before
amortization
STRATEGIC INTENT
AUTOMOTIVE
CHINA
INDUSTRIAL
BRAKES
CHINA
ACTUATORS
AND
CONTROLS
CHINA
THE KENDRION WAY
ADDED VALUE
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2,728
Total number of
employees in FTEs
at 31 December
(number FTE)
2020 2,456
1,385
Direct employees
(number FTE)
2020 1,214
1,127
Indirect employees
(number FTE)
2020 1,100
216
Temporary
employees
(number FTE)
2020 142
2,659
Total number of
employees
at 31 December
2020 2,468
1,267
Women employed
(number)
2020 1,220
1,392
Men employed
(number)
2020 1,248
People & Culture
Please refer to the section ‘About the sustainability report’ on pages 206 and 207 of this Annual Integrated Report for reporting periods, denitions, scope and limited assurance review.
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411
Employees with
a fixed-term
contract
(number)
2020 322
18
Overall employee
turnover rate
(%)
2020 17
43
Average age of
all employees
2020 43
11
Average number of
years’ service
2020 12
4.7
Illness rate
¹
(%)
2020 4.4
50.5
Wage costs per FTE
(EUR 1,000)
2020 46.9
0.3
Training costs
(as a % of wage
costs)
2020 0.3
¹
Please refer to the section ‘About the sustainability report’ on pages 206 and 207 of this Annual Integrated Report for reporting periods, denitions, scope and limited assurance review.
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Our people and culture
At Kendrion, we maintain a culture and environment that
empowers everyone to reach their full potential. Focussing on
human capital drives our performance and influences the
sustainability of our operations. We empower our people to put
their ideas into practice and to increase their engagement and
performance. The continued development of our employees is
an integral factor in creating long-term value for our customers
and other stakeholders. We are committed to becoming the
industry’s employer of choice. To achieve that we preserve a
culture of sustainable high performance and foster an open and
inclusive atmosphere to attract, select, recruit, develop,
motivate, and retain a talented and diverse workforce that
reflects the communities in which we operate. We provide our
people ample opportunities for career development and
personal growth in a safe and high-quality work environment.
In this context, we focus on the following areas:
■ Promoting and maintaining a culture consistent with the
norms and values underlying The Kendrion Way and our
Code of Conduct;
■ Developing leadership talents and capabilities;
■ Advancing diversity;
■ Fair labour practices and human rights.
The Kendrion Way and Code of Conduct
Kendrion’s strategy for realizing long-term value creation is
symbolically captured in our strategic house that provides
direction and uniformity within a clear structure. Creating long-
term sustainable value with a lean and focussed organization
and providing a high-quality work environment for our
employees are key to our strategy. The foundation of our
strategic house is our culture, since no building is stable
without a strong foundation, regardless of the strength of its
building blocks. Our culture and the underlying values underpin
all the work we do. Key values exemplifying our culture are
portrayed in The Kendrion Way: ‘A global team of actuator
specialists, with courage to act, curiosity to learn from
successes and mistakes, confidence to share, and open to
feedback’. The objective of defining The Kendrion Way is to
give our employees clear guidance as to the culture we foster
within our company, irrespective of location, level of
responsibility or functional role. The Kendrion Way provides a
consistent approach towards realising our ambitions, and – as
such – is the foundation on which we build Kendrion’s future.
Our Code of Conduct is intended to further develop and
implement our cultural norms and values, particularly the value
integrity. The Code of Conduct sets guidance for our business
decisions and provides principles of ethical business behaviour.
The Code of Conduct contains obvious and universal standards
and expected behaviours for all employees. The Code of
Conduct can be found on the corporate website at
www.kendrion.com.
Increasing awareness, education, training, and providing
concrete examples of expected behaviours, dilemmas and
actions are key to promoting and preserving our culture.
Dedicated value teams have been set-up to increase
awareness and to support employees in their value journey
and to help understand what each value means to them and
the organization. A mix of interactive trainings and learning
We are Kendrion
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platforms is available to help our employees live and breathe
the values of The Kendrion Way and the Code of Conduct.
Talent and succession management
A diverse, talented and ambitious workforce is key to the
successful execution of our strategy. Our talent and succession
management strategy focuses on the following key areas:
attracting, selecting, recruiting, and retaining talent, engaging
employees, enabling career development and providing
competitive compensation and benefits schemes.
High-quality training and career development form an integral
part of our talent and succession management strategy.
We provide a broad spectrum of learning and development
tools and opportunities and we foster a culture of trust and
recognition as reflected in The Kendrion Way and our Code of
Conduct. In 2021, we expanded our learning and development
tools with the e-learning platform of Goodhabitz. Goodhabitz
provides an online training platform that is easily accessible for
our employees. The e-learning platform of Goodhabitz offers
a wide variety of courses on topics from personal strength
to inspirational leadership, health, and well-being.
Effective succession planning is another priority within our talent
and succession management strategy. Our talent management
and succession-planning tool identifies and facilitates the
monitoring and review of our employees. More specifically,
the tool enables a structured development of our employees,
including our future leaders who have the talent and potential
to take on senior positions. The tool also facilitates the
consistent carrying out of performance reviews by providing
clear and structured insight for employee development.
Our tool includes a competency framework that defines how
we expect our employees to fulfil the tasks and responsibilities
in line with their job role. Together with the skills required for
a certain job role, the competency framework forms the basis
of our performance reviews and determines the requirements
for future positions. The competency framework is updated
as appropriate to increase effectiveness and improve the
performance review process. It helps our managers and
employees to better determine career paths and needed
training and development. With our talent management and
succession-planning tool we create an environment for our
employees to grow, perform and succeed in their careers.
Our talent management and succession planning tool has
a global reach and the number of employees monitored and
reviewed through the tool has increased consistently since
its introduction. To date approximately 270 employees are
included in the tool and this number is expected to continue
to increase.
New employees are recruited through various channels,
including employee referrals, online platforms such as LinkedIn
and other specialized job boards and external recruitment
agencies. If a vacancy arises, Kendrion will continue to identify
and look for internal and external candidates with a diverse
range of relevant competences and skills and from a variety
of backgrounds, nationalities, ethnicities, religion, ages and
gender. If external recruitment consultants are engaged,
Kendrion provides search instructions in line with the diversity
principles it endorses.
Our annual employee turnover rate was 18% (2020: 17%).
Our annual employee turnover rate is calculated by dividing
the number of employees who left Kendrion during the year
by the average number of employees during the year.
Attracting and retaining talent
We constantly do our utmost to attract, select,
recruit, develop and retain the right talent. Our
diverse talent recruitment initiatives focus on
recruiting, hiring, and promoting candidates with
a diverse range of relevant competences and skills
and a healthy mix of backgrounds, nationalities,
ethnicities, religion, ages, and gender. We provide for
transparent recruitment processes with clear and
consistent communication to all candidates.
Kendrion acknowledges and respects the principle
of equal opportunity, regardless of a candidate’s
gender, age, religion, ethnicity, nationality or
background. No form of discrimination is tolerated.
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Engaging employees
An engaged and committed workforce is key to achieving our
ambitions. We aspire to preserving an inspiring and high-quality
work environment for our employees. This becomes ever more
important in a market where it is challenging to attract certain
specialists, such as in software and electronics, and where
remote or hybrid working models imposed as a result of the
COVID-19 pandemic, have become a new reality.
We are committed to offering opportunities to our employees to
work on exciting tasks and projects in an engaging work
environment. Another essential component of Kendrion’s efforts
to maintain an engaged and committed workforce is the
offering of a wide range of measures and tools aimed at
nurturing a healthy, safe and sustainable workplace culture,
including the organization of annual ‘Health Days’, medical
check-ups and COVID-19 vaccination and testing facilities,
sports opportunities and other events. A prudent work-life
balance is also important to creating and maintaining employee
satisfaction and engagement. We support employees to
balance their personal lives with Kendrion’s dynamic and
performance driven work environment. Establishing a prudent
work-life balance and continue paying sufficient attention to our
employees’ mental health has increased in relevance due to
the continuing COVID-19 pandemic and the related restrictive
measures impacting the lives of all our employees.
Offering the opportunity to give and receive feedback is
imperative for maintaining an engaged and committed
workforce. This is also why we conduct a Kendrion-wide
employee satisfaction and culture survey at regular intervals.
The most recent employee satisfaction and culture survey was
conducted end of 2018 and completed early 2019. The survey
revealed – amongst others – the strong connection employees
feel towards Kendrion as employer. The preparations for a
subsequent Kendrion-wide employee satisfaction and culture
survey have commenced and the survey results will become
available early 2022.
Enabling career development
We acknowledge and respect the principle of equality of
opportunity for career development, regardless of background,
nationality, ethnicity, religion, age or gender. To maximise the
potential of our employees and to meet their development
needs, we advocate the principle of internal mobility and aim
to fill vacancies with internal candidates. Internal moves are
considered beneficial to the development of our people by
providing them with new and challenging opportunities and
experiences, while at the same time retaining knowledge within
the organization. Moreover, our culture in which the sharing of
ideas, knowledge and expertise and training on the job are
encouraged, contributes positively to the development of our
employees. In addition to new tools such as the e-learning
platform of Goodhabitz, our ‘Learn and Share’ The Kendrion
Way team is responsible for a variety of learning and
development programs targeted to advance skill sets and
leadership capabilities.
We encourage the advancement of young talent to
management roles in our business. The Kendrion High Potential
program is our global learning and development program and
provides our young talents with the potential for management
roles access to various modules. The High Potential program
offers development opportunities that match business and
individual needs such as strengthening personal competencies.
Standard modules of the High Potential program are: individual
personality and development, teamwork dynamics, finance,
conflict management and people management. Additional
modules are added as deemed appropriate, e.g., diversity and
inclusion, strategy and conceptual skills. In 2021 a new group
of talented and ambitious employees has been selected to
participate in the new edition of the High Potential program.
The role and responsibility of senior management is key to
creating and maintaining an inspiring learning environment that
stimulates innovation. Leadership and personal development
will always be themes of importance. Developing personal
leadership, building internal knowledge networks, encouraging
innovation and agility are important values in our management
programs and development initiatives.
Compensation and benefits
Kendrion strives to have compensation and benefits schemes
that are in line with industry standards and local practice to
attract, select, recruit, and retain talent. Our compensation and
benefits schemes are designed to create transparency and
fairness in the structure of both fixed and variable remuneration,
while offering a competitive package with appropriate upside
potential, linked to performance. Kendrion’s compensation
schemes include performance-based compensation and share-
based compensation for eligible employees. These programs
aim to ensure fair and attractive compensation and to
encourage employees to work for Kendrion’s long-term benefit.
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Diversity
We believe that diverse and inclusive organizations drive
performance and innovative results. They also become more
attractive employers and thereby increase their ability to attract
and retain talent. Talent, ambition, and commitment are key
to realising our growth strategy. We want to provide an
environment where all employees have the equal opportunity
to develop and contribute to the realization of our strategy,
regardless of their age, background, gender, nationality,
ethnicity, religion or any other (protected) characteristic.
Diverse and inclusive teams make our organization more agile,
creative and innovative. Enabling a diverse workforce – in terms
of gender, nationality, and background (i.e. education, (work)
experience), age, etc. – also gives us access to a larger talent
pool. Having the right mix of people in the right jobs, with the
right capabilities, encourages better decision-making and helps
us to grow our business.
As part of the Social and Human Capital value creation pillar of
our global sustainability program, we are committed to creating
an environment that is rich in diversity and that empowers all
employees. To fuel our ambitions we established a diversity
task force in 2020 consisting of participants of the
Key priorities of our strategic diversity framework include:
■ Recruitment of diverse employees – ensuring that our
recruitment process is free of bias, and clearly signals our
interest in a diverse group of candidates and support the
application from a diverse group of candidates, and
accordingly place expectations on our recruitment team;
■ Developing and maintaining a solid pipeline of a
diverse group of talents;
■ Retention and promotion of talents of diverse
backgrounds, nationalities, gender etc. – covering
various aspects from reward, recognition to benefits, but
also work allocation, performance management and career
development;
■ Advancement into management roles – preserving an
environment that allows for a diverse group of talents to
grow into management roles, technical roles, and other
leadership roles.
While our focus remains on a broad definition of diversity, our
strategic approach is directed at the improvement of gender
balance specifically in management roles, technical roles, and
other leadership position. Though building engagement around
gender equality amongst managers and other (senior)
employees and the development of concrete actions and
initiatives and by providing insight into possible barriers, we aim
to increase gender diversity across the organization until it is
sustainably gender balanced. Moreover, consistent
communication and promotion of gender diversity, as well as
prioritising diversity in our strategy are essential to advancing
diversity within our organization.
High Potential program. The diversity task force carried out
a comprehensive review structured along the following themes:
■ Analysis: company specific review;
■ Public perception and image: gaining insight into Kendrion’s
reputation to attract and retain a diverse group of
employees;
■ Attractive employer: employer branding, including work
environment and conditions;
■ Recruitment and retention: initiatives aimed at the
recruitment and retention of a diverse group of employees.
The outcome of the diversity review has been presented to the
Executive Board and the Supervisory Board and has served as
the basis for the development of a new strategic diversity
framework, which was launched in 2021. Our updated strategic
diversity framework is linked to the employee lifecycle through
which various aspects of diversity are encountered. The
employee lifecycle is used to unravel and address these
aspects and the complexity around (gender) diversity, especially
for a company like Kendrion where the demand for technical
and Science, Technology, Engineering and Mathematics (STEM)
skills is high.
EMPLOYEE LIFECYCLE
DIVERSITY MATTERS
RECRUITMENT
counteract
existing barriers
RETENTION
reward,
recognition
& benefits
ADVANCEMENT
INTO
MANAGEMENT
ROLES
it drives performance & innovative results
INTENT ALIGNED WITH ACTION
Management awareness, commitment and behaviour
The 'fingerprint tree' logo, which was
chosen by all employees to represent
diversity within Kendrion, embodies a
tree that can only keep growing and
gaining strength if it's fed by the talent,
creativity, commitment, and unique
qualities of each employee. Having the
right mix of people with the right
capabilities in the right positions
encourages better decision-making
and helps us grow our business.
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In 2021, a global and comprehensive diversity data analysis has
been carried out, providing a detailed breakdown by Business
Group and different senior management levels and leadership
roles. The outcome of the data analysis will serve as a basis for
the development of tailored diversity target-setting in the
following categories:
■ Female percentage in new hires and promotions;
■ Female percentage per function group (e.g. STEM and
other function groups).
Kendrion’s workforce comprised 39 nationalities (2020: 40)
employed in 10 countries (2020: 11) in 2021. 48% of our
workforce is female. We have a healthy balance of
backgrounds, nationalities, and gender across the organization
as a whole.
Fair labour practices and human rights
Respecting human rights is fundamental to a sustainable
society and an essential component of promoting sustainable
business practices across our organization and in our dealings
with our customers, suppliers, and other business partners.
Kendrion acknowledges and endorses the human rights of all
people as described in the Ten Principles of the United Nations
Global Compact. We acknowledge and respect children’s rights
to education and development and the applicable minimum
employment age and related conditions consistent with
applicable statutory requirements. Kendrion does not tolerate
any form of forced or involuntary labour. No material human
rights or labour issues were raised in relation to our activities
in 2021.
Kendrion does not accept any action, conduct or behaviour
which is disrespectful, humiliating, intimidating or in any other
way hostile or inappropriate. Actions, words, jokes or
comments based on a person’s background, belief or any other
characteristic such as gender, age or religion are not tolerated.
We expect our suppliers to recognize human rights and to
ensure that they are not involved in human rights violation or
abuses. Our suppliers are required to confirm and acknowledge
their compliance with the standards and principles of
sustainable sourcing – which include the recognition of human
rights – by signing the Kendrion Code of Conduct for Suppliers.
The Kendrion Code of Conduct for Suppliers can be found on
the corporate website at www.kendrion.com.
Employee representation
Kendrion respects freedom of association and the right to
collective bargaining. Works councils and employee
representatives have been appointed at Kendrion’s largest
operating companies in Germany as well as Kendrion’s
operating companies in the Netherlands, Romania and Austria.
The respective works councils and employee representatives
are involved in a wide range of employment, health & safety and
social issues, in accordance with local labour legislation.
Approximately 72.4% (2020: 62%), this includes 3T,
the Dutch electronics and embedded systems developer that
was acquired in September 2021 of all Kendrion employees
are represented by these works councils and employee
representatives. Approximately 68.9% (2020: 67%) of the
employment contracts in Germany and Austria are governed
by or follow the collective bargaining agreements for the metal
industry in the country concerned.
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Outlook
The COVID-19 pandemic dominated our operational and
business decisions throughout 2021, as it did in 2020. The
initial optimism that worldwide vaccination programs would
bring the pandemic under control over the course of the year,
turned out to be premature. The year started with a sharp
recovery of global demand. In the second half however, it
became clear that the sudden increase in demand had
stretched global supply chains, in some cases beyond breaking
point. So, in 2021, we traded the demand crisis from 2020 for
a supply chain crisis.
When COVID caused most of the world to lock down in 2020,
we were faced with a demand crisis. Economic activity was
low, and revenue dropped. This drop in demand was
somewhat predictable, allowing governments across the globe
to take mitigating measures and companies to plan and focus
on cash preservation, cost, and cashflow. In 2021, economic
activity recovered, and consequently, so did demand. In fact,
demand rocketed, causing shortages of all kinds of products –
from semiconductors to steel, plastics, building materials,
shipping containers, oil, natural gas, even labour. This supply
crisis disrupted the entire economy. Less predictable and more
volatile than the 2020 demand crisis, it put upward pressure on
raw materials, compressing gross margins. It also affected
working capital as customers across the supply chain expected
rapid delivery, forcing companies to keep stock of raw materials
that are not supply-constrained. In summary, the market
environment in 2021 was more volatile and in some ways more
difficult than that of 2020.
Against this backdrop, Kendrion had a good year, navigating the
unpredictable markets well. Kendrion is an actuator company
with products that help advance the global push towards
electrification and clean energy. Our balanced, diverse product
portfolio supports this transition, without being overly dependent
on any specific vertical or market segment. Our products include
brakes for wind power, robotics, automated warehouses; sound
actuators for electrical vehicles; and inductive heating technology
that supports the switch from oil and gas to electrical solutions in
industrial applications. In all our Business Groups, and in China,
the broad push towards electrification has determined our
product development decisions over the past couple of years
and will continue to do so.
This focus on energy transition also informs our M&A decisions.
The acquisition of INTORQ in 2020 has substantially
strengthened our position in the industrial brakes market.
As our industrial brakes are generally sold in tandem with
an electromotor, the accelerating energy transition towards
electrification provides us with considerable opportunities in
a fast-growing market. The acquisition of Dutch electronics
Growing opportunities
The acquisition of Dutch electronics and embedded
systems developer 3T in September 2021, offers
significant growth potential for our Industrial business.
and embedded systems developer 3T in September 2021,
offers significant growth potential for our Industrial business.
3T’s expertise perfectly complements the control technology
activities of our Business Group Industrial Actuators and
Controls (IAC). 3T also strengthens our software and electronics
development capabilities, which will benefit our Automotive
Group, and more specifically the development of our sensor
cleaning and sound actuation platforms. Integration of 3T has
started; we already see a positive impact on the Group
profitability.
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OUTLOOK
We are well positioned to continue the growth shown in 2021.
To accommodate anticipated growth in China, we started the
construction of a 28,000 m
2
manufacturing facility at Suzhou’s
Industrial Park, a premier location for technology and advanced
manufacturing companies. Kendrion’s operations in Suzhou
and Shanghai will be integrated in the new building.
We have also made significant progress upgrading our IT
infrastructure and continued to build our culture of global,
seamless cooperation: ‘The Kendrion Way’.
As we enter 2022, in Industrial Brakes, we expect to benefit
from the global push towards electrification, driving demand for
our products in wind power, robotics & automation, forklift
trucks, AGVs and more. We have leading positions in all these
segments and expect to benefit from strong and long-lasting
underlying growth trends. In China, our new manufacturing
facility will accommodate our large and growing project
pipeline. IAC will continue to focus on strong cash generation
and on investing in a growing list of opportunities in segments
like inductive heating for industrial processes, energy
distribution, control technology, nuclear power, and industrial
locks.
The broad disruption of the automotive industry continues.
The proliferation of Autonomous, Connected, Electric, and
Shared mobility (ACES), in combination with the ongoing push
for greater safety and comfort, presents the automotive industry
and Kendrion with substantial opportunities.
Kendrion Automotive Group, with significant commercial and
technical momentum, will put even more focus on products
that benefit from these changes, such as its AVAS sound
system for electric cars, valves for smart active damping
systems, and a turnkey sensor cleaning solution in a close and
exclusive partnership with a leading Tier 1 automotive supplier.
The economic outlook for 2022 remains uncertain as the
COVID-19 pandemic continues to have a significant impact on
global economic activity including supply chains. We expect the
unpredictability of our markets in 2022 to remain. Looking
beyond that volatility, the accelerating global transition towards
cleaner forms of energy such as electrical power, fuel cells and
nuclear power presents Kendrion with a growing list of
opportunities. We are confident that our strong position in the
growth markets of Industrial Brakes, selected segments of IAC,
Automotive and China will help deliver our medium-term
financial targets of 5% organic growth between 2019 and
2025, an EBITDA of at least 15% in 2025 and a ROIC of at
least 25% in 2025.
The accelerating global transition towards cleaner forms of
energy such as electrical power, fuel cells and nuclear power
presents Kendrion with a growing list of opportunities.
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OUTLOOK
Contents Profile Strategy Report of the Executive Board Report of the Supervisory Board Financial statementsOUTLOOK
The COURAGE to act while dealing with uncertainties
Effective risk management is key to executing Kendrion’s
strategy, achieving long-term value for Kendrion’s stakeholders,
protecting the company’s reputation and ensuring good
corporate governance. Kendrion promotes local
entrepreneurship and empowers local management to exercise
their associated discretionary powers. Kendrion’s risk
management is not intended to eliminate all risks since
exposure to risk is unavoidable in doing business. Kendrion
actively conveys the need to maintain a healthy balance
between entrepreneurial spirit and risk awareness. Our
objective is to adopt an approach to business risks that is
consistent with our risk appetite and that minimises the
probability of adverse events and the impact of such events,
while remaining competitive in an ever-developing business
environment. The Executive Board emphasises that risk
management and control systems can neither offer an absolute
guarantee that the company’s objectives will be achieved nor
entirely prevent material errors, loss, fraud, or violations of laws
or regulations.
Risk Management Framework
Risk management is fully integrated in Kendrion’s business
practices and extends to all areas such as culture,
policymaking, processes, duties, influencing conduct and all
other aspects of doing business. Kendrion’s approach to risk
management is part of its control environment and consists of
two main complementary elements: a top-down strategic view
of risk at the enterprise level and a bottom-up view of risk at the
operational level. The approach to risk management interacts
with all relevant elements in the control environment, both on
the enterprise as well as on the operational level. With this
consistent approach, Kendrion’s risk management and control
Risk management
The Kendrion Way for risk management
framework fosters a culture of risk awareness across the
organisation by identifying risks in a systematised manner and
defining appropriate controls aimed at the mitigation and
management of these risks in line with Kendrion’s risk appetite.
The Executive Board is responsible for maintaining a
comprehensive risk management and internal control system
aligned with the risks associated with Kendrion’s strategy and
activities, and for regularly reviewing and supervising its
effectiveness. In addition to maintaining a risk management and
internal control system, the Executive Board is responsible for
ensuring that such system is embedded in Kendrion’s business
practices.
Kendrion’s risk management function, headed by the Internal
Audit and Risk Manager, provides guidance and support to the
Executive Board. This includes driving risk awareness across
the Kendrion organisation and leading reviews of operational
processes and effectiveness of the risk management and
control system. In 2021, the risk management function has
CONTROL ENVIRONMENT
Annual corporate
risk management
cycle
Code of conduct
Speak-up procedure
Corporate policies
Internal audit
I
d
e
n
t
i
f
y
A
s
s
e
s
s
M
o
n
i
t
o
r
M
i
t
i
g
a
t
e
Local entity
risk management
process
OPERATIONAL
LEVEL
Periodic business reviews
Planning & Control cycle
Local policies and procedures
I
d
e
n
t
i
f
y
A
s
s
e
s
s
M
o
n
i
t
o
r
M
i
t
i
g
a
t
e
I
d
e
n
t
i
f
y
A
s
s
e
s
s
M
o
n
i
t
o
r
M
i
t
i
g
a
t
e
ENTERPRISE
LEVEL
Project risk
management
process
Certicates
Quarterly
reporting
Risk
owners
Corporate
top 10
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sustained its contribution to the organisation through the
facilitation of risk management activities and by proactively
supporting the identification, evaluation and mitigation of risks.
The Executive Board conducts an annual risk assessment and
considers if adjustments to the risk management and internal
control system are required, as conditions and market
circumstances may change. In 2021 it was decided to shift the
timing of the corporate risk assessment from Q4 to Q2 of the
next year to enable the Executive Board to leverage outcomes
and insights from local risk assessments for their annual risk
assessment. The result of the annual risk assessment is
discussed within Kendrion’s Management Team and also
shared and discussed with the Supervisory Board. In order to
strengthen risk management and oversight, risk owners are
assigned to the top-10 risks identified, and each risk owner is
responsible for preparing and updating mitigation plans. On a
quarterly basis, risk owners report to the Executive Board on
mitigation progress and risk development. This report is also
shared and discussed with the Audit Committee.
At the operational level, Kendrion’s plants hold internationally
recognised certifications designed to assess and improve their
processes. They have a responsibility to put internal controls
and procedures in place and to verify their effectiveness by
testing them at regular intervals. Local management is
expected to be fully aware of the operational risks and the
necessity of internal controls and procedures.
Risk appetite
Kendrion’s risk management framework balances risk and
opportunity and unambiguously describes the Executive
Board’s appetite for risk. The Executive Board and the
Management Team periodically review and discuss Kendrion’s
approach to risk management, as Kendrion’s risk appetite may
change over time reflecting developments in society,
geopolitics, the competitive and customer landscape as well as
changes within Kendrion.
Kendrion’s risk appetite provides an indicative bandwidth that
guides the organisation during its decision-making process.
RISK AREA RISK APPETITE TARGET
Risk averse Risk taking
Strategic
Operational
Financial & reporting
Compliance
Entrepreneurial
Innovative
Punctual
Sincere
This bandwidth is defined for each of the following risk areas;
Strategic, Operational, Financial & Financial reporting and Tax
Compliance. The width of the bandwidth and the position on
the risk spectrum (from risk averse to risk taking) differs for
each of the risk areas. The above visual shows that Kendrion
is risk averse when it comes to compliance risk exposure,
whereas the bandwidth for strategic risks is much broader and
allows for a higher degree of risk-taking in pursuit of the
strategic objectives.
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Risk overview
Risk area Risk name Risk description
Strategic Market disruption/decline (esp. automotive) Continued long term recession in de automotive market, of one of the key markets of the
industrial segment.
Prolonged global pandemic The current COVID-19 pandemic continues to impact our business environment (lockdowns,
customer plant shutdowns, supply chain interruptions, economic implications) longer than
currently anticipated.
Unsuccessful expansion in China Difficulties in the execution of the expansion activities in China resulting in unanticipated
losses and delayed or missed opportunities.
Insufficient new project nominations Insufficient new project nominations to grow the business or replace sunset business.
Operational Supply chain disruption Disruption in the supply chain impact ability to manufacture or deliver products in a timely
manner.
Significant volume decline or project cancelation Cancellation of current and upcoming projects, or significant reductions in order volumes.
Order volatility Increase in the volatility of customer orders, with larger deviations in quantities and shorter
notification times.
IT systems and security Informations systems not being fit for purpose, becoming unavailable, or comprised, may
lead to business interruptions, loss of confidential data and reputation damage.
Financial & reporting Pressure from large customers Increased pressure on price and/or payment terms from large customers impacting margins
and cash flow.
Purchase prices increases Risk of significant increase of purchase prices could lead to additional costs.
In addition to the selected key risks described in the table
above, Kendrion distinctively recognises risks related to climate
change and risks in the compliance area. Consistent with
Kendrion’s risk averse approach when it comes to compliance
risk exposure, as also shown in the figure on the previous page,
Kendrion has put in place strict internal controls on all levels of
the company to manage and mitigate risks in this area. Each of
the risk areas will be addressed in more detail below.
Strategic risks
Market disruption/decline (especially automotive)
Kendrion operates in a competitive market that is exposed to
economic changes, geopolitical developments, societal
changes as well as industry disruption, including the
accelerating transformation of the automobile from a product
that is mainly a hardware based, to a software centric electronic
device on wheels. Market disruption, saturation (possible Peak
Car in EU and USA) or decline, especially in the automotive
sector, could pressure Kendrion’s financial results and the
company’s ability to achieve its strategic goals. We will continue
our research and development efforts with a view to increase
potential revenue content per car and by focussing our
resources on developing product platforms that will benefit from
an increased application uptake, such as active suspension,
exterior AVAS sound systems and sensor cleaning systems. We
maintain a lean and flexible organisation that can swiftly adjust
to the economic tides and market trends. This flexibility not only
relates to working with temporary staff and focusing on the
reduction of variable operating expenses, but also includes the
ability to communicate up-to-date financial information
efficiently to decision-makers throughout the organisation,
make justifiable insourcing and outsourcing decisions, adjust
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supplier contracts, implement performance-dependent
employee benefits, work with flexible hour contracts and use
opportunities to reduce working hours in specific countries.
The composition of the group with about 50% automotive
activities and 50% industrial activities reduces Kendrion’s
exposure to a market disruption or decline in one of the markets.
Prolonged global pandemic
A longer than currently anticipated impact of the current
COVID-19 pandemic on Kendrion’s business environment
(lockdowns, customer plant shutdowns, supply chain
interruptions, economic implications) could impact Kendrion’s
operational performance and financial results. We develop and
update scenario analyses at regular intervals to estimate
potential (financial) impacts, and accordingly implement and
– as needed – adjust strict operating procedures to ensure
continuation of production in a safe and responsible manner,
and focus on cost control and working capital management to
protect our financial position and liquidity. In addition, a
prolonged pandemic would also continue to limit possibilities to
interact with customers, implement organisational changes or
operational improvements, and facilitate internal and external
staff development and knowledge sharing. Working from home
is promoted where possible and facilitated with required IT
equipment and digital connectivity. Online environments to
connect with (future) customers, such as online fairs, are
explored and have already proven to be valuable. Staff
engagement is cultivated by increased communication, and
online possibilities for personal and professional development
have been rolled out in 2021. Kendrion will continue to comply
with local regulations related to safety and hygiene to secure a
safe working environment for all staff that need to be present at
production facilities.
Unsuccessful expansion in China
Kendrion has significantly increased its revenue in China in
recent years and continues to pursue its growth strategy and
related expansion of activities by increasing local production,
supply chain and development capabilities. Difficulties in the
execution of these expansion activities could result in
unanticipated delays and increased costs. Delays in the
expansion activities may also result in delayed or missed
opportunities and related revenues. Over the past years
Kendrion China has recruited additional talented and ambitious
employees in the areas of development, industrial engineering,
quality, and supply chain. Going forward Kendrion continues to
invest in the Chinese workforce to accommodate its growing
revenue pipeline. Exchange programs between the Kendrion
development centres in Germany and China to share
knowledge have been replaced by online training platforms as
COVID-19 continues to impose travel restrictions. The
execution of the China growth strategy is closely monitored to
limit risk of delayed detection of deviations from expected
activities or outcomes. In 2021, Kendrion started with the
construction of a new 28,000m
2
factory to enable future
growth. The factory is built in the Suzhou Industrial Park area,
which is a prime location for technologically advanced
businesses.
Insufficient new project nominations
A substantial part of Kendrion’s revenue is generated with
customer projects that run for multiple years and generally
require one to two years of development and preparation
before production starts and revenue is generated. This is
particularly the case in Automotive. If Kendrion does not secure
sufficient new project nominations to replace or exceed projects
that will retire in the next few years, it will not be able to
maintain the current level of revenue or succeed in its growth
ambition. To increase its success rate in project nominations,
Kendrion focusses on strengthening relationships with key
customers and is in constant communication with its main
customers to make sure their demands and expectations are
included in innovation initiatives. As such Kendrion continuous
to invest in developing actuators that help enable Autonomous,
Connected, Electric and Shared mobility, also known as ‘ACES’
which are assumed to increase project nominations in the
coming years. This is supported by maintaining or increasing
relevant R&D capacity and capabilities, such as the
establishment of an automotive software competence centre,
and the development of sales capacity and competence. With
a continuous focus on optimizing supply chains and production
processes the competitiveness of Kendrion is monitored, while
also guarding quality and dependability.
Operational risks
Supply chain disruption
Kendrion is dependent on a continuous supply of (raw)
materials for its plants to operate and to be able to meet
customer demands and expectations. The supply chain of (raw)
materials can be disrupted in many ways, from issues during
transport, to a bankrupt supplier, to scarcity of certain
materials. Kendrion actively endeavours to increase the number
of alternative sources for its most important (raw) materials,
while always making sure that (raw) materials are purchased
from reputable suppliers. Quantities are generally secured via
advance capacity confirmations and regular financial quick
checks are performed to assess the solvency of suppliers.
Suppliers that are critical to Kendrion’s supply chain have been
identified and are actively monitored in order to secure
continuity of the supply chain. Kendrion predominantly uses
local supply chains for local production and revenue, and when
certain materials have a single supplier, contingency measures
are discussed (e.g. insourcing when possible, active periodic
monitoring of critical suppliers) to ensure the exposure is within
Kendrion’s risk appetite and swift action is possible when
required. In case disruptions in the supply chain do occur, the
customers affected by this disruption will be informed
immediately and solutions will be discussed.
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Significant volume decline or project cancellation
External events such as the current COVID-19 pandemic and
related economic downturn or changes in regulations or
preferences, can cause certain customers to experience a
steep decline in the demand for their products. There is a risk
that this will result in a similar decline in their order volumes
or even the cancellation of projects altogether. Kendrion
undertakes to negotiate contractual terms that ensure that
sales prices per product will increase when volumes are
reduced, and that investments (e.g., development, tools and
equipment) are reimbursed if contracts are cancelled. However,
this will not be sufficient to offset all the expenses incurred or
compensate for loss of revenues. Demand levels are closely
monitored to timely detect overcapacity and production
capacity and purchase volumes are adjusted accordingly to
mitigate the impact on profit and working capital.
Order volatility
Mainly driven by the recent economic conditions, customers
experience significant shortages in the supply of raw materials.
There is an increased risk that customer orders are adjusted
when insufficient components can be sourced, resulting in
ad-hoc and unpredictable adjustments to order levels. This may
result in significant and short-term fluctuations in demand,
requiring short-term plant capacity adjustments.
In turn, this may result in additional costs for underutilised plant
capacity or in an increase in production backlog due to
insufficient production capacity. Order volatility can also result in
increased inventory levels either because orders are cancelled,
or to ensure that increased demand can be fulfilled. Kendrion
focusses on strengthening relationships with key customers
and is in constant contact with customers to actively monitor
developments and changes to order volumes and timing where
possible.
Kendrion continuously adapts its production and supply chain
planning to movements in day-to-day orders and the roll-out of
predictive planning tools have enabled an increased flexibility in
production while maintaining a high level of efficiency.
IT systems and security
Kendrion recognises that more and more of its own activities
and customer demands are becoming data driven. This
requires existing infrastructure and/or software to be updated,
or new IT infrastructure and/or software to be implemented, in
order to facilitate the required changes in the organisation. With
this also comes an increased dependency on IT systems and
an increased exposure to cyber-attacks. Kendrion has ensured
redundancy in network and uninterrupted power supply and
critical software runs on high availability infrastructure with
disaster recovery in place. Kendrion is in the process of further
streamlining its IT systems and support on a global level,
increasing scalability, while also increasing the level of security
by leveraging the capabilities of our IT services providers.
IT security is also strengthened by awareness campaigns
on IT security topics such as password security and phishing,
targeting all employees, quarterly security reviews and
maintaining a security calendar with key security activities.
There is an ambitious IT strategy that will continue to be rolled
out in the next year to both increase uniformity within the
company and strengthen IT systems further and explore how
their value can be increased for both Kendrion and its
customers.
Financial & reporting risks
As a globally operating publicly listed company, Kendrion must
comply with financial reporting requirements. Material
misstatements in reporting could affect Kendrion’s reputation
and/or stock market value. Kendrion reports to the market on a
quarterly basis, and reports financial figures based on IFRS
standards. With the risk appetite for this risk area being on the
adverse side of the spectrum, Kendrion has several controls
in place that help to contain risk exposure within acceptable
boundaries.
It is critical that all operating entities report to the same
standards and deliver the same quality of reporting, in line with
applicable accounting and reporting principles. There are local
planning and control cycles that provide financial and non-
financial information to the group based on standardised
reporting formats on a weekly, monthly, or annual basis, based
on a group reporting manual (last updated in 2021).
In order to safeguard the integrity of reported information
without having to rely on manual controls, it is important that
effective general IT controls are in place, such as proper
segregation of duties, access control for important systems,
and source data protection through proportionate change
control procedures for all accounting and reporting systems
and their key infrastructure. Where Kendrion would mitigate
sub-optimal general IT controls in previous years by performing
additional manual controls, in recent years these manual
controls have gradually shifted to (automated) IT controls
through continuous improvement actions, also based on
recommendations by the external auditor over the past years.
In 2021, Kendrion completed the last actions of an
improvement plan that is expected to allow the external auditor
to rely on the accounting and reporting systems for their audit
approach. Kendrion will continue to improve its general IT
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controls, with a focus on increased control automation, while
balancing available resources against improvement benefits.
On a quarterly basis, all responsible officers provide a letter of
representation confirming the correct and complete reporting
of financial and non-financial information and the absence of
material violations of applicable laws, rules, and regulations,
along with internal policies such as the Kendrion Code of
Conduct. This also includes continuous monitoring of
upcoming changes in accounting and/or reporting standards,
laws and regulations, and periodic discussions with responsible
finance leaders and senior management within the business
units.
Apart from the key financial & reporting risk mentioned above,
Kendrion also recognizes financial & reporting risks related to
debt financing, credit exposure and interest and exchange rate
fluctuations (refer to pages 151-159 and following of the
financial statements for an outline of Kendrion’s financial market
risks and the policy for mitigating those risks or their impact).
Kendrion has proportionate mitigating measures in place for
these risks, which are monitored on different levels within the
company.
Pressure from large customers
Customers in all segments of the company are experiencing
the effects of the COVID-19 pandemic and its economic
consequences, including the impact of restrictive measures
imposed by governments. Key and other customers that
represent a significant part of Kendrion’s revenue may demand
more favourable terms for their business. This may manifest
itself in the form of re-negotiations on price or other adverse
changes to contractual conditions, such as shortening of
payment terms. This may have an impact on margins and/or
cash flow. Kendrion aims to maintain and protect its contractual
position and reject unreasonable changes to existing terms,
while valuing and preserving business relations. By consistently
delivering qualitative products according to customer
expectations against a competitive proposition, Kendrion aims
to satisfy its customers while also remaining profitable.
Increases in purchasing prices
The gross margin of Kendrion could be impacted by
fluctuations in the prices of raw materials. Kendrion aims to
minimise the financial impact of price fluctuations for those
materials that are most relevant. The most important (raw)
materials for Kendrion are machined steel parts, raw steel,
copper and permanent magnets. Where feasible, Kendrion
concludes fixed-price arrangements with steel suppliers and
suppliers of machined steel parts. Many key long-term
customer contracts contain copper price clauses, that provide
for a sales price adjustment when the actual average copper
price over a certain timeframe deviates from a predetermined
base price. In cases where the copper price risk is not passed
on to the customer, Kendrion usually fixes the purchase price
for some quarters in advance. In most cases, agreements for
products that contain permanent magnets provide for
automatic price adjustments based on movements in the price
of these permanent magnets.
Compliance risks
Kendrion commits to conducting business in accordance with
its Code of Conduct and the values underlying the Code of
Conduct, laws and regulations, including employment laws,
data protection laws and regulations, accounting standards, tax
laws, health and safety regulations as well as governance and
statutory filing requirements, applicable in the countries in
which it operates. Senior management is responsible for raising
awareness of, and applying, applicable laws and regulations.
Global and local policies are developed and maintained to
support compliance. Kendrion’s global policies include a range
of procedures and policies that always need to be applied
when conducting business such as a Code of Conduct, Insider
Trading Code, Speak-up procedure, etc. Kendrion’s Code of
Conduct builds on the values of The Kendrion Way, an inspiring
motto at the heart of the Kendrion organisation. The Code of
Conduct provides a set of principles and expectations that
guide the behaviour of all those who belong to Kendrion.
Guidance and training are provided to Kendrion employees on
recognizing compliance dilemmas and on raising actual or
suspected misconduct or irregularities under Kendrion’s
Speak-up procedure.
For more information about The Kendrion Way see pages
61-62 of this Annual Integrated Report.
Compliance with Kendrion’s internal policies and procedures,
and with local laws and regulations is also reviewed by
Kendrion’s internal audit function. The Global Internal Audit and
Risk Manager is responsible for the design and execution of the
annual audit plan in order to assess the adequacy of Kendrion’s
internal control systems. The Global Internal Audit and Risk
Manager reports to the Executive Board with direct and
independent access to the Audit Committee and external
auditor. Audit results are reported to the Executive Board and
the essence of the results are reported to, and discussed with,
the Audit Committee and external auditors on a regular basis.
The results of the audits conducted in 2021 were discussed
with local management and any control deficiencies have been
addressed. This conclusion is in line with the Management
Letter, in which the external auditors reported a limited number
of findings and no findings that qualified as significant.
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Tax compliance risks
In line with the overall risk averse appetite for compliance risks,
Kendrion also specifically reiterates this risk averse appetite for
tax compliance and associated risks. Administrative processes
are designed to capture and store required information and
report this within the respective jurisdictions on required
intervals. Given the international nature of Kendrion’s
operations, there is an exposure to transfer pricing and local
compliance risks because the plethora of local, regional and
global regulations are not always in agreement, leaving room for
different interpretations. Kendrion seeks to reduce this risk by
involving reputable external tax advisors when specialist
knowledge is required and (local) authorities when
interpretations of tax requirements will have an evident impact.
However, because audits by the tax authorities are usually only
conducted several years after the activities have taken place,
there is always a risk that these audits will result in the
identification of dispositions that the authorities do not agree
with. This may result in financial impacts in the form of tax
adjustments, accrued interest, fines, litigation against
Kendrion’s management, and also damaging Kendrion’s
reputation with the (local) authorities and it’s stakeholders.
Climate change
Society, shareholders and other stakeholders have increasing
environmental awareness and demands towards combatting
climate change and the delivery of sustainable solutions and
products. The socioeconomic impact of climate change and
the adoption of new regulations and the enforcement of
initiatives to reduce global warming and other impacts of
climate change, provide Kendrion with challenges and
opportunities when viewing its existing and future product
portfolio. In addition, a higher frequency of extreme weather
conditions increases the likelihood of natural disasters, which
may, from time to time, disrupt supply chains, production,
delivery times and the availability of raw materials. Significant
material price increases caused by persistent material
shortages and implementation of government actions to
mitigate climate change, such as a carbon tax, will negatively
affect future operating costs.
The product portfolio of Kendrion’s Industrial Business Groups
is expected to benefit from the global trend towards
electrification of industrial processes that decrease the use of
fossil fuels and greenhouse gas emissions. The automotive
industry is transforming based on four reinforcing trends
towards Autonomous, Connected, Electric and Shared (the
so-called ACES) mobility, leading to cleaner, safer and more
comfortable forms of transportation. To advance these trends,
the automotive industry requires new actuator technologies that
will replace existing technologies developed for internal
combustion engines of passenger cars and commercial
vehicles. Kendrion has been transitioning and will continue to
transition its product portfolio towards these new technologies,
and on balance we expect our Automotive revenue to benefit
from this transformation.
Kendrion is committed to reducing its contribution to climate
change by reducing the carbon footprint of its operations, via
the use of renewable energy, decreasing energy consumption,
decreasing waste from production and increased recycling
rates of materials. Kendrion is equally committed to continuing
to invest in the responsible product portfolio by developing
products that help advancing our industrial and automotive
customers in their objectives and ambitions to reduce
emissions and climate impact.
In control statement
Based on the approach described above, the Executive Board
is of the opinion that, to the best of its knowledge:
■ the Report of the Executive Board provides sufficient
insights into any failings in the effectiveness of the risk
management and internal control systems;
■ the risk management and internal control systems provide
reasonable assurance that the financial reporting, including
tax, does not contain any material inaccuracies;
■ based on the current state of affairs, it is justified that the
financial reporting is prepared on a going concern basis;
and
■ the Report of the Executive Board states those material
risks and uncertainties that are relevant to the expectation
of Kendrion’s continuity for the period of twelve months
after the date of the Report of the Executive Board.
Properly designed and implemented risk management and
internal control systems significantly reduce, but cannot fully
eliminate, the possibility of human errors, poor judgement,
deliberate circumvention of controls, fraud or infringements of
laws, rules or regulations, or the occurrence of unforeseeable
circumstances. Another factor considered within risk
management is that efforts related to risk management and
internal control systems should be balanced against the costs
of implementation and maintenance.
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Kendrion’s governance framework is based on the statutory
requirements applicable to public limited liability companies in
the Netherlands, including the principles of the Dutch Corporate
Governance Code (the ‘Code’)
*
and Kendrion’s articles of
association as lastly amended 25 June 2020. The core topics
of the Code are addressed in the various sections of this
Annual Integrated Report. For example, diversity in the
Supervisory Board, the Executive Board and the Management
Team is addressed in this Corporate Governance Report on
pages 77-78 ‘The Kendrion Way’ is described in the section
‘Sustainability’ on pages 52-53 and in the section ‘People &
Culture’ on pages 61-62. The articles of association together
with ancillary policies such as the Supervisory Board regulations
and the Supervisory Board committee regulations provide a
framework for the affairs and governance of Kendrion, including
a sound and transparent system of checks and balances. For
the articles of association, the Supervisory Board regulations,
the Supervisory Board committee regulations and additional
information about Corporate Governance at Kendrion, please
visit the corporate website at www.kendrion.com.
Kendrion N.V.
under the laws of the Netherlands, with its corporate seat in
shareholder information’ on pages 23-25.
Kendrion N.V., as the ultimate parent company, holds all the
shares of Kendrion Finance B.V., a private limited liability
company incorporated under the laws of the Netherlands,
with its corporate seat in Zeist, the Netherlands.
Kendrion Finance B.V., directly or indirectly, holds the shares in
all of Kendrion’s operating companies. All operating companies
are, directly or indirectly, wholly owned subsidiaries. Kendrion
N.V. is not subject to the large company structure regime and
no works council having jurisdiction over Kendrion N.V. has
been established nor is there a statutory requirement to
establish such a works council. Reference is made to section
People & Culture on page 65 for information about works
councils and employee representation established at certain of
Kendrion’s operating companies.
Two-tier governance structure
The Executive Board, consisting of the CEO and the CFO, is
entrusted with the management of Kendrion, under supervision
of the Supervisory Board. Members of the Executive Board and
the Supervisory Board are appointed and dismissed by the
General Meeting of Shareholders. The General Meeting of
Shareholders can amend the articles of association if and as
proposed by the Executive Board, with the prior approval of the
Supervisory Board. The decision to amend the articles of
association requires an absolute majority of the votes cast at
the General Meeting of Shareholders.
Executive Board
The Executive Board is responsible for the management and
the continuity of Kendrion and Kendrion’s long-term value
creation strategy, objectives, results, and policy, including the
responsibility for defining strategies and plans conducive to the
realization of key aspects of the Paris Agreement.
The Executive Board is accountable to the Supervisory Board
and the General Meeting of Shareholders. Important resolutions
of the Executive Board require the approval of the Supervisory
Board.
With due regard to the requirement under Kendrion’s articles of
association that the Executive Board must consist of at least
two members, the Supervisory Board determines the number
of members of the Executive Board.
The General Meeting of Shareholders appoints the members of
the Executive Board upon nomination of the Supervisory Board.
In compliance with provision 2.2.1 of the Code, all members of
the Executive Board are appointed for a maximum term of four
years and may be reappointed for a term of not more than four
years at a time. The diversity objectives as described in
Kendrion’s diversity policy for the Executive Board will be
considered when selecting persons for (re)appointment as
member of the Executive Board. The diversity policy can be
found on the corporate website at www.kendrion.com. Other
than upon a proposal of the Supervisory Board, the members
of the Executive Board are dismissed by the General Meeting of
Shareholders by a resolution adopted by an absolute majority
representing at least one-third of the issued share capital.
The members of the Executive Board satisfy the statutory
requirements concerning the number of supervisory or non-
executive functions that they can have with large enterprises.
The composition of the Executive Board and information about
its members is provided on page 26.
Corporate Governance Report
*
The Code can be found on the website of the Corporate Governance Code Monitoring Committee www.mccg.nl.
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A member of the Executive Board does not participate in the
deliberation and decision-making process concerning any
subject in which a member of the Executive Board has a
personal interest that conflicts with the interests of Kendrion.
A member of the Executive Board shall immediately report a
conflict of interest to the Chairman of the Supervisory Board.
Decisions to enter into transactions in which there are conflicts
of interest with a member of the Executive Board require the
approval of the Supervisory Board. There were no transactions
in which there was a conflict of interest with a member of the
Executive Board in 2021. Kendrion does not grant loans or
guarantees to Executive Board members.
Management Team
The Management Team consists of the CEO, the CFO and
several executives with clear accountability to deliver on all
components of the strategic plan. Strategic and functional
focus areas of the Management Team include Automotive
Commercial, Automotive Operations, Automotive Finance,
China, Information Technology, People, Sustainability and
Compliance. In addition, the Business Group Managers of
the Business Groups Industrial Brakes and Industrial Actuators
and Controls are represented on the Management Team.
The Executive Board decides the number of members of the
Management Team in consultation with the Supervisory Board.
The members of the Management Team who are not Executive
Board members are appointed and dismissed by the Executive
Board, subject to consultation with the Supervisory Board.
The diversity objectives as described in Kendrion’s diversity
policy for the Management Team will be considered when
selecting persons for (re)appointment as member of the
Management Team.
The Management Team meets frequently and those members
of the Management Team who are not also members of the
Executive Board are regularly invited to attend Supervisory
Board meetings.
The members of the Executive Board, together with the other
members of the Management Team, conducted an online
annual review of their individual performance and the
performance of the Management Team as a collective,
including the dynamics of and the relationship among the
members of the Management Team and the Executive Board
as well as the interaction with the Supervisory Board. Special
consideration was given to the 2021 strategic and operational
spearheads, including the intensification of establishing
strategies and action plans to help enabling the global push
towards electrification and clean energy, further strengthening
of the Automotive R&D organization conducive to the global
and accelerating proliferation of Autonomous, Connected,
Electric, and Shared mobility, developing the new
manufacturing facility in Suzhou’s Industrial Park, scaling up
of the China organization, enhancing strategies of Industrial
Brakes to capitalize on identified opportunities especially in
wind power and robotics and automation, driving efficiency
and effectiveness of the Industrial Actuators and Controls
organization towards further profitability and cash generation,
progressing the upgrade of the IT infrastructure with special
focus on digitalization and standardization. In addition to
reviewing past performance, the Management Team considered
the 2022 strategic and operational spearheads. In its annual
review meeting, the Management Team furthermore reflected
on the need to enhance the existing roadmap aimed at the
reduction of Kendrion’s energy consumption and CO
2
emissions
and the extension of environmentally sustainable activities, also
in light of the EU regulatory framework on sustainability. Outside
the presence of the other members of the Management Team,
the Executive Board evaluates the functioning of the
Management Team and its members and discusses
the conclusions that must be attached to the evaluation,
also in view of succession planning and the composition
of the Management Team taken as a whole. Having regard to
the feedback and recommendations of the Executive Board,
the Supervisory Board considers the functioning of the
Management Team and its members.
Supervisory Board
The Supervisory Board supervises and advises the Executive
Board on the performance of its tasks and duties and
supervises the overall development and performance of
Kendrion. In discharging its role, the Supervisory Board is
guided by the interests of Kendrion and its stakeholders and
focuses on – among other things – the effectiveness of
Kendrion’s risk management and internal control systems and
the integrity and quality of the financial reporting.
The Supervisory Board is composed in such a way that its
members can operate critically and independently of each
other, the Executive Board, the Management Team, and any
other particular interests. Each of the Supervisory Board
members has the necessary expertise, experience, and
background to perform his or her tasks and duties and its
composition is consistent with the ‘Profile outline’ for the
Supervisory Board and the diversity objectives described in
Kendrion’s diversity policy for the Supervisory Board. Both the
‘Profile outline’ and the diversity policy for the Supervisory
Board can be found on the corporate website at
www.kendrion.com.
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The Supervisory Board consists of four members. All members
of the Supervisory Board are independent within the meaning
of the Code. The members of the Supervisory Board satisfy
the statutory requirements concerning the number of
supervisory or non-executive functions that they can have with
large enterprises. The composition of the Supervisory Board is
consistent with the statutory requirements pursuant to the
Dutch Gender Balance Act which entered into force on
1 January 2022.
The General Meeting of Shareholders appoints the members
of the Supervisory Board on the recommendation of the
Supervisory Board for a period of four years. The Supervisory
Board elects a Chairman from amongst its members.
The Chairman chairs the meetings of the Supervisory Board
and ensures the proper functioning of the Supervisory Board
and its committees. The Chairman of the Supervisory Board
also ensures that the Supervisory Board has proper contact
with the Executive Board, the Management Team and the
General Meeting of Shareholders. Furthermore, the Chairman of
the Supervisory Board maintains regular contact with the CEO
concerning matters relating to the responsibilities of the
Supervisory Board. Similarly, the Chair of the Audit Committee
maintains regular contact with the CFO concerning matters
relating to the responsibilities of the Audit Committee.
The members of the Supervisory Board step down by rotation
pursuant to a schedule adopted by the Supervisory Board.
Members of the Supervisory Board who step down can be
reappointed. These reappointments take account of the
manner in which the candidate performed his or her duties as
a member of the Supervisory Board, the diversity objectives
as described in Kendrion’s diversity policy for the Supervisory
Board and best practice provision 2.2.2 of the Code regarding
appointment and reappointment periods. Each member of the
Supervisory Board can be dismissed by the General Meeting
of Shareholders.
New members of the Supervisory Board follow an introduction
program to get sufficiently acquainted with Kendrion, its
business activities as well as certain internal procedures and
processes necessary for the discharge of their duties as
members of the Supervisory Board.
Meetings of the Supervisory Board are usually attended by the
Executive Board and at regular intervals by members of the
Management Team. The Company Secretary supports the
Supervisory Board. The Company Secretary ensures that
correct procedures are followed and that the statutory
obligations and obligations under the articles of association are
complied with. Furthermore, the Company Secretary facilitates
the provision of information between the Executive Board and
the Supervisory Board and supports the Chairman of the
Supervisory Board in the organisation of the affairs of the
Supervisory Board.
The Supervisory Board has established two committees:
the Audit Committee and the HR Committee (combining
remuneration committee and selection and appointment
committee). The committees of the Supervisory Board are
responsible for preparing the decision-making of the
Supervisory Board. The tasks and procedures of the
committees of the Supervisory Board are set out in their
regulations, which can be found on the corporate website at
www.kendrion.com. The composition of the Supervisory Board,
its committees and information about the Supervisory Board
members is provided on pages 81-82 of this Annual Integrated
Report.
The Supervisory Board annually evaluates its own functioning,
the functioning of the Supervisory Board committees, and that
of the individual Supervisory Board members. The outcome
of the evaluation is discussed among the members of the
Supervisory Board and the Chairman subsequently informs
the Executive Board as appropriate. For further information
regarding the annual evaluation of the Supervisory Board,
reference is made to the Report of the Supervisory Board on
pages 84-90 of this Annual Integrated Report.
The members of the Supervisory Board do not receive, nor do
they have any shares and rights to acquire shares in Kendrion
as remuneration. Kendrion does not grant loans or guarantees
to Supervisory Board members. Pursuant to the Supervisory
Board regulations, a member of the Supervisory Board may not
participate in the deliberation and decision-making process
concerning any subject in which a member of the Supervisory
Board has a personal interest that conflicts with the interests of
Kendrion. There were no transactions in which there was a
conflict of interest with a member of the Supervisory Board in
2021.
Diversity within the Executive Board,
Management Team and Supervisory Board
Kendrion values a diverse workforce both across the Kendrion
organization as a whole and at the level of the Executive Board,
the Management Team and the Supervisory Board. Under the
value creation pillar ‘Social and Human Capital’ that forms part
of Kendrion’s sustainability program, the further advancement
of diversity across the organization is a priority. In 2021,
Kendrion developed and launched a new strategic diversity
framework which forms the foundation for the development
of diversity target setting for the entire Kendrion organization.
The outlines of Kendrion’s new strategic diversity framework are
described in the section ‘People & Culture’ on pages 64-65.
A diverse range of competences and skills and a variety of
backgrounds within the Executive Board, the Management
Team and the Supervisory Board contribute to effective
decision-making and consequently long-term value creation.
Kendrion considers diversity aspects of gender, nationality and
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background (education, (work) experience) most relevant for
Kendrion and its business. On the basis of the diversity aspects
considered, Kendrion is also committed to further progress its
approach to diversity in the Executive Board, the Management
Team and the Supervisory Board.
Pursuant to Kendrion’s existing diversity policy for the
Supervisory Board, Executive Board and Management Team,
at least 30% of the Supervisory Board shall consist of female
members. The Supervisory Board consists of two female
members and two male members, and with this the current
composition is in line with the 30% gender diversity target.
For the Executive Board and the Management Team, the
current gender diversity objective is to achieve gradual
improvement. Taking account of the most recent additions
to the Management Team, the gender diversity objective is
achieved for the Management Team.
Kendrion is globally active and has therefore also determined
targets in terms of nationality. The diversity policy determines
that in the Management Team at least two regions where
Kendrion is active shall be represented. Kendrion meets this
nationality diversity objective for the Management Team.
For the Supervisory Board and the Executive Board,
maintaining appropriate nationality diversity is the objective.
In the Supervisory Board one member has the German
nationality, i.e. the jurisdiction where Kendrion maintains an
important part of its operations.
Moreover, Kendrion’s diversity policy includes a background
diversity objective. Pursuant to the abovementioned policy, at
least one member of the Executive Board and at least three
members of the Management Team shall have experience in
international industrial or automotive business or an industry
adjacent thereto. For the background diversity objective for the
Supervisory Board reference is made to the Supervisory Board
‘Profile outline’ that is published on Kendrion’s corporate
website. The composition of the Executive Board, the
Management Team and the Supervisory Board meet the
respective background diversity objectives.
The composition of the Supervisory Board is diverse,
experienced, and knowledgeable and reflects a balanced
participation of two female members and two male members.
The Executive Board comprises qualified, knowledgeable, and
experienced members, albeit that it consists of two male
members. The Management Team comprises a healthy mix of
skills, nationalities, ages, backgrounds, and other relevant
factors.
The diversity objectives as described in Kendrion’s diversity
policy will be explicitly considered – in addition to functional
requirements, quality, expertise, and experience – when
selecting persons for (re)appointment as member of the
Supervisory Board and Executive Board and filling vacancies
within the Management Team, respectively. If external
recruitment consultants are engaged, Kendrion provides search
instructions in line with the diversity principles underlying the
diversity policy. Kendrion’s diversity policy can be found on the
corporate website at www.kendrion.com.
General Meeting of Shareholders
At least once a year, Kendrion convenes a shareholder meeting.
Meetings are convened by the Executive Board and/or
Supervisory Board. Meetings can also be convened at the
request of shareholders jointly representing at least 10% of
Kendrion’s issued share capital if authorized by the competent
Dutch court. Shareholders who hold at least 3% of the issued
share capital have the right to propose an item for inclusion on
the agenda. Kendrion will in principle include the item on the
agenda if it has received the substantiated proposal clearly
stating the item to be discussed, or a draft resolution, in writing,
at least 60 days prior to the meeting date. Each shareholder is
entitled to attend shareholder meetings in person or be
represented by written proxy and exercise voting rights in
accordance with the provisions of the articles of association.
Each outstanding share entitles the holder to one vote.
Resolutions are adopted by absolute majority of the votes cast,
unless the articles of association or applicable law provide
otherwise.
Shareholders representing 70.12% (2020: 67.95%) of the total
number of shares entitled to vote were represented at the
online General Meeting of Shareholders held on 12 April 2021.
For more information about the authority of the General Meeting
of Shareholders and the articles of association, please visit the
corporate website at www.kendrion.com.
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Special provisions relating to shares
Unless indicated otherwise, there are no restrictions on the
transfer of shares, the exercise of voting rights or the term for
exercising those rights, and there are no special controlling
rights attached to shares. On 12 April 2021, the General
Meeting of Shareholders granted the Executive Board the
authority to: (i) issue shares or grant rights to acquire shares
and restrict or exclude pre-emptive rights in relation to the issue
of shares or the granting of rights to acquire shares; and (ii)
acquire shares in Kendrion N.V. within the limits prescribed by
the articles of association and the applicable statutory
provisions, in each case for a period of 18 months from the
date of the General Meeting of Shareholders (i.e. until
12 October 2022) and subject to the prior approval of
the Supervisory Board.
Auditor
Before being presented to the General Meeting of Shareholders
for adoption, the annual financial statements as prepared by
the Executive Board must be audited by an external certified
public auditor. The General Meeting of Shareholders has the
authority to appoint the auditor. On 12 April 2021, the General
Meeting of Shareholders reappointed Deloitte Accountants B.V.
for a third and final period of four years (i.e. for the 2021 to
2024 financial years). The General Meeting of Shareholders
may put questions to the external auditor with respect to the
external auditor’s opinion on the financial statements. The
external auditor shall therefore attend and be entitled to
address the General Meeting of Shareholders.
Kendrion has an internal audit function that operates under the
responsibility of the Executive Board, with reporting lines to the
CFO and the Audit Committee of the Supervisory Board.
The role of the internal audit function is to assess the design
and the operation of the internal risk management and control
systems. In line with the Code, the Executive Board and the
Audit Committee of the Supervisory Board are involved in the
preparation and approval of the internal audit plan. The annual
internal audit plan will be submitted to the Executive Board and
the Supervisory Board for approval. Internal audit reports are
discussed with the Executive Board and with the Audit
Committee, and the external auditor is informed accordingly.
For the management statement of the Executive Board which is
required pursuant to article 5:25c of the Financial Supervision
Act (Wet op het Financieel Toezicht), reference is made to the
‘Report of the Executive Board’ on page 37.
Agreements in the meaning of the Decree for
the implementation of article 10 of the
Takeover Directive (Besluit artikel 10
overnamerichtlijn)
The credit facility of Kendrion N.V. includes a change of control
provision. An early repayment obligation is triggered if a party
acquires more than half of Kendrion’s issued share capital or
voting rights.
Corporate Governance statement
This Corporate Governance Report and the section ‘Share and
shareholder information’ on pages 23-25 include the information
referred to in the Decree for the implementation of article 10 of
the Takeover Directive. In addition, this Corporate Governance
Report in combination with the section ‘Risk management’ on
pages 68-74 and Report of the Supervisory Board on pages
84-90 should be regarded as the Corporate Governance
Statement required pursuant to the Decree on the contents of
the management report (Besluit inhoud bestuursverslag).
Relevant documents on corporate website
■ Articles of association;
■ Supervisory Board regulations and committee regulations;
■ Diversity policy for the Supervisory Board, Executive Board
and Management Team;
■ ‘Profile outline’ for the Supervisory Board;
■ Insider Trading Code;
■ Policy on bilateral contacts with shareholders;
■ Code of conduct;
■ Speak-up procedure.
Taxes
Kendrion’s tax policy is based on the core values embedded in
Kendrion’s Code of Conduct and aligned with Kendrion’s
strategy and the rationale underlying the value creation pillar
‘Responsible Business Conduct’, which is part of Kendrion’s
global sustainability program.
Taxable profits are recognized in jurisdictions in which value is
created, in accordance with the applicable tax regulations and
standards, including the OECD Guidelines for Multinational
Enterprises and local transfer-pricing and other applicable tax
regulations. Tax is not limited to corporate income tax but also
includes VAT, wage withholding tax, social security
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contributions, dividend withholding tax, real estate tax and any
other taxes that are payable by Kendrion in the relevant
jurisdictions. Kendrion does not seek to establish aggressive
tax driven structures that are not compliant with the letter or
spirit of applicable tax regulations. This means that Kendrion
does not pursue any aggressive tax planning or has entities
established in tax haven jurisdictions solely for tax optimisation
purposes and without commercial substance.
Kendrion provides adequate transparency towards tax
authorities and builds and maintains a professional relationship
with the tax authorities. If and when appropriate, tax authorities
are consulted in advance on certain material transactions or
business restructuring in order, for instance, to ascertain
compliance with the applicable tax regulations. Kendrion makes
tax-related disclosures in accordance with the applicable
statutory regulations and applicable reporting requirements
and standards, such as IFRS.
Key controls are in place to identify, monitor and address
(potential) tax risks with a view to mitigating and avoiding these
risks. Accredited tax advisors are consulted and involved in the
review and preparation of material corporate income tax
returns, if appropriate. Tax compliance is part of Kendrion’s
internal audit plan and material tax risks and topics, including
Kendrion’s tax policy, are reported to and discussed in the
Audit Committee.
The effective tax rate of Kendrion or any of its affiliates is not a
key performance indicator for Kendrion’s finance and tax
department nor do individual bonus schemes contain effective
tax rate performance targets. The effective tax rate for 2021 of
28.3% underlines Kendrion’s responsibility to society with
regard to taxation. Information about the reconciliation of the
effective tax rate can be found on page 168 of this Annual
Integrated Report.
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CORPORATE GOVERNANCE REPORT
Contents Profile Strategy Outlook Report of the Supervisory Board Financial statementsREPORT OF THE EXECUTIVE BOARD
F.J. van Hout (Chairman), male, 1960 J.T.M. van der Meijs, female, 1966
Nationality Dutch Dutch
International expertise Yes Yes
Date of first appointment 12 April 2021 31 October 2016
Term of office 2021-2025 2019-2023 (2
nd
term)
Current number of SB positions 4 3
Shares in Kendrion No No
Professional experience Semiconductors Finance
Additional positions
Former positions
Vice-Chairman of the Supervisory Board, Aixtron SE; Member of the
Supervisory Board, Bambi Belt Holding BV; Member of the Supervisory
Board, Stichting PhotonDelta; Member of the Supervisory Board,
Smart Photonics BV
Executive Vice President and Member of the Board of Management,
ASML; Chief Strategy Officer, Chief Program Officer, Chief Marketing
Officer and other various functions in management, ASML;
CEO, Beyeler Group; Chief Technology Officer, Datacolor
Non-executive Director & Chair of People and Remuneration
Committee, Koole Terminals Holding BV; Non-executive Director, Chair
of Corporate Governance Committee and member of Audit
Committee, Pharming Group NV; Non-executive Director & Chair of
Audit Committee, member of M&A and HR Committees, Grundfos
Holding A/S (Denmark); Non-executive Director & Member of the Audit
Committee, The Centre for Human Drug Research (CHDR)
Treasurer and Board Member, NDL (Nederland Distributieland);
CFO, Royal Schiphol Group; Non-executive Director, Groupe AdP
(Aéroports de Paris); Non-executive Director, Brisbane Airport
Corporation PtY Ltd; VP Finance Global Capital Projects and other
international senior management functions, Royal Dutch Shell
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MEMBERS OF THE SUPERVISORY BOARD
M.J.G. Mestrom, female, 1961 E. Doll, male, 1959
Nationality Dutch German
International expertise Yes Yes
Date of first appointment 11 April 2016 24 June 2020
Term of office 2020-2024 (2
nd
term) 2020-2024
Current number of SB positions 1 1
Shares in Kendrion No No
Professional experience HR/organizational design/transformation Automotive
Additional positions
Former positions
Chief Human Resources Officer at Brenntag AG
Head of Global Human Resources, at Siegwerk Druckfarben Group;
Senior Global Human Resources positions
Non-Executive Member of the Board of Directors, Aeristech Ltd.;
Member of the Supervisory Board, WITTE Automotive
President & CEO, Röchling Automotive SE; Vice Chairman of the
Executive Board, Röchling Group; Vice President, Plastic Omnium SA;
Managing Director, PO GmbH; General Manager, Johnson Controls;
Business Manager, BAS
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MEMBERS OF THE SUPERVISORY BOARD
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Resilience and exibility: the keys to 2021
and future success
Despite the continuing effects of the pandemic and broad
supply chain disruptions that impacted the 2021 business
climate, Kendrion's management and their teams delivered
good results. During 2021, the priority of the Supervisory Board
and Executive Management was to build and expand
the resilience and flexibility needed to effectively deal with such
disruptions, now and in the future. We are strongly supported in
this by strategic initiatives such as the acquisitions of INTORQ
and 3T, which strengthen our ability to capture opportunities in
changing markets. The substantial growth of our business
enabling the transition in the energy sector is a result of this
strategy.
As the recently appointed Chairman of the Supervisory Board,
I am grateful to Henk ten Hove for leaving me a great team of
dedicated and committed professionals. Just six months into
my role, my first impression of Kendrion is of a close-knit
community with a strong management team and very
committed employees.
Strong performance despite uncertainty
The business climate in 2021 was tough, with many
unexpected developments. In the Supervisory Board, we
worked closely with management to build the resilience and
flexibility that are necessary to navigate the current business
challenges and ensure a solid position for the future.
Our Automotive business especially suffered from significant
shortages in the supply chain. While demand for our products
increased, raw material shortages disrupted production.
Managing through tough times with determination
I am impressed with how well management and employees
handled these challenges, delivering good results through solid
execution.
Continuing our growth strategy
Our Industrial business remains a key strategic growth area
for Kendrion, with many opportunities. The energy transition
is a key driver but is certainly not the only prospective area
we are developing. With the acquisition of INTORQ, we have
significantly enhanced our market position as a full-service
supplier in the industrial brakes market. Recently acquired 3T
brings software and electronics development capabilities that
allow us to tap into new industrial markets and attract new
customers.
3T also strengthens our Automotive ACES (Autonomous,
Connected, Electric and Shared vehicles) offering. Electronics
play a key role in ACES and with 3T’s expertise in-house, we
are uniquely placed to deliver high-quality, smart actuators for
autonomous vehicles. In addition we are less dependent on
electronics suppliers.
In conclusion
On behalf of the Supervisory Board, let me express our
profound appreciation to all Kendrion employees. The COVID
pandemic not only disrupted the business, but also personal
lives. I’m truly impressed with how everyone remained
confident, upbeat, and flexible, rallying together to take on this
period of uncertainty as a true team. Thanks to their
unwavering commitment, we can wrap up this year with good
results and look to 2022 with confidence.
Frits van Hout
Chairman of the Supervisory Board
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PREFACE
The Supervisory Board provides oversight,
evaluates progress and performance, maintains
a sound and transparent system of checks and
balances, and advises the Executive Board when
appropriate. To this end, the Supervisory Board
weighs long-term value creation and the interests
of the company and its stakeholders.
This Report of the Supervisory Board sets out the way in which
the Supervisory Board fulfilled its duties and responsibilities in
2021.
Performance in 2021
The COVID pandemic continued to impact the lives of people
around the world and global industries faced another challenge
with significant disruptions in the supply chain.
With the persistent application of hygiene protocols and strict
operating procedures, management protected the health and
safety of our employees and safeguarded the continuation of
production in a safe and responsible manner. Certain of our
manufacturing facilities experienced an increased number of
reported COVID infections and precautionary self-isolations. No
noticeable divergent trend in the number of reported COVID
infections within our organization has been observed compared
to the general COVID trend within the regions where we
operate.
The pressure on the supply chain caused by the raw material
and other shortages imposed operational disturbances and
volatility in many manufacturing sectors. The immediate
impacts of a stressed and stretched supply chain were
particularly felt by the automotive industry, where at times
manufacturers were forced to shut down their facilities
completely or significantly reduce production volumes at short
notice. In turn, the reduced production volumes of automotive
manufacturing facilities and the related volatility in order
patterns, have triggered sequential financial problems of
component suppliers in the automotive industry. Management
gave adequate and consistent priority to managing supply
chain risks and rapidly adjusted practices in response to the
changing landscape, whilst at the same time developing and
implementing longer-term strategies to increase business
resilience against supply chain disruption.
Despite this period of volatility, management continued to invest
in opportunities for sustainable growth. The transition towards
clean energy offers significant growth opportunities for our
Business Groups. Our Business Groups Industrial Brakes and
Industrial Actuators and Controls take advantage of the energy
transition by the increasing demand for products in wind power,
automated warehouses, factory automation and inductive
heating technology. The Automotive Group contributes to the
advancement of sustainable mobility solutions through its smart
actuation technology that enable Autonomous, Connected,
Electric, and Shared (the so-called ACES) driving. The
acquisition of 3T added strategically relevant capabilities in
software and electronics, enabling the development of products
that contribute to the energy transition.
The development of a 28,000m
2
manufacturing facility at the
Suzhou Industrial Park to facilitate the anticipated growth in
China is well on track. This new manufacturing facility also
supports the 2019-2023 sustainability target framework,
particularly the reduction of CO
2
emissions.
Based on the outcome of the extensive diversity analysis
carried out by the participants of Kendrion’s High Potential
Program in 2020, an update to the strategic diversity
framework has been developed and introduced. The newly
launched diversity framework focuses on the entire employee
lifecycle and lays the foundation for the development of tailored
target-setting aimed at the increase of the percentage of female
hires and the percentage of female representation per function
group, specifically the Science, Technology, Engineering and
Mathematics (STEM) related function groups.
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REPORT OF THE SUPERVISORY BOARD
Focus in 2021
In coordination with the Executive Board, the Supervisory
Board previously determined certain focus areas for the year
2021. The Supervisory Board placed special emphasis on the
following predetermined subjects in 2021:
Contingency plans in addressing COVID-19 and safeguarding
the continuity of Kendrion
Notwithstanding the development of several effective vaccines
and the increased responsiveness and awareness about the
risks and effects of COVID, COVID-19 continued to dominate
global health and economies in 2021. Although always a
priority, health and safety has taken on a different significance
since the start of the COVID pandemic. COVID has brought
about additional challenges, especially for industries such as
manufacturing where physical interaction among production
staff is usually needed. Shift planning and workforce
management have been asked to adjust their established
approaches and implement new strategies to secure the health
of our staff in order to continue production in a safe and
responsible manner and with minimal disturbances. The
persistent application of hygiene protocols and strict operating
procedures are among the measures that have been followed
consistently and that are likely to become the standard
operating procedure for occupational health and safety
protection even after the pandemic.
Furthermore, remote and hybrid working models have become
a new reality. Apart from making the required technical
adjustments facilitating remote working – which were
implemented rather swiftly after the outbreak of the pandemic
in 2020 – more structured approaches are needed to
accommodate new sustainable ways of working whilst
preserving effective and efficient collaboration among teams
and departments. Maintaining an open, diverse, and inclusive
REPORT OF THE SUPERVISORY BOARD
environment and committing to the values underlying
The Kendrion Way and the Code of Conduct have been central
to the collaborative mindset and flexibility needed to maintain
Kendrion’s culture of sustainable high performance when faced
with a new reality that has transformed our thinking about
managing workplaces and maintaining an engaged and
committed workforce. We also have increased our focus on
mental health awareness as extended periods of isolation and
the reduced in-person interaction with colleagues may lead to
new forms of stress or pressure.
Despite the strict measures and the constant monitoring and
evaluation of health and safety performance, certain of our
manufacturing facilities experienced an increased number of
reported COVID infections and precautionary self-isolations.
No noticeable divergent trend in the number of reported COVID
infections within our organization has been observed compared
to the general COVID trend within the regions concerned.
COVID did not only continue to impact global health, but it also
changed the economic landscape. Although initially
manufacturing sectors were expected to rebound in 2021,
lasting raw material shortages increased risks of delivery failures
and extended delivery times. Moreover, the continued
shortages caused material prices to rise noticeably and have
led to higher risks of production downtime as well as
challenges around material planning and inventory
management. Persistent shortages were experienced in
semiconductors, steel, and certain plastics. The pressure on
the supply chain caused operational disturbances in many
manufacturing sectors. The immediate impacts of a volatile
supply chain were particularly felt by the automotive industry,
where at times manufacturers were forced to decrease
production volumes or shut down their facilities. In turn, the
reduced production volumes, and related volatility in order
patterns, have triggered sequential financial problems of
component suppliers in the automotive industry. Management
gave adequate and consistent priority to managing supply
chain risks and rapidly adjusted practices in response to the
changing landscape, whilst at the same time developing and
implementing longer-term measures to better anticipate supply
chain disruption.
In response to the outbreak of the pandemic back in 2020,
several scenario assessments were carried out to estimate the
financial impact of COVID, and the then existing contingency
plans were adjusted as needed and extraordinary measures,
including cost control measures, were implemented with a view
to safeguarding the continuity of Kendrion and its affiliated
enterprise. Different options were considered and in 2020
agreement was reached with Kendrion’s banking syndicate to
increase the leverage covenant for the quarters up to
December 2021. During 2021, management continued
monitoring compliance with financial covenants and in
particular the leverage ratio. With the acquisition of 3T,
investments for the new manufacturing facility in China, and
increased inventory levels predominantly caused by the
disruption of the supply chain and related order volatility, the net
debt position increased, however, Kendrion continued to stay
well within its financial covenants.
Continued investment in China
Following a detailed review carried out by management, in
2020 the Supervisory Board confirmed its approval for the
development of a new 28,000m
2
manufacturing facility at the
Suzhou Industrial Park in China to accommodate the ambitious
growth plans for China. The approved design for the
manufacturing facility allows for automated manufacturing and
warehouse processes. Digitalization and automation are
expected to contribute to productivity gains and will further
increase product quality and workplace safety. The efficiency
gains and benefits resulting from the application of modern
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technologies are also conducive to the objectives underlying
the 2019-2023 sustainability target framework and our
commitment to contribute to fighting climate change. Solar
panels will be installed on the 28,000m
2
manufacturing facility,
which increases our use of renewable energy and reduces our
CO
2
emissions significantly.
After the necessary approvals of the Chinese authorities,
construction activities for the new manufacturing facility
commenced and are proceeding in accordance with the agreed
development plan. It is contemplated to put the new facility into
operation before the end of 2022.
The construction of a new manufacturing facility has not
distracted management from its focus on enhancing
operational effectiveness and production quality and continuing
to invest in sustainable growth opportunities. Advancing the
localization of the R&D organization in China, consistently
pursuing a local supply chain strategy, and increasingly applying
global standardized process engineering and quality systems
have contributed to the enhancement of operational
effectiveness and product quality. The contemplated
infrastructure investments by the Chinese government –
including investments in renewable energy – offer sustainable
growth opportunities for both our Industrial Business Groups as
well as the Automotive Group.
Optimization European manufacturing footprint
Automotive Group
Building upon the initiatives that commenced in 2020,
management continued its review of the set-up of our
Automotive Group that has manufacturing facilities across three
continents: US, Europe, and Asia. With a view to enhancing
effectiveness and to further increasing our ability to respond to
disruptive trends and market developments, the review focused
predominantly on combining and enforcing the strengths of our
REPORT OF THE SUPERVISORY BOARD
European manufacturing facilities without prejudicing the
benefits of a global Automotive Group. One of the outcomes
of this review has been the planned shutdown of the
manufacturing facility in Eibiswald, Austria. The decision to
close the Eibiswald facility impacts our stakeholders, especially
our Eibiswald employees. Other obvious stakeholders that are
affected by the shutdown include our customers and suppliers.
The Supervisory Board therefore considered that the closure of
the Eibiswald facility required close monitoring and accordingly
identified the shutdown as a 2021 focus item. The constant
pressure on the supply chain and – in many ways – the
resulting unpredictability, necessitated flexibility as to the timing
of the execution of the closure activities. With the appropriate
notification, consultation and involvement of the relevant
stakeholder groups, the closure of the Eibiswald facility has
been initiated and is underway. Finalization of the shutdown is
anticipated for 2022.
Advancing IT strategy
Digitalization is transforming the manufacturing industry as it
enhances efficiency and productivity through smart technology
and data analytics. Demands of the present time include the
ability to swiftly respond to rapidly changing market conditions
and customer demands. The increasing demand for clean
energy and the accelerating development of electrification are
among the trends that require the ability to change fast.
Advancing Kendrion’s IT strategy and the execution thereof –
particularly in the manufacturing and development space – are
essential to long-term value creation and building an agile
organization and business model. This has made the IT
function and IT expertise increasingly strategically relevant.
Kendrion’s IT strategy is fully aligned to its business strategy.
Relevant IT expertise is increasingly embedded in product
development and manufacturing processes. The IT function is a
primary stakeholder for important projects and initiatives, such
as the construction of the new 28,000m
2
manufacturing facility
in China and the further harmonization and standardization of
the functional organizational set-up and key processes of the
Automotive Group.
In 2021 significant progress has been made with the execution
of the IT strategy. Key initiatives that were executed include
the outsourcing of the IT helpdesk and infrastructure. The
outsourcing of standard IT services facilitated the enhanced
focus and involvement on strategically relevant projects.
The foundation for digitalized manufacturing and product
development has been built with the start of the implementation
of a new global Product Lifecycle Management (PLM) system.
Completion of the implementation of the PLM system is
anticipated for 2022. Digitalization requires adjusted and newly
developed capabilities and in 2021 important data science
capabilities were developed which increased the efficient use of
Business Intelligence software and tools. The IT strategy is
designed to accelerate as needed in order to continue
advancing Kendrion’s digitalization footprint.
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Focus items 2022
The Supervisory Board has defined the following attention
points for 2022:
■ Advancing the development of a sustainability target
framework for the period beyond 2023, including the
development of concrete ambitions to reduce
environmental impact.
■ Accelerating the transition to a future proof organization
increasing organizational agility and resilience and
integrating digital technologies in all relevant business
processes.
■ Progress on the achievement of the medium to long-term
financial objectives for 2025 (i.e., average organic growth of
5% between 2019-2025, ROI of at least 25% and EBITDA
margin of at least 15% by 2025).
Meetings and attendance
The Supervisory Board held thirteen meetings in 2021, eight of
which were regular scheduled meetings. One extraordinary
meeting was convened to discuss the final proposal regarding
the development of the new manufacturing facility in China. In
addition, four extraordinary meetings were held to discuss the
acquisition of 3T, a Dutch based developer of electronics and
embedded systems.
The discussions with the Executive Board about the acquisition
of 3T involved amongst others: strategic rationale, business
case and valuation, financing, key due diligence findings, post-
acquisition integration outlook, including envisaged
organizational set-up and related matters. The Supervisory
Board unanimously supported the acquisition of 3T and is
convinced that 3T offers great potential for the control activities
REPORT OF THE SUPERVISORY BOARD
of Industrial Actuators and Controls. Moreover, with the
acquisition of 3T, Kendrion gets access to important software
and electronics development capabilities that enable the pursuit
of strategically relevant and sustainable growth opportunities
especially in Automotive.
In 2021 special consideration was given to Kendrion’s
sustainability program and the efforts undertaken by
management to reduce the impact of Kendrion’s business on
the environment. In addition to monitoring progress against the
2019-2023 sustainability target framework, the Supervisory
Board called attention to the increasing environmental
awareness of society and Kendrion’s stakeholders. The
Supervisory Board feels strong about further increasing
Kendrion’s contribution to fighting climate change. In line with
the expectations of Kendrion’s stakeholders, the Supervisory
Board expects management to not only assess and manage
the impact of Kendrion’s business operations on the
environment and society, but to also consider and address the
implications of climate change for Kendrion’s business model
and product portfolio. The increased focus of Kendrion’s
resources on the development of sustainable products is an
important development that is fully supported by the
Supervisory Board. The increasing demand for clean energy
and accelerating electrification provide substantial growth
opportunities for both the Industrial Business Groups and the
Automotive Group.
Reducing the negative impacts of climate change has been
identified as one of the 2022 focus items and will be closely
monitored by the Supervisory Board.
Furthermore, the Supervisory Board gave special consideration
to Kendrion’s newly launched strategic diversity framework that
is linked to the employee lifecycle through which various
aspects of diversity are identified.
All meetings of the Supervisory Board were attended by the
Executive Board, and at times by members of the Management
Team. In addition, meetings were held without the Executive
Board and without the Management Team. The attendance
percentage for regular scheduled Supervisory Board meetings
in 2021 was 100% (2020: 100%).
In addition, the Chairman of the Supervisory Board and the
Chair of the Audit Committee held monthly meetings with the
CEO and CFO, respectively. The Supervisory Board also
focused on direct interaction with the Management Team and
other senior management. This included presentations in the
areas of responsibility and one-on-one meetings between the
Chairman of the Supervisory Board and members of the
Management Team.
The agenda for the Supervisory Board meetings covered the
2021 focus items described on pages 85-86 and other
recurring topics that are annually addressed, such as:
operational and financial performance, progress against the
strategic plan and the principal risks associated with the
operation, progress, and the achievement of milestones of
special projects, fraud and risk management and internal
control system, governance and compliance and the General
Meeting of Shareholders.
The external auditor attended the meeting of the Supervisory
Board in February 2021 during which the full-year figures for
2020 and the auditor’s report were discussed.
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Evaluation
The Supervisory Board continued to invest in its own training
during the year and received updates on governance and
compliance. Once a year the Supervisory Board carries out a
self-assessment, including an assessment of the Supervisory
Board committees and the individual Supervisory Board
members. During a Supervisory Board meeting without the
Executive Board members present, the Supervisory Board
deliberated about its own performance. Aspects considered
included team dynamics, competences, and market
knowledge. In addition, performance was assessed based on a
structured questionnaire that was filled in by the members of
the Supervisory Board and the Executive Board. The
questionnaire addressed items such as: composition and
expertise of the Supervisory Board, dynamics within and
functioning of the Supervisory Board and its committees,
functioning of individual members of the Supervisory Board,
dynamics between the Supervisory Board and the Executive
Board and tasks and responsibilities of the Supervisory Board.
The Supervisory Board intends to perform the annual self-
assessment with the support of an external consultant once
every three years. Although the most recent external self-
assessment dates back to 2018, the Supervisory Board
resolved to defer the external self-assessment to 2022 in view
of the recent changes in the composition of the Supervisory
Board, including the change of the chairmanship in 2021 and
the replacement of the Supervisory Board’s industry expert in
2020.
The outcome of the evaluation confirmed a good and
constructive relationship between the Supervisory Board and
the Executive Board. The Supervisory Board members take
appropriate responsibility and are valued for their dedication,
expertise, and ongoing commitment. The Supervisory Board
members are aware of the different roles and responsibilities
between the Supervisory Board and the Executive Board and
are keen to secure them.
REPORT OF THE SUPERVISORY BOARD
In Supervisory Board-only meeting(s), the members assess the
functioning of the Executive Board and the individual members.
With the CEO and the CFO, the Supervisory Board discussed
performance and last year’s KPIs, strategic and operational
spearheads for 2022 and personal development.
Composition
The Supervisory Board consists of four members: Henk ten
Hove (Chairman until the end of his term and subsequent
resignation on 12 April 2021), Frits van Hout (Chairman as of
his appointment on 12 April 2021), Jabine van der Meijs (Chair
of the Audit Committee), Marion Mestrom (Chair of the HR
Committee) and Erwin Doll.
The Supervisory Board operates independently of the Executive
Board, the Management Team, any other participating interests,
and each other. Each of the Supervisory Board members has
the necessary expertise, experience, and background to carry
out his or her tasks and responsibilities. All members of
the Supervisory Board are independent within the meaning
of the Dutch Corporate Governance Code. The members
of the Supervisory Board satisfy the statutory requirements
concerning the number of supervisory or non-executive
functions that they can have with large enterprises.
The composition of the Supervisory Board is in line with
the Supervisory Board profile as drawn up by the Supervisory
Board and the diversity objectives described in the Diversity
Policy for the Supervisory Board. Both the Supervisory Board
profile and the Diversity Policy can be found on the corporate
website at www.kendrion.com.
The composition of the Supervisory Board reflects a balanced
gender participation of two men and two women.
Committees of the Supervisory Board
In order to perform in an efficient manner, the Supervisory
Board has established two committees: the Audit Committee
and the HR Committee. The primary task of the committees of
the Supervisory Board is to advise and facilitate the Supervisory
Board with respect to its responsibilities and to prepare
decision-making by the Supervisory Board. The committees
of the Supervisory Board have their own regulations, which
include a detailed description of the committee’s tasks and
responsibilities.
Audit Committee
The Audit Committee uses its knowledge and expertise to
advise on and prepare Supervisory Board’s decision-making,
particularly concerning matters relating to Kendrion’s financing,
financial statements, the integrity and quality of financial
reporting, the effectiveness of risk management and internal
controls and the approach and operation of the internal audit
function and internal audit program.
The Audit Committee consists of Jabine van der Meijs (Chair)
and Erwin Doll.
The Audit Committee held four meetings in 2021. Attendance
during 2021 was 100% (2020: 100%). The CFO, the Internal
Audit and Risk Manager and the Group Controller attended all
meetings. The external auditor Deloitte Accountants B.V.
attended the meetings of the Audit Committee during which the
full-year financial statements for 2020, the half-year financial
statements for 2021 and the management letter were
discussed. The Audit Committee met with the external auditor
without the CFO.
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In line with the increasing environmental awareness of society
and the progressing political debate, new laws and regulations
have been enacted that aim to contribute to the reduction of
the negative impacts of climate change. The EU taxonomy
introduces a classification system establishing a list of
environmentally sustainable economic activities and related
disclosure requirements. In addition, existing non-financial
reporting standards will be revised. Accurate and informative
sustainability reporting requires changes to existing reporting
processes and data collection. The Audit Committee informed
itself of relevant developments and in addition to regular
updates provided by management during the Audit Committee
meetings, the members of the Audit Committee attended a
specially convened expert session about ESG reporting
developments.
The Audit Committee monitored and reviewed regular topics
such as: the quarterly financial results, the half-year and full-
year financial statements, the auditor’s report, maintenance and
effectiveness of risk management framework and internal
control system, the internal audit plan and key findings of
internal audits performed, the external audit plan, transfer
pricing, tax policy, treasury policy, the group insurance program,
the speak-up procedure, legal and compliance, the annual
evaluation of external auditor and the annual evaluation of the
approach and operation of the internal audit function and the
internal audit program.
Regular updates were provided about the maintenance and
effectiveness of the risk management framework and internal
control system relating to strategic, financial, operational, tax
control and compliance matters. Kendrion monitors its internal
controls through a systematic approach, which is supported by
a solid risk management framework and the internal audit
program.
REPORT OF THE SUPERVISORY BOARD
The Audit Committee also discussed tax and treasury matters,
including Kendrion’s policies relating to transfer pricing. With
respect to tax, the Audit Committee also monitored and
discussed the status of pending tax audits, including the status
of the ongoing German tax audits.
In addition to the above, the Audit Committee discussed the
development of the new IT strategic framework 2020-2025 and
monitored progress on the execution of the new IT strategic
framework.
Deloitte Accountants B.V. was reappointed as external auditor
by the General Meeting of Shareholders on 12 April 2021 for
a final term of four years up to and including the financial year
2024. The Audit Committee monitored both the external
auditor’s performance and the effectiveness of the external
audit process and its independence. The Audit Committee
approved the 2021 external audit plan, including scope and
materiality applied. Reviews and discussions were held on
the findings of the external auditor in its management letter and
the actions taken to address the recommendations and
observations made by the external auditor. Also based on the
outcome of the assessment of Deloitte’s performance as well
as the advice of the Executive Board, the Audit Committee
advised the Supervisory Board regarding the reappointment
of Deloitte as external auditor.
HR Committee
The HR Committee consists of Marion Mestrom (Chair) and
Henk ten Hove (until resignation on 12 April 2021) and Frits van
Hout (as of appointment on 12 April 2021). The HR Committee
held two meetings, with an attendance rate of 100% (2020:
100%). The CEO attended both meetings.
In addition to the scheduled meetings, the HR Committee had
several informal meetings with and without the members of the
Executive Board being present.
Succession planning
In view of the expiry of the second term of Henk ten Hove in
2021, the Chair of the HR Committee timely commenced the
search to find a new Chairman for the Supervisory Board.
Taking account of the Supervisory Board profile and the
diversity objectives described in the Diversity Policy for
the Supervisory Board, the HR Committee recommended
the nomination of Frits van Hout. The Supervisory Board
unanimously resolved to nominate Frits van Hout for
appointment as Chairman to Kendrion’s Supervisory Board for
a four-year term and Van Hout was subsequently appointed by
the Annual General Meeting of Shareholders on 12 April 2021.
The Supervisory Board and the Executive Board express their
deep appreciation to Henk ten Hove for his significant and
invaluable contribution to Kendrion as he provided thoughtful
guidance and oversight throughout his membership and
chairmanship.
Performance management
The HR Committee considered and prepared the performance
reviews of the members of the Executive Board for discussion
in the Supervisory Board. The outcome of the performance
reviews process was discussed in a Supervisory Board-only
meeting.
Variable remuneration
The HR Committee agreed the financial and non-financial
performance criteria for the short-term and the long-term
variable remuneration of the Executive Board and reviewed
progress on these performance criteria.
The Executive Board provided the HR Committee with
information on the main components of the remuneration
structure that applies to members of the Management Team
who are not members of the Executive Board. The variable
remuneration of the Management Team is aligned to the
structure of the Executive Board variable remuneration.
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Financial statements and auditor’s opinion
The 2021 financial statements included in this Annual
Integrated Report have been audited and Deloitte Accountants
B.V. has issued an unqualified opinion. They were discussed
with the Supervisory Board, the Audit Committee in the
presence of the external auditor, and the Executive Board.
The Supervisory Board is of the opinion that the 2021 financial
statements meet all requirements for transparency and
correctness. Therefore, the Supervisory Board recommends
that the General Meeting of Shareholders to be held on
11 April 2022 adopt the 2021 financial statements and
the appropriation of net income.
This Annual Integrated Report furthermore contains a limited
assurance report of Deloitte Accountants B.V. on selected
sustainability performance targets.
Prot appropriation
Kendrion realized net profit of EUR 14.4 million in 2021.
Normalized net profit before amortization of intangibles arising
from acquisitions amounted to EUR 20.6 million.
The Supervisory Board approved the proposal of the Executive
Board to pay out 50% of normalized net profit as dividend.
The members of the Supervisory Board have signed the 2021
financial statements to comply with their statutory obligation
pursuant to article 2:101, paragraph 2, of the Dutch Civil Code.
Concluding remarks
The Supervisory Board is satisfied with the increased focus on
business resilience and flexibility and is confident about the
organization’s ability to respond to changing market conditions
and customer demands going forward. We thank the Executive
Board, the Management Team and the entire Kendrion staff for
their flexibility, loyalty, and commitment to perform throughout
the year. The Supervisory Board is also pleased that the
dialogue with our customers about new business continued
and has been successful. Last but not least we want to thank
our shareholders for their continuous trust and support.
Supervisory Board
Frits van Hout, Chairman
Jabine van der Meijs
Marion Mestrom
Erwin Doll
25 February 2022
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REMUNERATION REPORT
Introduction
This Remuneration Report describes the application of the
Remuneration Policy for the Executive Board and the actual
performance in 2021 against the predefined performance
criteria. In addition, the Remuneration report provides an
overview of the remuneration of the Supervisory Board in 2021.
Performance in 2021
Where COVID continued to dominate global health and
economies in 2021, Kendrion has demonstrated to be resilient
and delivered strong performance supportive to the realization
of its long-term value creation strategy. The impact of COVID
extended beyond the protection of the health and safety of our
employees and their families, as global supply chains faced
continued pressure from COVID-prompted disruptions such as
the persistent raw material shortages which led to price
increases and volatility in many manufacturing sectors. The
measures initiated at the beginning of the pandemic allowed us
to continue production in a safe and responsible manner whilst
prioritizing adequate management of supply chain risks and the
development of longer-term strategies to increase business
resilience against the extraordinary shift in market
circumstances.
The consistent pursuit of sustainable growth opportunities –
despite the unpredictable business environment which is
characterized by a stressed and stretched supply chain – has
been advantageous to our Business Groups, particularly the
Industrial Business Groups which showed strong growth due to
the increasing demand for clean energy and the accelerating
development of electrification of industrial processes. These key
trends in electrification particularly drive the demand for the
products of Industrial Brakes and Industrial Actuators and
Controls, respectively, in wind power, factory automation,
automated warehouses, nuclear power and inductive heating
technology. The acquisition of INTORQ in 2020 and the
acquisition of 3T in 2021 allow us to better pursue sizeable and
fast-growing sustainable opportunities. Hence, the prospects
for our Industrial Business Groups are beyond encouraging as
the transition to clean energy and the accelerating trend of
electrification of industrial processes is evolving at a rapid pace.
The Industrial Business Groups realized convincing organic
growth of 20% and achieved revenues that were as well 9%
higher than the pre-pandemic level of 2019.
Although the impacts of the volatile supply chain were
particularly felt by our Automotive Group, where at times OEMs
and Tier 1 suppliers were forced to significantly decrease
production volumes or even shut down their facilities, the
Automotive Group demonstrated organizational resilience and
flexibility needed to manage volatility in order patterns and
supply chain risks and swiftly adjusted practices to uphold the
commercial feasibility of its projects in a changing landscape.
More importantly, the prospects for the Automotive Group are
good as it also benefits from the transition to sustainable
mobility. The Automotive Group contributes to the
advancement of sustainable mobility solutions through its smart
actuation technology that enables the ACES. The software and
electronics development capabilities of 3T fuel the enhanced
development of the Automotive Group’s products that
contribute to the energy transition. The Automotive Group grew
by 13% compared to 2020. In 2021, EUR 305 million was
added in new project nominations, which is a solid addition to
the already healthy order pipeline and a book-to-bill of 1.32
times the 2021 Automotive Group revenue.
In addition to Kendrion’s contribution to the creation of a
sustainable future through its product portfolio and its
consistent investment in sustainable growth opportunities,
Kendrion is committed to reduce the impact of its operations
by increasing energy efficiency and use of renewable energy for
our manufacturing processes and facilities. The relative CO
2
emissions from energy by Kendrion’s production facilities has
been reduced by 54% compared to 2015, and Kendrion is
developing and implementing additional measures to further
replace fossil fuels with renewable energy sources. Consistent
progress has been made under the 2019-2023 sustainability
framework whilst further action has been taken to continue the
development of ambitious decarbonization strategies and
mitigation plans conducive to the key objectives of the Paris
Climate Agreement and the European green deal. It is
imperative to continue the development of sustainable
strategies that are consistent with the reasonable expectations
of our stakeholders and the increased environmental awareness
of society. Kendrion anticipates making an announcement in
2023 about its updated decarbonisation strategy and mitigation
plans for the period beyond 2023.
Remuneration Policy Executive Board
The Remuneration Policy for the Executive Board has been
developed by the Supervisory Board and adopted by the
General Meeting of Shareholders in June 2020.
The Remuneration Policy is evaluated at least once every four
years by the Supervisory Board. The HR Committee will
continue to keep the Supervisory Board informed about
relevant market and legislative developments in order to
support the periodic evaluation of the Remuneration Policy and
related decision-making. For more information about Kendrion’s
Remuneration Policy, please visit the corporate website at
www.kendrion.com.
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Remuneration in line with median level relative
to reference group
The Remuneration Policy serves to recruit and retain diverse,
qualified and experienced executives in order to deliver
Kendrion’s long-term value creation strategy. In addition, the
Remuneration Policy aims to further enhance the link between
pay and performance and align the interests of the members
of the Executive Board with the shareholders’ interests – and
other stakeholders’ interests – and focus on the sustainable
delivery of high performance over the long-term by stimulating
share ownership whilst adhering to the applicable standards
of good corporate governance.
Taking account of Kendrion’s size (in terms of revenues,
average market capitalization, total assets, and number of FTE),
its industrial market position, geographical scope and labor
market competition, the companies included in the AScX Index
on Euronext Amsterdam are defined as reference group.
Financial services, real estate and movies and entertainment
companies are excluded from the reference group. Within the
defined reference group, Kendrion is positioned around the
median in terms of the average of the abovementioned
parameters revenues, average market capitalization, total
assets and number of FTE. The remuneration structure of
the Executive Board is set at the median level relative to the
reference group.
The Remuneration Policy does not contain variable incentives
that may be detrimental to the responsibilities of the Executive
Board in defining and achieving Kendrion’s long-term value
creation strategy.
Temporary deviations
In exceptional circumstances, the Supervisory Board can
decide to temporarily deviate from the Remuneration Policy for
members of the Executive Board. Exceptional circumstances
mean circumstances in which a deviation is considered
necessary to serve long-term interests and sustainability of
Kendrion or to otherwise ensure its viability. Depending on the
exceptional circumstances, the Supervisory Board can resolve
to deviate from any or all of the four remuneration components
included in the Remuneration Policy for the members of the
Executive Board.
When considering a temporary deviation from the
Remuneration Policy, the Supervisory Board shall take into
account Kendrion’s long-term value creation strategy, ongoing
business and operational requirements as well as the financial
situation of Kendrion. In addition, the deviation considered
should be assessed in light of the principles of reasonableness
and fairness.
Upon having resolved a temporary deviation from the
Remuneration Policy, the Supervisory Board will (i) cancel and
withdraw all deviations from the Remuneration Policy prior to
the first annual General Meeting of Shareholders following the
effective date of the deviation; or (ii) propose the necessary
amendments to the Remuneration Policy for adoption during
the first annual General Meeting of Shareholders following
the effective date of the deviation.
Deviations from the Remuneration Policy will be reported in
Kendrion’s remuneration policy.
The Supervisory Board did not decide upon a temporary
deviation from the Remuneration Policy for the members
of the Executive Board in 2021.
Remuneration components
The Remuneration Policy for members of the Executive Board
consists of four components: a fixed base salary, a short-term
variable remuneration, a long-term variable remuneration and
other benefits such as a pension scheme and a car allowance
or lease budget.
The sum of the fixed base salary, the short-term variable
remuneration and the long-term variable remuneration for
members of the Executive Board are considered appropriate in
relation to: (i) the identity, the purpose, and values of Kendrion,
(ii) the pay-ratios within Kendrion, (iii) the international context in
which Kendrion operates and (iv) views of relevant stakeholder
groups.
The variable remuneration components are subject to
a maximum value determined in advance in accordance with
the Remuneration Policy. The Supervisory Board will carry out
scenario analyses to assess that the pay-out level of variable
remuneration components appropriately reflect performance.
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Base salary
Members of the Executive Board receive a base salary, the
amount of which is set at the median level relative to the
abovementioned reference group
*
. The fixed base salary levels
can be adjusted to be decided upon by the Supervisory Board,
based on general market movement and inflation figures.
In addition to the above, any increase of the annual fixed base
salary up to the median level relative to the abovementioned
reference group, can be decided upon by the Supervisory
Board and will not be regarded as an amendment to the
Remuneration Policy.
Following the annual performance review of the CFO Jeroen
Hemmen in January 2021, the Supervisory Board resolved to
increase the annual fixed base salary of the CFO with 15%
effective as of 1 January 2021. The Supervisory Board –
upon the recommendation of the HR Committee –
considered the salary increase justified and appropriate by
reference to the CFO’s performance and the commitments
made relevant to the gradual increase of the annual fixed
base salary upon the CFO’s appointment in 2019. With
the 15% increase, the 2021 annual fixed base salary of
*
On April 2019, the General Meeting of Shareholders reappointed J.A.J. van Beurden as CEO and
member of the Executive Board for a four-year period commencing on 1 December 2019 and ending on
1 December 2023. The fixed annual gross base salary that has become effective as of 1 December 2019
amounts to EUR 550,000, which amount is not subject to indexation during the second four-year term.
The reappointment resolution does not also encompass a change to the Executive Board Remuneration
Policy as adopted by the General Meeting of Shareholders in June 2020.
1
Effective until 1 December 2019.
2
Effective as of 1 December 2019 (i.e. the commencement date of the CEO’s second term).
3
The sum of EUR 462,591.25 (i.e. 11/12th of EUR 504,645) and EUR 45,833.33 (i.e. 1/12th
of EUR 550,000).
4
Voluntary salary reduction of 15% during April through July 2020 inclusive and voluntary salary
reduction of 10% for the month August 2020 in view of COVID-19 prompted cost measures.
5
Effective as of 1 July 2019 (i.e. the effective date of appointment to the Executive Board).
CFO Jeroen Hemmen remained below the relevant market
median consistent with the applicable Remuneration Policy.
2021 annual gross base salary
CEO (J.A.J. van Beurden) EUR 550,000
CFO (J.H. Hemmen) EUR 310,788
The table below provides an overview of the development of
the annual gross base salary levels of the members of the
Executive Board during previous financial years.
2021 annual
gross base salary
2020 annual
gross base salary
2019 annual
gross base salary
2018 annual
gross base salary
2017 annual
gross base salary
2016 annual
gross base salary
CEO (J.A.J. van Beurden) EUR 550,000 EUR 550,000 EUR 504,645
1
EUR 490,900 EUR 474,300 EUR 465,000
EUR 550,000
2
Actual EUR 517,916.67 (actual)
4
EUR 508,424.58 (actual)
3
CFO (J.H. Hemmen) EUR 310,788 EUR 270,250 EUR 235,000
5
Actual EUR 254,485.41 (actual)
4
EUR 117,500 (actual)
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Short-term variable remuneration
The short-term is payable in cash, the amount of which is
based on the achievement of predetermined, specific and
measurable financial and non-financial driven performance
criteria.
The overview below describes the key elements of the short-
term variable remuneration as recorded in the Remuneration
Policy for the Executive Board.
CEO
The short-term variable remuneration ranges from 0%
to 60% of the annual fixed gross base salary of the
CEO, with 40% being the target amount
CFO
The short-term variable remuneration ranges from 0%
to 52.5% of the annual fixed gross base salary of the
CFO, with 35% being the target amount
As part of the reappointment of Joep van Beurden as CEO for
a second four-year term, the General Meeting of Shareholders
resolved on 8 April 2019 that the short-term variable
remuneration of Joep van Beurden ranges from 0% to 90% of
the annual fixed gross base salary of Joep van Beurden, with
60% being the target amount. The reappointment resolution
does not also encompass a change to the Executive Board
Remuneration Policy (including the information in the table
above) as adopted by the General Meeting of Shareholders in
June 2020.
Performance criteria
The performance criteria for the short-term variable
remuneration are based on Kendrion’s strategic intent to
continuously grow revenue and profitability in a sustainable way.
The performance criteria for the short-term variable
remuneration include financial and non-financial criteria. The
financial driven performance criteria determine 60% of the
short-term variable remuneration and reflect the financial
priorities of Kendrion. The remaining 40% of the short-term
variable remuneration is determined by non-financially driven
performance criteria and reflect sustainability ambitions and
other priorities directly linked to Kendrion’s strategic intent.
Financial performance criteria
■ The financial driven performance criteria determine 60% of
the short-term variable remuneration.
■ Each year the Supervisory Board selects at least three
financial driven performance criteria from the list below with
a view to incentivize delivery of financial priorities that
support Kendrion’s strategic and operational spearheads.
■ The Supervisory Board may allocate different weight
percentages to the different financial performance criteria it
selects for a particular year, provided a minimum weight of
10% shall apply to a financial performance criterion.
■ Financial performance criteria
*
■ Net profit
■ Return on sales (ROS)
■ Average return on capital employed (ROIC)
■ Organic growth
■ Free cash flow
■ Revenue
■ EBITA
■ EBITDA
■ The performance incentive zone (threshold, target and
maximum) for each financial performance criterion will be
determined in advance by the Supervisory Board. No pay-
out will be made for below threshold performance. In the
case of performance equal to the threshold performance of
the relevant performance criterion, the pay-out of the short-
term incentive will be equal to 50% of the relevant target
amount. A linear curve will be applied to calculate the pay-
out between threshold performance and maximum
performance.
Non-financial performance criteria
■ The non-financial performance criteria determine 40% of
the short-term variable remuneration.
■ Each year the Supervisory Board selects a certain number
of non-financial performance criteria derived from the
strategic and operational spearheads for the respective
performance year, which will in any event include
performance criteria in the area of sustainability
(i.e. environmental, social and/or governance criteria).
■ Achievement of each individual non-financial performance
criterion will be measured by applying a binary scoring
model. The amount of the pay-out for the achievement of
non-financial performance criteria depends on the number
of non-financial performance criteria achieved.
■ A predefined step curve will be applied to calculate the pay-
out between the achievement of the minimum threshold
number of selected non-financial performance criteria and
achievement of all selected non-financial performance
criteria. No pay-out will be made for below threshold
performance.
*
In each case excluding exceptional or one-off cost and revenue items and the amortization of intangibles arising on acquisitions or similar corporate events.
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Investment
Members of the Executive Board have to invest at least 20% of
the net amount of the pay-out of the short-term remuneration
earned until the required ownership level has been reached as
prescribed under Kendrion’s ‘Share ownership guideline’ of the
Remuneration Policy.
2021 short-term variable remuneration
Within the framework of the Executive Board Remuneration
Policy, the Supervisory Board takes an informed decision
relevant to the variable remuneration of the members of the
Executive Board. For the determination of the financial and
non-financial performance criteria of the 2021 short-term
incentive, the Supervisory Board considered – amongst others
– the 2021 focus items as previously defined by the Supervisory
Board upon expiry of the financial year 2020; increasing
environmental awareness and demands of society and our
stakeholders to reducing the negative impact of climate
change, the volatile economic climate and trading environment
prompted by the COVID-pandemic and disruptive market
trends ; and the importance of long-term value creation through
continued investments in sustainable growth areas. The 2021
focus items of the Supervisory Board included preservation of
contingency plans in addressing COVID and safeguarding the
continuity of Kendrion, continued investment in China in
support of its ambitious growth plans, optimization of the
European manufacturing footprint of the Automotive Group and
the advancement of the IT strategy with a focus on digital
transformation in the manufacturing and development space.
The Supervisory Board reported on the progress made and the
key points of attention relevant to the 2021 focus items in the
Report of the Supervisory Board that can be found on pages
84-90 of this Annual Integrated Report.
For the 2021 short-term variable remuneration, the Supervisory
Board followed the recommendations of the HR Committee
and selected four financial performance criteria, a non-financial
performance criterion in the area of sustainability and other
non-financial performance criteria that are linked to the
Supervisory Board’s 2021 focus items and Kendrion’s strategic
plan and operational spearheads, including the sustainable
growth areas identified therein. Although no distinction is made
between the CEO and the CFO for the financial performance
criteria, within the non-financial performance criteria the
Supervisory Board decided to distinguish between the CEO
and CFO to ensure appropriate alignment with individual
responsibilities, without compromising the collective
responsibility of the Executive Board.
In 2021, the following short-term incentive target amounts
applied to the members of the Executive Board:
2021 short-term incentive target amount
CEO (J.A.J. van Beurden) EUR 330,000 (i.e. 60% of the annual
gross base salary of EUR 550,000)
CFO (J.H. Hemmen)
EUR 108,776 (i.e. 35% of the annual
gross base salary of EUR 310,788)
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For the performance year 2021, the short-term incentive
performance criteria are allocated as follows:
Short-term remuneration as percentage
of annual gross base salary in 2021
Performance
criterion
Weight Minimum At target Maximum
Financial performance criteria (60%)
ROI 15% 0 CEO 9% 13.5%
CFO 5.25% 7.88%
ROS 15% 0 CEO 9% 13.5%
CFO 5.25% 7.88%
EBITDA 10% 0 CEO 6% 9%
CFO 3.5% 5.25%
Free cash flow 20% 0 CEO 12% 18%
CFO 7% 10.5%
Non-financial performance criteria (40%)
0 CEO 24% 36%
CFO 14% 21%
TOTAL 100% 0 CEO 60% 90%
CFO 35% 52.5%
2021 short-term financial performance criteria
In 2021, the actual performance against the financial
performance criteria was as follows:
2021 short-term incentive performance on financial performance criteria
Financial performance criterion
Pay-out as % of short-term
incentive target amount
Pay-out as % of annual gross base salary
Pay-out in EUR (gross)
CEO (J.A.J. van Beurden) CFO (J.H. Hemmen) CEO (J.A.J. van Beurden) CFO (J.H. Hemmen)
ROI 150% 13.5% 7.88% EUR 74,250 EUR 24,474.60
ROS 150% 13.5% 7.88% EUR 74,250 EUR 24,474.60
EBITDA 150% 9% 5.25% EUR 49,500 EUR 16,316.40
Free cash flow 150% 18% 10.5% EUR 99,000 EUR 32,632.80
TOTAL 54% 31.51% EUR 297,000 EUR 97,898.40
2021 short-term non-financial performance criteria
The non-financial performance criteria for the 2021 short-term
incentive recognize the collective responsibility of the Executive
Board as they are closely aligned to the Supervisory Board’s
2021 focus items and Kendrion’s strategic and operational
spearheads. Nevertheless, without prejudicing the collective
responsibility, the non-financial performance criteria also
distinguish individual responsibilities of the members of the
Executive Board. The table below provides a summarized
description of the non-financial performance criteria.
Summarized description 2021 non-nancial performance criteria
Executive Board Diversity Launch updated strategic diversity framework aimed at the improvement of gender diversity and related target-setting
Executive Board China Development of 28,000m
2
of manufacturing facility at the Suzhou Industrial Park in line with agreed development plan
CEO Shelby (US) Enhancement operational performance and effectiveness
CEO Automotive Investment Automotive R&D organization, incl. shift in capabilities in support of transition to sustainable mobility (i.e. capabilities in software and
electronics)
CFO Automotive Further harmonization functional organizational set-up Automotive and standardization of key processes
CFO IT Increase digitalization footprint
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Consistent with the Remuneration Policy, achievement of an
individual non-financial performance criterion will be measured
by applying a binary scoring model where a non-financial
performance criterion can either be achieved or not achieved.
The amount of the pay-out for the non-performance criteria
depends on the number of non-financial performance criteria
achieved. The following step curve is applicable for the 2021
non-financial performance criteria.
Number of non-nancial
performance criteria achieved
Short-term
incentive pay-out
% of target amount
All 4 non-financial performance criteria achieved 150%
3 out of the 4 non-financial performance criteria achieved 100%
2 out of the 4 non-financial performance criteria achieved 50%
1 out of the 4 non-financial performance criteria achieved 0%
0 out of the 4 non-financial performance criteria achieved 0%
Throughout the year, the Supervisory Board reviewed progress
against the non-financial performance criteria and received
detailed updates about relevant developments and actions
taken. During the December 2021 Supervisory Board meeting,
the Executive Board provided a comprehensive overview of the
progress made and achievements realized under the 2021
strategic and operational spearheads. The organization’s ability
to respond to changing market conditions and customer
demands, and the increasing environmental awareness of
society and other stakeholders have been important themes
considered and discussed extensively among the Supervisory
Board and Executive Board. With the rapid adjustment of
standing practices and the development of longer-term
measures in response to the changing economic landscape,
Kendrion convincingly demonstrated its organizational agility
and resilience. The achievements realized with the consistent
focus on reducing the impact of climate change through the
continued investment in the development and expansion of
Kendrion’s responsible and sustainable product portfolio and
the advancement of decarbonization strategies and mitigation
plans have been encouraging. The Supervisory Board will
continue monitoring progress in the above-mentioned areas.
Reference is made to the Report of the Supervisory Board on
pages 85-86 that further substantiates performance and
achievements realized in 2021 and the focus areas for 2022.
During the annual performance reviews, specific attention was
paid to the individual performance and development of the
members of the Executive Board against the non-financial
performance criteria as well as key competencies such as
(change) leadership and organizational alignment and strategic
business orientation.
Through targeted actions and measures, processes and
operations of the manufacturing facility in Shelby improved.
The degree of operational improvement realized is, however,
insufficient to conclude achievement of this non-financial
performance criterion. Although certain organizational
structures within the Automotive Group have been harmonized
and certain key processes standardized, the extent to which
harmonization and standardization have been achieved are
insufficient to meet this non-financial performance criterion.
Without taking the position that no progress was made relevant
to these two non-financial performance criteria, the Supervisory
Board considers that the accomplishments that have been
realized in 2021, do not justify ‘achievement’ within the binary
scoring model where a non-financial criterion can either be
achieved or not achieved (i.e. no linear scoring applies).
Based on the comprehensive review of the performance of
the members of the Executive Board, the Supervisory Board
resolved that the CEO and the CFO each realized three out
of the four non-financial performance criteria.
The score on the non-financial performance criteria results in
a pay-out of 100% of the short-term target amount
representing: 24% of the CEO’s annual gross base salary of
EUR 550,000 and 14% of the CFO’s annual gross base salary
of EUR 310,788. This resulted in a pay-out of EUR 132,000
for the CEO and EUR 43,510.40 for the CFO.
2021 pay-out short term incentive
Overall performance resulted in the following pay-out of the
short-term incentive in 2021:
Total pay-out 2021 short-term incentive Pay-out as % of annual gross base salary
CEO (J.A.J. van Beurden) EUR 429,000 (gross) 78% of the gross annual base salary of EUR 550,000
CFO (J.H. Hemmen) EUR 141,408.80 (gross) 45.5% of the gross annual base salary of EUR 310,788
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Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
The table below provides an overview of the development of the pay-out under the applicable short-term incentive scheme
of the members of the Executive Board during previous financial years.
Short-term incentive 2020 2019 2018 2017
1
2016
1
CEO (J.A.J. van Beurden) EUR 358,600 (gross) EUR 191,282.90 (gross) EUR 117,816 (gross) EUR 170,748 (gross) based on 90%
achievement of 2017 performance criteria,
representing 36% of gross annual base
salary (i.e. 36% of EUR 474,300), one-third
paid in cash and two-thirds awarded
conditionally in shares.
EUR 180,420 (gross) based on 97%
achievement of 2016 performance criteria,
representing 38.80% of the gross annual
base salary (i.e. 38.80% of EUR 465,000),
one-third paid in cash and two-thirds
awarded conditionally in shares.
CFO (J.H. Hemmen) EUR 102,965 (gross) EUR 37,012.50 (gross) Not applicable – effective date of appointment to the Executive Board 1 July 2019
1
The short-term incentive scheme for the years 2016 and 2017 is subject to the terms of the then applicable remuneration policy.
Long-term variable remuneration
The long-term variable remuneration component incentivizes
members of the Executive Board to focus on long-term
sustainable value for shareholders and other stakeholders;
it thereby serves to align the interests of the members of the
Executive Board with the long-term interests of shareholders
and other stakeholder groups.
The members of the Executive Board annually receive
conditional performance shares. The conditional performance
shares will vest upon achievement of performance measured
over a period of three years following the grant date and are
restricted by a holding period for another two years after
vesting.
The size of the award is defined as a percentage of the annual
fixed gross base salary of the relevant Executive Board member
as per the grant date, where the actual grant is determined by
this percentage and the average share price of the last quarter
of the year immediately preceding the year of the grant date.
The target value at grant date is as follows:
CEO 55% of the annual fixed gross base salary of the CEO
as per the grant date
CFO 50% of the annual fixed gross base salary of the CFO
as per the grant date
The maximum opportunity for the long-term variable
remuneration shall not exceed 150% of the target value.
As part of the reappointment of Joep van Beurden as CEO for
a second four-year term, the General Meeting of Shareholders
resolved on 8 April 2019 that the long-term variable
remuneration of Joep van Beurden ranges from 0% to 90% of
the annual fixed gross base salary of Joep van Beurden, with
60% being the target amount. The reappointment resolution
does not also encompass a change to the Executive Board
Remuneration Policy (including the information in the table
above) as adopted by the General Meeting of Shareholders in
June 2020.
Performance measure
In order to support Kendrion’s strategic intent, the vesting
percentage of the performance shares is conditional upon the
achievement of performance measured as:
Weight Performance measure
40% Relative total shareholder return (relative TSR)
40% Basic earnings per share (EPS)
20% Sustainability (i.e. environmental, social and/or
governance)
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Relative TSR
To determine achievement of this performance measure, the relative TSR is measured, which means share price movements,
including dividends and assuming dividends are reinvested. The TSR performance of Kendrion is measured against the
performance of twelve selected TSR peer companies included in the table below.
TSR Performance Peer Group
# Company Activity HQ Listed
1. Schneider Electric SE Energy management / automation FR Paris
2. Eaton Corporation plc Actuators, valves, brakes, hydraulics etc. for industrial and automotive IR New York
3. Sensata Technologies
Holding NV Sensors and controls for automotive, commercial vehicles and industrial US New York
4. Aalberts Industries NV Industrial fragmented NL Amsterdam
5. Emerson Electric Co Industrial automation US New York
6. Continental AG Automotive GE Frankfurt
7. Schaeffler AG Automotive GE Frankfurt
8. TKH Group NV Industrial NL Amsterdam
9. Wabco Holdings Inc Commercial vehicles part supplier BE New York
10. Borg Warner Inc Automotive, commercial vehicles US New York
11. SKF AB Bearings, seals, mechanical transmission SW Stockholm
12. Phoenix Mecano AG Electronic components, actuators CH Zurich
13.
*
Grammer AG Seating automotive commercial vehicles GE Frankfurt
14.
*
Regal Beloit Electric motors FR Paris
15.
*
IMI Plc Fluid control UK London
*
Companies 13, 14 and 15 will be used as replacement companies in the case of delisting or other corporate events in respect of any
of the selected TSR peer companies during the relevant performance period.
The position of Kendrion in the TSR performance peer group, after three years, determines the score for this measure in
accordance with the following performance incentive zone:
Ranking 13 12 11 10 9 8 7 6 5 4 3 2 1
Vesting 0% 0% 0% 0% 0% 50% 75% 100% 100% 125% 150% 150% 150%
The position of Kendrion in the ranking defines the vesting for this part of the conditional grant of shares.
EPS
EPS is disclosed in Kendrion’s consolidated financial statements
and is calculated by dividing the profit or loss attributable to
shareholders of Kendrion by the weighted average number of
shares outstanding during the relevant period, excluding ordinary
shares purchased by Kendrion and held as treasury shares.
Earnings are adjusted for changes in accounting principles
during the performance period. The Supervisory Board sets the
performance incentive zone (threshold, target and maximum)
annually by reference to the mid-term plan as approved by the
Supervisory Board in the year of the grant date. Given that these
targets are considered commercially sensitive, EPS targets and
the achieved performance are disclosed in the Annual Integrated
Report after the relevant performance period.
The following performance incentive zone will be used to define
the vesting for this part of the conditional grant of shares:
< Threshold Target Maximum
EPS 0 100% 150%
The vesting is linear between threshold performance and on
target performance and between on-target performance and
maximum performance.
Sustainability
The Supervisory Board will annually set a sustainability target
that is aligned with Kendrion’s sustainability ambitions as
reflected in the sustainability target framework.
The following performance incentive zone will be used to define
the vesting for this part of the conditional grant of shares:
< Threshold Target Maximum
Sustainability 0 100% 150%
The vesting is linear between threshold performance and on
target performance and between on-target performance and
maximum performance.
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Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
2021 long-term variable remuneration
Consistent with the applicable Remuneration Policy as adopted
by the General Meeting Shareholders, the members of the
Executive Board were granted conditional performance shares
as described in the table below.
2021 annual
gross base salary
Target amount
Average share
price Q4 2020
Conditional
performance shares
Expiry vesting period
Expiry holding
period
CEO (J.A.J. van Beurden) EUR 550,000 EUR 330,000 (i.e. 60% of EUR 550,000) EUR 16.30 20,245 Expiry performance period 2021-2023 End of 2025
CFO (J.H. Hemmen) EUR 310,788 EUR 155,394 (i.e. 50% of EUR 310,788) EUR 16.30 9,533 Expiry performance period 2021-2023 End of 2025
In accordance with the applicable Remuneration Policy, the
vesting percentage of the performance shares is conditional
upon the achievement of performance measured as relative
TSR, EPS and a non-financial measure in the area of
sustainability. The sustainability performance criterion for the
2021 long-term incentive is related to the achievement of the
energy efficiency and CO
2
reduction targets as per the 2019-
2023 target framework and the implementation of the related
measures.
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Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
2019 long-term variable remuneration
Pursuant to the 2019 long-term incentive scheme, 11,559
conditional performance shares have been granted to Joep van
Beurden and 2,409 conditional performance shares have been
granted to Jeroen Hemmen. The number of conditional
performance shares has been calculated as follows:
2019 annual
gross base salary
Target amount
Average share
price Q4 2018
Conditional
performance shares
CEO (J.A.J. van Beurden) EUR 504,645
(until 1 December 2019)
EUR 550,000
(as of 1 December 2019)
EUR 281,925.41 (i.e. the sum
of EUR 254,425.41 and EUR 27,500)*
EUR 24.39 11,559
CFO (J.H. Hemmen) EUR 235,000 EUR 58,750 (i.e. 50% of 235,000 * 0.5)** EUR 24.39 2,409
*
EUR 254,425.41 for the 11-month period ending 30 November 2019 (i.e. 55% of the annual gross base salary of EUR 504,645 * 11/12th) and
EUR 27,500 for the one-month period commencing 1 December 2019 and ending 31 December 2019 (i.e. 60% of the annual gross base salary
of EUR 550,000
* 1/12
th
).
**
For the CFO, the long-term incentive for at target performance has been time pro-rated to account for the effective date of appointment to the
Executive Board on 1 July 2019.
Consistent with the applicable Remuneration Policy, the vesting
percentage of the performance shares is conditional upon the
achievement (during the performance period 2019-2021) of
performance measured as:
Weight Performance measure
40% Relative total shareholder return (relative TSR)
40% Basic earnings per share (EPS)
20% Sustainability (i.e. environmental, social and/or
governance)
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REMUNERATION REPORT
A summary description of the performance measure in the area of sustainability for the performance period 2019-2021 has been
included in the table below.
Summary description sustainability performance measure – 2019-2021
Achievement of measures in line with five-year roadmap containing
energy efficiency and emission mitigation measures as part of the
2019-2023 sustainability target framework
■ On target performance (i.e. 100% vesting): achievement 3/5
th
of five-year roadmap
■ Max. performance (i.e. 150% vesting): achievement of five-year roadmap
■ Min. threshold performance (i.e. 0% vesting): achievement less than 3/5
th
of five-year roadmap
number of measures that particularly enable the manufacturing
facilities to realize energy efficiencies and CO
2
reductions.
Based on the most recent estimates, the measures included in
the five-year roadmap together would lead to 2.4 MwH lower
energy consumption from electricity and natural gas by the end
of 2023. The fast majority of the measures has been fully
implemented and result in a 2.2 MwH lower energy
consumption from electricity and natural gas. A handful of
remaining included in the five-year roadmap and newly
developed measures will be implemented in the course of
2022/2023 and contribute to the further realization of the 2023
targets.
With reference to the effectivity review of the five-year roadmap,
certain measures have been cancelled, including the measures
for the manufacturing facility in Eibiswald which will be closed in
2022. The initial five-year roadmap has been subject to certain
additions which are prompted by technological developments
and other subsequent developments, such as the construction
of a new manufacturing facility in Suzhou. Solar panels will be
installed at the roof of the 28,000m
2
facility in Suzhou.
The reduction in energy consumption per million EUR added
value between 2018 and 2021 was 2% and negatively
impacted by an organic reduction in added value compared to
2018. Relative carbon emissions decreased 19% over the
same period. Based on the identified measures and expected
added value development in 2022 and 2023, Kendrion expects
to realize the targeted 15% reduction in both carbon emissions
and energy consumption.
As a result, under the 2019 long-term incentive scheme on
target performance has been realized with the sustainability
performance measure resulting in 100% vesting of 20% of the
target-value. This means that a total number of 2,311 shares
have vested for Joep van Beurden and a total number of 481
shares have vested for Jeroen Hemmen. The vested shares
remain subject to a holding period until the end of 2023.
In accordance with the long-term incentive plan, Joep van
Beurden and Jeroen Hemmen will be entitled to accrued
dividend for each of the 2,311 and 481, respectively, vested
shares. Accrued dividend will – in accordance with the long-
term incentive plan – be paid in cash.
Vesting is linear between min. threshold performance and
on-target performance and between on-target performance
and max. performance.
TSR and EPS
When measuring the relative TSR (i.e. share price movements,
including dividends assuming dividends are reinvested), the
position of Kendrion in the predefined TSR performance peer
group is 9. The ninth position results in below threshold
performance. Based on the EPS performance incentive zones
determined by the Supervisory Board by reference to the mid-
term plan presented in 2019, the 2021 EPS falls below the
threshold performance.
Sustainability – ve-year energy and
CO
2
roadmap
The five-year roadmap containing energy efficiency and
emission mitigation measures that has been developed as part
of the 2019-2023 sustainability target framework aims to
achieve a 15% relative reduction of energy consumption and
CO
2
emission by the end of 2023. The five-year roadmap was
designed in 2019 after extensive review and recommendations
by different specialists. The roadmap contains a significant
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statementsReport of the Executive Board
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Annual Integrated Report 2021
Development long-term incentive
The table below provides an overview of the development of the conditional share awards under the long-term incentive scheme
for the members of the Executive Board during previous financial years. The table also specifies the expiry of vesting periods and
holding periods for conditional shares awarded.
Long-term incentive
2020
number of
shares
Expiry
holding
period
2019
number
of shares
Expiry
vesting
period
Expiry
holding
period
2018
number
of shares
Expiry
vesting
period
Expiry
holding
period
2017
number
of shares*
Expiry
vesting
period
Expiry
holding
period
2016
number
of shares*
Expiry
vesting
period
Expiry
holding
period
CEO (J.A.J. van Beurden) 16,533 End of
2022
11,559 End of
2021
End of
2023
6,960 End of
2020
End of
2022
3,383 End of
2019
End of
2021
3,970 End of
2018
End of
2020
CFO (J.H. Hemmen) 6,769 End of
2022
2,409 End of
2021
End 2023 Not applicable – effective date of appointment to the Executive Board 1 July 2019
*
The long-term incentive scheme for the years 2016 and 2017 is subject to the terms of the then applicable remuneration policy.
Agreed upon procedures Deloitte Accountants B.V.
Kendrion’s external auditor Deloitte Accountants B.V. performed
agreed-upon procedures regarding the calculation of the fixed
base salary and the variable remuneration of the Executive
Board for the financial year ending 31 December 2021. The
procedures have been separately agreed upon between
Kendrion and Deloitte Accountants B.V. and do not constitute
an audit or review, or any other assurance engagement
conducted in accordance with the Dutch Standards on Auditing
or other Dutch Standards and, consequently, no assurance has
been provided by Deloitte Accountants B.V. This means that
Deloitte Accountants B.V. has not provided any assurance as to
the fair presentation of the financial data and notes thereto as
included in the fixed base salary and the variable remuneration
of the Executive Board. The agreed upon procedures have
been agreed with the intended users, being the Supervisory
Board.
Pension arrangement and other benets
Members of the Executive Board participate in the defined
contribution pension scheme. Kendrion N.V. will pay: (i) the cost
of contributions for participation in the defined contribution
scheme; (ii) the risk premium for the surviving dependents’
pension (nabestaandenpensioen) and (iii) the cost of
contributions for participation in the occupational disability
insurance (including WIA excedentverzekering) (collectively the
“Pension and Disability Insurance Contribution”). In addition,
members of the Executive Board are entitled to an annual gross
allowance to compensate for the loss of accrual of pension
benefits as a result of the Dutch Wage Tax Act, provided that
the sum of the Pension and Disability Insurance Contribution
and such annual allowance shall annually not exceed an
amount of EUR 75,000. This amount may be adjusted based
on market developments.
No schemes have been agreed for the voluntary early
retirement of members of the Executive Board.
Kendrion maintains a car lease policy for members of the
Executive Board. The lease budget (including fuel) is EUR 2,000
per month. Alternatively, members of the Executive Board are
entitled to a monthly gross car allowance of EUR 2,000.
In addition, Kendrion pays a monthly expense allowance to
members of the Executive Board of up to EUR 450, to cover
costs that are not suitable for individual reimbursement.
The amount of the car allowance and the expense allowance
are not included as a basis for calculation of the Pension and
Disability Insurance Contribution, or any other (variable)
remuneration or allowance, severance amount or benefit.
Kendrion has arranged for a directors’ and officers’ liability
insurance. The costs for this insurance are for the account of
Kendrion.
REMUNERATION REPORT
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Annual Integrated Report 2021
The Executive Board participates in the defined contribution
plan of Kendrion. The pension contribution in 2021 was
EUR 75,000 (2020: EUR 52,585.96) for the CEO and
EUR 65,972 (2020: EUR 34,046.17) for the CFO. In 2021
Kendrion provided the CFO with a car allowance in the monthly
gross amount of EUR 2,000.
Share ownership guideline
An objective of the Remuneration Policy is increase alignment
with the interests of shareholders by encouraging share
ownership. Kendrion applies a share ownership guideline for
members of the Executive Board of 100% of the annual fixed
gross base salary for the CEO and 50% of the annual fixed
gross base salary for the CFO. This shareholding has to be
gradually built up with performance shares earned under the
long-term incentive, although it is permitted to sell shares to
finance taxes due at the date of vesting of the performance
shares, and by purchasing shares with at least 20% of the net
amount of the pay-out of the short-term incentive.
Policy in case of change of control
Unvested performance shares awarded shall be deemed
vested as per the date of the change of control assuming on
target performance, subject to: (i) pro rating to reflect the
proportion of the normal performance period that has elapsed
as per the date of the change of control, and (ii) the
discretionary authority of the Supervisory Board to determine
otherwise, should such deemed vesting of performance shares
result in unreasonable or unequitable remuneration.
Adjustment and claw back
The Supervisory Board is authorized to adjust the amount of
the short-term and long-term variable remuneration to an
appropriate level should payment thereof result in unreasonable
or unequitable remuneration. In addition, a so-called claw-back
provision applies pursuant to which the Supervisory Board has
the authority to recover in whole or in part short-term and long-
term variable remuneration awarded to members of the
Executive Board should it transpire that such variable
remuneration was unjustifiably awarded on the basis of
incorrect information.
Other key elements
Term and termination
Management agreements with members of the Executive
Board are entered for a definite period of four years. The
management agreement may be terminated with due
observance of a notice period of six months. Kendrion is
entitled to terminate the management agreement with
immediate effect for cause (i.e. seriously culpable or negligent
behavior on the part of the Executive Board member).
Termination fee
In the event of termination of the management agreement on
Kendrion’s initiative, the termination fee for members of the
Executive Board shall not exceed 100% of the annual fixed
gross base salary (i.e. excluding short-term and long-term
incentive and other elements such as pension contributions).
The members of the Executive Board are not entitled to
a termination fee if the contract is terminated for cause
(i.e. seriously culpable or negligent behavior on the part of
the Executive Board member) or if the contract is terminated
at the initiative of the Executive Board member.
Pay ratio
The Executive Board to employee pay-ratio is approximately 15
(2020: 18). This pay ratio is based on the average of the 2021
Executive Board remuneration including pensions and other
expenses and the average wage costs per FTE in 2021 as
disclosed on pages 59-60 of this Annual Integrated Report.
Remuneration Policy Supervisory Board
Objectives
The remuneration policy of the Supervisory Board serves to
recruit and retain diverse, qualified and experienced members
to supervise the manner in which the Executive Board
implements Kendrion’s long-term value creation strategy.
Considering the nature of the supervisory responsibilities of the
Supervisory Board, the remuneration is not linked to Kendrion’s
performance, and therefore includes a fixed component only. In
line with good corporate governance, Supervisory Board
members will not receive a share-based incentive.
The remuneration of the Supervisory Board shall be as
described in the table below. The base fee and committee fee
levels in the table below are the same as determined by the
General Meeting in April 2017.
Base fee
Chairman Supervisory Board EUR 45,000
Member Supervisory Board EUR 35,000
Committee fee
Chair Audit Committee EUR 6,000
Member Audit Committee EUR 5,000
Chair HR Committee EUR 6,000
Member HR Committee EUR 5,000
REMUNERATION REPORT
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Annual Integrated Report 2021
Remuneration benchmark review
The base fee and committee fees in the table above have been
subject to a benchmark review by reference to the median
remuneration levels of a peer group of comparable companies.
At the Annual General Meeting of Shareholders on 11 April
2022, Kendrion will propose an adjustment to the base fee and
committee fee levels described in the table above to bring the
Supervisory Board remuneration to the median level.
Expenses
All reasonable and documented expenses incurred by the
Supervisory Board members in the course of performing their
duties are reimbursed.
Benefits and loans
Members of the Supervisory Board are not eligible to participate
in any benefits scheme offered by Kendrion to its employees,
nor shall Kendrion provide loans.
The aggregate amount of the remuneration of the
Supervisory Board members in 2021 EUR 172,000 (2020:
EUR 170,470). The table below gives a breakdown of the
remuneration in 2021 per Supervisory Board member.
Supervisory Board member 2021
H. ten Hove (stepped down April 2021) EUR 12,500
F.J. van Hout (appointed April 2021) EUR 37,500
M.J.G. Mestrom EUR 41,000
J.T.M. van der Meijs EUR 41,000
E.M. Doll EUR 40,000
Total
EUR 172,000
Advisory vote remuneration report 2020
The remuneration report 2020 has been discussed with the
shareholders and put to the General Meeting of Shareholders
for an advisory vote during the annual General Meeting of
Shareholders held on 12 April 2021. Almost 94% of the votes
were cast in favor of the 2020 remuneration report. Supported
by this advisory vote, the Executive Board and the Supervisory
Board considered that no substantive changes are needed
relevant to the application of the Remuneration Policy.
The voting results of the General Meeting of Shareholders held
on 12 April 2021 can be found on the corporate website at
www.kendrion.com.
Taking account of the content of this 2021 Remuneration
Report, it is determined that the aggregate amount of
remuneration awarded is in line with the Remuneration
Policy and contributes to the performance of Kendrion and
the execution of its long-term value creation strategy.
This 2021 Remuneration Report will be discussed with
shareholders and put to the General Meeting of Shareholders
for an advisory vote during the upcoming annual General
Meeting of Shareholders to be held on 11 April 2022.
REMUNERATION REPORT
Remuneration components 2021
CEO % CFO %
Base salary 550,000 49% 310,788 55%
Short term incentive 429,000 38% 141,409 25%
Long term incentive 48,647 4% 10,125 2%
Pension contribution 75,000 7% 65,972 12%
Other 15,358 1% 37,558 7%
Total compensation
1,118,005 100% 565,852 100%
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Annual Integrated Report 2021
Executive Board remuneration comparative
1
EUR Thousand 2021 2020 2019 2018 2017 2016
J.A.J. van Beurden, CEO 1,118.0 984.2 853.5 768.4 737.8 645.4
J.H. Hemmen, CFO 565.8 450.4 189.4
Remuneration of former
Executive Board members
F.J. Sonnemans, CFO 689.0 662.6 533.3
Pay ratio 15 18 14 12 13 13
Company performance
Normalized Revenue (EUR million)
3
463.6 396.4 412.4 448.6 461.8 443.4
Normalized EBITA (EUR million)
3
31.9 18.9 19.8 35.4 37.5 31.1
Normalized EBITA margin
3
6.9% 4.8% 4.8% 7.9% 8.1% 7.0%
1
Based on settled short-term and long-term benefits, refer to note 29 of the financial statements for detailed disclosure.
2
Restated to include 2016 long-term incentive.
3
Normalized for one off items. For a reconciliation to the most comparable IFRS performance measure, see page 38 of this Annual Integrated Report.
Supervisory Board remuneration comparative
2021
2020 (exl. fee
reduction)
2019 2018 2017 2016
Base fee
Chairman Supervisory Board EUR 45,000 EUR 45,000 EUR 45,000 EUR 45,000 EUR 45,000 EUR 40,000
Member Supervisory Board EUR 35,000 EUR 35,000 EUR 35,000 EUR 35,000 EUR 35,000 EUR 30,000
Committee fee
Chair Committee EUR 6,000 EUR 6,000 EUR 6,000 EUR 6,000 EUR 6,000 EUR 5,000
Member Committee EUR 5,000 EUR 5,000 EUR 5,000 EUR 5,000 EUR 5,000 EUR 5,000
Total Supervisory Board remuneration EUR 172,000 EUR 172,000 EUR 172,000 EUR 172,000 EUR 172,000 EUR 150,000
2 2
REMUNERATION REPORT
Contents Profile Strategy Report of the Executive Board Outlook Report of the Supervisory Board Financial statements
FINANCIAL STATEMENTS - CONTENTS
108 Consolidated statement of financial position
at 31 December
109 Consolidated statement of profit and loss
and other comprehensive income
110 Consolidated statement of changes in equity
112 Consolidated statement of cash flows
113 Notes to the consolidated financial statements
137 Property, plant and equipment
139 Intangible assets
143 Other investments, including derivatives
143 Deferred tax assets and liabilities
146 Contract costs
146 Inventories
146 Trade and other receivables
147 Cash and cash equivalents
147 Capital and reserves
149 Earnings per share
151 Loans and borrowings
153 Employee benefits
156 Share-based payments
157 Provisions
157 Contract liabilities
157 Trade and other payables
158 Financial instruments
166 Leases
166 Capital commitments
167 Contingent assets and liabilities
167 Operating segments
169 Business combinations and acquisitions
of non-controlling interests
173 Other income
173 Staff costs
174 Other operating expenses
174 Net finance costs
175 Income tax
175 Reconciliation of effective tax rate
175 Related parties
177 Other notes
177 Post-balance sheet events
178 Company balance sheet at 31 December
179 Company income statement
180 Notes to the company financial statements
180 General
180 Principles of valuation of assets and liabilities
and determination of results
180 Financial fixed assets
180 Receivables
181 Equity
182 Current liabilities
182 Financial instruments
182 Other income
183 Staff costs
183 Share in results of Group companies after tax
183 Profit appropriation
183 Commitments not appearing on the balance sheet
184 Post-balance sheet events
184 Fees to the auditor
184 Remuneration of and share ownership
by the Executive Board and Supervisory Board
FINANCIAL STATEMENTS
Annual Integrated Report 2021
107
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31DECEMBER
Note EUR million 2021 2020
Equity and liabilities
9, 10 Equity
Share capital 29.9 29.9
Share premium 45.8 51.7
Reserves 132.9 117.5
Retained earnings 14.4 4.3
Total equity
2
Liabilities
11 Loans and borrowings 136.4 104.2
12 Employee benefits 14.0 15.5
4 Deferred tax liabilities 17.7 15.9
14 Provisions 0.9 0.7
Total non-current liabilities
8 Bank overdraft 6.1 4.5
11 Loans and borrowings 6.7 7.5
14 Provisions 1.2 1.5
Current tax liabilities 6.0 5.2
15 Contract liabilities 4.5 5.5
16 Trade and other payables 74.3 65.2
Total current liabilities
Total liabilities
Total equity and liabilities
Note EUR million 2021 2020
Assets
Non-current assets
1
Property, plant and equipment 121.9 118.7
2 Intangible assets
1
3 Other investments, including
derivatives 0.4 3.0
4 Deferred tax assets
1
5 Contract costs 0.5 0.6
Total non-current assets
Current assets
6 Inventories 79.7 61.7
Current tax assets 2.7 1.4
7 Trade and other receivables 65.3 53.4
8 Cash and cash equivalents 18.6 13.0
Total current assets
Total assets
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
2
Equity is attributable to owners of the company as non-controlling interests are not applicable.
FINANCIAL STATEMENTS
Annual Integrated Report 2021
108
Home
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
CONSOLIDATED
STATEMENT OF
FINANCIAL POSITION
1
This item will never be reclassified to profit or loss.
2
These items may be reclassified to profit or loss.
3
All profits are attributable to owners of the company as non-controlling interests are not applicable.
CONSOLIDATED STATEMENT OF PROFIT AND LOSS AND OTHER COMPREHENSIVE INCOME
Note EUR million 2021 2020
Other comprehensive income
4 Remeasurements of defined benefit plans
1
Foreign currency translation differences for
foreign operations
2
17
Net change in fair value of cash flow hedges,
net of income tax
2
Other comprehensive income for the period,
net of income tax
(3.7 )
Total comprehensive income for the period
3
10 Basic earnings per share (EUR),
based on weighted average
3
10 Basic earnings per share (EUR),
based on weighted average (diluted)
3
Note EUR million 2021 2020
21 Revenue 464.0 396.4
23 Other income 0.2 0.3
Total revenue and other income
Changes in inventories of finished goods and work
in progress (3.5 ) 2.5
Raw materials and subcontracted work 241.9 203.2
24 Staff costs 138.1 119.5
Depreciation and amortization 27.8 30.1
25 Other operating expenses 36.0 31.3
Result before net finance costs
26 Finance income 0.0 0.0
26 Finance expense (3.7 ) (4.1 )
Share profit or loss of an associate (0.1 ) (0.3 )
Profit before income tax
27, 28 Income tax expense (5.7 ) (1.4 )
Profit for the period
Home
Consolidated
statement of
financial position
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
CONSOLIDATED STATEMENT
OF PROFIT AND LOSS AND
OTHER COMPREHENSIVE
INCOME
FINANCIAL STATEMENTS
Annual Integrated Report 2021
109
Note
EUR million
Share
capital
Share
premium
Translation
reserve
Hedge
reserve
Reserve for
own shares
Other
reserves
Retained
earnings
Total
equity
Balance at 1 January 2020 29.9 51.7 5.3 (0.1 ) (3.7 ) 111.2 8.3 202.6
Total comprehensive income for the period
Profit or loss – – – – – – 4.3 4.3
Other comprehensive income
12 Remeasurements of defined benefit plans – – – – – 1.6 – 1.6
Foreign currency translation differences
for foreign operations – – (5.5 ) – – – – (5.5 )
9 Net change in fair value of cash flow hedges,
net of income tax – – – 0.2 – – – 0.2
Other comprehensive income for the period,
net of income tax
Total comprehensive income for the period
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
9 Issue of ordinary shares – – – – – – – –
Share-based payment transactions – – – – 0.3 (0.1 ) – 0.2
9 Dividends to equity holders – – – – – – – –
9 Appropriation of retained earnings – – – – – 8.3 (8.3 ) –
Balance at 31December 2020
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
CONSOLIDATED
STATEMENT OF
CHANGES IN EQUITY
FINANCIAL STATEMENTS
Annual Integrated Report 2021
110
Note
EUR million
Share
capital
Share
premium
Translation
reserve
Hedge
reserve
Reserve for
own shares
Other
reserves
Retained
earnings
Total
equity
Balance at 1 January 2021 29.9 51.7 (0.2 ) 0.1 (3.4 ) 121.0 4.3 203.4
Total comprehensive income for the period
Profit or loss – – – – – – 14.4 14.4
Other comprehensive income
12 Remeasurements of defined benefit plans – – – – – 0.5 – 0.5
Foreign currency translation differences
for foreign operations – – 7.8 – – – – 7.8
9 Net change in fair value of cash flow hedges,
net of income tax – – – 0.1 – – – 0.1
Other comprehensive income for the period,
net of income tax
Total comprehensive income for the period
Transactions with owners, recorded
directly in equity
Contributions by and distributions to owners
9 Issue of ordinary shares 0.0 0.0 – – – – – 0.0
Own shares sold – – – – 1.4 0.2 – 1.6
Share-based payment transactions – – – – 0.1 1.0 – 1.1
9 Dividends to equity holders – (5.9 ) – – – – – (5.9 )
9 Appropriation of retained earnings – – – – – 4.3 (4.3 ) –
Balance at 31December 2021
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (CONTINUED)
FINANCIAL STATEMENTS
Annual Integrated Report 2021
111
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
CONSOLIDATED
STATEMENT OF
CHANGES IN EQUITY
Note EUR million 2021 2020
Cash flows from operating activities
Profit for the period 14.4 4.3
Adjustments for:
26 Net finance costs 3.7 4.1
Share profit or loss of an associate 0.1 0.3
27 Income tax expense 5.7 1.4
1, 2 Depreciation of property, plant and equipment and
software 23.9 25.7
2 Amortization of other intangible assets 3.9 4.4
1, 2
Impairment of fixed assets 3.5 2.4
3 Profit on disposal of associate (0.6 ) –
Share-based payments 1.2 0.0
Change in trade and other receivables (7.1 ) (0.2 )
Change in inventories (15.2 ) 6.9
Change in trade and other payables 5.9 (0.2 )
Change in provisions (1.2 ) (2.0 )
Change in contract liabilities (1.0 ) (1.1 )
Interest paid (3.2 ) (2.9 )
Interest received 0.0 0.0
Tax paid (6.2 ) (1.3 )
Net cash flows from operating activities
Note EUR million 2021 2020
Cash flows from investing activities
2 Acquisition of subsidiaries (23.2 ) (77.7 )
3 Proceeds from disposal of associate 3.3 –
1 Investments in property, plant and equipment (23.7 ) (12.9 )
1 Disinvestments of property, plant and equipment 0.7 0.4
2 Investments in intangible fixed assets (6.3 ) (3.1 )
2 Disinvestments of intangible fixed assets 0.2 0.0
3 (Dis)investments of other investments 0.2 (0.9 )
Net cash from investing activities
(48.8 ) (94.2 )
Free cash flow (21.0 ) (52.4 )
Cash flows from financing activities
11 Payment of lease liabilities (3.4 ) (2.9 )
11 Proceeds from borrowings (non current) 32.4 59.4
11 Proceeds from borrowings (current) – 0.2
11 Repayment of borrowings (current) (0.8 ) –
9 Dividends paid (4.3 ) –
Net cash from financing activities
Change in cash and cash equivalents 2.9 4.3
8 Cash and cash equivalents at 1 January 8.5 4.6
Effect of exchange rate fluctuations on cash held 1.1 (0.4 )
8 Cash and cash equivalents at 31December 12.5 8.5
FINANCIAL STATEMENTS
Annual Integrated Report 2021
112
CONSOLIDATED STATEMENT OF CASH FLOWS
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
CONSOLIDATED
STATEMENT
OF CASH FLOWS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Reporting entity
The consolidated financial statements of the Company as at and for the year ended 31December 2021 comprise the Company and its subsidiaries
Basis of preparation
Statement of compliance
The consolidated financial statements as of 31December 2021 have been prepared in accordance with International Financial Reporting Standards
(IFRS) and IFRS IC interpretations (IFRIC), published by the International Accounting Standards Board (IASB) as adopted by the European Union
(hereinafter referred to as EU-IFRS) and in accordance with the legal requirements of Part 9, Book 2 of the Dutch Civil Code. The Company financial
statements are integrated part of the 2021 financial statements of Kendrion N.V .
The financial statements were authorised for issue by the Executive Board on 25 February 2022.
Basis of measurement
The financial statements are presented in millions of euros, the euro also being the Group’s functional currency.
The financial statements have been prepared on a historical cost basis except that:
■ derivative financial instruments are stated at fair value;
■ the defined benefit liability is recognised as net total of plan assets and present value of the defined benefit obligations;
■ the contingent consideration is stated at fair value.
The methods used to measure the fair values are disclosed in note q.
In preparing these consolidated financial statements, the Executive Board has made judgements and estimates that affect the application of the Group’s
accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.
Executive Board made critical judgements in the process of applying Group's accounting policies and have the most significant effect on the amounts
recognised in the consolidated financial statements, see notes:
■ note 2 – goodwill impairment testing;
■ note 6 – inventories.
(a)
(b)
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
FINANCIAL STATEMENTS
Annual Integrated Report 2021
113
Executive Board made estimations concerning the future, and other key sources of estimation uncertainty at the end of the reporting period,
that may have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year.
■ note 2 – management forecast and growth rate of each cash-generating unit to determine whether goodwill is impaired;
■ note 4 – utilisation of tax losses;
■ note 4 – outcome of tax audits;
■ note 6 – valuation of inventories;
■ note 12 – salary and pension growth of defined benefit obligations;
■ note 14 – provisions;
■ note 18 – leases.
In 2021 the Group was affected by supply chain constraints triggered by a strong recovery of demand after the Covid-19 crisis in 2020. In particular the
prevailing shortage of semi-conductors in the Automotive industry indirectly impacted group revenue with customers having to reduce their production
volumes. For the goodwill impairment testing calculations the group has considered these supply chain contrains when preparing its budgets. For other
steps taken by the Executive Board to make judgements, estimates and assumptions, reference is made to the notes as included above.
Correction of misstatements
The group has opted to restate the statement of financial position retrospectively due to a reassessment of the tax position related to the acquisition of
INTORQ GmbH & Co KG on 8 January 2020. Based on the reassessment of the tax position the group has determined that it had overstated the
deferred tax asset and current tax liability and as a result understated the amount of goodwill in the 2020 statement of financial position. Because the
measurement period for the business combination ended on 8 January 2021 and therefore the one-year window for adjustments to the PPA does no
longer apply, the group has opted to restate the statements retrospectively in accordance with IFRS 3.50. The following table summarizes the impact on
the groups’s consolidated financial statements.
31-12-2020 31-12-2020
Restated
Consolidated Statement of Financial Position at 31 December
Intangible assets 159.1 158.1
Deferred tax assets
18.2 19.2
Total assets
429.1 429.1
Current tax liability 5.2 5.2
Total equity and liabilities
429.1 429.1
FINANCIAL STATEMENTS
Annual Integrated Report 2021
114
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
31-12-2020 31-12-2020
Restated
Basic earnings per share (EUR), based on weighted average 0.29 0.29
Basic earnings per share (EUR), based on weighted average (diluded) 0.29 0.29
The adjustment to the current tax liabilities rounds to EUR 0.0 million, therefore it does not show in above schedule as a change.
Significant accounting policies
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements
and by the entities within the Group.
Basis of consolidation
Business combinations
Business combinations are accounted for using the acquisition method at the acquisition date, which is the date on which control is transferred
to the Group. Control refers to the authority to govern the financial and operating policies of an entity to obtain benefits from its activities.
When assessing control, the Group takes into consideration potential voting rights that are currently exercisable.
The Group measures goodwill at the acquisition date as:
■ the fair value of the consideration transferred; plus
■ the recognised amount of any non-controlling interests in the acquiree; plus
■ if the business combination is realised in stages, the fair value of the pre-existing equity interest in the acquiree; less
■ the net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed.
If the excess is negative, a bargain purchase gain is recognised immediately in comprehensive income (hereafter also referred to as ‘profit
or loss’). The consideration transferred does not include amounts relating to the settlement of pre-existing relationships. Such amounts
are generally recognised in profit or loss.
Transactions costs, other than those associated with the issue of debt or equity securities that the Group incurs in connection with a business
combination are expensed as incurred.
Any contingent consideration payable is measured at fair value at the acquisition date. If the contingent consideration is classified as equity, then
it is not remeasured and settlement is accounted for within equity. Otherwise, subsequent changes in the fair value of the contingent consideration
are recognised in profit or loss.
When share-based payment awards (replacement awards) are required to be exchanged for awards held by the acquirees employees (acquirees
awards) and relate to past services, then all or part of the amount of the acquirer’s replacement awards is included when measuring the consideration
transferred in the business combination. This determination is based on the market-based value of the replacement awards as compared to the market-
(a)
(i)
FINANCIAL STATEMENTS
Annual Integrated Report 2021
115
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
based value of the acquirees awards and the extent to which the replacement awards relate to past and/or future service.
Subsidiaries
Subsidiaries are entities controlled by the Company. The Company controls an entity if it is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date that control commences, until the date that control ceases. The shares of third parties
in shareholders’ equity and results are stated separately. The accounting policies of subsidiaries are changed, where necessary, to align them with the
policies adopted by the Company.
Transactions eliminated on consolidation
Intragroup balances and transactions, as well as any unrealised gains and losses or income and expenses arising from intragroup transactions,
are eliminated when preparing the consolidated financial statements.
Foreign currency
Foreign currency transactions
Transactions expressed in non-euro zone currencies are translated into euros at exchange rates at the date of the transaction. Monetary assets and
liabilities denominated in non-euro zone currencies at the reporting date are translated into euros at the exchange rate at that date.
Non-monetary assets and liabilities denominated in non-euro zone currencies that are measured at historical cost are translated at the exchange rate
at the date of the transaction. Non-monetary assets and liabilities denominated in non-euro zone currencies that are measured at fair value are
translated in euros at the exchange rates when the fair value was determined. Currency differences on foreign currency transactions are recognised
in profit or loss, except loans considered to be part of the net investment, or qualifying cash flow hedges to the extent the hedges are effective.
Translation of foreign currency financial statements
Translation of foreign currency financial statements depends on the functional currency of the company concerned. The closing rate method is applied
if the functional currency of the company is other than the euro. With this method, assets and liabilities of non-euro zone operations, including goodwill
and fair value adjustments arising at the time of acquisition, are translated into euros at exchange rates at the reporting date.
The income and expenses of non-euro zone operations are translated into euros at rates approximating the exchange rates at the date of
the transaction. Foreign currency translation differences are recognised in other comprehensive income and accumulated in the translation reserve,
which is a component of equity.
On the partial or complete sale of a foreign operation, the related amount is transferred from the translation reserve to profit or loss.
Foreign exchange gains and losses arising from a monetary item receivable from or payable to a non-euro zone operation, of which the settlement
is neither planned nor likely in the foreseeable future, are considered to form part of a net investment in a non-euro zone operation and are recognised
directly in equity, in the translation reserve.
(ii)
(iii)
(b)
(i)
(ii)
FINANCIAL STATEMENTS
Annual Integrated Report 2021
116
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Property, plant and equipment
Owned assets
Items of property, plant and equipment are measured at cost or assumed cost less accumulated depreciation and accumulated impairment losses
(see accounting policy g). The cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets
includes the cost of materials, direct labour, the initial estimate, where relevant, of the costs of dismantling and removing the items and reinstating
the site on which they are located, a reasonable proportion of production overheads, and capitalised borrowing costs.
Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant
and equipment.
Lease
The Group has applied IFRS 16 using the modified retrospective approach in the financial statements 2018. Therefore, the below policies are applicable
from 1 January 2018, except when stated differently.
At inception of a contract, the Group assesses whether a contract is, or contains, a lease. A contract is, or contains, a lease if the contract conveys
the right to control the use of an identified assets for a period of time in exchange for consideration. To assess whether a contract conveys the right
to control the use of an identified asset, the Group uses the definition of a lease in IFRS 16.
This policy is applied to contracts entered into on or after 1 January 2018.
At commencement or on modification of a contract that contains a lease component, the Group allocates the consideration in the contract to each
lease component on the basis of their relative stand-alone process. However, the Group elects not to separate non-lease components from lease
components, and instead account for each lease component and any associated non-lease component as a single lease component for only
the following class of underlying asset: plant and equipment and other fixed assets.
If individual leases have similar characteristics (e.g. vehicles leased in one location from one lessor) the Group may apply the portfolio application
as a practical expedient.
The Group shall combine two or more contracts entered into at or near the same time with the same counterparty, and account for the contracts
as a single contract if one or more of the following criteria are met:
■ The contracts are negotiated as a package with an overall commercial objective that cannot be understood without considering the contracts
together; or
■ The amount of consideration to be paid in one contract depends on the price or performance of the other contract; or
■ The rights to use underlying assets conveyed in the contracts (or some rights to use underlying assets conveyed in each of the contracts) form
a single lease component.
(c)
(i)
(ii)
FINANCIAL STATEMENTS
Annual Integrated Report 2021
117
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
The Group recognises a right-of-use asset and a lease liability at the lease commencement date. The right-of-use asset is initially measured at cost,
which comprise the initial amount of the lease liability adjusted for any lease payments made at or before the commencement data, plus any initial direct
costs incurred.
The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the earlier of the end of the useful
life of the right-of-use asset or the end of the lease term. The estimated useful lives of right-of-use assets are determined on the same bases as those
of owned assets. The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease
liability.
The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using
the interest rate implicit in the lease or, if that rate cannot be readily determined, the Group’s incremental borrowing rate. Generally, the Group uses
its incremental borrowing rate as the discount rate.
The Group determines its incremental borrowing rate by obtaining interest rates from various external financing sources and makes certain adjustments
to reflect the terms of the lease and type of the asset leased.
Lease liability might include:
■ Fixed lease payments;
■ Amounts expected to be payable under a residual value guarantee;
■ Exercise price under a purchase option that the Group is reasonably certain to exercise, lease payments in an optional renewal period if the Group
is reasonably certain to exercise an extension option, and penalties for early termination of a lease unless the Group is reasonably certain not
to terminate early.
The lease liability is subsequently measured at amortised cost using the effective interest method. It is remeasured when there is a change in future
lease payments arising from a change in an index or rate, or in the Group’s assessment of exercising a purchase, extension or termination option.
When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-of-use asset or is recorded
in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.
When there is a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease,
this is a lease modification and can result in a separate lease or a change in an existing lease.
If a lease modification qualifies as a change in the accounting for the existing lease then the Group shall remeasure the lease liability based on
the present value of the revised lease payments using the interest rate implicit in the lease, if that rate cannot be readily determined, the Group uses
the incremental borrowing rate at the effective date of the modification. When lease modifications fully or partially decrease the scope of the lease,
the Group decreases the carrying amount of the right-of-use asset to reflect partial or full termination of the lease. Any difference is recognised
in profit or loss at the effective date of the modification.
FINANCIAL STATEMENTS
Annual Integrated Report 2021
118
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Subsequent costs
The cost of replacing part of an item of property, plant and equipment is recognised in the carrying amount of the item if it is probable that the future
economic benefits embodied within the part will flow to the Group, and its cost can be reliably measured. The carrying amount of the replaced part
is derecognised. The costs of the day-to-day servicing of property, plant and equipment are recognised as an incurred charge in profit or loss.
Depreciation
Depreciation is charged to profit or loss on a straight-line basis over the estimated useful life of each component of property, plant and equipment.
Land is not depreciated.
Leased assets are depreciated using the straight-line method from the commencement date to the earlier of the end of the useful life or the end
of the lease term.
Depreciation methods, useful lives and residual values are reviewed annually.
Recognition of transaction results
Gains and losses on the disposal of property, plant and equipment are accounted for in other operating income/other expenses in the statement
of comprehensive income.
Intangible assets
Goodwill
Goodwill that arises upon acquisition of a subsidiary is included in intangible assets. For the measurement of goodwill at initial recognition, see note b.
Goodwill is carried at cost less any accumulated impairment losses. Goodwill is allocated to cash-generating units and is not amortised but is tested
annually for impairment (see note g).
Negative goodwill arising on an acquisition is recognised directly in profit or loss.
Research and development
Research and development expenses comprise expenditure on research and development and expenses for customer-specific applications, prototypes
and testing.
Expenditure on research activities undertaken with the prospect of gaining new scientific or technical knowledge and understanding is recognised
in profit or loss as incurred.
(iii)
(iv)
(v)
(d)
(i)
(ii)
FINANCIAL STATEMENTS
Annual Integrated Report 2021
119
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Development activities involve a plan or design for the production of new or substantially improved products and processes. Development expenditure
is capitalised only if the development costs can be measured reliably, the product or process is technically and commercially feasible, future economic
benefits are probable, and the Group intends to and has sufficient resources to complete the development and to use or sell the asset. The expenditure
capitalised includes the cost of materials, direct labour, overhead costs that are directly attributable to preparing the asset for its intended use, and
capitalised borrowing costs. Other development expenditure is recognised in profit or loss when incurred.
Capitalised development expenditure is measured at cost less accumulated amortization and accumulated impairment losses.
Other intangible assets
Other intangible assets that are acquired by the Group and have finite useful lives are stated at cost less accumulated amortization (see next page)
and accumulated impairment losses (see note g). Based on the purchase price allocation of acquisitions, intangible assets that are part of the
other intangible assets and relate to, for example, valued customer relations, trade names and technologies are also recognised.
Subsequent expenditure
Subsequent expenditure on capitalised intangible assets is capitalised only if it increases the future economic benefits embodied in the specific
asset to which it relates. All other expenditure is expensed when incurred.
Amortization
Amortization is recognised in profit or loss on a straight-line basis over the estimated useful lives of the intangible assets unless such lives are indefinite.
Goodwill and other intangible assets with an indefinite useful life are systematically tested for impairment at each reporting date. Other intangible assets
are amortised from the date they are available for use. Amortization methods, useful lives and residual values are reviewed at each reporting date and
adjusted if appropriate.
Financial instruments and other investments
Financial instruments
Non-derivative financial instruments
Recognition and initial measurement
Trade receivables are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group
becomes a party to the contractual provisions of the instrument. A financial asset (unless it is a trade receivable without a significant financing
component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its
acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.
Classification and subsequent measurement
Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets,
in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.
(iii)
(iv)
(v)
(e)
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
■ it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
■ its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount
outstanding.
A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:
■ it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
■ its contractual terms give rise on specified dates to cash flows
On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the
investment’s fair value in OCI. This election is made on an investment-by-investment basis.
All financial assets not classified as measured at amortised cost as described above are measured at FVTPL. This includes all derivative financial assets.
On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or
at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.
The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects
the way the business is managed, and information is provided to management. Financial assets that are held for trading or are managed and whose
performance is evaluated on a fair value basis are measured at FVTPL.
Assessment whether contractual cash flows are solely payments of principal and interest
For the purposes of this assessment, ‘principal’ is defined as the fair value of the financial asset on initial recognition. ‘Interest’ is defined as
consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period
of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.
In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the
instrument. This includes assessing whether the financial asset contains a contractual term that could change the timing or amount of contractual
cash flows such that it would not meet this condition. In making this assessment, the Group considers:
■ contingent events that would change the amount or timing of cash flows;
■ terms that may adjust the contractual coupon rate, including variable-rate features;
■ prepayment and extension features; and
■ terms that limit the Group’s claim to cash flows from specified assets (e.g. non-recourse features).
Financial liabilities
Financial liabilities are classified as measured at amortised cost or FVTPL. A financial liability is classified as at FVTPL if it is classified as held-for-trading,
it is a derivative or it is designated as such on initial recognition. Financial liabilities at FVTPL are measured at fair value and net gains and losses,
including any interest expense, are recognised in profit or loss. Other financial liabilities are subsequently measured at amortised cost using the effective
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
interest method. Interest expense and foreign exchange gains and losses are recognised in profit or loss. Any gain or loss on derecognition is also
recognised in profit or loss.
Derecognition
The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive
the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in
which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.
The Group derecognises a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognises a
financial liability when its terms are modified, and the cash flows of the modified liability are substantially different, in which case a new financial liability
based on the modified terms is recognised at fair value. On derecognition of a financial liability, the difference between the carrying amount extinguished
and the consideration paid (including any non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Offsetting
Financial assets and financial liabilities are offset and the net amount presented in the statement of financial position when, and only when, the Group
currently has a legally enforceable right to set off the amounts, it intends either to settle them on a net basis or to realise the asset and settle the liability
simultaneously and the financial assets and financial liabilities are with the same party.
Other investments
Associates are those entities in which the Group has significant influence, but not control or joint control, over the financial and operating policies.
Interests in associates and the joint venture are accounted for using the equity method. They are initially recognised at cost, which includes transaction
costs. Subsequent to initial recognition, the consolidated financial statements include the Group’s share of the profit or loss and OCI of equity-
accounted investees, until the date on which significant influence or joint control ceases.
Trade and other receivables
Trade and other receivables represent the Group’s right to an amount of consideration that is unconditional. Trade and other receivables are carried
at amortised cost, less impairment losses (see note g).
Recognised interest-bearing loans and borrowings
After initial recognition, interest-bearing loans and borrowings are carried at amortised cost with any difference between the initial carrying amount
and the redemption amount, based on the effective interest method, taken to profit or loss over the respective terms of the loans.
Trade and other payables
Trade and other payables are carried at amortised cost.
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Cash and cash equivalents
Cash and cash equivalents comprise cash and bank balances and other call deposits payable on demand. Bank overdrafts that are repayable on
demand and form an integral part of the Group’s cash management, are included as a component of cash and cash equivalents in the statement
of cash flows. They are measured at fair value.
Other non-derivative financial instruments
Other non-derivative financial instruments are measured at amortised cost using the effective interest method, less any impairment losses.
Derivative financial instruments, including hedge accounting
The Group holds derivative financial instruments to hedge its foreign currency and interest rate exposures. Embedded derivatives are separated from the
host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met. At 31December 2021, no embedded
derivatives existed.
Derivatives are initially measured at fair value, with attributable transaction costs recognised in the statement of comprehensive income when they
are incurred. Subsequent to initial recognition, derivatives are carried at fair value. Any changes are taken to profit or loss.
The Group designates certain derivatives as hedging instruments to hedge the variability in cash flows associated with highly probable forecast
transactions arising from changes in foreign exchange rates and interest rates and certain derivatives and non-derivative financial liabilities as hedges
of foreign exchange risk on a net investment in a foreign operation. At inception of designated hedging relationships, the Group documents the risk
management objective and strategy for undertaking the hedge. The Group also documents the economic relationship between the hedged item and
the hedging instrument, including whether the changes in cash flows of the hedged item and hedging instrument are expected to offset each other.
Changes in the fair value of a derivative hedging instrument designated as a cash flow hedge are recognised in other comprehensive income and
presented in the hedging reserve.
The effective portion of changes in the fair value of the derivative that is recognised in OCI is limited to the cumulative change in fair value of the hedged
item, determined on a present value basis, from inception of the hedge. Any ineffective portion of changes in the fair value of the derivative is recognised
immediately in profit or loss. The Group designates only the change in fair value of the spot element of forward exchange contracts as the hedging
instrument in cash flow hedging relationships. The change in fair value of the forward element of forward exchange contracts (‘forward points’) is
separately accounted for as a cost of hedging.
When the hedged forecast transaction subsequently results in the recognition of a non-financial item such as inventory, the amount accumulated in
the hedging reserve and the cost of hedging reserve is included directly in the initial cost of the non-financial item when it is recognised.
For all other hedged forecast transactions, the amount accumulated in the hedging reserve and the cost of hedging reserve is reclassified to profit or
loss in the same period or periods during which the hedged expected future cash flows affect profit or loss.
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of profit and loss and other
comprehensive income
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statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
If the hedge no longer meets the criteria for hedge accounting or the hedging instrument is sold, expires, is terminated or is exercised, then hedge
accounting is discontinued prospectively. When hedge accounting for cash flow hedges is discontinued, the amount that has been accumulated in the
hedging reserve remains in equity until, for a hedge of a transaction resulting in the recognition of a non-financial item, it is included in the non-financial
item’s cost on its initial recognition or, for other cash flow hedges, it is reclassified to profit or loss in the same period or periods as the hedged expected
future cash flows affect profit or loss.
If the hedged future cash flows are no longer expected to occur, then the amounts that have been accumulated in the hedging reserve and the cost
of hedging reserve are immediately reclassified to profit or loss.
Inventories
Inventories are measured at the lower of cost and net realisable value. Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and the estimated costs to sell. The cost of inventories of the Group is based on the weighted
average cost, and includes expenditure incurred in acquiring the inventories, production or conversion costs, and other costs incurred in bringing
them to their current location and condition. The cost of inventories includes an appropriate share of overheads based on normal operating capacity.
Impairment
Financial assets
The Group recognises impairments for financial assets based on the ‘expected credit loss’ model. The Group measures loss allowances at an amount
equal to the lifetime expected credit losses.
Expected credit losses are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls,
being the difference between the cash flows due to the entity in accordance to the contract and the cash flows that the Group expects to receive.
The Group makes use of the simplified method for trade receivables and contracts assets as set out in IFRS 9.
The expected credit losses for significant financial assets are determined on an individual basis. The remaining financial assets are assessed collectively
in groups of assets that have similar credit risk characteristics.
All impairment losses are recognised in the consolidated statement of comprehensive income.
An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised.
For financial assets measured at amortised cost, the reversal is recognised in profit or loss.
Non-financial assets
The carrying amounts of the Group’s non-financial assets, other than inventories and deferred tax assets, are reviewed at each reporting date
to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated.
For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date.
(f)
(g)
(i)
(ii)
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statement of
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Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use,
the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. For the purpose of impairment testing, assets are grouped together into the smallest group of assets
that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the ‘cash-
generating unit’). For the purpose of impairment testing, the goodwill acquired in a business combination is allocated to cash-generating units that are
expected to benefit from the synergies of the combination.
An impairment loss is recognised if the carrying amount of an asset or its cash-generating unit exceeds its estimated recoverable amount. Impairment
losses are recognised in profit or loss. Impairment losses recognised in respect of cash-generating units are first allocated to reduce the carrying
amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.
Reversal of impairment losses
Impairment losses in respect of goodwill are not reversed. Impairment losses in respect of other assets are reversed if there has been a change in
the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not
exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognised.
Reversals of impairment losses are recognised in profit or loss.
Calculation of recoverable amount
The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows,
discounted at the original effective interest rate (i.e. the effective interest rate computed on initial recognition of these financial assets). Receivables
with a short remaining term are not discounted. The recoverable amount of other assets is the greater of their net selling price and value in use.
In determining value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current
market assessments of the time value of money and the risks specific to the asset. For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs.
Share capital
Ordinary shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction
from equity, net of any tax effect.
Repurchase, disposal and reissue of share capital (treasury shares)
When own shares recognised as equity are repurchased, the amount of the consideration paid, including directly attributable costs and net of any tax
effects, is recognised as a deduction from equity. Repurchased shares are classified as treasury shares and are presented as a deduction from total
equity. If treasury shares are sold or reissued subsequently, the amount received is recognised as an increase in equity, and the resulting surplus or
deficit on the transaction is transferred respectively to or from other reserves.
(iii)
(iv)
(h)
(i)
(ii)
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Dividends
The holders of ordinary shares are entitled to receive dividends as determined from time to time by the General Meeting of Shareholders.
The Executive Board has the authority to decide, with the approval of the Supervisory Board, what portion of the profit will be allocated to the reserves.
If applicable, the declared but unpaid dividends are recognised as a liability.
Employee benefits
Defined contribution plans
A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have
no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension plans are recognised
as an employee benefit expense in profit or loss when incurred. Prepaid contributions are recognised as an asset to the extent that a cash refund
or reduction in future payments will occur.
Defined benefit plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group’s net obligation in respect of defined benefit
plans is calculated separately for each plan by estimating the amount of future benefit that employees have earned in return for their service in the
current and prior periods; that benefit is discounted to determine its present value. The fair value of any plan assets is deducted. The Group determines
the net interest expense (income) on the net defined benefit liability (asset) for the period by applying the discount rate used to measure the defined
benefit obligation at the beginning of the annual period to the net defined benefit liability (asset). The discount rate is the yield at the reporting date
on Corporate bonds that have maturity dates approximating the terms of the Group’s obligations and that are denominated in the same currency
in which the benefits are expected to be paid.
The calculation is performed annually by a qualified actuary using the projected unit credit method. When the calculation results in a benefit to the
Group, the recognised asset is limited to the present value of economic benefits available in the form of any future refunds from the plan or reductions
in future contributions to the plan. In order to calculate the present value of economic benefits, consideration is given to any minimum funding
requirements that apply to any plan in the Group. An economic benefit is available to the Group if it is realisable during the life of the plan, or on
settlement of the plan liabilities.
Remeasurements arising from defined benefit plans comprise actuarial gains and losses, the return on plan assets (excluding interest) and the effect
of the asset ceiling (if any, excluding interest). The Group recognises them immediately in other comprehensive income, and all other expenses related
to defined benefit plans as employee benefit expenses in profit or loss. When the benefits of a plan are changed, or when a plan is curtailed, the portion
of the changed benefit relating to past service by employees, or the gain or loss on curtailment, is recognised immediately in profit or loss when the plan
amendment or curtailment occurs. The Group recognises gains and losses on the settlement of a defined benefit plan when the settlement occurs.
The gain or loss on a settlement is the difference between the present value of the defined benefit obligation being settled as determined on the
date of settlement and the settlement price, including any plan assets transferred and any payments made directly by the Group in connection with
the settlement.
(iii)
(i)
(i)
(ii)
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statement of
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Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Other long-term service benefits
The Group’s net obligation in respect of long-term service benefits other than pension plans is the amount of future benefit that employees have earned in
return for their service in the current and prior periods. The obligation is calculated using the projected unit credit method, discounted to its present value
and net of the fair value of any related assets. The discount rate is the yield at the financial position date on corporate bonds that have maturity dates
approximating the terms of the Group’s obligations. Any actuarial gains and losses are recognised in profit or loss in the period in which they arise.
Share-based payment transactions
As only equity settled share-based payments are applicable only the accounting policy for these transactions has been included.
The fair value on the grant date of share-based payment awards made to employees and the Executive Board is recognised as an employee expense,
with a corresponding increase in equity, over the period that the employees unconditionally become entitled to the awards. The amount recognised
as an expense is adjusted to reflect the number of awards for which the related service and non-market vesting conditions are expected to be met,
so that the amount ultimately recognised as an expense is based on the number of awards that meet the related service and non-market performance
conditions at the vesting date. For share-based payment awards with non-vesting conditions, the fair value on the grant date of the share-based
payment is measured to reflect such conditions, with no true-up for differences between expected and actual outcomes.
Short-term employee benefits
A liability is recognised for the amount expected to be paid if the Group has a present legal or constructive obligation to pay this amount as a result
of past service provided by the employee and the obligation can be estimated reliably. Short-term employee benefits are expensed as the related
service is provided.
Termination benefits
Termination benefits are expensed at the earlier of when the Group can no longer withdraw the offer of those benefits and when the Group recognised
costs for a restructuring. If benefits are not expected to be settled wholly within 12 months of the reporting date, then they are discounted.
Provisions
A provision is recognised in the statement of financial position if the Group has a present legal or constructive obligation as a result of a past event,
that can be estimated reliably and it is probable that settlement of the obligation will involve an outflow of funds. If the effect is material, provisions are
determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and,
where appropriate, the risks specific to the liability. The unwinding of the discount is recognised as finance cost.
Restructuring provisions
A provision for restructuring is recognised when the Group has approved a detailed and formal restructuring plan, and the restructuring either has
commenced or has been announced publicly. Future operating losses are not provided for.
(iii)
(iv)
(v)
(vi)
(j)
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of profit and loss and other
comprehensive income
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statement of
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Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Revenue
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of the goods or services are transferred to the customer at an amount that reflects
the consideration (net of discounts, rebates, returns and excluding VAT) to which the Group expects to be entitled in exchange for those goods or
services. The Group has generally concluded that it is the principal in its revenue arrangements because it typically controls the goods or services before
transferring them to the customer.
Sale of goods
Revenue from sale of goods is recognised at the point in time when control of the asset is transferred to the customer, generally on delivery
of the goods. The normal credit term is 15 up to 90 days upon delivery.
The Group considers whether there are other promises in the contract that are separate performance obligations to which a portion of the
transaction price needs to be allocated (e.g. warranties). In determining the transaction price for the sale of equipment, the Group considers
the effects of variable consideration (e.g. early payment discount, volume rebates), the existence of significant financing components, noncash
consideration, and consideration payable to the customer (if any).
If the consideration in a contract includes a variable amount, the Group estimates the amount of consideration to which it will be entitled in exchange
for transferring the goods to the customer. The variable consideration is estimated at contract inception and constrained until it is highly probable
that a significant revenue reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the variable
consideration is subsequently resolved. Some contracts for the sale of goods provide customers with a right of return and or volume rebates and
or early payment discount. These conditions might give rise to variable consideration.
Certain contracts provide a customer the right to apply an early payment discount when the consideration to which the Group is entitled is transferred
to the Group before the contractual agreed credit terms. Those rebates are offset against amounts payable by the customer. To estimate the variable
consideration for the expected future early payment rebates, the Group applies the most likely amount method for contracts with a single-volume
threshold and the expected value method for contracts with more than one volume threshold. The selected method that best predicts the amount
of variable consideration is primarily driven by the payment behaviour in the past and or any agreement with the customer when the consideration
will be transferred.
The related costs are recognised in profit or loss when they are incurred. Advances received are included in contract liabilities.
Services
Apart from sales of goods the Group provides limited services such as repairs and engineering/development services. Revenues from services
are recognised in proportion to the services rendered, based on the cost incurred in respect of the services performed up to balance sheet date,
in proportion to the estimated costs of the aggregate services to be performed. The cost price of these services is allocated to the same period.
(k)
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Contract assets
The Group recognises incremental costs of obtaining a contract and certain costs to fulfil a contract as an asset if the Group expects to recover those
costs. Any capitalised contract costs assets will be amortised on a systematic basis that is consistent with the entity’s transfer of the related goods
or services to the customer.
Contract liabilities
A contract liability is the obligation to transfer goods or services to a customer for which the Group has received consideration (or an amount of
consideration is due) from the customer. If a customer pays consideration before the Group transfers goods or services to the customer, a contract
liability is recognised when the payment is made, or the payment is due (whichever is earlier). Contract liabilities are recognised as revenue when
the Group performs under the contract.
Expenses
Lease expenses – short-term leases and leases of low-value assets
The Group has elected not to recognise right-of-use assets and lease liabilities for short-term leases of machinery that have a lease terms of
12 months or less and lease of low-value assets. Individual lease assets with a new value of EUR5,000 or less (or any other foreign exchange
equivalent) are considered to be low value assets. The Group recognises the lease payments associated with these leases as an expense
on straight-line basis over the lease term.
Net finance costs
Finance income comprises interest income on funds invested, and financial assets held to maturity. Interest income is recognised in profit or loss
as it accrues, using the effective interest method.
Finance expense comprises interest expense on borrowings, commitment fees, accrued interest on provisions, interest on pension liabilities, impairment
losses recognised on financial assets and losses on interest rate hedge instruments to the extent they are recognised in profit or loss. All borrowing
costs are recognised in profit or loss using the effective interest method.
Realised and unrealised foreign currency gains and losses on monetary assets and liabilities, including changes in fair value of currency hedge
instruments that are not qualified as cash flow hedges, are reported on a net basis.
Income tax
Income tax for the year comprises current and deferred tax. Income tax is recognised in profit or loss unless it relates to items recognised directly in
equity, in which case it is recognised in equity. The Group has determined that interest and penalties related to income taxes, including uncertain tax
treatments, do not meet the definition of income taxes, and therefore accounted for them under IAS 37 Provisions, Contingent Liabilities and Contingent
Assets.
Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or
receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or
(l)
(i)
(ii)
(m)
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Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date.
Current tax also includes any tax arising from dividends.
Current tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assetsagainst current tax liabilities and when they
relate to income taxes levied by the same taxation authority and the Group intends to settle its current tax assets and liabilities on a net basis.
Deferred tax is recognised using the balance sheet method, providing for temporary differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not recognised for the following temporary differences:
■ the initial recognition of assets or liabilities in a transaction that is not a business combination and that affects neither accounting nor taxable profit;
■ relating to investments in subsidiaries and jointly controlled entities to the extent that it is probable that they will not be reversed in the foreseeable future;
■ arising on the initial recognition of goodwill.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using tax rates enacted
or substantively enacted at the reporting date, and reflects uncertainty related to income taxes, if any.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities, and they relate to income taxes
levied by the same tax authority on the same taxable entity; or on different tax entities, but the intention is to settle current tax liabilities and assets on
a net basis or their tax assets and liabilities will be realised simultaneously.
A deferred tax asset is recognised to the extent that it is probable that future taxable profits will be available against which the asset can be applied.
Deferred tax assets are reduced if it is no longer probable that the related tax benefit will be realised.
Additional income taxes that arise from the distribution of a dividend are recognised at the same time as the liability to pay the related dividend is recognised.
Uncertain tax items for which a provision is made relate principally to the interpretation of tax legislation regarding arrangements entered into by the Group.
Due to the uncertainty associated with such tax items, there is a possibility that, on conclusion of open tax matters at a future date, the final outcome may
differ significantly.
Earnings per share
The Company presents basic and diluted earnings per share data for its ordinary shares. Basic earnings per share is calculated by dividing the profit or
loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the reporting period.
Diluted earnings per share is determined by adjusting profit or loss attributable to ordinary shareholders and the weighted average number of ordinary
shares outstanding, for the effects of all dilutive potential ordinary shares.
Segment reporting
The Group defines and presents operating segments based on the information that is provided internally to the Executive Board, the Group’s chief
operating decision-maker. This is in conformity with IFRS 8 – Operating segments.
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Company
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On the basis of the criteria of IFRS 8, Kendrion’s business units are the Group’s operating segments. An operating segment is a part of the Group
engaging in business activities that may result in revenue and expenses, including the revenue and expenses relating to transactions with any of the
Group’s other segments. The Executive Board conducts regular reviews of the operating segment’s results to reach decisions on the resources to
be allocated to the segment and to assess its performance, whereby separate financial information for each operating segment is available.
However, and on the basis of the aggregation criteria of IFRS 8.12, these operating segments have been aggregated into two reportable segments:
Automotive and Industrial. In accordance with IFRS 8, the Company also discloses general and entity-wide information, including information about
geographical areas and major customers of the Group as a whole. More information on the reportable segments is provided in note 21.
New standards and interpretations
A number of amendments to standards are effective, and have been endorsed by the European Union, for annual periods beginning on or after
1January 2021 and therefore apply to the year ended 31December 2021:
■ COVID-19-Related Rent Concessions (Amendment to IFRS 16).
■ Interest Rate Benchmark Reform, amendments to IFRS 9, IAS 39 and IFRS 7.
The amendments do not have a significant impact on the Group’s consolidated financial statements.
The following standards or interpretations published by the International Accounting Standards Board (IASB) and the International Financial Reporting
Interpretations Committee (IFRIC) are not effective at 31December 2021 and are not expected to have a significant impact on the Group’s consolidated
financial statements:
■ IFRS 17 Insurance Contracts (2023).
■ Classification of liabilities as current or non-current (amendments to IAS 1) (2023).
■ Disclosure of Accounting Policy (amendments to IAS 1 and IFRS Practice Statement 2) (2023).
■ Definition of Accounting Estimate (amendments to IAS 8) (2023).
■ Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28) (expected year
unknown).
Fair values
Measurement of fair value
Several of the Group’s accounting policies, as well as the information supplied by the Group, require the fair value of both financial and non-financial
assets and liabilities to be determined. For valuation and information supplied, the fair value is measured using the methods below. Where applicable,
more detailed information on the basis of the fair value measurement is disclosed in the specific notes on the asset or liability in question. The principal
methods and assumptions used in estimating the fair value of financial instruments included in the summary are given below.
Property, plant and equipment
The fair value of property, plant and equipment recognised as a result of a business combination is based on market value in use. The market value of
property is the estimated amount for which the property in question could be exchanged on the valuation date between a buyer and seller in an arm’s
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Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
length transaction, in which both parties have acted knowledgeably, prudently and without compulsion. The market value of other items of property,
plant and equipment is based on the quoted market prices of comparable assets and goods.
Intangible assets
The fair value of patents and trademarks acquired as part of a business combination is measured on the basis of the discounted estimated royalties that
have been avoided through ownership of the patent or trademark. The fair value of customer relationships acquired in a business combination is based
on the excess earnings method over multiple periods, valuing the asset in question by deducting a real return on all other assets which in total create
the related cash flows. The fair value of other intangible assets is based on the expected discounted value of the cash flows from the use and ultimate
sale of these assets.
Lease liabilities
The fair value is estimated on the basis of the present value of future cash flows, discounted at the interest rate for lease contracts of a similar nature.
The estimated fair value reflects movements in interest rates.
Inventories
The fair value of inventories acquired as part of a business combination is determined on the basis of the estimated selling price as part of normal
business operations, less the estimated costs of completion and the selling costs, plus a reasonable profit margin that reflects the completion and
sales effort.
Trade and other receivables/trade and other payables
The face value of receivables and liabilities falling due within one year is regarded as a reflection of their fair value. The fair value of all other receivables
and liabilities is measured on the basis of present value. The discount factor is based on the risk-free interest rate of the same duration as the receivable
and/or payable, plus a credit mark-up reflecting the credit worthiness of the Group.
Interest-bearing loans
The fair value is calculated on the basis of the present value of future repayments of principal and interest at the prevailing market rate of interest,
supplemented by a credit mark-up reflecting the credit worthiness of the Group.
Derivatives
The fair value of derivatives is based on the present value of the contractual cash flows for the remaining term based on a risk-free interest rate.
Non-derivative financial liabilities
The fair value of non-derivative financial liabilities is determined from information supplied and is based on the present value of future repayments
of principal and interest, discounted at a risk-free rate, and a margin based on the credit worthiness of the Group on the reporting date.
(iii)
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Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Contingent consideration
The fair value of contingent considerations arising in a business combination is calculated using the income approach based on the expected payment
amounts and their associated probabilities. If appropriate, it is discounted to present value.
Financial risk management
The Group has exposure to the following risks from its use of financial instruments:
■ credit risk;
■ liquidity risk;
■ market risk.
This section provides general information about the Group’s exposure to each of the above risks in the course of its normal business operations,
the Group’s objectives, policies and processes for measuring and managing risk, and the Group’s management of capital. Further quantitative
disclosures are included in the financial instrument section in these consolidated financial statements.
The Executive Board bears the ultimate responsibility for the organisation and control of the Group’s risk management framework. The Group’s risk
policy is designed to identify and analyse the risks confronting the Group, implement appropriate risk limits and control measures, and monitor the risks
and compliance with the limits. The risk management policy and systems are evaluated at regular intervals and, if necessary, adapted to accommodate
changes in market conditions and the Group’s operations.
The Company’s Supervisory Board supervises compliance with the Group’s risk management policy and procedures.
For a more detailed description of risk management and the position of financial risk management in the Group’s framework, see the Report
of the Executive Board.
Credit risk
Credit risk is the risk of financial loss to the Group in the event that a customer or counterparty to a financial instrument fails to meet its contractual
obligations. Credit risks arise primarily from accounts receivable, derivative transactions concluded with banks, and cash positions and deposits held
with banks. The Group continually monitors the credit risk within the Group. The Group does not normally require collateral for trade and other
receivables or financial assets.
The credit policy includes an assessment of the creditworthiness of every new major customer before offering payment and delivery terms.
This assessment includes external credit ratings or reports if they are available. The creditworthiness of major customers is actively monitored
on an ongoing basis.
The Group recognises impairment provisions of an amount equal to the estimated losses on trade and other receivables and other investments.
The main component of this provision comprises specific provisions for losses on individual accounts of material significance.
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STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Credit risk concentration
The customer with the largest receivable outstanding accounted for 7% of the trade and other receivables at 31 December 2021 (2020: 4%). Other
customers individually accounted for 6% or less of the trade and other receivables at 31 December 2021 (2020: 4%). The geographical credit risk from
the Group’s direct customers is largely concentrated in Germany. However, as the Group’s most important customers in the various segments of the
German market are multinational or global players, this reduces the Group’s dependency on the German market.
Investments and financial instruments
The Group currently does not invest in debt securities. Cash positions and exposure to the financial instruments of financial counterparties are
monitored actively. The Group’s main financial counterparties are well-established banks with good creditworthiness. The cash in bank accounts
at other than the core-relationship banks is maintained at the minimum level required for the operations of the Group’s companies.
Liquidity risk
The liquidity risk is the risk that the Group is unable to meet its financial obligations at the required time. Liquidity risk management is based on the
maintenance of sufficient liquidity in the form of unused (committed) credit facilities or cash to meet present and future financial obligations in normal
and adverse circumstances.
A summary of the credit lines available to the Group is disclosed in note 11 of these consolidated financial statements. The majority of the available
facilities are provided by a syndicate of lenders consisting of HSBC, Deutsche Bank and ING Bank on an equal basis. The Group had approximately
EUR40 million available within its existing revolving credit facility on the financial position date.
Market risk
The market risk is the risk of the deterioration of the Group’s income due to movements in market prices, such as those relating to exchange rates
and interest rates. The management of market risk exposure is intended to keep the market risk position within acceptable limits.
Derivatives are used to manage specific market risks. These transactions are carried out within the treasury framework adopted by the Executive Board.
If necessary, the Group uses hedge accounting to manage volatility in the statement of comprehensive income.
Interest rate risk
Pursuant to the Group’s policy more than 50% of the exposure to changes in interest rates on borrowings is maintained on a fixed rate basis, taking into
account any assets with exposure to changes in interest rates and expected short-term free cash flows. The policy is implemented by making use of
derivative financial instruments such as interest rate swaps and interest rate options.
The Group has currently outstanding interest swap contracts with a total underlying notional value of EUR60 million in order to reduce interest rate risk
exposure to increasing market rates. EUR20 million matures in 2022 and EUR40 million in 2023.
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NOTES TO THE
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STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Currency risk
The Group is exposed to exchange rate risks on sales, purchases, equity positions and loans expressed in currencies other than the euro. The Group
companies are primarily financed in their own currency. The majority of the revenues and costs of the Group companies are realised in the euro zone.
Sales outside the euro zone are partly generated locally and partly through exports from the euro zone. Most of these exports are realised in euros.
The Group’s activities in the Czech Republic have the most significant currency exposure, since the majority of revenue is generated in euros and part of
the costs are in Czech korunas. Pursuant to the Group’s policy this currency exposure is hedged to a level of at least 70% for the next four quarters and
at least 35% for the next four quarters thereafter. Exchange rate risks are hedged with derivatives.
Other currencies are actively monitored and where needed exposure is hedged, however less structural exposure is identified.
The Group also actively hedges intercompany loans in foreign currencies with currency forwards, swaps or back-to-back loans in the same foreign
currency.
Pursuant to the Group’s policy for other monetary assets and liabilities denominated in a foreign currency, net exposure is maintained at an acceptable
level by buying or selling foreign currencies at spot rates as required to correct short-term imbalances.
The Group’s policy stipulates that, in principle, equity investments and other translation exposures are not hedged.
Other price risks
Steel, copper and rare earth metals used in permanent magnets are the most important commodities for the Group.
Copper constitutes the Group’s main direct exposure to raw material price risks, since copper wire is an important component of electromagnets.
Pursuant to the Group’s policy, the sensitivity to copper prices is actively reduced both by concluding fixed-price purchase contracts in the normal
course of business with copper wire suppliers and by including raw material clauses in sales contracts. As the need arises the Group can also conclude
derivative financial instrument contracts with financial counterparties to hedge the copper risk. No financial derivative contracts for raw materials were
outstanding at the balance sheet date.
The Group is also exposed to risks associated with rare earth metals such as neodymium, a component of permanent magnets, which are used
in some of the Group’s products. Prices of these commodities have shown significant volatility in the past. The Group closely monitors developments
in this market and has increased stock levels and the number of supply sources for these permanent magnets.
Furthermore, agreements have been made with customers representing the majority of the sales volume in this context, to link sales prices to
movements in permanent magnet prices.
The Group is mainly indirectly exposed to raw material price risks relating to oil and steel, primarily as part of the purchase prices of machined components.
This exposure is monitored and, if feasible, reduced by means of raw material clauses with customers and by concluding fixed-price agreements with
suppliers for periods of between six and twelve months. The Kendrion steel contracts also partly govern the purchasing from component suppliers.
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Notes to the
company financial
statements
Company
balance
sheet
Company
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statement
Raw materials are purchased separately by each business unit, but in accordance with the group policy reviewed periodically with the objective
of further increasing and sharing knowledge on commodities and commodity markets between business units, reducing risks and/or prices.
Capital management
The Executive Board’s policy is designed to maintain a strong capital gearing to retain the confidence of investors, creditors and the markets,
and to safeguard the future development of the business activities. The Executive Board monitors the return on equity, which the Group defines
as the net operating result divided by shareholders’ equity, excluding minority interests. The Executive Board also monitors the level of dividend
distributed to ordinary shareholders.
The Executive Board seeks to strike a balance between a higher return that would be achievable with a higher level of borrowed capital and
the benefits and security of sound capital gearing.
Kendrion intends to distribute an annual dividend of between 35% and 50% of normalized net profit before amortization, taking into consideration the
amount of net profit to be retained to support the medium and long-term strategic plans of the company and to maintain a minimum solvency of 35%.
Neither the Company nor its subsidiaries are subject to any externally imposed capital requirements beyond those stipulated by law.
Government Grants
Grants that compensate the Group for expenses incurred are recognised in profit or loss as deduction on the related expense on a systematic basis in
the periods in which the expenses are recognised, unless the conditions for receiving the grant are met after the related expenses have been
recognised. In this case, the grant is recognised when it becomes receivable.
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STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Property, plant and equipment
EUR million 2021 2020
Property, plant and equipment owned 107.5 104.4
Property, plant and equipment right-of-use assets 14.4 14.3
Total
121.9 118.7
Property, plant and equipment owned
EUR million
Land and
buildings
Plant and
equipment
Other fixed
assets
Under
construction
Total
Cost
Balance as at 1 January 2020 57.1 145.6 56.4 12.4 271.5
Acquired through business combinations 8.4 3.3 1.8 1.6 15.1
Acquired, other 2.1 10.9 4.1 7.5 24.6
Disposals (0.2) (1.7) (1.7) (11.7) (15.3)
Currency translation differences (0.2) (0.6) (0.0) (0.3) (1.1)
Balance as at 31December 2020
67.2 157.5 60.6 9.5 294.8
Balance as at 1 January 2021 67.2 157.5 60.6 9.5 294.8
Acquired through business combinations – – 0.4 – 0.4
Acquired, other 0.9 7.1 3.2 15.8 27.0
Disposals (0.3) (3.1) (1.2) (3.3) (7.9)
Currency translation differences 0.3 0.7 0.0 0.5 1.5
Balance as at 31December 2021
68.1 162.2 63.0 22.5 315.8
Depreciation and impairment losses
Balance as at 1 January 2020 29.2 100.8 43.8 0.1 173.9
Depreciation for the year 2.8 11.8 4.7 0.0 19.3
Impairment – (0.0) 0.0 0.4 0.4
Disposals (0.2) (1.8) (1.2) – (3.2)
Balance as at 31December 2020
31.8 110.8 47.3 0.5 190.4
Balance as at 1 January 2021 31.8 110.8 47.3 0.5 190.4
Depreciation for the year 2.4 11.4 4.5 – 18.3
Impairment – 0.2 0.0 3.3 3.5
Disposals – (2.7) (1.2) – (3.9)
Balance as at 31December 2021
34.2 119.7 50.6 3.8 208.3
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Notes to the
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Company
balance
sheet
Company
income
statement
Property, plant and equipment owned
EUR million
Land and
buildings
Plant and
equipment
Other fixed
assets
Under
construction
Total
Carrying amounts
As at 1 January 2020 27.9 44.8 12.6 12.3 97.6
As at 31December 2020 35.4 46.7 13.3 9.0 104.4
As at 1 January 2021 35.4 46.7 13.3 9.0 104.4
As at 31December 2021 33.9 42.5 12.4 18.7 107.5
Right-of-use assets
EUR million
Land and
buildings
Plant and
equipment
Other fixed
assets
Under
construction
Total
Cost
Balance as at 1 January 2020 17.5 0.2 3.0 – 20.7
Acquired through business combinations 0.8 – 0.0 – 0.8
Acquired, other 2.3 – 0.5 – 2.8
Disposals (0.4) (0.0) (0.0) – (0.4)
Currency translation differences (0.2) (0.0) (0.0) – (0.2)
Balance as at 31December 2020
20.0 0.2 3.5 – 23.7
Balance as at 1 January 2021 20.0 0.2 3.5 – 23.7
Acquired through business combinations 1.9 – – – 1.9
Acquired, other 2.0 – 0.3 – 2.3
Disposals (1.8) – (0.0) – (1.8)
Currency translation differences 0.4 0.0 0.0 – 0.4
Balance as at 31December 2021
22.5 0.2 3.8 – 26.5
Depreciation and impairment losses
Balance as at 1 January 2020 4.8 0.1 2.0 – 6.9
Depreciation for the year 1.9 0.0 0.6 – 2.5
Balance as at 31December 2020
6.7 0.1 2.6 – 9.4
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Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Right-of-use assets
EUR million
Land and
buildings
Plant and
equipment
Other fixed
assets
Under
construction
Total
Balance as at 1 January 2021 6.7 0.1 2.6 – 9.4
Depreciation for the year 2.1 0.1 0.5 – 2.7
Balance as at 31December 2021
8.8 0.2 3.1 – 12.1
Carrying amounts
As at 1 January 2020 12.7 0.1 1.0 – 13.8
As at 31December 2020 13.3 0.1 0.9 – 14.3
As at 1 January 2021 13.3 0.1 0.9 – 14.3
As at 31December 2021 13.7 0.0 0.7 – 14.4
Translation differences are calculated on the carrying amount and reflected in the related item in the cost.
The estimated useful lives of the property, plant and equipment are as follows:
Buildings 10 – 30 years
Plant and equipment 5 – 10 years
Other fixed assets 3 – 7 years
The Executive Board reviews at each reporting period the estimated useful lives of each asset with a definite useful life. During the current year,
the Executive Board determined that the useful lives do not require to be revised.
Intangible assets
EUR million Goodwill
1
Development
costs
Software Concessions Other Total
Cost
Balance as at 1 January 2020 92.6 7.9 24.8 – 40.6 165.9
Acquired through business combinations 26.7 – 0.5 – 26.3 53.5
Acquired, other – 0.9 1.5 – 0.7 3.1
Disposals – – 0.0 – – 0.0
Currency translation differences (2.3) (0.0) (0.0) – (0.4) (2.7)
Balance as at 31December 2020
117.0 8.8 26.8 – 67.2 219.8
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
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Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
EUR million Goodwill
1
Development
costs
Software
Concessions
Other Total
Balance as at 1 January 2021 117.0 8.8 26.8 – 67.2 219.8
Acquired through business combinations 14.8 – – – 8.4 23.2
Acquired, other – 1.7 3.5 1.1 – 6.3
Disposals – (0.1) (0.1) – (0.8) (1.0)
Currency translation differences 1.9 0.2 0.1 – 0.3 2.5
Balance as at 31December 2021
133.7 10.6 30.3 1.1 75.1 250.8
Amortization and impairment losses
Balance as at 1 January 2020 – 1.0 20.0 – 29.4 50.4
Amortization for the year – 0.7 3.2 – 4.4 8.3
Impairment – 1.9 0.1 – – 2.0
Disposals – – – – – –
Balance as at 31December 2020
– 3.6 23.3 – 33.8 60.7
Balance as at 1 January 2021 – 3.6 23.3 – 33.8 60.7
Amortization for the year – 1.2 1.7 0.0 3.9 6.8
Impairment – – – – – –
Disposals – – (0.0) – (0.1) (0.1)
Balance as at 31December 2021
– 4.8 25.0 0.0 37.6 67.4
Carrying amounts
At 1 January 2020 92.6 6.9 4.8 – 11.2 115.5
At 31December 2020 117.0 5.2 3.5 – 33.4 159.1
At 1 January 2021 117.0 5.2 3.5 – 33.4 159.1
At 31December 2021 133.7 5.8 5.3 1.1 37.5 183.4
Goodwill has an indefinite estimated useful life. The investments in software during 2021 of EUR 3.5 million (2020: EUR 1.5 million) mainly relates to
various software upgrades, including a new global PLM system. The other intangible assets mainly comprise the carrying amount of customer
relationships (EUR 36.3 million). These customer relationships were acquired through business combinations. Note that for Cash Flow Statement
purposes the amortization of software is added to the line ‘Depreciation of property, plant and equipment and software’.
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
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NOTES TO THE
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STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Depreciation and amortization
Depreciation and amortization are recognised in the following items in the consolidated statement of comprehensive income:
EUR million 2021 2020
Depreciation and amortization 27.8 30.1
The estimated useful life of software is between three and eight years. The estimated useful life of other intangible assets is approximately between eight
and nineteen years. The Executive Board reviews at each reporting period the estimated useful lives of each intangible asset with a definite useful life.
Impairment testing for cash-generating units containing goodwill
For the purposes of impairment testing, goodwill has been allocated to the Group´s CGUs as follows.
Goodwill EUR million 2021 2020
1
Business Group - Industrial Actuators and Controls 39.2 23.9
Business Group - Industrial Brakes 33.8 33.8
Business Group - Kendrion Automotive Group 60.7 59.3
133.7 117.0
Key assumptions and method of quantification
Pursuant to IAS 36, the Group has performed an impairment test with reference to the goodwill allocated to each individual cash-generating unit.
This test was carried out by discounting future cash flows (‘value in use’) to be generated from the continuing use of the cash-generating unit to which
the goodwill applies and on the assumption of an indefinite life. The Group did not recognise any impairment of goodwill in this reporting period.
The cash flows for the first five years were based on budgets and mid-term plans drawn up by the local management and approved by the Executive
Board. For the subsequent years, the residual value was calculated on the basis of the results in the last year of relevant forecasts, with a terminal
growth rate of 1,5% taken into account. The forecasts took no account of tax considerations, i.e. were based on pre-tax cash flow. The weighted
average cost of capital (WACC) based on the Capital Asset Pricing Model was also pre-tax. Expansion investments were excluded from the calculations
in the residual value. The expected growth in cash flows as a result of these expansion investments was also excluded.
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Key assumptions used in the calculation of recoverable amounts concern discount rates, terminal value growth rates, EBITDA margin growth and
revenue growth. Key assumptions are based on past experience, management assessment of revenue and external sources.
Key assumptions Pre-tax discount rate Terminal value growth rate
2021 2020 2021 2020
Business Group - Industrial Actuators and Controls 11.0% 10.1% 1.5% 1.5%
Business Group - Industrial Brakes 10.5% 10.1% 1.5% 1.5%
Business Group - Kendrion Automotive Group 10.3% 9.9% 1.5% 1.5%
Discount rate
In determining the pre-tax discount rate, first the post-tax average costs of capital were calculated for all cash generating units containing goodwill. The
post-tax rate is based on debt leveraging compared to the market value of equity of 24%. All the post-tax weighted average cost of capital rates of cash
generating units amount to approximated 8.3%, and these rates were used for calculating the post-tax cash flows.
Terminal value growth rate
All cash generating units with goodwill have five years of cash flows included in their discounted cash flow models. A long-term growth rate in perpetuity
has been assumed on the basis of a growth rate of 1.5%.
Revenue and EBITDA margin
The revenue and EBITDA margin development of the cash generating units are based on the financial budgets for 2022 and the strategic business plans
for the 4 years thereafter. The growth rates are based on the expectation of market developments and management’s assessment of the project pipeline
of the cash generating units. The average annual growth rates in the first 5 years range between 4% and 10% and the development of the EBITDA
margin is in line with the long-term group target of at least 15% by 2025. For the period after 2025 a growth rate equal to the expected long-term inflation
is taken into account for revenue and EBITDA.
Sensitivity to changes in assumptions
The recoverable amounts of all cash-generating units with goodwill exceed their carrying amounts. Management has carried out an analysis of sensitivity
to changes in the key assumptions. Sensitivity analyses are performed based on a change in an assumption while holding other assumptions constant.
The following changes in assumptions are assessed:
■ Increase of the discount rate (post-tax) by 2.0%;
■ Decrease of terminal value growth rate by 1.0%;
■ Decrease of average revenues growth by 3.0%;
■ Decrease of average EBITDA growth by 10.0%.
Based on the sensitivity analyses performed it is concluded that any reasonable changes in the key assumptions would not require an impairment.
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142
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Other investments, including derivatives
EUR million 2021 2020
Equity-accounted investee 0.0 2.2
Other 0.4 0.8
0.4 3.0
The equity-accounted investee related to Kendrion Holding USA Inc.’s share in Newton CFV, Inc. On 3 August 2018 Kendrion Holding USA Inc.
acquired 30% of all issued shares in Newton CFV, Inc. The 30% of all issues shares in Newton CFV, Inc. were sold on 17 November 2021 for an amount
of EUR 3.3m.
Other investments in 2021 include financial derivatives and recognised upfront and legal fees related to the facility agreement (see note 11). Kendrion
amortises these costs over the remaining maturity of the facility. As these costs relate to the facility agreement as a whole and not to individual loans,
these costs are not part of the effective interest rate of outstanding loans.
Deferred tax assets and liabilities
The Group has recognised deferred tax assets for tax loss carry-forwards in the following jurisdictions:
Germany
Tax assessments have been submitted for the German companies up to and including 2019. In 2020 tax audits started with regard to the assessment
periods 2015-2018 with reference to our Northern Germany operating companies (tax assessment up to and 2014 are final) and assessment periods
2015-2018 with respect to our Southern Germany operating companies (tax assessments up to and 2014 are final, which are disputed by the tax
authorities).
At 31 December 2021, the tax loss carry forwards amounted to EUR 2.0 million (2020: EUR 3.8 million) (Trade Tax). These are recognised in full,
resulting in deferred tax assets of EUR 0.2 million (2020: EUR 0.5 million).
United States of America
Tax assessments have been submitted up to and including 2020. The years 2018 up to 2020 are open for tax audits. At 31 December 2021, the tax
loss carry forwards amounted to EUR 9.9 million (2020: EUR 7.9 million) (Corporate Income Tax) and EUR 5.4 million (2020: EUR 4.2 million) (State Tax).
These are recognised in full, resulting in deferred tax assets of EUR 2.2 million (2020: EUR 1.7 million).
The Netherlands
Tax assessments have been submitted up to and including 2019. The years 2014 up to 2021 are still open for potential tax audits. At 31 December
2021, the tax loss carry-forwards amounted to EUR 0.9 million (2020: EUR 2.5 million). These are recognised in full, resulting in deferred tax assets of
EUR 0.2million (2020: EUR 0.6 million). These tax loss carry-forwards originated in 2019.
3
4
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143
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
The Dutch corporate income tax rate will change in the near future from 25% to 25,8%. This means that deferred tax positions as per 31 December
2021 are revalued and had a positive impact of EUR 0.0 million on net deferred taxes as per 31 December 2021.
Uncertainty over income tax treatments
In 2016 a tax audit started for the years 2010-2014 for a German fiscal unity. For the outcome of this tax audit a liability was accounted for, amounting
to EUR 1.2 million (2020: 4.9 milion), which includes the estimated impact on subsequent years as well as estimated interest expenses. The decrease is
partly due to a voluntary payment to limit any subsequent interest charges. The total tax audit liability is compensated by assets totalling to EUR 2.2
million for Mutual Agreement Procedures in the Netherlands, UK and Czech Republic (2020: 2.4 million), effectively leading to a net position of EUR 1.0
million positive (2020: 2.5 million negative), again including the estimated interest expenses.
The best estimate of the impact of the tax audit is based on input received from our tax advisor, the tax audit reports and the most recent case law on
the relevant topics
Deferred tax assets and liabilities included in the financial position
The deferred tax assets and liabilities can be specified as follows:
Assets
1
Liabilities Net
EUR million 2021 2020 2021 2020 2021 2020
Property, plant and equipment 1.4 1.3 3.3 4.1 (1.9) (2.8)
Intangible assets 4.8 5.6 13.7 11.2 (8.9) (5.6)
Inventories 0.2 0.1 0.1 0.3 0.1 (0.2)
Employee benefits 1.4 1.8 0.0 – 1.4 1.8
Provisions 0.0 – 0.0 – 0.0 –
Other items 3.3 2.6 0.6 0.3 2.7 2.3
Tax value of recognised loss carry-forwards 7.2 6.8 – – 7.2 6.8
Deferred tax assets/liabilities
18.3 18.2 17.7 15.9 0.6 2.3
The deferred tax liabilities relate almost entirely to temporary differences between the carrying amount and tax base of property, plant and equipment
and intangible assets. These are of a relatively long-term nature, mostly longer than five years.
Deferred tax assets are recognised for unused tax losses to the extent that it is probable that future taxable profits will be available against which they
can be set off. Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer probable that the related tax
benefit will be realised; such reductions are reversed if the probability of future taxable profits improves. Tax loss carry forward limitation rules apply in
certain jurisdictions in which Kendrion has carry forward tax losses. These rules might under certain circumstances lead to a (proportional) forfeiture of
recognised and unrecognised carry forward tax losses in case of a direct or indirect change in ownership.
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
FINANCIAL STATEMENTS
Annual Integrated Report 2021
144
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
The tax losses carry forward for which no deferred tax assets are recognised in the statement of financial position are reviewed each reporting date.
These tax losses carry forward for which no deferred tax assets are recognised in the statement of financial position amount to zero (2020: EUR 0.1
million).
Movement in temporary differences during the financial year
2021
Net, EUR million At 1 January
Recognised
in profit or loss
Recognised
in other
comprehensive
income
At 31
December
Property, plant and equipment (2.8) 0.9 – (1.9)
Intangible assets (5.6) (3.3) – (8.9)
Inventories (0.2) 0.3 – 0.1
Employee benefits 1.8 (0.2) (0.2) 1.4
Provisions – 0.0 – 0.0
Other items 2.3 0.4 – 2.7
Tax value of loss carry-forwards used 6.8 0.4 – 7.2
2.3 (1.5) (0.2) 0.6
2020
Net, EUR million At 1 January
Recognised
in profit or loss
1
Recognised
in other
comprehensive
income
At 31
December
1
Property, plant and equipment (3.5) 0.7 – (2.8)
Intangible assets (1.9) (3.7) – (5.6)
Inventories 0.0 (0.2) – (0.2)
Employee benefits 1.8 0.6 (0.6) 1.8
Provisions 0.4 (0.4) – –
Other items 2.9 (0.6) – 2.3
Tax value of loss carry-forwards used 4.2 2.6 – 6.8
3.9 (1.0) (0.6) 2.3
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
FINANCIAL STATEMENTS
Annual Integrated Report 2021
145
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Contract costs
EUR million 2021 2020
Balance at 1 January 0.6 0.7
Amortization (0.1) (0.1)
Balance at 31December
0.5 0.6
From time to time, the Group acquires contracts with customers, for which costs are made to acquire these contracts. Those costs are recognised as
contracts costs. Contract costs are amortised on a systematic basis that is consistent with the Group’s transfer of the related goods to the customer.
Inventories
EUR million 2021 2020
Raw materials, consumables, technical materials and packing materials 49.4 38.8
Work in progress 15.4 10.9
Finished goods 13.5 10.0
Goods for resale 1.4 2.0
79.7 61.7
The value of inventory recorded as an expense in 2021 amounts to EUR 230.0m. The inventories are presented after accounting for a provision of EUR
8.6 million (2020: EUR 9.0 million) for obsolescence. In 2021, the release of the write-down to net realisable value of the inventories in earlier years was
EUR 1.7 million (2020: EUR 1.7 million write-down). The write-down and reversals are included in Raw material and subcontracted work.
Trade and other receivables
EUR million 2021 2020
Trade receivables 56.8 47.2
Other taxes and social security 2.8 2.4
Other receivables 3.7 1.9
Derivatives used for hedging 0.3 0.6
Prepayments 1.7 1.3
65.3 53.4
The credit and currency risks associated with trade and other receivables are disclosed in note 17, and in the financial risk management paragraph of
note r. The provision for doubtful debts amounts to EUR 0.4 million (2020: EUR 0.7 million).
5
6
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146
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Cash and cash equivalents
EUR million 2021 2020
Bank balances 18.6 13.0
Bank overdrafts (6,1) (4.5)
Cash and cash equivalents in the statement of cash flows
12.5 8.5
The bank balances include EUR 0.8 million (2020: EUR 0.7 million) of cash that is held in countries where the Group faces cross-border foreign
exchange controls and/or other legal restrictions that inhibit the Groups ability to make these balances available for general use by the Group.
The other bank balances are freely available. The interest rate risk for the Group and a sensitivity analysis for financial assets and liabilities are disclosed
in notes 17 and r.
Capital and reserves
Capital and share premium
Shares entitled to dividend Shares owned by Kendrion Total number of issued shares
2021 2020 2021 2020 2021 2020
At 1 January 14,766,481 14,753,533 167,503 180,451 14,933,984 14,933,984
Issued shares (share dividend) 69,634 – (68,883) – 751 –
Issued registered shares (share plan) 3,913 2,654 (3,913) (2,654) – –
Delivered shares 1,044 10,294 (1,044) (10,294) – –
At 31December
14,841,072 14,766,481 93.663 167,503 14,934 735 14,933,984
Issuance of ordinary shares
In 2021, in total 73,547 new shares were issued (2020: 2,654). During 2021, the Company delivered 4,957 shares to the Executive Board and senior
management as part of its share plan and remuneration packages (2020: 12,848).
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Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Ordinary shares
The authorised share capital consists of:
EUR million 2021 2020
40,000,000 ordinary shares of EUR2.00 80.0 80.0
Issued share capital
Balance at 1 January 2021: 14,933,984 ordinary shares (2020: 14,933,984) 29.9 29.9
Balance at 31December 2021: 14,934,735 ordinary shares (2020: 14,933,984) 29.9 29.9
Share premium
EUR million 2021 2020
Balance as at 1 January 51.7 51.7
Dividend payment (5.9) –
Share premium on issued shares 0.0 –
Balance as at 31December
45.8 51.7
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of associates in the non-euro
zone. Gains and losses relating to the translation risk are recognised in equity. The build-up of the cumulative figure commenced on 1 January 2004.
Hedge reserve
The hedge reserve comprises the effective portion of the cumulative net movement in the fair value of cash flow hedging instruments relating to hedged
transactions that have not yet occurred, net of tax.
The hedge reserve increased by EUR 0.1 million due to the realisation of hedged transactions (2020: EUR 0.2 million increase). The hedge reserve
increased by EUR 0.0 million due to valuation effects (2020: EUR 0.0 million increase). There was no hedge ineffectiveness in 2021 (2020: no hedge
ineffectiveness).
Reserve for own shares (treasury shares)
The reserve for the Company’s own shares comprises the shares held by the Company for issuance of share dividend and the remuneration packages
for the Executive Board. On 31 December 2021, the Company held 93,663 of its own shares (2020: 167,503).
FINANCIAL STATEMENTS
Annual Integrated Report 2021
148
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Other reserves
Other reserves are all the reserves other than those shown separately and primarily represent the accumulated, undistributed profits from previous
financial years.
Retained earnings
In 2021, the result for 2020 was fully transferred to other reserves. Retained earnings in the 2021 financial statements consequently consist solely
of the result for 2021.
Dividends
The following dividends were and paid by the Company for the year:
EUR million 2021 2020
0.40 cents per qualifying ordinary share (2020: -) 5.9 -
After the reporting date, the following dividends were proposed by the Executive Board. The dividends have not been recognised as liabilities and
there are no tax consequences.
EUR million 2021 2020
0.69 cents per qualifying ordinary share (2020: 0.40 cents) 10.3 5.9
Earnings per share
Basic earnings per share
The calculation of the basic earnings per share at 31 December 2021 is based on the profit for the period of EUR 14.4 million (2020: EUR 4.3 million)
attributable to the holders of ordinary shares and the weighted average number of shares outstanding during the year 2021: 14.816.000
(2020: 14.764.000).
EUR million 2021 2020
Net profit attributable to ordinary shareholders 14.4 4.3
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Weighted average number of ordinary shares
In thousands of shares 2021 2020
Issued ordinary shares at 1 January 14,934 14,934
Effect of shares issued as share dividend 1 –
Ordinary shares outstanding at 31December
14,935 14,934
Weighted average number of ordinary shares entitled to dividend 14,816 14,764
Basic earnings per share (EUR), based on ordinary shares outstanding at 31December 0,96 0.29
Basic earnings per share (EUR), based on weighted average 0,97 0.29
Diluted earnings per share
The calculation of the diluted earnings per share at 31 December 2021 is based on the profit of EUR 14.4 million (2020: EUR 4.3 million) attributable to
the holders of ordinary shares and the weighted average numbers of shares during the year after adjustment for the effects of all dilutive potential
ordinary shares of 14,819,000 (2020: 14,765,000).
EUR million 2021 2020
Net profit attributable to ordinary shareholders 14.4 4.3
Effect of dilution (0.0) (0.0)
Net profit attributable to ordinary shareholders (diluted)
14.4 4.3
Weighted average number of ordinary shares (diluted)
In thousands of shares 2021 2020
Weighted average number of ordinary shares entitled to dividend 14,816 14,764
Weighted average numbers of ordinary shares (diluted) 14,819 14,765
Basic earnings per share (EUR), based on weighted average (diluted) 0.97 0.29
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Annual Integrated Report 2021
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Loans and borrowings
These notes contain information on the contractual provisions of the Group’s interest-bearing loans and borrowings, which are carried at amortised cost
price. For further information on the interest rates, and the currency and liquidity risks borne by the Group, see note 17 and accounting policy r.
EUR million 2021 2020
Non-current liabilities
Bank syndicate loans 120 0 85.0
Lease liabilities 12.5 12.9
Mortgage loans 0.0 0.8
Other loans 3.9 5.5
136.4 104.2
EUR million 2021 2020
Current liabilities
Current portion lease liabilities 2.7 2.5
Current portion mortage loans 0.8 0.8
Current portion loans 3.2 4.2
6.7 7.5
At 31December 2021, the Group had the following credit lines available:
■ EUR162.5 million revolving Credit Facility with a syndicate of three banks consisting of HSBC, Deutsche Bank and ING Bank.
The Credit Facility is committed until 24 July 2023 and includes an option (accordion option) to increase the facility by a maximum
of EUR62.5 million and the possibility to attract additional alternative sources of debt funding;
■ EUR15.2 million in leases for buildings, various equipment and vehicles;
■ EUR 7.1 million other loans acquired through business combinations in 2020, with maturities in 2022 – 2026;
■ EUR0.8 million mortgage loan for the premises of the Kuhnke facilities in Malente, Germany. The loan ultimately matures in 2022;
■ EUR4.6 million in other overdraft facilities.
At 31December 2021, the total unutilised amount of the facilities was approximately EUR40 million.
11
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Banking syndicate credit facility
Pursuant to the terms of the credit facility and the agreed covenant relief with the banking syndicate, the Group has agreed to a financial covenant
relating to the leverage ratio (interest bearing debt / EBITDA). In accordance with this covenant, the leverage ratio should remain below 3.25, which can
under certain circumstances be temporarily increased to a maximum of 3.75. This covenant is tested quarterly on a 12-month rolling basis. The actual
leverage ratio at year-end was 2.3 (2020: 2.3).
Security provided
The Group has provided a mortgage on its premises in Malente, Germany for a EUR0.8 million loan. A positive pledge is relevant in relation to the
EUR162.5 million revolving Credit Facility.
Interest-rate sensitivity
Interest on the EUR0.8 million mortgage loan is based on fixed-term interest rates. Interest amounts payable on the EUR162.5 million revolving
Credit Facility are based on short-term interest rate (mainly three months). The other loans of EUR 7.1 million and leases of EUR 15.2 million both have
fixed interest rates. See note 17 and accounting policy r for further details.
Lease liabilities
The lease liabilities are payable as follows:
EUR million 2021 2020
< 1 year 2.7 2.5
1 - 5 years 10.7 10.9
> 5 years 1.8 2.0
15.2 15.4
The lease liabilities mostly relate to leases for various buildings & vehicles.
Buildings
The Group leases properties for its offices and manufacturing facilities. Some lease arrangements contain conditions to revise the rentals based on
changes of indices. The leases run for a period between 3 and 15 years. Majority of the leases include an option to renew the lease for an additional
period after the contract term. Key assumption as applied by the Group is that all renewal options, which can be exercised within the mid-term plan
period of five years and very likely to be exercised, are taken into consideration on top of the non-cancellable period of the lease.
Vehicles and equipment
The Group leases equipment with terms of two to five years. Based on experience the likelihood that these lease arrangements are extended for
a substantial period (> three months) is remote. Due to this no periods after the non-cancellable period of the lease are taken into consideration.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Employee benefits
EUR million 2021 2020
Present value of unfunded obligations 11.2 12.5
Present value of funded obligations 1.3 1.3
Fair value of plan assets (0.9) (0.9)
Recognised net liability for defined benefit obligations
11.6 12.9
Liability for long-service leave and anniversaries 2.4 2.6
Total employee benefits
14.0 15.5
The table shows a reconciliation from the opening to the closing balances for the net defined benefit liability and its components:
Defined benefit obligation Fair value of plan assets Net defined benefit liability
EUR million 2021 2020 2021 2020 2021 2020
Balance at 1 January 13.8 17.1 0.9 0.9 12.9 16,2
Included in statement
of comprehensive income
Current service cost 0.1 0.1 – – 0.1 0.1
Past service cost – – – – – –
Interest cost (income) 0.0 0.1 0.0 0.0 0.0 0.1
0.1 0.2 0.0 0.0 0.1 0.2
Included in OCI
Remeasurement loss (gain):
- Actuarial loss (gain) arising from:
- Demographic assumptions 0.0 0.0 0.0 0.0 0.0 0.0
- Financial assumptions (0.4) 0.2 – – (0.4) 0.2
- Experience adjustment (0.2) (2.5) – – (0.2) (2.5)
- Return on plan assets excluding
interest income – – – – – –
Effect of movements in exchange rates – – – – – –
(0.6) (2.3) 0.0 0.0 (0.6) (2.3)
Other
Contributions paid by the employer – – – – – –
Benefits paid (0.8) (1.2) (0.0) (0.0) (0.8) (1.2)
(0.8) (1.2) (0.0) (0.0) (0.8) (1.2)
Balance at 31December
12.5 13.8 0.9 0.9 11.6 12.9
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statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Actuarial calculations of employee benefits have not been materially influenced by amendments based on historical experience or by variable assumptions.
The Group contributes to the following post-employment defined benefits plans in several countries, mainly in Germany. Below the characteristics of the
major plans are included.
■ A direct commitment in the form of capital has been agreed upon with the employees, who directly receive this commitment as an one-off payment
upon retirement. An alternative version is a plan where the employees receive monthly payments instead of an one-off payment. The plans are
reviewed on periodic basis.
■ The DB plan entitles a retired employee to receive a monthly pension payment. The amount of these payments is based on individual contracts with
the respective employee. The person has to be employed for a certain time. Each further year of employment the employee receives an amount in
addition to the contractual fixed amount.
The defined benefit plans are administered by multiple pension funds which are legally separated from the Group. The board of the pension fund is
required to act in the best interest of the plan participants and is responsible for setting certain policies (e.g. investment, contribution and indexation
policies) of the fund.
The defined benefit plans expose the Group to actuarial risks, such as longevity risk, interest rate risk and market (investment) risk.
The expenses relating to the defined benefit pension arrangements are included in the following line items of the statement of comprehensive income:
Expense recognised in the consolidated statement of comprehensive income regarding defined benefit arrangements
EUR million 2021 2020
Staff costs 0.1 0.1
Net finance costs 0.0 0.1
0.1 0.2
Principal actuarial assumptions (expressed as weighted averages)
2021 2020
Discount rate at 31December 0.7% 0.4%
Future salary increases 1.0% 1.9%
Future pension increases 1.6% 1.6%
FINANCIAL STATEMENTS
Annual Integrated Report 2021
154
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Composition plan assets
EUR million 2021 2020
Bonds 0.8 0.8
Equity 0.0 0.0
Real estate 0.0 0.0
Government loans 0.1 0.1
Other 0.0 0.0
Total
0.9 0.9
Reasonably possible changes at the reporting date to one of the relevant actuarial assumptions, holding other assumptions constant, would have
affected the defined benefit obligation by the amounts shown below.
Sensitivity analysis
Defined benefit obligation
EUR million Increase Decrease
Discount rate (0.5 percent) (0.5) 0.6
Future salary growth (1.0 percent) 0.2 (0.6)
Future pension (1.0 percent) 1.0 (0.8)
Future mortality (1.0 percent) (0.1) 0.1
Although the analysis does not take account of the full distribution of cash flows expected under the plans, it does provide an approximation
of the sensitivity of the assumptions shown. The method for preparing the sensitivity analyses did not changed from prior year.
Assumptions regarding future longevity have been based on published statistics and mortality tables.
At 31 December 2021, the weighted-average duration of the defined benefit obligation was 9.1 years (2020: 9.5 years). The expected payment for 2022
amounts to EUR 1.8 million (2020: EUR 1.2 million).
Liabilities arising from employee benefits
The pension plans included defined contribution plans as well as defined benefit plans. In the case of defined contribution plans, the contribution is
charged to the year to which it relates. With defined benefit plans, benefit obligations are calculated using the projected unit credit method. Calculations
are made by qualified actuaries. The pension liability shown in the statement of financial position represents the present value of the defined benefit
obligation at the financial position date minus the fair value of the plan assets at this date. The discount rate methodology for accounting long-term
employee benefits in accordance with IAS 19 is determined by the Executive Board. Significant judgement is required when setting the criteria for bonds
to be included in the population from which the yield curve is derived. The most significant criteria considered for the selection of bonds include the
issue size of the corporate bonds, quality of the bonds and the identification of outliers which are excluded. The discount rate used to calculate the
defined benefit obligation is based on the yield on corporate bonds issued in Euros.
FINANCIAL STATEMENTS
Annual Integrated Report 2021
155
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Since the pension arrangements involve long-term obligations and uncertainties, it is necessary to make assumptions in order to estimate the amount
that the Group needs to invest to fund its pension obligations. External actuaries calculate the obligation for defined benefit plans partly on the basis
of information provided by the Executive Board, such as future pay rises, the return on plan assets, mortality tables and the probable extent to which
pension scheme members will leave the scheme because they have reached retirement age, become incapacitated or left the Group.
The greater part of the defined benefit obligation at year-end 2021 relates to post employment arrangements in Germany, with a small part in Austria.
The group companies account individually for the pension schemes. The individual group company is fully liable for its benefit obligation. A portion for
the German group companies is reinsured. All pension arrangements accounted for as defined benefit obligations are not open for new participants
(<15% active participants).
Liabilities arising from employee benefits also include liabilities relating to long-service, early retirement and service anniversaries of EUR 2.4 million
(2020: EUR 2.6 million) in Germany and Austria.
Share-based payments
At 31December 2021, the Group had the following share-based payment arrangements.
Share plan for the Executive Board (equity settled)
Details of the remuneration of the Executive Board are provided in note 29.
Share plan for the Management and Leadership Team (equity settled)
In 2021, 36,036 conditional performance shares were granted to the Management Team (2020: 28,380). In 2021 a new share plan was introduced
under which 42,176 conditional performance shares were granted to the Leadership Team. The conditional performance shares granted in 2021 to the
Management Team and Leadership Team will vest upon achievement of performance measured over a three-year period (2021-2023). The number of
conditional shares granted is calculated on the basis of the average share price during Q4 2020, which amounts to EUR 16.30.
Loyalty bonus (equity settled)
Until 2018, the Company maintained a share incentive scheme. This plan was discontinued. Expenses recognized in proft or loss for this plan amount to
EUR 0.0 million (2020: EUR 0.1 million).
13
FINANCIAL STATEMENTS
Annual Integrated Report 2021
156
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Provisions
EUR million 2021 2020
Balance at 1 January 2.2 1.4
Provisions made during the period 0.5 2.2
Provisions transferred/used during the period (0.6) (1.4)
Provisions released during the period (0.0) (0.0)
Balance at 31December
2.1 2.2
Non-current portion 0.9 0.7
The provisions consist of a restructuring provision of EUR 0.5 million (2020: EUR 0.5 million) and a provision for the interest portion of the tax audits of
EUR 0.7 million (2020: EUR 0.8 million). The remainder of the restructuring provision is expected to be used in the course of 2022, however the exact
timing is not known yet. The amounts and timing of the outflows related to the tax audits are still uncertain.
Contract liabilities
EUR million 2021 2020
Balance at 1 January 5.5 6.6
Consideration received – –
Recognised as revenue in the period (1.0) (1.1)
Other changes – –
Balance at 31December
4.5 5.5
The contract liabilities relate to long-term advance consideration received from customers for investments made in equipment in order to fulfil the
obligations according to the contract. Considerations are received and based on a mark-up on top of contractual agreed piece price during a certain
period of time. Recognition is consistent with the Group’s transfer of the related goods to the customer and released to profit or loss on a systematic
basis that is consistent with depreciation and amortization of related equipment.
Trade and other payables
EUR million 2021 2020
Trade payables 51.6 44.0
Other taxes and social security contributions 1.5 2.8
Derivatives used for hedging 0.1 0.2
Non-trade payables 6.5 5.6
Accrued expenses 14.6 12.6
74.3 65.2
14
15
16
FINANCIAL STATEMENTS
Annual Integrated Report 2021
157
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Accrued expenses relate to numerous other liabilities such as personnel-related liabilities (holiday allowance, bonus accruals, vacation days),
prepayments and other invoices that are expected but not yet received. Non-trade payables relate to all other payables.
Financial instruments
Credit risk
The carrying amount of the financial assets represents the maximum credit risk. The maximum credit risk on the reporting date was as follows:
EUR million 2021 2020
Cash and cash equivalents 18.6 13.0
Other long-term investments 0.4 3.0
Current income tax 2.7 1.4
Trade and other receivables 65.3 53.4
Total
87.0 70.8
Impairment losses
Aging analysis of the trade and other receivables
2021 2020
EUR million Gross Provision Gross Provision
Within the term of payment 56.2 – 41.5 –
0 – 30 days due 6.5 – 8.0 –
31 – 60 days due 1.7 – 1.8 –
> 60 days due 1.3 (0.4) 2.8 (0.7)
Total trade and other receivables
65.7 (0.4) 54.1 (0.7)
The provision for trade receivables is used to absorb impairment losses, unless the Group is certain that collection of the amount owed is impossible,
in which case the amount is treated as a bad debt and written off against the financial asset in question.
At 31 December 2021 the provision for impairment losses on trade and other receivables relates to several customer invoices that the Group believes to
be non-collectible, in whole or in part. Based on historic payment behaviour and financial information currently known all receivables that are not
impaired at 31 December 2021 are collectible. This system is in line with the cash shortfall model as described in IFRS 9. EUR 3.0 million of trade
receivables are more as 30 days overdue, of which EUR 0.4 million is provided for. The Group has written off EUR 0.2 million receivables in 2021 (2020:
EUR 0.3 million), which are recognised under other operating expenses in the statement of comprehensive income.
17
FINANCIAL STATEMENTS
Annual Integrated Report 2021
158
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
The customer with the largest trade receivables outstanding accounted for 7% of the trade and other receivables at 31 December 2021 (2020: 4%).
The geographical credit risk from the Group’s direct customers is largely concentrated in Germany. However, as the Group’s most important customers
in the various segments of the German market are multinational or global players this reduces the Group’s dependency on the German market.
Credit risk rating grades
The credit quality of the Group’s financial assets, contract assets and financial guarantee contracts, as well as the Group’s maximum exposure to credit
risk by credit risk rating grades on the reporting date was as follows:
31 December 2021 2021
Note
External
credit rating
Internal
credit rating
12-month
or lifetime ECL
Gross carrying
amount
Loss
allowance
Net carrying
amount
Trade receivables 7 N/A Low risk
1
Lifetime ECL 57.2 (0.4) 56.8
Contract costs
5 N/A Low risk Lifetime ECL 0.5 – 0.5
Equity-accounted investee
3 N/A Low risk Lifetime ECL – – –
Other investments
3 N/A Low risk Lifetime ECL 0.4 – 0.4
58.1 (0.4) 57.7
31 December 2020 2020
Note
External
credit rating
Internal
credit rating
12-month
or lifetime ECL
Gross carrying
amount
Loss
allowance
Net carrying
amount
Trade receivables 7 N/A Low risk
1
Lifetime ECL 47.9 (0.7) 47.2
Contract costs
5 N/A Low risk Lifetime ECL 0.6 – 0.6
Equity-accounted investee
3 N/A Low risk Lifetime ECL 2.3 – 2.3
Other investments
3 N/A Low risk Lifetime ECL 0.8 – 0.8
51.6 (0.7) 50.9
Liquidity risk
The liquidity risk is the risk that the Group is unable to meet its financial obligations at the required time. Liquidity risk management is based on the
maintenance of sufficient liquidity in the form of unused (committed) credit facilities or cash to meet present and future financial obligations in normal
and adverse circumstances.
The contractual terms of the financial obligations, including the estimated interest payments and repayment obligations, are set out on the next page.
1
Amongst the trade receivables there are a number of items that are considered doubtful
FINANCIAL STATEMENTS
Annual Integrated Report 2021
159
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
31 December 2021
EUR million
Carrying
amount
Contractual
cash flows
0 – 6 months 6 – 12 months 1 – 2 years 2 – 5 years › 5 years
Non-derivative financial liabilities
Bank syndicate loans 120.0 (123.0) (1.0) (1.0) (121.0) – –
Lease liabilities 15.2 (17.1) (1.6) (1.4) (4.7) (5.9) (3.5)
Bank overdrafts 6.1 (6.1) (6.1) – – – –
Other loans and borrowings 7.9 (8.1) (1.3) (1.3) (3.1) (2.4) –
Trade and other payables 78.8 (78.8) (78.8) – – – –
Tax liabilities 6.0 (6.0) (6.0) – – – –
Derivative financial liabilities
Interest rate swap contracts 0.1 (0.1) (0.1) (0.0) (0.0) – –
Forward exchange contracts 0.1 (0.1) (0.1) (0.0) – – –
Total
234.2 (239.3) (95.0) (3.7) (128.8) (8.3) (3.5)
31 December 2020
EUR million
Carrying
amount
Contractual
cash flows
0 – 6 months 6 – 12 months 1 – 2 years 2 – 5 years › 5 years
Non-derivative financial liabilities
Bank syndicate loans 85.0 (88.5) (0.7) (0.7) (1.4) (85.7) –
Lease liabilities 15.4 (17.3) (1.4) (1.4) (2.8) (8.2) (3.5)
Bank overdrafts 4.5 (4.5) (4.5) – – – –
Other loans and borrowings 11.3 (11.6) (3.8) (1.3) (2.5) (3.4) (0.6)
Trade and other payables 70.7 (70.7) (70.7) – – – –
Tax liabilities 5.2 (5.2) (5.2) – – – –
Derivative financial liabilities
Interest rate swap contracts 0.2 (0.3) (0.1) (0.1) (0.1) (0.0) –
Forward exchange contracts – – – – – – –
Total
192.3 (198.1) (86.4) (3.5) (6.8) (97.3) (4.1)
It is not expected that the cash flows included in the maturity analysis should occur significantly earlier, or at significantly different amounts.
FINANCIAL STATEMENTS
Annual Integrated Report 2021
160
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Within the scope of the Group’s risk management the Group has hedged the currency and interest risks with derivatives, whereby the hedges
have been designated as cash flow hedges.
Cash flow hedges (in statement of cash flows)
The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to occur.
2021
EUR million
Carrying
amount
Contractual
cash flows
0 – 6 months 6 – 12 months 1 – 2 years 2 – 5 years › 5 years
Interest rate swap contracts
Assets – – – – – – –
Liabilities (0.1) (0.1) (0.1) (0.0) (0.0) – –
Forward exchange contracts
Assets 0.3 0.3 0.2 0.1 – – –
Liabilities (0.1) (0.1) (0.1) (0.0) – – –
Total
0.1 0.1 0.0 0.1 (0.0) – –
2020
EUR million
Carrying
amount
Contractual
cash flows
0 – 6 months 6 – 12 months 1 – 2 years 2 – 5 years › 5 years
Interest rate swap contracts
Assets – – – – – – –
Liabilities (0.2) (0.3) (0.1) (0.1) (0.1) (0.0) –
Forward exchange contracts
Assets 0.4 0.4 0.3 0.1 – – –
Liabilities (0.0) (0.0) (0.0) – – – –
Total
0.2 0.1 0.2 – (0.1) (0.0) –
FINANCIAL STATEMENTS
Annual Integrated Report 2021
161
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Cash flow hedges (in statement of comprehensive income)
The following table indicates the periods in which the cash flows associated with derivatives that are cash flow hedges are expected to impact
the result.
2021
EUR million
Carrying
amount
Contractual
cash flows
0 – 6 months 6 – 12 months 1 – 2 years 2 – 5 years › 5 years
Interest rate swap contracts
Assets – – – – – – –
Liabilities (0.1) (0.1) (0.1) (0.0) (0.0) – –
Forward exchange contracts
Assets 0.3 0.3 0.2 0.1 – – –
Liabilities (0.1) (0.1) (0.1) (0.0) – – –
Total
0.1 0.1 0.0 0.1 (0.0) – –
2020
EUR million
Carrying
amount
Contractual
cash flows
0 – 6 months 6 – 12 months 1 – 2 years 2 – 5 years › 5 years
Interest rate swap contracts
Assets – – – – – – –
Liabilities (0.2) (0.3) (0.1) (0.1) (0.1) (0.0) –
Forward exchange contracts
Assets 0.4 0.4 0.3 0.1 – – –
Liabilities (0.0) (0.0) (0.0) – – – –
Total
0.2 0.1 0.2 – (0.1) (0.0) –
Interest-rate risk
Part of the Group’s loans is governed by a floating interest rate (usually 3-month EURIBOR). In view of the Treasury Policy, the Group hedges at least
50% of the floating interest rate exposure. To this extent the Group has outstanding interest rate swaps with a notional amount of in total EUR 60 million
(2020: EUR 75 million). The aggregate fair value of the outstanding interest rate swaps at 31 December 2021 was EUR 0.1 million negative (2020:
EUR 0.2 million negative).
The following table shows the interest rates prevailing at the financial position date for interest-bearing financial liabilities. The majority of all interest
expenses relate to senior bank loans. The effective interest rate of these loans equalises the nominal interest rate. The EUR0.8 million mortgage
loan was acquired through business combinations in 2013 and initially recorded at fair value. The effective interest rate of the loan is 3.7%.
Other loans are not provided at an upcount or discount and no incremental transaction costs were incurred when the loans were drawn.
FINANCIAL STATEMENTS
Annual Integrated Report 2021
162
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
The other loans were acquired through business combinations in 2020 and initially recorded at fair value.
2021 2020
Currency
Nominal
interest
Year of
redemption
Fair value
Carrying
amount
Fair value
Carrying
amount
Banking syndicate loans EUR IBOR + 1.6% 2023 120.0 120 85.0 85.0
Mortgage loan EUR 6.4% 2022 0.8 0.8 1.6 1.6
Other loans EUR 1.4-1.8% 2022-2026 7.1 7.1 9.7 9.7
Bank overdrafts China CNY PBOC +1.0% 2022 2.2 2.2 2.1 2.1
Bank overdrafts - other Various IBOR + 0.8-1.6% 2022 3.9 3.9 2.3 2.4
Lease liabilities
Various 2.0% - 7.8% Various 15.2 15.2 15.5 15.4
Total interest-bearing debt
149.2 149.2 116.2 116.2
Sensitivity analysis interest
Financial assets and liabilities with a fixed interest rate are not recognised at fair value by processing the value changes in profit or loss. For this reason,
a movement in interest rates across the yield curve at 1 January 2021 would not have had a material effect on the 2021 profit for the period.
The Group has hedged a considerable part of the floating interest rate exposure by means of interest rate swaps. When taking into account these
swaps and the loans with a fixed rate, in total EUR 67.9 million of the EUR 134.0 million long-term and short-term loans, excluding lease liabilities, at
financial year-end have an interest rate which is fixed for one year or longer. Based on the interest-bearing debt levels at year-end and expected cash
flow development, a 1%-point increase in the interest rate across the yield curve as from 1 January 2022, will have an increasing effect on interest
expenses in 2022 of maximum EUR 0.7 million.
Exchange rate risk
The aggregate fair value of the outstanding forward exchange rate contracts concluded to hedge anticipated transactions was EUR 0.2 million positive
at 31 December 2021 (2020: positive EUR 0.4 million).
A 10%-point appreciation of the currencies listed hereafter against the euro would increase shareholders’ equity at 31 December 2021 and the result for
2021 by the amounts shown in the following table. A 10%-point depreciation of the listed currencies against the euro would have had the opposite
effect. The same test was done for the profit or loss, where the sensitivities for a 10% appreciation or depreciation on 31 December would have had an
impact as is shown below.
31 December 2021 Equity Result
US dollar 4.8 0.3
Czech koruna 0.9 (0.1)
Chinese yuan 3.8 (0.0)
Romanian lei 1.5 (0.1)
Indian rupee 0.4 0.2
FINANCIAL STATEMENTS
Annual Integrated Report 2021
163
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
31 December 2020 Equity Result
US dollar 4.3 0.3
Czech koruna 0.9 (0.2)
Chinese yuan 2.9 0.7
Romanian lei 1.5 0.1
Indian rupee 0.4 0.1
Principal exchange rates during the reporting period were as follows:
Applicable currency rates
Value of EUR At 31 December 2021 At 31 December 2020 Average over 2021
Pound sterling 0,8403 0.8990 0,8613
Czech koruna 24,8583 26.2419 25,6885
Chinese yuan 7,1947 8.0225 7,6318
US dollar 1,1326 1.2271 1,1843
Romanian lei 4,9490 4.8683 4,9206
Swedish krona 10,2503 10.0343 10,1461
Indian rupee 84,2318 89,6620 87,4585
Fair values of financial instruments
The following table shows the fair values and carrying amounts of the financial instruments:
2021 2020
EURmillion Carrying amount Fair value Carrying amount Fair value
Assets carried at amortised costs
Receivables (including current tax assets) 68.0 68.0 54.8 54.8
Cash and cash equivalents 18.6 18.6 13.0 13.0
Held to maturity investments 0.4 0.4 3.0 3.0
87.0 87.0 70.8 70.8
FINANCIAL STATEMENTS
Annual Integrated Report 2021
164
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
2021 2020
EURmillion Carrying amount Fair value Carrying amount Fair value
Liabilities carried at amortised costs
Banking syndicate loans (120.0) (120.0) (85.0) (85.0)
Mortgage loan (0.8) (0.8) (1.6) (1.6)
Other loans (7.1) (7.1) (9.7) (9.7)
Lease liabilities (15.2) (15.2) (15.4) (15.4)
Bank overdraft (6.1) (6.1) (4.5) (4.5)
Trade and other payables (including current tax liabilities) (84.8) (84.8) (75.9) (75.9)
(234.0) (234.0) (193.6) (193.6)
Liabilities carried at fair value
Interest derivatives (0.1) (0.1) (0.2) (0.2)
Forward exchange contracts – – – –
(0.1) (0.1) (0.2) (0.2)
The Group has no available for sale financial assets and all liabilities at fair value were designated as such upon initial recognition.
The loans and receivables consist of the trade and other receivables, including the current tax assets in the statement of financial position.
The forward exchange contracts and interest derivatives are included in the trade and other payables in the statement of financial position.
Interest rate used in measuring fair value
The interest rate used for discounting estimated cash flows, where applicable, is based on the swap curve at 31December, augmented by the
prevailing credit mark-up, and is as follows:
2021 2020
Derivatives 0.0% 0.0%
Leases 1.6% 1.7%
Banking syndicate loans 1.6% 1.7%
Mortgage loans 1.6% 1.2%
Other loans 1.6% 1.2%
FINANCIAL STATEMENTS
Annual Integrated Report 2021
165
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Fair value hierarchy
In estimating the fair value of an asset or a liability, the Group uses market-observable data to the extent it is available. The fair value calculation method
of all assets and liabilities carried at amortised costs is categorised in level 2 of the fair value hierarchy. The table below analyses financial instruments
carried at fair value, by valuation method. The different levels have been defined as follows:
level 1 quoted prices (unadjusted in active markets for identical assets or liabilities);
level 2 inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly
(i.e. derived from prices);
level 3 inputs for the asset or liability that are not based on observable market data (unobservable inputs).
Level 1 Level 2 Level 3 Total
31December 2021
Derivative contracts used for hedging – 0,1 – 0,1
Total
– 0,1 – 0,1
31December 2020
Derivative contracts used for hedging – 0.2 – 0.2
Total
– 0.2 – 0.2
Master netting
The Company has no master netting agreement in place. All derivative instruments are presented individually as either an asset or liability.
Leases
The group leases buildings, cars, office equipment and forklifts. The lease term varies between 3 to 15 years. For buildings an option to renew the lease
after the lease period is customary. Information about leases for which the Group is a lessee is presented on several places throughout the financial
statement:
■ total cash outflow for leases is included in the consolidated statement of cash flows for repayments of lease liabilities (EUR 3.4 million
(2020: EUR 2.9 million)) and in note 26 for interest (EUR 0.7 million (2020: EUR 0.6 million));
■ the carrying amount of right-of-use assets at the end of the reporting period by class of underlying assets, addition to these assets and
■ the depreciation charge for these assets are included in note 1;
■ interest expense on lease liabilities are included in note 25;
■ expenses relating to short-term leases or low-value assets amount to EUR 0.3 million (2020: 0.2 million).
Capital commitments
As at 31 December 2021 the Group had capital commitments totalling to EUR 7.5 million (2020: EUR 5.4 million).
18
19
FINANCIAL STATEMENTS
Annual Integrated Report 2021
166
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Contingent assets and liabilities
Contingent liabilties
The Group had guarantees in particular with regard to rentals, financing facilities and post employee benefits totalling to EUR 1.1 million
(2020: EUR 1.6 million).
The Group has divested itself of a number of companies in the past. The customary representations and warranties for transactions of this nature are
included in the relevant share or asset purchase agreements. The Group, as is customary for transactions of this nature, also issued representations
and warranties for potential (tax) claims relating to periods prior to the various divestment dates.
Operating segments
The Group, in accordance with IFRS 8, has included general and entity-wide disclosures in these consolidated financial statements.
Geographical segments based on physical location of the Group operating companies
The revenue and non-current assets per geographic area are specified below.
Germany Other European countries Asia
1
EUR million 2021 2020
2
2021 2020 2021 2020
Revenue from transactions with third parties 262.8 219.4 107.9 90.3 49.4 46.8
Other non-current assets
2
206.8 210.9 60.9 33.9 19.6 16.4
Deferred tax assets
2
5.8 8.3 4.6 4.7 4.1 2.1
Net liability for defined benefit obligations 10.9 12.2 0.7 0.7 – –
The Americas Consolidated
EUR million 2021 2020 2021 2020
2
Revenue from transactions with third parties 43.9 39.9 464.0 396.4
Other non-current assets 18.9 20.2 306.2 281.4
Deferred tax assets 3.8 3.1 18.3 18.2
Net liability for defined benefit obligations – – 11.6 12.9
1
Mainly related to China
2
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Revenue segmented by customer location
EUR million 2021 2020
Germany 181.2 155.7
Other European countries 138.9 117.6
Asia 67.7 63.0
The Americas 73.9 58.0
Other countries 2.3 2.1
Total
464.0 396.4
Information about reportable segments
Kendrion has split all activities over two segments: Automotive and Industrial. Based on the structure of the Group and the criteria of IFRS 8 – Operating
segments, Kendrion has concluded that within this structure the Kendrion business units are the operating segments within the Group. Based on the
aggregation criteria of IFRS 8, these operating segments have been aggregated into two reportable segments: Automotive and Industrial. The automotive
activities focus on developing and manufacturing innovative high-quality electromagnetic components, solutions and applications for customers in the
automotive industry. The industrial activities of the business units Industrial Brakes and Industrial Actuators and Controls focus on developing and
manufacturing electromagnetic systems and components for industrial applications. These business units also have similar economic characteristics and
display a number of similarities with respect to their technology, production processes, equipment and customers.
Industrial Automotive Consolidated
EUR million 2021 2020 2021 2020 2021 2020
Revenue from transactions with third parties 231.5 190.3 232.5 206.1 464.0 396.4
Inter-segment revenue 0.1 0.0 0.1 0.1 0.2 0.1
EBITDA 37.4 26.3 14.3 13.9 51.7 40.2
EBITDA as a % of revenue 16.2% 13.8% 6.1% 6.7% 11,1% 10.1%
EBITDA
1
39.0 29.1 16.8 15.5 55.8 44.6
EBITDA as a % of revenue
1
16.8% 15.3% 7.2% 7.5% 12.0% 11.3%
Reportable segment assets 267.3 219.6 223.5 209.5 490.8 429.1
Reportable segment employees (FTE) 1,261 1,058 1,467 1,398 2,728 2,456
1
Normalized for non-recurring costs of EUR 4.1 million for FY 2021 and of EUR 4.4 million for FY 2020. Refer to page 38 for a reconciliation of the non-IFRS financial
measures..
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Disaggregation revenue
EUR million 2021 2020
Serial revenue 453.7 391.1
Revenue from engineering and samples 10.3 5.3
Total
464.0 396.4
Major customers
Three customers (Volkswagen and ThyssenKrupp Bilstein in Automotive and Siemens in Industrial) individually account for more than 5% of the
company’s total revenue.
Business combinations and acquisitions of non-controlling interests
2021
Business combinations
On 21 September 2021 Kendrion announced that it has entered into a definitive agreement to acquire 100% of the shares of Twente Technology
Solutions BV (TTS), who is the 100% shareholder of 3T BV (3T). The transaction was successfully completed on that same day, which also marks the
date that Kendrion got control over TTS. From that date onwards the financial statements of TTS and 3T are consolidated by Kendrion and reporting in
the Industrial segment. TTS/3T were included in the Business Group Industrial Actuators and Controls (IAC).
3T is an established, specialist developer, manufacturer, distributor, and provider of lifecycle management services for client-specific electronics and
embedded systems. With facilities in Enschede and Eindhoven, 3T employs some 80 FTE, and realizes around EUR 12 million in annual profitable
revenues. It offers a strong strategic fit with the control technology activities of Kendrion’s Business Group Industrial Actuators and Controls.
In addition, 3T’s extensive experience in software and electronics development is expected to be strategically important for Kendrion’s Automotive
Group, where the increasing content of leading-edge electronic components in passenger cars and commercial vehicles, offers a significant growth
opportunity.
3T’s highly skilled employees and proximity to leading technical universities and other institutions of higher technical education, enhance Kendrion’s
ability to further build and manage a talented team of software and electronics developers.
From 21 September 2021, TTS/3T contributed revenue of EUR 3.4 million to the Group’s results. Its contribution to net profit during this period
amounted to EUR 0.2 million after deduction of the charges relating to the purchase price allocation.
Consideration transferred
The total consideration transferred amounted to EUR 23.2 million.
22
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statement of
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Identifiable assets acquired and liabilities assumed
The table on the next page shows the recognised amounts of assets acquired and liabilities assumed at the acquisition date:
Carrying
amount
Fair value
adjustments
Recognised
value
Intangible fixed assets – 8.4 8.4
Property, plant and equipment 2.3 – 2.3
Inventories and Work-in-progress 1.4 – 1.4
Trade and other receivables 2.3 – 2.3
Cash and cash equivalents 0.5 – 0.5
Deferred tax liabilities – (2.1) (2.1)
Provisions (0.2) – (0.2)
Loans and borrowings (2.5) – (2.5)
Trade and other payables (1.7) – (1.7)
Total identifiable net assets
2.1 6.3 8.3
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
Total consideration transferred 23.2
Fair value of identifiable net assets (8.3)
Goodwill
14.8
The goodwill is mainly attributable to the assembled workforce, synergies expected to be achieved from the strong strategic fit with control technology
activities of IAC and increased access to software and electronics competence relevant for the Kendrion Automotive Group and the value attributable to
future customers.
Acquisition related costs
The group incurred acquisition-related costs of EUR 0.2 million related to advisory fees, legal fees and due diligence costs. The costs have been
included in other operating expenses in the statement of comprehensive income.
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statement of
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
2020
On 5 November 2019 Kendrion announced that it entered into a definitive agreement to acquire 100% of the shares of the company INTORQ GmbH &
Co. KG (hereinafter: INTORQ). This transaction was successfully completed on 8 January 2020, which also marks the date that Kendrion obtained
control over INTORQ. From that date onwards the financial statements of INTORQ and its subsidiaries are consolidated by Kendrion and reporting in
the Industrial segment. And as from 1 April onwards, INTORQ and IDS were included in a newly formed business unit Industrial Brakes (IB).
INTORQ manufactures spring-applied brakes and electromagnetic brakes and clutches for electrical drive technologies. INTORQ products are used in
a diverse range of applications, including geared and servomotors, electric forklifts, wind turbines, cranes, hoists, elevators and escalators. INTORQ has
production sites in Aerzen (Germany), Shanghai (China), Atlanta (the U.S.) and Pune (India) and produces approximately 1 million brakes and clutches
per year. In 2019, INTORQ had annual revenues of around EUR 55 million and nearly 300 employees.
With its strong position in and deep knowledge of the spring-applied brake technology, proven product portfolio and successful and sizeable presence
in Shanghai and Aerzen, INTORQ complements Kendrion’s business unit Industrial Drive Systems (IDS) that has a strong position and broad product
portfolio in permanent magnet brake technology. Both INTORQ and Kendrion are well-positioned to profit from growing end markets. The combination
with INTORQ, creates a leading industrial brake company with a full range of high-quality industrial brakes in an expanded number of growth markets in
Europe, China, the U.S. and India. Specific shared end-markets include electric motors, wind power and elevators. Complimentary markets include
geared motors, forklifts, cranes and hoists.
From 8 January 2020, INTORQ contributed revenue of EUR 54 million to the Group’s results. Its contribution to net profit during this period amounted to
EUR 3.2 million after deduction of the charges relating to the purchase price allocation. Management considers the revenue and contribution to net
profit in the period 1 January 2020 until 8 January 2020 neglectable.
Consideration transferred
The total consideration transferred amounted to EUR 64.8 million. This includes an amount of EUR 0.4 million which is payable as per
31 December 2021.
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statement of
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Identifiable assets acquired and liabilities assumed
The table on the next page shows the recognised amounts of assets acquired and liabilities assumed at the acquisition date:
Carrying
amount
Fair value
adjustments
1
Recognised
value
1
Intangible fixed assets 0.5 26.3 26.8
Property, plant and equipment 15.9 – 15.9
Deferred tax assets 0.3 3.5 3.8
Inventories 14.4 – 14.4
Trade and other receivables 7.3 – 7.3
Cash and cash equivalents 4.3 – 4.3
Deferred tax liabilities (0.6) (7.4) (8.0)
Provisions (0.1) – (0.1)
Loans and borrowings (18.5) – (18.5)
Trade and other payables (7.8) – (7.8)
Total identifiable net assets
15.7 22.4 38.1
Goodwill
Goodwill was recognised as a result of the acquisition as follows:
Total consideration transferred 64.8
Fair value of identifiable net assets
1
(38.1)
Goodwill
26.7
The goodwill is mainly attributable to the assembled workforce, synergies expected to be achieved from tangible and well-identified cost savings
including the integration of selected manufacturing sites in Europe, China and the U.S. and the value attributable to future customers.
Acquisition related costs
The group incurred acquisition-related costs of EUR 1.8 million related to advisory fees, legal fees and due diligence costs. Of these costs,
EUR 1.2 million were recognised in 2019 and EUR 0.6 million in 2020. The costs have been included in other operating expenses in the statement of
comprehensive income.
1
Restated 2020 due to retrospective correction of tax positions related to acquisition of INTORQ GmbH & Co KG.
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of profit and loss and other
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Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Post acquisition
On 4 September 2020, Kendrion (Aerzen) GmbH merged with INTORQ GmbH & Co. KG (now Kendrion INTORQ GmbH) via a legal merger. Kendrion
(Aerzen) GmbH was part of the business unit Industrial Brakes and was situated in Aerzen, Germaby. The merger was part of the INTORQ integration
plan. As a result of the merger Kendrion (Aerzen) GmbH seized to exist.
Other income
EUR million 2021 2020
Net gain on disposal of property, plant and equipment 0.0 0.0
Other 0.2 0.3
0.2 0.3
Staff costs
EUR million 2021 2020
Wages and salaries 107.3 96.4
Social security charges 18.9 17.7
Temporary personnel 8.2 2.2
Contributions to defined contribution plans 0.6 0.5
Expenses related to defined benefit plans 0.1 0.1
Increase in liability for long-service leave 0.1 0.1
Other costs of personnel 2.9 2.5
138.1 119.5
Total number of employees and temporary workers at 31December (FTE) 2,728 2,456
The number of employees and temporary workers at 31 December 2021 (FTE) working in the Netherlands is 92 (2020: 15). The staff costs 2021 include
EUR 1.4 million one-off costs related to the restructuring measures (2020: EUR 1.5 million). The staff costs 2021 included EUR - short-time work
compensation for social security charges, from Governments in multiple countries (2020: EUR 1.1 million).
23
24
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Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Other operating expenses
EUR million 2021 2020
Increase in provision for doubtful debts 0.2 0.3
Premises costs 6.1 5.6
Maintenance expenses 9.4 6.1
Transport expenses 2.1 2.0
Consultancy expenses 8.3 6.9
Sales and promotion expenses 0.9 0.9
Car, travel and representation costs 1.7 1.4
Insurance 2.1 2.3
Impairment of fixed assets 3.5 2.4
Other 1.7 3.4
36.0 31.3
The other operating expenses 2021 include EUR 2.7 million related to one-off costs (2020: EUR 2.9 million). Furthermore, the other operating expenses
includes an amount of EUR 1.1 million relating to a previous year adjustment. Finally, the impairment of machinery and equipment related to the
cancellation of an automotive project. Technical analysis of the equipment has revealed limited re-use for the group. Discussions with the customer for
compensation are continuing. The impairment charge is recorded as part of the other operating expenses.
Research & Development expenses (including staff and other operating expenses) for 2021 totalled EUR 32.6 million (2020: EUR 28.9 million) of which
EUR1.1 million is capitalised (2020: EUR 0.7 million).
Net finance costs
EUR million 2021 2020
Interest income 0.0 0.0
Net exchange gain – –
Finance income
0.0 0.0
Interest expenses (2.9) (2.8)
Interest expenses related to lease liabilities (0.7) (0.6)
Interest expenses related to employee benefits (0.0) (0.1)
Net exchange loss (0.1) (0.6)
Finance expense
(3.7) (4.1)
Net financing costs
(3.7) (4.1)
The interest expenses 2021 include EUR (0.0) million one-off costs related to the impact of tax audits (2020: EUR 0.6 million).
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statement of
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Income tax
EUR million 2021 2020
Current tax charge on year under review (5.7) (1.4)
Total corporation tax expenses in the income statement
(5.7) (1.4)
The current year tax expense includes an amount of EUR 0.4 million relating to a previous year adjustment.
Reconciliation of effective tax rate Reconciliation effective tax rate Reconciliation in EUR million
2021 2020 2021 2020
Profit before income tax 20.1 5.7
Income tax expense at local corporation tax rate
25.0% 25.0% 5.0 1.4
Non-deductible expenses 2.1% 16.0% 0.4 0.9
Effect of tax rates in foreign jurisdictions 0.6% (3.9)% 0.1 (0.2)
Tax exempt income (0.7)% (0.3)% (0.1) (0.0)
Changes in estimates related to prior years 2.7% (18.4)% 0.6 (1.0)
Current-year losses for which no deferred tax asset is recognised – – – –
Additional deductible items (0.5)% 1.4% (0.1) 0.1
Other movements (0.9)% 4.8% (0.2) 0.2
28.3% 24.6% 5.7 1.4
Related parties
Identity of related parties
A related-party relationship exists between the Company and its subsidiaries, their managers and executives. The Company has a number of
agreements with its subsidiaries relating to the charging of central costs to and from the business units, including management, development,
information technology and marketing costs, as well as agreements in respect of Group financing and use of intellectual property. Internal supplies
are also obtained within the business units. Intercompany transactions are effectuated at arm’s length market prices. As all subsidiaries are fully
consolidated and reflected in these financial statements, the amounts of these transactions are not further specified. For a list of the subsidiaries, see
pages 202-203.
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statement of
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of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Compensations of key management personnel
The remuneration of the Executive Board and Supervisory Board is as follows:
EUR thousand 2021 2020
Short-term benefits 1,656.1 1,453.7
Post-employment benefits 141.0 133.8
Other long-term benefits – –
Share-based payments 272.2 120.7
Termination benefits – –
2,069.3 1,708.2
The total remuneration is included in staff costs (see note 23). For a description of the remuneration policy of the members of the Executive Board,
see pages 91-106.
The CEO will, based on this performance, receive a variable remuneration of 78% of his gross fixed remuneration. The CEO’s gross variable
remuneration amounts to EUR 429,000 (2020: EUR 358,600) which will be paid in cash.
The CFO will, based on this performance, receive a variable remuneration of 45.5% of his gross fixed remuneration. The CFO’s gross variable
remuneration amounts to EUR 141,409 (2020: EUR 102,965) which will be paid in cash.
Kendrion applies a share ownership guideline for members of the Executive Board of 100% of the annual fixed gross base salary for the CEO and 50%
of the annual fixed gross salary of the CFO. This shareholding has to be gradually built up with performance shares earned under the long-term share
incentive, subject to the sell-to-cover concept as prescribed by the ‘Share ownership guideline’.
The amount charged to the profit or loss regarding the long-term variable remuneration policy was EUR 272,200 (2020: EUR 120,780).
The vesting and holding periods for (conditional) shares awarded to the CEO are specified as follows:
CEO (J.A.J. van Beurden) Number of shares Expiry vesting period Expiry holding period
2021 20,245 Expiry performance period 2021-2023 End of 2025
2020 16,533 Expiry performance period 2020-2022 End of 2024
2019 11,559 Expiry performance period 2019-2021 End of 2023
2018 6,960 Expiry performance period 2018-2020 End of 2022
2017
1
3,383 End of 2019 End of 2021
2016
1
3,970 End of 2018 End of 2020
1
The long-term incentive scheme for the years 2016 and 2017 is subject to the terms of the remuneration policy applicable immediately prior to the Executive Board
Remuneration Policy that was adopted in April 2018.
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statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
CFO (J.H. Hemmen) Number of shares Expiry vesting period Expiry holding period
2021 9.533 Expiry performance period 2021-2023 End of 2025
2020 6,769 Expiry performance period 2020-2022 End of 2024
2019 2,409 Expiry performance period 2019-2021 End of 2023
2018
Not applicable – effective date of appointment to the Executive Board 1 July 2019
2017
2016
Pensions
The Executive Board participates in the defined contribution plan of the Company. For 2021, the contribution to the pension insurer was EUR 36,226
(2020: EUR 31,949) for the CEO and EUR 26,364 (2020: EUR 25,905) for the CFO.
Transactions with shareholders
There were no transactions with shareholders.
Other related party transactions
As part of the INTORQ acquisition Kendrion also acquired a Related Party loan. The loan originally amounted to EUR 0.4 million, runs until June 2027
and has an interest percentage of 2%. As per 31 December 2021 the remaining outstanding amount is EUR 0.2 million (2020: 0.2 million). The loan is
not secured.
Other notes
The subsidiary Kendrion Holding Germany GmbH, Markdorf, Germany included in these consolidated financial statements makes use of § 264(3) HGB
(German Commercial Code). In accordance with that rule, the consolidated financial statements of Kendrion Holding Germany GmbH as of
31December 2020 were not published. A complete list of all subsidiaries is available from the Amtsgericht in Freiburg im Breisgau (number HRB
704749) and from the Company offices. The following German legal entities are consolidated in these consolidated financial statements: Kendrion
(Villingen) GmbH, Kendrion (Donaueschingen/Engelswies) GmbH, Kendrion (Markdorf) GmbH, Kendrion (Aerzen) GmbH, Kendrion Kuhnke GmbH,
Kendrion Kuhnke Automation GmbH, Kendrion Kuhnke Automotive GmbH, Kendrion FAS Controls Holding GmbH, Kendrion INTORQ GmbH, INTORQ
Beteiligungs-GmbH, Kendrion IP Management GmbH and Ochrea Grundstücksverwaltungsgesellschaft mbh & Co Vermietungs KG.
The subsidiary Kendrion (UK) Ltd. (registration number 1124810), Bradford, United Kingdom included in these consolidated financial statements is
exempt from the requirements of section 479A (audit of accounts) of the Companies Act 2006.
Post-balance sheet events
There were no post/balance sheet events that have to be taken into account in the consolidated financial statements for the year ended 31December
2021.
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statement of
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Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
NOTES TO THE
CONSOLIDATED FINANCIAL
STATEMENTS
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Note EUR million 2021 2020
Fixed assets
Property, plant and equipment 0.7 0.8
Intangible assets 0.1 0.0
Other investments, including derivatives 0.3 0.7
1.3 Financial fixed assets 259.5 234.9
Total non-current assets
260.6 236.4
Current assets
1.4 Receivables 0.5 1.0
Cash and cash equivalents 0.0 0.0
Total current assets
0.5 1.0
Total assets
261.1 237.4
1.5 Equity
Share capital 29.9 29.9
Share premium 45.8 51.7
Legal reserves 13.6 5.1
Other reserves 119.3 112.4
Retained earnings 14.4 4.3
Total equity
223.0 203.4
1.6 Current liabilities
Loans and borrowings 36.3 32.0
Payables 1.8 2.0
Total current liabilities
38.1 34.0
Total equity and liabilities
261.1 237.4
COMPANY BALANCE SHEET AT 31 DECEMBER
(before profit appropriation)
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Notes to the
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statements
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statement of
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Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
company financial
statements
Company
income
statement
Company
balance
sheet
COMPANY INCOME STATEMENT
Note EUR million 2021 2020
Revenue – –
1.8 Other income 5.4 3.8
Total revenue and other income
5.4 3.8
1.9 Staff costs 4.6 3.4
Depreciation and amortization 0.1 0.1
Other operating expenses 1.3 1.2
Result before net finance costs
(0.6) (0.9)
Finance income 0.1 0.1
Finance expense (1.4) (1.0)
Profit before income tax
(1.9) (1.8)
Income tax expense 0.1 1.6
Profit for the period
(1.8) (0.2)
1.10 Share in results of Group companies after tax 16.2 4.5
1.11 Net profit 14.4 4.3
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consolidated financial
statements
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statement of
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Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Notes to the company financial statements
General
The Company financial statements are part of the 2021 financial statements of Kendrion N.V. (the ‘Company’). The Company is registered
at the Chamber of Commerce in The Netherlands under number: 30113646.
Principles of valuation of assets and liabilities and determination of results
In selecting the principles employed in the company financial statements for the valuation of assets and liabilities and determination of results,
Kendrion N.V. has made use of the option provided by Section 362, subsection 8, of Book 2 of the Netherlands Civil Code. Consequently,
the principles employed in the Company financial statements of Kendrion N.V. for the valuation of assets and liabilities and determination of results
(the ‘accounting policies’) are identical to those employed in the consolidated EU-IFRS financial statements. Interests in entities in which Kendrion N.V.
has significant influence are measured using the equity method. The consolidated EU-IFRS financial statements have been prepared in accordance
with the standards adopted by the International Accounting Standards Board as endorsed for use in the European Union (hereinafter referred to as
‘EU-IFRS’). These policies are discussed in notes a – r.
Financial fixed assets
EUR million
Interest in Group
companies
Loans to Group
companies
Deferred tax Total 2021 Total 2020
Carrying amount at 1 January 232.8 – 2.1 234.9 232.4
Results of Group companies 16.2 – – 16.2 4.5
Movements in loans and borrowings – – – – –
Movements in deferred tax assets – – 0.0 0.0 1.6
Foreign currency translation differences for foreign operations 7.8 – – 7.8 (5.5)
Other movements 0.6 – – 0.6 1.9
Carrying amount at 31 December
257.4 – 2.1 259.5 234.9
Receivables
EUR million 2021 2020
Receivables from Group companies 0.2 0.4
Prepayments and accrued income 0.3 0.6
0.5 1.0
All receivables are due within one year.
1
1.1
1.2
1.3
1.4
NOTES TO THE COMPANY FINANCIAL STATEMENTS
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statements
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statement of
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Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Company
balance
sheet
Company
income
statement
NOTES TO THE
COMPANY FINANCIAL
STATEMENTS
Equity
EUR million
Share
capital
Share
premium
Translation
reserve
Hedge
reserve
Reserve for
participations
Reserve for
own shares
Other
reserves
Retained
earnings
Total 2021 Total 2020
Restated balance at 1 January 29.9 51.7 (0.2) 0.1 5.2 (3.4) 115.8 4.3 203.4 202.6
Appropriation of retained earnings – – – – – – 4.3 (4.3) – –
Foreign currency translation differences
for foreign operations – – 7.8 – – – – – 7.8 (5.5)
Net change in fair value of cash flow hedges,
net of income tax – – – 0.1 – – – – 0.1 0.2
Issue of ordinary shares 0.0 0.0 – – – – – – 0.0 –
Own shares sold – – – – – 1.4 0.2 – 1.6 –
Share-based payment transactions – – – – – 0.1 1.0 – 1.1 0.2
Dividends to equity holders – (5.9) – – – – – – (5.9) –
Other – – – – 0.6 – (0.1) – 0.5 1.6
Total recognised income and expenses – – – – – – – 14.4 14.4 4.3
Balance at 31 December
29.9 45.8 7.6 0.2 5.8 (1.9) 121.2 14.4 223.0 203.4
Share capital
The authorised capital of the Company amounts to EUR 80 million, divided into 40 million ordinary shares of EUR 2.00, of which 14,934,735 ordinary
shares have been issued (2020: 14,933,984).
Share premium
The share premium represents revenue from shares issued at more than their nominal value (issued above par). The issued and paid share capital,
including share premium, is fiscally recognised capital.
Translation reserve
The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of subsidiaries outside
the euro zone. Gains and losses relating to the translation risk are recognised in equity. The build-up of the cumulative figure commenced
on 1 January 2004.
Hedge reserve
The hedge reserve comprises the effective share of the cumulative net movement in the fair value of cash-flow hedging instruments relating
to hedged transactions that have not yet been executed.
1.5
1.5.1
1.5.2
1.5.3
1.5.4
FINANCIAL STATEMENTS
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Company
balance
sheet
Company
income
statement
NOTES TO THE
COMPANY FINANCIAL
STATEMENTS
Notes to the
consolidated financial
statements
Statutory reserve for participations
This reserve pertains to participating interests that are accounted for according to the equity accounting method. The reserve represents the difference
between the participating interests’ retained profit and direct changes in equity, as determined on the basis of the Company’s accounting policies, and
the share thereof that the Company may distribute. It is shown as the share in the undistributed results of the subsidiaries since they were first valued
using the equity method. The amount of any dividend – from these subsidiaries – to which there is an entitlement on adoption of the financial statements
is deducted from this reserve.
Reserve for own shares
The reserve for the Company’s own shares comprises the cost of the Company shares that are held by the Company for the remuneration package for
the Executive Board. At 31 December 2021, the Company held 93,663 of its own shares (2020: 167,503).
Other reserves
Other reserves are all the reserves other than those shown separately and comprise primarily the cumulative, undistributed profits from previous financial
years.
Retained earnings
In 2021, the full result for 2020 was included in other reserves. Retained earnings consequently consist solely of the result for 2021.
Current liabilities
EUR million 2021 2020
Debts to Group companies 35.7 31.3
Lease liability 0.6 0.7
Trade payables 0.5 0.3
Other payables and accrued expenses 1.3 1.7
38.1 34.0
Financial instruments
See note 17 to the consolidated financial statements for details on financial instruments.
Other income
EUR million 2021 2020
Management fee 5.4 3.8
Other – –
5.4 3.8
1.5.5
1.5.6
1.5.7
1.5.8
1.6
1.7
1.8
FINANCIAL STATEMENTS
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statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Company
balance
sheet
Company
income
statement
NOTES TO THE
COMPANY FINANCIAL
STATEMENTS
Notes to the
consolidated financial
statements
Staff costs
EUR million 2021 2020
Wages and salaries 3.8 2.8
Social security charge 0.2 0.1
Pension costs 0.4 0.4
Other costs of personnel 0.2 0.1
4.6 3.4
Total number of employees and temporary workers at 31 December (FTE) 16 15
The Company has only defined contribution plans for its employees.
Share in results of Group companies after tax
EUR 1.5M of costs are included in this year’s result of group companies related to prior years.
Profit appropriation
Appropriation of net profit
EUR million 2021 2020
Net profit 14.4 4.3
The Executive Board has decided, with the approval of the Supervisory Board, that the net profit of EUR 14.4 million will be added to the other reserves.
Commitments not appearing on the balance sheet
Joint and several liability and guarantees
The Company and its Group companies have issued guarantees mainly in the context of the financing by financial institutions.
The Company has issued declarations of joint and several liability, as referred to in Section 403 of Book 2 of the Netherlands Civil Code, for:
■ Combattant Holding B.V., Zeist;
■ Kendrion Finance B.V., Zeist;
■ Twente Technology Solutions B.V., Enschede;
■ 3T B.V., Enschede.
Kendrion NV has a guarantee which relates to the rent of the office in Amsterdam totalling to EUR 0.0 million.
Fiscal unity
The Company and its Dutch subsidiaries excluding Landfort II B.V., Kendrion Marketing B.V., Twente Technology B.V. and 3T B.V. form a tax group for
corporation tax purposes. According to the standard terms, each of the companies is jointly and severally liable for corporation tax payable by all the
members of the fiscal unity.
1.9
1.10
1.11
1.12
1.12.1
1.12.2
FINANCIAL STATEMENTS
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statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Company
balance
sheet
Company
income
statement
NOTES TO THE
COMPANY FINANCIAL
STATEMENTS
Notes to the
consolidated financial
statements
Post-balance sheet events
There were no post-balance sheet events that have to be taken into account in the consolidated financial statements for the year ended
31December2021.
Fees to the auditor
With reference to Section 2:382a of the Netherlands Civil Code, the following fees have been charged by Deloitte Accountants B.V. and its member
firms and affiliates in 2021 and 2020 to the Company, its subsidiaries and other consolidated entities:
2021 2020
EUR thousand
Deloitte
Accountants B.V.
Other Deloitte
member firms
and affiliates
Total
Deloitte
Deloitte
Accountants B.V.
Other Deloitte
member firms
and affiliates
Total
Deloitte
Audit of financial statements 300.3 342.0 642.3 256.8 347.3 604.1
Other assurance services 33.2 – 33.2 30.1 – 30.1
Tax advisory services – – – – – –
Other non-audit services – – – – – –
Total
333.5 342.0 675.5 286.9 347.3 634.2
Remuneration of and share ownership by the Executive Board and Supervisory Board
Remuneration of the Executive Board
The remuneration of current Executive Board members charged to the Company and Group companies, including pension expenses as referred to in
Section 383, subsection 1, of Book 2 of the Netherlands Civil Code, amounted to EUR 1,897,300 (2020: EUR 1,538,300). This remuneration is as
follows:
2021 2020
EUR thousand J.A.J. van Beurden J. H. Hemmen Total J.A.J. van Beurden J. H. Hemmen Total
Fixed remuneration 550.0 310.8 860.8 517.9 254.5 772.4
Short-term variable remuneration 429.0 141.4 570.4 358.7 102.8 461.5
Long-term variable remuneration 190.9 81.3 272.2 86.7 34.0 120.7
Total remuneration
1,169.9 533.5 1,703.4 963.3 391.3 1,354.6
Pension and other expenses 90.4 103.5 193.9 90.3 93.1 183.7
1,260.3 637.0 1,897.3 1,053.9 484.4 1,538.3
1.13
1.14
1.15
FINANCIAL STATEMENTS
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Company
balance
sheet
Company
income
statement
NOTES TO THE
COMPANY FINANCIAL
STATEMENTS
Notes to the
consolidated financial
statements
The 2021 short-term variable remuneration will be paid in cash after income tax.
For more information on the long-term variable remuneration see pages 176-177.
Remuneration of the Supervisory Board
The total remuneration of current and former Supervisory Board members in 2021 amounts to EUR 172,000 (2020: EUR 170,000).
This remuneration is as follows:
EUR thousand 2021 2020
F. van Hout (appointed as from 1 April 2021) 38 –
H. ten Hove (stepped down as from 1 April 2021) 12 47
M.J.G. Mestrom 41 38
J.T.M. van der Meijs 41 38
E.M. Doll (appointed as of 24 June 2020) 40 28
T.J. Wünsche (stepped down as from 30 April 2020) – 19
172 170
No loans, advances or related guarantees have been given to the Executive Board or Supervisory Board members.
Share ownership by the Executive Board and the Supervisory Board
31 December 2021 31 December 2020
Executive Board J.A.J. van Beurden J.A.J. van Beurden 34,556 32,941
J.H. Hemmen J.H. Hemmen 3,609 2,241
Supervisory Board – –
Amsterdam, 25 February 2022
Executive Board Supervisory Board
J.A.J. van Beurden F. van Hout
J.H. Hemmen M.J.G. Mestrom
J.T.M. van der Meijs
E.M. Doll
FINANCIAL STATEMENTS
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Company
balance
sheet
Company
income
statement
NOTES TO THE
COMPANY FINANCIAL
STATEMENTS
Notes to the
consolidated financial
statements
OTHER INFORMATION
Provisions in the Articles of Association governing the appropriation of profit
Under article 35.1 and 35.2 of the Articles of Association of the Company, the Executive Board shall, with the approval of the Supervisory Board,
determine which part of the profits is added to the reserves. The profit remaining after transfer to the reserves is available to the General Meeting
of Shareholders. The Company can only make payments to the shareholders and other parties entitled to the distributable profit insofar as the
shareholders’ equity exceeds the paid-up and called-up part of the capital plus the statutory reserves and exceeds the amounts resulting from
the distribution test, performed by the Executive Board at the date of each dividend payment.
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OTHER INFORMATION
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
To the shareholders and the Supervisory Board of Kendrion N.V.
Independent auditor’s report
Report on the audit of the financial statements 2021 included in the annual report
Our opinion
We have audited the financial statements 2021 of Kendrion N.V., based in Amsterdam. The financial statements comprise the consolidated financial
statements and the company financial statements.
In our opinion:
■ The accompanying consolidated financial statements give a true and fair view of the financial position of Kendrion N.V. as at 31 December 2021,
and of its result and its cash flows for 2021 in accordance with International Financial Reporting Standards as adopted by the European Union
(EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code.
■ The accompanying company financial statements give a true and fair view of the financial position of Kendrion N.V. as at 31 December 2021, and
of its result for 2021 in accordance with Part 9 of Book 2 of the Dutch Civil Code.
The consolidated financial statements comprise:
1. The consolidated statement of financial position as at 31 December 2021.
2. The following statements for 2021: the consolidated statement of financial position, the consolidated statements of profit and loss and other
comprehensive income, the consolidated statement of changes in equity and the consolidated statement of cash flows.
3. The notes comprising a summary of the significant accounting policies and other explanatory information.
The company financial statements comprise:
1. The company balance sheet as at 31 December 2021.
2. The company profit and loss account for 2021.
3. The notes comprising a summary of the accounting policies and other explanatory information.
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. Our responsibilities under those standards are
further described in the “Our responsibilities for the audit of the financial statements” section of our report.
We are independent of Kendrion N.V. in accordance with the EU Regulation on specific requirements regarding statutory audit of public-interest entities,
the Wet toezicht accountantsorganisaties (Wta, Audit firms supervision act), the Verordening inzake de onafhankelijkheid van accountants bij assurance-
opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations
in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
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Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Materiality
Based on our professional judgement we determined the materiality for the 2021 financial statements as a whole at EUR 1,500,000 (2020:
EUR 1,200,000). The materiality for this year is based on 7.5% of profit before tax. For 2020, due to the effect of COVID-19 on the company’s Profit
Before Tax, we deemed this to be a less appropriate benchmark for the audit and as such we therefor utilized net assets and revenue in determining
materiality in 2020. We have also taken into account misstatements and/or possible misstatements that in our opinion are material for the users of the
financial statements for qualitative reasons.
Component audits are performed using materiality levels determined by the judgement of the group audit team, considering materiality for the
consolidated financial statements as a whole and the reporting structure of the group. Component materiality did not exceed EUR 675,000.
We agreed with the Supervisory Board that misstatements in excess of EUR 75,000, which are identified during the audit, would be reported to them,
as well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
Kendrion N.V. is at the head of a group of entities. The financial information of this group is included in the consolidated financial statements of
Kendrion N.V.
In establishing the overall group audit strategy and plan, we determined the type of work that needed to be performed at the components by the group
engagement team and by the auditors of the components. We directed and supervised the work of our component auditors as part of the group audit.
Our group audit mainly focused on significant group entities in terms of size and financial interest, significant risks or where complex activities are
present.
By performing the procedures mentioned above at component entities, together with additional procedures at group level, we have been able to obtain
sufficient and appropriate audit evidence about the group’s financial information to provide an opinion about the consolidated financial statements.
Due to COVID-19 and related travel restrictions we were only able to visit Kendrion (Shelby) Inc. and we were unable to visits other components during
our 2021 audit. To overcome this limitation, we have had extensive contact with our component teams throughout the year and attended meetings with
local management.
Audit coverage
Audit coverage of consolidated revenues 92%
Audit coverage of consolidated assets 91%
For the other group companies, we have performed remote review procedures or have component auditors instructed to perform specific audit
procedures at other components.
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OTHER INFORMATIONOTHER INFORMATION
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Audit approach fraud risks
We identified and assessed the risks of material misstatements of the financial statements due to fraud. During our audit we obtained an understanding
of the entity and its environment and the components of the system of internal control, including the risk assessment process and management’s
process for responding to the risks of fraud and monitoring the system of internal control and how the Supervisory Board exercises oversight, as well as
the outcomes.
We evaluated the design and relevant aspects of the system of internal control and in particular the fraud risk assessment, as well as among others the
code of conduct, whistle blower procedures and incident registration. We evaluated the design and the implementation of internal controls designed to
mitigate fraud risks.
As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect to financial reporting fraud, misappropriation of assets and
bribery and corruption. We evaluated whether these factors indicate that a risk of material misstatement due to fraud is present. We performed these
procedures in close co-operation with our forensic specialists.
We performed, amongst others, the following specific procedures together with our component auditors:
■ We incorporated elements of unpredictability in our audit. We also considered the outcome of our audit procedures and evaluated whether any
findings were indicative of fraud or noncompliance;
■ We considered available information and made enquiries with management, those charged with governance and with others within the Company,
including but not limited to, e.g. General Counsel, Global Internal Audit & Risk Manager, Compliance Officer and Controllers;
■ We organized, together with our Forensic Specialists, a Global Audit Planning meeting with our component auditors during which we also held a
Fraud Risk brainstorm session;
■ We tested the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of the financial
statements;
■ Our Forensic Specialists were involved in the oversight of several components and were present during a number of file reviews, which are selected
based on complexity, risk and/or size;
■ We evaluated whether the selection and application of accounting policies by the group, particularly those related to subjective measurements and
complex transactions, may be indicative of fraudulent financial reporting;
■ We evaluated whether the judgments and decisions made by management in making the accounting estimates included in the financial statements
indicate a possible bias that may represent a risk of material misstatement due to fraud. Management insights, estimates and assumptions that
might have a major impact on the financial statements are disclosed in the notes to the consolidated financial statements. We performed a
retrospective review of management judgments and assumptions related to significant accounting estimates reflected in prior year financial
statements;
■ For significant transactions such as the 3T acquisition we evaluated whether the business rationale of the transactions suggests that they may have
been entered into to engage in fraudulent financial reporting or to conceal misappropriation of assets.
This did not lead to indications for fraud potentially resulting in material misstatements.
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Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Audit approach compliance with laws and regulations
We assessed the laws and regulations relevant to the Company through discussion with relevant employees (like Chief Financial Officer, General and
Legal Counsel and Global Internal Audit & Risk Manager), discussion with component teams, reading minutes of relevant meetings and reports of
internal audit and obtained lawyers letters. Our forensic specialists were also involved in this evaluation.
As a result of our risk assessment procedures, and while realizing that the effects from non-compliance could vary considerably, we considered the
following laws and regulations: adherence to (corporate) tax law and financial reporting regulations, the requirements under the International Financial
Reporting Standards as adopted by the European Union (EU-IFRS) and Part 9 of Book 2 of the Dutch Civil Code with a direct effect on the financial
statements as an integrated part of our audit procedures, to the extent material for the related financial statements. We obtained sufficient appropriate
audit evidence regarding provisions of those laws and regulations generally recognized to have a direct effect on the financial statements.
Apart from these, the Company is subject to other laws and regulations where the consequences of non-compliance could have a material effect on
amounts and/or disclosures in the financial statements, for instance, through imposing fines or litigation. Our procedures are more limited with respect
to these laws and regulations that do not have a direct effect on the determination of the amounts and disclosures in the financial statements.
Compliance with these laws and regulations may be fundamental to the operating aspects of the business, to Kendrion N.V.’s ability to continue its
business, or to avoid material penalties (e.g., compliance with environmental regulations) and therefore non-compliance with such laws and regulations
may have an indirect material effect on the financial statements. Our responsibility with these risks is limited to undertaking specified audit procedures to
help identify non-compliance with those laws and regulations that indirectly may have a material effect on the financial statements. Our procedures on
these risks are limited to (i) inquiry of management, the Supervisory Board, the Executive Board and others within the Company as to whether Kendrion
N.V. is in compliance with such laws and regulations and (ii) inspecting correspondence, if any, with the relevant licensing or regulatory authorities to help
identify non-compliance with those laws and regulations that may have a material effect on the financial statements.
Naturally, we remained alert to indications of (suspected) non-compliance throughout the audit.
Finally, we obtained written representations that all known instances of (suspected) fraud or non-compliance with laws and regulations have been
disclosed to us.
Audit approach going concern
Under the going concern basis of accounting, the financial statements are prepared on the assumption that the entity is a going concern and will
continue its operations for the foreseeable future, defined as until December 31, 2022. The Executive Board is of the opinion that, based on the current
state of affairs, it is justified that the financial statements are prepared on a going concern basis.
We have evaluated management’s assessment of the Company’s ability to continue as a going concern. In evaluating management’s assessment,
we considered whether management’s assessment includes all relevant information of which we are aware as a result of the audit.
We have evaluated the Company’s going concern assessment and performed (amongst others) the following procedures:
■ Analyzing and discussing cash flow, profit and other relevant forecasts with management;
■ Analyzing and discussing the entity’s latest available internal reportings;
■ Reading the terms of debt covenants and determining whether any have been breached;
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Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
■ Reading minutes of those charged with governance and relevant committees for reference to financing difficulties;
■ Inquiring of the entity’s Legal Counsel regarding the existence of litigation and claims and the reasonableness of management’s assessments
of their outcome and the estimate of their financial implications;
■ Performing audit procedures regarding subsequent events to identify those that either mitigate or otherwise affect the entity’s ability to continue
as a going concern;
■ Obtaining and reviewing reports of regulatory actions;
■ Determining the adequacy of support for any planned disposals of assets in so for relevant for the going concern;
■ Discussion with component auditors about facts and circumstances which might be relevant for the going concern assessment at group level.
■ Analyzing the Company’s assessment on the impact of the current market developments (i.e. supply chain constraints, semiconductor shortages,
demand volatility and increasing raw material prices)
Based on the procedure performed we concur with management’s evaluation.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements. We have
communicated the key audit matters to the Supervisory Board. The key audit matters are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not
provide a separate opinion on these matters.
In prior year, we included the valuation of goodwill and the general IT controls as separate key audit matters. These are also included in our 2021 report.
Compared to last year we did not include a key audit matter for the purchase price allocation of the INTORQ acquisition and the bank covenants.
The purchase price allocation has been completed in 2020 and is therefore no longer a key audit matter.
The banking covenants is also no longer included as the Company issued an early waiver termination request to its banking syndicate effectively
cancelling the covenant relief and the associated EUR 25 million minimum liquidity covenant, restrictions and information undertakings on 27 July 2021.
Based on the performance in 2021, the company is well within the maximum leverage ratio of 3.25.
For our 2021 report there are two new key audit matters, being the purchase price accounting for the 3T acquisition and the group audit.
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OTHER INFORMATIONOTHER INFORMATION
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
1. General IT controls
Description
Kendrion has operations in different countries that use one groupwide
Financial IT platform (excl. INTORQ and the newly acquired 3T entities),
which is located and maintained in Villingen, Germany. In the last couple
of years, management has been in the process of establishing a formal IT
control framework and further enhancing the internal controls surrounding
the overall IT environment. We consider Kendrion’s IT landscape and
general IT controls over financial reporting as our basis for designing audit
procedures that are appropriate for our audit. We have included general IT
controls as a key audit matter because the importance of these controls
on the group’s control environment.
How the key audit matter was addressed in the audit
We have evaluated the Group’s relevant general IT controls, including
standard processes and procedures. Our work consisted of assessing
the main characteristics of the IT infrastructure and applications and of
testing the relevant internal controls related to the infrastructure,
applications and related processes.
IT audit specialists have been deployed to assist us with testing the
group’s general IT controls.
Observation
We have shared our observations and recommendations in relation to
general IT controls with management. Although significant improvements
have been made in 2021, consistent with 2020, we were not able to rely
on the general IT controls for our audit. Alternatively, we gained the
required level of assurance from additional substantive audit procedures.
In 2022 we will verify whether the improvements make it possible to rely
upon the General IT Controls.
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Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
2. Goodwill impairment – Cash Generation Unit Kendrion Automotive Group
Description
Goodwill represents 27% of the balance sheet and 60% of total
equity. The goodwill related to the Cash Generation Unit (“CGU”)
Kendrion Automotive Group is 45% of the total goodwill.
The audit procedures carried out on the valuation of goodwill are
regarded as a key audit matter due to the relative significance of
the account as well as the challenging climate of the Kendrion
Automotive Group industry. As a result of financial performance
over the last years and the challenging climate, the relative
headroom (difference between the expected value of the future
cash flows and the carrying amount) compared to the other two
CGU’s is lower and a number of assumptions are sensitive.
Reason for us to mark the valuation of the goodwill within Kendrion
Automotive Group as a key audit matter in our audit. Within the
other CGU’s significant headroom exists.
In addition, the valuation of goodwill is susceptible to management
judgment and estimates and is based on assumptions that are
affected by future market and economic conditions.
The assumptions in relation to the expected future cash flows are
predominantly based on the approved budget for 2022. For the
period thereafter (2023-2026) the company prepared a midterm
business plan. The results of the impairment analysis are most
sensitive to:
■ Revenue growth;
■ EBITDA margin development; and
■ WACC
How the key audit matter was addressed in the audit
Based on our materiality level, the requirements in IFRS and the applicable auditing standards, we have audited the impairment
analysis in relation to the valuation of the goodwill of the Kendrion Automotive Group CGU.
Our audit procedures have mainly focused on:
■ Testing design and implementation of management’s process and control around the impairment analysis;
■ Evaluating the impairment model used by the Company and verifying the mathematical accuracy of this model;
■ Obtaining and evaluating independent market research reports and compared the general growth data to Kendrion’s
expectations;
■ Obtaining and evaluating the budget of 2022 and the midterm plan that are approved by the Supervisory Board;
■ Assessment of the key assumptions in the impairment model and discuss the results thereof with the Business Group
management, Executive Board and the Supervisory Board;
■ Assessment of the management estimate in relation to the budget of prior years based on the actual financial results
(back-testing);
■ Assessment of the methodologies, calculated WACC and the long-term growth percentage, using internal valuation
experts;
■ Reconcile the already contracted revenue to underlying source documents (like signed contracts) and evaluated the
expected pipeline;
■ The accuracy and completeness of the related disclosures in the annual report;
■ Performing sensitivity analysis based upon different scenarios with respect to the revenue growth, gross margin and WACC.
We have mainly adopted a substantive audit approach and did not rely on internal controls.
Observation
No impairment has been recognized in the annual report. Based on our procedures performed, we are of the opinion that the
anticipated growth in revenue and EBITDA development is ambitious, but in alignment with the strategic goals of Kendrion.
Not realizing the target impacts the sensitivity as further analyzed and disclosed by Kendrion as part of disclosure note [2] in
the annual report.
The WACC used by Kendrion is within the WACC range as determined by our internal valuation specialists. Based on the
procedures performed, we are of the opinion that the assumptions used by Kendrion in the calculations are acceptable at this
point in time and deem the related disclosures in the annual report sufficiently.
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Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
3. Purchase Price Allocation 3T acquisition
Description
On 21 September, Kendrion announced the acquisition of the
Dutch electronics and embedded systems developer 3T.
The total Purchase Price of 3T was EUR 23.2 million of which
EUR 14.8 million was allocated to Goodwill. Due to its significance
we have reported this as a key audit matter.
The acquisition has a number of implications for our audit. Firstly, auditing
the determination of the purchase price, and the necessary “Purchase
Price Allocation”. In addition to auditing the transaction itself, we had to
plan the nature, timing and extent of the audit of the 3T activities.
How the key audit matter was addressed in the audit
Based on the requirements of IFRS 3, we audited the recognition of the
acquisition for which we used a substantive approach. We inspected the
Share Purchase Agreement and validated that the purchase price is paid
to the seller. An important element in the “Purchase Price Allocation” is
the identification and valuation of the acquired (intangible) assets and
liabilities. We audited the identification of (intangible) assets and liabilities,
including the underlying business assumptions, based on our knowledge
of the operational activities of 3T and the reasons for the acquisition and
used internal valuation experts to validate the valuation based on general
accepted valuation models. We recalculated the amount of goodwill to be
recognized and assessed the allocation to cash-generating units. We also
validated the sufficiency of the disclosures in the annual accounts in
relation to the acquisition.
We further gained insights in the activities and business processes of 3T
to enable detailed risk analyses. The audit procedures in relation to those
risks are mainly performed on a substantive basis by the Group
engagement Team.
Observation
Based on our materiality and procedures performed, we are of the
opinion that the recognition of the acquisition of 3T is in line with the
requirements of IFRS 3 and that the acquisition is adequately disclosed
in the 2021 annual accounts.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
4. Group audit
Description
Kendrion is a global organization which operates in 9 countries and has
20 different locations in Europe, the Americas and Asia. They also
acquired companies with complementary technologies like INTORQ in
2020 and 3T in 2021. Almost all revenue and result before net finance
costs are generated outside the Netherlands.
Within this group, the consistent application of the group accounting
principles (in particular the estimates) and the complete and accurate
elimination of all intercompany related transactions is an important
element in our audit.
How the key audit matter was addressed in the audit
We have performed the following audit procedures:
■ We performed audit procedures at group level in areas such as
consolidation, reporting, accounting for the 3T acquisition, goodwill
impairment testing and taxation. Specialists were involved, amongst
others, in the areas of information technology, tax and valuation.
■ At group level, we have performed audit procedures regarding the
corporate entities and we also performed full scope audit procedures
on Kendrion (Shelby) Inc.
■ For all other relevant foreign components, the group audit team
provided detailed written instructions. Furthermore, we developed a
plan for overseeing each component audit team based on its relative
significance to the Company and certain other risk characteristics.
This included conference calls with component during all stages of
the audit whereby fraud specialists accompanied the group
engagement team at several preselected components, performing
remote file reviews, attending client meetings and reviewing
component audit team deliverables in order to gain sufficient
understanding of the work performed.
■ As part of the interaction with the components we paid specific
attention to the consistent application of the group accounting
policies.
■ As part of our audit of the consolidation, we tested the relevant
controls around the elimination of all intercompany transactions and
positions and performed detailed substantive procedures.
Observation
By performing the procedures mentioned above at group entities,
together with additional procedures at group level, we have been able to
obtain sufficient and appropriate audit evidence about the group’s
financial information to provide an opinion about the consolidated financial
statements.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Report on the other information included in the Annual Report
In addition to the financial statements and our auditor’s report thereon, The annual report contain other information that consists of:
■ Report of the Executive Board
■ Report of the Supervisory Board
■ Remuneration report
■ Other information as required by Part 9 of Book 2 of the Dutch Civil Code
■ Other information as included in the annual report
Based on the following procedures performed, we conclude that the other information:
■ Is consistent with the financial statements and does not contain material misstatements.
■ Contains the information as required by Part 9 of Book 2 of the Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained through our audit of the financial statements or otherwise,
we have considered whether the other information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the Dutch Civil Code and the Dutch Standard 720. The scope
of the procedures performed is substantially less than the scope of those performed in our audit of the financial statements.
Management is responsible for the preparation of the other information, including the Report of the Executive Board.
Report on other legal and regulatory requirements
Engagement
We were engaged by the Supervisory Board as auditor of Kendrion N.V. on April 13, 2015, as of the audit for the year 2015 and have operated as
statutory auditor ever since that financial year.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the EU Regulation on specific requirements regarding statutory audit
of public-interest
European Single Electronic Reporting Format (ESEF)
Kendrion N.V. has prepared its annual report in ESEF. The requirements for this are set out in the Commission Delegated Regulation (EU) 2019/815 with
regard to regulatory technical standards on the specification of a single electronic reporting format (hereinafter: the RTS on ESEF).
In our opinion, the annual report, prepared in XHTML format, including the partially marked-up consolidated financial statements, as included in the
reporting package by Kendrion N.V., complies in all material respects with the RTS on ESEF.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Management is responsible for preparing the annual report including the financial statements in accordance with RTS on ESEF, whereby management
combines the various components into a single reporting package.
Our responsibility is to obtain reasonable assurance for our opinion whether the annual report in this reporting package complies with the RTS on ESEF.
Our procedures, taking into account Alert 43 of the NBA (the Netherlands Institute of Chartered Accountants), included amongst others:
■ obtaining an understanding of the company’s financial reporting process, including the preparation of the reporting package;
■ obtaining the reporting package and performing validations to determine whether the reporting package containing the Inline XBRL instance and the
XBRL extension taxonomy files has been prepared in accordance with the technical specifications as included in the RTS on ESEF;
■ examining the information related to the consolidated financial statements in the reporting package to determine whether all required mark-ups have
been applied and whether these are in accordance with the RTS on ESEF.
Description of responsibilities regarding the Financial Statements
Responsibilities of management and the Supervisory Board for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with EU-IFRS and Part 9 of Book 2 of the
Dutch Civil Code. Furthermore, management is responsible for such internal control as management determines is necessary to enable the preparation
of the financial statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern.
Based on the financial reporting frameworks mentioned, management should prepare the financial statements using the going concern basis of
accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Management should disclose events and circumstances that may cast significant doubt on the Company’s ability to continue as a going concern in the
financial statements.
The Supervisory Board is responsible for overseeing the Company’s financial reporting process.
Our responsibilities for the audit of the financial statements
Our objective is to plan and perform the audit assignment in a manner that allows us to obtain sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we may not detect all material errors and fraud during our
audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of these financial statements. The materiality affects the nature, timing and extent of our
audit procedures and the evaluation of the effect of identified misstatements on our opinion.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
We have exercised professional judgement and have maintained professional skepticism throughout the audit, in accordance with Dutch Standards
on Auditing, ethical requirements and independence requirements. Our audit included among others:
■ Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error, designing and performing
audit procedures responsive to those risks, and obtaining audit evidence that is sufficient and appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion,
forgery, intentional omissions, misrepresentations, or the override of internal control.
■ Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.
■ Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
management.
■ Concluding on the appropriateness of management’s use of the going concern basis of accounting, and based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going
concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the
financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor’s report. However, future events or conditions may cause a Company to cease to continue as a going concern.
■ Evaluating the overall presentation, structure and content of the financial statements, including the disclosures.
■ Evaluating whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.
Because we are ultimately responsible for the opinion, we are also responsible for directing, supervising and performing the group audit. In this respect
we have determined the nature and extent of the audit procedures to be carried out for group entities. Decisive were the size and/or the risk profile of
the group entities or operations. On this basis, we selected group entities for which an audit or review had to be carried out on the complete set of
financial information or specific items.
We communicate with the Executive Board and the Supervisory Board regarding, among other matters, the planned scope and timing of the audit and
significant audit findings, including any significant findings in internal control that we identified during our audit. In this respect we also submit an
additional report to the audit committee in accordance with Article 11 of the EU Regulation on specific requirements regarding statutory audit of public-
interest entities. The information included in this additional report is consistent with our audit opinion in this auditor’s report.
We provide the Supervisory Board with a statement that we have complied with relevant ethical requirements regarding independence, and to
communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related
safeguards.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
From the matters communicated with the Supervisory Board, we determine the key audit matters: those matters that were of most significance in the
audit of the financial statements. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Eindhoven, February 25, 2022
Deloitte Accountants B.V. Initial for identification purposes:
B. Beemer
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statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
To the Shareholders and Supervisory Board of Kendrion N.V.
Assurance report of the independent auditor with respect to the 2021 Sustainability Information of Kendrion N.V.
Our conclusion
We have reviewed the sustainability information in the accompanying annual report for the year 2021 of Kendrion N.V. based in Amsterdam. A review is
aimed at obtaining a limited level of assurance.
Based on our review nothing has come to our attention that causes us to believe that the sustainability information does not present, in all material
respects, a reliable and adequate view of:
■ the policy and business operations with regard to corporate social responsibility; and
■ the thereto related events and achievements for the year 2021 in accordance with the reporting criteria as included in the section ‘reporting criteria’.
The sustainability information consists of performance information regarding Energy consumption and CO
2
-emission, Accidents and Lost Time Injuries,
Illness rate and Number of Supplier audits in the sections ‘Facts and Figures’ on page 10 and ‘Sustainability’ on pages 39 – 58 of the 2021 Annual
Report (hereafter: “the KPIs”).
Our limited assurance scope excludes the EU Taxonomy disclosures included in chapter ‘Sustainability’ in the 2021 Annual Report (pages 46-47).
Basis for our conclusion
We have conducted our review of the sustainability information in accordance with Dutch law, including Dutch Standard 3000A ‘Assurance
Engagements other than Audits or Reviews of Historical Financial Information’. Our responsibilities under this standard are further described in the
section ‘Our responsibilities for the review of the sustainability information’ of our report.
We are independent of Kendrion N.V. in accordance with the ‘Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten’
(ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in
The Netherlands. Furthermore we have complied with the ‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch code of ethics).
We believe that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for our conclusion.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Reporting criteria
The sustainability information needs to be read and understood together with the reporting criteria. Kendrion N.V. is solely responsible for selecting
and applying these reporting criteria, taking into account applicable law and regulations related to reporting.
The reporting criteria used for the preparation of the sustainability information are disclosed in the chapter ‘About the Sustainability Report’ of the
2021 Annual Report.
The absence of an established practice on which to draw, to evaluate and measure non-financial information allows for different, but acceptable,
measurement techniques and can affect comparability between entities and over time.
Responsibilities of the Executive Board and the Supervisory Board for the sustainability information
The Executive Board is responsible for the preparation of reliable and adequate sustainability information in accordance with the reporting criteria as
included in the section ‘reporting criteria’, including the identification of stakeholders and the definition of material matters. The choices made by the
Executive Board regarding the scope of the sustainability information and the reporting policy are summarised in the chapter ‘About the Sustainability
Report’ of the annual report.
Furthermore, the Executive Board is responsible for such internal control as it determines is necessary to enable the preparation of the sustainability
information that is free from material misstatement, whether due to fraud or error.
The Supervisory Board is responsible for overseeing the reporting process of Kendrion N.V.
Our responsibilities for the review of the sustainability information
Our responsibility is to plan and perform the review in a manner that allows us to obtain sufficient and appropriate assurance evidence for our
conclusion.
Procedures performed to obtain a limited level of assurance are aimed to determine the plausibility of information and vary in nature and timing from,
and are less in extent, than for a reasonable assurance engagement. The level of assurance obtained in review is therefore substantially less than the
assurance obtained in an audit.
We apply the ‘Nadere voorschriften kwaliteitssystemen’ (NVKS, Regulations for Quality management systems) and accordingly maintain a
comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional
standards and other relevant legal and regulatory requirements.
We have exercised professional judgement and have maintained professional scepticism throughout the review, in accordance with the Dutch Standard
3000A, ethical requirements and independence requirements.
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Our review included among others:
■ Performing an analysis of the external environment and obtaining an understanding of relevant social themes and issues, and the characteristics
of the company;
■ Evaluating the appropriateness of the reporting criteria used, their consistent application and related disclosures in the sustainability information.
This includes the evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates made by the Executive board;
■ Obtaining an understanding of the reporting processes for the sustainability information, including obtaining a general understanding of internal
control relevant to our review;
■ Identifying areas of the sustainability information with a higher risk of misleading or unbalanced information or material misstatements, whether
due to fraud or error. Designing and performing further assurance procedures aimed at determining the plausibility of the sustainability information
responsive to this risk analysis. These procedures consisted amongst others of:
– Interviewing management (and/or relevant staff) at corporate (and business/division/cluster/local) level responsible for the sustainability strategy,
policy and results;
– Interviewing relevant staff responsible for providing the information for, carrying out internal control procedures on, and consolidating the data
in the sustainability information;
– Obtaining assurance information that the sustainability information reconciles with underlying records of the company;
– Reviewing, on a limited test basis, relevant internal and external documentation;
– Performing an analytical review of the data and trends.
■ Evaluating the presentation, structure and content of the sustainability information;
■ Considering whether the sustainability information as a whole, including the disclosures, reflects the purpose of the reporting criteria used.
We communicate with the Supervisory Board regarding, among other matters, the planned scope and timing of the review and significant findings that
we identify during our review.
Eindhoven, 25 February 2022
Deloitte Accountants B.V.
B. Beemer
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statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
FIVE-YEAR SUMMARY
KENDRION N.V. CONSOLIDATED
1
2017 excluding one-off costs relating to simplifying
measures of EUR 5.1 million (after tax EUR 3.8 million),
2018 excluding one-off costs relating to simplifying
measures of EUR 8.8 million (after tax EUR 6.5 million),
EUR 0.3 million finance expenses and EUR 2.0 million tax
expenses for tax audit, 2019 excluding one-off costs
relating to simplifying measures of EUR 2.9 million (after
tax EUR 2.1 million), EUR 1,6 million claim settlement
(after tax EUR 1.2 million), EUR 1.2 million acquisition
costs (after tax 0.9 million), EUR 2.0 million positive release
from currency translation reserve, EUR 0.1 million finance
expenses and EUR 0.4 million tax expenses for tax audit,
2020 excluding one-off costs relating to simplifying
measures of EUR 3.8 million (after tax EUR 2.9 million),
EUR 0.6 million acquisition costs (after tax 0.4 million),
EUR 0.6 finance expenses for tax audit and EUR 0.2
million tax expenses relating to simplifying measures and
2021 excluding one-off costs relating to simplifying
measures of EUR 3.9 million (after tax EUR 2.8 million),
EUR 0.2 million acquisition costs (after tax 0.1 million),
EUR (0,0) finance expenses for tax audit and EUR 0.4
million tax expenses for tax audit.
2
Excluding accruals and provisions related to one-off costs.
3
Invested capital is property, plant and equipment, intangible
assets, other investments and net working capital less
goodwill and other intangibles related to acquisitions.
4
Excluding cash flows relating to acquisitions and disposals
and excluding payments and receipts relating to one-off
costs.
5
The net financing charges exclude foreign exchange
differences, the commitment fees for unused facilities, the
amortization of upfront and legal fees and the interest on
lease liabilities.
6
Restated due to retrospective correction of understated
elimination of unrealized profit on inventory transactions
between group companies as per 1 January 2020.
7
Restated due to application of IFRS 9, IFRS 15 and IFRS
16 as per 1 January 2018.
EUR million, unless otherwise stated 2021 2020 2019 2018 2017
Statement of normalized comprehensive income
1
Revenue 463.6 396.4 412.4 448.6 461.8
Organic growth 16.1% (16.7%) (8.1%) (2.9%) 4.2%
Operating result before depreciation and amortization (EBITDA) 55.8 44.6 43.8 58.5 60.0
Depreciation of property, plant, equipment and software 23.9 25.7 24.0 23.1 22.5
Operating result before amortization (EBITA) 31.9 18.9 19.8 35.4 37.5
Net profit for the period before amortization 20.6 11.7 12.6 24.3 25.7
Statement of financial position
at 31 December conform financial statements
Total assets 490.8 429.1 357.1 375.3 360.2
Total equity 223.0 203.4 202.6 182.1 179.6
Net interest-bearing debt 130.6 103.2 47.4 80.5 70.6
Working capital
2
64.9 41.4 42.9 51.4 45.1
Invested capital
2, 3
205.2 174.4 169.6 179.6 163.7
Statement of normalized cash flows
4
Net cash from operating activities 32.4 47.9 45.4 41.9 44.7
Net cash from investing activities 28.9 16.4 19.9 31.4 28.3
Free cash flow 3.5 31.5 25.5 10.5 16.4
Ratios
EBITDA margin
1
12.0% 11.3% 10.6% 13.0% 13.0%
Solvency 45.4% 47.4% 56.7% 48.5% 49.8%
Net interest-bearing debt / EBITDA
1
(debt cover) 2.3 2.3 1.1 1.4 1.2
Net interest-bearing debt / equity (gearing) 0.6 0.5 0.2 0.4 0.4
EBITDA
1
/ net finance costs (interest cover)
5
23.8 17.0 29.9 36.6 35.6
Return on Investment (ROI)
1, 2, 3
15.6% 10.8% 11.7% 19.7% 22.9%
Working capital
2
in % of revenue
1
14.0% 10.4% 10.4% 11.5% 9.8%
Dividend payout ratio of net profit
1
50% 50% 0% 52% 50%
Market capitalisation as at 31 December 314.4 247.9 312.9 283.7 542.9
Net interest-bearing debt as at 31 December 130.6 103.2 47.4 80.5 70.6
Theoretic value of the organisation (Enterprise value) 445.0 351.1 360.3 364.2 613.5
Number of employees at 31 December (FTE) 2,728 2,456 2,316 2,465 2,645
6 7
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comprehensive income
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statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Industrial
Industrial Actuators and Controls (Robert Lewin) Managing Director
Kendrion (Donaueschingen/Engelswies) GmbH, Donaueschingen, Germany Robert Lewin
Kendrion (Donaueschingen/Engelswies) GmbH, Engelswies, Germany Alfons Mattes
Kendrion (China) Co. Ltd, Suzhou, P.R. China Telly Kuo
Kendrion (Mishawaka) LLC, Mishawaka, Indiana, USA Corey Hurcomb
Kendrion Industrial (Sibiu) S.R.L., Sibiu, Romania Mihai Petculescu
Kendrion (Linz) GmbH, Linz, Austria Christian Edelmaier
Kendrion Kuhnke Automation GmbH, Malente, Germany Robert Lewin
Kendrion Kuhnke (Sweden) AB, Kristianstad, Sweden Ronnie Jennerheim
3T B.V., Enschede, the Netherlands Richard Mijnheer/Norbert Beltman
Industrial Brakes (Andreas Laschet) Managing Director
Kendrion (Villingen) GmbH, Villingen-Schwenningen, Germany Ralf Wieland
Kendrion (UK) Ltd., Bradford, United Kingdom Peter McShane
Kendrion (China) Co. Ltd, Suzhou, P.R. China Telly Kuo
Kendrion (Mishawaka) LLC, Mishawaka, Indiana, USA Corey Hurcomb
Kendrion INTORQ GmbH, Aerzen, Germany Lars Knoke
INTORQ (Shanghai) Co. Ltd, Shanghai, China Telly Kuo
INTORQ US Inc., Atlanta, US Olaf Detlef
INTORQ India Private Limited, Pune, India Aniket Gujrathi
Automotive (Ralf Wieland / Manfred Schlett) Managing Director
Kendrion (Villingen) GmbH, Villingen-Schwenningen, Germany Ralf Wieland
Kendrion Kuhnke Automotive GmbH, Malente, Germany Olaf Klinghagen
Kendrion (Markdorf) GmbH, Markdorf, Germany Manfred Schlett
Kendrion (Eibiswald) GmbH, Eibiswald, Austria Klaus Pichler
Kendrion Automotive (Sibiu) S.R.L, Sibiu, Romania Andra Boboc
Kendrion (Prostějov) s.r.o, Prostějov, Czech Republic Tomas Soldan
Kendrion (Shelby) Inc., Shelby, North Carolina, USA Rhett Cathcart
Kendrion (China) Co. Ltd, Suzhou, P.R. China Telly Kuo
Kendrion N.V. has, directly or indirectly, a 100% interest in all subsidiaries.
PRINCIPAL SUBSIDIARIES
At 31 December 2021
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comprehensive income
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statement of
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statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
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sheet
Company
income
statement
Blasio Grundstückverwaltungsgesellschaft mbh & Co Vermietungs KG, Mainz, Germany
Combattant Holding B.V., De Bilt, the Netherlands
INTORQ Beteiligungs GmbH, Aerzen, Germany
Kendrion FAS Controls Holding GmbH, Villingen-Schwenningen, Germany
Kendrion Finance B.V., Zeist, the Netherlands
Kendrion Holding Germany GmbH, Markdorf, Germany
Kendrion Holding USA Inc., Indianapolis, USA
Kendrion IP Management GmbH, Malente, Germany
Kendrion Kuhnke GmbH, Malente, Germany
Kendrion Marketing B.V., Zeist, the Netherlands
Kendrion (Pune) Private Limited, Maharashtra, India
Kendrion (Switzerland) AG, Hausen am Albis, Switzerland
Kendrion Toluca, SA de CV, Mexicaltzingo, Mexico
Landfort I B.V., Zeist, the Netherlands
Landfort II B.V., Zeist, the Netherlands
Ochrea Grundstücksverwaltungsgesellschaft mbh & Co Vermietungs KG, Mainz, Germany
Twente Technology Solutions B.V., Enschede, the Netherlands
Kendrion N.V. has, directly or indirectly, a 100% interest in all subsidiaries.
OTHER HOLDING AND DORMANT ENTITIES
At 31 December 2021
Annual Integrated Report 2021
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Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
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Consolidated
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of cash flows
Notes to the
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Notes to the
company financial
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Company
balance
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Company
income
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ABOUT THE SUSTAINABILITY REPORT
The scope of Kendrion’s sustainability or non-financial reporting
is based on the information requirements of our key stakeholder
groups.
In order to ensure that Kendrion meets its information
requirements towards its stakeholders, Kendrion performs a
materiality analysis at regular intervals. In furtherance of the
materiality analysis carried out in 2018, Kendrion commissioned
and completed the performance of a subsequent materiality
assessment in 2020. Together with a specialised consultancy
firm, a tailored approach was developed to assess materiality
and the results of the internal and external stakeholder
consultation. The outcome of the 2018 and 2020 materiality
analysis both formed an important input for Kendrion’s
sustainability program and the 2019-2023 target framework as
well as the further development and execution thereof. In
support of the development of a sustainability target framework
for the period beyond 2023, a new materiality assessment will
be prepared. Kendrion selected relevant material themes and
topics derived from Kendrion’s strategic plan, its activities and
applicable laws and regulations. For a description of our
materiality analysis, please refer to pages 41-42 of this Annual
Integrated Report.
Kendrion makes use of the Global Reporting Initiative (GRI)
reference claims for most of the general information and
material topics, including: economic performance, anti-
corruption, energy efficiency, emissions to air, occupational
safety and health and non-discrimination and equal
opportunities. This Annual Integrated Report references
Disclosure 201-1 (a) from GRI 201: Economic performance
2016, Disclosure 205-3 from GRI 205: Anti-corruption 2016,
Disclosure 302-1 (a, c, e-g) from GRI 302: Energy 2016,
Disclosure 305-1 (a, d, f-g) from GRI 305: Emissions 2016,
Disclosure 305-2 (a, d, f-g) from GRI 305: Emissions 2016,
Disclosure 403-9 (a, d-g) from GRI 403: Occupational Health
and Safety 2018, Disclosure 405-1 (a-i, b-i) from GRI 405:
Diversity and Equal Opportunities 2016. For the material
themes ‘responsible procurement practices’ and ‘training and
education’, Kendrion has developed its own indicators,
Kendrion’s non-financial reporting includes only data from
entities that are – directly or indirectly – wholly owned by
Kendrion N.V., unless explicitly stated otherwise. Acquisitions
are reported as from the effective date ownership is acquired.
Being transparent and accountable is fundamental to the way
in which Kendrion operates. Kendrion adheres to a solid
validation and reporting process supported by an appropriate
control framework in order to safeguard the quality and
accuracy of data collected. With a view to maintain the quality
and consistency of the data reported, the reporting process
and applicable definitions relevant to all non-financial data
collected and subsequently consolidated, are recorded in an
internal reporting manual which is regularly reviewed and
evaluated. Internal control procedures safeguarding the quality
and accuracy of non-financial data collected are part of
Kendrion’s Risk Management Framework. Compliance with the
internal reporting manual and the internal control procedures
are reviewed by the Global Internal Audit and Risk Manager.
The sustainability figures and data presented in this Annual
Integrated Report are not always fully comparable with those of
other companies. This may be caused by differences in targets
and definitions applied and the nature and spread of Kendrion’s
activities making comparison with other industrial companies
difficult. Information used was collected from the existing
management and reporting systems. Any estimates or
forecasts included are explicitly referred to as such.
No significant changes with regard to our own operation
locations and/or suppliers have taken place in 2021.
The non-financial information reported faithfully represents the
outcome of systematic data collection and review.
The reported numbers for energy consumption, absolute and
relative & CO
2
emissions, accidents, lost time injury, illness,
supply chain management as described in the section
‘Sustainability’ on pages 40-58, have been subjected to a
review by the external auditor Deloitte Accountants B.V.
The auditor’s report with limited assurance on selected targets
is included on pages 200-202.
For the reported numbers associated with relative energy
consumption, relative CO
2
emission, accidents per 1,000 FTE,
Lost Time Injuries (LTI) and illness rate, Kendrion used the GRI
Standards Specific Disclosures 302-1, 305-1, 305-2 and 403-2
respectively as described in the GRI referenced claim
mentioned above. We report on the same indicators as in
previous years and there are no material restatements on the
information accordingly presented in previous years.
Definitions, reporting period and scope
Energy consumption and CO
2
emission
The information on energy consumption is based on the
consumption of Kendrion’s production facilities (electricity,
natural gas, fuel oil) in Germany, the Czech Republic, Austria,
the USA, China, India and Romania. For greenhouse gas
emissions, Kendrion applies the same reporting scope as for
energy consumption, only operational control. In our
calculations we only included CO
2
emissions, other emissions
like CH4, N2O, HFCs, PFCs, SF6 and NF3 are not material for
us and therefore not included. Internal and external transport
under Kendrion’s control is limited, therefore transport
emissions are excluded.
Annual Integrated Report 2021
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Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
The relative energy consumption and CO
2
emissions are based
on the added value of the relevant production facilities. The
added value is the revenue plus other income, minus the
changes in inventory and work in progress and minus raw
materials and subcontracted work.
The absolute and relative energy consumption and CO
2
emissions are reported for a 12-month period from 1 January
2021 up to and including 31 December 2021. Until 2021, the
absolute and relative energy consumption and CO
2
emissions
were reported for the period from 1 December up to and
including 30 November of the following year. Because
of the change in reporting period comparative
absolute and relative energy consumption and CO
2
emission
figures for 2020 have been restated according to an identical
timeframe of 1 January 2020 up to and including 31 December
2020.
Calculation of the CO
2
emissions is based on the following
conversion factors:
Electricity generated from renewable sources: 0
Electricity generated from non-renewable sources (average):
0.416 kg/kWh (2020: 0.443 kg/kWh)
Renewable gas for plants with carbon neutral contracts: 0
Natural gas for other plants (average): 0.105] kg/kWh (2020:
0.145 kg/kWh)
Fuel oil (average): 0.204 kg/kWh (2020: 0.267 kg/kWh)
Accidents and LTI
Kendrion reports the total number of work-related accidents
during working time or on the way to or from work for its own
employees. Only the accidents that the group entity had to
report to an external institution, and which caused an absence
of more than three calendar days (not including the day of the
accident) are reported. This definition is based on regulations
applicable in Germany. Before 2021, Kendrion also included
accidents during working time or on the way to or from work
for independent contractors under supervision of Kendrion in
the reported figures. These have been removed from the
reported figure because eligibility for reporting based on the
absence of more than three calendar days (not including the
day of the accident) cannot be determined based on
information available to Kendrion.
In addition, Kendrion reports the absence resulting from work-
related accidents. The Lost Time Injury (LTI) is time (‘scheduled
working days’) that could not be worked (and is thus ‘lost’) as a
consequence of an employee being unable to perform the
usual work due to an occupational accident (‘at work accident’
as well as ‘way-to-work accident’) or disease. Before 2021
several locations did not record LTI if there is no longer a wage
continuation obligation for the employer pursuant to local
regulation. Since 2021 Kendrion aligned the LTI reporting
across all locations so the reported figure is not influenced by
whether the salaries or wages were paid by Kendrion or by an
external institution during that time.
A return to limited duty or alternative work for the same
organisation does not count as ‘lost days’. Counting of ‘lost
days’ begins with the first scheduled working day of full
absence (e.g. the day after the accident). A lost day counts as
one full day regardless of whether the employee has a part-time
or a full-time contract. Kendrion does not specify LTI data per
region, worker type or gender as Kendrion considers this
information not relevant to its current operations.
Illness rate
The reported illness rate is based on the total illness hours. The
locations in Shelby and Atlanta report 0% illness on a yearly
basis since no registration of illness takes place. However,
because of specific COVID-19 regulations in the USA during
2021, COVID-19 related illness hours have been registered in
Shelby during 2021. These hours have been included in the
illness rate calculation. The illness rate is calculated by
combining the total illness hours with and without wage
continuation and divide the result by the total timetable hours.
Supplier audits
As mentioned above, for reporting on the number of supplier
audits (i.e. ‘responsible procurement practices’) Kendrion
makes use of its own indicator. The supplier audits are internal
audits by Kendrion employees based on an internal procedure
that prescribes the collection of CR documentation (e.g. Code
of Conduct, ABC Policy, Whistle-blower procedure) of the
relevant supplier in the case the supplier is ISO certified and the
use of standardized self-assessment questionnaires in the case
the supplier is not ISO certified.
Kendrion has not selected underlying performance indicators or
GRI indicators for the following topics: ‘non-discrimination and
equal opportunities’, ‘market presence’, ‘responsible material
consumption’, ‘environmental & energy management’, ‘human
rights’, ‘effluents and waste management’, ‘customer privacy
and data security’, ‘anti-competitive behaviour’, ‘biodiversity’,
‘responsible local citizenship’, ‘innovation’, ‘customer
relationship and satisfaction’, ‘remuneration policy’ and
‘business ethics’. Following further engagement with Kendrion’s
stakeholders in the course of 2022, Kendrion will consider to
what extent these material themes continue to be relevant to
stakeholders and whether indicators on these topics should be
developed.
Annual Integrated Report 2021
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ABOUT THE SUSTAINABILITY REPORT
Home
Consolidated
statement of
financial position
Consolidated statement
of profit and loss and other
comprehensive income
Consolidated
statement of
changes in equity
Consolidated
statement
of cash flows
Notes to the
consolidated financial
statements
Notes to the
company financial
statements
Company
balance
sheet
Company
income
statement
Contact information
Any questions or comments about this Annual Integrated Report
or Kendrion’s activities can be raised with:
Mrs. Cleo Ferreira
Vesta Building 5
th
floor
Herikerbergweg 213
1101CN Amsterdam, Netherlands
Phone: + 31 85 073 15 00
Email: ir@kendrion.com
www.kendrion.com
Kendrion N.V.
Euronext code 0000383511
ISIN code 0000383511
Chamber of Commerce 30113646