32Share participation plans
Share-based payments charged to personnel expenses
|
millions of CHF |
|
2022 |
|
2021 |
|
Restricted share unit plan |
|
1.6 |
|
1.3 |
|
Performance share plan continuing operations |
|
13.8 |
|
19.5 |
|
Performance share plan discontinued operations |
|
- |
|
1.1 |
|
Total charged to personnel expenses |
|
15.4 |
|
21.9 |
Restricted share unit plan settled in Sulzer shares
This long-term incentive plan covers the Board of Directors. Restricted share units (RSU) are granted annually. Awards to members of the Board of Directors automatically vest with the departure from the Board. The plan features graded vesting over a three-year period. One RSU award is settled with one Sulzer share at the end of the vesting period. The fair value of the RSU granted is measured at the grant date closing share price of Sulzer Ltd, and discounted over the vesting period using a discount rate that is based on the yield of Swiss government bonds for the duration of the vesting period. Participants are not entitled to dividends declared during the vesting period. Consequently, the grant date fair value of the RSU is reduced by the present value of the dividends expected to be paid during the vesting period.
Given the spin-off of the Applicator Systems division in 2021, the group neutralized the consequences from the demerger for the restricted share plans. The number of originally granted RSU was recalculated to neutralize the effect of the spin-off on the share price, resulting in the same fair value before and after the spin-off and did not impact the share-based payments expense.
Restricted share units
|
Grant year |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Total |
|
Outstanding as of January 1, 2021 |
|
– |
|
– |
|
17’715 |
|
7’034 |
|
2’761 |
|
27’510 |
|
Granted |
|
– |
|
10’866 |
|
– |
|
– |
|
– |
|
10’866 |
|
APS division spin-off |
|
– |
|
5’766 |
|
4’910 |
|
1’415 |
|
– |
|
12’091 |
|
Exercised |
|
– |
|
– |
|
–8’461 |
|
–4’371 |
|
–2’761 |
|
–15’593 |
|
Outstanding as of December 31, 2021 |
|
– |
|
16’632 |
|
14’164 |
|
4’078 |
|
– |
|
34’874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of January 1, 2022 |
|
– |
|
16’632 |
|
14’164 |
|
4’078 |
|
– |
|
34’874 |
|
Granted |
|
11’637 |
|
– |
|
– |
|
– |
|
– |
|
11’637 |
|
Exercised |
|
– |
|
–10’344 |
|
–10’994 |
|
–4’078 |
|
– |
|
–25’416 |
|
Outstanding as of December 31, 2022 |
|
11’637 |
|
6’288 |
|
3’170 |
|
– |
|
– |
|
21’095 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average fair value at grant date in CHF |
|
77.82 |
|
106.32 |
|
65.22 |
|
97.76 |
|
118.20 |
|
|
Performance share plan settled in Sulzer shares
This long-term incentive plan covers the members of the Executive Committee and the members of the Sulzer Management Group. Performance share units (PSU) are granted annually, depending on the organizational position of the employee.
Vesting of the PSUs is subject to continuous employment and to the achievement of performance conditions over the performance period. Participants are not entitled to dividends declared during the vesting period. Vesting of the performance share plans (PSP) is based on three performance conditions: operational income before restructuring, amortization, impairments and non-operational items (operational profit) in the last year of the performance period (weighted 25%), average operational return on capital employed (operational ROCEA) (weighted 25%), and Sulzer’s total return to shareholders (TSR), compared to a selected group of peer companies (weighted 50%).
TSR is measured with a starting value of the volume-weighted average share price (VWAP) over the last three months prior to the first year, and an ending value of the VWAP over the last three months of the vesting period. The rank of Sulzer’s TSR at the end of the performance period determines the effective number of total shares. The exercise price of the PSUs is zero.
Given the spin-off of the Applicator Systems division, the group neutralized the consequences from the demerger for the PSP. The number of originally granted PSUs was recalculated to neutralize the effect of the spin-off on share price, resulting in the same fair value before and after the spin-off. The target values of the Applicator Systems business for the PSP 2019, PSP 2020 and PSP 2021, as derived from their respective three-year financial plans, are deducted for the Sulzer group. As a result, the target values for the group comprise only what remain as continuing businesses within the group. Furthermore, for each non-market performance condition (i.e., operational profit and operational ROCEA) of PSP 2019, PSP 2020 and PSP 2021, the performance curve depicting the gradient formed from the threshold and cap performance level remains unchanged.
The following inputs were used to determine the fair value of the PSUs at grant date using a Monte Carlo simulation:
|
Grant year |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Fair value at grant date |
|
84.69 |
|
124.95 |
|
78.18 |
|
115.95 |
|
143.62 |
|
Share price at grant date |
|
76.35 |
|
101.12 |
|
76.05 |
|
92.46 |
|
120.60 |
|
Expected volatility |
|
35.59% |
|
34.68% |
|
37.45% |
|
29.64% |
|
29.12% |
|
Risk-free interest rate |
|
0.39% |
|
–0.58% |
|
–0.64% |
|
–0.57% |
|
–0.42% |
The expected volatility of the Sulzer share and the peer group companies is determined by the historical volatility. The zero-yield curves of those countries in which the companies and indices are listed were used as the relevant risk-free rates. Historical data was used to arrive at an estimate for the correlation between Sulzer and the peer companies. For the TSR calculation, all dividends paid during the vesting period are added to the closing share price.
Performance share units – terms of awards
|
Grant year |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Number of awards granted |
|
97’930 |
|
90’527 |
|
151’422 |
|
112’857 |
|
74’467 |
|
Grant date |
|
April 1, 2022 |
|
April 1, 2021 |
|
June 1, 2020 |
|
April 1, 2019 |
|
July 1, 2018 |
|
Performance period for cumulative operational profit |
|
01/22–12/24 |
|
01/21–12/23 |
|
01/20–12/22 |
|
01/19–12/21 |
|
01/18–12/20 |
|
Performance period for TSR |
|
01/22–12/24 |
|
01/21–12/23 |
|
01/20–12/22 |
|
01/19–12/21 |
|
01/18–12/20 |
|
Fair value at grant date in CHF |
|
84.69 |
|
124.95 |
|
78.18 |
|
115.95 |
|
143.62 |
Performance share units
|
Grant year |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
|
Total |
|
Outstanding as of January 1, 2021 |
|
– |
|
– |
|
146’859 |
|
101’764 |
|
63’257 |
|
311’880 |
|
Granted |
|
– |
|
90’527 |
|
– |
|
– |
|
– |
|
90’527 |
|
APS division spin-off |
|
– |
|
44’801 |
|
74’680 |
|
53’141 |
|
– |
|
172’622 |
|
Exercised |
|
– |
|
–553 |
|
–3’829 |
|
–2’088 |
|
–63’257 |
|
–69’727 |
|
Forfeited |
|
– |
|
–7’284 |
|
–7’516 |
|
–1’008 |
|
– |
|
–15’808 |
|
Outstanding as of December 31, 2021 |
|
– |
|
127’491 |
|
210’194 |
|
151’809 |
|
– |
|
489’494 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of January 1, 2022 |
|
– |
|
127’491 |
|
210’194 |
|
151’809 |
|
– |
|
489’494 |
|
Granted |
|
97’930 |
|
– |
|
– |
|
– |
|
– |
|
97’930 |
|
Exercised |
|
–998 |
|
–3’788 |
|
–6’202 |
|
–151’809 |
|
– |
|
–162’797 |
|
Forfeited |
|
–2’746 |
|
–6’634 |
|
–4’828 |
|
– |
|
– |
|
–14’208 |
|
Outstanding as of December 31, 2022 |
|
94’186 |
|
117’069 |
|
199’164 |
|
– |
|
– |
|
410’419 |