Tue February 7 02:50 pm 2023 in category Stock exchange releases
New share-based long-term incentive plan for the management and selected key employees of Nokian Tyres plc, payments for plans that ended in 2022 and adjustment of financial criteria
Nokian Tyres plc Stock Exchange Release February 7, 2023, at 2:50 p.m. EET
The Board of Directors of Nokian Tyres plc has decided to establish a new share-based incentive plan for the group’s key employees. The aim is to align the objectives of the company’s shareholders and key employees for increasing the value of the company in the long-term, to retain the key employees at the company and to offer them a competitive incentive scheme that is based on earning and accumulating shares.
The Performance Share Plan 2023–2027 consists of three performance periods covering the financial years 2023–2024, 2024–2025 and 2025–2027. The Board will decide annually on the commencement and details of the performance periods.
In the plan, the target group is given an opportunity to earn Nokian Tyres plc shares based on the achievement of the targets set for the performance periods. Potential rewards of the plan will be paid by the end of April 2026, 2027, and 2028 respectively. The rewards will be paid partly in Nokian Tyres plc shares and partly in cash. The cash proportion of the reward is intended for covering taxes and tax-related expenses arising from the rewards to the participants. In general, no reward will be paid if the participant’s employment or director contract terminates before the reward payment.
The rewards from the performance period 2023–2024 are based on cumulative EBITDA, increase in passenger car tire production volume and reduction in direct CO2 emissions.
The President and CEO of the company and members of the Management Team are obliged to hold 50 per cent of the received net shares until the value of the participant’s total shareholding in the company corresponds to the participant’s annual gross salary. The shareholding amount must be maintained as long as the membership in the Management Team or the position as a President and CEO continues.
The value of the gross rewards to be paid from the performance period 2023–2024 will correspond to an approximate maximum total of 1,400,000 Nokian Tyres plc shares, including the cash proportion. Approximately 150 persons, including the President and CEO of the company and other Management Team members, belong to the target group of the performance period.
Restricted Share Plan 2023
The Board of Directors of Nokian Tyres plc has decided to continue the Restricted Share Plan, using the same structure as previous years. The purpose of the Restricted Share Plan is to serve as a complementary long-term incentive tool, used selectively for retention of Nokian Tyres key employees. It consists of annually commencing individual Restricted Share Plans, each with a three-year retention period after which the share rewards granted within the plan will be paid to the participants in shares of Nokian Tyres plc and partly in cash.
The commencement of each individual plan is subject to a separate approval by the Board of Directors.
A precondition for the payment of the share reward based on the Restricted Share Plan is that the employment relationship of a participant with Nokian Tyres continues until the payment date of the reward. In addition to this precondition, a financial performance criteria is applied to Nokian Tyres Management Team. The criteria is a threshold value for segments Return on Capital Employed (ROCE), which must be exceeded for a potential payment of a share reward based on the Restricted Share Plan 2023–2025.
The next plan (RSP 2023–2025) within the Restricted Share Plan structure commences effective as of the beginning of 2023 and the potential share reward thereunder will be paid in the first half of 2026. The possible rewards paid based on RSP 2023–2025 correspond approximately to a maximum of 120,000 gross shares.
Adjustment of financial criteria for Restricted Share Plans 2020–2022, 2021–2023 and 2022–2024
In addition to the employment precondition for the payment of the share reward based on the Restricted Share Plan, a financial performance criteria was set in Restricted Share Plans 2020–2022, 2021–2023 and 2022–2024 to Nokian Tyres Management Team, incl. the President and CEO. The criteria is a threshold value, which must be exceeded for any payment of a share reward based on the Restricted Share Plan.
In February 2023, the Board of Director decided to modify the financial performance criteria. The change was necessary to reflect the radical effects on business conditions, caused by the war in Ukraine. It was decided that the threshold criteria are changed and measured against a pre-set average threshold value for segments ROCE (during the financial years during the corresponding restriction period). The previous financial threshold criteria was set for an average value for ROCE (according to IFRS), during the restriction period in question.
A threshold value tied to average segments ROCE is be applied to Restricted Share Plans 2020–2022, 2021–2023, 2022–2024, as well as for the Restricted Share plan commencing in 2023, with a restriction period between 2023–2025.
Payments for share-based plans that ended in 2022
The Board of Directors of Nokian Tyres plc has approved payments of share awards from the Performance and Restricted share plans 2020–2022.
Performance Share Plan 2020–2022
The performance measure for the Performance Share Plan 2020–2022 was based on segments Earnings Per Share (EPS) and segments Return on Capital Employed (ROCE), both with an equal weight of 50%. The achievement for the segments Earnings Per Share (EPS) target was 50.0% and for the segments Return on Capital Employed (ROCE) target was 145.0%. The combined achievement of the set targets was thereby 97.5%. The rewards to be paid correspond to a total of approximately 158,500 Nokian Tyres plc gross shares. The rewards will be paid by the end of March 2023. Approximately 125 key employees participate in the Performance Share Plan 2020-2022, including members of the Management Team.
Restricted Share Plan 2020–2022
The three-year restriction period of the Restricted Share Plan 2020–2022 ended after financial year 2022. 67 key employees participate in the share-based incentive plan, including the President and CEO and members of the Management Team. The financial threshold value for segments Return on Capital Employed (ROCE) applied for the President and CEO and the Management Team members was achieved. The rewards to be paid correspond to a total of 71,550 Nokian Tyres plc gross shares. The rewards will be paid by the end of March 2023. A precondition for the payment of the share reward based on the Restricted Share Plan is that the employment relationship of a participant with Nokian Tyres continues until the payment date of the reward.
The total number of shares of the Company will not change due to payments for share-based plans that ended in 2022.
The Board of Directors anticipates that no new shares will be issued based on the share-based incentive schemes and that the schemes will, therefore, have no dilutive effect on the registered number of the Company's shares.
Further information: Päivi Leskinen, SVP, Human Resources, tel. +358 10 401 7776