Accounting policy

Solvay has set up compensation plans, including equity-settled and cash-settled share-based compensation plans.

In its equity-settled plans, the Group receives services as consideration for its own equity instruments (namely through the issuance of share options). The fair value of services rendered by employees in consideration of the granting of equity instruments represents an expense. This expense is recognized on a straight-line basis in the consolidated income statement over the vesting periods relating to these equity instruments with the recognition of a corresponding adjustment in equity. The fair value of services rendered is measured based on the fair value of the equity instruments on the grant date. It is not subsequently remeasured. At each reporting date, the Group re-estimates the number of share options likely to vest. The impact of the revised estimates is recognized in profit or loss against a corresponding adjustment in equity.

In its cash-settled plans, the Group acquires services by incurring a liability to transfer to its employees rendering those services amounts that are based on the price (or value) of equity instruments (including shares or share options) of the Group. The fair value of services rendered by employees in consideration of the granting of share-based payments represents an expense. This expense is recognized on a straight-line basis in the consolidated income statement over the vesting periods relating to these share-based payments with the recognition of a corresponding adjustment in liabilities. At each reporting date, the Group re-estimates the number of options likely to vest, with the impact of the revised estimates recognized in profit or loss. The Group measures the services acquired and the liability incurred at the fair value of the liability. Until the liability is settled, the Group remeasures the fair value of the liability at the end of each reporting period and at the date of settlement, with any changes in fair value recognized in profit or loss for the period.

Stock Option Plan

In 2016, as in every year since 1999, the Board of Directors renewed the share option plan offered to executive staff (about 70 persons) with a view to involving them more closely in the long-term development of the Group. The plan is an equity-settled share-based plan. The majority of the managers involved subscribed the options offered them in 2016 at an adjusted exercise price of € 75.98, representing the average stock market price of the share in the 30 days prior to the offer. The three-year vesting period is followed by a five-year exercise period, at the end of which any unexercised options expire. The settlement method is in equity.

In 2015, to compensate the dilution impact of the capital increase, an adjustment (based on the Euronext ratio of 0.93984) was made for each plan on the spot reference, on the exercise price, and on the number of options. Such is reflected in the tables below and did not impact the Group’s profit or loss.

At the end of December 2016, the Group held 2,650,810 treasury shares, which have been deducted from consolidated shareholders’ equity. At the end of 2015, the Group held 2,105,905 treasury shares. Treasury shares are intended to cover the share options offered to Group executives.

Share options

 

2016

 

2015

 

2014

 

2013

 

2012

 

2011

 

2010

 

2009

 

2008

 

2007

 

2006

 

2005

Number of share options granted and still outstanding at December 31, 2015

 

 

 

349,108

 

380,151

 

427,943

 

823,488

 

152,739

 

141,939

 

151,686

 

69,757

 

88,771

 

95,761

 

71,927

Granted share options

 

759,023

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Forfeitures of rights and expiries

 

 

 

(2,491)

 

 

 

 

 

(11,192)

 

(1,000)

 

(1,500)

 

(1,064)

 

 

 

(2,660)

 

 

 

 

Share options exercised

 

 

 

 

 

 

 

 

 

(70,971)

 

(12,254)

 

(6,925)

 

(16,290)

 

(69,757)

 

 

 

 

 

(3,405)

Number of share options at December 31, 2016

 

759,023

 

346,617

 

380,151

 

427,943

 

741,325

 

139,485

 

133,514

 

134,332

 

0

 

86,111

 

95,761

 

68,522

Share options exercisable at December 31, 2016

 

0

 

0

 

0

 

0

 

741,325

 

139,485

 

133,514

 

134,332

 

0

 

86,111

 

95,761

 

68,522

Exercise price (in €)

 

75.98

 

114.51

 

101.14

 

104.33

 

83.37

 

61.76

 

71.89

 

67.99

 

55.27

 

90.97

 

102.53

 

91.45

Fair value of options at measurement date (in €)

 

17.07

 

24.52

 

22.79

 

20.04

 

21.17

 

12.73

 

14.64

 

18.66

 

14.05

 

17.56

 

19.92

 

10.77

 

 

2016

 

2015

 

Number of share options

 

Weighted average exercise price

 

Number of share options

 

Weighted average exercise price

At January 1

 

2,753,270

 

96.45

 

2,889,689

 

89.65

Granted during the year

 

759,023

 

75.98

 

493,894

 

106.54

Forfeitures of rights and expiries during the year

 

(19,907)

 

85.51

 

(66,273)

 

94.52

Exercised during the year

 

(179,602)

 

69.30

 

(564,040)

 

70.65

At December 31

 

3,312,784

 

93.30

 

2,753,270

 

96.45

Exercisable at December 31

 

1,399,050

 

 

 

772,580

 

 

The share options resulted in a charge in 2016 of € 10 million calculated by third parties according to the Black-Scholes model and recognized in the consolidated income statement under commercial and administrative costs.

The value of the option is based on:

  • the price of the underlying asset (Solvay share): € 80.75 at February 24, 2016;
  • the time outstanding until the option maturity: exercisable from January 1, 2020 until February 24, 2024, taking into account the fact that some of them will be exercised before the option maturity;
  • the option exercise price: € 75.98;
  • the risk-free return: 0.27% (on average);
  • the volatility of the underlying yield, inferred from the option price: 30.90%; and
  • a dividend yield of 2.5%.

Weighted average remaining contractual life:

In years

 

2016

 

2015

Share option plan 2005

 

2.0

 

3.0

Share option plan 2006

 

3.0

 

4.0

Share option plan 2007

 

4.0

 

5.0

Share option plan 2008

 

0.0

 

1.0

Share option plan 2009

 

0.9

 

1.9

Share option plan 2010

 

2.0

 

3.0

Share option plan 2011

 

3.0

 

4.0

Share option plan 2012

 

3.1

 

4.1

Share option plan 2013

 

4.2

 

5.2

Share option plan 2014

 

5.2

 

6.2

Share option plan 2015

 

6.2

 

7.2

Share option plan 2016

 

7.2

 

 

Performance Share Units Plan (PSU)

Since 2013, the Board of Directors renewed a yearly Performance Share Unit Plan, offered to executive staff with the objective of involving them more closely in the development of the Group, making this part of the long-term incentive policy. All the managers involved subscribed the PSU offered them in 2016 at an adjusted grant price of € 77.91. The Performance Share Units Plan is a cash-settled share-based plan through which beneficiaries will obtain cash benefit based upon the Solvay share price, as well performance conditions.

Each plan has a three-year vesting period, after which a cash settlement will take place, if vesting conditions are met.

Download

Performance share units

 

Plan 2016

 

Plan 2015

Number of PSU

 

348,990

 

184,352

Grant date

 

02/24/2016

 

03/25/2015

Acquisition date

 

01/01/2019

 

01/01/2018

Vesting period

 

03/31/2016 to 12/31/2018

 

03/31/2015 to 12/31/2017

Performance conditions

 

50% of the initial granted PSU are subject to the Underlying EBITDA YoY growth % over 3 years (2016, 2017, 2018)

 

50% of the initial granted PSU are subject to the Underlying EBITDA YoY growth % over 3 years (2015, 2016, 2017)

 

50% of the initial granted PSU are subject to the YoY CFROI % variation over 3 years (2016, 2017, 2018)

 

50% of the initial granted PSU are subject to the YoY CFROI % variation over 3 years (2015, 2016, 2017)

Validation of performance conditions

 

By the board of Directors

 

By the board of Directors

In 2016 the impact of PSU on the consolidated income statement amounted to € 32 million, as against € 18 million in 2015.