Study results Short version

Transcription

1 Working capital "Cash for recovery" Study results Short version Stuttgart and Munich, May 2009

2 Contents Summary Given the current credit squeeze, the risk of insolvency has increased In Europe, cash potential increased against previous year about 32% (Q1) A. Introduction Working capital is becoming increasingly important as a source of finance, especially in the current economic situation B. Study design Tried and tested analysis with 216 companies from all key industry sectors C. Overall result Total cash potential of EUR 353 bn identified, potential up since 2004, massive increase in Q D. Identification of individual potential Quick check approach and Cash Navigator help identify the cash potential at company level E Contact Your contacts at Roland Berger Strategy Consultants 2009 Roland Berger Strategy Consultants GmbH 2

3 Summary Given the current credit squeeze, the risk of insolvency has increased In Europe, cash potential ti increased against previous year about 32% (Q1) 3

4 Given the current credit squeeze, the risk of insolvency has increased Idle cash potential of EUR 353 bn in working capital Summary of findings (1/2) > In the current overall economic situation, there is an increased risk of insolvency increased cash requirements but reduced cash supply and high financing costs > Out of the possible financing sources, only a few are suitable one of the main levers is to free up cash potential in working capital > The study covers 216 European companies EUR 3,700 bn in sales, EUR 422 bn in EBIT or 30% of the GDP of the EU 25 > The potential of the 216 companies considered totals EUR 353 bn in Q another enormous increase of 32% compared to 2008 > Relative to tied-up working capital, energy utilities and engineered products show the greatest scope for releasing cash potential > All three working capital components (customer receivables, supplier payables and inventories) i offer cash potential ti Source: Roland Berger 4

5 Given the current credit squeeze, the risk of insolvency has increased Idle cash potential of EUR 353 bn in working capital Summary of findings (2/2) > Overall cash potential has increased considerably since 2004 In Q there is another large increase in all components > Net working capital days are highest in aerospace and lowest in telecommunications > Mining and automotive OEMs are ahead in receivables management telecommunications and construction are ahead in supplier payables and inventory > Quick check approach and Cash Navigator help identify the cash potential at company level > To ensure the sustainability of working capital projects, a range of success factors should be taken into account Source: Roland Berger 5

6 A. Introduction Working capital is becoming increasingly important t as a source of finance, especially in the current economic situation 6

7 Currently an increased insolvency risk Increased cash demand but reduced cash supply with high financing costs Cash situation in current economic crisis INCREASED CASH DEMAND > Customers want longer payment terms > Suppliers want shorter payment terms (in some cases even advance payment) > Increased levels of write-offs > Attractive investment opportunities REDUCED CASH SUPPLY Low cash and high credit costs result in liquidity constraints and greater risk of insolvency > Reduced revenue and cash inflow insolvency > Restrictive credit offering by banks Reduced credit volumes Increased credit cost > Access to equity is more difficult Source: Roland Berger 7

8 B. Study design Tried and tested analysis of 216 companies from all key industry sectors 8

9 This study follows our well-established previous studies "Cash for Growth" and "Working Capital Excellence" Study history 2003/ STUDY SURVEY Cash for Growth Unlocking hidden resources for growth May 2004 Working Capital Excellence Part I: Managing accounts payable and receivable Roland Berger Strategy Consultants Stuttgart, April 2005 Working capital excellence Part II: Managing inventory Roland Berger Strategy Consultants Stuttgart, March 2006 Cash4Growth-Teaser_E 1 STR E-c.ppt 1 STR E-c.ppt 1 > Pan-European benchmarking study td on cash potential ti > Benchmarking of accounts receivables and payables > Benchmarking of inventory management > Analysis of cash potentials and > Optimization approaches and > Optimization approaches and Working Capital performance per levers to manage accounts levers for best-in-class inventory industry receivables and payables management Quelle: Roland Berger 9

10 The study includes 216 European companies Together, they had EBIT of EUR 422 bn in 2008 and covered 30% of EU 25 GDP Study scope The 216 European companies analyzed in 2008 accounted for EUR 3,700 bn in revenue EUR 422 bn in EBIT 30% of EU 25 GDP Results also extrapolated to include Q Source: Roland Berger 10

11 C. Overall result Total cash potential of EUR 353 bn identified, d potential ti up since 2004, massive increase in Q

12 The cash potential of the 216 companies analyzed was EUR 353 bn in Q Increase of more than 30% Cash potential /Q1 [EUR bn] +32% +38% (Q1) Inventories Customer receivables Supplier payables Source: Roland Berger 12

13 D. Identification of individual potential Quick check approach and Cash Navigator help identify the cash potential at company level 13

14 STR D-c.ppt 1 A comprehensive toolkit for working capital management has been developed by Roland Berger and is ready to use Working capital toolset General tools Cash Navigator "Lever Bible" Toolbox EVA/Cash Calculator Category-specific tools Customer Risk Analysis Value Stream Mapping Working Capital Quick Check Cash Navigator Working Capital Reduction Lever Bible Roland Berger Strategy Consultants > Quick calculation l of companies' working capital potential > Based on readily available data (can be detailed) and comprehensive working capital benchmarking database > "Fair benchmarking" based on external benchmarks and specific calibration factors > Comprehensive set of 110 > Cl Calculate lt impact of > Dt Determine customer > Analyze whole improvement levers supplier segment-specific value chain 50 inventory levers negotiations on risk for receivables > Identify non-value 35 receivables levers payables related to > Basis for receivables strategy steps adding process cash- and price 25 payables levers > For each lever there is a detailed description, evaluation of impact and questions for assessing its applicability effects > Determine optimal level of stock Source: Roland Berger 14

15 E. Contact Your contacts at Roland Berger Strategy Consultants t 15

16 Your working capital experts Contact us for further information Authors of the study Roland Schwientek Florian Kaiser Partner Senior Consultant Löffelstrasse 46 Mies-van-der-Rohe-Strasse Stuttgart München Tel.: +49 (711) Tel.: +49 (711) roland_schwientek@de.rolandberger.com florian_kaiser@de.rolandberger.com Thought Leadership in Performance Improvement Issues 16

17 We deliver results. 17