Working capital management 2012


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The report contains the findings of a review of the working capital performance of the largest 2.000 companies (by sales) headquartered in the US and Europe.

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Working capital management 2012

  1. 1. All tied upWorking capital managementreport 2012
  2. 2. Contents Study methodology of All tied up report Key working capital results WC performance in Belgium compared to other European countries Cash opportunity for improvement Main factors that can explain the reported year-on-year WC variations ContactsErnst & Young 2
  3. 3. Study methodology of All tied up report ►The report contains the findings of a review of the working capital performance of the largest 2.000 companies (by sales) headquartered in the US and Europe ►The analysis draws on the companies’ latest fiscal 2011 reports. Performance comparisons have been made with 2010 and with the previous nine years ►The review on which the report is based is segmented by region, country, industry and company. It uses metrics to provide a clear picture of overall WC management and to identify the resulting levels of cash opportunity ►Reported global, regional and country numbers are sales-weighted ►The WC performance metrics are calculated. In order to make the figures as comparable and consistent as possible, adjustments have been made to the data to reflect the impact of acquisitions and disposals and off-balance sheet arrangements.Ernst & Young 3
  4. 4. In 2011, the working capital performance of companies in the US has improved, butstalled in Europe ►Total reduction in C2C achieved since 2002 is 16% for both US and Europe ►Relative to 2010, WC performance has improved in the US, with C2C dropping by 3% but stalled in Europe where C2C has remained unchanged ► For the US, the overall improvement in C2C in 2011 arose from a combined reduction in receivables and inventories which was partly offset by lower payables ►In Europe, receivables and payables were marginally downErnst & Young while inventory was slightly up 4
  5. 5. The study includes 20 companies headquartered in Belgium from 13 industries withtotal turnover of more than €120 billion Belgian Companies included in the report Belgium 2011 Change from 2010 Industry # Companies Turnover 2011 (€M) DSO 36 -10%Building Materials 1 536 DIO 33 5%Chemicals 3 16.220Distillers & Brewers 1 28.090 DPO 49 -1%Electric Utilities 1 1.188 C2C 20 -8%Food Retailers & Wholesalers 2 28.987Gas Utilities 1 4.126Industrial Technology 2 4.064 Belgium EuropeMetals 2 17.969 DSO Reduction 50% 56%Paper & Forest Products 1 697 DIO Reduction 40% 42%Pharmaceuticals 1 3.246Specialty Retailers 1 5.977 DPO Enhancement 35% 50%Steel 1 3.340 C2C Reduction 55% 48%Telecoms 3 9.440Total 20 123.880 ►Cash to cash cycle in Belgium has been decreased by 8% to 20 days in 2011 ►The improvement in the cash to cash cycle is mainly driven by the increase in days of receivables outstanding ►Both days of payables outstanding and days of inventory outstanding have been deteriorated in 2011.Ernst & Young 5
  6. 6. Cash to cash cycle in Belgium has been improved by 8% in 2011 compared to theprevious year Year on year change in cash-to-cash cycle from 2010 to 2011 25% SPAIN 20% 15% 10% SWEDEN AUSTRIA SWITZERLAND 5% LUXEMBOURG FRANCE FINLAND NORWAY GERMANY 0% PORTUGAL IRELAND -5% UNITED KINGDOM DENMARK ITALY -10% GREECE BELGIUM -15% NETHERLANDS -20%Ernst & Young 6
  7. 7. The Belgian companies still have up to €10 billion of cash unnecessarily tied inworking capital Cash opportunity Value % WC scope % salesCountry/Region Average Upper quartile Average Upper quartile Average Upper quartile Belgium €7b €10b 18% 25% 6% 8% Europe €270b €460b 11% 19% 4% 7% United States $330b $590b 12% 21% 3% 6%►The wide variations in WC performance among different companies in each regional industry point to significant potential for improvement►Up to €10 billion cash is unnecessarily tied up in the WC of the leading Belgian companies. This figure is €460 billion in Europe and $590 billion in he US►The range of cash opportunity has been defined as the sum of the WC cash opportunity derived for each company. This has been calculated by comparing the 2011 performance of each company’s WC components with the average (low estimate) and upper quartile (high estimate) achieved by its industry peer groupErnst & Young 7
  8. 8. Several factors may explain the reported year-on-year WC variations ► Unusual quarterly sales patterns ►Continued focus on working capital management ► Inventory adjustments in response to deteriorating market conditions ►Stronger receivables performance ► Weaker payables performance ►Volatility in commodity prices ► Currency movement effectErnst & Young 8
  9. 9. GlossaryErnst & Young 9
  10. 10. 38Ernst & Young 10
  11. 11. Ernst & Young Deniz Ates Senior Manager Tel +32 (0)2 774 9052Assurance | Tax | Transactions | Advisory Mobile +32 (0)472 89 71 44 E-mail deniz.ates@be.ey.com2012 Ernst & Young Transaction Advisory ServicesAll rights reserved. Christophe Ballegeer PR & Communications ManagerAbout Ernst & Young Tel +32 (0)2 774 9007Ernst & Young is a global leader in assurance, tax, Mobile +32 (0)475 98 33 10transaction and advisory services. Worldwide, our E-mail christophe.ballegeer@be.ey.com152,000 people are united by our shared values andan unwavering commitment to quality. We make adifference by helping our people, our clients and ourwider communities achieve their potential.Ernst & Young refers to the global organization ofmember firms of Ernst & Young Global Limited,each of which is a separate legal entity.Ernst & Young Global Limited, a UK companylimited by guarantee, does not provide services toclients.For more information about our organization, pleasevisit us: Ernst & Young