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Controlling in the Wood Products Industry

SS 2018 Albert Sickl

Spring 20182

Module 2Take aways from Module 1

“FROM BEAN COUNTER TO BUSINESS PARTNER”

– Role of the controller is changing. More complexity in a fast moving

environment.

– From reporter of history to analyzer of the future.

– Four roles

– Accounting manager & part of Management Team

– Strategic controller (delivering the strategy)

– Impartial controller (protecting company values)

– Operational controller (month-end close, forecasting)

– Business partner who can still act as critical controller!

Spring 20183

Module 2Basic Tools

Financial Concepts:

– Efficiency in value creation (ROCE > WACC)

– Strength to cope with uncertainty (D/E, Equity ratio)

– Ability to reward stakeholders (Cash)

MUST REQUIREMENT: Ability to cope with all three dimensions

Spring 20184

Module 2Basic Tools

The magic triangle regarding the financial body:

Profit & Loss Statement (…the muscles)

Cash Flow (…the blood)Balance Sheet (…the bones)

KPIs

Spring 20185

Module 2Basic Tools – Income Statement or P&L

– One of the major financial statements beside Balance Sheet and Cash Flow Statement.

– “Muscles” of the financial body.

– Shows the profitability of a company during a PERIODE of time, i.e. information about a

company's ability – or lack thereof – to generate profit by increasing revenue, reducing

costs, or both.

– It does not show cash receipts (money you receive) nor cash disbursements (money

you pay out). The profit-&loss statement measures profitability, not cash flow!

– Prepared monthly, quarterly and / or annually.

– Two formats:

– Total Expenditure Format (Gesamtkostenverfahren)

– Cost of Sales Format (Umsatzkostenverfahren)

Spring 20186


Total Expenditure Format (Gesamtkostenverfahren)

• Shows the total performance and all costs for a selected period with change in inventories

• Expenses are shown according to their origin (material, personnel, maintenance, etc.)

Regarding 1) Financial result, 2) extraordinary items and 3) taxes, both methods have the

same structure and results.

Log consumption (60.000fm) x Yield (50%) = Production of the period (30.000m³)

Invoicing of the period (25.000m³)

Change in Inventory (+5.000m³)

Log price 100€/fm 6.000.000€ Log costs

Spring 20187


Cost of Sales Format (Umsatzkostenverfahren)

• Shows the cost of goods sold (COGS) for a selected period

• Expenses are shown according to functions (production, general & administration, sales)

Regarding 1) Financial result, 2) extraordinary items and 3) taxes, both methods have the

same structure and results.

Invoicing of the period (25.000m³)

NO change in Inventory

Yield (50%) Log consumption 50.000fm

Log price 100€/fm 5.000.000€ Log costs

Spring 20188


Operative Income statement and Key figures

Brand Sawn (EUR)

Jan

Sales 1.000

Change in Finished Goods Inventory & WIP 50

Other Operating Income Ext

Wood costs, variable Total

Energy costs Total

End Product Purchases Total

Chemical & filler costs

Other operating variable costs Total

Variable Costs -500

Personnel costs

Maintenance materials & services costs

Other fixed costs

Fixed costs -100

EBITDA 450

Planned depreciations -50

Profit/Loss on Disposal

Operating Profit / Loss (EBIT) 400

Spring 20189


– Contribution margin (Deckungsbeitrag):

The contribution margin is the amount that remains of our sales after deducting all

variable costs. It is used to cover fixed costs and eventually to make profits.

Gross Sales

- Sales deductions (rebates, cash discounts,..)

Net sales

- Freight costs, Commissions,..

- Variable Costs .

Contribution margin

– Can also be expressed as %-age of sales, i.e. a contribution margin of 15%

indicates that out of 1Euro sales, 15 cents remain for coverage of fixed costs

– Contribution margin can also be shown in several steps by allocating fixed costs to

articles, article groups, business areas,…

Contribution

Margin to

cover Fixed

costs

Gro

ss S

ale

s

(Re

ve

nu

es)

Rebates, CD

Energy, Freight

Log costs

Variable Costs

Spring 201810


Practical Example VBW:

Opern- und Musicalproduktionen in drei Häusern: Theater a.d. Wien (TAW),

Raimund Theater (RAI), Ronacher (RON)

Besucher: RON: 150.000; RAI 250.000; TAW 80.000

Kosten Intendanz: Musical: 600.000€; Oper: 500.000€

Leading Team Kosten: RON: 300T€; RAI: 350T€; TAW: 500T€

Produktionsausstattung:

RON: Bühne (450T€); Ton (50T€); Licht (50T€); Kostüm (200T€)

RAI: Bühne (500T€); Ton (50T€); Licht (50T€); Kostüm (200T€)

TAW: Bühne (600T€); Ton (50T€); Licht (50T€); Kostüm (300T€)

Personalkosten Haustechnik: RON: 25 Personen; RTH: 30 Personen; TAW: 20

Personen (durchschnittliche Kosten: 60.000€ / Person)

Orchester: RON: 10 Personen; RAI: 15 Personen; TAW: 20 Personen

(Durchschnittskosten pro Person: 60.000€)

Spring 201811


Practical Example VBW:

Opern- und Musicalproduktionen in drei Häusern: Theater a.d. Wien (TAW),

Raimund Theater (RAI), Ronacher (RON)

Technik (produktionsbezogene Überstunden): RON: 10.000h; RAI: 12.000h;

TAW: 6.000h (durchschnittliche Kosten: 30€/h)

Marketing (produktionsbezogen): RON: 300T€; RTH: 450T€; TAW: 600T€

Hausbezogener Materialaufwand: RON: 400T€; RTH: 350T€; TAW: 300T€

Durchschnittlicher Ticketpreis: RON: 45€; RAI: 50€; TAW 60€

Personalkosten FM Haus: RON: 25 Personen; RTH: 30 Personen; TAW: 20

Personen (durchschnittliche Kosten: 40.000€ / Person)

Cast: RON: 2.750T€; RAI: 3.125T€; TAW: 2.000T€

Overhead: Sonstiger Aufwand (Material, bezogene Leistungen): 2.500T€;

Zentrale Technik: 1.000T€; Zentrales FM: 700T€; Generaldirektion: 1.500T€

Spring 201812


Ronacher Raimund Theater a.d. Wien TOTAL

Besucher

Gross Sales

Leading Team

Ausstattung

Cast

Orchester

Technik Produktion

Marketing

DB I (Produktion)

Erträge Haus 20.000 60.000 20.000 100.000

Materialaufwand

Technik Haus

Facility Management Haus

DB II (Haus)

Intendanz

DB III (Sparte)

Sonstiger Aufwand

Technik zentral

Facility Management zentral

Generaldirektion

DB IV (Betriebserfolg)

Finanzerfolg 200.000

Profit / Loss

200.000

Musical Opera

Ronacher Raimund Theater a.d. Wien TOTAL

Besucher 150.000 250.000 80.000

Gross Sales 6.750.000 12.500.000 4.800.000 24.050.000

Leading Team -300.000 -350.000 -500.000 -1.150.000

Ausstattung -750.000 -800.000 -1.000.000 -2.550.000

Cast -2.750.000 -3.125.000 -2.000.000 -7.875.000

Orchester -600.000 -900.000 -1.200.000 -2.700.000

Technik Produktion -300.000 -360.000 -180.000 -840.000

Marketing Produktion -300.000 -450.000 -600.000 -1.350.000

DB I (Produktion) 1.750.000 6.515.000 -680.000 7.585.000

Erträge Haus 20.000 60.000 20.000 100.000

Materialaufwand -400.000 -350.000 -300.000 -1.050.000

Technik Haus -1.500.000 -1.800.000 -1.200.000 -4.500.000

Facility Management Haus -1.000.000 -1.200.000 -800.000 -3.000.000

DB II (Haus) -1.130.000 3.225.000 -2.960.000 -865.000

Intendanz -300.000 -300.000 -500.000 -1.100.000

DB III (Sparte) -3.460.000 -1.965.000

Sonstiger Aufwand -2.500.000

Technik zentral -1.000.000

Facility Management zentral -700.000

Generaldirektion -1.500.000

DB IV (Betriebserfolg) -7.665.000

Finanzerfolg 200.000

Profit / Loss -7.465.000

Musical Opera

-7.665.000

1.495.000

-2.500.000

-1.000.000

-700.000

-1.500.000

200.000

-7.465.000

Spring 201813


Practical example – Stora Enso:

1) How big is the contribution

margin?

2) How big is the margin %-age?

Operative Income statement and Key figures

Stora Enso GmbH

Sales 102.421

Change in Finished Goods Inventory & WIP 411

Other Operating Income Ext 29

Wood costs, variable Total -64.226

Energy costs Total -2.119

End Product Purchases Total -869

Chemical & filler costs 0

Other operating variable costs Total -420

Variable Costs -69.289

Personnel costs -10.576

Maintenance materials & services costs -1.551

Other fixed costs -5.448

Fixed costs -17.575

EBITDA 7.971

Planned depreciations -901

Profit/Loss on Disposal 0

Operating Profit / Loss (EBIT) 7.070

Spring 201814


– Break-Even Analysis: The break-even point defines the sales

volume which is needed to cover all costs, i.e. neither produces a

profit nor a loss.

Break Even Point means:

Profit = 0

Fixed costs = Total contribution margin

Revenues = Total costs

Profitability increase by:

– Increase of Sales

– Improvement of Contribution Margin (price increase, reduction of

variable costs, improved product mix)

– Reduction of Fixed costs

Fixed costs

Gro

ss S

ale

s

(Re

ve

nu

es)

Rebates, CD

Energy, Freight

Log costs

Variable Costs Tota

l Costs

Spring 201815


– Break-Even Analysis:

Break Even Point (Vol) = Fixed costs / Contribution margin per piece

Break Even Point (Value) = Fixed costs / Contribution margin %-age

Safety margin [value] = (Planned sales-Minimum sales) / Planned sales * 100

Safety margin [volume] = (Planned volume-Minimum volume) / Planned volume * 100

Targeted Turnover = (Fixed costs + Profit) / Contribution margin %-age

Spring 201816


Example 2:

A company has the following planned parameters:

Sales volume: 2.000 bicycle shoes

Production volume: 2.300 shoes

Variable costs/shoe: 120EUR

Net sales / shoe: 180EUR

Fixed costs: 110.000EUR

1) How big is the minimum sales value?

2) How big is the minimum sales volume?

3) What are the safety margins?

4) Return of Sales?

5)The owner's target is a profit of 9TEUR. Which turnover is necessary?

6) How much additional sales are necessary if a new sales rep is employed for 25.000EUR p.a.?

7) The head of sales suggests a 5% price decrease. How many % more sales is the minimum requirement?

Spring 201817


Sales 2.000

Production 2.300

Kvar/piece 120

Net sales 180

Fixed costs 110.000

BEP val 330.000 EUR

BEP vol 1.833 shoes

Safety margin val 8,33 %

Safety margin vol 8,33 %

ROS 2,78 %

Q5: 357.000 EUR

Q6: 75.000 EUR

Q7: value-wise 11,76 %

Q7: volume-wise 17,65 %

Spring 201818


Practical example – Stora Enso:

1) Minimum sales value?

2) Minimum sales volume?

3) Safety margins?

4) ROS?

Wages and Salaries, Production

Wages and Salaries, Maintenance

Wages and Salaries, Admin

Personnel costs

Maintenance Materials Total

Maintenance Services

Maintenance materials & services costs

Other fixed costs, excl. production cost Total

Other fixed costs, incl. in production cost Total

Contractors costs (log/truck/other)

Other fixed costs, admin

Other fixed costs, cost pool

Bad debts and credit losses

Wood proc related fixed

Other fixed costs total

Total fixed costs, CUR

-254

-44

-27

-324

-45

-3

-48

-8

-257

0

-8

-115

-66

0

-454

-826

Total invoicing, m3 6.814

Mill net price Total wo hedging CUR/m3 (ext) 429,38

Total variable costs, CUR -306,69

Spring 201819


Plan P&L Example 3:


Production volume: 8.100 aero-helmets

Sales volume: 8.000 aero-helmets

Net sales / helmet: 240EUR

Production time / helmet: 15min

Production wages / hour: 130EUR

Overhead production costs: 100%

Production materials / helmet: 28EUR

Overhead production materials / helmet: 3EUR

Basis for overhead material costs are production materials and for overhead production

costs the production wages.

Fixed costs: Personnel 150.000EUR

Other fixed costs 100.000EUR

Depreciation 190.000EUR

Interest costs 60.000EUR

1)Establish a plan P&L (Gesamtkostenverfahren)

2)Calculate the ROS

Spring 201820


Spring 201821

Module 2Basic Tools – Kostenarten (Cost elements), Kostenstellen (Cost centers), Kostenträger (Cost unit)

Konten / Kostenarten (Cost Elements): Kategorisierung nach der Natur der Kosten

Exkurs: Österreichischer Kontenrahmen

Kontenklasse:

0 Anlagevermögen

1 Vorräte und unfertige Aufträge Bestandskonten

2 Sonstiges UV und RAP

3 Verbindlichkeiten, RSt, RAP

4 Betriebliche Erträge

5 Materialaufwand und Aufwand für bez Leistungen

6 Personalaufwand Erfolgskonten

7 Abschreibungen und sonst betr Aufwendungen

8 Finanzkonten, Ao Erträge / Aufwendungen, Steuern

9 Kapitalkonten, Abschlußkonten

Spring 201822

Module 2Basic Tools – Kostenarten (Cost elements)

Konten / Kostenarten (Cost Elements): Kategorisierung nach der Natur

Spring 201823



Spring 201824



Spring 201825

Kostenträger (Cost Units): Wofür sind die Kosten angefallen?

RON

Produktion mit der Endung

12 - bis zur Premiere inkl. Audition

13 - ab (einschließlich) Premiere

51 - Premieren- und Dernièrefeiern

52 - Merchandising

54 - Tonträger

z.B. Tanz der Vampire 3310512

Profit Center Mapping

Stora Enso Wood Products CEU

SAP Company code Profit Center

160 68037 Brand Mill

68038 Brand Post

68237 Ybbs Mill

68238 Ybbs Post

68239 Ybbs CLT

68537 Sollenau Mill

68780 Wood Products Head Office

161 68837 BSL Sawn

68838 BSL CLT

162 68938 SE WP Holzverarb.


Spring 201826

Kostenträger (Cost Units): Wofür sind die Erträge / Aufwendungen angefallen?

Module 2Basic Tools – Kostenträger (Cost unit)

Kostenträger 1 Kostenträger 2

Spring 201827


Kostenstellen (Cost Centers): Wo sind die Kosten angefallen?

6871206 Management

6871211 Construction

6871212 Post & Beam

6871213 Sales office CE

6871214 Light Frame

6871215 Joinery

6871216 Sales SEA

6871217 BL Trading

6871218 Sales administration team

2600 Marketing

2612 Publikationen (Printwerbung)

2613 Aussenwerbung (Plakate)

2614 Medien

2601 Grafik

2604 Kooperationen

2605 Hilfskräfte / Verteiler

2606 Marktforschung

Spring 201828

Module 2Basic Tools – Kostenstellen (Cost centers)

Kostenstellen (Cost Centers): Wo sind die Kosten angefallen?

Spring 201829

Module 2Basic Tools – Income Statement or P&L – Value Creation and Value Capturing

Perceived Value Costs Value Comp.

benefit created created discount

Quality

Functions/

Reliability

Services

Logs

Personnel

Maintenance

Other

Profit

Price

Company's ability –

or lack thereof – to

generate profit by

increasing revenue,

reducing costs, or

both.

Spring 201830

Module 2Basic Tools – From Operations to Profits

Business Model

Income Statement or P&L

Spring 201831

Module 2Basic Tools – Balance Sheet (B/S)

– One of the major financial statements beside Income Statement

and Cash Flow Statement.

– “Bones” of the financial body.

– Shows the assets and liabilities of a company at a single POINT of

time. “Snapshot of a company's financial condition.”


– A standard B/S has three parts:

– Assets

– Liabilities

– Equity

Spring 201832


– ASSETS:

– The left-hand side of a B/S shows how a company uses the

capital given by owners (equity) or external sources (debt). The

assets represent things of value that a company owns and has

in its possession or something that will be received.

– Fixed assets are expected to remain in the use of the

company for a longer period of time (> 1 year).

– Current assets are not expected to remain long in the use

of the company (consumed within 1 year).

Spring 201833


– EQUITY & LIABILITIES:

– The right-hand side of a B/S shows where the capital of a

company comes from or in other words how the assets are

financed (equity, debt).

– Liabilities are those funds that a company owes to other

external sources. They are used to finance operations and

pay for expansions.

– Equity represents retained earnings and funds contributed

by the company's shareholders.

Spring 201834


The fundamental B/S equation:

ASSETS = EQUITY + LIABILITIES

– The equation HAS to be always in balance!

– A reasonable mix of equity and liabilities is a must for a financially

healthy company.

Example: Components of the Balance Sheet

Spring 201835


Current

Assets

Invest-

ments

Fixed

Assets

Current

Liabilities

Lt

Liabilities

Equity

How we use our money Where the money comes from

Land

Plant

Equipment

Replacement / Development

Strategic

Accounts receivables

Inventories

Cash

Share Capital

Retained Earnings

Lt Accruals (Pensions,..)

Lt Loans

Accounts payables

St Borrowings

Spring 201836


– Working Capital:

Delta between current assets and current liabilities.

Liquidity indicator: Shows the ability of a company to cover current liabilities

out of its current assets.

– Management approach:

Inventories

+ Accounts receivables

- Accounts payables

Working Capital

Lean working capital management means among others:

decreased costs (inventory space,…)

reduced bad debts

increased cash flow

Inventories:

Finished

Goods and

Work in

Progress

Operating

Working Capital

Accounts

Receivables

Accounts

Payables

Spring 201837


– Working Capital / Inventories:

“Trade-off Model“,

=> while focusing on one item, e.g. Lead Time, another item might be

impacted as a result of the previous change

Inventory InformationCapacity

Lead Time

Demand

Spring 201838


– Working Capital / Inventories:

Spring 201839


– Working Capital / Accounts receivables:

– A tight receivables management is more than ever important to

prevent revenue leakage and bad debts to occur!

– Sales is interested in selling (and not in administration of

outstanding receivables…).

– Payment terms need to be managed efficiently and reviewed

periodically.

– Cash discounts are expensive tools and need to be handled

restrictively.Example:

Effective cash discount rate = Cash discount rate * 360 / (Term for payment – Cash discount period)

Spring 201840


– Working Capital / Accounts receivables:

WP overdues by days31.12.2017 € thousand

Month 1 - 3 4 -14 15 - 30 31 - 60 61 - 90 91 - 120 120 Total O/D All rec O/D %Dec 16 3.998 4.897 1.138 524 79 2 32 10.673 107.093 9,97%

Jan 17 2.934 1.774 1.847 1.818 142 54 22 8.590 117.010 7,34%

Feb 17 1.011 2.133 854 217 21 56 39 4.333 128.606 3,37%

Mar 17 1.911 2.251 1.085 307 25 1 31 5.619 147.932 3,80%

Apr 17 3.809 2.850 1.164 356 92 13 30 8.320 150.334 5,53%

May 17 2.047 2.431 895 282 150 2 38 5.851 154.476 3,79%

Jun 17 3.075 2.304 808 360 100 0 28 6.686 155.978 4,29%

Jul 17 4.985 2.663 1.320 483 201 50 27 9.725 141.490 6,87%

Aug 17 2.249 2.205 1.558 693 243 135 26 7.118 131.362 5,42%

Sep 17 3.059 2.181 2.647 179 72 60 13 8.216 146.278 5,62%

Oct 17 3.235 2.835 799 1.108 91 23 65 8.166 153.172 5,33%

Nov 17 1.968 2.860 812 590 231 63 84 6.619 153.019 4,33%

Dec 17 6.011 3.360 2.233 521 337 3 131 12.603 128.930 9,78%

AVG 17 3.025 2.487 1.335 576 142 38 45 7.654 142.382 5,38%

AVG 16 3.259 2.572 1.425 527 122 55 97 8.063 132.370 6,09%

AVG 15 3.018 3.381 1.834 1.479 723 578 636 11.649 137.512 8,47%

AVG 14 4.075 4.735 3.563 1.768 917 229 216 15.102 155.478 9,71%

Spring 201841


Business Model

Income Statement or P&L and

Balance Sheet

Spring 201842

Module 2Basic Tools – Cash Flow (CF)

– One of the major financial statements beside Income Statement

and Balance Sheet.

– “Blood” of the financial body.

– Shows the flow of cash in and cash out of the business. It reflects

a company's liquidity during a PERIODE of time.


– A standard Cash Flow statement has three parts:

– CF from operating activities

– CF from investing activities

– CF from financing activities

Spring 201843


Spring 201844


“Cash is King!”

A lot of capital is usually tied up in receivables and inventory.

Importance to optimize working capital level becomes more evident than

in the past.

Longer term, companies need to create a culture in which everyone takes

responsibility for the balance sheet!

There are six common mistakes that companies make in managing cash:

1. Don't manage to the income statement.

2. Don't reward the sales force for growth alone.

3. Don't overemphasize production quality.

4. Don’t tie receivables to payables.

5. Don’t manage by current and quick ratios.

6. Don’t benchmark competitors.

Spring 201845


Business Model


Balance Sheet and Cash Flow Statement

Spring 201846


– A CF-statement is tied to the P&L and B/S via net earnings and

depreciation (P&L) on the one side and via working capital, fixed asset

investments, etc. (B/S) on the other side.

P&L:

Sales

+/- Change in inv

- Variable costs

- Fixed costs

- Depreciation

= Operating Profit

B/S:

Fixed Assets Equity

Inventories Accruals

Trade Receivables Trade payables

CF:

Operating Profit

+ Depreciation

+/- Change in inventories

+/- Change in Receivables

+/- Change in Payables

Spring 201847

Module 2Basic Tools – CF & B/S

Finanzplan & Planbilanz Example:


Planned P&LSales 16.000.000

- var costs: Materials: 3.200.000

Material overheads 480.000

Wages & Salaries 4.500.000

Production overheads 4.620.000

Contribution margin 3.200.000

Profit from disposal of assets 50.000

- fixed costs: Depreciations 560.000

Other fixed costs 1.790.000

EBIT 900.000

Income from shares 60.000

Depreciation of financial assets -40.000

Interest expenses -120.000

Financial result -100.000

Profit before taxes 800.000

Income taxes -200.000

Profit / Loss for the period 600.000

Spring 201848


Finanzplan & Planbilanz Example:A company has the following planned parameters:

B/S: 31.12. prior year

Fixed Assets 5.750.000 Equity 4.000.000

Inventory

Raw mat

Fin goods

1.200.000

900.000

Retained

earnings

890.000

Accounts

receivables

1.500.000 Profit of the

year

420.000

Cash /

banks

230.000 Accruals 880.000

Accounts

payables

1.200.000

Liab banks LT 2.100.000

Liab banks ST 90.000

Total Assets 9.580.000 Total Liabilities 9.580.000

Spring 201849


Finanzplan & Planbilanz Example:A company has the following planned parameters:

•Raw material purchases: 3.100.000

•Trade receivables turnover: 13,33 (including 20% VAT)

•Trade payables are reduced by 150.000EUR

•The plan P&L includes a LT accrual of 80.000EUR (Abfertigung &

Pensionen)

•An investment of a machine (900.000EUR) is planned. 1/3 is financed

by a new loan. Depreciations are included in the plan P&L.

•LT Loans of 130.000EUR have to be paid back in the planning period.

•Retained earning (Gewinnrücklage) of 48.000EUR should be booked.

•A dividend of 400.000EUR is to be paid.

•A positive or negative liquidity should be used to balance ST bank

accounts.LT…long-term

ST…short-term

Spring 201850


Planned Cash Flow

Profit / Loss for the period

Depreciations:

Fixed Assets

Financial Assets

Profit from Asset disposal

LT accruals

Funds from operations

Inventories

Accounts receivables

Change in other assets

Change in ST accruals

Accounts payables

Change in other liabilities

CF operating activities

Investments

Profit from Asset disposal

CF investing activities

Dividends paid

Loans

CF financing activities

Total Change: Liquidity

600.000

560.000

40.000 600.000

-50.000

80.000

1.230.000

100.000

300.000

0

-150.000

0

1.480.000

-900.000

50.000

-850.000

-400.000

300.000

-130.000 170.000

-230.000

400.000

Spring 201851


Planned B/S

Assets

Fixed Assets

Inventories

Finished Goods

Acc receivables

Cash at banks

Liabilities

Equity

Retained earnings

Profit of the year

Accruals

Acc payables

Liab banks LT

Liab banks ST

5.750.000

900.000

-560.000

-40.000 6.050.000

1.200.000

3.100.000

-3.200.000 1.100.000

900.000

1.500.000

-300.000 1.200.000

230.000

-90.000

400.000 540.000

9.790.000

4.000.000

890.000

48.000 938.000

420.000

-400.000

600.000

-48.000 572.000

880.000

80.000

960.000

1.200.000

-150.000 1.050.000

2.100.000

300.000

-130.000 2.270.000

90.000

-90.000 0

9.790.000

Spring 201852

Module 2Basic Tools – Key Performance Indicators

Key performance indicators (KPIs) are high-level snapshots of a

business based on specific predefined measures.

KPIs should be:

Specific

Measurable

Acceptable

Realistic

Timely

Should reflect the critical success-factors of a company variations

between different industries possible.

Spring 201853


Key performance indicators (KPIs) in the wood-products industry (example

Stora Enso):

KPIs connected to the P&L:

Return on Sales (ROS) = Operating Profit / Sales *100

Return on Capital Employed (ROCE) = Operating Profit / Operating capital *100

Personnel intensity = Personnel costs / Sales *100

Maintenance intensity = Maintenance costs / Sales *100

Raw material intensity = Raw material costs / Sales * 100

Spring 201854



Stora Enso):

KPIs connected to the B/S:

Inventory turnover ratio = Sales or COGS / (Average) Inventory

Inventory turnover days = 365/ Inventory turnover ratio (also called DIOH)

Receivables turnover ratio = Net Sales / (Average) Accounts receivables

Receivables turnover days = 365 / Receivables turnover ratio (also called DSO)

Payables turnover ratio = Purchases / (Average) Accounts payables

Payables turnover days = 365 / Payables turnover ratio (also called DPO)

Working Capital turnover = Sales / Working Capital

Relationship between the money used to fund operations

and the sales generated from these operations.

Spring 201855



Stora Enso):

KPIs connected to the B/S (continued):

Equity ratio = Owners equity / Total assets (Eigenkapitalquote)

Fixed Assets usage = accumulated depreciation / acquisition costs

(Anlagenabnützungsgrad)

Golden B/S rule: Fixed assets should be financed by equity (narrow) or equity +

long term liabilities (wider) (Goldene Bilanzregel)

Spring 201856



Stora Enso):

KPIs connected to the CF:

Cash Flow margin = Operating Cash Flow / Sales * 100

Gearing ratios:

Debt / Cash Flow

Debt / Equity (also known as debt to equity ratio)

Cash Flow KPIs are currently not used in monthly reporting.

Spring 201857

Module 2Basic Tools – From Operations to Profits to Asset based Profitability

Business Model


Balance Sheet and Cash Flow Statement

ROE and ROCE

Spring 201858


Return on

Equity

Profit

Margin

Capital

Turnover

Leverage

Ratio

Net income

Equity

Net income

Revenues

Revenues

Assets

Assets

Equity

How good are

we in translating

revenues into

profits?

How many units

of sales can we

squeeze out of

one unit of

assets?

How much debt

(i.e. borrowed

resources) do we

use?

Spring 201859


Operational

ROCE

Operating

Profit

Operating

Capital

100Higher ROCE means more efficient

use of Assets to generate earnings.

Spring 201860

Module 2Basic Tools – Value Creation

Provide Capital

Providers with a

reasonable rate of

return - WACC

Buy Capital

Assets ROCE

For each €Pay WACC Get ROCE

EVA = NOPAT – (Capital Invested x WACC)

EVA = (ROCE – WACC) * Capital Invested

EVA… Economic Value Added

NOPAT… Net operating profit after taxes

WACC… Weighted average cost of capital

ROCE… Return on capital employed

Sobald die Investitionsrendite (ROCE) die Kapitalkosten (WACC)

übersteigt, schafft eine Investition Wert.

Spring 201861


Operating

Profit

Sales

Operating

Profit

Operating

Capital

ROCE

Sales

Operating

Capital

Sales

Assets

Sales

EBIT

Sales

Total Costs

Prices

Volume

Mix

Working

Capital

Fixed

Assets

Cash

Inventories

A/R

A/P

Var Costs

Fixed Costs

Strategic Drivers!!!

Spring 201862


Operating

Profit

Sales

Operating

Profit

Operating

Capital

ROCE

Sales

Operating

Capital

Sales

Assets

Sales

EBIT

Sales

Total Costs

Prices

Volume

Mix

Working

Capital

Fixed

Assets

Cash

Inventories

A/R

A/P

Var Costs

Fixed Costs

Increase EBIT

Decrease Capital Employed

Spring 201863

Module 2Basic Tools

Financial Concepts:

– Efficiency in value creation (ROCE > WACC)

– Strength to cope with uncertainty (D/E, Equity ratio)

– Ability to reward stakeholders (Cash)

MUST: Ability to cope with all three dimensions

Spring 201864


Appendix

Spring 201866


Total Expenditure Format (Gesamtkostenverfahren)

1. Umsatzerlöse

2. Erhöhung oder Verminderung des Bestands an fertigen und unfertigen Erzeugnissen

3. andere aktivierte Eigenleistungen

4. sonstige betriebliche Erträge

5. Materialaufwand:

a) Aufwendungen für Roh-, Hilfs- und Betriebsstoffe und für bezogene Waren

b) Aufwendungen für bezogene Leistungen

6. Personalaufwand:

a) Löhne und Gehälter

b) soziale Abgaben und Aufwendungen für Altersversorgung und für Unterstützung, davon für

Altersversorgung

7. Abschreibungen:

a) auf immaterielle Vermögensgegenstände des Anlagevermögens und Sachanlagen

b) auf Vermögensgegenstände des Umlaufvermögens, soweit diese die in der

Kapitalgesellschaft üblichen Abschreibungen überschreiten

8. sonstige betriebliche Aufwendungen

BETRIEBSERFOLG

Spring 201867


Cost of Sales Format (Umsatzkostenverfahren)

1. Umsatzerlöse

2. Herstellungskosten der zur Erzielung der Umsatzerlöse erbrachten Leistungen

3. Bruttoergebnis vom Umsatz

4. Vertriebskosten

5. allgemeine Verwaltungskosten

6. sonstige betriebliche Erträge

7. sonstige betriebliche Aufwendungen

BETRIEBSERFOLG8. Erträge aus Beteiligungen,

davon aus verbundenen Unternehmen

9. Erträge aus anderen Wertpapieren und Ausleihungen des Finanzanlagevermögens,

davon aus verbundenen Unternehmen

10. sonstige Zinsen und ähnliche Erträge, davon aus verbundenen Unternehmen

11. Abschreibungen auf Finanzanlagen und auf Wertpapiere des Umlaufvermögens

12. Zinsen und ähnliche Aufwendungen, davon an verbundene Unternehmen

13. Ergebnis der gewöhnlichen Geschäftstätigkeit

14. außerordentliche Erträge

15. außerordentliche Aufwendungen

16. außerordentliches Ergebnis

17. Steuern vom Einkommen und vom Ertrag

18. sonstige Steuern

19. Jahresüberschuß/Jahresfehlbetrag

Spring 201868


Spring 201869


Spring 201870


Jahresüberschuss/-fehlbetrag nach Steuern

+ Abschreibungen auf das Anlagevermögen

- Zuschreibungen zum Anlagevermögen

+/- Gewinn (-) / Verlust (+) aus dem Abgang von Anlagevermögen

+/- Zunahme (+) / Abnahme (-) lfr Rückstellungen

= Cash Flow aus dem Ergebnis (cash earnings)

+/- Zunahme (-) / Abnahme (+) der Vorräte

+/- Zunahme (-) / Abnahme (+) der Forderungen LuL

+/- Zunahme (-) / Abnahme (+) sonstiger Aktiva und ARA

+/- Zunahme (+) / Abnahme (-) der kfr Rückstellungen

+/- Zunahme (+) / Abnahme (-) der Verbindlichkeiten LuL

+/- Zunahme (+) / Abnahme (-) sonstiger Passiva und PRA

= Cash Flow Operating Activities

- Investitionen

- Aktivierte Eigenleistungen

+ Buchwert abgegangener Anlagen

+/- Gewinn (+) / Verluste (-) aus dem Abgang von Anlagevermögen

+/- Erhöhung (-) / Verminderung (+) der Finanzdarlehen an verbundene Unternehmen

= Cash Flow Investing Activities

+ Einzahlungen von den Gesellschaftern

- Auszahlungen an die Gesellschafter

+/- Erhöhung (+) / Tilgung (-) von Finanzkrediten und Anleihen

= Cash Flow Financing Activities

Veränderung des Finanzmittelbestandes

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