focus areas and targets communication example company_magnus larsson
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FOCUS 2016
Our Focus areas and Targets
The Process Industry Company - PIC
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Content
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The Process Industry Company - PIC
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BACKGROUND
…to our choice of focus areas and targets
The Process Industry Company - PIC
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We haven chosen focus areas based on…
• The challenges we need to address to reach a sales and production output growth of 25% and deliver an EBIT increase of 600 Meur in 2016.
• Background• 400 Meur invested in new capacity and capability• Fixed unit cost above industry average• Current 7% EBIT margin not enough to reach our
owners target ROCE of >15%
The Process Industry Company - PIC
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Our performance• Margin erosion and CE increase resulted in 11% ROCE• With 25% growth in sales, EBIT margin at 10% and
flat capital turnover, we will deliver >15% ROCE
The Process Industry Company - PIC2010 2011 2012 2013 2014 2015
02468
1012141618
4
5
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9 8 8 8 87
1514 13 13 13
11
EBIT Margin ROCE Capital employed
EUR
billi
on
%
Year
ROCE min level
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WHAT
…to focus on and the targets to achieve
The Process Industry Company - PIC
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Focus 2016
Sales growthProfitability
Production output growth
People
600 MeurEBIT increase
10 kt weekly order intake
+1 shift operative
12 kt weekly capacity
8 activities to realize the targets
4 targets
4 focus areas
A SAFE WORKING ENVIRONMENT
The Process Industry Company - PIC
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Prioritized activites
• 8 prioritized activities, with targets and plans
• These are identified as the most critical activities to reach our targets. Limited number and scope allows time for ad-hoc activities.
• The top 8 take priority, in terms of funding and resources, over other activities
The Process Industry Company - PIC
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Our financial targets
• High level financial targets are:• Grow sales with 25%• EBIT +600 Meur (vs 2015)• Indirect cost reduction of 5%• Operational cash flow 100 Meur• Initial focus is to deliver the sales growth• NWC efficiency program to start in Q3
The Process Industry Company - PIC
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HOW
…we should act in order to reach our targets
The Process Industry Company - PIC
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Our opportunities
• With our latest investments, we can offer the highest quality product on the market
• Training has started for the new shift team
• Our recent order intake is up 10% vs 2015 average
• Initial discussions with major suppliers indicatea good opportunity for variable cost reductions
The Process Industry Company - PIC
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How to bridge the EBIT gap
• Steps to close the EBIT gap and reach a 10% margin
• 2600 Meur sales growth = +200 Meur
• Margins from 7% to 10% = +400 Meur• 350 Meur gross profit increase from
higher price and variable cost reduction• 50 Meur from 5% indirect cost reduction
The Process Industry Company - PIC
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How to act• Be proactive, take responsibility
• Collaborate across the whole organization
• Challenge old truths and find new ways
• Look for improvements in your daily tasks
• Speed. Act now. Even a small step is better than no step
The Process Industry Company - PIC
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VISUALIZATION
…of our focus areas and prioritized activities
The Process Industry Company - PIC
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Focus 2016Profitability Sales growth People
Production output growth
600 MeurEBIT increase
10 kt weekly order intake
+1 shift operative
12 kt weekly capacity
Targets
2016
Recruit and train a new shift team
+30% sales to key accounts
Launch & ramp up sales of the new AZ
product range
1kt weekly sales to new BC segment
The Process Industry Company - PIC
Selective customer and segment price
increase, +250 Meur
150 Meur cost reduction program
Right first time at 85%
Execute the capacity ramp-up plan
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ACTIVITY CARDS
…with background, plans and milestones
The Process Industry Company - PIC
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17
Focus 2016Area
Variable cost reduction 100 Meur
and 50 Meur indirect cost
reduction
Targets
2016
150 Meur cost reduction program
• Current unit cost is above industry average• Higher volume will improve our position• Major supply agreements not revised for several years• Overhead/indirect cost growth during investment phase• Investment in new shift considered in savings target
• Renegotiate our top 5 supply contracts• Phase out the investment project organization• No overtime in production 1 qtr after new shift operative• New IT-outsourcing agreement• Secure lower usage of consumables from new equipment
Background and activity plan with milestones
The Process Industry Company - PIC