ESAB has established clear financial and operational targets to improve performance and achieve strong growth in profit and cash generation.
10%
CAGR
10%
"through cycle"
target:
19%
of revenue by end of 2013
Target 1: Organic revenue CAGR of 10 per cent
To be achieved through:
- Focussing on end-user segments with strong growth potential (such as energy, transport and infrastructure)
- Building on regional strengths, particularly in growth and commodity-based economies (such as South America, Russia and Asia)
- Developing new product ranges through innovation
- Exploiting incremental market opportunities (such as ancillary welding products)
Target 2: Adjusted operating margin of 10 per cent “through-the-cycle”
To be achieved through:
- Cost-saving measures, including identified actions to save £38 million (as described below)
- Focus on specific end-user segments and regions with strong potential
- Product portfolio initiatives
- Focussing on supply chain and customer service
- Leverage from growth and cyclical recovery
Target 3: Working capital - 19 per cent of sales by the end of 2013
To be achieved through:
- Inventory management (such as reduction of slow-moving stock and shortening of supply chains)
- Debtor management (reduce overdue debt)
- Focussing on central purchasing to obtain improved commercial terms
- Strengthened management incentivised to deliver improvements
Cost saving measures
ESAB has identified £38 million of cost savings and has already commenced a programme to deliver these by mid-2013.
- £10.6 million - capacity re-alignment in Europe and North America
- £13.8 million - reduction in European factory manning and sales overhead
- £13.4 million - additional savings principally in South America, cutting & automation and central overheads
The majority of these cost savings are underway and we expect to deliver a run-rate of £15 million by year end 2011 and £35 million by year end 2012; the benefits to the income statement are expected to be £5 million in 2011 and £25 million in 2012. Exceptional charges relating to the implementation of these cost savings are £7 million in the first half of 2011, £12 million in the second half of 2011 and £13 million in 2012.
Opportunities for additional cost savings are being examined.
