Análisis multivariante

I N C R E A S I N G C O M PA N Y VA L U E

The goal of FUCHS PETROLUB is to increase its company value. By doing this, we generate value for our customers, employees, and shareholders. The basis for this is to both secure and strengthen our market position in mature markets and also to sustainably build on the market position in emerging markets. To this end, the Group relies on organic and – where prudent and possible – external growth. Securing the leading technological position of the FUCHS PETROLUB Group is of particular strategic importance in this regard.

Another factor of strategic importance is to maintain the independence of the FUCHS PETROLUB Group. This enables the Group to focus on lubricants and related specialties in an efficient environ- ment, while providing scope to further increase company value.

F U C H S VA L U E A D D E D A S A C E N T R A L K E Y P E R F O R M A N C E I N D I C AT O R

FUCHS pursues a value-driven growth strategy to increase its company value. The central key per- formance indicator (financial performance indicator) employed is FUCHS Value Added (FVA), which is based on income and capital investment. Only when the recorded earnings are higher than the costs of capital employed has value been added.

A key earnings performance indicator and control variable for the operating business in the Fuchs PETROLUB Group is earnings before interest and tax (EBIT), which in turn is largely determined by the drivers of sales revenues, raw material costs, as well as personnel and material expenses. The development of sales revenues is particularly important and, in connection with the sometimes vol- atile raw material costs and inflation-based increases in personnel and overhead costs, affects the earnings position. Local, regional and global management therefore focuses on these drivers. As earnings before interest and tax, EBIT has the advantage of making the operating performance of companies comparable without being influenced by differences in local financing and taxation rates.

Capital expenditure is largely influenced by investments in property, plant and equipment, invest- ments in intangible assets, as well as the development of net operating working capital (NOWC). Property, plant and equipment is therefore controlled on the basis of investment appraisals, while net operating working capital is monitored through targeted control of inventories, as well as accounts receivables and trade payables.

FUCHS calculates the capital tied up in the company, i. e. the annual average capital employed as the sum of shareholders’ equity, financial liabilities and pension provisions, as well as the accumu- lated scheduled goodwill amortization of former years (up to 2004: € 85.2 million). Cash and cash equivalents, and any asset surplus from outsourced pension liabilities, are deducted from this figure.

The costs of invested capital are calculated using the weighted interest rate (WACC), the level of which is reviewed annually at the end of each year applying the Capital Asset Pricing Model (CAPM) and financial market data.

This WACC also provides the basis for the annual impairment test. When determining the perfor- mance of subsidiaries, the cost of capital is adjusted on a country-specific basis to incorporate the differences in inflation rates and country risks.

Successes in revenue management and in controlling capital expenditure are reflected in the sum- marized performance indicator FVA. For this reason all bonus payments to local, regional, and global management are based on the FVA indicator. Only when positive added value has been gen- erated in a financial year will an entitlement to bonus payment arise. The level of this bonus can depend on additional individual agreements and performance factors.

The instruments for operational management of the companies include a detailed system that mon- itors any deviation between actual figures and target figures in the budget. In the course of the annual budgeting process, goals are defined for companies and regions with regard to growth, net contribution or gross margin and development of other personnel and operating costs. A monthly target / actual comparison ensures that compliance with the budget goals is continuously tracked. When targets are not achieved, the causes are promptly investigated, potential compensatory fac- tors examined and corresponding measures introduced.

F R E E C A S H F L O W A N D D E B T- E Q U I T Y R AT I O A S F U R T H E R P E R F O R M A N C E I N D I C AT O R S Its independence enables the FUCHS PETROLUB Group to concentrate on the lubricant business. Financial stability and good liquidity form the basis for this independence. The focus on FVA, and thereby on controlling earning power while at the same time monitoring capital expenditure, is already making a significant contribution to meeting these important framework conditions. In addition to this, questions of financial stability and liquidity also play an important part when con- sidering acquisitions or the dividend policy.

Development of free cash flow is therefore also used as a measure of liquidity in management deci- sions, beside the debt-equity ratio (gearing), which is used as a parameter to measure the stability of the financial position.

Free cash flow comprises the financial resources that are available to the Group from its business operations after financing net operating working capital, capital expenditures and acquisitions. It is used specifically to pay off debts, make dividend payments and to top up cash and cash equiva- lents.

Gearing is understood to mean the ratio of financial liabilities plus pension provisions less cash and cash equivalents (net financial debt) to shareholders’ equity. The debt-equity ratio allows statements to be made regarding the stability of the company in the environment of potential crises.

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