bridging the gap 2015 - benelux

Bridging the Gap2015 Annual Benelux Working Capital Survey

pwc.com/workingcapitalsurvey

2 Bridging the Gap

Contents

Executive summary

What is driving working capital?

1. Industry analysis

2. Geography analysis

3. Size analysis

4. Financial performance analysis

How we can support you

Contacts

3 8 11 17 23 27 32 42

Appendices

34

32015 Annual Benelux Working Capital Survey

First year ofsignificantimprovementin the Beneluxsince 2011

Benelux's cash balances swelled at

EUR 78bn

There is a

wide gap between top and bottom performersacross most sectors

12 out of 16 sectors managed to improve working capital since 2010

is characterised bythe lowest NWC%in the region

Small enterprises have a significantly

higher NWC %than large corporations

Companies that are top performers in working capital, are also better at

could be released from the balancesheets of Benelux listed companiesby addressing poor workingcapital performance

12/16

generating cash

Belgium

EUR 17bn

-10.9% The revenue trend in the lastfive years suggests that

EUR 8.5bnof additional working capital isneeded to enable next year's growth

4 Bridging the Gap

In the Benelux working capital has significantly improved in 2014 after two years of virtually flat performance

-17.6%

0.7%

-0.4% -10.9%

Days working capital

45.737.7 38.0 37.8 33.7

NWC days

Delta days %

2010 2011 2012 2013 2014

Working capital is the life blood of every company. During the 2007/08 global financial crisis companies were slow to respond to declining sales, resulting in excess inventory. Combined with the reduced payment morale this led to a steady increase in working capital ratios. In the aftermath of the crisis, working capital started to become a key lever to repay debt and sustain future growth.

After two consecutive years of vitually flat working capital performance, the last year marked a significant improvement in the net working capital (NWC)days of Benelux listed companies.


Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis

4. Financial perform

ance analysis

How

we ca

n su

pport youA

ppend

icesThe year-on-year improvement was primarily driven by a strong improvement in inventory, as well as trade receivables

Days sales outstanding

Days inventory outstanding

Days payables outstanding

2010 2011 2012 2013 2014

2010 2011 2012 2013 2014

37.334.2

51.1

54.052.6

71.0

54.9

54.753.254.1

59.9

8.3%

2010 2011 2012 2013 2014

37.5

50.6

41.9

51.7

6.5%

4.1%

2010 2011 2012 2013 2014

2010 2011 2012 2013 2014

37.334.2

51.1

54.052.6

71.0

54.9

54.753.254.1

59.9

8.3%

2010 2011 2012 2013 2014

37.5

50.6

41.9

51.7

6.5%

4.1%

2010 2011 2012 2013 2014

2010 2011 2012 2013 2014

37.334.2

51.1

54.052.6

71.0

54.9

54.753.254.1

59.9

8.3%

2010 2011 2012 2013 2014

37.5

50.6

41.9

51.7

6.5%

4.1%

Receivables performance, measured in days sales outstanding (DSO), improved by 8.3% to 34.2 days in the last year. This is significantly lower than what was four years ago, when DSO was 41.9 days. Many corporates continue to consider overdue reduction programmes, combined with delayed supplier payments, as the easiest and safest way to improve working capital. Opportunities relating to billing timeliness & quality, dispute resolution & root cause eradication, trade-offs in logistics & inventories, securitisation & outsourcing, terms & conditions, etc. have frequently remained unaddressed.

Inventory performance, measured in days inventories on-hand (DIO), has shown a year-on-year improvement of 3.6 days (6.5%). Both corporates and advisors typically focus on supply chain efficiencies, leaving many inventory reduction opportunities unaddressed. There are also some key trends at play that impact performance, such as the changing global economy or increasing environmental considerations, which have encouraged more companies to source or manufacture locally, thereby changing the retail landscape.

The amelioration made on the asset side of the balance sheet was partially countered by a deterioration on the liability side, where days payables outstanding (DPO) decreased by 4.1%. As with inventories, the focus is usually on efficiency (cost) improvements. There is certainly untapped opportunity in this space relating to new developments such as supply chain finance, dynamic discounting platforms and overall supplier performance (including goods in transit, inventories and returns). It is often argued that changes in payables and receivables are a zero sum game for the value chain as a whole: the improvement for one entity is eliminated by the deterioration for the other. However, this is not strictly true. Towards the beginning and the end of the value chain (end-users, commodity settlements, etc.) the terms usually remain unchanged. More importantly, many corporates are starting to think about trade-offs between cash, cost and service. A change in payment behaviour for one can therefore result in cost saving for the other. Lastly, the difference between the Benelux region DSO and DPO of 17.5 days can also be seen as evidence that it is not a zero sum game.

6 Bridging the Gap

Last year’s working capital improvement has contributed to a significant jump of 9.4% in the cash-on-hand balances, which grew to 77.7 billion in 2014

Cash-on-hand

2010 2011 2012 2013 2014

Cash-on-hand (EUR billion) Year-on-year change

66.8

60.5

Companies appear to be more awash with a steady improvement of their cash balance (+16.4% over the last five years). The amelioration in working capital is likely to be a key contributing factor.

As bank lending rates remain low across many of the world’s developed economies, this increasing pile of cash is starting to look extravagant to some investors. We expect to see more shareholders demanding excess cash to either be reinvested into their businesses or to be distributed in the form of dividends/share repurchase programmes. We are seeing more and more evidence in the market that investors are seeking to do both.

71.072.7

-9.1%

19.6%

-2.5%

9.4%

77.7


Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

icesThe revenue trend in the last five years suggests that EUR 8.5bn billion of additional working capital is required to enable next year’s growth

Revenue

Net working capital

At the same time, companies’ overall ability to generate new cash from operations has increased to the highest levels in five years

2010 2011 2012 2013 2014

67.2%70.9%

81.7%77.1%

81.7%

Cash conversion efficiency (CCE)

EUR8.5bn

2010

2010–2014 Compound annual growth rate (CAGR): 3.2%2010–2014 Compound annual growth rate (CAGR): 3.2%

2011

2012

2013

2014

EUR billion

EUR billion

770

920

920

880

940

2014

2015 95.6

87.1

2012-2014

CAGR: 1.4%

2010-2014

CAGR: 3.2%

EUR8.5bn

2010

2010–2014 Compound annual growth rate (CAGR): 3.2%2010–2014 Compound annual growth rate (CAGR): 3.2%

2011

2012

2013

2014

EUR billion

EUR billion

770

920

920

880

940

2014

2015 95.6

87.1

2012-2014

CAGR: 1.4%

2010-2014

CAGR: 3.2%

While cash levels are high at the moment, there is still a significant requirement for funds to support and enable future growth. Over the last three years the growth rate has been 1.3% per annum (compound annual growth rate).

If this growth rate remains constant and companies maintain the same level of average working capital performance in the last five years they will need a further EUR 8.5billion of working capital to fund their operations in 2015.

Linked to the working capital reduction, we have observed an improvement in the ability to convert EBITDA into operating cash flow (measured by CCE), which increased by 4.6 percentage points (pp) over the last year.

8 Bridging the Gap

What is driving working capital?


There are four factors impacting a company’s working capital requirementsand relative performance

Industry

Geo

grap

hy

Fina

ncia

l perfo

rma

nce

Size

1The type of business

2 The economic maturityof the region

4 Whether managementcares about cash

3 The companysize

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

10 Bridging the Gap


Industry analysis

There is a

wide gap between top and bottom performersacross most sectors

Engineering & Construction top the table in theBenelux region with a 8.5% improvement inNWC % in the last five years

12 out of 16 sectors improved workingcapital performance since 2010

12/16

-8.5%

Ind

ust

ry

Geography

Financial performance

Siz

e

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

12 Bridging the Gap

NWC Days

0

30

60

90

120

150

6370 26 13 11364485 38125 5759 50 4783 52

Engineering& construction

CommunicationsTransportation& logistics

Retail & consumer

Technology Forest, paper & packaging

Healthcare Industrial manufacturing

Hospitality& leisure

MetalsPharmaceuticals & life sciences

Entertainment & media

Aerospace, defence & security

Chemicals Automotive Energy, utilities & mining

While working capital consumption is dependent on each industry…

… most sectors show a significant spread in performance between top and bottom performers

NWC Days

“Healthcare”, “Technology”, and “Pharmaceuticals & life sciences” have the highest median working capital days

20

-

40

60

80

100

120

140

160

97

28

131

5

82

43

17

73 72

32

66

83

70

54

42 50

95

2535

19

38

(9)

154

97

81

37

5041

31

(9)

23

83



Retail & consumer








Top performers (top quartile)

Bottom performers (bottom quartile)


“Healthcare” and “Engineering & construction” are the sectors with the longest median DSO

“Pharmaceuticals & life sciences” and “Healthcare” are the sectors with the longest median DIO

“Hospitality & leisure” and “Transportation & logistics” are the sectors with the shortest DPO

DSO

DIO

DPO

Top performers

Median

Bottom performers

Top performers

Median

Bottom performers

Top performers

Median

Bottom performers

60

85

3940

74

39

49

67

30

88

59

65

5234

47

25

46

66

22

46

65

38

54

65

49

56

63

4729

41

20

82

149

56

4044

44

44

47

102

33

86

88

72

78

65

38

70

20

50

56

30

43

50

3639

49

17

30

44

25

46

55

31

54

83

32

43

69

32

66

86

4239

39

39

55

68

4135

38

32

97

62

103

186

102

65

78

47

74

151

3

71

121

49

86

92

54

8

11

5

22

63

13

57

57

57

52

82

-

93106

148

57

80

120

25

0

20

10

40

30

50

70

90

60

80

100

160

180

200

0

60

40

20

80

140

120

100

0

120

100

60

40

20

180

140

160

80

136

51

97

67

68

10

18

91

2

1

59

60

3732

58

10

84

58

75

43



Retail & consumer








58

83 103

83

109

60

85

3940

74

39

49

67

30

88

59

65

5234

47

25

46

66

22

46

65

38

54

65

49

56

63

4729

41

20

82

149

56

4044

44

44

47

102

33

86

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72

78

65

38

70

20

50

56

30

43

50

3639

49

17

30

44

25

46

55

31

54

83

32

43

69

32

66

86

4239

39

39

55

68

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38

32

97

62

103

186

102

65

78

47

74

151

3

71

121

49

86

92

54

8

11

5

22

63

13

57

57

57

52

82

-

93106

148

57

80

120

25

0

20

10

40

30

50

70

90

60

80

100

160

180

200

0

60

40

20

80

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120

100

0

120

100

60

40

20

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140

160

80

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51

97

67

68

10

18

91

2

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59

60

3732

58

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84

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Retail & consumer








58

83 103

83

109

60

85

3940

74

39

49

67

30

88

59

65

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47

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46

66

22

46

65

38

54

65

49

56

63

4729

41

20

82

149

56

4044

44

44

47

102

33

86

88

72

78

65

38

70

20

50

56

30

43

50

3639

49

17

30

44

25

46

55

31

54

83

32

43

69

32

66

86

4239

39

39

55

68

4135

38

32

97

62

103

186

102

65

78

47

74

151

3

71

121

49

86

92

54

8

11

5

22

63

13

57

57

57

52

82

-

93106

148

57

80

120

25

0

20

10

40

30

50

70

90

60

80

100

160

180

200

0

60

40

20

80

140

120

100

0

120

100

60

40

20

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140

160

80

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51

97

67

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10

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2

1

59

60

3732

58

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Retail & consumer








58

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xx

xx

xx

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

14 Bridging the Gap


Communications

-6.3%

Engineering & construction

-8.5%

Metals

-3.3%

Energy, utilities & mining

-3.9%

Retail & consumer

-3.0%

Hospitality & Leisure


-1.2%

Aerospace & defence

-4.3%

Transportation & logistics

-4.0%

Healthcare

-4.9%

Forest, paper & packaging

-5.3%Pharmaceuticals

& life sciences

0.0%0.4%

Automotive Industrial manufacturing

Technology

-2.5%Chemicals

-2.0%

0.7%

-1.0%

12 out of 16 sectors managed to improve working capital since 2010

Working capital improvement from 2010 to 2014 (in percentage points of NWC%)

Overall, 69% of the analysed sectors have shown an improvement in working capital since 2010.

The big winners in terms of working capital performance are companies within the “Engineering & Construction”, “Forest, paper & packaging” and “Healthcare” sectors.

Note that despite the improvements realised by the Healthcare sector, it is still the worst performing sector in absolute terms with an absolute median NWC performance of 125 days.

Of the companies that have failed to show an improvement over this period, those in the “Technology” sector have shown the most significant deterioration (4.3%).

Non-improversImprovers

16 Bridging the Gap

17

Geo

gra

ph

y

Size

Industry

Fina

nci

al

per

form

an

ce


Geography analysis

Netherlandsand Belgiumhave a higher ability to convert EBITDAinto cash than all global regions

Belgiumrealised the strongestdecrease in NWC%

has the highest NWC%(14.7%) in theBenelux region

Luxembourg

-4pp

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

18 Bridging the Gap

Luxembourg lags behind from a working capital perspective which is reflected in the ability to convert EBITDA into cash

NWC % EBITDA Margin CCE

82.4%20.6%

Belgium

77.1%16.9%9.3%

USA, Canada

78.1%14.4%10.8%

Europe

73.8%11.9%13.5%

Asia

77.8%18.7%11.0%

Americas

63.5%15.2%14.7%

Luxembourg

3.5%

85.0%9.2% 12.4%

Netherlands

Working capital varies greatly in the Benelux-region:

• Companies in Luxembourg have a significantly higher NWC% (14.7%) than those in Belgium and the Netherlands.

• On the contrary Belgium has the lowest NWC% of 3.5%. Also Belgian companies have the highest ability to convert EBITDA into cash.

• Belgium and the Netherlands have a lower NWC% than all global regions, whilst Luxembourg has a higher NWC% than all global regions.

• EBITDA margin is lowest in the Netherlands. From a global perspective only Asia has a lower EBITDA margin.


Belgium exhibited the best performance improvement in the last five years with a decrease of 4 percentage points. The Netherlands and Luxembourg improved by 3.5 and 1.8 percentage points, respectively

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

Luxembourg

-1.8pp

Change in percentage point (pp) between 2010 and 2014

Netherlands

-3.5pp

Belgium

-4.0pp


DSO improved in all countries in the last five years with the biggest improvements observed in Belgium and The Netherlands

DSO Trend

DIO improved by 17 days in Luxembourg and by 9 days in the Netherlands whereas Belgium saw a slight increase of 5%...

DIO Trend

However, only Belgium improved DPO performance, by 14 days

DPO Trend

Belgium

43

55

3935

38

38 39

4543

48

38 37

44

47

41

4240

39

4846

40

39

40

41

40

2010 2011 2012 2013 2014

44 44

373636

32

31

32

30

32

48

52

48

5150

4447

565454

3 3 3 33

14

13

14

1212

4342

44 44

46

2010 2011 2012 2013 2014

102

9087

8985

55

4849

50

46

2011 2012 2013 2014

28

2524

29

24

44

40

36 3533

96

2010

75 73

80

89

66

5457 58

54

50

70

49 5046

Luxembourg

43

55

3935

38

38 39

4543

48

38 37

44

47

41

4240

39

4846

40

39

40

41

40

2010 2011 2012 2013 2014

44 44

373636

32

31

32

30

32

48

52

48

5150

4447

565454

3 3 3 33

14

13

14

1212

4342

44 44

46

2010 2011 2012 2013 2014

102

9087

8985

55

4849

50

46

2011 2012 2013 2014

28

2524

29

24

44

40

36 3533

96

2010

75 73

80

89

66

5457 58

54

50

70

49 5046

Netherlands

43

55

3935

38

38 39

4543

48

38 37

44

47

41

4240

39

4846

40

39

40

41

40

2010 2011 2012 2013 2014

44 44

373636

32

31

32

30

32

48

52

48

5150

4447

565454

3 3 3 33

14

13

14

1212

4342

44 44

46

2010 2011 2012 2013 2014

102

9087

8985

55

4849

50

46

2011 2012 2013 2014

28

2524

29

24

44

40

36 3533

96

2010

75 73

80

89

66

5457 58

54

50

70

49 5046

22 Bridging the Gap


Size analysis

Size

Financial performance

Geography

Ind

ust

ry

However, there is no evidence that

... and also have significantly higher

than large corporations

large corporationsstretch their creditorsmore than SMEs doas DPO levelsare comparable

SMEs have

higher NWC %

DSO and DIO

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

24 Bridging the Gap

Small companies have significantly higher NWC% than large corporations, and the gap has consistently been above 8 percentage points since 2011

17.5%

18.4%18.5%

17.5%

18.2%

13.7%

17.6% 16.7%

14.9%15.4%

Large corporations

Revenues >= EUR 1,000m

2010 2011 2012 2013 2014

10.2%10.2%10.1%

12.4%

9.0%

In 2010, the gap between working capital levels of large corporations and SMEs was only 5.1 pp. Over the following four years, this gap has widened to remain between 8.1 and 8.5 pp.

5.1 percentage

points 8.5 percentage

points

Small enterprises (SMEs)Revenues < EUR 500m

Mid-sized companies

Revenues between EUR 500m and EUR 1,000m


The spread between DSO and DPO in large corporations suggests that these companies are better at negotiating terms with both their customers and suppliers than their SME counterparts, where we observe a balance between DSO and DPO. In addition, DIO levels suggests that large corporations manage their inventory more efficiently than SMEs

Small enterprises Mid-sized enterprises Large corporations

5256 54 52

61

51

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

71

34

54

DSO DSO DSODIO DIO DIODPO DPO DPO

26 Bridging the Gap


Financial performance analysis

Finan

cia

l per

form

ance

Industry

Size

Geo

gra

ph

y

The gapbetween NWC %top and bottomperformers issignificant

Bottom performers need to take on more debt tofinance theirinvestments

Better working capital leads to better conversion of

EBITDA into cash…

27.5pp

Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

28 Bridging the Gap


Investment rate

7.0%

5.1%

NWC %

2.6%

30.1%

Companies that are top performers (upper quartile) in working capital are also better at generating cash, as confirmed by the 19.7 pp difference in CCE. If bottom performers (lower quartile) were to improve their CCE to top performers’ levels, they would be able to generate extra EUR 3.8bn in operating cash flow

Bottom performers have a lower investment rate. This can be explained by the difficulties they face of converting EBITDA into the cash necessary for investments

CCE

Top performers

Bottom performers

88.0%

68.3%

19.7 percentage

points

30 Bridging the Gap


Summary Execu

tive su

mm

ary

Wh

at is drivin

g w

orking capital?

1. Indu

stry a

nalysis

2. G

eography

an

alysis3. Size

an

alysis


ance analysis

How

we ca

n su

pport youA

ppend

ices &

Con

tacts

In the Benelux there is an opportunity to realise EUR 17bn if under-performers improve to the next quartile

Working capital

€

€

€

€

€ €EUR 17bn

32 Bridging the Gap

How we can support you

Addressing the key levers: • Identification, harmonisation and improvement of

commercial terms

• Process optimisation throughout the end-to-end working capital cycles

• Process compliance and monitoring

• Creating and embedding a ‘cash culture’ within the organisation, optimising the trade-offs between cash, cost and service

21

34

Complete a working capital benchmarking exercise to compare performance against peers and identify potential improvement opportunities

Assist the realisation of sustainable working capital reduction by implementing robust, efficient and collaborative processes

Perform a diagnostic review to identify ‘quick wins’ and longer-term working capital improvement opportunities

Develop detailed action plans for implementation to generate cash and make sustainable improvements

Danny SiemesNL Director

“Working capital is the easiest and fastest source of cash to bridge funding gaps. Our team of dedicated working capital practioners has delivered sustainable cash improvements for many companies equal to 5-10% of revenues”


Execu

tive su

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Accounts receivable

• Credit risk policies• Aligned and optimised

customer terms• Billing timeliness

and quality• Contract and

milestone management

• Prioritised and proactive collection procedures

• Systems-based dispute resolution

• Dispute root cause elimination

Accounts payable

• Consolidated spending• Increased control with

centre-led procurement• Avoid leakage with

purchasing channels• Payment terms

• Supply chain finance• Payment methods• Eradicate early payments

Examples of areas where PwC could help you to release cash from working capital:

Inventory

• Lean and agile supply chain strategies

• Global coordination• Forecasting techniques• Production planning

• Accurate tracking of inventory quantities

• Differentiated inventory levels for different goods

• Balanced cash, cost and service considerations

Appendices

34 Bridging the Gap

Basis of calculations and limitations

Basis of calculationsThis study provides a view of working capital performance. The study is part of our global research of the largest 10,215 listed companies worldwide. The Financial Services, Real Estate and Insurance sectors are excluded.

LimitationsIn this Benelux report there are some constraints compared to the global sample. In the Benelux sample some industries are dominant whilst others are less populated.

Companies have been assigned to countries based on the location of their headquarters. Although a significant part of their sales and purchases might be realised in that country, it does not necessarily reflect typical payment terms or behaviour in that country.

As the research is based on publicly available information, all figures are financial year-end figures. Due to the disproportionate efforts to improve working capital performance towards year-end the real underlying working capital requirement within reporting periods might be higher. Also, off-balance-sheet financing or the effect of asset securitisation have not been taken into account.

Metric Basis of calculation

NWC % (Net working capital %) NWC % measures working capital requirements relative to the size of the company.

(Accounts Receivable + Inventories – Accounts Payable) / Sales

DSO (Days Sales Outstanding) DSO is a measure of the average number of days that a company takes to collect cash after the sale of goods or services have been delivered.

Accounts Receivable / Sales x 365

DIO (Days Inventories On‑hand) DIO gives an idea of how long it takes for a company to convert its inventory into sales. Generally, the lower (shorter) the DIO, the better.

Inventories / Cost of Goods Sold x 365

DPO (Days Payables Outstanding) DPO is an indicator of how long a company takes to pay its trade creditors.

Accounts Payable / Cost of Goods Sold x 365

CCE (Cash Conversion Efficiency) CCE is an indicator of how efficiently a company is able to convert profit into cash.

Cash Flow from Operations / EBITDA

Investment Rate Investment Rate measures the amount of investment relative to the revenues of a company.

Capital Expenditure / Sales

ROC (Return on Capital) ROC is an indicator of profit as a proportion of a company’s capital.

EBIT x (1 – tax) / Average Total Capital

EBITDA Margin (Earnings before interest, taxes, depreciation and amortisation)

EBITDA Margin is an indicator of a company’s profitability level as a proportion of its revenue.

EBITDA / Sales

Cost of Debt Cost of Debt is the effective rate that a company pays on its debt.

Interest Expense / Average Total Debt


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36 Bridging the Gap

In the Benelux region and across all sectors there is a total cash opportunity from working capital of more than EUR 17bn primarily concentrated the Netherlands and Luxembourg

Sector Belgium Luxembourg Netherlands Total

Aerospace, defence & security 5,752 5,752

Automotive - -

Chemicals 212 32 152 397

Communications 125 594 - 719

Energy, utilities & mining 46 1,028 579 1,652

Engineering & construction 23 11 285 319

Entertainment & media 8 433 441

Forest, paper & packaging - 3 3

Healthcare 338 338

Hospitality & leisure 1 187 188

Industrial manufacturing 93 43 942 1,078

Metals 435 2,730 12 3,177

Pharmaceuticals & life sciences 122 - 18 141

Retail & consumer 106 121 424 651

Technology 26 38 1,879 1,943

Transportation & logistics 257 - 89 347

Country Total 1,793 4,597 10,757 17,147

Total cash opportunity from working capital

High opportunity Low opportunity


Sampled companies by sector and macro-region


Aerospace, defence & security 2 2

Automotive 1 1

Chemicals 5 1 4 10

Communications 4 4 2 10

Energy, utilities & mining 3 3 6 12



Forest, paper & packaging 1 2 3

Healthcare 3 3


Industrial manufacturing 4 4 11 19

Metals 1 3 3 7

Pharmaceuticals & life sciences 1 1 1 3


Technology 3 2 11 16

Transportation & logistics 2 1 2 5

Total 41 26 70 137

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38 Bridging the Gap

NWC/Sales by sector and macro-region


Aerospace, defence & security 31.0% 31.0%

Automotive 13.6% 13.6%

Chemicals 12.6% 16.7% 12.7% 12.7%

Communications -0.8% 8.6% -8.0% ‑2.5%

Energy, utilities & mining 4.6% 36.0% 4.1% 4.9%

Engineering & construction 18.8% 15.7% 16.1% 16.2%

Entertainment & media -5.0% 20.0% 17.0%

Forest, paper & packaging 9.4% 10.9% 10.3%

Healthcare 32.0% 32.0%

Hospitality & leisure 1.6% 30.5% 19.5%

Industrial manufacturing 16.7% 10.4% 21.0% 19.7%

Metals 33.3% 13.4% 6.6% 13.7%

Pharmaceuticals & life sciences 22.8% 15.5% 26.1% 21.7%

Retail & consumer -5.5% 14.5% 3.2% ‑0.1%

Technology 24.9% 21.0% 29.8% 29.2%

Transportation & logistics 10.7% -0.7% 7.2% 8.1%

Total 3.5% 14.7% 9.4% 9.2%


DSO by sector and macro-regionE

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Automotive 39 39

Chemicals 39 55 40 40






Healthcare 79 79



Metals 93 18 42 23





Total 36 30 35 34

40 Bridging the Gap

DIO by sector and macro-region



Automotive 57 57







Healthcare 112 112



Metals 86 90 48 87





Total 51 85 46 51


DPO by sector and macro-regionE

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Automotive 44 44







Healthcare 54 54



Metals 52 56 68 57





Total 89 54 46 52

42 Bridging the Gap

Authors of the study

Saverio MitraniManagerT: +44 7711 562120 E: [email protected]

Saverio is a manager in the firm’s working capital practice and has spent his career delivering working capital and cash flow related projects across the UK and internationally. His expertise covers all the key areas of working capital, from order-to-cash to inventory management and procure-to-pay.

Saverio Mitrani

Contacts

Danny Siemes

Robert SmidUK Partner, Working Capital Practice LeaderT: +44 20 7804 3598E: [email protected]

Robert leads our working capital practice and brings over twenty years of working capital advisory experience. He has made an instrumental difference to the free cash flow and balance sheet structure of many companies.

Danny Siemes DirectorT: +31 (0)88 792 42 64 E: [email protected]

Danny leads our working capital practice in the Netherlands & Belgium and has over 10 years of experience.He successfully advised company management and investors on improving cash flow and working capital management.

Robert Smid

Rob Kortman

Rob KortmanGermany PartnerT: +49 1709 879253 E: [email protected]

Rob is a partner in our European working capital practice. He has over seventeen years of extensive experience of delivering working capital management programmes to generate cash for large, corporate clients across Europe, Asia and the Americas.

Nicolas Beaumont Senior Manager T: +32 2 7104130E: [email protected]

Nicolas leads our working capital practice in Belgium and has over 7 years of working capital advisory experience. He advised clients on working capital management, helping to release cash from their operations.

Nicolas Beaumont

Daniel WindausUK Partner, Lead AuthorT: +44 20 7804 5012E: [email protected]

Daniel is a partner in our working capital practice, with over sixteen years of working capital experience. He has advised company management and private equity investors on improving cash flow throughout Europe and North America.

Daniel Windaus

43

Denmark

Bent Jorgensen T: +45 3945 9259E: [email protected]

Middle East

Mihir Bhatt T: +971 4304 3641 E: [email protected]

Malaysia

Ganesh Gunaratnam T: +603 2173 0888E: [email protected]

Switzerland

Reto Brunner T: +41 58 792 1419 E: [email protected]

Germany & Austria

Rob KortmanT: +49 1709 879253 E: [email protected]

Finland

Michael HardyT: +358 50 346 8530E: [email protected]

Turkey

Gokdeniz GurT: +90 212 376 5332 E: [email protected]

The Netherlands & Belgium

Danny Siemes T: +31 88 792 42 64 E: [email protected]

France

Francois GuilbaudT: +33 156 578 537 E: [email protected]

Hong Kong

Ted Osborn T: +852 2289 2299E: [email protected]

Norway

Jørn Juliussen T: +47 95 26 00 60E: [email protected]

USA

Paul GaynorT: +1 925 699 5698E: [email protected]

Spain

Josu EcheverriaT: +34 91 598 4866E: [email protected]

Singapore

Peter Greaves T: +65 6236 3388E: [email protected]

CEE

Petr SmutnyT: +42 25 115 1215 E: [email protected]

Italy

Riccardo Bua OdettiT: +39 026 672 0536 E: [email protected]

Sweden

Jesper LindbomT: +46 70 9291154 E: [email protected]

Working Capital Management Global Network

Australia

David Pratt T: +612 8266 2776 E: [email protected]

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pwc.com/workingcapitalsurvey

PwC helps organisations and individuals create the value they’re looking for. We’re a network of firms in 157 countries with more than 195,000 people who are committed to delivering quality in assurance, tax and advisory services. Find out more and tell us what matters to you by visiting us at www.pwc.com.

This publication has been prepared for general guidance on matters of interest only, and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication, and, to the extent permitted by law, PwC does not accept or assume any liability, responsibility or duty of care for any consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

© 2015 PwC. All rights reserved. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity. Please see www.pwc.com/structure for further details.

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