We regularly examine the weighted average cost of capital
but only adjust it for the calculation of the AVA if it exceeds
or falls below a certain range. In the last few years, we set
our weighted average cost of capital at 8 %.
AVA and ROCE are used for measuring the company’s
success and for determining variable compensation compo-
nents. In addition, they are used as criteria for making
strategic and operative decisions at the Group holding, divi-
sional, and individual company levels.
Our goal is to achieve a sustainable positive AVA, that
is, to achieve operating earnings that exceed the cost of
capital. In each of the last few years, we have managed to
generate a clearly positive AVA.
Sustainable profitable sales growth forms the basis for
a long-term increase in our operating earnings and thus
in the value of the company. ALTANA’s goal is to outperform
the general market growth in the most important sales
segments and thus to obtain market shares.
In the long term, we aim to achieve average annual op-
erating sales growth of 5 %. We seek to generate additional
growth through acquisitions, either by acquiring supplemen-
tary activities at the level of our existing divisions or through
the possible integration of new business activities.
But growth should not be achieved at the expense of
profitability. Therefore, control of the EBITDA margin is very
important for the ALTANA Group (EBITDA = earnings be-
fore interest, taxes, depreciation and amortization). The longterm
target range for the EBITDA margin of the Group is
18 % to 20 %. Derived from this are long-term target margins
for our four divisions, which may deviate from the average
target value for the Group due to the different business ac-
tivities and market characteristics. In the last few years, the
Group margins achieved were within or, in some years, even
above the target range.
In addition to achieving long-term sales and earnings
momentum, another focus to successfully increase the value
of the company is control of the operating capital. The
main factors of influence in this context are the development
of fixed assets and of net working capital.
On average over several years, our investments in property,
plant and equipment and intangible assets have been
approximately 5 % to 6 % of our sales. Due to this continuity,
sharp increases in operating capital and resulting shortterm
fluctuations of the AVA can be minimized. In addition,
every important investment is examined regarding its short-
and long-term effects on the company’s value.
On account of the great importance of net working cap-
ital for the development of operating capital, for a few
years continual measures have been taken to optimize capi-
tal tied up in inventories as well as trade accounts receiv-
able and payable. These financial performance indicators are
analyzed and controlled by calculating ratios depending
on sales and the cost of sales.
Apart from the aforementioned essential financial con-
trol parameters, there are other financial key indicators
that help us analyze and control profitable growth and the
company’s value. The most important ones are cost fig-
ures (cost of materials, personnel expenses, etc.).
To guarantee that all activities are geared uniformly to
the Group’s strategy, we also use non-financial key perfor-
mance indicators. These indicators, however, are not directly
relevant for control and focus on a qualitative evaluation
of activities whose financial measurability is limited. They in-
clude data for evaluating innovation and sustainability,
analyzing sales markets, and gauging customer satisfaction.
Integrated Planning Processes
All of the key performance indicators relevant for control
are compiled and analyzed within the framework of stan-
dardized reporting processes. To be able to use these key
parameters effectively to control our strategy and possible
short- and medium-term measures, there is an integrated
planning process embracing different planning levels and di-
mensions.
50 Group Basics I Business Development