tegic and operative decisions at the Group holding, divisional, and individual subsidiary levels. Our goal is 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 outper- form 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 sales growth of 10 %. Of this amount, about half should be generated by operating growth and the rest through the acquisition of new companies and activities. The aim of our acquisitions is to purchase supplementary activities for our existing divisions and to possibly integrate new business activities. Our average annual sales growth in the last ten years was roughly in line with our target level. 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 long-term 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 aver- age target value for the Group due to the different busi- ness activities and market characteristics. In the last few years, the annual Group margin was within or slightly 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 short-term fluctuations of the AVA can be minimized. In addition, every important investment is examined regarding its short- and long-term effects on the com- pany’s value. On account of the great importance of net working capital for the development of operating capital, for a few years continual measures have been taken to optimize capital tied up in inventories as well as trade accounts receivable 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 control 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 figures (cost of materials, personnel expenses, etc.). To guarantee that all activities are geared uniformly to the Group’s strategy, we also use nonfinancial key performance indicators. These indicators, however, are not directly relevant for control and are used solely for a qualitative evaluation of activities whose financial measurability is limited. They include data for evaluating innovativeness, 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 standardized 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 dimensions. The planning cycle has a strategic planning component, which combines the analysis of the essential performance indicators for future business development at the product- group level with a detailed representation of the changes 40 Group Basics I Business Development
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