Demonstrating the Critical Differential Drivers and Their Impact on ROCE

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A) THE ROCE MECHANIC (COMMON GROUND FOR THE BOARD)

ROCE Formula (no debate)

ROCE = EBIT / Capital Employed

So there are only two real levers:

1. Increase EBIT (numerator)
2. Reduce or accelerate Capital Employed (denominator)

Everything else is noise.

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B) THE 7 CRITICAL DIFFERENTIAL DRIVERS (TRADITIONAL vs AI-DRIVEN)

Driver 1: Asset Intensity

Traditional	AI-Driven
Plants, cylinders, trucks dominate	Platforms, software, contracts dominate

ROCE Impact

• Capital Employed ↓ 10–30%
• Same EBIT → ROCE jumps mechanically

📌 This is the single biggest structural lever.

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Driver 2: Capacity Utilisation

Traditional	AI-Driven
Static planning, buffers	AI forecasting, dynamic optimisation

ROCE Impact

• EBIT ↑ 5–10%
• Same capital, more output

📌 Idle assets are silent ROCE killers.

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Driver 3: Pricing Power

Traditional	AI-Driven
Cost-plus, contracts, discounts	Value-based, usage-based, dynamic pricing

ROCE Impact

• EBIT ↑ 3–8%
• Zero capital increase

📌 Pricing is EBIT without CAPEX.

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Driver 4: Working Capital Velocity

Traditional	AI-Driven
Inventory buffers, slow billing	Predictive supply, automated billing

ROCE Impact

• Capital Employed ↓ 5–15%
• Faster cash conversion cycle

📌 Speed beats scale.

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Driver 5: Service & Digital Margin

Traditional	AI-Driven
Gas molecule margins	Service, data, uptime margins

ROCE Impact

• EBIT ↑ disproportionately
• Minimal incremental capital

📌 This is why Service & Digital explodes ROCE.

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Driver 6: Risk Profile (WACC Effect)

Traditional	AI-Driven
Volume & energy risk	Recurring, diversified revenues

ROCE Impact

• Lower risk → lower capital buffers
• Frees capital indirectly

📌 Stability is a hidden ROCE lever.

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Driver 7: Management Attention

Traditional	AI-Driven
Firefighting operations	Orchestration & steering

ROCE Impact

• Better capital allocation
• Fewer bad investments

📌 Bad decisions destroy ROCE faster than bad markets.

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C) ROCE IMPACT SUMMARY (NUMBERS THAT MATTER)

Illustrative Comparison (Industrial Gas Mid-Large Player)

Metric	Traditional	AI-Driven
EBIT	€750m	€900m
Capital Employed	€5.0bn	€3.8bn
ROCE	15.0%	23.7%

Δ ROCE: +8.7 percentage points

Not from heroics — from structure.

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D) DRIVER-TO-ROCE IMPACT MAP

Driver	EBIT Effect	Capital Effect	ROCE Impact
Asset-light shift	—	↓↓↓	★★★
Capacity optimisation	↑	—	★★
Pricing analytics	↑↑	—	★★★
Working capital speed	—	↓↓	★★
Service & Digital	↑↑↑	↓	★★★★
Risk reduction	—	↓	★
Better governance	↑	↓	★★

⭐ Service & Digital + Asset-Light = ROCE engine

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E) BOARD-LEVEL TAKEAWAY (NO FLUFF)

ROCE does not improve because people work harder.
It improves because the business needs less capital to earn more EBIT.

AI does not replace assets.
It makes assets obey.

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F) DECISION GUIDANCE FOR THE BOARD

If the board wants ROCE >20% sustainably, it must approve:

1. Capital reallocation from assets → services & platforms
2. AI Orchestrator governance (not IT projects)
3. ROCE targets by business area, not consolidated averages
4. Stop funding anything that cannot be doodled in 15 seconds

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G) ONE-SENTENCE POWER STATEMENT (BOARD-READY)

“Traditional ROCE is earned by owning assets; AI-driven ROCE is earned by orchestrating them.”– Josef David