🏭 Economic Value Added (EVA) System Case: Industrial Gases 2025–2030
🎯 Goal
To demonstrate how leading industrial gas companies (e.g., Linde, Air Liquide, Messer) can create shareholder value through systematic EVA improvement—linking operational performance → capital efficiency → strategic innovation.
⚙️ 1. EVA SYSTEM FRAMEWORK
| Layer | Key Drivers | Measured By | Typical Value Impact |
|---|---|---|---|
| A. Operating Performance | Gas volumes sold, energy efficiency, delivery reliability | EBIT margin (%) | +2–4% margin improvement |
| B. Capital Productivity | Asset turnover, working capital, plant utilization | Capital Employed Turnover | +0.1–0.3x |
| C. Cost of Capital Control | Financial structure, ROCE vs WACC | WACC (%) | -0.5–1.0% through optimization |
| D. Strategic Growth Innovation | AI-driven service models, circular gases, green hydrogen | Innovation ROICE | +5–10% EVA over 3 years |
💰 2. FORMULA
EVA = NOPAT – (Capital Employed × WACC)
- NOPAT: Net Operating Profit After Tax
- Capital Employed: Total Operating Assets – Non-Interest Liabilities
- WACC: Weighted Average Cost of Capital
Example (typical mid-size provider):
| Parameter | 2025 | 2030 Target |
|---|---|---|
| NOPAT (€m) | 320 | 450 |
| Capital Employed (€m) | 2,800 | 2,900 |
| WACC (%) | 8.0 | 7.0 |
| EVA (€m) | 96 | 247 |
🧭 Δ EVA = +€151m (+157%) improvement in 5 years
🔍 3. VALUE TREE: EVA DRIVERS
EVA
│
├── Operating Profit (↑)
│ ├── Volume Growth (↑)
│ ├── Energy Efficiency (↓ cost)
│ └── Smart Pricing (↑ margin)
│
├── Capital Employed (↓)
│ ├── Asset-Light Strategy
│ ├── Working Capital Optimization
│ └── Strategic Outsourcing
│
└── WACC (↓)
├── Debt Optimization
├── Risk Rating Improvement
└── Sustainable Financing (Green Bonds)
🚀 4. STRATEGIC MOVES 2025–2030
| Strategic Move | Description | EVA Impact |
|---|---|---|
| AI-driven Gas Logistics | Optimize cylinder routing & refills | +€15m/year |
| On-site O₂-as-a-Service | Asset-light long-term supply | +€20m/year |
| Green H₂ Transition | Capture new markets with low-carbon gases | +€30m/year |
| Predictive Maintenance | Reduce downtime & cost | +€10m/year |
| Customer Value Analytics | Price/value optimization by segment | +€8m/year |
Total EVA gain potential: +€83m/year (≈+3% ROCE)
📊 5. EVA DASHBOARD KPIs (for licensee dashboard)
| KPI | Formula | Target 2030 | Driver |
|---|---|---|---|
| ROCE | EBIT / Capital Employed | ≥15% | Profitability |
| EVA Margin | EVA / Sales | ≥10% | Value Creation |
| Capital Turnover | Sales / Capital Employed | ≥1.2x | Efficiency |
| Innovation EVA | EVA from new services / total EVA | ≥25% | Growth |
| Green EVA | EVA from sustainable products | ≥20% | ESG |
🔄 6. RAPIDTHRIVE INSIGHT
Traditional Model: CAPEX-heavy, asset-bound, margin-squeezed.
RapidThrive EVA Model: AI-driven, asset-light, and ecosystem-based — converting capital intensity into cash-flow velocity.
💡 EVA grows fastest when innovation shifts from plants → platforms.
🧭 7. CALL TO ACTION
Transform your Industrial Gas business into an EVA Growth Engine.
Deploy the RapidThrive EVA Dashboard and start tracking:
- Profit Growth → Smart Pricing
- Asset Efficiency → Asset-Light Model
- Sustainable Financing → Green Capital
Below is the EVA Business Area Model for the Industrial Gas Sector, combining Activity-Based Costing (ABC) with Economic Value Added (EVA) per business area.
🏭 EVA BUSINESS AREA MODEL – INDUSTRIAL GASES 2025–2030
🎯 Purpose
To reveal where real economic value is created or destroyed across Industrial Gas business areas — using Activity-Based Costing (ABC) to allocate operating costs accurately and EVA to measure net value creation after capital charges.
⚙️ 1. THE SYSTEM MODEL
| Layer | Description | Outcome |
|---|---|---|
| A. Business Area Segmentation | Separate activities by key value streams (e.g. On-site, Merchant, Cylinder, Specialty Gases, Services) | Transparency |
| B. Activity-Based Costing (ABC) | Allocate costs by driver (energy, logistics, service hours, capex tied to use) | True cost per area |
| C. EVA Calculation | Subtract capital charge (WACC × capital employed) from NOPAT per area | True value created |
| D. Portfolio Steering | Rank business areas by EVA and ROCE | Strategic focus on top value creators |
🧩 2. INDUSTRIAL GAS BUSINESS AREAS
| Business Area | Description | Cost Structure Type | Asset Intensity | Typical ROI Behavior |
|---|---|---|---|---|
| 1. On-Site Supply | Large volume customers (steel, chemicals); dedicated plants | Fixed-cost dominated | High | Stable, moderate returns |
| 2. Pipeline Networks | Industrial clusters with continuous demand | Infrastructure-based | High | Stable, utility-like |
| 3. Bulk/Merchant Supply | Truck deliveries to medium users | Semi-variable | Medium | Sensitive to volume, pricing |
| 4. Cylinder Gases | Small customers, high logistics/service share | Variable-heavy | Low–medium | High margins, high cost |
| 5. Specialty & Medical Gases | Lab, pharma, health | Service-driven | Low | High growth potential |
| 6. Service & Solutions | Maintenance, monitoring, digital services | People/tech based | Very low | High incremental EVA potential |
📊 3. ACTIVITY-BASED COSTING STRUCTURE
| Activity Driver | Cost Pool | Typical Share | Example Allocation |
|---|---|---|---|
| Energy Usage | Production Costs | 35–45% | On-site, pipelines |
| Logistics | Distribution Costs | 25–35% | Merchant, cylinder |
| Sales & Service | SG&A | 10–15% | Cylinder, specialty |
| Maintenance | Operational Reliability | 10–15% | On-site, pipeline |
| Innovation | R&D + Digital | 5–10% | Service, specialty |
💡 ABC reveals that 20–30% of total cost in merchant and cylinder segments comes from inefficient logistics and idle time — a hidden EVA destroyer.
💰 4. ECONOMIC VALUE ADDED PER BUSINESS AREA
| Business Area | NOPAT (€m) | Capital Employed (€m) | WACC (%) | Capital Charge (€m) | EVA (€m) | EVA Margin (%) | Comment |
|---|---|---|---|---|---|---|---|
| On-Site Supply | 220 | 1,800 | 7.5 | 135 | 85 | 5.2 | Solid, low risk |
| Pipeline | 180 | 1,400 | 7.5 | 105 | 75 | 5.4 | Steady utility income |
| Merchant/Bulk | 160 | 900 | 8.0 | 72 | 88 | 9.8 | Strong performer |
| Cylinder | 110 | 500 | 8.5 | 43 | 67 | 13.4 | Profitable but service-heavy |
| Specialty/Medical | 70 | 300 | 8.0 | 24 | 46 | 15.3 | Fastest-growing |
| Services & Digital | 25 | 100 | 7.0 | 7 | 18 | 18.0 | Highest EVA/Capital |
| Total | 765 | 5,000 | 7.7 avg | 386 | 379 | 7.6 avg | Balanced EVA mix |
🧭 Key Insight:
The Service & Digital business, though smallest, creates highest EVA per invested €.
Strategic expansion here multiplies group EVA by +20–30% without heavy CAPEX.
📈 5. EVA PORTFOLIO MAP (TEXT VERSION)
X-Axis: Capital Intensity →
Y-Axis: EVA Margin (%) ↑
| Quadrant | Label | Example Business | Strategic Role |
|---|---|---|---|
| High Intensity / High EVA | “Cash Core” | On-site, Pipeline | Maintain & optimize |
| Low Intensity / High EVA | “Future Growth” | Service & Digital | Scale rapidly |
| High Intensity / Low EVA | “Value Drain” | Some legacy pipeline zones | Restructure or divest |
| Low Intensity / Low EVA | “Test Lab” | New niches, start-ups | Experiment, validate fast |
🧠 6. STRATEGIC TAKEAWAYS
- Reallocate Capital: Shift from heavy plants → digital platforms and services.
- Reduce Hidden Costs: ABC reveals logistics and idle costs up to 15% EVA loss.
- Set EVA Targets by Area:
- Core Assets: Maintain EVA > €75m
- Growth Areas: Double EVA in 3 years
- Link Incentives to EVA Growth:
- Managers’ bonus = Δ EVA / Capital Employed
🧭 7. RAPIDTHRIVE INSIGHT
Industrial Gas Leaders thrive when they treat capital like a scarce resource and knowledge like a scalable one. – Josef David
RapidThrive EVA–ABC Model:
Data-Driven Cost Allocation + EVA Accountability = Sustainable Growth Engine
🧭 Strategic Focus on Service & Digital 2025–2030
The Strategic Business Case for Board Discussion & Approval
🎯 1. Executive Summary
Between 2025 and 2030, the Industrial Gas Industry faces margin compression in traditional supply segments (on-site, pipeline, merchant).
To maintain growth, improve EVA, and secure long-term competitiveness, the company must pivot strategically toward Service & Digital Solutions — the fastest-growing, highest-EVA business area.
Board Decision: Approve a five-year shift allocating 20–25% of new CAPEX toward AI-driven service and digital ecosystems delivering high-margin, asset-light recurring revenues.
💰 2. Financial Rationale: EVA Uplift
| Metric | 2025 | 2030 Target | Δ Change | Source of Gain |
|---|---|---|---|---|
| EVA (Group) | €379m | €520m | +€141m | Service & Digital expansion |
| Service & Digital Share of EVA | 5% | 20% | +15pp | New digital revenues |
| Capital Employed | €5.0bn | €5.2bn | +4% | Controlled CAPEX |
| WACC | 7.7% | 7.0% | -0.7pp | Risk diversification, ESG funding |
| ROCE | 15.3% | 18.0% | +2.7pp | Asset-light innovation |
🧮 Every €100m invested in digital services yields ~€18m EVA vs. €6–8m in traditional assets.
⚙️ 3. Business Model Shift
| From | To | Strategic Value |
|---|---|---|
| Asset-heavy gas plants | AI-enabled platform services | Higher margin, lower capital risk |
| Product sales | Subscription-based O₂/CO₂/Analytics-as-a-Service | Recurring revenue streams |
| Reactive maintenance | Predictive digital services | Efficiency + trust |
| Industrial supply chain | Customer ecosystem integration | Loyalty + data monetization |
🌐 4. Strategic Pillars 2025–2030
| Pillar | Initiative | Expected EVA Impact |
|---|---|---|
| 1. Digital Operations | Deploy AI-driven logistics, predictive maintenance | +€25m/year |
| 2. Customer Solutions | Launch “Gas-as-a-Service” subscription models | +€30m/year |
| 3. Health & Specialty Services | Medical oxygen monitoring, compliance dashboards | +€15m/year |
| 4. Data Platforms | Build cloud-based customer analytics & billing | +€10m/year |
| 5. ESG & Green Financing | Access green bonds for digital projects | +€5m/year |
| → Total Potential EVA Gain: | +€85m/year (+22% total EVA) |
🧩 5. Capability Roadmap
| Year | Key Milestones | Organizational Focus |
|---|---|---|
| 2025–2026 | Launch 3 pilot projects in Digital Services | Build digital core team |
| 2026–2027 | Standardize Service-as-a-Product platform | Integrate data systems |
| 2027–2028 | Scale subscription model across DACH & EU | Customer acquisition engine |
| 2028–2029 | Monetize data insights via analytics services | Ecosystem partnerships |
| 2029–2030 | Institutionalize AI-Driven Operations | EVA Dashboard automation |
🧠 6. Strategic Advantages
- High EVA Return: 2–3× higher EVA per invested € than production assets.
- Scalable Recurring Income: Subscription and service contracts stabilize cash flow.
- Brand Differentiation: Trusted “Digital Oxygen Provider” image.
- Sustainability Alignment: Low-carbon, energy-efficient AI systems attract ESG capital.
- Talent Magnet: Digital focus attracts young engineers and data scientists.
🚧 7. Risks & Mitigations
| Risk | Description | Mitigation |
|---|---|---|
| Execution Risk | Limited digital skills internally | Build hybrid AI–OT teams & partnerships |
| Market Adoption | Clients resist service subscription | Pilot programs with value-based pricing |
| Cybersecurity | Platform vulnerabilities | AI-driven security & ISO certification |
| Capital Dilution | Overinvestment in low-margin tech | Apply EVA hurdle rates per project |
🧩 8. Implementation Governance
- Board Sponsor: CEO / CFO
- Program Office: EVA Steering Committee
- Reporting: Quarterly EVA–ABC Dashboard updates
- KPIs: EVA per € invested, recurring revenue %, service NPS
🏁 9. Decision Request
Board Approval Requested:
- CAPEX Allocation Shift – 25% to Service & Digital 2025–2030
- Creation of Digital Business Unit (DBU) with full P&L
- EVA-based Incentive System for digital leaders
- Pilot Budget 2025: €30m for Service & Digital portfolio
🔮 10. Expected Legacy Impact
By 2030, Service & Digital will transform the company into a high-EVA, asset-light, knowledge-driven industrial ecosystem.
This shift ensures:
- Sustainable cash-flow generation
- Strategic resilience against commodity cycles
- Strong positioning in the Green and AI Economy
Final Message for Board:
“The future value of industrial gases will not come from molecules, but from knowledge, data, and service ecosystems that turn gas flow into value flow.” – Josef David
