Industrial Gas Sector
RapidKnowHowCLARITY™ Filter applied
A) Step 1 — What problem are we solving?
Problem: The business earns too little profit per euro of capital.
ROCE 8% means:
“For every €100 invested, we earn €8 operating profit.”
Target ROCE 15% means:
“For every €100 invested, we earn €15 operating profit.”
So we must create +€7 profit per €100 capital (or reduce capital while holding profit).
B) Step 2 — What is the ONE variable that drives the result?
ROCE = EBIT ÷ Capital Employed
So the ONE driver is:
✅ EBIT uplift + Capital release (together).
Industrial gas truth:
You won’t reach 15% by “selling more volume” alone.
You reach it by pricing + mix + working capital + capex discipline.
C) Step 3 — What happens if we do nothing?
If you stay at 8%:
- Capital becomes expensive (higher interest / risk premium)
- Big competitors out-invest you
- Hydrogen/energy volatility hits margins
- Board loses patience
- Valuation multiple compresses
Simple: low ROCE becomes a slow death spiral.
D) Step 4 — What simple actions change the outcome?
The 8-Month ROCE Jump Plan (4 Levers)
Lever 1 — Pricing & Contract Reset (Weeks 1–10)
Goal: EBIT +2–4 points
- Reprice merchant and cylinder segments weekly (not quarterly)
- Enforce energy pass-through automatically (no exceptions without CFO sign-off)
- Stop “free services” hidden in contracts
- Kill unprofitable customers fast (or reprice)
“Charge the right price and stop giving gifts for free.”
Lever 2 — Cost & Energy Optimization (Weeks 2–20)
Goal: EBIT +1–2 points
- Fix top 20 energy leakage sites (ASUs, compressors, liquefiers)
- Predictive maintenance on the top 30 critical assets
- Logistics routing: reduce emergency deliveries and empty miles
“Stop wasting electricity and fuel.”
Lever 3 — Working Capital Release (Weeks 1–16)
Goal: Capital -10–20%
- Receivables: tighten terms, accelerate collections, automate disputes
- Inventory: reduce slow movers, increase refill cycles accuracy
- Supplier terms: renegotiate where leverage exists
“Get paid faster and don’t store too much stuff.”
Lever 4 — Capex Freeze + ROCE Gate (Weeks 1–32)
Goal: Capital discipline + ROCE protection
- Freeze all “nice-to-have” capex for 90 days
- Any capex must pass: ROCE > 15% within 24 months
- Shift from owned assets to partner/merchant supply where possible (asset-light)
“Don’t buy big things unless they pay back clearly.”
E) Step 5 — How do we measure success?
Weekly Dashboard (5 KPIs only)
- ROCE % (rolling)
- EBIT €/month
- Price realization vs list
- Working capital days (DSO + inventory days − DPO)
- Capex spend vs gate (approved vs blocked)
Rule:
If a KPI doesn’t move weekly — it’s not a lever.
F) The 8-Month Execution Timeline (Simple)
Month 1–2: Pricing reset + capex freeze + collections sprint
Month 3–4: Energy optimization + logistics routing + inventory cleanup
Month 5–6: Contract normalization + customer portfolio cleanup
Month 7–8: Lock-in new standards + audit + reinforce
G) The Core Strategic Sentence
“To raise ROCE fast, we must earn more EBIT while using less capital — mainly by pricing discipline and working-capital release.”
