Many suppliers and service providers took a hit to their balance sheets both last year and this as a result of the financial and economic crisis, largely through a steep drop in orders right across the machine and plant engineering sector. By applying long-term financial management and aligning the Group to a defined crisis scenario early on, we were able to further strengthen our balance sheet despite the challenging economic environment. A key focus in strategic purchasing at Demag Cranes AG therefore lay on trimming working capital – primarily supplies and inventories – to match the reduced order intake. We scaled back key parameters, for example, inventories by nearly EUR 60 million and trade receivables by some EUR 50 million. As cutting material purchases can have a major financial impact on the supplier base, a constant focus in our close working relationships with suppliers was on the financial circumstances of the companies involved. The emphasis here was on detecting adverse turns of events at an early stage and taking corrective action as needed. By enforcing rigorous working capital and cash flow management – and despite a record dividend payout totalling roughly EUR 30 million – we sharply reduced net debt compared with the previous financial year-end by some EUR 12 million to around EUR 6 million. Apart from establishing effective means of control and Group-wide standards in areas such as payments management, receivables management and strategic purchasing, a further notable factor in this accomplishment comprised improvements in global processes. In parallel, we achieved a further boost in flexibility and substantially lowered breakeven points by successfully implementing our restructuring programme. At 27.8 percent, our equity ratio stayed strong and above the average for comparable industrial companies.

Management must be enabled by information not only to spot key changes early on, but also to take swift charge of them. This is the basic tenet of the financial control system adopted by Demag Cranes AG in financial year 2007/2008. With the new system, all key information can be collated, processed and presented in decision-ready, user-specific reports. CFO Rainer Beaujean explains: “Through our control activities, we enforce value focus throughout the Group. This means we need comparable data on segments, regions and companies. We bring this out by setting clear and uniform standards in financial control. Now those are in place, our system is increasingly delivering results and we are seeing the benefits.”

Decision makers receive most of the information they need in the form of performance indicators. We developed our system of performance indicators on the basis of our innovative financial control system, making use of wide-ranging empirical studies of revenue and liquidity together with early warning indicators and signals such as shrinking order books. With this modern system of performance metrics, Demag Cranes AG can budget reliably, quickly spot off-target performance and hold the Group on course in terms of earnings while keeping strong focus on sustained value growth.