Competition proposal: ELEKTROVAZHMASH Kharkiv Jean Andre Barbosa 12/03/2016
Current situation and problems of and industry Available figures and information available for ETM (see annex) show: Negative trends on all main indicators and ratios (even in UAH) since 2013 Dramatic and continuous decrease in sales since 2013 EBITDA close to 0 in 2015 (9 months) Cash available close to 0 (2015 (9 months)) Debt/equity increasing dramatically Decrease in nb of employees in 2015 (6 months) as well as in average salary (probably creating social and motivation issues) No available information for backlog of the company for coming years There is a severe negative trend accelerating. The company’s survival is at risk Jean-Andre Barbosa- ETM Competition proposal
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Current situation and problems of and industry The company is in a deep crisis situation where it’s survival is at stake (high risk of going concern) External risks on assets of the company (raid) Very exposed client portfolio risk has materialized (Russia), no short term options Debt and cash issues seem to be very serious Backlog takes time to build, and selling time is long Size and social responsibility of the company (5900 workers) makes it a sensitive and political problem Teams and public lack trust on future and management Probably not all issues are known at this stage These issues are mostly structural, no quick fix Jean-Andre Barbosa- ETM Competition proposal
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Solutions to business problems and prospects for its development • First 100 days (crisis management-Diagnosis): 1.
Ensure the company is in a position to continue activity (short term survival plan) • Maximize income of cash and zero expenditure • Review debt and debt maturity, cash situation, cashflow expectations-negotiate financing plan if needed • Adjust costs and Working capital immediately as much as possible (with “zero budget +” approach if needed) 2. Ensure safety of assets of the company • Put the assets of the company safe from any external/internal attack 3. Launch a comprehensive internal audit based on international benchmarks 4. Concentrate on short term sales (book and buy approach) 5. Carefully review the backlog of orders, identify promising sectors 6. Manage communication (internal/external): KEY Jean-Andre Barbosa- ETM Competition proposal
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Solutions to business problems and prospects for its development • First year (Determining strategy/implementing): – GM: • Constitute a robust and solid Management Board • Prepare and adopt by Management Board a long range plan (3 to 5 years) for the company • Ensure effective communication to keep stakeholders on board
– Sales: • Identify the segments and geographies to be developed • Define the positioning and pricing policy • Put in place an effective commercial organization • Work on the backlog • Work on developing short term sales (maintenance and services) – Finance: • Establish a financing plan for the company • Discuss and negotiate with shareholder and stakeholders of way forward based on the Long range plan • Introduce clear financing procedures regarding operations and Capex Jean-Andre Barbosa- ETM Competition proposal
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Solutions to business problems and prospects for its development • First year (Determining strategy/implementing): – Production: • Focus on safety and safety procedures • Rationalize production as long as budget is constraint • Make sure to keep competences and skills in-house • Proceed to only absolutely necessary Capex • Make sure to deliver on time and on cost • Focus on quality (make things right from the first time) – Purchasing: • Apply recommendations from internal audit • Ensure an effective purchasing process • Work on stocks and stocks guidelines – HR: • • • • • •
Establish an effective communication inside and outside the company Redesign an effective and simplified organization Screen and identify the talents Work with middle management Ensure development of competences and skills Focus on safety Jean-Andre Barbosa- ETM Competition proposal
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Solutions to business problems and prospects for its development • Three to five years (Results from turnaround/ New development phase): – Bring back ETM into a leadership position: • Come back to a sustainable business situation (profit and positive cash) asap • Be as close as possible to benchmarks and goals established by shareholder (ROA of 7 to 10%) • Efficient and Westerned-style efficient internal organization in place • New company culture introduced • New markets developed • Development of an innovation culture • Fully benefitting from UA competitive advantages Jean-Andre Barbosa- ETM Competition proposal
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Competitive advantage of the applicant More than 5 years experience as General Manager in Ukraine (Saint-Gobain Group) Has experience in turnaround processes and crisis management, especially in Ukraine and Russia Experienced in business development and export markets Strong leadership Recognized to be able to create and maintain robust and solid teams Extensive experience within multicultural environments Experience in energy sector, as well as in nuclear and heavy industry Result and customer oriented Very experienced in Government and Public relations Significant experience within National and International Jean-Andre Barbosa-Commission) ETM Competition proposal 8 Administrations (European
ANNEX: Reference figures for ETM analysis Income statement (me.gov.ua)
Balance sheet (me.gov.ua)
Net sales Cost of goods sold Gross profit EBITDA Depreciation Operating profit Net financial income Profit/loss before taxes Corporate Income Tax Net income
2015 (9mths) 1232 1015 217 31 43 -12 -41 -53 0 -53
2014 2014 (9mths) 1865 1527 1552 1232 314 295 114 165 51 37 63 127 -33 -23 31 104 8 21 22 84
2013 2205 1827 378 163 40 123 -23 100 21 79
Total assets Fixed assets PPE Current assets Accounts receivables Cash&cash equivalent Total liabilities&equities Total liabilities Accounts payable Debt Equity
2015 (9mths) 1542 355 274 1187 473 99 1542 1160 601 541 382
2014 2014 (9mths) 1425 1355 353 362 314 271 1072 993 398 326 205 1355 1425 1355 979 857 576 490 379 341 446 498
2013 1517 319 265 1198 352 1517 1517 1089 799 240 428
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ANNEX: Reference figures for ETM analysis Ratios (me.gov.ua)
Snapshot (me.gov.ua)
Average exch rate (bank.gov.ua) Inflation (index.minfin.com.ua)
Sales growth EBITDA Net Margin Debt/Equity Net Debt/EBITDA ROE ROA ROCE
2015 (9mths) -19.30% 2.60% -4.30% 141.90% 14.1 -17.50% -4.80% -1.70%
2014 2014 (9mths) -15.40% 1.50% 6.10% 10.80% 1.20% 5.50% 85% 68.40% 1.5 0.7 5.10% 23.40% 1.50% 7.80% 7.60% 20.20%
2013 51.90% 7.40% 3.60% 56.10% 0.3 19.70% 5.50% 18.40%
Nb of employees Average mthly salary
2015 (9mths) 5891 3584
2014 2014 (9mths) 6479 6586 4149 4422
2013 6467 4587
100 USD/UAH
2015 2184.47
2014 1188.67
2013 799.3
2012 799.1
2011 796.76
2010 793.56
inflation index
2015 143.3
2014 124.9
2013 100.5
2012 99.8
2011 104.6
2010 109.1
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