Definition Return on Capital Employed (ROCE)

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Presentation transcript:

Definition Return on Capital Employed (ROCE) KA/Group Business Control

Document Information Title: Definition Return on Capital Employed Description: Responsible: KA/Anders Östling Valid as of: 1 September 2010 Reviewed: 1 September 2012

ROCE Tree EBIT/Capital Employed = ROCE Financial steering Internal focus Financial steering Growth Sales EBIT Profitability Costs ROCE Fixed assets Capital efficiency CE WC EBIT/Capital Employed = ROCE

ROCE Follow up ROCE is calculated on consolidated levels only in order to exclude effects from transfer pricing Sandvik Group Business Area ( BA) Product Area (PA) ROCE is calculated on a quarterly basis only since monthly closings do not encompass a full balance sheet Actual – quarterly and year to date Forecast – quarterly and year to date

ROCE Calculations ROCE is calculated both on a 12-month rolling period and on an annualized three months result 12-month rolling ROCE is the official KPI, used in the CEO-comment and Interim report The 3-month ROCE might be used quarterly to analyze current trends 12 months ROCE ROCE = Where average capital employed is calculated as CB 5 quarters back Example: Calculation of ROCE Q3 2010 = 3 months ROCE Where average capital employed is calculated as: (OB actual quarter + CB actual quarter)/2 Example: Calculation of ROCE Q3 = OB=Opening Balance CB=Closing Balance EBIT 12 month back Average capital employed EBIT Q4 2009 - Q3 2010 Average capital employed (Q309, Q409, Q110, Q210, Q310) EBIT Q*4 Average capital employed EBIT Q3*4 (OB Q3 + CB Q3)/2