SUPPLY CHAIN

Economy slows customer business in some sectors

Revenue in the SUPPLY CHAIN Division amounted to €6,206 million in the first half of 2009 (previous year: €6,702 million), representing a 7.4% decline. Adjusted for adverse currency effects of €179 million, organic revenue fell by 4.8%. This was due to the economic slowdown impacting customer activity levels, particularly in the Automotive, Technology and Fashion sectors. Exposure in these sectors is variable by region with the Americas and Continental Europe being the most affected. Organic revenue fell in these regions by 11.7% and 12.3%, respectively. The UK business showed improvement driven by increased Health sector volumes. Williams Lea increased organic revenue by 2.3% with solid new business wins. 

Contract renewal rate exceeds 90%

The Supply Chain Business Unit gained new contracts worth around €550 million in annualised revenue with new and existing customers in the first half of 2009, much in line with the prior year. The contract renewal rate continues to exceed 90%. 

EBIT before non-recurring items declined

Profit from operating activities (EBIT) of €50 million for the first half of 2009 represented a 49.0% reduction on the previous year. EBIT in the second quarter was €16 million (previous year: €64 million). The prior-year figures were adjusted because we no longer report the return on plan assets in connection with pension obligations as part of EBIT. It is now reported under the Group’s net finance costs/net financial income. The return on sales was 0.8% (previous year: 1.5%). Adjusted for restructuring costs of €8 million, EBIT before non-recurring items declined by 40.8% to €58 million in the first half of the year, which reflects a 0.9% return on sales.

Profit was impacted by a €25 million charge following the insolvency application of Arcandor AG. Falling volumes and margin pressures were partially offset by operational productivity gains and overhead savings. The major restructuring of the US automotive industry also impacted results in the quarter, however, the business remains well positioned to assist in the recovery plans of the restructured customer base.

Operating cash flow was €62 million (previous year: €–47 million). Building on the prior-year trend, we reduced working capital further in the reporting period and cash flow improved as a result of refining our management of debtor and creditor metrics.