We implemented a new organizational structure in early 2019 in order to upgrade our capabilities and to take out complexity from the organization. The new structure enables faster decision making, more agility to respond to change, and enhanced ownership to drive performance and customer centricity.
The four business units (BU) have global P&L accountability for strategy and delivery in their distinct areas and therefore have dedicated production facilities and commercial and technology teams within their respective organizations. This helps them develop a customer-centric approach aligned with the specific needs and dynamics of their markets and enables each BU to bring new technological developments to market faster.
The functions take a role as strategic business partners, accountable for providing specific expertise and services across the Group and ensuring the business has the right capabilities to deliver on short and long term goals.
Through the Customer Excellence transformation program, we expanded our core commercial capabilities in several ways in 2019 and shifted the focal point to superior value creation.
Better customer segmentation and account management have helped us steer our attention more efficiently. Much of the profit restoration progress in the Bridon-Bekaert Ropes Group is about better segmenting the products and markets that help expanding the bottom line.
The Bekaert Customer Excellence (BCE) team developed and rolled out a pricing and margin management tool that facilitates the communication of pricing instructions and performance among our sales teams.
In 2019, Bekaert implemented significant cost savings actions, refinanced a large portion of the debt at better conditions, made robust progress in the profit restoration of some weaker performing business areas, and implemented restructuring and closure decisions where performance and market deterioration had proven to be structural and irreversible.
The impact of the profit restoration approach, already visible in the 2019 results, will deliver additional benefits in the near future. We have successfully managed to turn around some previously loss-generating entities like Bekaert Qingdao in China, Proalco in Colombia and Bekaert Bradford in the UK. Bridon-Bekaert Ropes Group continues to make progress in enhancing the business mix and profit margins, and more than doubled last year’s EBITDA margin. The benefits from recently implemented footprint adjustments, including restructuring programs and plant closures in Belgium, US, Malaysia, Brazil and UAE, will enhance our profit performance from 2020 onwards.
In 2019, the ‘toolbox’ of the Bekaert Manufacturing Excellence (BMS) program was extended with a number of new methods and applications: the ABC (Always Committed, Best Quality, Customer Delight) program, which focuses on quality improvements that directly and visibly benefit our customers, and BMS Digital, which brings digital tools to the shop floor.
With ABC, Bekaert wants to achieve a breakthrough in quality performance, durable problem solving and elimination, and a true customer-centric mindset throughout our operations worldwide. As such, it brings manufacturing and customer excellence together on the shop floor. The pilot plants where ABC was implemented showed immediate and durable results. This worked as a catalyst in the fast deployment of the program in all plants worldwide.
The digital component of BMS brings digital tools to the shop floor that leverage the efforts of the ABC program. For supervisors, the switch to paperless and real-time feedback enables them to respond immediately to process and specification deviations.
In order to create a healthy balance sheet and enable the company to restore its capability to invest in future growth, one of the priorities for 2019 was to deleverage our net debt. A key driver in our successful approach was the significant reduction of the working capital.
While optimizing working capital is an ongoing objective of the company, we made it a ‘must win battle’ in 2019. All teams worldwide organized themselves to work on each and every component of working capital. The 2019 numbers speak for themselves: the working capital reduced by 20% at the close of 2019, compared with the year before. This was a result of much lower inventories, better aligned payment terms, successful cash collection policies, and increased factoring.
Net debt on underlying EBITDA decreased from 2.7 at the close of 2018 to 2.1 at the end of 2019.
In addition to debt deleveraging, we refinanced a large part of our debt through the issue of a Schuldschein and a retail bond, hereby spreading the debt maturity over a longer period and decreasing the interest charges by 20%, year-on-year. These actions are restoring a healthy balance sheet in a structural way and will enable us to seize future growth opportunities.
CFO Taoufiq Boussaid and former CFO ad interim Frank Vromant ring the bell at the Brussels Euronext stock exchange to celebrate the successful issue of a new retail bond in October 2019.