Financial performance

The industrial gases industry routinely manages to earn attractive return rates. From 1992 to 2004, the average annual return on invested capital (ROIC) before tax was 13.6 percent. The industry s profitability was thus between that of specialty chemicals (17.8%) and commodities (12%), but more stable. In 2004, industrial gases almost came out on top of specialties, due to the latter s declining profitability in the second half of the 90s (Fig. 11.2).3) Air, its main raw material, is free , and its products are probably the purest commodities from a chemical point of view. In any case, the industrial gases industry has managed to deliver better and less volatile returns than the commodity chemicals sector. 

Source CITPD (McKinsey Chemical Long-ieim Performance Database) Fig. 11.2 Profitability by sector, 1992-2004. 

3) McKinsey Chemicals Long-term Performance Database 

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A P2 audit differs from most other types of audits because it makes use of a dual benchmarking approach namely, it uses both technical (environmental performance) and financial performance as its basis for making corrective actions. The status quo most often serves as the benchmark, though other standards certainly can be devised. A P2 audit can also affect non-environmental issues. The types of corrective actions can affect other types of wastes, energy, occupational safety, product quality, and worker productivity. 

Financial performance of the various farm enterprises the method is to allocate costs to each separate enterprise, so that these can be compared with sales figures and also show how well each enterprise has performed. Are the pigs doing better than the sheep, and what about the hens ... 

Reganold JP, Palmer AS, Lockhart JC, Macgregor AN (1993) Soil quality and financial performance of biodynamic and conventional farms in New Zealand. Science 260 344-349... 

The principal role of the CRO is to contribute to the enhancement of the financial performance of its customers (Table 21.1). Improvement in the efficiency of their clients product development activities provides benefits to regulators, physicians and their patients. These include reduced cycle time, availability of external capacity, increased quality of trial management, and higher quality clinical data, all of which can result in lower labor costs. In late stage peri-approval trials, CROs may also play a role in developing safety profiles in large patient populations that are exposed to a new product after it is approved for manufacture and sale. Such trials can also assist the revenue growth of a new product. 

To help shorten registration time and reduce costs, CROs can provide benefits to sponsors listed below. Since each of these factors can have a major beneficial impact on the financial performance of the sponsor, it may be helpful to describe the impact of each on the development process. If a sponsor elects to combine several of these elements in an effective fashion, the resulting positive leverage on the trial process can be substantial. 

For the accumulated costs and resources devoted to the development of a new chemical entity (NCE) or new molecular entity (NME) to make sense financially, the commercial potential of the compound must be evaluated in a rigorous manner. Compounds whose expected financial performance does not warrant these high investment costs must be abandoned or out-licensed as soon as possible so as to direct resources toward more profitable endeavors. By operating effectively, a well-designed drug discovery and development process can focus its efforts to operate efficiently on the compounds that will maximize cash flow to the pharmaceutical firm. 

Strategic position, organic growth, and financial performance... 

Firms that were unable to meet the requirements of the 4+2 formula dramatically increased their chances of failure and the differences in financial performance among these firms were remarkable. Winners produced total returns to shareholders (TRS) of 945% over the ten-year period of the study, whereas Tosers were only able to grow TRS 62%. Sales rose 415% for Winners, but only 83% for Losers. Similar results held for operating income. 

Ittner, C. Larcker, D. F. 1998. Are nonfinancial measures leading indicators of financial performance. An analysis of customer satisfaction. Journal of Accounting Research, 36 (Supplement) 1-35. 

Loveman, G. W. 1998. Employee satisfaction, customer loyalty, and financial performance an empirical examination of the service profit chain in retail banking. Journal of Service Research, 2(2) 138-144. 

In effect, a growing imbalance between shareholder expectations for continued shortterm financial performance and the longer-term needs of the industry to change its operating model to deliver new product innovations is resulting in increased tension. 

Besides a financial performance dialogue, specialty chemicals conglomerates also need to establish an operational performance dialogue. The corporate center can help drive operational excellence by challenging and coaching the individual business units, setting benchmarks, and fostering know-how transfer between the units. 

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