The Strategic Way Forward are having a clear effect. But although we achieved a further significant improvement in adjusted EBIT in the past fiscal year, we have not yet achieved our sustainable minimum requirement. Ambitious targets for our financial indicators and targeted improvements in strategic areas, including via indirect financial indicators, are therefore important elements of the Strategic Way Forward.
We are working hard to generate strong, stable positive free cash flow again in order to provide the funds needed to expand our growth businesses and pay a solid dividend to our shareholders. For this we need EBIT of at least €2 billion. We are convinced that we will achieve the earnings growth needed for this minimum requirement and beyond by strictly following the Strategic Way Forward in all business area. We have defined clear targets for this:
- Components Technology - Profitable growth, medium- to long-term return to EBIT margins of 6% to 8% through successful ramp-up of new plants and continuation of efficiency and restructuring measures
- Elevator Technology – Profitable growth and efficiency and restructuring measures for continuing improvements to EBIT margin by 0.5 to 0.7 percentage points per year to 15% long-term and an EBIT contribution of over €1 billion
- Industrial Solutions – Long-term sales expansion by on average around 5% per year to €8 billion with a sustainable EBIT margin of 6 to 7% through implementation of the new growth strategy
- Materials Services – Return to higher margin levels with recovery of materials markets and successful restructuring of AST
- Steel Europe – EBIT improvement through efficiency measures and differentiation initiatives to sustainably earn more than the cost of capital across the cycle
- Steel America – Further operating improvement with positive EBIT contributions
We expect that further progress on our Strategic Way Forward will again be reflected overall in our key performance indicators in fiscal 2015/2016. However, the economic climate has deteriorated and uncertainties have increased. Our materials businesses in particular are exposed to considerable foreign trade risks, because China's growing production surplus is being diverted massively into exports, resulting in regional supply overhangs and sharply falling prices worldwide. Despite these challenges and the fact that visibility for large parts of our materials and components businesses in the current economic climate does not extend far beyond a quarter, in the current fiscal year we expect a significant improvement in value added (tkVA), FCF before M&A level with the prior year and adjusted EBIT between €1.6 billion and €1.9 billion. More information on our key performance indicators can be found in this section under "Management of the Group", and details on the forecast for the current fiscal year are provided in the forecast report.
Indirect financial targets
To ensure the positive development of our financial indicators in the short, medium and long term, we must also systematically improve the performance of important indirect financial parameters. thyssenkrupp has therefore set itself indirect financial targets (IFTs) in the areas technology and innovations, environment, climate and energy, purchasing, and people. Our progress towards these targets is measured annually by thyssenkrupp's Sustainability Committee, which includes the Group Executive Board, the CEOs of the business areas and heads of corporate functions. Information on improvements already achieved, the status of target achievement and the associated management processes is provided in the corresponding sections and on our website.
Source: Annual Report 2014/2015, p. 42-43