Progress continues on value creation strategy; agreement signed for indirect spend optimization initiative; overall cost savings now expected to exceed USD 100 million versus prior target of USD 85 million; 2015 adjusted earnings per share target now greater than USD 1.00 versus prior target of USD 0.90 – USD 1.00.
Ferro Corporation has announced that it has entered into a five-year agreement with Procurian Inc., a leading specialist in procurement solutions, and expanded its relationship with Capgemini, a leading provider of technology and outsourcing services, to maximize the value derived from the company’s indirect spend procurement process.
As part of Ferro’s value creation strategy, the company is initiating a comprehensive programme to transform the way indirect spend is managed, improving procurement effectiveness and reducing costs. The programme will focus on expenditure categories including, among others, professional and contract services, facilities, information technology and telecommunications, packaging, capital equipment, utilities, logistics, and travel. Ferro’s annual expenditures for such goods and services are approximately USD 325 million.
The programme will further standardize procurement processes and bring deep market intelligence and category expertise to drive cost savings and optimize spend for indirect goods and services. Procurian will provide source-to-contract and category management services that include category planning, sourcing, demand management, contracting and compliance tools. Ferro also has expanded its current agreement with Capgemini to include the outsourcing of certain procurement processes. Capgemini will assist in standardizing the back-office procurement procedures for indirect spend and will provide data management services, including purchase order creation and management. Capgemini and Procurian have integrated their offerings to ensure savings are realized and sustained over time. Overall, the new programme is expected to increase operational efficiencies, drive savings and optimize indirect spend while providing a flexible, scalable solution as the company’s indirect procurement needs continue to evolve.
With implementation of the indirect spend optimization initiative, the company now is targeting adjusted earnings for 2015 in excess of USD 1.00 per share. Targets for 2015 have been updated to include the following metrics:
- value-added sales growth: global GDP + 1%;
- gross profit margin: greater than 21.5% (prior: greater than 21%);
- SG&A expense: less than USD 50 million per quarter (prior: less than 13%);
- EBITDA: greater than 12.5% (prior: approximately 11%);
- adjusted earnings per share: In excess of USD 1.00 (prior: USD 0.90 – USD 1.00);
- return on invested capital: greater than 15%.
Commenting on the indirect spend initiative, Peter Thomas, President and Chief Executive Officer, said “We are pleased to be expanding our relationship with Capgemini and we look forward to working with Procurian on this important programme. We continue to vigorously execute on our strategy and are firmly focused on reducing operating costs and improving returns. The benefits we expect to achieve in our indirect spend procurement function give us further confidence that our cost-saving initiatives will generate savings greater than USD 100 million and drive 2015 adjusted earnings in excess of USD 1.00 per share.”
Ferro Corporation is a leading global supplier of technology-based performance materials and chemicals for manufacturers. Ferro products are sold into the building and construction, automotive, appliances, electronics, household furnishings, and industrial products markets. Headquartered in Mayfield Heights, Ohio, the company has approximately 4,600 employees globally and reported 2012 sales of USD 1.8 billion.