Value Creation for Industrials in Europe | Page 3

Executive Summary

Industrial companies have experienced tail winds in recent years and the subindustry of industrial machinery & components performed particularly well as some companies were able to consistently outperform their peers .
CURRENT CHALLENGES FOR INDUSTRIALS TOTAL SHAREHOLDER RETURN ( TSR ) INSIGHTS
METHODOLOGY

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DIGITAL TRANSFORMATION
Industrial companies are facing increasing pressure to adopt digital technologies . The associated increased connectivity comes with the additional challenge of protecting themselves against cyberattacks .
GEOPOLITICAL INSTABILITY
Risks are coming from geopolitical disruptions like the Russian invasion of Ukraine , and corresponding frictions between the EU / USA and Russia require industrials to monitor risks and manage their impact .
CLIMATE CHANGE & SUSTAINABILITY
Industrial companies are under increasing pressure from regulatory bodies , financing partners , and consumers to reduce their environmental impact and become more sustainable .
SUPPLY CHAIN DISRUPTIONS
The COVID-19 pandemic has highlighted the vulnerability of global supply chains , and industrial companies are now looking for ways to create more resilient supply chain networks .

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FAST POST-COVID RECOVERY
The COVID-19 pandemic negatively impacted the average TSR of industrials in 2020 due to consumption slump and insecurities , but it recovered quickly in 2021 .
MACHINERY & COMPONENTS OUTPERFORMING
The subindustry group industrial machinery & components was able to consistently outperform the overall TSR of European industrial companies .
OPERATIONAL PERFORMANCE AS KEY TSR DRIVER
The analysis confirms operating performance ( i . e ., revenue growth and EBITDA growth ) together with changes in multiple as main TSR drivers for the industrial machinery & components subindustry .
SUCCESS FACTORS
Key factors for above market TSRs are the ability to adapt to changing market conditions , investments into new technologies , and early integration of sustainable practices .
• Data analysis is based on extracts from Capital IQ including financial ratios for 412 European industrial companies .
• Division of the 412 companies into 9 subindustries .
• Determination of total shareholder return ( TSR ) CAGRs and KPIs .
• Regression analysis to determine the correlation between performance indicators and TSR .
• Benchmarking of individual companies within subindustries and examination of success factors .
AUTHORS : Christian Bast , Partner Felix von Obernitz , Principal
The authors would like to thank Leon Ostermann and David Zingg for their contribution to this publication .
Source : goetzpartners analysis
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