Solvay’s extensive portfolio transformation has given us a stronger base, but also led to a decentralized operating model, with multiple cultures. We are now taking the last major step in our transformation, simplifying our Group to unleash its full potential and rally our teams around a shared single Purpose and culture. We have a new Group operating model: Solvay ONE.
Solvay ONE will support our performance-driven culture to help us win together as ONE Group. This new shared operating model is the how that will help us inform everything we do, from how we collaborate with our customers, to how we allocate our capital, R&I and talents, and how we leverage the operational synergies throughout the Group.
Shift to Enterprise leadership
Solvay is moving from a decentralized operating model to one of Enterprise leadership. Our business units will remain empowered, with responsibility for generating profits, cash and returns, each one with its own specific mandate. In addition, leaders of entities will be focused on unleashing the full potential of Solvay through key cross-Group initiatives, and incentives will be changed to include impact on Solvay as a whole, as well as business delivery.
We will leverage the many advantages of being one Group to enhance our collective performance. We will adopt a Group-level approach to our business support activities, sharing best practices and expertise across the Group and developing simplified processes.
We listened to our customers. We want to bring them the best of Solvay by refocusing our attention and resources, optimizing our end-to-end value chain process, smartly reducing indirect costs to invest in growth and optimizing asset utilization.
Manage our resources in a centralized and disciplined manner
We will manage resources, investments, R&I and talents centrally. Capex and R&I will target the highest growth opportunities, with strong discipline over total investment size, containing Capex to 7-8% of sales. Better choices, not higher spend, will generate more growth, cash and returns. For example, 60% of Capex and over 50% of R&I will go to Materials, to support growth investments in fields like thermoplastic composites, where the addressable market (for the aerospace and oil & gas markets) is worth some €500 million. This also applies to our talent management, where we want to ensure we have our people in the position where they contribute best to the Group’s success.
Improve our customer experience
We have opened a new chapter in customer relations: we want to be “customer-obsessed”, with a cross-functional approach that aligns the entire Group. We aim to fully understand who our customers are and tailor our approach accordingly. We have identified strategic key accounts that represent ~50% of our growth opportunities. These will be managed at Group level, with a single key account management team handling all of their needs. This will bring immediate benefits for the customer, facilitate collaboration, streamline Solvay’s resources and increase the share of wallet.
We will measure our progress using Net Promoter System, embarking, for strategic accounts, all our frontline employees. This combines digital surveys with personal interaction between customers and Solvay’s frontline teams and will be followed up by action plans. We will also develop our talent and management pipeline and leverage digital tools and analytics capabilities, introducing a new group-wide e-commerce platform for order placement and delivery management.
Acting as ONE Group
Create a repeatable cost and cash playbook
We are committed to simplification and synergies, coupling delivery on the simplification program already underway with the launch of a new synergy program. This will create a consistent structure across Solvay, decreasing indirect spend through improved group-wide policies and implementing an order-to-cash program, by reducing our logistics and packaging costs. Our target is to achieve €100 to €150 million of cost savings by 2024.
We will also step up productivity by increasing yield in our manufacturing plants and improving raw materials and energy efficiency. While reducing costs, we optimize asset utilization, focusing on operational efficiencies and have begun deploying a series of digital processes. Some use data analytics and modelling to increase efficiency and others are more customer focused. Rollout has begun in 20 plants already, with another 30 soon to come. Our productivity measures target a run rate of €200 million by 2024.
Together, these two programs are slated to generate cumulative structural gross cost savings of €300 to €350 million yearly by 2024.
Besides the cost savings, we target additional measures on cash. We aim to generate €500 million more cumulative cash from our operations in the next five years via three levers:
- Reduced pensions cash cost, at €40 million yearly as of 2020, by redeploying part of the net proceeds from the polyamide divestment to reduce pension liabilities.
- Continued decrease in financial charges, reaching €35 million by 2024, as we further optimize and reduce the debt structure through strong operational free cash flow delivery and benefiting from the remaining net proceeds from the polyamide divestment.
- A one-time €100 million release of working capital by our order-to-cash program, driven by a leaner supply chain and more effective inventory management.