Executive Summary
Management’s stated long-term target of a 7% EBIT margin is a vanity metric that distracts from the core objective of value creation. Our Shareholder Value Analysis (SVA) reveals that even if this target were achieved, it would be insufficient to cover the firm’s capital charge. The path to positive Economic Profit requires a dual focus on margin expansion and capital efficiency, a dimension absent from margin-only targets.
| Metric | Stated Corporate Target | SVA Required for Positive Economic Profit | Current Reality (FY2023 Est.) | Delta (Reality vs. SVA) |
| :— | :— | :— | :— | :— |
| EBIT Margin | ~7.0% | >8.5% | 5.2% | -3.3% |
| ROIC | Not Stated | >8.0% | 6.2% | -1.8% |
| Economic Profit | Not Stated | > €0 | -€1.4B | -€1.4B |
The disconnect is severe. The current operational reality is 330 basis points below the required EBIT margin to simply break even on a risk-adjusted capital basis. Focusing solely on a 7% margin target is a recipe for continued, albeit slower, value destruction.
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