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Case -

In the early 1980s there were 2 important growth opportunities:


a.North American Commercial Sector
b.Residential and commercial markets in Europe

As per its goal of expanding in Europe it had two major strategies:


A)Inorganic growth through acquisition of 4 companies
1.Corliss, a UK based manufacturer of HVAC systems.
2.Fontaire, a Brussels- based manufacturer of fans and ventila
3.Control del Clima, a Barcelona-based manufacturer of clima
4.AeroPuro, a Bresica, Italy-based manufacturer of compressi
B)Clayton restructured its organisation in 1988.
1.All operations in the United States and Canada were placed
2.The European acquisitions reported to a newly created Clay

EU Scene -
Market Penetration Air Conditioning System
Italy 7%
US 71%
Spain 11%
1 Brussels became the formal Headquarters for Clayton Europe. Four country mangers were appointed fo
2 Asian producers have gain preferences over European companies, largely on the basis of price
3 Led by Buis - Company increased its global market share for Europe from 33 % in 2000 to 45 % in 2009
Break of Sales
UK 12%
Spain 20%
BG/FR 38%
Italy 30%

Problem Statement -
1 challenges to meet the new 10/10/10 targets set
2 The country is lagging in revenue growth which has resulted in receivables and inventories both being a
3 Further the headcount reduction target cannot be met due to stringent local laws and tense union rela

Reasons
1 Many Europeans saw air conditioning as an expensive American luxury that harmed the environment
2 Most of the Europeans preferred local brands prevalent in the European markets
3 Stiff competition from cheaper options provided by a few Asian manufacturers.
4 Claytons products were not aligned as per the market requirements (required heavy duct work but)
5 Control Cost - One of the candidates for such policy adoption was to cut headcounts by eliminating red
6 Acquiring of AeroPuro was not turning out to be very fruitful (5th rank)
7 The penetration was poor since the product was too expensive and also behind competitors in innovati
8 As part of upgrade and expand operations, 203 people were employed, which was 20-30% higher than
9 Generous Benefit
10 Chillers lagged operating efficiencies of market leading units by 15%.

Macro Issues & Data Evaluation


1 Global Recession resulting in decrease in demand for Claytons products worldwide
Exhibit 4 2004 2005
Revenue 4.3
EBIDTA 14.8 14.2
Net Income 6.5 6
Impact: The impact is the fall in demand, increase in receivables and inv

2 Human resources problems and tough resistance it is facing from worker unions at its Italy plan. Also, g

Exhibit 6 2004 2005


Units 348 372
Revenue 75.2 82.4
Headcount 190 196
EBIDTA 10.4 10.9
Capex 10.8 11.2
3 facing tough competition from Asian players who are supplying cheaper air conditioning units in Europ
Clayton products are not adoptable to European houses
4 European organization is divided on product strategy
5 The European leadership wants to focus on compression based units, while Spain management is inves
6 Consumer preference to certain emerging technologies like absorption cooling and central district cool
facturer of HVAC systems.
d manufacturer of fans and ventilating equipment.
elona-based manufacturer of climate control products for industrial and commercial applications.
-based manufacturer of compression chillers for large commercial, public and institutional installations.

ed States and Canada were placed under Clayton North America.


s reported to a newly created Clayton Europe. Each of these being headed by a regional company president.

ntry mangers were appointed for by new president who were given responsibility for sales and exports
ely on the basis of price
om 33 % in 2000 to 45 % in 2009

bles and inventories both being above 120 days sales.


local laws and tense union relationships.

that harmed the environment

equired heavy duct work but)


t headcounts by eliminating redundancies.
o behind competitors in innovative features
, which was 20-30% higher than what was actually required

s worldwide
2006 2007 2008 2009
4.1 3.2 -4.1 -17.6
10.6 8.2 3.7 1.5
3.5 0.6 -2.9 -6.1
mand, increase in receivables and inventories

2006 2007 2008 2009

Revenue EBIDTA Net Income

er unions at its Italy plan. Also, government in Italy does not support lay-off strategies.

2006 2007 2008 2009


382 386 375 155
86.7 89.6 86.7 34
204 208 204 203
8.4 2.0 (12.8) (7.3)
2.3 2.8 3.0 0.8
r air conditioning units in European market

while Spain management is investing and producing absorption based unit


cooling and central district cooling have threatened Claytons business model
Option 1 Focus on Restoring Brescias profitability and long term viability; it involves procedures to
Pros
1.Investment period only limited to 12 months.

2.Renewed product could target Italian commercial customers and effectively compete
against the Asian products.
3.Achieve the higher management target to promote Chiller sales in rest of Europe

4.Initial investment is comparatively lower.

5.It will increase capacity utilization and increase efficiency


6.Investment in development of the new product line will be beneficial post-recession.

7.This will not raise any resistance from Italian workers union and the government.
8.Existing market of compression based units will not be affected

Option 2 Gradual Phase out of Compression line coolers, and introduction of the absorption line ch
Option 2 is a viable strategy, which targets increase in market share of chillers in countries outside Italy. However, the strategy r
Pros
1. Tap the growing market demand in Germany, Scandinavia, Spain and other
countries
2. Ability to market the product as a less carbon intensive, eco friendly and energy
efficient product.

3. Higher NPV of investment, since it requires $15mn investment over 5 years, which
is more profitable than Option A ($5mn over 1 year), taking into consideration the time
value of money.
4. Clayton already has the license to first class technology in this area.
5. It will help against competition from Asian companies in this area at cheaper
prices.
6. Absorption based technology offers environment-friendly alternative to
customers.

7. It is the phased changeover process. Investment of 15 Million is needed in 5 years


8. Over-employment problem can be addressed.

Option 3 Focus on efficiency measures to restore financial profitability, and analyzing various strate
Option 3 is not at all viable, since the strategy doesnt meet any of the Management objectives. It in fact is a very conservative
Pros
Risk averse measure
Moving in line with the economic downturn, and waiting for economy driven growth
and demand.
Would meet the existing credit liabilities of Clayton SpA.

In uncertainty of economic condition maintaining status quo can be good strategy.

Company can concentrate on cost reduction and increase in efficiency.

It provides flexibility to adopt strategy based one new trend post-recession.


No major investment or restructuring is required.

It does not have risk in case recession prolongs or consumer trend changes
it involves procedures to revitalize plant efficient, product development initiatives, revitalize the compression chiller line by a
Cons
Strategy fails to promote the sales of other product lines in Italy.
No strategy to target the potential Italian residential climate control market.

Option 1 to restore Brescias profitability is


Cost cutting strategy will involve layoffs, which would adversely affect the
companys political relationships. This would in turn affect their present sales.
If recession prolongs, investment in product development may not give ROI.

More efforts and expenditure on sales and marketing initiatives will be required.
There are no plans to accommodate emerging technology like absorption cooling.

The solution does not address over-employment problem at the Bresica plant.
No immediate results guaranteed by this solution.

of the absorption line chiller. The new product aims to meet the growing customer preference for energy efficient and less c
taly. However, the strategy requires high amount of investment, as well as restructuring and phase out stages in the first two years.
Cons
The company faces a high liquidity crunch, and is already reporting a net
loss in Profit. Such high investment is not viable at present.
No research is done for customer preferences for such energy efficient
products in Italy. It could adversely affect the sales in Italy.

No measure to improve sales of other product lines such as air conditioners


and ventilators in Italy.
There is no guarantee that absorption cooling will be successful.
Human resource restructuring will not go down well with employee unions
and the Italian government
Plant restructuring will be required including machinery upgrade and
employee skills.

Raising required money from banks may be issue in recession scenario


The European leadership is not in favor of absorption based cooling.

d analyzing various strategy option till the economy rebounds after the recession.
n fact is a very conservative approach, one similar to the strategy which led to the ouster of Lazzaro.
Cons
Doesnt meet any of the Management objectives put forward

The Strategy fails to prop up the sales of other product lines in Italy.
Strategy fails to increase sales of Chillers outside Italy.

There is no immediate solution to the problem that Clayton is facing


It does not provide details on how to handle HR problems that Bresica is
facing
If market improves Clayton can be behind competitors due to lack of new
products.
There is no unified strategy within company regarding product.

It may require certain investment on R&D to explore increase in efficiency.


ression chiller line by aggressive marketing to expand the sales outside Italy.

e Brescias profitability is favored, as it not only targets product promotion in other European markets, but also increases the Chiller marke

rgy efficient and less carbon intensive chillers.


he first two years.
ut also increases the Chiller market share in Italy. The only major obstacle to implement this strategy is the possibility of layoffs, which is in
he possibility of layoffs, which is inevitable under the economic circumstances.
Situation
1 TheItaliancompanywasamanufacturerofcompressionchillersforlargecommercial,public,
2 Initial sales were going to be very sluggish

3 Fortheperiodcommencingfrom2000to2009ClaytonEuropebecameamajorcontributoryfa

Background
1 ThemarketforairconditionersiswelldevelopedasconsumersviewAirconditionersasasymb
2 SimonneBuistookoverthereinsofClaytonin2001andimmediatelyadoptedatwoprongeda
3 Thecompanyduetoitsuncompetitiveproductprofilefounditselfstrugglinginmarketsoutside
4 Thepoorsalesandrisinginputcostshurtboththebottomlineaswellasthetoplineofthecom
5 Thecompanyfacedlabourunionproblems,anditwasverydifficulttofireanyoneowingtothe
6 TotopitthecompanyalsohasahighwagebillandaverylimitedcustomerbaseinItaly.

Target
1 ToincreasethemarketshareofClaytonSpAfrom7%to15%within4years(Four in Four o
2 ToreduceDaysReceivables,DaysInventoryby10daysandHeadcountby10%(10/10/10o

Alternative I - Revive the compression chiller line


Manufacturing Plan
1. $5 million investment in the next 12 months in the existing manufacturing facility
2. Addition of new features in compression chiller which would bring them at par with other Asian cou
3. Technological improvement resulting in higher efficiency for the compressor.
4. Utilize Economies of scale to reduce Average Cost.
5. Increased substitution of labor by capital to utilize lower marginal cost of capital versus higher margi

Financial Analysis
1 Financial Leverage (total liabilities by its stockholders' equity)
2 it is most often used to gauge the extent to which a company is taking on debts as a means of leveragin
3 A high debt/equity ratio generally means that a company has been aggressive in financing its growth w
4 Aggressive leveraging practices are often associated with high levels of risk.
5 If the cost of debt becomes too much for the company to handle, it can even lead to bankruptcy, which
6 Like with most ratios, when using the debt/equity ratio it is very important to consider the industry in w
Financial Analysis
Return on equity measures a corporation's profitability by revealing how much profit a company gener
It provides investors with insight into how efficiently a company (or more specifically, its management
1
2
1
2
3
4
5
6
1
2
1
2
3
4

1
2
3
1
2
eItaliancompanywasamanufacturerofcompressionchillersforlargecommercial,public,andinstitutionalinstallati
itial sales were going to be very sluggish
Nationalbrandpreferences
non compliance of design to European homes
competition from Asian producers
the recalcitrant behavior of the average European consumer meant
rtheperiodcommencingfrom2000to2009ClaytonEuropebecameamajorcontributoryfactorforthegrowthofthe

emarketforairconditionersiswelldevelopedasconsumersviewAirconditionersasasymbolofAmericanextravaga
monneBuistookoverthereinsofClaytonin2001andimmediatelyadoptedatwoprongedapproachtogaincompetiti
ecompanyduetoitsuncompetitiveproductprofilefounditselfstrugglinginmarketsoutsideItaly.
epoorsalesandrisinginputcostshurtboththebottomlineaswellasthetoplineofthecompany
ecompanyfacedlabourunionproblems,anditwasverydifficulttofireanyoneowingtothenormsofItaly
topitthecompanyalsohasahighwagebillandaverylimitedcustomerbaseinItaly.

increasethemarketshareofClaytonSpAfrom7%to15%within4years(Four in Four objective).


reduceDaysReceivables,DaysInventoryby10daysandHeadcountby10%(10/10/10objective).

ternative I - Revive the compression chiller line


anufacturing Plan
$5 million investment in the next 12 months in the existing manufacturing facility
Addition of new features in compression chiller which would bring them at par with other Asian counterparts.
Technological improvement resulting in higher efficiency for the compressor.
Utilize Economies of scale to reduce Average Cost.
Increased substitution of labor by capital to utilize lower marginal cost of capital versus higher marginal cost of labor.

nancial Analysis
ancial Leverage (total liabilities by its stockholders' equity)
s most often used to gauge the extent to which a company is taking on debts as a means of leveraging
high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt.
gressive leveraging practices are often associated with high levels of risk.
he cost of debt becomes too much for the company to handle, it can even lead to bankruptcy, which would leave shareholders
e with most ratios, when using the debt/equity ratio it is very important to consider the industry in which the company operate

Current liabilities
Long-term debt

Stockholders' equity

Total assets

Total Liabilities

Stockholders' equity

D/E Ratio

nancial Analysis
turn on equity measures a corporation's profitability by revealing how much profit a company generates with the money shareh
provides investors with insight into how efficiently a company (or more specifically, its management team) is managing the equi
Net income (loss)

Thisisagravematterofconcernforthecompanyasthecompanywillfacedifficultiesinraisingdebtanda
ByimplementingAlternative1,weexpecttoreaphighprofitsbythesecondyearofoperationsonwardswh

Pros
1.Investment period only limited to 12 months.

2.Renewed product could target Italian commercial customers and effectively


compete against the Asian products.

3.Achieve the higher management target to promote Chiller sales in rest of Europe

4.Initial investment is comparatively lower.


5.It will increase capacity utilization and increase efficiency

6. Investment in development of the new product line will be beneficial post-


recession.

7.This will not raise any resistance from Italian workers union and the government.

8.Existing market of compression based units will not be affected


size of compression chiller is $20B, 85% Mkt
Belief - Opp in crisis - Brigg's thinking

Alternative II Changing the product line by shifting from compressor chillers


to absorption chillers.
Manufacturing plan

1.Changingtheplantsetuptomanufactureabsorptionchillers.

2. Transfer of technology from Spain to Italy which would boost the


overallcapabilityofClaytonIndustries.

3. Lower involvement of labour would ensure substitution of labour by


capitalaspertheisocostline.

4. Company would reduce it carbon foot prints by manufacturing these


chillers,andgainonthecarboncreditsduetosuchchillers.
5. The company would reduce its overall cost due to lower
manufacturing expenses, and also hedge against adverse commodity
cycles.

Financial Analysis
EBITDAisoneindicatorofacompany'sfinancialperformanceandisusedasaproxyfortheearningpotent
evaluateacompany'sperformancewithouthavingtofactorinfinancingdecisions,accountingdecisionsort
EBIDTAallowsanalyststofocusontheoutcomeofoperatingdecisionswhileexcludingtheimpactsofnon
Byminimizingthenon-operatingeffectsthatareuniquetoeachcompany,EBITDAallowsinvestorstofocu
EBITDAmarginmeasuresacompany'searningsbeforeinterest,taxes,depreciation,andamortizationasap
BecauseEBITDAisameasureofhowmuchcashcameinthedoor,EBITDAmarginisameasureofhowm
EBITDA

EBITDA

EBIDTA Margin

50.00

40.00

30.00

20.00

10.00

0.00
2004 2005 2006
-10.00

-20.00
Cl ayton SpA (Ita l y/Germ
Other EU
Cl ayton SA (Spa i n/Portu

.Severeoligopolyensuresthatthecompanywouldfacecontinuedpressuresonbothtoplineandbottom-lin
Thismakestheopportunitycostofdiversifyingintoabsorptionchillers,adverselylucrative.

Current Ratio
Thecurrentratioisaliquidity ratio that measures a company's ability to pay short-term and lo
Thehigherthecurrentratio,themorecapablethecompanyisofpayingitsobligations,asithasalar
Current liabilities

Current assets

CURRENT Ratio

Theratioisagoodindicatoroftheliquidityconcernsofthecompany.Highervaluesofthecurrentratiosar
Wefindacontinuousdeclineinthecurrentratioofthecompany.
ThiscanbemainlyattributedtotheshrinkingEBIDTAwhichisreducingthenassets.

Asset Turn Over Ratio


Generallyspeaking,thehighertheassetturnoverratio,thebetterthecompanyisperforming,sincehigherra
Theassetturnoverratiohasmovedinlinewiththeindustrybenchmark,butsincethecompanyhasnotbeen
Changingovertoabsorptionchillersseemstobeanobviousoption.

Revenues

Total assets
Asset Turn Over Ratio

1.4

1.2

0.8

0.6

0.4

0.2

0
1 2
Cl ayto

Pros
1. Tap the growing market demand in Germany, Scandinavia, Spain and
other countries
2. Ability to market the product as a less carbon intensive, eco friendly and
energy efficient product.

3. Higher NPV of investment, since it requires $15mn investment over 5


years, which is more profitable than Option A ($5mn over 1 year), taking into
consideration the time value of money.
4. Clayton already has the license to first class technology in this area.
5. It will help against competition from Asian companies in this area at
cheaper prices.
6. Absorption based technology offers environment-friendly alternative to
customers.
7. It is the phased changeover process. Investment of 15 Million is needed in
5 years
8. Over-employment problem can be addressed.

Alternative III In depth study of the overall business processes


for a period of 6 months, for coming to a well informed decision.
impracticalbecauseofthefactthatcompanyisfacingcurrentissuesofstagnantcashflowsalongwithhuge
Waitingwouldfurtherlowerinvestorconfidenceandworsenthecurrentsituation
ommercial,public,andinstitutionalinstallations.

ajorcontributoryfactorforthegrowthofthecompanywithrevenuesaccountingfor45%oftheglobalrevenue

nditionersasasymbolofAmericanextravagance.However,thecompanydidreasonablywellthroughlocalbrandsCor
edatwoprongedapproachtogaincompetitiveadvantage.Thefocuswaseithertoslashcostsorbuildscalesorboth
inmarketsoutsideItaly.
toplineofthecompany
nyoneowingtothenormsofItaly
baseinItaly.

(Four in Four objective).


10%(10/10/10objective).

Marketing Plan
1. Brand Diversification - Collaboration wi
with other Asian counterparts. 2. Market Expansion - Leverage sales and
3. Market Penetration - Increased spendin

versus higher marginal cost of labor.

a means of leveraging
nancing its growth with debt.

to bankruptcy, which would leave shareholders with nothing.


ider the industry in which the company operates

2004 2005
204.3 224.3
Clayton SpA 28.5 32.9

Other Europe 46.7 51.3


North America 129.0 140.1
310.5 340.9
Clayton SpA 43.3 50.0

Other Europe 71.1 81.9


North America 196.1 209.0
267.9 245.5
Clayton SpA 37.4 32.2

Other Europe 61.3 61.5

North America 169.2 151.8


782.7 810.7
Clayton SpA 109.2 115.0

Other Europe 179.1 194.7


North America 494.4 501.0

Clayton SpA 71.8 82.8


Other Europe 117.8 133.2
North America 325.2 349.2

Clayton SpA 37.4 32.2


Other Europe 61.3 61.5
North America 169.2 151.8

Clayton SpA 1.9 2.6


Other Europe 1.9 2.2
North America 1.9 2.3
hugeerosioninshareholdersequity
attributedtopoorfinancialperformanceofthecompanyduringrecession
equityintheperiodoftimehasbeencompensatedbyincreaseinlong-termdebtsandcurrentliabilitiesofth
ByimplementingAlternative1,initiallytheD/Eratiowillbeadverselyaffectedbutinthelongruntheprof
Thissituationwouldresultinhighriskaversionofbankstofinancetheexpansionaryplansofthecompany.

fit a company generates with the money shareholders have invested.


lly, its management team) is managing the equity that shareholders have contributed to the company.
Revenues

Clayton N. America (USA/Canada/Mexico) 565.7 577.1


Clayton SA (Belgium/France/Netherlands) 107.5 118.6
Clayton SpA (Italy/Germany/Switzerland) 125.0 132.5
Clayton SA (Spain/Portugal/N. Africa) 58.1 62.9
Clayton Ltd (UK/Scandinavia) 39.3 42.8
Total 895.7 933.8
Clayton N. America (USA/Canada/Mexico) 31.1 28.9
Clayton SA (Belgium/France/Netherlands) 8.9 9.5
Clayton SpA (Italy/Germany/Switzerland) 10.8 10.5
Clayton SA (Spain/Portugal/N. Africa) 4.1 4.1
Clayton Ltd (UK/Scandinavia) 2.9 2.9

ROE 2004 2005


Clayton SpA (Italy/Germany/Switzerland) 29% 33%
Other EU 26% 27%

35%
30%
25%
20%
15%
10%
5%
0%
2004 2005 2006 200
-5%
-10%
-15%
Cl ayton SpA (Ita l y/Germany/Swi tzerl a nd) Other EU

nywillfacedifficultiesinraisingdebtandalsoinraisingmoneythroughshareholderequity.
ythesecondyearofoperationsonwardswhichwillgraduallyimprovetheretainedearningsofthecompany.

Cons
Strategy fails to promote the sales of other product lines in Italy.

No strategy to target the potential Italian residential climate control market.

Cost cutting strategy will involve layoffs, which would adversely affect the
companys political relationships. This would in turn affect their present sales.

If recession prolongs, investment in product development may not give ROI.


More efforts and expenditure on sales and marketing initiatives will be required.

There are no plans to accommodate emerging technology like absorption


cooling.

The solution does not address over-employment problem at the Bresica plant.

No immediate results guaranteed by this solution.


Clayton - lost $24.3M in last 6 mons, so putting $5 M is tough
The improvement initiative might not lead to significant cost advt
Briggs unlikely to be supportive

compressor chillers

Sales and Marketing plan


1. Brand Diversification The Company can get into product
distribution pacts with various other companies in the same niche
market.
2. Market Expansion - The sales channel can improve by deriving
synergiesbetweentheassociatedcompanies.
3. Market Penetration - No new marketing expenditure would be
required as this product would be a part of the successful range of
productline,manufacturedinSpain.

andisusedasaproxyfortheearningpotentialofabusiness
nancingdecisions,accountingdecisionsortaxenvironments.
ecisionswhileexcludingtheimpactsofnon-operatingdecisionslikeinterestexpenses(afinancingdecision),taxrates
company,EBITDAallowsinvestorstofocusonoperatingprofitabilityasasingularmeasureofperformance.
,taxes,depreciation,andamortizationasapercentageofitstotalrevenue.
oor,EBITDAmarginisameasureofhowmuchcashprofitacompanymadeinayearrelativetoitstotalsales.
Clayton N. America (USA/Canada/Mexico) 70.72 69.25
% Margin 13% 12%
Clayton SA (Belgium/France/Netherlands) 20.16 21.35
% Margin 19% 18%
Clayton SpA (Italy/Germany/Switzerland) 25.08 24.47
% Margin 20% 18%
Clayton SA (Spain/Portugal/N. Africa) 9.99 10.37
% Margin 17% 17%
Clayton Ltd (UK/Scandinavia) 7.02 7.34
% Margin 18% 17%
2004 2005
Clayton SpA (Italy/Germany/Switzerland) 25.08 24.47
Other EU 37.18 39.06
Clayton SA (Spain/Portugal/N. Africa) 9.99 10.37

2004 2005
Clayton SpA (Italy/Germany/Switzerland) 20% 18%
Other EU 54% 52%
Clayton SA (Spain/Portugal/N. Africa) 17% 17%

50.00 60%

40.00 50%

30.00 40%

30%
20.00
20%
10.00
10%
0.00
2004 2005 2006 2007 2008 2009 0%
2004 2005 2006
-10.00
-10%
-20.00 -20%
Cl ayton SpA (Ita l y/Germa ny/Swi tzerl and) Cl ayton SpA (Ita
Other EU Other EU
Cl ayton SA (Spa i n/Portuga l /N. Afri ca) Cl ayton SA (Spa

edpressuresonbothtoplineandbottom-line
chillers,adverselylucrative.

pany's ability to pay short-term and long-term obligations


isofpayingitsobligations,asithasalargerproportionofassetvaluerelativetothevalueofitsliabilities.
204.3 224.3
Clayton SpA 28.5 32.9

Other Europe 46.7 51.3

North America 129.0 140.1


277.0 291.6
Clayton SpA 49.0 54.1

Other Europe 60.6 66.5

North America 167.4 171.0

Clayton SpA 1.717149645 1.645621334


Clayton 1.355902768 1.300005445
Other Europe 1.297317275 1.295033584
mpany.Highervaluesofthecurrentratiosarefavorablefortheorganization 2
1.8
reducingthenassets. 1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1 2 3
Cl ayton SpA Cl

rthecompanyisperforming,sincehigherratiosimplythatthecompanyisgeneratingmorerevenueperdollarofasse
chmark,butsincethecompanyhasnotbeenabletotransformagoodassetturnoverratiointoconsistentprofits,theco

Clayton N. America (USA/Canada/Mexico) 565.75 577.06


Clayton SA (Belgium/France/Netherlands) 107.53 118.60
Clayton SpA (Italy/Germany/Switzerland) 124.99 132.45
Clayton SA (Spain/Portugal/N. Africa) 58.12 62.85
Clayton Ltd (UK/Scandinavia) 39.30 42.80

783 811
Clayton SpA 112 125
Other Europe 220 224
North America 451 461

Clayton SpA (Italy/Germany/Switzerland) 1.120045991 1.055612937


Other Europe 0.93 1.00
Clayton 1.144364996 1.151804538
1.4

1.2

0.8

0.6

0.4

0.2

0
1 2 3 4 5
Cl ayton SpA (Ital y/Germa ny/Swi tzerl and) Other Europe Cl ayton

Cons
The company faces a high liquidity crunch, and is already reporting a net
loss in Profit. Such high investment is not viable at present.
No research is done for customer preferences for such energy efficient
products in Italy. It could adversely affect the sales in Italy.

No measure to improve sales of other product lines such as air


conditioners and ventilators in Italy.
There is no guarantee that absorption cooling will be successful.
Human resource restructuring will not go down well with employee
unions and the Italian government
Plant restructuring will be required including machinery upgrade and
employee skills.

Raising required money from banks may be issue in recession scenario


The European leadership is not in favor of absorption based cooling.

Absorption chillers is just 15% - so still at early stage

suesofstagnantcashflowsalongwithhugedebtsonthebalancesheetdoesntseemtobealogicalsteptoundertake.
ecurrentsituation
globalrevenue

roughlocalbrandsCorlissandFontaire.
buildscalesorboth

cation - Collaboration with local European brands to improve Brand perception.


on - Leverage sales and distribution channels of other European arms of Clayton industries to explore newer markets.
ation - Increased spending in Advertising to improve customer awareness about the new features and reduced carbon foot-print

2006 2007 2008 2009


238.6 255.3 251.7 255.4
36.7 41.2 42.7 45.5

54.6 58.4 57.6 58.4


9.0

8.0

7.0
9.0
147.3 155.6 151.4 151.5
362.6 388.0 382.5 388.2 8.0

55.8 62.7 64.9 69.1 7.0


91.5 102.8 106.4 113.4 6.0
215.3 222.5 211.3 205.7
5.0
212.3 177.9 129.6 87.6
4.0
23.1 12.2 (0.9) (14.8)

57.9 54.1 50.1 59.9


3.0

131.3 111.6 80.4 42.5 2.0


813.4 821.2 763.8 731.2 1.0
115.6 116.1 106.7 99.8
0.0
204.0 215.3 214.1 231.7
1 2

493.9 489.8 443.0 399.6 Cl ayton SpA Other Europe

92.5 103.9 107.6 114.6


146.1 161.2 164.0 171.8
362.6 378.2 362.7 357.2

23.1 12.2 (0.9) (14.8)


57.9 54.1 50.1 59.9
131.3 111.6 80.4 42.5

4.0 8.5 (123.7) (7.7)


2.5 3.0 3.3 2.9
2.8 3.4 4.5 8.4

currentliabilitiesofthecompany
nthelongruntheprofitabilityofthecompanywillimproveresultinginimprovedD/Eratio.
plansofthecompany.Raisingmoneyfromshareholders

590.0 598.1 557.7 216.6


129.7 142.3 148.7 68.0
138.0 141.8 134.3 54.1
68.1 72.3 72.2 36.0
45.9 48.3 48.6 21.6
971.7 1,002.8 961.4 396.3
11.8 (6.0) (22.3) (17.3)
10.1 10.2 5.9 0.7
6.0 (1.1) (11.9) (6.7)
3.7 1.9 0.2 0.0
2.6 1.3 (0.3) (0.9)

2006 2007
26% -9% 1364%
28% 25% 12%

2007

hecompany.
ingdecision),taxrates(agovernmentaldecision),orlargenon-cashitemslikedepreciationandamortization(anaccou
performance.

oitstotalsales.
53.10 47.85 27.88 6.50
9% 8% 5% 3%
17.51 17.08 11.15 3.06
14% 12% 8% 5%
18.06 5.19 -12.77 -7.62
13% 4% -10% -14%
8.43 6.87 6.60 3.20
12% 10% 9% 9%
5.91 4.77 2.91 0.73
13% 10% 6% 3%
2006 2007 2008 2009
18.06 5.19 -12.77 -7.62
31.84 28.72 20.66 6.99
8.43 6.87 6.60 3.20

2006 2007 2008 2009


13% 4% -10% -14%
39% 31% 23% 17%
12% 10% 9% 9%

2005 2006 2007 2008 2009

Cl ayton SpA (Ita l y/Germany/Swi tzerl and)


Other EU
Cl ayton SA (Spa i n/Portuga l/N. Afri ca)

eofitsliabilities.
238.6 255.3 251.7 255.4
36.7 41.2 42.7 45.5

54.6 58.4 57.6 58.4

147.3 155.6 151.4 151.5


303.8 308.8 284.2 254.4
58.7 62.6 61.6 59.6

71.7 75.2 72.5 71.5

173.5 171.0 150.1 123.3

1.59859414 1.518398778 1.4420014333 1.309394665


1.273679516 1.209781771 1.1291916166 0.996010222
1.312785622 1.287137629 1.2593777247 1.223542775

2 3 4 5 6
Cl ayton SpA Cl ayton Other Europe

enueperdollarofassets
onsistentprofits,thecompanyneedstochangetheproductlineitisoperatingin.

589.99 598.07 557.66 216.60


129.67 142.33 148.65 68.00
138.05 141.78 134.32 54.10
68.10 72.30 72.20 36.00
45.90 48.30 48.60 21.60

813 821 764 731


125 127 120 117
228 231 220 226
460 463 424 389

1.102663764 1.114213046 1.1217655839 0.463697529


1.07 1.14 1.22 0.56
1.194633922 1.221114855 1.2587491271 0.541985777

5 6
ton

calsteptoundertake.
re newer markets.
d reduced carbon foot-print of the product.
2 3 4
n SpA Other Europe North Ameri ca
ndamortization(anaccountingdecision).

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