Gas Business Challenges GAWDA SMC Meeting Savannah, SC 5 April - - PowerPoint PPT Presentation

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G&W Distributor Gas Business Challenges

GAWDA SMC Meeting Savannah, SC 5 April 2016

• J. R. (Buzz) Campbell, Intelligas Consulting

Mike Masha, Masha Capital Management jrcampbel2@gmail.com & mamasha@comcast.net

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Challenges

& the need for

Better Activity Based Metrics

Buzz Campbell

Some Background

 Performance Metrics -- Mike Masha & JRC  We have an Activity Based Model to Increase Profitability  Activity Drives the P&L and Balance Sheet in $$$

• Labor, Materials & Equipment
• Investment & Results are in $$$

 Activity Measured by:

• People Doing in Time
• Number & Amount of goods, services
• Skills, Management & Capital

 To Improve Activity It Must be

• Monitored & Measured
• Reported & Discussed
• Action Decided on & Executed

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Challenges – Distributors’ Gas Business

 General:

• US Economy: 1/2% to 1.0% less %AGR
• Distributors’ Markets: to have less gas volume intensity
• Marketing/Sales & Operating Efficiency: will require greater

skills and management to Maintain Profitable Growth

• That will favor larger size and scale of operations to expand

markets

• Major Players more active in DTB, e.g. AL-Airgas

 Hardgoods: Covered by Jim Earlbeck  Gases: Increased EBIT and Net Worth will require more Activity Based MGT, More creatively related to the P&L and Balance Sheet

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More Focus -- What’s Behind the Gas P&L

 Revenue: Volume & Price Detail by Line Item & Product/Mode  COS: Competitive Unit Costs & Supply Chain Equipment  GP: %Rev by Product/Mode: Sensitivity to Price  Period Expenses - Operations

• Cylinder Fill
• Cylinder Ownership, Use & Rent Related
• Distribution: Operations Detail & Use of Labor

 Period Expenses – SG&A

• Sales & Marketing
• Admin, Finance & IT
• Corporate & Owner Expense

 The Priority of Challenges to Increasing EBIT & Net Worth

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Priority Challenges In the Gas P&L

 The Quality of Gas Pricing: Including pricing strategy and execution and management and motivation of sales force  Monitoring of Prod/mode GP as an important tool in better price management, with greater use of IT platforms  Increasing the quality of Marketing and Selling in growth market segments and geography  Increasing the Rental part and price of Cylinder Fleet, within competitive bounds  Reducing the unit cost of cylinder delivery, while maintaining/improving customer service levels  In our view, one of the necessary impacts on profitability is that last one … reduce cylinder delivery costs

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Distributor Gas Operations

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COMPANY % Revs GAS % Revs REVENUES ($000) 25,000 11,250 Gross Profit 11,250 45% 7,470 66% Operations Cylinder Fill 700 3% 700 6% Distribution 2,100 8% 2,000 18% Cylinder (et al) Ownership, M&R 700 3% 700 6% Subtotal 3,500 14% 3,400 30% SG&A Selling & Marketing 2,900 12% 1,500 13% Admin 1,000 4% 500 4% IT 500 2% 250 2% Finance 500 2% 200 2% Other Owner Costs 650 3% 400 4% Subtotal 5,550 22% 2,850 25% HardGoods Expenses 500 2% TOTAL EXPENSES 9,550 38% 6,250 56% E B I T 1,700 6.8% 1,220 10.8% Note that Gas:HardGoods Mix - 45%:55%

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IMPROVING DISTRIBUTION

A Distributor Challenge

Mike Masha