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Ensuring that the Schaeffler Group continues to meet its core business objective of growing profitably in the long-term necessitates a value-based approach to managing its business portfolio. The Schaeffler Group’s key value-based performance indicator is return on capital employed (ROCE) as well as Schaeffler Value Added, which is closely linked to ROCE. Neither indicator is directly used in managing the Schaeffler Group’s operations, although Schaeffler Value Added represents a key performance criterion within the framework governing the variable short-term remuneration of the Board of Managing Directors and the remuneration at the next-lower levels of management.

See section "Group strategy and management” - “Value-based management” for further detail.

Positive Schaeffler Value Added means that the Schaeffler Group’s EBIT exceeds the cost of capital for the period and has added the corresponding amount in value. Cost of capital is calculated by applying the minimum return of 10 % p.a. (before tax) set by the Board of Managing Directors and the Supervisory Board to the average capital employed during the year.

Average capital employed is calculated by adding up the following operating balance sheet items: property, plant and equipment, intangible assets, and working capital, which in turn comprises trade receivables and inventories net of trade payables. The annual average is determined as the mathematical average of the balance at the end of each of the four quarters.

While Schaeffler Value Added is an absolute measure of the value added by the company, return on capital employed – the ratio of EBIT to capital employed – measures the Schaeffler Group’s return on capital. Both indicators are determined before special items.

ROCE and Schaeffler Value Added

12/31/2016
12/31/2015
EBIT
1,556m €
1,402m €
EBIT before special items
1,700m €
1,676m €
Capital employed
7,848m €
7,455m €
Cost of capital
10.0 %
10.0 %
Cost of capital
785m €
745m €
ROCE
19.8 %
18.8 %
ROCE before special items
21.7 %
22.5 %
Schaeffler Value Added
771m €
657m €
Schaeffler Value Added before special items
915m €
931m €
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