Metro Group Looking for €1.5 Billion in Profit Improvements

The Group’s structures will be simplified to realise the maximum growth momentum and customer orientation while significantly reducing costs. The intended potential for profit improvements until 2012 and beyond will amount to €1.5 billion.

21/01/09 The METRO Group is launching a comprehensive efficiency- and value-enhancing programme. "The aim is to ensure profitable growth of the company in the long term," says Dr. Eckhard Cordes, Chairman of the Management Board at METRO Group. The Group’s structures will be simplified to realise the maximum growth momentum and customer orientation while significantly reducing costs. The intended potential for profit improvements until 2012 and beyond will amount to €1.5 billion. Half of this amount will result from cost savings. The remaining amount is to be realised through improved productivity and other profit-enhancing measures. The profit improvements resulting from the programme will depend on the development of the macroeconomic conditions in our sales markets.

"Shape 2012" is designed to make METRO Group more transparent, customer conscious, less complex and more efficiently managed. As part of this process, the optimisation programmes already being carried out in the sales divisions will be integrated into "Shape 2012". "The Management Board has been working on this strategy since last summer," Cordes says. "The ‘Shape 2012’ programme is designed to improve the competitive position of METRO Group. As a result of the current economic climate, we are weatherising the company through the introduction of this programme. At the same time, we are staying on our growth path with ‘Shape 2012.’ METRO Group is acting from a position of commercial strength and is shaping change on its own." A fundamental principle at METRO Group will remain growth through international expansion. "Our focus," Cordes says, "is not just to simply add up cost-cutting targets. Rather, we intend to exploit the opportunities offered by greater and faster market penetration."

The guiding principle of the change is: as decentrally as possible, as centrally as necessary. The new structure will give employees more freedom to conduct operational business and will enable the sales divisions to satisfy the ever-changing needs of their customers in a flexible, fast and autonomous way. At the same time, those topics relevant for the strategic leadership, governance and controlling of the Group will be more centralised.

The "Shape 2012" programme has five pillars:
1.) New leadership model promotes market and customer centricity
As a result of the company’s broad internationalisation, decision-making responsibility for the operational business will be further decentralised. As a result, the country operations will gain additional autonomy to satisfy the needs of their individual customers in an improved manner. In effort to conduct business more closely to the market, Metro Cash & Carry will manage its operational activities primarily from the three regions, Western Europe, Eastern Europe and Asia.

2.) Undivided responsibility for the sales divisions in the operational business
Metro Cash & Carry, Real, Media Markt and Saturn as well as Galeria Kaufhof will manage the entire value chain from the supplier to the customer. As a result, all sales divisions will have undivided responsibility for the operational business. Functions like procurement and logistics that have previously been conducted in a cross-divisional manner will become the responsibility of the sales divisions.

3.) Streamlined organisational structure for finance and compliance – strengthened human-resources focus
Finance, controlling and compliance will be managed centrally by the Duesseldorf headquarters. In taking this approach, METRO Group is creating a streamlined organisational structure that will facilitate the financial management of the Group and provide more effective compliance and risk management throughout all areas of the company. Human resources on Management Board level will be strengthened in order to address the constantly growing importance of manager selection and development.

4.) Real estate portfolio as a profit centre
All real estate of the METRO Group will be managed as a profit centre. Beginning in 2009, it will be disclosed separately in segment reporting. All sales divisions rent their property at typical market conditions.

5.) Strict management through central return targets
The new strict management structure will ensure a stronger focus on cost management and increased efficiency, particularly in overhead areas. Operational units that fail to meet return targets will be systematically restructured or disposed of.
As a result of "Shape 2012", global changes in the workforce structure will be required. Thereby METRO Group aims at reducing personnel through normal turnover as much as possible.

"With the new structure, we are giving the sales divisions significantly more freedom in the operating business. Critical areas of the company will be put to right and put on their feet. Against the backdrop of an increasingly challenging market environment, we must also tackle more aggressively our identified areas of weakness. A good example of this approach is the clearly structured turnaround process initiated last year at Real in Germany. We are already seeing the initial successes of this work. For costs as well, we have to ensure throughout the entire Group that we are in a position to gain further market share. In doing so, we are creating earnings potential for the future," Cordes says.

Ametro Group stressed following press reports that as part of "Shape 2012," personnel adjustments will be necessary in the coming years. Until 2012, about 15,000 jobs will be affected around the world. But this does not mean that 15,000 people will lose their jobs! Rather, the adjustments to be made over the next three years will be carried out through normal fluctuation as much as possible – this means that we will not fill all vacant positions.