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Euler Hermes World Agency Webinar

New DSO Data:

A High Stakes Game

Speaker: Maxime Lemerle, Economic Research

Moderator: Ilan Goren, Economic Research

27th July 2017 16.00 CET

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Maxime Lemerle joined Euler Hermes

in 1993 as a Credit Analyst for EH France,

specializing in the food and retail sectors.

He then moved to the Research team in 1999

before becoming Team Leader for global forecasts.

Maxime now leads cross-cutting sector and

insolvency research and is in charge of sector risk

ratings.

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Agenda

1 Global figures

2 Country Trends

3 Sector Trends

4 The 2016 DSO Heat Map

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1 Global figures

2 Country Trends

3 Sector Trends

4 The 2016 DSO Heat Map

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Days Sales Outstanding (DSO)

based on balance sheets financial data

• Systematic

updating on

a yearly

basis

What?

What is DSO?

DSO = (Accounts Receivables / Total Revenues) * 365

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Days Sales Outstanding (DSO)

based on balance sheets financial data

• Leading indicators of

payment terms

• Keys for our

business/clients since 1

out of 4 insolvencies due

to a major payment

incident

• Systematic

updating on

a yearly

basis

Why?

What?

DSO = (Accounts Receivables / Total Revenues) * 365

What is DSO?

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Days Sales Outstanding (DSO)

based on balance sheets financial data

• Leading indicators of

payment terms

• Keys for our

business/clients since 1

out of 4 insolvencies due

to a major payment

incident

• Perimeter of 27,000 listed

companies

• 20 sectors

• 36 countries all around the

world

• Systematic

updating on

a yearly

basis

Why?

How?

What?

DSO = (Accounts Receivables / Total Revenues) * 365

What is DSO?

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Days Sales Outstanding (DSO)

based on balance sheets financial data

• EH’s Economic

Research Department

• Based on Bloomberg

database

• Systematic

updating on

a yearly

basis

Why?

How? Who?

What?

DSO = (Accounts Receivables / Total Revenues) * 365

What is DSO?

• Leading indicators of

payment terms

• Keys for our

business/clients since 1

out of 4 insolvencies due

to a major payment

incident

• Perimeter of 27,000 listed

companies

• 20 sectors

• 36 countries all around the

world

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Days Sales Outstanding (DSO)

based on balance sheets financial data

• EH’s Economic

Research Department

• Based on Bloomberg

database

• Systematic

updating on

a yearly

basis

Why?

How? Who?

When?

What? • Yearly updates

DSO = (Accounts Receivables / Total Revenues) * 365

What is DSO?

• Leading indicators of

payment terms

• Keys for our

business/clients since 1

out of 4 insolvencies due

to a major payment

incident

• Perimeter of 27,000 listed

companies

• 20 sectors

• 36 countries all around the

world

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Worldwide DSO average stable around 64 days…

Global steadiness of world average - Little fluctuation since 2012 around 64 days -

Slightly lower than pre crisis level – 2017 expected at 64 days

65.1

59.5

60.8

63.8

62.2

63.7

64.3 63.9 64.1 64.1 64.0

56

57

58

59

60

61

62

63

64

65

66

2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017f

DSO- worldwide average (in number of days)

Sources: Bloomberg, Euler Hermes

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…but watch out for the distribution

High dispersion: 1 out of 4 companies were paid after 88 days in 2016 (2 days faster

than in 2015)

8.8%

14.9%

31.2%

23.9%

12.2%

9.0%

0%

5%

10%

15%

20%

25%

30%

35%

Below 10days

Between 10and 30 days

Between 30& 60 days

Between 60& 90 days

Between 90& 120 days

Above 120days

2015 2016

Worldwide DSO – Distribution around the average

(in number of companies by range of DSO, in %)

Sources: Bloomberg, Euler Hermes

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1 Global figures

2 Country Trends

3 Sector Trends

4 The 2016 DSO Heat Map

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We see 4 main country groups in terms of levels: 1 out 3 countries posted an increase

in DSO (1 out of 3 a decrease)

DSO level by country in 2016

(in number of days and changes versus 2015, selected countries)

Heterogeneity and Country trends

42 44 46 48 49 49 50 53 53 53 54 56 58

61 64 67 67 69 69

73 75 80

85 88 89

0

20

40

60

80

100

120

140

Sources: Bloomberg, Euler Hermes

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DSO level by country in 2016

(in number of days and changes versus 2015, selected countries)

42 44 46 48 49 49 50 53 53 53 54 56 58

61 64

67 67 69 69 73

75 80

85 88 89

0

20

40

60

80

100

120

140

Sources: Bloomberg, Euler Hermes

-4 -1 +1 +2 +3 -1 +5 +2 -3 +3 -2 -2 +1 +7 -1 -3 -4 +1

Heterogeneity and Country trends

We see 4 main country groups in terms of levels: 1 out 3 countries posted an increase

in DSO (1 out of 3 a decrease)

: increase in DSO

: decrease in DSO

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Western Europe: a clear improvement in companies’ longest-delayed payments

(DSO above 90 days)

Focus 1: Western Europe

Sources: Bloomberg, Euler Hermes

DSO distribution across Western Europe for the share of DSO

exceeding 90 days

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Focus 2: China

China has not succeeded in reducing outstanding payments (DSO above 120 days)

since at least 2015

DSO split in China between 2007 and 2016

(% of Chinese companies paid within a given time period, in number of days)

Sources: Bloomberg, Euler Hermes

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53 55 59

65 65 65 67 73

66 70 71

68

82 77

88 90 91 96 97 98

94

112 114 120

133

18

33 38

33

24 28

22 24

31 31 26

33

22

35 31 31 32

40 40 44

34

43

55

49

37

42 44 46 48 49 49 50 53 53 53 54 56 58

61 64

67 67 69 69 73

75 80

85 88 89

0

20

40

60

80

100

120

140

25% of companies are paid after25% of companies are paid beforeAverage DSO in the country

From the smallest (Austria, Netherlands) to the largest dispersion (China)

DSO level and distribution by country in 2016

(in number of days, selected countries)

DSO distribution varies by country

Sources: Bloomberg, Euler Hermes

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1 Global figures

2 Country Trends

3 Sector Trends

4 The 2016 DSO Heat Map

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On average, upstream sectors (Electronics, Machinery and Equipment, Construction) have to

cope with higher DSO than sectors related to household consumables

A structural difference between B2C and B2B

Sector DSO on a global average ( 2016 level and change since 2012, in number of days)

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46 46 46

51

56 56 58 59 60 61

64

68 69 71

73

80 82

87 88

0

1 1

0 0

3

0

1

-2

-7

3

0

8

4

3

-4

1 1

3

1

-8

-6

-4

-2

0

2

4

6

8

10

0

10

20

30

40

50

60

70

80

90

100

Change in

the n

um

ber o

f days

Num

ber

of days

2016 (lhs)

2016 vs. 2012 (rhs)

Sources: Bloomberg, Euler Hermes

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From the smallest (Retail) to the largest range (Construction)

DSO level and dispersion by sector in 2016

(in number of days)

DSO distribution varies by sector

39

68

62 62 68

75 78

74 79 80 79

83 87 86

94 95

106

113 113 115

5

13

21 22

29 29

22

33 31 27

35 38

41 44 43 44

46

40

51 55

27

46 46 46 51

56 56 58 59 60 61 64

68 69 71 73

80 82 87 88

0

20

40

60

80

100

120

25% of companies are paid after25% of companies are paid beforeAverage DSO in the sector worldwide

Sources: Bloomberg, Euler Hermes

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On a global basis, 8 sectors have registered an increase in Working Capital

Requirements (WCR). Aeronautics requires attention as both DSO (+8 days since

2012) and WCR (+16) are up

Compare DSO with Working Capital Requirements

Electronics

Retail

Other services

Oil & gas

Food

Metals

Pharma

Transportation

Auto

Telecom

Aero

Household goods

Construction

Chemicals

Business services

Technology

Machinery & eq

Utilities

Personal & recreational goods

Paper

-10

-5

0

5

10

15

20

-10 -8 -6 -4 -2 0 2 4 6 8 10

Sector DSO (x-axis) and WCR (y-axis) on a global average

( 2016 level versus 2015 level, in number of days)

Sources: Bloomberg, Euler Hermes

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1 Global figures

2 Country Trends

3 Sector Trends

4 The 2016 DSO Heat Map

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The 2016 Days Sales Outstanding Heat Map

Reta

il

Oth

er

serv

ices

Tra

nsport

ation

Food

Fin

ancia

ls

Tele

com

Pers

onal &

recre

ational

goods

Meta

ls

Utilit

ies

Household

goods

Oil

& g

as

Paper

Busin

ess

serv

ices

Aero

Auto

Chem

icals

Technolo

gy

Pharm

a

Constr

uction

Machin

ery

& e

q

Ele

ctr

onic

s

Countr

y a

vera

ge

New Zealand 14 23 36 49 23 39 38 51 34 50 20 - 46 - - - 75 70 38 57 68 42

Austria - 38 30 45 - - 27 39 47 - 73 - - - 33 - - - 42 48 - 44

Netherlands 7 47 34 49 103 - 35 - - 52 60 - 64 - - 53 54 - 43 51 55 46

South Africa 33 44 39 43 40 41 - 36 - 33 91 51 61 - - 60 74 74 50 60 55 48

Denmark 26 29 55 40 46 - 37 - 80 40 35 - 51 - - - 56 59 54 68 48 48

U.S. 21 39 34 34 52 37 42 42 52 38 55 37 54 52 53 54 59 63 53 58 59 49

Switzerland 15 26 22 43 - - 68 53 66 67 - 64 57 - - 89 60 64 53 54 64 49

Australia 23 52 36 51 46 44 53 37 40 56 47 69 57 44 50 54 59 81 58 57 70 50

United Kingdom 15 46 38 50 55 40 41 33 48 40 46 60 59 48 61 69 72 80 54 72 69 53

Finland 20 26 41 24 44 91 57 43 - 46 - 40 48 - - - 86 - 37 57 62 53

Germany 30 45 40 41 64 54 51 42 52 41 59 15 63 - 63 53 59 69 47 59 63 53

Canada 16 59 46 34 60 42 57 38 49 59 69 33 59 60 68 46 71 83 60 59 61 54

Sweden 24 43 30 34 34 35 64 53 46 42 37 43 65 60 40 72 74 63 60 65 62 56

Norway 6 34 36 51 80 33 - 51 37 - 73 - 55 - - 46 58 46 55 61 93 56

Poland 35 52 46 52 49 45 40 43 33 53 31 51 69 58 39 53 70 73 63 85 72 58

Russia 25 23 27 33 48 - 23 46 55 59 56 40 46 78 72 31 96 103 69 71 82 58

Bulgaria 68 25 52 46 71 - 50 42 58 67 51 60 15 - 63 72 - 59 98 73 42 59

Brazil 57 44 44 40 54 85 101 49 63 59 41 43 61 65 53 49 53 70 66 93 - 61

Hong Kong 30 42 45 41 30 33 55 55 52 60 83 59 70 - 80 69 69 97 67 108 90 63

Chile 65 73 59 61 55 67 62 56 60 77 - 31 58 - - 81 68 - 68 101 - 64

Belgium 43 57 60 57 114 62 45 30 125 - 72 - 85 - - 47 83 67 51 78 64 65

India 54 58 49 41 60 31 57 57 73 55 67 45 77 120 54 73 85 72 82 80 101 67

Saudi Arabia 19 51 60 49 81 99 - 56 - 53 - - 109 - - 69 - - 85 65 138 67

South Korea 36 51 48 47 55 60 56 72 65 58 53 65 49 59 68 65 67 104 69 84 67 67

Portugal 16 40 97 67 29 - - - 88 - - 48 - - - - 116 - 101 - - 69

Romania 42 18 66 82 36 - 29 48 58 51 68 54 79 57 58 63 - - 87 83 83 69

Japan 22 36 49 51 17 66 60 80 43 65 49 86 59 101 65 94 71 97 109 104 95 69

Taiwan 35 25 35 47 33 43 57 56 44 58 63 56 69 86 73 72 69 76 69 94 96 72

France 33 78 61 59 97 54 54 57 82 63 85 53 80 75 47 84 97 75 68 90 77 73

Singapore 35 28 66 47 46 38 78 72 66 72 98 84 79 76 78 83 82 68 90 92 87 73

Spain 21 62 - 62 47 52 76 51 51 56 100 59 69 - - - 88 93 125 115 - 75

Turkey 27 75 45 67 56 109 85 75 28 80 86 102 48 - 76 75 108 100 111 94 110 80

Morocco 61 79 - 58 98 - - 53 - - 41 - - - - - 140 96 80 - - 83

Italy 55 98 70 54 89 73 66 - 106 94 77 - 107 - 44 129 101 75 101 97 71 85

Greece 41 50 34 97 46 - 68 95 - 123 24 - 100 - - 90 99 - 117 116 - 87

China 20 51 48 38 34 48 60 72 49 73 115 94 86 142 111 80 112 96 112 130 136 89

Sector average 27 46 46 46 50 51 56 56 58 59 60 61 64 68 69 71 73 80 82 87 88 64

Sources: Bloomberg, Euler Hermes

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Find more details in our report: eulerhermes.com/economic-research

Payment risk data and dynamic charts

mindyourreceivables.eulerhermes.com

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Thank you for

your attention

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Apendix: the 27,000 listed companies

By sectors By countries