Adidas 1999 Annual Report Download - page 40

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36
Management Discussion and Analysis
Capital expenditure geared
to stronger growth
adidas-Salomon intends to use the year 2000 to repo-
sition the company, increase efficiency and create the
necessary conditions for a new growth phase. This in-
tention has been the source for setting up the growth
and efficiency program. This intention has also been the
guiding principle for the investment plans. All capital
expenditure is to either improve the cost structure, in-
crease the efficiency of doing business or increase sales.
For 2000, adidas-Salomon is planning to invest a
total volume of just under DM 300 million. Investment
activity will focus on
●setting up of own retail stores in the USA, including
expansion of the chain of factory outlets,
●acquisition and renovation of new headquarters for
adidas and Salomon North America in Portland,
Oregon, bringing together the activities which are cur-
rently spread over several leased locations,
●IT hardware and software to improve the efficiency of
the information flow, and
●restructuring of the production facilities of the
Salomon and Mavic brands.
adidas-Salomon expects net cash provided by operating
activities to be in excess of the investment volume again
in 2000. The surplus amount is to be used for further
reduction of net borrowings.
Growing profits from 200 1 onwards
Improved cost efficiency helps to boost profits in the
medium term. However, also in the medium-term per-
spective, adidas-Salomon considers sales growth to be a
much more reliable way of increasing profits. For this
reason, adidas-Salomon is deploying more resources
and employees in order to develop new products, offer
attractive designs and, wherever possible, introduce
innovative technologies into the marketplace.
All these elements, including the growth and efficiency
program, will put in place the conditions for the Group’s
business
to grow more strongly again. On this basis, it is
expected that from 2001 onwards every single percent
of sales growth will be reflected in a higher percentage
improve
ment of the result. For the years 2001 to 2003,
Manage
ment aims to achieve 15% annual growth in
earnings.
Expectations
êé
200 0 2001
PROFITS