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7. Working capital and cash flow management
Inventory reduction will most likely be an area of focus in 2H20, especially for aerospace companies. While receivables have been a focus of working capital improvement programs in previous quarters, manufacturers are trying to balance overdue receivable levels without putting destabilizing financial pressure on clients.
8. Geographic developments – growth markets
Revenue growth in China has been higher than in any other country or region, reversing 1Q declines. Meanwhile, demand for defense equipment and services from countries in the Middle East has continued to grow. However, on the flipside, major Asia-Pacific and Latin American economies, especially India, Brazil and Mexico, are facing growth challenges as COVID-19 cases rise.
9. Changes in production rates
Production lines serving end markets with especially sharp drops in activity, such as aerospace and automotive, are operating at reduced levels to control operating costs and inventory. At the same time, production of pandemic supplies is operating at full capacity. Companies that expanded operations temporarily are considering long-term commitments to serving new markets.
10. Business reorganization or restructuring
To meet increased cost savings goals, several companies are streamlining their internal structures, especially for business units serving challenged end markets. Many firms are even divesting noncore or underperforming business units to generate cash and strengthen balance sheets, allowing them to focus more closely on core operations.
Summary
The 2Q20 quarterly review throws light on some of the important issues the sector faces. Once again, cost management has become a top priority. Financial initiatives, and culture and talent are other poignant themes that have been elaborated and analyzed in the review.
