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Project Acropolis: Building a Strategic Plan for the Treasury Function Klaas Springer – Director Corporate Treasury EuroFinance Budapest, 15-17 October 2014
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• General introduction Royal FrieslandCampina
• Strategy process: Acropolis
• Deliverables: key projects and roadmap
Contents
General introduction Royal FrieslandCampina
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19,000 ambitious member farmers are the owners of FrieslandCampina
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Coöperative Council
Members
Member Council
Supervisory Board
Districts
General Meeting of Shareholders
Board
Executive board
Zuivelcoöperatie
FrieslandCampina U.A.
Royal
FrieslandCampina N.V.
holding all shares in
The Company is owned by the Cooperative
13,887 member dairy farms
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7
employees 21.186
11.4 billion euro revenue
28 Facilities in
countries 100 Export to over
countries
Millions of consumers
member dairy farmers own the Company
19,244
Every day
FrieslandCampina at a glance 2013
Figures 2013
North and South America
United States Brazil
Africa and Middle East
Nigeria Ghana United Arab Emirates Saudi Arabia
Asia en Oceania
Indonesia Malaysia Singapore Thailand Vietnam Philippines China Hong Kong India Japan New Zealand
Figures2013 * in millions of euros
Europa
Netherlands Germany Belgium Greece Hungary Romania Russia France Spain Italy Austria United Kingdom
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1,165 revenue *
1,026 employees
19 locations
26
2,938 revenue *
6,846 employees
30 locations
61
6,965 revenue *
13,147 employees
68 locations
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350 revenue *
167 employees
7 locations
Worldwide
8
%
%
%
%
3.6
3.8
3.8
4.4
4.4
5
5.3
5.3
5.6
5.6
5.7
6.5
6.6
9.4
11.2
11.2
11.5
14.6
15.2
21.3
20. Morinaga Milk Industry - Japan
19. Schreiber Foods - USA
18. Müller - Germany
17. Kraft Foods - USA
16. Bongrain - France
15. Sodiaal - France
14. Mengniu - China
13. DMK - Germany
12. Meiji - Japan
11. Unilever - Netherlands/UK
10. Yili - China
9. Dean Foods - USA
8. Saputo - Canada
7. Arla Foods - Denmark/Sweden
6. Dairy Farmers of America - USA
5. FrieslandCampina - Netherlands
4. Fonterra - New Zealand
3. Lactalis - France
2. Danone - France
1. Nestlé - Switzerland
Our position in the dairy sector
9 Figures 2013 in billion of euros
Company Dairy Revenue
5. FrieslandCampina - Netherlands
Source: Rabobank, July 2014
Strategy process: Acropolis
Key figures Corporate Treasury
● Net Debt € 1,4 bln
● Interest € 29 mio
● Property damage sum insured € 11,5 bln
● Over 20 banks
● 20 institutional investors
● 718 bank accounts (-81)
● FX annual turnover € 2,7 bln
● Around 3400 FX deals annually averaging € 0,8 mln per deal
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● Budget 2014 € 2,1 mio, 8,3 fte
● Liability coverage limit € 600 mio per occurrence
● Front office: 4 fte
● Mid office: 2 fte
● Insurance: 2 fte
Treasury
Resources
Insurance ● Around 10 insurance comp.
Project Acropolis Q3 2013 – Q2 2014
Steering Group: CFO, Dir. Finance & Reporting,
Dir. Internal Audit
Unanticipated Challenges Are The Normal…….
Fast changing regulatory environment
Extreme currency moves
Impacts of sovereign debt crisis
Potential break-up of Euro Zone Low interest rates
Big financing needs
…With A Fast Changing Regulatory Environment
SEPA EMIR
BASEL III
Solvency II
MIFID FTT
RFC
SWOT analysis
Weaknesses Strengths
Threats Opportunities
• Financing of FrieslandCampina • Bank Relationships • Investor Relationships • Interest Rate Risk management • Liquidity Risk management • Skilled staff
• Internal Controls • Limited resources for operational activities • Control over local activities • No Corporate Treasury presence in Asia • Distance to the Business • No clearly communicated strategy
• Budget cuts • Highly independent Operating Companies • Low quality cash forecasts • Laws and Regulations, increase administrative
activities • Highly dependent on multiple IT systems
• Internal Control Framework • Summit implementation • 3S project: Financial Shared Service Center • New Mid-Officer • Internal Credit rating • 3rd party IT solutions
Treasury Audit Main Issues
Weaknesses in internal controls regarding:
• Bank Account Management: e.g. visibility of contracts, source documentation, job roles, authorizations
• Payment Organization: E-banking
• Currency Management: e.g. transactions executed outside trading platform
How to interpret this?
• Call for centralization of treasury function, our peers are multinationals
• Central management is not enough, central control is required
• Confronts RFC with “As Is” situation which is a heritage from the past: e.g. in the corporate manual OpCo Finance Directors “Must Authorize” and are “Responsible” for:
- Proxies bank accounts;
- Local cash management and payments
• Adjusted approach will require full alignment within Finance Function
Deliverables: key projects and roadmap
The new Mission and Vision of the Corporate Treasury functions can be described as:
The Mission: The Corporate Treasury Team is there to optimize the capital structure and funding of the Group, manage its financial risks in an effective and efficient way, and is centrally responsible for the operational treasury function. The Vision: To be a Treasury Team that is pro-actively supporting the future growth of the Group and placed in the top quartile compared to peers in terms of treasury infrastructure and operations by the end of 2015
Centralization - Visibility - Control
Project Acropolis
Project Jungfrau Project Vaalserberg Project K2
Strategic planning for the Corporate Treasury function
Deliverables: vision, strategy, swot analysis, roadmap
Central Payment solution Replace all E-banking
applications by one centrally managed solution.
Benefits: a) Realize cost savings b) Improve internal control measures c) Increase insight on cash flows and d) Harmonize processes
Centralization of bank account opening/closing.
Benefits: a) Implement a cost efficient process b) Improve internal control measures (e.g. SIBC: Standard Internal Bank Confirmation) c) Being prepared for future inhouse banking solutions
Global roll out of the 360T trading platform for derivatives trading.
Benefits: a) Best market prices/quotes b) Improve internal control measures c) Fully integrated with the Treasury management system d) Improved visibility of FX cash flows.
21 Reporting package
Roadmap Corporate Treasury
FrieslandCampina System Landscape Project Jungfrau
Shared Service Center
Head Office Subsidiaries
Other systems
Shared Service Center
Head Office Subsidiaries
Other systems
Plugin Agent Agent Agent
Single point of contact
Host-to-host, EBICS or Swift
Central Payment Solution
Q & A