Treasury focused on growth Etienne Kleuters Michel Hanssen 14 November 2014.

Treasury focused on growthEtienne KleutersMichel Hanssen

14 N

ovem

ber

2014

Table of Contents

1. Introduction2. Business case for Treasury Management System3. Treasury system landscape

Cash and Liquidity ManagementHedge Management Business forecastingExposure Management

4. Next steps5. Lessons Learned

1. Introduction - Qrcus

Michel HanssenSAP Finance Consultant

[email protected]

mailto:[email protected]

1. Introduction - OCI NVFacts and figures

Leading global nitrogen fertilizer producer and engineering & construction contractor

Employing more than 55,000 people in 35 countries

Listed on NYSE Euronext as AEX-fund in Amsterdam

Founded in 1950 as a construction company

First fertilizers activities acquired in 2008, nowadays top 3 nitrogen-based fertilizer producer

1. Introduction - OCI FertilizersLocations

Challenges:Combining two separate companies into one OCI NitrogenDisconnected from corporate environment and operate as a stand alone company

1. Introduction - OCI Nitrogen

One of the European marketleaders in fertilizers andammonia products and thelargest producer of melamineworldwide. Over 80 years ofhistory and as from 2010 partof OCI

LocationHQ in Geleen (The Netherlands)(approx. 800 employees worldwide)

ProductionAmmonia, Mineral Fertilizers and Melamine

Annual TurnoverEUR 1.2 billion

Key strategic player within OCI Fertilizers

2. Business case for TMS2010 2014

Meeting first requirements stand alone

treasury organization

Upscaling to increased requirements (risk

management, regulatory,

accounting, financing, public listing parent)

Integration in corporate treasury

?< 2010

Fully integrated in

corporate treasury DSM

Organization

Policies

Information

Challenges:Develop a sustainable systemAchieve process efficiencySecure accuracy / Data integrationMeet the increased need for information

Treasury applications from SAP

SAP Treasury and Risk ManagementRisk Analyzer

Transaction Manager

SAP Bank Communication Management

SAP In-House Cash

Cash Management Liquidity Planning

Credit Risk Market Risk Portfolio Analyzer

Hedge Management Exposure ManagementMoney Market

Foreignexchange Securities Commodities

SAP Cash & Liquidity Management

Derivates Debt Mgmt

BPCForecasting

3. Treasury system landscape


Cash Management Liquidity PlanningSAP Cash & Liquidity Management

3. Treasury system landscapeCash & Liquidity Management

A0 FI Banks

F2 Debtors

Today Today +1 Today +2 Today +3 Today +4

Cash position

B1 Outgoing Payment subledger

B3 Incoming Payment subledger

T1 Treasury in

Liquidity position

T1 Treasury out

Treasury deals

Payment in Transit

AP/AR

F1 Creditors

Sales and Purchases

P1 Purchase orders

P2 Sales orders 300

300

800

-800

-800

-800A0 FI Banks

Level / Short text

500 500 500

D C D C D C D C D C

500

-800



Transaction Manager


Market Risk

Hedge ManagementMoney Market

Foreignexchange


Derivates

3. Treasury system landscapeHedge Management

12

Types of risk which are hedged by OCIN:Foreign currency risk Interest rate risk

Hedging aims to mitigate the impact of economic risks on an entity’s performance.

Hedge accounting:Adjust the accounting treatment of a hedging instrument and/or a hedged item to enable recognition of gains and losses on the hedging instrument in the income statement in the same period as offsetting losses and gains on the hedged item.(Matching concept).

Hedge Management


13

Strict criteria:Existence of formal documentationAchievement of effectiveness tests (80%- 125%)

Effectiveness tests:

Key date valuation

Retrospective

Inception date Interim or annual financial statements

Prospective

Interim or annual financial statements

Hedge Management




Transaction Manager


Market Risk

Hedge ManagementMoney Market

Foreignexchange


Derivates

BPCForecasting

3. Treasury system landscapeSAP Business Planning & Consolidation (BPC)

SAP BPC is used for:Budget & ForecastAd hoc simulations

Advantages:

SAP BPC

Integration with SAP ECC ERP system

Shared responsibility Business Controllers

One-time input of (forecast) data

Possibility to delegate responsibilities of data input to other departments


SAP BPC

Input currencies

&

Basic Assump.

Prices Raw Materials

Calculate Cost prices

Sales Volume &

Prices

Logistical Tariffs

P&L Reporting

Cash flow

BS

ReportingBPC Exposure

Mgmt

Automated CF Statement Identify exposures Scenario analysis




Transaction Manager


Market Risk


Foreignexchange


Derivates

BPCForecasting

3. Treasury system landscapeExposure Management

Main requirements:– Identify FX exposures – Analyse Sensitivity – Accurate reporting FX results

Qualitative analysis to identify types of FX risk– Transactional (economic) versus Translational (accounting)– Direct and indirect – Different price commitment periods– Mainly EURUSD (long and short)

Quantative analysis to determine sensitivity

“OCI Nitrogen looked for a structural solution to get the required insight and

understanding of their FX exposure”

Exposure Management


Exposure Management




Transaction Manager

SAP Bank Communication Management

SAP In-House Cash


Credit Risk Market Risk Portfolio Analyzer


Foreignexchange Securities Commodities


Derivates Debt Mgmt

BPCForecasting

4. Next steps

5. Lessons Learned

Understanding the business is key

Identify key (corporate) objectives and quick wins

Early involvement relevant stakeholders

Stay flexible

Don’t let best get in the way of better (2014, Peter Fels, Sabic)

Etienne KleutersTreasury & Credit [email protected]

Michel HanssenSAP Finance [email protected]

Thank you



Treasury focused on growth Etienne Kleuters Michel Hanssen 14 November 2014.

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