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

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Presentation on theme: "Treasury focused on growth Etienne Kleuters Michel Hanssen 14 November 2014."— Presentation transcript:

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

2 Table of Contents 1. Introduction 2. Business case for Treasury Management System 3. Treasury system landscape Cash and Liquidity Management Hedge Management Business forecasting Exposure Management 4. Next steps 5. Lessons Learned

3 1. Introduction - Qrcus Michel Hanssen SAP Finance Consultant Michel.Hanssen@Qrcus.nl

4 1. Introduction - OCI NV Facts 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

5 1. Introduction - OCI Fertilizers Locations

6 Challenges: Combining two separate companies into one OCI Nitrogen Disconnected from corporate environment and operate as a stand alone company 1. Introduction - OCI Nitrogen One of the European market leaders in fertilizers and ammonia products and the largest producer of melamine worldwide. Over 80 years of history and as from 2010 part of OCI Location HQ in Geleen (The Netherlands) (approx. 800 employees worldwide) Production Ammonia, Mineral Fertilizers and Melamine Annual Turnover EUR 1.2 billion Key strategic player within OCI Fertilizers

7 2. Business case for TMS 20102014 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 system Achieve process efficiency Secure accuracy / Data integration Meet the increased need for information

8 Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzer Transaction Manager SAP Bank Communication Management SAP In-House Cash Cash ManagementLiquidity Planning Credit RiskMarket RiskPortfolio Analyzer Hedge Management Exposure Management Money Market Foreign exchange SecuritiesCommodities SAP Cash & Liquidity Management DerivatesDebt Mgmt BPC Forecasting 3. Treasury system landscape

9 Treasury applications from SAP Cash ManagementLiquidity Planning SAP Cash & Liquidity Management 3. Treasury system landscape Cash & Liquidity Management

10 A0 FI Banks F2 Debtors TodayToday +1Today +2Today +3Today +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 300 800 -800 A0 FI Banks Level / Short text 500 D C 500 -800

11 Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzer Transaction Manager Cash ManagementLiquidity Planning Market Risk Hedge Management Money Market Foreign exchange SAP Cash & Liquidity Management Derivates 3. Treasury system landscape Hedge 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). 12 Hedge Management 3. Treasury system landscape

13 Strict criteria: Existence of formal documentation Achievement of effectiveness tests (80%- 125%) Effectiveness tests: 13 Key date valuation Retrospective Inception date Interim or annual financial statements Prospective Interim or annual financial statements Hedge Management 3. Treasury system landscape

14 Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzer Transaction Manager Cash ManagementLiquidity Planning Market Risk Hedge Management Money Market Foreign exchange SAP Cash & Liquidity Management Derivates BPC Forecasting 3. Treasury system landscape SAP Business Planning & Consolidation (BPC)

15 SAP BPC is used for: Budget & Forecast Ad 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 3. Treasury system landscape

16 SAP BPC BPC Automated CF Statement Identify exposures Scenario analysis 3. Treasury system landscape

17 Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzer Transaction Manager Cash ManagementLiquidity Planning Market Risk Hedge Management Exposure Management Money Market Foreign exchange SAP Cash & Liquidity Management Derivates BPC Forecasting 3. Treasury system landscape Exposure Management

18 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 3. Treasury system landscape

19 Exposure Management 3. Treasury system landscape

20 Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzer Transaction Manager SAP Bank Communication Management SAP In-House Cash Cash ManagementLiquidity Planning Credit RiskMarket RiskPortfolio Analyzer Hedge Management Exposure Management Money Market Foreign exchange SecuritiesCommodities SAP Cash & Liquidity Management DerivatesDebt Mgmt BPC Forecasting 4. Next steps

21 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)

22 Etienne Kleuters Treasury & Credit officer etienne.kleuters@ocinitrogen.com Michel Hanssen SAP Finance consultant michel.hanssen@qrcus.nl Thank you

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