Treasury focused on growth Etienne Kleuters Michel Hanssen 14 November 2014

Table of Contents Introduction Business case for Treasury Management System Treasury system landscape Cash and Liquidity Management Hedge Management Business forecasting Exposure Management Next steps Lessons Learned

SAP Finance Consultant SAP Treasury Theory 30-06-2010 1. Introduction - Qrcus Michel Hanssen SAP Finance Consultant Michel.Hanssen@Qrcus.nl OCI Nitrogen

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

1. Introduction - OCI Fertilizers Locations

1. Introduction - OCI Nitrogen Key strategic player within OCI Fertilizers Location HQ in Geleen (The Netherlands) (approx. 800 employees worldwide) Production Ammonia, Mineral Fertilizers and Melamine Annual Turnover EUR 1.2 billion 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 Challenges: Combining two separate companies into one OCI Nitrogen Disconnected from corporate environment and operate as a stand alone company

2. Business case for TMS Challenges: Develop a sustainable system < 2010 2010 2014 ? Organization Meeting first requirements stand alone treasury organization Integration in corporate treasury Fully integrated in corporate treasury DSM Upscaling to increased requirements (risk management, regulatory, accounting, financing, public listing parent) Policies Information Challenges: Develop a sustainable system Achieve process efficiency Secure accuracy / Data integration Meet the increased need for information

SAP Cash & Liquidity Management SAP Bank Communication Management 3. Treasury system landscape Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzer Credit Risk Market Risk Portfolio Analyzer BPC Forecasting Transaction Manager Hedge Management Exposure Management Money Market Foreign exchange Derivates Debt Mgmt Securities Commodities SAP Cash & Liquidity Management Cash Management Liquidity Planning SAP In-House Cash SAP Bank Communication Management

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

Today Today +1 Today +2 Today +3 Today +4 Cash position Level / Short text D C D C D C D C D C Cash position A0 FI Banks A0 FI Banks 500 500 500 500 800 -800 Payment in Transit B1 Outgoing Payment subledger -800 B3 Incoming Payment subledger Treasury deals T1 Treasury in T1 Treasury out Liquidity position AP/AR F1 Creditors -800 F2 Debtors 300 Sales and Purchases P1 Purchase orders -800 P2 Sales orders 300

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

3. Treasury system landscape Hedge Management 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).

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

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

3. Treasury system landscape SAP BPC SAP BPC is used for: Budget & Forecast Ad hoc simulations Advantages: 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 SAP BPC Input currencies & Basic Assump. Prices Raw Materials Calculate Cost prices Sales Volume & Prices Logistical Tariffs P&L Reporting BS Reporting Exposure Mgmt BPC Automated CF Statement Identify exposures Scenario analysis Cash flow

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

3. Treasury system landscape Exposure 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”

3. Treasury system landscape Exposure Management

SAP Cash & Liquidity Management SAP Bank Communication Management 4. Next steps Treasury applications from SAP SAP Treasury and Risk Management Risk Analyzer Credit Risk Market Risk Portfolio Analyzer BPC Forecasting Transaction Manager Hedge Management Exposure Management Money Market Foreign exchange Derivates Debt Mgmt Securities Commodities SAP Cash & Liquidity Management Cash Management Liquidity Planning SAP In-House Cash SAP Bank Communication Management

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)

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