Strategic Treasury

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Interview – François Huchet We chat to François Huchet about how Razel's financial management is organised - particularly how they minimise the risks linked to construction.

Interview - François Huchet

Director of Finance and Management Control, Razel

“Acting on the levers more than the causes”

Le Lettre du Trésorier

What does Razel do and how big is the company?

François Huchet

Razel is a construction business operating in France and Africa with a turnover of €405m in 2010. We employ 3,900 people, almost two-thirds of whom are overseas, and are now part of Group Fayat, which had a turnover of €2.7bn last year 2010] in construction and industrial activities such as road construction materials. Razel is involved in several areas of construction – civil engineering, roads, tunnels, earthworks, dams, highway maintenance, quarries, green spaces – and is divided into two types of activity – big projects, and our agencies’ and subsidiaries’ activity. Each year, we manage around 300 sites of all sizes each of which can reach €200m. On one hand, these present very different characteristics; on the other, they are all subject to considerable unknown quantities with heavy exposure to varied risks, particularly climatic and geologic. This varied and risky activity naturally has significant impact on the management of the treasury and financial risks.

What sort of impacts are you thinking about?

On the subject of risk management, finance managers need to continually deal with the unexpected. Take foreign currency risk, for example: the unknown quantities of a project permanently overturn cash-flow forecasts, a phenomenon that the treasurer needs to incorporate into his hedging by adapting the tools and/or the hedging strategy. In the case of road building, which requires the purchase of bitumen in dollars, there is a double risk: exchange and raw material. There again, the treasurer needs to adapt by researching the flexibility of their hedging. Options offer big advantages, but with a relatively high cost. That is the reason why we don’t use them. For the financial management, hedging of a risk at such a level of unknown quantities needs to take the form of an efficient and regular treasury budget system. The treasury service centralises budgets and updates them every month.

Is every construction site managed directly by entities of your company?

No. For a certain number of them, when it involves heavy or risky projects, or necessitates a technological pooling of resources, we create an ad-hoc structure with our partner businesses which can take diverse legal forms: economic interest groups, partner organisation, joint-venture companies, etc. These organisations use their own bank accounts which are unconsolidated but monitored by the central service. That is one of the major specificities of treasury management in our sector: on one hand, the central service needs to manage numerous accounts – around 600; in addition, it needs to communicate daily with the managers of the project companies in order to integrate ‘retroactive value’ transactions which are going to take place between project companies and consolidated entities. This exercise requires a reactive central service and a high-performance communications system. Finally, the multiplicity of project companies necessitates particular procedures to secure cash flow.

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