Strategic Treasury

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Interview: Frédéric Bernet, Sequana We speak to the Director of Finance and Treasury at the stationary group Sequana about their hedging strategy, debt financing, exchange rate risk and more.

Frédéric Bernet

Director of Finance and Treasury, Sequana

“It’s no longer desirable to rely on just one banking credit”


Could you tell us about the type of work Sequana does?

Sequana is a stationery group encompassing two areas of activity, each of which is the leader in its field. Antalis, the European number one for paper and packaging distribution, has a turnover of €2.8bn with 230,000 clients and 6,000 employees. Its two main markets to date are editors and/or publishers, and companies and the civil service. Antalis is actively expanding in two other fields, notably through acquisitions: visual communications and packaging – that is to say, secondary packaging – both important markets which are growing but very fragmented. With a turnover of €1.5bn, Arjowiggins groups together production activities across 25 sites, just over a third of which are in France. Arjowiggins is the world leader in high quality paper, bank note paper and tracing paper. It is also the leading producer of recycled graph paper in terms of volume, and the European leader in the green paper market.

With a presence in 44 countries, Sequana is very international: 87% of turnover comes from outside France – Great Britain alone accounts for 17%, and 74% of the workforce is employed outside France. The company’s long-term strategy involves refocusing on distribution, with the industrial division concentrating on sectors where it is, or could be, the leader. The group is listed on the stock market on Euronext Paris and is eligible to use the Deferred Settlement Service. 28.2% of the company is held by the Agnelli family through Exor, 20.2% by the Lebard family through DLMD and 11.8% by Allianz, with the balance making up the stock market float.

A strong presence abroad, raw material-intensive production: that probably means lots of risk that requires hedging?

Paper production, including bank note paper, has numerous components such as pulp, old paper which is used to create the pulp, recycled paper, even cotton, but also energy – electricity, gas – latex, starch and chemicals. Hedging can be done through mid- and long-term trade agreements with suppliers and/or by way of market operations, mostly in the form of swaps. Operational foreign exchange risk management at Arjowiggins involves large volumes, notably the parity of the euro to dollar, euro to pound and pound to dollar. To give an idea of the figures, hedging of purchases and sales in 2011 represented almost €1bn. These operations, carried out by the central office, are effected through swaps and forwards; we have no or little recourse to options.

Antalis is less concerned with operational foreign exchange risk management: sales and acquisitions are mostly carried out in the local currency. There are some exceptions, particularly in South Africa, Latin America and certain countries in central Europe: in those cases, after a consultation with the treasury and finance management team, hedging in order to protect margins is carried out directly by the subsidiary. This is usually due to the regulations of the country.

What is the level of Sequana’s debt? How Is it financed?

The net debt of the group was €609m at the end of the last fiscal year, for shareholder funds of €669m and a gross operating surplus of €135m – €206m, pro forma, in 2010. At the start of the year, the group finalised with the bank the terms of a renewal of Arjowiggins’ and Antalis’ syndicated credit contracts and also of a confirmed line of credit signed by Sequana, the latter with the same time scales as an overdraft. As for Arjowiggins, we renewed a line of credit worth €400m which had an expiry date of July 2012. The extension, to July 2014, was negotiated with the seven banks involved in the initial pool, after an adjustment of the margins and reinforcement of the guarantees to the lenders and the financial covenants. Antalis had signed for a credit of €650m with eight banks in October 2007. This credit was renewed, for €560m, until June 2014; the margins and covenants were also revised.

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