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Cash & Liquidity Management
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Cash Pooling Past, Present and Future

by David Flory, Head of Group Cash Management, HeidelbergCement

HeidelbergCement has a centralised group treasury function based in Germany comprising 14 professionals across front, middle, back office and cash management. With a flat hierarchy and a direct report to the Group CFO, the department is able to be highly responsive to both market and business changes, and take a pragmatic, hands-on approach to problem-solving. In this article, David Flory, Head of Group Cash Management, discusses cash management at HeidelbergCement, in particular the role of cash pooling in achieving the group’s cash and treasury management objectives.

Cash management at HeidelbergCement

Our cash management business is relatively complex. We have over 210 banking partners and manage 1,700 bank accounts across 45 countries. In the cement and aggregates business, and still more for ready-mix concrete, production needs to take place within close proximity to customers, so we have to support payment and collection needs across a wide diversity of locations within each country which are often quite remote. Consequently, it is more difficult for us to reduce the number of our banking partners than for other industries, as we need to work with banks that have a strong branch network and support local payments and collections. This means that we need to manage a wide range of electronic, manual and cash-based flows as well as diverse regulatory environments across the countries in which we operate. Furthermore, we have a mix of both long and short cash positions across the group, and a variety of different shareholdings, from wholly-owned subsidiaries to minority joint ventures, which again adds cash management complexity.

At the end of the third quarter 2013 we had a group net debt position of approximately €8bn, financed through a variety of capital market borrowings and backed by a €3bn syndicated facility with 19 banks. Like many multinational corporations, we make extensive use of cash pooling to minimise net debt and enhance our total return on cash. Furthermore, we use cash pooling as a form of ancillary business for our core lending banks.