Published: June 01, 2013
Bonduelle is a company with a strong commitment to its staff and customers, integrity and excellence across everything that we do. Treasury has a key role in supporting the company in fulfilling its objectives and enabling our businesses to focus on customer engagement and satisfaction, therefore it should not be considered as a back-office function. Consequently, we have a centralised treasury function that is structured to support the business and deliver value. This article outlines some of the ways in which we have achieved this so far, and some of our current and future plans.
Our treasury department comprises six people, and acts as an in-house bank, conducting all cash and treasury requirements on behalf of the Bonduelle group. In this way, we maintain control over our cash, treasury and risk requirements globally, achieve harmonised financing conditions and ensure adherence with transfer pricing regulations. We use JD Edwards as our ERP across Bonduelle, a common database across the company which ensures a ‘single source of truth’ for information such as supplier settlement instructions. This is integrated with our treasury platform, Sage FRP Treasury. We use SWIFT for bank communication, which is outsourced to a service bureau.
In addition to managing the core cash, treasury and risk management requirements for Bonduelle, we also manage a centralised payments factory within the treasury department. We were already providing payments services, including foreign currency payments, for some entities in the past, but 18 months ago we expanded the payments factory to provide more comprehensive, group-wide services, prompted by the need to migrate to SEPA (Single Euro Payments Area). Consequently, we now have a ‘payments-on-behalf-of’ model, and support 42 out of a total of more than 60 entities across the group, although some of those that are not included in the payments factory are non operational entities. We use a standardised format across all entities, currencies and regions, and combine multiple files into a single payment process, enhancing efficiency and automation. Payments are validated by two signatories from the relevant entity and then passed to the bank via SWIFT using 3SKey. We have five individuals registered for 3SKey tokens at group level: this is where the payments ‘on-behalf-of’ model makes sense; although it’s more difficult to initiate, you add a significant step in security as you limit numbers of people who are able to sign and the number of bank accounts used.
We also worked with our treasury management system provider to enhance the system to enable approvals/ signatures to take place earlier in the payment process and thus ensure smooth global process.
The key added value in this process are:
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Another key way in which our centralised treasury and payments factory delivers value to the business is in foreign currency risk management. All subsidiaries are obliged to hedge their currency exposures with treasury, so we can then manage our currency risk on a net basis. As the business operates on a seasonal basis, we hedge our currency risk annually based on the detailed mapping per entity of budget figures, which includes projected in/out flows. We then monitor our hedge position monthly based on a rolling forecast, and adjust our hedges accordingly.
We make payments in every group currency (currently around 13 currencies) and post the equivalent subsidiary’s current account in its base currency. In some cases, we have to triangulate our currency hedging as the currency pairs we require are not traded. For example, we sell products in Russia from Hungary. We hedge both currencies via EUR but we provide the equivalent RUB – HUF rate to the local entity.
Delivering a unique guaranteed rate per currency to our entities and taking care of FX risk management at the group level is the efficient way we manage currency exposure, by centralising management risks where knowledge and tools are, and allowing entities to rely on a secured rate throughout the year.
As an industrial company, the Bonduelle business is quite cash-intensive, so financing is an essential activity for us. We have US private placements and French bonds etc. We recently refinanced our debt with a revolving credit facility for €300m (around half of our debt) involving eight banks. We have also put in place a euro private placement for €145m, so our debt is now around 40% with banks and 60% with US and European investors. With a number of large maturities this year, refinancing has been an essential treasury activity.
The treasury team is also ‘added value’ oriented as far as refinancing is concerned by trying to be innovative. We have been involved in disintermediation since 2000, by issuing one of the first USPP for a French mid size corporate, and are now considered as a repeat issuer with our 2004/5 and 2010 issues. Obsaars issued in 2007 and 2009 were also an innovative solution for Bonduelle in refinancing. More recently, the company issued the first ever Euro Private Placement for a French non-rated mid size corporate. Bondulle has twice been awarded ‘Financial operation of the year 2012’: the first time by NYSE Euronext, and recently in May by ‘Club des Trente’, showing that innovation can create added value by finding new markets for refinancing.
For daily business, we select our transaction banking partners based on their participation in our refinancing needs, establishing a win/win relationship based on ’financing vs sidebusiness’. Over the past five years or so, we have relied primarily on our panel of French banks, which is typically easier to manage than appointing local banks: we have had more challenging experiences in countries such as Spain and Italy. However, as our payments are centralised, we have credit lines with our French banks and France-based accounts, so local accounts are usually required for collections.
Although we have implemented cash pooling in some countries, this is an area in which we are looking to keep on improving. We have several cash pools for EUR covering countries such as Germany, Austria, Belgium, the Netherlands, Italy, Spain and Portugal. Last year we implemented a cross-border cash pool in Polish zloty and we are now setting up a cross-border cash pool in HUF, starting in May. In our remaining currencies, such as RUB, USD and CAD, we transfer funds regularly into a central account per currency and hedge positions through FX swaps or cross-currency swaps for greater maturities.
Beyond basic service of cash collections, our cash pools are set up in order to deliver added value through refinancing solutions in currencies (PLN or HUF overdraft facilities), and once linked to our payments factory process, these become a global treasury tool simplifying the activity of the local entities by taking over responsibility for payments, cash sweeping, FX exposure, etc.
Looking ahead, we are considering implementing SEPA Direct Debits (SDD) for some collections, although there will be a limited number of these. In addition, we are seeking to automate our processes further in order to free up more time for reporting and analysis. This will include reviewing the integration between systems to ensure that the flow of information is as efficient as possible. As an example, we have started to set up an electronic FX dealing platform, in order to integrate operations directly with our treasury management system: this will allow us to use ‘zero paper’ confirmations via SwiftNet or other media. As far as ‘zero paper’ is concerned, we are considering eBAM as a solution which should improve bank mandate management.
Another focus is on working capital management, and improving the quality/ accuracy of our forecasts. For example, reducing inventory levels can have a major impact on debt, so we are investing significantly in our working capital processes. To do this, we are creating closer relationships with the business to demonstrate what we do with data they provide to us, including forecasts, and how treasury’s activities benefit them.
Although Bonduelle is smaller than some of the corporations that regularly appear in the treasury media, we have been able to achieve comparable levels of efficiency, control and automation, and therefore enhance the value we are able to deliver to the business. Technology has a major enabling role to play, but this can only add value when the underlying business organisation and processes are aligned with the needs of the business. In our case, centralisation both of treasury and payments has been a vital catalyst for delivering value across the 18 countries in which we have a presence, enabling business managers to focus on developing new business channels and increasing customer satisfaction.
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