Published: November 15, 2011
La Lettre du Trésorier
In France, the reputation of your company is modest in comparison to its size; it is worth over €1.5bn on the stock market…
Benoît Kerloc’h
The company is indeed not well known in France, although it was founded in 1887, but on the other hand it is very well known in Africa, where it conducts 80% of its business in 34 countries, with the remainder of sales coming from overseas regions and territories. CFAO is a specialised distribution business with three arms: automobile distribution and import which accounts for 58% of our revenue, distribution of pharmaceutical products, (30%), and a variety of industrial activities, involving equipment and services. The company, which had a turnover of €2.7bn in 2010, an operating profit of €233m and a net profit of €140m, employs 9,500 people in 140 subsidiaries.
What were the impacts of the financial crisis?
The two years of worldwide crisis, from which we have now emerged, acted as an interesting stress test. We were in fact able to see for ourselves that our markets resisted it better and that our mixture of activities and countries made for a well-adapted, diversified and solid risk profile: the distribution of medicines, for example, continued to increase during the crisis and not every country entered the crisis at the same time. Over the course of the last ten years, turnover has more than doubled with an average growth rate in the region of 10% per year, half of which was due to organic growth, the other half to acquisition.
Has your listing on the stock exchange, in December 2009, had a significant effect?
PPR, which was CFAO’s only shareholder, sold 58% of its holding, a large part of which had been acquired by long-term investors attracted by Africa’s rapid development across a diversified society, by a fairly liquid secondary market and high-quality ‘governance’ and financial communication. But this process, which marks the beginning of a new era for the company, has also necessitated a transition period during which we have had to sever links with our old parent company. Thus, when it came to financing, we had to negotiate a syndicated credit of €300m over three years, extended by one year since then. The other novelty concerned the management of foreign exchange risk. CFAO has high exposure essentially to the buying rate, especially in dollars and yen. We protect ourselves systematically when we order, at the moment of exposure. We prioritise micro-hedging in order to be able to determine our cost price and commercial margins very accurately. Up until September 2010, all our hedging operations were carried out by the PPR trading room, which was our only shareholder. We have had to manage the transition – 1,200 contracts – and install risk management software at the same time. Also, for the sake of simplicity, we have decided to entrust all our operations to one of our banks. Now that we have finished the installation of the software and put in place a rationalisation of our currency risk management, we will be able to start working with other banking partners during the course of the second trimester.[[[PAGE]]]
How is the management of the finances and treasury structured?
At the moment it consists of a dozen people, while the treasury function itself started out barely ten years ago. There were numerous areas to get up and running and the withdrawal of our major shareholder opened up others. The management is divided into two sections, one dedicated to subsidiaries and the other to the holding company and buying offices. Represented in this workforce are two former students with second degrees in ‘business treasury’ from Paris I Pantheon-Sorbonne and AFTE, and one person with the same degree currently in an apprenticeship.
What sort of links do you have with your subsidiaries?
The group is historically, and inherently, very decentralised when it comes to daily operations. Where finance is concerned, we tend to give our 140 or so subsidiaries a degree of independence, but within the framework of ‘group’ rules. This method of functioning has been strengthened since the introduction, as of 2005, of the Kyriba treasury software, allowing us to control our operational entities and to aggregate data in the form of performance indicators. In addition, we are limited by a particular feature of our business - the impossibility of centralising cash due to local regulatory requirements - and this constitutes an additional constraint to take into account.
In the spirit of encouraging more independence, we consider the financial directors of our subsidiaries best placed to manage their own banking relationships, provided that they give priority to banking partners of the group whose networks suit our establishment: the French and English banks, not forgetting the large Moroccan, Nigerian and pan-African banks. This is all within the context of synchronised conditions and regular dialogue with the central treasury, local managers and the bank headquarters.
What choice did you make in terms of banking communication?
For a company like ours, which was for so long at the heart of a large centralised financial group, the ending of the national banking communication protocol Etebac presented an excellent opportunity for a great leap forward. We chose SWIFTNet for three reasons: we would benefit long-term from a single channel for currency exchange linking the banks with all of our subsidiaries, we could carry out our confirmations of market operations and we could benefit from a multi-banking trade finance tool, one of the major areas of operation of the CFAO treasury.
What has been your career path up until now?
In a way, it took place under the sign of Africa. After finishing my studies at business school, specialising in finance, I went to the Bolloré group, where, over the course of ten years, I held the positions of financial controller, treasurer and financier at the holding company in Africa and at the operational divisions. I joined CFAO in 2002 with the task of building a treasury service.
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