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.[[[PAGE]]]

Do you ever consider other methods of financing?

I don’t think it’s possible or desirable to rely on just one banking credit any more. Since 2008, Sequana diversified its sources of financing with the introduction of a forfaiting programme at Arjowiggins, which involves around €80 to 90m. This diversification strategy could have been followed for the refinancing of the whole group, notably by way of a bond issue. However, the events that occurred in Greece in the summer of 2011 have compromised the viability of this type of operation with numerous issuers; Sequana has therefore opted for a solution of ‘amend-to-extend’ for its financing contracts. What’s more, we are bearing in mind the need to eventually diversify our sources of funding and we continue to explore all kinds of alternatives to banking credit, such as the bond market, private investment, securitisations, forfaiting and others.

Is exchange rate risk covered?

Almost all the debt is subject to a variable rate and is at present weakly hedged. Taking into account the extent of the decrease in interest rates over the course of the last few trimesters, we envisage an increase in the level of hedging.

What are the group’s options when it comes to cash management?

The general principle for cash management is maximum centralisation, which is achieved by putting in place cash pools, automatic or not, everywhere where the regulatory frameworks allows this under acceptable conditions. However, taking into account the arrangements specified in our funding contracts, we manage the treasuries for Sequana, Arjowiggins and Antalis in three individual cash pools and are not permitted to merge them in to one. When it comes to banking communications, we have replaced the old protocol, Etebac 5, in stages: first Ebics T, at the end of 2011, then Ebics TS, which we have just put into place. As for Sepa, we have switched to SCT for a large proportion of our transfers in France. There are five people in the financing and treasury management team which I lead, one of whom works across a number of areas – including banking communication, forecasts, forfaiting – and, I should add, a student intern.

What steps have you taken to get to where you are now?

After studying at Sciences Po Paris and a postgraduate degree in finance and capital markets at Dauphine, my post-study training led me to work in capital markets. My professional journey began in industry in 1991, at PSA Peugeot Citroën. I worked there for 17 years, which allowed me to familiarise myself with many different aspects of finance: financial engineering, evaluation and financing of foreign operations, market operations and also banking relations. I also tried banking at Banque PSA Finance, a subsidiary of PSA Peugeot Citroën, where I contributed to the setting up of the Basel II framework. In 2008, I joined Sequana as the treasurer of Arjowiggins and became the director of finance and treasury at Sequana in 2009.