by Markku Honkasalo, Chief Financial Officer, Rautaruukki Corporation
As a diverse business with three distinct business segments, Ruukki has different capital profiles and working capital requirements in each case. The business is capital-intensive, particularly Ruukki Metals, and we have around €2bn capital employed, of which €1.5bn is required by the metals division. Our total working capital is around €700m. Consequently reducing the overall working capital requirement is a priority for Ruukki so that we can maximise investment in the business.
We recently changed our operating model in the Metals division, so we now operate an efficient organisational structure, with a principal company in Finland, and subsidiaries operate as agents, which enables us to reduce working capital requirements by owning inventory centrally. However, in addition to structuring the business appropriately, we needed to be proactive in optimising the elements that contribute to working capital. We have therefore embarked on a variety of working capital initiatives to improve the ratio of working capital to net sales.
A key strategic partnership
SEB has been a core bank for Ruukki for a number of years, and our relationship extends to a variety of areas, including both trade finance and cash management. Consequently, the bank takes a major strategic role in helping us to meet our financial objectives in areas such as working capital. One of the initiatives that we have worked on together was to go through SEB’s Corporate Financial Value Chain™ (CFVC) programme, a structured way of identifying and addressing points of weakness in the financial supply chain. Based on this analysis, we identified a variety of areas in which we recognised scope for improvement, which has been highly beneficial for our business.