The working capital requirements of large corporations are often too complex and variable to be effectively addressed with a one-off financing tool. Julien Tizorin, Head of Coverage, Energy & Chemicals Americas, and Massimo Ortino, Head of GTB Americas, at UniCredit, discuss how a flexible receivables financing programme successfully met the changing cash flow requirements of National Oilwell Varco (NOV) – a leading provider of technology, equipment and services to the global oil and gas industry.
Dynamic receivables financing is an innovative and particularly useful working capital tool for corporates whose cash flow is subject to peaks and troughs over the course of the financial year. By agreeing to price the receivables financing in accordance with an expected payment date, for example – as opposed to the due date – corporates and their banks can establish a flexible and robust working capital solution, as NOV discovered.
As one of the largest providers of equipment and components used in oilfield services – operating in multiple countries and almost every oilfield around the world – NOV’s business is dependent on the energy cycle.
When oil prices are high, NOV receives an increased number of purchase orders, building up a back-log. When oil prices are low, the back-log goes down. Releasing working capital allows NOV to execute these orders faster when oil prices are up.