In 2014, David Flory, Head of Group Cash Management at HeidelbergCement, discussed the evolution of the company’s cash pooling strategy. This is a particularly complex undertaking as cement, aggregates and ready-mixed concrete production take place within close proximity to customers, leading to diverse payment and collection requirements across a wide diversity of often remote locations within each country. It can therefore be difficult to rationalise bank relationships, so treasury efficiency, standardisation and centralisation are essential. In this article, we are delighted to welcome David Flory back to TMI who discusses how treasury’s priorities have evolved.
- The growth of HeidelbergCement since the author’s last article in TMI in 2014 has led to the company reviewing and revising its cash pooling strategy, and in some cases appointing new partner banks
- The acquisition of Italcementi in 2016 posed new challenges as the two treasuries are integrated involving complex technical and financial reorganisation
- With over 300 banks and more than 2,500 bank accounts in 3,000 locations across 60 countries, KYC and compliance requirements are particularly demanding
- A banking panel provides new ideas and solutions and treasury focuses on ensuring that changes in technology are implemented in all its country organisations
Scale, complexity and resourcing
Our business has experienced significant change since 2014, as figure 1 illustrates, with an increase of one third in the number of HeidelbergCement Group employees and 35% increase in Group revenue. However, despite greater scale and complexity in our operations, our treasury staffing has grown only fractionally from 14 to 15 treasury professionals. Consequently, in an environment of both large and small acquisitions and disposals, and an increasingly challenging external environment, maximising efficiency, standardising processes and controls and optimising information flows for decision-making has never been so important. Treasury centralisation is crucial to this, so despite the decentralised nature of our industry, we aim to centralise our cash, treasury and risk management activities as far as possible.
Cash and liquidity optimisation
In our 2014 article, we discussed the evolution of our cash pooling strategy, which we have continued to develop. Since then, we have introduced cash pools in Poland, Romania, Netherlands, Iceland and Malaysia, and put in place a regional cash pool for Scandinavia. Current projects are France and Italy. In some cases, such as the Netherlands, Romania and Malaysia, we have had to respond to bank exits from these markets, so we used the opportunity of appointing new banks to enhance our cash and liquidity management. In Scandinavia, we already had individual cash pools in each country, but at the request of our shared service centre, that manages payments and collections for these markets, we rationalised this structure to become more efficient. We will continue to review and revise our cash pooling strategy as our business continues to expand, prioritising countries according to the scale of our activities and the degree of opportunity in the relevant market.
Although we have maintained the same treasury management system (TMS), we have continued to make use of additional functionality to reflect changes in our own business and the wider market environment. We have also continued to expand our use of SWIFT across a larger number of banks, and rolled out our system to an expanded group of users. Previously, when we received treasury reporting from subsidiaries, it was already outdated, but we now receive daily or intra-day account information via SWIFT. In situations where the relevant bank does not support SWIFT, remote users can access our TMS online and update bank balance information daily or weekly. We therefore have a far more accurate, centralised liquidity position, allowing us to make better decisions.