formats need to be changed and how,” explains John. “Rationalising our bank structure makes everything much easier. For transaction banking, we now have just three relationship banks but have retained slightly more for our financing. We’re still in the midst of the centralisation process and having completed Europe, we’re well on track in the US–Mexico–Canada region. Our next challenge is Asia.”
Treasury has grown in line with the company’s expansion through a combination of organic growth and acquisitions. As a supplier, ElringKlinger has locations close to the main car production plants, minimising environmental impact by keeping supply chains short. Several of these subsidiaries have very straightforward finance structures and it made sense to bring these together. “Five or 10 years ago, head office was the source of as much as 50% of total income, but as we’ve steadily grown and expanded it made sense to centralise,” adds John.
Pandemic resilience Outside of Germany, ElringKlinger has production units in European countries such as the UK, Spain, Hungary, Romania and Turkey, while further afield it operates in countries including the US, Canada, Mexico and Brazil. It also has units in Asia’s two main economies – China and Japan – as well as South Korea, Indonesia, Thailand and India.
For John, managing risk effectively is the key to sustainable profits, and absorbing the US dollar foreign exchange (FX) risk is key for an industry that sources its raw materials from major commodity companies. “As we produce locally, we’re close to our customers and sell to them in the local currency, so the dollar fluctuation risk can impact on prices,” he says.
FX risk is largely handled through natural hedges, which is mainly a controlling exercise with the ability to pass on much of the impact of fluctuations through price- changing clauses. Any leftover financial risk is hedged through derivatives, most of which are cross-currency swaps.
The company’s recent quarterly reports have noted how its free cash flow has provided it with resilience during the pandemic, and John admits that it has proved even better than he was anticipating. Key to this success has been harmonisation, he explains. “We have
48
ElringKlinger supplies battery systems for solar vehicles made by Sono Motors. Below, ElringKlinger fuel cell stack NM12
reduced our bilateral loans to diversify our funding portfolio with a promissory note loan (Schuldscheindarlehen) and a syndicated loan, which is the backbone of our financing.”
Even before the rapid spread of Covid-19 across Europe last spring, the treasury’s cash strategy was to pay down debt, so in early 2020 the firm was “well positioned and able to sit through the crisis fairly comfortably”, to the extent that the treasury team was able to focus on its investment and cost-efficiency programmes.
Game changer John says that his role as Treasurer has expanded as various processes have been transferred to head office and developed organically. “By implementing the TMS we established a central point of information, so that treasury effectively acts as the gatekeeper,” he explains. “It means
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94
