Photo of Tom Gilliam, SABMiller.

The building of a global function and setting up of the regional treasury centres has meant treasury continues to mitigate commodity, FX, cash, counterparty and supply chain risk in a very cost effective manner.

The challenge:

‘Old school’ treasury and banking practices were prevalent in many of the emerging and developing markets in which SABMiller operated – what was the ‘norm’ in Europe and North America was not available in Latin America, Africa or even Asia. SWIFT connectivity for corporates in these countries did not exist and the global banks had limited, or no presence in these countries. Manual processes, physical signatures and even fingerprints were required from senior directors to undertake daily operations.

“Excess cash had built up from cash generative businesses and the sale of a division in South Africa led to cash balances far beyond the capacity of our traditional bank deposits and money market funds,” says Alan Chitty, Regional Treasurer – Europe.

Restrictive target metrics from the ratings agencies compared to their peer group led to agency ratings that were under pressure and difficult accounting standards for commodity hedging, supply chain financing and inventory meant that the accounting tail ended up wagging the economic dog on occasions. EMIR and Dodd-Frank requirements were merely compounding the problem.

SABMiller decided to act and build upon the Highly Commended Award they won in the Adam Smith Awards Top Treasury Team category in 2014.

The solution:

To overcome these challenges, the global team has looked to utilise best practices from each region and turn them into a set of global standards for every aspect of treasury. The solution comprises a number of elements including:

• Implementation of corporate SWIFT payments and confirmations in an additional 15 new countries.
• Early repayment of an $850m 2016 bond to reduce excess cash, achieve a positive NPV and significantly reducing the 2016 debt tower.
• Purchasing of corporate CP and implementing tri-party repos to reduce counterparty risk exposures to financial institutions.
• Upgrade to A- from S&P and a revised “Positive” outlook from Moody’s.
• Chinese Joint Venture declaring a first ever dividend, ultimately resulting in a $228m cash inflow into the group.
• Excellently executed funding projects in highly regulated countries like India, Nigeria and Uganda resulted in cost savings of over $3m.
• A fully automated commodity hedging programme across six commodity categories over four regions achieving full hedge accounting from an initial pilot project before 2014.
• On-boarding of suppliers to the supply chain financing programmes over three continents with three banks.
• A very successful treasury management system (IT2) upgrade that was under budget and within initial agreed timelines.

The decision to award SABMiller the Highly Commended Winner award in the Best Risk Management category this year is based on the team’s significant contribution to the group’s performance and growth over the last 15 months whilst continuing to mitigate commodity, FX, cash, counterparty and supply chain risk in a very cost effective manner.

Best practice and innovation:

The team has adopted and, after some initial reservations, embraced the global best practices based on complete straight through processing and treasury technology, allowing the team additional time to investigate, adopt and implement new cutting edge treasury solutions across every area of corporate treasury, and even outside its traditional area of influence.

The building of a global function and set-up of the regional treasury centres (RTCs) has meant that the team is now a much appreciated value-add partner to the business and has contributed significantly to the group’s performance and growth whilst continuing to mitigaterisk.

Key benefits:

• Cost savings.
• ROI.
• Improvement in company credit rating.
• Time taken to implement solution and realise benefits.
• Productivity gains.
• Process efficiencies.
• Improvements in days payable outstanding (DPO).
• Interest savings.
• Foreign exchange gain(s).
• Risk removed/mitigated.
• Satisfies evolving regulatory requirements eg Dodd-Frank/EMIR.