The challenge:

Asia is regarded by Sonepar as highly strategic and the fastest growth market for the group. In 2013, Sonepar generated around €1.4 billion in sales from Asia-Pacific, representing 8% of the group’s sales. As part of the group’s expansion strategy, in 2008 Sonepar acquired part of Hagemeyer, including activities in Asia. The integration of the Hagemeyer subsidiaries gave rise to new cash management needs, including restructuring and harmonisation.

Given the fast pace of growth and complexity of operations, it was important for Sonepar to put in place flexible banking arrangements to meet its evolving needs as its business expanded across nine markets in Asia. Sonepar’s treasury was highly decentralised because of the acquisition. This adversely impacted the efficiency of its cash management, trade finance, funding, liquidity management and foreign exchange.

“The company sought to centralise our treasury management function to our regional headquarters in Hong Kong,” says Matthieu Raffestin, Senior VP Finance, Asia-Pacific at Sonepar. “This would enable us to optimise our working capital to fund expansion, while accommodating the needs of our various entities to comply with diverse legal and regulatory restrictions as well as different financial infrastructures and market practices.”

The company also needed to streamline banking relationships and consolidate the cash management of its operating entities at a regional level, while still satisfying the requirements of its centralised treasury in Paris.

The solution:

A comprehensive range of cash and liquidity management solutions was developed, designed for future scalability. These included a range of products and services, including cash management (accounts, electronic banking and payments and collections), liquidity management, working capital facilities (overdrafts, trade finance, short-term loans) and FX lines for regulated currencies.

The jewel in the crown is the company’s new liquidity management solution that supports business operations in China, which is the largest revenue contributor in the region. The two-way RMB cross-border cash pool was implemented in April 2014 and runs through an entity in the Shanghai Free Trade Zone (FTZ). The solution allows Sonepar to fully integrate its onshore RMB cash flow with its regional cash pools. The integrated liquidity management solution gives Sonepar’s regional management full visibility of the group’s liquidity across 49 subsidiaries in six markets as well as offering both visibility and management control at central treasury level in Europe.

Best practice and innovation:

The cash management solutions that were developed and implemented have removed barriers to efficiency and effectiveness with cross-border cash management solutions that ensure optimum use of surplus liquidity.

“Through our primary bank, RBS, we implemented a comprehensive range of cash and liquidity management solutions that include the management of accounts through electronic banking and payments and collections,” says Raffestin. “The innovative liquidity management solutions give us full visibility of our balances, both with RBS and with other institutions. This puts the company in full control of its surplus liquidity and self-funding for our overdrawn positions, with access to a range of information that enables us to manage and administer our own pooling solutions.”

These solutions have delivered a range of cost efficiencies, including a reduction in borrowing expenses through the aggregation of balance positions from different bank accounts into a single account through the new domestic zero balancing pools, improved cash flow with streamlined collections and reconciliation processes, and a reduction in the number of manual transactions through electronic banking.

They have also increased accuracy and operational efficiencies, including the simplification and automation of receivables reconciliation, and provided Sonepar’s treasury with greater control over its cash, partly as a result of the consolidation of its liquidity into master accounts.

All this was achieved with the delivery of a one-stop secure electronic banking platform across Asia that integrates with Sonepar’s global treasury system, guaranteeing round-the-clock transparency of operations and liquidity.