Distribution finance programme improves working capital
Published: Feb 2025
Best Supply Chain Solution
Overall Winner
Dow Chemical (China) Investment Co Ltd
Photo of Jolene Liu, Citi collects the award on behalf of Dow Chemical (China) Investment Co Ltd.
Shirley Chen
APAC Treasury Director
The Dow Chemical Company is one of the world’s leading material science companies, serving customers in high-growth markets such as packaging, infrastructure, mobility and consumer applications. Headquartered in Michigan, USA. Dow operates manufacturing sites in 31 countries and employs approximately 35,900 people. It delivers annual sales of approximately US$45bn.
in partnership with
The challenge
In today’s fast-changing economic environment, effective working capital management and maintaining a healthy cash flow have become increasingly challenging for treasury management. These are crucial not only for supporting business growth but also for providing flexibility needed to navigate unforeseen complexities and to capitalise on emerging opportunities. As business volume continues to grow in APAC, the Dow regional treasury team has been committed to exploring innovative solutions for optimising working capital.
The solution
In partnership with Citi, Dow launched the inaugural Distribution Finance (DF) Programme in March 2024 in Singapore and China. This is an innovative and sophisticated solution of synthetic securitisation to optimise working capital and support business growth, offering a more advanced solution compared to other traditional account receivable programmes.
The underlying logic is the sale of receivables from a group of buyers as a portfolio solution. Given the large pool and diversified risk, the solution leverages an innovative risk management by applying statistic modelling and risk sharing between Citi and Dow without credit insurance.
Citi purchases the Account Receivables of the entire portfolio and collects payment at a future maturity date by appointing Dow as the collection agent. The solution enables the company to generate cash flows earlier, shortening the cash conversion cycle, reducing DSO, and optimising working capital in a systematic way.
The portfolio approach allows quick expansion of the programme, minimising operational burden and customer interference.
With this, Dow was able to quickly achieve a programme size with an aggregated amount of US$127m within three months and expand further to US$359m within six months, covering multiple selling entities across Asia Pacific.
Best practice and innovation
Time-to-market was critical to the success of this transaction. The Dow APAC Treasury team was able to identify the opportunities and implement the innovative solution in just three months across two markets. The initial discussion started in December 2023, with the first batch of funding released in March 2024.
At every stage of the implementation, the team has shown best practice in dealing with the complexities of the regional treasury and country laws. By leveraging an excellent, collaborative working relationship across multiple functions such as sales, credit, accounting, invoicing, and legal team, and Citi’s DF solution, ensured a strong partnership was quickly forged.
Key benefits
Working capital improvement.
Economic of Scales.
Risk mitigation.
Automation via digital platform.
Operational efficiency and flexibility.
“We have been delighted with the success of our DF programme and the commitment and partnership shown by Citi and the cooperation between multiple functions at Dow. We look forward to Citi’s ongoing support to expand the programme further and appreciate their flexibility, quick implementation and benefits,” says Chen.
Miaofei Xi (Kathy)
Solution Sales, Treasury and Trade Solutions, Citi China
Our partnership with Dow is one of collaboration where we always look to innovate together. On this Distribution Finance (DF) Programme, we aligned on our collective goals around working capital optimisation and business growth and finally designed and implemented this market leading scalable solution in APAC within a record time of three months by leveraging Citi’s key strength, deep understanding of the business asks and strong project management and implementation experiences. Our programme proved to be innovative as a win-win solution for both Dow and distributors and gives Dow’s treasury the ability to quickly achieve scalable cash flow enhancement.
Citi is honoured to have worked with Dow’s APAC team leveraging the excellent, collaborative working relationship across multiple functions on this DF Programme and looking forward to more collaboration.
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The Adam Smith Awards Asia are the industry benchmark for best practice and innovation in corporate treasury. The 2024 awards attracted 406 nominations. To find out more please visit treasurytoday.com/adam-smith-awards-asia
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