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  • 1. Metsä Group How to create value and drive better cash management? Case: Collection Factory1 Metsä Group
  • 2. Metsä Group2 Metsä Group
  • 3. Metsä Group structure Metsä Group Metsä Finance Sales EUR 5.3 billion, personnel 12,500 51% M-real Metsäliitto Cooperative 49% Metsäliitto Metsä Group’s parent company. Owned by 125,000 forest owners. Cooperative Metsä Tissue Metsä Board Metsä Fibre Metsä Wood Metsä Forest Sales: Sales: Sales: Sales : Sales: EUR 1.0 billion EUR 2.5 billion EUR 1.3 billion EUR 0.9 billion EUR 1.5 billion Personnel: 3,300 Personnel: 4,000 Personnel: 900 Personnel: 2,900 Personnel: 1,000 Ownership: Ownership: Ownership: Ownership: Ownership: Metsäliitto Metsäliitto Metsäliitto Metsäliitto Metsäliitto Cooperative 77% Cooperative 60,8%** Cooperative 57%, Cooperative 100% Cooperative 100% Metsä Board 32%3 Metsä Group
  • 4. The Cash Flow Automation Matrix* Order OptimumUniformprocesses Cash Flow Automation MatrixLocal Tradition Systemsprocesses Manual Automated Metsä Group *Matrix copryright OpusCapita 4
  • 5. Vision for Finance 2010• A thorough review of Metsä Group s way of operating in different financial areas resulted to a group level development programme called Vision for Finance 2010• Collect Project with a target of a uniform and effective way of collecting the Group s receivables was one of the sub targets 5 Metsä Group
  • 6. Elements of Metsa Group Vision for Finance Key Characteristics: Key Characteristics: • Decision makers inIT • Common finance various level understand architecture defined Management and how their decisions are used Organisation • effect on profitability and Common systems ROCEsystems are replaced when & cash flow Key Characteristics: Key • Transparent and consistent • Controllers understand finance • High quality proactive financial data owned by Characteristics: support for business the figures and suggest Target • actions IT Finance costs Lower based on decision making and • Rolling planning analysis People and Finance Processes • Finance people place forecasting in concentrate • Common training in Culture • Efficient transaction on value-added finance place for finance and Operating processes activities – controller non-finance people Model function is optimized • Fast reporting with • Skilled and motivated analysis • Transactions are done in finance people shared service centers • Working capital • Embedded “Reach management • Common financial IT systems and integrated with language, key policies and Higher” culture and Intrastructure controller ethics proceduresprocess planning6 Metsä Group
  • 7. From decentralized model to Group Shared Services – Communication – Legal – ICT – HR – Financial Shared Group Services – Administration Shared – Energy Services – Logistics – Procurement – Business Intelligence – Metsä-Finance Multi location One location7 Metsä Group
  • 8. Financial shared services road map From a multi location financial concept to one location concept Current service locations in main markets Finland (3 locations, serving 65 business units) UK (1 location, serving 6 business units) Germany (3 locations, serving 8 business units) France (1 location, serving 2 business units) Smaller companies, smaller companies outside service centers One location model to be implemented 2012-2013 Poland(Gdansk) All Group companiesJTA18.5.2012 8 Metsä Group
  • 9. Role of Metsä FinanceAll external (and internal) financial transactions of Metsä Group business units areexecuted and/or arranged by Metsä Finance: METSÄ FINANCE Money & derivatives MARKET OPERATIONS Short term funding markets - external - internal Debt Capital GROUP FINANCING markets Metsä Wood TRADE FINANCE Metsä Forest Metsä Board L/C CASH MANAGEMENT Metsä Fibre counterparties TREASURY SUPPORT Metsä Tissue RISK CONTROL 9 Metsä Group
  • 10. Metsä Group challenges • Group operating model • Metsä Group earlier managed rather as a holding structure • Independent business models • Each business having their own management and legal operating models • System landscape • Each business running their own processes, own ERPs and master dataJTA18.5.2012 10 Metsä Group
  • 11. Objectives of payment collections program Process Control Visibility Monetary Improvement Improvement Improvement Savings New collection bank Global and transparent view on A/R Reduction of external banking costs account structure => and credit management System development only in one More effective collection => Better liquidity planning based on system -> cost savings less overdues more transparent A/R data Routine tasks will be Better hedging based on more automated => focusing on accurate data core competencies Better credit risk management -> less Automatic allocation of credit losses invoices => More effective use of personnel11 Metsä Group
  • 12. Collection Structure – Starting Point Customer A Customer Each company Metsä Board B Customer maintaining own A/R Bank accounts C collection bank Customer Metsä Fibre D accounts A/R Customer Bank accounts E Customer F A/R run separately Metsä Tissue A/R Customer G by each company Bank accounts Customer H Metsä Wood Customer A/R I Bank accounts12 Metsä Group
  • 13. New Metsä Group Financial Platform – Collection view Reporting Internal Bank Customers Credit & Collections Management Collection Accounts structure Banks Accounts receivable Metsä Metsä Metsä Metsä Metsä ERP ERP ERP ERP ERP Board Wood Wood Forest Fibre FI SE PL DE SK13 Metsä Group
  • 14. Collection Factory structure Metsä BoardCustomer XMetsä Board Metsä TissueCustomer Y Collection InternalMetsä Tissue Account * Bank Internal Bank Metsä account statements sweeping FibreCustomer ZMetsä Wood Metsä Wood A/R Metsä * Collection Agent Model Forest Bank account owned by Metsä Finance 14 Metsä Group
  • 15. Collection Agent Model • Change in the invoice phrase and the customer information letter about using the collection agent have usually been enough for the customers • Some customers have required bank’s confirmation of the banking relationship which Metsä Finance provides by request • In some cases we have provided also the internal Collect agreement as a proof of the nature of the operation15 Metsä Group
  • 16. Collection Bank Account Rationalisation Roadmap Starting Number of bank Currencies Countries Banks accounts Point 244 17 28 16 Final Number of bank Currencies Countries Banks accounts Situation 26 15 28 516 Metsä Group
  • 17. Key Elements and Enablers Collection bank account structure Collection agent model Internal Bank solution Bank Partners with cash pools17 Metsä Group
  • 18. Achievements • Very transparent view on Group Liquidity • More effective hedging (due to FX losses now being very apparent) • Reduction in FTE´s by 17 on Group Level  Reduction completely on A/R and Credit Management • Annually Euro 370.000 savings on external bank account costs • Project pay back 2,3 years18 Metsä Group
  • 19. The Cash Flow Automation Matrix* - our journey Order OptimumUniformprocesses Cash Flow Automation MatrixLocal Tradition Systemsprocesses Manual Automated Metsä Group *Matrix copryright OpusCapita 19
  • 20. Thank You20 Metsä Group