Carlsberg’s treasurer on the ‘moment of truth’ in any banking relationship
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Carlsberg’s treasurer on the ‘moment of truth’ in any banking relationship

Big M&A deals grab headlines, but behind every deal the treasurer plays a crucial role in making it work. In an interview with Euromoney, Carlsberg’s treasurer talks global expansion, treasury strategy and the impact of Basel III.

It might be a crude way of expressing how important a corporate client is to a bank but when a bank provides a new loan, it is really putting its money where its mouth is.

For Carlsberg, the world’s fourth largest beer-brewing company, it called on its relationship banks late last year to show their commitment to the company, and in December some 19 of them answered the call by backing a new loan facility.

The €2.51 billion loan, arranged by Carlsberg, refinances two earlier facilities and matures in February 2019, although the company has an option to extend the maturity out to 2020 or 2021.

Securing such financial backing is important, not least because it gives the company and its treasurer some degree of financial certainty in an otherwise uncertain and ever-changing global financial landscape.

Much of that is concentrated on and around the global banking sector, the force of which is causing an historic shift in the relationships banks have with their clients.

Lars Cordi, treasurer of Carlsberg

Lars Cordi, vice-president and treasurer of Carlsberg in Copenhagen, is acutely aware of this and says the new loan the company has secured is “relationship defining”. “Whenever we refinance our big loan facilities, that does give us an opportunity to re-evaluate our banking relationships, for us and for them,” says Cordi. “Companies have a constant dialogue with their banks, but on refinancing that really is the moment of truth.”

He adds that today more than ever there needs to be a mutual alignment on strategy between the company and its banks “on where we are heading, and can our relationship banks support us in that as a result of the strategy they are pursuing”.

New financial regulation is the primary force behind the strategic shift banks have been undertaking, with higher capital requirements under Basel III in particular forcing them to make “hard decisions on what clients to prioritize”, says Cordi.

That can be a ruthless decision-making process, which can result in a long-term lending relationships being cut or at the very least lending to clients being cut. As such, banks are doggedly focused on trying to strengthen their corporate client relationships in other areas, and transaction banking for many banks is the standout.

Even though Carlsberg has the full financial support of 19 banks – BNP Paribas, Citi, Danske Bank, Nordea, Royal Bank of Scotland, Bank of Tokyo-Mitsubishi UFJ and UniCredit among them as lenders – Cordi says banks are still placing more emphasis than before on developing a transaction banking relationship.

However, he adds that while more banks are becoming aware they need to find their true strength or niche in what they can do better than others, “they realize they cannot pitch for everything”.

The importance banks are placing on transaction banking does reflect the enhanced strategic importance the corporate treasurer has taken on since the financial crisis. For Cordi, this has manifested itself in a number of areas, from focusing intensely on free cash-flow and deleveraging, to mergers-and-acquisition support and working capital. “In 2008, about 8% of group sales were tied up in trade working capital and now we are below 1%,” says Cordi, who co-led a working capital initiative with the company’s group strategy team.

“Through this process, it became very clear to us where capital was being tied up, in what markets, in what categories, which is crucially important,” he says. “Incentive schemes within the company were changed, and down to sales guys in a particular market who should have key performance indicators related to working capital.”

Combined with that has been the M&A and operational support Cordi and his team have had to provide to the company, which since 2008 has notched up a string of acquisitions across northern, western, eastern Europe and Asia, the latest being the Chongqing Brewery Company in China.

“By region we have different strategies and priorities,” says Cordi. “In western Europe, it’s very much the centralization of accounting processes, procurement processes and supply-chain planning across Europe. In eastern Europe, the priorities are very much the same, but we have to respect differences in market characteristics, legislation etc.”

He adds that in Asia he and his team are providing specific M&A support as well as supporting the company in the integration of the newly acquired businesses.

“For instance, we have just completed the partial take-over offer for shares in Chongqing Brewery Company, which has 23 breweries located across western and eastern China, and employs 6,500 employees,” says Cordi.

A substantial part of that integration process will involve technology platforms, and there Cordi says Carlsberg started implementing a new treasury system last year and that this year the company will go live with it, “which will be a major step forward for us and will also include e-treasury”.

“As a result of this, the treasury team here in Copenhagen will have straight-through processing, FX trading, aluminium trading, among other capabilities, and many of our subsidiaries will have this e-banking/e-treasury functionality too,” he says.

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