How to Create Value

Metsä Group

Metsä Group How to create value and drive better

cash management? Case: Collection Factory

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Metsä Group

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Metsä Group

Metsä Group

Metsä Group structure

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Metsä Group Sales EUR 5.3 billion, personnel 12,500

Metsä Wood Sales : EUR 0.9 billion

Personnel: 2,900

Ownership: Metsäliitto Cooperative 100%

Metsä Tissue Sales: EUR 1.0 billion

Personnel: 3,300


Metsä Fibre Sales: EUR 1.3 billion

Personnel: 900

Ownership: Metsäliitto Cooperative 57%, Metsä Board 32%

Metsä Forest Sales: EUR 1.5 billion

Personnel: 1,000


Metsä Board Sales: EUR 2.5 billion

Personnel: 4,000

Ownership: Metsäliitto Cooperative 60,8%**

Metsäliitto Cooperative Metsä Group’s parent company. Owned by 125,000 forest owners.

Metsä Finance

51% M-real 49% Metsäliitto Cooperative

Metsä Group

The Cash Flow Automation Matrix*

Order Optimum

Tradition Systems

Cash Flow Automation Matrix

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Uniform processes Local processes

Manual Automated

*Matrix copryright OpusCapita

Metsä Group 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

Metsä Group

Elements of Metsa Group Vision for Finance

Management and Organisation

Processes

IT systems and Intrastructure

People and Culture

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Target Finance

Operating Model

Key Characteristics: •High quality proactive support for business decision making

•Finance people concentrate on value-added finance activities – controller function is optimized

•Transactions are done in shared service centers

•Common financial language, key policies and procedures

Key Characteristics: •Common finance IT architecture defined

•Common systems are used when systems are replaced

•Transparent and consistent financial data owned by finance

•Lower IT Finance costs

Key Characteristics: •Decision makers in various level understand how their decisions effect on profitability and ROCE & cash flow

•Controllers understand the figures and suggest actions based on analysis

•Common training in place for finance and non-finance people

•Skilled and motivated finance people

•Embedded “Reach Higher” culture and controller ethics

Key Characteristics:

•Rolling planning and forecasting in place

•Efficient transaction processes

•Fast reporting with analysis

•Working capital management integrated with planning process

Metsä Group

From decentralized model to Group Shared Services

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– Communication – Legal – ICT – HR – Financial Shared

Services – Administration – Energy – Logistics – Procurement – Business

Intelligence – Metsä-Finance

Group Shared Services

Multi location One location

Metsä Group 18.5.2012

JTA

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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 companies

Metsä Group 9

Role of Metsä Finance

All external (and internal) financial transactions of Metsä Group business units are executed and/or arranged by Metsä Finance:

Short term funding Money & derivatives markets

Metsä Wood Metsä Forest Metsä Board Metsä Fibre Metsä Tissue

MARKET OPERATIONS - external - internal

CASH MANAGEMENT TREASURY SUPPORT

RISK CONTROL

Debt Capital markets

METSÄ FINANCE

GROUP FINANCING

TRADE FINANCE

L/C counterparties

Metsä Group 18.5.2012

JTA

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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 data

Metsä Group

Objectives of payment collections program

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Process Improvement

Control Improvement

Visibility Improvement

Monetary Savings

New collection bank account structure => More effective collection => less overdues Routine tasks will be automated => focusing on core competencies Automatic allocation of invoices => More effective use of personnel

Global and transparent view on A/R and credit management Better liquidity planning based on more transparent A/R data Better hedging based on more accurate data Better credit risk management -> less credit losses

Reduction of external banking costs System development only in one system -> cost savings

Metsä Group

Collection Structure – Starting Point

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A/R run separately by each company

Each company maintaining own collection bank accounts

Metsä Board

Metsä Fibre

Metsä Tissue

Metsä Wood

A/R

Bank accounts

A/R

Bank accounts

A/R

Bank accounts

A/R

Bank accounts

Customer B

Customer I

Customer C

Customer A

Customer D

Customer E

Customer F

Customer G

Customer H

Metsä Group 13

New Metsä Group Financial Platform – Collection view

Metsä Wood

Metsä Wood

ERP FI

ERP SE

ERP SK

ERP PL

ERP DE

Metsä Board

Reporting

Internal Bank

Credit & Collections Management

Collection Accounts structure

Accounts receivable

Metsä Forest

Metsä Fibre

Customers

Banks

Metsä Group 14

Collection Factory structure

Metsä Tissue

Metsä Wood

Metsä Board

Internal Bank

A/R

Metsä Forest

Metsä Fibre

Customer X Metsä Board

Customer Y Metsä Tissue

Customer Z Metsä Wood

Internal Bank account statements

sweeping

Collection Account *

* Collection Agent Model Bank account owned by Metsä Finance

Metsä Group

Collection Agent Model

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• 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 operation

Metsä Group

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Collection Bank Account Rationalisation Roadmap

Starting Point

Number of bank accounts

Currencies Countries Banks

244 17 28 16

Final Situation

Number of bank accounts

Currencies Countries Banks

15 28 5 26

Metsä Group

Key Elements and Enablers

Collection bank account structure Collection agent model Internal Bank solution Bank Partners with cash pools

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Metsä Group

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 years

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Metsä Group

The Cash Flow Automation Matrix* - our journey

Order Optimum

Tradition Systems

Cash Flow Automation Matrix

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Uniform processes Local processes

Manual Automated

*Matrix copryright OpusCapita

Metsä Group

Thank You

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