About DAW SE:
DAW (short for Deutsche Amphibolin-Werke von Robert Murjahn) boasts a literally “brilliant” range of products: the company has been developing, producing and selling innovative coating systems since 1895. This includes paint, varnish and glazes (with Alpina and Caparol the most popular brands) but also a range of other products: DAW champions innovation in the coating agent, insulation and preservation of structures markets. The business is 5th generation family-owned and one of the largest private paint manufacturers in Europe. In Germany, Austria, Turkey and Belarus they’re market leader. DAW has 5,600 employees in over 40 countries and 29 production sites. In 2015, they achieved a turnover of EUR 1.3 billion.

Treasury Profile

ADaily Cash Management

BCash Pooling

CPayment Processing

DPayment on Behalf of

ECollection on Behalf of

FSWIFT

GeBAM

HLiquidity Planning

IContract Management for Interest, Currencies

JManagement of Commodities

KTrade Finance Contracts

LCapital Markets

MRegulatory Requirements

NGeneral Risk Management

OTreasury Accounting

PStandard / Individualized Reporting

QNetting & Reconciliation

RInsurance

SMergers & Acquisitions

TInvestor Relations

 

In 2012, BELLIN first visited DAW’s headquarters in Ober-Ramstadt in Germany and were surprised by the diverse business models in the group, with a main focus on the manufacture of paint for professional decorators supplied by wholesalers. DAW is active in the insulation sector, and next to a large portfolio of industrial coatings they also contain an in-house paint design studio whose concepts have been recognized on several occasions.

Strong brands for various distribution channels

DAW comprises various brands. The target audience includes both professional tradesmen and “DIY” hardware store customers. DAW uses different distribution channels to do its diverse product portfolio justice. They also do commercial business, representing an additional organizational level. A number of wholesaler acquisitions and the continued extension of the trade network have meant changes to the organization and the business sectors DAW operates. In turn, these are driving factors behind the development of the treasury and have helped them become established in the group.

Antonio Gallina took up his position as Head of Treasury at DAW nearly four years ago. The department had just been established, and he was tasked with finding a professional and optimum setup. According to him, DAW is somewhere mid-process now on this path to the ideal treasury. The first key steps have been taken, but it will take another few years for Antonio Gallina to realize his vision and get his treasury to the point where they can act as the perfect in-house bank and a central service provider in connection with all banking operations for all group companies. Despite being a “young discipline,” DAW’s treasury has become firmly established as an independent unit within the finance and accounting section.

“Accountant,” “paymaster,” “custodian”

The treasury department’s responsibilities mirror this development of “taking root” in the group. For example, the team is in charge of account statement entries and the corresponding allocation of all incoming payments to accounts – something that is not commonly handled by a treasury department. DAW’s treasury takes this responsibility very seriously, and it has a set place in their daily routine. In the morning, all account statements are received electronically, grouped and transferred to the respective company code in SAP, which is used for accounting. DAW has achieved a fully automated processing of the individual items on the statements, which makes their lives considerably easier. It goes without saying that these postings are not the main focus of Antonio Gallina and his team. Antonio Gallina sees himself more in the role of “custodian of payments,” “paymaster,” or the one responsible for funding and liquidity. He is fully in charge of all payments processes as well as FX deals to manage liquidity and to hedge FX risks. Given the group’s comprehensive portfolio, the treasury department is also involved in many other areas, for example purchasing projects. They’re the ones making sure financial framework conditions are used to maximum effect. Slowly but surely, the young treasury department has become firmly established in the organization. What ultimately counts is the added value the treasury brings to the whole group. What good is the best deal if it doesn’t make you any money in the end? The experienced treasury department’s contributions are invaluable, and more and more people in the group see them as a key partner in the financial organization.

The currencies and specific characteris-tics in the countries where DAW does most of its business are a particular challenge. In addition to Central Europe, this is mainly countries in Eastern Europe. With a large business volume, Russia, Poland and Hungary have made PLN, RUB and HUF the most important currencies following EUR. While RUB does not account for the largest volume, it certainly is a currency that requires particular attention. DAW is also market leader in Belarus and one of the main contenders in Ukraine. UK, Switzerland and Sweden are also important markets, but administration in these countries is so much less complicated that at least the treasury can handle them almost “by the by.”

Taking into consideration country specifics and local currencies

Whenever a new location is established, DAW considers it important to think and act in local currency. This applies to funding business operations as well as sales activities. The latter are often only possible in local currency, or any alternative wouldn’t make any sense. Business risk is contained in this country. Drawing on their great experience, the treasury team supports local staff in setting up banking connections, and in the early stages they often provide guarantees for credit lines negotiated with local banks.

Geopolitical factors influence day-to-day operations

Regulatory requirements play an important role in many businesses (both the regulations they need to comply with and the ones applicable to their banks). For DAW on the other hand, the geopolitical framework is a bigger focus. For example, a nationalization of businesses in Russia would have dramatic consequences. After all, people only invest in new homes if long-term prospects are good. Seasonal volatilities, which building material suppliers are subject to, come on top of geopolitical issues, and both influence liquidity. Despite the fact that DAW’s operations span a large geographical area, the different seasons have an impact on business. Winter simply isn’t as good a time for renovations as summer, and this affects cash flows and business liquidity. Developments in the banking sector are equally relevant for DAW – for example specific banks withdrawing from some markets.

The treasury department has now been up and running for a while but there’s still room for improvement when it comes to the banking structure. Implementing the banking strategies they’ve drawn up for themselves, which includes local requirements, remains a great challenge for the treasury department. This will continue to be the case for months or years to come. Transparency is key when it comes to sound bilateral relationships with banks that are built on trust. The banks’ offering represents an important prerequisite for good business.

Standardizing the colorful payments landscape

DAW’s treasury has been backing system-supported process optimization since 2013, and they have much to show for their efforts. Payments in Germany and other countries, such as France, Spain or Italy, have been standardized completely. They’ve been combined with cash management and the overall administration of banking business. Limits are managed centrally, and FX transactions are integrated. Gone are the times when the treasury department was working with a number of spreadsheets – and no one wants to go back! Even rolling out this concept to other countries is less problematic than initially feared.

While some group companies viewed payments standardization with skepticism to start with (in particular in connection with the introduction of cash pools at the same time), the success has seen most critics fall silent. Local payments are now entered on a shared platform, with signatures and payment release handled by central treasury. This way, cash flows are always transparent while dual approval is upheld locally and centrally.

Of course, such a process is never without “a hitch:” in Italy for example, DAW requires workaround solutions for RIBAs and tax payments. What’s more, despite SEPA and CGI, a multitude of formats for financial messages persists.

Even technologies such as host-to-host connections or Global EBICS occasionally face limitations and can sometimes be a challenge for DAW. While DAW initially hoped to fully meet all requirements at all times, the treasury department has come to realize that the selected channels will not provide a complete 100% solution.

Aiming for 100%

Treasurer Antonio Gallina and his team have set themselves the goal of continuously optimizing workflows, and they have defined some guiding principles:

  • Know your business.
  • Know the factors that can help you influence business in a positive way.
  • Know the system. This is the only way to support group companies in using it.

Antonio Gallina’s own background is in auditing, and he has made his way via accounting and balance sheet preparation to treasury. He enjoys the many different challenges he’s faced with at DAW that make for an interesting and constantly changing working environment. Innovation and creativity are an absolute must if you want to tackle continuously new challenges. It’s important to keep pace and to never fall behind! While this is clearly not something that is only true for DAW’s treasury, Antonio Gallina and his team embody it extremely well. 

 

The most important aspect when implementing a TMS is to know your business. You need to really understand the circumstances and the environment in which you operate to make qualified decisions and find the right solutions.

Antonio Gallina | Head of Treasury, DAW