About Sartorius:
Sartorius Group is a leading international pharmaceutical and laboratory equipment supplier. The company has two main divisions: “Bioprocess Solutions” accounts for about three quarters of the revenue. As a biopharmaceutical supplier, this division makes an important contribution to help ensure that biopharmaceutical drugs and vaccines are safe and efficiently produced. The second division “Lab Product & Services” offers premium products and services to research and quality assurance laboratories (in particular in the pharmaceutical industry and academic research facilities), such as laboratory balances, pipettes or bioanalytical instruments. Sartorius is a business steeped in tradition: nearly 150 years old, they’ve been growing steadily, particularly in the last decade. Today, Sartorius operates globally and is listed on the German TecDax index. In the fiscal year of 2016, Sartorius had around 7,000 employees worldwide and achieved a turnover of around 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

 

If you’d have to choose an image that perfectly captures Sartorius, it would be that of a speed boat: two-digit growth figures have allowed the group to surpass the EUR 1 billion threshold in 2015, and they have their eyes set on the 2 billion revenue mark for 2020. Sartorius has been expanding all around the world: it has production and sales entities located across the globe and is therefore not restricted to its headquarters in Göttingen, Germany, or other important European locations, such as France or the UK. They have also entered markets such as China and India to directly meet demands in Asia. Sartorius pursues the same approach in the Western hemisphere: for North America, which is the biggest market in the pharmaceutical industry, they have production sites in Puerto Rico, allowing Sartorius to supply its second largest market following Europe in a most efficient manner.

Secure liquidity footing for future acquisitions

In addition to the organic growth of the business, acquisitions regularly play an important role for Sartorius. These require a sound integration into the business processes, workflows and global treasury operations. The speed with which Sartorius has been growing and the funding requirements in connection with acquisitions call for complete visibility when it comes to liquidity management. Both are only possible if the group can always fall back on sufficient cash reserves, enabling Sartorius to seize opportunities quickly as and when they arise. Taking a closer look, you realize that the secure liquidity footing is no coincidence but the combination of many different factors and the success of a long-term and thought-through strategy when it comes to banking. Even with liquidity readily available, it is still essential to use the existing financial resources efficiently within the group, and this is one of the main responsibilities in financial management.

Rapid growth requires sustainable integration

Using spreadsheets is no longer a viable or suitable option for the treasury of a business that has grown so dynamically and operates globally, with 90 sub-sidiaries in over 110 countries. The Sartorius treasury team would never be able to meet the process and reporting requirements without system support. This is why any entities and units that are acquired are quickly integrated into the centralized structure in order to standardize processes.

"One of our main challenges is the recent rapid growth, and the fact that we plan to continue our dynamic expansion in the next few years. It is treasury’s responsibility to support this growth and to lay the foundations for the successful financial integration of worldwide acquisitions. We need to make sure that all group companies always have sufficient liquidity to keep their business operations running. For us, it needs to be transparent how much money is available in all locations."

Integration starts with a review of all local bank accounts, hedging and financing instruments. It also involves starting negotiations with local banks. In a next step, the funding of the entity through intercompany loans is set up, and the banking business is concentrated in one of the selected main banks of the group – to the extent that the local circumstances allow.

A good relationship with your banks – the key to success

Sartorius has defined creditor relations as one of the main treasury responsibilities. Targeted bank relationship management ensures regular communication and visibility vis-à-vis banks and their responsible account managers. Being listed on the TecDax, Sartorius is also accountable to the public, which in turn facilitates visibility. Banks are very important partners for Sartorius: next to two long-term promissory notes, banks represent the main source of funding for acquisition financing that is often required at short notice. A trusted relationship with their bank contacts has been a major success factor for Sartorius, not least to ensure that the banks will commit to even larger investments at short notice.

"Good stakeholder relations are crucial for a company’s success, including investors and banks. We want to ensure our banking partners get all the relevant information from us, so we can build a relationship based on trust. This helps us establish long-term, stable banking relationships and improves conditions. It really pays off!"

Goodbye routine, hello strategy!

Thanks to system support, a small team can handle treasury responsibilities at Sartorius very efficiently. Routine tasks, such as daily cash positioning for cash pools or the valuation of FX forwards, have long been replaced as the main focus of the day-to-day treasury operations – they’re done “in passing” with a few clicks every morning. This frees up time that can be dedicated to strategic tasks, such as the continued standardization of international payment processing.

Sartorius has implemented a group-wide, standardized payments platform with EBICS and host-to-host connections to the main banks. This not only considerably facilitates day-to-day business but also the integration of newly acquired entities. Around 80% of all accounts are integrated, and the electronic account statements that are received on a daily basis form the basis for any cash management decisions. Payment orders are also processed via the platform: the group entities create a standard file in their accounting system (mainly but not always SAP) which is automatically imported into the payment system. This makes things particularly straightforward as smaller entities in particular no longer need to worry about formats – the submitted file is automatically converted to the format required by the bank. Once a payment has been authorized – again with a few simple clicks in the system – it is submitted to the bank by the local entity. Central treasury monitors processes at all times and manages user rights for authorizing and sending local payments. The execution of payments is set up as a collaborative process, saving the Sartorius treasury team time and money, while fully supporting compliance and security requirements.

Group-wide FX management constitutes an essential part of day-to-day opera-tions: with production sites distributed around the world and local markets being supplied by local manufacturers, cash flows play an important role in connection with FX risk. The challenge is not so much in managing currency risks, but rather in accurately identifying risk factors of the respective currencies, which range from USD, JPY, CHF, GBP to KRW or RNB.

Sartorius’ maxim is to minimize currency risk in the operative units. This is achieved via natural hedging at operational level on one hand, and the targeted transfer of subsidiaries’ FX risks to the holding on the other. Centralized analysis of FX exposure at group level has great potential: in a scenario where products produced in Germany are delivered to China and settled internally in USD to then be sold in RNB, the analysis should not focus on the USD exposure but mainly on the EUR-RNB risk. The treasury team frequently has to reach out to local management to work out hedging recommendations at monthly FX Risk Committee meetings.

In addition to external financing and the ensuing relationship management, treasury focuses on intercompany financing. Within the framework of working capital management, the treasury team needs to raise awareness in the group that a sale doesn’t yet equal payment receipt, pointing out how a few simple measures can go a long way in improving liquidity. This puts the treasury department in contact with operative units in the group. In the past, comparatively small treasury departments remained fairly “invisible” compared to accounting and controlling, but this has changed in line with their extended responsibilities.

Dynamic treasury environment – something new every day

What else is of importance to the treasury team in their day-to-day business? The treasury was in charge of converting a separate, syndicated loan that had been put in place when the French Stedim Group was integrated in 2007 to a single source of financing for the whole group – a measure aimed at harmonizing and optimizing group financing. Moreover, in light of three recent acquisitions, the banking strategy in the US requires reviewing to achieve procedural and financial synergies by concentrating banking business.

Brexit, EMIR, any requirements in connection with IFRS9 or banking business in general require constant adaptations and management. Sartorius also needs to respond to changes in the banking landscape: Dresdner Bank, WestLB or WGZ used to be some of the group’s main banks, and none of them still exist in their old form. Conditions in the market have a massive influence on treasury: the volatility of the EUR-CHF exchange rate following the abandonment of the currency ceiling by the Swiss Central Bank or the outcome of the Brexit referendum the day before the closing of a new acquisition are only some examples of the kinds of events the Sartorius treasury team needs to always be prepared for.

"Treasury is a dynamic discipline that is constantly changing. We see it as one of our key responsibilities to constantly monitor these developments and assess potential consequences. This way we can serve as internal advisors and help everyone be prepared for new developments at all times."

Projects and challenges such as the above are what define daily operations. Routine processes are largely automated and highly standardized. The treasury system is used worldwide on a daily basis by all group entities to capture bank accounts, payments and interest and FX management deals as well as to manage the many guarantees. All this makes treasury management much more straightforward. Up-to-date information for the whole group is available at any time, for example regarding the global financial status, currency exposure or derivative valuation. No other setup would allow a small team to cope with the complex and dynamic nature of treasury operations of the “Sartorius speedboat.”

 

We ensure that all entities worldwide are integrated in our TMS. And we make sure that funds are made available wherever they’re needed – in any possible currency. We’re currently rolling out a new cash management setup in Asia. The cash pool in China is already in place, so the funding for business operations there is ensured. It is projects like these that have boosted our international profile. A few years ago, no one even knew there was a treasury department, let alone what we do. This has changed completely – and that shows us we’re doing something right.

Christian Schnurbusch | Director Group Treasury, Sartorius