STRICTLY PRIVATE & CONFIDENTIAL
How Supply Chain Finance is set to serve company´s strategic goal
Patrik Zekkar
October 7 , 2015
Denmark
HolmensKanal 2-12
1092 Copenhagen K
Finland
Pohjoisesplanadi 37A
00100 Helsinki
Norway
Bryggetorget 4
0107 Oslo
Sweden
Norrmalmstorg 1
103 92 Stockholm
United Kingdom
75 King William Street
London EC4N 7DT
Agenda
1.
The company´s strategic goal
2.
Supply chain finance today
3.
Evolution of the supply chain
4.
How to build a successful SCF program
5.
What's stopping us?
Q&A
1
│
The company´s strategic goal
2
│
The company´s strategic goal
Working capital key driver of ROCE
Working capital metrics
Sales %
ROE
Margins
ROCE
Cash conversion cycle  DIO  DSO  DPO
Business operating cycle
Days inventory outstanding (DIO)
Shareholder value
management
Days payable
Outstanding (DPO)
Revenue
Days sales
outstanding (DSO)
Cash conversion cycle (CCC)
Profitability
Number of days
Costs
ROCE
Working
capital
Fixed
assets
Potential trade-off between p/l effects and balance sheet
for management of working capital
Invested
capital
WACC
IC: Invested capital; WACC = Weighted average cost of capital; DIO = (Inventory/COGS) * 365; DSO = (Accounts Receivable/Sales) * 365; DPO = (Accounts Payable/COGS) * 365
3│
Supply chain finance today
4
│
2002-04-12
5│
Supply chain finance in Danske Bank
Potential buyer (CaseCo) and supplier benefits
Automated flow and clear legal structure
CaseCo

Improved Days Payable Outstanding (DPO) - leads to improved working capital

Reduce the cost of goods purchased

One limit for all suppliers

Stable supply base

Total exposure overview with Danske Bank

Known systems & processes

Supplier
Goods and invoice
according to existing
supply agreement
CaseCo
2
4
3
5
Strengthen relationship with supplier
1
Supplier
6

Reduced Days Sale Outstanding (DSO) - leads to improved working capital

Improved solidity

“Additional Facility”

Flexible cash flow

Known systems & processes

Strengthen relationship with CaseCo
│
1
CaseCo upload
invoices daily
(automatically)
3
Bank accepts
(purchases the
invoices)
2
Supplier can see all
approved invoices and
offer the bank to purchase
all or some of these
4
Bank pays the
invoice amount
less interest
5
Danske Bank
make an account
sweep on the
invoice due date
Supply chain finance today
Key criterias
Implementation of buying entities
Invoice processing
Connectivity (managing multiple
ERPs, format & data tranfers)
-Straight-through-processing
Onboarding of suppliers
- Speed of onboarding
- Hit ratio
- Multiple-juristictions
- SCF web interface
7
│
- Speed of payment
- Multi-currency capability
Daily support
A fully IFRS compliant SCF program

8
│
The audit reports on Danske Banks SCF program is
yearly updated
Evolution of the supply chain
9
│
Evolution of the supply chain
”Unbundling” of the supply chain
Level of bundling
Cost of
goods
Cost of
goods
Cost of
goods
Cost
Face-to-face
communication
cost
Cost
Face-to-face
communication
cost
Cost
Face-to-face
communication
cost
2nd unbudling
1st unbudling
Pre-globalisation
t
10│
Evolution of the supply chain
Increased complexity with globalisation of the supply chain
Laptop computer
for educational use
11│
Evolution of the supply chain
Increased complexity with globalisation of the supply chain
Laptop computer
12│
Evolution of the supply chain
Changing value added in the value chain activities
Value added
Global value chain in the 2000s
R&D
Services
Design
Marketing
Sourcing
Logistics
Value chain in the 1970s
Production
Pre-production intangible
Source: OECD
13│
Production
tangible activities
Post-production
intangible
Value chain
activities
Evolution of the supply chain
Drivers payment terms in the Nordics
1.
Nordic companies moves towards a
international harmonisation of payment
terms, i.e. increase payment terms in
Nordics
2.
Large corp. continue to focus on measure
capital efficiency (shift from EBIT(DA) to
ROCE).
3.
1. & 2. above, will indirectly affect suppliers
in the local SME segment, with no
international trade.
30-35 days
45-50 days
60 days
90-120 days
Source: Danske Bank point of view
14│
How to build a successful SCF program
15 │
Supply Chain Finance is a
derivative on an existing Supply Chain
16│
How to build a successful SCF program
Bad preparations are the mother of all failurs
Exploring potential
Customer specific WC
business case building
17 │
Strategy & approach
Structured & confident
E2E process
Predictibility & transparancy
A systematic
approach
Explore top down potential
CaseCo cash flow profile in balance over last 5 years
Average peer has performed stronger
CaseCo 5Y (average, % of sales)
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
• Cash flow deployment analysis  representation of
the cash flow statement
• We standardize using sales for every year and
calculate the 5Y average
18│
Peer group 5Y (average, % of sales)
8%
7%
6%
5%
4%
3%
2%
1%
0%
-1%
• CaseCo has invested more in net working capital
relative to peers over the last 5 years
Optimization of payables constitute a potential of 2-4% of sales top-down
CaseCo still lags best-in-class performers ‘A’, ‘B’, and ‘C’ by 2-4% points
Accounts
receivable/sales
Net working capital/sales
Accounts payable/sales
15%
25%
14%
10%
20%
12%
5%
0%
-5%
10%
15%
8%
10%
6%
5%
4%
0%
2%
Be careful with conclusions based on top-down peer studies
1
19│
Understand industry and supply chain dynamics
• Peers:
• Business model
• Geographical footprint
• Sales channels, B2C, B2B
2
Peer studies
• Valuable inputs for
• Business case
• Strategic management of net
working capital
• But there is no ”one-size-fits-all”
Sub-suppliers
CaseCo suppliers
CaseCo channels & consumers
Direct
Retailers
Factory
Distributors
Raw material/
Ingredienses
Warehouse
20│
Web
Consumers
Supplier strategy and effect of reverse factoring program
EXAMPLE
An incremental approach to supplier onboarding for CaseCo´s SCF program
Supply strategy
Number
of Suppliers
Key target suppliers
Add largest supplier with spend of Xm
Supplier A
1
All red segment
28
All country A
60
Add Country A accounts where CaseCo can offer
attractive terms based on strong credit profile
All tier 1
86
Consider approach to remainder of tier 1 and value
proposition for large ticket multinationals with strong
credit profiles
Non-tier 1
Approach suppliers outside of tier 1

Focus first on Supplier A and smaller suppliers with strong relations to establish
scale, secure breadth of program and gain experience

Red segment seems to be a key target group where many suppliers would gain
from entering a program

A capital release of Xm is attainable equivalent to 2.2% of sales, if all tier 1
suppliers are included

CaseCo will move close to best-in-class performance compared to peers
and relieve strain on capital structure metrics
Release when payment terms are extended from the current weighted average of 37
Spend m
Release m
SCF limit need increases with program
1-day release m
Supplier
A
Amapola
Flyg AB
0.3%
AllAll
Transportation
red segment
0.7%
All country
SwedenA
1.7%
All tier 1
2.2%
90 days
21 │
SCF limit need m
120 days
135 days
Map credit profile compared to supplier base
CaseCo can lever credit profile to extend payment terms towards preferred suppliers
High
CCC+
B-
Supplier with
largest spend
B
B+
BB-
Reverse factoring
attractiveness
BB
Credit rating
BB+
BBBBBB
BBB+
AA
A+
AAAA
AA+
AAA
Low
0
22│
100
200
300
Spend (millions)
400
500
600
Focus first on large tickets and suppliers with strong reliance
Spend size and reliance matters for attractiveness of program
Large tickets
400
Supplier sales to CaseCo (millions)
350
•
•
•
•
Key supplier
Large spend
Very high reliance
Large NWC commitments on balance
Company EBITDA margin Net WC/Sales
A
20%
36%
B
4%
10%
C
19%
9%
D
7%
21%
E
19%
11%
F
3%
27%
G
3%
-18%
H
8%
23%
I
9%
27%
J
10%
4%
K
3%
14%
L
4%
13%
M
5%
24%
N
5%
26%
O
9%
21%
P
10%
4%
Q
17%
8%
R
8%
26%
S
2%
20%
T
2%
-15%
U
5%
14%
V
1%
0%
X
9%
14%
Y
9%
21%
Z
13%
8%
Supplier A
High
300
• Large multinational
• Ratingwatch negative S&P
• Need to lower debt burden
250
SCF
attractiveness
200
150
• Low margins, large balance sheet
• Privately owned
• Strong reliance
100
50
Low
0
0%
10%
20%
30%
40%
50%
60%
70%
Supplier sales to CaseCo/supplier sales %
Reliance
23│
80%
90%
100%
Suppliers with strong
reliance on buyer
What´s stopping us?
24 │
Internal efficienty and financial re-engineering are key tools for sustainable improvement
of NWC
25 │
What`s stopping us?
• (Special) project for the WCM-project group to be done on top of their daily work
• The project turns out to be bigger then expected (e.g Invoice approval process)
• Several IT systems combined with interfaces not working perfectly together, difficult
to get the right data, get a overall view and monitor
• Lack of resources or knowledge, IT being a bottle-neck and dependency on external
consultancy (-ies) /competences
• Fragmented data and huge work to create an overview in large and complex company
structures (Ex. business units structure / legal structure / products or geographical
segments...)
• Complexity to analyse large volume of data and understanding of different products ,
markets, production, etc.
• Errors in data (Ex. counterparty and payment terms – master data or work procedure)
• Non-standardised and non-governed procedures
26 │
27│
DISCLAIMER
This presentation has been prepared by Danske Bank for information purposes only and should be viewed solely in conjunction with the oral presentation provided by Danske Bank. It is not an offer or
solicitation of any offer to purchase or sell any financial instrument. Whilst reasonable care has been taken to ensure that its contents are not untrue or misleading, no representation is made as to its
accuracy or completeness and no liability is accepted for any loss arising from reliance on it. Danske Bank, its affiliates or staff, may perform services for, solicit business from, hold long or short positions
in, or otherwise be interested in the investments (including derivatives), of any issuer mentioned herein.
This presentation is not intended for retail customers in the UK or any person in the US. Danske Bank A/S is regulated by the FSA for the conduct of designated investment business in the UK and is a
member of the London Stock Exchange.
This presentation does not imply that Danske Bank has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and
when circumstances arise that will lead to changes compared to the date when statements were provided.
Copyright (2014) Danske Bank A/S. All rights reserved. This publication is protected by copyright and may not be reproduced in whole or in part without permission.