AFP Emerging Markets Presentation

transcript

Leadership in Treasury: Emerging

Markets Pave the Way for

Globalization

Andres Ken Shuyama, CTP

Director of International

Treasury,

Stanley Black & Decker, Inc.

Jiro Okochi

CEO & Co-Founder,

Sharon Petrey, CTP

Treasury and Risk

Management,

Session Agenda

• Introduction to the Session

• Objectives and Best Practices

• Case Study: Stanley Black &

Decker

Emerging Markets Growth

• In 1988, there were just 10 countries in the MSCI Emerging Markets Index, representing less than 1% of world market cap

• Today the MSCI Emerging Markets Index covers over 800 securities across 23 markets and represents approximately 11%1 of world market cap

• Goldman forecasting that emerging markets market cap will eventually exceed developed markets

• Yet to the developed world emerging markets continue to pose a challenge

• Why is that?

The Emerging Markets Challenge

• Despite time,

importance and growth

emerging markets is

daunting to many

• “Treasury in Brazil is a

nightmare and would

avoid it at all cost”

European Treasurer,

September 17, 2014

• “Emerging markets

don’t change and will

always be emerging”

Emerging Markets FX

Trader 1998

The Times They Aren’t A Changing

Why Does Treasury Care More Now?

Trapped Cash

• The multinational companies have accumulated $1.95 trillion outside the U.S., up 11.8 percent1

• China, India and Russia worst offenders in trapping company cash2

• U.S. corporations are holding $1.95 trillion in deferred earnings outside our borders. – 12% higher than one year earlier.

– Repatriated would generate about $682.5 billion in tax revenue.

1 Bloomberg News, March 12, 2014 2 Euromoney, March 13, 2014 3 Forbes.com, Sept 25, 2014

Follow The Money: Cash Visibility

• Central Treasury can struggle to integrate post M&A or with new business units

• Regional offices can “hide” behind local: language, culture, requirements, & relationships

• Change management from the top

• Reeling in control from the bottom with the cash

• Sweeping cash to HQ sends a powerful message!

SaaS Technology For Control &

Change Management • Single global platform for

real-time cash visibility

• Eliminate riskier manual processes

• Better workflow controls

• Easier regional deployment and connectivity

• No need for regional IT support

• Emerging markets telco infrastructure can be better than some developing countries

Globalization

Sharon Petrey, CTP

Treasury and Risk

Management,

Overarching Objectives: Entering

Emerging Markets

Strategically

• Ensure access to sufficient financing

• Maintain sufficient in-country liquidity

• Manage risk

• Optimize local cash

Operationally

• Overall ease of operation • Streamlined and

optimized banking structures

• Technology Optimization

• Efficiency and oversight

Best Practices for Entering

Emerging Markets

• Setting treasury structures and policies

• Key questions when setting a funding

strategy

• Opening and managing bank accounts

• Maintaining liquidity, visibility and

control

Treasury Structures and Policies

• Ensure entity can operate legally

• Ensure policies are in place

• Review structures after a period of time

Funding New Activity

• Who is responsible for arranging

funding?

• Is the funding arranged up front or as

needed?

• Is there an initial capital requirement?

• How will working capital be financed?

Opening and Managing Bank

Accounts

• Are in-country bank accounts needed?

• How many, which types, which

currencies?

• What bank?

Maintaining Liquidity, Visibility

and Control

• Do you have visibility into bank

accounts and accessibility to cash?

• Do you have the right liquidity in

various countries?

• Can you even maintain control in

certain locations?

The Tax and Treasury

Conversation

• Concepts

– Permanent Reinvestment

– SubPart F income

– Transfer Pricing

– Withholding Tax

– Thin Capitalization Rule

– New Developments

Globalization

Director of International

Treasury,

Agenda

• Overview of Stanley Black &

Decker

• Impact of Globalization on

Treasury

• Lessons Learned and Tips that

Helped Us

A Diversified Global Leader

Industrial

Security

Building World Class Branded Franchises With Sustainable Strategic Characteristics

That Create Exceptional Shareholder Value

Market Cap & Dividend Yield Are As Of Market Close 7/25/2014 $90.77

Industrial $3.3B • Industrial & Automotive Repair

• STANLEY Engineered Fastening

• Infrastructure

Security $2.4B • Convergent Security

• Mechanical Access

• Healthcare

CDIY $5.3B • Professional Power Tools

• Hand Tools & Storage

• Consumer Products Group

• Fastening & Accessories

Stanley Black & Decker (NYSE: SWK)

2013 Revenue: ~$11.0B Market Cap: $14.2B Cash Dividend Yield: 2.2%

Dividend Paid Consecutively For 138 Years; Increased For Past 47 Consecutive Years

Global Brand Power

A Powerful Portfolio Of Well Managed Brands

Global Presence

Australia 1Q’14 2Q’14

Organic Flat + 2%

% SWK 2% 2%

Europe 1Q’14 2Q’14

Organic + 4% + 1%

% SWK 29% 26%

Canada 1Q’14 2Q’14

Organic + 9% - 1%

% SWK 5% 5%

Japan 1Q’14 2Q’14

Organic + 11% + 1%

% SWK 2% 2%

US 1Q’14 2Q’14

Organic + 2% Flat

% SWK 46% 48%

Emg Mkt 1Q’14 2Q’14

Organic + 5% + 1%

% SWK 16% 17%

Expanding Geographic Reach Nearly Half Of Our Revenues Still Generated In The U.S.

54% 19%

U.S. Europe Emerging Markets ROW

Industrial

Security CDIY

Canada 5%

Australia 2%

Japan 3%

Emerging Markets ~17% Of 2013 Revenue | Goal Of 20%+

Global Emerging Markets Represent A Significant Opportunity For Organic Growth

Stanley Black & Decker Segments

Compelling Acquisitive Growth

Opportunities Growth

Characteristics

Acquisition Capital Focused On Driving Growth In Both Core And New Platforms

Five Acquisitive Growth Areas

Security

Engineered Fastening

Infrastructure

Tool Consolidation $35B 3-5%

$35B 4-6%

$15B 6-8%

$85B 6-8%

Addressable

Market Size

Emerging Markets $15B 10-20%

Overview of Stanley Black &

Decker

Diversified & Global Company

Powerful Brands

Focus on growth in Emerging Markets

What does this mean to Stanley Black & Decker’s Treasury team?

Impact of Globalization on

Treasury • Increased complexity

• Increased unpredictability / risk

• Need to learn new things / new responsibility

• Working as a team with other functions / business

units is a must

• Interaction with different cultures and styles of

communication

Greater visibility and opportunity

Lessons Learned and Tips

1. Take care of existing

operations

Simplify and reduce

complexity

Enhance processes and

leverage technology

Automate transactions,

‘connect the pipes’ and create

liquidity structures

2. Prepare for growth in

new markets

Assess banking & credit

needs and availability in

target country

Understand funding and

repatriation requirements

Monitor risks (currency,

geopolitical, counterparty)

Free up capacity to focus on new markets

Stay involved!

Best Practices for Entering

Emerging Markets • Collaborate internally (tax, legal, finance ops, etc.)

• Learn from your peers, local treasury associations, technology

and banking partners

Streamline

Standardize

Maximize

Liquidity

Manage Risks

Ask & Learn

• Setting Treasury structures and policies

• Optimize banking structures

• Examine processes and technologies

• Maintain liquidity, visibility and control

–Leverage controls and reporting to improve visibility & forecast

–Utilize liquidity structures to maximize liquidity and funding

• Monitor and manage risk according to appetite (Operational,

Financial, Liquidity, Country, Counterparty, Cost)

Questions?

Jiro Okochi

CEO & Co-Founder

Jiro.okochi@reval.com

Sharon Petrey, CTP

Treasury & Risk Management

Sharon.petrey@reval.com

Director of International Treasury

Ken.Shuyama@sbdinc.com

AFP Emerging Markets Presentation

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