MERCK GROUP TREASURY Flexible reporting in a heterogeneous system environment
Juni 2017
Jörg B. Bermüller Head of Cash and Risk Management We are meRck – the original
In 1887, Merck Merck – opened its own office the original in New York, which holds the global gave rise to the rights to the Merck subsidiary Merck & name and brand. Merck KGaA, Co. three years later. Darmstadt, Exceptions are As a result of World Germany Canada and the War I, this subsidiary United States, was expropriated in where we operate 1917 and has been as EMD Serono, an independent MilliporeSigma and company ever since. EMD Performance Materials.
2 Merck Group Treasury May 2017 What we do
Performance Healthcare Life Science Materials
• Prescription drugs and solutions • Innovative tools and laboratory • A wide range of high-tech to treat cancer, multiple sclerosis, supplies for the life science chemicals, such as: infertility, cardiovascular and industry that make research and Liquid crystals and OLED metabolic diseases biotech production better, faster materials for displays & • Over-the-counter products for and safer lighting a healthy lifestyle • Broad and in-depth portfolio of Effect pigments for coatings • Allergy products and biosimilars 300,000 products and cosmetic products • Industry leading e-commerce Specialty chemicals for the platform, SigmaAldrich.com semiconductor industry • Award-winning innovation Functional materials for solar panels
3 Merck Group Treasury May 2017 Group Treasury at Merck - One global Treasury
Treasury is a centralized function in Darmstadt, Germany. There are no other treasury centers in the group. Treasury plans to establish Treasury Hubs in Asia and Latam which will be part of the group function. The Treasury employees in Asia and Latam will deliver all treasury services for the subsidiaries in the respective time zone.
Group Treasury has the overall responsibility within the Group for:
• Ensuring sufficient liquidity at all time Optimizing treasury • Safeguarding financial solvency for external growth processes • Limiting financial risks within a sound economic framework and systems is key • Bank relations and accounts
4 Merck Group Treasury May 2017 Drivers of Treasury Setup
• Complete financial risk overview at any time
• Centralising external payment flows Main • Group wide efficient intercompany clearing Requirements • Centralised bank account processing
• Standard processes creating efficiency for SSC
• Very fast integration of acquisitions
5 Merck Group Treasury May 2017 Core Processes within Merck Treasury – Intercompany accounts
MFS holds Intercompany Accounts (ICA) with each subsidiary. They have the same significance as external bank accounts. Possible cash flows occurring on ICAs:
Intercompany Payment Clearing Factory Intercompany Account (ICA)
EUR 100 BankICA 250 Intercompany 150 JPY 442 USD 224 Transfer 100 100 Loan / Deposit 250 250 442 150 CHF 442 150 224 224 100 250 442 150 224
Cross Cash Pooling Currency Pooling
6 Merck Group Treasury May 2017 Core Processes within Merck Treasury – IC Clearing IC Clearing without IHB MFS
The settlement of intercompany transactions is centralized through the In-house bank Merck Financial Services GmbH (MFS) using group wide standardized applications
MFS is the sole clearing In-house Bank of the Merck Group Maintains intercompany accounts with subsidiaries Provides same service like external banks and is like an external bank
IC Clearing with IHB MFS
IC facts & figures • All 391 Subsidiaries participating • 40 currencies processed • 2.300 intercompany accounts • 5m transactions p.a. • 28bn EUR transaction volume
7 Merck Group Treasury May 2017 Core Processes within Merck Treasury – Central FX Management
The In-house bank manages FX exposure centrally, by eliminating to the most possible extent FX positions on local level
Cross Currency Pooling (CCP) as instrument to internally clear the subsidiaries' intercompany accounts from FX positions MFS Subsidiary EUR Central hedging of locally booked FX exposure EUR EUR Central hedging of planned FX exposures 100 100+1 250 250+23 150 150+44 442 442+400 MTO subsidiaries excluded from central approach due to 224 224+23
specific restrictions USD USD 200 0 0 220 10 412 22
JPY CCP JPY 10 0 0 50 15 44 24
SAR SAR 1000 0 0 50 FX facts & figures 1500 4421 2241 • 18.000 external FX deals • 40 currencies Subsidiary Intercompany Accounts • 55bn EUR transaction volume
8 Merck Group Treasury May 2017 Core Processes within Merck Treasury – Payment Factory PF facts & figures • 260 Subsidiaries The payment factory is the centralized settlement of external participating payments through MFS using group wide standardized applications • 30 currencies processed Subsidiaries use payment factory to pay external vendors • 1m transactions p.a. Embargo-screening of all beneficiaries and beneficiary banks • 90bn € transaction vol. MFS bears all external transaction charges – no internal reallocation Further Roll-out with MBS planned
External Payments Inhouse Bank
Payment Factory Subsidiaries
Account statements
9 Merck Group Treasury May 2017 Core Processes within Merck Treasury – Liquidity management
The In-house bank centralizes liquidity using cash-pools (CP) in multiple currencies
Automated cash sweeps from or to connected subsidiary bank account. At day-end all connected bank accounts are “zero-balanced” MFS holds Master accounts where Zero-balancing is reflected No local account clearing required anymore Elimination of FX balances on local level In-house Bank
EUR USD Deutsche JP BNP Morgan Paribas Bank Subsidiary
EUR USD CHF ICAs 100 100 100 250 250 250 CHF JPY 150 150 150 442 442 442 CP facts & figures 224 224 224 • 249 Subsidiaries participating EUR EUR USD USD CHF CHF • 16 currencies processed • 24bn EUR transaction vol. Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary Subsidiary A B C D E F
Subsidiary Bank Accounts 10 Merck Group Treasury May 2017 Core System within Merck Treasury
QUANTUM TRAX
D+H TIP
26 Project EVOlution | Training LATAM / May 2017 Future Treasury Management System Landscape External
121 Local Banking Apps 7 eBanking Applications TransAct MyTreasury
RegisTR 360T Banks SWIFT Worldcheck NTT Bloomberg Misys
Merck D+H Ext. Acc. Statements D+H Treasury Ext. Payment Files
Embargo Screening Ext. Acc. Statements Ext. Payment Files
Electronic EMIR Reporting FX Trades TIP TRAX Signature Market Data Trade Confirmations Financial Requests Ext. Acc. Statements IHB Subledger Single Deals & Summary Balances Quantum Subsidiaries/SSC
Ext. Acc. Statements IC-Clearing Market Data Merck BT IC-Clearing, Ext. Payments Ext. Payments IC-Clearing, Ext. Payments Ext. Acc. Statements ICA Statements Ext. Acc. Statements Market Data Market Data ICA Statements ICA Statements SAP PI File Server Non-SAP
12 Merck Group Treasury May 2017 THANK YOU VERY MUCH FOR YOUR ATTENTION AND FEEL FREE TO ADDRESS ANY QUESTIONS TO