World Trade - September 2008 - (Page 14) ADVERTORIAL Quick Conversion to Cash Key for Commodities Exporter, Sims Metal Management How collaboration between Sims and HSBC supports Working Capital Optimization A Challenging Context The dynamics of the commodities business provide a challenging context for receivables management. Sims typically ships much of its ferrous scrap metal in bulk (i.e., one vessel) and uses containers for non-ferrous shipments. A number of variables impact bulk shipment timing, including the date a vessel arrives—subject to weather and other factors—when it loads a shipment, and when it leaves port. Payment timing can be difficult to forecast. Sims maintains a schedule for bulk shipments, which its treasury department continually monitors as part of its cash flow forecasting methodology. Therefore, the ability to convert receivables to cash for working capital requires close coordination between trade and treasury staff within Sims and between Sims and HSBC, one of its primary trade banks. that you can trust, says Dietrich. “It takes knowledgeable ” people who understand your needs and respond with tools to help you. Andrea and the HSBC team provide Sims with this kind of collaborative relationship. ” According to Don Betson, Vice President, Finance with Sims Metal Management, Sims uses LC discounting throughout the year as a tool to optimize DSO, regularly working with HSBC. The tool is part of Sims’ broader strategy for working capital optimization, which includes operational and trade-specific programs to manage inventory and receivables levels. Says HSBC’s Ratay, “This is the kind of relationship we look to cultivate with our export clients. Partnership works both ways. HSBC closely collaborates with our clients to support them in optimizing the management of their business. ” A Close Collaboration A close working relationship with HSBC proved invaluable when Sims found itself with a large receivables position on its balance sheet. The LC advising bank was unwilling to expedite LC negotiation and provide Sims with discounted proceeds in a timely manner. Since the LC was freely negotiable, Walter Dietrich, Vice President Sales Administration with Sims Group Global Trade Corporation, spoke with Andrea Ratay, Regional Trade Manager for HSBC Bank USA, N.A., about the dilemma. “HSBC negotiated the documents on our behalf in 4 hours, and within 8 hours had discounted the LC, says Dietrich. ” While LC discounting is a transactional-level service, says Dietrich, HSBC takes a long-term relationship approach to working with Sims. “It’s very important to work with a bank Responding with Agility Five years ago, says Dietrich, 100% of exports sales were shipped in bulk, with a typical transaction size of 35,000 to 40,000 tons. Increasingly, though, Sims is making container shipments of approximately 50 to 100 containers per Bill of Lading (18 tons per container). The rise of China—with its growing demand for commodities has put upward pressure
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