Cash & Liquidity Management

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Innovative Cash Pooling with CSOB PRO.MED.CS Praha is predominantly an export business, with nearly three-quarters of its total production currently exported. They document how they used a cash pooling structure to solve their operation financing issue.

Innovative Cash Pooling with CSOB

by Milan Mračno, Member of the Board of Directors and Chief Financial Officer, PRO.MED.CS Praha a.s.

PRO.MED.CS Praha is predominantly an export business, with nearly three-quarters of its total production currently exported. Foreign sales are typically conducted in USD, EUR and more recently RUB; similarly, many of our suppliers invoice us in USD or EUR. We aim to make our payments in the currencies of our international receivables, i.e., reduce the need for foreign currency conversion which has an impact on exchange rate risk as well as cost.

PRO.MEDS.CS trades in many demanding markets and CSOB has always proved a reliable and knowledgeable partner.

We export into a number of markets in Eastern Europe and Central Asia where the payment terms are 180 days or more, which creates working capital challenges for PRO.MED.CS. We fund this period between delivery and payment through an overdraft facility which is expensive. On one hand, the company has high credit balances on RUB accounts; on the other hand, a permitted EUR overdraft is used.

Banking solutions

Ever since our incorporation, we have had a relationship with ˜CSOB. Initially, we worked with the bank for payments, both domestic and international, but the relationship has subsequently expanded to investment financing and leasing. PRO.MED.CS trades in many demanding markets, e.g., Kazakhstan, Uzbekistan, Belarus etc. and ˜CSOB has always proved a reliable and knowledgeable partner. However, our company has a number of banking partners, so we contacted each of them, including ˜CSOB, to request a proposal for the best solution to include operation financing in relation to higher RUB balances and protection from adverse exchange rate developments.

Every bank was able to recommend risk management solutions such as using FX forwards or options to hedge our risk; however, it was only ˜CSOB that proposed a cash pooling structure. Having examined the product, we found that it met our needs, and based on the bank’s professional approach we decided to implement a cash pooling solution with ˜CSOB. This has proved a very positive decision, with a surprisingly short implementation, which took less time than the initial selection of a solution.

Solution and outcomes

We have now implemented a notional, multicurrency cash pool, which has enabled us to reduce our interest costs associated with working capital financing considerably. As the pool is notional, there are no physical transfers of funds between accounts, so we are able to optimise the liquidity of each foreign currency account within the cash pool. We receive detailed information for the preceding period from CSOB at the beginning of each month which assists further in our decision-making.

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