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Liquidity Management

Custom Solution For Mitr Phol Sweetens Cost Savings

Liquidity structure drives significant efficiencies for Asia’s largest sugar producer


About

Headquartered in Thailand and with operations in Australia, China and Laos, Mitr Phol Sugar Corporation is the largest sugar producer in Asia and the fourth-largest in the world. While sugar makes up nearly 80 percent of its business, Mitr Phol has also expanded along the sugar value chain, using sugar by-products to generate bio-power and other forms of renewal energy.

The Challenge

As Mitr Phol expanded outside of Thailand, managing liquidity and working capital requirements across multiple markets became increasingly challenging.

Due to different sugar harvest seasons between the northern and southern hemispheres, working capital demands are vastly disparate across markets. For example, Mitr Phol’s Chinese entity required more cash towards year-end to support the harvest season while the reverse was true for its Australian operations where sugar is harvested in June.

With no centralized platform to move liquidity directly between its offshore entities, Mitr Phol’s local working capital needs were often met using external funding.

All balances were repatriated to the headquartered treasury in Thailand and manually converted into local currencies before they were channeled to markets that required funding. This often resulted in a build-up of idle cash in offshore entities, creating inefficiencies in its treasury operations.

The J.P. Morgan Solution

Mitr Phol embarked on a full treasury transformation, partnering with J.P. Morgan to develop a two-phased solution.

The first phase was to consolidate the firm’s offshore cash, starting with centralizing the USD export proceeds and overseas disbursements of one of its key Thai entities. J.P. Morgan collaborated closely with Mitr Phol to understand the firm’s end-to-end commercial flow, provided guidance and expertise on the optimal funding to enhance the firm’s liquidity and FX settlements and obtained the necessary approvals from the Bank of Thailand to move forward with the unique solution. During this time, Mitr Phol also established a Treasury Center (TC) in Thailand, leveraging it as a hub to manage its treasury operations across cash, risk and funding.

The second phase involved setting up a liquidity structure, using Mitr Phol’s TC to open onshore accounts in Hong Kong as part of a multicurrency notional pool. The structure connects all of Mitr Phol’s entities and automatically pools surplus balances into a single location so the firm can facilitate internal cross-border movements to fund entities and manage cash shortfalls across different cyclical seasons.

J.P. Morgan took time to understand our unique business needs and helped us navigate Thailand’s complex regulations to develop a liquidity structure that allows us to effectively manage cash across the group, regardless of seasonal factors which had heavily impacted our treasury operations in the past.

Sarayuth Saengchan, Senior Executive Vice President – Finance, Mitr Phol Sugar Corporation

The Result

The first phase of the solution has driven significant treasury and operational efficiencies for Mitr Phol, resulting in over USD 800,000 in cost-savings by:

  • Consolidating nearly USD 1 billion in export proceeds into a single USD account and maximizing the natural hedge of USD payments and receipts to reduce transaction costs
  • Automating cash concentration into a single location and funding back if needed, while allowing treasury to retain greater visibility and control at the group level
  • Pooling surplus cash across the group and automatically investing cash to optimize yields and benefit from enhanced interest rates
  • Improving the firm’s overall tax position as offshore revenues are subject to a full tax exemption under Thai regulations

The implementation of the multicurrency notional pool is expected to drive further efficiencies by reducing the need to manually manage FX conversions. The solution – customized to Mitr Phol’s unique business needs – provides its treasury with the flexibility to add new currencies and entities into the global liquidity structure to support the business as the firm expands.

 

This webpage was prepared exclusively for the internal use of the J.P. Morgan client to whom it is addressed (including the client’s affiliates, the “Company”). This webpage is incomplete without reference to, and should be viewed solely in conjunction with, the oral briefing provided by J.P. Morgan.

This webpage is confidential and proprietary to J.P. Morgan and is not intended to be legally binding. J.P. Morgan makes no representations as to the legal, regulatory, tax or accounting implications of the matters referred to in this presentation. The products and services described in this webpage are ordered by Banco J.P.Morgan, S.A., Institución de Banca Múltiple, J.P.Morgan Grupo Financiero and/or its affiliates, subject to applicable laws, regulations and service terms.

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