As $16.7 billion Kimberly-Clark Corp. implemented its global business plan and focused on growth in emerging markets, Jolene Varney, vice president and treasurer, saw an opportunity for her treasury team to play a more strategic role in the capital structure planning at the company's 150 affiliates. One problem with the existing process was that treasury was often forced into a reactive, rather than proactive role, "because we were often not involved early enough," says Varney. Moreover, the Dallas-based paper products company's forecasting and budgeting process did not focus on balance sheet, cash flow and capital structure decisions at the affiliate level.
Fortunately, Kimberly-Clark's treasury had a model it had developed for use in the Latin American businesses--one that, it believed, could be expanded globally. The International Capital Structure Planning process was born, providing a twice-yearly forum for analysis, discussion and approval of cash, financing needs, repatriation and tax planning at the affiliates. Based on financial forecasts, the meetings allow local business leaders and the CFO to agree on authorizations for the coming year and give treasury time to prepare."This process has supported our objectives to add value in treasury, minimize our cash balances while retaining flexibility, ensure our affiliates are properly funded and support our tax-rate objectives," says Varney.
The results? In Russia, where a big expansion was planned, treasury organized a working group to make recommendations on the capital structure, financing and risk management aspects of the project. In Thailand, treasury partnered with a global bank to successfully lobby for an exemption from a 30% reserve requirement for short-term capital inflows for construction. The alternatives to address currency exposures in key markets are more visible and relationships were formed through a financing plan developed in Turkey. "As many companies talk about 'strategic treasury,' we believe this process has allowed us to move closer to that vision," says Varney.