Sterigenics is a global market leader in the sterilisation and ionisation of medical equipment (80 % of its turnover), food (10 %) and cutting edge technological equipment (10 %). The company employs four different technologies, i.e. gas, gamma rays, electron guns and X-rays. Sterigenics has a workforce of one thousand people and generates an annual turnover of approximately 200 million euro. The multinational’s headquarters are located in Chicago and the company has 40 subsidiaries throughout the world, of which 30 are based in the United States. Louvain acts as the central nerve centre for about ten subsidiaries outside the United States (including Fleurus and Verviers).

Cross border cooperation with Fortis

Sterigenics was part of the Euronext Brussels quoted Ion Beam Applications (IBA) for quite a long time. Mid 2004 the parent company – which was once included in the Bel 20 – sold Sterigenics to PPM Capital, the private equity arm of the British holding, Prudential Plc, which heralded an immediate change in the company’s organisation. In order to optimise its cash management Sterigenics set up a cash pooling system in conjunction with Fortis. This was in fact a logical decision as Fortis had been one of the supporting bankers at the time of the takeover and had subsequently become Sterigenics’ principal banker.

Approximately twelve months after the takeover the cash pooling system was operational. “Fortis Belgium manages the system but the central account is based in the Netherlands.”

Cash Pooling is worthwhile

More than two years ago Sterigenics opted for target balancing through which local balances are transferred to the parent account in the Netherlands on a day to day basis. The advantages of this kind of approach are quite obvious.

“Previously each group company maintained a separate balance in its account and each local subsidiary had to negotiate loan facilities and interest conditions independently. Our centralised cash management system has enabled us to realise cost savings, since, with a consolidated group balance, the positive balances of one subsidiary counterbalance the negative balances of another subsidiary. Credit is always more expensive than the interest gained from a positive balance.”

No easing of credit management

Sterigenics employees feel that the extra administrative and accounts work is minimal. In fact it only involves one extra transaction and booking each day. Definitely not an overly demanding task. Another, more tenuous side of target balancing is the increased risk of a slackening in credit management in local subsidiaries. Before the introduction of target balancing local employees would be confronted with account developments on a daily basis. After its introduction, however, the account is reduced to zero each night.

“Independent of the pooling system, our local branches have to submit extensive reports every month. Psychologically there is always a certain amount of resistance to the introduction of a system such as this, but we have not incurred any notable problems with it. Right from the start we clearly explained to our accountants how to handle cash pooling and what its advantages were.”

Limited to ‘Euro’ countries for the time being

Target balancing is particularly appropriate when dealing with a single currency. Otherwise the local balance has to be converted every night into the central currency, which does create quite a few practical problems. Sterigenics has, therefore, only centralised its euro activities.
“It does not make sense, for example, to transfer British currency (Pound Sterling) to the central account in the Netherlands, as this currency is not used in any other country.”

The pool currently includes Belgian (3 companies), Dutch, German and British euro transactions. France will join in due course and Danish euro transactions will follow in the long term. The British Pound and Danish Krone will not be included in the central pool. Sterigenics has invested heavily in Thailand and China in recent years but, for the time being, these countries will not be included in the pool because of legal restrictions.

Smooth implementation process

The system was implemented very smoothly in Belgium, the Netherlands and Germany. France proved to be much more difficult mainly because of local cultural differences.

“We often refer to a unified Europe but there are still major differences between countries. France, for example, is an administrative nightmare. The entire procedure took about six months to complete, much longer than in other countries. Some documents consist of twenty pages and have to be submitted in six fold. Not exactly user friendly! The goodwill is there but the paperless office is still a long way off.”

High performance Internet platform

The cash pooling system is fully automated and worked without teething troubles from the outset. Bart Duysters is able to follow up financial positions on a day to day basis via a high performance Internet platform and at the end of each month he can download relevant statistics from the Fortis website.
”I am particularly satisfied with the service, and after sales service, we received. Contacts with Fortis are not only maintained via the contacts manager but also via a Cash Management Officer, who is completely au fait with the dossier.”