IRCA took the award for Best Working Capital Funding Solution thanks to a landmark fixed-rate supply chain finance (SCF) solution that delivered a significant boost to the Italian food ingredient company’s days payable outstanding (DPO) and helped broaden its funding base beyond traditional bank and bond channels.
By implementing one of the first major supply chain finance (SCF) programmes for a lower-rated private equity-sponsored company, IRCA also catapulted itself into the big league in terms of working capital best practices.
Aiming high
Economic uncertainty has put pressure on an increasingly competitive consumer goods sector as inflation-sensitive consumers buy more cautiously. And as companies also grapple with higher costs, they are forced to be more proactive and strategic about financial optimisation.
IRCA – which private equity player Advent Group acquired from Carlyle Group in 2022 – had already long admired the financial agility of its top-tier peers. Many of these companies benefit from long-standing SCF arrangements that have improved their supply chain resilience and helped them thrive even through downturns. Keen to emulate their practices, and compete from a position of greater financial strength, it decided to overhaul its working capital metrics.
The company wanted especially to bring its DPO into alignment with those of its investment-grade peers and to be equally successful at tapping liquidity from non-bank institutional investors. But while IRCA was attracted to SCF, it wanted associated financing costs to be more predictable and to be able to better manage interest-rate risk, finding this to be a key concern for auditors.
To tick all these boxes, IRCA partnered with Orbian to implement at pace its Fixed Rate SCF solution, which allows suppliers to lock in an interest rate for up to five years.
Measurable impact
The solution delivered tangible impacts for IRCA almost immediately – a key factor behind it winning this year’s award. It enabled it to quickly establish competitive payment terms, while improving liquidity and strengthening its relationship with suppliers, whose participation in the programme is high. The company’s DPO increased from 60 days to 90 days, significantly improving the company’s net working capital position and improving its ability to compete with larger rivals.
Crucially, the programme was also fully funded by non-bank institutional investors. This has helped IRCA broaden and diversify its funding base to reduce a historical reliance on traditional financing channels while also preserving existing credit lines. Having access to a larger and more sustainable funding pool has left the company more financially and operationally resilient.
Sophisticated problem solving
The fixed-rate element of the programme – which was implemented with full audit alignment, ensuring transparency and compliance – means IRCA’s financing costs are also more stable and predictable, and helped allay any auditor concerns.
Judges were especially impressed with the sophisticated problem-solving IRCA demonstrated here, with the programme attracting high scores for both its innovation and its success at achieving desired objectives.
The programme’s global scope and rapid implementation were seen as further evidence of IRCA’s big-league working capital management capabilities.
Culture of collaboration
While judges commended IRCA for its forward-thinking leadership, they also credited the success of the programme to a strong culture of collaboration at the company, with IRCA’s Finance, Treasury and Procurement teams working closely to implement the solution at speed.
Treasury provided strategic oversight and ensured the programme aligned with IRCA’s liquidity targets. Finance ensured reporting and compliance were robust, enabling the programme to meet internal and external stakeholder expectations. And Procurement facilitated supplier onboarding and engagement.
“IRCA’s fixed-rate SCF solution demonstrates how a sophisticated approach to working capital management can help firms of all sizes boost their liquidity and strengthen their competitiveness,” said Mike Hewitt, CEO of Working Capital Forum. “As well as delivering an impressive uptick to DPO, the programme has helped IRCA strip out interest-rate risk, build stronger supplier relationships and diversify its funding pool.”