Sales and credit, one team ?

Sales and credit, one team ?

Reality or myth ?

Topics:

• Chevron Phillips Chemicals at a glance• Product range• EMEA Credit Organization• Scoring System• Collection Activities• Conclusion

Company formed in July 2000

About Us

• Manufacturer of petrochemicals that are essential to manufacturing over 70,000 consumer and industrial products

• At end of 2012 : $9.4 billion in assets and more than $13.3 billion in annual revenues

• Trusted supplier to customers in more than 125 countries

• A highly educated & diverseworkforce of approximately

5,000 employees working on five continents across the globe

Manufacturing Locations

Saudi Arabia Qatar

Singapore

China

South Korea

Belgium

Colombia

United States

Global Significant Projects – Middle East

SAUDI POLYMERS COMPANY – SAUDI ARABIA

Q-CHEM II – QATAR

2012 Sales & Assets

End Uses

• Adhesives and Sealants • Agricultural • Appliances • Automotive • Building and Construction • Chemical Manufacturing • Dry Cleaning • Electronics • Healthcare• Household • Imaging and Photography

• Industrial • Lubricants• Oil, Gas and Mining • Packaging • Paint and Coatings • Personal Care and Cosmetics • Pharmaceuticals • Pipe• Plastics and Rubber • Solar Panels• Textiles

EMEA Credit Organization & Strategy

• Team of 4 people• Global exposure control via SAP FSCM• Unique financial scoring (implied rating)• Best practice sharing with US & Asian colleagues• Involve sales in collection activity• Tight follow-up on overdue invoices, order blocking when invoice 5

days late• Sales person takes ownership of unpaid debt• Monthly meeting with product line manager on default accounts

Implied rating

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Investment Grade   Speculative Grade

Moody's Rating Aa or Aaa A Baa   Ba B Caa

S&P Rating AA or AAA A BBB   BB B CCCVery

strong Strong Good   Marginal Weak Very weak

1. EBIT Int Cov. *(x) 8.8 + 8.7 - 5.4 5.3 - 3.1   3.0 - 1.6 1.5 - 0.5 < 0.5

2. Funds Flow/TD*(%) 51 + 50.9 - 38 37.9 - 25   24.9 - 14.3 14.2 - 7.7 < 7.6

3. TD / TC (%) < 38 37.9 - 43.843.9 - 54.3   54.4 - 67.9 68 - 82 > 82

4. Debt / EBITDA (x) < 1 1 - 2 2 - 3   3 - 6 6 - 9 > 9

5. 4-VARIABLE Z-SCORE > 7 6.9 - 6.4 6.3 - 5.6   5.5 - 4.7 4.6 - 3.7 < 3.6

*When scores fall in more than one category, give more weight to the Coverage ratios.

Uniform rating system on corporate level

EMEA Customer Portfolio Profile

Investment grades : AAA, AA, A & BBBSpeculative grades : BB, B & CCC

BBB

A

AAAAA

BB

CCC

BSecured

Not rated

Investment grade : 70%

Speculative grade : 22%

Collection Activities

• Weekly dunning letters by email or fax

• Mid-month statement of account by email (all outstanding invoices are mentioned)

• SAP Credit check indicating overdue situation when new order

is entered

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Collection Procedure

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5-7 days

• Treasury/Credit contacts the customer by email (dunning letters are sent automatically through the SAP system)

>10 days

• Treasury/Credit sends email to CSR with copy to sales person• CSR to contact the customer and inform Treasury/Credit/Sales person

>3 weeks

• Treasury/Credit sends email to sales person with copy to CSR and credit manager

• Sales person to contact the customer and inform Treasury/Credit/CSR

>8 weeks

• Credit and treasury manager will involve legal department after agreement with responsible sales person and product line manager

Overdue of:

EMEA Credit and Collection KPI’s

Key Performance Indicators EMEA (year 2012)

• DSO 38 days

• Delinquency 1 day

• Collection Efficiency 96 %

• Overdue at month-end < 3%

• Annual write-off < 0.1 Pro Mile

Tools of Success

• Strong communication and mutual support between credit and sales

“sales are our eyes and ears on the field”

• Involvement of sales in the collection activity and ownership of unpaid debt

• Tight follow-up on overdue invoices• Control on payment terms > risk control• Financial training provided by credit to sales’ force

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Sales & Credit = one team & it works!