How to grow your cash base

Asian Bamboo CFO Peter Sjovall talks about his company's evolving cash management needs.
 Peter Sjovall, Asian Bamboo
Peter Sjovall, Asian Bamboo

There is a stereotype that chief financial officers are suited, stodgy types who can spout numbers better than they can recall the winner of last year's Fifa World Cup. Peter Sjovall, CFO of Asian Bamboo, is not one of those executives.

In casual slacks, a button down and toting a back pack, he looks as if he would be more at ease in some hip outdoor supplier's office than in the Mandarin Oriental coffee shop discussing his recent multi-stop roadshow through Europe raising capital for Fuzhou, China-based bamboo producer Asian Bamboo. But raise money is exactly what Sjovall does and does well, since joining the company in June 2008 he has raised more than €35 million ($47.7 million) from banks and investors on the Frankfurt Stock Exchange where the company listed in 2007.

"We are a plantation management company," he said. "We lease [bamboo] plantations at a fixed fee for 20 years and then try to maximise the return from the land."

With 27,944 hectares of bamboo in production last year, the company generated an estimated €55 million in revenue (up 25.5% over 2008) by selling the woody plant to be made into a diverse range of products including paper, flooring, furniture and even clothes.

As CFO, Sjovall is responsible for Asian Bamboo's finance department and investor relations. Prior to joining the firm two years ago, he was a director with Brunswick Group in Hong Kong, advising international corporations and Chinese enterprises on merger and acquisition activities. 

Asian Bamboo plans to grow and, much like the plant it's named after, plans to do so quickly. "A company naturally goes through a couple of phases," said Sjovall. "We're in the growth phase."

Since its initial public offering, Asian Bamboo has posted nearly a three-fold increase in revenue and more than doubled the total size of its plantations. Current plans call for revenue to continue growing at 30% annually, with the business doubling in size every three years.

Bamboo by comparison can grow at a rate of 20 metres in three months. A rate that makes it one of the most sustainable woody plants and an increasingly popular material for furniture and building elements.

"As we are investing nearly all the cash we generate and raise in new plantation leases, there is limited scope for cash management," said Sjovall. For example, he explains, in the last six months, Asian Bamboo had spent more than €50 million on new leases, increasing its land holdings by approximately 10,000 hectares.

Based on his experience in the financing stage of corporate cash management at Asian Bamboo, Sjovall offers two words of advice: equity markets.

"It's hard to find long-term debt as a small company, so the equity markets made all the difference for us," he said on the company's ability to successfully finance its growth. "For small corporations, gaining access to global equity financing is a wonderful thing."

Sjovall was not without a word of caution. "The challenges with equity markets as a small company is you've got to fight for investors' attention and you've got to deliver on your promises. Only if you deliver, you can then come back and ask for more money." He explains that, if done well, this creates a virtuous cycle where a company can repeatedly use equity financing to fund its expansion.

Asked when he intends to shift his focus towards more cash management and less capital raising, Sjovall is indecisive. He initially said "when we stop growing" but corrected himself and said "when we grow more slowly" and added that he does not believe a company should keep large amounts of cash in the bank. Instead, Sjovall said they should either reinvest the money in the business or return it to shareholders.

"It's not our money to hold," he concluded.

Asian Bamboo may never implement a complex, multi-country notional pooling liquidity management solution, but Sjovall appears to have his priorities in order. The company is growing and his job is to make sure it has the money to do so. With that in mind, one has to agree, there is a time and place for robust cash management and Asian Bamboo is just not in that time nor place.

¬ Haymarket Media Limited. All rights reserved.
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