Boosting sales growth in challenging markets
“You can take significant credit risks. Or you can ask EKN for guarantees.”
Swedish steel manufacturer SSAB carries out short-term credit transactions in a large number of emerging markets around the world. Their regular export markets include Nigeria, Ghana, Russia, the United Arab Emirates, South Africa and South America. More often than not, for SSAB, trade in these markets would be a non-starter without EKN’s guarantees for payments.
One of the main challenges facing SSAB is that their current export growth is particularly strong in some of the most challenging emerging markets.
“We cannot simply sell whilst taking all the risk ourselves. So either we don’t sell, or we sell and use some kind of risk mitigation”, says Henrik G. Welch, Vice President, Head of Group Treasury, SSAB.
SSAB has decided to use EKN’s guarantees to reduce risk.
This also allows them to offer their customers more favorable credit terms. And advantageous financing conditions for customers mean greater competitiveness for SSAB.
“We would definitely miss out on sales opportunities if we didn’t use EKN’s risk coverage” says Welch.
SSAB typically uses EKN when private credit insurers either refuse or are unable to offer them cover, as can be the case in certain markets. According to SSAB, the costs of any other alternatives would be prohibitive.
“If you ask the customers for pre-payment, they would need to obtain finance locally, which is often extremely costly. And if you request a letter of credit, their banks often first demand payment upfront. In addition, we also see that using EKN in connection with an L/C transaction also enables banks to get involved in transactions they otherwise would not be interested in touching at all.”
An integral part of the credit insurance policy
EKN’s risk coverage has been an integral part of SSAB’s credit insurance policy for several years now.
“There are two main reasons we use credit insurance. Firstly, to cover our sales against risks and secondly, to outsource, to a certain extent at least, credit checks on our customers. We use it for all our transactions from the Nordics”, says Welch.