Report by Behind the Numbers

BTN have been warning investors about companies enjoying an unsustainable tailwind to cash flow growth by accelerating their use of short-term financing vehicles. However, rising rates are about to end the SCF party. They highlight Keurig Dr Pepper, JM Smucker and Procter & Gamble who have utilised SCF arrangements to a material degree and offer a simple framework for assessing the impact on their earnings and cash flows. They also discuss the implications of the FASB announcement this summer that it will be requiring enhanced disclosure regarding these programs (new rules go into effect in 2023).