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PG signs deal with Sherwood International

PG Industries has signed a three year business process outsourcing agreement with a South African company — Sherwood International — in order to boost its merchandising division.

Report By Staff

Business Process Outsourcing (BPO) is the contracting of the operational responsibility of business functions and processes to a third-party service provider.

Well-placed sources told businessdigest this week that under the agreement Sherwood would starting next year acquire control and responsibility for all of the outsourcing requirements, which would result in transactional funding, increased buying power, implementation of best practice controls and systems as well as instant global procurement  capabilities.

The company will also set up a distribution centre.

PG’s merchandising division has been a problem child for the group since dollarisation as it has always faced working capital challenges.

The other main problem has been that the group has been concentrating on high margin products due to better lines of supply as compared to lower margin and volume business.

The division has lost significant market share to mainly informal traders. In the six months to June, gross sales at PG Merchandising were down 12% to US$10,514 million.

Generally, companies undertake BPOs due to lack of significant purchasing power, procurement spend (cash-flow), lack of supply chain processes, knowledge, lack of skills, resources and knowledge to perform administrative functions.

At the last analysts briefing, CEO Hillary Munyati said the group would sign an agreement with an international supply chain management company that would see the company strategically position itself to benefit from cheap sourcing of product from the suppliers through the company and these benefits can be passed on to consumers due to the centralised nature of the operation.

Meanwhile, at an extra-ordinary general meeting held on Wednesday, shareholders approved the group’s resolution to dispose of its remaining 27,9% stake in Manica Board & Doors (MBD) to Old Mutual and to dispose of non-core properties.

The sale of the 27,9% equity stake in MBD for a total consideration of US$2,9 million (as of June 30, 2012) will see US$1,35 million being used to pay off a debt that is held by MBD.

The difference together with an expected US$5,15 million to be raised from the sale of all properties that are not being used in on-going operations, which Chairman Fried Lutz termed “excess properties”, will be used to pay-off some of the short-term debt in PG and also part of the accounts/trade payables.

Some of the proceeds are expected to be used to increase the tile plant capacity to 40 000 tiles from the current 22 000 by the acquisition of extra tile pallets.

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