Sheraton Textiles pursues potential strategic equity ally, as indicated by IDC
In an effort to bolster its operations and ensure long-term sustainability, the Industrial Development Corporation (IDC) has announced that it is seeking a strategic equity partner for Sheraton Textiles. The textile company, a 100% subsidiary of the IDC, has been designing and manufacturing fine household linen and accessories since 1920.
The decision to seek a strategic partner comes as Sheraton Textiles has been grappling with challenging economic conditions. The company incurred a net loss of R16-million for the 2024 financial year, following a loss of R23m in 2023. One of the main issues facing Sheraton Textiles is its over-reliance on the retail market, a sector that has been trading below expectations due to adverse economic conditions.
The turnaround plan for Sheraton Textiles will also focus on improving efficiencies and exploring cost savings. To address this over-reliance, the group will diversify its customer base to include other sectors.
The strategic equity partner is expected to provide investment capital, enhance operational and strategic capabilities, and support the company’s growth and sustainability in the market. The partner can bring expertise in areas such as manufacturing, market expansion, supply chain optimization, or product innovation.
The partnership is anticipated to bring several benefits to Sheraton Textiles. These include improved financial strength, operational efficiencies, market access and brand strength, sustainability and innovation, and long-term viability. The enhanced governance and strategic planning can future-proof the company in a challenging industrial environment.
This approach aligns with IDC’s efforts to support local industry players facing deindustrialization challenges. Ebrahim Patel, Minister of Trade, Industry and Competition, has stated that this investment aligns with the government's localisation and industrialisation initiatives.
The IDC has already invested significantly in Sheraton Textiles. In 2009, the IDC initially invested in the company as part of a business rescue process in support of the South African government's strategy to support the textile industry. The IDC has also invested R1,6-billion to support employee stock ownership plans (ESOPs) and related worker and community trusts. In May 2024, the IDC invested R140-million into a state-of-the-art production facility at Sheraton's Diep River plant.
The IDC has also approved R21,4-million in funding for a turnaround plan to support Sheraton's board and management. Additionally, the IDC is providing resources to fill critical vacancies, appoint a dedicated business development executive, and a chief operating executive.
In a significant move, the IDC has approved the sale of a 15% share in Sheraton Textiles to a newly established workers' trust for a nominal amount. The IDC's 2026 Annual Performance Plan also mentions that the transfer of shares to the workers' trust is imminent.
Despite the implementation of a turnaround plan, Sheraton Textiles continues to generate losses. The IDC is, therefore, open to bringing in a new shareholder as part of its efforts to turn the company around.
[1] [News Report 1] [2] [News Report 2]
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