Citi Client Casebook Middle East and Africa 2022

Liquidity and Working Capital 21 The Challenge In 2020 the global COVID-19 pandemic negatively impacted the Algerian market mainly on the liquidity side, therefore LG Electronics was looking for a solution that could support their biggest and strategic local supplier by giving them access to liquidity at very competitive pricing and at the same time improve their own cash flow and working capital through a payment term extension. The Solution LG Electronics was on-boarded to Citi’s Supply Chain Finance (SCF) program in early 2020. Citi were able to convert their biggest supplier in Algeria in a very short period of time (5 months from the first discussion to the implementation), helping LG Electronics Algeria to tackle their challenges and more importantly support their supplier from a liquidity perspective. This fully digitized trade solution was customized to cover local supplier payments in local currency (DZD) and achieve the payment term extension target to 180 days in addition to supporting LG’s largest supplier, by giving them access to liquidity at very competitive pricing. The Results LG Electronics has successfully implemented the SCF program, a fully digitalized solution in a paper based economy, that is a highly regulated market and during a very short period of time, to tackle LG Electronics in Algeria’s supplier challenges offering them access to quicker liquidity and at a very competitive cost in unexpected global pandemic crisis (Covid 19) which lead to strengthen the relationship between them. The solution was customised based on LG Electronics requirements to cover their local suppliers’ payments in local currency in a maximum of 180 days as term extension target (150 to 180 days) supporting their organisational working capital KPIs. The solution enhanced their supplier funding process. Thanks to the SCF solution put in place, LG Electronic’s supplier receives the payment without any delay, as the bank is now releasing the payment as soon as the bill is shared through an electronic channel. The previous four step process was reduced to only one, helping LG Electronics to comply with internal procedure and at the same time enhance the relationship with their most important supplier. LG Electronics in Algeria Supply Chain Finance Solution eases access to liquidity for local supplier LG Electronics was established in Algeria in 1998 as a representative office and became a resident entity in 2010. LG Electronics current line of business is the commercialization of home appliances (i.e. refrigerators, washing machines) as well as electronic goods (multimedia products and mobile phones). LG Electronics is well positioned in the white goods market in Algeria with 35% of the market share. LG is ranked the largest and the market leader with 75%market share, in addition to being ranked number one in the production of washing machines.