# Template
State Owned Enterprises- Company Overviews
OCPA - Ministry of Industry & Minerals
Note: All currency figures are in 000's of Iraqi Dinars unless otherwise noted.
1. General Information
Company Name: State Companies for Fertilizer - Northern & Southern Regions
Sector Fertilizer / Petrochemical
Brief Description Two separate Companies, one serving Northern Iraq, the other Southern Iraq. Both produce urea as its main product. Urea is a basic nitrogen fertilizer used throughout Iraq and the world. Northern Company started in 1990.
Revenue in 2002 (Iraqi Dinars '000s) 30000000
# of Employees 4276 (2,694 in South and 1,582 in North)
Annual Employee Salaries & Bonus 8340000
Headquarters Address Basrah (3 km fro port of Khor Al-Zubar) ideal for export & Bayji serving local arabal market.
2. Company Highlights
Significant local demand and high long-distance transport costs give local manufacturers and advantage over imports.
Cost advantage of local supply of raw materials (natural gas).
Revenue of 30 billion ID (combined), could increase to over 100 billion selling fertilizer at market rates and full capacity utilization.
Operating margin of 33% even while selling 90% of products at one third the market rates.
Selling at market rates will offset increased cost of buying natural gas and electricity at market rates (previously heavily subsidized).
Capacity to increase production 50%.
Urea production technology has not changed much in last 20 years, so Company is not disadvantaged with its equipment.
One issue: no internal sales, marketing or raw material purchasing staff or experience. These functions were performed at the Ministry level.
Another issue: Company uses 25% more electricity per unit of output than international competitors.
There is third plant designed to produce urea in the vicintity of the southern Fertilizer Co. This was damaged during the Iraq-Iran war and it could be broght back to ptoduction at the cost of approx. $50M. This factory should be attached to the fertilizer companies who can finance the re-building.
Northern Co. benefited at least 1B ID and maybe as much as 8B ID (depending on who payables are to) by CPA policy of cancellation of government debts, payables and bank accounts.
Northern Co. allocated $1.0M USD for 2H 2003 operating budget and provided with 7mw off of grid.
Southern Co. allocated $1.5M USD for 2H 2003 operating budget and provided with 15mw off of grid.
3. Facilities
Name Province City Grid Damage % Power Needs
Southern Plant Basrah TP144197256 Minimal 25 mw
Northern Plant Salahdin Bayji N35 05' 53.5", E43 23' 28.4" Minimal 25 mw
Value of All Plant & Equipment Before War, and Initial Purchase Dates and Prices for Major Items Northern Plant valued at $260M USD by mgmt. It was built in 1986 for $360M USD.
4. Products
Product Name Unit Measurement Design Capacity Available Capacity 2002 Production 2002 Revenue
Urea - Southern Plant Ton 1060000 720000 597661 13711280
Ammonia - Southern Plant Ton 660000 504000 418495
Urea - Northern Plant Ton 500000 400000 392200 12598084
Description of Importance of Products to Other Iraqi Industries Urea needed by farmers, especially for fall harvest.
5. Customers
Customer Name 2002 Revenue Subsidized (Y/N) Products Sold to Customer and Unit Pricing
Ministry of Agriculture 90% of total Yes Urea at 37K ID per ton
Direct to Farmers Yes Urea at 60K ID per ton
State Co. for Phosphates Yes
Syria Slightly Urea at $90 USD per ton
6. Suppliers
Supplier Name 2002 Purchases Subsidized (Y/N) Products Purchased and Unit Pricing
Natural Gas Co. 350K tons Yes Gas
International catalysts suppliers
Sacks suppliers
Current Payment Terms From Suppliers Not clear. Mgmt says, "Upon receiving bills from suppliers".
7. Imports & Exports
2002 Import Markets for Raw Materials 509,335 for spare parts and catalysts
Potential Import Markets in Free Market
2002 Export Markets for Finished Products Syria
Potential Export Markets in Free Market South east Asia can take about 60% of the design capacity of both plants. (aprox. 1 million ton)
8. Competition
Description of Competitive Situation Company currently has price advantage due to cheap raw materials and electricity. If electricity prices rise to market rates, Company is uncompetitive since it is inefficient.
Market Share Description 100% of Iraqi market.
9. Summary of War Damage & Looting of Property & Equipment
Description of Damage Minimal
Current Operating Status Neither operating. There are good prospects for the northern plant to start soon, Operating the souther plant can provide an opportunity for export business. Gas availability is only major hold-up preventing re-start. Not clear when this will be resolved.
Immediate Property & Equipment Needs To Restart Operations None, but Southern Company needs $1.5M USD for spare parts and repair of cooling tower to operate second line.
Total Cost to Return to Pre-War Condition Minimal
10. Inventory Status
Raw Material Status Gas is not available. Catalysts is available to run the factories for six months.
Months of Material Supplies & Production Rate
Immediate Raw Material Needs Sulfuric acid and caustic soda (50 tons in Baghdad - needs transport).
Finished Products Supply (Units and Value) South Co. has 19K to 25K tons (depending on who you ask) valued around $2M USD at open market rates.
Northen Co. has 15 K ton ready for sale at a rate of 50,000 ID decided by the Ministry of Industry
11. Fuel & Electricity Needs
Description of Fuel Needs South Co needs 50 mcf of natural gas per line - 100 mcf total. North Co needs 90 mcf gas from the North Gas Project in Kirkuk.
Description of Electricity Needs South Co needs 25 mw, of which 5 mw is supplied by Khor Al-Zubar power plant. North Co needs 25 mw. Needs are 25% higher than foreign competitors on a per unit basis.
12. Other Needs to Restart
Working Capital Needs Salaries and other standard operating costs.
Security Needs Already has security.
Other Needs Sales and marketing department. $4M USD to upgrade capacity at Northern Company to 95% of design capacity. Southern Company needs $10M USD to upgrade capacity to 1.0 million tons from current capacity of 600,000 tons.
13. Strengths, Weaknesses, Opportunities & Threats
Description of Strengths Cheap supply of raw materials. The souther plants have access to sea ports.
Description of Weaknesses Company has operated solely as a manufacturing facility, with no sales or marketing staff. Staff needs training from outside Iraq.
Description of Opportunities Export and sell at market rates.
Description of Threats Management may be forces to sell at a discounted rate which will prevent it from raising enough cash to maintain and rehabilitate its plants.
14. Long Term Strategy
Description of Strategy Put the two companies as well as the bombed factory in Abu AlKhasib in one company. Re-use the revenue to revamp production capabilities. Enter into joint ventures with investors/technology providers to build petrochemical complexes in and around Basra. Phosphate fertilizer co may entering the same club but it would be better to be treated separately.
Potential New Products More Urea, Amonium sulphate, Methanol, and Ethanol
Potential Partnership Opportunities Needs technology providers and investors
15. Revenue and Costs Overview
Description of How Pricing Was Set Set by Ministry at significantly subsidized rates to help farmers, many of whom are Ba'athist. Actual market rates for Urea are around $100 USD per ton, excluding delivery costs. Farmer subsidy should come from the ministry of agriculture rather than the factory.
Description of Production Costs South Co has 24K ID/ton production costs. North Co's costs are less, at $17K ID/ton. Both Companies benefitted from subsidized power and natural gas. Actual production costs without subsidies unkown.
Potential for Profitability in Free Market Given massive profit margins if sold at market rates, Company has good chance of remaining profitable even when subsidies are removed.