# 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 Company for Tobacco & Cigarettes
Sector Food
Brief Description Manufacturer of matches and cigarettes under 4 brands, Sumer, Al-Rasheed, Kithana and Baghdad. Sold exclusively in Iraq. 40% market share, down from 90% fifteen years ago, due to dimished quality (aged equipment) and an influx of cheap imports.
Revenue in 2002 (ID '000) 37453599
# of Employees 2246
Annual Employee Salaries & Bonus 2733587
Headquarters Address Habibiya, Baghdad
2. Company Highlights
Received $8M to $10M USD in subsidies last year. Without subsidies, Company would have only been marginally profitable.
Forced late last year to reduce its wholesale price from 110 ID per pack to 80 to fight loss in market share. Without subsidies at new prices, Company will not be profitable. However, it will be cash flow positive while CPA pays salaries, electricity and rent are free, and it uses raw materials already paid for.
Mgmt admits quality of product has dimished significantly over last decade due to shortage of spare parts and upgrades.
On the other hand, inquiries to original manufacturers of equipment, Marden Edwards and Molins indicate equipment is still competitive if repaired.
Ministry believes Company would be cash flow positive if re-started. Unclear if they've taken into account loss of subsidies.
US Army currently using facilities as a base for 1,000 soldiers. Willing to return manufacturing facilities to Company, but not HQ admin offices.
Company claims to have been drastically hurt by CPA policy to cancel inter-governmental debts and accounts, but in reality, Company was harmed at most $5M USD (which is less than 2002 subsidies) after taking into account debts it had to MOF and MIM that were forgiven.
Company wants $4M USD loan for raw materials and spare parts.
Allocated $2.5M USD for 2H 2003 operating budget and provided with 1 mw off of grid.
3. Facilities
Name Province City Grid Damage % Power Needs
Old Factory -Baghdad Baghdad Baghdad 20% furni & tools 1.5 MW (they have)
New Factory-AL-Nasir Baghdad Baghdad - Saddam City 100% of storage 3 MW (they need)
Value of All Plant & Equipment Before War, and Initial Purchase Dates and Prices for Major Items Major equipment purchased in early and mid 1980's for new factory. Price unknown. Old factory built in 1950's. The estimated value of all P&E before the war was $46,990,283 USD.
4. Products
Product Name Unit Measurement Design Capacity Available Capacity 2002 Production 2002 Revenue
Matches Case (720 match) 588000 338000 73000 292000
Cigarettes Case (10K cigs) 1713360 987480 571000 24743333
Description of Importance of Products to Other Iraqi Industries None. Only reason to keep this Company running is for potential positive cash flows and employment of 2,000 workers in one of the poorest neighborhoods in Baghdad.
5. Customers
Customer Name 2002 Revenue Subsidized (Y/N) Products Sold to Customer and Unit Pricing
Over 500 Wholesale Customers 24969066 No New 2003 price: Wholesale price/pack: 80 ID. Retail price: 250 ID
Will cause a significant decrease in revenue over 2002.
6. Suppliers
Supplier Name 2002 Purchases Subsidized (Y/N) Products Purchased and Unit Pricing
Jadoura 1252005 Y paper cartons
Deccan 7235580 Y Tobacco
Alashaab Nova 1000000 y AL-foil &PVA gum
Current Payment Terms From Suppliers Standard state contracts under MOU.
7. Imports & Exports
2002 Import Markets for Raw Materials Vietnam, India, Jordan, China, Italy
Potential Import Markets in Free Market Used to purchase high-quality tobacco from Iraqi kurdstan before 1991. Should be able to re-establish suppliers in that territory now.
2002 Export Markets for Finished Products None.
Potential Export Markets in Free Market
8. Competition
Description of Competitive Situation Low quality imported cigarettes have flooded the Iraqi market in recent years, including conterfeit "knock-offs". Mgmt believes these imports are dangerous to consumers and should be subject to quality standards which would even the playing field.
Market Share Description Market share has dropped from 90% in the late 1980's to 35% today due to increased competition. And expected to drop further this year.
9. Summary of War Damage & Looting of Property & Equipment
Description of Damage Minimal damage to manufacturing equipment, but administrative offices and some of the storage warehouses are damaged.
Current Operating Status Old Baghdad plant is operating at 50%. Newer Al-Nasir plant is not operating yet. In process of building new fence around production facilities. Could re-start in September.
Immediate Property & Equipment Needs To Restart Operations Computers, thurayas, furniture, cupboards.For Al-Nasir needs computer, furniture some spare parts and 3MW generator.
Total Cost to Return to Pre-War Condition $1.5M USD by one estimate, $3.5M according to questionnaire.
10. Inventory Status
Raw Material Status Plenty of tobacco and various other raw materials. Total value of $1M USD. More to arrive via last of OFF contracts - valued over $2M USD. Paper and other ancillary items will be needed within a couple months of newer plant re-starting.
Months of Material Supplies & Production Rate 12 months of raw tobacco
Immediate Raw Material Needs Aluminum foil, paper and tips.
Finished Products Supply (Units and Value) None, but raw materials could produce 7.4B ID worth of finished goods.
11. Fuel & Electricity Needs
Description of Fuel Needs None
Description of Electricity Needs Available in Baghdad plant 2MW. AL-Nasir needs 2 to 3MW
12. Other Needs to Restart
Working Capital Needs 400,000 for worker transportation and fuel (G. Corliss note: which is odd considering description of fuel needs above).
Security Needs US Army currently located at newer factory and intends on maintaining administrative offices, which are the "high ground" in the neighborhood. This should supply sufficient security.
Other Needs None
13. Strengths, Weaknesses, Opportunities & Threats
Description of Strengths Cheap labor, long experience, good production lines with additional capacity if spare parts are provided.
Description of Weaknesses Aged equipment, need of upgrade and repair.
Description of Opportunities With upgrades, will be ready to produce at higher capacity. Has many investors ready to invest in company, and some offers to use production lines after upgrading.
Description of Threats Low priced, low quality imports.
14. Long Term Strategy
Description of Strategy With investors we will upgrade some lines, and be able to reduce our west which is sometimes reaches 50%. And also we need to go directly to the sources of raw materials to reduce the cost of raw.
Potential New Products
Potential Partnership Opportunities Many offers for investment have been received.
15. Revenue and Costs Overview
Description of How Pricing Was Set Based on competitive pressures.
Description of Production Costs Per pack: raw material - 60 dinars (subsidized); labor - 2 dinars; spare parts - 2 dinars; taxes - 5 dinars; other - 6 dinars; total - 75 dinars.
Potential for Profitability in Free Market Unclear.