Cement Cos — State Owned Enterprises- Company Overviews

# 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 Cement (3 Companies - Northern, Central (Iraqi) & Southern) Sector Construction Brief Description Manufacturers of portland cement, sulfur resistent cement, white cement and lime. Three companies, each serving separate sections of Iraq. Only producers of cement in Iraq. Revenue in 2002 (Iraqi Dinars '000s) 133836294 (North - 21,389,943 ; Central - 50,456,233; South - 61,990,118) # of Employees 10800 (North - 2,300; Central - 3,300; South - 5,200) Annual Employee Salaries & Bonus 25000000 2. Company Highlights Extremely high local demand. Lack of supply has driven market rates to $80 USD per ton. Company used to sell at $10. Local cement has advantage over imports due to prohibitive cost of long-distance transportation of finished products. 70% of production already sold in the private sector. Operating margins of over 40% (with fuel and electricity subsidies). Without subsidies, profitability unknown. Efficiency of electricity usage per ton of output is low compared to international standards (300kwh per ton compared to 130kwh for new technology) Will be a problem is electricity subsidies are removed. Most of Co's plants use inefficient "wet" process. A portion of costs increases due to impending loss of subsidies can be reclaimed through increased prices, which are currently below-market. Capacity to double production. Relatively modest cash needs to reach capacity (around $5 million USD). Northern Co allocated $2.0M USD for 2H 2003 operating budget and provided with 25mw off of grid. Iraqi (Central) Co allocated $3.0M USD for 2H 2003 operating budget and provided with 25mw off of grid. Southern Co allocated $2.6M USD for 2H 2003 operating budget and provided with 40mw off of grid. 3. Facilities Name Province City Grid Damage % Power Needs Central - Kirkuk Plant Kirkuk Kirkuk 0 17 mw Central - Kubassa Plant Anbar Kubassa 0 17 mw Central - Al Qaim Plant Anbar Al-Qaim 0 17 mw Central - Baghdad Admin & Marketing Office Baghdad Baghdad 0 Minimal Central - Fallujah Plant Baghdad Fallujah 0 7 mw at 50% North - Sinjai Mosul Mosul 0 7 mw at <50% North - Badoosh Mosul Mosul 0 7 mw at <50% North - Aliah Mosul Mosul 0 7 mw at <50% South - Kufa (2 plants - 5 lines) Alnajaf Kufa 0 32 mw South - As Samawah Muthianah As Samawah Looting 13 mw South - Saddah Babel Saddah Looting 6 mw South - Karbala Karbala Karbala 0 South - Karbala ar Razarar Karbala Karbala 0 17 mw South - Karbala Noura/Lime Karbala Karbala 0 5 mw South - Sulfur Resistant Muthianah Muthianah Looting 17 mw South - Grinding and Milling Basrah Basrah Looting 5 mw Value of All Plant & Equipment Before War, and Initial Purchase Dates and Prices for Major Items Most plants were built in the 1970's, and are not efficient compared to modern technologies. 4. Products Product Name Unit Measurement Design Capacity Available Capacity 2002 Production 2002 Revenue South - Sulfur Resistant Cement Tons '000s /Year 3859 2893 1646 South - Portland Cement Tons '000s /Year 2973 2434 1983 South - Lime Tons '000s /Year 200 160 67 Central - White Cement Tons '000s /Year 280 210 175 Central - Sulfur Resistant Cement Tons '000s /Year 1000 470 453 Central - Portland Cement Tons '000s /Year 4000 2880 1642 North - Superfine Cement Tons '000s /Year 100 90 40 North - Portland Cement Tons '000s /Year 3600 2750 1110 Description of Importance of Products to Other Iraqi Industries Critical raw material for rebuilding of all Iraqi industries and infrastructure. 5. Customers Customer Name 2002 Revenue Subsidized (Y/N) Products Sold to Customer and Unit Pricing Private Consumers 40% of total Yes 15K ID/ton for portland cement Government Ministries 30% of total Yes 15K ID/ton for portland cement Private Construction Companies 20% of total Yes 15K ID/ton for portland cement Export 10% of total No $17 USD/ton for portland cement 6. Suppliers Supplier Name 2002 Purchases Subsidized (Y/N) Products Purchased and Unit Pricing Iraq (Private and Public) Jordan Y Russia Y France Y Turkey Y Current Payment Terms From Suppliers Cash or release of pay at delivery. 7. Imports & Exports 2002 Import Markets for Raw Materials Jordan, Russia, France Potential Import Markets in Free Market 2002 Export Markets for Finished Products Syria, Northern Iraq Potential Export Markets in Free Market Saudi Arabia, Kuwait, Syria, Turkey, Jordan 8. Competition Description of Competitive Situation None in Iraq. Companies have a monopoly on their region. Market Share Description Company claims 100% of Iraqi market before the war, but this is questionable. Imports most likely satisfied some of local demand. 9. Summary of War Damage & Looting of Property & Equipment Description of Damage Northern Co had 25% damage to head office at Northern Elbe and 30% damage to Singar plant. Badoosh plant was not damaged at all. Central Co had 50% damage to cement warehouse, but operating equipment was not damaged. South Co's Samawa, Muthianah and Um Qasr facilities had looting damage. Current Operating Status Most need electricity and security only to restart. LTC Jackson working on allocating electricity to 2 factories in each of the three regions - enough to produce 8K to 10K tons per day total. See Section 11 for details. North Co's Operating Status Badoosh facility was operating one line producing 2.5K tons per day until end of July when security issues forced factory to close. Could produce 6K tons if 50mw was supplied. Sinjar plant started milling Aug 1. Will produce 2.5K tons once electricity is supplied. Aliah plant currently producing 300 tons, all used for Mosul Dam. Central Co's Operating Status 4 factories are doing annual maintenance as of July, paying for it with proceeds from recent stock sales. Will be ready to produce in August when electricity is supplied. South Co's Operating Status Kufa needs to $1M USD to fix pressure equipment. Once it has the money, it will take one month to restart. Needs 7mw per mill (has 2 mills) and could produce 3K tons per day combined. Karbala needs 5 mw per mill (has 2 mills) and could produce 3K tons, but it only has 10 days of raw materials. Mithewa and Samawa plants still being looted. No ability to restart these. Immediate Property & Equipment Needs To Restart Operations Northern Co needs $2M USD for spare parts. Central Co needs $2M, and Southern Co needs $2.5M, both for spare parts and repairs. Total Cost to Return to Pre-War Condition The Northern $5M USD. The Central $ 0.5M. The Southern $9M. Notes Deputy DG of Kufa plant is Mr. Hazim. Market price of cement in July is $80 USD per ton in Central and Southern Iraq. Southern Co wants to sell at $65 per ton (much higher than historical rates) to crush black market. As supply increases, Company will adjust prices down and match market prices, which should level out at $30, the Company believes. Kufa plant will make $2.7M USD revenue per month at 3K tons per day and $30 per ton. Local manager is trying to "take over" half of Mithena plant and make it a separate Company which he will control. Local Govenorate is supporting this. Notes from Badoosh site visit: · 5 production lines consisting of 3 new lines with 2,000 tons per day capacity and 2 old lines with 300 tons per day capacity. · Upgrades are needed after 13 years of sanctions, but factory is in relatively good condition for Iraqi standards. · Only one new line is currently running using 15mw. Other lines need additonal 25mw electricity to restart. Need a total of 40mw to run all new lines. · Can purchase 2x25mw power plants for $15 million if power is not available off of grid in the forseeable future. · Currently selling at 40,000 ID per ton for bulk and 50,000 ID for bagged cement. Selling to government and local contractors. Much of this is suspected to be resold in black market at much higher rates. · Company is currently depositing an average of $50,000 of revenue per day in bank, but can not access it per orders of local govenorate. Company has deposited 1 billion ID ($666,000) in bank since June 1, 2003. · US troops which were guarding facility left on Tues July 22. New employee security not effective according to management since they are loyal to local villages. DG has received death threats if he does not give cement to local villages free of charge. Company plans to completely shut down operations immediately since all output will be stolen. DG wants to hire KDP to provide security. · DG wants, as long term solution to distribution/allocation issue, to have all production allocated to a single buyer who will determine distribution. This appears to do little more than pass the buck though. · Sinjar factory (not visited) was looted. One mill out of four was rebuilt in July by scavenging other three for parts. Two bagging facilities out of four were rebuilt in a similar fashion. 5mw was recently provided and operations have restarted. One out of two kilns will restart in August. Can produce 2,500 tons of cement per day if additional 10mw is provided (15mw total). · Security at Sinjar factory not an issue – local police force is reportedly effective. · Local contractors are currently being used to provide transportation equipment to move raw materials from mine to Sinjar factory. This adds 2,000 ID in costs per ton of finished cement.