Paper Co

# Template State Owned Enterprises- Company Overviews OCPA - Ministry of Industry & Minerals Note: It appears Company reported most financials in US $. Needs verification. 1. General Information Company Name: State Company for Paper Industies Sector Chemical Brief Description Three factories manufacturing pencils, paper packaging, writing paper and cardboard. Ministry of Education biggest customer. Packaging used by many Iraqi SOEs. Revenue in 2002 (USD - I think) 11170070 # of Employees 3700 Annual Employee Salaries & Bonus (USD) 3705044 Headquarters Address Basrah, Aldiar Hartna 2. Company Highlights Company is well located for this industry. Equipped to handle wasted paper as well as reed from the local marshes. Equipment is lower volume than current international standards and also under maintained. Running at much lower level than design capacity. As a result, company was only marginally profitable even with $3.2M in raw material subsidies. Would have lost $3M without these subsidies. The market will witness an expansion in demand for various paper and board products and the company can benefit from such expansion. Company would benefit from specialized partner in the paper and board sector. A fresh feasability study should be conducted for the Company. Multiple sources have indicated Basra and Maysan factories critical to local social stability. Company has 11 million finished notebooks worth $5M USD, and raw materials for another 11 million notebooks. Should focus on selling this to Ministry of Education and use proceeds to fund operations and rebuilding facilities. Allocated $250K USD for 2H 2003 operating budgetand provided with zero mw off of grid. 3. Facilities Name Province City Grid Damage % Power Needs Baghdad - Taji Taji MC33330209 0 1 mw Misan Misan 0 6 mw Basrah Basrah 0.3 8 mw Value of All Plant & Equipment Before War, and Initial Purchase Dates and Prices for Major Items Misan plant built in 1980 using German and Swiss equipment. Basrah plant built in 1970 and 1978. Company believes prewar value was $94M USD and that $360M was initially spent. 4. Products Product Name Unit Measurement Design Capacity Available Capacity 2002 Production 2002 Revenue Pencils 1000 85000 40000 10684 Paper Tons 47100 28000 10200 Exersize School Books Million Sheets 6537 3100 2054 Egg Trays 1000 92340 30000 21000 460000 Converting Production Tons 10800 6500 4183 Board Tons 30900 14500 6900 Furfural (for oil industry) no data Description of Importance of Products to Other Iraqi Industries Factory uses 30% of its input is recycled paper, 30% Reed from the local marches. Products are important for the education sector. There will be a substantial rise in the need for its packaging products but in a better quality by the manufacturing sector including private sector. 5. Customers Customer Name 2002 Revenue Subsidized (Y/N) Products Sold to Customer and Unit Pricing State Cigarette Company Packaging Ministry of Education 2166666 Notebooks Oil Ministry Furfural State Company for Drugs & Medical Supplies 1978666 Packaging State Vegetable Oil Company 1020000 Packaging State Cement Companies Bags for Cement $366 /T Private Sector Companies 30% of total Packaging and Paper 6. Suppliers Supplier Name 2002 Purchases Subsidized (Y/N) Products Purchased and Unit Pricing Local Pulp Suppliers (Sugar Co) 10,000 tons No Pulp Pulp Imports 5,000 tons No, inflated $600 USD/ton through brokers, open mkt price is $450 Bratskii (Russia) Pulp Nordcel (Sweden) Pulp Current Payment Terms From Suppliers Cash upon delivery. 7. Imports & Exports 2002 Import Markets for Raw Materials Russian, Syria, Germany. 30% of pulp imported. Potential Import Markets in Free Market Potentially this factory can absorb the waste paper from the region such as Kuwait, UAE and Saudi Arabia 2002 Export Markets for Finished Products None Potential Export Markets in Free Market Corrugated board made from waste paper can be one product with high export potential. 8. Competition Description of Competitive Situation Local competition in assembly of notebooks, but not production. For cartons: Iraqi Carton Co has 10% of market, other Iraqi private companies have 10% and imports cover 30%. Market Share Description Produced 80% of Iraqi notebook paper demand in 2002, 50% of cardboard demand and 80% of eggtray demand. 9. Summary of War Damage & Looting of Property & Equipment Description of Damage The finishing halls of the Basra facilities were severly damaged. However, this damange is not critical to the restart of the factory. Misan factory was not damaged or looted. Both Basra and Misan power supply and finishing lines heavily damaged. Taji headquarters completely looted, all furniture stolen and windows broken, but building structure is OK. Eggcrate factory is operational. Other Taji factories lightly looted. Current Operating Status Basra not operating due to looting damage. Taji factory ready to open once it receives power and working capital. Currently operating only eggcrate facility. Misan needs raw materials and some spare parts to open. Immediate Property & Equipment Needs To Restart Operations Misc. spare parts for Misan and Basra. Current budget and lack of working capital is the biggest problem now. Total Cost to Return to Pre-War Condition At least $4M USD, maybe as much as $6M. 10. Inventory Status Raw Material Status Purchased 70% of pulp needs from local sugar factories, and waste papaer. Months of Material Supplies & Production Rate 2 months supply of paper in Taji (700K tons). 1.5 months at Basra, and 4 months at Misan. Immediate Raw Material Needs Paper and pulp for Misan plant. Finished Products Supply (Units and Value) 11 million notebooks, and additional raw material to produce similar quantity. Also has 120 tons of products for cement industry, value unknown. 11. Fuel & Electricity Needs Description of Fuel Needs Description of Electricity Needs 1 mw for Taji, 6 mw for Misan. Basrah needs 8mw. 12. Other Needs to Restart Working Capital Needs $1-2M to get basic spare parts to restart the plants. $2-3M pulp imports to restart production. Security Needs Badly in need for a force protection against local trible looters who represent continuous risk to the factory. Other Needs Management consultancy and support to help structuring a rescue plan and possible a route for partnerships, etc with external investors. 13. Strengths, Weaknesses, Opportunities & Threats Description of Strengths Well positioned for the importation and utilization of local and regional resources of pulp and waste paper. Good experience in the industry. Packaging material including corrugated board is bulky and expensive to transport. Description of Weaknesses Low capacity, no economies of scale. If the factory focused its production on fewer products then it may be able to improve its competitiveness. Description of Opportunities Expanding market in the packaging sector. Plenty of under used capacity. Description of Threats Weak management. Weak marketing and planning. Risk of local markets overrun by better quality imports paid by donating countries. 14. Long Term Strategy Description of Strategy Best option for this factory to partner with a paper and board manufacturer who wants to have a foothold in the regional market (Iraq,Saudi & Gulf). Efforts should be made to start the search for such a partner before the company starts to disintegrate. Potential New Products Although the Company is planning to produce printing paper and tissue paper, a more focused approach should be considered in the short term to improve competitiveness. Potential Partnership Opportunities A Canadian company IBMA seems to have shown some interest in a partnership with this company. No details is available on the date of the interest or its seriousness. Contact name: Mr. Sam Berber. 15. Revenue and Costs Overview Description of How Pricing Was Set This was conrolled centrally through a set formula at the Ministry level. Carton boxes sold at $340 per ton, cement paper at $366 per ton and egg trays at $15 per thousand. Description of Production Costs Pulp is greatest raw material cost at $600 USD per ton for imports. Paper waste and reed is obtained at a much lower cost. Potential for Profitability in Free Market It has the potential to be profitable in bulky products with raw material sourced locally providing the factories were rehabilitated to their design capacity and operated continuously.