Cotton Co — Mosul (BUS-3760e177)

# Template State Owned Enterprises- Company Overviews OCPA - Ministry of Industry & Minerals Note: Company responded to most questions in US $, not ID. 1. General Information Company Name: State Company for Cotton Industries Sector Textile Brief Description Manufacturer of medical cotton, gauze, and cotton fabrics. Due to low quality cotton supplied by Iraqi farmers, Company focuses on low quality "burlap" fabrics. Revenue in 2002 29000000 US $ # of Employees 6720 (1,750 in Mosul Factory) Annual Employee Salaries & Bonus 6058000 Headquarters Address Kadymiyah Baghdad 2. Company Highlights Company was obliged to purchase 100% of Iraqi cotton production regardless of actual needs. 90K tons of raw cotton purchased in 2002 at prices above market (to subsidize farmers). Borrowed 76B ID from govt banks to purchase cotton. 15K tons looted. Company still has massive cotton inventory (2 to 3 years production), and under new CPA rules on inter-agency debt forgiveness, Company now has one of strongest balance sheets of all MIM companies. Factories are outdated and not competitive with Asian imports according to DG. Production per hour only 5 kg versus 80 for new machines. Company has everything it needs to restart operations if electricity and fuel are supplied. Mgmt believes it can generate 27B ID in revenue in 2H 2003 using inventory on hand, and possibly be slightly profitable (questionable). While Company may not be profitable in long term, there appears to be little cost or risk in re-starting it and letting it operate using existing inventory. Company can try to restructure in that time to become viable. Allocated $1.0M USD for 2H 2003 operating budget and provided with 4mw off of grid (2 each for Baghdad and Mosul). 3. Facilities Name Province City Grid Damage % Power Needs Headquarters Baghdad MB377919 0 2 mw Mosul (from "raw cotton to fabric") Mosul 0 1.5 mw Diwaniya Diwaniya 1.5 mw Qadmiya (Horria) Qadmiya (Horria) 0 Value of All Plant & Equipment Before War, and Initial Purchase Dates and Prices for Major Items Baghdad was taken over by the state in 1964. Mosul was established in 1957 and merged with the state company 1070. Diwanya was established in 1976. Plants currently valued at $45M USD. 4. Products Product Name Unit Measurement Design Capacity Available Capacity 2002 Production 2002 Revenue Medical Cotton ton 495 396 385 Gauze 1000 m^2 32500 16000 8937 Cotton Fabric 1001 m^2 131093 88628 38645 Description of Importance of Products to Other Iraqi Industries Largest buyer of Iraqi cotton harvest. 5. Customers Customer Name 2002 Revenue Subsidized (Y/N) Products Sold to Customer and Unit Pricing Ministry of Defence $10,000,000 USD Y Fabrics Ministry of Health Y Gauze Local Market N Cotton Fabrics 6. Suppliers Supplier Name 2002 Purchases Subsidized (Y/N) Products Purchased and Unit Pricing Iraqi Cotton Farmers 76,000,000 ID No, overpriced 2,000 ID per kilo for low quality cotton worth 1,500 ID Syrian State Company for Textile Industry Chinese Suppliers Current Payment Terms From Suppliers Private suppliers now demanding cash upon delivery. 7. Imports & Exports 2002 Import Markets for Raw Materials Syria, China, Europe, S. Asia Potential Import Markets in Free Market USA, Asia and Europe 2002 Export Markets for Finished Products None Potential Export Markets in Free Market None 8. Competition Description of Competitive Situation Machinery outdated and inefficient. Imports pose threat. Market Share Description Approximately 10% of non-military demand. 9. Summary of War Damage & Looting of Property & Equipment Description of Damage Cotton stores were looted and destroyed. Kirkuk ginning plant partially damaged. Mosul factory had no looting damage. Current Operating Status Only Mosul plant is running (at 40% due to lack of spare parts - 30K tons per day of fabric). Needs security, electricity and fuel to start other facilities. Immediate Property & Equipment Needs To Restart Operations None Total Cost to Return to Pre-War Condition $6.9M USD, company claims. 10. Inventory Status Raw Material Status 18,251 tons of Ginned cotton, cost of $22.5M USD. 30,000 tons of raw cotton, cost of $11M USD. Months of Material Supplies & Production Rate 2 to 3 years of raw cotton. 6 months of chemicals and dyes. Immediate Raw Material Needs Chemicals and dyes (but it has 6 months worth?), polyester fiber. Finished Products Supply (Units and Value) None Notes The Company had been forced to buy the Iraqi domestic product, which is of low quality, at higher prices $1,308/ton. While the same quality they can buy for $800/ton from the imported market. The reason is the cotton farmers are the leaders of the Ba'ath party and the biggest cotton farm owner is Izat Aldouri. Notes from Mosul visit on 7/22/03: · Currently operational. No looting of facilities, which are in relatively good condition. Scales of facilities is very large, covering hundreds of thousands of sq. ft. · Factory operations include everything from the ginning of the raw cotton through to the weaving and dying of the fabric. · Since the quality of Iraqi cotton is low (known as “short hair cotton”), only coarse fabrics can be produced. Finished products include mattress covers and burlap style fabrics, but not soft cotton clothing quality. · Currently operational. No looting of facilities, which are in relatively good condition. Scales of facilities is very large, covering hundreds of thousands of sq. ft. · Now that sanctions are lifted, Company wants funding to buy higher quality imported cotton, which it will mix with its massive stores of Iraqi cotton to produce clothing quality fabric. · Much of fabric and yarn is sold to private sector. · Both factory workers and management complained that current 4 tier pay scale is unfair. As an example, they introduced us to workers who have been with the Company for 30 years and used to make $150 per month, but now make only $60 per month (lowest tier). Over 700 of 1,750 employees fall into the lowest pay tier. Mgmt believes 500 of them are paid significantly less than they received under previous pay structure, where majority of compensation came from incentives and overtime pay. Many workers are threatening to leave the job if pay issue is not addressed. Mgmt wants permission to move some workers from lowest to second tier. · Long term viability of Company questionable due to import pressure, but with facilities operational and large raw material stores, short term funding to maintain stability is advisable.