Ready Made Wear Co

# 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 Ready Made Wear Industries Sector Textile Brief Description Four factories manufacturing children's clothing, men's clothing, tents and school uniforms. Mosul factory (started in 1983) is only one operating as of July, 2003. Najaf factory heavily damaged by US bombing during war. Revenue in 2002 (Iraqi Dinars '000s) 20990287 # of Employees 3229 Annual Employee Salaries & Bonus 3577789 Headquarters Address Mosul, Najaf, Baghdad & Anah 2. Company Highlights 40% of revenue and all profits were generated from selling to Iraqi Army. Heavily subsidized, with MOU import subsidies of $20M USD per year exceeding total revenues. Another Co. source claimed only $3K in MOUs. Many management responses to financial questions were conflicting, or just didn't make sense. Najaf factory, a subsidiary, provided separate answers to the questionnaire, and some of their numbers were higher than the parent Co's combined total. No financials herein are reliable. Forced to sell suits at 38K ID - well below market price - to universities. Mgmt claims that it did not benefit from subsidies since all benefit was passed through to consumer. Later claimed its prices are same as market. Mgmt believes it can be profitable as a cost-plus assembly and finishing provider. Finished goods supply include: 100,000 uniforms, 1,000 tents and 2B ID worth of military uniforms No additional capex budget should be provided to this Company. Long term viability without significant restructuring unlikely. Undamaged factories should be provided limited operating budget for raw materials since incremental costs are minimal. Allocated $1M USD for 2H 2003 operating budget and provided with zero mw off of grid (but Mosul is getting electricity from somewhere). 3. Facilities Name Province City Grid Damage % Power Needs Men's Suits Najaf 100% of the storage been damaged + part of production area 2 mw Tents Baghdad MB434911 1 mw Boys and Girls Cloths Mosul 1 mw Arab Wear Ana 0.5 mw Value of All Plant & Equipment Before War, and Initial Purchase Dates and Prices for Major Items Najaf was best factory, built in 1982 for $55M USD. Mgmt claims plant and the equipment cost 1980 - 1983 was 1.4B ID (seems very high at historical exchange rates. Equals $4.5B USD). 4. Products Product Name Unit Measurement Design Capacity Available Capacity 2002 Production 2002 Revenue All products Pieces 2823000 2823000 3171000 Mens Safari Outfits Mens Suits Military Uniforms 7707308 Wind Jackets 4619840 Tents 5481000 Dishdashas Description of Importance of Products to Other Iraqi Industries Nothing that couldn't be satisfied through imports. 5. Customers Customer Name 2002 Revenue Subsidized (Y/N) Products Sold to Customer and Unit Pricing State Universities 30% of total Yes Uniforms sold at 38K dinars each Direct to Consumer 30% of total Yes Suits and cloths Iraqi Army 40% of total No, inflated Tents (408K ID each) and uniforms 6. Suppliers Supplier Name 2002 Purchases Subsidized (Y/N) Products Purchased and Unit Pricing Awadh Ammora (Syria) $1,162,896 USD yes Fabric and sewing machines Ai Shamiya Trading Co (Syria) $969,166 USD Misc. items State Co for Textiles (Syria) $925,396 USD Tent fabric Liao Yuan (China) Endulus (Turkey) Current Payment Terms From Suppliers Most items purchased under protocols, and therefore paid in advance by Ministry. 7. Imports & Exports 2002 Import Markets for Raw Materials China, Syria, Jordan, Turkey Potential Import Markets in Free Market Imports will impose a serious pressure on the products of fashion-related factories. 2002 Export Markets for Finished Products None Potential Export Markets in Free Market Limited. 8. Competition Description of Competitive Situation Heavy competition both from local private enterprises and from imports, including China, Indonesia and Syria. Market Share Description In the past dominated the government based business. Now their capacity is no more than 20% of market needs. 9. Summary of War Damage & Looting of Property & Equipment Description of Damage Najaf factory: Warehouse A and final stage departments were competely destroyed by US bombs, Brand new $1M cutting machine is safe, The cutting department is partially damaged. Staged repair of a budget of $2-5M will restart the factory. Mosul factory is intact and producing. It did not suffer from looting at all. Current Operating Status All factories except Najaf are operating. Mosul factory has over 900 people currently working, mostly female. Immediate Property & Equipment Needs To Restart Operations See list on file for Najaf factory. Other factories need only small spare parts. Total Cost to Return to Pre-War Condition $15M USD at least, maybe as much as $25M. 10. Inventory Status Raw Material Status Mosul is in short supply. Needs to import soon to meet production plans Months of Material Supplies & Production Rate Mosul & Baghdad have 2 months supply of raw materials. Immediate Raw Material Needs Will run out of materials by July. Need $4M USD to supply Mosul for 6 months. Finished Products Supply (Units and Value) 100,000 uniforms. 1,000 tents. 2B ID worth of military uniforms 11. Fuel & Electricity Needs Description of Fuel Needs Description of Electricity Needs 1 to 2 mw for each facility. See Section #3. 12. Other Needs to Restart Working Capital Needs $2-3M for Mosul for Materials. $0.5M Anna , Najaf $2M to restart its first phase of rebuilding. Security Needs None. US Army stationed at Mosul factory. Other Needs Sales and marketing staff. Phones and other communication equipment to make sales calls. 13. Strengths, Weaknesses, Opportunities & Threats Description of Strengths Good experience and cheap labor. Manufacturing cost is very good. Description of Weaknesses Design and marketing departments are weak. Description of Opportunities Very willing to work and find investors to rebuild the storage and have more equipment. The Company could partner with cotton textile co. to produce unique designs targeted at Iraqi market. Description of Threats Massive dumping of imports could weaken their ability to maintain market share. 14. Long Term Strategy Description of Strategy The focus should be on Mosul by supporting with marketing and design input with quick supply of material to enable them to catch up with the main festival season in NOVEMBER. Further coordination with the cotton textile factory to take place to develop unique designs. To encourage international brand licensing and cooperation with local and regional marketing and distribution companies to promote the products. For Anna factory the products should follow the Saudi model by involving a brand development and good packaging to secure position and good price. Najaf factory has a high volume output and is best suited for contract manufacturing for others. Tent factory needs to think of new business plan. Potential New Products Children fashon, jeans, ladies fashion. Potential Partnership Opportunities Company is willing, but no partners identified. 15. Revenue and Costs Overview Description of How Pricing Was Set Ministry set all prices. Some were inflated, some were subsidized, depending on customer. Description of Production Costs Potential for Profitability in Free Market May be viable as a niche cost-plus contractor to work on assembly (Najaf). Mosul and Anna can also be successful if the Design and marketing departments were successful or a good marketing partner is found. Need to move away from low-end clothing, where Chinese imports will underprice them. Notes Notes from Mosul trip: Mosul factory has 16 production lines. Mosul Address: PO Box 2200, phone: 913473 - 819267 · Raw materials are running low, expected to run out in late August. Only funding needs are for additional raw materials. Electricity is being supplied and facilities are adequate to continue operations without further capex. · Final products, casual clothing for children and adults and school uniforms, are sold both wholesales and direct to customers through Company owned retail stores. · Company targets lowest end of market, which is succeptible to greatest threat from import competition. · Factory was built in 1980. Consists of little more than manual cutting rooms and row after row of sewing machines. · Mgmt has no experience in sales, marketing or raw material acquisition. New mgmt is needed if this Company is to successfully transition to market economy. Current mgmt unable to comprehend “new way of doing business”. · Without phones or funding for travel, mgmt claims it can not contact new suppliers. Old suppliers were middle-men who provided low quality fabrics at inflated prices. · All current cash flow from sales is going to RMW headquarters, which is preventing factory from purchasing additional raw materials. Factory does not know if it will receive any of the 2003 operating budget allocated to RMW parent Company ($1 million). Given that this is the only currently functioning RMW facility, it should receive the lion’s share of this funding. · Mgmt also complains that it has no Board of Directors representation at RMW. This is preventing it from getting proper support from parent company. · Low raw materials supplies is limiting operations today. Only selling $40,000 per month in finished goods. This is far lower than costs. · In long term, Company will have extreme difficulties competing against imports. However, given that facilities are operational and salaries are paid anyways, Company should be provided funding for raw materials to maintain short term stability.