Egypt's cigarette manufacturing monopoly, the Eastern Tobacco Company (ETC), has reported a 16.5 percent bottom line drop for the nine-month period, which ended March 31, 2002. The company posted a 179.9 million Egyptian pound ($38.7 million) net profit between July and March 2002, compared with EP215.5 million at the end of the comparative period the previous year.
The bottom line drop was mainly attributed to a 13 percent hike in ETC’s COGS (Cost of Goods Sold), totaling EP1.3 billion. Although partially offset by a six percent rise in sales—reaching EP1.68 billion— ETC nonetheless closed the nine-month period with a 13 percent fall in gross profit, at EP381.4 million.
The company’s declining profitability is connected to the devaluation of the Egyptian Pound over the past year, considering that 90 percent of ETC’s COGS—tobacco and various packaging—is imported.
Currently, 34 percent of the company’s stocks are traded on the stock exchange—with 10 percent held by the employees’ association and 24 percent by private investors—while the remaining 66 percent is owned by the state-owned Mining and Refraclories holding company.
The Egyptian government had slated ETC for privatization last year, seeking to divest another 15 percent stake in the state-run company. However, although tobacco multinationals Philip Morris and British American Tobacco had shown interest in becoming ETC’s strategic investors, no formal bids were ultimately submitted.
ETC is the sole manufacturer of cigarettes in Egypt. Domestic cigarette brands comprise over 95 percent of ETC's production, with the Cleopatra brand dominating the market. The remaining five percent consists of foreign brands, produced under authority from 14 international cigarette manufacturers. The company’s products also include water pipe tobacco, pipe tobacco, rolling tobacco, chewing tobaccos and cigars.
ETC’s products are exported throughout the Arab world. The Middle East cigarette market consumes as much as 80 billion cigarettes per annum. With some 40 percent of the region’s males and eight percent of women smoking regularly, sales are rising at an average annual rate of 24 percent.
Established in 1920, Eastern Tobacco was merged in 1984 with the El Nasr Tobacco company, to from the existing ETC. The company employs some 140,000 workers nationwide.— (menareport.com)
© 2002 Mena Report (www.menareport.com)
