Tobacco Monopoly Tests Western Markets, Continues with Major Restructuring

9. Oktober 2006, 00:00

Bulgarias tobacco monopoly Bulgartabac is testing ground in Italy and Austria

Bulgarias tobacco monopoly Bulgartabac is testing ground in Italy and Austria. Late last week it dispatched the first batches of Victory and MM cigarettes to these markets, company officials said.

The strategy of winning new markets has been accompanied with major cost-streamlining initiatives. Bulgartabac has already divested of its Plovdiv-based filter printing and cigarette making unit via the bourse and is set to do the same with its Shumen BT and Asenovgrad BT and tobacco processing plant Dupnitsa BT.

The processing units in Kardjali and Gotse Delchev will be sold through a competitive procedure.

Furthermore, the company is about to reduce production costs and staff. As it is eyeing western markets, the company has tasked a team to develop a new method to calculate production costs, which is to replicate the formulas of multinational peers.

International standards foresee for each 10,000 tonnes of cigarettes 25 to 180 employees. This automatically means huge layoffs at Blagoevgrad-based factory, which produces 13,000 tonnes of cigarettes and holds 1,250-strong workforce. The same goes for the Sofia factory, which makes 5,000 tonnes of cigarettes and employs 550 staff.

First signs of recovery are already in place. Bulgartabacs profits surged after the shutdown of loss-making units.

While in 2004, the company ran eight cigarette factories and nine tobacco processing plants and reported a mere BGN 1.5 million in profit, in 2005 the bottomline saw a boost to BGN 39 million with the liquidation of four cigarette factories and six tobacco processing units.

The profitable cigarettes factories Sofia BT and Blagoevgrad BT as well as the Pleven BT processing plant should also go private by the end of 2006.

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