Банкеръ Weekly



The consolidated financial result of Bulgartabac Holding will go down by about BGN20MN due to the current re-evaluation of 18,000 t of old stocks of tobacco, the Executive Director Georgi Popov announced. Therefore, instead of posting a profit of BGN5MN for 2001 in a few weeks, the companies under the holding's umbrella will report a loss of BGN15MN.This is because of purchased but unprocessed quantities of tobacco since 1997, that so far figured in the accounting reports of Bulgartabac's subsidiaries with the prices at which they were bought, amounting to BGN60MN. Now they will be entered in the balance sheets with their market value of BGN40MN. The enterprises in Haskovo and Stara Zagora, which were anyway operating at a loss last year, will be most severely hit. On the other hand, Sofia-BT will have least problems, as it is the only enterprise within the holding's structure, which is not processing tobacco and is just making cigarettes. For that reason it has small quantities in stock.During his visit to Russia, which began on February 6, Bulgartabac's CEO Popov is expected to sign contracts for distribution of tobacco with one or two Russian companies. The aim is to reorganize the sales on that important market. Bulgartabac Holding's five factories in Russia are operating at low capacity and one of them has even gone bankrupt. Since March 2001 the holding's cigarette factory in Romania is not operating either. It has been deprived of its licence due to unpaid excise duties of USD1.7MN. In that case, however, Mr. Popov hopes that a triangular scheme will be applied because the enterprise itself has receivables of USD1MN.Obviously, Bulgartabac's companies abroad are its major problem. Their losses for 2001 exceed BGN10MN and their long-term liabilities are over BGN28MN. The holding has set an ambitious task for 2002. Its sales on the Russian market should reach 3% this year, although Bulgartabac's share on it was just 1% in 2001. Judging from the pre-privatisation plans for Bulgartabac's development, light cigarette brands are to be established in Russia. Considerable expenses, mostly for advertising and distribution, will be necessary for the purpose. According to experts in the branch, even if this goal is reached, it could turn out to be a Pyrrhic victory, as the increased costs will eat up all the profit.Establishment of regional distributions centers in Bulgaria (the first one in the town of Shoumen) is projected for 2002. They should optimize transport costs for tobacco dealers. According to Georgi Popov, no new price hike of the cigarettes, produced by Bulgartabac, is probable. But the profitableness of sales in Bulgaria is low and an eventual price rise can be endured by the market at a sufficiently broad margin in the prices of Bulgarian and imported cigarettes, Mr. Popov believes.

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