Tobacco Enterprise Stoking up Production with New Machine Acquisition


The new machine will produce six billion cigarettes a year - the amount smoked by the Ethiopian population




The National Tobacco Enterprise (NTE), a monopoly, has acquired a new 140 million Br cigarette making and packing machine, which could raise its annual production to six billion sticks – the amount it says is smoked by Ethiopia’s 1.5 million smokers.

The 70-year-old Enterprise, which started production with a single machine and brand called Nigusu in 1942, had been operating with same machine for over 60 years until it bought a new one for 150 million Br in 2003; that machine could produce 7,000 sticks a minute. The latest machine, with a capacity to produce 12,000 cigarettes a minute, will be its third machine in 70 years.

The Enterprise obtained a 100 million Br loan from the Development Bank of Ethiopia (DBE) and the remaining 40 million Br was covered by the Enterprise, according to Ayele Alebel, public relations officer of the Enterprise.

The machine has already arrived at the Modjo Dry Port terminal and is expected to reach the factory within two weeks, according to Ayele.

The machine was acquired from G.D SpA – an Italian supplier of machinery for cigarette making and packing, as well as filter production, with an annual turnover of 624 million Euros in 2012. This company, which employs 2,500 people, boasts a presence in 110 countries with 2,500 employees.

The Enterprise, which is located along Roosevelt Street, has a 3.3 billion Br capital and 5,230 permanent and contract workers. It manufactures five brands of cigarettes, including Nyala, Elleni, Delight, Nyala Premium and Gisilla, with an annual production capacity of four billion sticks.

“The new machine will increase the production capacity of the factory to six billion sticks [a year] and will be fully operational by January 2015,” Ayele told Fortune.

The enterprise has been enjoying growing profits over the past three years, with 246 million Br in 2011/12, 280 million Br the following year and 319.5 million Br during the 2013/14 fiscal year.

The NTE estimates that it’s share of the market is 62pc, with the rest of the market supplied by such brands as Rothmans, More, Benson and Marlboro, according to a survey it conducted in 2012.

But the market share of the NTE products has grown following a strong intervention by the Ethiopian Revenues & Costumes Authority (ERCA) to control the smuggling of foreign brands, according to Ayele.

The Enterprise estimates that over six billion sticks of cigarettes are smoked in Ethiopia yearly. While its own brands dominate the market, other brands are imported from China, Lithuania, Kenya and Germany.

The Enterprise was registered in 1999 as a share company, with the government controlling a 78pc share and the rest owned by a Yemeni company, Sheba Investment Group up to 2014. Sheba boosted its ownership to 60pc in July 2014, paying 1.25 billion Br to the Privatisation & Public Enterprises Supervising Agency (PPESA) for the equivalent share of the government.

The Enterprise gets 30pc of its tobacco supply from a farm in Shewa Robit in the Amhara Regional State, and three farms in Hawassa, Welayta and Blate, in the Southern Regional State, where it has contracts with 8,000 farmers. On average, the company produces 1,200kg of tobacco a hectare, cultivating 2000ha in two seasons a year. The remaining 70pc is imported from Brazil and India.

The NTE commissioned its own study, which estimated that there are 1.5 million smokers in Ethiopia, between the ages of 15 and 49. This, it says, is 1.7pc of the total population. Among the age group of 15 to 49, 7.6pc of men and one percent of women are smokers, according to the same study.

Ethiopia’s import of tobacco has increased by 82pc in quantity and 182pc in value since 2009/10, with 275,512kgs imported then for 80.8 million Br; this was up to 502,466kgs and 228 million Br in 2013/14. Imports from China were 92,000kgs last year, costing 88.8 million Br. Lithuania was the source of 108,000kg of import, which cost 65.5 million Br.



By FASIKA TADESSE
FORTUNE STAFF WRITER

Published on September 7, 2014 [ Vol 15 ,No 749]


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