PLOVDIV-BT
  1. General Information
    Plovdiv-BT is one of the 22 factories included in the structure of Bulgartabac Holding Group. The main scope of activity of Plovdiv-BT includes: purchasing, processing and trade in tobacco; production and trade in cigarettes.
    Plovdiv-BT is a public company, regulated by the Financial Control Commission. The company is listed on the Bulgarian Stock Exchange /Reuters - PLOBT.BB/. The registered capital of the company is BGN 1.079.127. The company headquarters are located in Plovdiv - the second largest city in Bulgaria.
  2. Market Positions
    The competition on the Bulgarian cigarettes market is mainly on brand level. Plovdiv-BT market share for 2003 was 6.67% /6.8% for 2002/ generated by the sales of "FEMINA" and "NEW LINE" brands. Around 70 tons of cigarettes from those brands are distributed on the market every month. Market leaders with a total market share of 60% are "VICTORY" and "SREDETZ" brands, produced by Blagoevgrad-BT and Sofia-BT respectively.
    An interesting detail which shall be mentioned here is the fact that all rights related to the brands are transferred by the daughter companies to Bulgartabac Holding.
    At present, a large part of Plovdiv-BT production capacity is not fully utilized due to the production and export quotas imposed over the daughter companies by Bulgartabac Holding. After the privatization, the mandatory production and sales programs imposed by Bulgartabac Holding are expected to fall which will probably lead to much higher sales and total optimization of the activities. Of course investments in the production capacity /some of the machinery is from the late 60's/ will also be needed.
    In order to extend its cigarette exports, in 1999, Plovdiv-BT established a joint venture for cigarettes manufacturing in Sochi, Russia. Plovdiv-BT owns a 77% stake in the joint-venture. In 2003 the stake was revalued from BGN 7,2 mln to BGN 0. The major reason for the revaluation is the legal claims from the russian counter partner.
  3. Shareholders structure
    The major stake in the company - 78.18% - is owned by Bulgartabac Holding, and 10.9% are owned by Finance Consult.
    On October 8, 2003, 118 016 shares or 10.9% of the company's capital were transferred in a block transaction at a price of BGN 7,00. The seller was Rozin Investment, which is registered in Cyprus and is a daughter-company of the British Framlington Investment Fund. According to a press release, the buyer was some British investment fund and the deal was negotiated by the headquarters of both companies in London. The buyer was also interested in the stakes of Rozin Investment in other daughter companies of Bulgartabac Holding, but for now, considered the stake in Plovdiv-BT as most attractive and of good value. The official information from the Central Depository shows that the direct buyer is the Plovdiv based Bulgarian company Finance Consult which is 100% owned by Bristol Distillers Group Ltd. registered on the Britains Virgin Islands. Whether Bristol Distillers Group Ltd. is an investment fund or not, we cannot say.
  4. Stock Market Performance
    Since July, 2003, the company's share price has risen more than 200% /from BGN 4.00 to BGN 15.00/. The main reason for the steep rise is the new Government's strategy for the tobacco sector privatization, placing Plovdiv-BT among the first 4 companies from the structure of Bulgartabac Holding, due to privatization. Nevertheless the investors should bear in mind that the liquidity of Plovdiv-BT shares is very low and only around 5% are free floating. In fact, in the last months the shares of all tobacco companies were boosted by the privatisation news. The main reason for the positive momentum in the tobacco sector comes from the provisions of the Public Offering of Securities Act, according to which after the sale of the majority stakes in the factories, the new owners will be obliged to make a tender offer for purchasing the remaining shares, and the offered price in those tender offers won't be much lower than the one, paid in the majority stake transaction.

  5. Industry
    Bulgartabac Holding is established in 1947 as a tobacco trading company. In 1993 the company is transformed into holding company with 22 daughter companies located in the tobacco production regions of Bulgaria. Today, Bulgartabac's cigarette brands are dominant on the domestic market with 98% market share. The company is also a leader among the tobacco companies in Eastern Europe and one of the major manufacturers of cigarettes in Europe. The Holding's activity includes the full production cycle, beginning with the selection of tobacco varieties, tobacco seeds production, purchasing, processing and trade of tobacco, cigarettes production and trade, research and development in the field of the tobacco industry. Out of the joint-stock companies comprised in the structure of Bulgartabac Holding, 11 subsidiaries purchase, process and trade only with tobacco. 8 of the subsidiaries /including PLOVDIV-BT/ have a combined activity - tobacco purchasing, processing and trade and cigarettes production and trade. One of the subsidiaries deals only in cigarettes manufacturing and trade. Another subsidiary in the holding system has auxiliary functions - making of filters, printed materials, spare parts and non-standard equipment for cigarette industry. The Tobacco Products Institute is also part of the Holding with its research and development activity. Bulgarian cigarettes are marketed in Latin America, the Near East and other regions. Bulgartabac tried to extend its cigarette exports through the establishment of its own units and joint ventures for cigarettes manufacturing on the territory of the main consumers - Russia, Ukraine, Romania. The foreign companies proved not to be very effective, and in the recent years exports have been continuously falling.
  6. Privatisation
    According to the Government's new strategy for privatisation of Bulgartabac Holding, the company's new two-tier management system consists of Supervisory Board and Management Board. The Supervisory Board is in charge of the privatisation procedures, in compliance with the Government policy in the tobacco sector, and the Management Board is responsible for selling the shares of Bulgartabac daughter-companies, after receiving the Supervisory Board approval. The Supervisory Board will also determine the specific terms of the deals. The 5 members of the Supervisory Board, appointed on October 7, are members of the Government, and so representatives of the state, the majority owner of Bulgartabac. According to the strategy, the most attractive cigarette factories, Blagoevgrad-BT, Sofia-BT, Stara Zagora-BT, Plovdiv-BT, as well as the maker of packing and filters Yourii Gagarin-BT, will be offered for individual sale, and the remaining companies will be restructured. The contract for consultant services on the privatisation of Bulgartabac Holding with Morgan Stanley & Co. Limited, London, has been officially signed on March 11, 2004. The consultant was selected by a decision of the Supervisory Board of Bulgartabac on February 16, 2004. The experts of Morgan Stanley will work together with Freshfields Bruckhaus Derringer, a leading international law company, specialized in consultations on mergers and acquisitions in the tobacco sector. According to the contract, the consultant's remuneration, is bound with the successful sell-off of Bulgartabac's subsidiaries.
    On July 19, the privatisation procedure officially started, as notices for the sale of the four most profitable companies were published in Financial Times and two Bulgarian dailies. The companies were grouped into two pools: Blagoevgrad BT and Stara Zagora BT in the one pool, and Sofia BT and Plovdiv BT in the other pool. The information memorandum will be available to potential investors until August 2. The deadline for submission of offers is September 30. The candidates are required to have at least five years of experience in the sector of cigarette production and to represent EUR 500 M in net sales revenue for the last financial year. The short-listed pool-buyers will become known by the end of November, and the sale is planned to be completed by the end of this year. The consultant Morgan Stanley & Co. Ltd confirmed that major tobacco companies had shown interest in the sale, including British American Tobacco (BAT), Philip Morris, Imperial Tobacco, Korean KT&G and British Gallaher.
  7. Financial reports
Balance sheet in BGN '000 June 30 2004 June 30 2003
Current assets 14,349 13,504
Fixed assets 19,015 19,685
Total assets 33,364 33,189
Short-term liabilities 19,362 23,248
Long-term liabilities 6,600 3,100
Total liabilities 25,962 26,348
Additional capital 6,323 5,762
Registered capital 1,079 1,079
Total capital 7,402 6,841
Total liabilities + capital 33,364 33,189

Income statement in BGN '000 June 30 2004 June 30 2003
Sales 13,031 10,888
Operating costs -11,314 -9,406
Operating income 1,717 1,482
Other costs -389 -320
Other profits 201 281
Depreciation -685 -741
Net income from financial activities -283 -174
Net extraordinary gain/loss 0 0
Pretax income 561 528
Taxes 0 -39
Net income 561 489
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