Tobacco Manufacturers Merge in Structural Reform

05/17/2004

Two tobacco manufacturers in southwest China's Yunnan Province – the largest tobacco-growing region in China – have recently merged to form a bigger cigarette-making enterprise in a large-scale structural reform to increase the competitiveness of the local tobacco industry. On May 12, a grand ceremony was held in Qujing City of Yunnan to inaugurate the new Qujing Cigarette Factory reincorporated on the basis of the merger between the former Qujing Cigarette Factory, which was already one of the 36 key Chinese tobacco manufacturers – and the former Huize Cigarette Factory. [img border=0 hspace="4" vspace="4" align="left" src=http://www.tobaccochina.com/english/picture/040514qujing.jpg] In a statement released to the press, the new Qujing Cigarette Factory said that the merger is in implementation of the policy of the State Tobacco Monopoly Administration (STMA) "to deepen reform, promote reorganization, develop association and seek common development," and that it has gained the approval of both the STMA and Yunnan Provincial China Tobacco Industry Company which is responsible for overseeing the tobacco manufacturers in Yunnan. Following the merger, the corporate status of the former Huize Cigarette Factory was revoked. The reincorporated tobacco manufacturer will continue using the name of Qujing Cigarette Factory while the former Huize Cigarette Factory will continue operating as a subsidiary of Qujing Cigarette Factory. The assets, liabilities and rights of the former Huize Cigarette Factory have been totally transferred to the new Qujing Cigarette Factory. The merger signifies the start of a large-scale structural reform of the tobacco industry of Yunnan characterized by the merger, acquisition or association of tobacco manufacturers. According to Deputy Governor Chen Yingxuan of Yunnan Province, the nine tobacco manufacturers in Yunnan will be merged to form four new cigarette-making enterprises in the structural reform. Director Yu Ruifang of the former Qujing Cigarette Factory has been appointed director of the new Qujing Cigarette Factory while Director Ma Zixiao of the former Huize Cigarette Factory has been appointed the deputy director of the new factory. At the inaugural ceremony, the leadership of the new Qujing Cigarette Factory announced the basic policy of greatly promoting the development of the already well-known cigarette brands of Xiaoxiongmao (The Little Panda) and Shilin (The Stone Forest), and also the plan to turn the new Qujing Cigarette Factory into a key tobacco manufacturer relatively advantageous in cigarette brands, production technology and marketing. The new Qujing Cigarette Factory has a large annual cigarette production capacity of 1.05 million cases (52.5 billion cigarettes), and is capable of generating over 4 billion yuan (480 million U.S. dollars) in annual profits and taxes. It boasts such well-known cigarette brands as Fu (Fortune), Xiaoxiongmao (The Little Panda), Shilin (The Stone Forest) and Jiqing taking shares of high-, medium- and low-grade cigarette markets in China. Incorporated in 1966, the former Qujing Cigarette Factory was one of the 36 key Chinese tobacco manufacturers designated by the STMA, and covered a total area of 1.21 million square meters. Two of its well-known brands – Fu and Shilin – both ranked among the 36 key Chinese cigarette brands. The former Qujing Cigarette Factory had over 3 billion yuan (over 360 million U.S. dollars) in fixed assets, and special-purpose equipment valued at over 2.4 billion yuan (289 million U.S. dollars), including equipment for threshing and redrying tobacco leaves, expanding cut tobacco, cutting tobacco for making cigarettes, and rolling, joining and packaging cigarettes imported from Britain, the United States and Italy. It had an annual cigarette production capacity of 1 million cases (50 billion cigarettes), with an annual cigarette sales volume of 950,000 cases (47.5 billion cigarettes). It used to generate over 3 billion yuan (360 million U.S. dollars) in annual profits and taxes. Established in 1973, the former Huize Cigarette Factory was a small cigarette-making enterprise had an annual cigarette production capacity of 200,000 cases (10 billion cigarettes), with an annual cigarette sales volume of 100,000 cases (5 billion cigarettes). With a total workforce of 762 persons, it used to generate 1.2 billion yuan (144 million U.S. dollars) in annual profits and taxes. In the late 1990s, the former Huize Cigarette Factory entered a period of rapid development. Qujing Cigarette Factory is the first cigarette-making enterprise in Yunnan to have undergone a process of merger. In an address to the inaugural ceremony, General Manager Zhang Shuichang of Yunnan Provincial China Tobacco Industry Company said that the inaugural ceremony actually served as a press conference to declare the start of a large-scale structural reform of the tobacco industry of Yunnan characterized by merger, acquisition or association. Enditem