Restructuring for efficiency, instead of privatisation, will be the main goal for Bulgaria's tobacco monopoly Bulgartabac Holding.

This was unveiled in a series of statements in the past week by representatives of the holding management.

Under the privatisation strategy for Bulgartabac, adopted by its supervisory board in early February, the holding will dispose of its tobacco processing plants and will retain ownership of its profitable cigarette-making factories.

The most crucial measure that will be implemented is the relocation of cigarette production from the factory in Stara Zagora to the one in Plovdiv.

The talk of the possible closure of Sluntse-Stara Zagora BT started in late 2005 when the Cabinet decided to hike cigarette excise duties. The measure was expected to wash 30 per cent off of Bulgartabac's sales in 2006.

The mid-term plans for the company will keep in the holding structure the best-performing cigarette factories in Blagoevgrad, Plovdiv and Sofia. The financial performance of the companies in the first quarter of 2006 and the impact of the new market conditions on their sales will determine a future course of action regarding their possible privatisation.

During the last privatisation procedure for the tobacco monopoly, the cigarette production licences of the cigarette plants in the towns of Assenovgrad, Haskovo, Pleven and Shoumen were revoked and they continued to operate as processing factories. Later, the units in Haskovo and Vidin were declared insolvent.

Under the new privatisation strategy, the cigarette-making equipment of Assenovgrad BT and Shoumen BT will be dismantled before the companies are sold on the Bulgarian Stock Exchange - Sofia. Bulgartabac's stakes in Doupnitsa BT and Pazardjik BT will also be divested on the bourse if the sell-off competition for the Doupnitsa-based unit fails.

Competitive sell-off procedures are envisaged for Sandanski BT, Smolyan BT and Yambol BT. No plans have been announced for Doulovo BT and Harmanli BT.
The Yuri Gagarin factory in Plovdiv, which comprises a printing and filter-making unit and a manufacturing unit for cigarette-making equipment, will be sold as a self-contained asset.

The restructuring of Bulgartabac Holding was not oriented towards the privatisation of the company but towards efficient production, the holding's executive director, Hristo Lachev, said in an interview with Bulgarian National Radio on March 5.

Bulgartabac would rely mainly on the increase in exports in the coming years, Lachev said.

Cigarette sales in January and February 2006 totalled 300 tons and 450 tons, respectively, compared to monthly sales of 1200 tons for the corresponding months in 2005.
The expansion of cigarette smuggling following the increase in cigarette prices is considerable and is up 15 per cent.