The Industrial Development Authority (IDA) has issued a conditions brochure for the new cigarette production licence, with several companies invited to enter into the industry in Egypt.
Several conditions will be applied to the IDA-managed auction system, taking into account that competition is always in the consumer’s benefit. It also raises Egypt’s international rating investment grade, given by ratings investment agencies.
Egyptian tobacco product manufacturer, the Eastern Company, was informed of the study’s details and conditions.
One of the conditions set out in the brochure is that the Eastern Company’s General Assembly will take a 24% share in the capital of the new company, without paying its share in the cost of the licence.
This will achieve a partial replacement for any loss that may be caused to the Eastern Company, in the event that one of its current clients leaves and obtains the new licence.
It comes particularly in light of the requirement that the new licence includes the manufacturing of new electronic cigarettes, which is not present in the current agreements.
Under the proposed new licence, the new company also does not have the right to produce cigarettes in the same price category controlled by the Eastern Company. This takes into consideration that cigarette products represent 98% of the latter’s total revenues.
This will accordingly guarantee that there is no competitive threat from the new company on the Eastern Company’s main products.
The current Board of Directors at the Egyptian company had formed a group of committees, including a risk committee, with the priority of setting out guidelines to deal with the entry of a new competitor in the cigarette manufacturing sector.
The Eastern Company is currently studying several important projects that will soon be announced, and which will have a positive impact on the company’s financial results. These projects are also set to strengthen its position as a leading company in its field, and ensure its future growth.
The company’s business volume has witnessed unprecedented growth since 2019, whether in terms of production, sales or profits.
The entry of Cleopatra, a new competitor not concerned with the cigarette segment, will not have a fundamental impact on the volume of Eastern Company’s business.
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