EXPORTING FINISHED PRODUCTS IS A NEW STRATEGY OF MKT

The cotton has been well-known to India since VII B.C. and only 24 centuries later the cotton fabric production reached Europe (England was the first European country that started this production in 1772). Cotton-growing was practiced in Azerbaijan during many centuries, thus forming a strong material and technical basis, culture and correspondence experience as well as interest in this field. Successful agrarian reforms implemented in the country and change into a private sphere stimulated development of this industry. The State Program on the social and economic development of regions of the Azerbaijan Republic (2004-2008) being the most important stage within development of agriculture focuses great attention on cotton-growing development. As a result in 2005 MKT Istehsalat Kommersiya Ltd sowed the cotton at about 65.1 thousand hectares and gathered around 103.6 thousand tons of raw cotton.

Background

MKT Istehsalat-Kommersiya Ltd started its working on April 19, 1995. In 1997 MKT Istehsalat-Kommersiya Ltd purchased the packet of shares of some cotton-cleaning plants of the Azerbaijan Republic and the Ali-Bayramly Fat & Oil Complex at the cost of over 8 million USD with the view to deal with the cotton-growing industry.

As a result of the privatization process in Azerbaijan, MKT currently implements its activity on the basis of the two-sided contracts on cotton processing with 14 cotton-cleaning plants. In 1997 MKT purchased the cotton sowed by the Ministry of Agriculture in collective and state farms. That time there was limited number of farmlands in Azerbaijan. The selection activity implemented by the company in 1990s turned to be very important. In 1998 the Company brought from Turkey 7 new high-yielding, drought- and disease resistant varieties of cotton; 5 varieties justified themselves in the climatic conditions of Azerbaijan. Growing of new varieties expanded the cotton fields and increased their crop capacity. The company strives to increase the demand on the Azerbaijan cotton at the world markets. At present the new sorts do not yield to the Uzbek cotton at the markets. The primary activity is to improve the quality of production.

To date MKT Istehsalat-Kommersiya Ltd gained the image of a company that fulfills its obligations at the world market in compliance with the requirements of the Liverpool Cotton Association. During the previous years the Company was consistently expanding its activity through serious investment projects in Azerbaijan. In April 2003 MKT Istehsalat-Kommersiya Ltd became an associated member of the Liverpool Cotton Association.

By now the Company has spent over 4 million USD to completely upgrade the processing equipment of 7 out of 14 cotton-cleaning plants. The Company liquidated unprofitable equipment. The cotton-cleaning plants of Azerbaijan are capable of processing large amount of cotton as when Azerbaijan used to gather 1 million tons of cotton it was processed at these plants. As a matter of fact, the old technologies became out of date, but the capacity of new plants can be increased owing to additional equipment. During the times of the former USSR these plants processed 1 million tons and worked the whole year round. Usually cotton is processed during 4-5 months.

Work with farmers

With the view to implement successful working, the administration of MKT Istehsalat-Kommersiya Ltd worked out the program aimed at rendering assistance to farmers. Thus, the Company applies advanced technologies and up-to-date manufacturing methods to instruct farmers and improve cotton growing. Farmers receive cash to purchase fuel, to pay wages to machine-operators and irrigate the fields. MKT also brings agricultural equipment, which is either rented to farmers or used by the company itself for land plowing at the fields of these farmers. A sum for rendered service is kept back from payment to a farmer for raw cotton.

The company has started to conclude contracts with farmers growing raw cotton. Every year MKT concludes in average 15,000 contracts.

Today MKT cooperates with farmers on the basis of purchase-sale contracts, arranges cotton sowing and raw cotton deliveries, processes cotton at the cotton-cleaning plants and sells finished production.

MKT Istehsalat-Kommersiya Ltd produces up to 2,000 tons of MKT, lint and fuzz manufactured in the process of raw cotton procession and sells these products at the hole and foreign markets.

Today MKT is the only company in Azerbaijan that has satellite online communication with all the plants. The computers at the plants are connected to the MKT head office through the satellite. All activities implemented at the plants in the regions are displayed at the central computer in Baku. All plants are equipped with electronic scales; the whole manufacturing process is computerized. The human factor in the process of raw cotton procession was reduced to minimum thus stimulating growth of trust from the side of farmers towards MKT as the whole process starting with financial assistance on land plowing to harvesting is transparent.

Sales

At present MKT Istehsalat-Kommersiya Ltd sells the major part of manufactured products to Switzerland, Turkey, European states, Lichtenstein and first of all to Russia.

MKT Company held on long lease the Ganja Spinning Factory and invested in its reconstruction 0,7 million USD more to supply the market with both cotton and cotton yarn. As a result the Company established the well-run cotton and cotton yarn business in Russia due to which our country currently holds the leading positions on sales of cotton fiber and yarn at the Russian market.

When the technical process of cotton procession was completely upgraded and computerized, the Company started reconstruction of the Ali-Bayramly Fat & Oil Complex, which was renamed as Ali-Bayramly Yag-Piy JSC as MKT owns the control packet of shares of this enterprise. The Company purchased new equipment, constructed a new complex before beginning of the season. In September 2006 the new line of the Complex will be started up to produce about 4,000 tons of high-quality and cost-effective cotton-seed oil. In future the Company intends to export its products to the markets of Russia and other CIS countries after introduction of new technologies.

Outlooks

By now the development strategy of MKT Istehsalat-Kommersiya Ltd has undergone certain changes. If earlier the Company dealt with gathering, procession and sales of lint cotton, sales of cotton-seed oil manufactured from cotton-seeds, cotton yarn of various numbers, today the company is targeted at manufacturing of finished production, in particular textile that can be exported.

Late 2005 MKT signed the contract with the American Company Valmont Industries Inc. According to the agreement, the American Company undertakes obligations to sell cotton products, to irrigate and mechanize 704 hectares in Yevlakh region using up-to-date equipment, international experience in the field of management and new agricultural technologies. Besides, with the view to implement the project, Valmont Company assumed obligations to open a credit line for MKT to the sum exceeding 2,7 million USD in the American Bank ExImBank.

By now some equipment has already been delivered. The Company plans to implement similar works in other regions of the republic.

The Company privatized uncompleted construction of Stator Plant located in Heydar Aliyev Avenue, Baku. The machine-building area operates within the territory of the plant, which implements almost all repair works on the agricultural and technological equipment by own strength. Late 2004 the plants started up the cold rolled metal section. Investments in this project already exceeded 5 million USD.

Besides, for the purpose to create a whole production chain from the cotton fields to fabric manufacture MKT Istehsalat-Kommersiya Ltd is constructing a modern textile complex that will manufacture cotton fabric and yarn in Baku. The Company intends to draw a credit to the sum of 11 million USD to implement the project.

The lines on acrylic and half-woolen fiber manufacture will be started up in Sumgait as MKT purchased the control packet of shares (68,7%) in Sumgait Khovlu-Iplik MKT in September 2005. The fundament of a new factory has already been laid at the territory of the plant. The Company has already purchased the new equipment from Germany to start up high-tech acrylic and half-woolen fiber manufacturing lines.

The administrative building of Stator Plant is allocated on the way to the airport and faces Heydar Aliyev Avenue. Considering the statements of Ilham Aliyev, the President of Azerbaijan who spoke many times about the necessity to improve the highway to the airport including modern infrastructure and buildings, MKT started construction of an A-class 9-stored office and hotel complex., which will be the first office building of such class in Baku. The complex will be started up on September 1, 2006.

Sponsorship

"Mekhsul" Imishli Rural Voluntary Sport Society rented to MKT Istehsalat-Kommersiya Ltd a football stadium and a wrestling room for 20 years as the Company made up a decision to form a football club MKT-Araz with the view to develop sport in Imishli region. The primary target is to follow the football tradition in Imishli and grant the joy of this A-class kind of sport to local fans.

MKT-Araz Football Club was founded in 2003 on the initiative of MKT Istehsalat-Kommersiya Ltd. The Company undertook all finance charges of MKT-Araz Football Club and did its best to develop football in Imishli region located in the southeast of Azerbaijan. The Ministry of Justice registered MKT-Araz in January 2004. Today the Football Club is among the best ones and holds a position in the first ten within the fixture list of the championship of the country.

Ilham Aliyev, the President of Azerbaijan took part in the ceremony dedicated to opening of a MKT-Araz Football Club’s new stadium held on March 23, 2006 in Imishli. President Ilham Aliyev cut the ribbon symbolizing the official opening of the stadium.

As Ikram Kerimli, the General Director of MKT Istehsalat-Kommersiya Ltd and the President of MKT-Araz Football Club said, at present MKT-Araz demonstrates a professional game in the major league and entered the semi-final in the championship on the Cup of the Country. MKT Company constructed the stadium that holds 8500 sits and completely meets the European standards at the expense of own funds. All stands are covered. The training center for young footballers and the wrestling section function within the stadium. The construction costing 2,2 million USD was implemented by 75 men.

The President thoroughly examined the stadium, congratulated the football-players on occasion of the new stadium. Ilham Aliyev got familiarized with the wrestling section of the Club and the two wrestlers who won the championship of the country. President Aliyev highly appreciated the implemented work. In his opinion, the Azerbaijan football meets the modern requirements, thus the Club faces great goals related to football development. The President wished success to the sportsmen.

Ilham Aliyev approved the offer of MKT Istehsalat-Kommersiya Ltd to award the stadium Heydar Aliyev name. Thus, the stadium meeting all modern requirements of UEFA and FIFA will become the only one in the country having the name of the national leader of Azerbaijan, Heydar Aliyev.