Brief history and analysis of the enterprises under study

Three enterprises have been selected in this study as stated in chapter 3 – National Grain Silos Ltd, National Cigarette and Match industries Ltd, and Al- Esayi Beverages Company Ltd Canada Dry/Aden.

5.2.1. Brief History of case study enterprises

(i) National Grain Silos Ltd.

National Grain Silos was established as one of the components of the Yemeni General Organization for Grain, which was created by Law No. (126)/1976 and then joined the General Corporation for Foreign Trade in 1987.

The new institution began exercising the functions and powers that were vested in both the previous institutions, including the management and operation of grain silos that operate with a storage capacity of 30,000 tons, the subsequent suction and discharge equipment, and packaging of fixed and mobile equipment.

However, starting from 1992, the role and functions of the institution have substantially decreased for several political and economic reasons and those relating to grain silos following:

1 - Abolition of the government support for wheat and flour, and leaving the field of marketing to the private sector.

2 - The private sector creates fixed and mobile equipment for packaging in each of the ports of Hodeida, Salif, Aden, resulting in reduced activity of the Grain Silos.

According to (Committee established by decision of the Deputy Prime Minister, 2002) the balance sheet for the year 2000, the losses of the institution were 369,635,667

riyals and the 2001 data prepared by the institution indicated that the losses would increase to 750 million riyals. On the other hand, it estimated that the size of the actual losses were at least 2 billion riyals because of the lack of differences in calculating the exchange rate for the value of the remaining installments to the institution with the benefits of foreign loans owed by the institution.

In addition, the report noted that the cash balance of the institution in April 2002 did not exceed 120 million riyals, and the Committee expected that the amount be used to meet the salaries and wages and certain general expenses to the maximum extent until the end of July 2002 (Committee established by decision of the Deputy Prime Minister, 2002).

The Committee concluded that the appropriate option to address the situation of the institution was liquidation. The legal justifications relied upon by the Committee was the earlier privatizing of the Grain Silos under Cabinet Resolution No. 142 of 2002 of $ 7.5 million.

The new company became an independent company on behalf of the National Company for Grain Silos Ltd and proceeded for expansion and progress. Where before privatization they had a storage capacity limited to only 30000 tons, this had now increased to 90000 tons, and, in the future, it is expected to increase to 120000 tons in addition to the plan for the establishment of flour mills.

The new company began their improvement with the establishment of five silos, storage, accessories for cranes, conveyor belts, high precision scales and the capacity of

each silo was 12000 tons. In addition, the automatic vacuum system was updated in order to convey this storage capacity, which increased the former productivity by more than 50% for two years in a row.

The data were collected for the variables under study of the National Grain Silos Ltd for a period of three years prior to the privatization process (1999, 2000, and 2001) as well as for three years after the privatization process (2007, 2008, and 2009).

From figure 5.1, we can see that the performance of the National Grain Silos Ltd during the period of the study in general was not good. The results of the profitability showed that there were negative changes after privatization for all indicators (return on sale, return of asset, and return on equity). In addition, other indicators decreased and only sale efficiency, capital expenditure to sale increased after privatization. On the other hand, employment of the enterprise decreased as it should be after privatization.

1999 2000 2001 2007 2008 2009

1999 0.047 0.027 0.179 1099537. 51594.47 0.953 0.547 0.000002 484

2000 0.064 0.032 0.236 1045600. 66405.48 0.936 0.474 0.000001 496

2001 -0.289 -0.046 -0.333 425233.7 -122705. 1.289 0.205 -0.00000 380

2007 0.082 0.049 0.354 1653751. 135547.6 0.918 0.548 0.000002 365

2008 0.087 0.047 0.382 1683613. 146527.0 0.913 0.492 0.000002 365

2009 0.098 0.051 0.442 1725086. 169171.5 0.902 0.467 0.000002 365

Figure 5.1 : National Grain Silos Ltd Performance

By looking at the percentages change in figure 5.2 we recognize that the sale efficiency was the highest increased percentage change by 299.96% (32% of the indicators) followed by capital expenditure to sale which record 27.75% (3% of the indicators) by contrary the other indicators records negative percentage changes. Net income efficiency and return on equity registered the highest decreased by -138 % (14% of the indicators) and -132.94% (14% of the indicators) respectively followed by return on

profitability return on sale return on assets

return on equity operating efficiency sale efficiency

net income efficiency capital expenditure capital expenditure to sale capital expenditure to assets output real sale

Figure 5.2 : National Grain Silos Ltd Percentage change

(ii) National Cigarette and Matches industries Ltd

The national cigarette and matches industries were established in 1978 by merger of the Arabian Match Company Ltd (AMCO), which was established in 1970, and the National Tobacco and Cigarettes Ltd, which was established in 1973. The company produces two kinds of cigarettes and imports roll your own tobacco, and tobacco papers from Europe.

It was within the mixed sectors where the Government contributed 80% of the capital and 20% private sector contribution; moreover, the Government occupied the company administration instead of the private sector as a result of the nationalization law, which was practiced in South Yemen before unification, through which a lot of private properties were confiscated for the Government.

After unification in 1990, the private sector increased the capital of the company with an amount of USD3,000,000 as a result the percentage was edited so that the private sector got 60% and the Government got 40% and the administration of the company returned to the private sector starting from 1991.

Accordingly, the factory returned to the original owner, who, in turn, began to improve and develop the factory in terms of updating machines, increasing the size of production, and the establishment of a new factory for tobacco in 2003 at a total cost 1 billion and 400 million riyals.

The data were collected for the variables under study of the National Cigarette and Matches Industries Ltd for a period of three years prior to the privatization process (1987, 1988, and 1989) as well as for three years after the privatization process (2007, 2008, and 2009).

1987 1988 1989 2007 2008 2009

1987 0.040 0.020 35.09 311574 12534 0.960 0.480 0.040 350.00

1988 0.054 0.040 45.55 302753 16269 0.946 0.702 0.040 350.00

1989 -0.003 -0.003 -2.96 336439 -1057 1.003 0.996 0.040 350.00

2007 0.099 1.026 6116.96 233742182303073 0.901 9.384 0.100 332.00

2008 0.087 1.075 5530.92 239273042082424 0.913 11.277 0.100 332.00

2009 0.098 0.831 6744.11 258928692539198 0.902 7.640 0.100 332.00

Figure 5.3 National Cigarette and Matches Industries

Performance

The performance of this enterprise after privatization was better than before. From

profitability return on sale return on assets

return on equity operating efficiency sale efficiency

net income efficiency capital expenditure capital expenditure to sale

capital expenditure to assets output real sale

employment

Figure 5.4 : National Cigarette and Matches Industries Ltd percentage change

From figure 5.4, we can observe that most of the indicators recorded increasing in the percentage change. Net income efficiency record the highest percentage increased by 24857.98% (40% of the indicators) followed by return on equity which record 23574%

(38% of the indicators) and the capital expenditure to sale was the only indicator has decreased which record -6.63% .

(iii) Al-Esayi Beverages Company Ltd Canada Dry/Aden

The factory, which ran from July 26, 1961, consisted of four sections, a section to generate steam, Processing Section, Department of Production, and Department for carbon dioxide. The factory continued to work efficiently until 1972 when the Government issued Law No 8/1972 for the establishment of the National Foundation for the packing of soda water. The Act provided nationalization of four companies, including Al-Eisayih Company (Canada Dry) and its affiliated facilities and devolved ownership to the people represented by the National Endowment for the mobilization of carbonated water.

After the unity between the two parts of Yemen, the State started to re-nationalize property to their respective owners so that the former owners provide a request to return their previous property. Thus, the Yemeni Government agreed to return the company to their respective owners in 2001 and renamed it the Al-Esayi Beverages Co., Ltd. The new company started to work with an appropriate economic and business performance while at the same time implementing updates and improvements at all

levels of production, mechanization, management and keeping up with recent developments in its field.

The data were collected for the variables under study of the Al-Esayi Beverages Company Ltd Canada Dry/Aden for a period of three years prior to the privatization process (1999, 2000, and 2001) as well as for three years after the privatization process (2007, 2008, and 2009).

The enterprise showed improves in its performance because of the privatization policy.

1999 0.04692 0.02690 0.17858 1099537 51594 0.95307 0.54656 2.2E-06 484 2000 0.06350 0.03213 0.23554 1045601 66405 0.93649 0.47384 1.7E-06 496 2001 -0.2885 -0.0459 -0.3334 425234 -122705 1.28855 0.20520 -1E-06 380 2007 0.08196 0.04891 0.35381 1653751 135548 0.91803 0.54789 2.4E-06 365 2008 0.08703 0.04689 0.38246 1683613 146527 0.91296 0.49194 2.7E-06 365 2009 0.09806 0.05074 0.44157 1725087 169172 0.90193 0.46675 2.4E-06 365

Figure 5.5 : Al-Esayi Beverages Company Ltd Canada Dry Performance

increasing during the years of privatization and there is only one indicator record decreased which is the capital expenditure to sale.

From figure 5.6, we can observe that the enterprise showed improves in its performance as all indicators increased except capital expenditure to sale. The highest change indicators was the net income efficiency which record 9690% (76 of the indicators) followed by return on equity with percentage change of 1360% (11% of the indicators).

capital expenditure to sale capital expenditure to assets

output real sale

employment

Figure 5.6 : Al-Esayi Beverages Company Ltd Canada Dry/Aden percentage change

5.2.2. Analysis of the enterprises under study

Previously, it was noted that the research aimed to test the performance change of the enterprises under study after privatization with respect to the change in the mean and median values in terms of profitability, operating efficiency, capital expenditure, output, and employment. Figure 5.7 demonstrates the result with the sub-framework in Figure 4.3, which compares the performance change for the three enterprises under study.

Figure 5.7 : Enterprises Performance Change Result

Enterprises

This section will present and discuss the results of analysis using unadjusted standard measurements of performance for the selected sample consisting of the three privatized companies.

The empirical results for the three enterprises under study are represented in table 5.1 and figure 5.7 and discussed as follows