ARCHIVESHISTORIQUES
DELACOMMISSION
COLLECTION RELIEEDES
DOCUMENTS "COM"
COM(79)505
Vol.1979/0172

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COMMISSION
OFTHE
EUROPEAN COMMUNITIES
GeneralSecretariatCOM(79)505 final
Brussels,istOctober1979
FOROFFICIAL USEONLY
REQUESTFORASSENT,PURSUANT TOARTICLE56.2a
OFTHEECSC.TREATYTOGRANTING ARECONVERSION LOANTO
"CARRERAS ROTHMANSLIMITED'' UNITEDKINGDOM
(presentedbytheCommissiontotheCouncil)
COM(79)505final

COMMUNICATION TOTHECOUNCIL
Subject:Requestforassent,pursuanttoArticle56.2aoftheECSCTreaty
tograntingareconversion LoantoCarrerasRothmansLimited,
UnitedKingdom.
I.ESSENTIAL INFORMATION
Applicant
Beneficiary
Project
Location
Investment
.Loanrequested
Jobscreated
Interestreduction:CarrerasRothmansLimited,UK
:Same
:Newcigarettefactory
:Spennymoor,Co.Durham,NorthernRegion,UK
:b29.4m
:t14.5m(+22.367mEUA)
:772
:300,000peryearforthefirstfiveyears.
II.CONFORMITY WITHARTICLE56OFTHEECSCTREATY
TheinvestmentprojectforwhichECSCassistanceissought,islocated
atSpennymoor,Co.Durham-partoftheNorthernRegionwhichcoversthe
countiesofTyneandWear,Cleveland,Northumberland ,DurhamandCumbria.
Theregionhasapopulationof3.2mandaworkforceof1.3m(approximately
5%oftheinsuredworkingpopulationoftheUK).Ithasahistoryof
dependence upontraditional heavyindustries-coal-mining,shipbuilding,
heavyelectricalandmarineengineering andametalmanufacture-allofwhich
havesufferedadramaticdeclineinthepast25years.
Particularly Co.Durhamhasbeenover-reliant onheavyindustrysuchas
coal-mining andironandsteel.Inthe1960s,therebeganamajordecline
inemploymentincoal-miningintheCountywitharesultantlossofabout
70,000intheindustry.Nevertheless,employmentincoal-miningisstill
importantinthecounty(the17,000jobsinminingrepresent12.7%ofall
maleemployees);theindustryisparticularly importantineastDurham
■••/•••
Provisionaladdress:RuedeloLoi200.B-1040Brussels–Téléphoné350040-358040-Télégraphieaddress:«COMEURBrussels»–
Telex:tCOMEURBRU 21877>

-2-
(62.0%ofallmaleemployees).Itisfearedthatexhaustionofsome
inlandcollieries andincreasingproduction mayresultinareducedlabour
forceandalossofsome6/000jobopportunities by1991.
Spennymoorisapproximately equidistanttoHartlepool andConsett.
ThesteelworksatHartlepoolclosedinDecember1977,affecting1,900jobs.
ThesteelworksatConsetthas,4nrecentyears,beenthreatenedwithpartial
closureorcontraction onanumberofoccasions.Thedifficulties facing
thesteelindustrygenerallyandthedevelopmentofalargenewIntegrated
steelworksatRedcarinClevelandCountycanonlyintensifydoubtsabout
thelong-termfutureofConsett.
Theunemployment rateoftheTravel-to-WorkareaCentralDurhamwhich
comprisesSpennymoor,iscurrentlyrunningat7%.
III.THEUNDERTAKING
ThepromotoroftheprojectisCarrerasRothmansLimited("CR")whichis
theUnitedKingdombasedwholly-owned subsidiaryofRothmansInternational
Limited<"RI").
RothmansInternational Limitedisapubliccompanyincorporated inEngland.
Itwasincorporated in1903underthenameofCarrerasLimited("Carreras").
AsaresultofamergerschemewhichtookeffectfromJuly1972,the
companywastransformed fromapredominantly UKbusiness,albeitwitha
substantial exporttrade,toonewithmajormanufacturing andmarketing
interestsinthetobaccoindustryinEuropeandinotherpartsoftheworld.
Underthemergerschemethecompanybecametheholdingcompanyofthe
resultantgroup,theprincipal membersofwhichincludedMartinBrinkman AG
ofWestGermany,Tabacofina SAofBelgiumandTurmacTobaccoCompanyBV
oftheNetherlands .Inordertoreflecttheinternational characterofthe
company,itsnamewaschangedtoRothmansInternational and,withaview
toeachcontributing companyintheenlargedgroupretainingitslocal
identityandmanagementineachcountryofoperation,itwasdecidedthat
thecompany'sexistingtradingoperations underthenameofCarrerasshould
beconducted onitsbehalfandforitsaccountbyoneofitsexisting
subsidiaries whichassumedthenameofCarrerasRothmansLimited("CR").
TheRegisteredOfficeofbothRothmans .International LimitedandCarreras
RothmansLimitedisatBasildon,Essex,theHeadOfficeofCRisat
Aylesbury,Bucks.
CR'ssharecapitaloffc125.000IsheldbyRothmansInternational .

-3-
CRisengagedinthetobaccoindustryandmanufactures andsellscigarettes,
pipetobaccos,cutragandcigars.Theprincipalproductsofthecompany
arequalityinternational cigarettebrandsandthemainbrandnamesare
Dunhill,Rothmans,Craven,PeterStuyvesant,ConsulateandPiccadilly.
ThecompanysellsitsproductsintheUnitedKingdomandinmanyworld
markets.Currentlyabout1/3rdofthecompany'stotalsalesareintheUnited
Kingdom.Oftheexportsalesabout2/3rdareinMiddleEast.
CarrerasRothmansemploysapproximately 6,800people(February1979).
IV.THEPROJECT
• •
TheinvestmentprojectatSpennymoorforwhichECSCsupportissought,
formspartofanoverallexpansionandmodernisation programmefor
CarrerasRothmans.Withinthisprogrammethemajoritemofcapitalexpen­
ditureonexpansion .projectsistheSpennymoorprojectandthisfactory
willprovidemostoftheadditionalproductioncapacitywhichthecompanyneeds
tomeetincreasingsalesinthecomingyears.
ThepremisesatSpennymoorwhichhavebeenacquiredbyCarrerasRothmansare
situatedonanestablishedindustrialestate.Thetotalfloorspaceis
340,000squarefeet.Thesiteareaisapproximately 32acres.
Thefactorywilloperatea2-shiftsystemandtheprincipalsectionswill
consistof:
a)aLeafWarehouse
b)aPrimaryProcessDepartmentwhichwillconditionandcutraw
tobaccotoprovideCutRagforcigarettemanufacture
c)aFilterMakingDepartmenttoproducefilterrodsforthetotal
cigaretteoutputofthefactory
d)aCigaretteManufacturing Departmentwhichwillmakeandpack
cigarettesofKingSizeandInternational Sizespecification
e)aFinishedGoodsPackingDepartmentwith7automaticcasefillers
feedingtoaDespatchDepartment
f)othermajorareaswillinclude-BoilerHouse,MaterialsStores,
TrainingSchoolwithmakingandpackingmachines,Canteenand
WelfareAreas,EngineeringWorkshop,LaboratoryandOffice
Accommodation .
•i/•■

-4-
Thecostoftheprojectissummarisedasfollows:
b'000
LeafProcess 4-000
Cigarettemakingcombinations 6,804
Packingmachines 8,356
Filtermakingmachines 890
FactorySystems 1,026
FactoryEquipmentandSpares 1,163
Vehicles 77
OfficeEquipment '207
PlantTotal 22,523
Modifications toBuildings 4,400
26,923
PurchasePrice
-BuildingsandSite 2,455
TotalOutlay 29,378
Itisplannedthatfullproductioncapacityof15,000millioncigarettes
perannumwillbereachedin1982/83.Toachievethismostofthe
machineryrequiredwillbeinstalledin1979/80and1980/81.
V.EMPLOYMENT
About772jobswillbeprovidedatSpennymoor whenthefacilityhasreached
fullcapacity.Ofthesejobsabout450willbeformales.Thequalifications
requiredwillbe:
471ProductionOperatives
108GeneralWorkers
79SkilledEngineering Tradesmen
25Senior&MiddleManagersincludingprofessional
engineers *
89Clericaladministrative 8someprofessional staff.
■■•/•••

-5-
Thetimingofrecruitmentofemployeeswillbegearedtotheinstallation
programmeformachinesandthetimerequiredforcompletionoftraining
courses.AfirmrecruitmentschedulefortheperiodtoOctober1979
requires386employees.Thetimingofrecruitment beyondthatdatewill
dependupontheprogressofcapacitybuild-up.
Apermanenttrainingdepartmentwillbeestablishedinthefactoryandthis
willbeconcernedwithtrainingproductionoperativesandtechnicaltraining
formaintenance andtechnicalstafftoprovidebasicfamiliarisation with
tobaccomachineryandsystems.Furthermoreallnewentrantswillspend
oneweekonacompanygeneralIntroduction Course.
VI.ENVIRONMENTAL ASPECTS
Thereisnoriskofpollutioncausedbysolid,liquidandgaseouseffluent.
However,fineparticlesoftobaccodustcouldbedischarged 1ntheevent
offailureofbagorfeagsofbagfiltersintheplantdustextractionsystem.
Asaprecaution,allsuchfiltersandfansdischargeintotheinternalfan
roomairspaceinorderthatafailureisimmediatelynoticedanddust
settlesonthefloorforrecovery.Dust-freeaironlyisdischargedfrom
fanrooms.
AsiscommonthroughoutEuropeanmanufacturers radioactive sourcesare
usedincigarettemakingmachinesforcontroipurposes.Fullprecautionary
measuresaretaken-registeredpersons,registeredpremises-dose
gaugeswornbyregisteredpersonnel.FullapprovalofH.M.FactoryInspecto­
ratehasbeenobtained.
VII.MARKET
CarrerasRothmansseethemarketsinwhichtheytradedevelopasfollows:
UnitedKingdom
Althoughtotalmarketvolumewillcontractin1979/80and1980/81<-1%each
year)itisanticipatedthatthegrowthoftheKingSizesectorwillcontinue
butataslowerpacethanrecently.Itisthecompany'sintentionto
continuetoincreaseitsmarketsharebybuildingonthesignificantgains
madebyitsmajorKingSizebrands.
MiddleEastRegion
Thisregionprovidesapproximately 66%ofCR'stotalexportsales.
ThevolumeofitsbusinessintheArabianPeninsulahasincreasedgreatly
duringthepastfouryearsduetothesubstantialchangesintheeconomies
ofthosemarketsthathavefollowedinthewakeoftheoilpriceincrease
of1973-74.Lookingtothefuture,anddrawinguponinformedeconomic
surveysofthelikelypaceoffurthereconomicdevelopmentinthemarkets
concerned,CRtakestheviewthatthegrowthofconsumerdisposableincome
willincreaseinrealterms,albeitatalesserratethanthatexperienced
since1979.Consequently CRanticipatescontinuingincreasesintotalsize
ofdemandforcigarettesinthesemarkets.
••/••

-6-
Europe
ManyEuropeanmarketsaresuppliedbyothercompaniesintheRothmans
International Group.CR'sproductsaresoldprincipallyintheChannel
Islands/Scandinavia,SpainandGreece.Agrowthpotentialisseenparticularly
inSpainandGreece.
IntheEuropeanmarkets,CRfacesmanycompetitors fromEuropeanAmerican
andUnitedKingdomcompanies.
Africa
CRisforecastingsignificantgainsinthisregion.Themarketsconcerned
arelocalisedinCentralandWestAfrica.
»
Asia/Pacific
ThegrowthinthisregionforsalesofproductsfromtheUnitedKingdomwill
bemoderate.Itisexpectedthatthemajorgrowthwillbeinsalesof
productsfromlocalmanufacture.
America
CR'ssalesaremainlyintheCaribbeanandLatinAmerica,withavery
smallpresenceintheUnitedStates.
VIII.FINANCING
TheUKfundingrequirements ofCarrerasRothmansLimitedareconsidered
asawhole.Thecompanyhasvariousfacilitiesavailablewhicharereviewed
regularlyandareusedforthepurposeofthetotalbusiness.Itisnot
possibletoindicatepreciselywhichfundswouldbeusedforfinancingthe
newfactoryatSpennymoor.
However,theSummaryFunrfrngPlan(197&/79-1981/82)indicatesthelevelof
financewhichwillbeneededandthecompany'sbestestimateofhowthiswill
beprovided.
b'000
FinanceRequired
FixedAssets 29,378
WorkingCapital 39,000
68,378

û
-7-
b'000
ToBeProvidedBy
Loan-EuropeanCoal
andSteelCommunity 14,500
ExternalFunds
GroupFunds9,260
44,618
68,378
IX.CONCLUSION
TheCommissionconsidersthattherequestcomplieswithArticle56(2a)of
theECSCTreatyandthattheproposedinvestmentiseconomically sound.
Inconsequence theCommissionhasapprovedaloantoCarrerasRothmans
LimitedforitsprojectatSpennymoor,Co.Durhamforamaximumamountof
b14.5moritsequivalent amount.Interestistobereducedby300,000EUA
peryearforthefirstfiveyearsafterthepaymentorpaymentsoftheloan.
TheCommissioninvitestheCounciltogiveitsassenttotheforegoing
decision.