MCashmere

Mongol Nekhmel

"Mongol Nekhmel" Joint Stock Company was established in 1934, as one of the branch of Industrial Production that was established during the USSR period. It is the first equipped production of Mongolian industry that based on Fabric Production.

The factory and the production type were changed and expanded for many times from its first dedication that were only the production of hot washed wool, cloth and felt including: felt boots since 1936, wool textile products since 1942 and soon it became independent.

Since 1960, the factory became able to produce 1 million meters of textiles in favor of People’s Republic of China and began producing various types of wool blankets, cloths and felts.

Thus, the factory exported 30 percents of its total products to the USSR, Poland, Germany, Vietnam, North Korea, Romania, and Hungary. The factory also supplied its remaining 70 percents of products to the domestic market demands of laborers and herdsmen. Between 1973-1987, the factory has renewed its equipments by modern equipments from the USSR, Germany, England, Belgium etc. Consequently, the production capacity reached 1.35 million m2 fabrics and factory has become able to fully utilize its capacity by the end of 1980’s and its workers reached 800.

Since 1992, the factory was privatized and formed as ‘Mongol Nekhmel’ Joint Stock Company. The annual outputs have sharply decreased year by year, during the transition years from the socialist economy into the market economy. We even completely stopped our production between 1999-2000. During this hard time, the administration of the factory has done some management changes and as the result we have started recovering our activities since 2001, the beginning of this new millennium. Currently, the factory has only 2 workshops of knitting and processing lines and was expanded to have a fullline structure of wool washing production with cleaning workshop, knitting, processing, coloring, spinning workshops and its equipment was renewed for many times. Now we are capable to produce the blankets, cloths, towels, neckwears etc. that are made of wool and cashmere. We also have branches that produce wool strings. Previous experience on similar projects

The company used to be the only Mongolian factory that supplied the domestic market demands by blankets, cloths, wool cloths, and army clothes materials and exported its 30 percents of production to former Socialist Republics.

Although there are few new productions established after a transition to the market economy, our factory still remained as the only production that was capable to fully produce wool and cashmere by our full-line equipments. Other factories still lacked some equipment for a full processing stage.

Today, we are producing the products of some Mongolian brands such as Goyo, Altai Cashmere by their order through our knitting, processing workshops.

Although some sales channels have been opened to us, we could not successfully supply all 21 provinces of Mongolia and we only supply some of the foreign countries. The main reason of this disadvantage is caused from our ineffective management policy that is focused only on the factory expansion like renewing the old equipments, the factory premises maintenance etc. Thus, we spent MNT 1 trillion on those issues and could not resolve the issues to compensate a lack of current assets and, therefore, could not form the financial sources.

Currently, we are able to produce and supply our products as a wholesale to 21 provinces of Mongolia and to export them to some developed markets including Europe, America, and an emerging markets in Asia.

Mongolian commercial banks have a poor credit-granting capability. In addition, the situation is complicated due to the high interest rates on bank loans. As raw materials of wool can only be gained in a very short season between April to June in Mongolia, one needs to purchase these seasonal materials on wholesale-basis. This causes any company to apply for a credit from banks. Each year, banks have to approve loans worth MNT 0.8 to 1.00 billion to cover the credit demand. If all conditions are created, the local factory will be able to produce yak wool and camel wool, fine and uncombed sheep wool and cashmere worth MNT 4 to 6 billion and to earn a profit of MNT 0.8 to 1.5 billion. This will enable it to self-finance its own manufacturing in the future.

We conclude that there is a big market for our finished products should the manufacturing is organized as discussed. We are striving to realize our main objective to boost the local production to a higher level. Should the trade environment improve between Mongolia and Russia, we will be able to deliver 10 to 20 thousand tons of textile to the Siberian markets. For instance, if we receive orders from 10 buyers for 2000 throws and blankets (made of yak and camel wool, fine/uncombed sheep wool or cashmere) each, we will be able to fill the orders only with 30 to 40 percent of our annual production which will have a total capacity to deliver 38 to 40 thousand meters of products annually. Therefore, we are confident that there is a market for small-sized manufacturers like us. Moreover, our company and Montextile Holding in which the company holds a significant stake has the ability to create the favorable conditions needed for the sale of the products to foreign markets.

To secure a reliable market, we need to improve the overall quality of our finished products, to expand the knitting capacity and to significantly boost the annual textile output. To meet these targets, we need the latest state-of-the-art manufacturing technology. Once we are able to improve our wool processing capacity using the locally available raw materials, we have potential markets for our finished products available in Japan, the USA and the Republic of Korea. The purchase of proper manufacturing technology will result in creation of our own textile production allowing us to earn an additional annual profit of MNT 3.0 to 3.5 billion and to recover the manufacturing cost within a fairly short period.

Ability to work Since the acquisition of the 71 percent stake in Mongol Nekhmel on time and within budget by the current management on June 20, 2001, the company has set up structures needed to modernize and expand the production, to improve technology and to undertake the following projects. Prior to the new management, the company had only one workshop for knitting and processing and possessed only one knitting (3.1 to 5.1mm) and two combing machines.

The accomplishments based on the modernization projects that were implemented:

- Purchase and installation of a Chinese-made complete line for cleaning and washing wool and cashmere raw materials

- Purchase and installation in the knitting facility of 4 units of knitting equipment TP-520 (made in Italy), a jacquard machine TP-520 and a new yarn spinning equipment.

- The finishing facility acquired new equipment for dehairing/combing, drying and shortening from the PR of China, for combing and brushing from the Russian Federation, German-made equipment for textile cutting and combing, and machinery for shortening, washing, polishing and coloring from Italy. Investment: USD 500.000.

- The spinning division was installed by Kyowa complete production line purchased in Japan.

- Setting up of a jointly owned production facility with the acquisition of a complete Japanese-made combing and spinning line capable of delivering threads 24/2-28/2. Investment: USD 600.000.

- Purchase in Japan of 6 units of textile-processing equipment and construction of the first part of textile factory. Investment: USD 4100.000.

- Set-up of a new dyeing facility with the installation of a complete line for wool and thread dyeing. Investment: USD 450.000.

Total investment: USD 1 250 000.00