Business Plan: Greenhouse Complex For Industrial Production Of Rose In Bulgeria
Project Summery
The Borrower is seeking funding of amount $398,500,000.00 US for a greenhouse complex for the industrial production of rose on area 87.5 acre/35 Ha Bulgeria,South East Europe.
Project Location
The borrower company is located at PO Box-104, Sofia-1463., Bulgher4ia, South East Europe. The location of the conservatory is in the industrial zone of Sliven Town. This is a city with 100 000 inhabitants in Eastern Bulgaria. The town is located near the highway of 165 miles / 300 km / from the capital of Bulgaria Sofia and of 60 miles / 100 km / from Burgas on the shore the Black Sea. Burgas City is the second largest commercial port in Bulgaria. It has a large international airport, a starting point for international flow of tourists for southern Bulgarian Black Sea resorts.
Sliven Town has a mixed economy by industry and agriculture. Unfortunately, after the democratic changes in Eastern Europe, privatization from the State of all plants, they don't withstand the competition, and of onset of the financial crisis and many of them failed to adapt to new conditions and have declared bankruptcy. With this act be freed many workers - men and women of working age. Thus, unemployment in the region has increased significantly. In agriculture dominated by the cultivation of grapes and large gardens planted with peaches, have and little livestock breeding. Production of vegetables is slightly developed. Mainly on open areas. There are also small, not professional greenhouse, by family type, but without economic importance.
The city was not chosen randomly. Prevailed primarily humanitarian and economic considerations. High unemployment among the urban population, and particularly among women was one of our main arguments. This the Greenhouses complex will give work to more than 350 people, mostly women. Second is with the Appropriate climate - a hot and dry summer. Winter is almost without snow and temperatures do not fall too low. Not to ignore the fact that the gas pipeline passes near. The gas is the main fuel for the Greenhouses. Significantly are reduces transport expenses. The proximity is to Burgas International Airport, which allows for quick transport to key locations in Europe related to this business - the major customers of fresh flowers are in the UK, Germany, Russia, Netherlands. Here we should note that in the Netherlands is the largest exchange in the world for fresh flowers and has approximately 6,500 suppliers and more than 1,500 clients.
The Business
Business Structure: Limited Liability
Corporation
Business Location: Bulgaria, South East
Europe
Date Established: Year Of 1995
Relevant Experience: Nearly about 20 years in the field
The Market
Here, on this market, flowers arrive from around the world and are buying for all the world. For fresh flower traders give serious sums. For example: USA - $1250 Great Britain, purchases amount to
1070 million US$annually, France – 750 million US$, Germany –855 million US$, Russia – 190 million US$ and there is a strongly expressed tendency of increase of purchases. They, as secondary markets is not being excluded direct deliveries to them.
The selected for construction of the Greenhouse complex plot is private property, included in the general urban plan of the City. Located in an area of the city designed for mixed construction - industry and of housing.
This plot has a size of 87.5 acres / 36 ha / enough space for the construction of 10 modules of the Greenhouse complex, each of 7.5 acres / 3ha /. This is a small toward medium Greenhouse for industrial production of roses with the ability to be exiting the international market for flowers. Everything which is a less than 10 modules by this Greenhouse will be with regional scale and will not justify the investment.
The plot is privately owned. Owners do not live in Bulgaria and want the land to be sold. In the sale of this plot has engaged a lawyer. He wants the fastest to close the deal. In a conversation with him, he agreed publicly not to yet announced this sale. This commitment is valid until the beginning of June. After this he will make announced the plot for sale and the Company will loses the advantage for purchase.
The plan to construct a 10 module Greenhouses complex is with possibility for producing annually
67.5 million stems by all modules, resulting with an estimated annual turnover of $ 63.135 million and a net profit of $ 14.69 million based on current market prices and full activity throughout the year. Research conclusions provided the project sponsors the comfort required and a review of operations was carried out resulting in this business plan.
Marketing Plan
Although that this theme of Market research is not currently on the agenda for us, because we intend for the first 5 years of operation of this Greenhouse Complex, we to accept the proposed Contract for the purchase of all future production, we must think about after this.
Ra Ste Commerce to carry out a limited marketing budget plan due to the confirmed
Contract
agreement of complete off take of entire production for the first 6 years of cooperations. However, a targeted marketing campaign will be carried out in order to ensure maximum visibility throughout its future target markets.
Marketing objectives
The following will be the main marketing objectives:
* Develop and maintain an online presence through a company website that will ensure global and direct contact with top management.
* Develop and maintain marketing relationships with companies and government agencies that are into the business of events organisation.
Marketing Strategies
There are on-going power groups or lobbying networks within the country that are pushing for preferential treatment in sustainable and environmentally friendly business initiatives. These agencies put pressure on the government to comply with EU standards and green technology. These groups also make sure that the public is made aware of the benefits of environmentally friendly business initiatives and provide the necessary grass roots support. It is envisaged by management that supporting these local structures will potentially open up other marketing leads. In addition, a general awareness of the benefits of greener energy sources especially in the horticultural sector might provide
the necessary impetus prompting consumers and lawmakers to expand tax credits and and other related incentive programs for the sector.
The Finances
Project Summary:
TOTAL PROJECT COST / $ 398,500,000.00 USLESS: Borrower’s Cash Injection
LESS: Seller Financing
LESS: Other (Specify): / $ 0
LESS: Other (Specify): / $ 0
TOTAL LOAN AMOUNT REQUESTED / $ 398,500,000.00 Million USD
Total Loan Allocation:
Cost for one modules 3 Ha/7.5 acres = US$ 23 278 775
10 modules = /US$ 232 787 750 .00
OTERS EXPENDITURE:
87.5 acres/ 35 ha/ purchase the land
And the construction of offices building, kitchen and dining room for 350 people , processing of finished goods,
refrigerated for roses and etc. = US$ 46 432 950.00
Infrastructure Constructions = US$ 23 049 450.00
Truck refrigerator = US$ 3 607 740.00
Working capital = US$ 10 021 500.00
Other purchase = US$ 5 085 283.00
Installation of energy production = US$ 40 500 000.00
Reserve unforeseen = US$ 35 404 000.00
TOTAL CAPITAL INVESTMENT = US$ 398,500,000.00
The company is expected to go straight into profits in its second year of operations reporting an EBITDA, margin of 38%, profit margin of 55% per stem. Construction and operations will be carried out in stages as follows:
Stage 1: Start of construction of the first 3 Greenhouse modules.
Stage 2: After 2 month by start, begins construction of the next 4
modules.
Stage 3: Construction of last 3modules.
It is projected that the entire construction process to full blown production of all modules would take about 18 months or slightly less. This method of stepwise construction will give possibilities after 7-8 month by the start of construction already to have vintage by the first 3 completed modules. This will are ensure year round production of roses and provide regular deliveries to customers.
An evaluation of the projected annual sales, EBITDA, and net profit for the top three preferred raw materials as shown in the below table and graph, showed the Rose flower as the most preferred choice for the Greenhouse complex for better returns to the debt.
Cucumber Tomatoes Roses
Projected annual sales / $ 26 464 700 / $ 30 073 500 / $ 63 154 350Projected EBITDA- / $ 21 171 800 / $ 26 231 100 / $ 49 755 400
Projected net profit / $ 5 293 000€ / $ 3 806 500 / $ 17 506 115
Company will generate a substantial IRR for equity investors.
1 year 2 year 3 year 4 year 5 year 6 year 7 year 8 year 9 year 10 year
Profit (all amounts X US$1,000) of 1 module by all 10 modules / 298 6 690.3 6 490 6 490 6 971 5894 6 115.8 7 452 7 542 7 542
Cumulative result / 299.3 6 989.7 13 479.6 19 970.8 26 941.8 24 574 32 835.8 47 739.7 55 191.7 62 643.7
Business ratios for 1 module
Year 1 / Year 2 / Year 3 / Year 4 / Year 5Sales growth / 18 940 635 / 56 548 318 / 62 812 757 / 63 135 450 / 63 135 450
EBITDA margin / 84 039 / 45 573 156 / 49 451 419 / 49 780 565 / 49 673 896
Profit margin after tax / 62 894 / 10 304 328 / 15 431 776 / 17 500 875 / 19 324 902
The Company does not intend to stop here in the development of this Greenhouses complexes. Potential is very large, profit also, and therefore will continue development. In the future we intend to begin planting and growing of seasonal flowers of open areas and produce seeds and bulbs of flowers.
So the company sees its future.
ECONOMIC AND FINANCIAL RESULTS FOR ONE MODUL
CONSIDERED TERMS OF CONSTRUCTION AND OPERATION
OF THE PROJECT
- BEGINNIG OF CONSTRUCTION
- BEGINNIG OF OPERATION
- END OF THE CONSIDERED PERIOD OF OPERATION
INVESTMENT - TOTAL CREDIT
TERM OF REPAYMENT INCL. GRACE PERIOD
BASIC PRODUCTION – in stalk (AVERAG ANNUAL)
BASIC PRODUCTION – AT MARKET VALUE (AVERAG ANNUAL)
25 years
March 2014
October 2015
End of 2024
/ $ 28 926 195
$ 28 926 195
7 years
1 years
13,500,000 stems
$ 12 630 870
43 person
$ 7 207
EMPLOYEE (AVERAG ANNUAL)
GROSS SALARY PER 1 EMPLOYEE (AVERAG ANNUAL)
AVERAGE ANNUAL PRODUCTIVITY
- SALES PER 1 EMPLOYEE
- NET PROFIT PER 1 EMPLOYEE
AVERAGE ANNUAL GROSS PROFIT GROSS PROFIT / SALES RATIO
GROSS PROFIT / CAPITAL USED RATIO AVERAGE ANNUAL NET PROFIT
NET PROFIT / SALES RATIO
NET PROFIT / CAPITAL USED RATIO PRESENT VALUE OF THE ENTERPRISE
(DISCOUNTED NET CASH FLOW AT DISCOUNT FACTOR = 26%):
INTERNAL RATE OF RETURN OF INVESTMENTS ( IRR)
TERM OF RETURN ON INVESTMENTS
/ $293 741. 16
/$ 150 911.45
/$ 7 120 068.2
32%
29%
$ 6 692 356.2
23%
21%
$ 3 284 026.2
33%
4 years and 6 months + 2 years grace period
Risk:
The company has identified the following as the key risk factors in which it is exposed to:
1. Technical risks: Mitigated through contract with the Royal Dutch company supplying technical advisors for the period of 3 to 5 years renewable.
2. Delivery risks: Mitigated through agreement on ex-works invoicing.
3. Management risks: Mitigated through employment of long term serving employees with relevant business and managerial know how.
4. Market risk: Market risk in this case consists essentially of having a year significant buyer. This risk would be mitigated through a year contracts with buyer with optional to cover the entire period of debt facility until complete payback.
In made of the Executive Summary company has succinctly researched the market in terms of sustainability as sales is wholly done to a single client. Despite the significant risk of reliance on a single off taker, management believes the rewards far out-weigh the risks and more important, guarantees the sustainability of the project during the entire life of the debt facility. This risk is in turn mitigated through the use of the off-taker's agronomists and engineers as technical advisors for the company ensuring quality is guaranteed to the required standards. Despite the recent global market price movements in terms of Fast Moving Consumer Goods, the market price movement of the rose flower has remained consistent within the past years and the trend is expected to remain the same. This corroborates the fact that the product remains an adorned species of plant for events and gifts.
The Collateral
No Collateral details.The fund is required in form of unwarranted debt loan.