(c) Ade Cahyat 20031 Operations Plan. (c) Ade Cahyat 20032 Rattan Processing Procedure How is rattan...
-
date post
20-Dec-2015 -
Category
Documents
-
view
214 -
download
0
Transcript of (c) Ade Cahyat 20031 Operations Plan. (c) Ade Cahyat 20032 Rattan Processing Procedure How is rattan...
(c) Ade Cahyat 2003 2
Rattan Processing ProcedureHow is rattan processed?
Step 1Washing
100kg per day per personRp. 150 per kg
Step 2Sulphur smoking
2 days
Step 3Drying
2-3 days
Step 2 & 3Rp. 150 per kg
(c) Ade Cahyat 2003 3
Rattan Processing ProcedureHow is rattan processed?
Step 4Peel and core
270 kg per day by machineRp. 240 per kg
Rattan core
Rattan peel
(c) Ade Cahyat 2003 4
Farmers will supply raw rattan from their gardens on a schedule dictated by SEP customer demand and co-ordinated by P3R
Farmers will transport raw rattan to SEP processing units and Kedang Pahu warehouse
The Kedang Pahu warehouse and SEP processing units and will: Wash the rattan to remove stains and blemishes Smoke the rattan in sulphur fumes to cure and color the rattan Dry the smoked rattan to remove excess moisture
The Kedang Pahu warehouse will further process the dry rattan by splitting the rattan into core and peel. As production volume of semi-finished products grows, additional investment in processing machinery at the warehouses or selected processing units will be made to maintain the optimal product mix.
How is rattan processed?Rattan Processing Procedure
(c) Ade Cahyat 2003 5
SEP Distribution Chain DesignWhat is the flow of rattan like within the company at launch?
Kedang Pahu warehouse
Raw
Raw
Dry
PeelCore
Craft
Peel
Raw
Dry
Surabayawarehouse
Up River
Down River
Dry
Dry
DryPeelCore
Crafts
R&D
Non SEP boat/truck
SEP managed Truck/boat
SEP managed Boat
DryPeelCore
Crafts
ProcessingSorting
InventorySemi-Finished
FarmersLocal
Processing Units
FarmersLocal
Processing Units
Farmers
Craft-Makers
Furniture Makers
Exporters/Overseas Furniture Makers
ProcessingSorting
InventoryRound Rattan
Inventory Retail
Contractors
Suppliers
SEP operations
Customers
Qualitycheckpoint
(c) Ade Cahyat 2003 6
• Build a processing and inventory holding warehouse in Kedang Pahu
• Rent a retail warehouse in Surabaya
• As production volume of semi-finished products increase, add semi-finished processing machine in Surabaya warehouse to increase semi-processing capacity and to reduce per machine operation cost
• As customer base matures and consists of large companies and the infrastructure in Samarinda is improved move retail warehouse from Surabaya to Samarinda and deliver to customers direct from Samarinda
TimeYear 0 Year 5 Long Term
Warehouse Roll-out ScheduleSEP Distribution Chain Design
Year 10
• As supply grows, rent a inventory holding warehouse in Samarinda to coordinate transportation to Surabaya
(c) Ade Cahyat 2003 7
Initially processing of wet and semi-finished rattan will be performed in the Kedang Pahu warehouse. As production volume increases, processing units will be contracted in proximity to the rattan gardens to increase the processing capacity.
Farmers will be responsible for transporting wet rattan to the Kedang Pahu warehouse and/or SEP processing units. SEP will manage transportation of processed rattan from the Kedang Pahu warehouse as well as the SEP processing units. Rattan processed in the SEP processing units will be transported directly to the Surabaya warehouse via Samarinda.
What is the flow of rattan like within the company?SEP Distribution Chain Design
(c) Ade Cahyat 2003 8
The Surabaya warehouse will manage sales inventory, the showroom, the relationships with small to medium sized furniture makers and market intelligence gathering.
Initially no warehouse will be set up in Samarinda. However in year 3 or 4 one may be established to better manage supply and demand and coordinate transportation.
In the long term, as the customer base matures (consists of large companies that have had long standing relationships with SEP) and the infrastructure in Samarinda is improved, SEP will move the retail warehouse from Surabaya to Samarinda and deliver to customers direct from Samarinda.
What is the flow of rattan like within the company?SEP Distribution Chain Design
(c) Ade Cahyat 2003 9
Operations PlanHow much rattan will we be purchasing?
Volume of Wet Rattan Purchases from Farmers (tonnes)
0
200
400
600
800
1,000
1,200
1,400
1,600
Year 1 Year 2 Year 3 Year 4 Year 5
Vol
ume
ratta
n w
et (
tonn
es)
Sega Round Red Pulut
(c) Ade Cahyat 2003 10
How much rattan will we be purchasing?
Volume of Wet Rattan Purchases from Farmers (tonnes)Segmented by Final Use
0
200
400
600
800
1,000
1,200
1,400
1,600
Year 1 Year 2 Year 3 Year 4 Year 5
Vol
ume
ratta
n w
et (
tonn
es)
Sega Round Red Pulut Round Sega for Semi-Finished Products
Operations Plan
(c) Ade Cahyat 2003 11
Operations PlanHow much are we going to produce?
Volume of Dry Rattan Products Production (tonnes)
0
100
200
300
400
500
600
700
Year 1 Year 2 Year 3 Year 4 Year 5
Vol
ume
dry
ratta
n pr
oduc
ts (
tonn
es)
Sega Round Red Pulut Semi-Finished Products
(c) Ade Cahyat 2003 12
Operations Plan
Wet volume (tonnes) Year 1 Year 2 Year 3 Year 4 Year 5
Round Sega 18 272 605 678 678
Semi Finished 5 82 182 204 204
Red Pulut 17 248 551 618 618
Total 40 602 1,339 1,500 1,500
Purchases (Wet Rattan in tonnes)
How much are we going to purchase and produce?
Product dry volume (tonnes)
Year 1 Year 2 Year 3 Year 4 Year 5
Round Sega 10 146 324 363 363
Semi Finished 3 40 88 99 99
Red Pulut 5 79 177 198 198
Total 18 265 589 660 660
Production (Dry Rattan in tonnes)
(c) Ade Cahyat 2003 13
Operations PlanHow much of the critical resources are we going to need?
Area required (ha/rotation)
Year 1 Year 2 Year 3 Year 4 Year 5
Sega 244 3665 8145 9122 9122
Red Pulut 239 1912 4301 4779 4779
Total 483 5577 12446 13901 13901
Year 1 Year 2 Year 3 Year 4 Year 5
Farmers 59 333 500 500 500
Processing units 0 3 8 8 8
Semi-finished processing machines
1 2 3 3 3
Farmers, Processing Units and Machines
Rattan Garden Required (in hectare per rotation)
Rotation (time between harvests): 36 months for Sega and 30 months for Red Pulut
(c) Ade Cahyat 2003 14
Operation Plan
At company inception, the first priority is to build the Kedang Pahu warehouse and grow the local supply base.
As production increases, processing units will be contracted outside of the Kedang Pahu warehouse. At the end of the first year, SEP will turnover approximately 6,700kg of dry rattan per month. By the end of year 3, SEP will have contracted eight local processing units and will turnover nearly 125,000kg of dry rattan per month.
Semi-finished products will initially be processed exclusively at the Kedang Pahu warehouse but as production of semi-finished products grows, additional investment in processing machinery at the warehouses or local processing units will be made to maintain the optimal product mix.
SEP will aim to support the recruitment of 17 P3R farmers per month on average and a total of 500 P3R member farmers to be its suppliers by year 4.
How much are we going to purchase and produce?
(c) Ade Cahyat 2003 15
Quality Management
SEP will establish Research and Development functions at the Kedang Pahu facility to improve rattan processing methods and technology To reduce costs, increase quality, and decrease chemical residue Materials and the production equipment will be replaced with those
which do not leave a dangerous chemical residue
Farmers and processing units will be encouraged to process raw rattan within a day of harvest Establish processing units in proximity to rattan gardens Evaluate opportunities to purchase from farmers by grade
SEP will aggressively support P3R activities in obtaining and maintaining FSC certification (eco-label certificate)
Semi-finished processing will be performed using an accurate Taiwanese machine
How are we going to manage quality?
(c) Ade Cahyat 2003 16
Quality Management
Quality control systems will be implemented throughout the operation. Check points include: At the time of receipt into Kedang Pahu warehouse After initial and semi-finished process (performing grading) At the time of receipt into Surabaya warehouse
How are we going to manage quality?
(c) Ade Cahyat 2003 17
Operations Summary
The dry rattan production process involves purchasing raw rattan from farmers, washing, sulphur smoking and drying. The semi-finished production process involves splitting the dry rattan into core and peel.
SEP will manage transportation of rattan post processing to customer site.
The most critical quality checking (grading) will be performed after processing at the Kedang Pahu warehouse. SEP will also have quality control check points at the time of each warehouse receipt.
Semi-finished products will initially be processed exclusively at the Kedang Pahu warehouse but as volume grows, additional investment in processing machinery at the warehouses or local processing units will be made to maintain the optimal product mix.
What are the major operations take-aways?
(c) Ade Cahyat 2003 18
Operations Summary
SEP will establish Research and Development functions at the Kedang Pahu facility to improve rattan processing methods and technology.
SEP expects to reach steady-state operations by the end of year 3, representing a farmer supply base of 500, 8 local processing units and a volume turnover of around 125,000kg wet rattan supplied per month.
What are the major operations take-aways?
(c) Ade Cahyat 2003 20
Organizational StructureWhat does the company’s organizational structure look like?
CEO / Managing Director
Finance Director Sales Director Marketing Director
Finance and AdminAssistant
Operations Director
Contract Processors
WarehouseEmployees
First 6 month hires
18 month hires
ContractSales Agents
SHK Business Development Officer
NGO PartnerLater hires(if required)
(c) Ade Cahyat 2003 21
Roles and ResponsibilitiesWho does what in the company?
CEO Sales Director Operations Director Responsible for the total
operation of the company Develop and implement
corporate strategy Responsible to the Meeting
of Share Holders
Acquire customers Manage sales planning, order
processing and distribution Manage inventory of
Surabaya warehouse Manage quality control
Manage contractor Manage inventory of Kedang
Pahu warehouse (and Samarinda warehouse?)
Manage procurement Manage packing and
transportation Manage R&D Manage quality control Develop product
requirements plan
Finance Director Marketing Director Financial Administrator(Initially role of the CEO) Responsible for managing
corporate finances including debt and credit agreements
(Initially a role of the CEO) Develop marketing strategy Plan and implement
promotional activities Manage public relations
Responsible for all forms of administrative tasks
Book-keeping of company
finances
(c) Ade Cahyat 2003 22
Roles and ResponsibilitiesWho does what in the company?
Contracted Sales Agents Warehouse Employees Processing Contractors Generate and expand volume
sales in low and high quality furniture manufacturers
Process and manage orders Promote key market
messages
Manage and operate machinery
Make semi-finished product Manage quality of semi-
finished product Manage warehouse inventory
Purchase rattan from farmers Wash, smoke and dry rattan Coordinate transportation to
SEP
(c) Ade Cahyat 2003 23
NGO PartnersPartnership among P3R, SHK and SEP
SHK E. Kalimantan
Rattan Program
SEP
P 3 R
RATTAN MARKET
• Provide technical assistance• Facilitate skill development
• Develop and manage relationship to donors and institutions
• Purchase, Process, make and sell raw, semi-finished and crafts
• Develop and manage customer relationships
• Develop and manage brand of P3R rattan
• Conduct product development and process improvement
• Improve livelihood of local farmers and craft makers by creating employment
opportunities and providing competitive purchase prices
• Organize farmers and craftsmen
• Monitor sustainability of resources
• Manage policy and regulation changes
(advocacy and campaigns)• Disseminate information
• Conduct training of farmers and craftsmen/perform
technical assistance• Facilitate skill development
• Develop and manage relationship to donors and
institutionsProfit Sharing (5%)
Supplier Service
Tech Assistance
Reputation
Reputation
Tech Assistance
(c) Ade Cahyat 2003 24
NGO PartnersWho are NGO partners and what are their roles?
SEP’s most critical NGO relationship is with P3R, the farmers collective organization based in the Mahakam watershed area. P3R’s primary roles are to: Provide organizational structure for farmers & craftsmen Monitor sustainability of resources Policy advocacy Information dissemination Conduct farmer-specific training Facilitate technical skill development
SHK, a Samarinda based NGO is a crucial partner in training, technical assistance and fund-raising activities
Other NGOs (the EU and DFID) are primary donors for the project
(c) Ade Cahyat 2003 28
Organizational Summary
SEP executive management will consist of a managing director, a sales director and a production director, with a marketing director and a finance director hired at a later stage if required
SEP will hire employees for critical processes and contract others to minimize labor costs
SEP will hire employees to process rattan and manage inventory at the Kedang Pahu and Surabaya warehouses
SEP will contract processing units in local villages and sales agents in Java
SEP will leverage its NGO relationships with P3R and SHK. P3R will be responsible for coordinating the farmers and
ensuring sustainability of the rattan resources. SHK will be responsible for technology and knowledge transfer,
training and policy advocacy.
What are the major organizational take-aways?
(c) Ade Cahyat 2003 30
Timing of Critical MilestonesWhat has to be achieved and by when?
Recruit key personnel
Secure P3R farmer supply
Secure supply-chain partners
Build first customer relationships
Develop KP warehouse operations
Build Kedang Pahu warehouse
Conduct feasibility study for crafts
Recruit local processing contractors
First customer sales
First production
50,000kg per month to Surabaya
25,000kg per month to Surabaya
Cash-flow positive
Payback period complete
12 24 36 48 60Month of operation
Potential additionalrevenue stream
developmentTrial shipments
(c) Ade Cahyat 2003 31
The most critical time for the company is in the first six months where the major tasks will be:
1. Recruit key personnel2. Develop strong relationships with first customer targets3. Negotiate the most efficient possible solution for supply-chain
transportation over the first year of operations4. Build the Kedang Pahu warehouse5. Research Surabaya warehouse6. Recruit sufficient farmers and in appropriate locations to P3R
membership (a P3R task)
First production is expected in month 7 while first shipments to customers in Surabaya takes place in month 8
SEP expects to be shipping 2 containers per month by the end of the first year
50,000kg dry rattan products per month is expected to be reached in month 31
What has to be achieved and by when?Timing of Critical Milestones
(c) Ade Cahyat 2003 33
Major Risks Facing the CompanyWhat do we have to be worried about?
Risk Mitigating Strategy
External
Decreasing relative value/price of rattan (increasing accessibility and attractiveness of substitutes)
Differentiate SEP with superior customer service Develop SEP brand (eg SEP eco-label sticker for customers’
products as fruit companies brand their products) Be prepared to incur additional costs in less sensitive areas (eg
more frequent transport) that will help support product pricing
Changing government policy Support SHK advocacy activities Lobby through ASMINDO
High dependence on furniture industry and strength of economy
Identify new opportunities for rattan Diversify customer mix (eg. geography, products etc)
High dependence on P3R (supply-side data collection, execution the resource plan)
Scale sales efforts in tandem with supply-side production forecasts Identify service requirements and include them in contracts Pay P3R monthly
Increasing transportation (fuel) price
Improve supply chain efficiency and effectiveness Perform processing close to supply to minimize transporting waste Identify non-transportation related costs to cut
(c) Ade Cahyat 2003 34
Major Risks Facing the CompanyWhat do we have to be worried about?
Risk Mitigating Strategy
Internal
Limited supplier flexibility (single supplier dependence)
TBD – P3R, SHK and SEP to discuss
Outsourcing processing functions (processing units)
Identify requirements and include them in contracts Develop close relationships/partnerships with processing units Provide technical assistance and training to contractors
(c) Ade Cahyat 2003 35
SEP faces several external risks. Decreasing relative value of rattan and increasing accessibility and
attractiveness of substitutes. To mitigate this risk, SEP will differentiate itself through superior customer service and branding activities.
High dependency on the strength of the furniture market and the overall economy. To mitigate this risk, SEP will establish business development functions to diversify customer mix and identify new rattan use.
Potential change in government policies. To mitigate this risk, SEP will support SHK advocacy activities and lobby through ASMINDO.
High dependency on P3R to collect supply data and to execute the resource plan. To mitigate this risk, SEP will identify service requirements and make service fee paid to P3R contingent upon their service levels.
Increasing transportation costs. To mitigate this risk, SEP will seek opportunities to improve supply chain effectiveness.
What do we have to be worried about?Major Risks Facing the Company
(c) Ade Cahyat 2003 36
SEP faces several internal risks: Limited supplier flexibility. To mitigate this risk, SEP will … TBD. Outsourcing processing units. To mitigate this risk, SEP will identify
requirements (service, quality etc) and include them in the contracts. SEP will also develop close relationships/partnerships with processing units and provide technical assistance to the processing units.
What do we have to be worried about?Major Risks Facing the Company
(c) Ade Cahyat 2003 38
Key Assumptions
Production and sales assumptions First purchases of raw materials from farmers occur in month 7 First sales to customers occurs in month 8 First revenue collection from customers occurs in month 9 Purchases of raw rattan from farmers are paid on a cash-on-delivery
basis Steady state-operations are achieved at the end of the third year of
operations Kedang Pahu warehouse and processing unit is operating at full capacity 8 processing units are operating on a contract basis 125,000kg wet rattan purchased from farmers per month SEP purchases from a total of 500 farmers On average 250kg wet rattan is purchased per farmer per month Wet Sega purchase price is Rp. 900 per kg Wet Red-Pulut purchase price is Rp. 6,000 per kg
What have been the key financial assumptions?
(c) Ade Cahyat 2003 39
Key Assumptions
Logistics SEP will lease a warehouse in Surabaya and build a warehouse in
Kedang Pahu Contracted processing units are paid based on volume processed River transport costs are paid based on volume shipped Samarinda to Surabaya transport costs are paid per container shipped
1 container = 5,000kg dry rattan products
Personnel and service costs SEP will employ 4-6 management staff to oversee company operations The Kedang Pahu warehouse employees and contractors are paid
based on volume processed Service fees are paid to P3R
on a monthly basis calculated at 5% of the previous month’s profits
What have been the key financial assumptions?
(c) Ade Cahyat 2003 40
Key Assumptions
Capital expenditure The major capital investments are:
Kedang Pahu warehouse construction in months 1 to 3 Purchasing of a vehicle to transport rattans in month 4 Purchasing of additional processing machines to maintain constant
product mix in months 21 and 32
Financing and funding Major start-up funds are expected to be provided by the EU of Rp. 1bn
The company cannot start without this funding The first month of operation is after this funding has been secured
Prior funds have been secured from DFID at Rp. 45m and have financed the first processing machine for the Kedang Pahu warehouse
The company makes no use of credit facilities or loans from local financial institutions
No other equity investments are made
What have been the key financial assumptions?
(c) Ade Cahyat 2003 41
Overview of Financial MetricsHow does the company perform based on the assumptions in this business plan?
Million Rp. Year of operation
0 1 2 3 4 5
Funds provided 1,050 - - - - -
Total revenue - 100 1,960 4,760 5,500 5,500
Total cost - 270 1,760 3,900 4,460 4,460
Net income (before tax) - -170 200 860 1,040 1,040
Before tax profit margin - - 10% 18% 19% 19%
Net cash-flow -120 -500 -200 540 840 790
Closing cash position 930 430 230 770 1,610 2,400
Total assets 1,050 870 1,070 1,880 2,660 3,400
Total liabilities - - 60 260 310 310
Total owner’s equity 1,050 870 1,010 1,620 2,350 3,090
(c) Ade Cahyat 2003 42
Overview of Financial MetricsHow does the company perform based on the assumptions in this business plan?
0
1,000
2,000
3,000
4,000
5,000
6,000
Year 1 Year 2 Year 3 Year 4 Year 5
Sal
es r
even
ue (
m R
p.)
Round Sega Red-Pulut Semi-finished products
90
2,260
4,760
5,500 5,500
(c) Ade Cahyat 2003 43
Overview of Financial MetricsHow does the company perform based on the assumptions in this business plan?
Long-term cost-base
Raw materialpurchasing cost
77%
Management2%
Depreciation1%
Warehouse Rent In Surabaya
1%
Other G&A Cost2%
Discount Back Money
1%Sales & Marketing
Expenses1%
Packing and Insurance Cost
3%
Transportation12% Semi-finished product
Round Sega33%
Red-Pulut40%
Round Sega27%
(c) Ade Cahyat 2003 44
Overview of Financial MetricsHow does the company perform based on the assumptions in this business plan?
Long Term Cost Break-down (at Steady State)
Direct Material54%
DirectOperation
24%
Sales Expense3%
Management1%Depreciation
1%
Supply Chain17% Note
• Direct material costs include raw material and P3R service fees
• Direct operation costs include salary and fees paid to the Kedang Pahu processing employees and the local processing units
• Management costs include salary paid to executive management
• Supply chain costs include transportation costs, warehouse rents etc
• Sales expense includes salary paid to sales agents, discount cash backs, advertising, marketing etc.
• Depreciation includes depreciation expense for the Kedang Pahu building, machinery, trucks and computers
Long Term Cost Break-down (at Steady State)
Direct Material54%
DirectOperation
24%
Sales Expense3%
Management1%Depreciation
1%
Supply Chain17% Note
• Direct material costs include raw material and P3R service fees
• Direct operation costs include salary and fees paid to the Kedang Pahu processing employees and the local processing units
• Management costs include salary paid to executive management
• Supply chain costs include transportation costs, warehouse rents etc
• Sales expense includes salary paid to sales agents, discount cash backs, advertising, marketing etc.
• Depreciation includes depreciation expense for the Kedang Pahu building, machinery, trucks and computers
(c) Ade Cahyat 2003 45
Overview of Financial Metrics
Financial highlights1. The five-year value of the company, assuming a 0% discount rate is Rp.
2.4 bn
2. SEP will become cash-flow positive in the month 10 of year 2 of operation (month 22)
3. SEP will reach its break-even point in the month 1 of year 3 of operation (month 25)
Steady-state operations (after month 36) for the company are:1. Annual revenue: Rp. 5.5bn
2. Annual cost-base: Rp. 4.5bn
3. Net-income: Rp. 1,040
4. Before-tax profit margin: 19%
How do we perform based on the assumptions in this business plan?
(c) Ade Cahyat 2003 46
Financial Risks
Funding If the EU funding is not secured, the business cannot start
Cash deficiency Between months 21 and 26, SEP will run low on cash balances
Sensitivity to the price of rattan in Surabaya SEP is very sensitive to the street-price of rattan in Surabaya A 10% reduction in prices across all products results in:
More than a 50% reduction in company value over 5 years A delay of 5 months in becoming monthly cash-flow positive An extension of 17 months in the pay-back period
What are the major risks facing us from a financial perspective?
(c) Ade Cahyat 2003 47
Financial Risks
Delays in business development and sales SEP is highly sensitive to delays in first product sales and to a lesser
extent, slower than predicted sales growth Delaying first sales by 1 month results in
A reduction in 5 year company value of 15% A delay of 3 months in becoming monthly cash-flow positive An extension of 4 months in the pay-back period
A 10% increase in the time taken to scale supply and customer volume to steady-state conditions results in A reduction in 5 year company value of 5% A delay of 1 month in becoming monthly cash-flow positive An extension of 2 months in the pay-back period
What are the major risks facing us from a financial perspective?
(c) Ade Cahyat 2003 48
Financial Risks
Dependency on fuel and other transportation costs Due to the long supply-chain, SEP is exposed to transportation cost risk A 10% increase in transportation costs across all operations results in:
A reduction in 5 year company value of 8% A delay of 1 months in becoming monthly cash-flow positive An extension of 2 months in the pay-back period
Customer default risk Due to the nature of the rattan industry, SEP faces potentially high levels
of sales default If 5% of sales can not be collected, then this results in
A 28% reduction in company value over 5 years A delay of 2 months in becoming monthly cash-flow positive An extension of 5 months in the pay-back period
What are the major risks facing us from a financial perspective?
(c) Ade Cahyat 2003 49
Investor RelationsWhy and when do we encourage investment?
Potential investor scheduling
Year0
Year1
Year2
Year3
Year4
Year5
EU Start-up funds
P3R farmer investment
Non-P3R member investment
P3R members provided with exclusive “option to invest” benefits to incentivize membership and SEP sales
Rp. 1bn initial start-upP3R/SHK also funded by EU
Potential P3R farmer ownership
opportunities
Potential non-P3R member ownership
opportunities
(c) Ade Cahyat 2003 50
Investor Relations
Initial investment of Rp.1bn provided by the European Union1. Finances Kedang Pahu warehouse construction2. Funds supply-chain development3. Supports setting up of the Surabaya warehouse and sales operation4. Takes company through cash-flow positive and breakeven milestones
Long-term investment opportunity for P3R farmers is an important incentive but initial operations are too risky to encourage farmer financial involvement at the start-up phase
Investment should be delayed until the business model has been refined through experience and sustainability has been proven
A potential vehicle for maintaining farmer incentives and delaying investment is the provision of ownership options to P3R members
Ownership to non-P3R members will be delayed until after P3R members have had the chance to invest
Why and when do we encourage investment?
(c) Ade Cahyat 2003 51
Financial Forecast Summary
Major highlights:1. SEP will become cash-flow positive in the month 10 of year 2 of
operation (month 22)2. SEP will reach its break-even point in the month 1 of year 3 of operation
(month 25)
Steady-state operations (after month 36) for the company are:1. Annual revenue: Rp. 5.5bn2. Annual cost-base: Rp. 4.5bn3. Net-income: Rp. 1.04bn4. Before-tax profit margin: 19%
The company faces significant financial risks in terms of:1. Sensitivity to the price of rattan and associated products in Surabaya2. Delays in business development and sales3. Transportation and fuel costs4. Customer default risk
What are the major financial take-aways?