Final report Business Plan

Lao People’s Democratic Republic

Peace Independence Democracy Unity Prosperity

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Business Plan

by Dr. Damrong

PHOMDOUANGSY

November 6

2013

Delta Agro-Forestry Promotion and Import-Export Sole Co., Ltd Business registration No. 1744/ຫຈກຫຈກຫຈກຫຈກ

Reserve of theReserve of theReserve of theReserve of the copy copy copy copy right by Delta Groupright by Delta Groupright by Delta Groupright by Delta Group

Lao Office: 197 Nonh Peeng

Village, Chanthabury District,

Vientiane Capital, Lao PDR.

Lao number: +856-20 99337774,

E-mail: [email protected]

Thai Office: 57/33 Moo 7 Glory

House, Phuthamonthon Si 3,

Thaweewathana, Bangkok 10170,

Thai number: 0910151381

Contents Confidentiality Statement .......................................................................................................................... 1

Future perspectives ............................................................................................................................... 1

Land arable in Laos ............................................................................................................................... 2

Agricultural Land in Laos ....................................................................................................................... 2

Market/industry ........................................................................................................................................... 3

Situation of Bio-Fertilizers Factories in Laos ...................................................................................... 3

The Utilization of Fertilizer in Laos ...................................................................................................... 3

Lao Government Initiatives ....................................................................................................................... 3

Measures by the government ............................................................................................................... 3

Measures by non-government organizations, producers and traders ........................................... 4

Lao Government Incentives: ..................................................................................................................... 4

Measures enhancing/ensuring the quality and safety ...................................................................... 4

Promotion and support .......................................................................................................................... 4

Foreign Direct Investment (FDI) in Lao People’s Democratic Republic ........................................ 5

Company Profile ......................................................................................................................................... 6

Why Delta is deferent? .............................................................................................................................. 6

SWOT Analysis of the Delta ................................................................................................................. 6

Delta’s Strategy for food Security ........................................................................................................ 7

Delta ..................................................................................................................................................... 7

Cost of inputs reduction ..................................................................................................................... 7

Increased yields .................................................................................................................................. 7

Wealth creation ................................................................................................................................... 7

Increased Competitiveness of the agricultural produce ............................................................... 7

Place of Food Security in Regional Development ................................................................................. 8

Cost of food directly affects inflation ................................................................................................... 8

The national government intends to achieve food security as a basis for national development

.................................................................................................................................................................. 8

Majority of rural population are small scale farmers, with no real income hence the need for

affordable food ........................................................................................................................................ 8

Available Opportunities For Partnership ................................................................................................. 8

Request for Partnership for Realization of Regional Development .................................................... 8

Growth Strategy .......................................................................................................................................... 9

Production’s Schema ............................................................................................................................... 10

Operation Marketing & Sales ................................................................................................................. 11

Experienced Management Team: ......................................................................................................... 11

Competition Advantage ........................................................................................................................... 12

With the present areas of rice cultivation.......................................................................................... 12

Product Superiority............................................................................................................................... 12

Policy Advantages ................................................................................................................................ 13

Cost Advantage .................................................................................................................................... 13

Intellectual Property ............................................................................................................................. 13

Rick Factor. ............................................................................................................................................... 13

Future Finance Performance .............................................................................................................. 13

Need for additional Financing ............................................................................................................. 14

Customer Acceptance ......................................................................................................................... 14

Reliance on key Individual; Need to Hire Additional Qualified Personnel ................................... 14

Loss of Incentives................................................................................................................................. 14

Litigation ................................................................................................................................................ 14

Slow Economic ..................................................................................................................................... 14

Financial Projection .................................................................................................................................. 14

Assumptions to pro forma ....................................................................................................................... 15

1. Currency ........................................................................................................................................ 15

Total Initial Investment Cost: .............................................................................................................. 15

2. Production (Unit: Liters ................................................................................................................ 15

3. Inflation........................................................................................................................................... 15

4. The Growth Rate .......................................................................................................................... 15

5. Revenue......................................................................................................................................... 16

6. Cost of Goods Sold ...................................................................................................................... 16

7. Operating Cost .............................................................................................................................. 16

8. Earnings Before Depreciation & Amortization, Income Tax .................................................. 16

9. Account Receivable ..................................................................................................................... 16

10. Account Payable ....................................................................................................................... 16

11. Inventory .................................................................................................................................... 16

12. Cash Reserve Policy ............................................................................................................... 16

13. Taxation ..................................................................................................................................... 17

14. Depreciation .............................................................................................................................. 17

15. Discount rate ............................................................................................................................. 17

16. Payment ..................................................................................................................................... 17

Financial Ratio ...................................................................................................................................... 18

17. The Measure of Financial Projection ..................................................................................... 18

Income Statement .................................................................................................................................... 20

Balance Sheet........................................................................................................................................... 23

Statement of Cash Flow .......................................................................................................................... 26

Conclusion ................................................................................................................................................. 30

References ................................................................................................................................................ 31

Acronym AFTA ASEAN Free Trade Area ASEAN Association of South East Asian Nations BCH Biosafety Clearing House BIOTEC National Center for Genetic Engineering and Bio-technology BSO Biological Safety Officer CBD Convention on Biological Diversity CHM Clearing House Mechanism CPB Cartagena Protocol on Biosafety DNA Deoxyribonucleic acid EE Environment Education GEF Global Environment Facility GMOs Genetically Modified Organism HEIs Higher Education Institutions HRD Human Resources Development IBC Institutional Biosafety Committee IT Information Technology JICA Japan International Cooperation Agency LDCs Least Developed Countries LMOs Living Modified Organism NA National Assembly NBC National Biosafety Committee NBF National Biosafety Framework NCC National Coordinating Committee NEA National Executing Agency NGO Non Government Organization NPC National Project Coordinator NRIES National Research Institute for Education Science PCM Project Cycle Management PEAP Public Education Awareness and Participation PM Prime Minister PS Project Supervisor STEA Science Technology and Environment Agency UNCED United Nations Conference on Environment and Development UNDP United Nations Development Programme UNEP United Nation Environmental Program USA United States of America WTO World Trade Organization

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Confidentiality Statement

Future perspectives

Potentials: Organic agriculture has good potential in Laos, both for in-country consumption and for exporting. Many of the production systems used are based on no or minimal external inputs. Furthermore, the mountainous topography provides a wide range of environments. Products with high potential include: forest products, rice, vegetables, coffee, and fruits. This situation puts the country in a special position because:

� For many farmers changing to organic agriculture is easily possible with minimal or no yield loss and minimal or no extra cost.

• Consumers in Laos and abroad have more confidence in Lao products because they have a reputation for having no or lower levels of residues from plant protection chemicals

• Hill environments offer opportunities for “out of season” fruit and vegetable production with high market potential

Other strengths of the Lao conditions identified based on a recent stack holder interviews (Table 1, PROFIL, 2003) included: high level of farmers organization, experiences with biological pesticides, and strong political support. Lao consumers and traders are aware of the concept of organic agriculture. The perception by consumers for the concept of “organic agriculture” reflects the existing situation. The largest proportion (40%) equated “organic agriculture” to “natural agriculture” a term which probably describes the traditional farming systems with no external inputs, especially the upland fallow rotation system, the collection of wild products or the production of traditional fruits. The consumers are used to buy fresh products produced by small holder farmers or collected in the forest. They would like to buy organic products but they are not available in the market. Only 13.7% of the consumers knew a trader selling organic (not certified) products. At this stage most consumers are, however not ready to pay more than 20% higher prices for organic products. Table 1. Strength and potentials for organic farming

Market Good reputation of Lao products

Growing international market for organic products

Big demand for organic products in domestic and border markets

Reportedly unsafe imported agricultural commodities (with pesticide residues)

Production Favourable conditions for organic products in the Lao PDR (not much mineral fertilizer is imported / applied)

Existing farmers’ groups organization, but geographically limited (e.g. Boloven Plateau)

There are motivated farmers

Impact on farms of conversion to organic farming is known in the region (Vietnam, Thailand, China)

Experience Existing experience in the country (e.g. Lao Farmers’ Products)

Strong “domino” effect among farmers

Experience with organic farming in the region and worldwide

Experience with organic fertilizers (EM, BE)

Interest and

support

High interest for organic farming at all levels

Existing network for sustainable farming in the Lao PDR (SAForum)

Public awareness of problems linked to the use of mineral fertilizers and pesticides

Agro-chemical industries (lobby) are not strong in Lao PDR

Existing bio-fertilizers factories in the country

Support from the government policy

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Commodities

with potential

Fruit and vegetables for the domestic and regional markets

Mulberry tea for the international market

Purple rice for the international market

Organic coffee for the international market

Cotton for processing in the country (handicrafts) Source: Helvetas 2003 (Based on stack holder interviews)

Land arable in Laos: Laos is a landlocked nation in Southeast Asia, northeast of Thailand, west of Vietnam, that covers 236,800 square kilometers in the center of the Southeast Asian peninsula, is surrounded by Burma (Myanmar), Cambodia, the People's Republic of China, Thailand, and Vietnam. Its location has often made it a buffer between more powerful neighboring states, as well as a crossroads for trade and communication.

Laos' population was estimated at about 6,48 million in July 2011, dispersed unevenly across the country. Most people live in valleys of the Mekong River and its tributaries. Vientiane Prefecture, which includes Vientiane, the capital and largest city of the country, had about 569,000 residents in 1999. The country's population density is 23.4/km².

Agricultural Land in Laos: The Agriculture land is 10.16% (of land areas) or 23,680,00.00 ha and suitable for rice cultivation about 5,000,000.00 ha or 21% (of agriculture areas), according to a World Bank report, published in 2010. The present of rice cultivated is covered 2,375,100 ha or 47.50% (of total suitable areas for rice cultivation). Population with 80% holds professional agriculture principles (or 5, 184,00.00 people). The agricultural sector accounts for half of GDP.

Table 2. Most important agricultural crops, area and production Crops

Most important agricultural crops, area and production Crops

Harvested Area (ha) Production (t)

2007 2008 2009 2010

Rain fed Rice 519,471 564,953 1,801,200 1,819,800

Irrigated Rice 84,000 81,360 375,000 369,100

Upland Rice 134,553 109,999 240,300 186,200

Maize 44,956 51,670 124,122 143,177

Peanut Not available Not available 16,377 16,019 Data resource: World Bank, 2010

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Market/industry Situation of Bio-Fertilizers Factories in Laos: With technical support from Vietnam the Government established 7 bio-fertilizer factories in the late 1990s. All factories use similar raw material with peat (60-80%) from a lake being the main ingredient. A range of other products are added and composted together with the peat. For example, the Dongxiengdy factory adds slaughterhouse by-products, by-products from beer, sugar, and tobacco processing, rock phosphate and guano. All components are mixed, a solution of micro-organisms is sprayed on and then the mixture is fermented for 20-30 days. In the year 2004 the factories produced about 20,000 ton. Although the name suggests a product ideal for organic farming we have to be cautious. Systematic testing by Lao-IRRI and an FAO project showed no or little response of rice to this fertilizer and most farmers say that it only has an effect when used in combination with in-organic fertilizers. Furthermore, as per IFOAM standards the use of peat is not allowed except for pots. A large proportion of the fertilizer was sold because of its promotion through various projects and organizations promoting “chemical free agriculture”. Because of the limited market, 5 factories have stopped production in 2005.

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The Utilization of Fertilizer in Laos: According to the World Bank report in 2010, the average use of chemical fertilizers in Laos about 9.1 kg per ha and 100 % imported. And bio-fertilizer is 20 kg per ha. Table below as indicators use of bio-fertilizers increased 5% per year and imported from neighboring countries 95%. This positive impact to environment and consumers due to the government policy is promoting the organic agriculture production. By support clean tech enterprise Government has policy’s tax holiday 2-5 years for investment on clean agriculture sector. Table 3: The Utilization of Fertilizer

Data Resource: World Bank, 2010

Delta is planning: To create the Bio-Organic Foliar Fertilizer Plant instead of the factories have been

stopped production since 2005. By establishing 5 factories which will be based in different part of Laos,

these are the products will be meet IFAOM standard. More importantly, the Delta’s products will be

effective in raising crop yields and subsequent sale prices, accelerating production; not to mention the

significant environmental and health protective effects as a result of conserving soil and water.

Lao Government Initiatives Measures by the government: The government, mostly through the Ministry of Agriculture and Forest has initiated a wide range of activities and programs with the main objectives of maintaining/improving the production resources and ensure consumer safety and quality. The most important activities/programs are listed below.

o Supply of plant protection chemicals: Subsidies and other support by the Government for the supply of plant protection chemicals have been stopped since 1993. By making chemicals less available and/or more expensive it is expected that farmers will be less likely to use them.

o Integrated Pest management (IPM): The Ministry has a long history of promoting IPM, and newly also ICM (integrated crop management) concepts.

1Inputs available for organic farming, W. Roder, P. Chittanavanh, K. Sipaseuth, and M. Fernandez PROFIL, 2005.

The Utilization of Fertilizer Per Ton Per Year 2006 2007 2008 2009

Urea 10,113.15 12,499.00 12,500.00 12,400.00

Complex NPK 12,113.15 15,499.00 15,400.00 14,600.00

Subtotal(Ton) 22,226.30 27,998.00 27,900.00 27,000.00

Bio-Fertilizer 72,225 74,404 235,244 233,155

Subtotal 72,225 74,404 235,244 233,155

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o Pesticide free zones: The Government has decided to select 3 zones that must remain free of pesticides and chemicals. These 3 zones are: the Boloven Plateau in the south, Vangvieng area in the Centre and Luang Prabang in the Northern part of the country.

o Projects and NGO’s: The Government supports NGO’s and projects focusing on organic agriculture and the promotion of bio-pesticides

o Lao Organic Standard has been ratified by the Ministry of Agriculture and Forest since 2005. The Standards are based on the International Federation of Organic Agriculture Movements (IFOAM) Basic Standards. These Standards for the certification of organic products govern the management, inspection and accreditation of such products during the production, harvesting and processing stages.

Measures by non-government organizations, producers and traders: Many NGO’s are promoting organic agriculture, sustainable agriculture and the use of bio-fertilizer or bio-pesticides. Often the marketing aspects are not given enough attention. The most visible organization which was also successful in the export market is the Lao farmers association. Recently the Department of Agriculture in collaboration with Helvetas (Swiss Association for International Cooperation) started a project for “The promotion of organic farming and marketing in Lao PDR (PROFIL). The main goal of the project is “to contribute to improved living conditions in rural areas of the Lao PDR, the good health of consumers, the sustainable use of natural resources, and economic growth through the promotion of organic agriculture”. The project activities include all aspects of production, processing, marketing and regulations. The project is expected to become a platform for organic farming, where specific knowledge is made available, and where the various stakeholders can exchange their experiences in this field.

Lao Government Incentives: The project PROFIL (Promotion of organic farming and marketing in Lao PDR) which started in March 2004, has initiated activities with the objective to:

o liaise among government institutions and NGO’s in attempts to introduce an enabling environment for organic agriculture

o generate the development of standards and legislation for organic agriculture in 2003. o facilitate certification through internationally accredited bodies o introduce a local certification system

Measures enhancing/ensuring the quality and safety: There is a strong awareness at the highest

level of the Government on the need to limit the use of chemicals in agriculture (Decree of Plant

Quarantine in Lao PDR No. 66/PM, dated March 3, 1993). Similarly, many projects and NGO’s have

emphasized the importance of sustainability, biodiversity and the need to protect the environment and the

natural resources.

Promotion and support: The Government, especially the Ministry of Agriculture will play an important

role in promoting and supporting the development of organic agriculture. NGO’s, consumer groups,

producer groups and traders will however have to play an equally important role. The most important

issues to address are:

� Coordination of the various efforts aimed at introducing/supporting organic agriculture � Creation of an enabling legal environment through appropriate rules and regulations. � Support of producers through appropriate extension activities � Marketing support for in-country and export markets

It is expected that the Department of Agriculture in collaboration with the project PROFIL will play a leading role in addressing those issues. The project has an ambitious list of activities. It represents the Department of Agriculture and the NGO’s and it will be in a good position to facilitate efforts in coordination.

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Foreign Direct Investment (FDI) in Lao People’s Democratic Republic: Inflows of Foreign Direct Investment (FDI) into Laos began once the country embarked on its economic transition to a market-driven economy in 1986. Following the promulgation of the first law on investment in 1988, inflows increased steadily, from US$2 million in 1988 to US$6 million in 1990 and US$36 million in 1993. Following a 1994 amendment to the Investment Law, FDI increased considerably compared to previous years, from US$59 million in 1994 to US$128 million in 1996. The Asian financial crisis temporarily impacted the FDI flows to the Asian countries, including Laos. Since, however, Laos has witnessed a significant increase in investment, driven mainly by the hydropower and mining sectors. Peaking in year 2007, registered inflows of US$324 million were almost 12 times higher than the 2005 amount of US$28 million. The global financial crisis led to a reduction or delay in investment projects causing figures to fall by about 50 percent between 2007 and 2009. Table 4: FDI inflows and stock annual data

FDI inflows and stock

annual data

(US$ million)

Year

1990 1993 1996 1998 2000 2005 2006 2007 2008 2009

FDI inflows 6 36 128 45 34 28 187 324 228 157

FDI stock 13 63 339 470 556 669 856 1180 1408 1564

Source: UNCTAD, 2010

The majority of FDI into Laos has flowed into natural resource sectors, which accounted for more than 80 percent of total FDI in the past few years. Investment in non-resource sectors has increased considerably and agribusiness is among the areas of future growth. According to Laos’ Department of Domestic and Foreign Investment (DDFI), of over 1,000 projects approved during the 2000–2010 time-period, the energy sector attracted 50 projects capitalized at US$4.6 billion while mining US$3.2 billion/209 projects; service US$1.6 billion/207 projects; agriculture US$1.3 billion/238 projects; industry and handicraft US$1.1 billion/303 projects. During the first half of 2010, the number of investment proposals increased slightly compared to the previous year (104 applications). According to government sources, from 2001 to 2010, 38 countries invested in Laos with a total capital of around US$13 billion. Viet Nam topped the list with 252 projects worth US$2.8 billion, followed by China with 397 projects valued at US$2.7 billion; and Thailand US$2.7 billion/269 projects. Other major investor countries are Republic of Korea, France, Japan, India and Australia. The Lao People's Democratic Republic is one of the few remaining communist states. The economy is essentially a free market system with active central planning by the government.

Since the FAO Investment Policy Support FOREIGN AGRICULTURAL INVESTMENT PROFILE Lao People’s Democratic Republic introduction of the New Economic Mechanism (NEM) in 1986, the country has introduced reforms to liberalize the economy, stimulate growth and enhance the business climate. The first Investment Law of 1988 opened most sectors to foreign participation, including agriculture, forestry and industry. Since then, the law has been revised considerably: the Law on Promotion and Management of Foreign Investment, enacted in 1994, was amended in both 2004 and 2009 to further promote Laos as an investment destination, provide more incentives, streamline regulations and reduce tax. In particular, the latest amendment consisted in the merger of once separate laws on domestic and foreign investment. One of the key changes in the new law is the provision allowing foreigners to own land, previously reserved solely to Lao nationals. The main FAO Investment Policy Support FOREIGN AGRICULTURAL INVESTMENT PROFILE Lao People’s Democratic Republic agricultural exports in terms of value are green coffee, maize, fruit preparations, sesame seed and groundnuts with shell. The value of agricultural imports in 2008 was US$235 million, an increase from the 2005 value of US$170 million. The average growth rate of imports from 2005 to 2008 was 11.5 percent. The main agricultural imports in terms of value are non-alcoholic beverage, food preparations, distilled alcoholic beverage, coffee extracts and refined sugar. Laos also has a comparative advantage in lumber and forest products because of its vast forest resources.

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Although the government only opened the sector to foreign investment in 2005, in 2006 alone 30 agriculture projects worth a total of US$458 million were approved. Concessions were granted to Lao firms, as well as Chinese, Vietnamese and Thai investors. More recently, investors from the Republic of Korea, Japan, India and Scandinavia have become active players with a particularly strong presence in the central provinces. So far, foreign investors have focused on cash and export-oriented crops, including maize, soybean, tea and vegetables. As examples, Thai CP Group has invested in Sayaboury province and River Kwa (Northern regional) International Food Industry has invested in organic farming in Paksong, Champasack province (Southern regional) Mitr Phol Sugar is investing in sugar cane production mainly in Savannakhet province (Centre regional).

The country has also initiated the Lao Business Forum (LBF), held twice a year since 2005, as a formal dialogue mechanism between the government and the private sector.6 In the Doing Business (DB) 2011 summary data, the overall Ease of Doing Business status ranks the country 171st out of 183 economies. The table below lists the rankings by each topic and the following displays the enterprise surveys results for perceived constraints to firm investment.

Company Profile

Background of The Company: Ðelta Agro-Forestry Promotion and Imports & Exports Sole Co., Ltd is a registered private company in Laos with the purpose on the production, distribution and promotion of the use of Bio-Organic Foliar Fertilizer and Export Good Organic Agriculture Products from Laos.

Business Registration No. 1744/ຫຈທ; dated 26 June 2012

The following is a strategy document for Delta Agro-Forestry Promotion and Import-Export Sole Co., Ltd, a company incorporated in Laos. It gives the background of the company, strategy for achieving food security and available opportunities for partnership.

Why Delta is deferent?

SWOT Analysis of the Delta

� Strength (internal firm)

1. Have a direct knowledge and 15 years experienced in the Bio-Tech and Organic Foliar Fertilizer

Production

2. Have a direct knowledge and 20 years experienced in the field of agriculture.

3. Have a understanding of customer needs

4. Strong brand ambassador whom people can tell the organic man

5. Strong research and development

� Weakness (internal firm)

1. Customer loyalty lacking

2. Source of investment fund lacking

� Opportunity (External Firm)

1. Most Population holds professional agriculture principles (80%).

2. High awareness of people in chemical hazardous material

3. High demand of organic food in the world market

� Threat (External firm)

1. Easy in entrance of new competitors

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2. Easy in looking for the substitutes of goods

Delta’s Strategy for food Security: Preservation of the soil fertility and preservation of environment are the priority number one for Bio-Organic Foliar Fertilizer is to overcome the problem of soil fertility dilapidation. Through research the Company discovered that erosion of soil fertility contributes a great deal to the poor harvests that are realized by farmers. This has been linked to the formation of acids and other compounds in the soils as a result of usage of inorganic fertilizers. Many farmers unable to follow the strict instructions of the application of inorganic fertilizers find themselves using fertilizers with little attention on the state of the soil on which they religious apply fertilizers. As a result, the different fertilizers react to form acids and other compounds that begin to intoxicate the soils, thereby reversing the goal of the fertilizer application.

Delta comes to solve this problem. It introduces micro-nutrients and micro- organisms that constantly work on the soil to ensure fertility is maintained. Environmental preservation is very important in any farming venture. Reducing the pollution of our environment through residuals formed by inorganic fertilizers is a deliberate strategy of the company. Frequent and consistent use of Bio-Organic Foliar Fertilizer rids the soil of carbon and other impurities that pollute our environment. Delta’s Bio-Organic Foliar Fertilizer does not also harm aquatic life since it is 100% organic.

Cost of inputs reduction: Research done by the Company showed that the balance sheet of the farmer does not always balance, in many instances it goes against the farmer as the liabilities are usually more than the assets. One factor that contributes to this has been the use of different types of fertilizers at different times of the crop growth and development. These fertilizers are not usually of the same price. At the end of the day the costs of fertilizers alone are so high that the peasant farmers often till their farms without its use. Delta ‘s Bio-Organic Foliar Fertilizer has overcome this by developing a product that caters for all the needs of the plant such that the farmer not have to use more than Delta Bio-Organic Foliar Fertilizer; once used, it caters for needs of the plant from planting to harvesting.

Increased yields: The farmer's biggest goal is to have higher crop harvest to cater for the family needs and surplus for selling to get income to cater for other needs. Delta Bio-Organic Foliar Fertilizer addresses this problem by ensuring that the plant is healthy, grows in conducive environment and therefore produces to its maximum. Bio-Organic Foliar Fertilization is the most efficient way to increase yield and plant health. Tests have shown that foliar feeding can increases yields from 12% to 25% when compared to conventional fertilization.

Wealth creation: Delta has a wealth creation strategy for the farmer. When the farmer increases production, there is problem of the market as middle men come in to erode the profits that would have been gained by the farmer. This provides a strategic opportunity for the Company-that of opening value addition industries and factories. As the farming production increases, the company intends to let the farmer benefit through the opened industries. The Company also hopes to move the Bio-Organic Foliar Fertilizer Production factories to the farmer with the aim of cutting down the cost of production further and encouraging farmers to become shareholders in a company that they promote by buying the fertilizer. This will create wealth by absorbing the many young and unemployed youths. The value addition will ensure that farm produce fetch better prices.

Increased Competitiveness of the agricultural produce: The world is turning to the use of organically grown foods. Delta intends to tap this market to the benefit of the farmer. Food grown using organic fertilizer will compete favorably at the international market since the traceability tests will not be imposed on such crops.

By focusing on these aspects, Delta hopes to achieve a food security revolution. This is possible because already the fertilizer has been analyzed by various regulatory bodies in Laos. They include, Delta, the Bio-Tech Research and Development Institute (DBTRDI), National Agriculture Forestry Institute (NAFRI) Southern Agricultural and Forestry Research and Development Center (SAFRAC) and Ministry of

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Agriculture and Forestry of Laos (MOFA) that patented the technology that has been used to make the fertilizer. All of them posting favorable results and through their independent trials, they have proven that the fertilizer is indeed doing what is being said it does.

Place of Food Security in Regional Development

Cost of food directly affects inflation: When computing the rates of inflation, the Lao National Bureau of Statistics and other economic experts always include the cost of food as a major determinant of inflation. When food items become scarce, the inflation rates shoot up.

Thus achieving food security is one way of checking the runaway inflationary rates that might have devastating effects to the county development. Any measure to increase food security is a measure at addressing the inflation rates that affects an entire economy. Any county that intends to achieve the Laos‘s Vision 2020 goal or the Millennium Development goals, it must begin by addressing the issue of food security.

The national government intends to achieve food security as a basis for national development: In its policy pronouncements so far, the Lao Government Policy has set out achieving Food Security and Sustainable Livelihoods in the Laos as one way of triggering economic development. The national government is keen on feeding its people as a way of ensuring that accelerated national development is achieved. As a consequence, every county must put in place measures, policies, practices and an enabling environment that will ensure that food security is achievable. The county government’s ability to feed its people will then directly contribute to the national government being able to feed the nation.

Majority of rural population are small scale farmers, with no real income hence the need for affordable food: All the 3 regional of Laos have a form of farming taking place in one form or another. This is because; Laos being an agrarian economy majority of its population is based at counties. The biggest employer at the county level is the agriculture sector, be it farming or livestock keeping.It is therefore in the interest of every county to see that the sector has been given due attention.

Available Opportunities For Partnership

Partnership between Delta Agro-Forestry Promotion and Import-Export Sole Co., Ltd with any regional government, NGO and International Organization produces the following opportunities:

� Food production increment

� Commercial crops yields increment hence increased trade.

� Environmental conservation.

� Creation of value addition chains and industries, hence creation of employment.

� Increased revenue to the counties.

These are the opportunities that will accelerate the counties to develop at higher rates. Any county that takes advantage of these opportunities will stay ahead of the rest.

Request for Partnership for Realization of Regional Development

Why then would Delta seek to partner with Local Government, Private Sector, NGO and International Organization?

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� Delta‘s Bio-Organic Foliar Fertilizer has been passed by various bodies such as NAFRI,NAFES, SAFREC, Coffee Research Center in ITOU Station This means that it is a product that has passed minimum standards according to the various bodies. This is important because Local Governments are assured of the quality of the product.

� It is affordable to the farmers: Deliberate steps have been taken by the company to ensure that the cost of Delta’s Bio-Organic Foliar Fertilizer remains affordable to the farmer. The product is made and distributed with the farmer as the central determinant of every process and step.

Its application process is easy: This is one product that makes the farmer to have a rest of mind. The farmer uses only one type or fertilizer in Delta Bio-Organic Foliar Fertilizer

Contact us: Delta Agro-Forestry Promotion and Import-Export Sole Co., Ltd

Office in Laos: 197 Noonpeeng Village, Chathabury District, Vientiane Capital, Lao PDR

Phone and Fax number +856-21-540231, Mobile +856-20-99337774 or 20-55718714

Office in Thailand: 57/33 Moo 7 Glory House, Phuthamonthon Si 3, Thaweewathana, Bangkok 10170 Mobile number: +669-1015-1381 or 095-962-1326

Email: [email protected] or [email protected]

Growth Strategy

The Project’s Implementation.

• In 2014 Delta’s will be setting up 3main factories to cover 3 regionals of Laos:

1. The Factory No. 1 will be based in (Naxaythong District, Vientiane

Capital) the Northern Part to cover 7 Northern Provinces, like Luang

prabang, Houaphanh, Oudomxay, Phongsaly, Luang Namtha, Bokeo

and Xayabury.

2. The Factory No. 2. will be based in (Xay District, Oudomxay Province)

the Central Part to cover 6 Central Provinces, like Vientiane capital,

Xieng Khouang, Vientiane, Bolikhamxay, Kham mouane, Savanhnaket,

3. The Factory No. 3. will be based in (Parxe District, Champasack

Province) the Southern Part to cover 4 Southern Provinces, like

Champasack, Xekong, Saravanh and Attapeua.

• By 2019 and 2014. Delta will be expanding the 2 more factories, where there are

the highest growth rates of agriculture. The capacity of production will be at

1,320,000.00 liters or 1,400.00 tons in 2014 and 4,896,000.00 liters or 5,000.00

tons in 2029. Please see the Project Implementation’s Map.

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Production’s Schema

Bio-Organic Foliar Fertilizer’s Processing Line

Supply raw materials

• Vegetables

• Fruits

Preparing raw materials

• Ground all raw materials

Extraction for Amino Acid

Ferment raw materials by using

Effective Microorganism

Refine product at 600,000 ppm

and add some necessary’s plant

nutrients

Semi-Finished Product

Vitamin C, Total ascorbic acid and

hormones as plant nutrient

Marketing and

Distribution

Partnership with local

authority

Finish Product

It is ready to pack in bottle and

labeling

11

Operation Marketing & Sales: Delta’s headquarters are located at 197 Nongpeeng village,

Chathabury district, Vientiane capital, Lao PDR. The Company currently operates a production facility

with 10 tons per year of Bio-Organic Foliar Fertilizers, on leased land with one small factory buildings and

administrative offices.

Management is planning to establish 3 new production plants which will be based in Northern and other

two will be in Central and Southern region of Lao PDR in early 2014, to increase total aggregate capacity

to 1,400.00 tons per year. Thereafter will be expended 2 more factories in 2019 and 2024. Each plant is

expected to be granted tax free status for first 5 years as a result of Lao Government and Local

Government Policies and incentives that promote green agricultural practices.

Strategically, the Company uses foreign production partners to test market capacity and seek distributor

and consumer (farmer) feedback. Obtaining required financing to build out self-production capacity will

lower Delta’s cost of goods sold and lead to increased profits.

Expansion of a distribution network is a critical component to support the build-out of production capacity.

The Company currently serves distributors with the bulk of product sales coming from Vientiane Capital

(Central regional). At this time the Company has begun developing business within the additional

provinces such as Northern and Southern regionals.

The Company intends to secure exclusive selling rights with the mid-sized to large scale bio-organic foliar

fertilizer distributors and sellers in each major agricultural region of Laos.

The next step will be for Delta to consider direct sales teams or joint venture holding companies with the

large scale fertilizer distributors and sellers in an effort to optimize profits.

The Company will also consider building locally-based factories for direct sales. Direct selling at the local

level provides enhanced connectivity with individual farmers and will better serve the individual needs of

its customers. This model is especially appealing to farmers who refer to purchase locally produced

government certified fertilizer.

Delta is focused on enhancing and building brand awareness of its product lines. The Company has

made a commitment to marketing its branded Bio-Foliar Fertilizer Products nationwide through advertising

at all the regional agricultural products distribution centers, the agriculture channel on Lao Star

Television, and various agricultural trade conferences. In rural areas and smaller cities, the Company

plans to promote its products through wall advertising, free samples, demonstrations and the organization

of educational meetings for farmers.

Experienced Management Team: 1. Mr. Damrong Phomdoungsy, Team leader, Managing Director (Product Management &

Branding Organic Fertilizers) at Delta Agro-Forestry Promotion and Import-Export Sole Co., Limited. To handle Product Management & Branding Bio-Organic Foliar Fertilizers for Delta Agro-Forestry Promotion and Import-Export Sole Co., Limited,

o Conduct the Research and Develop Bio-Tech Products for Enterprise o Capacity building of Delta staff for Lab Engineer and Field Engineer works.

Past: 20 years experienced involved with Agriculture and Forestry in rural remoter area in Laos; well known the location and the need in among minority and ethnic group, rich inexperienced of rural development and become a Social Economic and Environment Advisor to Lao Government for many years.

12

Education:

Summary: 20 years of experienced in Social Economic and Environment Management in Laos.

2. Mr. Boune Soune Keomany, Deputy Manager, Supply Chain and Import-Export at Delta

Agro-Forestry Promotion and Import-Export Sole Co., Limited Past: Management Trainee (Imports & Supply Chain) at Delta Development Consultant Sole Co., Limited for 10 years. To Handle: Southern, Central and Northern regional, Laos | Marketing and Advertising, Logistic, Contract Farming and Delta’s Products distributor Education: University of Laos, Science and Environment Faculty, Institute of Economic and Management, Summary: Many years involved Agri-Business.

3. Miss. Thanluck Meecharuen, Assistance to Director - Marketing & Product Management at Delta Agro-Forestry Promotion and Import-Export Sole Co., Limited Past: The Secretary of The Controlling State Enterprise Policy committee, The Secretary of Privatization committee, responsible to monitor the Policy of Provincial Electricity Authority Pro (PEA), to assist the colleague to take care the policy of Bangchak Petroleum PLC

Management Trainee- Marketing - Bio / Organic Fertilizers at Delta Agro-Forestry Promotion and Import-Export Sole Co., Limited, Live Project Trainee, Product Management Team, Org... Education:

Institution (Date: from - Date to) Degree(s) or Diploma(s) obtained

■ The University of Adelaide, Australia (2008) ■ Master of Applied Finance

■ The University of Thai Chamber of Commerce, Thailand (2001)

■ Master of Business Administration (MBA)

■ Bangkok University, Thailand (1997) ■ Bachelor of Accounting

Summary: About 5 years of experience in Marketing, Product Management, Brand Management, sales and New Business Development.

Competition Advantage With the present areas of rice cultivation: Delta’s planned to share the domestic market of Bio-

Fertilizer for 10% or about 237,510.00 to 500,000.00 ha. The Company will be supply the Bio-Organic

Foliar Fertilizer and Pesticide Product to The Organic Rice Production Project for 200,000 ha and small

holders as Farmer’s Credit. That meant Delta will be produced 950,040.00 to 2,000,000.00 liters per year

or more in order to meet the demand and take the place of the import of chemical fertilizer and pesticide.

Product Superiority: Delta has developed the products such as “Bio-Organic Foliar Fertilizer” and “Bio-

Pesticide” that met IFAOM standard. The products are the most efficient way to increase yield and plant

health. And it is satisfactory to Lao Farmers. The production method also has excellent efficiency, it is

Institution (Date: from - Date to) Degree(s) or Diploma(s) obtained

■ University of Berkley of California, USA (1987) ■ Ph. D in Food Science and Technology

■ International Correspondence Schools, Canada, 1984

■ M. Sc in Wildlife/Forestry Conservation

■ Building and Construction School, Vientiane Capital, Lao PDR, 1981

■ B. Sc in Architectural and Engineering,

■ National University of Lao PDR, Vientiane Capital, Lao PDR, 1977

■ B. Sc in Bio-Chemistry

13

easy to commercialize and has a high value-added quotient; thus maximizing economic efficiency,

ecological and other environmental benefits to optimize the advantages.

More importantly, the Delta’s products will be effective in raising crop yields and subsequent sale prices,

accelerating production; not to mention the significant environmental and health protective effects as a

result of conserving soil and water.

Policy Advantages: Apart from all the benefits, advantages and tax incentive it enjoys under the Lao

Government referred to earlier in this Business Plan, the Company is subject to be granted the exemption

of profit tax for a period 2 - 5 years and afterward 10% corporate profit tax will be applied; Industrial sector

shall be granted the exemption of profit tax for a period 5 - 10 years and afterward 35% corporate profit

tax will be applied to support clean tech enterprise.

The Factory will be established in heart with agricultural production source in order to supply the raw

materials in place. This safeguards the Company’s requirement and also has greatly reduced

transportation costs.

Cost Advantage

• Labor force and technical assistance are available in locally.

• Raw material is available in locally and admissibility price.

• There are methods for bacteria culturing themselves

For example: the efficiency of the conventional of rice cultivation in Laos, farmer must use 200 Kg of

chemical fertilizer per ha per season in order to reach the yield 3.5-5 ton per ha. Recently the chemical

fertilizer‘s price in Lao Market is € 0.5 per Kg. That meant farmer will spend €100.00 per ha per season to

purchase chemical fertilizer.

Delta’s Bio-Organic Foliar Fertilizer 1liter can mix with 200-250 liters of water and spray to cover 1,600

square meters of cultivation area or 1/6 ha. Farmer will use 6 liters of Delta’s Bio-Organic Foliar Fertilizer

per ha per season. Products of Delta cost €12.00 per liter or € 72.00 per ha.

Intellectual Property

The Company has a wealth of specialized methodologies, production, equipment and know how that is

employed in their operations. As such, numerous patents are in the application process in order to protect

the Company’s competitive advantages such as;

• Methods of culturing microorganism.

• Methods of fermentation of raw material and treatment.

• Methods of use activated microorganism to produce amino acid

• Methods of packing and labeling

Rick Factor. Future Finance Performance: As relative newcomer in the industry, the company has a good reputation

and good foundation, however consistent sales and scalable have not been reaching as yet. As a result,

consistently profitability is unknown and Company may not be profitable in the future. The Company faces

of not being able to substantially maintain the margin and volume on its products and consequentially not

being to achieve its projected profitability.

14

Need for additional Financing: Delta’s long-term liquidity will be affected by numerous factors,

including, but not limited to demand for the Company’s products; expenses for sales and marketing and

research and development; the extent to which competitors are successful in developing and marketing

their own products and increasing their market share; and the level and timing of revenues. To the extent

that resource is insufficient to fund the Company’s activities, the Company may need to raise additional

capital. There can be no assurance that such additional funding, if needed, will be available on terms and

conditions attractive to the Company, or at all. If adequate funds are not available on acceptable terms,

the Company may be unable to expand its business, develop or enhance its products, take advantage of

future opportunities or respond to competitive pressures, any of which occurrences could have a

materially adverse effect on the Company’s business. Operating results and financial condition. In the

event that the Company is successful in raising addition

Customer Acceptance: The Company is creating a new brand and expanding line of products.

Widespread acceptance is yet unproven. The Company’s marketing effort play a pivotal role in the future

success of the Company.

Reliance on key Individual; Need to Hire Additional Qualified Personnel: Delta is dependent upon

the active participation of its founding Chairman and CEO and CTO as well as certain other key

employees. The departure of these individuals would have a material adverse effect on the Company’s

business and revenues. Although the Company is committed to offering competitive salaries, benefits and

appealing work environment, there can be no assurance that the Company’s inability to hire and retain

qualified personnel could have a material adverse effect upon the Company future business prospects.

Loss of Incentives: The degree that several tax exemptions, rebates and /or subsidies that either

produces organic and green agriculture/fertilizers are available to Delta from Lao Government may be

altered cease providing such benefit to the Company.

Litigation: Delta intends to rely upon trade secrets, trademarks and unpatented Know-how to protect its

products, design, proprietary and logistical activities that its brand strategy. The Company may lack the

financial resource to effectively pursue infringement of its intellectual property rights. In event there are

patent infringement suits by other companies, any litigation could in substantial cost and diversion of the

Company is ultimately successful. The Company believes it is taking all reasonable precautions to avoid

legal action against the Company.

Slow Economic: Delta is exposed to temperature risks from slow economies, now and in the future that

may cause fluctuations in the Company’s sales and revenues requiring additional financing may in turn

dilute the position of shareholders.

Financial Projection. The financial projection of the Company is based on assumptions that the Company believes are reasonable as of the date of this Business Plan. Such assumptions, including the Company’s ability to finance its operations and the size and growth of the market for the Company’s products, may be incomplete or inaccurate, and unanticipated events and circumstances may occur that could have a material adverse effect on the Company’s ability to achieve these Projections. The projections involve a number of risks and uncertainties. The projections assume that the Company will be able to meet it’s the short-term and long-term capital needs and the sufficient secondary sources of capital such as commercial debt financing will be available to the Company on favorable terms. In addition to the risk factors, among the other factors that could cause actual results to differ materially from projections include, without limitation: 1) Business conditions and growth within the agriculture and/or fertilizer industries and the general economy, 2) The degree of acceptance of the Company’s products by farming

15

communities, 3) The Company’s ability to maintain a properly trained workforce and/or to maintain viable production facilities production volume and 4) The Company’s ability to secure adequate financing to build and/or maintain variable production facilities. Some assumptions on which the projections are based inevitably will not materialize, and unanticipated events and circumstances will occur. Therefore the actual output achieved during the projection period may vary from the projection and variations may be material.

Assumptions to pro forma 1. Currency: All financial statements are reported in Euro and based on a US dollar currency exchange

rate of 1.35.

Total Initial Investment Cost:

No. Items Total amount of Financing

1 Property cost €4,800,000.00 2 Equipment cost €2,400,000.00 3 Research and development cost €400,000.00 4 Sales and Administration cost €1,200,000.00 5 Net working capital €1,200,000.00

2. Production (Unit: Liters): The Company will be established the 3 main factories in 3 regions of Lao

PDR in 2014. In 2019 and 2024, the Company will plan to expand the two more factories, where there are the highest growth rates of the agriculture. The totally capacity of the production will be at 1,400 tons in 2014 and 5,000 tons in 2029.

Factory 1 2 3 4 5 Maximum production Capacity 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 Economy of Scale 800,000 800,000 800,000 800,000 800,000 Actual Production Capacity (2014) 330,000 330,000 330,000 0.00 0.00 Actual Production Capacity (2019) 367,026 367,026 367,026 367,026 0.00 Actual Production Capacity (2024) 455,917 455,917 455,917 455,917 455,917 Actual Production Capacity (2029) 734,253 734,253 734,253 734,253 734,253

2014 2015 2016 2017 2018 2019 2020 2021

Number of Production

990,000

1,069,200

1,154,736

1,247,115

1,346,884

1,468,104

1,600,233

1,744,254

2022 2023 2024 2025 2026 2027 2028 2029

Number of Production

1,901,237

2,072,348

2,279,583

2,507,541

2,758,295

3,034,125

3,337,537

3,671,291

3. Inflation: Referred to Bank of the Lao PDR report in 2003 to 2012, the average inflation rate of Lao PDR at 7% will be applied against the entire sale price and the cost of goods sold.

4. The Growth Rate: The average growth rate of the sale number of the Company has effected from the average GDP of Lao PDR in 10 years later. The average GDP is approximately 8% which is calculated from 2000 to 2012

2.

2Data of World Bank, 2013

16

5. Revenue: The forecasting the revenue each year is affected from the growth rate and the inflation rate. The growth rate is compounded in the number of sale in every year, and the inflation rate is calculated in the sale price in every year.

2015 - 2018 2019 - 2023 2024 - 2029

The percent of Number of Sale 108% 109% 110%

Increasing the sale price has an impact the customer loyalty, thus the company plan the sale price

per unit will be increased in every five year.

2015 - 2018 2019 - 2023 2024 - 2028 2029 The Sale Price per Liters €12 €16.8 €23.6 €33.1

6. Cost of Goods Sold: The percent of cost of goods sold is decreased because of the economy of scale. Economies of scale are the cost advantages that enterprises obtain due to size, with cost per unit of output generally decreasing with increasing scale as fixed costs are spread out over more units of output. Often operational efficiency is also greater with increasing scale, leading to lower variable cost as well. 2015 - 2018 2019 - 2023 2024 - 2029

The percent of Cost of Goods Sold 100% 95% 90%

7. Operating Cost: The Operating cost has two costs: the research & development costs and the Sale

& Administrative costs. The R&D costs are increased at 1% of each year. The S&A costs are increased at 5% of each year.

8. Earnings before Depreciation & Amortization, Income Tax: In 2014, the Company is set up the expected profit at €4,700,000 which covering the pay back loan and cash reserve policy. Following the breakeven point (BP) analysis, the number of production is 900,000 Liters at the first year.

BP at the expected profit = ��

(�� !"#$)

= &,()),))) � *,+)),))

(&,�-)

= 900,000 Liters

9. Account Receivable: The approximate forecasting account receivable is calculated at 20% of annual revenue at the end of each year. The collecting period of the account receivable is 180 days.

10. Account Payable: The approximate forecasting account payable is calculated at 10% of annual cost of goods sold at the end of each year. The payback period of the account payable is 30 days.

11. Inventory: To maintain an adequate supply of commodity, the company assumes that final product

will be held a level equal to 10% of annual number of sale at the end of each year.

12. Cash Reserve Policy: The Company has a several problems to face with the real situation such as agriculture industrial risk, foreign currency risk, managing the Company’s account receivable, account payable, and the cost of production. The Company plan and set up the cash reserve policy to protect the Company’s short-term and long-term liquidity. The cash reserve is calculated at the percent of annual net income in each year, showing the table below.

17

2014 - 2018 2019 - 2023 2024 - 2029 The percent of Cash reserve 40% 50% 60%

13. Taxation: The income tax rate is 35%.

14. Depreciation: The Company uses the straight line method improving the company’s property and

equipment.

Item Year Rate of Depreciation Office Facilities 5 20.0% Laboratory tools 8 12.5% Production Machine 10 10.0% Building & Factory 20 5.0%

15. Discount rate: The Company uses only the debt cost in investment and setting up the business, so the Company will have benefit from the tax saving.

Debt rate = the rate of loan interest × (1- tax rate)

= 3% × (1 – 0.35)

= 1.95%

Discount rate = Inflation rate + Debt rate

= 7% + 1.95%

= 8.95%

16. Payment: In case of financing debt 3%, the company will except for the payment of the loan payback and interest loan expenses at the first year. At the first year, the Company will start building the factory and the laboratory. Moreover the company will launch the product the Laos people to know this bio technology and knowhow. However the three areas the company will set up the factory, we have has our customer. The below table is explained the detail of the payback loan.

The Beginning of Loan Amount 10,000,000 The Period of Financing 15 year The Excepting Period of Paying Loan 1 year The Rate of Loan Interest 3% The Payment • 15 installments

• Paying equally each installment • Paying every year until 15 years

The Timetable for pay back loan for 15 years

Year Beginning Payment Interest Expense Payback Balance

1 10,000,000.00

2 10,000,000.00 837,665.80 300,000.00 537,665.80 9,462,334.20

3 9,462,334.20 837,665.80 283,870.03 553,795.77 8,908,538.43

4 8,908,538.43 837,665.80 267,256.15 570,409.65 8,338,128.78

5 8,338,128.78 837,665.80 250,143.86 587,521.94 7,750,606.84

6 7,750,606.84 837,665.80 232,518.21 605,147.59 7,145,459.25

7 7,145,459.25 837,665.80 214,363.78 623,302.02 6,522,157.22

18

8 6,522,157.22 837,665.80 195,664.72 642,001.08 5,880,156.14

9 5,880,156.14 837,665.80 176,404.68 661,261.12 5,218,895.03

10 5,218,895.03 837,665.80 156,566.85 681,098.95 4,537,796.08

11 4,537,796.08 837,665.80 136,133.88 701,531.92 3,836,264.16

12 3,836,264.16 837,665.80 115,087.92 722,577.88 3,113,686.28

13 3,113,686.28 837,665.80 93,410.59 744,255.21 2,369,431.07

14 2,369,431.07 837,665.80 71,082.93 766,582.87 1,602,848.20

15 1,602,848.20 837,665.80 48,085.45 789,580.35 813,267.85

16 813,267.85 837,665.80 24,398.04 813,267.76 -

Financial Ratio

2014 2015 2016 2017 2018 2019 2020 2021

(1) Profitability Ratio

Return on equity 167% 64% 42% 31% 24% 49% 40% 33%

Return on asset 23% 17% 15% 14% 12% 31% 27% 25%

Gross profit margin 58% 55% 52% 49% 45% 60% 58% 55%

(2) Asset Efficiency Ratio

Asset turnover ratio 89% 86% 84% 83% 82% 106% 99% 94%

(3) Liquidity ratios

Current ratio 11.95

13.93

15.22

15.93

15.12

15.41

17.30

18.46

Quick ratio 10.95

12.93

14.22

14.93

14.12

14.41

16.30

17.46

(4) Capital structure ratios

Debt to equity ratio 635% 282% 174% 122% 92% 61% 44% 33%

Debt ratio 86% 74% 64% 55% 48% 38% 31% 25%

Equity ratio 14% 26% 36% 45% 52% 62% 69% 75%

2022 2023 2024 2025 2026 2027 2028 2029

(1) Profitability Ratio

Return on equity 28% 24% 45% 40% 35% 32% 29% 47%

Return on asset 22% 20% 39% 35% 32% 29% 27% 45%

Gross profit margin 52% 48% 63% 60% 57% 54% 51% 63%

(2) Asset Efficiency Ratio

Asset turnover ratio 90% 88% 114% 107% 101% 98% 95% 119%

(3) Liquidity ratios

Current ratio 18.34

17.88

18.45

19.70

20.33

20.32

20.10

21.53

Quick ratio 17.34

16.88

17.45

18.70

19.33

19.32

19.10

20.53

(4) Capital structure ratios

Debt to equity ratio 26% 21% 15% 12% 9% 7% 6% 5%

Debt ratio 21% 17% 13% 10% 8% 7% 6% 4%

Equity ratio 79% 83% 87% 90% 92% 93% 94% 96% From the above table, the output of financial ratios can describe that the business plan of the Company has effectiveness. This business plan can be established the Company.

17. The Measure of Financial Projection:

19

Payback Period 6.3 years Net Present Value (NPV) €42,943,749.48 Internal Rate of Return (IRR) 19%

In conclusion, the Company has a positive net present value investment, and the high internal rate of return. It means the project will be invested.

20

Income Statement

Currency : Euro

2014 2015 2016 2017 2018

Revenue 10,800,000.00 11,664,000.00 12,597,120.00 13,604,889.60 14,693,280.77

Less Cost of Goods Sold 4,500,000.00 5,200,200.00 6,009,351.12 6,944,406.15 8,024,955.75

Gross Profit 6,300,000.00 6,463,800.00 6,587,768.88 6,660,483.45 6,668,325.02

Less Operating Expenses 1,600,000.00 1,664,000.00 1,731,040.00 1,801,270.40 1,874,849.10

Earnings before Depreciation, Amortization and Income Tax 4,700,000.00 4,799,800.00 4,856,728.88 4,859,213.05 4,793,475.91

Less Depreciation & Amortization 481,500.00 1,328,765.80 1,339,133.80 1,350,331.24 1,362,424.48

Earnings before Income Tax 4,218,500.00 3,471,034.20 3,517,595.08 3,508,881.81 3,431,051.44

Less Income Tax 35% 1,476,475.00 1,214,861.97 1,231,158.28 1,228,108.63 1,200,868.00

Net Income 2,742,025.00 2,256,172.23 2,286,436.80 2,280,773.17 2,230,183.43

Note: (1) The operating cost has the research & development cost, and the sales & administration.

21

Income Statement

Currency : Euro

2019 2020 2021 2022 2023

Revenue

22,462,814.14

24,484,467.42

26,688,069.48

29,089,995.74

31,708,095.35

Less Cost of Goods Sold 8,891,530.60

10,370,192.14

12,094,755.09

14,106,112.86

16,451,959.43

Gross Profit

13,571,283.55

14,114,275.28

14,593,314.39

14,983,882.88

15,256,135.92

Less Operating Expenses 1,951,941.90 2,032,722.83 2,117,374.65 2,206,089.21 2,299,067.97

Earnings before Depreciation, Amortization and Income Tax

11,619,341.65

12,081,552.45

12,475,939.75

12,777,793.66

12,957,067.96

Less Depreciation & Amortization 1,601,576.51 1,620,170.22 1,640,251.44 1,796,599.05 1,820,021.78

Earnings before Income Tax

10,017,765.14

10,461,382.23

10,835,688.31

10,981,194.61

11,137,046.18

Less Income Tax 35% 3,506,217.80 3,661,483.78 3,792,490.91 3,843,418.11 3,897,966.16

Net Income 6,511,547.34 6,799,898.45 7,043,197.40 7,137,776.50 7,239,080.01


22

Income Statement

Currency : Euro

2024 2025 2026 2027 2028 2029

Revenue

48,919,468.42

53,811,415.26

59,192,556.79

65,111,812.47

71,622,993.71

110,500,449.17

Less Cost of Goods Sold

18,344,800.66

21,591,830.37

25,413,584.35

29,911,788.78

35,206,175.39

41,437,668.44

Gross Profit

30,574,667.76

32,219,584.89

33,778,972.44

35,200,023.69

36,416,818.32

69,062,780.73

Less Operating Expenses

2,396,522.40

2,498,674.57

2,605,757.60

2,718,016.28

2,835,707.60 2,959,101.40

Earnings before Depreciation, Amortization and Income Tax

28,178,145.36

29,720,910.32

31,173,214.83

32,482,007.40

33,581,110.71

66,103,679.33

Less Depreciation & Amortization

2,190,060.66

2,223,675.81

2,259,980.17

2,362,144.72

2,404,490.13 2,462,806.18

Earnings before Income Tax

25,988,084.70

27,497,234.51

28,913,234.66

30,119,862.69

31,176,620.59

63,640,873.15

Less Income Tax 35%

9,095,829.65

9,624,032.08

10,119,632.13

10,541,951.94

10,911,817.21

22,274,305.60

Net Income

16,892,255.06

17,873,202.43

18,793,602.53

19,577,910.75

20,264,803.38

41,366,567.55


23

Balance Sheet

Currency: Euro

2014 2015 2016 2017 2018

Current Assets Cash 2,766,715.00 4,390,718.34 6,025,584.42 7,649,172.64 8,394,987.52 Account Receivable 2,160,000.00 2,332,800.00 2,519,424.00 2,720,977.92 2,938,656.15 Inventory 450,000.00 520,020.00 600,935.11 694,440.62 802,495.58 Total Current Assets 5,376,715.00 7,243,538.34 9,145,943.53 11,064,591.18 12,136,139.25 Fixed Assets Net Property & Equipment 7,200,000.00 7,248,000.00 7,299,840.00 7,355,827.20 8,255,202.82 Less Accumulated Depreciation 481,500.00 972,600.00 1,474,068.00 1,986,733.44 2,511,492.12 Total Fixed Asset 6,718,500.00 6,275,400.00 5,825,772.00 5,369,093.76 5,743,710.71 Total Asset 12,095,215.00 13,518,938.34 14,971,715.53 16,433,684.94 17,879,849.96

Current Liabilities Accounts Payable 450,000.00 520,020.00 600,935.11 694,440.62 802,495.58 Total Current Liabilities 450,000.00 520,020.00 600,935.11 694,440.62 802,495.58 Long Term Liabilities Long Term Debt 10,000,000.00 9,462,334.20 8,908,538.43 8,338,128.78 7,750,606.84 Total Long Term Liabilities 10,000,000.00 9,462,334.20 8,908,538.43 8,338,128.78 7,750,606.84 Total Liabilities 10,450,000.00 9,982,354.20 9,509,473.54 9,032,569.39 8,553,102.42 Equity Capital - 537,665.80 1,091,461.57 1,661,871.22 2,249,393.16 Retained Earning 1,645,215.00 2,998,918.34 4,370,780.42 5,739,244.32 7,077,354.38 Total Equity 1,645,215.00 3,536,584.14 5,462,241.99 7,401,115.54 9,326,747.54 Total Liabilities & Equity 12,095,215.00 13,518,938.34 14,971,715.53 16,433,684.94 17,879,849.96

24

Balance Sheet Currency: Euro

2019 2020 2021 2022 2023

Current Assets

Cash 8,317,152.85 12,002,307.26 15,785,365.13 18,647,083.56 21,431,632.10

Account Receivable 4,492,562.83 4,896,893.48 5,337,613.90 5,817,999.15 6,341,619.07

Inventory 889,153.06 1,037,019.21 1,209,475.51 1,410,611.29 1,645,195.94

Total Current Assets 13,698,868.73 17,936,219.96 22,332,454.53 25,875,693.99 29,418,447.11

Fixed Assets

Net Property & Equipment 10,798,815.20 10,891,783.78 10,992,189.84 12,177,907.66 13,471,635.18

Less Accumulated Depreciation 3,275,402.82 4,057,907.25 4,860,492.88 5,819,426.14 6,801,782.12

Total Fixed Asset 7,523,412.38 6,833,876.53 6,131,696.96 6,358,481.52 6,669,853.06

Total Asset 21,222,281.11 24,770,096.49 28,464,151.49 32,234,175.51 36,088,300.18

Current Liabilities

Accounts Payable 889,153.06 1,037,019.21 1,209,475.51 1,410,611.29 1,645,195.94

Total Current Liabilities 889,153.06 1,037,019.21 1,209,475.51 1,410,611.29 1,645,195.94

Long Term Liabilities

Long Term Debt 7,145,459.25 6,522,157.22 5,880,156.14 5,218,895.03 4,537,796.08

Total Long Term Liabilities 7,145,459.25 6,522,157.22 5,880,156.14 5,218,895.03 4,537,796.08

Total Liabilities 8,034,612.31 7,559,176.44 7,089,631.65 6,629,506.31 6,182,992.02

Equity

Capital 2,854,540.75 3,477,842.78 4,119,843.86 4,781,104.97 5,462,203.92

Retained Earning 10,333,128.05 13,733,077.28 17,254,675.98 20,823,564.23 24,443,104.23

Total Equity 13,187,668.81 17,210,920.05 21,374,519.84 25,604,669.20 29,905,308.16

Total Liabilities & Equity 21,222,281.11 24,770,096.49 28,464,151.49 32,234,175.51 36,088,300.18

25

Balance Sheet Currency: Euro

2024 2025 2026 2027 2028 2029

Current Assets

Cash

22,219,839.85

29,608,665.70

37,290,670.96

44,762,772.84

52,921,555.22

62,963,336.20

Account Receivable 9,783,893.68

10,762,283.05

11,838,511.36

13,022,362.49

14,324,598.74

22,100,089.83 Inventory 1,834,480.07 2,159,183.04 2,541,358.43 2,991,178.88 3,520,617.54 4,143,766.84

Total Current Assets

33,838,213.60

42,530,131.79

51,670,540.76

60,776,314.21

70,766,771.50

89,207,192.87 Fixed Assets

Net Property & Equipment

17,350,449.70

17,518,525.46

17,700,047.28

18,399,737.48

18,611,464.53

18,965,959.87

Less Accumulated Depreciation 8,154,176.98 9,540,186.99

10,962,501.36

12,486,980.28

14,053,804.61

15,678,944.99 Total Fixed Asset 9,196,272.72 7,978,338.47 6,737,545.92 5,912,757.20 4,557,659.93 3,287,014.88

Total Asset

43,034,486.32

50,508,470.27

58,408,086.68

66,689,071.42

75,324,431.43

92,494,207.75

Current Liabilities Accounts Payable 1,834,480.07 2,159,183.04 2,541,358.43 2,991,178.88 3,520,617.54 4,143,766.84 Total Current Liabilities 1,834,480.07 2,159,183.04 2,541,358.43 2,991,178.88 3,520,617.54 4,143,766.84 Long Term Liabilities Long Term Debt 3,836,264.16 3,113,686.28 2,369,431.07 1,602,848.20 813,267.94 - Total Long Term Liabilities 3,836,264.16 3,113,686.28 2,369,431.07 1,602,848.20 813,267.94 - Total Liabilities 5,670,744.22 5,272,869.32 4,910,789.51 4,594,027.08 4,333,885.48 4,143,766.84 Equity

Capital 6,163,735.84 6,886,313.72 7,630,568.93 8,397,151.80 9,186,732.06

10,000,000.00

Retained Earning

31,200,006.26

38,349,287.23

45,866,728.24

53,697,892.54

61,803,813.89

78,350,440.91

Total Equity

37,363,742.10

45,235,600.95

53,497,297.17

62,095,044.33

70,990,545.95

88,350,440.91

Total Liabilities & Equity

43,034,486.32

50,508,470.27

58,408,086.68

66,689,071.42

75,324,431.43

92,494,207.75

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Statement of Cash Flow

Currency: Euro

2013 2014 2015 2016

Changes in Cash: Net Income 1,645,215.00 1,353,703.34 1,371,862.08

add back Depreciation & Amortization 481,500.00 1,328,765.80 1,339,133.80 Income from Operations 2,126,715.00 2,682,469.14 2,710,995.88 Changes in Working Capital Increase / (Decrease) in cash:

Beginning Working capital (Increase) / Decrease in Account Receivable - (172,800.00) (186,624.00) (Increase) / Decrease in Inventory - (70,020.00) (80,915.11)

Increase / (Decrease) Account Payable - 70,020.00 80,915.11

Subtotal Changes in Working capital - (172,800.00) (186,624.00) Changes in Investments: (Increase) / Decrease in Property & equipment - (48,000.00) (51,840.00)

Subtotal Changes in Investments - (48,000.00) (51,840.00) Changes in Financing: Beginning Financing Increase / (Decrease) in Long Term Debt - (537,665.80) (553,795.77) Subtotal Changes in Financing - (537,665.80) (553,795.77)

Total Changes in cash During Period 2,126,715.00 1,924,003.34 1,918,736.11 Beginning Cash Flow (10,000,000.00) (10,000,000.00) (7,873,285.00) (5,949,281.66) Ending Cash Flow (10,000,000.00) (7,873,285.00) (5,949,281.66) (4,030,545.55)

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Statement of Cash Flow Currency: Euro

2017 2018 2019 2020

Changes in Cash:

Net Income 1,368,463.90 1,338,110.06 3,255,773.67 3,399,949.22

add back Depreciation & Amortization 1,350,331.24 1,362,424.48 1,601,576.51 1,620,170.22

Income from Operations 2,718,795.14 2,700,534.54 4,857,350.18 5,020,119.45

Changes in Working Capital Increase / (Decrease) in cash:

Beginning Working capital

(Increase) / Decrease in Account Receivable (201,553.92) (217,678.23) (1,553,906.68) (404,330.65)

(Increase) / Decrease in Inventory (93,505.50) (108,054.96) (86,657.48) (147,866.15)

Increase / (Decrease) Account Payable 93,505.50 108,054.96 86,657.48 147,866.15

Subtotal Changes in Working capital (201,553.92) (217,678.23) (1,553,906.68) (404,330.65)

Changes in Investments:

(Increase) / Decrease in Property & equipment (55,987.20) (899,375.62) (2,543,612.38) (92,968.58)

Subtotal Changes in Investments (55,987.20) (899,375.62) (2,543,612.38) (92,968.58)

Changes in Financing:

Beginning Financing

Increase / (Decrease) in Long Term Debt (570,409.65) (587,521.94) (605,147.59) (623,302.02)

Subtotal Changes in Financing (570,409.65) (587,521.94) (605,147.59) (623,302.02)

Total Changes in cash During Period 1,890,844.38 995,958.74 154,683.53 3,899,518.19

Beginning Cash Flow (4,030,545.55) (2,139,701.18) (1,143,742.43) (989,058.91)

Ending Cash Flow (2,139,701.18) (1,143,742.43) (989,058.91) 2,910,459.29

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2021 2022 2023 2024

Changes in Cash:

Net Income 3,521,598.70 3,568,888.25 3,619,540.01 6,756,902.02

add back Depreciation & Amortization 1,640,251.44 1,796,599.05 1,820,021.78 2,190,060.66

Income from Operations 5,161,850.14 5,365,487.30 5,439,561.79 8,946,962.68



(Increase) / Decrease in Account Receivable (440,720.41) (480,385.25) (523,619.92) (3,442,274.61)

(Increase) / Decrease in Inventory (172,456.30) (201,135.78) (234,584.66) (189,284.12)

Increase / (Decrease) Account Payable 172,456.30 201,135.78 234,584.66 189,284.12

Subtotal Changes in Working capital (440,720.41) (480,385.25) (523,619.92) (3,442,274.61)


(Increase) / Decrease in Property & equipment (100,406.06) (1,185,717.82) (1,293,727.53) (3,878,814.52)

Subtotal Changes in Investments (100,406.06) (1,185,717.82) (1,293,727.53) (3,878,814.52)


Beginning Financing

Increase / (Decrease) in Long Term Debt (642,001.08) (661,261.12) (681,098.95) (701,531.92)

Subtotal Changes in Financing (642,001.08) (661,261.12) (681,098.95) (701,531.92)

Total Changes in cash During Period 3,978,722.58 3,038,123.12 2,941,115.39 924,341.63

Beginning Cash Flow 2,910,459.29 6,889,181.87 9,927,304.99 12,868,420.37

Ending Cash Flow 6,889,181.87 9,927,304.99 12,868,420.37 13,792,762.01

29


2025 2026 2027 2028 2029

Changes in Cash:

Net Income 7,149,280.97 7,517,441.01 7,831,164.30 8,105,921.35 16,546,627.02

add back Depreciation & Amortization 2,223,675.81 2,259,980.17 2,362,144.72 2,404,490.13 2,462,806.18

Income from Operations 9,372,956.78 9,777,421.19 10,193,309.02 10,510,411.48 19,009,433.20



(Increase) / Decrease in Account Receivable (978,389.37) (1,076,228.31) (1,183,851.14) (1,302,236.25)

(7,775,491.09)

(Increase) / Decrease in Inventory (324,702.97) (382,175.40) (449,820.44) (529,438.66) (623,149.30)

Increase / (Decrease) Account Payable 324,702.97 382,175.40 449,820.44 529,438.66 623,149.30

Subtotal Changes in Working capital (978,389.37) (1,076,228.31) (1,183,851.14) (1,302,236.25)

(7,775,491.09)


(Increase) / Decrease in Property & equipment (168,075.76) (181,521.82) (699,690.20) (211,727.05) (354,495.33)

Subtotal Changes in Investments (168,075.76) (181,521.82) (699,690.20) (211,727.05) (354,495.33)


Beginning Financing

Increase / (Decrease) in Long Term Debt (722,577.88) (744,255.21) (766,582.87) (789,580.26) (813,267.94)

Subtotal Changes in Financing (722,577.88) (744,255.21) (766,582.87) (789,580.26) (813,267.94)

Total Changes in cash During Period 7,503,913.78 7,775,415.85 7,543,184.81 8,206,867.91 10,066,178.84

Beginning Cash Flow 13,792,762.01 21,296,675.79 29,072,091.64 36,615,276.45 44,822,144.36

Ending Cash Flow 21,296,675.79 29,072,091.64 36,615,276.45 44,822,144.36 54,888,323.20

30

Conclusion This paper is support a National Export Strategy (NES), The NES was designed to develop the organic agricultural products sector in Laos, and aims to be a partaking of the National Economic Growth in next ten years. To achieve the goals and objectives of the strategy, we have to put a particular focus on the following:

o develop Organic Agricultural Business that help Bio-Organic Foliar Fertilizer Market in a

sustainable way in rural areas to improve the living condition of multi-ethnic group in mountainous and remote areas.

o build up capacity of farmers in rural areas and private sectors people to increase the production of high quality organic agricultural products and meet the demand according to internationally recognized standards.

o promote Bio-Organic Foliar Fertilizer in the rural areas in order to increase the export of high quality organic agricultural

o Intending to support Lao Government’s Strategy on Chemical Hazardous Material Elimination in Agriculture Sector from 2010 to 2020…

o to support Lao National Export Strategy on Organic Agriculture Sector from 2006 and 2010 to 2020.

31

References

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