- Country: Ghana
- Industry: Manufacturing
- Stage: Initial growth (first revenues)
- Investment size: $85,000,000 / min. $5,000,000
- Type of investment: Debt
A producer of Palm Oil wishes to expand its operations in the coming years to meet the ever increasing domestic and global demand.
The enterprise’s production capacity is very low because of low capacity production equipment. The objective of management is to expand palm oil processing factory in Nkwateng with a capacity of about 980 tons of Palm Oil per annum; construct new structures; purchase new trucks to increase productivity; expand its network of suppliers of Palm Fruits; improve its management structure and product quality to achieve higher levels of customer satisfaction.
The company's mission is to produce Palm Oil and related products mainly for the export market. Its vision is to become the leading producer of Palm Oil and related products for export to the rest of the world.
The company has several strong points to ensure project success:
• Experience of Management Team: A management team comprising of well qualified and experience people shall be employed to manage the enterprise. PricewaterhouseCoopers shall be tasked to carry out such recruitments.
• Large production capacity: As compared to the other companies, this enterprise will have a much bigger production capacity. A 100 ton per hour FFB machinery shall be acquired to carry out production.
• Strong vision and commitment: The owner of the enterprise has a very strong commitment to the success of the business, and as such has a vision to transform the enterprise gradually into a giant successful enterprise.
Rationale for the deal
The owner of the business has been researching the palm oil industry for about six (6) years before investing in the manufacturing of palm oil about a year ago.
Experience has shown that there is a huge market for the oil but besides a few big companies, the other manufacturers are small scale village women that use less mechanized equipments and as a result are able to produce small quantities of palm oil per day.
Successive governments as well as the World Bank have stressed the need to invest in the Palm Oil sector as there is a big opportunity there for this country. Malaysia is a typical example of one of the countries that have made it big in this sector. Considering all the relevant factors in this industry, Ghana seems to be at a very good advantage but we as a country have not harnessed the opportunities in this sector to the fullest.
The government of Ghana is relying on the private sector to bring some change to this sector. In view of this the Proprietor of the Oil Palm Enterprise in charge has taken up this challenge to bring some change to this sector to help improve the economy and the working life of the farmers as well as the village folks.
Use of financing
Land, New Buildings and Structures: US$620,000
Plant, Machinery and Equipment: US$71,730,000
Trucks, Vehicles, Bikes: US$1,350,000
Working Capital: US$9,500,000
Included in Land, New Buildings and Structures are Office building worth US$60,000, Land worth US$100,000 and Factory structure worth US$460,000. Included in Plant, Machinery and Equipment, totaling US$71,730,000 are FFB Strippers, Boilers, Digesters, Pressers, Separators, Filters, Power Generators, Tanks and Scales, etc.
Opportunity for the investor
The Enterprise is seeking a dollar-denominated loan of US$83,180,000.00 to finance part of the fixed assets while the Proprietor will provide US$20,000 to finance the remaining. The loan will have a term of ten years with a two year moratorium and an interest rate of 5% per annum.
With the proposed investment, Sales revenue is expected to reach US$28,266,250.00 in the first year and beyond in constant dollar terms. The enterprise will also improve its profitability; net profit after tax is expected to be US$6,761,179.00 in the first year and US$8,351,705.00 in the fifth year of operation in constant dollar terms. Cash flow in the first year of operation is expected to be US$7,885,720.00 and US$9,440,345.00 in the tenth year. The improved performance of the enterprise is reflected in a net profit after tax to sales ratio projected to range from 23% in the first year to over 29% by five years and beyond. The estimated IRR is 11.62% and ROE is 3386.47%.
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