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SIGMA PROM –SIGMA MILK-GOAT MILK DAIRY PLANT

Bosnia and Herzegovina

The company and its plant is located in Bosanski Novi/Novi Grad. The location
is considered as very suitable. This municipality is in north-west part of BIH along two
rivers Una and Sana surrounded by the hills and mountains Kozara and Grmec. The
municipality has a border with Republic of Croatia. Distance to bigger places is 135km
to Zagreb, 89km Banja Luka and 69 to Bihac. The locations for planned farms are
very convenient for goat breeding because of lot of water sources and grasslands.

Location of goat milk dairy plant

BUSINESS PLAN—GOAT BREEDING, MILK AND CHEESE PRODUCTION


1 . INFORMATION ABOUT THE INVESTOR (ENTERP RISE)

1.1 Name of Enterprise


SIGMA PROM COMPANY—SIGMA MILK GOAT MILK DAIRY PLANT
Address UL. Oslobodjenja 5, 79220 Bos.Novio/novi Grad
Telephone/Fax / 00387-65-172-44
Contact Person (name and position)
MANAGER/DIRECTOR-- SENIJA RAKOVIC
MANGER ASSISTANT-- SLAVKO POZNANOVIC-
For English speaking call 00385958315557

1.2 Legal form and registered capital of the Enterprise


SIGMA PROM IS 100% PRIVATE OWNERSHIP
Registered capital / 402.000,00 KM (1€ -1,958 KM) on 31.12.2006.
Registration number 1-512-00 BASIC COURT BANJA LUKA
Date of Enterprise formation / 09.05.1990.
Date of registration or last amendment/ 30.06.2005 GOD.

1.3 Operations summary of the Enterprise business-


The company is producing and processing of goat milk and cheese.
The company employed 10 person .Production 6, technologist 1, development assistant
1, and technical manager 1 manager 1. Milk production is traditional business of this
region based on rich natural resources. Principal products manufactured/sold are goat
milk and cheese. Main market by geography—Main market for distribution is BIH
market. Beside this the company has arranged an export of products. Distribution is by
whole sale. Major links with other companies, domestic and foreign are contractual
relations.
Activities during the past five years
Company Sigma Prom doo is registered 1990. Owner of the company is Senija Rakovic
From the start till 2005. the company made trade business. From 2005. the main
business of the company is buying, processing and producing of goat milk and cheese.
The company invested during 2005. over 300.000€ for equipment purchase and
reconstruction of facilities. Company development strategy is based on enforcement of
goat milk dairy plant-- Sigma Milk. Company mission is to be brand No.1 in
production of organic health food from goat milk in the BIH and wider. According to
market research the company is the only one dairy plant at the moment in the BIH
which is processing goat milk. It is significant that the production of goat milk and
cheese is supported by governmental subventions. Until now the raw milk was provided
by small number of farmers, while this project will create cooperative farmers’ net and
herd of milk goats owned by the company.

1.4 Project summary


The project is subjected to improvement of present production program of the company
by purchase of: equipment(UHT milk line), two transportation vehicles, milk packing
machine, tank truck for raw milk transportation, 3200 heads of milk goats for 30 new
farmers 90 goats per each, 500 goats for its company’s production and reproduction.

Type of Project—Expansion
Total Cost of Project 3,380.000$
Contribution of Donation/Loa Total
company n
Other investm.
Land 200.000 200.000
Facilities 400.000 400.000
Reconstruction 100.000 100.000
UHT milk line 530.000 530.000
Milk cooler (2) 30.000 30.000
Milking machines 20.000 20.000
Packing machine (tetra) 480.000 480.000
Cooling transp. van (2) 50.000 50.000
Tank truck for raw milk 70.000 70.000
3200 heads of Alpine goats 1,300.000 1,300.000
Assets 200.000
Total 400.000 2,980.000 3,380.000

. Amount of loan finance required –2,980.000$

2 . MANAGEMENT

MANAGER
I
Administration...............................I..............................Counting
I
Sale Development assistant Technical director
I
I
Goat milk dairy plant Goat farm (row milk)

Names and functions of key personal:


Senija Rakovic, Manager
Slavko Poznanovic, Technical director
Dragan Rastok, Development assistant
Merima Raseta Chief of production

Background and experience of management (education, experience in line of business,


years with enterprise)
Name Education Business experien. Years with entrerpr.
Senija Rakovic University 20 years private business 20 years
Slavko Poznanovic University 25 years 10 years
Dragan Rastok University 17 years 2 years
Merima Raseta University 2 years 2 years

Person in charge of financial matters Mrs. Senija Rakovic


3 . MARKET
According to market research there are a few milk producers, who have goat milk
production in their production program, but it is side production program. At the
present Company Sigma Prom-Sigma Milk only one producer specialized for
production of goat milk and cheese. Also this company is the leader in the sector of
goat milk and cheese production, considering to the competition companies this is side
activity.

3.1 Present and projected markets


Projected annual sales after Project implementation
1Year 2.Year 3.year
Total enterprise 1,723.057 5.732800.00 5.732800.0
0
- - of which sales of products from the 1,503.98 5.100000.0 5.100000.0
Project 8 0 0
- of which export sales (in %) 80-85% 80-85% 80-85%

Total number of customers and sales shares of three biggest costumers

The company makes business with approx. 100 customers:


C Market Banja Luka Tropic centar Banja Luka Doo Janjos Prijedor
Nerdi doo Sarajevo Potkozarje Gradiska AD doo Bihac
Doo kasuipovic Cazin doo Alinea Cazin MM Komerc Cazin
Doo Stojakovic Novi Grad Diona Banja Luka Simil Dubica
Prehranakomerc B. Luka Promtes Teslic Fruktatrade Doboj
Interprom Derventa Alegra Prijedor Latekokomerc Tuzla
Lejlakomerc Bihac Toptrade Bjeljina

Major customers for Project products


Major customers for company’s products are trade companies. Final customers
of products are individuals oriented towards organic healthy food and special food.

Marketing and distribution arrangements for Project


The company is the only one producer in BIH producing goat milk. Demand
for goat milk and cheese, especially from abroad market is over offer. The company
received a few letter of intend from abroad buyers interested for our products. The
company focused towards two market segments. First one are customers of healthy
food, and second one are customers of special food.
Describe any firm contracts (to be enclosed) or strong indications of interest from
buyers for Project products: domestic- BG Komerc Dubica, doo Nerdi Sarajevo
Abroad- Dragon 2K SDN. BHD Malaysia, also there is letter of intend from Swiss,
Turkey, Egypt and Germany

3.2 Assessment of competition of Project products and main competitors in the market
In the category of goat milk production the competition is very weak because the
existed competition have this production as side program. As the major advantages
regarding domestic competition this company covers big part of market. Regarding the
competition from neighborhood like Vindija from Croatia, the products of this
company are cheaper 10%, while the quality is the same. By this project the company
intend to form 30 farms consisted of 90 goats, while 500 goats will be in its own
reproductive center. In this way will be provided 3,685.400 litters of raw milk yearly,
what will result the efficiency of facilities for milk processing and enable the company
to meet demands from abroad. Present price for raw milk is 0,5$/l, while one goats
makes 3-5l/day.

Price list
Item Quantity Domestic price
Goat milk litter 1,5$
Goat cheese kg 14,0$

For 1kg of cheese it is needed 10 litters of goat milk.

4 . PRODUCTION

4.1 Production facilities


The company is operational at present, the capacity of production line is 7500 litters/h.
Because of lack of raw material the capacity utilization is 10-15%.This project will
increase the capacity utilization. In this purpose it is needed to provide 3200 goats,
which would meet full capacity utilization and demands from abroad. The plant
operates in rented building, and by this project the company intends to buy the building
from the owner.
Planned investments
Planned investments are related to improvement of present production program, also
improvement of distribution system, establishing of 30 goat farms in the region of
north-west BIH and in the region of Srebrenica which regions are suitable for goat
breeding, and establishing of its own reproductive goat center.
Location of plant the company and its plant is located in Bos. Novi/Novi Grad. The
location is considered as suitable. This municipality is in north-west part of BIH along
two rivers Una and Sana surrounded by the hills Kozara and Grmec. The municipality
has a border with Republic of Croatia. Distance to bigger places is 135km to Zagreb,
89km Banja Luka and 69 to Bihac. The locations for planned farms are very
convenient for goat breeding because of lot of water sources and grasslands.

Estimated average age of major machines and equipment


Machines and equipment average age is seven years.

Intended increase of work force after project implementation


After the project implementation the company will employ80 new workers.
Farmers—65 Transport—5Production—5 Administration --5 Total-----------80
5 . IMPLEMENTATION SCHEDULE
The project starts after the financial assets are received and completes in the period of
one year meaning that the financial assets can be granted quarterly.

6 . EXPECTED EFFECTS OF INVESTMENT

Increased employment (total number of additional jobs to be created by the Project)


Total number of additional jobs created by project is 90 after implementation of
investment. The size of production will increase. Also the raw milk will be increased up
to full capacity of diary plant. It is needed to mention that goat breeding is very
economical work because of governmental support and subventions. For example goat
Alpine gives 3-5l/day. Milk price is 0.5$/l and plus subvention of 0.1$/l. Lactation
period takes 288 days in one year. One goat gives birth of 1,8 goat baby per year.
Selling price of goat babies is 70$ per one. According all mentioned above expected
income by one goat is 702$ per a year. Goat consumes 560 herbs, many of them are
curable, while caw consumes ten times less herbs. According to above mentioned
it means that goat breeding is very profitable knowing that they arte resistible to many
animal disease. By this project the company will introduce HACCAP food control
system.
Other economic or social benefits of the Project (promoting private business, staff
training, new technology, structural improvement of region)
Like other economic or social benefits would be promoting of private business,
production of organic healthy food, decrease of unemployment.

7 . SUMMARY RISK ASSESSMENT AND MITIGATION


There are no serious risks for implementation of this project, it is planned to insure
complete investment at insurance company.

8. COLLATERAL AND FINANCIAL GUARANTEES


The company provides present legal ownership in value of 600.000$ also additional
value of investment by this project in the case of loan.

PLANNED EXPENSES AFTER INVESTMENT

1. Operational expenses

Item 2007 2008-2009


Goat milk bought 203.806.00
Cheese bacterial culture 52.020,00 157.200,00
Packing material 228.520,00 530.000,00
Other expenses 158.360,00 650.000,00
Total 642.706.00 1,337.200,00

Projected expenses made on basis of average expenses considering to planned increase


of production in the coming period.

2. Salary expenses
EMPLOYMENT Present New Monthly 2007. 2008-2009.
salary
Production 6 5 647,00 46.584,00 85.404,00
Technologist 1 1400,00 16.800,00 16.800,00
Farmers 65 650,00 507.000,00
Development assist. 1 900,00 10.800,00 10.800,00
Administrator 5 550,00 33.000,00
Driver 5 550,00 33.000,00
Technical manager 1 1200,00 14.400,00 14.400,00
Manager 1 1500,00 18.000,00 18.000,00
Total 10 80 106.584,00 718.404,00

3. Energy expenses

Energy 2007 2008-2009


Electrical energy 100.800,00 258.000,00
Fuel 122.400,00 364.000,00
Total 232.400,00 622.000,00

4. Depreciation

Facility Value Depreciation 2007. 2008.-2009


Present equipment 402.000,00 15% 60.300,00 60.300,00
New equipment 1,180.000,0 15% 177.000,00
0
New facilities 500.000,00 5% 25.000,00
3200 heads of goats 1,300.000,0 16% 208.000,00
0
Total 60.300,00 470.300,00

5. Production services expenses

Item 2007 2008-2009


Maintenance expenses 6.500,00 15.000,00
Telephone 7.200,00 13.000,00
Utilities 2.100,00 4.000,00
Commercials-marketing 12.000,00 50.000,00
Business office 4.800,00 6.000,00
Other expenses 50.000,00 70.000,00
Total 82.600,00 158.000,00
INCOME STATEMENT

Operational Income 2005. year 2006.year


-from sales of goods 878.353 1,026.887
-from sales of products and services 878.353 1,026.887

Business expenses 831.218 935.195


-operational expenses 397.204 533.981
-fuel and energy 171.392 118.334
-salaries 21.614 20.064
-production services expenses 115.208 162.000
-depreciation 52.985 58.000
-non operational expenses 72.815 42.816

Excess of income over expenses 47.135 91.692


5% 9%

Total Income 878.353 1,026.887


Total expenses 831.218 935.195

A Profit/loss before taxes 47.135 91.692


A Taxes 4.713 9.169
A Profit after tax 42.422 82.523
A Net margin % 5% 8%

B Profit/loss before taxes 47.135 91.692


B Taxes 4.713 9.169
B Profit after tax 42.422 82.523
B Net margin % 5% 8%
BALANCE SHEET 2005 2006

Assets
Cash 23.231 31.937
Accounts receivable 18.118
Short term placement 100.000
Prepaid Expenses 50.000 89.824

Total current assets 173.231 139.879


Equipment 85.237 270.397

Total net fixed assets 85.237 270.397

Merchandise inventory 73.354 183.568

Other assets 73.354 183.568

Total assets 331.822 593.844

Liabilities
Accounts payable 84.083
Taxes payable 9.001
St Loans Payable 100.000 40.000
Other 1.692 5.670

Total current liabilities 110.693 129.753


LT loans 85.000
Total LT liabilities 85.000

Total liabilities 100.693 214.753


Registered capital 2.500 5.000
Retained earnings 218.629 374.091
Total capital 221.129 379.091

Total liabilities +net worth 331.822 593.844

Net working capital 62.538 10.126


Current assets/liabilities ratio 1,56 1,08
Debt/equity ratio 0,50 0,57
Dawn bellow mentioned financial statement is based on the following parameters:
-3200 heads of goats ( 4l/head of milk) will produce 3,686.400 litters per year then
processed is equal to 200.000kg of goat cheese and 1,684.000 litters of milk
Produce 5760 baby goats per year (1 goat gives 1,8 baby goats per year)
Financial projection for 2007. year includes pre investment and post investment period,
while 2008. and 2009. present projection including complete investment.

INCOME STATEMENT

2007. year 2008-2009.

Operational Income 1,723.057 5,732.800

Business expenses 1,124.590 3,305.904

Excess of income over expenses 598.467 2,426.896


35% 42,3%

Total Income 1,723.057 5,732.800


Total expenses 1,124.590 3,305.904

A Profit/loss before taxes 598.467 2,426.896


A Taxes 10% 59.846 242.689
A Profit after tax 538.621 2,184.207
A Net margin % 31% 38,1%

Place, Bos. Novi/Novi Grad-Bosnia and Herzegovina


Date, 15.07.2007.
Name: Senija Rakovic and Slavko Poznanovic