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Business Plan

Proposal to set up a Pineapple Concentrates Processing Plant in Malaysia

set up a Pineapple Concentrates Processing Plant in Malaysia project management abu dhabi, astana, athens, brno,

project

Pineapple Concentrates Processing Plant in Malaysia project management abu dhabi, astana, athens, brno, como,
Pineapple Concentrates Processing Plant in Malaysia project management abu dhabi, astana, athens, brno, como,

management

abu dhabi, astana, athens, brno, como, dnepropetrovsk, jakutsk, kuala

lumpur, lugano, moscow, prishtina, sarajevo, tashkent, tehran, tirana, vienna

CONFIDENTIALITY STATEMENT

This Confidential Information Memorandum (Memorandum) is prepared by Hans-jib Project Management Sdn Bhd solely for information purposes to be reviewed by prospective investors interest in investing in the venture.

The information contained herein has been prepared to assist interested parties in making their own evaluation of the Business Plan and does not purport to be all- inclusive or to contain all of the information that a prospective investor may desire.

This Memorandum includes statements, estimates and projections which reflects the anticipated future performance of the business. While Hans-jib Project Management Sdn Bhd has endeavored to provide absolute accuracy and completeness of the information contained herein as a result of our prudence in-depth analysis, we expressly disclaim any and all liability for any assumption which may or may not prove to be correct with regard to anticipated results.

By accepting this Memorandum, the recipient acknowledges and agrees that all information contained herein is of confidential nature and is for limited circulation only, and the recipient agrees not disclose it without the express written permission of Hans-jib Project Management Sdn Bhd. Without limiting the generality of the foregoing, the recipient will not reproduce this Memorandum, in whole or in part, and will use this Memorandum solely for the purpose of evaluating the recipient’s interest in the venture, and , if the recipient dose not wish to pursue this matter, this Memorandum will be returned to Hans-jib Project Management Sdn Bhd. Any proposed actions by the recipient, which are inconsistent with the foregoing agreement will require the prior, written consent of Hans-jib Project Management Sdn Bhd.

Hans-jib Project Management Sdn Bhd reserves the right to negotiate with one or more investors at any time and to enter into a definitive agreement with any party without prior notice to the recipient or other prospective investors. Hans-jib Project Management Sdn Bhd reserves the right to terminate, at any time, the further participation in the analysis, evaluation and proposal process by any party and to modify, at any time, any procedure relating to such process without disclosing any reason whatsoever.

The recipient is encouraged to conduct his own investigation, appraisal and exercises of due diligence. Hans-jib Project Management Sdn Bhd undertakes to assist the recipient in the course of the recipient’s evaluation of the Business Plan.

Upon request, this Memorandum shall be returned to:

Hans-jib Project Management Sdn Bhd

Technical Department

E-mail

mohdhanifhassan@yahoo.com

EXECUTIVE SUMMARY

Hans-jib Project Management Sdn Bhd has received an offer to produce pineapple concentrates to be exported to Europe. The buyer has pledged to issue Letter of Credit from a reputable European bank in excess of RM 18 million (USD 5.14 million) to assist Hans-jib Project Management Sdn Bhd in securing the required financing to set up the manufacturing plant and to commence operation. Upon conclusion of in- depth, all-encompassing appraisal of the proposition, the following conclusions were drawn:

1. The venture is deemed as feasible of generating acceptable returns with moderate exposure of risk.

2. The proposal entails setting up a manufacturing plant in Malaysia and procurement of plantation land an area of 708 hectares (1,749 acres).

3. Plantation cost is estimated to be USD 3,828.00 per hectares per cycle. With an average harvest of 72 ton per hectare, cost of pineapple is USD 53.17 per ton (market price for pineapple is USD 80.00 per ton).

4. Machinery for the processing line and technical support is to be provided by APV Hill & Mills which guarantees the acceptance of the finished product by European and American governing standards. Total cost of machinery is USD3.5 million.

5. Total capital investment and working capital is USD 8,164,749.35

6. Assuming manufacturing plant’s processing line life of 12 years without major refurbishment; loan repayment at 8% over a period of 8 years; and no reinvestment of revenue, the yield of the investment is as follows:

Payback period:

11 years

Return on Investment:

10.09 %

Internal Rate of Return:

4.79 %

PREAMBLE

The market for pineapple concentrates has been very receptive both in the United States and Europe. Upward trend in demand together with such factors as rising cost of producing and manufacturing, coupled with inflation has pushed up the price of pineapple concentrates from USD 900 per ton in 1999 to USD 1,300 per ton in 2005. Currently, the principle exporters of pineapple, both fresh and processed, are Thailand, the Philippines, Costa Rica and the Republic of Indonesia.

The pineapple industry in Malaysia has not gain much prominence due to high costs, resulting in a limited number of factories to cater mainly for the local market. However, setting up a factory in Malaysia is economically viable if Hans-jib plant pineapple for its own consumption.

Hans-jib Project Management Sdn Bhd has agreed in principle to accept the offer made by a reputable European-based importer of juice concentrates and purees, to set up a factory producing pineapple concentrates for the European market. The buyer shall be providing Letter of Credit as buy-back guarantee for the anticipated production output of the first 3 years and is willing to sign a subsequent 3-year exclusive purchase agreement at prevailing market price of the day.

THE OPERATION

Hans-jib Project Management Sdn Bhd has not finalized the actual site of the factory. Criteria such as distance from plantation; proximity of utilities and infrastructure; rate and tenure of lease are among the decisive factors which will govern the selection process.

To cater for production, the land area required for plantation is in access of 708 hectares (1,749 acres). The predominant types of pineapple in Malaysia are of the N36, Josephine, Smooth Cayenne and Gandul variety. Hans-jib has opted for either the N36 or Smooth Cayenne variety due to its size, color and local knowledge of this variety. Both types of pineapples grow to an average weight of 1.8 kg per fruit with a 14 month cycle from planting to harvesting. The current cultivation practice produces a yield of 40,000 fruits or 72 ton per hectare.

Estimated raw pineapple requirement is 36,400 ton per month (51 hectares or 125 acres). This is based on a production output of 14 ton concentrated pineapple per day per 14 hour shift.

Current prevailing open-market price of pineapple is USD 80.00 per ton delivered to the factory. By comparison, this price is reduced to USD 53.17 per ton coming from own plantation.

The proposed factory is to be built on a compound not less than 15,000 square meters. The processing building’s floor area is 1,350 square meters with and additional 600 square meters set aside for administration, laboratory, canteen and services.

THE PROCESS

Pineapple concentrates is extracted at a ratio of 10:1, i.e., 10 ton of raw fruit is required to produce 1 ton of concentrates.

The processing line has the capacity to process 10 ton of raw fruit per hour. Due to the rather harsh weather conditions, fruit reception shall be placed indoors.

Extracted juice is fiber reduced and thermally treated to retard enzyme effects and discoloration of the juice prior to intermediate storage.

Juice is first processed through an aroma stripping evaporator to recover aroma and essences for eventual add-back to the pineapple concentrates prior to aseptic packaging.

The final product has a concentration rating of 65.0 ºbrix and packaged in a 55 US gallon/210 liter aseptic bag which is then placed in a drum.

The production capacity is targeted at 20 container load per month. Each 20’ container shall be packed with 18 ton of pineapple concentrate. Due to its aseptic nature, the pineapple concentrate is transported at ambient temperature. The cost of shipping out from the factory to Europe via local port is USD 1,544.00 per container (including insurance).

The individual components for the pineapple fruit juice concentrate processing plant have been finalized, and the total amount quoted by APV Hill & Mills is USD 3.5 million.

IMPLEMENTATION PLAN

Schedule of implementation is as per the following

Key Milestone

Date

Status

Preliminary studies, discussion with equipment supplier

Dec 2006

Completed

Preparation of Business Plan, Costing

Dec 2006

Completed

Finalizing details agreement with buyer

Jan 2007

On going

Approaching investors/banks and total financing closure

Feb 2007

On going

Tie-ups with strategic partners: raw materials, logistics, equity

Feb 2007

Players identified, prelim discussions held

Placing of orders with equipment supplier

Feb 2007

Not commenced

Commencement of construction works

May 2007

Not commenced

Recruitment of key personnel and training

Aug 2007

Senior personnel

identified

Completion of factory and commissioning of processing line

Dec 2007

Not commenced

Commencement of operation

Jan 2007

Not commenced

SWOT ANALYSIS

Strength

.

Ready market for the first three years of operations with the option to extend for another three years.

.

Availability of land for plantation

.

Acceptance of end-product to European market

.

Proven technology and excellent technical support from machine supplier

.

Possibility of support from Malaysian Government bodies e.g. FAMA, Lembaga Nenas, Ministry of Agriculture

Weakness

. Complexity in plantation operations

Opportunity

.

Availability of buyer means that no marketing is needed during the early stages of operations

.

Opportunity to take participate in a stable, continuously expanding fruit juice market

Threat

. Risk associated with plantations

OTHER FACTORS FOR CONSIDERATION

1. Waste Management

The amount of waste to be disposed off could post a logistical and environmental problem. A production capacity of 140 ton raw pineapple produces waste in the form of fiber up to 20 ton per day (520 ton per month). Proper disposal is needed. Alternatively, the company could look into the possibility of turning these fibers into bales for farm feed (cattle and goats).

2. Complexity of Plantation Operation

To cater for production, a daily requirement of 140 ton of pineapple means that 77,777 fruits are required (approximately 10 truckloads of pineapples). The company needs to address the following issues.

i. Availability of pineapple sapling for planting (77,777 per day and 2,022,222 per month)

ii. Assuming a plantation worker can plant/pick 60 fruits per hour, for an 8 hour shift, minimum total of plantation hands needed is 162 workers for planting, 162 workers for picking (after 14 months onwards) and another 20 for maintenance. This is based on assumption that work does not stop due to rain, unavailability of sapling, lack of workers and other factors. Alternatively, the company needs to look into automation.