Business Plan Sigma Milk

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 POZNANOVICFor 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 businessThe 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 company Land Facilities Reconstruction UHT milk line Milk cooler (2) Milking machines Packing machine (tetra) Cooling transp. van (2) Tank truck for raw milk 3200 heads of Alpine goats Assets Total

Donation/Loa n Other investm.

200.000

200.000 400.000

Total

400.000 100.000 530.000 30.000 20.000 480.000 50.000 70.000 1,300.000

200.000 400.000 100.000 530.000 30.000 20.000 480.000 50.000 70.000 1,300.000

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 Total enterprise 1,723.057 - - of which sales of products from the Project - of which export sales (in %)

1,503.98 8 80-85%

2.Year 5.732800.00 5.100000.0 0 80-85%

3.year 5.732800.0 0 5.100000.0 0 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 Goat milk Goat cheese

Quantity litter kg

Domestic price 1,5$ 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 Goat milk bought Cheese bacterial culture Packing material Other expenses Total

2007 203.806.00 52.020,00 228.520,00 158.360,00 642.706.00

2008-2009 157.200,00 530.000,00 650.000,00 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

Production Technologist Farmers Development assist. Administrator Driver Technical manager Manager Total

6 1

5 65

1 5 5 1 1 10

Monthly salary 647,00 1400,00 650,00 900,00 550,00 550,00 1200,00 1500,00

80

2007.

2008-2009.

46.584,00 16.800,00

85.404,00 16.800,00 507.000,00 10.800,00 33.000,00 33.000,00 14.400,00 18.000,00 718.404,00

10.800,00 14.400,00 18.000,00 106.584,00

3. Energy expenses Energy Electrical energy Fuel Total

2007 100.800,00 122.400,00 232.400,00

2008-2009 258.000,00 364.000,00 622.000,00

4. Depreciation Facility Present equipment New equipment

Value 402.000,00 1,180.000,0 0 500.000,00 1,300.000,0 0

New facilities 3200 heads of goats Total

Depreciation 2007. 15% 60.300,00 15%

2008.-2009 60.300,00 177.000,00

5% 16%

25.000,00 208.000,00 60.300,00

5. Production services expenses Item Maintenance expenses Telephone Utilities Commercials-marketing Business office Other expenses Total

2007 6.500,00 7.200,00 2.100,00 12.000,00 4.800,00 50.000,00 82.600,00

2008-2009 15.000,00 13.000,00 4.000,00 50.000,00 6.000,00 70.000,00 158.000,00

470.300,00

INCOME STATEMENT Operational Income -from sales of goods -from sales of products and services

2005. year 878.353 878.353

2006.year 1,026.887 1,026.887

Business expenses -operational expenses -fuel and energy -salaries -production services expenses -depreciation -non operational expenses

831.218 397.204 171.392 21.614 115.208 52.985 72.815

935.195 533.981 118.334 20.064 162.000 58.000 42.816

Excess of income over expenses

47.135 5%

91.692 9%

Total Income Total expenses

878.353 831.218

1,026.887 935.195

A Profit/loss before taxes A Taxes A Profit after tax A Net margin %

47.135 4.713 42.422 5%

91.692 9.169 82.523 8%

B Profit/loss before taxes B Taxes B Profit after tax B Net margin %

47.135 4.713 42.422 5%

91.692 9.169 82.523 8%

BALANCE SHEET Assets Cash Accounts receivable Short term placement Prepaid Expenses

2005

2006

23.231

31.937 18.118

100.000 50.000

89.824

Total current assets Equipment

173.231 85.237

139.879 270.397

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 Taxes payable St Loans Payable Other

9.001 100.000 1.692

84.083 40.000 5.670

Total current liabilities LT loans Total LT liabilities

110.693

129.753 85.000 85.000

Total liabilities Registered capital Retained earnings Total capital

100.693 2.500 218.629 221.129

214.753 5.000 374.091 379.091

Total liabilities +net worth

331.822

593.844

Net working capital Current assets/liabilities ratio Debt/equity ratio

62.538 1,56 0,50

10.126 1,08 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 35%

2,426.896 42,3%

Total Income Total expenses

1,723.057 1,124.590

5,732.800 3,305.904

A Profit/loss before taxes A Taxes 10% A Profit after tax A Net margin %

598.467 59.846 538.621 31%

2,426.896 242.689 2,184.207 38,1%

Place, Bos. Novi/Novi Grad-Bosnia and Herzegovina Date, 15.07.2007. Name: Senija Rakovic and Slavko Poznanovic