Fertilizer Profitability Across Nigeria’s Diverse Agro Ecological Zones and Farming Systems
Profitability - Let's Talk Indoor Farming Series
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Transcript of Profitability - Let's Talk Indoor Farming Series
Safe Harbour StatementOur discussion may include predictions, estimates or other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risks and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today’s discussion, we will attempt to present some important factors relating to our business that may affect our predictions.
Internal Rate of Return
-$70,000 Total Startup Costs
$12,000 year 1 net income
$15,000 year 2
$18,000 year 3
$21,000 year 4
$26,000 year 5
9% Internal Rate of Return over 5 years
Ready, set, business planning!
1. Calculate Annual Expenses2. Calculate Annual Revenue3. Calculate IRR over a period of time
Net Income
The income statement, also called the profit and loss statement, is a report that shows the income, expenses, and resulting profits or losses of a company during a specific time period.
Cost of Equipment $261,360Facility Upgrades and Misc. Equipment $22,600Truck $15,000Office $2,800Startup Cash Flow 9 Months $179,652
Total $481,412
Capital Investment
Operating Expenses - Fixed$51,228.00 Loan of $159,041 amortized at 8% over 10 years$54,000.00 1.5 FTE - Management at $3,000 salary$6,048.00 Worker's Comp$4,131.00 Payroll Taxes$1,884.00 Liability insurance$600.00 Insurance (vehicle)$300.00 Registration (vehicle)$900.00 Accounting/Legal$600.00 Office$600.00 Marketing$800.00 Fuel (vehicle)
$1,200.00 Regulatory$6,000.00 Consulting
Operating Expenses - Variable$5,040.00 Seed Plugs 780 towers, 12 plants per tower$252.00 Pest control
$4,500.00 Fertilizer
$10,158.00 Packaging and Distribution
$50.00 Water (11,000 gal per year)Energy Costs
$91,246.00$239,537.00 Total annual expenses
10 oz Lettuce Clamshell
Lines of Business
% of Production
CapacityVolume Unit Price Value per
HarvestHarvests per Year Revenue
Revenue per
tower
After 10% Crop Loss
10 oz Lettuce - Wholesale/Retail 28% 1397
10 oz clamshell $2.60 $3,634 12 $43,610 $199 $39,249
Kale - Wholesale by the pound
Line of Business% of
Production Capacity
Volume Unit PriceValue
per Harvest
Harvests/Year Revenue Revenue/
tower
10% Crop Loss
Kale - Wholesale 40% 1560 1 lb $6.00 $9,360 12 $112,32 $360 $101,088
Basil - Wholesale by the pound
Line of Business% of
Production Capacity
Volume Unit PriceValue
per Harvest
Harvests per Year Revenue
Revenue per
tower
After 10% Crop Loss
Basil - /lb wholesale 10% 351 1 lb $20 $7,020 12 $84,240 $1,080 $75,816
Mini heads of lettuce - carton of 12
Line of Business % of Production Capacity Volume Unit Price
Value per
Harvest
Harvests per Year Revenue
Revenue per
tower
After 10% Crop Loss
Mini Head of Lettuce - Wholesale/Retail 22% 2745.6
Carton of 12 $12 $2,745.60 12 $32,947 $192
$29,652.48
Year 1 - Net Income($481,412) - Total Investment Including 9 Months operating expenses
($59,884) - 3 months of additional operating expenses
$218,493.85 Total Revenue
($322,803) - Net Income Year 1
Revenue Year 2 Lines of Business
% of Production
Capacity
Volume Unit Price
Value per
Harvest
Harvests per Year
Revenue
Revenue per tower
After 10% Crop Loss
Basil - /lb wholesale 10% 351
lb wholesal
e $20 $7,020 12 $84,240 $1,080 $75,816
10 oz Lettuce - Wholesale/Retail 28% 1397.76
10 oz clamshe
ll $2.60 $3,634 12 $43,610 $199 $39,249Mini Head of Lettuce -
Wholesale/Retail 22% 2745.6Carton of 12 $12 $2,745 12 $32,947 $192 $29,652
Kale - Wholesale/Restaurant 40% 1560
Per lb Wholesa
le $6 $9,360 12 $112,320 $360 $101,088
Total $245,805.58
IRR - Scenario ATotal Annual Cash Flows Including Investing Activities
IRR
Year 1 -$322,802 -
Year 2 $6,269 -98%
Year 3 $6,269 -85%
Year 4 $6,269 -70%
Year 5 $6,269 -57%
Year 6 $57,497 -26%
A closer look at assumptionsYear 1 is at 80% of capacity - limited by market penetration
4 lbs per tower for lettuce
4.5 lbs per tower for basil
5 lbs per tower for kale
Pricing
LOB }
Products Scenario A
Lines of Business% of
Production Capacity
Price Value per Harvest Revenue Revenue
per tower
After 10% Crop Loss
Basil - /lb wholesale 10% $20 $7,020 $84,240 $1,080 $75,816
10 oz Lettuce - Wholesale/Retail 28% $2.60 $3,634 $43,610 $199 $39,249Mini Head of Lettuce - Wholesale/Retail 22% $12 $2,745 $32,947 $192 $29,652
Kale - Wholesale/Restaurant 40% $6 $9,360 $112,320 $360 $101,088
Additional packaging and distribution expense
Fixed Costs - Annual
$51,228.00Loan of $159,041 amortized at 8% over 10 years
$54,000.00 1.5 FTE Management Salary
$58,000.00 2 FTE Packaging and Distribution$12,000.00 Worker's Comp
$8,000.00 Payroll Taxes
$307,358.00 Total annual expenses
Optimize Your Lines of Business
Lines of Business % of Production Capacity
Basil - /lb wholesale 15%10 oz Lettuce - Wholesale/Retail 30%Kale - Wholesale/Restaurant 40%Mint .75oz Wholesale 5%Basil - .75oz Wholesale/Retail 5%Parsley 5%
Increased profitability
Lines of Business% of
Production Capacity
Price Harvests per Year Revenue Revenue
per tower
After 10% Crop Loss
Basil - /lb wholesale 15% $20.00 12 $126,360.00 $1,080 $113,724
10 oz Lettuce - Wholesale/Retail 30% $2.90 12 $58,631.04 $251 $52,768
Mint .75oz Wholesale 5% $1.50 12 $66,339.00 $1,701 $59,705
Kale - Wholesale/Restaurant 40% $6.50 12 $121,680.00 $390 $109,512
Basil - .75oz Wholesale/Retail 5% $1.50 12 $66,339.00 $1,701 $59,705
Parsley 5% $1.50 12 $66,339.00 $1,701 $59,705
Total $455,119