Steel sm

PROPOSAL

BUSINESS FEASIBILITY STUDY

PROJECT

STEEL IRON

BESI PROFIL BARU LTD

BY

XXX

1994

Part of Book “A to Z Entrepreneur In Practice” Writer: Harmaizar Zaharuddin 1

Exchange Rate US$ 1 = Rp 2,200

CONTENTS

CONTENTS

SUMMARY

CHAPTER IGENERAL INFORMATION ABOUT THE COMPANY

I,1, Project background I-1I,2, Company ownership I-1I,3, Business Legality I-2I,4, Technology, Licenses and Technical Cooperation I-3

CHAPTER IIECONOMICAL AND MARKETING ASPECTS

II,1, Preface II-1II,2, Supplies and Demand Analysis II-2II,3, Marketing Strategy II-6

CHAPTER IIITECHNICAL AND PRODUCTION ASPECTS

III,1, Project lokation III-1III,2, Finished Product III-2III,3, Raw Material III-2III,4, Know - How III-2III,5, Production Process III-3III,6, Facilities III-4III,7, Production Machines III-6III,8, Other Facilities III-9III,9, Utility III-10III,10, Human Resource III-10III,11, Project Implementation III-11

CHAPTER IVCOMPANY MANAGEMENT ASPECTS

IV,1, Oraganization IV-1IV,2, Company Management IV-5

CHAPTER VFINACIAL ASPECTS

V,1, Total Project Cost V-1V,2, Fund Source V-5V,3, Financial Projection Assumptions V-6V,4, Financial Projection V-10V,5, Sensitivity Analysis V-17V,6, Financial Ratio Analysis V-18


Attachments and Financial analysis Forms

CHAPTER I GENERAL ASPECTS

Attachment-I,1, Company Establishing CertificateAttachment-I,2, Company Licenses

CHAPTER IIIPRODUCTION AND TECHNICAL ASPECTS

Attachment-III,1, Location Map

CHAPTER VFINANCIAL ASPECTS

Form-A Investment CostForm-B Factory Overhead CostForm-C Selling ExpensesForm-D General Administrative ExpensesForm-E Production, Raw Material Cost & Selling Price

Attachment V-0 SummaryAttachment V-1 Projected Balance SheetAttachment V-2 Cash Flow ProjectionAttachment V-3 Profit and Loss ProjectionAttachment V-3A Profit and Loss Projection with “Double Declining Balance”AttachmentV,4, Cost of Goods SoldAttachment V-5 Production and SalesAttachment V-6 Structure of Funds, Loan Disbursement and Repayment ScheduleAttachment V-6A Detail of Repayment ScheduleAttachment V-7 Draw Down of Project Cost ScheduleAttachment V-7A Interest during ConstructionAttachment V-8 Investment and Reinvestment ScheduleAttachment V-9 Depreciation, Amortization, and Maintenance ScheduleAttachment V-9A Depreciation and Amortization with “Double Declining Balance”Attachment V-10 Cash Requirement for OperationAttachment V-11 Estimated Working Capital NeededAttachment V-12 Financial RatioAttachment V-13 Internal Rate of ReturnAttachment V-14 Sensitivity Analysis


SUMMARY

I. General Aspects

Besi Profil Baru Ltd. is an Limited company that is established based on the official document of notary no ……………… date ……………, 1999… in front of public notary ………,,. Master of Law in Jakarta.

The company basis capital as included in the official document of public notary is Rp, ……………… (,,,,,,,,,,,,rupiah)divided in ,,,,,,,,,,,,, (,,,,,,,,) shares with the nominal price for each is Rp, ,,,,,,,,,,,,,(……,rupiah).

Total capital that has been deposited at the moment establishing the company is a sum of Rp, ………………,,(Rp,500 million) or ……,,(……) shares with details as follow:

1. M, Dicky Harvinanda : …….shares

2. M, Andhika Harvinanda : ....... shares

3. Sandrina Alya Harvinanda :…….shares

To run this Steel Iron factory that needs lots of capital, that capital is not satisfying yet. Hence, there is suggested to add the capital minimal as much as amount of equity is needed.

Economical and Marketing Aspects

Recently, there have been 31 companies that produce Steel Iron in Indonesia, among them, 23 companies have joined in Indonesian Steel Iron Producers Association and other 8 companies are not the member yet. Besides that there have been 2 companies to be going to establish Steel Iron factory and have obtained agreement of Coordinative Agency for Investment, are: Banung Sarana Baja Ltd, and Industry Galvealmas Ltd, But Banung Sarana Baja still delays its development, while, Industry Galvanealmas is going to obtain the agreement letter from Coordinative agency for investment at 10-02-1994.

Actual and Demand Projection to Steel Iron in1989 –2000

Year Consumption (ton) Growth (%)Actual1989 931,9141990 1,178,277 26.441991 1,203,879 0.02 1992 1,197,364 - 0.541993 1,198,304 0.08Projection1994 1,276,193 6.501995 1,359,136 6.501996 1,447,490 6.501997 1,541,577 6.501998 1,641,780 6.501999 1,748,496 6.502000 1,862,148 6.50


Data Source: CICProduction Plan of Besi Profil Baru Ltd. and other companies are served in the next table:

(Ton)

YearP R O D U C T I O N

T O T A LPRODUCTION

Existed Companies

Industri Galvanealmas Ltd.

Besi ProfilBaru Ltd.

Actual1989 1,017,718 0 0 1,017,7181990 1,189,987 0 0 1,189,9871991 1,217,424 0 0 1,217,4241992 1,277,300 0 0 1,277,3001993 1,379,910 0 0 1,379,910Projection1994 1,379,910 0 0 1,379,9101995 1,379,910 0 0 1,379,9101996 1,379,910 56,250 43,000 1,479,1601997 1,379,910 61,875 50,495 1,492,2801998 1,379,910 67,500 56,135 1,503,5451999 1,379,910 75,000 56,400 1,511,3102000 1,379,910 75,000 56,400 1,511,310

Data Source: CIC and proceed

From the result of supplies and demands projection, comparison of 2 matter is obtained, as served below:

Ton

YearSupplies Total

Supplies (A)

Demand (Consumption)

(B)

Balance(A-B)Production Import Export

1989 1,017,718 303 86,107 931,914 931,914 01990 1,189,987 817 12,527 1,178,277 1,178,277 01991 1,217,424 429 13,974 1,203,879 1,203,879 01992 1,277,300 141 80,077 1,197,364 1,197,364 01993 1,379,910 289 181,895 1,198,304 1,198,304 0Projection1994 1,379,910 324 193,004 1,187,230 1,276,193 - 88,9631995 1,379,910 334 204,792 1,175,452 1,359,136 - 183,6841996 1,479,160 245 217,300 1,262,105 1,447,490 - 185,3851997 1,492,280 215 230 572 1,261,923 1,541,577 - 279,6541998 1,503,545 190 244,654 1,259,081 1,641,780 - 382,6991999 1,511,310 145 259,596 1,251,859 1,748,496 - 496,6372000 1,511,310 123 275,451 1,235,982 1,862,148 - 626,166

From the projection result above, as seen that the existing demands exceeds the supplies, it is of production output from domestic or import From the marketing segment can be taken a conclusion


that investments in Steel Iron industry field are possibly to be carried out, in the reason that all production outputs can be absorbed predictably by existing market

III. Technical and Production Aspects

Steel Iron factory of Besi Profil Baru Ltd. is located in Village …,.Sub District ……Regency ……,,or + 80 Km from ……and entire project area is + 30,000 m2

The planned project shall produce Steel Iron and Profil namely, a product which is used as constructions to erect building.,

And Steel Iron is produced from the heating process and the forming Billet.

The Steel Iron which is produced by Besi Profil Baru Ltd. has the quality export and as same as international quality standard.

The production technology of Steel Iron above is the technology from abroad / import; hence, in order that local oporetors are capable to operate it there are needed firstly know-how trainings, In this case, the technology providers are prepared to hold trainings for the related operators and bring about the trainers from the origin factory to train local workers.

IV. Company Management Aspects

The company organization arranging of Besi Profil Baru Ltd. is based on needed functions to get company’s goal.

The company consists of 3 departments:

1. Financial, General and Administration Department.

2. Technique and Production Department.

3. Sales / Marketing and Purchasing Department.

4. Full organization structure is, as follow:


ORGANIZATION STRUCTURE of Besi Profil Baru Ltd.

V. Financial Aspect

The Steel Iron factory development project of Besi Profil Baru Ltd. is estimated to absorb the investment cost a sum of Rp 15,828,195,000.

Costs allocation can be analyzed as follow:

A. Lando Land buying in 30,000 sqm Rp 1,800,000,000o Land improvement in 30,000 sqm Rp 75,000,000


Board of comm.

Director

Fin. Gen & Adm Manager Production Manager Marketing Manager

Gen. & Adm. Head Division

Fin. Head Division

Marketing Hd. Division

Purchasing Head Division

Warehouse Head Division

Production Head Division

Heating Section

Milling Section

Finished Goods Sect.

Raw Material Section

Cooling & Finishing Section

Forming Section

B. Machines, Construction and Facilities Machine and Equipment Stock:o Building Cost Rp 2,947,500,000o Inside Battery Limit (ISBL) Rp 7,102,440,000o Outside Battery Limit (OSBL) Rp 1,128,000,000o Vehicles Rp 313,000,000o Tools & Office Equipment Rp 405,500,000

-------------------Total Fixed Assets Cost Rp 13,771,440,000

C. Pre-Operation Costo Office Expenses Rp 250,000,000o Consultant Fee Rp 100,000,000o Designing Fee Rp 152,040,000o Expatriate (one month) Rp 136,836,000

-------------------Total pre-operation cost Rp 638,876,000

D. Others:o Interest During Construction Rp 1,226,501,000o Management Fee Rp 50,436,000o Commitment Fee Rp 140,942,000

-------------------Total Others Rp 1,417,879,000

Total Investment Rp 15,828,195,000

V.2. Fund Source

Steel Iron factory development of Besi Profil Baru Ltd. is planned to be funded with Bank Loan and Private Capital. Project Funding Structure is describable as follow: 1. Fixed Assets investment

Bank Loan- Investment Loan (70%) Rp 10,087,221,000- Interest during Construction Rp 1,226,501,000

------------------Total Bank Loan Rp 11,313,722,000

Private Capital - Investment (30%) Rp 4,323,095,000- Management Fee Rp 50,436,000- Commitment Fee Rp 140,942,000

------------------Total Private Capital Rp 4,514,473,000

Total Investment Cost Rp 15,828,195,000

2. Addition of Working Capital is needed for 3 years: Bank Loan:Year-1 Rp 4,467,005,000


Year-2 Rp 1,517,650,000Yaer-3 Rp 990,799,000

------------------Total Working Capital Rp 6,975,454,000

Cost of money

- Interest level for Investment Loan, 14.00%

- Interest level for Working Capital Loan, 16.00%.

Grace Period

Grace period for the projected bank loan installment is needed for + 1 year.

Credit payment

Loan Investment return can be explained as follow:

- Year-1 Rp 1,500,000,000- Year-2 Rp 2,000,000,000- Year-3 Rp 2,000,000,000- Year-4 Rp 2,500,000,000- Year-5 Rp 3,313,722,000

------------------Total Loan Return Rp 11,313,722,000

Profit and Loss Projection

In first production year 1997, the company receives profit a sum of Rp, 612,851,000. In second production year 1997 is a sum of Rp, 2,003,738,000,-. In further years, the company’s net, income keeps increasing up to the end of the production year. Loss / profit projection can be seen on Attachment-03.

The company profit accumulation in tenth projection year is a sum of Rp, 30,306,422,000,-

Internal Rate of Return (IRR)

In Intenal Rate of Return analysis of Besi Profil Baru Ltd. is apparently 27.71%. It shows that fund utilizing for that project is proper.

CONCLUSSION AND SUGGESTION

Conclusion

Based on this study analysis, we come to conclusion that Steel Iron factory development business is rather proper, either being observed from the legality, marketing, technique, management aspects or the company financial aspects,

Suggestion

For being able to implement this business in accordance with the development main goal and also the plan in this study, we hoop that Besi profil Baru Ltd. may pay attention the suggestions as follow:


1. This feasibility study is made by some assumptions, For obtaining a business result appropriately with this study, we suggest Besi Profil Baru Ltd. can refer and analyze every used assumption.

2. In order that marketing smoothness can be guaranteed for long term. Besi Profil Baru Ltd. still must keep its quality product, observe market condition and can also distribute safely, quickly and precisely in time.

3. Supplies and production observing management will give influence much to produced product, For that reason, it is suggested to Besi Profil Baru Ltd. in order to do it well.

4. The company basis capital as included on the company establishment official document a sum of Rp……………, And for the equity which needed by Besi Profil Baru Ltd. is Rp, …………………,. To fulfill the amount of needed equity, we suggest amount of basis capital in the official document of notary can added appropriately to the amount of equity.

** Steel-SM.Microsoft Word **


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