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Business Expansion Final
Selan Candle Industries is requesting a revolving short-term loan of LKR 20 million to meet increased working capital needs during the upcoming seasonal demand period of Vesak and Poson. The funds will be used to purchase extra inventory of two varieties of candle products. The company has been profitable over the last three years, but working capital needs have increased as the company has expanded production capacity and introduced new product lines.
Business Expansion Final
- 1. ChamindaRuwanpathirana 2009 BusinessExpansionPlan Requesting funds asa Revolving – Short Term Loan of LKR.20.00 Mio., under bullet repayment after 06 Months and Interest to be serviced monthly, in order to meet the forthcoming Seasonal working capital requirement i.e. to meet the very heavy demand in “Vesak – Poson” Season. The funds will be used to hold extra stocks of Candle products in two different varieties & qualities. SELAN CANDLE INDUSTRIES No.10/1, Vidyala Road, Kotaboda Watta, Avissawella. 036 – 2230518
- 2. 2 Contents Vision / Mission ManagementStructure Company Profile Candle Making Machines Accounts Summary Accounts Highlights Purpose Breakeven Level / Leverages Bankers Working Capital Statement Cash-flow Statement Assessment of Risks Page No. 03 04 05 07 08 09 11 12 13 14 15 16
- 3. 3 Our Vision Our Mission Tobe the number one in highest quality yet affordable Candle products provider to the nation. We will be the highly market oriented and the premier provider of Candle products beyond the customer expectations, while managing and expanding the Company effectively and efficiently in a social responsible and sustainable manner. To be the number one in highest quality, yet affordable Candle products provider. We will be the highly market oriented and the premier provider of Candle products beyond the customer expectations, while managing and expanding the Company effectively and efficiently in a sustainable manner.
- 4. 10 O 01 - Sup 0- Machine Operators MA ST M ervisor e ANAGE TRUC Manag EMEN TURE ging P 15 Packing & Storing NT E Partneers 01 - Supe Tran Dis ervisor 04 nsportation & stribution n
- 5. cand Prese The cons “Vel of w Prese diffe Mr. Anil “Selan dles(in two ently the com MAN Mr. Anil Pi of “Seetha I Mr. Ruhan years, befor good knowl business is struction of landa Piyasa water and abil ently from t erent qualitie M SMALL sized, eac packet contained 40 numbe of Candle B Kumara & Candle Indu different ve mpany can b NAGING iyadasa was Industries – A Kularatne w re the comp ledge of acco M Located at “ same was fi a”. Taking in lity to find a the above sa es which diff Brand "SEL weight o 40 ch d er es Retail price LK Wholesale price Retail price LK Wholesale price BUSINES & Mr. Ruhan ustries” (SC erities i.e. L be placed am G PARTN an Ex-Sales Avissawella was a manag any was for ounting. MACHIN “Anhettigam inanced by “ n to conside ample labour id factory pr fer from its w named LAN" of a packet 00g KR.160/‐ LKR.120/‐ LARGE sized, each p containe 08 number of KR.160/‐ LKR.120/‐ SS PART n Kularatne CI), which i Large and S mong the Top NERS - E s Representa a” for over a er attached t rmed and ha NES AN ma”, in a fac “Seylan Ban eration, it is r resources a roduces two weight and t E packet ed Candles TNERS A e were scho s actively en Small, to m p 02 of the le EXPERI ative (with a period of 05 to “D. C. M as the neces D THE C ctory buildin nk PLC – A an idyllic se at a lower co o different ve the prices as AND AC oolmates and ngaged in m eet the cust eading Cand IENCE I an enormous 5 years, befo Mills – Balum sary admini CAPACI ng, property Avissawella” etting for the st in the vici erities of can follows. SMALL sized, eac packet contained 40 numbe of Candle TIVITIE d are the m manufacturin tomers’ dem dle manufact IN THE experience ore the comp mmahara” fo strative skil ITY worth over ” branch thro e business s inity area. ndles i.e. La Brand "DES weight o 36 h d er es Retail price LK Wholesale price Retail price LK Wholesale price ES managing pa ng and distri mand) in lar turers in the TRADE in the trade pany was for or over a per ls together w LKR.6.00 M ough a facil ince, free av arge and Sma named SHAN" f a packet 60g R.160/‐ LKR.120/‐ LARGE sized, each p containe 08 number of KR.150/‐ LKR.110/‐ artners of ibuting of rge scale. country. E concern) rmed. riod of 06 with very Mio., and ity called vailability all in two E packet ed Candles
- 6. 6 The following machineshave been installed in the site at present. QUANTITY PRODUCTION CAPACITY AT ONCE MV (LKR’000) 08 Machines (03 Brand-new Machines) 300 Small candles from each 2,400 02 Machines 50 Large candles from each 350 02 Machines 100 Large candles from each 500 01 Machine (Brand-new Machine) 120 Large candles 500 Minimum output for a normal day - 15,600 Large Candles or 1,950 packets or 65 Cases - 74,400 Small Candles or 1,860 packets or 62 Cases Permanent employees - 18 Casual Basis - 15 Note 01 : Please note that the before the newly installed machines the capacity was, Small and Large candles both, 50 cases each for a normal day. Further, the above mentioned output per day and the casual workers which the company is introducing to the process will be TRIPLED during the Season MARKET INQUIRIES / MARKET SHARE OF THE COMPANY According to the market inquiries the only competitor to the company in this line of industry is “Elephant Brand” (known as the present Market leader or Branded candles) yet, the “SCI” holds the largest market share at all-times. “Selan Candle Industries” holds the largest market share of them all, approximately 55%. The present market leader “Elephant Brand” holds approximately 30% and the “Sun Brand” 10% and other Brands holds the rest of the market share in the country. 01 Case (Large OR Small) 30 Packets (Large OR Small) Large → 240 Candles Small → 1,200 Candles Selan Candle Industries Elephant Brand Sun Brand Other Brands
- 7. 7 Note 02 :Please note that the all above machines are Water Coolant and the island wide distribution is carried out by the company’s own vehicles.
- 8. 8 THE COMPANY’S SUMMARYOF THE BALANCE SHEET / PROFIT & LOSS HIGHLIGHTS FOR PAST THREE YEARS. FIXED ASSETS Furn & Fitts 67 67 19 Machinery 1,430 1,430 1,430 Vehicles 3,631 3,631 2,030 Land & Buildings 1,690 1,690 1,690 6,818 6,818 5,169 CURRENT ASSETS Stocks 16,269 11,416 4,520 Cash 1,268 5,354 1,329 Savings Accounts 525 18,062 225 16,995 - 5,849 24,880 23,813 11,018 EUITY Capital 1,000 1,000 1,000 Add : Net Profit 3,645 8,364 2,151 4,645 9,364 3,151 Less : Drawings - 1,140 1,317 4,645 8,224 1,834 CURRENT LIABILITIES Bank Overdraft 4,686 5,595 4,007 Loans 13,000 5,500 3,000 Leases 1,143 1,400 - Invoices 1,406 20,235 3,094 15,589 2,177 9,184 24,880 23,813 11,018 Sale s 49,148 43,511 27,499 Le s s : Cos t of Sale s Stocks 11,416 4,520 3,869 Purchases 42,747 35,524 20,556 16,269 37,894 11,416 28,628 4,520 19,905 Gros s Profit 11,254 14,883 7,594 Le s s : Expe nditure s Fuel 557 415 421 Other 494 324 291 Salaries 2,600 2,175 1,892 Meals 109 101 87 Packing 1,717 1,617 1,196 Vehicle Maintaine 207 282 175 Electricity 68 94 59 EPF/ETF 296 143 100 Fire Woods 214 286 139 Bank Charges 209 81 157 OD Interest 618 383 298 Loan Interest 222 618 628 Lease Interest 186 - - VAT 66 - - Taxes 46 7,609 - 6,519 - 5,443 Ne t Profit 3,645 8,364 2,151 01/04/2007 - 31/03/2008 LKR '000 01/04/2006 - 31/03/2007 LKR '000 01/04/2005 - 31/03/2006 LKR '000 Stocks as at 31 st March for the Current Year ended
- 9. 9 SUMMARY BALANCE SHEET 2008 – 2007 (LKR.‘000) 2007 – 2006 (LKR. ‘000) 2006 – 2005 (LKR. ‘000) Current Assets 18,062 16,995 5,849 Less : Current Liabilities 20,235 15,589 9,184 Net Current Assets (2,173) 1,406 (3,335) Fixed Assets 6,818 6,818 5,169 Other Assets - - - Total Net Assets 4,645 8,224 1,834 Equity 4,645 8,224 1,834 Long term Debt - - - Total 4,645 8,224 1,834 PROFIT & LOSS HIGHLIGHTS 2008 – 2007 (LKR. ‘000) 2007 – 2006 (LKR. ‘000) 2006 – 2005 (LKR. ‘000) Revenue 49,148 43,511 27,499 Cost of Sales 37,894 28,628 19,905 Gross Profit 11,254 14,883 7,594 Operating Profit 4,993 9,365 3,234 Interest 1,236 1,001 1,083 Profit Before Taxation 3,757 8,364 2,151 Tax 112 - - Net Profit After Taxation 3,645 8,364 2,151 Ratios 2008 – 2007 2007 – 2006 2006 – 2005 Gross Profit Margin 22.9% 34.2% 27.6% Net Profit Margin 07.4% 19.2% 07.8% Current Asset Ratio 0.89 : 1 1.09 : 1 0.64 : 1 Quick Asset Ratio 0.07 : 1 0.36 : 1 0.14 : 1 Debt / Equity 4.05 : 1 1.52 : 1 3.82 : 1 Gearing / Debt Ratio 0.81 : 1 0.65 : 1 0.83 : 1 Interest Cover 3.95 times 9.36 times 2.99 times
- 10. BAL SAL NOT Altho over Thus 10 15 20 25 5,0 10,0 15,0 20,0 25,0 30,0 35,0 40,0 45,0 50,0 LANCE LES TO TE WITH oughthe Fin 01st January s, the financi ‐ 5,000 0,000 5,000 0,000 5,000 31.03 ‐ 000 000 000 000 000 000 000 000 000 000 Year 2 SHEET GROSS CARE nancial Yea y - 30th June ial figures ar 3.2006 31.03 2006 Year GROWT PROFIT ars rolling ov every year re intricate / .2007 31.03. 2007 Year TH T TO NET ver 01st Apri and the last confused to 2008 r 2008 T PROFI il - 31st Marc credit collec analyse to g ASSETS EQUITY LIABILITIES Sales Gross Profit Net rofit Note 03: The reaso increasing is due to stocks for the exces due to the called “D August ’0 of financi The reaso year 200 trend in N year ’08, it was LK the Year 2 IT ANAL Note 04: The reaso Increasing is due to for the en introducti “Deshan” affected to Reason, f Net Profi the decre (Wax) for inflated c was affec ‘08. Furth May ’07, prepare a consumer New Year financial y Purchasin August ’0 over LKR taken for Avissawe not reflec ch every yea ctions will b get the clear : on for decrem g Assets from the mere fac r the end of f ss amount of e introduction Deshan” to th 05 and it wa ial year ’07. on for decreas 07-2008 is d Net profit fo i.e. Change i KR.6.2 Mio., 2007-2008 by LYSIS on for decrem g of Sales fro the fact of ho nd of financia ion of low ” in August ’0 o the end of f for decrease it for the yea ement in the r the end of f ost of the Wa cted for the her, the “Ves , which is m and lesser am rs, as soon aft r” and it was year ended 20 ng of pro 06, where the R.2.20 Mio., same from t ella for LKR. ted by the abo ar, the compa be over by en picture for t ment in the c m the Year 20 cts of holding financial year Cash in hand n of low pric he market du s affected for se the Equity due to the de r the end of in the year 20 and was dec y LKR.4.7 M ment in the c om the year 20 olding an ext al year ’07 an priced, bran 05 and such p financial year the Gross P ar 2007-2008 change in P financial-year ax during the end of finan ak” was falle much shorter p mount in cash ter the “Sinha badly affecte 008. operty at e Company ha and the fac the Seylan B 6.75 Mio., w ove financials any’s Season nd of July ea the Season. change in 007-2008 g an extra r ’07 and d, mainly ced brand uring the r the end y from the ecreasing financial 006-2007 creased in io. change in 007-2008 tra stocks d further, nd called profit was r ’07. rofit and is due to Purchases r ’07 and e year ’07 ncial year en on 01st period to with the ala Hindu ed for the Ukwatte as funded cility has Bank PLC which was s. n rolling ach year.
- 11. PUR Prese whic dema Thus Bran Furth meet TH Sale Less Purc Gro Less Fue Sala Mea Pack Fire Loa Net RPOSE O ently theSe ch is not suf and at all, es s, the necess nd new mach 03 Machine 01 Machine her, “SCI” i t their custom E COMP P es s : Cost of S chases oss Profit s : Expenditu l aries als king e Woods an Interest t Profit OF THE lan Candle I fficient to m specially dur sary steps ha hines with be es → 300 S es → 50 La is required a mer’s heavy ANY’S P THE C Particulars Sales ures CREDIT Industries (S meet their ex ring the seas ave been alre etter capacity Small candle arge candles and targeted demand on PROJECT CANDLE T FACIL SCI) functio xpected prod son sale i.e. J eady taken t y. s from each at once d to produce the forthcom TED PRO PRODUC De LITY oning with m duction of c January to Ju to enhance th → MV is → MV is 10,000 case ming season OFIT & L CTION O ebits 28,125 50 750 20 870 180 2,400 maximum ou candles in o uly. he productio approximat approximat es additiona . OSS HIG OF 10,000 Cred utput for the rder to neut on by install tely LKR.30 tely KR.100, ally which is GHLIGHT 0 CASES dits 34,500 last couple tralise the cu ing under m 0,000/- ,000/- s hardly suff TS ONLY . LKR Total 34 6 2 of years, ustomers mentioned fficient to Y FOR R ‘000 4,500 6,375 2,105
- 12. PR Acco prod Vari Fixe Aver Brea Brea Note The mat targ Note Plea for th ODUCTI ording toth duction of 10 iable Cost ed Cost (LKR rage Whole ak-even Lev ak-even Lev e 05: company tched whe geted / exp e 06: se note that he expected ION CAP he Company 0,000 cases, t R.’000) esale Selling vel (in Units) vel (in LKR. y’s (SCI) en they pected can the above L enhanced ca PACITY y’s’ Manage the Breakev = = g Price = ) = ) = ) No Pro touched t ndle prod O c O T F T a t Leverages ha andle produc / BREAK ement Acco ven Level can 97.48 pac 2,964 LKR.115/ 169 (pack 19.435 Mi ofit – No the sales uction of OVERHE Operating Sales Tu “SCI” spend company’s o Operating Equ The company FINANC T Owner’ Equity The “SCI” ru are not in a p their owner’ as been estim ction of 10,0 K-EVEN ounts and th n be as follo ckets /- kets in ’000) io. o Loss m turnover 10,000 ca EADS & Expenses urnover ds; approxim operating exp Expenses ity y’s operating e IAL LEV otal Debts s + Total Debt unning the b position to re s equity mated as per 000 cases. N LEVEL he projected ws. ) margin (Br r of LKR ases. OPERAT = 6,261 mately 13% penses. = 6,26 expenses for q VERAGE s = l s (4 business with epay all their the Financia L d Profit & L reakeven R.19.435 TING LE 1 / 49,148 from their s 61 / 4,645 quity is 1.35 t ES 20,235 ,645 + 20,23 h high debt e r debts in the al Year ende Loss for the Level) w Mio., fo EVERAG = 0.13 tim sales turnove = 1.35 ti times. = 1 : 0 35) exposure, wh e short-run f ed March ’08 e Candle will be r their ES mes er for the imes .81 hich they from 8 and not
- 13. BA Prese The fully Mio Seyl Prese Per Rev Vel Lea Tot Furth welc made ANKING ently, the “S 1st facilityw y secured nat approximat an Bank PL ently “SCI” Facility rmanent Ove volving Shor lenda Piyasa ase Facilities tal Existing F her, with th coming staff e a tremendo G & BAN SCI” is exclu was granted o ture. Simult tely during t C. enjoying un y Type erdraft rt Term Loan a Loan s Facilities he proper g f and togethe ous growth i NKERS usively bank on March 19 aneously, w the past and nder mention C n guidance an er with the in a very sho ing with Sey 996, after wh we have mana d we have in ned facilities Capital Grant LKR. 3,700 13,000 6,750 1,565 25,015 nd the expe commitment ort period ylan Bank PL hich the seve aged to buil nvested the with the Se ted 0,000- 0,000- 0,000- 5,217- 5,217- rtise of the ts, enthusias LC at Avissa eral facilities d up a depo same under ylan Bank P Capital Ou LKR 3 6 e Selan Ban sm of the bu awella since s were grante sit base to th long term F PLC at Aviss utstanding R. 3,700,000- 00- 6,000,000- nk PLC at usiness partn e December ed time to tim he value of Fixed Depo sawella bran Rate o Interes 27.0% p 15.5 % p 17.5 & p Avissawella ners, the bus 1994. me, under LKR.3.70 sits at the nch. of st p.a. p.a. p.a. a branch’ siness has
- 14. 14 ASSESSMENT OF WORKINGCAPITAL REQUIREMENT ASSUMPTIONS Expect production per 1 month in units 9,525 cases (approx. 6,750,000 candles in both large and small) 1 Case includes 30 packets with small 40 / large 8 candles each. Purchasing and storing of Raw Materials is 1 month (57,150 cases per 6 months). Processing Time is 2,820 candles for 20 Minutes, and maximum of 203,040 candles can be manufactured per day (5,076,000 per month), during the season. Storing period of finished goods (Candles) is 1month. 60% sales done on Credit and Credit allowed for 45 days Production requirement is for 6 months No. of Workers 50. Working 24 Hours round the clock (shift work) during the season and No. of Working days per months = 25 days. Payments made for Raw Materials within 1 Month Average wholesale selling price per 1 Case is LKR.3,450/- Raw Materials Paraffin Wax 50 Kg. is LKR.12,500/-, estimated production is, 11.25 Kg., required for {average weight from “Selan” & “Deshan”=(12+10.5)/2=11.25}1 Case. Therefore, to 160,734,500 produce 57,150 cases “SCI” required 642,938 Kg. (value for 1Kg is LKR.250/-) Value required for 6 Months is (642,938 X 250) Yarn 200 g., per 1 Case (1 Kg = LKR.325/-), Therefore, required Kilograms per __3,714,750 6 month 11,430 Kg. Value required for 6 Months is Paper - estimated cost per case is LKR.40/-. Value required for 6 Months is __2,286,000 Labels - estimated cost per case is LKR.25/-. Value required for 6 Months is __1,428,750 1 Box per 1 case - estimated cost is 22/-. Value required for 6 Months is __1,257,300 Total Raw Materials 169,421,300 Salaries (Direct Labour) – Candle production of 1 case entitle for LKR.40/- per worker __3,143,250 Therefore Wages per month (9,525 X 55/- = 523,875/-). Wages for 6 Months Fuel and Transport ___ 407,000 Loan Interest __4,455,000 Factory Overheads ___ 345,000 Administration & Establishment Expenses ___ 600,000 Assessment of Working Capital Requirement for 6 months No Months Amount (LKR.) Raw Materials 01 _28,236,883 Working Progress ½ _14,266,369 Finished Goods ⅔ _19,819,061 Debtors 1 ½ _26,755,732 Gross Working Capital _89,078,045 Less : Suppliers Credit 01 28,236,883 Revolving STL at Seylan Bank PLC– Avissawella 13,000,000 Company’s Contribution _6,500,000 Cash Sales 19,716,750 _67,453,633 Net Working Capital Requirement _21,624,412 =========
- 15. 15 PROJECTED CASH FLOWSTATEMENT FOR THE REVOLVING SEASONAL PERIOD FROM 1ST JANUARY TO 31ST JULY 2009 January 2009 February 2009 March 2009 April 2009 May 2009 June 2009 July 2009 Cash Inflow Sales Turnover 28,715,000 29,750,000 30,910,000 31,980,000 32,850,000 29,750,000 15,500,000 Sales on Cash 4,506,000 8,900,000 10,320,000 14,460,000 21,320,000 14,210,000 6,066,000 Proceeds on Credit Sales excluding returns (68%) - 10,759,000 12,708,000 23,606,000 28,842,000 22,152,000 19,610,000 RSTL 13,000,000 - - - - - - SCI's Contribution 6,500,000 - - - - - - Total Cash Inflow 24,006,000 19,659,000 23,028,000 38,066,000 50,162,000 36,362,000 25,676,000 Cash Outflow Salaries / Wages 524,000 524,000 524,000 524,000 524,000 524,000 280,000 Fuel / Transportation 68,000 68,000 68,000 68,000 68,000 68,000 68,000 Other Factory Over Heads 58,000 58,000 58,000 58,000 58,000 58,000 58,000 Fire wood 80,000 80,000 80,000 80,000 80,000 80,000 80,000 Bank Interest 742,500 742,500 742,500 742,500 742,500 742,500 742,500 Admin & Estb. 100,000 100,000 100,000 100,000 100,000 100,000 100,000 Raw Materials Parapin Wax 26,789,000 26,290,000 26,785,000 26,039,000 26,540,000 25,985,000 22,514,000 Yarn 619,000 619,000 619,000 619,000 619,000 619,000 619,000 Paper/Labels 615,000 615,000 615,000 615,000 615,000 615,000 615,000 Boxes 210,000 210,000 210,000 210,000 210,000 210,000 210,000 Total Cash Outflow 29,805,500 29,306,500 29,801,500 29,055,500 29,556,500 29,001,500 25,286,500 Net Cash Outflow Excess/(Short) -5,799,500 -9,647,500 -6,773,500 9,010,500 20,605,500 7,360,500 389,500 B/F - -5,799,500 -15,447,000 -22,220,500 -13,210,000 7,395,500 14,756,000 Total New Cashflow Excess/(Short) -5,799,500 -15,447,000 -22,220,500 -13,210,000 7,395,500 14,756,000 15,145,500
- 16. AS Com Indu Econ SESSM mpany Risk ustry Risk nomyRisk ENT OF : Since “ reputati compan : There a competi (previou share an effectiv : When it or the material to the w F RISK SCI” has be on and stand ny risk is ver are no sever itors. Howe usly and till nd also wer e manner. t comes to a heavy Impo ls especially whole country een in this t ds among th ry narrow. re or huge ever, now th l recently, t re the Mark a Economic ort-duty imp y for Parping y as well. trade over d he Top-02 le risks or thr he “SCI” ho the “Elephan ket Leader). risk there is posed by th g Wax, but i decade of tim eading Cand reats in this olds the lar nt Brand ca But the “SC s always ther he Governm it will be aff me, as they dle manufact s Industry o rgest market andles” held CI” handles re the Tax a ment time to fected to the gained an e tures in this other than th t share of t d the largest s the situatio and the Gove o time for t e whole Indu excellent country, he main them all t market on in an ernment, the Raw ustry and