Professional Documents
Culture Documents
1.0
BUSINESS DESCRIPTION
Business Description
The company XYZ COMPANY will engage in the import/export of cereals
and grains between Uganda and South Sudan. The whole function includes
the supplier/buyer identification, contracting and consultation for future
market expansion. The secondary operation of the company will be the
acquisition of in-demand cereals and grains for trading purpose in the
Republic of South Sudan. This includes exportation of cereals and grains to
the Republic of South Sudan that will be exclusively sourced from Uganda.
The XYZ COMPANY expects to do a successful import/export trading
business between South Sudan and Uganda as the directors have good
communication skills in the local languages of both countries as well as
excellent command in the English language.
Introduction
XYZ COMPANY was founded in the Republic of South Sudan in 2015. As a
young and ambitious growth company, XYZ COMPANY projects to emerge
as one of East Africas largest and most respected traders in agricultural
products. XYZ COMPANY plans to establish supply chains extend across
east African countries within the next 10 years.
The XYZ COMPANY envisaged supply chain will penetrate deeply into
remote agricultural regions where we shall be procuring commodities from
smallholder farmers through strategically located centres. The commodities
will then be accumulated at XYZ COMPANY nodal warehouses and/or
transported to processing facilities, prior to reaching our customers.
It is therefore the ambition and intention of XYZ COMPANY to move and
trade in not less than 20,000 metric tonnes of maize grain and other cereal
products between Uganda and the Republic of South Sudan while providing
direct employment to more than 600 people annually.
It is the mission of XYZ COMPANY to provide complete import/export
trading services including purchase contracts, shipping, warehousing, and
delivery scheduling. The company will concentrate on the purchase of maize
grain from Uganda for sale to the food deficit areas in the Republic of South
Sudan.
1
Supplier/Buyer identification
Purchasing, contracting and consulting
Market exploration services
Road transportation
Warehousing
Delivery
It must be noted that XYZ COMPANY does not possess any warehousing
facilities and intends to outsource this particular service during the first year
of the project. We expect to earn revenues by charging a commission based
on the value of goods moved per order.
Products
In demand products such as cereals and grains (especially maize grain and
maize flour).
The Market
The market for white maize in the Republic of South Sudan is continuing to
2
Gross Profit
Net Profit
80,000,000
70,000,000
60,000,000
50,000,000
40,000,000
30,000,000
20,000,000
10,000,000
0
1.1
Year 1
Year 2
Year 3
Year 4
Year 5
Vision
To be the strongest link between farmers and consumers within the East
African region.
1.2
Mission
To facilitate production of high quality crops
To propagate value addition and
To provide a market for all tradable surplus commodities
To provide consumers with a range of quality yet affordable branded
products.
4
1.3
Objectives
The three year goals for Visigoth Imports are the following:
Maize was introduced in Uganda in 1861 and has since become a major part
of the farming system, ranking third in importance among the main cereal
crops (finger millet, sorghum and maize) grown in the country (USAID, 2010).
Much of the production of maize aims to supply export markets in the region,
mostly especially Kenya and recently Southern Sudan, which are in chronic
maize deficits. The maize sub-sector is estimated to provide a livelihood for
about 3 million Ugandan farm households, close to 1,000 traders and over 20
exporters (UBoS, 2011). Therefore, maize is a growing source of household
income and foreign exchange through exports. Providing more support to the
maize industry is therefore a key part of Ugandas strategy to strengthen its
positioning in regional and world markets.
2.1
Maize Production
2.1.1 Maize Trends and Projections
2008
2009
2010
2011
2012
2013
2014
840,000
942,000
2,314,90
9
2,354,66
4
1,032,00
0
2,373,50
1
1,063,00
0
2,551,00
0
1,094,00
0
2,734,00
0
1,101,00
0
2,748,00
0
1,103,00
0
2,750,00
0
Volume (MT)
2015
N/A
2,600,00
0
Domestic Consumption
While maize has been grown for a long time in Uganda, nonetheless, unlike
in neighbouring countries (Kenya, Tanzania, etc.), it does not form a major
part of the populations traditional diet, but is grown primarily for income
generation, rather than for food security. However, the growing cost of
traditional staple foods (such as bananas [Matooke] has had the impact of
increasing maize consumption, especially in urban areas. Kampala alone
accounts for about 50% of formal trade in maize. The domestic market for
maize in Uganda is estimated at 350,000 - 400,000 metric tonnes per annum
(NRI/IITA, 2002). In 2007, domestic consumption remained at 400,000 MT out
of a national availability average of approximately 638,000 MT (USAID,
2008).
The main domestic market for maize is Kampala, which accounts for about
50% of the formal trade. The main buying centre is the Kisenyi market which
has a concentration of processors (about 88 millers). The main domestic
demand for maize is from institutions (schools, prisons, hospitals, etc.). Major
institutional buyers of maize include the World Food Programme (WFP),
which stocks supplies destined for distressed areas both within Uganda and
the region (DRC, Burundi and Rwanda) and the Uganda Grain Traders Limited
(UGT), which is an association of 16 Ugandan major trading companies.
Maize is consumed in various forms grilled or whole, as a cake [Posho, or
Ugali], or as porridge especially in urban centres. Over 70% of the maize is
consumed as food, and about 10% is used as animal feeds (maize bran).
There is also increasing demand of value-added products (maize flour,
poultry feeds, etc) especially in urban centres where maize is gaining
importance both as a major food item and for income generation.
2.3
10
2008
2009
2010
2011
2012
2013
2014
Production (MT)
2,314,9
09
22,715
2,354,6
64
6,559
2,373,5
01
1,457
2,551,0
00
N/A
2,734,0
00
N/A
2,748,0
00
N/A
2,868,0
00
N/A
210,155
143,532
Imports (MT)
Formal Exports (MT)
71,699
98,471
151,389
Formal Exports as a % of
Production
3.10%
4.18%
6.38%
93,610
3.67%
141,78
9
7.69%
5.22%
2015
N/A
N/A
290,66
2
4.94%
Data obtained from FAOSTAT (2012) indicates that formal imports of maize
have been declining since 2004. The same conclusion is also reported by
USAID (2010). Imports of maize have been high in seasons of low harvest
(e.g., 2004) especially on account of variations in rainfall patterns. By and
large, however, Uganda has always been self-sufficient in maize production
and has not been dependent on imports.
11
3.0
3.2
Agricultural Production
Other sectors of the economy aside from oil, such as agriculture and
livestock production, are not yet sufficiently developed to compensate for
the significant reduction in oil exports. Livestock, especially larger animals
such as cows, are generally kept as assets given the high social value they
have among pastoralists, rather than reared specifically for export. Small
ruminants such as goat and sheep are a key income source for pastoralists
and determine their ability to buy staple food in the market.
The potential for agricultural production in South Sudan is huge. Half of the
countrys 82m hectares of agricultural land is suitable for agricultural
production, yet only 4.5% is routinely under cultivation (Annual Needs and
Livelihoods Assessment, 2012/2013). Yields are low, with the average across
all cereals generally below one ton per hectare (Oxfam, 2014). The country
has only been self-sufficient in cereal production twice in the last decade;
overall food production fell from 954,000 tonnes in 2012 to 900,000 tonnes
in 2013 and 891,000 tonnes in 2014 (FAO/WFP 2014). This was against an
estimated total demand of 1.3m tonnes in 2013/14, giving an overall deficit
13
State
Central Equatoria
Eastern Equatoria
Western Equatoria
Jonglei
Upper Nile
Unity
Lakes
Warrap
W. Bahr-el-Ghazal
N. Bahr-el-Ghazal
South Sudan Total
Source: WFP (2015)
3.3
2012
2013
2014
4
6
2
24
21
12
5
19
6
13
112
4
4
3
10
32
19
5
25
6
11
119
9
4
3
24
25
25
14
21
4
7
136
Juba is the key trading and import hub for much of the country, in particular
for goods using the Kampala Nimule Juba corridor. There are four key
markets: KonyoKonyo, Customs, Jebel and Souq Lybia, as well as various
smaller or medium-sized neighbourhood markets. Konyo Konyo (North and
South) is the largest market in the region, the main hub for imports from
neighbouring countries and the primary point of origin for market supplies
throughout South Sudan. Imports from Uganda come directly to Konyo
Konyo, Jebel and Customs markets, and traders in Customs and Jebel also
buy from Konyo Konyo. Souq Lybia does not receive imports directly, so its
traders buy goods from one of the other three markets (see the figure
below). According to interviews, people prefer to buy from Konyo Konyo
market because of the wider range of goods available compared to other
markets. Konyo Konyo is not necessarily cheaper, except for maize and
15
Jebel
Customs
Souq Libya
Terekeka
Sells to
Buys from
3.4
Trade Flows
16
18
3.5
Market Composition
Most traders on Jubas markets import the majority of their goods from
Uganda. Exact figures are difficult to come by, but estimates suggest that
imports account for 85%90% of total supply in Konyo Konyo market (WFP,
2015). It is not only wholesalers who import goods: retailers, even smaller
ones, also do at times. The decision on whether to import or buy locally is
heavily influenced by the exchange rate and the availability of, and traders
access to, foreign currency.
The figure above summarizes the various entry points into the grain market.
Traders who buy from Uganda either make the trip there themselves or send
a close relative or business partner. Some have a South Sudanese or
Ugandan associate based permanently in Uganda who will source the goods
locally and load them on a truck bound for South Sudan. Many of the larger
traders buy directly from the two or three large grain traders/processers
based in Kampala. These large traders source grains from all over Uganda,
as well as having grinding and processing capacity in their factories in
Kampala. Smaller traders buying in Uganda often source cereals themselves,
19
Ugandan
Farmers: Hoima,
Kiryandongo and Jinja
Pooled or
individual
truck
Processors:
Uganda
Pooled trucks
Individual
truck
Wholesalers (Juba)
Wholesalers (Juba:
dont import)
Trader/transporter
(mobile)
Small Wholesalers
(Juba)
Retailers (Juba:
dont import)
Retailer (Juba)
Consumers
Transport
Trucks normally carry either 15 tons or 25 tons, and traders may load a
combination of different cereals and other items on a single truck. Rental
prices reported by traders were around 7m Ugandan Shillings ($2,000) for a
25-ton truck and around 4m Shillings for a 15-ton truck. Trucks are generally
hired in Kampala and operate independently of traders, though some may
also have their own trucks. Transporters in Juba who take produce upcountry
also operate independently. Checkpoints along the roads (both formal and
informal) are a major factor driving up the price of goods. A study by the
National Bureau of Statistics (NBS, 2011) found six checkpoints between Juba
and Nimule, 32 between Juba and Aweil, 24 between Juba and Wau and nine
between Wau and Aweil, with varying amounts of payment demanded at
each. This study found reports of numerous checkpoints between Kampala
and Juba, with traders having to pay between 100 and 200 SSP at each
unofficial checkpoint and and 200300 SSP at Nesitu.
3.7
Terms of Trade
Staple food markets operate on both credit and cash. Almost all traders
access credit on an informal basis, rather than through formal channels such
as banks or other financial institutions. Credit arrangements are often inkind, where a trader receives the goods but only has to pay for them after
selling them and collecting the profits, normally a couple of weeks later.
Credit also depends heavily on the connections individual traders have with
other traders or processors/producers. For example, several traders reported
that they knew large maize processors in Uganda well and did not have to
pay in advance for their goods, but paid once they had sold their stock.
Others mentioned that they always had to pay upfront because they did not
have the same personal contacts.
3.8
Prices
Food prices in South Sudan have been highly volatile since independence in
2011. There are enormous price differences between different markets due
to weak market integration across the country, mainly down to poor roads,
expensive fuel, illegal checkpoints and taxes and unfavourable exchange
rates (Special Focus Report, 2014). Generally, the further from an import
point (Uganda, Sudan, Ethiopia) the less integrated markets become, and the
more likely it is that prices will be higher (WFP, 2015). WFP price monitoring
23
24
BUSINESS MODEL
Key Activities
Value
Propositions
Import-export
companies
SMEs
and
business owners
Consultation
Unique products
Import-Export of
products
Cost efficiency
High quality
24-7
Services
Online
Key Resources
Channels
Finances
Internet
Marketing
Word-of-mouth
Industry specific
expertise
Cost Structure
Travelling
Initial packaging of products
Licences
4.1
Customer
Relationships
Customer
Segments
ImportersExporters
SMEs
Personal
contacts
Revenue Streams
Advanced Partial payments
Online payments
Customer Segments
The customers of XYZ COMPANY would be the importers and exporters and
small and medium size companies in South Sudan which are engage in the
process of growth and expansion. The entrepreneur will engage them by
offering different products and services so to create his own market niche.
4.2
Value Propositions
25
Channels
Newspapers, TVs, FM radio stations, and social media marketing and other
internet marketing tools will be the core source for XYZ COMPANY to
convey her message to its target audience. Other sources such as word of
mouth, referrals and personal contacts would be secondary source.
4.4
Customer Relationships
Revenue Streams
Due to the nature and type of business, there are generally two different
types of revenue streams such as Advance partial payments which will be
paid at the time of order and other will be bank transfers method (using
documentary letters of credit) partially before and after the sale or purchase
of products and services.
4.6
Key Activities
XYZ COMPANY will be engaged in two major activities, consultation and the
sale and purchase of in demand products (maize grains).
4.7
Key Resources
The key resource for the business are the finances it owes to run its
operations. These resources will be utilized to meet daily expenses and to
buy different products.
4.8
Key Partnerships
26
Cost Structure
The main cost of the business that will be incurred is the purchase of
products (maize grains). Also road transportation is another key cost as the
entrepreneur will carry out business operations with different transportation
companies located in Uganda, Kenya, and South Sudan to move the
agricultural products.
Figure 9: Projected Sales Map
Sales
Maize Grain
Consultation
Warehousing
Other Services
Figure 9, above shows the projected sales of the company. The major
source of income would be maize grain and consultation to other companies.
The company also intends to provide other services such as market surveys,
purchasing contracts, warehousing, transportation, and follow up service
analysis.
Differentiate our services to our niche clients so that they realize that
we are better able to serve their needs than a more generic
competitor.
Keeping close contact with clients and establishing a well-functioning
long-term relationship with them to generate repeat business and
create a top notch reputation.
Establish a comprehensive service experience for our clients/customers
that includes consultation, product/client search, purchasing contracts,
warehousing, transportation, cereals delivery, and follow up service
analysis.
4.11 The Business Process
Processin
g
Exportin
g
Shipping &
Logistics
Importing
Distributio
n
Processin
g
FARM GATE
30
Marketing
Purchases
commodities directly
from farm gate
Regional/International Distribution
Centre
THIRD PARTY
Or two-directional supply chain
allows us to move products
forwards and backwards through
our procurement and distribution
network
Current Status
XYZ COMPANY
(month) 2015 to
South Sudan. In
the2016 season,
is a newly established company, registered in ----------meet the inherent huge maize demand in the Republic of
order to import and distribute quality maize grain during
XYZ COMPANY will erect a maize cleaning and pre-export
31
Startup Costs
There are several start-up costs that are due to infrastructure development
and initial operating costs. These costs are one-time expenditures totaling
US$ 4,500,000 and include:
5.3
Workforce
Post start-up, during normal operation the maize pre-export cleaning facility
will require 10 to 15 laborers respectively during the off and peak seasons to
run at capacity. The XYZ COMPANY partners will manage and oversee the
day-to-day operations including operations management and financial
management. Operations management will consist of overseeing maize preexport cleaning and packaging operations, labour, maintenance, quality
control and product delivery. Financial management will consist of sales,
32
Business Capacity
The maize pre-export cleaning facility will have a throughput capacity of 50 100 tons of maize per hour. The down time on a mill is about 15% with 10%
idle time. A six-hour milling period will result in roughly 400 - 450 tons of
export-grade maize grains per day.
6.0
MARKETING PLAN
7.0
FINANCIALS
Capital Requirements
Startup costs total US$ 4,500,000. Capital going towards capital inventory is
US$ 1,000,000 including pre-operating expenses of US$ 100,000. Initial
working capital to finance one (1) months cost of goods and other related
transaction costs is estimated at US$ 3,500,000. Monthly gross sales are
estimated at US$ 4,200,000 for the first year with an annual growth rate of
5%. The assumption used in calculating monthly sales revenues is that XYZ
COMPANY will be selling 10,000 metric tonnes of white maize grain at a rate
of US$ 420 per metric tonne CIF Juba in South Sudan.
The pre-opening expense of US$ 100,000 is made up of fixtures & fittings,
office vehicles, computer equipment and other office needs.
The founding entrepreneurs of XYZ COMPANY are able and willing to
contribute US$ 500,000 in form of preference shares towards the maize
trading projects start-up capital budget. The balance of US$ 4,000,000 of
the start-up capital budget shall be raised from a trade investment bank
source or as equity finance angel investor as a 5-year loan carrying an
interest rate of 20% per annum.
7.2
The forecasts in Table 7 below shows that the business will be profitable by
the end of the first year income expenditure and cash flow statement but
considering the fact that US$ 4,000,000 of the money for the business will be
from loan, which shall be paid at the end of each financial year, BEFCO shall
have a negative cash flow at end first year of CFA 950,000 francs. The
profitability trend continues throughout the business projection period and
this is expected to leverage the maize export/import trading business
venture to enable it complete payment of the bank loan by the end of the
fifth year and make a positive cash flow of US$ 16,399,146.
As the entire industry is mostly a cash industry, XYZ COMPANY will pay all
accounts in cash never carrying any debt. XYZ COMPANY also expects all
sales except for a few large accounts to be cash. These accounts will be net
30 days.
36
Unit Cost
(UShs/kg)
600
Cost - 10k
MT (US$)
1,764,706
20
20
Cost - 10k
MT (UShs)
6,000,000,00
0
200,000,000
200,000,000
10
20
50
100,000,000
200,000,000
500,000,000
29,412
58,824
147,059
50
20
10
270
500,000,000
200,000,000
100,000,000
2,700,000,00
0
500,000,000
147,059
58,824
29,412
794,118
200,000,000
11,400,000,
000
58,824
3,352,941
50
20
1,140
Monthly
(USD)
1,588,235
Annual
(USD)
19,058,820
10,000
120,000
37
58,824
58,824
147,059
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
180,000
72,000
60,000
144,000
360,000
120,000
504,000
48,000
120,000
5,000
1,737,235
60,000
20,846,820
38
1
10,000
2
10,000
3
10,000
4
10,000
5
10,000
6
10,000
7
10,000
8
10,000
9
10,000
10
10,000
11
10,000
12
10,000
998,060
1,696,12
0
2,394,18
0
3,092,24
0
3,790,30
0
4,488,36
0
5,186,42
0
5,884,48
0
6,582,54
0
7,280,60
0
7,978,66
0
8,676,720
0
4,500,0
00
0
0
4,200,00
0
5,198,0
60
0
0
4,200,00
0
5,896,1
20
0
0
4,200,00
0
6,594,1
80
0
0
4,200,00
0
7,292,2
40
0
0
4,200,00
0
7,990,3
00
0
0
4,200,00
0
8,688,3
60
0
0
4,200,00
0
9,386,4
20
0
0
4,200,00
0
10,084,4
80
0
0
4,200,00
0
10,782,5
40
0
0
4,200,00
0
11,480,6
00
0
0
4,200,00
0
12,178,6
60
4,200,000
12,876,7
20
1,764,70
5
2,735,2
95
1,764,70
5
3,433,3
55
1,764,70
5
4,131,4
15
1,764,70
5
4,829,4
75
1,764,70
5
5,527,5
35
1,764,70
5
6,225,5
95
1,764,70
5
6,923,6
55
1,764,70
5
7,621,7
15
1,764,70
5
8,319,77
5
1,764,70
5
9,017,83
5
1,764,70
5
9,715,89
5
1,764,70
5
10,413,9
55
0
12,876,7
20
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
998,06
0
0
998,06
0
0
998,06
0
0
998,06
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
1,696,1
20
0
1,696,1
20
0
1,696,1
20
0
1,696,1
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
2,394,1
80
0
2,394,1
80
0
2,394,1
80
0
2,394,1
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
3,092,2
40
0
3,092,2
40
0
3,092,2
40
0
3,092,2
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
3,790,3
00
0
3,790,3
00
0
3,790,3
00
0
3,790,3
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
4,488,3
60
0
4,488,3
60
0
4,488,3
60
0
4,488,3
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
5,186,4
20
0
5,186,4
20
0
5,186,4
20
0
5,186,4
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,2
35
5,884,4
80
0
5,884,4
80
0
5,884,4
80
0
5,884,4
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
6,582,54
0
0
6,582,54
0
0
6,582,54
0
0
6,582,54
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
7,280,60
0
0
7,280,60
0
0
7,280,60
0
0
7,280,60
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
7,978,66
0
0
7,978,66
0
0
7,978,66
0
0
7,978,66
1,588,23
5
10,000
15,000
6,000
5,000
12,000
30,000
10,000
42,000
4,000
10,000
5,000
1,737,23
5
8,676,72
0
0
8,676,72
0
0
8,676,72
0
0
8,676,72
INFLOWS:
Cash B/F
Seed Loan
Promoter's Equity
Sales Revenue
Total Inflows
0
4,000,00
0
500,000
0
0
OUTFLOWS:
Cost of Goods Sold
Gross Profit
Operating
Expenses
Transaction Costs
Rent
Labour
Utilities
Fuel & Oil
General & Admin.
Sales & Marketing
Overhead Costs
Insurance
Consumables
Misc & contingencies
Depreciation*
Total Opex
EBITDA
Loan Interest
Net Profit Before
Tax
Corporate Tax (30%)
Earnings After Tax
Loan Repayment
Net Profit
39
0
0
0
0
0
0
0
0
0
0
0
0
0
12,876,7
20
800,000
12,076,7
20
3,623,016
8,453,70
4
800,000
7,653,70
20
80
40
00
60
20
80
998,060
1,696,12
0
2,394,18
0
3,092,24
0
3,790,30
0
4,488,36
0
5,186,42
0
5,884,48
0
6,582,54
0
7,280,60
0
7,978,66
0
8,676,72
0
7,653,704
Table 7-2: White Maize Export/Import 5-Year Net Income Statement (In USD)
YEAR
Maize Tonnage
INFLOWS:
Cash B/F
Seed Loan
Promoter's Equity
Sales Revenue
Total Inflows
OUTFLOWS:
Cost of Goods Sold
Gross Profit
Operating Expenses
Transaction Costs
Rent
Labour
Utilities
Fuel & Oil
General &
Administrative
Sales & Marketing
Overhead Costs
Insurance
Consumables
Miscellaneous &
contingencies
Depreciation*
Total Opex
EBITDA
Loan Interest (20% p.a.)
Net Profit Before Tax
Year 1
120,000
Year 2
120,000
Year 3
120,000
Year 4
120,000
Year 5
120,000
4,000,000
500,000
50,400,000
54,900,00
0
7,653,704
0
0
52,920,000
60,573,70
4
10,268,582
0
0
55,566,000
65,834,58
2
12,521,046
0
0
58,344,300
70,865,34
6
14,535,323
0
0
61,261,515
75,796,83
8
21,176,460
33,723,54
0
22,235,283
38,338,42
1
23,347,047
42,487,53
5
24,514,400
46,350,94
7
25,740,119
50,056,71
8
5% increase
19,058,820
120,000
180,000
72,000
60,000
20,011,761
126,000
189,000
75,600
63,000
21,012,349
132,300
198,450
79,380
66,150
22,062,967
138,915
208,373
83,349
69,458
23,166,115
145,861
218,791
87,516
72,930
5%
5%
5%
5%
5%
increase
increase
increase
increase
increase
144,000
360,000
120,000
504,000
48,000
151,200
378,000
126,000
529,200
50,400
158,760
396,900
132,300
555,660
52,920
166,698
416,745
138,915
583,443
55,566
175,033
437,582
145,861
612,615
58,344
5%
5%
5%
5%
5%
increase
increase
increase
increase
increase
120,000
60,000
20,846,82
0
12,876,72
0
800,000
12,076,72
126,000
60,000
21,886,16
1
16,452,26
0
640,000
15,812,26
132,300
60,000
22,977,46
9
19,510,06
6
480,000
19,030,06
138,915
60,000
24,123,34
3
22,227,60
4
320,000
21,907,60
145,861
60,000
25,326,51
0
24,730,20
9
160,000
24,570,20
40
Notes
5% increase
5% increase
0
3,623,016
8,453,704
800,000
Net Profit
Cash Balance C/F
7,653,704
0
4,743,678
11,068,58
2
800,000
10,268,58
2
6
5,709,020
13,321,04
6
800,000
12,521,04
6
4
6,572,281
15,335,32
3
800,000
14,535,32
3
9
7,371,063
17,199,14
6
800,000
16,399,14
6
7,653,704
10,268,582
12,521,046
14,535,323
16,399,146
41
30%
RISK MANAGEMENT
9.1
10.0
10.1.1
Market Risks
11.0
12.0 There are a few areas of risk within the maize trading sector. First and
foremost is drought. Drought causes significant increases in demand
for maize grain and the price shoots up quite markedly as there
demand greatly exceeds available supplies.The high maize grain
purchase costs may impact negatively on the profitability of a maize
exporting enterprise as the end-market pricing may not necessarily
adjust in the same proportions as the upward movement in source cost
price especially if fixed end-market prices are built into lengthy maize
supply contracts. Conversely, in times of plentiful rain harvest yields
are higher and maize costs at source go down in response to
competition from plentiful supply of other food crops that are also
available in the maize production areas. In both cases one can help
mitigate the losses by gathering and bulking maize grain at times of
plenty and selling it at times of scarcity. Hence the need and
advantage of having large maize crop storage warehouses at the
source points.
13.0
13.1.1
Operations Risks
14.0
15.0 Fuel can become expensive, especially in times of political instability in
Kenya because most oil is imported through the eastern border.
Although the cost to clean and package the maize will increase as fuel
prices increase, it is believed that most, if not all, of the cost can be
passed on to the customers in a higher price because the
transportation costs to take the maize elsewhere will rise with the fuel
costs as well.
16.0
17.0 An additional risk is that the pre-export maize-cleaning and bagging
machines will break down and create expenses and/or downtime. This
will be addressed by ensuring the maintenance procedures are
followed correctly and timely. In addition to proper maintenance, the
company should have the most common failure spare parts on hand
(many spares are included with the engine, but as parts are used they
will be replaced before failure so downtime is cut down).
18.0
19.0
42
24.0 XYZ COMPANYs risk appetite is aligned with the companys strategy
of long-term and sustainable growth. Being exposed to trade in
multiple commodities and countries, effective risk management will be
critical to XYZ COMPANYs ongoing success and operational integrity.
The companys risk governance structures have to afford robust
oversight, delineation of roles, accountability and independent
assurance. Primary direction will be provided by the Board Risk
Committee consisting of members independent of the trading
company, while day-to-day oversight will be provided by the Executive
Risk Committee represented by suitably qualified senior management.
25.0
26.0 The companys risk management framework gives recognition to all
the intrinsic risks of its ongoing activities while maintaining a proactive
stance in assessing trade practices and exposure. Whereas its policies
and processes promote a strong culture of communication and risk
awareness, a central risk platform is charged with aggregating,
monitoring and reporting on market, credit and forex risk relating to
physical and forward commodity and freight exposure.
27.0
28.0 Limit structures are clearly defined and the result of balancing risk
tolerance against operational and financial capabilities. Unmandated
residual exposure is therefore hedged, sold, or financed as appropriate
with vetted counterparties. XYZ COMPANY also deploys a
combination of ancillary risk metrics to measure and quantify downside
risk, including: value at risk (VaR), scenario and stress testing.
29.0
30.0 SYSTEMS & REPORTING
31.0
32.0 XYZ COMPANY plans to immediately embark on the implementation
of a fully integrated commodity trade and risk management system
(CTRM) in its continued efforts to enhance its Risk Management
capabilities.
33.0
34.0 The CTRM solution will integrate with the organizations existing
enterprise resource planning (ERP) solution and aims to deliver the
following benefits to the end users in XYZ COMPANY:
35.0
43
36.0
37.0
38.0
39.0 typical maize flows in south sudan - world bank
40.0
44