Business Plan

Proposal to set up a Pineapple Concentrates Processing Plant in Malaysia

project
management abu dhabi, astana, athens, brno, como, dnepropetrovsk, jakutsk, kuala
lumpur, lugano, moscow, prishtina, sarajevo, tashkent, tehran, tirana, vienna
 CONFIDENTIALITY STATEMENT

This Confidential Information Memorandum (Memorandum) is prepared by Hans-jib

Project Management Sdn Bhd solely for information purposes to be reviewed by
prospective investors interest in investing in the venture.

The information contained herein has been prepared to assist interested parties in
making their own evaluation of the Business Plan and does not purport to be all-
inclusive or to contain all of the information that a prospective investor may desire.

This Memorandum includes statements, estimates and projections which reflects the
anticipated future performance of the business. While Hans-jib Project Management
Sdn Bhd has endeavored to provide absolute accuracy and completeness of the
information contained herein as a result of our prudence in-depth analysis, we
expressly disclaim any and all liability for any assumption which may or may not prove
to be correct with regard to anticipated results.

By accepting this Memorandum, the recipient acknowledges and agrees that all
information contained herein is of confidential nature and is for limited circulation
only, and the recipient agrees not disclose it without the express written permission of
Hans-jib Project Management Sdn Bhd. Without limiting the generality of the
foregoing, the recipient will not reproduce this Memorandum, in whole or in part, and
will use this Memorandum solely for the purpose of evaluating the recipient’s interest
in the venture, and , if the recipient dose not wish to pursue this matter, this
Memorandum will be returned to Hans-jib Project Management Sdn Bhd. Any
proposed actions by the recipient, which are inconsistent with the foregoing
agreement will require the prior, written consent of Hans-jib Project Management Sdn
Bhd.

Hans-jib Project Management Sdn Bhd reserves the right to negotiate with one or
more investors at any time and to enter into a definitive agreement with any party
without prior notice to the recipient or other prospective investors. Hans-jib Project
Management Sdn Bhd reserves the right to terminate, at any time, the further
participation in the analysis, evaluation and proposal process by any party and to
modify, at any time, any procedure relating to such process without disclosing any
reason whatsoever.

The recipient is encouraged to conduct his own investigation, appraisal and exercises
of due diligence. Hans-jib Project Management Sdn Bhd undertakes to assist the
recipient in the course of the recipient’s evaluation of the Business Plan.

Upon request, this Memorandum shall be returned to:

Hans-jib Project Management Sdn Bhd

Technical Department

E-mail mohdhanifhassan@yahoo.com
EXECUTIVE SUMMARY

Hans-jib Project Management Sdn Bhd has received an offer to produce pineapple
concentrates to be exported to Europe. The buyer has pledged to issue Letter of
Credit from a reputable European bank in excess of RM 18 million (USD 5.14 million) to
assist Hans-jib Project Management Sdn Bhd in securing the required financing to set
up the manufacturing plant and to commence operation. Upon conclusion of in-
depth, all-encompassing appraisal of the proposition, the following conclusions were
drawn:

1. The venture is deemed as feasible of generating acceptable returns with

moderate exposure of risk.

2. The proposal entails setting up a manufacturing plant in Malaysia and

procurement of plantation land an area of 708 hectares (1,749 acres).

3. Plantation cost is estimated to be USD 3,828.00 per hectares per cycle.

With an average harvest of 72 ton per hectare, cost of pineapple is USD
53.17 per ton (market price for pineapple is USD 80.00 per ton).

4. Machinery for the processing line and technical support is to be provided

by APV Hill & Mills which guarantees the acceptance of the finished
product by European and American governing standards. Total cost of
machinery is USD3.5 million.

5. Total capital investment and working capital is USD 8,164,749.35

6. Assuming manufacturing plant’s processing line life of 12 years without

major refurbishment; loan repayment at 8% over a period of 8 years; and
no reinvestment of revenue, the yield of the investment is as follows:

Payback period: 11 years

Return on Investment: 10.09 %
Internal Rate of Return: 4.79 %
PREAMBLE

The market for pineapple concentrates has been very receptive both in the United
States and Europe. Upward trend in demand together with such factors as rising cost
of producing and manufacturing, coupled with inflation has pushed up the price of
pineapple concentrates from USD 900 per ton in 1999 to USD 1,300 per ton in 2005.
Currently, the principle exporters of pineapple, both fresh and processed, are
Thailand, the Philippines, Costa Rica and the Republic of Indonesia.

The pineapple industry in Malaysia has not gain much prominence due to high costs,
resulting in a limited number of factories to cater mainly for the local market.
However, setting up a factory in Malaysia is economically viable if Hans-jib plant
pineapple for its own consumption.

Hans-jib Project Management Sdn Bhd has agreed in principle to accept the offer
made by a reputable European-based importer of juice concentrates and purees, to
set up a factory producing pineapple concentrates for the European market. The
buyer shall be providing Letter of Credit as buy-back guarantee for the anticipated
production output of the first 3 years and is willing to sign a subsequent 3-year
exclusive purchase agreement at prevailing market price of the day.

THE OPERATION

Hans-jib Project Management Sdn Bhd has not finalized the actual site of the factory.
Criteria such as distance from plantation; proximity of utilities and infrastructure; rate
and tenure of lease are among the decisive factors which will govern the selection
process.

To cater for production, the land area required for plantation is in access of 708
hectares (1,749 acres). The predominant types of pineapple in Malaysia are of the
N36, Josephine, Smooth Cayenne and Gandul variety. Hans-jib has opted for either
the N36 or Smooth Cayenne variety due to its size, color and local knowledge of this
variety. Both types of pineapples grow to an average weight of 1.8 kg per fruit with a
14 month cycle from planting to harvesting. The current cultivation practice produces
a yield of 40,000 fruits or 72 ton per hectare.

Estimated raw pineapple requirement is 36,400 ton per month (51 hectares or 125
acres). This is based on a production output of 14 ton concentrated pineapple per
day per 14 hour shift.

Current prevailing open-market price of pineapple is USD 80.00 per ton delivered to
the factory. By comparison, this price is reduced to USD 53.17 per ton coming from
own plantation.

The proposed factory is to be built on a compound not less than 15,000 square
meters. The processing building’s floor area is 1,350 square meters with and additional
600 square meters set aside for administration, laboratory, canteen and services.

THE PROCESS

Pineapple concentrates is extracted at a ratio of 10:1, i.e., 10 ton of raw fruit is

required to produce 1 ton of concentrates.

The processing line has the capacity to process 10 ton of raw fruit per hour. Due to
the rather harsh weather conditions, fruit reception shall be placed indoors.
 Extracted juice is fiber reduced and thermally treated to retard enzyme effects and
discoloration of the juice prior to intermediate storage.

Juice is first processed through an aroma stripping evaporator to recover aroma and
essences for eventual add-back to the pineapple concentrates prior to aseptic
packaging.

The final product has a concentration rating of 65.0 ºbrix and packaged in a 55 US
gallon/210 liter aseptic bag which is then placed in a drum.

The production capacity is targeted at 20 container load per month. Each 20’
container shall be packed with 18 ton of pineapple concentrate. Due to its aseptic
nature, the pineapple concentrate is transported at ambient temperature. The cost
of shipping out from the factory to Europe via local port is USD 1,544.00 per container
(including insurance).

The individual components for the pineapple fruit juice concentrate processing plant
have been finalized, and the total amount quoted by APV Hill & Mills is USD 3.5 million.

IMPLEMENTATION PLAN

Schedule of implementation is as per the following

Key Milestone Date Status

Preliminary studies, discussion with equipment supplier Dec 2006 Completed

Preparation of Business Plan, Costing Dec 2006 Completed

Finalizing details agreement with buyer Jan 2007 On going

Approaching investors/banks and total financing closure Feb 2007 On going

Tie-ups with strategic partners: raw materials, logistics, Feb 2007 Players identified,
equity prelim discussions held

Placing of orders with equipment supplier Feb 2007 Not commenced

Commencement of construction works May 2007 Not commenced

Recruitment of key personnel and training Aug 2007 Senior personnel

identified

Completion of factory and commissioning of processing Dec 2007 Not commenced

line

Commencement of operation Jan 2007 Not commenced

SWOT ANALYSIS

Strength

. Ready market for the first three years of operations with the option to extend
for another three years.
. Availability of land for plantation
. Acceptance of end-product to European market
. Proven technology and excellent technical support from machine supplier
. Possibility of support from Malaysian Government bodies e.g. FAMA,
Lembaga Nenas, Ministry of Agriculture

Weakness

. Complexity in plantation operations

Opportunity

. Availability of buyer means that no marketing is needed during the early

stages of operations
. Opportunity to take participate in a stable, continuously expanding fruit juice
market

Threat
. Risk associated with plantations

OTHER FACTORS FOR CONSIDERATION

1. Waste Management

The amount of waste to be disposed off could post a logistical and environmental
problem. A production capacity of 140 ton raw pineapple produces waste in the
form of fiber up to 20 ton per day (520 ton per month). Proper disposal is needed.
Alternatively, the company could look into the possibility of turning these fibers into
bales for farm feed (cattle and goats).

2. Complexity of Plantation Operation

To cater for production, a daily requirement of 140 ton of pineapple means that
77,777 fruits are required (approximately 10 truckloads of pineapples). The company
needs to address the following issues.

i. Availability of pineapple sapling for planting (77,777 per day and 2,022,222
per month)
ii. Assuming a plantation worker can plant/pick 60 fruits per hour, for an 8
hour shift, minimum total of plantation hands needed is 162 workers for
planting, 162 workers for picking (after 14 months onwards) and another 20
for maintenance. This is based on assumption that work does not stop due
to rain, unavailability of sapling, lack of workers and other factors.
Alternatively, the company needs to look into automation.
iii. Risks involved in plantation which includes pineapple succumbing to
diseases and/or not reaching the required weight, effects of natural
disaster, adverse weather phenomena (extended monsoon or dry season)
and others. Every hectare of crop damage could potentially lead to a
maximum loss of USD 3,828.00 depending on the stage of growth.