I.

Executive Summary
Under the country's Agricultural Led Industrialization Development strategy,
agriculture serves as the main drive where it is the source of development
while industrialization is the target. In the Ethiopian economy agriculture still
serves as the mainstay contributing a significant portion of the country's Gross
domestic Product (GDP), accounts over 60% of export earnings and 85% of
employment. Over 85% of the country's population which are living in rural
Ethiopia fully rely its livelihood on agriculture.

When we think of the country's external trade particularly export sector, the
first and foremost historical commodity that comes to any Ethiopian mind is
coffee. Of the total export earnings of the country, coffee still takes the lion's
share accounting over 35% in 2011/12. It is the dominant commodity in the
country's export trade. In fact the contribution of coffee towards the country's
total export volume and value has decreased. This arises mainly due to
diversification of the country's export base so as to reduce dependence on
few primary commodities. However, this does not mean that the role played
by coffee in boosting country's export earning will be undermined. Rather the
government has given due attention to this crop so as to increase production,
productivity and export earnings recognizing the country's potential for further
growth and expansion. The continuous growth in the value of coffee over the
past recent consecutive years also encouraged the government and coffee
growers to work hard more in increasing production and thereby export
earnings.

The Ethiopian coffee is the preferred natural quality in its aroma and taste by
consumers. Because of this investors engaged in export trade of coffee don't
face difficulty of penetrating the market as far as they could meet timely
delivery, product quality, order size, etc at competitive price. It is in recognition

G.M.T. Industrial PLC Page 1

of the available market space that the promoter GMT industrial PLC was
decided to engage in coffee export business.

This business plan aims at assessing the viability of expanding the existing
coffee export business. The company planned to expand the existing
operation evaluating the current conducive business environment, the priority
given to the export sector and viability of the existing business. This study is
commissioned by the promoter to make an assessment of the business's
commercial and financial viability to make the owner reach decision to go on
the expansion activity and also solicit financial support in the form of loan from
local lending banks.

Since the ultimate destination of the product is export market, we assessed

the production and trade pattern of coffee globally on the world market, the
place and opportunity of Ethiopia in the global market and the prospect for the
company to continue running viable business venture, Ethiopia is one of the
top 10 countries with the largest production and export volume and value in
2012. It is the first in Africa and 10th largest in the world in terms of export and
the first in Africa and 6th largest in the world in production. The value of export
of coffee in Ethiopia has significantly increased from USD 528 million in
2009/10 to USD 832 million in 2011/12.

The export of the company will organized in such a way that there is a
V/General Manager at the apex next to General Manager of the company
followed by three functionally related units where all are operating tinder close
supervision from the General Manager. The General Manager of the company
gives the general direction on the important financial decisions and policy
guidance.

It is mainly export trading activity; there is no significant fixed investment that

will take place. Therefore, the major investment component of the business is

G.M.T. Industrial PLC Page 2

 working capital which is planned to be raised partly from equity source and
most importantly from Bank loan. The financial statements during the year
2012/13 (July 7, 2013) the company has earned a gross revenue of birr
445,873,740.09. The expansion of the business has also other socio-
economic advantages through creating employment opportunity, creating tax
revenue to the government treasury, earning foreign currency as it destines its
product for the export market, add value to the existing resource of the
country and give an opportunity and idea for the owner to engage in more
value adding activities (coffee roasting and grounding in the future).

II. BACKGROUND

2.1. The Company Address

Name: GMT Industrial PLC

Address: Addis Ababa, Akaki Kaliti sub City, Woreda 05, House No. 2149
Legal Form of Business: Private Limited Company
Type of Business: Export
Type of Product: Coffee

2.2. The Company

S.N No of Par %age of
Name Total Value
shares Value share
1 G/Egziabher Mezgebe 22,000 1,000.00 22,000,000.00 66.67%
2 W/ro Firewoini Tesfay 11,000 1,000.00 11,000,000.00 33.33%
Total 33,000,000. 100.00%
33,000
00

GMT INDUSTRIAL PRIVATE LIMITED COMPANY was initially established

on 1999 E.C. (2006 G.C.) by two Ethiopians spouse to one another
shareholder with a total paid up capital of Birr 3,000,000 divided in to 100
shares of Birr 1,000 par value each and this share distribution is raised to 33
million. The company has been engaged in export of coffee and import of

G.M.T. Industrial PLC Page 3

durable goods for the past 7 years. Name of the shareholders, number of
shares and share value is presented below.

It is secured through trade license No. 6396/99 issued by FDRE Ministry of

trade and industry.

2.3. Current Business Activities

Currently, the PLC is mainly activating in export of coffee and sesame seeds
and cereals as well as unusually import of different sorts of goods. The
company is well known in exporting coffee specifically to European countries
and sesame seeds to the Middle East and Far East countries. Besides, per
the memorandum of association, it is established to perform the following
objectives:

 To carry on general import and export business and act as commission

agent.

 To take part in horticulture sub sector – in production of flowers, fruits

and vegetables.

 To activate in construction work and participate in real state

development.

 To render forwarding and transit services.

 To involve in any other related trade auxiliaries.

2.4 Brief Profile of Ato G/Egziabher Mezgebe

The general manager of the company, Ato G/Egziabher Mezgebe, had been
engaged in export business of coffee, oil seeds, cereals and other agricultural
products to Israel, U.A.E, Saudi Arabia, China, Taiwan, England, Germany,
Italy, Canada and America. He also actively engaged in wholesale of cereals
and other items to the domestic market before he turned the business to

G.M.T. Industrial PLC Page 4

G.M.T Industrial PLC. Though he was licensed to run the export and import
businesses in 1995 E.C., he has been in grain marketing business for more
than a decade.

In addition, he also acquired knowledge from several managerial courses and

relevant conferences. This has helped him to successfully discharge his
duties as Manager in the company. GMT Industrial PLC is engaged on Export
to well known importers. The company for the past seven years has been
successful in supply of this product throughout the world. This is boldly a
result of the company's management competence in successfully and
efficiently carrying out the required duties. There is Ato G/Egziabher’s direct
effort behind the success of the company as Manager as well as owner.

2.5. Credit Relationship-

The Company, GMT Industrial PLC has maintained Banking relationship with
Wegagen Bank ,Commercial Bank of Ethiopia and Awash International Bank
for both its import and export business, It has got Overdraft and term facilities
and has good credit worthy relationship with captioned Banks and is regularly
meeting its debt obligation ahead of the expiry date. The turnover and swing
movement of the overdraft facilities in the three banks has been satisfactory.

Similarly, GMT Industrial PLC is paying its tax commitments strictly in

accordance with the country's law. The company in this regard has good
reputation in the eyes of the tax authority. In general, the company has clean
record both in terms of banking relationship as well as in its tax paying
behavior.

III. EXPORT BUSINESS

G.M.T. Industrial PLC Page 5

The company started this export business since the past seven years. It has
recorded quite a remarkable performance during the seven fiscal years with
considerable progress overtime.

The company commenced its export business to contribute its part in the
country's development endeavor through participation in priority sector of the
economy. The company has also decided to engage in this export business
attracted by the country's export promotion and export-led development
strategies. Although' the company commences its coffee export business with
limited scale, it has short term target of expanding the existing coffee export
business to large scale level with long term vision of establishing its own
coffee plantation.

3.1. Export Volume and Value

GMT Industrial PLC managed to export with total earnings of birr 445,873,740
(USD 24,226,312) during the current year operation until July 7, 2013, and
export earnings of birr 361,044,784 (USD 18,861,406) during the last fiscal
year i.e. July 7, 2012. As the table below depicts, there is considerable
progress value of export over the two consecutive years.

Table 1: Value of Export

Year Sales Value (USD) Sales Value (Birr)

2011/12 18,861,406.34 361,044,784

2012/2013 24,226,312.50 445,873,740

The table above depicts that GMT industrial PLC is meeting one of the target
of earning foreign currency.

G.M.T. Industrial PLC Page 6

3.2. Financial Statement Analysis
a) Profit and Loss Statement

GMT Industrial PLC

Profit/Loss Statement
Description 7 July 2013 7 July 2012
Total Revenue 455,562,227.01 366,543,264.46
Cost of Sales 443,431,240.47 337,839,495.87
Gross Profit 12,130,986.54 28,703,768.59
Expenses
Selling and distribution 12,487,156.02 10,051,467.02
General and adm. 6,608,672.72 2,844,070.22
Financial charge 15,820,410.00 15,372,530.62
Net Profit (Loss) after tax (22,785,252.20) 289,740.99
Balance brought forward 5,593,919.69 5,304,178.70
Balance carried forward (17,191,332.52) 5,593,919.69

Table 2:

According to the audited income statement for 2012/13 and 2011/12 has
incurred loss of Birr 17,191,332.52 of the fiscal year 2012/13 and has
registered a net profit after tax of Birr 5,593,919.69 of the fiscal year 2011/12.

There are situations by which the price of coffee increases in the local
market is more than the increase in the international price which makes
exporters in disadvantageous position.

The loss incurred during the current first year is due to lower amount in
international market which was not in a position to cover its administrative and

G.M.T. Industrial PLC Page 7

selling expenses. It is mainly because the company well known to the export
market particularly to the coffee export which it builds good reputation in the
eyes of importers to relay to a greater degree on their suppliers for quality and
timely delivery in addition, losing of highly reputable brand image and
customer make dangerous for sustainability of the business, this and other
external problems makes the company to incurred loss. What is required to
more earning is scaling up the existing operation to make use of economies of
scale. Meanwhile, the company incurred above birr 28 million of construction
cost in the current year and only birr 8 million is considered as construction in
progress in the financial statement, therefore, the unconsidered amount of
construction cost in the financial statement makes the current year loss
amount overstate.

b) Balance Sheet Statement

GMT Industrial PLC Balance Sheet

Balance sheet
Description 7 July 2013 7 July 2012
Assets
Fixed Assets 130,733,222.99 59,831,657.59
current Assets 132,213,305.76 214,432,997.07
Stock 72,050,494.01 106,164,497.38
Cash at Hand & in Bank 3,753,206.63 9,159,896.60
Debtors 49,550,409.09 63,985,568.20
Shareholder account 5,550,674.62 34,153,500.63
Withholding tax 1,308,521.41 969,534.26
Total Assets 262,946,528.75 274,264,645.66
Equity and liabilities 84,423,099.77 38,814,463.97
Creditors 43,008,294.84 936,677.42
Interest payable - 1,101,901.45
Bank Loan due within a year 107,826,333.76 211,819,154.82
Overdraft 8,641,568.43 8,740,092.52
Provision for profit Tax - 130,710.22
Current Liabilities 159,476,197.03 222,728,536.43
Total Liabilities and Capital 262,946,528.75 274,264,645.66

G.M.T. Industrial PLC Page 8

Table 3

total asset as at 7 July 2013 stood at Birr 262.9 million out of which Birr 130
million which accounts for only 49% of the total assets are fixed assets while
the remaining Birr 132 million accounting 51% of the total assets are current
assets. Out of the current assets, the major portion goes in the form of stock
holding which amounts to Birr 72 million (accounting almost 54% of current
assets) while the remaining are debtors cash at hand and in Bank,
shareholder account and withholding tax. On the other side of the coin, the
current liabilities of the business as at the stated period amounts to Birr 159.5
million (with Birr 107 million Bank loan and Birr 43 million from creditor)

The asset of this of the company over the two consecutive periods shows an
increasing trend from Birr 59.8 million as at 7 July 2012 to Birr 130.7 million as
at 7 July 2013. The detail of the Balance sheet statement during the two
periods is shown here above:

3.3. Financial Ratios

The Actual performance of the company's export over the past two year’s
operation indicates mediocre situation in view of the current nature of export
business in Ethiopia. The current ratio and quick asset ratio is lower than the
0.83 and 0.96 level. This is because the nature of the business demands
huge liquid capital where the majority of which couldn't be covered from equity
source. This ratio will be improved whenever the company is building up its
financial capacity over time. The quick asset ratio is lower than the current
ratio since the firm has a considerable amount of inventory that will be
exported abroad.

G.M.T. Industrial PLC Page 9

 GMT industrial PLC
Financial Ratios
Particulars 7 July 2013/Audited/ 7 July 2012/Audited/
Liquidity Ratios:
Net Working Capital -27,262,891 -8,295,539
Acid Test Ratio 0.38 0.49
Current ratio 0.83 0.96
Leverage:
Debt to Equity 211% 607%
Debt to Total Assets 67.89% 85.85%
Profitability:
Profit Margin -3.77% 1.53%
Efficiency Ratios:
Days in Inventory 19 115
Days in Receivable 13 64
ROE -20.36% 14.41%
Payable Period 43 241

Table 4

As shown on the leverage ratio above, the division relies on external source to
finance the business. This is because the coffee export business in general
demands huge financial capital. As a result it is difficult for business firms to
operate without the financial support of lending institutions. It is because of
this reason that the debt portion out of the total asset and relative to its equity
is found out to be on the high side. It is expected to get better than the current
status when it builds its capacity as time goes.

Coffee export business in general demands huge capital and transaction so

as to make use of economies of scale since the margin between revenue and
costs is minimal. Because the cost of sales (price of coffee at central market)

G.M.T. Industrial PLC Page 10

is responsive to what is happening to the price at the international market.
Whenever, there is an increase in price of coffee internationally, local
suppliers offer higher price at central market leaving the spread same as
before the price increase. Even, there are situations by which the price of
coffee increases in the local market is more than the increase in the
international price which makes exporters in disadvantageous position.

The asset turnover indicating the business is low level efficiency in using its
assets.
IV. KEY SUCCESS AND RISK FACTORS
4.1 Success Factors
4.1.1 Macro Level Success Factors
 Favorable economic policy of the government like market led
economic policy, the improvement in the national physical
infrastructure and the registered growth in GDP in general;
 There are incentives to attract investment in the country and regional
offices through tax exemption, tax holidays for certain years.
Investment in coffee farming practices is one of the area which has
been encouraged by the government and appropriate incentives is
being provided.
 Improvements in infrastructure facilities in actual and potential
production areas of the commodity.
4.1.2 Sector Specific Success Factors
 The export sector has given due attention recognizing the possible
significant earning the country and farmers could gain from it.
 Now days, the government's effort to bring the coffee marketing
activities in modern way through establishment of Ethiopian
commodity exchange (ECX) is being fruitful
 There is coordinated and effective effort on the part of the

G.M.T. Industrial PLC Page 11

 government on production and marketing activities in the coffee
export sector.
 The country has immense cultivable land suitable for coffee farming
and has great potential in the future to develop.
 The sector is given as one of the priority area of the government
where financial service is reserved for it.
 Encouraging export performance and achievable extended five year
production and export plan in the sector.
 All the strategies are designed to resolve the possible man made
and natural challenges that the sector could face.
4.1.3. Firm level success factors
 Management - The Company is led by qualified and experienced
entrepreneurs and management team that would make expansion of
the Business possible.
 The company's General Manager has relevant experience in export
business and has got certification that confirmed his capacity as
Coffee cupper and knowledge of the coffee sector which will make
the company competitive to export best quality coffee in Ethiopia.
Other management team members assigned are well experienced in
their field which could lead to the success of the export business.
 Company's success as Export:- The experience over the past
seven year's on export of coffee helped the company to develop good
habit in the area of:
o Quality consciousness
o Loyalty to customers and suppliers
o Timely delivery and
o Efficient and customer focused after sales service
This habit can be considered as a major asset for developing good reputation

G.M.T. Industrial PLC Page 12

and loyalty in its business.

4.2 Risk Factors

 Fluctuation in International Price of Coffee
As is well known the international price of coffee in general has volatile nature
although the recent trend shows decline. Whenever, the International price
declines/Increases, it has unpredictable implications on profitability of all the
actors involved from production to exporters. This could some how be
mitigated shortly at present context when the inflow of information is up-to-
date. In this regard has to closely follow up the international price and in
general market trend of coffee so as to determine its level of participation in
coffee auction market domestically.

 Competition from Similar Exporters in the Country

The challenge in coffee export business is not in getting the required quantity
of the commodity at domestic auction market but in secured dependable
export market. Exporters in Ethiopia are competing for similar world wide
prominent coffee dealers/exporters which make competition between them
stiff. The appropriate mitigating mechanism for this practice is to have well
versed management that has extensive experience in export business, and
maintaining the quality and price of the commodity competitive at the export
market. This would be possible by taking the appropriate precaution during
selection of coffee, cleaning and attaining high level efficiency in marketing
and overall management of the business. The Company in this regard is
blessed with its competent management team that could make the realization
of its export plan possible meeting all the requirements of importers in terms
of quality, price, delivery time and meeting contracts.

G.M.T. Industrial PLC Page 13

V. MARKET STUDY
5.1. General Overview
As is customarily said, the Ethiopian economy is an agrarian economy where
agriculture constitutes 42% of GDP, more than half of export earnings and
85% of the labor force. About 85% of the country's population rely its
livelihood on agriculture. Despite the country's dependence on this sector, still
there is untouched potential for the sector to grow further and generate
earnings to the country's economy which could serve as basis for the
development of other economic sectors. Even though, most of the populations
are densely populated in highland areas, there is a vast area of land still
uncultivated particularly in the low land areas.
Recognizing Its contribution to the country's economy, the potential to serve
as basis for future growth as well as the country's existing resource
endowment (be it land, capital, labor, etc.), the government has designed and
implementing Agricultural Led Industrialization (ADLI) Development strategy
where agriculture Is the mainstay while industrialization follows the foot step
through adding value to the existing resource. The agricultural sector is
expected to continue being the leader in the country's development endeavor
at the present Ethiopia's context, since there is unexploited potential for
growth above any other sectors. The farming system is still traditional, the
productivity of land is still at lower level (although shown encouraging sign of
growth), there is still abundant labor force in rural areas, and the industry
sector is at infant stage to absorb the labor force, there is uncultivated land in
different parts of the country, the country has developed good reputation in
production and export of agricultural crop varieties. All these factors magnify
the importance of agriculture in the Ethiopian economy.

G.M.T. Industrial PLC Page 14

Even if the country could able to graduate towards industrialization, it doesn't
mean that the importance of agriculture will be undermined. The role of
agriculture rather will not be replaceable under those days of joining emerging
industrial countries category. Alike the sectoral distribution, it is primary
agricultural commodities that are the major sources of the country's export
earnings. When one thinks of the country's export sector, the first and
foremost historical agricultural commodity that comes to any Ethiopian mind is
coffee. It is and has been the leading crop type in terms of its contribution
towards the export sector.
The agriculture-based Ethiopian economy is highly dependent on coffee
arbica as it contributes more than 30% of the country's foreign exchange
earnings. No other product or service in Ethiopia has earned as much. The
labor intensive tree crop also provides much employment in rural areas and is
the means of livelihood for over 15 million people in Ethiopia.

5.2. Global Market Opportunity

5.2.1. Production
Coffee is the most important agricultural commodity in the world and is worth
up to $14 billion annually. More than 80 countries, including Ethiopia, cultivate
coffee, which is exported as the raw, roasted or soluble product to more than
165 countries worldwide. More than 121 countries export and/or re-export
coffee. More than 50 developing countries, some of them in Africa, depend on
coffee as an export, with 17 countries earning 25% of the foreign exchange
from coffee.
According to recent data obtained from FAD statistics, the top ten largest
producer of green coffee ranked in value terms as per 2008 FAD report are
Brazil, Vietnam, Colombia, Indonesia, Peru, Ethiopia, Mexico, India,
Guatemala and Uganda. All these countries together produce 6.77 million
metric tones of green coffee in 2008.

G.M.T. Industrial PLC Page 15

The largest two producers Brazil and Vietnam have annual harvest of around
2.8 million tones, and 1.1 million tones respectively. The four top producers
(Brazil, Vietnam, Colombia and Indonesia) are consistently on top of the list in
all four years under review. Ethiopia ranks the 6th place in quantity of
production in 2008. In general the level of production of green coffee in
Ethiopia increased from 156.17 thousand metric tones in 2004 to 273.40
thousand metric tones in 2008 growing on the average by 17.36% per annum.
Table 5: Top Ten Producers of Green Coffee (Qty in `000 metric tones and Value in $million)

2008 2007 2006 2005 2004

Country
Qty Value Qty Value Qty Value Qty Value Qty Value
Brazil 2,796.93 2,286.66 2249.01 1838.70 2573.37 2103.88 2140 1749 2466 2016
Viet Nam 1,067.40 872.66 1251.00 1022.77 985.30 805.54 831 679.39 913.80 747.09
Colombia 688.68 563.04 757.08 618.96 724.74 592.52 667.14 545.43 674.40 551.36
Indonesia 682.94 558.34 676.48 553.06 682.16 557.71 640.37 523.54 647.39 529.28
Peru 273.78 223.83 225.99 184.76 273.18 223.34 188.61 154.20 231.45 189.22
Ethiopia 273.40 223.52 325.80 266.36 241.48 197.43 171.63 140.32 156.17 127.68
Mexico 265.82 217.32 268.56 219.57 279.64 228.62 294.36 240.66 312.41 255.42
India 262.50 214.20 288.00 235.46 274.00 224.01 276.00 225.65 271.00 221.56
Guatemala 248.47 203.26 243.60 196.49 234.71 191.89 248.28 202.98 250.28 204.62
Uganda 211.73 173.10 175.35 143.36 133.31 108.99 158.10 129.26 170.08 139.05
Source: FAOSTAT
Brazil retains its top position in value of production terms with over $2.29 billion of
green coffee in 2008 followed by Vietnam and Colombia with about $872.66 million
and $563.04 million respectively. Similarly, Ethiopia ranked sixth next to the above
three top performers, Indonesia and Peru with value of production increasing from
about $127.68 million in 2004 to $223.52 million in 2008. It has grown on the
average by 17.36% per annum over the five consecutive years.
5.2.2. Trade
A) Export
Brazil, Vietnam, Colombia, Indonesia, Germany, Belgium, Guatemala, Peru,
Honduras and Ethiopia are the top ten exporters during the year 2008. Ethiopia
ranked tenth place both in its export volume and value with annual export of about

G.M.T. Industrial PLC Page 16

179.28 thousand metric tones and earnings of $561.51 million in 2008. Ethiopia is
the only African country under the top ten performers in green coffee export.
Table 6: Top Ten Exporters of Green Coffee (Qty in `000 metric tones and Value in
$million)
2008 2007 2006 2005 2004
Country
Qty Value Qty Value Qty Value Qty Value Qty Value
Brazil 1567 4132 1488 3378 1476 2929 1352 2517 1411 1750
Viet Nam 1061 2114 1232 1911 981 1477 892 735.49 869.83 641.97
Colombia 602.88 1905 673.42 1729 600.72 1217 616.38 1488 574.94 960.82
Indonesia 468.02 989.40 320.60 634.16 411.72 583.51 443.37 498.37 339.88 283.33
Germany 286.27 916.40 302.53 822.04 290.25 680.14 264.14 558.40 221.75 384.74
Belgium 265.34 769.42 96.64 239.19 83.32 179.76 92.99 181.69 66.61 103.28
Guatemala 230.21 646.75 230.62 577.56 203.66 463.97 201.93 464.15 208.49 328.01
Peru 224.65 643.80 173.62 426.89 237.54 513.84 142.15 306.08 191.12 289.90
Honduras 199.36 575.39 206.77 499.01 171.64 389.57 145.46 329.42 177.03 257.16
Ethiopia 179.28 561.51 158.47 417.32 188.24 429.97 172.19 348.85 166.39 264.92
Source: FAOSTAT
The volume of Ethiopia’s export of green coffee is almost stagnant within the five
years above revolving around 166.39 thousand metric tones in 2004, 188.24
thousand metric tones in 2006 and 179.28 metric tones in 2008 and 211.98 metric
tones in 2010. Studies made on Ethiopia’s green coffee indicates that the natural
quality of Ethiopia’s coffee is a preferred one on the world market which makes the
promising prospect the sector has in boosting the country’s future earnings.
In value terms as well Brazil, Vietnam and Colombia are still the three largest
exporter of green coffee with export proceed exceeding one billion USD each in the
year 2008. Alike in volume terms Ethiopia ranks 10 th place with export earning
increasing from about $264.92 million in 2004 to $561.51 million in 2008. Some
countries which haven’t been under the list of top ten producers turns out to be
under the top ten exporters. These countries are Germany and Belgium which
ranked fifth and sixth place both in volume and value of export. These countries
serve as trade hub for European market being the first and second largest exporters
from EU countries importing largely from developing countries.

G.M.T. Industrial PLC Page 17

B) Imports
The increase in international trade in green coffee noted above is also shown in the
increased imports. USA ranked first place in imported quantity of green coffee in all
the five successive years since 2004 followed by Germany. Italy and Japan, etc. in
their order of significant.
Table 7: Major Importers of Green Coffee (Qty in `000 metric tones and Value in $million)
2008 2007 2006 2005 2004
Country
Qty Value Qty Value Qty Value Qty Value Qty Value
USA 1311 3805 1313 3238 1276 2828 1214 2502 1239 1979
Germany 1055 2930 1022 2369 1001 2060 900.81 1702 959.04 1223
Italy 456.60 1249 451.87 1002 424.35 814.35 408.74 683.38 395.22 489.44
Japan 387.54 1186 389.82 998.20 422.70 973.58 413.26 918.21 400.98 636.08
Belgium 362.68 1048 193.43 477.88 221.77 459.33 196.41 384.67 193.52 275.15
Spain 254.14 658.46 258.53 539.60 240.92 418.00 240.82 357.00 225.74 243.56
France 223.21 612.45 245.04 557.97 222.67 466.95 214.68 398.10 239.71 314.30
Canada 129.34 375.35 126.00 339.57 135.66 334.72 132.28 296.56 136.74 223.74
Sweden 110.30 358.03 110.26 292.21 110.47 257.83 103.94 241.80 909.65 147.07
UK 121.03 357.70 116.71 284.47 118.36 250.51 113.50 195.97 122.34 175.95
4410.84 12579.99 4226.66 10098.9 4173.9 8863.27 3938.44 7679.69 4821.94 5707.29

Source: FAOSTAT
Except Japan which ranked fourth place, import of green coffee is dominated by
USA and European countries. It is because multinational monopolists which have
engaged in coffee roasting and grinding activities based their companies in USA and
Europe. there is almost stagnant trend in the quantity of imports for the ten top
importers where it revolves around 4 to 5 million metric tones. However, there is
continuous increment in import value from $5.7 billion in 2004 to 12.6 billion in 2008.
An increase in international price of coffee could be part of the explanation behind
this significant surge in import value trend.

5.3. Ethiopia's Case

5.3.1 The Coffee Sector in Ethiopia

Coffee is mainstay of the rural and national economy in Ethiopia. It is the first

G.M.T. Industrial PLC Page 18

largest export earner for the country with more than 15 million small holders
bases their livelihood involving in its production. The growing demand in the
world market for this product and the available potential to expand production
could make coffee the engines of economic growth of Ethiopia at present as
well as in future.

Ethiopia has an attractive portfolio of high value coffee for export markets. It is
in the top 6 producing countries and the tenth top exporter in world market.
According to the 2008 figure, Ethiopia is the first in Africa both in the value and
volume of production and export of coffee. The government supports the
sector by providing different investment incentives.

Many smallholders and a limited number of large farms grow coffee. Coffee is
a cash crop on subsistence farms. Production is characterized as labor
intensive, low-input and rain-fed. The potentials to increase the production are
huge. Productivity per hectare can be grown with higher input levels and
improved technologies and seeds. New virgin areas are fertile and offer good
opportunities for organic and sustainable coffee production. Opportunities for
future coffee export growth are not fully exploited yet because of inefficient
marketing, improper cleaning and sometimes poor contract discipline.

5.3.3. Ethiopia's Coffee Market Destinations

Ethiopia exported coffee to more than 35 countries around the world. The
major countries of destinations during the past one years are Germany, Saudi
Arabia, USA, Japan, Belgium, Italy and France. The share of these seven
countries all together accounts 78% of the total export value. The important
destination countries in year 2012 are Belgium, Canada, France, Germany,
Italy, Japan, Saudi Arabia and USA.

G.M.T. Industrial PLC Page 19

 Table 9: The Ethiopian Export (Value) of Coffee during the year 2012
by Country of Destination

countries Importing Ethiopian Volume (In tone) Market Share

coffee
Germany 57,237 33%
Saudi Arabia 28,958 17%
USA 14,168 8%
Japan 5,836 3%
Belgium 12,254 7%
Italy 9,239 5%
France 7,967 5%
Others 22%

Source: Ethiopian coffee exporter association

5.3.4. Business Environment

Under the current market economic system, the main actors of coffee export
starting from the farm (production), local suppliers and exporters are the
private sector and cooperatives. The private sector is allowed to freely
participate in coffee trading business at different level of the value chain.
Farmers could either supply their product to their cooperatives/unions in which
they are members or could sale directly to the local suppliers. These local
suppliers collect coffee from the farmers and supply to Ethiopian Commodity
Exchange while exporters purchase the product from ECX and supply to

G.M.T. Industrial PLC Page 20

world market after further processing /cleaning. Trading of coffee at all levels
is reserved exclusively for Ethiopians only which creates protection from
foreigners. In general the coffee marketing, processing and export business
environment in Ethiopia is conducive for the private sector to freely participate
as far as they operate in accordance with the country’s commercial law
maintaining product’s quality.

5.3.5. Investment Potential and Incentives

It is known that Ethiopia is considered as the birth place of coffee. The coffee
comes form the name keffa which is one administrative zone in Ethiopia.
Coffee in Ethiopia is not only grown by farmers and investors but also are
found in natural forests indication how indigenous Ethiopian coffee is. Over 15
million populations in Ethiopia rely their livelihood on coffee. About 462
thousand hectares of land is covered by coffee tree in 20011/12, the yield
level on the average is 7.4 quintals/hectare. However, there is great potential
for growing coffee in Ethiopia and the current level of productivity /yield could
be considered as one of the lowest in the world.

This area of land that is suitable for growing coffee are located mostly in areas
where there is sparsely populated leaving room for coffee growers to engage
on aggressive expansion. Investors shown interest to engage in commercial
farming of coffee could also be provided sufficient area of land for coffee
plantation.

Given there is a vast area of uncultivated land suitable for coffee growing,
there is immense potential to invest on coffee plantation. The challenge in this
sector is that the initial investment for coffee plantation is so high since it
takes long gestation period until the coffee is grown and give the first
fruit/harvest. Similarly the amount of investment capital required for trading of

G.M.T. Industrial PLC Page 21

coffee particularly in recent years is becoming so high associated with an
increase in international coffee price.

In order to attract investment in the sector the government has provided

various incentive packages. It gives cultivable land at reasonable charge with
improved service delivery; it allows importation of the required farm
machineries, implements, vehicles, hulling, cleaning and other machineries
and equipments free of tax/customs duty. It also relieved from income tax for
the first few operational years of investment.

5.3.6. Available incentive for exporters

The country’s national economic development strategy gives particular priority

to the export sector. Exporters are the foremost beneficiaries in all areas of
investment and trading activities. The incentives provided are with the
intention of implementation export promotion strategy. This strategy is
selected with the double objective of building up the capacity of domestic
producers to make them capable to resist foreign competitors and at the same
time to effectively substitute imports. Engagement in global market will also
help for know-how and technology transfer to local entrepreneurs.

In order to promote export the government has taken a series of policy

measures one of which being devaluation of local currency against foreign
currency. This policy measures encourages not only exporters but also all the
actors involved along the value chain from farming, hulling, cleaning, and
marketing activities. Other incentives include exemption form value added tax,
giving priority for provision of the required credit from financial institutions,
allowing of importation of raw materials free of tax, etc.

5.3.7. Growth and transformation plan with regards to coffee production

and export

G.M.T. Industrial PLC Page 22

On its growth and transformation plan, the area to be covered by coffee crop
is projected to increase from 715 thousand hectars in 20013/14 to 815
thousand hectares in 2014/15. Similarly the production level is also planned to
increase from 679 thousand tones in 2009/10 to 831 thousand tones at the
end of the two years plan period. Not only has the government planned to
increase area to be cultivated, it has also the intention to improve the level of
productivity of the crop. In this regard the level of productivity will increase
from 9.5 quintals/hectare in 2013/14 to 10.2 quintals/hectare in 2014/15.

Table 10: Growth and Transformation Plan on Coffee Crop

Indicator plan
2013/2014 2014/15
Area cultivated (‘ooo hect.) 715 815
production (‘ooo tones) 679 831
productivity (qtls/hect.) 9.5 10.2
export volume (‘000 tones) 526 601
export value (‘million$) 1698 2038

Source: Ministry of Finance and Economic Development

The volume of export is projected to increase from 526 thousand tones in

2012/13 to 601 thousand tones in 2014/15. Export earnings from this crop is
also planned to be increasing from $1.698 billion in 2012/13 to $2.04 billion
during the last year of the five years plan period. The GTP clearly shows how
the government has given due consideration to increase the level of
production and export earnings from this crop over the two years plan period.

5.3.8 National Coffee Marketing System

The national coffee marketing system can be described after establishment of

Ethiopian Commodity Exchange (ECX). The main stakeholders involved in

G.M.T. Industrial PLC Page 23

coffee production, marketing and exporting business are farmers, processors,
local suppliers and exporters. Farmers usually supply their coffee to
processors for hulling and drying. After processing they sale to exporters at
central market. Exporters select coffee that meets the standard and quality
requirements and after making cleaning of coffee, they directly export t world
market. In case where there is ECX local suppliers after collecting coffee from
farmers directly supply t ECX market. ECX will store all the stock purchased in
its warehouses. ECX supply the purchased coffee at central market on
auction basis for exporters. Exporters after purchasing on auction market will
further clean the coffee so as to select the best quality and meet export
standard requirements. Exporters finally ship the cleaned and graded coffee
to export market. This is the actual marketing practice being taken place
through ECX at present.

5.4. GMT Industrial PLC Export Marketing Strategies

1. Participating in international trade fairs to promote the company and the

product.
2. Increasing its competitiveness in terms of price and quality. Price
through cost effectiveness and quality through roper selection of quality
coffee and clan storage and cleaning facility. It is by way of this that the
company could develop good reputation in the eyes of importers. In
order to maintain product’s quality internally the company is currently
plan to organizing its own coffee laboratory. Besides the internal control
system there is ministry of Agriculture Coffee Quality Control Unit that
supervises/ standardizes the quality of exportable coffee.
3. Focusing on market development strategies through creation of new
market and expansion of existing markets.
4. Price and price policy: For the determination of sales prices, the internal
purchase and marketing costs, customer reactions to prices (price

G.M.T. Industrial PLC Page 24

 elasticity) and the price policies of competitors must be considered. It
also takes into consideration the prevailing international price
movement.
5. The export division could penetrate the market by conducting face to
face visit at importers site so as to create trade linkage with prospective
buyers.
6. Export has already developed its website to intensively promoting its
product to worldwide dealers. It will strengthen this effort so as to widen
up its market base.
7. Advertising to stimulate demand usually attracts many customers. The
Company can therefore commission specialized agencies, which
design the advertisement and select proper media.
8. The company will also develop good reputation as reliable supplier in
product quality, delivery time, and in meeting contractual obligations.
9. The company will also promote its product by inviting potential buyers
at warehouse so that they could observe the company’s capacity and
effort to meet order and keep the product’s quality up to the required
standard. The company will make the visit inspiring with good
hospitality preparing coffee cupping sessions.

VI. SWOT ANALYSIS

It gives a general picture on the Strength, weaknesses, opportunities and threats

associated with the sector and explore the project’s strategy to withstand these
difficulties.

Strengths Weaknesses
Qualified and Experienced Management
team of the Business.

The export division of the company which is

G.M.T. Industrial PLC Page 25

responsible for handling the coffee export
business is well organized by qualified and
experienced personnel. The General
Manager of the business has the relevant
qualification and export sector experience.
This makes the company’s vision of being
prominent and quality coffee supplier
possible.

Engagement in Practically Tested

Business

The company has been in this business

since the last seven year. During this time, it
has developed good reputation with
importers and tested the possible practical
challenges that it could face. The practical
experience that the company has acquired
since the past seven year and the market
linkage that it created with importers could
be considered as one major strength.

The company’s Strong Financial Base.

The business has for long years been

engaged on export business and good
reputation from banks and creditors. This
makes the export to have strong financial
base of course coupled with injection of fund
from Banks.

The Company’s long years Experience in

international trade as exporter

The company has been in export trading

business since its establishment in 1999..
During this period it has developed relevant
experience on handling international trading
practice. This experience also believed to
serve the company for its business

Use of own Premise (clearing facility)

Currently, the company uses its own

cleaning facility. This practice may somehow
decrease its operating cost which could
gratis its competitive capacity as compared

G.M.T. Industrial PLC Page 26

with those operating in rented warehouse.
Recognizing this, the company planned to
increase its cleaning warehouse in the near
future.

Opportunities Threats
Economic Restructuring Yield at a Low level

At this moment several economic incentives Due to traditional way of farming with low
are already available for sectors producing inputs, yield levels for coffee in Ethiopia is
export priority products. Coffee is among at low level as compared with other
them. The government is also exerting all producing countries. With transfer of new
rounded effort in order to make the playing technologies and providing inputs,
ground of investment inviting for investors. It productivity of the sector can be strongly
is also investing on massive infrastructural increased.
projects such as road, electricity, telephone
etc. which activates the whole economic and Subsistence farming
business environment.
Many smallholders are still focused on food
Increase in demand security. Coffee as on of the cash crops are
generally grown only to have enough capital
Economic development of emerging to buy some necessities of life. Food
countries will increase the demand for coffee security needs to be enhanced so that
on the world market. As a result higher price growers feel more comfortable growing
for coffee can be foreseen in the medium Coffee.
and longer term as has happened over the
past consecutive years but not the current Lacking International Market orientation
year.
International market orientation is
Diversity of Rather Unique Coffee Crop insufficient. The farmer or trader has no full
information of the real interest of the
Ethiopia has altitude from below sea level to ultimate customers in highly developed
4,500 meter above sea level with very export markets. Only with a stronger market
different climate zones. This enables the orientation, a clear strategy to attain access
country to grow a wide variety of coffee crop. and growth of specific target markets can
This provides a good base for acquiring or be realized. The promoter in this regard is
expanding a profitable position on the world far sighted, have exposure on the
market. international market play to anticipate the
interest of the ultimate consumer of the
High quality of Coffee product.

Ethiopia has high natural quality coffee High Transaction Costs

varieties. If Ethiopia farmers and traders
manage to prevent blending of different The chain starts with a very large number of
types with distinct qualities and provide small holders each producing a very limited

G.M.T. Industrial PLC Page 27

adequate seed cleaning up to 99-99.5% quantity. This requires additional efforts to
more added value in export markets can be collect sufficient large quantities, meeting
realized and new markets can be created. the required export volumes. Costs are
involved in each transaction, lowering the
price for the actors involved in the process.
The creation of farmers unions and ECX
Entrepreneurship and Ambitious Coffee has some how shorten the chain of
Exporters transaction.
Although market orientation needs to be Contract discipline and reconsideration
improved, many ambitious entrepreneurs of payment L/C
are anxious to intensify business relations
with market parties abroad. The government Doing international business means
and ECX is also working hard to improve its complying with international trade rules on
market information systems. contract discipline and quality. Ethiopia has
to regain its name as reliable exporters in
Available land and labor this regard. The owner in this regard is well
informed on the importance of meeting the
Virgin fertile new areas are available and rules on the international contract discipline.
can meet organic certification standards.
These new areas can be cultivated on a
large scale. Labor is cheap and abundantly
available. Most new areas are in the low Storage Facilities
lands. The government is very supportive in
issuing land to investors. When this fertile Storage facilities needs to be improved in
virgin land is cultivated there will be most cases. Creating a demand driven
dependable supply of coffee for export supply chain for high demanding markets
market. requires storage capacity which complies
with quality assurance systems.
Attractive investment package Vulnerability off storage to pest, moisture
and rodents should be banned out.
Coffee is a priority export product. The
government enhances investments in the
sector with an extended package of
investment incentives.

VII. TECHNICAL STUDY

7.1. The Cleaning Warehouse Location:- The warehouse where coffee

cleaning takes place is located in Addis Ababa city administration, Akaki Kality
sub-city and Oromia regional state, Gelan

7.2. Store Availability

The company in the short run will operate in own premise.

G.M.T. Industrial PLC Page 28

7.3. Site and built up area of the store

The warehouse that the company is using and planned to continue using for
its operation is sufficient for the current scale of operation of the business.

7.4. Store holding capacity

The warehouse stock holding capacity is enough both for cleaning purpose as
well as for storage.

7.5. Cleaning Machinery and Equipment

The company has been using own cleaning machinery and equipment. It also
planned to continue using rented machinery during the plan period and it has
own cleaning machinery as one strategy of cost minimization.

7.6. Coffee Demand Supply situation at central market

Coffee export business is seasonal market depending up on the harvesting

season like any other agricultural product. There is immense supply during
the peak season and limited supply during the slack period. The supply of
coffee at the central market also varies depending up on the season. Since
the demand by exporter also slows down accordingly, there is no as such
mismatch between demand and supply at the central coffee market (ECX
market). The experience of the company over the past seven years also
proves this fact. An exporter that came to buy coffee from ECX market doesn’t
face difficulty of obtaining the required supply.
VII. ORGANIZATION AND MANAGEMENT
Whatever capital is injected to a business firm, it will be fruitless unless it is
managed properly and successfully. Therefore, it is imperative to put in place
plausible organization structure, management team, qualified and skilled staff.
8.1. Organization
The business enterprise is organized in such a way that there is G/Manager at
the apex of the hierarchical ladder followed by V/General Manager. The

G.M.T. Industrial PLC Page 29

G/Manager will set the General direction of the company/project and will pass
major financial decisions. The G/Manager will lead the general operation of
the company. The V/General Manager is responsible to the day-to-day
operation of the business.

G.M.T. Industrial PLC Page 30

There are six functionally related Department Managers under the V/General
Manager: Marketing research & Business Dev. Dept., Administration and
General Service, Finance, Import & Export, Operation and production and
Construction where all will operate under direct supervision from the
V/General Manager. The duties and responsibilities of the V/General Manager
and the three functionally related Department Managers are presented below:

General Manager
He is leading the day-to-day operation of the business in accordance with the
general direction given from the General Manager. He is commending with
the following tasks:
 Appoint, control and dismiss departmental managers, determine and
notify their job description collaboration directed by General Manager.
 Be the executive of the technical and administrative affairs of the
company.
 Implement the decisions of the G/Manager.
 Marketing activities and market development
 Contract administration
 Follow up of coffee purchase and deliveries
 Follow up of client accounts
 Employ and dismiss workers and agents of the company and credit its
payments as well as sign its financial statements.
 Cause and take appropriate measures for the efficient keeping of
outflow and inflow accounts of the company to be submitted and
approved by the G/Manager.

G.M.T. Industrial PLC Page 31

  Delegate any other person in the name of the company when it is
necessary to execute some of the duties assigned to him herein above
for the achievement of the purposes of the company.

Administration and General Service

This department will lead the administration and General Service of the
division having the responsibility of undertaking the following tasks:
 Applying and practicing sound administrative functions.
 Personnel management
 Administration of property
 Manpower recruitment, training and development
 Security and external relations
 Perform general service functions

Finance Manager
 Preparing and closing of accounts
 Establish and control the accounting procedure and system
 Management of cost and budget
 Pricing of products and stock management
 Maintaining of cost control and systems
 Internal control and financial planning
 Closely follow up client accounts
Marketing research and business development Commercial Department
This department will be entrusted with all commercial functions with the
following major duties and responsibilities:
 Administering the general market and business operations
 Developing and establishing marketing policies and business strategies
 Perform and follow up sales promotion and development activities
 Work closely with staffs under operations department on matters of

G.M.T. Industrial PLC Page 32

 product development and maintaining of quality of products.
 Closely follow up marketing functions.

Production and Operations Manager

The major duties and responsibilities of this department among others
include:
 Follow up quality management and product development functions
 Follow up cleaning and technical operations
 Closely follow up operations and maintenance programs and schedules.
 Manage material consumption and output balance
 Manage process and technical information
 Ensure the availability of sufficient coffee, utilities and other technical
services that are vital for the operation of the firm.
Import & Export Dept.
 Preparation of export documents
 Preparation of import documents
 Import and export follow-up and documentation

8.2. Management Profile

1) Ato G/Egizihabir Mezegebe

Ato G/Egizihabir Mezegebe is a graduate with Diploma in Marketing. He has

more than 16 years of diverse experience in export business in his
companies,

Besides his qualification, he has got enormous training in Business

Administration and Strategic Management. He has also been trained in coffee
quality control.

Besides his qualification the experience he acquired over his stay as a

G.M.T. Industrial PLC Page 33

manager in his PLC is directly relevant for the duties to be carried out as
General Manager of the export business. The remarkable progress observed
over the last two years of the company's coffee export business is directly
related with the Management efficiency and competence of Ato G/Egizihabir
Mezegebe and his team.

2) Ato G/Egizihabir Woldu

G/Egizihabir woldu is a graduate with B.A Economics from A.A. University.

He has over 37 years of hands on experience in government and private
bank. Currently, He is working as V/G/ Manager- Operation of GMT industrial
PLC.

3) Ato Getachew Tefera

Ato Getachew Tefera has got B.A. in Geography and Environment Studies
and Diploma in General Agriculture and. He has over 27 years of experience
in different owned owned organizations before his assignment as
V/G/Manager Coffee processing Plant in in GMT Industrial PLC. He has also
vast and diverse experience in using and practically applying expertise in
coffee processing.

4) Ato Shimels Nigussie

Shimels Nigussie is a graduate with B.A Marketing from Mekele University.

He has over 15 years of hands on experience in government and private
organization. Currently, He is working as Marketing Research and analyst of
GMT industrial PLC.

5) Ato Amanuel Assefa

Amanuel Assefa is a graduate with B.A in accounting. He has over 9 years of

hands on experience in GMT Industrial PLC. Currently, He is working as

G.M.T. Industrial PLC Page 34

Acting Finance Manager of GMT industrial PLC.

5) Ato Temesgen G/Micheal

Temesgen G/Micheal is a graduate with B.A in Accounting. He has over 4

years of hands on experience in GMT Industrial PLC. Currently, He is working
as senior accountant of company.

8.3. Training Requirement

Although the Company intends to recruit qualified professionals from the labor
market, provision of training in selecting, processing and marketing of coffee
to key persons for limited duration is felt necessary to ensure technology
transfer and product quality. This helps the company to sell good quality
coffee that will remain competitive in the market. Appropriate training will also
be provided in selection of coffee so that a crop with good quality could be
purchased from the market or collected from ECX market.

G.M.T. Industrial PLC Page 35

 IX. FINANCIAL PROJECTIONS

Assumption for Financial projection:-

Rate in Revenue projection

Description July, 7 2013 July 7, 2012
Actual Seale 445,873,740.09 361,839,495
Increase in revenue 24%
Due to upcoming expected good world market
price and devaluation of Ethiopian Birr, the 50%↑
expected revenue increased by

Therefore, the revenue will increase by 50% for 1st year, 30% for 2nd year and 20%
for 3rd year.

%age Sales to cost of seals ratio of last year statement

Description Sales
July, 7 2013 July 7, 2012 July 7, 2011
Cost of Sales 443,431,240.47 337,839,495 425,217,511
445,873,740.09 99% 361,839,495 93% 455,522,941 93%
Average 94%
Therefore, cost of sales is 94% in every year.

%age other income increase

Description July, 7 2013 July 7, 2012

9,688,486.92 5,498,479.64
%age increase 76%↑
With unexpected business
circumstances, average other income will
60%↑
increased by:-

Therefore, the other income will increase by 60% for 1st year, 30% for 2nd year and
20% for 3rd year.

G.M.T. Industrial PLC Page 36

 Expense

Expense
July, 7 2013
Selling & Distribution General and Adm. Financial Charge
12,487,156 6,608,672 15,820,410
Sales 445,873,740 2.8% 445,873,740 1.48% 445,873,740 3.55%
Expense
July, 7 2012
Selling & Distribution General and Adm. Financial Charge
Sales 10,051,467 2,844,070 15,372,530
361,044,784 2.78% 361,044,784 0.79% 361,044,784 4.2%
Average 2.79% 1.15% 3.87%

Therefore, selling and distribution ratio will 2.79% of the total sales, General and
administration cost will 1.14% of total sales and financial charge will 3.87% of the
total sales. Each expense in the category will distributed according to the percentage
share of each expense.

GMT INDUSTRIAL P.L.C

PROFIT AND LOSS STATEMENT
Actual/ Audited PROJECTED
Description
July 7, 2013 7-Jul-14 7-Jul-15 7-Jul-16
REVENUE
SALES 445,873,740 668,810,610.00 869,453,793.00 1,043,344,551.60
OTHER INCOME 9,688,486 15,501,577.60 20,152,050.88 24,182,461.06
Total Sales 455,562,226 684,312,187.60 889,605,843.88 1,067,527,012.66
COST OF GOODS SOLD 443,431,240 615,305,761.20 799,897,489.56 959,876,987.47
CROSS PROFIT 12,130,986 69,006,426.40 89,708,354.32 107,650,025.18
SELLING AND DISTRUIBUTION EXPENSE
Transportation 3,200,931 4,783,219 6,218,185 7,461,822
sales commission 575,513 860,001 1,118,002 1,341,602

G.M.T. Industrial PLC Page 37

transit and cleaning service 2,095,420 3,131,231 4,070,600 4,884,720
fuel and lubricant 3,242,152 4,844,817 6,298,262 7,557,914
demurrage, sea fright and other 499,797 746,857 970,915 1,165,097
parking expense 77,911 116,424 151,351 181,622
repair and maintenance 730,337 1,091,358 1,418,766 1,702,519
travel and periderm 394,934 590,158 767,206 920,647
printing and packaging 39,851 59,550 77,415 92,898
Port fee, Documentation 666,846 996,482 1,295,427 1,554,512
miscellaneous 413,557 617,987 803,383 964,060
advertising and promotion 3,300 4,931 6,411 7,693
weight claim and other sales expenses 546,602 816,801 1,061,839 1,274,207
Total selling & distribution expense 12,487,151 18,659,816 24,257,761 29,109,313
General & administration expense
salary and benefit 2,324,732 2,702,578 3,517,252 4,214,370
office rent 131,400 152,926 198,804 238,207
repair and maintenance 275,302 320,403 416,524 499,079
Utility Expenses 314,570 366,104 475,935 570,265
communication 113,802 132,445 172,179 206,305
printing and office supplies 197,346 229,676 298,579 357,757
professional fees 380,590 442,940 575,822 689,949
insurance expense 258,256 300,564 390,734 468,177
travel and periderm 200,580 233,440 303,472 363,620
vehicle running 246,916 287,367 373,577 447,619
depreciation 104,432 121,540 158,003 189,319
membership fee 15,707 18,280 23,764 28,475
miscellaneous 433,778 507,841 656,293 786,371
Tax Expenses 1,611,255 1,875,217 2,437,782 2,920,949
Total general & administration expense 6,608,666 7,691,321 9,998,720 11,980,462
Financial Charge 15,820,410 25,882,971 33,647,862 40,377,434
Total expense 34,916,227 52,234,108 67,904,343 81,467,209
Profit before tax -22,785,241 16,772,319 21,804,012 26,182,816
Provision for profit tax payable 5,031,696 6,541,204 7,854,845
Net income/loss After tax -22,785,241 11,740,623 15,262,808 18,327,971
Working Capital Projection Amount

Basic assumptions and facts:

It is evident that coffee export business has seasonal nature where there will
be bulk export during the peak season and the quantity and value of export
decrease during slack period. It is based on this notation that the company
designed its export plan. During the coming fiscal year, it intendeds to export
668 million worth of washed and unwashed coffee and cereals. Based on

G.M.T. Industrial PLC Page 38

 previous export performance, we can determine the facility on the following
assumption and facts.

 Due to the prevalence of devaluation of Birr and expected growth in the

business volume, it is assumed that sales of the company for the coming
period will grow at a rate of 50% when compared to the sales figure registered
at the closing date of July 7, 2012/13.

 Cost of sales will also grow at proportionate rate with sales.

 Selling and administration expenses are expected to grow at a rate of

20%

 The facility turnover (cycle) is supposed to be 3 times per the year. i.e.
concluded export sales contact up to getting of export proceeds

 Export cost of good sales made within the previous one year is
443,431,240

 Therefore, working capital required for the business is:

Cost of sales for the period ended July 7, 2012/13 Br. 443,431,240
Expected growth percentage 50%
Expected cost of sales for the coming period Br. 665,146,860
Sales & adm. expenses for the period ended July 7, 2012/13 Br. 19,095,817
Expected growth percentage 20%
Expected Sell & Admi. expenses for the coming period Br. 22,914,980
Total annual requirement Br. 688,061,840
Working capital required for four months Br. 229,353,947
Less: positive working capital available 0.00
Working capital needed for the coming year Birr 229,353,947

G.M.T. Industrial PLC Page 39