ALBANCOTT INVESTMENT PROJECTIstanbul August, 1995 Prepared by XXX NAME OF THE JOINT VENTURE: Albancott LTD. ADDRESS: Sheshi Garibaldi Lagje No:6 Tirana - Albania DATE OF ESTABLISHMENT: Nov 11, 1992 REGISTERY NUMBER: 7338 CAPITAL: USD 8 650 000 OBJECTIVE: Cotton processing and trading of all textile products. Expenditures for human resources g.Total initial investment .Other expenditures h. FINANCIAL BRIEFS E. PROJECT STAGES C. EVALUATION OF TEXTILE MARKETS D.Other machines & equipment e.International relations 5. TEXTILE SECTOR IN ALBANIA C. OTHER ARRANGEMENTS BEFORE STARTING PRODUCTION 1.Geographical information 2.Machinery list 4. PROJECT SUMMARY A.Initial investment a.Expenditures for HR F.Government administration 4.Building b.Fiscal incentives apply to textile sector B. KEY PERSONNEL III. FEASIBILITY STUDY A.Supplementary machhines & equipment in production E. TABLE OF CONTENTS II. ASSETS ( OTHER THAN HUMAN ASSETS ) D.Factory building maintenance f. TABLE OF CONTENTS I. FINANCIAL ANALYSIS OF THE PROJECT 1. TECHNICAL INFORMATION ABOUT THE PROJECT 1.Technological specifications 3.I.Other machines & equipment 2.Supplementary machines & equipment d.Demographical information 3. AIM OF THE PROJECT B.Choice of technology 2.Factory building maintenance 3.Machinary c.Economic information 6.Working capital investment i. GENERAL INFORMATION ABOUT ALBANIA 1. Amount of financing required a. CURRICULUM VITAE OF KEY PERSONNEL B.Estimated operational revenues b. Certificate of incorporation 2.Estimated general & administrative expences 3.Articles of association C.PROJECT SUMMARY .First year's net income b.2.Estimated operational expences c.Cumulative cash flows d. APPENDIX A. OTHER DOCUMENTS II.Repayment of funds e.Total financing needed b.Profitability of the project G.Estimated revenues & expences a. CONCLUSION IV. LEGAL DOCUMENTS OF ALBANCOTT 1.First three year's net income projections 4.Breakdown of funds required c.Estimated net income a. from spinning to garments production based on cotton. The factory building is rented from government for 99 years and has: 12 860 sqm. established in June 1994. 12 860 sqm of area for weaving and knitting. In later stages. of garden and open area. garments are planned to be produced in another building which will be rented. 41 130 sqm total area Bleaching and dying units are planned to be located in the factory space to be built in the open area. The portion that is not going to enter the next stage of production will be sold in the market. hight as main warehouse. C. mainly USA and EC. 1 370 sqm x 6 mt. PROJECT STAGES The Albancott project has three main stages depending on our financial sources: At the first stage for which we applied to your company for funding. The yearly production capacity is planned as 5000 mt. knitting. under ministerial authority in accordance of the Foreign Investment Law of Albania. For the second stage. FINANCIAL BRIEFS . we will establish weaving . 11 150 sqm.AIM OF THE PROJECT Albancott is a joint venture company. the proposed capacities are 2000mt for weaving. 850 sqm x 6 mt. ASSETS (OTHER THAN HUMAN ASSETS) Currently. of additional warehouse space. we are concerned with cotton-spinning only. At the final stage. Finally.A. bleaching and dying and 1000 mt for the ready-made garments. B. of administrative buildings. there are 1100 metric tons of USA cotton in our warehouses. named Tirana-Textile Mill and extend and improve the processes to an integrated textile complex. The factory buildings already have the electrical systems and water supplies ready for production. the ready-made cotton garments will be produced. of factory area for spinning units. The aim is to renew the old technology of the second biggest textile mill of Albania. D. bleaching and dying units. knitting. 1 040 sqm. Perparim Zaimi Mr.) %1 Mr. GENERAL INFORMATION ABOUT ALBANIA . Board of Directors Mr. KEY PERSONNEL 1. Stan Mehaffey Ms. Murat Durul Türk Mr. Emin Türk Mr. Isa Feçi (Technical Coordinator) ( Financial Director) ( Administrative & Marketing Coordinator) ( Marketing Director) (Administrative Director -Firm representative to Albanian Government) ( Technical Director) The CV's of the key personnel are in the appendix. III. E. Emin Türk (Nautilus Trading Limited) 75% shares . Ayþe Nergis Turan Mr. Arthur Hoxholli (On behalf of Albanian Government) 24% shares 2. Carlton Lawson ( Amaricott Inc.Amount of money sought : 4 218 300 Currency : USD Breakdown on utilization of funds : October 1995: 1 448 300 November 1995: 216 000 December 1995: 314 000 January 1996: 2 240 000 Location Projected Profitability : Tirana/ ALBANIA : 27 % The details about financial information is in the financial analysis section of the feasibility study. FEASIBILITY STUDY A. Ahmet Þenkal Mr.unique manager Mr.Shareholders Mr. 500 2.000 4. Skkoder.0 % Vocational school : 138. Elbasan. Education: The literacy rate : 99 % Pre-primary school students : 130. The average temperature is 18 C (64 F).500 0. to Greece on south and by the Adriatic and Ionian Seas on the west. to the Republic of Mecadonia on the east. Government Administration: Republic of Albania is a secular and parliamentary republic. 2.8 % b. Greek 1.5 %0 c. The total land area is 28. Macedonian 1.8 % Total schooling rate : 28.2 % Higher education : 27. The parliament is called "People's Assembly" elects the president of Republic who is also the Head of State.2 % Highschool : 67.direct and secret ballot The last election was held on March 22. the majority are Muslims(70%).000 17. The other major cities are Durres.748 sq km. It has boarders to Yugoslavia on north and north-east. The Mediterranean climate is dominant throughout the country. Geographical Information The Republic of Albania lies in south-eastern Europe. The literary language is formed of both dialects with the stucture of Tosk prevailing.Albanian 98 % a. The capital city is Tirana with a population of approximately 250. The parliament consist of 140 deputies is elected for four years with free. He appoints the Chairman of the Council of Ministers .2 % 3.1. 1992.485. Others 4 %00 Language: The language is Albanian which has two dialects mainly Gheg and Tosk. Demographical Information Population Urban Rural : 3.000 4.000 .000 (estimated for 1994) : 24 % : 76 % Ethnic Groups : a.0 % Primary and secondary students : 557. Vlore and Korçe. Religion : The State permitted the places of worship and religious activities in 1990. Although there are groups of Roman-Catholics(10%) and EasternOrthodox(20%). . Main export items are mined ores. The seperation of powers principle. initiated privatization og agricultural land. The President and the Head of State is Dr. 100 lek/$ in 1993 and . mining. inferior technology in industry and services. turism and labor intensive consumer goods of which textile is the strongest as far as the competitive advantages are concerned. detergents. The devaluation rate of lek against hard currencies is relatively low. But situation will change as the economy develops and people accumulate money on their hands. transportation and other services. Inflation as measured by consumer price index declined from very high levels to about 30%. The government took mesures to establish fiscal and monetary control. But.lek/$ at present. import items on the other hand. petrolium. including those of national minorities. It has good relationships with the neighbouring countries. The Albanian economy has the potential to achieve international competitiveness in sectors such as agriculture. namely legislative. there is still an unpredictable chaos in former Yugoslavia. tobacco. low consumption.9 million leks (US$ 429. It has been predicted that the struggle will come to an end by Crotian attacts to Sýrps and a new order to be established like Tito regime. and low wages. fertilizers and handicraft products. no competition. coal. Albania is a country geographically very close to EC. On the other . The Social Democratic Party of Albania (SDP). According to 1993 figures. judicial holds. cars& trucks. compared to similar countries.819 million). Sali Berisha. International Relations The Republic of Albania is recognized by almost all nations around the world.and also the Ministers upon the recommendation of the Chairman. Albania also recognizes and guarantees those fundamental rights and freedoms that are proclaimed in international law. executive. So many years of close regime. electrodomestic appliances. inefficiency.475 million) and imports are 42981. namely. 4. exports are 11347. energy.5 million leks (US$ 113. Albenian Republican Party (ARP) and Independents is in power. Economic Information: Albania has been implementing a comprehensive economic adjustment program since mid1992. trade and foreign exchange system reforms. A coalition of Democratic Party of Albania( DPA). 5. More than 50% of GDP is produced by agriculture. brought certain disadvantages.. The exchange rate against USD was 80lek/$ in 1992. but has diverse characteristics. public housing and small and medium size enterprises.. only 13-17% by industry and the rest by costruction. food products. introduced comrehensive price. GDP growth rate is estimated to be 8% for the coming years. There are 28 political parties. Albania consists of 27 districts each of which is administered by multi-party executive committees. 55% of the working population is employed in agriculture. manufacturing. most important is being the USA. and then only under due process of law and with appropriate compensation. 6. 60% reduction on tax o profits if the profits are re-invested. by nature of the past regime. requisition or any other measure of similar effect. No turnover tax on goods that are exempted from customs duties. 2. Albania is the member of Multilateral Investment Guarantee Agency (MIGA) and ICSID. except when this is in public interest. gas and water supplies. Free Trade Agreement in negotiation All other OECD countries except Japan have granted MFN and/or GSP status. To realize the potential in the economy. forestry and fishing. There are also no limits concerning the equity policy. Fiscal incentives apply to textile sector: 1. there is no management and entrepreneurship at all. hunting. consfication. Albania has so far no export restriction imposed by EC and NAFTA. 55% of the working population are males. . Four-year tax holiday in manufacturing or production sector.hand. No one is after profitability which avoids the accumulation of funds to renew the technology. nationwide social security systems gave people equal chance to be educated and solve their health problems. 5. No turnover tax for imported goods needed for maintenance and development of investment as well as for raw materials and equipments that are part of the production cycle. 15% in governmental services sector and 19% in mining. Losses can be carried on for three consecutive years in addition to the year the loss occured. Albania also signed bilateral agreements on the promotion and protection of reciprocal investments with more than 20 countries. According to the 1989 figures (latest census) the economically active population is approximately 46% of total population. electricity. Foreign investments are not to be subject to nationalization. From 1991 on. Albania entered major trade agreements: GATT observer status. expropriation. 3. working party on accession (1992) EC Trade and Cooperation Agreement (Sept. All revenues made by foreign investors in Albania may be trasferred abroad after payment of all due taxes. the lack of competition brings inefficiency. 1993) EFTA Declaration on Cooperation. government has given vast importance to foreign investment and capital. Highly educated but inefficient labor force work for very low wages. No withholding tax on outgoing dividends. 45% are females. 4. while many other textile exporting countries suffer from quota restrictions. thus maintain economic growth even further. Approximately 15% of the row material is provided domestically and the rest from imports. Cotton Textile 57 800 000 lb.) World cotton stocks . The cotton usage 18. India and Pakistan has suffered from low productivity/ hectar due to technical inefficiencies ( diseases.TEXTILE SECTOR IN ALBANIA In 1989. Total Textile Output ( 1989) : 59 400 000 lb. (lowest in Europe) C. Since 1989.B. wrong irrigation practices etc. The technology belongs to 1950-60. in textile industry. making collaboration with foreign partners and joint ventures.11 million metric tons in 1994. covering 70% of the production of light industry and 16% of total industrial production of Albania.96 million mt. The productivity/hectar is 578 kg. The biggest producers of cotton are China. World cotton yield is 18. the production consequently the employment is decreased 3-5 fold. Besides China. Employment 20 714 (1994) 10 400 000 lb 9 900 000 lb. All cotton exporters with the exception of USA prefer to process cotton domestically in order to increase the value added. EVALUATION OF TEXTILE MARKETS Cotton Textile Market is evaluated in terms of cotton production and yarn manufacturing. as a result of sudden economic and political changes which has arranged the albanian textile enterprises in face of foreign competition. USA. The strategy of the government is to privatize the textile enterprises. Pakistan and Uzbeckistan. 7 763 The technology in textile industry is out of date and has low productivity. The excess demand over yield is met from the stocks. India. According to the research made by a foreign firm in 1994 Albanian production ( Textile Thread) 2 700 mt Textile Imports 9 470 mt Textile Exports 950 mt Albanian textile consumption 11 200 mt Per capita consumption 3. the textile industry represents the main branch of light industry.4 kg. Amount of cotton x 93% = Amount of yarn produced. Production is based on 200 000 lbs/ 7 days and 3 shift.1%) while open-end spinning capacity increase a little (1. The Turkey's imports of yarn in 1994 53 300 mt.4 million mt and cotton consumption 19 million mt. 3. Average thickness 18/1 carded yarn. Wider product range satisfies the market better. According to the data of International Textile Manufacturers Federation. Ring spinning capacity is decreasing (-1. Turkey which is the sixth in the same ranking increased its capacity by 20% last year. Turkey imports yarn from far east. falling cotton prices in 1992-3 will increase and world prices will be above $ 1.unprecedentedly below 8 million mt. more advanced and less problematic than other technologies. Indirect and white collar workers are not included in this figure. For 1995 it is expected that cotton production will be 18. 2.75/ kg. Expected efficiency on rotors : 90% e. Less machine is involved which reduces the overall price of machines.Machinery list: a. In the same year. Expected break factors 1500 to 1800. D. south Asia and Africa.B Cleaner Model MSR Multimixer Model MPMo Fun Model MTVR 500 . d. with an average price of $ 3. Range of yarn counts is 6/1 to 30/1. Turkey's open-end spinning capacity increased by 20% and became the sixth biggest capacity in the world ranking.13/kg. Despite this fact. it is newer.Technological specifications: a. It has seen that technology is rather changing to open-end woldwide. c.TECHNICAL INFORMATION ABOUT THE PROJECT 1. It is also expected that. The basic reason is that. The reason to mention these two countries specifically. Labor force required to operate plant total 114 workers for three shifts.2%) in 1992.Choice of technology: The technology that is preferred for Albancott is the "Open-end" spinning. the total spinning capacity of the world is 172 400 000 needles and 8 400 000 open-end rotors. Opening and cleaning Truetzschler Opening Lines(Model 1985) 2 units Each consisting of: Blendomat Model BDT 18 Blendcommander Model BC Magnet Condenser Model LVSA. is because the machinery will be from USA and also some of the back-ups will be supplied from Turkey. USA has the largest capacity of updated open-end systems. f. b. Uster C . Carding Rieter Aeromixer 1976 Rieter Condense 3 units Rieter Flock Feads 3 units Rieter Fans 3 units Rieter Control Panels 3 units Saco. Blending Fiber Control Blend Line Consisting of: Fiber Control Weigh Pan Hoppers with Extended Aprons 2 units Fiber Control Weigh Pan Hopper with D106 Condensers 2 units Fiber Control Conveyor Fiber Control B1 Blender Magnet c. 8 End up Creel 30" Can Manual Doff Running 0 1198 ft/minute 9 units Zinzer 720 Draw Frames ( Finisher) Model 1977 Dual Delivery 20 x 42. Boiler with capacity of 5000 lt/ hour of steam. Transformer 550 Volt . Set Up Back Winding 4. b. 46 MM Rotor Dia 0820 Combing Rolls. 30" Crosrol Coilers. Year 1977 60 Spindle. Forklift d. Rieter Aerofeet Chutes 21 units d. Crosrol Autolevellers.Supplementary Machines and Equipment in Production: a.Lowell 40" cards revolving Fiat Tabs. 1 piecer 12 units f. 168 Rotor.3 Clearers. Drawing Zinzer 720 Draw Frames ( Breaker) Model 1977 Dual Delivery 20 x 48. Crosrol Varga Fronts.Tandem X-L Cleaners with fiber control D 106 Condensers each 2 units X-L Cleaner with fiber control d106 condenser Fiber control stock funs 2 units b. 8 End up Creel 20" Can Manual Doff Running 0 1198 ft/minute 9 units e. Spinning Schlafhorst Autocorne/Open-End Machines Model SRZ 1985. Winding Schlafhorst Autocorner Winder Model 107. Crane system c. FINANCIAL ANALYSIS OF THE PROJECT 1. Expenditures for Human Resources: a. Functional arrangements in the open areas. 3. the equalent values for the buildings in use are calculated and included in the investment amount. Service Minibusses b. However. Air Conditioner industrial type 3 units f. Painting of the factory and administartive building. Punchcard machine and guardwatches 2.Building TOTAL 12 860 sqm 2 220 sqm 1 040 sqm $ 300/sqm $ 250/sqm $ 300/sqm $ 3 858 000 $ 555 000 $ 312 000 $ 4 725 000 Buildings and land is rented from Albaian Government for 99 years. Office furniture and decoration. Additional Quality Control Labratory Equipment g. Arrangements in the warehouses for yarn storage. Building (Only the buildings to be used are taken into account) Factory space Warehauses Adm. e. Managerial training c. Cars c. c. Factory Building Maintenance: a. Other Machines and Equipment: a. b.e. Workcloths F.Computer hardware and software e. Machinery: . Covering the floors of spinning area and warehouses with appropriate material. clean and waste water and steam systems are ready for use are assumed in the equavalent costs. b. The electrical. Truck d. in order not to have a bias in profitability analysis. d. Initial investment a. Hand Tools D. OTHER ARRANGEMENTS BEFORE STARTING PRODUCTION 1. Technical training b. Boiler 2. Sevice minibusses (2 $ 30 000 units) 2. Service cars (2 units) $ 25 000 3. Cafeteria 7. Air conditioner(3 units) 6. Additional QCL equipment 8. c. Forklift 4. Quality Control Lab. 7. Technical training 2. Punchcard mashine $ 5 000 7. Fire detector system $ 3 000 TOTAL $ 112 500 e. Computer software $ 10 000 6. Supplementary Machines & Equipment: 1. Transformer 5. Work clothes $ 25 000 $ 15 000 $ 9 000 . Arranging the warehaus 4. It is negotiated to pay 50% at shipment and 50% with 6 Months L/C. Infirmary TOTAL $ 150 800 $ 15 000 $ 10 000 $ 80 000 $ 25 000 $ 50 000 $ 5 000 $ 335 000 f. Guard watches(3 units) $ 1 500 8. Computer hardware $ 18 000 5. Painting (12 000 sqm) 3. Expenditures for Human Resources: 1.The total purchase price of the production machines which are given in the machinery list section amounts to $ 1 580 000 (C&F price). Open area arrangement 6. Truck $ 20 000 4. Floor covering (15 080 sqm) 2. Crane system 3. Hand tools TOTAL $ $ $ $ $ $ $ 85 000 54 000 7 000 16 000 87 000 10 000 4 000 (Ready to use in the factory at present) $ 2 000 $ 265 000 d. Managerial training 3. Factory Building Maintenance: 1. Office furniture & decoration 5. Other Machines & Equipment: 1. i. The usage will decrease the inventory until the optimal level is reached. the capacity usage will be 85%.TOTAL g. Working capital investment TOTAL $ 4 725 000 $ 1 580 000 $ 265 000 $ 112 500 $ 335 000 $ 49 000 $ 436 000 $ 100 000 $ 2 590 000 $10 193 300 2. 5. Salary payments to locals 6. Legal consultancy 3. Total Initial Investment: 1. Unexpected expenditures 9. Maintenance will be made in the first two weeks of August. Fees to local consultants 2. Work-in-process 3. Misc. expenditures up to now TOTAL h. Expenditures for HR 7. Full capacity production is the processing of 200 000 lbs/week in three shifts. However. Machinery 3. Cash TOTAL $ 150 000 $ 30 000 $ 120 000 $ 40 000 $ 16 000 $ 80 000 $ 436 000 $ 2 090 000 $ 0 $ 300 000 $ 200 000 $ 2 590 000 (1 100 mt x $1900/mt) The level of raw materials are the portion of capital committed by the local partners and in the stocks of the company. Consultancy fee for US cooperation 4. Other Expenditures: $ 49 000 1. Factory building maintenance 6. . Other machine & eq. Building 2. Other Expenditures 8. The firm will work for 50 weeks/year and there will be two weeks of machine maintenance period. Raw materials (cotton) 2. the optimal level of inventory is lower and and calculated as $ 600 000. Finished goods (yarn) 4. Estimated Operational Revenues and Expenses: In first two quarters. After than the firm will reach its practical full capacity. Working Capital Investment: 1. Supplementary machine & eq 4. Financial consultancy 5. After the high quality raw material is exhausted (in 300 days). Weekly working hours of a worker is 45 hrs.Q $ 1 784 371 Total Raw material usage From the existing inventory $ 634 888 To be purchased ($ 1. There will be 50% extra payment for the work done in official holidays. like secretary.Raw cotton on hand is of Memphis origin.Q $ 1 784 371 $ 1 776 298 $ 2 046 347 $ 634 888 $ 632 016 $ 188 205 $ 1 149 483 $ 1 144 282 $ 1 858 142 $ $ $ 22 000 $ 64 905 48 345 $ $ 22 000 58 215 48 345 $ $ $ 36 000 63 845 48 345 .90/kg) b.35 which is $ 2. price is assumed to be $ 2. Direct and indirect labor cost per worker / month is $100 net. Management team consists of 7 managers. Direct labor force consists of 114 workers for three shifts. In order to penetrate to the market. It is planned to be mixed with the lower grade short fiber cotton with the price of $0. the lower grade cotton will be used in production. weekends and night shifts.80/lb. According to the information given by the ex-owner of the machines.end production.Q 1 002 456 932 284 2 703 624 2. This includes the workers in the weekend shifts. The process has 7% waste and amount of production is equal to 93% of the cotton processed.84/lb. $130 gross. middle lenght fiber. The other relevant cost will be given below a.94/lb) Therefore its price is relatively high for open.Q 997 920 928 066 2 691 391 4.97/kg. for office jobs. Estimated Operational Expenses: 1.Q 3.Q 4. A mixture of high grade 1/3 and low grade 2/3. the yearly maintenance cost is 8% of the machinery value. The firm needs 10 white collar personnel.90/kg. functional departmental jobs etc.Q 1 002 456 932 284 2 703 624 3. the average cost will be $0. Estimated Operational Revenues: According to the figures taken from USA and European markets. the selling price of 1 lb.Q 1 179 360 1 096 805 3 180 735 Amount of cotton processed(kg) Yarn produced (kg) Sales revenue ($ 2. of 18/1 yarn is $ 1. 1. The indirect labor force consists of 26 workers of different jobs.80/kg) $ 1 149 483 Insurance & freight Direct Labor Wages $ $ $ 22 000 64 110 48 345 2. (The cost of this kind of cotton is $0. Estimated General & Administrative Expenses: 1.Q Management salaries $ 54 000 $ 54 000 Employee salaries (gross) Office expences Communication expenses Transportation expenses Local International Marketing & promotion exp. Accomodation expenses Local International Food for all personnel $ $ $ $ $ $ $ $ $ $ $ 10 500 5 000 6 000 19 500 3 000 16 500 40 000 8 000 3 000 5 000 10 000 $ $ $ $ $ $ $ $ $ $ $ 10 500 1 000 6 000 19 500 3 000 16 500 25 000 8 000 3 000 5 000 10 000 3.Q 2.Q 54 000 10 500 1 000 6 000 19 500 3 000 16 500 25 000 8 000 3 000 5 000 10 000 .Night shift Holidays & weekends Indirect Labor Wages Night shift Holidays & weekends Packaging Repairs & maintenance Electricity Steam & water Total Operating Costs $ $ $ $ $ $ $ $ $ $ 8 060 7 705 14 618 11 023 1 838 1 757 22 000 31 600 11 765 2 200 $ $ $ $ $ $ $ $ $ $ 8 060 8 500 14 799 11 023 1 838 1 938 22 000 31 600 11 765 2 200 $ $ $ $ $ $ $ $ $ $ 4 030 5 840 13 274 11 023 919 1 332 22 000 31 600 9 955 1 160 $ $ $ $ $ $ $ $ $ $ 8 060 7 440 14 557 11 023 1 838 1 696 25 000 31 600 11 765 2 200 $ 1 952 664 $ 1 953 640 $ 1 934 502 $ 2 231 314 c.Q $ 54 000 $ $ $ $ $ $ $ $ $ $ $ 10 500 1 000 6 000 19 500 3 000 16 500 25 000 8 000 3 000 5 000 7 500 $ $ $ $ $ $ $ $ $ $ $ $ 4. First Three Years' Net Income Projections: In the first year of activity. expenses Net Income 1. Starting from the second year. $ 10 000 $ 10 000 $ 10 000 $ 10 000 $ 163 000 $ 144 000 $ 141 500 $ 144 000 3. expenses Net income 4.& Adm.Q $ 3 180 735 $ 2 231 314 $ 949 421 $ 144 000 $ 805 421 b. There is $ 2 090 000 worth of high quality cotton in the warehouse which is going to be used with lower grade cotton until the fourth quarter.Q $ 2 703 624 $ 1 952 664 $ 750 960 $ 163 000 $ 587 960 2. 1.& Adm.Year $ 12 655 443 $ 8 515 028 $ 4 140 415 $ 651 750 $ 3 488 665 Sales revenue Total operating expenses Operating income Gen.00/kg. & Adm. Exp. Due to increasing activity level. The proposed increase in general and administrative expenses is 10%. certain positions will be opened and number of personnel will increase. prices of yarn is kept below the market level in order to penetrate the market.Year $ 11 279 374 $ 8 072 120 $ 3 207 254 $ 592 500 $ 2 614 754 2.Q $ 2 691 391 $ 1 934 502 $ 756 889 $ 141 500 $ 615 389 4. but only an allowance from net income for tax purposes and for recording sake.90/kg. The price of yarn will be $3. Year $ 12 655 443 $ 8 515 028 $ 4 140 415 $ 651 750 $ 3 488 665 3. it is not a cash outlay. Apart from these two investment items. Therefore. for the second and third years.Unexpected expenditures Total Gen. The firm has 4 years of tax holiday and there is no need to show the depreciation. Yearly depreciation charges are not shown in calculations.) Total operating expenses Operating income Gen. general and administrative expenses from sales revenue directly gives the net income. a part of this investment is already completed. The building is ready to use. First Year's Net Income: Sales revenue ($ 2. However. The figure calculated by deducting total operating expenses. prices are increased gradually to increase the profitability. Estimated Net Income: a.Q $ 2 703 624 $ 1 953 640 $ 749 984 $ 144 000 $ 605 984 3. The reason is that. Amount of Financing Required: Total initial investment is $ 10 193 300. the rest has to be financed externally. . after maintenance. Therefore. After then. but needs additional equipment worth of $ 4 000. The first quarters purchase should also be financed externally.& eq.& eq. Total Financing Needed: Machinary Supplementary mach. Machinery will be bought 50% cash and with 50% 6 months L/C. a. However. the cash flows will be adequate to meet the purchasing requirement.The lower grade cotton will be purchased starting from the first quarter.Q Minimum cash OCT 95 $ 790 000 $ 255 000 $ 37 500 $ 175 800 $ 15 000 $ 175 000 NOV 95 DEC 95 JAN 96 $ 790 000 $ $ $ 80 000 10 000 120 000 $ $ $ $ 75 000 80 000 24 000 135 000 $ 100 000 $ 1 150 000 $ 200 000 . is ready. Factory building maint. Other machine & equipment Factory building maintenance Expenditures for HR Other expenditures Unexpected expenditures Purchase of cotton Minimum cash TOTAL $ 1 580 000 $ 255 000 $ 112 500 $ 335 800 $ 49 000 $ 436 000 $ 100 000 $ 1 150 000 $ 200 000 $ 4 218 300 b. mach. Purchasing cotton for 1. these funds are needed in a period of time starting from September 1995 until the beginning of the first quarter. The periodical financing needs are given below: EXPLANATION Purchase of machinery Supp. Expenditures for HR Other expenditures Unexpected exp. Breakdown of Funds Required: Total of $ 4 218 300 is needed to start up the business.&eq. The quality control lab. Other mach. ( $3 554 751) d. 31. 1999 June 30. the sales revenues are immediately begin and cover the costs of production as well as general and administrative expenses. 1998 Dec. expenses Total disbusements Net cash position Beginning cash balance Cumulative cash (Minimum cash) Cash surplus (deficit) 1. the generated funds can meet the purchasing requirement.Q $ 2 691 391 $ 1 144 282 $ 158 204 $ 141 500 $ 1 443 986 $ 1 247 405 $ 2 663 720 $ 3 911 125 $ 200 000 $ 3 711 125 4. 2000 e. Starting from the second quarter. 1998 June 30.Q $ 2 703 624 $ 1 149 483 $ 160 269 $ 144 000 $ 1 462 752 $ 1 240 872 $ 1 422 848 $ 2 663 720 $ 200 000 $ 2 463 720 3. 31. 1999 Dec. Profitability of the Project: . As the production starts with the first quarter of 1996. Cumulative Cash Flows: The table of Cumulative Cash Flows shows the accumulation of funds in the first year.Q $ 2 703 624 $ 1 149 483 $ 168 203 $ 163 000 $ 1 488 776 $ 1 222 848 $ 200 000 $ 1 422 848 $ 200 000 $ 1 222 848 2. 31.Total Grand Total $ 1 448 300 $ 216 000 $ 314 000 $ 2 240 000 $ 4 218 300 c. The repayment according to the cash flows generated from operations is planned as follows: Amount $ 1 150 000 510 000 510 000 510 000 510 000 510 000 518 300 Repayment time Dec. we get the accumulated cash as a result of the operations. 2000 Dec. & adm.Q $ 3 180 735 $ 1 858 142 $ 184 067 $ 144 000 $ 2 187 109 $ 993 626 $ 3 911 125 $ 4 904 751 $ 200 000 $ 4 704 751 If we subtract initial inventory financing from the cumulative cash at the end of the year. At the end of the first year. Operational cash flows : Sales revenue (collections) Disbursements Raw material purchases Other operational costs Gen. the external inventory financing is not necessary and that portion can be payed back. Only the first quarter's inventory purchase has to be financed externally. Repayment of Funds: The total amount that is planned to be financed externally is equal to $ 4 218 300. 1997 June 30. 31. Incentives of Albanian Government in the privatization period. 2. The project's profitability is calculated on IRR basis. In the first 4 years. The low labor cost is the main advantage as far as the operational costs are concerned.72/ hr). the relatively high gross margin and reasonable periodic expenditures make up a considerable EBIT. The poor performance of textile industry in Albania due to lack of advanced technology. there is an incentive of tax holiday. since there is no interest and no tax accrued for the first years.3% of Europe's up-dated open-end rotor capacity if the former Soviet Union's out-of-date capacity is excluded. Also the transportation and collection of sales revenues will take less time. After then. Besides these advantages: 1. which compares very poorly with Albancott's profitability. as an American investment in Albania. The net income figures calculated in section 3b above is taken as the yearly net cash benefits arising from the project. CONCLUSION: Albancott project is a JV with Albanian Government and receive their full support. 3.As seen from the cost and revenue figures. The machinery found for this purpose of that sort is not easy to find. Also. The yearly cash benefits used to calculate IRR are: Year 1 Years 2-4 Years 5-10 $ 2 614 754 3 488 655 2 790 924 Initial investment taken as (-) cash benefit is: $10 193 300 IRR= 27% A similar factory operates with 5-8% profitability in USA. G. Considerably low labor cost ($0. New machines are much more expensive and delivery lead times are about a year. The high profitability of the investment (27%). American Consulate in Tiran pays close attention. it is also firm's net income. entrepreneurship and financial sources locally. therefore it is advantageous to keep low yarn inventory. they spend their best effort to speed up the project. The economic life of the project is assumed as 10 years. Albania is very close to EC market which is one of the major markets we direct our yarn production. but fairly qualified and educated. The project constitutes 0. better utilization of funds will be achieved. The final product (yarn) has higher cost than cotton. the tax rate is 20%. . fiber mix. planner and assistant manufacturing expert on my staff. (Directed plant from 78% to 97% weaving efficiency. I utilized the staff services of the company to accomplish objectives. Of course. 100% filament warp. printcloth. 100% cotton. Responsibilities: Start up Clemson Yarn and staff plant.843 41 02 PERSONAL: Age:60. Health is excellent. It was my responsibility to coordinate the sale of the fabric with a Vice President of Merchandising who was located at the New York office. industrial fabrics.six plants. There were approximately 4300 hourly paid employees who produced 180 000 000 yards of fabric annually.Owned and operated by Wm.C. . Woolside Division of Dan River Inc. Popp of Popp Yarn Corporation. A. Hatboro. 100% filament filling.are the main reasons to undertake this project. Liberty South Carolina 29 657 USA TEL: 803. Also operate and manage it for Mr. **1971-1978 Vice President of Manufacturing. Inn. Attitude surveys indicate employee morale as good. EDUCATION: Furman University Industrial Engineering BUSINESS EXPERIENCE: ** 1989-1994 Retired from General Management Post. Greenville. My responsibility was to direct the activities at six plants located in Fountain. Lowenstein. **1978-1983 General Manager of Huntsville Manufacturing Company. Opelika Manufacturing Corporation. from print or ROM quality to 95% plain shades and from no grading system to 40 point system.flannel. Products. I also had a chemist. These plants manufacture woven fabrics. It was also my responsibility to explore new product areas. Basley and Liberty South Carolina. The wage payroll for these six plants was appoximately $23 million annually. 4000 to 1654 looms . Themanager reported to me.P. **1968-1971 Group Manager of Woolside's Cotton Blended operations. I made frequent trips to call upon old customers and potentially new customers. There was a management team located at each manufacturing unit.Woolside. in addition. group personnel director. ** 1987-1988 Vice President of Clemson Yarn Corporation. **1967-1968 Assistant Division Manager of Plain Goods Division . the fabrics may be anything from Cam to Dobby Looms and Industrial to Apparel and use. Belmont Huntage Belmont N. **1984-1987 Vice President Mill Division. polyester/cotton.Mr. Married.1700 to 600 employees. Wm A Popp. has four children.) Directed plant from a militant union strike to a non-union status. CV OF KEY PERSONNEL FRED STANLEY MAHAFFEY CITIZENSHIP: American RESIDENCE: 713 Ruhamah Rd. Veteran of World War II. Buocon **1988-1989 V. John D. Virgil Simpson.Retired and lives in Greenville. 2. Hollingsworth . REFERENCES: 1.P. presently with J. Boy Scouts of America. **1960*1962 Worked out of a central office on special production problems and machinery research. Vice President of Woolside Delta. which included specifications. OUTSIDE ACTIVITIES AND INTERESTS: *Trustee of North Greenville Junior Collage * Board of Directors . 3. **1950-1960 Industrial engineer .Have worked on many yarn projects with John D. Lowenstein. Jim Smith .Woolside Division. **1962-1964 Assistant Manager of Beattle Plant. Rotary Club. Huntsville.Formerly M. Harold Mason Sr.Woolside Mills and Norris Cotton Mills. Dan River Mills . . I formerly reported to Mr.Former President of Woolside Div. cotton and synthetic ( this was a part of a training program). Woolside Division.Plant Saco Lowell 4. This plant has 56 000 spindles and 1152 looms. *Holder of Silver Beaver Award. * Former member of Greenville County Mental Health Commission * Former President of Greenville Textile Club. Assisted in the initial start-up of this plant. Hollingsworth.Stevens 5.**1964-1967 Beattle Plant . methods and standards and staffing. Mason. *Director. SC. machinery erection. Monnie Broome . .President of Southern Textile Association * President of Blue Ridge Council.