Feasibility Study

» By:

– Kory Lylyk

– Daniel Hutton

– Daniel Ferre

– Anthony Renneberg

Prairie Pulse Processing

Introduction

» Prairie Pulse Processing will be:– purchasing raw products from local producers

– splitting the lentils and peas into a edible human product.

» Mission Statement

– To provide a consistent high quality product for East Indian human consumption markets. To develop a competitive alternative market for Saskatchewan pulse producers.

Operations Plan

» Prairie Pulse Processing will be located:– R.M. 370 - Humboldt– Approx. 5 Miles west on Highway #5– Adjacent to the existing AgriCore United

Facility– CNR loading at Saskatoon, SK.

Location

Humboldtt

Site PlanUnloading Scale

Ra

w S

tora

ge

Offic

e B

uild

ing

Feedmill Loading

Loading Dock

Organizational Structure

Organizational Structure

Marketing Manager(Grain Buyer)

Board of Directors(3 Foreign and 4 Canadian)

GGeenneerraall MMaannaaggeerr

Processing Plant Staff

(1)Shipper/Receiver (2) Baggers

(2) Forklift Operators

MMaaiinntteennaannccee MMiillllwwrriigghhtt)) ((22))

Secretary

(2)Foreman

Clean Up Staff(1)

Production Flow Chart

Cleaner Destoner

Gravity Table

Dehusker

Polisher

Sizer

Splitter

Bagger

Storage (Bulk)

Warehouse

Raw storage Stone storage

LoadingDock

Finished Storage

Screenings

Operating Expense

Table 3.4 Operating Expenses for 2004Description Cost / $ Year Source

Telephone 7,200 SasktelSalaries 165,000 Financial ProjectionsBenefits 20,048 Financial ProjectionsMarketing 32,500 Marketing PlanAdministration 37,741 Financial ProjectionsTransportation 1,984,283 CN RailwayTrucking Premiums 591,000 Kooistra TruckingInsurance 12,000 Hycerenko Insurance AgenciesMiscellaneous 3,000 EstimateInterest LT Debt 284,700 Advantage CU

Summary of Financial Statements

Year 2004 2005 2006 2007 2008Sales 16,679,775$ 20,616,202$ 21,234,688$ 21,871,729$ 22,527,880$ COGS 11,366,549$ 15,169,776$ 15,583,083$ 15,858,954$ 16,181,181$ Gross Profit 5,313,226$ 5,448,061$ 5,687,355$ 6,070,341$ 6,410,016$ Expenses 3,137,471$ 3,733,939$ 3,816,911$ 3,901,422$ 3,987,448$

Income Tax 663,321$ 516,336$ 566,109$ 661,144$ 741,906$ Net Income 1,512,435$ 1,197,786$ 1,304,335$ 1,507,775$ 1,680,662$

Net Present Value (NPV) 3,317,618Expected Rate of Return on Equity Investment (IRR) 37.3%

$ 2,168,919 $ 2,422,568

Net Cash Flow to Equity

$ 315,430 $ 1,364,567 $ 872,664 $ 229,979 $ 70,064

$ 2,175,756 $ 1,714,122 Net Income Before Taxes

$ 1,870,444

Capital Expenditures

Table 3.5 Capital ExpensesDescription Cost Dimensions/Quantity/Source

Asx115 OC GFG aspirator Northland SuperiorNS-FB24 FR Feed Box Northland SuperiorCamas SV4-1 Density Separator Northland SuperiorForsberg Model G3 Destoner Breakdown Northland SuperiorOliver Model 160 gravity table Not Northland SuperiorNS-HC56 OC FR Aspirator Available Northland SuperiorNS-22x120-P22 Rotary Cleaner Northland SuperiorNS-HC56 CC GFG Aspirator Northland SuperiorNS-22x120-P22 Rotary Cleaner Northland SuperiorNS 4 multi cylinder length separators Northland SuperiorSite Construction 120,000 Hadiken Concrete & SupplyLand 20,000 R.M HumboldtBuilding 280,000 Boychuk BuildersBobcat 30,000 Kelsey Farm EquipmentUtilities Installation 100,000 Crown Corp'sStorage Bins 200,000 Federated Coop100' Scale 100,000 Northland SuperiorOffice Expense 10,000 Staples

Total Value 6,300,000

Human Resources

Staff Position General Marketing Secretary/ Foreman Shipper/ Millwright Forklift Baggers Cleanup

Manager Manager Accountant Receiver Operators

Number 1 1 1 2 1 2 2 2 1Annual Salary 65,000 55,000 45,000 80,000 35,000 100,000 50,000 50,000 25,000E.I. (3.08%) 2,002 1,694 1,386 2,464 1,078 3,080 1,540 1,540 770CPP (4.07%) 2,646 2,239 1,832 3,256 1,425 4,070 2,035 2,035 1,018Comp. (5.0%) 3,250 2,750 2,250 4,000 1,750 5,000 2,500 2,500 1,250

Total Cost 72,898 61,683 50,468 89,720 39,253 112,150 56,075 56,075 28,038

Line of Authority

Marketing Manager(Grain Buyer)

GGeenneerraall MMaannaaggeerr

Processing Plant Staff

(1)Shipper/Receiver (2) Baggers

(2) Forklift Operators

MMaaiinntteennaannccee MMiillllwwrriigghhtt)) ((22))

Secretary

(2)Foreman

Clean Up Staff(1)

Marketing

» Marketing of the final product will be minimal due to:– One company purchasing all edible finished

product.– Low volume of screenings available for sale.

Supply of Unprocessed Product

» Lentils– In 2001 there was 798,392 tonnes produced in

Sask.

» Green and Yellow Peas– In 2001 there was 2,403,668 tonnes produced

in Sask.

Location of Production

» Of the pulse production required:– Lentils 1% of production in Sask.– Primarily sourced from Southern Sask.– Peas less than 1% of production in Sask.– Sourced from nearby districts:

• Districts 8A, 8B, 5B and 6A

Direct Competitors

» Belle Pulse - Bellvue (Peas, Lentils)

» Best Cooking Pulses - Rowatt (Peas)

» Canadian Select Grains - Eston (Chickpeas)

» Darlaine Natural Foods - Radisson (Peas)

» Parkland Pulse Grain - North Battleford (Peas)

» Walker Seeds - Tisdale (Peas)

Marketing Budget

Advertising Ads 7,500.00$ Inserts 500.00$ Total Advertising 8,000.00$

Promotion and Development Web Page 3,500.00$ Travel Expenses 20,000.00$ Trade Show 1,000.00$ Total Promotion 24,500.00$

Total Marketing Expenses 32,500.00$

SWOT Chart

Strengths Weaknesses48% of Foreign FundingLarge supply of raw productGuaranteed Purchase of Finished ProductState of the Art Facility

High cash conversion cycleHigh start up costsNo control over finished product pricingDependency of foreign customers

Opportunities ThreatsOther potential customers (Europe, MiddleEast)Ability to process other productsPotential to expand

WeatherCompetitionVariation of commodity pricesSubstitutes for Production

Financial

Lentils Break Even

$-

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

1 2 3 4 5 6 7 8 9 10

Year

$/to

nn

e Economic

Net Income

Cash Flow

Financial

Peas Break Even

$-

$100

$200

$300

$400

$500

$600

$700

1 2 3 4 5 6 7 8 9 10

Year

$/to

nn

e Economic

Net Income

Cash Flow

Net Income

Net Income

0

500

1000

1500

2000

2500

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

Year

$ /

1000

Net Income After Tax

Ratios

2004 2008 2013Liquidity

Current Ratio 8% 12% 12%Quick Ratio 6% 10% 9%

SolvencyDebt Ratio 44% 30% 9%

ProfitabilityGross Profit Ratio 32% 28% 30%Net Profit Ratio 9% 7% 9%

Financial Ratios

Critical Variables

Variable Level of Importance (1,2,3)Split Lentils Sold (t) 2Split Peas Sold (t) 3Screenings Sold (t) 3Export lentil price 1Export pea price 1Screenings price 2Transportation cost 2Pea purchase price 1Lentil purchase price 1Trucking premiums 3