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BAGASSE PROCESSING FACTORY INVESTMENT
PROJECT FOR EXPORT

CONTENT
I. INVESTMENT NEEDS AND OBJECTIVES OF THE PROJECT

1. The need of investment
2. Objectives of the project
II. SCALE AND MODE OF INVESTMENT
1. Project target
2. Investment mode
3. Scale and capacity
III. PRODUCTION PRPOGRAM AND FACTORS
1. Production procedures
2. Satisfactory factors

3. Main production equipment
IV. FINANCIAL ANALYSIS
EVALUATION

AND

INVESTMENT

EFECTIVENESS

1. Total investment capital, resources and own ability

2. Economic- financial effectiveness analysis

1 | Page

V. CONCLUSION AND RECOMMENDATION

2 | Page


Part 1: INVESTMENT NEEDS AND OBJECTIVES OF THE PROJECT
1.
Natural - economic - social conditions of Phu Yen Province have advantages for
bagasse processing to export:
Phu Yen is a coastal province locating in the South Central Vietnam; the province’s natural
area is 5,060 km2. Phu Yen province has highway and railway No.1A and National Road
No.25 connecting with Gia Lai as well as road No.29 connecting with Dac Lac province.
The province has Vung Ro deep-water port, Tuy Hoa airport. Phu Yen is considered as
grain elevator as well as sugar cane and cassava center for commodity production. Forests
and forest land accounts for ¾ total land of the province;
Currently, Phu Yen province has two cane sugar factories namely: Son Hoa Cane Sugar
Factory and Dong Xuan Cane Sugar factory. Those factories have legal investment policy
and reasonable product consumption that encourage people to invest sugarcane and
intensive cultivation by the application of mechanization in sugarcane fields to improve
productivity, abundant raw materials. In the 2012-2013 production plan: The sugar
factories will process 1.24 million tons sugar cane, increasing 12.2%, the production
output is 114 300 tons, an increase of 26.2% over the previous year;
The province have high quantity of bagassee, however, it so far has been wasted due to no
bagasse processing factory. On the other hand, the demand for finished products of
bagasse is great in many countries, especially Japan and South Korea. According to the
Japanese partner, Japan spend up to $ 10 billion to export foods for dairy and feed cattle
while Vietnam's exports is very small with total value is less than 1% of 10 billion USD.
2.

Project investment objective:
The project aims to develop one bagasse processing factory with reasonable scale.

The factory will produce goods in compliance with exporting conditions to countries with
high bagasse demand such as: Britain, Canada, Taiwan, Korea, in particular in great
demand markets like Japan. The company also has some partners wishing to import huge
bagasse for planting mushroom, cropping and animal feed;
The factory will help to enhance capacity of processing waste resources from other
factories in the province as well as neighboring provinces, contributing to poverty
reduction and industrialization and modernization. It also creates more jobs with stable
3 | Page


incomes for local people, increase sales and revenue from export activities for the
province.
The factory will create a certain income for investors, increase profitability and earn
foreign exchange for the country, improve environmental protection when collecting and
processing waste.

Part 2: SCALE AND MODE OF INVESTMENT
1. The project’s objectives: The project will construct a bagasse processing factory with
reasonable scale to make products for export standard, including bagasse wood items,
bagasse packing for export. This will create reasonable income for investors, increase
revenue, bring foreign exchange to the country and increase revenue for Phu Yen province.
a. Type of investment:
-

Investment mode: direct investment. The company provide their own fund to
directly involved in the business operations and management;

-

Investment form: construction of a new factory100%;

-

Technology: includes imported machines and domestic machines;

-

Employers: local workers.

b. The investment scale and capacity:
-

Project area: 15,000 m2;

-

Capacity: 36,000 tons / year;

-

Total investment: 53,228,208,000 VND;

-

Total employees: 140.

Part 3: PRODUCTION PRPOGRAM AND FACTORS
I.

Production procedure:

4 | Page


1. Products: Products of the project are including: packaged bagasse and bagasse wood.
- Packaged bagasse products: these are products in the form of block bagasse,
bagasse wood. Bagasse is packed with 30kg in weight and these are mainly exported to
Japanese and Korea. Bagasse wood products are consumed by domestic retailers.

2. Production season and production plan
a.

Production season: Bagasse production for export is conducted in whole

year; however, the company must have planned to save raw material from November –
June where sugar cane/raw material is limited. Based on the actual situation, the
production season of the factory is 10 months / year
b.

Production plan: Based on the consumption situation, the ability to

purchase local materials, the production of mentioned products are expected as follows:
Product
Export products (80%)
Packages bagasse (90%)
Bagasse wood

Domestic product (20%)
Bagasse wood
Total
II.

1
20,160
18,144
2,016
5,040
5,040
25,200

2
23,040
20,736
2,304
5,760
5,760
28,800

Sustainability
25,920
23,328
2,592
6,480
6,480
32,400

Satisfactory Factors:

1.

Market consumption: as stated above, the demand for packaged bagasse

products now and in the coming years are becoming higher and higher as soil for
mushroom cultivation and processing product as animal feed.
5 | Page


Packaged bagasse products are to export which are favored products of many
countries in the world, especially Japan, Korea and Taiwan. Over the years, this item has
strong advantages and competition while Phu Yen province has high supply of raw
materials with good quality.
Therefore, the market of the project is determined for short phase as the traditional
markets: Japan, Taiwan, and South Korea. Later, the company will continue to expand into
the European market, North America. This is a large market can consume a variety of
products made by the company. The company will take all efforts to follow and implement
ISO production program which is an internationally recognized safety qualification and
management to provide products to the market.
To continue maintaining and expanding the market of projects, the company has
following solutions:
•

Form responsible staffs taking in charge of the export market and respond to
the directors for export business;

•

Continue creating measures to manage product quality to meet the
requirements of high quality for the export market;

•

Have mechanisms for pro-active export in compliance with customer
requirements (in terms of price, delivery time, shipping procedures).

2. Demand for annual raw materials of the project
T
T

The
Material

Unit

consumpti
on

I Export product
1

Packaged

bagasse
2 Bagasse wood

Total (I+II)

2nd year

50,400

57,600

64,800

Stable year

2.5

45,360

51,840

58,320

Ton

2.5

5,040

5,760

6,480

12600

14400

16200

12600

14400

16200

63,000

72,000

81,000

products
1 Bagasse wood

1st year

Ton

I Domestic
I

Demand

Ton

2.5

6 | Page


Take into consideration between the production of sugar companies and material
needs of the factory showed that the material is sufficient for the factory to operate at full
capacity (with current expected scale of investment). Furthermore, the factory also has
ability to reach out to find material in the other neighboring provinces.
III. Main production equipment: The consumer market for products of this project is the
traditional markets namely: Japan, Korea, and Taiwan with high quality products, suitable
price. Later, the company will expand to the U.S market. Therefore, the company aim to
invest into high-tech equipment, saving investment fund and processing high quality
products meeting export standards with lower price, increasing market competitiveness are
crucial factors that deciding success of the company.
In general, the company will select processing equipment lines as following:
equipment assembly in Vietnam and primarily exported from Japan, Germany, China
which have advance in high technology in processing and manufacturing to meet the strict
requirements processing of export products.
The total value of the equipment manufacturing for the project: 22,770,000,000
VND including main equipment.
The company aim to have stable production in the early stages of the project. The
factory can sully 36,000 tons of products to the market annually (300 working days in year
and 3 shifts/day)
The average real capacity based on product structure of the project in the first year
is 70% and subsequent years will increase the capacity based on the actual demand.

Part 4: FINANCIAL ANALYSIS AND INVESTMENT EFFECTIVENESS
EVALUATION
I. Total investment scale
1/ Total investment of the project: 52.728.208 billion VND (Fifty-two billion,
seven hundred and twenty eight million, and two hundred and eight thousand Dong

only).
7 | Page


In which:
- Construction cost: 19,635,000,000 dong.
- Equipment costs: 22,770,000,000 dong.
- Other expenses: 10,823,208,000 dong.
2. Estimated resources and ability to respond capital:
No
1
2

Criteria
Capital of the investors
VDB Loan
Total

Value (Dong)
15,968,462,400
37,259,745,600
53,228,208,000

Rate
(%)
30%
70%
100%

a/ Capital of the investors: Vinh An Company has started business activities in

1995 mainly in the field of commercial paper industry, beef, copra export …etc. So, the
company has strong experience in export and management. With a long operation period,
the company has accumulated investment capital to this project include: a portion of
machinery and equipment, the transfer of land use rights ... so with 30% of equity
participating , the company will commit to fully participate in the project with its financial
resources
b/ VDB loan: the expected loan is with 70% of total investment of the project in
accordance with the laws and regulations in the field of investment encouragement. The
project investor hope to have loan from VDB
II. Analysis of economic – financial efficiency of project:
1. Calculation methods
-

Depreciation of fixed assets is in compliance with Decision No.206/2003/QD-

BTC December 12, 2003 of the Ministry of Finance promulgated the Regulation on
management, use and depreciation of fixed assets. The depreciation of fixed assets formed
after the annual investment of the project:
+ The construction part: 20 year depreciation. The average depreciation for 01 years
is: 935 million VND.

8 | Page


+ The device: 10-year depreciation period. The 01 year average depreciation:
2,070,000,000 VND.
2. Product price:
Rating for 1

T

Material

No

Unit

ton of

Unit price

In cash

product
2.5

30,000

75,000

1

200,000

200,000

1

Buy bagasse (1 ton = 2.5 tons of fresh)

2

Transport

Ton
Ton

3

Dry

Ton

1

200,000

200,000

4

Crushing

Ton

1

200,000

200,000

5

Bock

Ton

1

200,000

200,000

Kw

40

3,000

120,000

Dong

1

65,000

65,000
1,060,000

Electricity consumption (40kw x 3000
6
7

Dong)
Direct management cost
Total

9 | Page


3. Business Results:
Price
T

Content

T

increas

0 year

ing

1st year

2nd year

3rd year

4th year

5th year

6th year

7th year

rate
1

2

3

4

5

6

7

70%

80%

90%

90%

80%

80%

80%

-

38,896,200,000
(34,583,723,280

44,452,800,000

50,009,400,000

50,009,400,000
(42,965,838,315

44,452,800,000

44,452,800,000

44,452,800,000

-

)
(28,047,600,000

(38,748,859,920)

(42,916,245,660)

)
(36,061,200,000

(38,897,755,963)

(38,952,431,865)

(40,006,422,362)

Operating capacity
5
I
I
I

Revenue

%

Operation cost
5
1

Transportation costs

3

Depreciation expenses

4

Reparations cost

5

Regular maintenance cost
Stationery, water, electricity

6 costs

%

)

(32,054,400,000)

(36,061,200,000)

)

(32,054,400,000)

(32,054,400,000)

(32,054,400,000)

(4,147,040,000)

(4,147,040,000)

(4,147,040,000)

(4,147,040,000)

(4,147,040,000)

(4,147,040,000)

(5,124,080,000)

(414,000,000)

(414,000,000)

(414,000,000)

(414,000,000)

(414,000,000)

(414,000,000)

(414,000,000)

(187,000,000)

(187,000,000)

(187,000,000)

(187,000,000)

(187,000,000)

(187,000,000)

(187,000,000)

(252,000,000)

(264,600,000)

(277,830,000)

(291,721,500)

(306,307,575)

(321,622,954)

(337,704,101)

5
%
5

7

Salary

(630,000,000)

(661,500,000)

(694,575,000)

(729,303,750)

(765,768,938)

(804,057,384)

(844,260,254)

8

Marketing cost

(388,962,000)

(444,528,000)

(500,094,000)

(500,094,000)

(444,528,000)

(444,528,000)

(444,528,000)

9
1

Management cost

(388,962,000)

(444,528,000)

(500,094,000)

(500,094,000)

(444,528,000)

(444,528,000)

(444,528,000)

Contingency cost

(128,159,280)

(131,263,920)

(134,412,660)

(135,385,065)

(134,183,450)

(135,255,527)

(155,922,007)

VAT

(449,316,065)

(578,676,371)

(707,975,395)

(706,624,130)

(574,619,361)

(573,129,593)

(480,967,081)

1

Value added tax input

3,536,018,182

4,041,163,636
3,462,

4,546,309,091

4,546,309,091

4,041,163,636

4,041,163,636

4,041,163,636

2
I

Value added tax output

3,086,702,116

487,265

3,838,333,696

3,839,684,960

3,466,544,275

3,468,034,044

3,560,196,555

0

%

I
II

V

Profit and Loss
Earnings before interest and

5,125,

1 taxes

(1,210,941,73

3,863,160,655

263,709
(4,480,

6,385,178,945

6,336,937,555

4,980,424,676

4,927,238,542

3,965,410,557

2

Interest Payment

2)
(1,210,941,73

(2,421,883,464)

484,408)
644,77

(3,511,731,023)

(2,542,977,637)

(1,634,771,338)

(666,017,953)

-

3
4

Profit before tax
Corporate Income Tax

2)
-

1,441,277,191
(360,319,298)

9,301
(161,1

2,873,447,923
(718,361,981)

3,793,959,917
(948,489,979)

3,345,653,338
(836,413,334)

4,261,220,590
(1,065,305,147)

3,965,410,557
(991,352,639)

10 | Page


94,825)
483,58

(1,210,941,73
5

Net profit

2)

1,080,957,893

4,476

2,155,085,942

2,845,469,938

2,509,240,003

3,195,915,442

2,974,057,918

11 | Page

4. Debt Balance Sheet:
S

Criteria

No

0

1

2

3

4

5

6

7

I

Source of Payment

(1,210,941,732)

4,903,710,525

4,485,549,133

5,655,600,159

6,138,868,957

5,903,508,002

6,384,180,810

7,205,920,542
5,124,080,

1

Depreciation (100%)

-

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

000
2,081,840,

2
I

Net gains (70%)
Cumulative payment

(1,210,941,732)

756,670,525

338,509,133

1,508,560,159

1,991,828,957

1,756,468,002
25,876,295,04

2,237,140,810
32,260,475,85

542
39,466,39

source

(1,210,941,732)

3,692,768,793

8,178,317,926

13,833,918,085

19,972,787,042

4

4

Payment demand

-

-

7,451,949,120

7,451,949,120

7,451,949,120

7,451,949,120

18,424,345,92

7,451,949,120
24,808,526,73

Balance (II)-(III)

(1,210,941,732)

3,692,768,793

726,368,806

6,381,968,965

12,520,837,922

4

4

I

6,396

I
II
I
V

39,466,396,
396

5. Working capital needs:
S

0

No

Criteria

year

1st year

2nd year

3rd year

4th year

5th year

6th year

7th year

691,674,466

774,977,198
5,812,328,98

858,324,913
6,437,436,84

859,316,766
6,444,875,74

777,955,119
5,834,663,39

779,048,637
5,842,864,78

800,128,447
6,000,963,35

1

Cash demand (2% of total cost)

2

Good in stock (15% of total cost)

5,187,558,492

8
4,445,280,00

9
5,000,940,00

7
5,000,940,00

4
4,445,280,00

0
4,445,280,00

4
4,445,280,00

3

Receivables from customers (10% of total revenue)

3,889,620,000

0
7,749,771,98

0
8,583,249,13

0
8,593,167,66

0
7,779,551,19

0
7,790,486,37

0
8,001,284,47

4

Receivables for sellers (20% total cost)

6,916,744,656

4
3,282,814,20

2
3,713,452,63

3
3,711,964,85

3
3,278,347,32

3
3,276,707,04

2
3,245,087,32

5

Capital demand (1+2+3-4)

2,852,108,302
2,852,108,30

2

0

1

1
(433,617,529

4

9

2

430,705,901

430,638,428

(1,487,780)

)

(1,640,277)

(31,619,715)

370,774,079

426,765,846

482,748,842

482,555,431

426,185,152

425,971,916

421,861,353

6 Capital change (+/-)
8 Interest

12 | Page


6. Financial criteria:
S

N

0 year

o
1

1st year

2nd year

3rd year

4th year

5th year

6th year

7th year

Criteria
Cash flow from
business contract
Revenue

-

38,896,200,000

44,452,800,000

50,009,400,000

50,009,400,000

44,452,800,000

44,452,800,000

44,452,800,000

Operation cost

-

(30,436,683,280)

(34,601,819,920)

(38,769,205,660)

(38,818,798,315)

(34,750,715,963)

(34,805,391,865)

(34,882,342,362)

VAT

-

(449,316,065)

(578,676,371)

(707,975,395)

(706,624,130)

(574,619,361)

(573,129,593)

(480,967,081)

CIT

-

(360,319,298)

(161,194,825)

(718,361,981)

(948,489,979)

(836,413,334)

(1,065,305,147)

(991,352,639)

13 | Page


2

Net cash flow
Cash flow from

-

7,649,881,357

9,111,108,884

9,813,856,965

9,535,487,575

8,291,051,341

8,008,973,395

8,098,137,918

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

5,124,080,000

investment contract
Investment cost
depreciation
Acquisition of fixed

(53,228,208,00
0)
-

341,964,000

assets
Net Cash flow
3

(53,228,208,00

0)

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

4,147,040,000

(7,451,949,120.000)

(7,451,949,120.000)

(7,451,949,120.000)

(7,451,949,120.000)

4,147,040,000

5,466,044,000

Cash flow from
financial contract
Own capital

15,968,462,400

Medium-term loan

37,259,745,600

-

-

-

Interest Payment

(1,210,941,732)

(2,421,883,464)

(4,480,484,408)

(3,511,731,023)

(2,542,977,637)

(1,634,771,338)

(666,017,953)

-

Net Cash flow
Opening balance of

52,017,266,268

(2,421,883,464)

(11,932,433,528)

(10,963,680,143)

(9,994,926,757)

(9,086,720,458)

(8,117,967,073)

-

(1,210,941,732)

8,164,096,161

9,489,811,516

12,487,028,338

16,174,629,156

19,526,000,040

23,564,046,362

(1,210,941,732)

9,375,037,893

1,325,715,356

2,997,216,822

3,687,600,818

3,351,370,883

4,038,046,322

13,564,181,918

(1,210,941,732)

8,164,096,161

9,489,811,516

12,487,028,338

16,174,629,156

19,526,000,040

23,564,046,362

37,128,228,280

11,796,921,357

13,258,148,884

13,960,896,965

13,682,527,575

12,438,091,341

12,156,013,395

13,564,181,918

0.90

0.85

0.81

0.79

0.76

0.75

0.73

10,631,980,830

11,243,841,204

11,339,772,015

10,747,831,062

9,506,727,691

9,078,758,504

9,929,562,361

(42,596,227,170)

(31,352,385,966)

(20,012,613,951)

(9,264,782,889)

241,944,802

9,320,703,306

19,250,265,668

Repayment of principal

cash
Cash generated during
the period
Ending balance of cash
Cash flow from
business and
investment contract
Conversion ratio
Present value of cash flow
Accumulation
The discount rate

(53,228,208,00
0)
1.00
(53,228,208,00
0)
(53,228,208,00
0)

0)

15%

NPV

596,183,818

IRR

15.37%

Return time

(7,451,949,120.00

5.97

14 | Page

-


7. Sensitivity analysis
Change of total investment:

-

P/A

Option 1
-10%

Option 2

Option 3
4%

NPV

596,183,818

5,406,871,537

596,183,818

(1,176,174,815)

IRR

15.37%

18.63%

15.37%

14.29%

Option 2
-3%
596,183,818
15.37%

Option 3
2%
596,183,818
15.37%

596,183,818

15.37%

Option 1
-10%
(13,386,151,595

Option 2
-5%
(5,962,269,146

Option 3

Option 4

)
6%

)
11.21%

Rate

Option 5
10%
-

)
13.27%

4,467,697,991

12%

Price change:

-

P/A
Rate
NPV
IRR

Option 4
7%
(2,948,533,449

596,183,818
15.37%

Option 1
-10%
596,183,818
15.37%

Option 4

Option 5
4.0%
596,183,818
15.37%

Quantity change:

P/A
Rate
NPV

596,183,818

IRR

15.37%

5%

Option 5
10.0%

596,183,818

6,839,164,790

13,082,145,762

15.37%

19.14%

23%

Two side survey:

Survey for
NPV change
Quantity
change

Price change
596,183,818
-10%
-5.0%
5.0%
10.0%

-10.0%
(13,386,151,595)
(13,386,151,595)
(13,386,151,595)
(13,386,151,595)
(13,386,151,595)

-5.0%
(5,962,269,146)
(5,962,269,146)
(5,962,269,146)
(5,962,269,146)
(5,962,269,146)

596,183,818
596,183,818
596,183,818

596,183,818
596,183,818

5.0%
6,839,164,790
6,839,164,790
6,839,164,790
6,839,164,790
6,839,164,790

8. Annual Social, economic effectiveness:
•

Create jobs for over 100 local employees;

•

Increased export volume of 5.5 million USD;

• Contribute to state budget of 500 million VND.
Comment: Through analysis of the economic efficiency of the project, it is
stated that the project have economic feasibility, highly profitable businesses, create
many new jobs for local workers
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I.

CONCLUSION AND RECOMMENDATION
Vinh An Bagasse Processing Factory Project is suitable with natural scale of

the local province. The project’s activities are effective, quick fund return and high
feasibility. The project implementation will exploit the abundant resource of the
province. The project also produces many products for export, thereby increasing the
revenue for the budget, contributing to achieve social economic goals of the province
as well as employment and income for many local laborers.
To deploy the project timely and put it into production, Vinh An Trade-Service
Co., Ltd would request following points:
1.

Phu Yen Management Board for Industrial Zones in Phu Yen province

and authorities should pay attention and verify relevant document relating to project
investment;
2.

Vietnam Development Bank – Phu Yen branch verifies and accepts or

issue guarantee verification for the company as basic to loan the fund for the
investment projects.
3.

Vinh An Trade-Service Co., Ltd commits to implement the project in

accordance with planed progress, the contents of the project and state regulations on
construction investment, production organization and management – do business with
high efficiency and full repayment.

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REFERENCES
1. Corporate Finance, Dr. Nguyen Van Dinh, September, 2013
2. Corporate Finance Curriculum, Dr. Luu Thi Huong, University of National
Economics, Banking Science, Education Publishing House, 2012 – 1st Edition
3. Fundamentals of Corporate Finance, Stephen A.Ross, Randolph W. Westerfield,
Bradford D.Jorrdan, 6th edition, The McGraw-Hill Companies, 2002

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