brennan mcarthur dan wilson amanda johnson andrew larson
TRANSCRIPT
Company Overview
founded in 1998 Recycles drywall into gypsum soil
amendment and drilling mud additive 137,000 tonne gypsum drywall on site
Industry Overview
Gypsum is a naturally occurring rock 20% Calcium, 15% sulfur by weight
12% of new drywall wasted Growing environmental concern
Potential uses: New drywall processing Agricultural fertilizer Industrial absorbent Drilling mud additive Composting “Natural” lawn food
Goals and Objectives
To market and sell bulk quantities of gypsum with as little production prep as possible
To sell 82,000 metric tonne of gypsum within 10 years
To create and sell a well branded product To raise general awareness of benefits and
uses of gypsum
Process Flow
DISC
TROMMEL SCREENER
1° PRODUCT
Waste
GASDRYER
HAMMER MILL
DOUBLE SCREEN
SCREENER
2º PRODUCTOVERHEAD
HOPPER
BAG
3 tonne/hour Take Moisture
Coarser product for farmers
Fine Product for Oil Industry
Capital Budget
Description Cost (Can $) SourceLand 0Cover All Storage (includes construction) $45,000 Cover all
Total $45,000
EquipmentTractor Case 2470 $8,000 Jeff Howsam (Oct. 4 2007)14Ft Breaking Disc $5,000 Jeff Howsam (Oct. 4 2007)Screener $40,000 Jeff Howsam (Oct. 4 2007)Machinery Gas Dryer
Hammer MillSmaller Screen
Movable Container Bagging MachinerySkid Wrapper
Total $100,000 Jeff Howsam (Oct. 4 2007)Truck (1990) $5,000 Jeff Howsam (Oct. 4 2007)Trailer $10,000 Jeff Howsam (Oct. 4 2007)
Loader Vovlo $30,000 Jeff Howsam (Oct. 4 2007)Small Bobcat JCB (forks and bucket) $30,000 Jeff Howsam (Oct. 4 2007)Fork Lifts Ford $5,000 Jeff Howsam (Oct. 4 2007)
Electric Indoor Use $10,000 Jeff Howsam (Oct. 4 2007)
H2S Gas Monitor $220 All gas
Equiptment Total $243,220
Office SuppliesComputer $1,209 Dell CanadaDesk, File Cabinet $2,000 Office DepotChair $200 Office DepotPrinter, fax copier $200 Office DepotPhone & Answering Machine $70 Office DepotReception Chairs $500 Office DepotMiscellaneous Equipment $2,500 Estimate
Office Total $6,679Working CapitalFuel $19,900 Co-op Miaintenence/Repairs $12,161 EstimateInsurance $2,000 Jeff HowsamBags $9,240 Bulldog BagsSkids $3,000 Wood PalletUtility Tarps 3 Quantity $75 Peavey MartSaftey Supplies $500 EstimatePlastic Wrap $2,112 Soap GoatOffice Supplies $2,500 Estimate
H2S Training (2) 175 each $350 Parkland Regional College
Building (lease rate) $12,250 Jeff Howsam (Oct. 4 2007)Waste Disposal 410 tonne (5% total) $18,450 City of Saskaoon
Total Expenses $82,537$377,436Total Capital Requirements
Cost of Goods Manufactured
Dircet MaterialsGypsum $0Bags $9,240Fuel $19,900Skids $3,000Plastic Wrap $2,112Maintenance $12,161Saftey Supplies $500Waste $18,450Miscellaneous $2,500
Total Direct Costs $67,863Direct LabourYard Manager $30,000Indirect Labour costs $2,856Total Labour and Benefits $32,856
Manufacuturing OverheadBuilding Rent and Bills $12,250Total Capital Cost Allowance $42,072Variable Overhead $2,425
Total Overhead $56,747Total Cost of Goods
Manufactured$157,466
Cost of Goods Sold
Beginning Inventory -$ Cost of Goods Produced 157,466$ Cost of Goods Available for Sale 157,466$ Ending Inventory 25,885$
Cost of Goods Sold 131,581$
Job Description
Three employees President
Oversees day to day operations Marketing and business decisions
Secretary Reception and administration
Yard Manager Manages yard duties Product preparation and equipment operation
Labour Requirements
Total Direct and Indirect Labour Source of Estimates obtained
President $37,500 25% of $150,000 annual wageYard Manager $30,000 50% of $60,000 annual wageSecretary $4,000 10% of $40,000 annual wage
Presendent $37,500 1.87% 4.53% 3.12% $3,570Secretary $4,000 1.87% 4.53% 3.12% $381Yard Manager $30,000 1.87% 4.53% 3.12% $2,856
Total Benefits $6,807$78,307
NSIG Salary
Total Wages and Benefits
Total Benefits
Employment Insurance
Canada Pension
Workers Compensation
Marketing Mix
Product Agricultural soil amenity Drilling mud additive
Price $40/tonne- soil amenity (bulk) $160/tonne- drilling mud additive (bagged)
Place Farmers within Saskatchewan Oil and gas industries in Southern Saskatchewan and Eastern
Alberta Promotion
Trade shows in the ag and oil industries Advertisements in the Western Producer
Segmentation
Agriculture soil amenity Oil industry drilling mud additive Soil amenity for home and garden
Small scale Recycled into new drywall
Needs to be shipped to Alberta Grease absorption
Targeting and Positioning
Focus on Ag and Oil Sectors Most potential for bulk sales
Soil Amenity Sulfur fertilizer substitute Highly competitive market
Drilling Mud Additive Price takers Differentiated product
NSIG STRENGTHS WEAKNESSES Human Resources Strong leadership and
business experience from the president
Production and business familiarity between: president, yard manager, and secretary
Hierarchy of authority Good internal
understanding of gypsum Small number of
employees must manage and use time well
Workers have other duties during workday than gypsum.
Lack of direction in marketing product.
Secretary is in a separate building from main work area.
Little experience in the Gypsum Industry
Small number of employees little room for lost time
Physical Resources Processing equipment already established.
Located just off 51st with access to a rail-line.
Slow release form of sulphur
Large yard, with easy access to big trucks.
Cover-All building to hold an abundance of bulk product.
Shared building with other company
Can screen 40 tonne/hr, but only dry 3 tonne/hr.
Aging machinery and equipment
Lots of non-NSIG traffic in the yard due to shared spaces.
Distance to market
Financial Resources Owns machinery ($243,220) and land
Low labour requirement
Tough to secure loan since the product is worthless to others.
Ability to pay bills and wages if sales are slow
Opportunities Threats Markets Rising cost of synthetic
Fertilizer New idea-early market entrant in Saskatchewan Environmental shift in industry Long Term Data (works as well or better than expected)
Less practical, one more application step No customer awareness City Regulation on Industrial Waste Crop input regulation Lack of Long term Data Companies competing directly using other gypsum
Competition
Advantages Disadvantages
Northstar Innovative
Gypsum-Agriculture
- Affordable: $40/tonne - Slow solubility -One in five applicat ion - Environmentally friendly - Soil amendment - Source of Calcium - Recycled product - Waste products useable
- Extra application process - Extra product to handle - Blend requires extra processing - High applicat ion rates - Specialized equipment - Lower availability - No awareness - Not easily stored - Currently only one formulat ion
Sulphur Fertilizer
Manufacturers
- Ease of use - Oligopoly/Monopoly market - Readily available form of sulphur - Can be blended - Source of Nitrogen - Lower application rates - Regular equipment - Applicat ion flexibility
- Expensive: $300/tonne - Rising costs - Can be toxic to plants -Yearly practice
Northstar Innovative
Gypsum- Drilling
Mud
- Raises cation levels - Environmentally safe - Easy handling - Lubricant
- No awareness - Highly competit ive market - Distance to market - Limited market - H2S gas issues
Drilling Stabilizer
Products
- Proximity to market - Brand awareness - Low toxicity - Highly competit ive - Majority market share
- Limited market - Mud lagoons - Expensive
Marketing Budget
Marketing Budget
Booth for Agriculture Shows $5,000 Heydey CommunicationsBrochures for Agriculture Producers $5,000 Heydey CommunicationsHotels $345 115 3 Regina InnMeals $123 41 3 U of S Policy In prov.Mileage (Regina) $202 0.3875 520 Google maps, university policyOil and Gas Show Booth $5,000 Heydey CommunicationsBrochures to Oil Industry $5,000 Heydey CommunicationsHotels $172 86 2 Weyburn Travel LodgeHotels $210 105 2 Edmonton, Ab.(Ramada)Meals $123 41 3 Weyburn, U of S policyMileage (Weyburn) $294 0.3875 758 Google maps, university policy WeyburnMeals $153 51 3 U of S EdmontonMileage (Edmonton) $406 0.3875 1048 Google maps, U of S policy Out of ProvinceWages (Managers Time) $7,244 37500 0.1932 Time to Marketing at booths, ect. Western Producer (Banner) $400 7.70 52 Western ProducerTotal $29,672
ActivityDays, time or Distance(KM)
Cost ($) SourceTotal Cost
Equity Financing
Year 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016Sales $400,000 $408,000 $416,160 $424,483 $432,973 $441,632 $450,465 $459,474 $468,664 $478,037COGS $131,581 $182,427 $170,608 $167,520 $168,279 $160,120 $162,067 $165,912 $160,606 $155,966Gross Margin $268,419 $225,573 $245,552 $256,963 $264,694 $281,512 $288,398 $293,563 $308,057 $322,071Expenses $67,879 $69,236 $70,621 $72,033 $73,474 $74,943 $76,442 $77,971 $79,531 $81,121Net Income Before Tax $200,540 $156,337 $174,931 $184,930 $191,220 $206,569 $211,956 $215,592 $228,527 $240,950
Income Tax $20,054 $15,634 $17,493 $18,493 $19,122 $20,657 $21,196 $21,559 $22,853 $24,095Net Income After Tax $180,486 $140,704 $157,438 $166,437 $172,098 $185,912 $190,760 $194,032 $205,674 $216,855Net Cash Flow to Equity $1,313 $201,223 $137,625 -$71,311 $80,953 $3,452 -$63,971 $77,420 $4,800 $4,581
40.0%
Net Present Value (NPV)Internal Rate of Return on Equity External Rate of Return on Equity
$486,70760.4%
Critical Variable Analysis
Critical Variables Base Case (IRR 60.4%) IRR =0 % Allowable % Change Bulk Sales 7600 tonnes 488 tonnes -94% Bagged Sales 600 tonnes (-1178) tonnes -296% Bulk Price $40 $16 -59% Bagged Price $160 (-139.33) -187% Labour (Yard Worker) $30,000 $192,058 540% Fuel $19,900 $347,117 1644% Lease Rate $12,250 $189,901 1450% All Bulk Sales 7600 tonnes 2890 tonnes No bagged Sales IRR = 28.9% ERR = 22 % NPV= $106,818
Debt and Equity Financing
-$20.00
-$10.00
$0.00
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Years
Bu
lk P
ric
e
Economic B/E Cash Flow B/E
Net Income B/E Base Run
Scenario Analysis
Worst Case Scenerio Base Best Case ScenerioBulk Sales 5000 Tonnes 7600 Tonnes 10,200 TonnesBagged Sales 600 Tonnes 600 Tonnes 600 TonnesBulk Price $16.00 $40.00 $64Bagged Price $160.00 $160.00 $160NPV -$419,179 $486,707 $1,695,981IRR N/A 60.4% 169.2%ERR N/A 40.0% 83.3%