On March 15, 2000 the European Union's parliament voted for the inclusion of so called "wild fats" into the composition of chocolate products manufactured inside the Union. That long awaited decision opened up a market in the range of 100,000 metric tons per year for a wild fat: shea butter, also known as Karité.

HIB's production will be mainly based - at 57% - on shea butter and oils cake originated from shea butter production. Globally, HIB's production will account only for 2 % of the international market available for "wild fats".

HUILERIES INDUSTRIELLES DU BENIN (HIB) will produce all kinds of vegetable oils and fats for industrial use and human consumption for Benin's national market; ECOWAS Regional Mark and international market..

Figure below highlights sales, gross margin and net profit margin.

Figures in "Ratio Table" show the solid financial basis of the company. No needs for elaborate comments; these ratio values are self explanatory. HIB will meet its debt obligations without any financial trouble. Investors will benefit from a high percentage of return on equity; dividends are paid from the second operating year and the amount paid on third year- from financial results of second operation year- can be set at US$ seven (7) against one US$ share.

Management team is well experienced. General manager has a French Business School background and more than 15 years experience in the commodities trade business.

President-Chairman of the Board is a preeminent player in the country decision-maker's panel. He knows the ropes with regard how to untangle red tapes.

HIB's management will be constantly in touch with Promoter and Planner , acting as implementation and supervising body.

Benin is a peaceful democratic and international law abiding West African State; ballots are scheduled and held regularly to elect rulers of the country.

HIB will produce all kinds of oils and fats for industrial use and human consumption from vegetable seeds such as ground nuts, sheanuts, mango nut, cashew nuts, palm kernels... for the national, regional and international markets.

Total production level at full capacity - all productions included: oils, fats and cakes - is 68,645 metric tons, for a global international potential market of 3,500,000 metric tons.

• To efficiently organize raw material supply to HIB's factory. To give incentive- higher purchasing prices- to suppliers who deliver good quality products i.e. products with low moisture content, low sand and soil contents; regular delivery.

• To produce oils and fats - particularly shea butter - of high quality matching the international standards and chemistry specifications of transformers.

• To negotiate firm purchase agreements and contracts with industrialists in targeted countries in Europe, Asia and America.

• To deliver to purchasers with punctuality at competitive and guaranteed prices.

HIB will be set-up:

• To produce all kinds of industrial oils, consumable oils and fats.
• To capture a very small but highly profitable market available for "wild fats" international market - particularly in the European Union's market due to the European Union's parliament vote - on March 15, 2000 - allowing the inclusion of "wild fats" into the composition of chocolate products manufactured in Europe.
• To supply the local Benin market and the huge regional market of ECOWAS with high grade cooking oil and industrial oil.

HIB's production at full capacity reads as follows:

1. Shea butter: 11,419 metric tons.
2. Cake from crushed shea kernels: 16,536 metric tons.
3. Cooking oil from ground nuts: 13,634 metric tons.
4. Cake from crushed ground nuts: 27,055 metric tons.

Please see Chapter 3.2: Technology, for more specifics and details on production; and Chapter 4: Market Summary Analysis for indications about production level.

Principal production equipment is composed of two Sterling 75 screw presses from de Smet-Rosedowns (UK) or Krupp Maschinenfabrik GmbH (Germany).

HUILERIES INDUSTRIELLES DU BENIN (HIB) will be a private company incorporated under Benenese law. The African investors group includes Benenese businessmen, ECOWAS businessmen, traditional chiefs and opinion leaders.

African investors group welcomes joint partner(s) and is ready to give-up up to 49% equity to technical partners / international investors.

BusinessAfrica Investment and Business Planners are the promoters of the project and implementation / investment planning body.

Start-up expenses represent investment and operation costs for engineering, installation and commissioning / Business Plan /implementation supervision fees and investment planning commissions. Factory-compound and building construction are financed through combination of shareholders investment and short-term loans:

• Start-up inventory stands for production during the commissioning period: October-November-December 2001.
• Other short-term assets represent office furniture, computers and software.
• In "Miscellaneous" start-up expenses are included customs duties for equipment, raw material for commissioning period and miscellaneous expenses for the period from 9/1/2000 to 12/31/2001.

HIB's factory-compound, five hectares, is located at Parakou; a northern city, at 400 km from Cotonou - Benin's harbor's city - at the end of the railway link to the North. Parakou is the regional economic capital city of the Northern region of Benin; right in the center of Benin's sheanuts and ground nuts production area; with strong economic relationships with the neighboring countries: Niger, Nigeria, Burkina Faso and Togo. Additional quantities of raw material can be imported from these countries if necessary.

Click here for countries briefs

Factory-compound will be leased. Extensive works undertaken for land development, interior road construction, utilities installation. In addition to the plant building itself, office premises and storage warehouses for raw material and finished products will be erected.

Technology to be used by HIB is a well established one; developed by international companies such as de Smet Rosedowns (UK) or Krupp Maschinenfabrik GmbH (Germany). Cooking oils and fats production factories based on that technology are operating world wide. One of the companies will sell the appropriate equipment to HIB and supply the technology.

A - Capacity:

1-Groundnut:

100 metric tons per 24 hours. One kg of ground nuts - 8% moisture content - gives 920 gr of dried ground nuts to produce 441.6 gr of cooking oil - and taking in account 1% handling losses -finally 437 gr of cooking oil and approximately 473 gr of cake-containing 7% of residual oil - suitable for animal feeding.

2 - Shea butter:

100 metric tons of shea kernels per 24 hours. One kg of shea kernels -10% moisture content - gives 900 gr of dried kernels to produce 370 gr of shea butter - and taking into account 1% handling losses - finally 366 gr of shea butter and approximately 530 gr of shea nut cake- containing 15% of residual oil - suitable for animal feeding.

B - Production level

1 - Shea butter:

100 metric tons of shea nuts -10% moisture content - will yield in 24 hours 36.6 metric tons of shea butter and 53 metric tons of cake. That is to say: 26*100 metric tons of raw material in one month give : 26*36.6 metric tons of shea butter and 26*53 metric tons of cake; and in one year production - at full capacity - 26*100*12 of sheanuts nuts give 26*36.6*12 metric tons of shea butter and 26*53*12 metric tons of oil cake.

2 - Cooking oil:

100 metric tons of ground nuts - 8% moisture content - produce in 24 hours 43.75 metric tons of cooking oil and 47.3 metric tons of cake. That is to say: 26*100 metric tons of raw material in one month give : 26*43.75 metric tons of cooking oil and 26*47.3 metric tons of cake; and in one year production - at full capacity - 26*100*12 of ground nuts to produce 26*43.75*12 metric tons of cooking oil and 26*47.3*12 metric tons of cake.

Benin's global consumption of cooking oils of all kinds (palm oil, ground nut oil...) is in the range of 150,000 metric tons per year; 100,000 metric tons being imported from Nigeria, Côte d'Ivoire and Europe.

So, there is an opportunity to enter the market and HIB's production of 13,634 metric tons of cooking oil will be easily sold on the national market.

Shea butter is an African product categorized as "wild fats"in the international products classification. It is used, for first rated product, as swelling ingredient (CBE) or substitute (CBS) of cocoa butter when international price of the latter hits the roof.

Other wild fats exist which can also be used as CBE and CBS. They are SAL (India), MONRAH (India), ILLIPE (India,Borneo,Sumatra).

Table below shows the average consumption - in metric tons, during 1989-1999 period -
of CBE and CBS of all kinds in comparison to pure chocolate:

140,000*50%*1.25 (standing for the utilization index after fractionating of shea butter); i.e. 87,000 metric tons per year.

According to the European Union's Panel Group in charge of "Chocolate Regulations", The European Union needs for all kinds of wild fats are the following for the 1995-2005 period; in metric tons: shea butter (100,000-250,000); illipé (13,000); sal (10,000).

Globally the same amounts are needed for the rest of the world.

  HIB's production of shea butter represent a mere 2% of the potential market available world wide.

It is quite impossible to forecast in advance the quantity of "wild fats" available on the market; for the simple reason that the fruits which give the nuts to produce these wild fats are not harvested from manly organized plantations, but picked from wild trees scattered over large territories. The picking of the fruits, their gathering, transportation to drying areas etc... compete with farmers' other agricultural activities.

Furthermore, the production yield of the trees, one year in one year out, is not constant and the transformation process to wild fats is based on traditional methods with low yield and second grade product. Consequently, the availability of the finished product - in quality and quantity - on the international market is not guaranteed.

In the contrary, HIB will :

• Establish a systematic gathering / purchasing strategy of shea-nut.
• Produce a high grade product and guarantee the delivery at international agreed price.

Taking into account explanations given in former Chapters, one can see that a big opportunity exists to enter the market of wild fats and capture a sizable share. Keys to success exposed in Chapter 1.3 have to be implemented by HIB's management team to:

1. Build a strong and reliable network of raw materials providers. This will be fairly easy to accomplish as the factory is located in the production area of sheanuts and ground nuts. Villagers knowing that the factory exist- and in order to make extra money- will take the necessary measures to "harvest" the shea fruits and increase ground nuts plantations.
2. Produce high quality product in accordance the international, physics and chemistry specifications of shea butter. A small R & D unit will be established to control raw material suitability, process uniformity and quality of finished product.
3. Contact potential buyers and constantly keep in touch with them to forecast their needs.
4. Motivate the whole staff of HIB for quality production.
5. Reach full production capacity as soon as possible.
6. Take - in good time - necessary management decisions to be in the position to increase production more drastically - if necessity arises - to cope with increase in demands.
7. Study the possibility to install an automatic powered bottling system for cooking oil. That might increase one third more the selling price of cooking oil and consequently improve cash flow.
8. Study the possibility to produce a more elaborate animal feed with the cakes; that will also bring in more cash.

• Shea butter sample will be sent to known and potential buyers in the food, cosmetics and chemistry business in general, to promote the high quality of HIB's production.
• HIB's marketing manager will visit once per year big purchasers and will constantly keep in touch through the World Wide Web.
• A national network of traditional businessmen will be established for the distribution of cooking oil on Benin's villages markets.

Shea butter selling price is internationally set-up ; presently, it fluctuates between US$ 1,161 (village production) and US$ 1,696 (industrial production); however, some buyers - from Asia - are ready to pay a premium to secure regular deliver. Nevertheless, the selling price chosen to evaluate sales forecast has been set - for shea butter - at US$ 1,500; that is to say at 11,55% less than the international prevailing price of US$ 1,696

HIB's cooking oil pricing will be 10% less than the imported oil prices.

Oil cakes are priced quite 30% less than alternative animal feed based on cereals.

January 2002 sales forecast is based on production obtained from commissioning operations: October-November-December 2001; (Please have a look at sales evolution during the first operating year.)

"Other" in Unit sales stands for by products generated by the crushing process; mainly oil cake.

By-products (oil cakes) direct unit costs are already included in shea butter and cooking oil direct unit costs.

Item labeled "other" in the direct unit costs stands for production- team' salary (as outlined in personnel plan in Chapter 6.4 - Benenese Welfare System's tax included) divided by total units of shea butter and cooking oil.

Sales evolution had been set-up at a conservative 9% per annum over the year 2002 to 2003 against 5% increase between years 2003 and 2004.

Shea butter contribute to 57.6% of sales; cooking oil to 30% and oil cakes for the remaining 13.4%.

Sales program for shea butter will be organized according to customers' demands - on the first order first serve basis - for the months of January through April 2002.

Afterwards, allocations will be made to all customers in Asia, Europe and America, in accordance with sales forecast per region. However, client offering premium on international prevailing price of shea butter will get also a premium in allocated quantities by HIB.

Cooking oil will be delivered to few chosen local Benenese tradesmen and businessmen against 55% down payment; the balance being due within 30 days.

HIB's management staff will include experienced Benenese managers already active in the commodities trade and (if necessary) other African managers well acquainted with vegetable oil industry.

The supplier of the equipment is providing for two commissioning engineers to stay for six months; to ensure a good start-up of the production. They will assist the production manager who will be trained for nine months in Europe in the supplier shop.

Financial allocation have been made in the "Income statement" for the constant availability of a production /manager / consultant to assist the production manager.

HIB's general manager and his deputy - in charge of personnel management and daily organization of the compound - will be responsible for global management of the company; under the supervision of the President-Chairman of the board.

HIB's general manager will supervise other divisional managers: production, sales-marketing and administration.

Production manager will be assisted by a deputy; the company operating on a three shifts basis as soon as possible. The foremen (3) in charge of each shift, will be also trained in Europe together with the production manager.

1. President-Chairman of the Board can be the representative of technical or financing joint venture partner(s).
2. General manager is a seasoned businessman experienced in the commodities (cocoa, coffee) trade; his background is economics from a French "Grande Ecole".
3. Deputy manager has more than 20 years experience gained as personnel manager of an international air carrier.
4. Production manager is a mechanics engineer.
5. Sales and marketing manager has not yet been selected.

As stated before, allocation have been made in "Income Statement" for a permanent production manager / consultant - who might be a retired experienced European or Asian production manager - to help solve any production problem in order to ensure a smooth and continuous operation of the factory.

A contest will be held to select the sales and marketing manager.

He should have a finance background; be computer literate and have a good experience and enhanced knowledge in cash flow and debt management.

The deputy accountant - in charge of the computing system - should have a proved and long standing experience in accounting practice based on accounting software assistance.

HIB's management team includes seven persons:

• President-Chairman of the Board.
• General manager.
• Deputy general manager- in charge of personnel management.
• Production manager and his deputy.
• Sales and marketing manager and an accountant.

Staff members total sixty eight (68) which reads as follows:

1. Production: foremen (3), mechanics (3); electricians (2); plumbers (2); screw presses workers (18); fork lifters ((3);; handlers (9); cleaners (3); chemists (1); chemist assistant (1); typist (1).
2. Sales and marketing: drivers (5); fork lifters (3); warehouse officer (1); commodities receptionist (1); typist (1); sales/purchases officer (1).
3. Administration: Assistant/Executive secretary (1); typist (1); night watchers (2); errand men(2); cleaners (2).

Top management i.e. President-Chairman, general manager, production manager, sales and marketing manager, personnel manager is entitled to housing scheme allocations; staff members benefit from many incentives such as a permanent nurse and medical doctor present on the compound - but not on the list as employees; professional clothes and pharmaceuticals for first care interventions. Globally, all these incentives and bonuses represent 13% of the payroll burden. Contribution to the Benenese welfare system (Office Béninois de la Sécurité Sociale-OBSS) standing for the remaining 23% of the payroll burden.

Salaries increase have been set-up to 5% annually for years 2003 and 2004.

Towards the end of second operating year, HIB's growth potential will be obvious with regard the fulfillment of sales forecasts and demands and requests from customers.

Nonetheless a production increase - 9% - have been applied to production level reached at the end of operational year 2002 for targeted production level of operational year 2003; and a 5% increase on production level of operational year 2003 for operational year 2004. As full capacity is already reached at the end of operational year 2002, these successive increases in output should come from either the purchase of additional production equipment, or through productivity improvement...

If customers' demands are high - in accordance with business segmentation outlined in Chapter 4.1, HIB's management should consider, beginning of second semester of first operational year, taking necessary measures to purchasing additional equipment. Allocation (US$ 20,000 per month) has been made in pro forma Cash flow for such purpose.

Benenese raw material suppliers prefer cash payment. However HIB will negotiate 10% cash payment on delivery and the balance within 30 days for the three operating months of the first operational year.

Inventory turnover stands for the shea butter production; 45 days are necessary to complete all export formalities and banks procedures for payment.

Personnel burden have been explained in Chapter 6.4.

Being classified as a start-up company in agribusiness sector, HIB is eligible to the tax exemption scheme of Benin's Investment Code (for three running years starting from operating year N°-1). Nonetheless , 35% tax level has been considered in the General d Assumption starting from the first operation year.

As shown on the Benchmark Comparison Chart, forecasted sales evolution has been set at a moderate pace because full capacity production is reached at the end of operating year N°1.

However, one should bear in mind, following explanations given in Chapter 4 about market segmentation, that sales could be increased more steeply if management has taken - in good time- the necessary measures to buy additional production equipment.

Management should pay careful attention to collection days evolution; in order to shrink its duration. Sales and purchases officer will have an important role to play in obtaining a quick freight allocation on ships available for export of shea butter.

BusinessAfrica as the supervising body of the venture implementation and its successful development will make sure that HIB's management is based on best practice, with deadlines fulfillment, indicators watching and adequate benchmarking.

For break even analysis, we assume running costs of approximately US$ 40,877 per month (which includes our full payroll burden); average unit selling price at US $492 and average unit cost at 178.6. That give us a break even units per month of 132 metric tons of combined production of shea butter, cooking oil and cakes; and monthly sales break even of US$ 64,721.

Nota Bene: from the starting month of first operating year, HIB's output is already far beyond the break even.

As shown in this Table of the Annexes, gross margin is at 80,92% from the beginning of the operations to average 82.43% at the end of first operational year. That high level is maintained for the following years N°2 and N°3. (Table below)

Net profit over sales is at a hefty 46,72% (2002) and remained at 47% for the following years.

HIB is in good financial state and will fulfill its long-term debts obligations without any financial turmoil.

To obtain a positive Cash flow balance from the beginning of the operation, HIB's management should obtain from its local deposit banks credit facility against order / purchases of products in the range of US 350,000 for the two beginning months respectively. Afterwards, cash flow balance remains positive throughout the year and for two consecutive years.

HIB will meet its debt obligations with punctuality and without financial trouble. Management can even increase capital expenditure up to US$ 20,000 per month without jeopardizing the financial basis of the company:

1. Additional production equipment can be purchased - without long-term borrowing - to cope with increase in demands for shea butter.
2. Diversification of HIB's activities undertaken into bottling of the cooking oil and installation of a complete animal feeds production unit.

Dividends paid at the end of fiscal year 2003 amount to US$ 3.75 per one US$ share; and at the end of fiscal year 2004 to US$ 7 (seven) per one US$ share.

Cash Flow balance illustration below highlights the sound financial state of "HUILERIES INDUSTRIELLES DU BENIN (HIB)"

Projected Balance Sheet's figures are self explanatory and in accordance with "Loss and Profit" and "Cash Flow" statements.

The net worth of the company is positive from the fourth month of first operating year and increases steadily to reach at the end of first operating year an amount superior to the long-term loan subscribed to launch the project.

As far as HIB's management can skillfully perform and keep close to the Business Plan assumptions and recommendations made by the "Supervising Body", the financial future of "HUILERIES INDUSTRIELLES DU BENIN (HIB)" is cloudless; loans obligations will be met regularly and investors can expect hefty dividends from the second operation year.

"Dr. B.M. QUENUM and Associates"

will see to it that HIB's management complies with Business Plan assumptions and recommendations.

HIB implementation is really an opportunity not to be missed.

The market for "Wild Fats" will get a boost in demand due to the European Union decision taken by the Union parliament vote on March 15, 2000 to allow European Union chocolate products manufacturers to include additional fat to pure chocolate paste for the production of chocolate products. The market opened by this along awaited decision is - for Europe only - in the range of 100,000 metric tons per year. HIB's main production in value - shea butter - represents only 11,41% of the European yearly demand; and 2% of worldwide demand.