w w w . c a p i t a l f i n a n c e – t r . c o m i n f o @ c a p i t a l f i n a n c e – t r . c o m
w w w . e t a c a b l e s . c o m i n f o @ e t a c a b l e s . c o m
CONFIDENTIALITY AGREEMENT
i i
The undersigned reader acknowledges that the information provided by ETA Elektrik
Telekomunikasyon Taahhüt A.Ş. in this business plan is confidential; therefore, reader agrees not to
disclose it without the express written permission of ETA Elektrik Telekomunikasyon Taahhüt A.Ş.
It is acknowledged by reader that information to be furnished in this business plan is in all respects
confidential in nature, other than information which is in the public domain through other means
and that any disclosure or use of same by reader, may cause serious harm or damage to ETA Elektrik
Telekomunikasyon Taahhüt A.Ş.
Upon request, this document is to be immediately returned to ETA Elektrik Telekomunikasyon
Taahhüt A.Ş.
02/10/2008
*This is a business plan. It does not imply an offering of securities.
TABLE OF CONTENTS
i i i
1.0 Executive Summary 1 1.1 Objectives 2 1.2 Mission 2 1.3 Keys to Success 2
2.0 Company Summary 3 2.1 Company Summary 3 2.2 Company History 3 2.3 Company Locations and Facilities 4
3.0 Products 5 3.1. Products Description 5 3.2 Competetive Comparison 6 3.3 Sales Literature 6 3.4 Sourcing 7 3.5 Technology 7 3.5 Future Products 8
4.0 Market Analysis Summary 8 4.1 Market Segmentation 8 4.2 Target Market Segment Strategy 9 4.2.1 Market Needs 9 4.2.2 Market Trends 10 4.2.3 Market Growth 10 4.3 Industry Analysis 10 4.3.1 Industry Participants 11 4.3.2 Distribution Patterns 11 4.3.3 Competetion and Buying Patterns 11
5.0 Strategy and Implementation Summary 12 5.1 Strategy Pyramid 12 5.2 Marketing Strategy 12 5.2.1 Positioning Statement 13 5.2.2 Pricing Strategy 13 5.2.3 Advertising Strategy 14 5.2.4 Distribution Strategy 14 5.2.5 Marketing Programs 14 5.3 Sales Strategy 14 5.3.1 Sales Forecast 15 5.3.2 Sales Programs 16 5.4 Strategic Alliances 16
6.0 Management Summary 17 6.1 Organizational Structure 17 6.2 Management Team 18 6.3 Management Team Gaps 18 6.4 In-Direct Personnel Plan 19
7.0 Financial Plan 20 7.1 Fund Using Plan 20 7.2 Important Assumptions 20 7.3 Key Financial Indicators 21 7.4 Exit Strategy 21 7.5 Projected Profit and Loss 22 7.6 Projected Cash Flow 23 7.7 Projected Balance Sheet 25 7.8 Project Valuation 26
8.0 S.W.O.T. Analysis 27
Appendix I
PAGE 1
BUSINESS PLAN
ETA A.Ş.
1.0 EXECUTIVE SUMMARY
ETA Elektrik Telekomunikasyon Taahhüt A.Ş. is a leading copper and fiber optic cables manufacturer in Turkey and listed in Top 500 Companies List. It has a production plant in Gebze city. Production plant is on an area of 30.000m2 and factory has a closed area of 20.200m2. Its products are mainly sold to goverment tenders and foreign projects of telecommunication. Eta Cable ® covers 35% of total needs of Turk Telecom, Inc.
This business plan is prepared for foreign credit request and aimed to give information abour our company. In the next 3 years, we intend to add new product lines to our products and produce high technology cables for electronic equipments. We also intend to add copper processing machines in order to produce at least 30% of our raw material needs.
The following chart illustrates highlights of our financial performance as projected for the next 3 years. Production, sales and profit should continue to grow.
Highlights (Planned)
$
$ 50.000.000
$ 100.000.000
$ 150.000.000
$ 200.000.000
$ 250.000.000
$ 300.000.000
$ 350.000.000
$ 400.000.000
2009 2010 2011
$ 2
80
.00
0.0
00
$ 3
30
.00
0.0
00
$ 3
90
.00
0.0
00
$ 3
8.6
55
.189
$ 4
5.5
31
.327
$ 5
3.5
51
.569
$ 3
1.6
77
.309
$ 3
7.2
58
.128
$ 4
3.9
25
.834
Sales
Gross Margin
Net Profit
PAGE 2
BUSINESS PLAN
ETA A.Ş.
1.1 Objectives
To solve problems with the banks and make the factory work again with a minimum capacity of 60%.
To take back its market share and increase its buying strength to decrease costs. To increase production capacity to 70% and have a monthly turnover of $25.000.000. To get 10% net profit ($2.000.000 / month) by strengthen the buying, decreasing the costs. To add new product lines of copper processing in order to solve raw material needs. New
copper processing line will decrease costs, increase productivity. To add a new line of fiber optic cable production. To add a new line of high voltage electric transmittal cables production.
1.2 Mission
Eta Cables ® is a prefered manufacturer in copper and fiber optic cable sectors. With a high production capacity, our company is able to produce any demand and also our company is invited to all goverment tenders. Our company has also quality certificates:
ISO-EN-14001 -Environmental Management System Certificate ISO-EN-9002 -Quality Management Certificate Turkish Standarts Institution -Certificate of Conformity
We intend to make enough profit to generate a fair return for our investors and finance continued growth and development in quality products. We maintain a fair and creative work environment which respects diversity and new ideas.
1.3 Keys To Success
Keys to success in this business area are:
Product Quality. Meeting European and international quality standarts to have strength in international tenders of
telecom and electric distribution lines. Marketing : Cable industry’s main target customer is international telecom and electric
distribution sectorial companies. To have a strong relation and make international advertisement are the main points in marketing strategy. Our company got some international tenders and finished projects respecting timing and quality. These references give our company an advantage in international tender.
Management : On-time product delivery, marketing budgets managed. There is a temptation to fix on growth at the expense of profits.
PAGE 3
BUSINESS PLAN
ETA A.Ş.
2.0 COMPANY SUMMARY
ETA Elektrik Telekomunikasyon Taahhüt A.Ş develops and manufacture copper and fiber optic cables for telecommunication, data and electric transmittal. Its customers are goverments, private distributors and electrical system manufacturers. The company incorporated in Gebze / Turkey in 1990 by Mr. Seyfi ERKAN. Company has its own production plant with production lines with latest technological development.
2.1 Company Ownership
ETA Elektrik Telekomunikasyon Taahhüt A.Ş is a privately-owned company. Seyfi ERKAN, founder of company, is majority owner. He established the company after an experience of 10 years in administration of HES Group of Companies including HES Kablo Inc, HES Finance Inc, HES Chemicals Inc. where he was also a shareholder.
ERKAN Family owns also HES Polymer Inc. which is chemical products factory producing cable raw materials like swelling jellies and petroleum based coating raw material.
2.2 Company History
Company was active till March 2004. After that time, because copper prices increased about 80%, company stopped production. Company’s main debts were to copper raw material manufacturers and debts were based as copper date to prices. All sales were in fixed currency. So company could not cover the debts with sales incomes and decided to stop production. From 2000 to 2003; sales, copper prices and date to today multiplier are as below: (All copper prices are received from London Metal Exchange Statistics)
2000 2001 2002 2003
Avarage Copper Prices 1.820
(USD/Tons) 1.545
(USD/Tons) 1.730
(USD/Tons) 1.780
(USD/Tons)
Copper July 2007 Price 8.090
(USD/Tons) Multiplier x 4,445 x 5,236 x 4,676 x 4,545
PAGE 4
BUSINESS PLAN
ETA A.Ş.
2.3 Company Locations and Facilities
Company headquarters is located in Gebze (60 kms far away from Istanbul) at the address “İplikdere Mevkii. Güzeltepe Köyü. 41400 Gebze Kocaeli / TURKEY”. Total area of the company is 30.000m2 and the closed area is 20.200m2. Factory is closed to the Turkish Custom Warehouses and also in the factory area there is a seperate warehouse for custom. A creative work environment is supplied with comfortable office conditions.
$
$ 25.000.000
$ 50.000.000
$ 75.000.000
$ 100.000.000
$ 125.000.000
$ 150.000.000
$ 175.000.000
$ 200.000.000
$ 225.000.000
$ 250.000.000
2000 2001 2002 2003
$ 3
7.5
17
.85
7
$ 2
0.4
01
.31
8
$ 5
2.5
96
.63
6
$ 4
8.2
35
.05
6
$ 1
66
.76
6.8
74
$ 1
06
.82
1.3
01
$ 2
45
.94
1.8
70
$ 2
19
.22
8.3
30
Sales (Sales) x (Multiplier)
Sales & Converted Sales By Multiplier
PAGE 5
BUSINESS PLAN
ETA A.Ş.
3.0 PRODUCTS ETA Elektrik Telekomunikasyon Taahhüt A.Ş. is producing cables especially for the telecommunication. ETA has 3 main product lines.
Copper Telecommunication Cables - Jelly or air filled cables upto 3600 pairs - Aerial, direct burled, armored and unarmored types - For indoor and outdoor usage - Pair or quad systems
Fiber Optic Cables - Metallic or non-metallic F/O cables - Direct burled or aerial - Armored or unarmored - Rodent protected and weather protected cables - Fiber optic jumper cables
Cable Accessories - Joint closures - Termination boxes - Pig-tails and patch cords - Connectors and channel systems
Cables are the main component in distribution of electric, telecommunication and data transmittal. Paralel with the improvements in technology, new high-tech cables are more requested like fiber-optic cables. International telecom companies are investing replacement of old technology transmittal cables with new, more resistable underground cable systems. Our company is receiving demands of fiber-optic cables and underground resistable cables.
3.1 Products Description We have 2 product lines with details below:
1. Copper Cables :
Foam skin or solid PE or PVC insulated Jelly filled or air filled cable core with different capacity requirements Cable core sizes from 2 pairs to 3600 pairs Conductor size from 0,3mm to 0,9mm Different designs:
i. Primary (armored) ii. Secondary (unarmored)
iii. Duct type iv. Indoor (air filled or pvc cables) v. Jumper wires and subscriber cables
PAGE 6
BUSINESS PLAN
ETA A.Ş.
2. Fiber Optic Cables : Optical fibers
i. Single mode (ITU-G652) ii. Multi mode (ITU-G651)
iii. Non-zero dispersion shifted (ITU-G655) Jelly filled, loose tube structured Optical Fiber Cables Core sizes from 2 pairs to 360 fibers Conductor size from 0,3mm to 0,9mm Different designs:
i. Underground ducts ii. Direct burial
iii. Fig.8 type aerial cables iv. Monotube (central tube)
3.2 Competetive Comparison There are already existing cable manufacturers in the market: Türk Prysmian Inc, HES Elektrik San. Inc., Nexans Inc, MASS Cable Inc, Tümka Kablo Inc. But in cable sector, the most important end-buyers are domestic and international goverment telecommunication. And for the tenders, companies should meet some specification like capacity, quality, product differentiation. Our company is able to meet these specifications, therefore for large end-buyers, our company is prefered. Our company has the largest capacity and highly developped production line (efficiency of our lines are higher than other other companies in market).
Also we have the capacity to produce both copper cables and fiber optic cables. Telecommunication and electric transmittal projects need both types at once for underground, indoor and outdoor transmittal. Capability of producing both types, Eta Cables has the strength of meeting tenders specifications.
These 2 main points bring the result:
1. Low costs (because of high production capacity and efficient product lines)
2. To be prefered (past experiences in international telecommunication projects)
ETA Elektrik Telekomunikasyon Taahhüt A.Ş. is in the leading position in the market and with new copper processing unit (we will be able to produce our own raw material), we intend to be at top in the next years.
3.3 Sales Literature
A new line of brochure and product catalogues are prepared in order to give brief explanation about our products. Cable industry has standart products. To differentiate ourselves from the market companies, we focus on product quality (like underground cable durability) and our product quality is approved by worldwide known qulity test companies. These certificates are all mentioned in brochures. We also work with an agency to prepare a detailed website which gives brief information about our company and products.
PAGE 7
BUSINESS PLAN
ETA A.Ş.
3.4 Sourcing
In order to keep our high quality production level, we work with quality approved raw material manufacturers. Raw materials that we use, are all in worldwide requested quality levels. List of raw material manufacturers that we work are
Raw Material Manufacturers
MANUFACTURER RAW MATERIAL
Sarkuysan Inc. – Akseki Bakır Inc. Copper Alcatel SM & MM fiber Dow Plastics – Borealis PE Dupont - Akzo Aramid yarns Cousin Chemicals – ESA Chemicals FRP PolOne – Scapa Polymerics HFFR (LSOH) compund & masterbatch Dow Chemical Steel Tapes Wilson Colors PBT & PE Masterbatch Degussa Hüls, BASF, Dow and EMS PBT Dupont Ripcords Degussa Hüls & MWO Tube filling compound HES Polymer & BP Hot melt, water swellable jelly and core filling Lenzing Binder Tapes
3.5 Technology
The technology used in ETA factory is the most developped one currently used in the world. Cable coating machines are the most efficient ones among the compatitors in the market. List of production Technologies are listed as below:
Foam-Skin insulation lines (Tandem with wire drawing) Number of Lines : 14 Average Speed : 2,200 m / min Total Capacity : 12 Million Conductor KM / Year
Group Stranding Number of 13 pairs stranding lines : 2 Number of 25 pairs stranding lines : 4 Number of Pairing Machines : 20 Net resultant production capacity = 15 Million Conductor KM / Year
Drum Twisters Number of Lines : 5 Average Speed : 50 m / min. Production Capacity : 13 Million Conductor KM / Year
PAGE 8
BUSINESS PLAN
ETA A.Ş.
Sheathing Lines
Number of Lines : 6 Average speed for 200 pair cable : 30 m / min Production Capacity : 12.917 Million Conductor KM / Year
3.6 Future Products
We intend to produce a new product for the year 2009. In the 5th month, we plan to build the production line for cable production from aluminum block. This product is used for high voltage electric transmittal. Mainly these cables do not have ant PE or PVC coating material for outfdoor usage. Also when we plant the copper processing unit (copper cylinder rod), we will be able to differentiate our copper cable line. Processed copper is easier to produce very thin cables which are used also in the electronic sector.
4.0 MARKET ANALYSIS REPORT
The market of telecommunication copper & fiber optic cables is worth an estimated $4.000 million as total of both domestic market and international tenders. The market growth rate is projected as 4-5 % according to professional forecasts in specialized issues in 2007. Sources incudes World Trade Organization reports.
Market leaders other than ETA are; Türk Prysmian Inc, HES Elektrik San. Inc., Nexans Inc, MASS Cable Inc, Tümka Kablo Inc. and industry is highly concentrated. Top 10 major companies account for %90 of the total market.
4.1 Market Segmentation
Telecommunication cables belong to the electric and data transmittal industry.
We prefer a segmentation by 2 different lines; according to product group and according to end-buyers.
Segmentation by Product Group (Market capacity is for domestic market) Copper Cables : It has a worth of $642.5m domestic market sales and $722.8m export
sales. As a total; market capacity is : $1.365,3m. Fiber Optic Cables : It has a worth of $172,1m domestic market sales and $193,9m export
sales. As a total; market capacity is : $365,7m. High Voltage Electric Cables : It has a worth of $112m domestic market sales and $126m
export sales. As a total; market capacity is : $238m.
Segmentation by End-Buyers International Tenders : Market segment is $620m worth. Domestic Tender : Market segment is $927m worth. Private Buyers : Market segment is $390m worth.
PAGE 9
BUSINESS PLAN
ETA A.Ş.
4.2 Target Market Segment Strategy
The following sections outline ETA Elektrik Telekomunikasyon Taahhüt A.Ş’s market segment startegy.
4.2.1 Market Needs
We understand that our market needs more durable cables especially for the underground transmittal lines. Our sister company, HES Polymer has Research&Development department to produce more durable coating and filling materials.
Especially for the paralel development with the technology, data transfer lines are more needed. A growing demand of fiber optic cables brings a result of adding new lines to our production line. Fiber optic cable production lines have special environmental conditions. Production should be in isolated rooms. At the moment there is one production line of fiber optic cables. Two more lines should be organized for fiber optic cables production.
Another product needed in the market is electric transmittal cables (high voltage). We intend to plant another line of production for this market demand. Especially internatioal markets (in Middle-East countries and North African countries) develop new projects to be built. Our company has references to be involved in these projects.
Our plant is built in 16.200m2 area and there is stil around 5.000m2 convenient area for buildings of new production lines.
69%
12%
19%
Copper CablesHigh Voltage Elec. CablesFiber Optik Cables
Market Segmentation By Product Group
48%
32%
20%
Domestic AdjudicationsInternational AdjudicationsExport To Private Buyers
Market Segmentation By End-Buyers
PAGE 10
BUSINESS PLAN
ETA A.Ş.
4.2.2 Market Trends
Our market has grown towards more technological cables. Also quality of durability is the main target in end-buyers’ demands. International markets are looking for complicated manufacturers producing copper cables, fiber optic cables and accessories. These manufacturers should meet capability of building a full system of electric, telecommunication and data transmittal. When building a full system, there is a need of different types of cable specifications. Manufacturers should produce them at once and this can be realized only with high capacity manufacturers.
4.2.3 Market Growth
According to Ministry of Energy, there is projected tenders for the next 5 years. Each year around $9.000.000.000 buying will be done and $870.000.000 of this total buying will be done for cables. Each year this demand increases by 5-6%.
International buyers (both private buyers and energy/telecom tenders) have a worth of $1.042.320.179 market according to Turkish Foreign Trade Association bulletins. Market growth is shown below:
Export of Cable Industry
2002 2003 2004 2005 2006 Export Total (F.O.B.)
476.619.206 USD
473.466.775 USD
545.015.536 USD
691.866.607 USD
1.042.320.179 USD
Market Growth - - 1% + 15.11 % + 26.94 % + 50.65 %
4.3 Industry Analysis
According to World Trade Organization, total export amount of cable sector is $ 56.5billion and market growth in the world is about 4,7%. For the domestic market, with developments in technology and data transmittal, there is a growing demand of underground durable copper cables and fiber optic cables. Lower costs and high level technology, Turkey is getting a bigger market share in the world market. According to Turkish Foreign Trade Association, Turkey will have a projected growth in the market share as given below:
Projected Export of Cable Industry in Turkey
2008 2009 2010 Export Total (F.O.B.)
Approx. 1.300.000.000 USD
Approx. 1.500.000.000 USD
Approx. 1.750.000.000 USD
PAGE 11
BUSINESS PLAN
ETA A.Ş.
4.3.1 Industry Participants
Participants in the industry are both domestic and internationl companies. There are just a few companies but have the majority in the market. Participants of the the industry and information about these companies:
Türk Prysmian Inc. : Formerly was Pirelli Cable. After the acquisition by Goldmann & Sachs Investment, company name is changed to Türk Prysmian.
HES Elektrik San. Inc. : A group of companies located in Kayseri (Mid-Anatolia). Owner of ETA Cables, Mr. Erkan, was a shareholder and administrator in the group. He established ETA Cables and after seperating from the group, he continued holding the majority share in HES Polymer.
Nexans Inc. : A member of Alcatel Group. Alcatel itself mainly produces fiber optic cables. And for product differentiation, the establish Nexans to produce copper cables.
MASS Cable Inc. : A part of Demirer Group and it is a company of partnership with United Arabic Emirates company.
Tümka Kablo Inc. : A company producing special specificated cables. They produce small quantities from these products (as the market is small) and sell with high profit.
4.3.2 Distribution Patterns
The distribution channel is only for the private international buyers. To reach these buyers we intend to work with local distributors in these countries. Especially European companies are in our interest. As our company has the competetiveness, we are sure to succeed in these markets with right distributors. We have some applications to local chambers of commerce to forward our request to find distributors. We look forward to make quota based agreement in order to have the pre-information in our production.
4.3.3 Competetion and Buying Patterns
For a better position in the market competetion, our main aim is to focus on producing at least 30% of raw metarial needs. Our sister company HES Polymer in Kayseri produces swelling jellies for cable filling and petroleum based coating materials. In our near future plans, we intend to produce our own copper block process. Our main product is copper cables and copper is the main raw material we use cable cores. Approximately 60% of our production cost is copper. There are 3 main manufacturer companies in Turkey and as a monopoly these 3 companies have the fix price in processed copper. We pay more about $350 /tons for the processed copper. By building our own copper processing plant, as we have planned, cost of copper processing will be around $120/tons. A difference of $230 per tons means: LME Copper Price $8.090 /Tons Copper processing price + $ 350 /Tons Total Cost of Copper $8.440 /Tons
Cost Decrease $ 230 = 2.72% ==> Net cost decrease in cable raw material Total Cost of Copper $8.440 Raw material cost decrease 2.72% Portion of copper cost in total cost x 0.60
Total net decrease in unit cost 1.63%
PAGE 12
BUSINESS PLAN
ETA A.Ş.
5.0 STRATEGY AND IMPLEMENTATION SUMMARY
Our strategy is based on using our large production capacity and quality products. In competetion we have the main plan to get advantage, we intend to invest in fiber optic production to increase production capacity. In our factory, we have 13 lines for copper cable production and increase sales in copper cables, we have 2 main strategies: to decrease costs and increase quality level.
For cost decreasing, we plan to plant a new copper processing. This will give an advantage of raw material supplying. In the market, copper processing is mainly handled by 3 manufacturers and prices are high because monopoly in the market.
For increasing the quality level, we intend to develop our Research & Development Department. We intend to create more durable cables. There are 2 ways to increase durability; resistable coating and resistable filling foam. Our R&D Department in Kayseri factory (HES Polymer) creats new ideas for cable duarbility increasing.
5.1 Strategy Pyramid Strategy
Tactics
Plans
5.2 Marketing Strategy
Our marketing strategy is based on international publications and brief product description facilities. In order to get successs in internationally being recognized, we intend to realize our marketing plans. Lowering costs and new products (developments of product durability) are our bases of our marketing strategy. To decrease costs, we intend to make new investments. We support our strategy by new investment plans which can be realized by international financial sources.
We plan the result of our marketing strategy is getting a share of at least 20% and that makes about a worth of $ 400.000.000. And we intend to get this share at the end 2010.
There also some companies who are successful in foreign tenders but don’t have enough capacity for production. These companies also request for production alliances. With our production capacity and different products availability, our company has it own marketing strategy and realisation of success.
Max. Market Share
Low Costs
Investment Building For New Production Lines
Investment Copper Process Unit
New Product Development
Research & Development
PAGE 13
BUSINESS PLAN
ETA A.Ş.
5.2.1 Positioning Statement
With our capacity, ETA becomes one of the most important participant of the sector. Our production with copper cables, optic cables and new investment of high voltage cables make our product line meet all needs of the market. Also our agreement with Turk Telecom will bring us a gurantee of orders from Turk Telecom. This agreement assumes to give a fixed market share from Turk Telecom cable demands and this ratio is 7% ( it is worth of about $55- 60 million.)
ETA had already its position in the market and this place is among top major participants. According to production capacity in Turkey, top 3 cable manufacturers are listed as:
1st : ETA Cables, 2nd : HES Cables, 3rd : Türk Prysmian Inc
5.2.2 Pricing Strategy
In the cable sector, selling prices are differing in very narrow band.
To compete with the pricing, there are some ways to decrease costs:
Increasing capacity, Buying copper with future delivery, Incresing production line eficiency by technology, Creating new products, Building an integrated production system. (Producing some raw materials inhouse).
We have already prepared or planned some conditions above. But some of them needs a strong financial program. We intend to realize these programs by global financial sources. As an example; copper (60% of cost is copper) prices with future delivery are:
Cash Buyer 3 Months Buyer 15 Months Buyer 27 Months Buyer $ 8.090 / Tons $ 7.961 / Tons $ 7.205 / Tons $6.425 / Tons
London Metal Exchange Prices (July 2008)
3 and 6 months buying prices makes an effect of 0.5–0.8% of decrease in copper cost. We plan to arrange our cash flow programs to invest more copper buying in 3-6 months terms. With our efficient production technology, copper processing investment and future-term copper buying, we plan to realize a cost decrease of 5% and by keeping our profit fixed, we will take our prices to 5% lower and take position at the top in market competition.
5.2.3 Advertisement Strategy
The long-range goal is to create enough visibility to achieve penetration on different market.
Sectoral publications: there are sectoral publications in different European countries. We intend to give advertisement pages in these publications in order to take notice of European companies and delaers. We intend to make create demands.
When international tenders are announced, we intend to begin an introduction campain with sectoral publications, product catalogues, introductory letters mentioning our previous success in these markets. So that in the selection phase, we plan to become a well-known company in these countries.
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BUSINESS PLAN
ETA A.Ş.
5.2.4 Distribution Strategy
The distribution strategy is to create establishing agreements with dealers in main European countries, Middle-East and North Africa countries. With these distributors we have 2 targets to realize:
To sell private buyers trough these distributors To become participant of important tenders trough these distributors’ strong relations with
native project companies.
5.2.5 Marketing Programs
The most important point in our marketing program is seperating the domestic and international marketing departments. We consider these two marketing sections as different companies and a competetivity occurs between them. Domestic marketing executive is focusing on strong relations with goverment and Turk Telecom in order to get full information about tenders, competitors’s positions, pricing levels. This program will bring us the success. For the international markets, most important marter-cards are pricing strategy and past performances as references. We observe international buyers and tenders and prepare our projects and plans carefully. One of the most important thing in international marketing is to have staff with native language and we intend to hire more personnel in our marketing department who speaks Arabic (Middle-East companies), English, German, French (for North African companies).
5.3 Sales Strategy
We intend to set 2 diffetent strategies for international and domestic markets: Strategy for Domestic Market : We have strong relations with goverment establishments and also
after the privatization of Turk Telecom, we settled reliable relations with Turk Telekom. As we have finished many projects for Turk Telecom before, we have references which meet their needs. These references and strong relations give an advantage in tenders. By increasing our capcity and product segmentation, we intend to become a preferable company in covering Turk Telecom buying demands. ETA Elektrik Inc. was already supplying 35% of total need of Turk Telecom cable demand. We intend to get this market again by increasing capacity, lowering costs and increasing the product quality according to sector trends.
Strategy for International Market : In the past, we have finished many projects in international markets like; Syrian Telecom (14.935 Km copper cable project), Yemen Telecom, Iran Telecom, Bulgarian Telecom, Iraq Telecom (armored copper cable), Algeria Telecom (fiber optic cables and accessories). These references make our company preferable in the international market and we are in invitation lists for future tenders. We intend to work with represent offices in Middle-East & North Africa countries for future projects. As a strategy, having represent offices, will bring a better information flow and establish strong relations for mentioned countries’ goverments. For international private buyers (European countries are prefered), we intend to work with distributors. We have the plan and contacting with different Europen companies. We will work with these distributors with quota based and this will quarantee a fixed order quantity.
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BUSINESS PLAN
ETA A.Ş.
5.3.1 Sales Forecast
Our sales forecast assumes a growth in sales paralel to the market growth. With our copper processing plant in future project, we will have advantage in prices and this will bring a growth in sales. With increase in optic fiber cable production, our sales growth will be higher in this product type and proportion of product segmentation by product will be closer. Our new product group, high voltage electric cables, which will be produced by beginning of 2009 will be another share in the total sales. In 2 years time, capacity of high voltage electric cables production will meet 600% growth according to year 2009.
$ m
$ 50 m
$ 100 m
$ 150 m
$ 200 m
$ 250 m
$ 300 m
$ 350 m
$ 400 m
$ 450 m
2009 2010 2011
$ 5 m $ 15 m $ 30 m
$ 90 m$ 125 m
$ 150 m
$ 185 m $ 190 m $ 210 m
$ 280 m
$ 330 m
$ 390 m
High Voltage Electric Cables
Optic Fibre Cables Sales
Copper Cables Sales
TOTAL SALES
Sales Forecast By Product
$ m
$ 50 m
$ 100 m
$ 150 m
$ 200 m
$ 250 m
$ 300 m
$ 350 m
$ 400 m
$ 450 m
2009 2010 2011
$ 55 m $ 65 m $ 75 m
$ 90 m $ 105 m $ 125 m
$ 135 m$ 160 m
$ 190 m
$ 280 m
$ 330 m
$ 390 mPrivate Buyers
International Market
Domestic Market
TOTAL SALES
Sales Forecast by Market
PAGE 16
BUSINESS PLAN
ETA A.Ş.
5.3.2 Sales Programs ETA mainly has 2 sales area:
Domestic Market : In domestic market, we have two sales lines. We directly involve to tenders of goverment establishments and Turk Telecom. The second way is; we make sales alliances with companies who got the tenders. Because of our capacity, most companies in Turkey are looking a strong partner after getting these tenders.
International Market : For international markets, we have again two sales lines. We directly involve to the tenders. The second line is; we distribute trough dealers.
5.4 Strategic Alliances
We have already 3 strategic alliances: ETA has been selected as sole-authorized distributor of cable accesories of Raychem/Tyco Electronics for Turkish market and has been selected as a sub-contractor in switching equipments by ZTE / China. And also we are certified and approved optic fiber connectors supplier of Molex Premises Networks world wide. We wish to settle more strategic alliances in order to have the capability of building a full projects with cables, connectors, switchers and other accessories by our production and our partner companies. This kind of strategic alliances increases the success in realizing projects.
6.0 MANAGEMENT SUMMARY
ETA Elektrik Telekomunikasyon Taahhüt A.Ş. has a well-settled management team. We are slow to hire new people and very loyal to those who are fired. Management style reflects the participation of the owners. The company respects its community of co-workers and treats all workers well and fair. We attempt to develop and nature the company as a community. In decision stage of sales programs, committees are organized representing each department. For example; for an international tender, finance, personell, production planning and internaitonal marketing representatives participate the committee to take the final decision under the control of general manager. In order to improve management abilities, special training seminars are organized for our management team according to market developments and trends.
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BUSINESS PLAN
ETA A.Ş.
6.1 Organizational Structure
Seyfi Erkan, is the company CEO and responsible for the overall business management. He has experience of 30 years in this sector and he has the capability of directing production, finance and marketing departments.
Ibrhim Teoman Karagöz, is the Finance Manager. He is responsible for general finance, accounting and human resources subjects. Under his management, there are 2 executives responsible for accounting and human resources. He is also a member of Project Evaluation Committee ( P.E.C.).
Murat Ayvaz, is the Production Manager, responsible for overall production. There are 3 main executives under his management; production planning, quality management and buying. Beside his in-direct mangement staff, he has also Direct Production chiefs. He is also a member of Project Evaluation Committee ( P.E.C.).
Mustafa Akşit, is the Marketing Manager. He is responsible for both domestic and international marketing. He is also responsible for building new relations with international tender responsibles. He has 2 executives for domestic and international markets. He holds all direct communication with international buyers.
Ahmet Albayrak, is responsible manager for Research&Development department. He is responsible for inspecting market needs and technological developments in products and production processes.
MANAGING DIRECTOR
Finance Manager
Accounting Executive
Human Resources Executive
Production Manager
Production Planning Executive
Quality Management
Executive
Buying Executive
Marketing Manager
Domestic Marketing Executive
International Marketing Executive
Private Buyers Responsible
Adjudication Responsible
R & D Manager
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BUSINESS PLAN
ETA A.Ş.
6.2 Management Team
The company is managed by Mr. Seyfi Erkan. Seyfi Erkan : Founder, chairman and CEO of the company. He has been in the cable industry for 30 years. He began his business in Kayseri with his other partners and established HES Cables. They made the company become one of the biggest in the sector supporting with other group companies like HES Chemicals Inc., HES Polymer Inc, HES Steel Inc, HES Fibel Inc. In 1990, Mr. Erkan established ETA Cables and in 1999, he seperated from HES Group. He still owns HES Polymer Inc. which a cable raw material manufacturer company. With his experience in cable industry, ETA has been established with the latest technology and currently ETA has the most efficient production plant among other cable industry participants.
6.3 Management Team Gaps
There are 1 main gap in planning process: We have to find some local dealers especially in West European countries. Marketing planning for
the West Europe market is weak. We have good relations with Middle-East and North Africa market. But system and procedure are quite different in european countries and for project based orders, we have to educate our marketing staff.
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BUSINESS PLAN
ETA A.Ş.
6.4 In-Direct Personnel Plan
In-Direct Personnel Plan 2009 2010 2011
Production Personnel Production Manager $72.000 $80.400 $88.000 Production Planning Executive $43.200 $48.000 $109.000 Quality Assurance Executive $30.000 $34.800 $43.500 Buying Executives $30.000 $34.800 $36.500 Other (3 personnel) $54.000 $60.000 $103.000
Subtotal $229.200 $258.000 $380.000
Sales & Marketing Personnel Marketing Manager $84.000 $93.900 $103.000 Domestic Marketing Executive $36.000 $42.600 $42.700 International Marketing Executive $43.200 $48.000 $52.800 Other $0 $0 $0
Subtotal $163.200 $183.500 $198.500
Finance & Human Resources Personell Finance Manager $72.000 $79.400 $88.000 Accounting Executive $38.200 $42.600 $46.500 Human Resources Executive $30.000 $33.000 $37.000 Other $0 $0 $0
Subtotal $140.200 $155.000 $171.500
Research & Development Manager $80.400 $90.000 $100.000 Subtotal $80.400 $90.000 $100.500
General & Administrative Personnel General Manager $240.000 $265.000 $290.000 Assistant $39.600 $45.000 $50.000
Subtotal $279.600 $311.000 $340.000
Other Personnel Company Doctor $35.400 $40.000 $44.000 Custom Official $12.000 $13.500 $16.000 Other $0 $0 $0
Subtotal $47.400 $53.5000 $60.000
Total Headcount
Total Payroll $940.000 $1.050.000 $1.250.000
Payroll Burden $0 $0 $0
TOTAL PAYROLL EXPENDITURES $940.000 $1.050.000 $1.250.000
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BUSINESS PLAN
ETA A.Ş.
7.0 FINANCIAL PLAN
Our financial plan picture is encouraging. We have sufficient production capacity and we intend to work
with approximately 60% efficiency in the FY2009. Our factory capacity is (by working 100% efficient
capacity) is around $ 550 – 600 million. And by the FY2010, with our new investments in building new
production lines, our capcity increases by 10% and efficiency increases to 70-75%, we will meet the
sales forecast of around $400.000.000 by FY2012.
Because of our business sector specifications, copper industry is based on cash buyings. Raw materials
copper, PVC, PE are all sold cash. In order to increase our sales, efficiency and invest new projects, we
plan to work with a financial suppport. Basicly, we have the capability to exit from this credit plan
maximum in 3 years, but we intend to use it for a longer time and to make a better cash flow to
guarantee our future operating costs. At the end of exit program, ETA will have enough cash to support
its facilities and cash collected will be nearly 50% of its annual sale.
7.1 Fund Using Plan
DEAL TYPES DESCRIPTION INVESTMENT
SIZE
Refinancing depts Bank and raw material manufacturers debt $ 30.000.000
Expansion, development Copper process unit investment $ 4.000.000
Expansion, development Aluminum cable product line $ 3.000.000
Expansion, development New fiber optic production line $ 2.000.000
Expansion, development New building for investments $ 2.000.000
Expansion, development Factory revision $ 2.500.000
Seed capital Raw material buying $ 34.000.000
Seed capital Salaries and operating expences $ 2.500.000
TOTAL $ 80.000.000
7.2 Important Assumptions
The financial plan depends on important assumptions. The key assumptions are listed as below:
We assume a slow-growth economy, without major recession
We assume to access to equity capital and financing sufficient to resume our financial plan.
We assume that there occurs no changes in tax amounts.
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BUSINESS PLAN
ETA A.Ş.
7.3 Key Financial Indicators
The following chart shows changes in key financial changes (2009 is the base date and graph shows the growth rate according to 2009):
7.4 Exit Strategy We intend to use €60.000.000 fund in 10 years term. We have enough net profit (after taxes) to cover both borrowed main capital annual payments and interest. Table is given below as an analysis considering the interest as 5,5%. (Capital payback can begin at the 4th year of capital agreement due tol ender request) A clear exit program is planned as January 2016 (assuming an approval of our application)
Payment Time
Main Capital Payment
Interest TOTAL PAYMENT (Assuming approx. 5%)
Jan. 2010 - $ 80,0m x 10,0% $ 8.000.000 $ 8.000.000 Jan. 2011 - $ 80,0m x 10,0% $ 8.000.000 $ 8.000.000 Jan. 2012 - $ 80,0m x 10,0% $ 8.000.000 $ 8.000.000 Jan. 2013 - $ 80,0m x 10,0% $ 8.000.000 $ 8.000.000 Jan. 2014 - $ 80,0m x 10,0% $ 8.000.000 $ 8.000.000 Jan. 2015 - $ 80,0m x 10,0% $ 8.000.000 $ 8.000.000 Jan. 2016 $ 80.000.000 $ 80,0m x 10,0% $ 8.000.000 $ 88.000.000
0,00
0,50
1,00
1,50
2,00
Sales Gross Margin Op. Expenses Net Profit
1,0
00
1,0
00
1,0
00
1,0
001
,17
9
1,1
86
1,1
17
1,1
961,3
93
1,3
95
1,3
74
1,3
96
200920102011
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BUSINESS PLAN
ETA A.Ş.
Table is prepared assuming;
Net profits for 2012, 2013,… and 2016 are considered to be without growth in order to consider with pessimistic sales.
7.5 Projected Profit and Loss
We intend to manage the company with a profit that will cover our borrowed capital and interests payment and maintain a healthy operating in the factory.
Company works with a lower capacity (efficency) in 2009 and in following years, sales will increase by increasing the capacity used. Our main important profit will be increasing the efficiency. Keeping a small increase in production direct-workers, we plan increase a production and sales growth of approximately 17,8%.
For a better position in the market, we plan to work with a lower profit level of 11.2-11.3%. this will give us an advantage of increased capacity using and from 2011, this capacity increase will bring the result of cost decrease and net profit ratio will be around 15%.
Net Profit & Capital+Interest Payments
$ ,00 m
$ 10,00 m
$ 20,00 m
$ 30,00 m
$ 40,00 m
$ 50,00 m
2009 2010 2011 2012
$ 8,00 m $ 8,00 m $ 8,00 m $ 8,00 m
$ 31,7 m$ 37,3 m
$ 43,9 m $ 43,9 m
Interest Payment Net Profit
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BUSINESS PLAN
ETA A.Ş.
Table: Profit & Loss (Projected)
Proforma Profit & Loss 2009 2010 2011 Sales $280.000.000 $330.000.000 $390.000.000
Direct Cost of Production $238.132.208 $280.798.673 $331.898.431
Direct Production Personnel $2.200.000 $2.450.000 $3.100.000
Other $1.012.603 $1.220.000 $1.450.000
Total Cost of Sales $241.344.811 $284.468.673 $336.448.431
Gross Margin $38.655.189 $45.531.327 $53.551.569
Gross Margin % 13,81 % 13,80% 13.73%
Operating Expences:
Sales & Marketing Expences $145.000 $160.000 $180.000
General and Administrative Expenses:
General and Administrative Payroll $940.000 $1.050.000 $1.250.000
Payroll Burden $0 $0 $0
Depreciation $1.220.000 $1.260.000 $1.300.000
Total General and Administrative Expenses $2.160.000 $2.310.000 $2.550.000
General and Administrative % 0.77% 0.40% 0.65%
Other Expenses $100.000 $100.000 $100.000
Total Operating Expenses $2.405.000 $2.570.000 $2.830.000
Profit Before Interest and Taxes $36.250.189 $43.961.327 $50.721.569
Interest Expense Short-term $0 $0 $0
Interest Long-term (*) $0 $0 $0
Taxes Incurred $4.572.880 $5.663.199 $6.795.735
Extraordinary Items $0 $0
Net Profit $31.677.309 $37.258.128 $43.925.834
Net Profit/Sales 11,31% 11.30% 11.26%
(*) Payment of financial capital is not included in the table.
7.6 Projected Cash Flow
Our projected cash flow is prepared below. In 2009, we intend to invest our copper processing, aluminum cable production (high voltage electric cables), new fibre optic production line and new 5.000m2 building.
We plan to use a portion of cash balance in raw material stock buying and keep security cash for salaries and other payments. At the end of 2011, we plan to arrange a cash balance which will secure an exit program for our investor. Other portion of cash balance, will be used for stocks and other facilities to decrease costs and increase our market share.
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BUSINESS PLAN
ETA A.Ş.
Proforma Cash Flow
CASH RECEIVED 2009 2010 2011
Cash from Operations
Cash Sales $280.000.000 $330.000.000 $390.000.000
Cash from Receivables $4.000.000 $0 $0
Subtotal Cash from Operations $284.000.000 $330.000.000 $390.000.000
Additional Cash Received
Sales Tax, VAT Received $0 $0 $0
New Current Borrowing $80.000.000 $0 $0
New Other Liabilities (interest free) $0 $0 $0
New Long-term Liabilities $0 $0 $0
Sales of Other Current Assets $0 $0 $0
New Investment Received $0 $0 $0
Subtotal Cash Received $80.000.000 $0 $0
EXPENDITURES 2009 2010 2011
Expenditures from Operations
Cash Spent on Costs and Expenses $238.132.208 $280.798.673 $331.898.431
Wages, Salaries, Payroll Taxes $3.140.000 $3.500.000 $4.350.000
Payments of Accounts Payable $2.377.603 $2.640.000 $2.930.000
Subtotal Spent on Operations $243.749.811 $287.038.673 $339.178.431
Additional Cash Spent
Sales Tax, VAT $4.577.309 $5.663.199 $6.795.735
Principal Repayment of Current Borrowing $31.510.000 $0 $0
Other Liabilities Principal Repayment $2.055.000 $0 $0
Long-term Liabilities Principal Repayment $8.000.000 $8.000.000 $8.000.000
Purchase Other Current Assets $11.645.000 $0 $0
Purchase Long-term Assets $0 $0 $0
Dividends $0 $0 $0
Subtotal Cash Spent $57.767.309 $13.663.199 $14.795.735
Net Cash Flow $62.482.880 $29.298.128 $36.025.834
Cash Balance (*) $62.482.880 $91.781.008 $127.806.842
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BUSINESS PLAN
ETA A.Ş.
7.7 Projected Balance Sheet
Table: Balance Sheet (Projected)
Assets Short Term Assets 2009 2010 2011 Cash $62.482.880 $91.781.008 $127.806.842
Accounts Receivable $0 $0 $0
Inventory $0 $0 $0
Other Short Term Assets $0 $0 $0
Total Short Term Assets $62.482.880 $91.781.008 $127.806.842
Long Term Assets 2009 2010 2011 Long Term Assets $0 $0 $0
Accumulated Depreciation $1.220.000 $2.480.000 $3.780.000
Total Long Term Asstes $0 $0 $0
Total Long Term Assets $0 $0 $0
TOTAL ASSETS $63.702.880 $94.261.008 $131.586.842
Liabilities and Capital
2009 2010 2011 Accounts Buyable $0 $0 $0
Current Borrowing $0 $0 $0
Other Short Term Liabilities $0 $0 $0
Total Short Term Assets $0 $0 $0
Long Term Liabilities $0 $0 $0
TOTAL LIABILITIES $0 $0 $0
Paid-in Capital $80.000.000 $80.000.000 $80.000.000
Retained Earnings ($50.522.691) $24.551.207 $61.799.335
Earnings $31.677.309 $37.258.128 $43.925.834
Total Capital $63.702.880 $141.809.335 $187.935.169 Total Capital and Lialibities $63.702.880 $141.809.335 $187.935.169 Net Worth (USD) $63.702.880 $141.809.335 $185.725.169
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BUSINESS PLAN
ETA A.Ş.
7.8 Company Valuation
DESCRIPTION VALUE
(EURO) *
Company Name,
Licences and
Know-how
€10.000.000
Land 28.985.2m2 € 10.900.000
Production Area 13.568,05m2. Steel Construction Building. Vacuumed
concrete floor. Aluminum roof. 8 mts of height. € 8.300.000
Old Administration
Building
150,30m2. Concrete building. 3 Floors. Ceramics covered
floor. € 650.000
Refectory Building 360,10m2. Concrete building. Single Floor. Ceramics covered
floor. €200.000
Warehouse 1 1.018,06m2. Steel Construction Building. Vacuumed concrete
floor. Aluminum roof. 7 mts of height. € 1.230.000
Warehouse 2 884,77m2. Steel Construction Building. Vacuumed concrete
floor. Aluminum roof. 7 mts of height. € 1.180.000
New
Administration
Building
194,18m2. Concrete building. 2 Floors. Ceramics covered
floor. €220.000
Electric
Transformer
Building
58,04m2. Concrete building. Single Floor. Vaccuumed
concrete floor. € 40.000
Machine
Production &
Transport Building
98,00m2. Steel Construction Building. Vacuumed concrete
floor. Aluminum roof. 6 mts of height. €130.000
Carpentry Building 500,48m2. Steel Construction Building. Vacuumed concrete
floor. Aluminum roof. 6 mts of height. € 540.000
Reparation
Building
124,23m2. Steel Construction Building. Vacuumed concrete
floor. Aluminum roof. 6 mts of height. € 135.000
Security Building 16,00m2. Single Floor. €3.000
Weightridge Scaling upto 40 tons. € 54.300
Area Hedge 3mt height with concrete column with steel web € 10.300
Raw Material
Tanks 4 tanks. € 6.850
Area concrete cover 11.650m2. Covered with Concrete type3. €274.500
Production Lines,
machines and
implement
€63.000.000
*Values are converted from YTL to Euro by
currency for EURO/YTL = 2,000 TOTAL €96.873.950
*Euro/USD Currency =1,350 $130.780.000
Company evaluation is prepared by Istanbul Chamber of Commerce in Top 500 companies ranking.
Due to request, we can refresh it by any international consultancy companies like Arthur Andersen or
Bureau Veritas.
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BUSINESS PLAN
ETA A.Ş.
8.0 S.W.O.T. ANALYSIS
As a result of previous sections of company and industry analysis, S.W.O.T. analysis presents all points of company current situation in the market. Company has more positive internal and external points to operate in the market. Developments of external opportunities, supports company internal strength and company has a strong and reliable projected financials.
PAGE I
APPENDIX
PICTURES FROM THE FACTORY
PAGE II
APPENDIX