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Improvised Containers (MSc project)

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Rajeev Kumar
Rajeev Kumar

This is the presentation made by me and my colleagues for our Shipping project. It contains images of improvised containers challenging and hence increasing size of the container market.

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Contain Solutions Inc.
Who are we? ? Designing, Marketing and Integrating specialized containers to multimodal transportation ? Specially designed ¡®New Age¡¯ containers: ¨C Slotted container: 20¡¯ and 40¡¯ feet ? Shipment of small consignments at economical rates ¨C Dangerous cargo container: 20¡¯ feet only ? Specialized solution to the bulk shipment of packaged dangerous goods: airtight with gas detectors alarm system and CO2 fire fighting system ? Central Office: Singapore ? Manufacturing will be outsourced to a third party
Our Business ? Operational Routes: ¨C Europe-Far East ¨C Europe-Middle East ¨C Far East-Middle East ¨C Transatlantic liner routes ? Long term time-charter slots with the major Liner companies ? Long term contract with local freight forwarding agencies per container slot basis
Mission/Competitive Advantage ? Weaknesses of the current LCL container market: ¨C High rates ¨C Longer waiting time ¨C High probability of damage ¨C Multiple handling ¨C No reliability and security ? Solution: ¨C Competitive rates and compact slots ¨C Safe and speedy delivery, and reliability ¨C Greater flexibility and constant service ¨C Anti-fire systems and fire alarms
Service Specifics ? Seven major shipping routes (container capacity) ? Door-to-door service ¨C freight forwarders ? Slot handling ¨C freight forwarders ? Including: ¨C International sea delivery for any sized consignment and DG goods ¨C 24/7 delivery and operating hours ¨C Inland distribution up-to 300 miles (third party logistics company) ¨C Storage facilities ¨C Parcel tracking ¨C Packaging and re-packaging ¨C Documentation, etc¡­
Customers ? Mass population ? Small traders and businessman ? Shippers/Shipping Companies ? Chemical producers, pharmaceutical companies, etc¡­ ? Online retailers (Amazon, EBay, Alibaba, etc¡­) ? DHL, FedEx, UPS, etc¡­ ? Retail firms with international mail order, internet shopping and home delivery of large items ? Construction firms ? Small to mid-size couriers ? Medical supply firms ? IT suppliers ? Business with delivery fleets, etc¡­
Market Summary ? Employed routes to cover regions of high growth. (Far ¨C East ¨C Europe trades), BRIC Nations. ? Significant correlation between Industrial Production, Economic growth, global merchandise trade and sea borne trade volumes. ? Greater impact on the small scale and medium scale industries in developing countries. ? Increasing price ¨C during increased seasonal demand ? Decreasing price ¨C during slow seasons.
Competition and Strategies in place. POTENTIAL COMPETITORS: ? Large national Courier Firms (Royal Mail, TNT Express, FedEx,UPS,DHL). ? International Freight Forwarders which have substantial market share. ? Mid-size freight forwarders and courier firms operating a fleet of several vehicles. ? Local delivery specialist. STRATEGIES IN PLACE: ? SWOT Analysis, Marketing mix strategies will be revaluated every 6 months to update our position in the market. ? Survey was carried out to know about customer knowledge. (73% were ignorant about understanding loss in LCL and ready to use if they were cheaper and 13% felt they would avail the service if it cost them less, 8% felt they would avail if easily accessible and 6% were unaware about the industry. ? Obtain International Patents that would restrict our competitors from following the same business idea.
1. Strategic and Market risk: Risks ? E.g. Competition from existing freight forwarders and NVOC shippers o To implement strategies and business vision from the very beginning and declare itself as a strong and reliable player to assure clients in its reliability and high standard of services 2. Financial risk o To hedge financial risks and be proactive in implementation of new finance strategies 3. Asset and Resources risk o Insurance 4.Personnel and Productivity risk o To hire experienced staff or spend more time for training the personnel 5. Intellectual Property and Information risk ? Copy our design and reduce our attractiveness. o To have a highly dedicated executive and management staff who will have a share in the company or benefits package o To use comprehensive IT programmes to protect its systems 6. Product and Operations risk o To implement strong computerized systems in place for tracking and analyses of operations o Slotted containers first of it¡¯s Kind 7. Technological and Systems risk o To use comprehensive IT programmes to protect its systems 8. Legal and Compliance risk o contract terms and conditions must be clearly stated and all legal disputes should be indemnified
CS Risk Management Process
Shanghai ¨C Xiamen- Kaohsiung ¨C Hong Kong ¨C Shekou ¨C Singapore ¨C Port Kelang ¨C Southampton ¨C Rotterdam ¨C Hamburg ¨C Southampton ¨C Singapore ¨C Shekou ¨C Hong ROUTE 1 Kong ¨C Kaohsiung ¨C Ningbo. Straight line Total depreciation purchasing cost (Assuming No. of slots available 100 of containers $938,000 10yrs life) $233,800 Total Average lnland purchasing cost T/C Rate on route $36,000Charges per slot $100 of wagons $1,400,000 No. of containers in route 10 $2,338,000 Shangha Kaohsi Singap Port Southa Hambur Southa Hong Kaohsi Total no. i Xiamen ung Shekou ore Kelang mpton Rotterdam g mpton Shekou Kong ung Ningbo Total Monthly of days Distance 549 168 360 1421 256 8020 263 275 521 9630 23 337 494 124 22441 47 Total no. of days in No. of slots available 100 100 100 100 100 100 100 100 100 100 100 100 100 100 port T/C Rate (Pro-Rata Assumption 30% of Distance) 8807 2695 5775 22796 4107 128657 4219 4412 8358 154485 369 5406 7925 1989 360000 177697 14 sailing days Port handling charges / Including Custom clearance & Total no. Documentation handling of days charges 2057 2057 3629 3600 5212 2360 4343 5652 5805 4343 3600 5832 3629 2057 54178 26742 for RV 60.78 Average Inland transportation for 300miles / Including ANNUAL repositioning/ Freight DISTAN 131076. Forwarders commision 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 140000 69104 CE 92 Weighted average for depreciation of containers and wheeled wagon for this route 140 43 92 362 65 2044 67 70 133 2454 6 86 126 32 5718 2823 (Cost of containers+cost of wheel wagon* dist for voyage)/ (10 (st line dep) * total dist. on all planned route * no. of voy on this route annual) Fixed overhead Cost (Includ. Insurance) 598 183 392 1549 279 8741 287 300 568 10495 25 367 538 135 24458 12072 Total fixed Cost 390176 Total Cost 584354
ASM ($ (Distance x No. of Available Slot Mile for route 2244100mile) slots available) Cost per available mile per slot 0.174$/mile Breakeven Cost for each slot 95.45 29.21 62.59 247.07 44.51 1394.42 45.73 47.81 90.58 1674.34 4.00 58.59 85.89 21.56 139441.7 Breakeven Cost for 100 slots 9545.33 2920.97 6259.23 24706.57 4451.01 4 4572.72 4781.36 9058.50 167434.41 399.90 5859.33 8589.05 2155.96 15832.0 Total variable cost for 100slots 12057.18 12057.18 13629.23 13600.07 15212.08 12360.23 14343.33 15651.86 15804.78 14343.33 13600.07 0 13629.23 12057.18 Transhipment cost for 100slots 151801.9 21691.3 door to door 21602.51 14978.16 19888.46 38306.64 19663.09 7 18916.04 20433.21 24863.28 181777.74 13999.97 3 22218.29 14213.14 (Under assumption of average inland transportaion cost) Total Transhipment cost for each slot 216.03 149.78 198.88 383.07 196.63 1518.02 189.16 204.33 248.63 1817.78 140.00 216.91 222.18 142.13 Profit Profit margin (10%) 21.60 14.98 19.89 38.31 19.66 151.80 18.92 20.43 24.86 181.78 14.00 21.69 22.22 14.21 584.35 Price for Customers per slot 237.63 164.76 218.77 421.37 216.29 1669.82 208.08 224.77 273.50 1999.56 154.00 238.60 244.40 156.34 Sale revenue 642789.22 Total Profit on route per voyage Monthly 317282.06 (On both directions) 58435.38 Sale rev. 31 Annual Profit 341318.583 Container Total cost Handling Document except charges ation Customs FFA Cost FFA Shanghai 95.24 3.81 3.81 100 2057.18 Xiamen 95.24 3.81 3.81 100 2057.18 Kaohsiung 168.02 6.72 6.72 100 3629.23 Shekou 166.67 6.67 6.67 100 3600.07 Singapore 241.30 9.65 9.65 100 5212.08 Port Kelang 109.27 4.37 4.37 100 2360.23 Southampton 201.08 8.04 8.04 100 4343.33 Rotterdam 261.66 10.47 10.47 100 5651.86 Hamburg 268.74 10.75 10.75 100 5804.78 Southampton 201.08 8.04 8.04 100 4343.33 Shekou 166.67 6.67 6.67 100 3600.07 Hong Kong 270.00 10.80 10.80 100 5832.00 Kaohsiung 168.02 6.72 6.72 100 3629.23 Ningbo 95.24 3.81 3.81 100 2057.18 Average 179.16
Five Years Profit Projection Contain Solution 2011 % 2012 % 2013 % 2014 % 2015 % Sales $22,906,481 100.00% $24,555,747 100.00% $52,647,522 100.00% $ 78,971,283 100.00% $ 84,657,215 100.00% Cost/ Goods Sold (COGS) 2,184,739 9.54% $ 2,293,976 9.34% $ 4,817,349 9.15% $ 7,226,023 9.15% $ 7,587,324 8.96% Gross Profit $20,721,742 90.46% $22,261,772 90.66% $47,830,173 90.85% $ 71,745,260 90.85% $ 77,069,891 91.04% Total Expenses $16,179,956 70.63% $17,474,352 71.16% $18,697,557 35.51% $ 19,819,410 25.10% $ 20,810,381 90.85% Net Profit Before Tax 4,541,786 4,787,420 29,132,617 51,925,850 56,259,511 Income Taxes 772,104 813,861 4,952,545 8,827,394 9,564,117 Net Profit After Tax 3,769,683 3,973,558 24,180,072 43,098,455 46,695,394 Owner Draw/ Dividends - - - 4,309,846 4,669,539 Retained Earnings $ 3,769,683 $ 3,973,558 $24,180,072 $ 38,788,610 $ 42,025,854 Break-even analysis Cost Description Fixed Costs ($) Variable Expenses (%) Cost of Sales T/C rates 2,184,739 0.0 Salary expenses 4,297,500 0.0 Office Rent 440,500 0.0 IT 240,000 0.0 Advertising, signage, printing, travel, others 380000 Accounting and legal 50,004 - Container handling charges, documentation and customs 24618 In land transportation 10393905 Insurance 161,520 Depreciation 311,909 Total Fixed Expenses 7,686,171 Total Variable Expenses 10798523 Breakeven Sales level = 182
CASH FLOW STATEMENT Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Fiscal Year Begins Receipt Share Capital 14,762,301 3,780,000 Sales revenue 22,906,481 24,555,747 26,323,761 28,219,072 30,250,845 Fund Borrowed from Cass Plc. For expansion 3,780,000 Depreciation 311,909 311,909 311,909 311,909 311,909 Total Receipt 41,760,690 28,647,656 26,635,670 28,530,980 30,562,753 Payments Start up cost (from start up sheet) 8,249,602 Licencing fee 1,850,000 1,199,450 180,000 Fixed T/C rate 2,184,739 2,403,212 2,403,212 2,883,855 2,403,212 Salary expenses 4,297,500 4,727,250 5,199,975 5,719,973 6,234,770 Office Rent 440,500 471,335 504,328 539,631 577,406 IT 120,000 126,000 132,300 138,915 145,861 Advertising, signage, printing, travel, others 380,000 475,000 593,750 771,875 926,250 Accounting and legal 50,004 52,504 55,129 57,886 63,674 Container handling charges, documentation and customs 24,618 25,849 27,141 29,041 30,493 In land transportation 10,393,905 11,537,235 11,652,607 13,400,498 14,606,543 Insurance 161,520 169,596 178,076 186,980 196,329 Taxes 131,139 134,024 140,726 147,762 155,150 Total Payment 29,433,527 21,321,456 20,887,245 24,056,416 25,339,688 Net Cash Flow 6,034,464 7,326,200 5,748,425 4,474,565 5,223,065 0 6,034,464 13,360,664 19,109,089 23,583,654 Opening Balance Closing Balance 6,034,464 13,360,664 19,109,089 23,583,654 28,806,719
Projected Balance Sheet for As on 1st July As on 30th June As on 30th June As on 30th June As on 30th June five years 2011 2012 2013 2014 2015 Total Assets less Total $ $ $ $ $ liabilities 7,211,922 18,735,203 23,086,509 27,450,059 32,517,686 Share Capital 7,211,922 10,991,922 18,735,163 23,065,713 27,451,016 $ Retained Profit - 7,743,241 4,330,550 4,385,304 5,068,321 Shareholder's Equity 7,211,922 18,735,163 23,065,713 27,451,016 32,519,337 Non-current Liabilities - - - - - Capital Employed 7,211,922 18,735,163 23,065,713 27,451,016 32,519,337
Financial Assumptions 1. To calculate break even for each slot, a unique concept of ¡®Slot per mile¡¯ is introduced. This concept is definitely new in the Container industry but same concept is used in airline industry to calculate breakeven for calculating ¡®Available seat per mile¡¯. 2. For first seven of our selected routes, Financial calculation is carried out to check the robustness of pricing system and breakeven calculation. 3. Time Charter rate for calculation is based on Data obtained from Freight Forwarder in India (This is an approximation, as slot rates are available only between two ports without multiple port handling) 4. Capital cost for procuring containers and its equipments are based on quotation received from one the manufacturers (approximation) 5. Average data for port handling charges and distance is taken from www.csav.cl and www.axamarine.com. For the simplicity of financial calculation, port handling is taken as constant. 6. Also, in difficulty of getting data for inland transportation, an average of $100 per slots is taken for 300miles. Also, WACC is based on 10% is based on similar company¡¯s financial data and risk free rate of 4% is taken. Sales revenues is increasing at a rate of 7.2% per annum ( Projected growth of most of the container liners in year 2011). Inflation is ignored. 7. All the above assumptions, may affect the credibility of financial calculation. But at large, it is not affecting company¡¯s profitability because of its nature of pricing of each slot. All variable costs are passed to the customers. Variable cost for the customer includes VAT and cargo insurance. 8. Unique way of slot pricing for customer will help the company and investor¡¯s in mitigating all price risk. 9. A projection of cash flow, balance sheet and profit and loss statement is prepared for next 5 years.
Contain Solutions is forecasted to have an Internal rate of return (IRR) of 29% over a period of ten years. The NPV has been simulated for varying WACC¡¯s using 1000 iterations the NPV is found between $ 8.25 and $ 25.12 million at 90% confidence interval. The start up expenses amount to $ 8.6 million and the company requires an additional $ 3.78 million during the first year of expansion of its operations.The capital allocated for the purpose of this project far exceeds the funding required in turn eliminating external sources of funding in the near future. Possible Exit Strategy The Exit strategy we have is to sell the time charter slots to other freight forwarders and sell off the containers in the container leasing market. Since, the company?s investment on fixed costs is minimal, it provides a strategic advantage to exit the market easily.
Conclusion 1. Contain Solutions will aim to increase the value for its investors. 2. The company, with it¡¯s extensive marketing, route selection and planning, consolidation of NVOCC under the company¡¯s name and fail-proof financial planning will definitely expand the horizon of containerization by providing the new-age containers. 3. Company¡¯s deep in-sighted dictum ¡®transporting values¡¯ incorporates values concerning investors, social value, value for its employees, values for international rules and regulations. CONTAINER WORLD WITHOUT CONTAINER WORLD WITH CONTAIN SOLUTIONS CONTAIN SOLUTIONS GROWTH WITH CONTAIN CARGO SOLUTIONS VOLUME CARGO VOLUME Testimonial: I have read thro' your presentation and it reads well. I think you have presented the facts in a logical way and it makes for an interesting proposal ¨C Rita Barnish , Experienced Sale and Purchase broker Your plan shows that you understand that FAK means Freight All Kinds and show that you understand that "The major drawback with containerisation is dealing with LCL (Less Container Load) cargoes." > "Less than full Container Loads" as opposed to FCL = Full Container Loads. Your idea, names, figures and tables are excellent ! ¨C Jeffrey Blum , Director Interlink International Trading.
Thank you

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Improvised Containers (MSc project)

  • 2. Who are we? ? Designing, Marketing and Integrating specialized containers to multimodal transportation ? Specially designed ¡®New Age¡¯ containers: ¨C Slotted container: 20¡¯ and 40¡¯ feet ? Shipment of small consignments at economical rates ¨C Dangerous cargo container: 20¡¯ feet only ? Specialized solution to the bulk shipment of packaged dangerous goods: airtight with gas detectors alarm system and CO2 fire fighting system ? Central Office: Singapore ? Manufacturing will be outsourced to a third party
  • 3. Our Business ? Operational Routes: ¨C Europe-Far East ¨C Europe-Middle East ¨C Far East-Middle East ¨C Transatlantic liner routes ? Long term time-charter slots with the major Liner companies ? Long term contract with local freight forwarding agencies per container slot basis
  • 4. Mission/Competitive Advantage ? Weaknesses of the current LCL container market: ¨C High rates ¨C Longer waiting time ¨C High probability of damage ¨C Multiple handling ¨C No reliability and security ? Solution: ¨C Competitive rates and compact slots ¨C Safe and speedy delivery, and reliability ¨C Greater flexibility and constant service ¨C Anti-fire systems and fire alarms
  • 5. Service Specifics ? Seven major shipping routes (container capacity) ? Door-to-door service ¨C freight forwarders ? Slot handling ¨C freight forwarders ? Including: ¨C International sea delivery for any sized consignment and DG goods ¨C 24/7 delivery and operating hours ¨C Inland distribution up-to 300 miles (third party logistics company) ¨C Storage facilities ¨C Parcel tracking ¨C Packaging and re-packaging ¨C Documentation, etc¡­
  • 6. Customers ? Mass population ? Small traders and businessman ? Shippers/Shipping Companies ? Chemical producers, pharmaceutical companies, etc¡­ ? Online retailers (Amazon, EBay, Alibaba, etc¡­) ? DHL, FedEx, UPS, etc¡­ ? Retail firms with international mail order, internet shopping and home delivery of large items ? Construction firms ? Small to mid-size couriers ? Medical supply firms ? IT suppliers ? Business with delivery fleets, etc¡­
  • 7. Market Summary ? Employed routes to cover regions of high growth. (Far ¨C East ¨C Europe trades), BRIC Nations. ? Significant correlation between Industrial Production, Economic growth, global merchandise trade and sea borne trade volumes. ? Greater impact on the small scale and medium scale industries in developing countries. ? Increasing price ¨C during increased seasonal demand ? Decreasing price ¨C during slow seasons.
  • 8. Competition and Strategies in place. POTENTIAL COMPETITORS: ? Large national Courier Firms (Royal Mail, TNT Express, FedEx,UPS,DHL). ? International Freight Forwarders which have substantial market share. ? Mid-size freight forwarders and courier firms operating a fleet of several vehicles. ? Local delivery specialist. STRATEGIES IN PLACE: ? SWOT Analysis, Marketing mix strategies will be revaluated every 6 months to update our position in the market. ? Survey was carried out to know about customer knowledge. (73% were ignorant about understanding loss in LCL and ready to use if they were cheaper and 13% felt they would avail the service if it cost them less, 8% felt they would avail if easily accessible and 6% were unaware about the industry. ? Obtain International Patents that would restrict our competitors from following the same business idea.
  • 9. 1. Strategic and Market risk: Risks ? E.g. Competition from existing freight forwarders and NVOC shippers o To implement strategies and business vision from the very beginning and declare itself as a strong and reliable player to assure clients in its reliability and high standard of services 2. Financial risk o To hedge financial risks and be proactive in implementation of new finance strategies 3. Asset and Resources risk o Insurance 4.Personnel and Productivity risk o To hire experienced staff or spend more time for training the personnel 5. Intellectual Property and Information risk ? Copy our design and reduce our attractiveness. o To have a highly dedicated executive and management staff who will have a share in the company or benefits package o To use comprehensive IT programmes to protect its systems 6. Product and Operations risk o To implement strong computerized systems in place for tracking and analyses of operations o Slotted containers first of it¡¯s Kind 7. Technological and Systems risk o To use comprehensive IT programmes to protect its systems 8. Legal and Compliance risk o contract terms and conditions must be clearly stated and all legal disputes should be indemnified
  • 11. Shanghai ¨C Xiamen- Kaohsiung ¨C Hong Kong ¨C Shekou ¨C Singapore ¨C Port Kelang ¨C Southampton ¨C Rotterdam ¨C Hamburg ¨C Southampton ¨C Singapore ¨C Shekou ¨C Hong ROUTE 1 Kong ¨C Kaohsiung ¨C Ningbo. Straight line Total depreciation purchasing cost (Assuming No. of slots available 100 of containers $938,000 10yrs life) $233,800 Total Average lnland purchasing cost T/C Rate on route $36,000Charges per slot $100 of wagons $1,400,000 No. of containers in route 10 $2,338,000 Shangha Kaohsi Singap Port Southa Hambur Southa Hong Kaohsi Total no. i Xiamen ung Shekou ore Kelang mpton Rotterdam g mpton Shekou Kong ung Ningbo Total Monthly of days Distance 549 168 360 1421 256 8020 263 275 521 9630 23 337 494 124 22441 47 Total no. of days in No. of slots available 100 100 100 100 100 100 100 100 100 100 100 100 100 100 port T/C Rate (Pro-Rata Assumption 30% of Distance) 8807 2695 5775 22796 4107 128657 4219 4412 8358 154485 369 5406 7925 1989 360000 177697 14 sailing days Port handling charges / Including Custom clearance & Total no. Documentation handling of days charges 2057 2057 3629 3600 5212 2360 4343 5652 5805 4343 3600 5832 3629 2057 54178 26742 for RV 60.78 Average Inland transportation for 300miles / Including ANNUAL repositioning/ Freight DISTAN 131076. Forwarders commision 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 10000 140000 69104 CE 92 Weighted average for depreciation of containers and wheeled wagon for this route 140 43 92 362 65 2044 67 70 133 2454 6 86 126 32 5718 2823 (Cost of containers+cost of wheel wagon* dist for voyage)/ (10 (st line dep) * total dist. on all planned route * no. of voy on this route annual) Fixed overhead Cost (Includ. Insurance) 598 183 392 1549 279 8741 287 300 568 10495 25 367 538 135 24458 12072 Total fixed Cost 390176 Total Cost 584354
  • 12. ASM ($ (Distance x No. of Available Slot Mile for route 2244100mile) slots available) Cost per available mile per slot 0.174$/mile Breakeven Cost for each slot 95.45 29.21 62.59 247.07 44.51 1394.42 45.73 47.81 90.58 1674.34 4.00 58.59 85.89 21.56 139441.7 Breakeven Cost for 100 slots 9545.33 2920.97 6259.23 24706.57 4451.01 4 4572.72 4781.36 9058.50 167434.41 399.90 5859.33 8589.05 2155.96 15832.0 Total variable cost for 100slots 12057.18 12057.18 13629.23 13600.07 15212.08 12360.23 14343.33 15651.86 15804.78 14343.33 13600.07 0 13629.23 12057.18 Transhipment cost for 100slots 151801.9 21691.3 door to door 21602.51 14978.16 19888.46 38306.64 19663.09 7 18916.04 20433.21 24863.28 181777.74 13999.97 3 22218.29 14213.14 (Under assumption of average inland transportaion cost) Total Transhipment cost for each slot 216.03 149.78 198.88 383.07 196.63 1518.02 189.16 204.33 248.63 1817.78 140.00 216.91 222.18 142.13 Profit Profit margin (10%) 21.60 14.98 19.89 38.31 19.66 151.80 18.92 20.43 24.86 181.78 14.00 21.69 22.22 14.21 584.35 Price for Customers per slot 237.63 164.76 218.77 421.37 216.29 1669.82 208.08 224.77 273.50 1999.56 154.00 238.60 244.40 156.34 Sale revenue 642789.22 Total Profit on route per voyage Monthly 317282.06 (On both directions) 58435.38 Sale rev. 31 Annual Profit 341318.583 Container Total cost Handling Document except charges ation Customs FFA Cost FFA Shanghai 95.24 3.81 3.81 100 2057.18 Xiamen 95.24 3.81 3.81 100 2057.18 Kaohsiung 168.02 6.72 6.72 100 3629.23 Shekou 166.67 6.67 6.67 100 3600.07 Singapore 241.30 9.65 9.65 100 5212.08 Port Kelang 109.27 4.37 4.37 100 2360.23 Southampton 201.08 8.04 8.04 100 4343.33 Rotterdam 261.66 10.47 10.47 100 5651.86 Hamburg 268.74 10.75 10.75 100 5804.78 Southampton 201.08 8.04 8.04 100 4343.33 Shekou 166.67 6.67 6.67 100 3600.07 Hong Kong 270.00 10.80 10.80 100 5832.00 Kaohsiung 168.02 6.72 6.72 100 3629.23 Ningbo 95.24 3.81 3.81 100 2057.18 Average 179.16
  • 13. Five Years Profit Projection Contain Solution 2011 % 2012 % 2013 % 2014 % 2015 % Sales $22,906,481 100.00% $24,555,747 100.00% $52,647,522 100.00% $ 78,971,283 100.00% $ 84,657,215 100.00% Cost/ Goods Sold (COGS) 2,184,739 9.54% $ 2,293,976 9.34% $ 4,817,349 9.15% $ 7,226,023 9.15% $ 7,587,324 8.96% Gross Profit $20,721,742 90.46% $22,261,772 90.66% $47,830,173 90.85% $ 71,745,260 90.85% $ 77,069,891 91.04% Total Expenses $16,179,956 70.63% $17,474,352 71.16% $18,697,557 35.51% $ 19,819,410 25.10% $ 20,810,381 90.85% Net Profit Before Tax 4,541,786 4,787,420 29,132,617 51,925,850 56,259,511 Income Taxes 772,104 813,861 4,952,545 8,827,394 9,564,117 Net Profit After Tax 3,769,683 3,973,558 24,180,072 43,098,455 46,695,394 Owner Draw/ Dividends - - - 4,309,846 4,669,539 Retained Earnings $ 3,769,683 $ 3,973,558 $24,180,072 $ 38,788,610 $ 42,025,854 Break-even analysis Cost Description Fixed Costs ($) Variable Expenses (%) Cost of Sales T/C rates 2,184,739 0.0 Salary expenses 4,297,500 0.0 Office Rent 440,500 0.0 IT 240,000 0.0 Advertising, signage, printing, travel, others 380000 Accounting and legal 50,004 - Container handling charges, documentation and customs 24618 In land transportation 10393905 Insurance 161,520 Depreciation 311,909 Total Fixed Expenses 7,686,171 Total Variable Expenses 10798523 Breakeven Sales level = 182
  • 14. CASH FLOW STATEMENT Jul-11 Jul-12 Jul-13 Jul-14 Jul-15 Fiscal Year Begins Receipt Share Capital 14,762,301 3,780,000 Sales revenue 22,906,481 24,555,747 26,323,761 28,219,072 30,250,845 Fund Borrowed from Cass Plc. For expansion 3,780,000 Depreciation 311,909 311,909 311,909 311,909 311,909 Total Receipt 41,760,690 28,647,656 26,635,670 28,530,980 30,562,753 Payments Start up cost (from start up sheet) 8,249,602 Licencing fee 1,850,000 1,199,450 180,000 Fixed T/C rate 2,184,739 2,403,212 2,403,212 2,883,855 2,403,212 Salary expenses 4,297,500 4,727,250 5,199,975 5,719,973 6,234,770 Office Rent 440,500 471,335 504,328 539,631 577,406 IT 120,000 126,000 132,300 138,915 145,861 Advertising, signage, printing, travel, others 380,000 475,000 593,750 771,875 926,250 Accounting and legal 50,004 52,504 55,129 57,886 63,674 Container handling charges, documentation and customs 24,618 25,849 27,141 29,041 30,493 In land transportation 10,393,905 11,537,235 11,652,607 13,400,498 14,606,543 Insurance 161,520 169,596 178,076 186,980 196,329 Taxes 131,139 134,024 140,726 147,762 155,150 Total Payment 29,433,527 21,321,456 20,887,245 24,056,416 25,339,688 Net Cash Flow 6,034,464 7,326,200 5,748,425 4,474,565 5,223,065 0 6,034,464 13,360,664 19,109,089 23,583,654 Opening Balance Closing Balance 6,034,464 13,360,664 19,109,089 23,583,654 28,806,719
  • 15. Projected Balance Sheet for As on 1st July As on 30th June As on 30th June As on 30th June As on 30th June five years 2011 2012 2013 2014 2015 Total Assets less Total $ $ $ $ $ liabilities 7,211,922 18,735,203 23,086,509 27,450,059 32,517,686 Share Capital 7,211,922 10,991,922 18,735,163 23,065,713 27,451,016 $ Retained Profit - 7,743,241 4,330,550 4,385,304 5,068,321 Shareholder's Equity 7,211,922 18,735,163 23,065,713 27,451,016 32,519,337 Non-current Liabilities - - - - - Capital Employed 7,211,922 18,735,163 23,065,713 27,451,016 32,519,337
  • 16. Financial Assumptions 1. To calculate break even for each slot, a unique concept of ¡®Slot per mile¡¯ is introduced. This concept is definitely new in the Container industry but same concept is used in airline industry to calculate breakeven for calculating ¡®Available seat per mile¡¯. 2. For first seven of our selected routes, Financial calculation is carried out to check the robustness of pricing system and breakeven calculation. 3. Time Charter rate for calculation is based on Data obtained from Freight Forwarder in India (This is an approximation, as slot rates are available only between two ports without multiple port handling) 4. Capital cost for procuring containers and its equipments are based on quotation received from one the manufacturers (approximation) 5. Average data for port handling charges and distance is taken from www.csav.cl and www.axamarine.com. For the simplicity of financial calculation, port handling is taken as constant. 6. Also, in difficulty of getting data for inland transportation, an average of $100 per slots is taken for 300miles. Also, WACC is based on 10% is based on similar company¡¯s financial data and risk free rate of 4% is taken. Sales revenues is increasing at a rate of 7.2% per annum ( Projected growth of most of the container liners in year 2011). Inflation is ignored. 7. All the above assumptions, may affect the credibility of financial calculation. But at large, it is not affecting company¡¯s profitability because of its nature of pricing of each slot. All variable costs are passed to the customers. Variable cost for the customer includes VAT and cargo insurance. 8. Unique way of slot pricing for customer will help the company and investor¡¯s in mitigating all price risk. 9. A projection of cash flow, balance sheet and profit and loss statement is prepared for next 5 years.
  • 17. Contain Solutions is forecasted to have an Internal rate of return (IRR) of 29% over a period of ten years. The NPV has been simulated for varying WACC¡¯s using 1000 iterations the NPV is found between $ 8.25 and $ 25.12 million at 90% confidence interval. The start up expenses amount to $ 8.6 million and the company requires an additional $ 3.78 million during the first year of expansion of its operations.The capital allocated for the purpose of this project far exceeds the funding required in turn eliminating external sources of funding in the near future. Possible Exit Strategy The Exit strategy we have is to sell the time charter slots to other freight forwarders and sell off the containers in the container leasing market. Since, the company?s investment on fixed costs is minimal, it provides a strategic advantage to exit the market easily.
  • 18. Conclusion 1. Contain Solutions will aim to increase the value for its investors. 2. The company, with it¡¯s extensive marketing, route selection and planning, consolidation of NVOCC under the company¡¯s name and fail-proof financial planning will definitely expand the horizon of containerization by providing the new-age containers. 3. Company¡¯s deep in-sighted dictum ¡®transporting values¡¯ incorporates values concerning investors, social value, value for its employees, values for international rules and regulations. CONTAINER WORLD WITHOUT CONTAINER WORLD WITH CONTAIN SOLUTIONS CONTAIN SOLUTIONS GROWTH WITH CONTAIN CARGO SOLUTIONS VOLUME CARGO VOLUME Testimonial: I have read thro' your presentation and it reads well. I think you have presented the facts in a logical way and it makes for an interesting proposal ¨C Rita Barnish , Experienced Sale and Purchase broker Your plan shows that you understand that FAK means Freight All Kinds and show that you understand that "The major drawback with containerisation is dealing with LCL (Less Container Load) cargoes." > "Less than full Container Loads" as opposed to FCL = Full Container Loads. Your idea, names, figures and tables are excellent ! ¨C Jeffrey Blum , Director Interlink International Trading.
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