Transcript Northstar Innovative Gypsum Client: Jeff Howsam

Brennan McArthur
Dan Wilson
Amanda Johnson
Andrew Larson
Company Overview



founded in 1998
Recycles drywall into gypsum soil
amendment and drilling mud additive
137,000 tonne gypsum drywall on site
Industry Overview

Gypsum is a naturally occurring rock


12% of new drywall wasted


20% Calcium, 15% sulfur by weight
Growing environmental concern
Potential uses:






New drywall processing
Agricultural fertilizer
Industrial absorbent
Drilling mud additive
Composting
“Natural” lawn food
Goals and Objectives




To market and sell bulk quantities of
gypsum with as little production prep as
possible
To sell 82,000 metric tonne of gypsum
within 10 years
To create and sell a well branded product
To raise general awareness of benefits and
uses of gypsum
Operations
Organizational Structure
Site Plan
Floor Plans
DISC
Process Flow
TROMMEL
SCREENER
Coarser product
for farmers
3 tonne/hour
Waste
1° PRODUCT
GAS
DRYER
Take
Moisture
HAMMER MILL
DOUBLE
SCREEN
SCREENER
Fine
Product for
Oil Industry
2º PRODUCT
OVERHEAD
HOPPER
BAG
Description
Land
Cover All Storage
Cost (Can $) Source
0
(includes construction)
$45,000
Cover all
Total
$45,000
Equipment
Tractor
14Ft Breaking Disc
Screener
Machinery
Case 2470
Capital Budget
Movable Container
Loader
Small Bobcat
Fork Lifts
Gas Dryer
Hammer Mill
Smaller Screen
Bagging Machinery
Skid Wrapper
Total
Truck (1990)
Trailer
Vovlo
JCB (forks and bucket)
Ford
Electric Indoor Use
H2S Gas Monitor
Equiptment Total
Office Supplies
Computer
Desk, File Cabinet
Chair
Printer, fax copier
Phone & Answering Machine
Reception Chairs
Miscellaneous Equipment
Office Total
Working Capital
Fuel
Miaintenence/Repairs
Insurance
Bags
Skids
Utility Tarps
3 Quantity
Saftey Supplies
Plastic Wrap
Office Supplies
H2S Training (2)
175 each
Building (lease rate)
Waste Disposal
410 tonne (5% total)
Total Expenses
Total Capital Requirements
$8,000
$5,000
$40,000
$100,000
$5,000
$10,000
$30,000
$30,000
$5,000
$10,000
$220
$243,220
Jeff Howsam (Oct. 4 2007)
Jeff Howsam (Oct. 4 2007)
Jeff Howsam (Oct. 4 2007)
Jeff Howsam
Jeff Howsam
Jeff Howsam
Jeff Howsam
Jeff Howsam
Jeff Howsam
Jeff Howsam
All gas
(Oct.
(Oct.
(Oct.
(Oct.
(Oct.
(Oct.
(Oct.
$1,209
$2,000
$200
$200
$70
$500
$2,500
$6,679
Dell Canada
Office Depot
Office Depot
Office Depot
Office Depot
Office Depot
Estimate
$19,900
$12,161
$2,000
$9,240
$3,000
$75
$500
$2,112
$2,500
$350
$12,250
$18,450
$82,537
$377,436
Co-op
4 2007)
4 2007)
4 2007)
4 2007)
4 2007)
4 2007)
4 2007)
Estimate
Jeff Howsam
Bulldog Bags
Wood Pallet
Peavey Mart
Estimate
Soap Goat
Estimate
Parkland Regional College
Jeff Howsam (Oct. 4 2007)
City of Saskaoon
Cost of Goods Manufactured
Dircet Materials
Gypsum
Bags
Fuel
Skids
Plastic Wrap
Maintenance
Saftey Supplies
Waste
Miscellaneous
Total Direct Costs
Direct Labour
Yard Manager
Indirect Labour costs
Total Labour and Benefits
Manufacuturing Overhead
Building Rent and Bills
Total Capital Cost Allowance
Variable Overhead
Total Overhead
Total Cost of Goods
Manufactured
$0
$9,240
$19,900
$3,000
$2,112
$12,161
$500
$18,450
$2,500
$67,863
$30,000
$2,856
$32,856
$12,250
$42,072
$2,425
$56,747
$157,466
Cost of Goods Sold
Beginning Inventory
Cost of Goods Produced
Cost of Goods Available for Sale
Ending Inventory
Cost of Goods Sold
$
$ 157,466
$ 157,466
$
25,885
$ 131,581
Human Resources
Job Description
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Three employees

President
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Secretary
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Oversees day to day operations
Marketing and business decisions
Reception and administration
Yard Manager
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Manages yard duties
Product preparation and equipment operation
Labour Requirements
Total Direct and Indirect Labour
Source of Estimates obtained
President
Yard Manager
Secretary
25% of $150,000 annual wage
50% of $60,000 annual wage
10% of $40,000 annual wage
Presendent
Secretary
Yard Manager
$37,500
$30,000
$4,000
NSIG
Employment Canada
Workers
Salary
Insurance
Pension Compensation
$37,500
1.87%
4.53%
3.12%
$4,000
1.87%
4.53%
3.12%
$30,000
1.87%
4.53%
3.12%
Total Benefits
Total Wages and Benefits
Total
Benefits
$3,570
$381
$2,856
$6,807
$78,307
Marketing
Marketing Mix
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Product
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Price
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$40/tonne- soil amenity (bulk)
$160/tonne- drilling mud additive (bagged)
Place
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Agricultural soil amenity
Drilling mud additive
Farmers within Saskatchewan
Oil and gas industries in Southern Saskatchewan and Eastern
Alberta
Promotion
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Trade shows in the ag and oil industries
Advertisements in the Western Producer
The Market
Segmentation
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Agriculture soil amenity
Oil industry drilling mud additive
Soil amenity for home and garden

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Recycled into new drywall

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Small scale
Needs to be shipped to Alberta
Grease absorption
Targeting and Positioning
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Focus on Ag and Oil Sectors

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Soil Amenity

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Most potential for bulk sales
Sulfur fertilizer substitute
Highly competitive market
Drilling Mud Additive

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Price takers
Differentiated product
NSIG
Human Resources
Physical Resources
Financial Resources
STRENGTHS
 Strong leadership and
business experience from
the president
 Production and business
familiarity between:
president, yard manager,
and secretary
 Hierarchy of authority
 Good internal
understanding of gypsum
 Small number of
employees must manage
and use time well
 Processing equipment
already established.
 Located just off 51st with
access to a rail-line.
 Slow release form of
sulphur
 Large yard, with easy
access to big trucks.
 Cover-All building to
hold an abundance of
bulk product.
 Owns machinery
($243,220) and land
 Low labour requirement
WEAKNESSES
 Workers have other
duties during workday
than gypsum.
 Lack of direction in
marketing product.
 Secretary is in a
separate building from
main work area.
 Little experience in the
Gypsum Industry
 Small number of
employees little room
for lost time
 Shared building with
other company
 Can screen 40 tonne/hr,
but only dry 3 tonne/hr.
 Aging machinery and
equipment
 Lots of non-NSIG
traffic in the yard due
to shared spaces.
 Distance to market
 Tough to secure loan
since the product is
worthless to others.
 Ability to pay bills and
wages if sales are slow
Markets
Opportunities
 Rising cost of synthetic
Fertilizer
 New idea-early market
entrant in Saskatchewan
 Environmental shift in
industry
 Long Term Data (works
as well or better than
expected)
Threats
 Less practical, one
more application step
 No customer awareness
 City Regulation on
Industrial Waste
 Crop input regulation
 Lack of Long term Data
 Companies competing
directly using other
gypsum
Competition
Advantages
Northstar Innovati ve
Gypsum-Agriculture
Sulphur Fertilizer
Manufacturers
Northstar Innovati ve
Gypsum- Drilling
Mud
Drilling Stabilizer
Products
Disadvantages
- Affordable: $40/tonne
- Slow solubility
-One in five applicat ion
- Environ mentally friendly
- So il amend ment
- Source of Calciu m
- Recycled product
- Waste products useable
- Ext ra application process
- Ext ra product to handle
- Blend requires extra
processing
- High applicat ion rates
- Specialized equip ment
- Lower availability
- No awareness
- Not easily stored
- Currently only one
formulat ion
- Ease of use
- Oligopoly/Monopoly market
- Readily available form of
sulphur
- Can be blended
- Source of Nitrogen
- Lower application rates
- Regular equip ment
- Applicat ion flexibility
- Expensive: $300/tonne
- Rising costs
- Can be to xic to plants
-Yearly practice
- Raises cation levels
- Environ mentally safe
- Easy handling
- Lubricant
- No awareness
- Highly co mpetit ive
market
- Distance to market
- Limited market
- H2 S gas issues
- Pro ximity to market
- Brand awareness
- Low to xicity
- Highly co mpetit ive
- Majority market share
- Limited market
- Mud lagoons
- Expensive
Marketing Budget
Marketing Budget
Activity
Booth for Agriculture Shows
Brochures for Agriculture Producers
Hotels
Meals
Mileage (Regina)
Oil and Gas Show Booth
Brochures to Oil Industry
Hotels
Hotels
Meals
Mileage (Weyburn)
Meals
Mileage (Edmonton)
Wages (Managers Time)
Western Producer (Banner)
Total
Total Cost Cost ($)
$5,000
$5,000
$345
$123
$202
$5,000
$5,000
$172
$210
$123
$294
$153
$406
$7,244
$400
$29,672
Days, time or
Distance(KM)
115
41
0.3875
3
3
520
86
105
41
0.3875
51
0.3875
37500
7.70
2
2
3
758
3
1048
0.1932
52
Source
Heydey Communications
Heydey Communications
Regina Inn
U of S Policy In prov.
Google maps, university policy
Heydey Communications
Heydey Communications
Weyburn Travel Lodge
Edmonton, Ab.(Ramada)
Weyburn, U of S policy
Google maps, university policy Weyburn
U of S Edmonton
Google maps, U of S policy Out of Province
Time to Marketing at booths, ect.
Western Producer
Financials
Equity Financing
Year
Sales
COGS
Gross
Margin
Expenses
Net Income
Before Tax
2007
$400,000
$131,581
2008
$408,000
$182,427
2009
$416,160
$170,608
2010
$424,483
$167,520
2011
$432,973
$168,279
2012
$441,632
$160,120
2013
$450,465
$162,067
2014
$459,474
$165,912
2015
$468,664
$160,606
2016
$478,037
$155,966
$268,419
$67,879
$225,573
$69,236
$245,552
$70,621
$256,963
$72,033
$264,694
$73,474
$281,512
$74,943
$288,398
$76,442
$293,563
$77,971
$308,057
$79,531
$322,071
$81,121
$200,540
$156,337
$174,931
$184,930
$191,220
$206,569
$211,956
$215,592
$228,527
$240,950
Income Tax
Net Income
After Tax
Net Cash
Flow to
Equity
$20,054
$15,634
$17,493
$18,493
$19,122
$20,657
$21,196
$21,559
$22,853
$24,095
$180,486
$140,704
$157,438
$166,437
$172,098
$185,912
$190,760
$194,032
$205,674
$216,855
$1,313
$201,223
$137,625
-$71,311
$80,953
$3,452
-$63,971
$77,420
$4,800
$4,581
Net Present Value (NPV)
Internal Rate of Return on Equity
External Rate of Return on Equity
$486,707
60.4%
40.0%
Critical Variable Analysis
Critical Variables Base Case (IRR 60.4%)
Bulk Sales
7600 tonnes
Bagged Sales
600 tonnes
Bulk Price
$40
Bagged Price
$160
Labour (Yard Worker)
$30,000
Fuel
$19,900
Lease Rate
$12,250
All Bulk Sales
7600 tonnes
No bagged Sales
IRR = 28.9%
IRR =0 %
488 tonnes
(-1178) tonnes
$16
(-139.33)
$192,058
$347,117
$189,901
2890 tonnes
ERR = 22 %
Allowable % Change
-94%
-296%
-59%
-187%
540%
1644%
1450%
NPV= $106,818
Debt and Equity Financing
Bulk Price
$60.00
$50.00
$40.00
$30.00
$20.00
$10.00
$0.00
-$10.00
-$20.00
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Years
Economic B/E
Cash Flow B/E
Net Income B/E
Base Run
Scenario Analysis
Bulk Sales
Bagged Sales
Bulk Price
Bagged Price
NPV
IRR
ERR
Worst Case Scenerio
5000 Tonnes
600 Tonnes
$16.00
$160.00
-$419,179
N/A
N/A
Base
7600 Tonnes
600 Tonnes
$40.00
$160.00
$486,707
60.4%
40.0%
Best Case Scenerio
10,200 Tonnes
600 Tonnes
$64
$160
$1,695,981
169.2%
83.3%
Questions???