Profitability Analysis Overview for Certified Arabica Coffee Seed Production to Seed Entrepreneurs in Ethiopia

The objectives of the enterprise is to provide high yielding, disease-resistant, pure, viable, and quality coffee seed services to coffee growers, NGO’s and other private and governmental coffee-growing sectors. It will start as a private limited company with two stakeholders. The business starts its production with the amount of 10qt/ha certified coffee seeds. Annual production will begin a total of 20,000 kg (200qt) from 20 hectares after four years, which the business starts, and increase to 50,000kg (500qt) with a total area of 50 hectares after year six. The business will produce certified Arabica coffee seed to four agro-ecological production areas; which are Harar, Wollega (Nekemt), Limu and Sidama/Yirgacheffee coffee specialties. These coffee production regions have their own quality standards; to meet that standard and maximize the national market opportunity the business is paramount. The majority of the business will be sold in their own shop, but as production increases, the owners will utilize other distribution channels to reach the individual customers. The amount of money required to start up the business will be Birr 1,000,000. From this, 50% will be from the bank with 15 years loan period and 50% own saving. Out of the total initial investment birr 420,000 will be used for asset cost and 580,000 working cost. Generally, this capital will be used to construct the certified coffee seed store, to purchase tractors, coffee processing machines, generator office materials, and the necessary farm equipment, and to cover operating expenses. The enterprise requires 20 to 30 daily and contract workers when the business starts and increases more than 50 workers after five years of establishment. The profitability assumption is based on the total annual production of 500,000 Kg of coffee seeds. This is the volume of the product that will be supplied to the market after the projected permanently established. GGCACSE will be selling certified coffee seed at a basic minimum of birr 110 per kilogram - the maximum price will depend on the market. The average net profit margin over the projected three-year production period, based on the price of birr 110/kg is estimated at 29.3%. The break-even percentage is 3.34. At this point the business neither profit nor loss. The project is expected to provide an annual net profit in the fourth, fifth year 546,582 ETB and 769,096 ETB respectively. It will be increased to 1,912,153 ETB after six years of business establishment.