**Expanded Financial Projections & Analysis**
Below is a detailed breakdown of Boaz Trading PLC’s financial projections, including assumptions, revenue streams, cost structures, and ROI justification.
---
### **Revenue Breakdown**
| **Segment** | **Year 1 (ETB)** | **Year 2 (ETB)** | **Growth Driver** |
|------------------|------------------|------------------|----------------------------------|
| **B2B (Industries)** | 16.5M (50%) | 27.5M (50%) | GERD contracts + textile factory demand |
| **B2C (Retail)** | 9.9M (30%) | 16.5M (30%) | Fuel station expansions + prepaid cards |
| **Government** | 6.6M (20%) | 11M (20%) | Infrastructure tenders |
| **Total Revenue** | **33M** | **55M** | |
**Assumptions**:
- **Volume Growth**:
- Year 1: 733,333 liters/month (33M ÷ ETB 45 avg. price).
- Year 2: 1.22M liters/month (55M ÷ ETB 45), driven by 10% Addis Ababa market capture.
- **Pricing**: Maintain 10% below competitors (ETB 45/liter diesel, ETB 50 gasoline).
---
### **Cost Structure**
| **Category** | **Year 1 (ETB)** | **Year 2 (ETB)** | **Notes** |
|---------------------|------------------|------------------|----------------------------------|
| **COGS** | 23.1M (70%) | 33M (60%) | Import costs, logistics, storage |
| **Operating Expenses** | 6.6M (20%) | 11M (20%) | Marketing, salaries, admin |
| **Taxes** | 1.65M (5%) | 2.75M (5%) | 10% corporate tax rate |
| **Net Profit** | **8.25M (25%)** | **16.5M (30%)** | |
**Year 1 Cost Details**:
- **COGS**: ETB 23.1M (70% of revenue) includes:
- Russian oil imports: ETB 19.8M (60% of ETB 33M revenue).
- Logistics/storage: ETB 3.3M (10% of revenue).
- **Operating Expenses**:
- Marketing (ETB 5.5M) + salaries/rent (ETB 1.1M).
**Year 2 Efficiency Gains**:
- **COGS Reduction**: 60% of revenue (vs. 70% in Year 1) due to bulk import discounts and rail subsidies.
- **Economies of Scale**: Operating expenses grow slower (20% vs. revenue’s 67% increase).
---
### **ROI Justification**
- **Initial Investment**: ETB 22M (project cost).
- **Cumulative Net Profit (Years 1–2)**: ETB 24.75M (8.25M + 16.5M).
- **ROI Calculation**:
- **Year 2 ROI**: (16.5M ÷ 22M) × 100 = **75%**.
- **Cumulative ROI**: (24.75M ÷ 22M) × 100 = **112.5%**.
- **Plan’s 150% Claim**: Based on **equity returns** (assuming partial debt financing):
- If 50% of ETB 22M is equity (ETB 11M), Year 2 net profit (16.5M) yields **150% equity ROI** (16.5M ÷ 11M).
---
### **Key Assumptions**
1. **Market Penetration**: 10% of Addis Ababa’s diesel market (2.4M liters/month) by Year 1 end.
2. **Russian Oil Pricing**: Stable discounts ($70/barrel vs. Brent’s $85).
3. **Currency Stability**: ETB/USD depreciation capped at 10% annually (hedged via forward contracts).
4. **Regulatory Compliance**: No new tariffs or sanctions on Russian oil.
---
### **Risks & Mitigation**
| **Risk** | **Impact** | **Mitigation** |
|-------------------------|-------------------------|-----------------------------------------|
| **Oil Price Surge** | COGS increases 15% | Lock in 50% supply via fixed-price contracts. |
| **ETB Depreciation** | Import costs rise 20% | Hedge 70% of forex exposure. |
| **NOC Price War** | Margin drops to 15% | Leverage Russian cost buffer to sustain 10% below competitors. |
---
### **Sensitivity Analysis**
| **Scenario** | **Year 2 Revenue** | **Year 2 Net Profit** |
|-----------------------|---------------------|------------------------|
| **Base Case** | ETB 55M | ETB 16.5M |
| **Optimistic (+20%)** | ETB 66M | ETB 22M |
| **Pessimistic (-20%)**| ETB 44M | ETB 11M |
---
### **Cash Flow Projections**
| **Metric** | **Year 1** | **Year 2** |
|----------------------|------------|------------|
| Operating Cash Flow | ETB 9.9M | ETB 19.8M |
| Capital Expenditure | ETB 3.3M | ETB 5.5M |
| Net Cash Flow | **ETB 6.6M** | **ETB 14.3M** |
---
**Conclusion**
Boaz’s financial projections hinge on capturing price-sensitive B2B clients and scaling rural distribution. While the 150% ROI claim reflects equity returns under leveraged financing, the base case delivers a robust 112.5% cumulative return. Risks are mitigated through hedging, fixed-price contracts, and agile pricing. This model positions Boaz to achieve profitability while addressing Ethiopia’s energy crisis.