DEBT BURDEN AND PROFITABILITY OF STATE COFFEE PLANTATION CASE STUDY OF LIMMU COFFEE PLANTATION DEVELOPMENT ENTERPRISE

There are five state Coffee Plantations under Limmu Coffee Development Enterprise. These Plantations are found in Limmu Awraja (District) in Illubabor administrative region. The Plantations were established before the revolution and were nationalized during the land reform in 1975.

The productivity of the plantations was very low when they were nationalized. Therefore, rehabilitation programme was recommended to improve the productivity of these plantations. The rehabilitation programme initiated in 1980, and it is financed by Agricultural and Industrial Development Bank (AIDB).

The debt burden of the Enterprise is increasing since nationalization, while it couldn't be able to operate at profit. Therefore, what are the factors which has lead to unprofitability and to what extent the debt burden has affected the profitability of the enterprise?

The result of the study has indicated that debt burden and profitability are not directly related. Their relationship is reflected indirectly through the financial charges. Due to the high tax burden, the Coffee sub-sector couldn't become profitable, this leads to the inability to cover financial obligations, and the inability of having reserve fund for replacement and expansion. This situation again lead to increased debt burden as well as the risk of being unprofitable.

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