Investment Office ANRS
Project Profile on the Establishment
of Absorbent cotton Making plant
Development Studies Associates (DSA)
JULY 2016
Bahir Dar
Table of Contents
1. Executive Summary................................................................................ 2
2. Product Description and Application ................................................... 2
3. Market Study, Plant Capacity and Production Program................... 3
3.1
Market Study....................................................................................................... 3
3.1.1
Present Demand and Supply ....................................................................... 3
3.1.2
Projected Demand ....................................................................................... 4
3.1.3
Pricing and Distribution .............................................................................. 5
3.2
Plant Capacity ..................................................................................................... 5
3.3
Production Program ............................................................................................ 6
4. Raw Materials and Utilities ................................................................... 6
4.1
4.2
Availability and Source of Raw Materials .......................................................... 6
Annual Requirement and Cost of Raw Materials and Utilities........................... 6
5
Location and Site .................................................................................... 7
6
Technology and Engineering ................................................................. 7
6.1
6.2
6.3
7
Human Resource and Training Requirement ................................... 10
7.1
7.2
8
Human Resource ............................................................................................... 10
Training Requirement ....................................................................................... 10
Financial Analysis ................................................................................. 11
8.1
8.2
8.3
8.4
9
Production Process .............................................................................................. 7
Machinery and Equipment .................................................................................. 8
Civil Engineering Cost ........................................................................................ 9
Underlying Assumption .................................................................................... 11
Investment ......................................................................................................... 12
Production Costs ............................................................................................... 13
Financial Evaluation ......................................................................................... 13
Economic and Social Benefit and Justification.................................. 14
ANNEXES ............................................. Ошибка! Закладка не определена.
1. Executive Summary
This project profile deals with the establishment of absorbent cotton making plant in Amhara
National Regional State. The following presents the main findings of the study.
Demand projection divulges that the domestic demand for absorbent cotton is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 160 ton annually. The
total investment cost of the project including working capital is estimated at Birr 13.09 million
and creates 40 jobs and Birr 1.42 millions of income.
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 24.6% of capacity utilization and it will
payback fully the initial investment less working capital in 3 years. The result further shows that
the calculated IRR of the project is 28% with NPV of Birr 13,539,277.22
In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and import
substitution.
Generally, the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.
2. Product Description and Application
Absorbent cotton is sterilized, deoiled and bleached loose cotton wadding. Originally absorbent
cotton was developed for the purpose of medical use. At present absorbent cotton is used for
sanitary use and in surgical operation as well as for ordinary daily living. Since absorbent cotton
is a material which comes in direct contact with the human body, it must satisfy the
pharmacopeia requirements. In Ethiopia absorbent cotton is usually needed by women during
their menstruation period and hence the viability of establishing the plant is examined from this
point of view.
2
3. Market Study, Plant Capacity and Production Program
3.1
Market Study
3.1.1 Present Demand and Supply
At present the demand for absorbent cotton is met from domestic production as well as import.
However, there is no exact figure as to the level of domestic production per annum. Similarly,
the information obtained from Customs Authority aggregates the sanitary pad with other similar
materials so that the actual level of import could not be documented. However, a market research
conducted in various supermarkets and shops in Addis Ababa revealed that most of the sanitary
pads on sale are imported ones. This suggests that domestic production is unable to meet the
growing demand for the product.
To arrive at the present effective demand for the product, this profile employed a proxy approach
as follows. As has been stated earlier, women use sanitary pads during their menstruation period.
Therefore, the demand for the product depends on the number of women in the age group 15-49
years that are believed to make use of the product. According to CSA, Annual abstract (2006),
currently there are 3.5 million women in urban and 14.9 million women and rural areas of the
country as shown in table 1 below.
Table 1: Population of Women Between the Age of 15-49
Age Group
15-19
20-24
25-29
30-34
35-39
40-44
45-49
Total
Urban
291417
260242
181767
107484
102398
59026
53282
1055616
Rural
938720
694980
650241
471572
470484
346048
301725
3873770
Total
1230137
955222
832008
579056
572882
405074
355007
4929386
Source: CSA, Annual Report (2006)
3
The age group listed in the above table represents the age group that demands sanitary pads.
However, for a number of reasons such as ability to pay, awareness, etc, women in the urban
areas use the product more frequently than the rural areas. Therefore, in estimating the present
demand, it is important to make some assumption as to the demand for the product. In this
connection it is assumed that about 30% of the urban women and 1% of the rural women make
use of absorbent cotton during their menstruation period. Given the importance of the product,
this assumption can be considered as a conservative approach. Thus, about 1,061,984 women in
the urban area and about 148,938 of the urban females make use of the sanitary towel every
month. This makes the total potential users to be 1,210,922. On average a woman uses 4 pads in
a given month, and, therefore, the annual demand for the absorbent cotton is estimated to be
about 58,124,235 pieces per year. Roughly speaking this is equivalent to 581.2 tons. Therefore,
this figure can be fairly taken as the current level of demand for the product.
3.1.1 Projected Demand
In forecasting the future demand for absorbent cotton the population growth rate is used. This is
because as the number of women with in the age group of 15 to 49 increases, the demand for the
product also increases. Accordingly, 3% growth rate is considered to arrive at the following
forecast figure.
4
Table 2: Projected Demand for Absorbent Cotton (in tons)
Year
Projected Demand
2014/15
2015/16
2016/17
2017/18
2018/19
2019/20
2020/21
2021/22
2022/23
2023/24
2024/25
2025/26
736
758
781
804
829
854
880
906
933
961
990
1020
Thus, as per the above table, demand for the product will increase substantially in the coming
years. This suggests the relevance of establishing a small plant.
3.1.2 Pricing and Distribution
Based on the market research result and the capacity of the envisaged plant, the selling price of
absorbent cotton is set to be Birr 141,130 per ton. In other words it is Birr 14 per packet. In
distributing the product the envisaged plant shall make use of the available retail and wholesale
network.
3.2
Plant Capacity
Thus, given the expected demand for absorbent cotton as presented earlier, and the planned
technology, the envisaged plant is set to produce 160 tons annually. For a plant that may start
operation in 2016/17 this capacity represents about 19% of the total demand.
5
3.3
Production Program
The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 55 percent capacity and then it grows to 75
percent in the 2nd year and 90 percent in the 3rd year. The capacity will grow to 100 percent
starting from the 4th year. This consideration is developed based on the assumption that market
and logistics barriers would take place for the first three years of operation.
4. Raw Materials and Utilities
4.1
Availability and Source of Raw Materials
The main raw materials required in the production of absorbent cotton are raw ginned cotton,
soda ash, caustic soda, bleaching agent, other chemicals, wetting agents and packing materials.
The raw cotton shall be secured from the region while the other materials are imported from
abroad.
4.2
Annual Requirement and Cost of Raw Materials
and Utilities
The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in table 3 below.
6
Table 3: Material and Utility Requirement
Material and Input
Raw Cotton
Soda Ash
Caustic Soda
Bleaching Agent
Other Chemicals
Wetting agent
Packing Material
Total Material Cost
Quantity
L.C.
170 ton
13 ton
18 ton
13
Lump sum
Lump sum
Lump sum
Total Cost
F.C.
3079200
166790
277128
216827
41505.05
62258.858
103763.908
2721083.908
764508.908
Utility
Electricity
Furnace Oil
Water
Total Utility Cost
120,000 kwh
60,000 lit
10,000m3
66,000
420,000
26,500
512,500
According to the above table the annual cost of material and utility at full capacity of operation is
Birr 3,998,093.
5 Location and Site
The appropriate locations for the envisaged project in view of the availability of input,
infrastructure as well as market for the output are Bahir Dar, Combolcha and Gonder towns.
6 Technology and Engineering
6.1
Production Process
The production process in producing absorbent cotton involves the following. First of all the raw
cotton is opened and loosened, separated from dust particles and other contaminants. Then the
cotton is boiled using steam for up to four hours with various chemicals like detergents, caustic
soda, soda ash etc. This treatment removes oils, waxes and other and foreign matters. The Cotton
is then washed in large thanks. The washed cotton is then bleached with chemicals like hydrogen
7
peroxide or sodium hypochlorite. The bleaching not only whitens the cotton but also improves its
moisture absorbing qualities and further cleans it. The bleached cotton is thoroughly washed
again to remove adhering chemicals. A small quantity of dilute sulpheric acid may be used to
neutralize any excess alkali. The neutralized cotton is then processed in a hydro extractor to
remove absorbed water and dilute sulpheric acid. It is then opened again in a wet cotton opening
machine.
The opened cotton is then dried or subjected to sun drying. Sun drying in the open, however, is
not advisable as it attracts fresh dust and requires a huge amount of open space. After drying the
cotton is sent to the blow room where it is opened more thoroughly and made into laps. The laps
of cotton are then fed into a carding machine which turns the cotton laps into 6” to 12” wide
brands. A special indigo colored paper is placed under each band and the cotton is rolled,
compressed, weighed and cut into packaging of different sizes. The rolls are then packed in a
polyethylene roll after labelling and stamping with correct weight. The final packing is done in a
card board or corrugated board cartons.
The alternative technology requires a fully automatic production process. In this situation much
of the work will be handled by the machines and minimizes the role of labor in the process. This
approach is very expensive and produces very large amount of finished absorbent cotton per day
when compared with the process discussed earlier. For the envisaged plant the manual approach
is more preferable since its production capacity is lower, relatively labor intensive and the
technology is cheaper than the fully automated one.
6.2
Machinery and Equipment
The machineries and equipment required for producing absorbent cotton is detailed in table 4
below.
8
Table 4: Machinery and Equipment
Machinery and Equipment
High Pressure Kier Boiler (cap 500 kg)
Carding Machine
Wet Cotton Opener
Hydro extractor (centrifugal type)
Cotton drier (steam operated continuous type)
Dry Cotton Opener
Porcupine Cleaner
Lap Forming Machine
Rolling Machine
Rolling Cutting Band Saw
Multi-Fuel Boiler (1000kg/hr evaporation
capacity at 150 psig)
Water Reservoir (15,000 litters cap)
Water, Steam, Discharging piping and fittings
Laboratory and testing equipment
Quantity
1
1
1
1
1
1
1
1
1
1
1
1
1
set
The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 20,528,000.
The following are some of the machineries suppliers’ address for the envisaged project
1. Machinery Manufacturers Corporation
B-61, Circular Garden Road,
Calcutta – 600 043, India
2. Gujarat Machinery Manufacturers Ltd.,
187, Worli, Mumbai – 400018, India
6.3
Civil Engineering Cost
The total site area for the envisaged plant is estimated to be 500m2 where 350m2 is allocated for
the production place and the remaining space is left for stores (100m2), office buildings and
facilities (50m2).
9
7 Human Resource and Training Requirement
7.1
Human Resource
The list of required manpower for the envisaged plant is stated in table 5 below.
Table 5: Human Resource Requirement
Position
Manager
Production Manager
Finance Head/Administrator
Accountant
Secretary
Sales Clerk
Chemist
Store Keeper
Technician
Supervisor
Operators
Daily Labourers
Cleaners
Messengers
Driver
Guards
Benefit (20%)
Total
No. Required
1
1
1
1
1
2
1
1
2
2
14
6
2
1
1
3
Monthly
Salary
Total Annual
Salary
11547
138564
10264
123168
7698
92376
3079.2
36950.4
2566
30792
2052.8
49267.2
3079.2
36950.4
2052.8
24633.6
2566
61584
3079.2
73900.8
2052.8
344870.4
1026.4
73900.8
1026.4
24633.6
1026.4
12316.8
2052.8
24633.6
1026.4
36950.4
237098.4
40
1422590
[[[[[[[[[[[
The envisaged plant creates 40 jobs and about Birr 1.4 millions of income. The professionals and
support staff for the envisaged plant shall be recruited from Amhara region.
7.2
Training Requirement
Training of key personnel shall be conducted in collaboration with the suppliers of the plant
machineries. The training should primarily focus on the production technology and machinery
maintenance and trouble shooting. Birr 256,600 will be allocated as training expense.
10
8 Financial Analysis
8.1
Underlying Assumption
The financial analysis of absorbent cotton making plant is based on the data provided in the
preceding sections and the following assumptions.
A. Construction and Finance
Construction period
2 years
Source of finance
40% equity and 60% loan
Tax holidays
2 years
Bank interest rate
12%
Discount for cash flow
18%
Value of land
Based on lease rate of ANRS
Spare Parts, Repair & Maintenance
1% of fixed investment
B. Depreciation
Building
5%
Machinery and equipment
10%
Office furniture
10%
Vehicles
20%
Pre-production (amortization)
20%
11
C. Working Capital (Minimum Days of Coverage)
Raw Material-Local
Raw Material-Foreign
Factory Supplies in Stock
Spare Parts in Stock and Maintenance
Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable
8.2
30
120
30
30
10
15
30
30
30
Investment
The total investment cost of the project including working capital is estimated at Birr 33.09
million as shown in table 6 below. The Owner shall contribute 40% of the finance in the form of
equity while the remaining 60% is to be financed by bank loan.
Table 6: Total initial investment
Items
Land
L.C
F.C
Total
3849
3849
Building and civil works
Office equipment
2566000
2566000
256600
256600
Vehicles
Plant machinery & equipment
1283000
1283000
2566000
23094000
25660000
Total fixed investment cost
Pre production capital expenditure*
6675449
23094000
29769449
Total initial investment
Working capital at full capacity
8163921
23094000
31257921
1505039
333603.1
1838642
Total
9668960
23427603
33096563
1488472
1488472
*Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy fee during
construction and expenses for company‘s establishment, project administration expenses, commission expenses,
preproduction marketing and interest expenses during construction.
The foreign component of the project accounts for 70.8% of the total investment cost.
12
8.3
Production Costs
The total production cost at full capacity operation is estimated at Birr 18.3 million as detailed in
table 7 below.
Table 7: Production Cost
Items
1.
2.
3.
4.
Raw materials
Utilities
Wages and Salaries
Spares and Maintenance
Factory costs
5. Depreciation
6. Financial costs
Total Production Cost
8.4
I.
Cost
3485592.816
1315075
1422590.4
297694.49
6520952.706
3274254.49
1985794.042
18301953.94
Financial Evaluation
Profitability
According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. A modest profit, however, is
obtained starting from the second year of operation. Ratios such as the percentage of net profit to
total sales, return on equity and return on total investment are 0.14%, 0.13% and 16.64%
respectively in the first year and are gradually rising. Furthermore, the income statement and
other profitability indicators show that the project is viable.
II.
Breakeven Analysis
The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 24.6% of capacity utilization.
13
III.
Payback Period
Investment cost and income statement projections are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in 3 years.
IV.
Simple Rate of Return
For the envisaged plant the simple rate of return equals to 27.9%
V.
Internal Rate of Return and Net Present Value
Based on cash flow statement described in the annex part, the calculated IRR of the project is
28% and the net present value at 18 % discount is Birr 5,276,413.57
VI.
Sensitivity Analysis
The envisaged plant incurs loss of Birr 116,424.11 in the first year of operation when cost of
production increases by about 10%. The plant will generate profit starting from the second year.
This result is accompanied by somewhat similar NPV obtained earlier.
9 Economic and Social Benefit and Justification
The envisaged project possesses wide range of benefits that promote the socio-economic goals
and objectives stated in the strategic plan of the Amhara National Regional State. It boosts the
inter sectoral linkage between the agricultural and industrial sectors. At the same time, therefore,
it helps diversify the economic activity. The other major benefits are listed as follows:
A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 2.88 million per
year and Birr 28.81 million within the project life. Such result induces the project promoters to
reinvest the profit which, therefore, increases the investment magnitude in the region.
B. Tax Revenue
14
In the project life under consideration, the region will collect about Birr 11.3 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result creates
additional fund for the regional government that will be used in expanding social and other basic
services in the region.
C. Import Substitution and Foreign Exchange Saving
Based on the projected figure we learn that in the project life an estimated amount of US Dollar
8.09 million will be saved as a result of the proposed project. This will create room for the saved
hard currency to be allocated to other vital and strategic sectors.
D. Employment and Income Generation
The proposed project is expected to create employment opportunity for several citizens of the
region. That is, it will provide permanent employment to 40 professionals as well as support
staff. Consequently the project creates income of Birr 1.4 millions per year. This would be one of
the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production process is environment friendly.
F. Diversification and Inter Sectoral linkage.
The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the region as well as the county’s economy.
15
16
Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION
PRODUCTION
Year 1
Year 2
1
2
3
4
0
0
55%
75%
90%
100%
0.00
0.00
1193740.792
1627828.369 1953394.032
2170438
0.00
0.00
346747.1724
472837.0509 567404.4663
630449.4
Raw Material-Local
0.00
0.00
163265.0345
222634.1403 267160.9632
296845.5
Raw Material-Foreign
0.00
0.00
183452.1379
250202.9107 300243.5031
333603.9
Factory Supplies in Stock
0.00
0.00
5877.11508
Spare Parts in Stock and Maintenance
0.00
0.00
53585.0082
Work in Progress
0.00
Finished Products
Capacity Utilization (%)
1. Total Inventory
Raw Materials in Stock- Total
9617.1114
10685.67
73070.46806 87684.55654
97427.3
0.00
146928.1079 200356.5132 240427.8107
267142
0.00
0.00
293856.2159 400713.0263 480855.6213
534284
2. Accounts Receivable
0.00
0.00
3. Cash in Hand
0.00
2217024
2463360
0.00
164259.924 223990.8101 268788.9619
298654.4
0.00
0.00
2366101.544 3226502.128 3871802.528
4302003
4. Current Liabilities
0.00
0.00
1354848
1847520
2217024
2463360
Accounts Payable
0.00
0.00
1354848
1847520
2217024
2463360
TOTAL NET WORKING CAPITAL REQUIRMENTS
0.00
0.00
1011253.544 1378982.128 1654778.528
1838643
INCREASE IN NET WORKING CAPITAL
0.00
0.00
1011253.544 367728.5589 275796.4256
183864.3
CURRENT ASSETS
1354848
8014.2595
1847520
17
Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
Capacity Utilization (%)
5
6
7
8
9
10
100%
100%
100%
100%
100%
100%
2170437.808
2170437.808 2170437.808 2170437.808 2170437.808
2170437.808
630449.3927
630449.3927
630449.3927 630449.3927 630449.3927
630449.3927
Raw Material-Local
296845.5289
296845.5289
296845.5289 296845.5289 296845.5289
296845.5289
Raw Material-Foreign
333603.8895
333603.8895
333603.8895 333603.8895 333603.8895
333603.8895
Factory Supplies in Stock
10685.67078
10685.67078 10685.67078 10685.67078 10685.67078
10685.67078
1. Total Inventory
Raw Materials in Stock-Total
97427.2993
97427.2993
97427.2993
97427.2993
Work in Progress
267142.0261
267142.0261
267142.0261 267142.0261 267142.0261
267142.0261
Finished Products
534284.0265
534284.0265
534284.0265 534284.0265 534284.0265
534284.0265
2463360
2463360
298654.4049
298654.4049
4302002.82
4302002.82
4302002.82
4302002.82
4302002.82
4302002.82
4. Current Liabilities
2463360
2463360
2463360
2463360
2463360
2463360
Accounts Payable
2463360
2463360
2463360
2463360
2463360
2463360
1838642.82
1838642.82
1838642.82
1838642.82
1838642.82
1838642.82
0.00
0.00
Spare Parts in Stock and Maintenance
2. Accounts Receivable
3. Cash in Hand
CURRENT ASSETS
TOTAL NET WORKING CAPITAL REQUIRMENTS
INCREASE IN NET WORKING CAPITAL
0.00
0.00
97427.2993
2463360
97427.2993
2463360
2463360
298654.4049 298654.4049 298654.4049
298654.4049
0.00
2463360
0.00
18
Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION
Year 1
Year 2
PRODUCTION
1
2
3
4
15628961 17467603.5
13774288
17428272
20692224
22827136
15628961 17467603.5
1354848
492672
369504
246336
Total Equity
6251584 6987041.41
0
0
0
0
Total Long Term Loan
9377376 10480562.1
0
0
0
0
TOTAL CASH INFLOW
1. Inflow Funds
0
0
1354848
492672
369504
246336
2. Inflow Operation
0
0
12419440
16935600
20322720
22580800
Sales Revenue
0
0
12419440
16935600
20322720
22580800
Interest on Securities
0
0
0
0
0
0
0
0
0
0
0
0
15628961 15628960.7 11493661.76 11593440.11
14651581
15278378
Total Short Term Finances
3. Other Income
TOTAL CASH OUTFLOW
15628961 15628960.7
0
0
0
0
Fixed Investments
14884725 14884724.5
0
0
0
0
Pre-production Expenditures
744236.2 744236.225
0
0
0
0
4. Increase In Fixed Assets
5. Increase in Current Assets
0
0 2366101.544 860400.5589
645300.4
430200.3
6. Operating Costs
0
0 3776188.416 5040430.494
5988612
6620733
7. Corporate Tax Paid
0
0
0
2722218
3329153
8. Interest Paid
0
0 5351371.779 2382952.619
1985794
1588635
9.Loan Repayments
0
0
0 3309656.437
3309656
3309656
10.Dividends Paid
0
0
0
0
0
0
Surplus(Deficit)
0
1838642.82 2280626.236 5834831.891
6040643
7548758
Cumulative Cash Balance
0
1838642.82 4119269.082 9954100.973
15994744
23543502
0
19
Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5
6
7
8
9
10
22580800
22580800
22580800
22580800
22580800
22580800
0
0
0
0
0
0
Total Equity
0
0
0
0
0
0
Total Long Term Loan
0
0
0
0
0
0
Total Short Term Finances
0
0
0
0
0
0
2. Inflow Operation
22580800
22580800
22580800
22580800
22580800
22580800
Sales Revenue
22580800
22580800
22580800
22580800
22580800
22580800
0
0
0
0
0
0
0
0
0
0
0
0
14458443.8 14180432.71 10592765.13
10592765
10592765
TOTAL CASH INFLOW
1. Inflow Funds
Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
14570167
4. Increase In Fixed Assets
0
0
0
0
0
0
Fixed Investments
Pre-production
Expenditures
0
0
0
0
0
0
0
0
0
0
0
0
5. Increase in Current Assets
0
0
0
0
0
0
6. Operating Costs
6620733
6620733.05 6620733.053 6620733.053
6620733
6620733
7. Corporate Tax Paid
3448301
3733736.82 3852884.462 3972032.079
3972032
3972032
8. Interest Paid
1191476
794317.54 397158.7827
0
0
0
9. Loan Repayments
3309656
3309656.44 3309656.437
0
0
0
0
0
0
10.Dividends Paid
0
Surplus(Deficit)
8010633
8122356.15 8400367.291 11988034.87
11988035
11988035
31554136
39676491.8 48076859.11 60064893.97
72052929
84040964
Cumulative Cash Balance
0
0
20
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION
Year 1
PRODUCTION
Year 2
1
2
3
4
TOTAL CASH INFLOW
0
0
12419440
16935600
20322720
22580800
1. Inflow Operation
0
0
12419440
16935600
20322720
22580800
Sales Revenue
0
0
12419440
16935600
20322720
22580800
Interest on Securities
0
0
0
0
0
0
0
0
0
0
0
0
8986626
10133751
2. Other Income
TOTAL CASH OUTFLOW
15628961
15628960.7 4787441.985 5408159.053
3. Increase in Fixed Assets
15628961
15628960.7
0
0
0
0
Fixed Investments
14884725
14884724.5
0
0
0
0
Pre-production Expenditures
744236.2
744236.225
0
0
0
0
4. Increase in Net Working Capital
0
0 1011253.544 367728.5589
275796.4
183864.3
5. Operating Costs
0
0 3776188.416 5040430.494
5988612
6620733
6. Corporate Tax Paid
0
0
0
2722218
3329153
-15628961 7631998.015 11527440.95
-31257921 -23625923.4 12098482.46
11336094
12447049
-762389
11684661
-13244882 5481182.152 7015956.456
-28873843 -23392660.5 16376704.11
5847031
5440720
-1.1E+07
-5088953
NET CASH FLOW
-1.6E+07
CUMMULATIVE NET CASH FLOW
-1.6E+07
Net Present Value (at 18%)
-1.6E+07
Cumulative Net present Value
-1.6E+07
0
21
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5
6
7
8
9
10
TOTAL CASH INFLOW
22580800
22580800
22580800
22580800
22580800
22580800
1. Inflow Operation
22580800
22580800
22580800
22580800
22580800
22580800
Sales Revenue
22580800
22580800
22580800
22580800
22580800
22580800
0
0
0
0
0
0
0
0
0
0
0
0
10354469.9 10473617.52 10592765.13
10592765
10592765
Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW
10069034
3. Increase in Fixed Assets
0
0
0
0
0
0
Fixed Investments
0
0
0
0
0
0
Pre-production Expenditures
0
0
0
0
0
0
0
0
0
0
0
0
4. Increase in Net Working Capital
5. Operating Costs
6620733
6620733.05 6620733.053 6620733.053
6620733
6620733
6. Corporate Tax Paid
3448301
3733736.82 3852884.462 3972032.079
3972032
3972032
NET CASH FLOW
12511766
12226330.1 12107182.48 11988034.87
11988035
11988035
CUMMULATIVE NET CASH FLOW
24196427
36422756.9 48529939.37 60517974.24
72506009
84494044
Net Present Value (at 18%)
4634753
3838151.08 3220972.603 2702775.241
2290488
1941091
Cumulative Net present Value
-454200
3383950.81 6604923.388
11598186
13539277
Net Present Value (at 18%)
Internal Rate of Return
9307698.63
13539277.22
28.0%
22
Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
Capacity Utilization (%)
1
2
3
4
5
55%
75%
90%
100%
100%
12419440
16935600
20322720
22580800
22580800
12419440
16935600
20322720
22580800
22580800
0
0
0
0
0
3163696
4314131
5176956.7
5752174.128
5752174.128
VARIABLE MARGIN
9255744
12621469
15145763.3
16828625.87
16828625.87
(In % of Total Income)
191.244
191.244
191.24398
191.24398
191.24398
3886747
4000554
4085909.8
4142813.415
4142813.415
OPERATIONAL MARGIN
5368997
8620915
11059853.5
12685812.46
12685812.46
(In % of Total Income)
110.9282
130.6094
139.64172
144.15788
144.15788
4. Less Cost of Finance
5351372
2382953
1985793.86
1588635.08
1191476.323
5. GROSS PROFIT
17625.32
6237962
9074059.63
11097177.38
11494336.13
0
0
2722217.9
3329153.213
3448300.856
17625.32
6237962
6351841.73
7768024.164
8046035.304
1. Total Income
Sales Revenue
Other Income
2. Less Variable Cost
3. Less Fixed Costs
6. Income (Corporate) Tax
7. NET PROFIT
RATIOS (%)
Gross Profit/Sales
0.14%
36.83%
44.65%
49.14%
50.90%
Net Profit After Tax/Sales
0.14%
36.83%
31.25%
34.40%
35.63%
Return on Investment
16.64%
26.41%
25.33%
28.27%
27.91%
Return on Equity
0.13%
47.12%
47.98%
58.68%
60.78%
23
Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
6
Capacity Utilization (%)
7
100%
100%
8
9
10
100%
100%
100%
22580800
22580800
22580800 22580800 22580800
22580800
22580800
22580800 22580800 22580800
0
0
0
0
0
5752174
5752174
5752174
5752174
5752174
VARIABLE MARGIN
16828626
16828626
16828626 16828626 16828626
(In % of Total Income)
74.53
74.53
74.53
1. Total Income
Sales Revenue
Other Income
2. Less Variable Cost
74.53
3588519
3588519
3588519
3588519
OPERATIONAL MARGIN
13240107
13240107
13240107 13240107 13240107
(In % of Total Income)
58.63
58.63
58.63
4. Less Cost of Finance
794317.5
397158.8
5. GROSS PROFIT
12445789
12842948
6. Income (Corporate) Tax
3733737
3852884
3972032
3972032
3972032
7. NET PROFIT
8712053
8990064
9268075
9268075
9268075
3. Less Fixed Costs
3588519
74.53
58.63
0
58.63
0
0
13240107 13240107 13240107
RATIOS (%)
Gross Profit/Sales
55.12%
56.88%
58.63%
58.63%
58.63%
Net Profit After Tax/Sales
38.58%
39.81%
41.04%
41.04%
41.04%
Return on Investment
28.72%
28.36%
28.00%
28.00%
28.00%
Return on Equity
65.81%
67.91%
70.01%
70.01%
70.01%
24
Annex 5: Projected Balance Sheet (in Birr)
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9.Net Profit After Tax
Dividends Payable
Retained Profits
CONSTRUCTION
Year 1
Year 2
15628960.73
33096564.27
0
1838642.82
0
0
0
0
0
0
0
0
0
0
0
1838642.82
0
0
15628960.73
31257921.45
0
14884724.5
14884724.5
14884724.5
744236.225
1488472.45
0
0
0
0
0
0
15628960.73
33096564.27
0
0
0
0
0
0
9377376.435
19857938.57
9377376.435
19857938.57
0
0
6251584.29
13238625.7
6251584.29
13238625.7
0
0
0
0
0
0
0
0
0
0
0
0
1
34469037.59
6485370.626
406209.2957
146928.1079
293856.2159
1354848
164259.924
4119269.082
0
27983666.96
29769449
0
1488472.45
3274254.49
0
0
34469037.59
1354848
1354848
0
19857938.57
19857938.57
0
13238625.7
13238625.7
0
0
0
17625.31514
0
17625.31514
PRODUCTION
2
3
37890016
41301705
13180603
19866547
553921.8
664706.1
200356.5
240427.8
400713
480855.6
1847520
2217024
223990.8
268789
9954101
15994744
0
0
24709412
21435158
29769449
29769449
0
0
1488472
1488472
6548509
9822763
0
0
0
0
37890016
41301705
1847520
2217024
1847520
2217024
0
0
16548282
13238626
16548282
13238626
0
0
13238626
13238626
13238626
13238626
0
0
0
0
17625.32
6255588
6237962
6351842
0
0
6237962
6351842
4
46006408.59
27845505.1
738562.3628
267142.0261
534284.0265
2463360
298654.4049
23543502.28
0
18160903.49
29769449
0
1488472.45
13097017.96
0
0
46006408.59
2463360
2463360
0
9928969.286
9928969.286
0
13238625.7
13238625.7
0
0
12607429.45
7768024.164
0
7768024.164
25
Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
TOTAL ASSETS
1. Total Current Assets
Inventory on Materials and Supplies
Work in Progress
Finished Products in Stock
Accounts Receivable
Cash in Hand
Cash Surplus, Finance Available
Securities
2. Total Fixed Assets, Net of Depreciation
Fixed Investment
Construction in Progress
Pre-Production Expenditure
Less Accumulated Depreciation
3. Accumulated Losses Brought Forward
4. Loss in Current Year
TOTAL LIABILITIES
5. Total Current Liabilities
Accounts Payable
Bank Overdraft
6. Total Long-term Debt
Loan A
Loan B
7. Total Equity Capital
Ordinary Capital
Preference Capital
Subsidies
8. Reserves, Retained Profits Brought Forward
9. Net Profit After Tax
Dividends Payable
Retained Profits
5
50742787.49
35856138.49
738562.3628
267142.0261
534284.0265
2463360
298654.4049
31554135.64
0
14886649
29769449
0
1488472.45
16371272.45
0
0
50742787.49
2463360
2463360
0
6619312.849
6619312.849
0
13238625.7
13238625.7
0
0
20375453.61
8046035.304
0
8046035.304
6
56145183.64
43978494.64
738562.3628
267142.0261
534284.0265
2463360
298654.4049
39676491.82
0
12166689
29769449
0
1488472.45
19091232.45
0
0
56145183.64
2463360
2463360
0
3309656.437
3309656.437
0
13238625.7
13238625.7
0
0
28421488.91
8712052.588
0
8712052.588
7
61825590.93
52378861.93
738562.3628
267142.0261
534284.0265
2463360
298654.4049
48076859.11
0
9446729
29769449
0
1488472.45
21811192.45
0
0
61825590.93
2463360
2463360
0
0
0
0
13238625.7
13238625.7
0
0
37133541.5
8990063.728
0
8990063.728
8
71093666
64366897
738562.4
267142
534284
2463360
298654.4
60064894
0
6726769
29769449
0
1488472
24531152
0
0
71093666
2463360
2463360
0
0
0
0
13238626
13238626
0
0
46123605
9268075
0
9268075
9
80361741
76354932
738562.4
267142
534284
2463360
298654.4
72052929
0
4006809
29769449
0
1488472
27251112
0
0
80361741
2463360
2463360
0
0
0
0
13238626
13238626
0
0
55391680
9268075
0
9268075
10
89629815.51
88342966.51
738562.3628
267142.0261
534284.0265
2463360
298654.4049
84040963.69
0
1286849
29769449
0
1488472.45
29971072.45
0
0
89629815.51
2463360
2463360
0
0
0
0
13238625.7
13238625.7
0
0
64659754.94
9268074.868
0
9268074.868
26
27