Investment Office ANRS
Project Profile on the Establishment
of Acrylic Yarn Producing Plant
Development Studies Associates (DSA)
July 2016
Bahir Dar
Table of Contents
1. Executive Summary ........................................................................................... 3
2. Product Description and Application .............................................................. 3
3. Market Study, Plant Capacity and Production Program .............................. 4
3.1
Market Study................................................................................................................... 4
3.1.1
Present Demand and Supply ................................................................................... 4
3.1.2
Projected Demand ................................................................................................... 6
3.1.3
Pricing and Distribution .......................................................................................... 7
3.2
Plant Capacity ................................................................................................................. 8
3.3
Production Program ........................................................................................................ 8
4. Raw Materials and Utilities .............................................................................. 8
4.1
4.2
Availability and Source of Raw Materials ...................................................................... 8
Annual Requirement and Cost of Raw Materials and Utilities....................................... 8
5. Location and Site ............................................................................................... 9
6. Technology and Engineering ............................................................................ 9
6.1
6.2
6.3
Production Process .......................................................................................................... 9
Machinery and Equipment ............................................................................................ 10
Civil Engineering Cost .................................................................................................. 11
7. Human Resource and Training Requirement .............................................. 11
7.1
7.2
Human Resource ........................................................................................................... 11
Training Requirement ................................................................................................... 12
8. Financial Analysis ............................................................................................ 12
8.1
8.2
8.3
8.4
Underlying Assumption ................................................................................................ 12
Investment ..................................................................................................................... 13
Production Costs ........................................................................................................... 14
Financial Evaluation ..................................................................................................... 14
9. Economic and Social Benefit and Justification ............................................. 16
ANNEXES.........................................................Ошибка! Закладка не определена.
1. Executive Summary
This project envisages production of 170 tons of Acrylic Yarn per annum. The total investment
requirement of the project including the working capital is estimated to be Birr 8.9 million; of
which Birr 5,132,000 is the cost of the working capital and Birr 2,566,000 is the cost of building
and civil works while Birr 1.02 million is for machinery and equipments. Based on the cash flow
statement, the calculated internal rate of return (IRR) and simple rate of retun (SRR) of the
project are 31 % and 24.6 %, respectively. And the net present value (NPV) at 18 % discounting
rate is about Birr 3343 millions. The plant is expected to create employment opportunities for
about 36 persons.
2. Product Description and Application
Acrylic yarn is a type of yarn made from man made fibers. The yarn is used for making fabrics
which are, in turn, used for making clothes. They are used by both men and women, and all
demographic groups. Acrylic has a wide variety of end uses. It can easily be blended with wool
and cotton, and can thus be used for suiting, shirting, dress making and other yarn materials.
Easy lauder ability with dimensional stability and quick drying are the other properties of acrylic
yarn. Therefore, it is frequently used for fabrics making.
Acrylic yarn span from acrylic fibers has the following properties:-Good tenacity,
-Excellent stability to sunlight
-Good dye acceptance,
-Soft and pleasing wool-like characteristics, and
-Good abrasion resistance.
Further more, acrylic is very resistant to light, insects and microbiological attack.
3
3. Market Study, Plant Capacity and Production Program
3.1
Market Study
3.1.1 Present Demand and Supply
Probably because of their durability, fabrics made from acrylic yarn are widely used in the rural
Ethiopia. These fabrics are made as dresses, jackets, trousers, skirts, shirts and etc. Even the
garment called “Gojam Azene” is woven from acrylic yarn; and this garment is worn by almost
every male in the rural areas of the ANRS. However, almost all the fabrics made from acrylic yarn
and the yarn itself are imported from abroad. With the fact that everybody wearing clothes made
from acrylic fabrics, one could have expected the existence of large scale acrylic fabrics and acrylic
yarn making plants in the country. But this is not the case.
Acrylic yarn has been imported to the country since a long time, the bulk of which goes to meet the
requirement of sweater producers and the handloom sector. The Dire Dawa Textile Factory also
produces acrylic yarn for the domestic market. The annual production capacity (acrylic yarn) of this
factory is limited. Although Dire Dawa’s acrylic yarn is much in demand its capacity has never been
fully utilized due to various reasons. Table 3.1 shows the annul local production of acrylic yarn for
the period between 1989 E.C and 1999 E.C.
4
TABLE 3.1
DOMESTIC PRODUCTION OF ACRYLIC YARN
Year E.C Production of Acrylic Yarn
(In Tons)
1989
2420
1990
1257
1991
730
1992
354
1993
411
1994
146
1995
1120
1996
5164
1997
2629
1998
3747
1999
NA
Regarding imports, the customs and External Trade Statistics (1990 E.C-1995 E.C) do not show
the import of 100 % acrylic yarn separately rather it shows the aggregated figure of the entire
synthetic or man-made yarn. For the period between 1995 E.C and 1999 E.C, however, there is a
disaggregated figure for acrylic yarn imports. Table 3.2 shows the annual import of different all
types of synthetic yarns including acrylic for the period between 1990 E.C and 1999E.C.
5
TABLE 3.2
IMPORT OF SYNTHETIC/MAN-MADE YARN
All Synthetic
100 % Acrylic
Yarns
Year E.C
Yarn
including
( In Tons)
Acrylic Yarn
(In Tons)
1990
NA
3781
1991
NA
3932
1992
NA
4089
1993
NA
4253
1994
NA
4423
1995
1038
4600
1996
1079
4784
1997
1122
4975
1998
1167
5174
1999
1214
5381
Source: Compiled from CSA’s Import Data
As it is seen in the above table, imports of synthetic yarns including acrylic have been increasing
through out of the past decade. The country imported more than 45 thousand tons of the products
during the period. This clearly shows the existing huge demand for man made yarns in the
country.
3.1.1 Projected Demand
As noted earlier, acrylic based fabrics are very popular in rural and urban Ethiopia. Since income
and population size (both have an increasing trend) affect the demand for acrylic based products
positively, it is believed that this favorable market situation will persist in the future. To project
future demand, this project profile conservatively assumes the demand for acrylic yarn to grow 5
% annually. Besides, the year 1998 E.C is taken as base year for the projection. Based on these,
the future demand for acrylic yarn is given as follows (See Table 3.3).
6
TABLE 3.3
DEMAND PROJECTION FOR ACRYLIC YARN
Year E.C
Acrylic Yarn Demand Acrylic Yarn Demand
( In Tons)
( In Tons)
At Country Level
At ANRS Level
8909
2227
2009
9354
2338
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
9822
10313
10829
11370
11939
12536
13163
13821
14512
15238
16000
2455
2578
2707
2842
2984
3133
3290
3455
3628
3809
3999
As it is seen from the above table, the demand for acrylic yarn is expected to reach at 12,536
tons and 16,000 tons in 2016 E.C and 2021 E.C, respectively. Similarly, the demand for the
product at ANRS level (computed as a proportion of its population size) is expected to reach at
3,133 tons and 3,999 tons for the comparable period. This clearly justifies the establishment of
acrylic yarn making plants in the country in general and in ANRS in particular.
3.1.2 Pricing and Distribution
The wholesale price of imported acrylic yarn ranges from Birr 108 to Birr 128 per kg while the
locally produced one is sold around Birr 103 per Kg. The envisaged plant is assumed to sell its
product to the wholesalers at Birr 95 per Kg. The product will find its market outlet through the
existing textile and yarn distributors throughout the country.
7
3.2
Plant Capacity
Based on the available minimum economic capacity, it is envisaged to establish a plant with
capacity of 170 ton per annum. The plant will operate 16 hours per day, in two shifts and 275
days per year. The working days are set by deducting Sundays and public holidays, and by
assuming that annual maintenance works and unexpected work interruptions take 25 days.
3.3
Production Program
Considering a little period needed for production skill development and market penetration, the
capacity utilization rate in the first year is assumed to be 90%; and it will be 100 % starting from
the second year of the operation.
4. Raw Materials and Utilities
4.1
Availability and Source of Raw Materials
Synthetic fibers like acrylic yarn are made from different raw materials. Some are made from
petroleum products; and others are made from coal and trees. Still others are made from
chemicals. Production of the substance from which the acrylic yarn is to be made requires huge
investment and complex technology and this is done in industrially advanced countries. Hence
the “raw material or the “artificial cotton” from which the yarn will be made is to be imported.
4.2
Annual Requirement and Cost of Raw Materials and Utilities
The major raw material is acrylic fiber, and its annual requirement is indicated in Table 4.1.The
total cost of raw material and other miscellaneous inputs is estimated to be Birr 11.5 million.
8
TABLE 4.1
ANNUAL RAW MATERIAL REQUIREMENT
(AT FULL CAPACITY)
No
Raw Material
Unit
Qty.
1
2
Acrylic Fiber
Miscellaneous
Materials
Tons
200
L.S
F.C
Cost(In Birr)
L.C
Total
7,698,000
3,849,000
11,547,000
15,396
10,264
25,660
Total
7,713,396
11,572,660
3,859,264
Electricity and water requirement is about 50 MWH and 1000 m3. The total annual cost of utility
at full capacity is equal to Birr 30,150.
TABLE 4.2
UTILITIES REQUIREMENT
No.
1.
2.
Utility
Electricity
Water
Total
Requirement
(Annual)
50 MWH
1,000 m3
Unit Price
Birr0.55 /KWH
Birr2.65 /m3
Cost
(Birr)
27,500
2,650
30,150
5. Location and Site
For its convenience for distribution of the acrylic yarn to the entire northern part of the country,
Bahir-Dar is an appropriate choice for the establishment of the yarn producing plant in the
ANRS.
6. Technology and Engineering
6.1
Production Process
Production of acrylic yarn or synthetic fiber follows the pattern of cotton yarn production. The
main processing stages are drawing, combing, roving, spinning, twisting, winding, setting and
packing. Depending on the type of plant to be established, the production process could start
from spinning. Main plant and machinery include roving, spinning, twisting, winding and
9
setting machines. With regard alternative technology, the production process could start from
spinning. In this case, the combing and the roving stages of production are not necessary; and
this makes the project less expensive. However, this alternative creates less employment
opportunity, and has less profit.
6.2
Machinery and Equipment
The machinery and equipment required is given in Table 6.1.
TABLE 6.1
LIST OF MACHINERY AND EQUIPMENT
Ring Frame of 400 Spindle
Trankusbims Type with Aluminum Type Separators, Titex Ring and
Grambhir
Twisting Machine Of 200 Spindles
German Type with Bottom and Top Rollers and Aluminum Pulley
Intersection Gill Box 2Hx2 Balls
Japan Type 48 Faller, High Speed
Robbins Machine 10Hx20 Balls
Robbins Machine 15Hx 30 Balls
Cheese Winder 30 Spindles CI Drum
Two Rolling Machine 40 Page Cads
Carding Machine
Hand Bundling Press 5 Kg. Capacity
Electrical Fitting
Temperature And Humidity Control
The total cost of machinery/equipment is estimated at Birr 1,026,400 of which Birr 769,800 is in
foreign currency and Birr 256,600 in local currency.
10
Machinery Suppliers Address:
COMPANY NAME: SUNBORN INTERNATIONAL CO. LTD.
LOCATION:
6.3
RM 701 KUKJE B/D, 39-1 PIL-DONG 1-GA,
CHUNG-GU, SEOUL, KOREA
Civil Engineering Cost
It is estimated that a total area of 1000m2 of land will be required for the envisaged project, out
of which 500m2 is built-up area. The total cost of the building, including the civil work, is about
Birr 1,566,000. The total cost of land lease is equal to Birr 153,960; which is based on the land
lease price of Bahir-Dar for industrial purpose. Of the total cost of the lease 5 % is paid in the
beginning while the rest will be paid in 40years.
7. Human Resource and Training Requirement
7.1
Human Resource
Details of the manpower requirement of the plant is shown in Table 7.1
TABLE 7.1
MANPOWER REQUIREMENT
No
Position
NO
Salary, Birr
Monthly
Annual
8981
107772
General
Manger
1
1
3849
46188
2
Personnel Officer
1
4619
55426
3
Chemist
1
3079
36950
4
Accountant
1
2053
24634
5
Secretary
1
1540
18475
Cashier
1
6
3079
73901
7
Shift Leader
2
2566
61584
8
Technicians
2
2053
246336
9
Operators
10
1026
197069
10
Unskilled Labors
16
868,334
Sub -Total
36
173,667
Benefit (20%)
1,042,001
Total
36
The total annual wages and salary, including 20 % benefits, amount to Birr 1,042,001.
11
7.2
Training Requirement
One month on job training is required for technical personnel. And this can be managed by
hiring one or more experts in the area from the local textile industry.
8. Financial Analysis
8.1
Underlying Assumption
The financial analysis of Acrylic Yarn producing plant is based on the data provided in the
preceding chapters 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
3% of the Fixed Investment
B. Depreciation
Building
5%
Machinery And Equipment
10%
Office Furniture
10%
Vehicles
20%
Pre-Production (Amortization)
20%
12
C. Working Capital (Minimum Days of Coverage)
Raw Material-Local
30 Days
Raw Material-Foreign
120 Days
Factory Supplies In Stock
30 Days
Spare Parts In Stock And Maintenance
30 Days
Work In Progress
Finished Products
Accounts Receivable
Cash In Hand
Accounts Payable
10 Days
15 Days
30 Days
30 Days
30 Days
8.2
Investment
The total investment cost of the project including working capital is estimated at Birr 8.9 million
as shown in Table 8.1 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 8.1
TOTAL INITIAL INVESTMENT
Items
Land
Building and Civil Works
Office Equipment
Vehicles
Plant Machinery & Equipment
Total Fixed Investment Cost
Pre Production Capital
Expenditure*
Total Initial Investment
Working Capital at Full Capacity
Total
L.C
F.C
Total
7698
7698
2566000
2566000
128300
128300
0
0
256600
769800
1026400
2958598
769800
3728398
147930
38490
186420
3106528
808290
3914818
1640185
3365845.29
5006030
4746713
4174135.29
8920848
*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.
13
Of the total investment outlay, the working capital and the cost of building share Birr 2 million
(56.1 %) and 1 million (28.8 %), respectively. The foreign component of the project accounts
only Birr 4.1 million or 46.8 % of the total investment cost.
8.3
Production Costs
The total production cost at full capacity operation is estimated at Birr 13.6 million (See Table
8.2). Raw materials and utilities account for 84.9 %.
TABLE 8.2
PRODUCTION COST AT FULL CAPACITY
Raw Material Requirement
Cost
1. Local Raw Materials
2. Foreign Raw Materials
3859264
7713396
Total Production Cost at full Capacity
Items
Cost
1. Raw materials
2. Utilities
3. Wages and Salaries
4. Spares and Maintenance
Factory Costs
5. Depreciation
6. Financial Costs
Total Production Cost
8.4
11,572,660
30,150
1,042,001
111,852
12,756,663
281,054
642,301
13,680,018
Financial Evaluation
I.
Profitability
According to the projected income statement (See Annex 4) the project will generate profit
beginning from the first year of operation and increases on wards. The income statement and
other profitability indicators also show that the project is viable.
14
II.
Breakeven Analysis
The breakeven point of the projects is given by the formula:
BEP =
Fixed Cost
Sale –Variable Cost
at full capacity.
The project will break even at 19.8 % of capacity utilization
III.
Payback Period
Investment cost and income statement projection are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in four years.
IV.
Simple Rate of Return
The project’s simple rate of return (SRR) is given by the formula:
SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.
The SRR would be 24.6 % at full capacity utilization.
V.
Internal Rate of Return and Net Present Value
Based on cash flow statement (See Annex 2) the calculated internal rate of return (IRR) of the
project is 31 % and the net present value (NPV) at 18 % discount is Birr 3,043,531
VI.
Sensitivity Analysis
The sensitivity test result which undertaken by increasing the cost of production by 10 % still
indicates that the project would be viable.
15
9. Economic and Social Benefit and Justification
Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project promotes the socio-economic goals and objectives stated in the
strategic plan of the Amhara National Regional State. These benefits are listed as follows
A. Profit Generation
The project is found to be financially viable and earns on average a profit of Birr 759 thousand
per year and Birr 19.5 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
In the project life under consideration, the region will collect over Birr 6.6 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
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
As there is few local production of Acrylic Yarn in the country, the commencement of this
project relieves a portion of the import burden. That is, based on the projected figure we learn
that in the project life an estimated amount of US Dollar 15.9 million will be saved as a result of
the proposed project. This will create room for the saved hard currency to be allocated on other
vital and strategic sectors
D. Employment and Income Generation
The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 36 professionals as well as support
stuffs. Consequently the project creates income of birr 1.4 million per year. This would be one of
the commendable accomplishments of the project.
E. Pro Environment Project
The
proposed
production
[[
process
is
environment
friendly.
16
Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTIO
N
PRODUCTION
Year 1
Year 2
1
2
3
4
0
0
90%
100%
100%
100%
0.00
0.00
7803696.722
8670774 8670774.14
8670774
0.00
0.00
3408170.54
3786856 3786856.15
3786856
Raw Material-Local
0.00
0.00
378909.5447
421010.6 421010.625
421010.6
Raw Material-Foreign
0.00
0.00
3029260.97
3365846 3365845.52
3365846
Factory Supplies in Stock
0.00
0.00
12847.01258
14274.48 14274.4784
14274.48
Spare Parts in Stock and Maintenance
0.00
0.00
10981.8385
12202.02 12202.0228
12202.02
Work in Progress
0.00
0.00
321175.5968
356861.8
356861.78
356861.8
Finished Products
0.00
0.00
642351.2192
713723.6
713723.56
713723.6
2. Accounts Receivable
0.00
0.00
1584668.3
1760743 1760742.55
1760743
3. Cash in Hand
0.00
0.00
109901.3951
122112.7 122112.681
122112.7
0.00
0.00
6090095.903
6766773 6766773.22
6766773
4. Current Liabilities
0.00
0.00
1584668.3
1760743 1760742.55
1760743
Accounts Payable
0.00
0.00
1584668.3
1760743 1760742.55
1760743
TOTAL NET WORKING CAPITAL REQUIRMENTS
0.00
0.00
4505427.602
5006031 5006030.67
5006031
INCREASE IN NET WORKING CAPITAL
0.00
0.00
4505427.602
500603.1
Capacity Utilization (%)
1. Total Inventory
Raw Materials in Stock- Total
CURRENT ASSETS
0
0
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%
8670774.141
8670774 8670774.14
8670774
8670774.1
8670774
3786856.15
3786856 3786856.15
3786856
3786856.2
3786856
Raw Material-Local
421010.6252
421010.6 421010.625
421010.6
421010.63
421010.6
Raw Material-Foreign
3365845.525
3365846 3365845.52
3365846
3365845.5
3365846
Factory Supplies in Stock
14274.47838
14274.48 14274.4784
14274.48
14274.478
14274.48
Spare Parts in Stock and Maintenance
12202.02282
12202.02 12202.0228
12202.02
12202.023
12202.02
Work in Progress
356861.7799
356861.8
356861.78
356861.8
356861.78
356861.8
Finished Products
713723.5598
713723.6
713723.56
713723.6
713723.56
713723.6
2. Accounts Receivable
1760742.55
1760743 1760742.55
1760743
1760742.6
1760743
122112.6812
122112.7 122112.681
122112.7
122112.68
122112.7
6766773.222
6766773 6766773.22
6766773
6766773.2
6766773
4. Current Liabilities
1760742.55
1760743 1760742.55
1760743
1760742.6
1760743
Accounts Payable
1760742.55
1760743 1760742.55
1760743
1760742.6
1760743
5006030.672
5006031 5006030.67
5006031
5006030.7
5006031
0
0
0
1. Total Inventory
Raw Materials in Stock-Total
3. Cash in Hand
CURRENT ASSETS
TOTAL NET WORKING CAPITAL REQUIRMENTS
INCREASE IN NET WORKING CAPITAL
0
0
0
18
Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION
PRODUCTION
Year 1
Year 2
1957409
6963440 16110794.3
16316214
16140140
16140140
1957409
6963440
1584668.3
176074.2
0
0
Total Equity
782963.58
2785376
0
0
0
0
Total Long Term Loan
1174445.4
4178064
0
0
0
0
0
0
1584668.3
176074.2
0
0
2. Inflow Operation
0
0
14526126
16140140
16140140
16140140
Sales Revenue
0
0
14526126
16140140
16140140
16140140
Interest on Securities
0
0
0
0
0
0
0
0
0
0
0
0
15074879
15029158
14954222
TOTAL CASH INFLOW
1. Inflow Funds
Total Short Term Finances
3. Other Income
1
2
3
4
TOTAL CASH OUTFLOW
1957409
1957409 18988289.3
4. Increase In Fixed Assets
1957409
1957409
0
0
0
0
Fixed Investments
1864199
1864199
0
0
0
0
Pre-production Expenditures
93209.95
93209.95
0
0
0
0
5. Increase in Current Assets
0
0
6090095.9
676677.3
0
0
6. Operating Costs
0
0 11581528.5
12863816
12863816
12863816
7. Corporate Tax Paid
0
0
0
0
738005.72
770120.8
8. Interest Paid
0
0 1316664.92
642301.1
535250.92
428200.7
9. Loan Repayments
0
0
0
892084.9
892084.86
892084.9
10. Dividends Paid
0
0
0
0
0
0
Surplus(Deficit)
0
5006031
-2877495
1241335
1110982.5
1185918
Cumulative Cash Balance
0
5006031 2128535.67
3369871
4480853.1
5666771
19
Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5
6
7
8
9
10
16140140
16140140
16140140
16140140
16140140
16140140
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
16140140
16140140
16140140
16140140
16140140
16140140
Sales Revenue
16140140
16140140
16140140
16140140
16140140
16140140
0
0
0
0
0
0
0
0
0
0
0
0
14815537 14740602.2
13773582
13773582
13773582
TOTAL CASH INFLOW
1. Inflow Funds
Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
14879287
4. 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
6. Operating Costs
12863816
12863816
12863816
12863816
12863816
12863816
7. Corporate Tax Paid
802235.83
845536.1 877651.135
909766.2
909766.19
909766.2
8. Interest Paid
321150.55
214100.4 107050.184
0
0
0
9. Loan Repayments
892084.86
892084.9
892084.86
0
0
0
10. Dividends Paid
0
0
0
0
0
0
Surplus(Deficit)
1260852.7
1324603 1399537.79
2366558
2366557.8
2366558
Cumulative Cash Balance
6927623.4
8252226 9651763.87
12018322
14384879
16751437
5. Increase in Current Assets
20
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION
Year 1
PRODUCTION
Year 2
1
2
3
4
TOTAL CASH INFLOW
0
0
14526126
16140140
16140140
16140140
1. Inflow Operation
0
0
14526126
16140140
16140140
16140140
Sales Revenue
0
0
14526126
16140140
16140140
16140140
Interest on Securities
0
0
0
0
0
0
0
0
0
0
0
0
TOTAL CASH OUTFLOW
1957409
1957409
16086956.1
13364419
13601822
13633937
3. Increase in Fixed Assets
1957409
1957409
0
0
0
0
Fixed Investments
1864199
1864199
0
0
0
0
Pre-production Expenditures
93209.95
93209.95
0
0
0
0
4. Increase in Net Working Capital
0
0
4505427.6
500603.1
0
0
5. Operating Costs
0
0
11581528.5
12863816
12863816
12863816
6. Corporate Tax Paid
0
0
0
0
738005.72
770120.8
NET CASH FLOW
-1957409
-1957409
-1560830.1
2775721
2538318.2
2506203
CUMMULATIVE NET CASH FLOW
-1957409
-3914818
-5475648
-2699927
-161608.8
2344594
Net Present Value (at 18%)
-1957409
-1658821
-1120963.9
1689389
1309236.3
1095485
Cumulative Net present Value
-1957409
-3616230
-4737194
-3047805
-1738568
-643084
2. Other Income
21
Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
5
6
7
8
9
10
TOTAL CASH INFLOW
16140140
16140140
16140140
16140140
16140140
16140140
1. Inflow Operation
16140140
16140140
16140140
16140140
16140140
16140140
Sales Revenue
16140140
16140140
16140140
16140140
16140140
16140140
0
0
0
0
0
0
0
0
0
0
0
0
13666052
13709352
13741467.2
13773582
13773582
13773582
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
5. Operating Costs
12863816
12863816
12863816
12863816
12863816
12863816
6. Corporate Tax Paid
802235.83
845536.1
877651.135
909766.2
909766.19
909766.2
NET CASH FLOW
2474088.1
2430788
2398672.83
2366558
2366557.8
2366558
CUMMULATIVE NET CASH FLOW
4818682.5
7249470
9648143.22
12014701
14381259
16747817
Net Present Value (at 18%)
916480.28
763085.2
638138.514
533554.8
452165.1
383190.8
Cumulative Net present Value
273396.57
1036482
1674620.25
2208175
2660340.2
3043531
Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW
4. Increase in Net Working Capital
Net Present Value (at 18%)
Internal Rate of Return
3,043,531
31.0%
22
Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
Capacity Utilization (%)
1. Total Income
Sales Revenue
1
2
3
4
5
90%
100%
100%
100%
100%
14526126
16140140
16140140
16140140
16140140
14526126
16140140
16140140
16140140
16140140
0
0
0
0
0
11165467.5
12406075
12406075
12406075
12406075
3360658.51
3734065
3734065
3734065.01
3734065
23.14
23.14
Other Income
2. Less Variable Cost
VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
23.14
23.14
23.14
697114.971
738795.02
738795
738795.022
738795
2663543.54
2995270
2995270
2995269.99
2995270
18.56
18.56
18.56
18.56
18.56
4. Less Cost of Finance
1316664.92
642301.11
535250.9
428200.737
321150.6
5. GROSS PROFIT
1346878.62
2352968.9
2460019
2567069.25
2674119
0
0
738005.7
770120.776
802235.8
1346878.62
2352968.9
1722013
1796948.48
1871884
6. Income (Corporate) Tax
7. NET PROFIT
RATIOS (%)
Gross Profit/Sales
9.27%
14.58%
15.24%
15.90%
16.57%
Net Profit After Tax/Sales
9.27%
14.58%
10.67%
11.13%
11.60%
Return on Investment
31.63%
33.58%
25.30%
24.94%
24.58%
Return on Equity
37.75%
65.94%
48.26%
50.36%
52.46%
23
Annex 4: NET INCOME STATEMENT (in Birr):Continued
PRODUCTION
Capacity Utilization (%)
6
7
8
9
10
100%
100%
100%
100%
100%
16140140
16140140
16140140
16140140
16140140
16140140
16140140
16140140
16140140
16140140
0
0
0
0
0
12406075
12406075
12406075
12406075
12406075
3734065
3734065
3734065
3734065
3734065
23.14
23.14
23.14
23.14
23.14
701511
701511
701511
701511
701511
3032554
3032554
3032554
3032554
3032554
18.79
18.79
18.79
18.79
18.79
4. Less Cost of Finance
107050.2
0
0
0
107050.2
5. GROSS PROFIT
2925504
3032554
3032554
3032554
2925504
6. Income (Corporate) Tax
877651.1
909766.2
909766.2
909766.2
877651.1
7. NET PROFIT
2047853
2122788
2122788
2122788
2047853
1. Total Income
Sales Revenue
Other Income
2. Less Variable Cost
VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
RATIOS (%)
Gross Profit/Sales
17.46%
18.13%
18.79%
18.79%
18.79%
Net Profit After Tax/Sales
12.22%
12.69%
13.15%
13.15%
13.15%
Return on Investment
24.52%
24.16%
23.80%
23.80%
23.80%
Return on Equity
55.29%
57.39%
59.49%
59.49%
59.49%
24
Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION
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
Year 1
1957409
0
0
0
0
0
0
0
0
1957409
0
1864199
93209.95
0
0
0
1957409
0
0
0
1174445.4
1174445.4
0
782963.58
782963.58
0
0
0
0
0
0
Year 2
8920848.57
5006030.67
0
0
0
0
0
5006030.67
0
3914817.9
1864199
1864199
186419.9
0
0
0
8920848.57
0
0
0
5352509.13
5352509.13
0
3568339.44
3568339.44
0
0
0
0
0
0
PRODUCTION
1
11852395
8218632
3431999
321175.6
642351.2
1584668
109901.4
2128536
0
3633764
3728398
0
186419.9
281054
0
0
11852395
1584668
1584668
0
5352509
5352509
0
3568339
3568339
0
0
0
1346879
0
1346879
2
13489354
10136644
3813333
356861.8
713723.6
1760743
122112.7
3369871
0
3352710
3728398
0
186419.9
562108
0
0
13489354
1760743
1760743
0
4460424
4460424
0
3568339
3568339
0
0
1346879
2352969
0
2352969
3
14319282
11247626
3813333
356861.8
713723.6
1760743
122112.7
4480853
0
3071656
3728398
0
186419.9
843161.9
0
0
14319282
1760743
1760743
0
3568339
3568339
0
3568339
3568339
0
0
3699848
1722013
0
1722013
4
15224146
12433544
3813333
356861.8
713723.6
1760743
122112.7
5666771
0
2790602
3728398
0
186419.9
1124216
0
0
15224146
1760743
1760743
0
2676255
2676255
0
3568339
3568339
0
0
5421861
1796948
0
1796948
25
Annex 5: Projected Balance Sheet (in Birr): Continued
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
5
16203944.6
13694396.6
3813332.65
356861.78
713723.56
1760742.55
122112.681
6927623.42
PRODUCTION
6
7
8
17284777 18440545 20563333
15018999 16418537 18785095
3813333 3813333 3813333
356861.8 356861.8 356861.8
713723.6 713723.6 713723.6
1760743 1760743 1760743
122112.7 122112.7 122112.7
8252226 9651764 12018322
9
22686121
21151653
3813333
356861.8
713723.6
1760743
122112.7
14384879
10
24808908
23518210
3813333
356861.8
713723.6
1760743
122112.7
16751437
0
0
0
0
0
0
2509548
3728398
2265778
3728398
2022008
3728398
1778238
3728398
1534468
3728398
1290698
3728398
0
0
0
0
0
0
186419.9
1405269.9
186419.9
1649040
186419.9
1892810
186419.9
2136580
186419.9
2380350
186419.9
2624120
0
0
0
0
0
0
0
0
0
0
0
0
17284777 18440545 20563333
1760743 1760743 1760743
1760743 1760743 1760743
22686121
1760743
1760743
24808908
1760743
1760743
16203944.6
1760742.55
1760742.55
0
0
0
0
0
0
1784169.72
1784169.72
892084.9
892084.9
0
0
0
0
0
0
0
0
0
0
0
0
0
0
3568339.44
3568339.44
3568339
3568339
3568339
3568339
3568339
3568339
3568339
3568339
3568339
3568339
0
0
0
0
0
0
0
0
0
0
0
0
9090693 11063610 13111463
1972918 2047853 2122788
15234251
2122788
17357039
2122788
7218809.35
1871883.61
Dividends Payable
0
0
0
0
0
0
Retained Profits
1871883.61
1972918
2047853
2122788
2122788
2122788
26
27