74. PROFILE ON PRODUCTION OF GLASS BOTTLES
AND TUMBLERS
TABLE OF CONTENTS
PAGE
I.
SUMMARY
74 -3
II.
PRODUCT DESCRIPTION & APPLICATION
74 - 3
III.
MARKET STUDY AND PLANT CAPACITY
74 - 4
A. MARKET STUDY
74 - 4
B. PLANT CAPACITY & PRODUCTION PROGRAMME
74 - 6
MATERIALS AND INPUTS
74 - 6
A. RAW & AUXILIARY MATERIALS
74 - 6
B. UTILITIES
74 - 6
TECHNOLOGY & ENGINEERING
74 - 7
A. TECHNOLOGY
74 - 7
B. ENGINEERING
74 - 8
MANPOWER & TRAINING REQUIREMENT
74 - 10
A. MANPOWER REQUIREMENT
74 - 10
B. TRAINING REQUIREMENT
74 - 11
FINANCIAL ANLYSIS
74 - 11
A. TOTAL INITIAL INVESTMENT COST
74 - 11
B. PRODUCTION COST
74 - 13
C. FINANCIAL EVALUATION
74 - 13
D. ECONOMIC BENEFITS
74 - 14
IV.
V.
VI.
VII.
74 - 3
I.
SUMMARY
This profile envisages the establishment of a plant for the production of glass bottle and
tumblers with a capacity of 2 million and 5 million pcs per annum, respectively.
The present demand for the proposed product is estimated at 11,500 tonnes and 3000 tonnes for
bottles and tumblers respectively per annum. The demand is expected to reach 29,600 tonnes
and 7,700 tonnes for bottles and tumblers respectively by the year 2020.
The plant will create employment opportunities for 76 persons.
The total investment requirement is estimated at Birr 23.85 million, out of which Birr 18.15
million is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 15% and a net present
value (NPV) of Birr 9.79 million discounted at 8.5%.
II.
PRODUCT DESCRIPTION & APPLICATION
Glass bottles and tumblers are vitreous silica compounds produced in a suction fed type
blowing machine. Glass bottles are used for handling liquid, paste or powder products from
beverage, cosmetic or pharmaceutical industries. Shape, colour and size of glass bottles may
vary according to clients demand, architecture and strength. Almost all glass bottles are flat
bottom, straight with a ‘neck’ for corking or sealing.
Glass bottles are produced either clear, brown or in green colour. Standard sizes for glass
bottles may range from 50 cc to 1,000 cc. Typical sizes are 50,100,250,330,500,630,750 and
1,000 ccs.
Tumblers are flat bottom, straight clear drinking glass without handles. They are usually
produced as 250 cc glasses.
74 - 4
The demand for bottles is a derived demand of the beverage sector and other commercial users
of glass packing materials. Tumblers on the other hand are used by households and other
institutions to serve liquids. The current demand is mainly met through imports.
Basic raw material is silica compounds found in sands.
Production of bottles and tumblers involves cleaning, mixing, and molding. It is environment
friendly.
The plant can be rated as medium scale industry.
It has forward linkage effects with manufacturing sector.
III.
MARKET STUDY AND PLANT CAPACITY
A.
MARKET STUDY
1.
Past Supply & Present Demand
1.1
Glass Bottles
The source of bottle supply in Ethiopia is both domestic production and imports. The major
end-users are beverage bottlers (beer, mineral water, soft drinks, etc), cosmetics manufacturers,
jam, marmalade, squash, honey producers and pharmaceutical plants.
The sole domestic producer of bottles is the Addis Ababa Bottle and Glass Factory. It has a
production capacity of 30 tonne/day at 85% efficiency. Working 341 days in a year, its annual
capacity is, thus, 8,695.5 tonne.
The production of Addis Ababa Bottle and Glass Factory meets about 50% of the domestic
demand, which emanates mainly from beverage and cosmetics factories.
The remaining
demand, which originates from such factories as pharmaceuticals, honey etc and have unique
requirements, is largely covered by imports.
74 - 5
The historical supply of glass bottles, which refers to production figures of Addis Ababa Bottle
and Glass Factory and imports, is given in Table 3.1.
Table 3.1
APPARANET CONSUMPTION (HISTORICAL SUPPLY)
OF GLASS BOTTLES (1996-2005)
Year
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Domestic
Production 1
5,801
6,120
5,904
5,006
5,603
5,120
5,545
1,104
6,329
5,040
Import 2
601
477
3,404
4,081
4,596
4,251
3,265
6,089
6,417
6,253
Total
6,402
6,597
9,308
9,087
10,199
9,371
8,810
7,193
12,746
11,293
Source: 1. Addis Ababa Bottle & Glass Factory.
2. Customs Authority, External Trade Statistics, Annual Issues.
Scrutiny of the data in Table 3.1 reveals that domestic production shows no discernible growth
trend, averaging about 5,000 tonnes in the past 10 years. This is not surprising since Addis
Ababa Bottle & Glass Factory is the sole local producer and no new plant has been set up
despite the growing demand. The factory is operating at about 60% of its capacity in most
years, though in year 2003 production had plum mated to only 1,104 tonnes, i.e, about 13% of
capacity.
The increasing demand for glass bottles is reflected, rather, in growth of imports. Over the 10
years covered by the data set (1996-2005), import of glass bottles has grown at an average
annual growth rate of 30%. The growth in imports especially marked since 1998 when about
3,400 tonnes of bottles were imported. The present level of imports is in the order of 6,000
tonnes, bringing the total supply to about 11,300 tonnes. Assuming supply approximates
effective demand, present demand is, thus, estimated to be 11,500 tonnes.
74 - 6
Regarding, domestic sales, the largest in terms of number of bottles sold is beer bottles,
followed by mineral water. The data of local bottle sales, disaggregated by end-use is
shown in Table 3.2.
Table 3.2
BOTTLE SALES BY ADDIS ABABA BOTTLE & GLASS FACTORY (TONNES)
Bottle type
Beer Amber
Beer – White (cosmetics)
Mineral Water ( ambo)
Bottled Water
ARAKI
Soft Drinks
Wine
Others (Marmalade,Kinoto
etc…)
Total
2003
No.
1,893,025
3,133,075
1,794,149
1,096,412
584,306
287,208
244,362
867,022
9,899,559
2004
Weight
559
897
802
329
403
122
77
212
No.
5,770,464
3,248,875
2,932,846
926,172
1,312,319
403,345
900,287
3401 15,494,308
2005
Weight
1,713
930
1,121
637
523
218
279
No.
Weight
10,026,006
2,995
2,484,275
721
1,139,907
508
674,405
464
3,212,657
940
200,157
101
438,140
85
5,421 18,175,547
Source: Addis Ababa Bottle and Glass Factory.
1.2.
Tumbler (Drinking Glasses)
Until about five years ago (2001), the supply source of tumblers (drinking glass) in Ethiopia
had been both import and domestic production (Addis Ababa Bottle and Glass Factory). The
production capacity of Addis Ababa Bottle and Glass Factory (AABGF) for tumbler production
was about 1,220 tonnes per annum. Although AABGF has stopped tumbler production for 5
years due to technical reasons, it has conducted a rehabilitation study of its tumbler line and
hopes to resume production when the investment needed for this purpose is approved by the
Government.
The tumbler products of AABGF are mostly drinking glasses meant to satisfy the demands of
lower income households and institutional consumers. They included mainly such items as tea
glass, water glass, tela glass, arekie glass and whisky glass.
5,814
74 - 7
As AABGF is out of the business, presently, the total demand for tumblers of all kinds is being
met through imports. The import data of tumblers, comprising different kinds of drinking
glasses are shown in Table 3.3.
Table 3.3
IMPORT OF TUMBLERS
Year
Import (tonnes)
1995
1,668
1996
1,463
1997
476
1998
1,430
1999
1,016
2000
1,421
2001
1,986
2002
2,323
2003
3,464
2004
1,588
Source: Cusotms Authority, External Trade Statistics, Annual Issues
Table 3.3 shows that import of tumblers was erratic during the past 10 years though a general
growth trend is observable in the years 2002 and 2003. An averages of about 3,000 tonnes of
tumblers were imported in those years, which this study considers to represent the present
effective demand.
2.
Demand Projection
2.1
Glass Bottles
The future demand for bottles is a function of industries which are dependent on bottles for
packaging and distributing their product.
Given existing technology, all the end – users
identified in this study are bound to be critically dependent on bottles to sell their products for a
long time. The demand for beverages, be it alcoholic or non-alcoholic, is expected to exhibit
74 - 8
continuous growth, thereby necessitating an increase on production capacity through both
expansion and rehabilitation of existing plants as well as the establishment of new ones.
Hence, in order that production in these enterprises may not be constrained, and to avoid
depending on imports which will entail lots of inconveniences, and loss of foreign exchange to
the country, a reliable domestic supply of bottles must be assured. The pharmaceutical, food
processing, cosmetics and personal care industries in Ethiopia are also showing unmistakable
signs of growth and the demand emanating from these sectors will also constitute an
increasingly important market.
Taking all the above elements in to account, the future demand for bottles is forecasted to grow
at 7% per annum, which is the rate, at which the Ethiopian economy is recently growing and
the result shown in Table 3.4
2.2
Tumblers
Being mass consumption goods, the demand for tumblers largely depends on the size and
growth rate of the population. In the Ethiopian context, however, as far as glass-based products
are concerned, the most important market is the urban population. The urban population grows
at the rate of 2.5% per annum.
Although the size and growth rate of population is the most important determinant of demand
for tumblers, demand is also affected by a host of other factors, including income and price.
Hence in order to take account of the impact of these other demand determining variables, the
urban population growth rate of 4% is inflated to 7% and used to project future demand (see
Table 3.4)
74 - 9
Table 3.4
DEMAND PROJECTION OF BOTTLES & TUMBLERS (TONNES)
2006-2020
Year
3.
Projected Demand
Bottles
Tumblers
Unsatisfied Demand *
Bottles
Tumblers
2006
11,500
3,000
6,500
1,800
2007
12,300
3,200
7,300
2,000
2008
13,200
3,400
8,200
2,200
2009
14,000
3,700
9,000
2,500
2010
15,000
3,900
10,000
2,700
2011
16,000
4,200
11,000
3,000
2012
17,000
4,500
12,000
3,200
2013
18,500
4,800
13,500
3,600
2014
20,000
5,000
15,000
3,800
2015
21,000
5,500
16,000
4,300
2016
22,600
5,900
17,600
4,700
2017
24,200
6,300
19,200
5,100
2018
25,900
6,800
20,900
5,500
2019
27,700
7,200
22,700
6,000
2020
29,600
7,700
24,600
6,200
Pricing and Distribution
Based on current market price for the products a factory gate price of Birr 1.80 and 2.50 per pcs
for tumblers and bottles, respectively is recommended.
The envisaged plant can distribute it’s products through the existing household goods retailers
and directly to bulk end users such as beverage factories.
*
The unsatisfied demand is calculated by assuming that the AABGF will continue to
Produce about 5000 tonnes of bottles and 1200 tonnes of tumblers during the projected
Period.
74 - 10
B.
PLANT CAPACITY AND PRODUCTION PROGRAMME
1.
Plant Capacity
According to the market study, the unsatisfied demand of bottles and tumblers in year 2006 is
6500 tonnes and 1800 tonnes, respectively. These figures are projected to grow to 16,000
tonnes and 4,300 tonnes in 2015, respectively.
Based on demand projection shown is Table 3.4, the annual production capacity of the
envisaged plant would therefore be 10500 tonnes of glass bottles and tumblers per annum. This
would be 5 million pieces of tumblers and 2.0 million pieces of glass bottles.
The proposed plant is an energy intensive unit where large quantity of fuel oil is required in
order to operate the glass melting furnace. Such a plant is required to operate continuously for
24 hours a day and for 350 days a year. Therefore, the proposed plant operates three shifts a
day.
2.
Production Programme
In order to provide adequate time for developing the skill of producing glass bottles and
tumblers, and develop market outlets at different locations of the country, it would be advisable
to start production at a lower level and gradually build up the scale of production. Accordingly,
the envisaged plant will start operation at 70% of its production capacity, during the first year
of operation, and then raise up production to 80%, 90% and lastly to 100% during the next
succeeding years. Table 3.5 below shows production programme.
Table 3.5
PRODUCTION PROGRAMME
Year
Capacity
Utilization
(%)
Production (Pcs)
1
70
1.4 million
3.5 million
2
80
1.6 million
4 million
3
90
1.8 million
4.5 million
4-5
100
2 million
5 million
Glass Bottle
Tumblers
74 - 11
IV.
RAW MATERIALS AND INPUTS
A.
RAW & AUXILIARY MATERIALS
The major raw materials required for manufacturing of glass bottles and tumblers are silica,
limestone, soda ash and cullet. Annual consumption of these materials at full production of the
capacity plant is given in Table 4.1 below. Auxiliary materials include dolomite, ceramic
colour (enamel), and packaging materials.
Table 4.1
RAW AND AUXILLIARY MATERIALS
Sr.
No.
Description
Qty.
Cost in Birr (‘000)
FC
LC
TC
6,410
1,750
1,950
1,770
-
-
288.45
192.50
2730.00
35.40
3246.35
288.45
192.50
2,730.00
35.40
3,246.35
340
5.30
As req
-
50
50.0
85.00
65
150.0
85.0
50.0
65
200.0
-
50
3,396.35
3,446.35
A. RAW NATERIAL
1
2
3
4
Silica sand
Limestone
Soda Ash
Cullet
Sub – total
-
B. AUXILIARY MATERIAL
1
2
3
Dolomite
Cermaic Color ( Enamel)
Packing Mateirals
Sub-total
Total Cost
B. UTILITIES
The utilities required for the envisaged plant are electricity, water and furnace fuel. The annual
requiredment of utilities and associated cost is shown in Table 4.2.
74 - 12
Table 4.2
UTILITIES REQUIRMENT
Sr.
No.
1.
Description
Qty.
Unit Cost (Birr)
LC
FC
Total Cost (Birr)
LC
FC
TC
Electricity
2.1 kWh
0.4738/kWh
994.98
994.98
2.
Water
200,000m3
3.1/m3
620
620
3.
Furnace fuel
1,575,0001
2.25
3543.35
3543.75
4.
Air
300,000m3
5158.33
5158.33
Total
VI
TECHNOLOGY AND ENGINEERING
A.
TECHNOLOGY
1.
Production Process
The foreign matter and pieces of iron contained in the raw material will be removed and
weighed in proportion to the mixing ratio with auxiliary material.
Then, the mixture is
proposed into molten, refined glass in the furnace at the temperature of approximately 1,5000c.
It is molded by bottle forming and tumbler forming machines and cooled slowly in the
annealing lehr.
Going through inspection, the annealed product is packed and delivered. When necessary, the
bottle as well as the tumbler is printed in ceramic colors by multi-color decorating machine.
After glazing, final inspection will be conducted for delivery.
2.
Source of Technology
The technology required for bottles & tumblers is simple and widely applied for many years in
countries such as western Europe, China, India & Korea. It would be possible to obtain the
latest technology for the manufacturing of bottles & tumblers from these countries.
74 - 13
Please find here below the machinery supplier address:1) ITTFLYGT, Srl
Fax: 02-9019990
E-Mail:ittlypt. Italia@flygt.com
Country of orgin: Italy
2) Muhak Co., LTD
Add: 4G9-6,Pong-amdong,
Hoewon-gu,masanKyongnam
Tel: 0551-293-3161
Fax: 0551-296-2200
Home page: WWW.muhak.Co.kr.
B.
ENGINEERING
1.
Machinery and Equipment
The required machinery and equipment for the production of glass and tumblers plant will be
acquired through import. The total machinery and equipment cost is estimated at Birr 26.453
million, out of which about Birr 21.16 million will be required in foreign currency. The
detailed list of machinery and equipment is given in Table 5.1.
74 - 14
Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT & COST
Qty.
(pc)
Description
Unit Cost
Birr (‘000)
LC
FC
Total Cost
Birr (‘000
FC
LC
A. Machinery
1. Raw material preparation plant
2. Mettin furnace
3. Forming Machine
4. Annealing lehr
5. Decorating and packing machine
6. Compressor
7. Boiler
8. Generator
9. Pumps
1 set
1 pc
1 pc
1 pc
1 set
2 pcs
1 pc
2 pcs
1 set
B. Installation costs
1. Oil system
2. LPG system
3. Electrical System
4. Cooling system
1 set
“
“
“
1,660
458
3,213
650
268
65
1.Contingency 10%
2. Freight and Insurance
FOB)
Total Costs
6set
2 pcs
(15%
CIF landed Cost
Total Cost
2.
268
65
125
134
166
125
325
225
206
188
125
268
166
250
320
165
117
122
(A+B)
C. Equipments
1. Office furniture
2. Vehicles
Sub- Total Machinery Cost
1,660
458
3,213
650
325
225
206
188
320
165
117
122
7,734
1,057
6,790
36
270
639
6
135
773
1,160.1
9,667.1
16,457.1
1696
18,153.10
Land, Building and Civil Works
The envisaged plant will require a total land area of 4,000 m2, out of which 2,000 m2 will be
covered by factory and office buildings, stores, etc.
74 - 15
The total cost of building and civil works, estimated at a rate of Birr 1200 per m 2, will be Birr
2.4 million. Cost for holding of land for 70 years of lease is estimated at Birr 40,000.
Therefore, the total cost for land holding, building and civil works will be Birr 2.44 million.
3.
Proposed Location
The plant is considered to be established around Dire Dawa where the raw materials,
infrastructure & utilities are available. Moreover, the location of the plant should be at a place
where the workers conveniently commute or take up their lodgings in view of the fact that the
plant is operated for 24 hours a day.
VI.
MANPOWER AND TRAINING REQUIRMENT
A.
MANPOWER REQUIRMENT
The total manpower requirement of the envisaged project is 76 persons.
manpower and the estimated annual labour cost are indicated in Table 6.1.
The proposed
74 - 16
Table 6.1
MANPOWER REQUIRMENT AND LABOUR COST)
Sr.
Description
No.
1.
General Manager
Monthly
Salary (Birr)
3,000
Annual Salary
(Birr)
36,000
2.
Executive Secretary
1
1,000
12,000
3.
Plan and Statistics Head
1
1,800
21,600
4.
Production and Technical Manager
1
2,500
30,000
5.
Commercial and Marketing Manager
1
2,300
27,600
6.
Finance Manager
1
2,300
27,600
7.
Administration Manager
1
2,500
30,000
8.
Personnel
1
1,500
18,000
9.
Secretary
3
800
28,800
10.
Glass Technologist
1
1,800
21,600
11.
Production Workers
30
400
144,000
12.
Technicians
10
600
72,000
13.
Sales man
4
500
24,000
14.
Store Head
1
500
6,000
15.
General Accountant
2
450
10,800
16.
Finance and Budget Accountant
2
450
10,800
17.
General Service
15
150
27,000
Sub-Total
Employees Benefit (25% BS)
Training Cost
Total
B.
Req.
Qty.
1
76
547,800
136,950
30,000
714,750
TRAINING REQUIRMENT
Training is required for technical staff and operators for a period of one month. For this
arrangements can be made with Addis Ababa Glass and Bottle Factory. A total of Birr 30,000
is allotted to execute the training programme.
74 - 17
VII.
FINANCIAL ANALYSIS
The financial analysis of the glass bottles and tumblers project is based on the data presented in
the previous chapters and the following assumptions:-
Construction period
1 year
Source of finance
30 % equity
70 % loan
Tax holidays
2 years
Bank interest
8%
Discount cash flow
8.5%
Accounts receivable
30 days
Raw material local
60days
Raw material, import
90days
Work in progress
2 days
Finished products
30 days
Cash in hand
5 days
Accounts payable
30 days
A.
TOTAL INITIAL INVESTMENT COST
The total investment cost of the project including working capital is estimated at Birr 23.85
million, out of which 65.23 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
74 - 18
Table 7.1
INITIAL INVESTMENT COST
Sr.
Total Cost
No.
Cost Items
1.
Land lease value
2.
Building and Civil Work
3.
Plant Machinery and Equipment
18153.10
4.
Office Furniture and Equipment
75.00
5.
Vehicle
6.
Pre-production Expenditure*
1393.10
7.
Working Capital
1347.35
Total Investment cost
Foreign Share
B.
(‘000 Birr)
40.00
2400.00
450.00
23858.45
65.23
PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 12.91 million (see
Table 7.2). The material and utility cost accounts for 66.61 per cent, while repair and
maintenance take 1.16 per cent of the production cost.
* N.B Pre-production expenditure includes interest during construction ( Birr 1.2 million)
training (Birr 30 thousand) and (Birr 150 thousand) costs of registration, licensing and
formation of the company including legal fees, commissioning expenses, etc.
74 - 19
Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items
Cost
%
Raw Material and Inputs
3446.35
26.68
Utilities
5158.33
39.93
Maintenance and repair
150.00
1.16
Labour direct
328.68
2.54
Factory overheads *
136.95
1.06
Administration Costs**
219.12
1.70
Total Operating Costs
9439.43
73.08
Depreciation
2070.80
16.03
Cost of Finance
1406.94
10.89
12917.17
100.00
Total Production Cost
C.
FINANCIAL EVALUATION
1.
Profitability
According to the projected income statement, the project will start generating profit in the
second year of operation.
Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total investment)
show an increasing trend during the life-time of the project.
The income statement and the other indicators of profitability show that the project is viable.
* Factory overhead cost includes salaries and wages of supervisors, insurance of factory
workers social costs on salaries of direct labour etc.
**
Administrative cost includes salaries and wages, insurance, social costs, materials and
services used by administrative staff etc.
74 - 20
2.
Break-even Analysis
The break-even point of the project including cost of finance when it starts to operate at full
capacity ( year 3) is estimated by using income statement projection.
BE =
Fixed Cost
=
49 %
Sales – Variable Cost
3.
Pay-Back Period
The investment cost and income statement projection are used to project the pay-back period.
The project's initial investment will be fully recovered within 6 years.
4.
Internal Rate of Return and Net Present Value
Based on the cash flow statement, the calculated IRR of the project is 15 % and the net present
value at 8.5% discount rate is Birr 9.79 million.
D.
ECONOMIC BENEFITS
The project can create employment for 76 persons.
In addition to supply of the domestic
needs, the project will generate Birr 324.85 thousand in terms of tax revenue.
The
establishment of such factory will have a foreign exchange saving effect to the country by
substituting the current imports.