Investment Office ANRS

Project Profile on the Establishment

Of Aluminium Household Utensil
Making Plant

Development Studies
Associates (DSA)

September 2008
Addis Ababa

Table of Contents
1.Executive Summary..............................................................................................3
2.Product Description and Application.................................................................3
3.Market Study, Plant Capacity and Production Program.................................4
3.1Market Study...........................................................................................................................4
3.1.1Present Demand and Supply............................................................................................4
3.1.2Projected Demand............................................................................................................4
3.1.3Pricing and Distribution...................................................................................................5
3.2Plant Capacity.........................................................................................................................5
3.3Production Program................................................................................................................5

4.Raw Materials and Utilities.................................................................................5

4.1Availability and Source of Raw Materials..............................................................................5
4.2Annual Requirement and Cost of Raw Materials and Utilities...............................................5

5Location and Site...................................................................................................6

6Technology and Engineering ...............................................................................6
6.1Production Process..................................................................................................................6
6.2Machinery and Equipment......................................................................................................7
6.3Civil Engineering Cost............................................................................................................9

7Human Resource and Training Requirement.....................................................9

7.1Human Resource ....................................................................................................................9
7.2Training Requirement...........................................................................................................10

8Financial Analysis................................................................................................11
8.1Underlying Assumption .......................................................................................................11
8.2Investment.............................................................................................................................12
8.3Production Costs...................................................................................................................13
8.4Financial Evaluation.............................................................................................................13

9Economic and Social Benefit and Justification.................................................14

ANNEXES..............................................................................................................16

1. Executive Summary
This project profile deals with the establishment of Aluminium Household Utensil Making Plant
in Amhara National Regional State. The following presents the main findings of the study
Demand projection divulges that the domestic demand for aluminium household utensils is
substantial and is increasing with time. Accordingly, the planned plant is set to produce 700,000
various types of utensils annually. The total investment cost of the project including working
capital is estimated at Birr 26.82 million and creates79 new jobs.
The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 26.41% of capacity utilization and it will
payback fully the initial investment less working capital in third year of operation. The result
further show that the calculated IRR of the project is 20.9% and te NPV discounted at 18% per
annum is Birr 2.39 million.
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 diversification.
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

Aluminium utensils are popular because they are light; they dont rust and are relatively less
expensive than utensils made from steel and sliver.

The proposed plant produces kitchen vessels such as pans and kettles for boiling, and bowls and
tubs using aluminium. The plant, however, will be able to produce almost any other sort of
household vessels. Market Study, Plant Capacity and Production Program

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

If we assume that there one aluminium utensil per household, the current demand in ANRS is
approximately 2,956,632. The proposed plan produces only 700,000 units (a small fraction of the
demand) when it operates at full capacity. If we add the demand from the neighbouring regions,
the total demand will be much more than the plants capacity.

3.1.2 Projected Demand

The future demand is projected taking a conservative assumption that demand will increase by
2% annum. Table 1 depicts the outcome.
Table 1: Projected Demand

Year
2,009
2,010
2,011
2,012
2,013
2,014
2,015
2,016
2,017
2,018

Demand
(pcs)
3,015,765
3,076,080
3,137,602
3,200,354
3,264,361
3,329,648
3,396,241
3,464,166
3,533,449
3,604,118

3.1.3 Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the average selling
price of aluminium utensils has been estimated at Birr 40.00.

3.2

Plant Capacity

Thus, given the expected demand for aluminium utensils presented earlier, and the planned
technology, the envisaged plant is set to produce 700,000 annually.

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 75 percent capacity and then it grows to 85
percent in the 2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This
consideration is developed based on the assumption that market and logistics barriers would take
place for the first two years of operation.

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

The major raw material aluminium rod should be imported preferably from Asia. It can also be
obtained from Europe but it will be a bit more expensive.

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 2 here under.

Table 2: Required Raw Material at Full Capacity

No.

Material
Aluminum rod (99%
aluminum)
Total

Qty
(Kg) Unit
35000 52
0
35000
0

Local
3,640,00
0
3,640,00
0

Price
Foreign
14,560,00
0
14,560,00
0

Total
18,200,000
18,200,000

5 Location and Site

The location of the plant should be in big towns where real estates, hotels, commercial buildings,
residential houses, government buildings etc are to be built. In this regard, Bahir Dar could be
the most preferred location. Bahir Dar is also an ideal location to collect the plant's raw materials
from Addis and distribute its out put to the rest of zonal towns of the region.

6 Technology and Engineering

6.1

Production Process

The plant has three lines:

the pan body, bowl, and tub line;
the kettle line; and
the lid (cover) line.
The process up to forming is general; the process thereafter (polishing and surface finishing),
however, will differ depending on the demand. That is, only buff polishing is required in certain
situations and further chemical brightening to increase the gloss is required in other situations.
After polishing, too, only degreasing and washing are necessary in certain situation, and
electrolytic anodizing treatment might be required in other situations. The latter treatment will
improve the anticorrosion property and the hardening of the surface. The cost, of course, will be
higher than simply degreasing, but the merit is certain. Electrolytic anodizing treatment is done
in an acid bath such as sulfuric acid or oxalic acid, so the building in which electrolytic
anodizing treatment is done should be built separately. An apparatus to keep the products
flowing, however, such as a conveyor, is actually being used.
6

In the finishing and packing process the body and lid will be fastened in one piece during the
assembly process for products which require a lid, so two lines, on the whole, would be
sufficient. During the manufacturing process a side line would be desirable for surface treatment.
That is, external damage, slight corrosion, or other defects will generally occur during
manufacturing., Some of these defective products can be reprocessed. In order to reprocess the
defective products, however, the surface layer of the vessel must be removed in most cases.
Caustic soda is used to do the work. This line is called the alkaline treatment line. This line is
generally attached to the vessels manufacturing plant. The explanation made so far is the so
called direct manufacturing line.
Alternative technology
There are three stages in the production process of aluminum utensils. These are pressing,
beading and coating. Aluminum scrap or ingot first melted in iron crucible and molten metal
cast into the slab type open mould by mechanical process into rectangular billets. The billets,
after annealing and cleaning are pressed through re-rolling machine three to five times to make
the sheet of reaustic thickness. The stamped circle is now ready for deep drawing to get the
shape of the desired utensils. Shaping refers to pressing with dies on press, beading on the lathe
and surface treatment. Main plant and machinery include coal fired furnace, reversible moulds
could rolling mill, pre-heating, circle cutting and stamping machine, de-drawing double action
power press, spinning lather and pre- heating furnace, counter spinner and hand press and
cleaning tanks.

6.2

Machinery and Equipment

The machineries and equipment required are shown in tables 3 and 4.

Table 3: Manufacturing Facilities for

Item
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
11)
12)
13)

Two-high roller for oil coating

80-ton drawing pres(with auto-leader or by natural)
Spining machine for surface smoothing
(with auto-loader or by manual)
Trimming machine(including curling if necessary)
(with auto or manual loading)
Outside polishing machine
(full automatic machine is recommendable)
Perforating machine (auto or manual)
Anodizing line (including sealing)
automatic line except lading and unloading)
Degreasing line (by chemical agent)
(auto or manual)
Finish polisher (manual or auto
Riveting machine (manual or auto)
Assembling & Packaging conveyer line
(usually by manual with tools)
Trimming & Curling machine (for bowl & tub)
Inside Polishing machine(auto or manual)

No.
of
set

Capacity

1
1

5,000/8hrs.
3,500/8hrs.

2,000-2,400/8hrs.

2000-2,500/8hrs.

1
1

2,000-3,000/8hrs.
3,000-5,000/8hrs.

2,000-4,000/8hrs.

1
1
4

2,000-4,000/8hrs.
2,000-3,000/8hrs.
500-1,000/set/8hrs.

1
1
1

2,000/8hrs.
2,000/8hrs.

Table 4: Auxiliary Facilities

1)
2)
3)
4)
5)
6)
7)
8)
9)

Belt Conveyor lines and /or hanger conveyor lines

Alkaline treatment line 10% NaOH solution
(70oC) Rinse10% HNO3 solution -Rinse- Drying)
Fork-lifters
10-30ton press
Lathes
Milling machine
Boters
Grinders
Shear

The total cost of machineries equipments excluding the auxiliary facilities is estimate at Birr
12,860,000.00.
Suppliers Addresses:
Pingguo Asia Aluminum Co., Ltd.
Sales Company
Tel: 86-757-8522 3888 Fax: 86-757-8522 8658
Add: Lixi Industrial Zone, Dali Town, Nanhai, Foshan, GuangDong, China.
P.C.: 528231
8

Manufactory Company
Tel: 86-776-5608888 Fax: 86-776-5608666
Add: Pingguo Industrial Zone, Baise, Guangxi, China.
PC.: 531400
Email: sales@goldapple.com.cn
The technology of Machinery and Equipment of the plant could also be selected from companies
of Italy and Germany.

6.3

Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 4,000 m2 where 2000m2 is allocated
to the production place and the remaining space is left for stores, office buildings and facilities.
The land lease is estimated at Birr 240,000 while the buildings cost Birr 4 million.
The annual power requirement of the plant is estimated at 380,000 kwh. Water consumption will
be about 68750 m3 per day. Thus, the annual cost for utilities will amount to Birr 209,000 for
power and Birr 182,188 for water summing up to Birr 391,188.

7 Human Resource and Training Requirement

7.1

Human Resource

The list of required manpower for the envisaged plant is stated in table 6 below

Salary/Wage (Birr)

Job Title
1
2
3
4
5
6
7
8
9
1
0
1
1
1
2
1
3

General Manager
Production Head
Technicians
Ass. Machinists
Labourers
Personnel Head
Secretary
Accountant
Marketing Officer

No.
1
1
6
12
40
1
1
1
1

Monthly
Annual
4,500
54,000
3,500
42,000
2,000
144,000
1,000
144,000
500
240,000
2,000
24,000
850
10,200
2,000
24,000
2,000
24,000

Casher

850

10,200

Security

350

21,000

Clerks

800

38,400

Genitor

5
79

350

21,000
796,800

Total
Employment Benefits 20% of Annual
Salary

159,360
956,160

The envisaged plant therefore, creates 79 job opportunity. The professionals and support staffs
for the envisaged plant shall be recruited from Amhara region

7.2

Training Requirement

Training of key personnel shall be conducted. The training should primarily focuses on the
production technology and machinery maintenance and trouble shooting. Birr 90,000 is included
in working capita for this purpose.

10

8 Financial Analysis
8.1

Underlying Assumption

The financial analysis is based on the data provided in the preceding chapters and the following
assumptions.
A. Construction and Finance

Construction period

2 year

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 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

30

Raw Material-Foreign

120

Factory Supplies in Stock

30

Spare Parts in Stock and Maintenance

30

Work in Progress
Finished Products
Accounts Receivable
Cash in Hand
Accounts Payable

10
15
30
30
30

8.2

Investment

The total investment cost of the project including working capital is estimated at Birr 26.82
million as shown in table 5 below.
Table 5: Total Initial Investment and Working Capital

Total Initial Investment

Item
Land
Building and civil works
Office equipment
Vehicles

Cost
12,000.00
4,000,000.00
75,000.00
250,000.00

Plant machinery & equipment

Total Fixed Investment
Pre production capital expenditure
Total Initial Investment
Working capital at full capacity

12,860,000.00
17,197,000.00
859,850.00
18,056,850.00
8,759,464.41

Total

26,816,314.41
*Pre-production capital expenditure includes - all expenses for pre-investment
studies, consultancy fee during construction and expenses for companys
establishment, project administration expenses, commission expenses, preproduction
marketing and interest expenses during construction.

12

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 23.71million as detailed in
table 6 below.
Table 6: Total Production Cost at Full Capacity

Total Production Cost at Full Capacity

Items
Cost
1. Raw materials
2. Utilities

391,187.50

3. Wages and Salaries

956,160.00

4. Spares and Maintenance

515,910.00

Factory costs
5. Depreciation
6. Financial costs

Total Production Cost

8.4
I.

18,200,000.00

20,063,257.50
1,715,470.00
1,930,774.64
23,709,502.14

Financial Evaluation

Profitability

According to the projected income statement attached in the annex part (see annex 3) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 0.71%, 17.39%, and
1.40% 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 26.41% of capacity utilization.

13

III.

Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in third year of
operation.
IV.

Simple Rate of Return

For the envisaged plant the simple rate of return equals to 17.6%.
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
20.9% and the net present value at 18 % discount is Birr 2.39 million.
VI.

Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector. This result is accompanied by IRR value of 22.18%% with payback period of four
years.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it 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 Birr 22.28 million within the project life.
Such result induces the project promoters to reinvest the profit which, therefore, increases the
investment magnitude in the region.

14

B. Tax Revenue
In the project life under consideration, the region will collect about Birr 9.45million 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
This plan has string import substitution effect and saves hard currency
D. Employment and Income Generation
The proposed project is expected to create employment opportunity to 79l citizens of the region.
This would be one of the commendable accomplishments of the project.
E. Diversification
The project contributes a lot in diversification of the regions as well as the countrys economy.

15

ANNEXES

16

Annex 1: Total Net Working Capital Requirements (in Birr)

CONSTRUCTION

Capacity Utilization (%)

1. Total Inventory

PRODUCTION

Year 1

Year 2

75%

85%

100%

100%

11,522,270

13,058,573

15,363,026

15,363,026

5,062,909

5,737,964

6,750,545

6,750,545

Raw Material-Local

297,818

337,527

397,091

397,091

Raw Material-Foreign

4,765,091

5,400,436

6,353,455

6,353,455

Factory Supplies in Stock

17,819

20,195

23,759

23,759

Spare Parts in Stock and Maintenance

42,211

47,839

56,281

56,281

Work in Progress

445,474

504,871

593,965

593,965

Finished Products

890,948

1,009,741

1,187,931

1,187,931

2. Accounts Receivable

2,290,909

2,596,364

3,054,545

3,054,545

3. Cash in Hand

110,238

124,936

146,983

146,983

8,860,507

10,041,908

11,814,010

11,814,010

4. Current Liabilities

2,290,909

2,596,364

3,054,545

3,054,545

Accounts Payable

2,290,909

2,596,364

3,054,545

3,054,545

TOTAL NET WORKING CAPITAL REQUIREMENTS

6,569,598

7,445,545

8,759,464

8,759,464

INCREASE IN NET WORKING CAPITAL

6,569,598

875,946

1,313,920

Raw Materials in Stock- Total

CURRENT ASSETS

Annex 1: Total Net Working Capital Requirements (in Birr)

(continued)

PRODUCTION
5

10

100%

100%

100%

100%

100%

100%

15,363,026

15,363,026

15,363,026

15,363,026

15,363,026

15,363,026

6,750,545

6,750,545

6,750,545

6,750,545

6,750,545

6,750,545

397,091

397,091

397,091

397,091

397,091

397,091

6,353,455

6,353,455

6,353,455

6,353,455

6,353,455

6,353,455

Factory Supplies in Stock

23,759

23,759

23,759

23,759

23,759

23,759

Spare Parts in Stock and Maintenance

56,281

56,281

56,281

56,281

56,281

56,281

593,965

593,965

593,965

593,965

593,965

593,965

Finished Products

1,187,931

1,187,931

1,187,931

1,187,931

1,187,931

1,187,931

2. Accounts Receivable

3,054,545

3,054,545

3,054,545

3,054,545

3,054,545

3,054,545

146,983

146,983

146,983

146,983

146,983

146,983

11,814,010

11,814,010

11,814,010

11,814,010

11,814,010

11,814,010

4. Current Liabilities

3,054,545

3,054,545

3,054,545

3,054,545

3,054,545

3,054,545

Accounts Payable

3,054,545

3,054,545

3,054,545

3,054,545

3,054,545

3,054,545

TOTAL NET WORKING CAPITAL REQUIREMENTS

8,759,464

8,759,464

8,759,464

8,759,464

8,759,464

8,759,464

Capacity Utilization (%)

1. Total Inventory
Raw Materials in Stock-Total
Raw Material-Local
Raw Material-Foreign

Work in Progress

3. Cash in Hand
CURRENT ASSETS

INCREASE IN NET WORKING CAPITAL

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

9,028,425

17,787,889

23,290,909

24,105,455

28,458,182

28,000,000

9,028,425

17,787,889

2,290,909

305,455

458,182

Total Equity

3,611,370

7,115,156

Total Long Term Loan

5,417,055

10,672,734

2,290,909

305,455

458,182

2. Inflow Operation

21,000,000

23,800,000

28,000,000

28,000,000

Sales Revenue

21,000,000

23,800,000

28,000,000

28,000,000

Interest on Securities

TOTAL CASH OUTFLOW

9,028,425

9,028,425

27,995,281

22,771,842

27,425,340

25,427,982

4. Increase In Fixed Assets

9,028,425

9,028,425

8,598,500

8,598,500

429,925

429,925

5. Increase in Current Assets

8,860,507

1,181,401

1,772,101

6. Operating Costs

15,001,521

16,978,035

19,942,805

19,942,805

7. Corporate Tax Paid

1,419,824

1,516,363

8. Interest Paid

4,133,252

1,930,775

1,608,979

1,287,183

9.Loan Repayments

2,681,631

2,681,631

2,681,631

10.Dividends Paid

Surplus (Deficit)

8,759,464

-4,704,372

1,333,613

1,032,841

2,572,018

Cumulative Cash Balance

8,759,464

4,055,093

5,388,706

6,421,547

8,993,565

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

3. Other Income

Fixed Investments
Pre-production Expenditures

Annex 2: Cash Flow Statement (in Birr): Continued

PRODUCTION
5
28,000,000

6
28,000,000

7
28,000,000

8
28,000,000

9
28,000,000

10
28,000,000

Total Equity

Total Long Term Loan

Total Short Term Finances

2. Inflow Operation

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

Sales Revenue

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

TOTAL CASH OUTFLOW

25,202,725

25,044,059

24,818,802

21,911,913

21,911,913

21,911,913

4. Increase In Fixed Assets

Fixed Investments

Pre-production Expenditures

19,942,805

19,942,805

19,942,805

19,942,805

19,942,805

19,942,805

1,612,901

1,776,031

1,872,570

1,969,109

1,969,109

1,969,109

965,387

643,592

321,796

2,681,631

2,681,631

2,681,631

2,797,275

2,955,941

3,181,198

6,088,087

6,088,087

6,088,087

11,790,840

14,746,781

17,927,979

24,016,066

30,104,153

36,192,239

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income

5. Increase in Current Assets

6. Operating Costs
7. Corporate Tax Paid
8. Interest Paid
9. Loan Repayments
10.Dividends Paid
Surplus (Deficit)
Cumulative Cash Balance

Annex 2: Cash Flow Statement (in Birr): Continued

PRODUCTION
5
28,000,000

6
28,000,000

7
28,000,000

8
28,000,000

9
28,000,000

10
28,000,000

Total Equity

Total Long Term Loan

Total Short Term Finances

2. Inflow Operation

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

Sales Revenue

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

TOTAL CASH OUTFLOW

25,202,725

25,044,059

24,818,802

21,911,913

21,911,913

21,911,913

4. Increase In Fixed Assets

Fixed Investments

Pre-production Expenditures

19,942,805

19,942,805

19,942,805

19,942,805

19,942,805

19,942,805

1,612,901

1,776,031

1,872,570

1,969,109

1,969,109

1,969,109

965,387

643,592

321,796

2,681,631

2,681,631

2,681,631

2,797,275

2,955,941

3,181,198

6,088,087

6,088,087

6,088,087

11,790,840

14,746,781

17,927,979

24,016,066

30,104,153

36,192,239

TOTAL CASH INFLOW

1. Inflow Funds

Interest on Securities
3. Other Income

5. Increase in Current Assets

6. Operating Costs
7. Corporate Tax Paid
8. Interest Paid
9. Loan Repayments
10.Dividends Paid
Surplus (Deficit)
Cumulative Cash Balance

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

1. Inflow Operation

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

Sales Revenue

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

21,555,706

21,718,836

21,815,375

21,911,913

21,911,913

21,911,913

3. Increase in Fixed Assets

Fixed Investments

Pre-production Expenditures

19,942,805

19,942,805

19,942,805

19,942,805

19,942,805

19,942,805

6. Corporate Tax Paid

1,612,901

1,776,031

1,872,570

1,969,109

1,969,109

1,969,109

NET CASH FLOW

6,444,294

6,281,164

6,184,625

6,088,087

6,088,087

6,088,087

CUMULATIVE NET CASH FLOW

7,046,452

13,327,616

19,512,241

25,600,328

31,688,414

37,776,501

Net Present Value (at 18%)

2,387,170

1,971,815

1,645,346

1,372,596

1,163,217

985,777

-4,746,537

-2,774,722

-1,129,375

243,221

1,406,438

2,392,215

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

5. Operating Costs

Cumulative Net present Value

Net Present Value (at 18%)
Internal Rate of Return

2,392,214.78

20.9%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
Capacity Utilization (%)
1. Total Income
Sales Revenue

75%

85%

100%

100%

100%

21,000,000

23,800,000

28,000,000

28,000,000

28,000,000

21,000,000

23,800,000

28,000,000

28,000,000

28,000,000

14,537,003

16,475,270

19,382,671

19,382,671

19,382,671

6,462,997

7,324,730

8,617,329

8,617,329

8,617,329

Other Income
2. Less Variable Cost
VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
4. Less Cost of Finance
5. GROSS PROFIT

30.78

30.78

30.78

30.78

2,179,988

2,218,234

2,275,604

2,275,604

2,275,604

4,283,009

5,106,495

6,341,725

6,341,725

6,341,725

20.40

21.46

22.65

22.65

22.65

4,133,252

1,930,775

1,608,979

1,287,183

965,387

149,757

3,175,721

4,732,746

5,054,542

5,376,338

1,419,824

1,516,363

1,612,901

149,757

3,175,721

3,312,922

3,538,179

3,763,437

6. Income (Corporate) Tax

7. NET PROFIT

30.78

RATIOS (%)
Gross Profit/Sales

0.71%

13.34%

16.90%

18.05%

19.20%

Net Profit After Tax/Sales

0.71%

13.34%

11.83%

12.64%

13.44%

Return on Investment

17.39%

20.02%

18.35%

17.99%

17.63%

Return on Equity

1.40%

29.61%

30.89%

32.99%

35.09%

Annex 4: NET INCOME STATEMENT (in Birr): Continued

PRODUCTION
Capacity Utilization (%)
1. Total Income

10

100%

100%

100%

100%

100%

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

28,000,000

19,382,671

19,382,671

19,382,671

19,382,671

19,382,671

8,617,329

8,617,329

8,617,329

8,617,329

8,617,329

30.78

30.78

30.78

30.78

2,053,634

2,053,634

2,053,634

2,053,634

2,053,634

6,563,695

6,563,695

6,563,695

6,563,695

6,563,695

23.44

23.44

23.44

23.44

23.44

643,592

321,796

5. GROSS PROFIT

5,920,104

6,241,899

6,563,695

6,563,695

6,563,695

6. Income (Corporate) Tax

1,776,031

1,872,570

1,969,109

1,969,109

1,969,109

7. NET PROFIT

4,144,073

4,369,330

4,594,587

4,594,587

4,594,587

Gross Profit/Sales

21.14%

22.29%

23.44%

23.44%

23.44%

Net Profit After Tax/Sales

14.80%

15.60%

16.41%

16.41%

16.41%

Return on Investment

17.85%

17.49%

17.13%

17.13%

17.13%

Return on Equity

38.63%

40.73%

42.83%

42.83%

42.83%

Sales Revenue
Other Income
2. Less Variable Cost
VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
4. Less Cost of Finance

30.78

RATIOS (%)

Annex 5: Projected Balance Sheet (in Birr)

8

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
9,028,425
0
0
0
0
0
0
0
0
9,028,425
0
8,598,500
429,925
0
0
0
9,028,425
0
0
0
5,417,055
5,417,055
0
3,611,370
3,611,370
0
0
0
0
0
0

Year 2
26,816,314
8,759,464
0
0
0
0
0
8,759,464
0
18,056,850
8,598,500
8,598,500
859,850
0
0
0
26,816,314
0
0
0
16,089,789
16,089,789
0
10,726,526
10,726,526
0
0
0
0
0
0

PRODUCTION
1
29,256,980
12,915,600
5,122,939
445,474
890,948
2,290,909
110,238
4,055,093
0
16,341,380
17,197,000
0
859,850
1,715,470
0
0
29,256,980
2,290,909
2,290,909
0
16,089,789
16,089,789
0
10,726,526
10,726,526
0
0
0
149,757
0
149,757

2
30,056,524
15,430,614
5,805,997
504,871
1,009,741
2,596,364
124,936
5,388,706
0
14,625,910
17,197,000
0
859,850
3,430,940
0
0
30,056,524
2,596,364
2,596,364
0
13,408,157
13,408,157
0
10,726,526
10,726,526
0
0
149,757
3,175,721
0
3,175,721

3
31,145,997
18,235,557
6,830,585
593,965
1,187,931
3,054,545
146,983
6,421,547
0
12,910,440
17,197,000
0
859,850
5,146,410
0
0
31,145,997
3,054,545
3,054,545
0
10,726,526
10,726,526
0
10,726,526
10,726,526
0
0
3,325,477
3,312,922
0
3,312,922

4
32,002,545
20,807,575
6,830,585
593,965
1,187,931
3,054,545
146,983
8,993,565
0
11,194,970
17,197,000
0
859,850
6,861,880
0
0
32,002,545
3,054,545
3,054,545
0
8,044,894
8,044,894
0
10,726,526
10,726,526
0
0
6,638,400
3,538,179
0
3,538,179

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
33,084,350
23,604,850
6,830,585
593,965
1,187,931
3,054,545
146,983
11,790,840
0
9,479,500
17,197,000
0
859,850
8,577,350
0
0
33,084,350
3,054,545
3,054,545
0
5,363,263
5,363,263
0
10,726,526
10,726,526
0
0
10,176,579
3,763,437
0
3,763,437

6
34,546,791
26,560,791
6,830,585
593,965
1,187,931
3,054,545
146,983
14,746,781
0
7,986,000
17,197,000
0
859,850
10,070,850
0
0
34,546,791
3,054,545
3,054,545
0
2,681,631
2,681,631
0
10,726,526
10,726,526
0
0
13,940,016
4,144,073
0
4,144,073

7
36,234,489
29,741,989
6,830,585
593,965
1,187,931
3,054,545
146,983
17,927,979
0
6,492,500
17,197,000
0
859,850
11,564,350
0
0
36,234,489
3,054,545
3,054,545
0
0
0
0
10,726,526
10,726,526
0
0
18,084,088
4,369,330
0
4,369,330

8
40,829,076
35,830,076
6,830,585
593,965
1,187,931
3,054,545
146,983
24,016,066
0
4,999,000
17,197,000
0
859,850
13,057,850
0
0
40,829,076
3,054,545
3,054,545
0
0
0
0
10,726,526
10,726,526
0
0
22,453,418
4,594,587
0
4,594,587

9
45,423,663
41,918,163
6,830,585
593,965
1,187,931
3,054,545
146,983
30,104,153
0
3,505,500
17,197,000
0
859,850
14,551,350
0
0
45,423,663
3,054,545
3,054,545
0
0
0
0
10,726,526
10,726,526
0
0
27,048,005
4,594,587
0
4,594,587

10
50,018,249
48,006,249
6,830,585
593,965
1,187,931
3,054,545
146,983
36,192,239
0
2,012,000
17,197,000
0
859,850
16,044,850
0
0
50,018,249
3,054,545
3,054,545
0
0
0
0
10,726,526
10,726,526
0
0
31,642,591
4,594,587
0
4,594,587

10