Investment Office ANRS

Project Profile on the

Establishment of Milk production
and processing plant

DevelopmentStudiesAssociates
(DSA)

October 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............................................................................................................5
3.1.3Pricing and Distribution...................................................................................................6
3.2Plant Capacity.........................................................................................................................6
3.3Production Program................................................................................................................7

4.Raw Materials and Utilities.................................................................................7

4.1Availability and Source of Raw Materials..............................................................................7
4.2Annual Requirement and Cost of Raw Materials and Utilities...............................................7

5.Location and Site..................................................................................................8

6.Technology and Engineering ..............................................................................8
6.1Production Process..................................................................................................................8
6.2Machinery and Equipment......................................................................................................9
6.3Civil Engineering Cost..........................................................................................................10

7.Human Resource and Training Requirement..................................................10

7.1Human Resource ..................................................................................................................10
7.2Training Requirement...........................................................................................................11

8.Financial Analysis...............................................................................................11
8.1Underlying Assumption .......................................................................................................11
8.2Investment.............................................................................................................................13
8.3Production Costs...................................................................................................................14
8.4Financial evaluation..............................................................................................................14

9.Economic and Social Benefits and Justification..............................................15

ANNEXES..............................................................................................................17

1. Executive Summary
This project profile deals with processed milk producing plant in Amhara National Regional
State. The following presents the main findings of the study.
Demand projection divulges that the domestic demand for processed milk is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 550,000 litters annually.
The total investment cost of the project including working capital is estimated at Birr 4.12
million and creates 28 jobs Birr 288,720 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 30.8% of capacity utilization and it will
payback fully the initial investment less working capital in 3 years and 3 months. The result
further shows that the calculated IRR of the project is 23.3% and NPV discounted at 18% of Birr
799,285.37. The envisaged project is to some extent sensitive to an increase in the cost of
production.
In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue and employment creation.
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

Cow milk is a highly nutritive drink that is consumed by all age groups of the society. Nowadays
the demand for cow milk continues to increase steadily from year to year for consumption by
general households, hotels, cafes, hospitals, teaching institutions, etc. It is a marketable product
with the increase in awareness among the consumers.

Pasteurized milk available to end consumers, particularly ordinary milk, comes in 500 cc
containers. These containers are usually made of plastics (polyethylene). Processed (pasteurized)
milk has relatively longer shelf life (up to 72 hours) when compared to raw milk.

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

Milk processing industry has shown a growing trend in the country during the last decade. Two
additional dairy plants have been established in and around Addis Ababa. Available documents
point out that there is no commercial milk processing plant that pasteurize and distribute milk in
the major towns of the Amhara National Regional State although the region has ample raw
material (raw milk). Therefore, the demand for milk by urban dwellers of the region is met either
by own home production or purchase from others.
In this major town, the largest source of milk is from intra-urban milk producers of different
sizes. Although exact data of supply is not known, it is expected to be thousands of litters of milk
daily in view of the population size of the towns. In many cases it is the producers that deliver
milk to consumers. Nonetheless, this house-to-house milk marketing system is traditional, and it
poses risks to consumers. The milk being marketed under this system is of questionable quality,
it is not pasteurized and there is a possibility of adulteration. Although, some sellers produce
good quality milk, hygienic quality and composition of most milk marketed in such production
systems is poor.
The potential demand for milk in these major towns of the region can be estimated simply by
taking the population size and expected consumers of the towns into account. That is, if we
assume that 30 percent of the major urban population consumes one liter of milk per month, the
estimated demand will be as shown in table 1 below.

Table 1: Estimated Current Demand for Milk

Major Towns of the Region
Population Size
Targeted Population (30%)

Bahir
Debre
Dar
Gonder
Dessie
D/Markos Birhan
209,564 254,583 198,801 93,902
73,767
52,391
63,646
49,700 23,476
18,442

According to table 1 currently the monthly potential demand for milk is estimated to be 62.9
thousand liters in Bahir Dar, 76.4 thousand litters in Gonder, 59.6 thousand liters in Dessie, 28.2
thousand liters in Debre Markos and 22.1 thousand litters in Debre Berhan.
Thus, if a mini processing plant is installed in the major urban towns of the region with proper
marketing that creates awareness in the community, it can attract adequate consumers.

3.1.2 Projected Demand

The future demand for processed milk depends on the population growth as well as the
awareness for the product that is expected to increase with time. Taking the current estimated
demand for milk presented in table 1, it is assumed that three-fourths (75%) of the population
will be attracted to the envisaged plant. Thus with proper marketing the monthly demand that the
plant can attract would be about 47.2 thousand liters in Bahir Dar, 57.3 thousand litters in
Gonder, 44.7 thousand liters in Dessie, 21.1 thousand liters in D/Markos and 16.6 liters in Debre
Birhan. Furthermore, in forecasting the future demand, it is assumed that the current demand will
grow by 3% per annum (in line with the population growth rate). Accordingly, the projected
demand for processed milk in the major towns is presented in table 2 hereunder.

Table 2: Projected Demand for Processed Milk (liter per month)

Year
2007/08
2008/09
2009/10
2010/11
2011/12
2012/13
2013/14
2014/15
2015/16
2016/17
2017/18
2018/19

Bahir Dar
48,566
50,023
51,524
53,070
54,662
56,302
57,991
59,731
61,523
63,368
65,269
67,227

Gonder
59,000
60,770
62,593
64,470
66,405
68,397
70,449
72,562
74,739
76,981
79,291
81,669

Dessie
46,072
47,454
48,878
50,344
51,855
53,410
55,013
56,663
58,363
60,114
61,917
63,775

D/Markos
21,762
22,415
23,087
23,780
24,493
25,228
25,985
26,764
27,567
28,394
29,246
30,123

B/Berhan
17,096
17,608
18,137
18,681
19,241
19,818
20,413
21,025
21,656
22,306
22,975
23,664

Accordingly to table 2 the monthly demand for pasteurized milk in 2009/10 will be 51.5
thousand litters in Bahir Dar, 62.6 thousand litters in Gonder, 48.9 thousand litters in Dessie,
23.1 thousand liters in D/Markos and 18.1 liters in D/ Birhan. The demand steadily increases in
all towns as time goes by. This indicates the possibility of establishing a mini milk pasteurizing
plant .

3.1.3 Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the selling price of a
500 cc pasteurized milk is set to be Birr 2.95 per piece. As the product is new, the plant should
implement marketing and awareness creation in its construction as well as operation periods. For
a good result the plant should develop smart milk distribution networks.

3.2

Plant Capacity

In consideration of the projected demand for pasteurized milk presented earlier, and the planned
technology, the envisaged plant is set to produce 2,000 liters of milk per day (which is 4,000
pieces in a 500 cc plastic bag).

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 70 percent capacity and then at 75 percent in the
2nd year. With proper marketing the capacity will grow to 85 percent in the 3 rd year and 95
percent in the 4th year. The plant will produce at full capacity beginning from the 5 th year of
operation. This consideration is developed based on the assumption that awareness problem,
market and logistics barriers would be reduced through time.

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

The main raw material in this plant is raw milk. As the envisaged plant is small, it can get the
required amount in the town by arranging milk collection center. In addition to this, the
production also requires plastic container. This can be arranged with firms that are engaged in
the supply of polyethylene products.

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 here under:Table 3 Material and Utility Requirement

Material and Input

Raw Milk
Plastic Container (500 cc)
Total Material Cost

Quantity

Total Cost
L.C.
F.C

550,000 lit
4,000

1,100,000
110,000
1,210,000

89,100 kwh
13,750 lit
750 m3

49,005
96,250
1988
147,243

Utility
Electricity
Furnace Oil
Water
Total Utility Cost

Thus, the annual full capacity requirement of material and input will be Birr 1,357,243.
7

5. Location and Site

The appropriate locations for the envisaged project, mainly in view of the availability of
adequate market, input and infrastructure, are the major towns of the region namely Gonder,
Bahir Dar and Dessie. The level of demand forecasted in Debre Markos and Debre Birhan are
substantially lower than the capacity set by the envisaged plant and, therefore, are not selected as
possible locations.

6. Technology and Engineering

6.1

Production Process

After the fresh milk is received it is filtered and pumped into the dump tank. It is then chilled
with help of a chiller so that the growth of bacteria is minimized.On average; fresh milk contains
4.5% fats which will be reduced to 3.5% with the help of a cream separator. The milk will then
undergo the pasteurization process. This is based on heating the milk to 75C and holding at that
temperature for at least 15-20 seconds. This heat treatment ensures the destruction of unwanted
micro-organisms and all bacteria. During this process the temperature is reduced to 4C as at this
temperature ideal growth of bacteria is stopped.
After milk processing, the pasteurized milk is filled in the 0.5 liters plastic container and then are
ready for distribution in market. After the pasteurization process is completed, the tanks will be
cleansed through steam for sterilization.
The technological options available for use are related to the raw material employed and the
desired finished product. For example, when using powdered milk (instead of raw milk),
supplementary investment is necessary to reconstitute the milk before conversion. However, as
the envisaged plant is set to use milk from local herd (i.e. raw milk), it does not require
additional machinery (investment) other than what is stated in the following section.

6.2

Machinery and Equipment

The machineries and equipment required for producing pasteurized milk from herd is detailed in
table 4 below:Table 4: Machinery and Equipment
Machinery and Equipment
Weighing tank (50 kg)
Receiving tank ( 150 kg)
Milk clarifier (750 liters/hour)
Milk pump ( 750 liters/hour)
Plate cooler (750 liters/hour)
Storage tank (2000 liters)
Milk pump (250 liters/hour)
Pasteurizer (250 liters/hour)
Surge tank (500 liters)
Filling and packaging machine (750 pcs./hour)
Boiler 100 kg (evap.)
Chiller (10,000 Kcal/hour)

Quantity
1
1
1
1
1
2
1
1
2
1
1
1

The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 1,540,521
The following are some of the machineries suppliers address for the envisaged project
Goma Engineering Private Limited
9

Off. L. B. S. Marg, Majiwada, Thane, Maharashtra - 400 601, India

Phone: +(91)-(22)-25340875/25346436/25340875/25341438
Fax: +(91)-(22)-5333634
Eskimo Refrigeration Industries
S.No. 85/1, Shree Shankar Nagar, B-Building, G Floor,
Poud Road, Kothrud, Pune, Maharashtra - 411 029, India
Phone: +(91)-(20)-25381934/32910820
Fax: +(91)-(20)-25381934
Website: http://www.indiamart.com/eskimorefrigeration

6.3

Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 750m 2 of which 600m2 is allocated to
the production space and the remaining space is left for stores (50m2), office buildings and
facilities (100m2).

7. Human Resource and Training Requirement

7.1

Human Resource

The required manpower for the envisaged plant is stated in table 5 below:Table 5: Human Resource Requirement

Position
No. Required
Plant Manager
1
Administrator/Accountant
1
Secretary
1
Sales Clerk
1
Laboratory Technician
1
Technician
2
Supervisor
1
Operators
10
Laborers
4
Cleaners
2

Monthly
Salary
3500
1800
850
600
1000
1000
1000
600
300
300

Total Annual
Salary
42000
21600
10200
7200
12000
24000
12000
72000
14400
7200
10

Driver
Guards
Benefit (20%)
Total

1
3

600
300

28

7200
10800
48120
288720

The envisaged plant creates 28 jobs and about Birr 288,720 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 40,000 will be allocated as training expense.

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of milk production and processing plant is based on the data provided in
the preceding sections and the following assumptions.
A. Construction and Finance
Construction period
Source of finance
Tax holidays
Bank interest rate
Discount for cash flow
Value of land
Spare Parts, Repair & Maintenance

2 years
40% equity and 60% loan
2 years
12%
18%
Based on lease rate of ANRS
3% of fixed investment

B. Depreciation
Building
Machinery and equipment
Office furniture
Vehicles
Pre-production (amortization)

5%
10%
10%
20%
20%

11

12

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 4.12
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
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
2,250
1,500,000
40,000
500,000
240,521
2,282,771
179,139
2,461,910
361,304
2,823,214

F.C

1,300,000
1,300,000

Total
2,250
1,500,000
40,000
500,000
1,540,521
3,582,771

1,300,000
0
1,300,000

179,139
3,761,910
361,304
4,123,214

*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.

The foreign component accounts for 31.5% of the total investment cost.

13

8.3

Production Costs

The total production cost at full capacity operation is estimated at Birr 2.35 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

Cost
1,210,000
147,243
288,720
35,828
1,681,791
368,880
296,871
2,347,542

Financial evaluation
I.

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. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 2%, 2% and 17%
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 30.8 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 3 years and 3
months.

14

IV.

Simple Rate of Return

For the envisaged plant the simple rate of return equals to 21%.
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
23.3% and the net present value at 18 % discount is Birr 799,285.37.
VI.

Sensitivity Analysis

The envisaged plant is to some extent sensitive to an increase in cost of production. That is, the
plant incurs a loss of Birr 72,368 in the first year of operation when 10 % cost increment takes
place in the sector. The plant will be earning profit beginning from the second year of operation.
This result is accompanied with a payback period of 3 years and 3 months.

9. Economic and Social Benefits and Justification

The envisaged project possesses wide range of benefits that help promote the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. It also
boosts the inter sectorial linkage between the agricultural (livestock) and industrial sector. At the
same time, therefore, it helps diversify the economic activity of the region. The other major
benefits are listed as follows:
A. Profit Generation
The project is found to be financially viable and earns a profit of Birr 6.9 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 about Birr 2.7 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.

15

C. 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 28 professionals as well as support
staff. Consequently the project creates income of Birr 288.729 per year. This would be one of the
commendable accomplishments of the project.
D. Pro Environment Project
The proposed production process is environment friendly.

16

ANNEXES

17

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

CONSTRUCTION

PRODUCTION

Year 1

Year 2

Capacity Utilization (%)

0.00

0.00

70%

80%

85%

95%

1. Total Inventory

0.00

0.00

312021.26

356595.73

378882.96

423457.43

0.00

0.00

92400.00

105600.00

112200.00

125400.00

Raw Material-Local

0.00

0.00

92400.00

105600.00

112200.00

125400.00

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

0.00

0.00

1565.97

1789.68

1901.53

2125.24

Spare Parts in Stock and Maintenance

0.00

0.00

8207.80

9380.35

9966.62

11139.16

Work in Progress

0.00

0.00

39149.16

44741.90

47538.27

53131.01

Finished Products

0.00

0.00

78298.33

89483.80

95076.54

106262.02

2. Accounts Receivable

0.00

0.00

247800.00

283200.00

300900.00

336300.00

3. Cash in Hand

0.00

0.00

33291.72

38047.68

40425.66

45181.62

0.00

0.00

500712.98

572243.41

608008.62

679539.05

4. Current Liabilities

0.00

0.00

247800.00

283200.00

300900.00

336300.00

Accounts Payable

0.00

0.00

247800.00

283200.00

300900.00

336300.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

252912.98

289043.41

307108.62

343239.05

INCREASE IN NET WORKING CAPITAL

0.00

0.00

252912.98

36130.43

18065.21

36130.43

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%

445744.66

445744.66

445744.66

445744.66

445744.66

445744.66

132000.00

132000.00

132000.00

132000.00

132000.00

132000.00

132000.00

132000.00

132000.00

132000.00

132000.00

132000.00

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

2237.10

2237.10

2237.10

2237.10

2237.10

2237.10

Spare Parts in Stock and Maintenance

11725.43

11725.43

11725.43

11725.43

11725.43

11725.43

Work in Progress

55927.38

55927.38

55927.38

55927.38

55927.38

55927.38

Finished Products

111854.76

111854.76

111854.76

111854.76

111854.76

111854.76

2. Accounts Receivable

354000.00

354000.00

354000.00

354000.00

354000.00

354000.00

3. Cash in Hand

47559.60

47559.60

47559.60

47559.60

47559.60

47559.60

715304.26

715304.26

715304.26

715304.26

715304.26

715304.26

4. Current Liabilities

354000.00

354000.00

354000.00

354000.00

354000.00

354000.00

Accounts Payable

354000.00

354000.00

354000.00

354000.00

354000.00

354000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

361304.26

361304.26

361304.26

361304.26

361304.26

361304.26

INCREASE IN NET WORKING CAPITAL

18065.21

0.00

0.00

0.00

0.00

0.00

Capacity Utilization (%)

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

CURRENT ASSETS

Annex 2: Cash Flow Statement (in Birr)

CONSTRUCTION

PRODUCTION

Year 1

Year 2

1880954.78

2242259.04

2519300.00

2631400.00

2775950.00

3118150.00

1880954.78

2242259.04

247800.00

35400.00

17700.00

35400.00

Total Equity

752381.91

896903.61

0.00

0.00

0.00

0.00

Total Long Term Loan

1128572.87

1345355.42

0.00

0.00

0.00

0.00

0.00

0.00

247800.00

35400.00

17700.00

35400.00

2. Inflow Operation

0.00

0.00

2271500.00

2596000.00

2758250.00

3082750.00

Sales Revenue

0.00

0.00

2271500.00

2596000.00

2758250.00

3082750.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

1880954.78

1880954.78

2367132.48

2150795.43

2355449.63

2570582.72

4. Increase In Fixed Assets

1880954.78

1880954.78

0.00

0.00

0.00

0.00

1791385.50

1791385.50

0.00

0.00

0.00

0.00

89569.28

89569.28

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

500712.98

71530.43

35765.21

71530.43

6. Operating Costs

0.00

0.00

1203425.25

1370072.22

1453395.71

1620042.68

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

206574.50

268773.97

8. Interest Paid

0.00

0.00

662994.24

296871.39

247392.83

197914.26

9.Loan Repayments

0.00

0.00

0.00

412321.38

412321.38

412321.38

10.Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

361304.26

152167.52

480604.57

420500.37

547567.28

Cumulative Cash Balance

0.00

361304.26

513471.78

994076.36

1414576.73

1962144.01

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
3262700.00

6
3245000.00

7
3245000.00

8
3245000.00

9
3245000.00

10
3245000.00

17700.00

0.00

0.00

0.00

0.00

0.00

Total Equity

0.00

0.00

0.00

0.00

0.00

0.00

Total Long Term Loan

0.00

0.00

0.00

0.00

0.00

0.00

17700.00

0.00

0.00

0.00

0.00

0.00

2. Inflow Operation

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

Sales Revenue

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2607183.95

2577532.06

2542897.06

2095940.69

2095940.69

2095940.69

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

35765.21

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

1703366.17

1703366.17

1703366.17

1703366.17

1703366.17

1703366.17

7. Corporate Tax Paid

307295.50

362887.38

377730.95

392574.52

392574.52

392574.52

8. Interest Paid

148435.70

98957.13

49478.57

0.00

0.00

0.00

9. Loan Repayments

412321.38

412321.38

412321.38

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

655516.05

667467.94

702102.94

1149059.31

1149059.31

1149059.31

Cumulative Cash Balance

2617660.05

3285127.99

3987230.93

5136290.24

6285349.56

7434408.87

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

Interest on Securities
3. Other Income
TOTAL CASH OUTFLOW
4. Increase In Fixed Assets

5. Increase in Current Assets

10.Dividends Paid

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

CONSTRUCTION

PRODUCTION

Year 1

Year 2

TOTAL CASH INFLOW

0.00

0.00

2271500.00

2596000.00

2758250.00

3082750.00

1. Inflow Operation

0.00

0.00

2271500.00

2596000.00

2758250.00

3082750.00

Sales Revenue

0.00

0.00

2271500.00

2596000.00

2758250.00

3082750.00

Interest on Securities

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

TOTAL CASH OUTFLOW

1880954.78

1880954.78

1456338.24

1406202.65

1471460.92

1924947.08

3. Increase in Fixed Assets

1880954.78

1880954.78

0.00

0.00

0.00

0.00

Fixed Investments

1791385.50

1791385.50

0.00

0.00

0.00

0.00

89569.28

89569.28

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

252912.98

36130.43

18065.21

36130.43

5. Operating Costs

0.00

0.00

1203425.25

1370072.22

1453395.71

1620042.68

6. Corporate Tax Paid

0.00

0.00

0.00

0.00

206574.50

268773.97

NET CASH FLOW

-1880954.78

-1880954.78

815161.76

1189797.35

1286789.08

1157802.92

CUMMULATIVE NET CASH FLOW

-1880954.78

-3761909.55

-2946747.79

-1756950.44

-470161.36

687641.56

Net Present Value (at 18%)

-1880954.78

-1594029.47

585436.49

724147.40

663711.49

506086.33

Cumulative Net present Value

-1880954.78

-3474984.25

-2889547.76

-2165400.36

-1501688.87

-995602.54

2. Other Income

Pre-production Expenditures

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

1. Inflow Operation

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

Sales Revenue

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

2028726.88

2066253.55

2081097.12

2095940.69

2095940.69

2095940.69

3. Increase in Fixed Assets

0.00

0.00

0.00

0.00

0.00

0.00

Fixed Investments

0.00

0.00

0.00

0.00

0.00

0.00

Pre-production Expenditures

0.00

0.00

0.00

0.00

0.00

0.00

18065.21

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

1703366.17

1703366.17

1703366.17

1703366.17

1703366.17

1703366.17

6. Corporate Tax Paid

307295.50

362887.38

377730.95

392574.52

392574.52

392574.52

NET CASH FLOW

1216273.12

1178746.45

1163902.88

1149059.31

1149059.31

1149059.31

CUMMULATIVE NET CASH FLOW

1903914.68

3082661.14

4246564.02

5395623.34

6544682.65

7693741.97

Net Present Value (at 18%)

450545.93

370038.02

309642.59

259062.40

219544.41

186054.58

Cumulative Net present Value

-545056.62

-175018.60

134623.99

393686.39

613230.79

799285.37

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

4. Increase in Net Working Capital

Net Present Value (at 18%)

Internal Rate of Return

799,285.37

23.3%

Annex 4: NET INCOME STATEMENT ( in Birr)

6

PRODUCTION
1

70%

80%

85%

95%

100%

2271500.00

2596000.00

2758250.00

3082750.00

3245000.00

2271500.00

2596000.00

2758250.00

3082750.00

3245000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

1085687.19

1240785.36

1318334.45

1473432.62

1550981.71

1185812.81

1355214.64

1439915.55

1609317.38

1694018.29

52.20

52.20

52.20

52.20

52.20

486617.87

498166.67

503941.07

515489.87

521264.27

699194.94

857047.97

935974.48

1093827.51

1172754.02

30.78

33.01

33.93

35.48

36.14

4. Less Cost of Finance

662994.24

296871.39

247392.83

197914.26

148435.70

5. GROSS PROFIT

36200.70

560176.57

688581.65

895913.25

1024318.33

0.00

0.00

206574.50

268773.97

307295.50

36200.70

560176.57

482007.16

627139.27

717022.83

Gross Profit/Sales

2%

22%

25%

29%

32%

Net Profit After Tax/Sales

2%

22%

17%

20%

22%

Return on Investment

17%

21%

18%

20%

21%

Return on Equity

2%

34%

29%

38%

43%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)

6. Income (Corporate) Tax

7. NET PROFIT
RATIOS (%)

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

7

PRODUCTION
6

10

100%

100%

100%

100%

100%

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

3245000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

1550981.71

1550981.71

1550981.71

1550981.71

1550981.71

1694018.29

1694018.29

1694018.29

1694018.29

1694018.29

52.20

52.20

52.20

52.20

52.20

385436.56

385436.56

385436.56

385436.56

385436.56

1308581.73

1308581.73

1308581.73

1308581.73

1308581.73

40.33

40.33

40.33

40.33

40.33

98957.13

49478.57

0.00

0.00

0.00

5. GROSS PROFIT

1209624.60

1259103.17

1308581.73

1308581.73

1308581.73

6. Income (Corporate) Tax

362887.38

377730.95

392574.52

392574.52

392574.52

7. NET PROFIT

846737.22

881372.22

916007.21

916007.21

916007.21

Gross Profit/Sales

37%

39%

40%

40%

40%

Net Profit After Tax/Sales

26%

27%

28%

28%

28%

Return on Investment

23%

23%

22%

22%

22%

Return on Equity

51%

53%

56%

56%

56%

Capacity Utilization (%)

1. Total Income
Sales Revenue

VARIABLE MARGIN
(In % of Total Income)
3. Less Fixed Costs
OPERATIONAL MARGIN
(In % of Total Income)
4. Less Cost of Finance

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
1880954.78
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
1880954.78
0.00
1791385.50
89569.28
0.00
0.00
0.00
1880954.78
0.00
0.00
0.00
1128572.87
1128572.87
0.00
752381.91
752381.91
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
4123213.81
361304.26
0.00
0.00
0.00
0.00
0.00
361304.26
0.00
3761909.55
1791385.50
1791385.50
179138.55
0.00
0.00
0.00
4123213.81
0.00
0.00
0.00
2473928.29
2473928.29
0.00
1649285.52
1649285.52
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
4407214.51
1014184.77
102173.77
39149.16
78298.33
247800.00
33291.72
513471.78
0.00
3393029.74
3582771.00
0.00
179138.55
368879.81
0.00
0.00
4407214.51
247800.00
247800.00
0.00
2473928.29
2473928.29
0.00
1649285.52
1649285.52
0.00
0.00
0.00
36200.70
0.00
36200.70

Annex 5: Projected Balance Sheet (in Birr):

2
4590469.70
1566319.77
116770.02
44741.90
89483.80
283200.00
38047.68
994076.36
0.00
3024149.93
3582771.00
0.00
179138.55
737759.62
0.00
0.00
4590469.70
283200.00
283200.00
0.00
2061606.91
2061606.91
0.00
1649285.52
1649285.52
0.00
0.00
36200.70
560176.57
0.00
560176.57

3
4677855.47
2022585.35
124068.15
47538.27
95076.54
300900.00
40425.66
1414576.73
0.00
2655270.12
3582771.00
0.00
179138.55
1106639.43
0.00
0.00
4677855.47
300900.00
300900.00
0.00
1649285.52
1649285.52
0.00
1649285.52
1649285.52
0.00
0.00
596377.27
482007.16
0.00
482007.16

4
4928073.36
2641683.05
138664.40
53131.01
106262.02
336300.00
45181.62
1962144.01
0.00
2286390.31
3582771.00
0.00
179138.55
1475519.24
0.00
0.00
4928073.36
336300.00
336300.00
0.00
1236964.14
1236964.14
0.00
1649285.52
1649285.52
0.00
0.00
1078384.42
627139.27
0.00
627139.27

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
5250474.81
3332964.31
145962.53
55927.38
111854.76
354000.00
47559.60
2617660.05
0.00
1917510.50
3582771.00
0.00
179138.55
1844399.05
0.00
0.00
5250474.81
354000.00
354000.00
0.00
824642.76
824642.76
0.00
1649285.52
1649285.52
0.00
0.00
1705523.70
717022.83
0.00
717022.83

6
5684890.65
4000432.25
145962.53
55927.38
111854.76
354000.00
47559.60
3285127.99
0.00
1684458.40
3582771.00
0.00
179138.55
2077451.15
0.00
0.00
5684890.65
354000.00
354000.00
0.00
412321.38
412321.38
0.00
1649285.52
1649285.52
0.00
0.00
2422546.53
846737.22
0.00
846737.22

7
6153941.49
4702535.19
145962.53
55927.38
111854.76
354000.00
47559.60
3987230.93
0.00
1451406.30
3582771.00
0.00
179138.55
2310503.25
0.00
0.00
6153941.49
354000.00
354000.00
0.00
0.00
0.00
0.00
1649285.52
1649285.52
0.00
0.00
3269283.75
881372.22
0.00
881372.22

8
7069948.71
5851594.51
145962.53
55927.38
111854.76
354000.00
47559.60
5136290.24
0.00
1218354.20
3582771.00
0.00
179138.55
2543555.35
0.00
0.00
7069948.71
354000.00
354000.00
0.00
0.00
0.00
0.00
1649285.52
1649285.52
0.00
0.00
4150655.97
916007.21
0.00
916007.21

9
7985955.92
7000653.82
145962.53
55927.38
111854.76
354000.00
47559.60
6285349.56
0.00
985302.10
3582771.00
0.00
179138.55
2776607.45
0.00
0.00
7985955.92
354000.00
354000.00
0.00
0.00
0.00
0.00
1649285.52
1649285.52
0.00
0.00
5066663.18
916007.21
0.00
916007.21

10
8901963.13
8149713.13
145962.53
55927.38
111854.76
354000.00
47559.60
7434408.87
0.00
752250.00
3582771.00
0.00
179138.55
3009659.55
0.00
0.00
8901963.13
354000.00
354000.00
0.00
0.00
0.00
0.00
1649285.52
1649285.52
0.00
0.00
5982670.40
916007.21
0.00
916007.21

10