110.

PROFILE ON PRODUCTION OF GLASS

BOTTLES AND TUMBLERS

110-2
TABLE OF CONTENTS

PAGE

I.

SUMMARY

110-3

II.

PRODUCT DESCRIPTION & APPLICATION

110-3

III.

MARKET STUDY AND PLANT CAPACITY

110-4

A. MARKET STUDY

110-4

B. PLANT CAPACITY & PRODUCTION PROGRAMME

110-7

RAW MATERIALS AND INPUTS

110-8

A. RAW & AUXILIARY MATERIALS

110-8

B. UTILITIES

110-9

TECHNOLOGY & ENGINEERING

110-10

A. TECHNOLOGY

110-10

B. ENGINEERING

110-11

MANPOWER & TRAINING REQUIREMENT

110-13

A. MANPOWER REQUIREMENT

110-13

B. TRAINING REQUIREMENT

110-15

FINANCIAL ANALYSIS

110-15

A. TOTAL INITIAL INVESTMENT COST

110-15

B. PRODUCTION COST

110-16

C. FINANCIAL EVALUATION

110-17

D. ECONOMIC BENEFITS

110-18

IV.

V.

VI.

VII.

110-3

I.

SUMMARY

This profile envisages the establishment of a plant for the production of glass bottles and
tumblers

with a capacity of 5 million bottles and 6 million tumblers per annum.

The present demand for the proposed product is estimated at 21 million bottles and 8.75 million
tumblers

per annum. The demand is expected to reach at 43.8 million bottles and 18.19

million tumblers

by the year 2022.

The plant will create employment opportunities for 76 persons.

The total investment requirement is estimated at about Birr 27.62 million, out of which Birr
19.06 million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of

23

% and a net

present value (NPV) of Birr 16.14 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, color 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 color. 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.

110-4

III.

MARKET STUDY AND PLANT CAPACITY

A.

MARKET STUDY

1.

Past Supply and Present Demand

The demand for glass bottles and tumblers is met through both domestic production and
imports. However, data on imports of the products is not readily available since the external
statistics of the customs authority does not show the products separately. The volume of
domestic production of bottles and tumblers during 1996-2005 is shown in Tables 3.1.
Apparently, the quantity of glass bottles and tumblers produced in the country fluctuated from
year to year but, on the average, 14353000 bottles and 1985000 tumblers are produced during
the period under consideration.

Table 3.1
DOMESTIC PRODUCTION OF GLASS BOTTLES AND TUMBLERS ('000 PIECES)

Year

Glass

Tumblers

Bottles
1996

11706

4180

1997

11030

880

1998

18997

2731

1999

23134

2000

16078

2001

16233

149

2002

12362

2003

2647

2004

16658

2005

14681

14353

1985

Average

Source: CSA, Statistical Abstract, Various Issues

110-5

A survey conducted on some retailers and wholesalers reveals that the market share of
domestically produced glass bottles and tumblers roughly stood at 75% and 25% of the total
supply, respectively. Assuming the average annual domestic production for the period under
reference represents the domestic production capacity for the products and making use of the
above stated market share of domestic production of the products, the effective demand for
glass bottles and tumblers for the year 2006 is estimated at 19137000 and 7940 pieces,
respectively.

The demand for bottles comes from the beverage industry, the catering industry and other
commercial users of glass packing materials. Household, the catering industry and other
institutions like hospitals and boarding schools constitute the major users of tumblers. The
demand for the products is therefore estimated to grow at the rate of 5% annually. Thus the
present demand for glass bottles and tumblers (i.e. for 2007) is estimated at 21099000 and
8754000 pieces, respectively.

2.

Demand Projection

For the reasons stated above, a 5% rate of growth is applied in projecting the demand for glass
bottles and tumblers. As stated above, the market share of domestically produced bottles and
tumblers is estimated at 75% and 25%, respectively.

Assuming domestic producers will

maintain their share, the projected demand and the market share of the envisaged is shown in
Tables 3.2.

110-6
Table 3.2
PROJECTED DEMAND FOR GLASS BOTTLES AND
TUMBLERS (PIECES)

Bottles

Tumblers

Market
Year

3.

Share

Market

of

Share

Projected

Envisaged

Projected

of Envisaged

Demand

Plant

Demand

Plant

2007

21099000

5274750

8754000

6565500

2008

22153950

5538488

9191700

6893775

2009

23261648

5815412

9651285

7238464

2010

24424730

6106182

10133849

7600387

2011

25645966

6411492

10640542

7980406

2012

26928265

6732066

11172569

8379427

2013

28274678

7068669

11731197

8798398

2014

29688412

7422103

12317757

9238318

2015

31172832

7793208

12933645

9700234

2016

32731474

8182869

13580327

10185245

2017

34368048

8592012

14259344

10694508

2018

36086450

9021613

14972311

11229233

2019

37890773

9472693

15720926

11790695

2020

39785311

9946328

16506973

12380229

2021

41774577

10443644

17332321

12999241

2022

43863306

10965826

18198937

13649203

Pricing and Distribution

The prices of glass bottles and tumblers vary depending on size and quality. On the average, the
unit prices of a bottle and a tumbler are Birr 5 and Birr 3, respectively. Allowing margin for

110-7
whole sale and retail, the unit factory gate prices of a bottle and a tumbler for the envisaged
plant are estimated at Birr 3.50 and Birr 1.5 , respectively.

The envisaged plant is expected to distribute its product directly to users in the case of bottles.
Tumblers can be marketed through the existing wholesale and retail network.

B.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1.

Plant Capacity

Based on demand projection shown is Table 3.2, and capital requirement, the envisaged glass
bottles and tumblers plant will have a capacity of producing 5 million pieces of glass bottles
and 6 million pieces of tumblers per annum.

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 3.3 below shows production programme.

110-8

Table 3.3
PRODUCTION PROGRAMME

Description

Production Year

Unit
2008

2009

2010

2011-2022

Glass Bottles (' 000)

Pcs

3,000

4,000

4,500

5,000

Tumblers ('000)

Pcs

4,200

4,800

5,400

6,000

Capacity Utilization

70

80

90

100

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. In addition to raw materials, auxiliary materials like include
dolomite, ceramic colours (enamel), and packaging materials are required. Annual consumption
of these materials at full production capacity of the plant and their estimated cost is given in
Table 4.1 below.

Thus, the total annual cost of raw and auxiliary materials at full capacity production will be
Birr 5,293,011 of which Birr 78,865 is required in foreign currency, and the remaining Birr
5,214,146 is in local currency.

110-9

Table 4.1
RAW AND AUXILIARY MATERIALS

Description

No.

Cost in Birr (000)

Qty.
FC

LC

TC

A. RAW MATERIAL

Silica sand

9,190

454.90

454.90

Limestone

2,510

303.71

303.71

Soda Ash

2,796

4194.00

4194.00

Cullet

2,538

55.836

55.836

Sub total

5,008.446

5,008.446

B. AUXILIARY MATERIAL

Dolomite

488

134.200

134.200

Ceramic Color ( Enamel)

7.6

78.865

Packing Materials

71.5

71.5

78.865

205.0

205.0

78.865

5,214.146

5,293.011

Sub-total

Total Cost

As req
-

B. UTILITIES

The major utilities required by the envisaged project are electricity, water and furnace fuel.
The annual requirement of utilities and associated cost is shown in Table 4.2. The total cost of
utilities is estimated at Birr 12,363,036.

110-10

Table 4.2
UTILITIES REQUIREMENT

No.

Utilities

Unit

Qty.

1.

Electric power

KWh

3,010,000

1,425,536

2.

Water

M3

180,000

990,000

3.

Furnace oil

lit

1,750,000

9,947,500

Grand Total

VI

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Production Process

Total Cost (Birr)

12,363,036

Production of glass bottles and tumblers mainly involves cleaning, mixing, molding and
packing. These processes are discussed in brief as follows.

Cleaning and mixing: - 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.

Molding: - The molten mixture is molded by bottle forming and tumbler forming machines and
cooled slowly in the annealing lehr.

Packing: - Going through inspection, the annealed product is packed and delivered. When
necessary, the bottle as well as the tumbler will be printed in ceramic colors by multi-color
decorating machine. After glazing, final inspection will be conducted for delivery.

110-11

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.

Please find here below the machinery supplier address:-

A. ITTFLYGT, Srl
Fax: 02-9019990
E-Mail:ittlypt. Italia@flygt.com
Country of orgin: Italy

B. 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 19.061
million, out of which about Birr 17.280 million will be required in foreign currency. The
detailed list of machinery and equipment is given in Table 5.1.

110-12
Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT & COST

Description

Unit

Qty.

A. Machinery
1. Raw material preparation plant

Set

2. Melting furnace

Pcs

3. Forming Machine

Pcs

4. Annealing lehr

Pcs

5. Decorating and packing machine

Set

6. Compressor

Pcs

7. Boiler

Pcs

8. Generator

Pcs

9. Pumps

Pcs

1. Oil system

Set

2. LPG system

Set

3. Electrical System

Set

4. Cooling system

Set

1. Office furniture

Set

2. Vehicles

Pcs

B. Installation costs

C. Equipments

2.

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.
The total cost of building and civil works, estimated at a rate of Birr 2300 per m2, will be Birr
4.6 million. Cost for holding of land at a lease rate of 0.1 Birr per square meter for 80 years of

110-13
lease is estimated at Birr 32,000. Therefore, the total cost for land holding, building and civil
works will be Birr 4.632 million.

3.

Proposed Location

Konso s/ woreda and Surma woreda which are found in Konso s/ woreda and Benchmaji zone
respectively are considered as the potential woredas for the envisaged project due to their
access to raw materials.

From the above woredas, Karat town, the center of Konso s/ woreda, is selected to be the
location of the envisaged plant. 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 REQUIREMENT

A.

MANPOWER REQUIREMENT

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

110-14

Table 6.1
MANPOWER REQUIREMENT AND LABOUR COST)

Sr.

Description

No.

Req.

Monthly

Annual Salary

Qty.

Salary (Birr)

(Birr)

1.

General Manager

3,000

36,000

2.

Executive Secretary

1,000

12,000

3.

Plan and Statistics Head

1,800

21,600

4.

Production and Technical Manager

2,500

30,000

5.

Commercial and Marketing Manager

2,300

27,600

6.

Finance Manager

2,300

27,600

7.

Administration Manager

2,500

30,000

8.

Personnel

1,500

18,000

9.

Secretary

800

28,800

10.

Glass Technologist

1,800

21,600

11.

Production Workers

30

400

144,000

12.

Technicians

10

600

72,000

13.

Sales man

500

24,000

14.

Store Head

500

6,000

15.

General Accountant

450

10,800

16.

Finance and Budget Accountant

450

10,800

17.

General Service

15

150

27,000

Sub-Total

76

547,800

Employees Benefit (25% BS)

136,950

Training Cost

30,000

Total

714,750

110-15
B.

TRAINING REQUIREMENT

Training is required for technical staff and operators for a period of at least one month. It is
recommended that machinery supplier will provide on-job training or arrangements can be
made with Addis Ababa Glass and Bottle Factory. A total of Birr 30,000 is allotted to execute
the training programme.

VII.

FINANCIAL ANALYSIS

The financial analysis of the

glass bottle 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
Bank interest

3 years
8%

Discount cash flow

8.5%

Accounts receivable

30 days

Raw material local

30 days

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
million, of which 32 per cent will be required in foreign currency.

The major breakdown of the total initial investment cost is shown in Table 7.1.

Birr 27.62

110-16
Table 7.1
INITIAL INVESTMENT COST

Sr.

Total Cost

No.

Cost Items

(000 Birr)

Land lease value

32.0

Building and Civil Work

Plant Machinery and Equipment

19,061.0

Office Furniture and Equipment

125.0

Vehicle

200.0

Pre-production Expenditure*

1,657.6

Working Capital

1,953.4

4,600.0

Total Investment cost

Foreign Share

27,629.0
32

* N.B Pre-production expenditure includes interest during construction ( Birr 1.65 thousand ) training (Birr 30
thousand ) and Birr 120 thousand costs of registration, licensing and formation of the company including legal
fees, commissioning expenses, etc.

B.

PRODUCTION COST

The annual production cost at full operation capacity is estimated at Birr

Table 7.2).

The material and utility cost accounts for 80.20

maintenance take 1.27

per cent of the production cost.

22

million (see

per cent, while repair and

110-17
Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)

Items

Cost

Raw Material and Inputs

5,293.01

24.04

Utilities

12363.04

56.16

280

1.27

Labour direct

328.68

1.49

Factory overheads

109.56

0.50

Administration Costs

219.12

1.00

18,593.41

84.46

2218.6

10.08

1202.76

5.46

22,014.77

100

Maintenance and repair

Total Operating Costs

Depreciation
Cost of Finance
Total Production Cost

C.

FINANCIAL EVALUATION

1.

Profitability

According to the projected income statement, the project will start generating profit in the first
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.

110-18

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

42 %

Sales Variable Cost

3.

Pay Back Period

The investment cost and income statement projection are used to project the pay-back period.
The projects initial investment will be fully recovered within 4 years.

4.

Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 23 % and the net present
value at 8.5% discount rate is Birr 16.14 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 10.78 million 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.