184.

PROFILE ON THE PRODUCTION OF

CITRIC ACID

184-2

TABLE OF CONTENTS

PAGE

I.

SUMMARY

184-3

II.

PRODUCT DESCRIPTION & APPLICATION

184-3

III.

MARKET STUDY AND PLANT CAPACITY

184-4

A. MARKET STUDY

184-4

B. PLANT CAPACITY & PRODUCTION PROGRAMME

184-6

MATERIALS AND INPUTS

184-7

A. RAW & AUXILIARY MATERIALS

184-7

B. UTILITIES

184-7

TECHNOLOGY & ENGINEERING

184-8

A. TECHNOLOGY

184-8

B. ENGINEERING

184-10

MANPOWER & TRAINING REQUIREMENT

184-11

A. MANPOWER REQUIREMENT

184-11

B. TRAINING REQUIREMENT

184-11

FINANCIAL ANLYSIS

184-13

A. TOTAL INITIAL INVESTMENT COST

184-13

B. PRODUCTION COST

184-14

C. FINANCIAL EVALUATION

184-15

D. ECONOMIC BENEFITS

184-16

IV.

V.

VI.

VII.

184-3

I.

SUMMARY

This profile envisages the establishment of a plant for the production of citric acid with a
capacity of 50 tonnes annum.

The present demand for the proposed product is estimated at 43.3 tonnenes per annum. The
demand is expected to reach at 85.5 tonnes by the year 2017.

The plant will create employment opportunities for 22 persons.

The total investment requirement is estimated at Birr 7.03 million, out of which Birr 4.5
million is required for plant and machinery.

The project is financially viable with an internal rate of return (IRR) of 14 % and a net
present value (NPV) of Birr 1.10 million discounted at 8.5%.

II.

PRODUCT DESCRIPTION AND APPLICATION

Citric acid is one of the widely used organic acid and extensively used in the food industry
as an acidulate and flavor enhancing agent i.e., in Soft drinks, fruit juices, candies and
gelatin desserts. It is also finds use in pharmaceutical industry, cosmetics and toiletries as a
buffer. Citric acid is also a reactive intermediate in chemical synthesis. There is high
demand for this product in food and pharmaceutical Industry.

184-4

III.

MARKET STUDY AND PLANT CAPACITY

A.

MARKET AND STUDY

1.

Past Supply and Present Demand

Citric acid is mainly used by pharmaceuticals, confectionery, carbonated beverage

industries, food industries, in the metal sector for cleaning and polishing and other
industries. Up to the present time, the countrys requirement of citric acid is entirely met
through import. Its devitrified application in the pharmaceuticals, beverage, food and other
industries will increase the demand in the future. Import of citric acid in the past 10 years is
given in Table 3.1.

Table 3.1
IMPORT OF CITRIC ACID (TONNENES)

Year

Import

1997

10.8

1998

2.2

1999

16.2

2000

30.8

2001

16.0

2002

4.3

2003

38.8

2004

16.3

2005

8.2

2006

43.3

Source:-Customs Authority
As could be seen from Table 3.1, import of citric acid fluctuates from year to year although
the general trend is upward This could be evidenced from the fact that the average imported
quantity during the period 2001-2002 is almost double when compared with the period

184-5
1997-1999. The yearly average imported quantity during the period 2003-2006 is about 31
tonnenes which is higher than by 82% Compared to the average level of import during 20002002.

Since import has been generally rising in the past 10 years the imported quantity during year
2006 is taken as current effective demand. Accordingly current effective demand for citric
acid is set at 43.3 tonnenes.

2.

Projected Demand

The development of the manufacturing sector, mainly these mentioned in the above section,
will influence the demand for citric acid.Since the industrial sector has been growing by
more than 6% in the past few years an annual average growth rate of 7% is applied to
forecast the future demand (see Table 3.2)

Table 3.2
FORECASTED DEMAND FOR CITRIC ACID (TONNENES)

Year

Forecasted

2008

46.3

2009

49.6

2010

53.0

2011

56.8

2012

60.7

2013

65.0

2014

69.5

2015

74.4

2016

79.6

2017

85.2

184-6

3.

Pricing and Distribution

A factory-gate price of Birr 55,000 per tonne is recommended for sales revenue projection.
The product can be sold directly to the end user industries.

B.

PLANT CAPACITY AND PRODUCTION PROGRAMME

1.

Plant Capacity

Based on the market study the envisaged plant will have annual production capacity of 50
tonnenes. The plant will operate in a single shift of 8 hours a day, and for 300 days a year.

2.

Production Programme

At the initial stage of the production period, the plant would require some years to penetrate
into the market and build technical capacity. There fore production will commence at 60%,
and then will grow to 75%, 90% and 100% in the second, third and fourth year and then
after, respectively Detail production programme is shown in Table 3.3 below.

Table 3.3
PRODUCTION PROGRAMME

Year

4-10

Capacity utilization (%)

60

75

90

100

Production (tonnes)

30

37.5

45

50

184-7

IV.

MATERIALS AND INPUTS

A.

RAW AND AUXILIARY MATERIALS

The major raw materials used to produce citric acid are molasses, lime, and sulphuric acid.
Auxiliary material needed to produce citric acid is packing material. Annual consumption
of raw and auxiliary materials at full production capacity is given in Table 4.1 below. The
total cost of raw material is estimated at Birr 487,000.

Table 4.1
RAW AND AUXILIARY MATERIALS REQUIREMENT AND COST

Sr.

Cost, ['000 Birr]

No.

Description

Molasses[tonnees]

1667

Lime[tonnees]

22

Sulphuric acid[tonnees]

32.5

Packing material(lump sum)

50.000

Grand Total

B.

Qty
166,700
7.7
162.5
150
487,000

UTILITIES

Electricity, water and fuel oil are the utilities required by the envisaged plant. Details of
utilities are shown in Table 4.2. The total cost of utilities is estimated at birr 532,020.

184-8

Table 4.2
UTILITIES REQUIREMENT AND COST

Sr.

Description

Quantity

Unit price

Total Cost,

(Birr)

Birr

No.
1

Electricity

200,000

0.4736

(kWh)

94720

Water (m3)

50,000

5.5

275000

Furnace oil (lt.)

30,000

5.41

162300

Grand Total

V.

TECHNOLOGY AND ENGINEERING

A.

TECHNOLOGY

1.

Production Process

532,020

Citric acid can be extracted from the juice of citrus fruits. It is obtained also by fermentation
of glucose with the aid of the mold Aspergillus niger and can be obtained synthetically from
acetonnee or glycerol.

Today, essentially all of the commercial citric acid is produced by fermentation. Processes
employed are surface or submerged fermentation by mold (Aspergillus niger) and
submerged fermentation by yeast (Candida guilliermondii, C. lipolytica), using a variety of
substrates including sucrose, molasses, corn syrup, enzyme-treated starch, and normal
paraffin.

In the envisaged plant, the cultures of Aspergillus niger are fed on molasses to produce citric
acid. Molasses containing 54-60 percent sugar is taken into mixer and sulphuric acid is
added to adjust the PH between 5-6. Phosphorous, potassium and nitrogen in the form of

184-9
acids or salts are added as nutrients for proper mold. Then mixture is sterilized with live
steam and finally diluted with water. Now take this medium to shallow aluminium trays
which are arranged in tiersin sterile fermentation chambers.

After cooling the fermentation medium to about 30C, it is inoculated with spores of
organisms. As time passes more and more acid is produced and PH drops to 2 and acid
content varies from 10-12% at the end of fermentation and the temperature is maintained at
28-30 C. Purified air is passed in the fermentation chamber.

Chamber and trays are thoroughly sterilized after completion of each run. Run crude liquor
into settling tanks and allow waste mould to drain. Send liquor to precipitating tank and heat
up to 90C. Remove oxalic acid by preferential precipitation by hydrated lime.

Now add one part of lime in two parts liquor and raise the temperature to 95C. Precipitated
calcium citrate is filtered on a vacuum filter and filtrate is drained. Acidulate the cake with
H2SO4 in decomposition tank. New filter the slurry for giving cakes of calcium sulphate.
Concentrate the solution in vacuum evaporator then send to crystallizer where it is cooled to
give crystals of monohydrate citric acid.

2.

Source of Technology

The technology of production of citric acid can be obtained from different countries and
suppliers. Address of an Indian machinery supplier is given below for further contact:-

Good Rich Sugar and Chemical Complex Limited

Registered Office : No.16, 2nd Main, 2nd cross, AECS Layout, III Stage, Sanjaynagar,
Bangalore -560094
Phone: 91 - 080 23411400
Fax: 91 - 080 23410388
Email : rao@goodrichsugar.com
Website : www.goodrichsugar.com

184-10

B.

ENGINEERING

1.

Machinery and Equipment

The list of machinery and equipment required by the envisaged plant is given in Table 5.1
below. The total cost of machinery and equipment with the envisaged capacity is estimated
at Birr 4.5 million, out of which birr 3.6 million is required in foreign currency.

Table 5.1
MACHINERY AND EQUIPMENT REQUIREMENT

Sr.

Qty.

No.

Description

(No.)

Mixing tank

Fermentation tank

Settling tank

Precipitation tank

Press filter

Acidification tank

Evaporator

Charcoal treatment tank

Crystallization tank

10

Drier

11

boiler

12

Sulphuric acid storage tank

13

Sulphuric acid dilution tank

14

Molasses storage tank

184-11

2.

Land, Building and Civil Works

The total land requirement, including provision for open space is 1,000 m2, of which 600 m2
will be covered by building. Estimating unit building construction cost of Birr 2,300 per m2,
the total cost of building will be Birr 1,380,000. The cost of land leasing is Birr 0.70 per m2,
and for 80 years land holding will be Birr 56,000. Thus, the total investment cost of land,
building and civil works will be Birr 1,436,000.

3.

Proposed Location

Arba Minch is proposed to be the best location for the envisaged citric acid plant due to the
presence of the required infrastructure like electricity, road, clean water etc. It is also
accessible to the raw materials and market.

VI.

MANPOWER AND TRAINING REQUIREMENT

A.

MANPOWER REQUIREMENT

The plant requires 22 workers, and their annual expenditure, including fringe benefits, is
estimated at Birr 183,000. For details see Table 6.1 below.

B.

TRAINING REQUIREMENT

The production operators will be trained on the operation and maintenance of machinery for
about two weeks during erection and commissioning period by the expert of machinery
supplier. The total cost of training is estimated at Birr 30,000.

184-12

Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST

Sr.

Description

No.

Req.

Salary, Birr

No.
Monthly

Annual

Plant manager

2,000

24,000

Secretary

700

8,400

Accountant

900

10,800

Clerk

350

4,200

Production supervisor

900

10,800

Technician Operator

2,000

24,000

Laborers

1,800

21,600

Chemist

900

10,800

Store keeper

500

6,000

10

Purchaser/sales man

900

10,800

11

Driver

450

5,400

12

Guard

600

7,200

13

Cleaner

200

2,400

Sub-total

22

Employee benefit (25% BS)

Total

146,400
36,600
183,000

184-13

VII.

FINANCIAL ANALYSIS

The financial analysis of the

citric acid 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

3 years

Bank interest

8%

Discount cash flow

8.5%

Accounts receivable

30 days

Raw material local

30days

Work in progress

2days

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 7.03
million, of which 51 per cent will be required in foreign currency.

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

184-14

Table 7.1
INITIAL INVESTMENT COST

Sr.

Total Cost

No.

Cost Items

(000 Birr)

Land lease value

Building and Civil Work

1,380.0

Plant Machinery and Equipment

4,500.4

Office Furniture and Equipment

175.0

Vehicle

200.0

Pre-production Expenditure*

503.2

Working Capital

223.5

Total Investment Cost

Foreign Share

56.0

7,037.5
51

* N.B Pre-production expenditure includes interest during construction ( Birr 403.21 thousand ) training
(Birr

30 thousand ) and Birr 70 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 2.29 million (see
Table 7.2).

The material and utility cost accounts for 4448 per cent, while repair and

maintenance take 5.46 per cent of the production cost.

184-15

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

Items

Cost

Raw Material and Inputs

487.0

21.26

Utilities

532.02

23.22

125

5.46

Labour direct

109.8

4.79

Factory overheads

45.75

2.00

Administration Costs

73.2

3.20

Total Operating Costs

1,372.77

59.92

Depreciation

596.5

26.04

Cost of Finance

321.68

14.04

2,290.95

100

Maintenance and repair

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.

184-16

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

= 43 %

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 6 years.

4.

Internal Rate of Return and Net Present Value

Based on the cash flow statement, the calculated IRR of the project is 14 % and the net
present value at 8.5% discount rate is Birr 1.10 million.

D.

ECONOMIC BENEFITS

The project can create employment for 22 persons.

In addition to supply of the domestic

needs, the project will generate Birr 1.39 million in terms of tax revenue.