Investment Office ANRS

Project Profile on the Establishment

of Cocks and Valves producing plant

Development Studies
Associates (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...................................................................................................7
3.2Plant Capacity.........................................................................................................................7
3.3Production Program................................................................................................................8

4.Raw Materials and Utilities....................................................................................8

4.1Availability and Source of Raw Materials..............................................................................8
4.2Annual Requirement and Cost of Raw Materials and Utilities...............................................9

5.Location and Site....................................................................................................9

6.Technology and Engineering ...............................................................................10
6.1Production Process................................................................................................................10
6.2Machinery and Equipment....................................................................................................10
6.3Civil Engineering Cost..........................................................................................................11

7.Human Resource and Training Requirement.......................................................12

7.1Human Resource ..................................................................................................................12
7.2Training Requirement...........................................................................................................12

8.Financial Analysis................................................................................................13
8.1Underlying Assumption .......................................................................................................13
8.2Investment.............................................................................................................................14
8.3Production Costs...................................................................................................................14
8.4Financial Evaluation.............................................................................................................15

9.Economic and Social Benefit and Justification....................................................16

ANNEXES...............................................................................................................18

1. Executive Summary
This project provides basic information on the production of pipe fittings (taps, cocks and
valves). The initial investment of the project is estimated at about Birr 29.5 million, of which
50.9% is in foreign currency.
The market study shows the existence of adequate demand for the product.
Total production costs at full capacity amount to about Birr 12.3 million while sales revenues are
estimated at Birr 1.3 million.
The project is assessed to earn an internal rate of return (IRR) of about 32.0 %, and a net present
value of Birr 16.1 million on net cash flows discounted at 18%.
The project creates employment for 102 people. Other benefits included tax revenue to the
region, foreign exchanges savings, and technological benefits.

2. Product Description and Application

Pipe fittings and valves are mechanical items which are required in a pipe network system, such
as gage values, globe valves elbows, tees, Y-branches, unions, straight couplings, etc. They are
in most cases manufactured by melting and casting scrap iron, bronze and other metals. High
pressure fittings are produced form commercial steel.
Pipe fittings and valves have applications like regulating, changing direction and prolonging the
transport of liquids through fitted pipes in a wide range of industrial fields and domestic water
supply systems.
Pipe fittings and values have various types and sizes. But the most commonly used ones can be
limited to about 70.

Cocks and valves are fittings used in water pipes. They are needed in all areas (homes,
hospitals, offices, public water taps, etc) where water is delivered through pipes. These fittings
are also used (with adjustment) for pipes used to transport other liquid substances. Examples of
cocks and valves are water taps used for opening and closing the flow of water; check valves are
used to check the flow of water or other liquid during maintenance operations. Cocks and valves
are normally made of brass or stainless steel due to the fact that these metals/alloys are not
affected by water and are corrosion proof. The products are produced either by casting or
machining process

3. Market Study, Plant Capacity and Production Program

3.1

Market Study
3.1.1 Present Demand and Supply

The market for pipe fitting and valves is assessed based on the applications listed earlier. The
demand assessment is analyzed suing the trend of supplies which are composed of local
production if any and/or imports. The source of data is the yearly published External trade
Statistics by the Customs authority for imports.
The supply of piped water is expanding in both urban and rural areas of the Amhara Region.
About twenty years ago, bringing water from rivers springs or a well to villages through pipes
was very rare. Today one can witness the presence of water points in village centers in many
parts of the Region. Most of the urban areas of the Region are supplied with piped water; and
the provision of piped water is expanding. However, all materials used to construct or install
piped water (pipes, valves, water meters, etc) are either imported or brought from Addis Ababa.
In another project idea, we have proposed the establishment of a plant which will produce metal
pipes for water supply. The Region should also try to be self-sufficient in the production of
cocks and valves to facilitate the further expansion of piped water supply in the Region.

Table 1 shows the yearly supplies of appliances such as taps, cocks and valves during the period
1991 to 20001 only through imports as there is no local production of such construction
materials.
The import figures during the period 1991 to 2000 have shown a general increasing trend.
During the period indicated, an average of 510,740 tons or about 511 tons of taps, cocks and
valves per year had been imported into the country with a total CIF value of Birr 25 million.
The present demand for such fittings and valves is conservatively estimated to be the average
imports between the year 1994 and the year 2000, which is about 651 tons /year.

Table 1
SUPPLY OF TAPS, COCKS AND VALVES
(1991 - 2000)
Year
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
Total
Average

Quantity (kg)
18,656
23,988
605,374
411,802
758,033
463,345
553,685
638,791
1,122,982
4,596,656
510,740

CIF Value('000'Birr)
881
2,066
23,288
23,017
28,514
24,883
22,600
34,403
69,119
228,771
25,419

Source: Customs Authority, Import Statistics, 1991-2000

3.1.2 Projected Demand

The supply of piped water is expanding in both urban and rural areas of the country at large in
Amhara Region. About twenty years ago, bringing water from rivers springs or a well to villages
through pipes was very rare in almost all rural areas of the country in general. Today one can
witness the presence of water points in village centers in many parts of all the Regions. Most of
1

Years in this Document are in Ethiopian Calendar

the urban areas of the Amhara Region are supplied with piped water; and the provision of piped
water is expanding. However, all materials used to construct or install piped water in the country
or in Amhara Region (pipes, valves, water meters, etc) are imported from abroad. In another
project idea, we have proposed the establishment of a plant which will produce metal pipes for
water supply. To facilitate the further expansion of piped water supply and hygiene of the
population as well as to be self-sufficient, the production of taps, cocks and valves in the Region
is of paramount importance.
All taps, cocks and valves used in the water system of the country are imported. Considering the
extent of water supply system and its potential for expansion all over the country, one can safely
assume that there is more than sufficient demand for such construction materials, which will
make a new plant viable.
The basis of demand projection is either the growth trend of past supplies or the anticipated
growth of the construction sector contribution of GDP. The construction sector GDP is estimated
to increase by about 14.5% yearly. Assuming that the future growth of sector is almost same
level, say 14% per year, the projected demand for taps, cocks and valves, etc for the coming ten
years is given in Table 2.
In this projection demand for the products will increase from 742 tons in the year 2001 to 2413
tons in the year 2010.
Table 2
DEMAND PROJECTION FOR TAPS, COCKS AND VALVES (TONS)
Year
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010

Projected Demand
742
846
964
1100
1253
1429
1628
1857
2117
2413

3.1.3 Pricing and Distribution

Selling prices are determined by general market indictors. Since the fittings are of various in
sizes and types, their selling prices vary also from time to time as a result of fluctuations in
supplies. The CIF selling price of such fittings ranges from Birr 38/kg to Birr 61/kg .The selling
price of the plant is estimated to be Birr 20,000 per ton.
Sales and distribution can be arranged through sole distributors and retailers. In this particular
case, the market area and the nature of the product dictate that sales and distribution be arranged
through wholesalers and retailers so that the product can be made available throughout the
market.

3.2

Plant Capacity

Under circumstances where supplies are made only through imports and there are no local
producers, it becomes reasonable to assume case of import substitution and consider all imports
as potential demand in the country. In all cases, the portion of demand met by imports has been
considered as part of the gap between supply and demand, or the available demand.
Considering 8 working hours per day and 275 working days per year, the envisaged plant is
assumed to produce about 1200 tons of different fittings and valves per year in one shift.
Maintenance, activities will be carried out in phase without interruption of production, if
possible, and preventive maintenance will be carried out on non production hours.
It should be noted that all sizes of pipe fittings and valves are not equally demanded. Smaller
sizes are the most commonly used and the production schedule should be planned accordingly.
The proposed product mix of the plant is indicated in table 3 bellow.

Table 3
ANNUL PRODUCTION AND MIX AT 100% CAPACITY UTILIZATION
Pipe fittings and
valves

1
1
1
1
2
2
3
Total Production

3.3

Production
(%)
25
20
15
10
10
6
5
6
4
100

Production
(tons)
300
240
180
120
120
72
60
60
48
1200

Production Program

New producers/ suppliers that come into the market take time before they get used to customer
behaviour, establish sales networks and create sufficient awareness of their brand of a product.
Thus, three year period has been assumed to elapse before the plant reaches at full capacity.
According, a production programme of 75%, 85% and 100% capacity has been adopted during
the first, second and third year of production, respectively.

4. Raw Materials and Utilities

4.1

Availability and Source of Raw Materials

The major raw material for the production of pipe fittings and valves is scrap iron. Other inputs
like limestone, coal, etc. which are quite small in proportion are added. The scrap and other
materials requirements are almost double by weight of the product. Almost all of these materials
are locally available.

4.2

Annual Requirement and Cost of Raw Materials and Utilities

As per the IPS estimations, the annual requirement of raw materials and utilities and their
respective cost are given in Table 4.
The only auxiliary materials required for the manufacturing of pipe fittings and valves are oil and
packaging materials. Both of these auxiliary materials are abundant locally.
The utilities required the manufacturing of valves and pipe fittings are electric power and water.
The power requirement is, on average, 2,688,000 KWA. Annual consumption raw materials and
utilities for a single shift per day, 275 days per year of operation is given in Table 4.
Table 4.
ANNUAL MATERIALS AND UTILITIES REQUIREMENT AT 100%
CAPAITY UTILIZATION
Materials and Input

Unit

Qty.

Unit Cost in
Birr/ton

Total cost in Birr

Raw Materials
Scrap iron & steel
Tons
1,500
2000
Others

500
Aux. Materials
Oil
Lit
108,000
5.00
Packaging materials
Sub total
Utilities
Electric power
Kwh
2,688,000
0.55
Water
M3
750
2.65
Sub total
Total
Source of Technology is UNIDO, how to start manufacturing industries.

3,000,000
600,000
540,000
200,000
4,340,000
1,478,400
1987
1,480,387
5,820,387

5. Location and Site

The first requisite of the plant is the convenient procuring of high voltage electric power
and water. The most suitable place should be chosen by taking this and other
conditions into consideration. In this regard Combolcha or Bahir Dar could be suitable
location.
9

6. Technology and Engineering

6.1

Production Process

First, the various materials are weighed and charged into a furnace. After making sure that the
chemical composition is within the range of malleable iron casting, the metal is tapped into the
crane ladle to be powered into the sand mould previously made. The castings are separated from
sand after cooling for 5 to 10 minutes by share out.
After removing sand, the cast products are separated from spruce, runners and gates by
hammering. The products are then treated in a shot blast prior to inspection.
The spruce, runners and gates are re-melted for use. After inspection, the products are sealed in
an annealing pot and charged into the annealing furnace. After being annealed completely at a
proper temperature for a proper time, the casting is removed of gates and burrs by the cutting
machine.
The distortion of casting is removed by the deformation corrector. Then, the castings are cleaned
by shot blast and pickled for galvanizing. The castings after galvanizing are machined and
threaded. Finally, every, piece of casting is subject to the pressure leakage test and anti corrosive
oil is applied to the casting and packed for dispatch.
Alternatively the promoter can increase the production scale of the plant from 1200 tons per year
to 400 tons per year by increasing a little reinforcement of equipment according to the increase
of demand.

6.2

Machinery and Equipment

The machinery and equipment to be employed for the manufacturing of pipe fittings and valves
are standard and well known and proven all over the world. Details of these machinery and
equipment with respective cost estimates are given in Table 5. The total estimated cost of
machinery and equipment is about Birr 20 million, of which 5 million is in local currency used
for installation work and steel fabrications. The project will also requires about Birr 250,000 and
Birr 20,000 to purchase a pick up vehicle and office furniture and equipments, respectively.
10

Table 5
MACHINERY AND EQUIPMENT
Machinery & equipment
Moulding machines
Sand Conditioning plant
Melting furnace
Shot blasting Machine
Annealing Furnace
Galvanizing shop
Tapping machine
Laboratory Equipment
Testers etc

Qty.
1set

''

Machinery and equipment of the project could be purchased from the following Supplier.

Ashok Kumar Arora

E-81, Phase IV, Focal Point
Ludhiana 141010
Punjab
India
Phone: 91-161-2673735
Fax: 91-161-2670077
For better quality, the promoter could buy the machineries and equipment from
companies of Italy or Germany.
6.3

Civil Engineering Cost

It is recommended that the plant site area should be about 12,000 meter-square. The total
building area necessary for factory proper, stores and office complex is 4,000 meter square. Of
this, office complex is estimated to cover an area of about 200m2. The plant will require about
Birr 10,000 for the purchase of office equipment and furniture.
The average cost of building for factory proper and a store is about Birr 1500 per meter-square
and that for office complex is Birr 2000 per meter-square. Therefore, the total building cost will
be Birr 6,100,000
11

The plant layout for the production line must be designed to follow the process. Stores are
recommended to be located at the beginning and end of the production line.

7. Human Resource and Training Requirement

7.1

Human Resource

The total manpower requirement for this plant will be about 95 people. Of this, about 80 will be
direct workers. Details of manpower and associated salaries are given in Table 6.
Table 6
DETAILS OF MANPOWER

Manpower
Manager
Engineer
Foremen
Operators
Asst. Operators
Technicians
Asst. Technicians
Clerical workers
Others
Total
Benefits (20%)
Total Salary

7.2

Qty.
1
1
4
40
40
3
3
6
4
102

Monthly
Salary /Person
3500
3000
1500
900
750
1000
800
800
400

Annual
Salary (Birr)
42,000
36,000
72,000
432,000
360,000
36,000
28,800
57,600
19,200
1,083,600
216,720
1,300,320

Training Requirement

It is recommended that all operators and technicians should be trained on-the job by the experts
of machinery suppliers. But for an engineer and foremen, it will be worth considering for
training and exposure abroad in the suppliers training center. It is assumed that with the above
training and the experience that will be gained during erection operation and maintenance of the
plant can easily be handled by local staff.

12

8. Financial Analysis
8.1

Underlying Assumption

The financial analysis of Pipe fittings producing plant is based on the data provided in the
preceding chapters and the following assumptions.
A. Construction and Finance
Construction period

2 years

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%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local

30 days

Raw Material-Foreign

120 days

Factory Supplies in Stock

30 days

Spare Parts in Stock and Maintenance

30 days

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

10 days
15 days
30 days
30 days
30 days

13

8.2

Investment

The total investment cost of the project including working capital is estimated at Birr 29.5
million as shown in table 7 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.
The foreign component of the project accounts for Birr 15.0 million or 50.9% of the total
investment cost.
Table 7: Total initial investment
LC
Land
Building
Office equipment
Vehicles
machinery & equipment
Total Fixed Investment
Pre production
Total Initial
Investment
Working capital

FC

Total

36,000

36,000

6,100,000

6,100,000

20,000

20,000

250,000

250,000

5,000,000

15,000,000

20,000,000

11,406,000

15,000,000

26,406,000

1,320,300

1,320,300

12,726,300

15,000,000

27,726,300

1,736,582

1,736,582

Total

14,462,882 15,000,000
29,462,882
*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.

8.3

Production Costs

Production costs are comprised of raw, materials costs, labor, utilities, depreciation and financial
costs. Total production costs at full capacity utilization are about Birr 12.6 million as shown in
table 8 bellow.

14

Table 8

Total Production Cost at full Capacity

Items
Cost
1. Raw materials

4,340,000

2. Utilities

1,480,378

3. Wages and Salaries

1,300,320

4. Spares and Maintenance

Factory costs
5. Depreciation
6. Financial costs

Total Production Cost

8.4

792,180
7,912,878
2,621,060
1,767,773
12,301,711

Financial Evaluation
I.

Profitability

According to the projected income statement the envisaged project starts earning profit from the
first year of operation. The rate of return on investment and the rate of return on equity of the
project is 33% and 42 %, respectively.
II.

Breakeven Analysis

Break-even capacity is the level of capacity utilization at which the project not makes any profit
or incurs any losses. Its revenues are equal to its costs of operation. The Breakeven point of the
project is 19.8 %
III.

Payback Period

Payback period is the number of years the annual project cash flows cover totally the amount
investment made. The payback period for this project is three years.
IV.

Simple Rate of Return

Simple rate of return (SRR) is the percentage of net profit after taxes plus interest to the total
investment. Thus SRR for this project is about 34%.

15

V.

Internal Rate of Return and Net Present Value

Based on cash flow statement the calculated IRR of the project is 32% and the net present value
of 18% discount rate Birr 16.1 million.
VI.

Sensitivity Analysis

The project will not be affected if prices of raw materials increase by 10%.

9. Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project facilitates the provision of piped water, introduces new skills and
technology to the Region, and promotes self-sufficiency; possibility of exporting to other parts of
the country and 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 on average a profit of birr 17.6 million per
year and birr 76.2 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 28.4 million 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
As there is no local production of pipe fittings in the country, the commencement of this project
relieves a portion of the import burden. That is, based on the projected figure we learn that in the
project life an estimated amount of US Dollar 22.9 million will be saved as a result of the
proposed project. This will create room for the saved hard currency to be allocated on other vital
and strategic sectors
16

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
country. That is, it will provide permanent employment to 102 professionals as well as support
staff. Consequently the project creates income of birr 1.3 million per year. This would be one of
the commendable accomplishments of the project.
E. Pro Environment Project
The proposed production does not pollute the environment.

17

ANNEXES

18

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

CONSTRUCTION

PRODUCTION

Year 1

Year 2

Capacity Utilization (%)

0.00

0.00

75%

85%

100%

0%

1. Total Inventory

0.00

0.00

1430015.96

1620684.76

1906687.95

0.00

0.00

0.00

355090.91

402436.36

473454.55

0.00

Raw Material-Local

0.00

0.00

355090.91

402436.36

473454.55

0.00

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

0.00

0.00

8618.68

9767.83

11491.57

0.00

Spare Parts in Stock and Maintenance

0.00

0.00

64814.73

73456.69

86419.64

0.00

Work in Progress

0.00

0.00

215466.91

244195.84

287289.22

0.00

Finished Products

0.00

0.00

430933.83

488391.67

574578.44

0.00

2. Accounts Receivable

0.00

0.00

1963636.36

2225454.55

2618181.82

0.00

3. Cash in Hand

0.00

0.00

227511.65

257846.54

303348.87

0.00

0.00

0.00

3266073.07

3701549.48

4354764.10

0.00

4. Current Liabilities

0.00

0.00

1963636.36

2225454.55

2618181.82

0.00

Accounts Payable

0.00

0.00

1963636.36

2225454.55

2618181.82

0.00

TOTAL NET WORKING CAPITAL REQUIRMENTS

0.00

0.00

1302436.71

1476094.94

1736582.28

0.00

INCREASE IN NET WORKING CAPITAL

0.00

0.00

1302436.71

173658.23

260487.34

-1736582.28

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%

1906687.95

1906687.95

1906687.95

1906687.95

1906687.95

1906687.95

473454.55

473454.55

473454.55

473454.55

473454.55

473454.55

473454.55

473454.55

473454.55

473454.55

473454.55

473454.55

Raw Material-Foreign

0.00

0.00

0.00

0.00

0.00

0.00

Factory Supplies in Stock

11491.57

11491.57

11491.57

11491.57

11491.57

11491.57

Spare Parts in Stock and Maintenance

86419.64

86419.64

86419.64

86419.64

86419.64

86419.64

Work in Progress

287289.22

287289.22

287289.22

287289.22

287289.22

287289.22

Finished Products

574578.44

574578.44

574578.44

574578.44

574578.44

574578.44

2. Accounts Receivable

2618181.82

2618181.82

2618181.82

2618181.82

2618181.82

2618181.82

3. Cash in Hand

303348.87

303348.87

303348.87

303348.87

303348.87

303348.87

4354764.10

4354764.10

4354764.10

4354764.10

4354764.10

4354764.10

4. Current Liabilities

2618181.82

2618181.82

2618181.82

2618181.82

2618181.82

2618181.82

Accounts Payable

2618181.82

2618181.82

2618181.82

2618181.82

2618181.82

2618181.82

TOTAL NET WORKING CAPITAL REQUIRMENTS

1736582.28

1736582.28

1736582.28

1736582.28

1736582.28

1736582.28

INCREASE IN NET WORKING CAPITAL

1736582.28

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

13863150.00

15599732.28

19963636.36

20661818.18

24392727.27

-2618181.82

13863150.00

15599732.28

1963636.36

261818.18

392727.27

-2618181.82

Total Equity

5545260.00

6239892.91

0.00

0.00

0.00

0.00

Total Long Term Loan

8317890.00

9359839.37

0.00

0.00

0.00

0.00

0.00

0.00

1963636.36

261818.18

392727.27

-2618181.82

2. Inflow Operation

0.00

0.00

18000000.00

20400000.00

24000000.00

0.00

Sales Revenue

0.00

0.00

18000000.00

20400000.00

24000000.00

0.00

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

13863150.00

13863150.00

13727821.73

11926383.93

16505664.06

286902.48

4. Increase In Fixed Assets

13863150.00

13863150.00

0.00

0.00

0.00

0.00

13203000.00

13203000.00

0.00

0.00

0.00

0.00

660150.00

660150.00

0.00

0.00

0.00

0.00

5. Increase in Current Assets

0.00

0.00

3266073.07

435476.41

653214.61

-4354764.10

6. Operating Costs

0.00

0.00

5700688.04

6423291.77

7507197.38

281160.00

7. Corporate Tax Paid

0.00

0.00

0.00

0.00

3631190.90

0.00

8. Interest Paid

0.00

0.00

4761060.63

2121327.52

1767772.94

1414218.35

9. Loan Repayments

0.00

0.00

0.00

2946288.23

2946288.23

2946288.23

10. Dividends Paid

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

0.00

1736582.28

6235814.63

8735434.25

7887063.21

-2905084.30

Cumulative Cash Balance

0.00

1736582.28

7972396.91

16707831.15

24594894.36

21689810.06

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
26618181.82

6
24000000.00

7
24000000.00

8
24000000.00

9
24000000.00

10
24000000.00

2618181.82

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

2618181.82

0.00

0.00

0.00

0.00

0.00

2. Inflow Operation

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

Sales Revenue

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

19712237.12

15204202.82

14956714.60

11762938.17

11762938.17

11762938.17

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

5. Increase in Current Assets

4354764.10

0.00

0.00

0.00

0.00

0.00

6. Operating Costs

7507197.38

7507197.38

7507197.38

7507197.38

7507197.38

7507197.38

7. Corporate Tax Paid

3843323.66

4043608.03

4149674.41

4255740.79

4255740.79

4255740.79

8. Interest Paid

1060663.76

707109.17

353554.59

0.00

0.00

0.00

9. Loan Repayments

2946288.23

2946288.23

2946288.23

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

Surplus(Deficit)

6905944.69

8795797.18

9043285.40

12237061.83

12237061.83

12237061.83

Cumulative Cash Balance

28595754.76

37391551.94

46434837.34

58671899.17

70908961.01

83146022.84

TOTAL CASH INFLOW

1. Inflow Funds

Total Short Term Finances

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

18000000.00

20400000.00

24000000.00

0.00

1. Inflow Operation

0.00

0.00

18000000.00

20400000.00

24000000.00

0.00

Sales Revenue

0.00

0.00

18000000.00

20400000.00

24000000.00

0.00

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

13863150.00

13863150.00

7003124.74

6596950.00

11398875.63

-1455422.28

3. Increase in Fixed Assets

13863150.00

13863150.00

0.00

0.00

0.00

0.00

Fixed Investments

13203000.00

13203000.00

0.00

0.00

0.00

0.00

660150.00

660150.00

0.00

0.00

0.00

0.00

4. Increase in Net Working Capital

0.00

0.00

1302436.71

173658.23

260487.34

-1736582.28

5. Operating Costs

0.00

0.00

5700688.04

6423291.77

7507197.38

281160.00

0.00
13863150.00
13863150.00
13863150.00
13863150.00

0.00
13863150.00
27726300.00
11748432.20
25611582.20

0.00

0.00

3631190.90

0.00

10996875.26
16729424.74

13803050.00

12601124.37

1455422.28

-2926374.74

9674749.63

11130171.91

7897784.59
17713797.62

8400962.37

6499519.77

636178.49

-9312835.25

-2813315.49

-2177136.99

2. Other Income

Pre-production Expenditures

6. Corporate Tax Paid

NET CASH FLOW
CUMMULATIVE NET CASH FLOW
Net Present Value (at 18%)
Cumulative Net present Value

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

(Continued)

PRODUCTION
5

10

TOTAL CASH INFLOW

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

1. Inflow Operation

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

Sales Revenue

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

0.00

13087103.32

11550805.41

11656871.79

11762938.17

11762938.17

11762938.17

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

4. Increase in Net Working Capital

1736582.28

0.00

0.00

0.00

0.00

0.00

5. Operating Costs

7507197.38

7507197.38

7507197.38

7507197.38

7507197.38

7507197.38

6. Corporate Tax Paid

3843323.66

4043608.03

4149674.41

4255740.79

4255740.79

4255740.79

NET CASH FLOW

10912896.68

12449194.59

12343128.21

12237061.83

12237061.83

12237061.83

CUMMULATIVE NET CASH FLOW

22043068.59

34492263.18

46835391.39

59072453.22

71309515.06

83546576.89

Net Present Value (at 18%)

4042481.12

3908113.82

3283743.16

2758919.88

2338067.70

1981413.30

Cumulative Net present Value

1865344.12

5773457.95

9057201.11

11816120.99

14154188.69

16135601.99

Interest on Securities
2. Other Income
TOTAL CASH OUTFLOW

Net Present Value (at 18%)

Internal Rate of Return

16,135,601.99

32.0%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
1

75%

85%

100%

0%

100%

18000000.00

20400000.00

24000000.00

0.00

24000000.00

18000000.00

20400000.00

24000000.00

0.00

24000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

5029432.04

5700022.97

6705909.38

0.00

6705909.38

12970567.97

14699977.03

17294090.62

0.00

17294090.62

72.06

72.06

72.06

#DIV/0!

72.06

3292316.00

3344328.80

3422348.00

2902220.00

3422348.00

9678251.97

11355648.23

13871742.62

-2902220.00

13871742.62

54

56

58

#DIV/0!

58

4. Less Cost of Finance

4761060.63

2121327.52

1767772.94

1414218.35

1060663.76

5. GROSS PROFIT

4917191.34

9234320.70

12103969.68

-4316438.35

12811078.86

0.00

0.00

3631190.90

0.00

3843323.66

4917191.34

9234320.70

8472778.78

-4316438.35

8967755.20

Gross Profit/Sales

27%

45%

50%

#DIV/0!

53%

Net Profit After Tax/Sales

27%

45%

35%

#DIV/0!

37%

Return on Investment

33%

39%

35%

-10%

34%

Return on Equity

42%

78%

72%

-37%

76%

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

PRODUCTION
6

10

100%

100%

100%

100%

100%

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

24000000.00

Other Income

0.00

0.00

0.00

0.00

0.00

2. Less Variable Cost

6705909.38

6705909.38

6705909.38

6705909.38

6705909.38

17294090.62

17294090.62

17294090.62

17294090.62

17294090.62

72

72

72

72

72

3108288.00

3108288.00

3108288.00

3108288.00

3108288.00

14185802.62

14185802.62

14185802.62

14185802.62

14185802.62

59

59

59

59

59

707109.17

353554.59

0.00

0.00

0.00

5. GROSS PROFIT

13478693.45

13832248.03

14185802.62

14185802.62

14185802.62

6. Income (Corporate) Tax

4043608.03

4149674.41

4255740.79

4255740.79

4255740.79

7. NET PROFIT

9435085.41

9682573.62

9930061.83

9930061.83

9930061.83

Gross Profit/Sales

56%

58%

59%

59%

59%

Net Profit After Tax/Sales

39%

40%

41%

41%

41%

Return on Investment

34%

34%

34%

34%

34%

Return on Equity

80%

82%

84%

84%

84%

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)

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
13863150.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
13863150.00
0.00
13203000.00
660150.00
0.00
0.00
0.00
13863150.00
0.00
0.00
0.00
8317890.00
8317890.00
0.00
5545260.00
5545260.00
0.00
0.00
0.00
0.00
0.00
0.00

Year 2
29462882.28
1736582.28
0.00
0.00
0.00
0.00
0.00
1736582.28
0.00
27726300.00
13203000.00
13203000.00
1320300.00
0.00
0.00
0.00
29462882.28
0.00
0.00
0.00
17677729.37
17677729.37
0.00
11785152.91
11785152.91
0.00
0.00
0.00
0.00
0.00
0.00

PRODUCTION
1
36343709.98
11238469.98
428524.31
215466.91
430933.83
1963636.36
227511.65
7972396.91
0.00
25105240.00
26406000.00
0.00
1320300.00
2621060.00
0.00
0.00
36343709.98
1963636.36
1963636.36
0.00
17677729.37
17677729.37
0.00
11785152.91
11785152.91
0.00
0.00
0.00
4917191.34
0.00
4917191.34

2
42893560.64
20409380.64
485660.89
244195.84
488391.67
2225454.55
257846.54
16707831.15
0.00
22484180.00
26406000.00
0.00
1320300.00
5242120.00
0.00
0.00
42893560.64
2225454.55
2225454.55
0.00
14731441.14
14731441.14
0.00
11785152.91
11785152.91
0.00
0.00
4917191.34
9234320.70
0.00
9234320.70

3
48812778.46
28949658.46
571365.75
287289.22
574578.44
2618181.82
303348.87
24594894.36
0.00
19863120.00
26406000.00
0.00
1320300.00
7863180.00
0.00
0.00
48812778.46
2618181.82
2618181.82
0.00
11785152.91
11785152.91
0.00
11785152.91
11785152.91
0.00
0.00
14151512.04
8472778.78
0.00
8472778.78

4
43248308.41
21689810.06
0.00
0.00
0.00
0.00
0.00
21689810.06
0.00
17242060.00
26406000.00
0.00
1320300.00
10484240.00
0.00
4316438.35
43248308.41
0.00
0.00
0.00
8838864.68
8838864.68
0.00
11785152.91
11785152.91
0.00
0.00
22624290.82
0.00
0.00
0.00

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
47571518.86
32950518.86
571365.75
287289.22
574578.44
2618181.82
303348.87
28595754.76
0.00
14621000.00
26406000.00
0.00
1320300.00
13105300.00
0.00
0.00
47571518.86
2618181.82
2618181.82
0.00
5892576.46
5892576.46
0.00
11785152.91
11785152.91
0.00
0.00
18307852.47
8967755.20
0.00
8967755.20

6
54060316.04
41746316.04
571365.75
287289.22
574578.44
2618181.82
303348.87
37391551.94
0.00
12314000.00
26406000.00
0.00
1320300.00
15412300.00
0.00
0.00
54060316.04
2618181.82
2618181.82
0.00
2946288.23
2946288.23
0.00
11785152.91
11785152.91
0.00
0.00
27275607.67
9435085.41
0.00
9435085.41

7
60796601.43
50789601.43
571365.75
287289.22
574578.44
2618181.82
303348.87
46434837.34
0.00
10007000.00
26406000.00
0.00
1320300.00
17719300.00
0.00
0.00
60796601.43
2618181.82
2618181.82
0.00
0.00
0.00
0.00
11785152.91
11785152.91
0.00
0.00
36710693.08
9682573.62
0.00
9682573.62

8
70726663.27
63026663.27
571365.75
287289.22
574578.44
2618181.82
303348.87
58671899.17
0.00
7700000.00
26406000.00
0.00
1320300.00
20026300.00
0.00
0.00
70726663.27
2618181.82
2618181.82
0.00
0.00
0.00
0.00
11785152.91
11785152.91
0.00
0.00
46393266.71
9930061.83
0.00
9930061.83

9
80656725.10
75263725.10
571365.75
287289.22
574578.44
2618181.82
303348.87
70908961.01
0.00
5393000.00
26406000.00
0.00
1320300.00
22333300.00
0.00
0.00
80656725.10
2618181.82
2618181.82
0.00
0.00
0.00
0.00
11785152.91
11785152.91
0.00
0.00
56323328.54
9930061.83
0.00
9930061.83

10
90586786.94
87500786.94
571365.75
287289.22
574578.44
2618181.82
303348.87
83146022.84
0.00
3086000.00
26406000.00
0.00
1320300.00
24640300.00
0.00
0.00
90586786.94
2618181.82
2618181.82
0.00
0.00
0.00
0.00
11785152.91
11785152.91
0.00
0.00
66253390.37
9930061.83
0.00
9930061.83

10