Alemu Elala
Alemu Elala
Alemu Elala
JULY, 2022
ADDIS ABABA, ETHIOPIA
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MILK PROCESSING PLANT
I. EXCUTIVE SUMMARY
6. Total Initial Investment Br. 76,000,000 of which 30% equivalent to Br. 22,800,000
Capital
financed by the owner equity and the rest 70% equivalent to
birr 53,200,000 financed through bank loan
7. Employment Opportunity 250 persons
8. Benefits for the region/ Add value to the economy, Source of Revenue to the
country
government , Employment opportunity, Save Foreign
currency, Benefit for the local community, Stimulate the
local economy and technology transfer
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MILK PROCESSING PLANT
1. Introduction
Ethiopia has the largest livestock population in Africa and the contribution of livestock
and livestock products to the agricultural economy is significant. Recent figures indicate
that the livestock sector contributes about 12-16% of national GDP, 30-35% of
agricultural GDP, 15% of export earnings and 30% of agricultural employment.
Livestock contribute to the livelihoods of 60-70% of the population Smallholder farmers
represent about 85% of the population and are responsible for 98% of the milk
production. Productivity however is relatively low, quality feeds are difficult to obtain
and support services are inadequate.
There is an immediate and growing shortage of dairy products in all major cities of
Ethiopia and the trends of economic prospects for dairy industry performance and
development are rather good both at small holder level and on more commercial level.
Rapidly increasing population size with a growing urban population is resulting in a
growing demand for dairy products. Dairy development can lead to income generating
activities, increasing incomes, transfer technology and create employment opportunities.
The analysis of the support market and dairy business services revel that the dairy
industry is immature and young, competition barely exist, basic services are either not
existing or inadequate. In general, it offers wide opportunity for investment in dairy and
related businesses. The investment opportunities are immense. The potential is within the
grasp of investors. It only needs adapting the technology, capital and human resources to
specific market niche and opportunity excising or to be developed a new Conducive
government policies, laws and regulations as part of the economic liberalization program
besides investment incentives are necessary to smooth the progress of easy entry in to and
expand the investment opportunities in the Ethiopian dairy industry. To this effect, with
the objective of promoting smallholder and commercial dairy production and the inflow
of foreign capital and technology into the country, the Ethiopian government provides
various packages of fiscal incentives to both foreign and domestic investors engaged in
establishing new enterprises and expansions. In this regard, the owner of the envisioned
plant planned to invest and carried out this pre-project study to check the market,
technical and financial feasibility of this project. The result of the study is very sound and
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MILK PROCESSING PLANT
romising for the owner to start the project in this area. That is this opportunity that
initiates the promoter to develop the project.
Though, The Government aims at stimulating dairy industry (Dairy farm and milk
marketing) in potential areas dairy product processing and marketing are not developed
well with demand on the market. .
Though, the formal market appears to be expanding with the private sector entering the
dairy processing. It is believed that though there is immense potential on this sector our
country did not use efficiently.
The project is believed to have a significant social and economic benefit that accrue to
the society beyond financial returns to the owner of the project
In addition to the above facts, the following points further explain the rationales for
establishment for the envisioned plant by the owners.
High market demand and few plant in this sector
High population.
Favorable and attractive investment incentives packages by the governments
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The envisaged project deemed to contribute to the economic development of the nation in
general and the region in specific with following ways:
The project under discussion will provide quality and fair priced dairy products for the
country market.
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MILK PROCESSING PLANT
B. Value add
The establishment of this plant will add a value to the dairy industry sector in specific and
in the economy in general.
C. Source of revenue
As public policy of any nation, the government collects different forms of taxes from
different business organizations and individuals. Among the different forms of taxes,
business income taxes, VAT and payroll taxes are collected from undertaking business
activities. Therefore, the plant will serve as sources of revenue for both the region and
nation in general.
D. Employment opportunity
One of the problems that our country faced is unemployment. Therefore, the current
objective of the government is working on tackling the problem of unemployment and
fostering the development process either through creating self employment or
employment in other organization. Hence, this plant will hire around 150 persons.
By minimizing the market gab for dairy products demand and supply, the plant will help
to reduce the nation’s foreign exchange cost to import these products. This will save the
foreign exchange resource of the nation.
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This factory has positive externality in the zone that will encourage the economic
movement of local economy. Hence, there will be economic relationship and transactions
among different actors.
H. Technology transfer
By dairy industry, the project will train and develops the capacity of the staffs. By doing
this, the plant will add value in technology transfer for the nation.
1.1.4.1 Location
The envisaged project is planned to be established in OSZSF zone, Akaki Woreda ,
Oromia National Regional State. Akaki Woreda is center of Special zone is situated at
about 38 kms away from Addis Ababa. it is accessible all year round with all types of
motor vehicles. The area is conducive social and investment situations, ease of future
development and increase number of private investment in the area are some of the
reasons behind selecting the area for the proposed project.
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1.1.4.2 Infrastructure
Supplies such as road, potable water and electric power are available in the town. The
available electric power, water supply, telephone service & transportation facilities are
also in the town.
The total land holding of the project is 1 hectare , that means 0.5 hek to farm and 0.5 hek
for processing the premises required planned as follows in table below;
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Over the last 30 years, national and per capita production and consumption of livestock
products have declined (Ayele et al. 2003). During 1993-2001, per capita income
remained at about USD100. Livestock production increased by much less than the
production increase for the agriculture sector as a whole, so relative share of livestock to
agricultural GDP declined. Hence, per capita livestock output fell by 5% while crop and
agriculture grew by 14 and 6% respectively (Halderman 2004).
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The favorable climate throughout the country supports use of improved, high-yielding
animal breeds and offers a relatively disease-free environment for livestock development.
Given the high potential for dairy development and the ongoing policy reforms and
technological interventions, success similar to that realized in the neigh bouring Kenya
under a very similar production environment is expected in Ethiopia
The Ethiopian highlands possess a high potential for dairy development. They occupy the
central part of the Ethiopia, cover over 40% (approx. 490.000 km2) of the country area
and are the largest of their kind in Sub- Saharan Africa. In the highland areas, the
agricultural production system is predominantly subsistence smallholder mixed farming,
with crop and livestock husbandry typically practiced with in the same management unit.
The dairy sector in Ethiopia can also be categorized based on market-orientation, scale,
and production 1 Ethiopia currently manages the largest livestock population in Africa,
estimated at 29 million cattle, 24 million sheep and 18 million goats, 7 million equines, 1
million camels and 53 million poultry. The country holds 2.4% of the world, 3.4% of
developing countries and 15.9% of Africa cattle population (ILRI, 2000).
When considering the economic dependency of the rural population it was estimated that
7.8% are purely livestock dependent, 14.6% predominantly livestock dependent and
74.5% dependent on crop production (Winrock, 1992). The pastoralist livestock
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production system which supports an estimated 10% of the human population covers 50-
60% of the total land area mostly lying at altitudes ranging from below 1500 masl.
The traditional smallholder system corresponds to the rural milk production system.
Both the pastoralists and smallholder farmers produce 98% of the national milk
production (MOA, 1993) and 75% of the commercial milk production. The majority of
milking cows are indigenous Zebu breeds with low production performance (average age
at first calving of 53 months and average calving intervals of 25 months). Cows had three
to four calves before leaving the herd at 11-13 years of age and the average lactation
yield is 524 litres/ cow for 239 days (of which 45% is off take for human use while 55%
is suckled by the calf).
The state dairy farms used to be known as the Dairy Development Enterprises. The
farms mostly use grade animals (those with more than 87.5% exotic blood) and are
concentrated within 38 km distance around Addis Ababa.
The first attempt to introduce modern dairy production in the country was made by the
Imperial regime in 1947, when 300 Friesian and Brown Swiss dairy cattle were received
as a donation from the United Nations Relief and Rehabilitation Administration. A small
milk processing plant was established in Addis Ababa to support commercial dairy
production (Yigezu 2000). With the introduction of these cattle in the country,
commercial liquid milk production started on large farms in Addis Ababa (and Asmera).
Most interventions during this period was focused on urban-based production and
marketing.
During the second half of the 1960s, dairy production in the Addis Ababa area began to
develop rapidly as a result of the expansion in large private dairy farms and the
participation of smallholder producers. With the advent of modern dairying, the
government established the Addis Ababa Dairy Industry in 1966 and, later on, the Dairy
Development Agency (DDA) in 1971 to control and organize the collection, processing
and distribution of locally produced milk. By 1972, the DDA was receiving about 21,000
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litres milk/ day for processing, of which 57% come from 65 large farms. In addition to
collecting milk, the DDA sold milk and dairy products through its kiosks and shops as
well as to institutions.
It also facilitated the creation of dairy cooperatives to ease the provision of credit and
technical and extension service to dairy producers. In 1979 it was merged with numerous
other nationalized dairy farms to establish the Dairy Development Enterprise (DDE). The
DDE includes large dairy farms, milk collection networks, and a processing plant.
The DDE, which is privatized in 2007and changed its name to Lame Dairy, has a
capacity to process 60,000 litres of milk at its inception (Yigezu, 2000). DDE is
privatized and re-named as LAME. With the downfall of the Derg regime in 1991, as a
result of the country’s policy reforms that aim to bring about a market-oriented economic
system, the private sector has begun to enter the dairy sector and market as an important
actor. Many private investors have established small and large dairy farms.
This commercial farms use grade and crossbred animals that have the potential to
produce 1120-2500 litres over 279 day lactation. This production system is now
expanding in the highlands among mixed crop-livestock farmers, such as those found in
Selale, Ada’a and Holetta, and serves as the major milk supplier to the urban market.
Additionally, some ten private investors and one cooperative union have established
milk-processing plants to supply fresh processed milk and dairy products to Addis
Ababa, Dire Dawa and Dessie towns.
The Sebeta Agro Industry, the biggest dairy-processing in Ethiopia, has a capacity to
process around 30,000 litres of milk per day. Around 6000-10000 litres of this milk
come from the owner’s dairy farm with 600 cows. Currently, the market share of this
company has exceeded that of the DDE’s (now LAME).
The other private milk-processing plants established in and around Addis Ababa are
FAMILY, LEMA, Genesis, Ada’a dairy cooperative and Dinsho dairy industries that
have already started marketing their products. Although their market share are still
small compared to DDE and Sebeta Agro- Industry.
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Processed milk production has stagnated in the early 1960s but expanded significantly in
the second half of 1960s and early 1970s. To bridge the gap between supply and demand,
dairy imports increased significantly beginning from 1978. This was partly due to
increased food aid milk powder imports by WFP, and a level of dairy production
development that lagged far behind the demand. Imports reached a peak of 314,700
metric tons in 1986 during the drought period (Reda, 2001). During the period between
1977 and 1989, dairy imports as a percent of total consumption increased from 4.1% to
12.8%. Commercial imports grew rapidly at 24.2% per year (Felleke and Geda, 2001).
Further, it is estimated that imported milk powder accounted for 23% of Addis Ababa
market.
Post 1991 producer groups such as the Addis Ababa Dairy Producers Association
(AADPA) emerged encompassing 90% of all urban dairy producers and a large
proportion of peri-urban producers within a radius of 38km of Addis Ababa (Staal 1995).
Milk production grew faster in the post reform period, at an annual growth rate of 3%.
Per capita milk production stagnated though grew at a positive but insignificant rate. This
represents a reversal or termination of the negative trend in the growth of per capita
production during the previous two phases.
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Using rough estimates from the FAO database and available information from DDE and
Felleke and Geda (2001), the contribution of imported milk to total milk consumption
declined from 24% in 1985 to less than 1% in 2000. At the same time, the share of
government-owned enterprises in total milk production decreased markedly. In contrast,
the share of smallholder production in total consumption increased by 30% from 71% to
97%. To sum up, total milk production in Ethiopia increased during the 1961-2000 period
at an average annual rate of 1.55% though per capita production declined as a result of
the high population growth rate.
However, during the last decade production grew at a higher rate of 3%. The increased
coverage of extension services (such as better management skills) and increased use of
improved inputs (improved breeds and feed) and policy changes promoting dairy
production have contributed to faster growth of the sub-sector. Dairy product imports
during this period were relatively smaller than the previous three decades. Most of the
growth during the 90’s is concentrated in the peri-urban and rural production systems.
The emergence of private processing industries and marketing units have stimulated
producers in the peri-urban areas and rural production systems as it offered them a new
market for their milk production.
On the whole, dairy processing and marketing function was being performed at various
levels; parastatal sector (DDE) had dominated the dairy industry scene until late 90’s
where private sector and cooperative sector appeared to play significant roles in
collecting and processing milk. Under the current market-oriented economic system,
private sector involvement in milk marketing was emerging alongside co-operative
marketing organizations. The privatisation of DDE in 2007 marked the end of the
parastatal dairy production system in Ethiopia.
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systems. Until 1991, the formal market of cold chain, pasteurized milk was exclusively
dominated by the DDE which supplied 12% of the total fresh milk in Addis Ababa
(Holloway et al., 2000). Even though the proportion of milk Two are established by
FAO/TCP (Technical Cooperation Programme) and World Food Programme.
The informal market involves direct delivery of fresh milk by producers to consumer in
the immediate neighborhood or sale to itinerant traders or individuals in nearby towns. In
the informal market, milk may pass from producers to consumers directly or through two
or more market agents. The informal system is characterized by no licensing requirement
to operate, low cost of operations, high producer price compared to formal market and no
regulation of operations.
In Ethiopia, 95% of the national milk is marketed through informal channels and is
unprocessed. The traditional processing and marketing of dairy products, especially
traditional soured butter, dominate the Ethiopian dairy sector. Only 5% of the milk
produced is marketed as liquid milk due to underdevelopment of infrastructures in rural
areas. Hence, the informal (traditional) market has remained dominant in Ethiopia.
Production is non-market oriented and most of the milk produced is retained for home
consumption.
Formal milk markets are particularly limited to peri-urban areas and Addis Ababa. The
formal market appears to be expanding during the last decade with the private sector
entering the dairy processing industry in Addis Ababa, Dire Dawa and Dessie towns.
The Lame Dairy (formerly DDE), collects milk for processing from different sources,
including large commercial farms and milk collection centres that receive milk from
smallholder producers. The enterprise operates 25 milk collection centres located around
Addis Ababa, of which 13 located around Selale, 5 around Holetta and 7 around Debre
Brehane. Ten private milk processing plants have entered the milk marketing and
processing, increasing the amount of milk channelled via the formal markets.
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Recent study by Teferra Abreha (2006) indicates that in Addis Ababa milk shed there are
about 66,770 cattle of which 46.5% were estimated to be crossbred dairy cows. The peri-
urban milk system includes smallholder and commercial dairy farms found in the
proximity of Addis Ababa, secondary and other regional towns. In some case intensive
production units based on stall feeding of crossbred and high grade cows is practiced.
This sector controls most of the country’s improved dairy stock. The urban and peri-
urban dairy farmers produce 2% of the total milk production of the country. The total
estimated milk supplied to Addis Ababa annually is65 million litres
Sebeta Agro Industry established the first UHT6 dairy processing facility in the country.
The new production lines will produce 500ml carton pouches (Tetra Fino Aseptic) and
250ml portion packages (Tetra Brik Aseptic). The DDE, now LAME, produces
pasteurized milk in 500ml plastic pouches. The introduction of UHT dairy products on
the market is a great step forward to offset the seasonality in milk production and
consumption. Share of milk sold in the formal market is insignificant in Ethiopia, less
than 2%, compared to 15% share in Kenya and 5% in Uganda (Muriuki and Thorpe,
2001).
Ethiopia there is no market for dairy, exception in few major urban areas. Absent markets
affect the overall dairy production and consumption in the country. UHT products are
aseptically processed and packaged, which gives them a shelf life of 6-12 months without
the need for cooling during storage and transportation.
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capita consumption (FAO, 2003). The recommended per capita milk consumption is 200
litre/year. On the other hand, they regularly consume other dairy products such as butter,
ayib (cottage cheese) and fermented milk. According to the Central Statistics Authority
(2005) only 15.4% of the milk produced is sold in the market where as 54.7% milk
produced is consumed at home.
The remaining, 29.5% of the milk produced, is converted into butter and cottage cheese
or ayib using traditional processing technologies. It is to be expected that these
proportions would start to change as collection infrastructures improve around the
country. There are differences in the demand for milk between rural and urban
population. The demand for milk in rural areas is mainly for fresh whole milk and this
demand is partially satisfied by home production and or purchased from neighboring
producers. The demand for processed milk in the rural areas, is currently nil and expected
not to change significantly in the near future.
The potential market for surplus milk which will have to be processed is found in the 7%
urban population, i.e. 4 million people. Sixty five percent of this market is formed by
Addis Ababa and the surrounding districts. The principal demand will continue to be
fluid milk, much of which will be supplied through informal channels. In rural areas,
consumption of milk and milk products is heavily influenced by livestock ownership, but
in the urban areas, in particular, the principal determinant of consumption levels is
income. The growth in demand resulted from rapidly growing population, urbanization,
change in life style and consumption behaviors, and some increase in per capita incomes.
3.1 Technology
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A) Milk Analyzers
We now take extreme pleasure in introducing our New Model of High Speed Milk
Analyzers developed by our European Principals who are the patent holders for ultrasonic
Milk Analyzers and the largest and most reputed manufacturers of Milk Analyzers-
worldwide. These Analyzers have been specially built to meet the requirement of Indian
Market. Having a vast experience of work with Indian Dairy Companies, and in keeping
with our strategy of offering the best solutions for the Dairy Industry. We now offer
model of high speed milk analyzer which fully meets the requirements of the Indian
Market and is suitable for milk collection centers, cooperative societies, and Dairy
Laboratories where there is a big work load and fast and cost effective analysis is needed.
We are offering AMCS to enable milk collectors to automate the testing and payment
system at the milk collection point. This system enables immediate analysis of milk for
Fat, SNF, added water and calculation of rate, amount of the supplier based on the
formula used by buyer. You can issue acknowledgment slip to the supplier and also
generate shift summary, milk bill summary.
The DPU offered is one of a kind and unmatched in features or hardware used. We can
assure you that no other DPU available in the country can match our product in features
or Hardware used, at this price.
Various reports like acknowledgment slip (with amount payable), Shift Summary
(Purchase register), Milk bills (optional) Online Printer Low Operation & Maintenance
Cost Systems
Features :
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Milk tester performs simple and easy and accurate milk fat testing
We offer our clients a range of electric cream separators that are fabricated from high
grade stainless steel and other materials. Designed using advanced techniques; these
separate the milk cream from milk carefully and speedily. Our cream separators are
resistant to corrosion and rust, thus ensuring that milk is not contaminated.
Features:
E) Cream Separators
We offer cream separators that have dynamically balanced bowl and available in different
capacities. Constructed using graded material, these are acknowledged for their corrosion
resistance, high performance and long functioning life. Further, we also make sure that
these are in strict compliance with the prevalents industrial standards.
Mild Steel
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CRCA Sheet
to maintain
F) Milk Cans
We have with us a range of S.S milk cans that are appreciated for their robust designs,
corrosion resistance and superior finishing. Our ranges of cans are available in various
storage capacities and are compliant with the set industrial norms. Further, these cans are
provided by us with durable handles for easy portability.
Features:
We bring forth a range of hand and electric centrifuges that are widely acclaimed for their
smooth and trouble free working. Fabricated from premium quality material, these are
sturdy in construction and compliant with the set industrial standards. Our range is
available in various models and specifications to suit the diverse requirements of clients.
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Hand & Electric Centrifuges for Gerber fat test available in various models. Hand Driven
Centrifuge also available with ISI Mark Smooth & Trouble Free Working Solid
Construction Electric motor AC 50 cycles, 220/230V,Single phase, 1440 RPM, Send Enq
H) Butter Churners
We bring forth a gamut of butter churners that are hand operated and available in various
capacities ranging from 5 Ltrs to 500 Ltrs. Made from graded stainless steel and
other materials, these are known for their sturdy construction and are easy to operate and
maintain. Moreover, our range is quality tested in order to ensure a flawless range to our
clients.
Features:
I) Milking Machines
Various models available to suit all needs Machines available in mobile and fixed models
Ranging from single cluster to Herringbone type installation for big farms. All major
components from largest European manufacturers.
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cup milk claw. Precision engineered, our range offer high performance, reliable
operations and long service life. Milking Machine with one can and one cluster
Assembly Complete with all major parts like pulsator, liners, complete set of teat cup
Milk Claw Specially designed vacuum pump (capable of expanding the machine in
future) Can Milk herd of 10-12 animals in one hour
3.2 . Production
The project will start with 200 dairy Friesian cows (100 milking and 100 pregnant ),
50 open 30 female calves , and 20 bulls with the total 300 dairy purchased from the
markets with assistance of animal breeding and health professionals in the initial
year of the project.
The project aims at keeping and producing milking cows in stock with female
calves and selling non milking ones and male calves. In the future the proportion of
calves born is 50:50 of female and male calves.
When the project starts is operation the number of dairy cows(milking and
pregnant), open, female and male calves, bulls reaches up to 1,495
Holstein-Friesian breeds are valuable animals and proper health care will done to
attain the targeted daily milk production of 20lit/ per cow.
Project year
Sir. no Description 1 2 3-10
1 Dairy cows 200 200 670
2 Open 50 50 450
3 Female calves 30 30 270
4 Male calves - 10 270
5 Bull 10 10 25
Total 290 300 1,495
Note:- All this description is linkage to others farmers to supply that
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Ethiopia imports powdered milk that is used in the food industry and for domestic
consumption. Beginning from 1978 dairy imports increased significantly to bridge the
gap between supply and demand. Powder milk imports (WFP) has reached its peak of
315 thousand metric tons in 1986 during the drought period (Reda 2001). Commercial
imports grew rapidly at 24.2% per year (Felleke and Geda, 2001). Further, it is estimated
that imported milk powder accounts for 23% of Addis Ababa market.
Processing surplus milk into powdered milk would reduce post-harvest losses and add
value to a product for both the domestic and regional market. The ideal location for the
powdered milk plant is the in and around Addis Ababa, including the peri-urban areas
within the radius of 100km. This location would take advantage of the milk surplus in
this production area, largely reduce transport costs for the raw milk and has proximity to
the regional market of COMESA, ESA and Middle East.
Powdered milk production and sales of the project:-
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In year 1, 4,00,000.00 kg butter is produced and sales will be birr 60/kg that
generates birr 240,000.00/year.
In year 2, 5,000,000.00 kg butter is produced and sales will be birr 60/kg that
generates birr 300,000.00/year.
In year 3, 5,250,000.00 kg butter is produced and sales will be birr 65/kg that
generates birr 341,250.00/year.
In year 4, 5,512.50 kg butter is produced and sales will be birr 65/kg that generates
birr 358,312.50/year.
In year 5, 5,788.00 kg butter is produced and sales will be birr 70/kg that generates
birr 405,168.75/year.
In year 6-10, 6,077.00 kg butter is produced and sales will be birr 70/kg that
generates birr 425,427.00/year.
C)Cheese production
Few private firms produce cheeses as their principle products. The DDE and Sebeta Agro
industry produce pasteurized (table/bread) butter; yogurt and various type of cheese
(apart from cottage cheese or ‘ayib’) apart from being imported. The country still imports
cheese. Cheese production provides yet another investment opportunity.
In year 1, 3,000 cheese will be produced and sales will be birr 12/unit that generates
birr 36,000.00/year.
In year 2, 3,200 cheese will be produced and sales will be birr 12/unit that generates
birr 38,400.00/year.
In year 3, 3,360 cheese will be produced and sales will be birr 15/unit that generates
birr 50,400.00/year.
In year 4, 3,528 cheese will be produced and sales will be birr 15/unit that generates
birr 52,920.00/year.
In year 5, 3,704 cheese will be produced and sales will be birr 15/unit that generates
birr 55,566.00/year.
In year 6-10 , 3,889 cheese will be produced and sales will be birr 15/unit that
generates birr 58,344.00/year.
Among the dairy products consumed by Ethiopians, raw milk, yoghurt, sours (ergo) and
pasteurized milk is mostly made in Ethiopia. The Lame Dairy, Sebeta Agro-industry,
Genesis Farm are the leading yoghurt producing firms. However, other private firms
produce and sell yoghurt. Cultured yoghurt or ergo is very popular countrywide and its
demand are expected to grow. However, its production is by small-scale processors and
the informal sector. Investment by the formal sector is required in order to exploit this
market and develop it further.
In year 1, 260,000.00 lit flavored yogurt is produced and sales will be birr 10/lit that
generate birr 2,600,00.00/year.
In year 2, 290,000.00 lit flavored yogurt is produced and sales will be birr 10/lit that
generate birr 3,349,500.00/year.
In year 3, 304,500.00 lit flavored yogurt is produced and sales will be birr 11/lit that
generate birr 3,349,500.00/year.
In year 4, 319,725 lit flavored yogurt is produced and sales will be birr 11/lit that
generate birr 3,516,975.00/year.
In year 5, 3,35,711.25 lit flavored yogurt is produced and sales will be birr 12/lit that
generate birr 4,028,535.00/year.
In year 6, 352,496 lit flavored yogurt is produced and sales will be birr 14/lit that
generate birr 4,934,955.00/year.
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. In year 2, 2,300 cream will be produced and sales will be birr 15/unit that
generates birr 34,500.00/year.
In year 3, 2,415 cream will be produced and sales will be birr 17/unit that generates
birr 41,055.00/year.
In year 4, 2,553 cream will be produced and sales will be birr 17/unit that generates
birr 43,107.75/year.
In year 5, 2,666 cream will be produced and sales will be birr 18/unit that generates
birr 47,925.00/year.
In year 6-10, 2,795 cream will be produced and sales will be birr 18/unit that
generates birr 50,321.00/year.
In year 4, 30 aged cows will be sold and sales will be birr 8,000/heard that
generates birr 240,000.00/year
In year5, 40 aged cows will be sold and sales will be birr 8,500/heard that
generates birr 340,000.00/year
In year 6-10 , 50 aged cows will be sold and sales will be birr 8,500/heard that
generates birr 425,000.00/year
In year 1, 100 male calves will be born and sales will be birr 5,000/heard that
generates birr 300,000.00/year
In year 2, 125 male calves will be born and sales will be birr 6,000/heard that
generates birr 750,000.00/year
In year 3, 150 male calves will be born and sales will be birr 6,500/heard that
generates birr 975,000.00/year
In year 4, 150 male calves will be born and sales will be birr 7,000/heard that
generates birr 1,050,000.00/year
In year 5, 160 male calves will be born and sales will be birr 8,000/heard that
generates birr 1,280,000.00/year
In year 6-10, 165 male calves will be born and sales will be birr 8,000/heard
that generates birr 1,320,000.00/year
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The organizational structure should be in a way that the project able to achieve its
objectives as well as the satisfaction of standard requirement.
Generally the project will create job opportunities for 100 qualified and 150 daily
laborers totally for 250 employees
The man power list and the Corresponding labor cost are shown on the financial part.
The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be
manager with the responsibility of supervising the overall activity of the plant.
Depending up on the nature of the center and the amount of work to be performs; there
exist auxiliary units under the general manager.
Employees under each unit will be supervised by the department head that is accountable
for the general manager. General Manager is appointed by the owners.
Owner
General Manager
Executive
Secretary
Production
Hence the following
Department
section deals with Admin
the duties and responsibilities of some
& Finance Marketing
Department Department
departments.
1. General Manager
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MILK PROCESSING PLANT
Will prepare the annual financial statements and prepare condensed reports for the
general manager, owner and other concerned government body.
Will control the human and non human resources of the plant, which include:
effective handling of the different inventories of the machineries, equipments, raw
materials, finished products, and devise strategies of controlling against fraud and
damage.
Manage and execute the company national and international procurement
procedure
Administer and control the company logistic resource
Effectively administer the company Procurement process domestically as well as
internationally.
Manage the public relation of the company/factory with external
parties/stakeholders
Provide and manage general supportive service to the plant.
4. Commercial Department
Duties and responsibilities:-
Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
Provide cost estimates in preparation for securing ...
Gather information on new product design, profile
Approval of new products profile & brand plan analyzes market research.
Plan and execute sales.
Will develop effective customer handling strategies
Will design and implement effective advertisement and promotion schemes
Will develop the marketing strategies for future project center’s development.
Conduct both foreign and domestic market research for expanding the sales of
the company
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MILK PROCESSING PLANT
The total amount of money that is required to establish the envisaged project is estimated
to be birr 76,000,000.00
No Description Cost
1 Fixed Investment
1.1 Land, Building and Construction 21,280,000 0.00
1.2 Machines and Equipment’s 16,720,000 0.00
1.3 Vehicles and Motors 2,280,000 0.00
1.4 Office Furniture and Equipment 1,520,000 0.00
Total Fixed Investment Cost 41,800,000 0.00
2 Operating Expense 0.00
2.1 Raw Materials Purchase and Products 15,200,000 0.00
2.2 Salary Expense 7,600,000 0.00
2.3 Other Operating Expense 2,280,000 0.00
2.4 Pre-operating Expense 1,520,000 0.00
Total Operating Expense 26,600,000 0.00
Contingency (Lump sum) 10% 7,600,000
Total Investment Cost 76,000,000 0.00
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TOTAL 3,300,000.00
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C) Vehicles
D) Office Equipment
11 Others 1,100,000.00
Total 1,520,000.00
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MILK PROCESSING PLANT
A) Purchase of animals
No Description Quantity Unit cost Total cost
1 Cows, 50 20,000.00 1,000,000.0
- Young cows 0
-Older cows
2 Dairy bull 33 20,000.00 500,200.00
Total 45 40,000.00 1,500,200.0
0
B) Salary expense
As indicated in part three of this study, the total cost of salary and wage is estimated
to be 7,600,000 birr.
N Description Req . No Qualificatio Monthly Annual
o n salary in salary in
birr birr
1 Dairy farm manager 1 B.A in
Animal
science 5,000.00 5,000.00
2 Secretary 1 Dip. in
Sec.Science 1,500.00 1,500.00
3 Adminstator 1 Dip.in Pub.
adminstartio
n 1,500.00 1,500.00
4 Accountant 1 Dip. in
Accoounting 1,500.00 1,500.00
5 Purchaser & sales man 1 Dip. In
marketing 1,500.00 1,500.00
6 Cashier 1 Dip. in
Accounting 1,000.00 1,000.00
7 Store keeper 3 Grade 7 1,000.00 3,000.00
8 Machine operator 5 Grade12 1,000.00 5,000.00
Time keeper 2 10th complete 1,000.00 2,000.00
7 Milk processing plant 10 Diploma
workers TVET 1,000.00 10,000.00
8 Barn workers 10 10th complete 1,000.00 10,000.00
9 Veterinarian 5 Dip. In
Vet.Science 1,250.00 6,250.00
10 Pasture area worker 7 8 grade 1,000.00 7,000.00
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MILK PROCESSING PLANT
11 Driver 5 10th
Complete 1,500.00 7,500.00
12 Assistant driver 3 6th complete 1,000.00 3,000.00
13 Guards 2 Grade 10 1,000.00 2,000.00
14 Cleaners 2 Cleaners 1,000.00 2,000.00
15 Daily labors(30birr*60 35 Un skilled
days*56 person) 1,500.00 52,500.00
Sub total 90 50,000.00 2,500,000.0
0
Employee benefit 35,985.00
(30%) 0.00
Grand total 250 155,935.0 2,500,000.0
0 0
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MILK PROCESSING PLANT
2 EIA 35,000.00
Total 1,520,000.00
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Asset
Current Asset
Cash 11,400,000
Inventory of raw materials and inputs 15,200,000
Total Current Asset 26,600,000
Fixed Asset
Land, Building and Construction 21,280,000
Machineries and Equipment’s 16,720,000
Office Equipment 1,520,000
Vehicles 2,280,000
Total fixed Asset 41,800,000
Total Asset
Liability
Account payable 53,200,000
Owners Equity 22,800,000
Capital
Total Liability & Owners’ Equity 76,000,000
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B) Ratios
In financial analysis financial ratios and efficiency ratios are used as an index or yardstick
for evaluating the financial position of a firm. It is also an indicator for the strength and
weakness of the firm or a project. Using the year-end balance sheet figures and other
relevant data, the most important ratios such as return on sales which is computed by
dividing net income by revenue, return on assets ( operating income divided by assets),
return on equity ( net profit divided by equity) and return on total investment ( net profit
plus interest divided by total investment) has been carried out over the period of the
project life and all the results are found to be satisfactory.
C) Break-even Analysis
The break-even analysis establishes a relationship between operation costs and revenues.
It indicates the level at which costs and revenue are in equilibrium. To this end, 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 = 23 %
Sales – Variable Cost
D) Payback Period
The pay back period, also called pay – off period is defined as the period required
recovering the original investment outlay through the accumulated net cash flows earned
by the project. Accordingly, based on the projected cash flow it is estimated that the
project’s initial investment will be fully recovered within 4 years.
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The internal rate of return (IRR) is the annualized effective compounded return rate that
can be earned on the invested capital, i.e., the yield on the investment. Put another way,
the internal rate of return for an investment is the discount rate that makes the net present
value of the investment's income stream total to zero. It is an indicator of the efficiency or
quality of an investment. A project is a good investment proposition if its IRR is greater
than the rate of return that could be earned by alternate investments or putting the money
in a bank account. Accordingly, the IRR of this porject is computed viable indicating
the vaiability of the project.
Net present value (NPV) is defined as the total present ( discounted) value of a time
series of cash flows. NPV aggregates cash flows that occur during different periods of
time during the life of a project in to a common measuring unit i.e. present value. It is a
standard method for using the time value of money to appraise long-term projects. NPV
is an indicator of how much value an investment or project adds to the capital invested. In
principal a project is accepted if the NPV is non-negative.
5. Future Development
Every business undertakings be it large or small should have future development plan. It
is a plain fact that business activities are undertook in a dynamic business nature and
different environment. Therefore, the plant will have an expansion phase depending on
the condition of the sector character particularly in dairy farm and milk processing plant.