Investment Office ANRS

Project Profile on the Establishment of

Composite Flour Producing Plant

Development Studies Associates

(DSA)

October 2008
Addis Ababa
 Table of Contents

1. Executive Summary..................................................................................1
2. Product Description and Application......................................................1
3. Market Study, Plant Capacity and Production Program...................1
3.1 Market Study.......................................................................................................1
3.1.1 Present Demand and Supply........................................................................1
3.1.2 Projected Demand........................................................................................3
3.1.3 Pricing and Distribution...............................................................................4
3.2 Plant Capacity......................................................................................................4
3.3 Production Program.............................................................................................5
4. Raw Materials and Utilities....................................................................5
4.1 Availability and Source of Raw Materials...........................................................5
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................6
5 Location and Site.....................................................................................6
6 Technology and Engineering.................................................................7
6.1 Production Process...............................................................................................7
6.2 Machinery and Equipment...................................................................................7
6.3 Civil Engineering Cost........................................................................................9
7 Human Resource and Training Requirement......................................9
7.1 Human Resource..................................................................................................9
7.2 Training Requirement........................................................................................10
8 Financial Analysis.................................................................................10
8.1 Underlying Assumption.....................................................................................10
8.2 Investment..........................................................................................................11
8.3 Production Costs................................................................................................12
8.4 Financial Evaluation..........................................................................................13
9 Economic and Social Benefits and Justification.................................14
ANNEXES....................................................................................................16
 1. Executive Summary

The project envisages production of 5,000 tons of composite flour per annum. The total
investment requirement of the project is estimated at about Birr 40 million; of which Birr
25.6 million is for machinery and equipment while Birr 8.1 million is the cost of working
capital. Based on the cash flow statement, the calculated internal rate of return (IRR) and
simple rate of return of the project are 29.2% and 25.2%, respectively. And the net
present value (NPV) at 18 % discounting rate is Birr 16,007 thousand. The plant is
expected to create employment opportunities for about 41 persons.

2. Product Description and Application

Composite flour is a mixture of cereals or legumes or the combination of both. Cereals in

composite flour processing include sorghum, wheat, barley and maize. The legumes are
beans, peas, chick peas and soybeans. In most cases, composite flour is delivered packed
in plastic bags of either 5 Kg or 10 Kg. The main nutritional value of composite flour (if
it is a mixture of cereals and legumes), is that it contains both carbohydrates and proteins
which is particularly useful for feeding children.

3. Market Study, Plant Capacity and Production

Program
3.1 Market Study
3.1.1 Present Demand and Supply

Currently Dubbe, Miten and Ediget are the composite flours which are available in the
market. All of them are slocated in Addis Ababa. Due to the cost of transportation, the
lion’s share of their supply is for the population of Addis Ababa.

1
 TABLE 3.1
SUPPLY OF COMPOSITE FLOUR

Year E.C. Supply of Composite

Flour( in Tones)
1989 3215
1990 4704
1991 4684
1992 6183
1993 9983
1994 11693
1995 9216
1996 15379
1997 18481
1998 12828
1999 14570
2000 15706
Source: CSA’s Manufacturing Data

With quantitative increase in food grains and growing income, millers will compete in
supplying higher quality flours with higher nutritive value than the traditional monotype
flour supplied to bakeries and households. Because of the gradual change in consumption
habit, growth in GDP and population growth, the demand for composite flour has been
increasing through out.

ANRS with its large population size and growing economy could have its own
proportional demand for composite flour. However, there is no plant that produces the
product in the region. The establishment of such a plant in the region (with a strong
marketing effort and sales activity) is a viable investment opportunity for investors.
Such project contributes to the reduction of nutrition deficiency in the region, stimulates
production of legumes by creating a new demand for the crops, and diversifies the pattern
of food consumption in the region by reducing the high dependency on cereals and by
increasing the consumption of legumes.

2
 3.1.2 Projected Demand

Though it has not yet been met, there is some demand for composite flour in the ANRS.
Given its large population size( ANRS’s population constitutes a quarter of the total) and
a number of urban centers( where awareness towards nutrition is relatively better) of the
region, this unmet demand for the product can be estimated to be a quarter of the
country’s current supply; which is nearly 8574 tons pre annum by the year 2008 E.C.

Future demand for composite flour will be influenced by population growth, income
growth and change in taste as well as awareness for more nutritive food items. The
average GDP growth rate for the period between1996 E.C and 2000 E.C was reported to
be 10 %. With high elasticity of demand for food and population growth (i.e. nearly 3 %),
the fast income growth is expected to generate a shift of demand from quantity to quality
of food. Thus, it will be reasonable to assume that the demand for composite flour can
grow at least 10 % per year for the coming decades. Based on this, the future demand for
composite flour is projected as shown in Table 3.2..

3
 TABLE 3.2
PROJECTED DEMAND FOR COMPOSITE FLOURIN ANRS

Year E.C Projected Demand

(In Tones)
2008 8574
2009 9432
2010 10375
2011 11413
2012 12555
2013 13812
2014 15194
2015 16714
2016 18387
2017 20227
2018 22251

As it is seen in the above projection, the demand for composite flour in the ANRS is
expected to reach 13,812 tons in 2013 E.C and 22,251 tons in 2018 E.C. This clearly
justifies the establishment of a medium scale composite flour producing plant in the
region.

3.1.3 Pricing and Distribution

The current average retail price of composite flours is Birr 15.4 per Kg. Producers can
sell their product at factory gate price of Birr 11.5 per Kg. The project should mainly
focus on distributing their products to different urban centers of the ANRS using their
own means.

3.2 Plant Capacity

The annual production capacity of the envisaged plant is 5000 tons per year. The plant
will operate 275 days a year. Sundays and national holidays, account for 65 days a year,
For maintenance and repair work as well as for unexpected work interruption additional
25 days are assigned.

4
 3.3 Production Program

The production programme of the plant and the projected regional demand are indicated
in Table 3.3. During the first and the second years, the plant will produce at 75 % and 85
85% of its capacity, respectively. Starting from the third year, the plant will produce at its
full capacity. Capacity build-up is established by considering the time required to
introduce the new product to the competitive market.
TABLE 3.3
PRODUCTION PROGRAMME
Year Projected Production
Programme (in
Demand (tons)
Tons)
2008 8574 5000
2009 9432 5000
2010 10375 5000
2011 11412 5000
2012 12553 5000
2013 13808 5000
2014 15189 5000
2015 16707 5000
2016 18378 5000
2017 20215 5000

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

As mentioned above, the main raw materials for composite flours are cereals (wheat,
barley, and oats) and legumes (peas, beans, click peas, lentils.....). The ANRS is one of
the regions in the country, where these groups of crops grow relatively in large quantities.
The region can supply sufficient quantities of these crops for the plant to be established.

4.2 Annual Requirement and Cost of Raw Materials

and Utilities

5
The annual requirement of the raw materials and utilities are indicated in Table 4.1 and
Table 4.2 below.
TABLE 4.1
RAW MATERILA REQUIREMENTS

Raw Material Qty Unit Cost Total Annual Cost

(in tons) (in Birr) ('000 Birr)
1. Wheat 2500 6415 16037.5
2. Sorghum 1500 4362.2 6543.3
3 Peas 1000 8981 8981
4. Soybean 500 11547 5773.5
3. Packing bags 500,000 Pcs 0.5132 256.6
Total Costs Raw Materials 37592

TABLE 4.2
UTILITY REQUIREMENT AND COST

Utilities Qty Unit Cost Total Cost

(In Birr)
Electric 500 MWH Birr 0.55/kwh 275,000
Water 2000 m3 Birr 2.65/m3 5,300
Total 280,300

5 Location and Site

For its convenience to procure the necessary raw materials and to distribute the product to
different parts of the region, Bahir-Dar is an appropriate place to establish a composite
flour producing plant in ANRS.

6 Technology and Engineering

6.1 Production Process

The raw materials are first cleaned by a separator and the suction filter. Then after being
weighed in the weighing section, it is scoured. It is stored in the dampener where water is

6
added for drenching. Milling is then performed and inserted into the square sifter. Next, it
is delivered to a double deck purifier and then to the needling mill. Finally, the products
are mixed in a mixing vessel according to proportional mix ratio. It will then be
inspected, weighed and packed.

Alternatively, it is possible to use a computerized capital intensive plant with an

equivalent production capacity but with a lesser labour requirement. In this case, a single
machine can handle different stages of the production. However, this alternative capital
intensive technology is relatively expensive.

6.2 Machinery and Equipment

Main machineries and equipment needed for the plant include screw conveyor, weighing
machine, milling separator, disc separator, scores machine, suction fitter, dust collector,
stoner, dampener, brush machine, pneumatic conveyor, double roll mill, square sifts,
double deck purifier, bran finisher, middling mill, agitator, packer, bucket elevator, chain
feeders, mixers and bagging machine. Machinery and equipment necessary for the
production of composite flour are indicated in Table 5.1. The total cost of machinery and
equipment is estimated at Birr 10 million; out of which, Birr 21.8 million will be required
in foreign currency.

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 TABLE 5.1
MACHINERY AND EQUIPMENT

Machinery Qty (pcs)

1. Screw conveyor 1
2. Weighing machine 1
3. Milling separator 1
4. Disc separator 1
5. Scores machine 1
6. Suction fitter 1
7. Dust collector 1
8. Stoner 1
9. Dampener 1
10. Brush machine 1
11. Pneumatic conveyor 1
12. Double roll mill 1
13. Square sifts (6 sections) 1
14. Square sifted (4 sections) 1
15. Double deck purifier 1
16. Bran finisher 1
17. Middling Mill 1
18. Agitator 1
19. Packer 1
20. Bucket Elevator 1
21. Chain Feeds 1
22. Mixer 1
23. Bagging Machine 1

Machinery Supplie’s Address:

Labh Group of Companies Snacks Plant Division
403-405, Time Square, Near Pariseema Complex,
C.G. Road, Ahmedabad, Gujarat,380006,
India

8
 6.3 Civil Engineering Cost

Due to technological and engineering requirements the production hall shall have four
story building with a total floor area of 716m 2, and it costs Birr 42,960. This would
include cost of land preparation and associated civil works. The total land area of the
plant including the open space is 1200 m 2. The cost of the land lease is Birr 184,752
which is as per ANRS land lease rate for Bahir-Dar (which is equal to Birr 60 per sq
meter for industrial purpose). Of the total cost of the lease 5 % is paid at the beginning
while the rest will be paid in 40 years.

7 Human Resource and Training Requirement

7.1 Human Resource

Manpower requirement of the plant is indicated in Table 7.1 below.

TABLE 7.1
MANPOWER REQUIREMENTS

Post No Salary/Month (Br.) Annual Salary

Expenses (Birr)
Plant Manager 1 10264 123168
Technologist 1 7698 92376
Engineer 1 6415 76980
Secretary 1 2181.1 26173.2
Mechanics 9 2566 277128
Operators 15 2052.8 369504
Driver 2 2052.8 49267.2
Clerks 3 1796.2 64663.2
Cashier 1 1924.5 23094
Administrator 1 6415 76980
Guards 6 1026.4 73900.8
Sub-Total 41 0 1253234.4
Benefits 20 %   0 250646.88
Total 41 0 1503881.28
Total annual salary expenses including benefits equals Birr 1,503,881.28.

7.2 Training Requirement

9
Training of technical staff and operators of the plant can be managed by hiring one or
more experts from the technology suppliers.

8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of Composite Flour producing plant is based on the data provided
in the preceding sections and the following assumptions.

A. Construction and Finance

Construction period 2 years

Source of finance 30% equity and 70% 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

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 Factory Supplies in Stock 30 days
Spare Parts in Stock and Maintenance 30 days
Work in Progress 10 days
Finished Products 15 days
Accounts Receivable 30 days
Cash in Hand 30 days
Accounts Payable 30 days

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr
40.15 million as shown in Table 8.1 below. The owner shall contribute 30 % of the
finance in the form of equity while the remaining 70 % is to be financed by bank loan.
TABLE 8.1
TOTAL INITIAL INVESTMENT

Items L.C F.C Total

Land
42,960   42,960
Building and civil works
3,161,312 0 3,161,312
Office equipment
128,300 0 128,300
Vehicles
1,539,600 0 1,539,600
Plant machinery & equipment
3,849,000 21,811,000 25,660,000
Total fixed investment cost
8,721,172 21,811,000 30,532,172
Pre production capital
expenditure* 1,524,922 0 1,524,922
Total initial investment
10,246,094 21,811,000 32,057,094
Working capital at full capacity
8,097,885 0 8,097,885
Total 18,343,980 21,811,000 40,154,980
*Pre-production capital expenditure includes - all expenses for pre-investment studies,
consultancy fee during construction and expenses for company‘s establishment, project
administration expenses, commission expenses, preproduction marketing and interest
expenses during construction.
The major components of the investment are plant machinery and equipment, building
and civil works. The foreign component of the project accounts for Birr 21.8 million or
54.4 % of the total investment cost.

8.3 Production Costs

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The total production cost at full capacity operation is estimated at Birr 46 million (See
Table 8.2). Of the total production cost, raw materials and utility account for 82.4% while
wages and salary take only 3.2%.

Table 8.2
PRODUCTION COST AT FULL CAPACITY

Raw Material Requirement Cost

1.Local Raw Materials 37,591,900
2.Foreign raw Materials 0

Total Production Cost at full Capacity

Items Cost
1.      Raw materials 37,591,900
2.      Utilities 280,300
3.      Wages and Salaries 1,503,881
4.      Spares and Maintenance 914,953
Factory costs 40,291,035
5.      Depreciation 3,349,800
6.      Financial costs 2,407,275
  Total Production Cost 46,048,110

8.4 Financial Evaluation

I. Profitability
According to the projected income statement (See Table 4) the project will generate
profit beginning from the first year of operation which increases onwards. The income
statement and other profitability indicators also show that the project is viable.

12
 II. Breakeven Analysis
The breakeven point of the projects is given by the formula:

BEP = Fixed Cost

Sale –Variable Cost at full capacity.

The project will break even at 23.6% of capacity utilization

III. Payback Period

Investment cost and income statement projection are used in estimating the project
payback period. The project will payback fully the initial investment less working capital
in three years.

IV. Simple Rate of Return

The project’s simple rate of return is given by the formula:

SRR= (Net Profit + Interest)/ (Total Investment Outlay) at full capacity utilization.

The SRR would be 25.2% at full capacity utilization.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement (See Annex 2) the calculated internal rate of return( IRR)
of the project is 29.3% and the net present value(NPV) at 18 % discount is Birr 16,007
thousands.

VI. Sensitivity Analysis

The sensitivity test result when undertaken by increasing the cost of production by 10 %
still indicates that the project would be viable.

9 Economic and Social Benefits and Justification

13
Based on the foregoing presentation and analysis, we can say that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained
earlier. In general the envisaged project 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
8.57million per year and Birr 86 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 32 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result
creates additional fund for the regional government that will be used in expanding social
and other basic services in the region.

C. Employment and Income Generation

The proposed project is expected to create employment opportunity for several citizens of
the region. That is, it will provide permanent employment to 41 professionals as well as
support staff. Consequently the project creates income of Birr 1.504 million per year. This
would be one of the commendable accomplishments of the project.
D. Pro Environment Project

The proposed production process is environment friendly.

E. Diversification and InterSectoral linkage.

The proposed project helps to diversify ANRS’ and Ethiopian economy. It contributes to
industrialization of the region as well as the county’s economy.

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15
ANNEXES

16
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0.00 0.00 75% 85% 100% 100%

1. Total Inventory 0.00 0.00 8967223 10162853 11956297 11956297

Raw Materials in Stock- Total 0.00 0.00 3075701 3485794 4100935 4100935

Raw Material-Local 0.00 0.00 3075701 3485794 4100935 4100935

Raw Material-Foreign 0.00 0.00 0 0 0 0

Factory Supplies in Stock 0.00 0.00 36065.28 40873.99 48087.05 48087.05

Spare Parts in Stock and Maintenance 0.00 0.00 74859.84 84841.15 99813.11 99813.11

Work in Progress 0.00 0.00 901632 1021850 1202176 1202176

Finished Products 0.00 0.00 1803264 2043699 2404352 2404352

2. Accounts Receivable 0.00 0.00 4723773 5353609 6298364 6298364

3. Cash in Hand 0.00 0.00 181892.6 206144.9 242523.4 242523.4

CURRENT ASSETS 0.00 0.00 10797187 12236812 14396250 14396250

4. Current Liabilities 0.00 0.00 4723773 5353609 6298364 6298364

Accounts Payable 0.00 0.00 4723773 5353609 6298364 6298364

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 6073414 6883203 8097886 8097886

INCREASE IN NET WORKING CAPITAL 0.00 0.00 6073414 809788.6 1214683 0

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
  5 6 7 8 9 10

Capacity Utilization (%) 100% 100% 100% 100% 100% 100%

1. Total Inventory 11956297 11956297 11956297 11956297 11956297 11956297

Raw Materials in Stock-Total 4100935 4100935 4100935 4100935 4100935 4100935

Raw Material-Local 4100935 4100935 4100935 4100935 4100935 4100935

Raw Material-Foreign 0 0 0 0 0 0

Factory Supplies in Stock 48087.05 48087.05 48087.05 48087.05 48087.05 48087.05

Spare Parts in Stock and Maintenance 99813.11 99813.11 99813.11 99813.11 99813.11 99813.11

Work in Progress 1202176 1202176 1202176 1202176 1202176 1202176

Finished Products 2404352 2404352 2404352 2404352 2404352 2404352

2. Accounts Receivable 6298364 6298364 6298364 6298364 6298364 6298364

3. Cash in Hand 242523.4 242523.4 242523.4 242523.4 242523.4 242523.4

CURRENT ASSETS 14396250 14396250 14396250 14396250 14396250 14396250

4. Current Liabilities 6298364 6298364 6298364 6298364 6298364 6298364

Accounts Payable 6298364 6298364 6298364 6298364 6298364 6298364

TOTAL NET WORKING CAPITAL REQUIRMENTS 8097886 8097886 8097886 8097886 8097886 8097886

INCREASE IN NET WORKING CAPITAL 0.00 0.00 0.00 0.00 0.00 0.00

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 16011686 24109572 48025023 49704586 58679755 57735000
1. Inflow Funds 16011686 24109572 4723773 629836.4 944754.6 0
Total Equity 6404674 9643829 0 0 0 0
Total Long Term Loan 9607012 14465743 0 0 0 0
Total Short Term Finances 0 0 4723773 629836.4 944754.6 0
2. Inflow Operation 0 0 43301250 49074750 57735000 57735000
Sales Revenue 0 0 43301250 49074750 57735000 57735000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 16011686 16011686 47622005 42867308 52567857 50071401
4. Increase In Fixed Assets 16011686 16011686 0 0 0 0
Fixed Investments 15249225 15249225 0 0 0 0
Pre-production Expenditures 762461.2 762461.2 0 0 0 0
5. Increase in Current Assets 0 0 10797187 1439625 2159437 0
6. Operating Costs 0 0 30501244 34526827 40565201 40565201
7. Corporate Tax Paid 0 0 0 0 3423817 3568253
8. Interest Paid 0 0 6323574 2888731 2407275 1925820
9.Loan Repayments 0 0 0 4012126 4012126 4012126
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 0 8097886 403017.7 6837278 6111898 7663599
Cumulative Cash Balance 0 8097886 8500904 15338182 21450079 29113678

Annex 2: Cash Flow Statement (in Birr): Continued

3
 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 57735000 57735000 57735000 57735000 57735000 57735000
1. Inflow Funds 0 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 0 0 0 0 0 0
2. Inflow Operation 57735000 57735000 57735000 57735000 57735000 57735000
Sales Revenue 57735000 57735000 57735000 57735000 57735000 57735000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 49734382 49581235 49244217 44895072 44895072 44895072
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 0 0 0 0 0 0
6. Operating Costs 40565201 40565201 40565201 40565201 40565201 40565201
7. Corporate Tax Paid 3712690 4040998 4185434 4329871 4329871 4329871
8. Interest Paid 1444365 962910.2 481455.1 0 0 0
9. Loan Repayments 4012126 4012126 4012126 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus(Deficit) 8000618 8153765 8490783 12839928 12839928 12839928
Cumulative Cash Balance 37114296 45268061 53758844 66598772 79438700 92278628

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

  CONSTRUCTION PRODUCTION

4
 Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 43301250 49074750 57735000 57735000

1. Inflow Operation 0 0 43301250 49074750 57735000 57735000

Sales Revenue 0 0 43301250 49074750 57735000 57735000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 16011686 16011686 36574658 35336616 45203701 44133455

3. Increase in Fixed Assets 16011686 16011686 0 0 0 0

Fixed Investments 15249224.8 15249225 0 0 0 0

Pre-production Expenditures 762461.24 762461.24 0 0 0 0

4. Increase in Net Working Capital 0 0 6073414 809788.6 1214683 0

5. Operating Costs 0 0 30501244 34526827 40565201 40565201

6. Corporate Tax Paid 0 0 0 0 3423817 3568253

NET CASH FLOW -16011686 -16011686 6726592 13738134 12531299 13601545

CUMMULATIVE NET CASH FLOW -16011686 -32023372 -2.5E+07 -1.2E+07 972652.8 14574198

Net Present Value (at 18%) -16011686 -13569225 4830933 8361453 6463505 5945361

Cumulative Net present Value -16011686 -29580912 -2.5E+07 -1.6E+07 -9925021 -3979660

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

PRODUCTION
  5 6 7 8 9 10

5
 TOTAL CASH INFLOW 57735000 57735000 57735000 57735000 57735000 57735000

1. Inflow Operation 57735000 57735000 57735000 57735000 57735000 57735000

Sales Revenue 57735000 57735000 57735000 57735000 57735000 57735000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 44277891 44606199 44750636 44895072 44895072 44895072

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 0 0 0 0 0 0

5. Operating Costs 40565201 40565201 40565201 40565201 40565201 40565201

6. Corporate Tax Paid 3712690 4040998 4185434 4329871 4329871 4329871

NET CASH FLOW 13457109 13128801 12984364 12839928 12839928 12839928

CUMMULATIVE NET CASH FLOW 28031307 41160108 54144472 66984400 79824327 92664255

Net Present Value (at 18%) 4984937 4121459 3454336 2894840 2453254 2079029

Cumulative Net present Value 1005277 5126737 8581073 11475913 13929167 16008195
16,008,195.48
Net Present Value (at 18%)

Internal Rate of Return 29.3%

Annex 4: NET INCOME STATEMENT ( in Birr)

  PRODUCTION

6
 1 2 3 4 5
Capacity Utilization (%) 75% 85% 100% 100% 100%

1. Total Income 43301250 49074750 57735000 57735000 57735000

Sales Revenue 43301250 49074750 57735000 57735000 57735000
Other Income 0 0 0 0 0
2. Less Variable Cost 29740707 33706135 39654276 39654276 39654276
VARIABLE MARGIN 13560543 15368615 18080724 18080724 18080724
(In % of Total Income) 80.36712 80.36712 80.36712 80.36712 80.36712
3. Less Fixed Costs 4110337 4170492 4260725 4260725 4260725
OPERATIONAL MARGIN 9450206 11198123 13819999 13819999 13819999
(In % of Total Income) 56.452 59.018 61.584 61.584 61.584
4. Less Cost of Finance 6323574 2888731 2407275 1925820 1444365
5. GROSS PROFIT 3126632 8309392 11412723 11894178 12375633
6. Income (Corporate) Tax 0 0 3423817 3568253 3712690
7. NET PROFIT 3126632 8309392 7988906 8325925 8662943
RATIOS (%)  
Gross Profit/Sales 7% 17% 20% 21% 21%
Net Profit After Tax/Sales 7% 17% 14% 14% 15%
Return on Investment 25% 29% 26% 26% 25%
Return on Equity 19% 52% 50% 52% 54%
Annex 4: NET INCOME STATEMENT (in Birr):Continued
  PRODUCTION

7
 6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 57735000 57735000 57735000 57735000 57735000

Sales Revenue 57735000 57735000 57735000 57735000 57735000
Other Income 0 0 0 0 0
2. Less Variable Cost 39654276 39654276 39654276 39654276 39654276
VARIABLE MARGIN 18080724 18080724 18080724 18080724 18080724
(In % of Total Income) 79.546 79.546 79.546 79.546 79.546
3. Less Fixed Costs 3647820 3647820 3647820 3647820 3647820
OPERATIONAL MARGIN 14432903 14432903 14432903 14432903 14432903
(In % of Total Income) 64.15 64.15 64.15 64.15 64.15
4. Less Cost of Finance 962910.2 481455.1 0 0 0
5. GROSS PROFIT 13469993 13951448 14432903 14432903 14432903
6. Income (Corporate) Tax 4040998 4185434 4329871 4329871 4329871
7. NET PROFIT 9428995 9766014 10103032 10103032 10103032
RATIOS (%)  
Gross Profit/Sales 23% 24% 25% 25% 25%
Net Profit After Tax/Sales 16% 17% 17% 17% 17%
Return on Investment 26% 26% 25% 25% 25%
Return on Equity 59% 61% 63% 63% 63%

Annex 5: Projected Balance Sheet (in Birr)

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 CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 16011686 40121258 47971663 52898766 57820301 62134100
1. Total Current Assets 0 8097886 19298091 27574994 35846329 43509928
Inventory on Materials and Supplies 0 0 3186626 3611509 4248835 4248835
Work in Progress 0 0 901632 1021850 1202176 1202176
Finished Products in Stock 0 0 1803264 2043699 2404352 2404352
Accounts Receivable 0 0 4723773 5353609 6298364 6298364
Cash in Hand 0 0 181892.6 206144.9 242523.4 242523.4
Cash Surplus, Finance Available 0 8097886 8500904 15338182 21450079 29113678
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 16011686 32023372 28673572 25323772 21973972 18624172
Fixed Investment 0 15249225 30498450 30498450 30498450 30498450
Construction in Progress 15249225 15249225 0 0 0 0
Pre-Production Expenditure 762461.2 1524922 1524922 1524922 1524922 1524922
Less Accumulated Depreciation 0 0 3349800 6699600 10049400 13399200
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 16011686 40121258 47971663 52898766 57820301 62134100
5. Total Current Liabilities 0 0 4723773 5353609 6298364 6298364
Accounts Payable 0 0 4723773 5353609 6298364 6298364
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 9607012 24072755 24072755 20060629 16048503 12036377
Loan A 9607012 24072755 24072755 20060629 16048503 12036377
Loan B 0 0 0 0 0 0
7. Total Equity Capital 6404674 16048503 16048503 16048503 16048503 16048503
Ordinary Capital 6404674 16048503 16048503 16048503 16048503 16048503
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 3126632 11436024 19424931
9.Net Profit After Tax 0 0 3126632 8309392 7988906 8325925
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 3126632 8309392 7988906 8325925
Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10

9
 TOTAL ASSETS 66784917 72201786 77955674 88058706 98161739 1.08E+08
1. Total Current Assets 51510546 59664310 68155094 80995022 93834949 1.07E+08
Inventory on Materials and Supplies 4248835 4248835 4248835 4248835 4248835 4248835
Work in Progress 1202176 1202176 1202176 1202176 1202176 1202176
Finished Products in Stock 2404352 2404352 2404352 2404352 2404352 2404352
Accounts Receivable 6298364 6298364 6298364 6298364 6298364 6298364
Cash in Hand 242523.4 242523.4 242523.4 242523.4 242523.4 242523.4
Cash Surplus, Finance Available 37114296 45268061 53758844 66598772 79438700 92278628
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 15274372 12537476 9800580 7063685 4326789 1589894
Fixed Investment 30498450 30498450 30498450 30498450 30498450 30498450
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 1524922 1524922 1524922 1524922 1524922 1524922
Less Accumulated Depreciation 16749000 19485896 22222792 24959687 27696583 30433478
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 66784917 72201786 77955674 88058706 98161739 1.08E+08
5. Total Current Liabilities 6298364 6298364 6298364 6298364 6298364 6298364
Accounts Payable 6298364 6298364 6298364 6298364 6298364 6298364
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 8024252 4012126 0 0 0 0
Loan A 8024252 4012126 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 16048503 16048503 16048503 16048503 16048503 16048503
Ordinary Capital 16048503 16048503 16048503 16048503 16048503 16048503
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 27750855 36413799 45842794 55608807 65711840 75814872
9. Net Profit After Tax 8662943 9428995 9766014 10103032 10103032 10103032
Dividends Payable 0 0 0 0 0 0
Retained Profits 8662943 9428995 9766014 10103032 10103032 10103032

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