Investment Office ANRS

Project Profile on the Establishment

of Plant for dyeing, printing and
Finishing Fabrics

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...................2
3.1 Market Study.......................................................................................................2
3.1.1 Present Demand and Supply........................................................................2
3.1.2 Projected Demand........................................................................................3
3.1.3 Pricing..........................................................................................................3
3.2 Plant Capacity......................................................................................................3
3.3 Production Program.............................................................................................4
4. Raw Materials and Utilities....................................................................4
4.1 Availability and Source of Raw Materials...........................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities...........................4
5. Location and Site.....................................................................................5
6. Technology and Engineering.................................................................5
6.1 Production Process...............................................................................................5
6.2 Machinery and Equipment...................................................................................6
6.3 Civil Engineering Cost........................................................................................7
7. Human Resource and Training Requirement......................................8
7.1 Human Resource..................................................................................................8
7.2 Training Requirement..........................................................................................8
8. Financial Analysis...................................................................................9
8.1 Underlying Assumption.......................................................................................9
8.2 Investment..........................................................................................................10
8.3 Production Costs................................................................................................10
8.4 Financial Evaluation..........................................................................................11
9. Economic and Social Benefits and Justification.................................12
ANNEXES....................................................................................................14
 1. Executive Summary
This project profile deals with the establishment of plant for dyeing, printing and finishing of
fabrics in Amhara National Regional State. The following presents the main findings of the study

Demand projection divulges that the demand for dyeing, printing and finishing of fabrics is
substantial and is increasing with time. Accordingly, the planned plant is set to process 4.4
million square meters of fabrics annually. The total investment cost of the project including
working capital is estimated at Birr 19.38 million and creates 62 jobs and annual income of Birr
810.00.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 23.5% of capacity utilization and it will
payback fully the initial investment less working capital in 3 years. The result further shows that
the calculated IRR of the project is 24.5% and NPV at 18% discount rate is Birr 4,696,593.96.
The project is marginally sensitive to increase in cost of production.

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation and export
promotion.

Generally, the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

In fabrics production, there are two basic stages. These are production of the fabrics and
production of the finished fabrics. The finished fabric is produced by dyeing, printing and
finishing. For the production of the value added products, dyed fabric is the key element. The
processed fabric is converted into garments and other textile makes. Due to small number of
existing processing units and increased demand of value added products, this sector has great
potential for investments.

1
 3. Market Study, Plant Capacity and Production Program

3.1 Market Study

3.1.1 Present Demand and Supply

The production of textile goods is the largest formal sector manufacturing activity in the country.
The sub-sector accounts for about 36% of total manufacturing being the second largest
manufacturing sub-sector after agro-processing.

Currently there are 7 integrated textile mills, 2 spinning mills, 2 thread factories, 1 blanket
factory and 11 factories and 26 new entrants of garment plant in the country. The aggregate
capacity of the existing 7 textile factories is 120 million square meters of fabric and 32,000 tons
of yarn per year. However, as most of the factories have become obsolete due to old age, they
are operating at significantly below the capacity they were originally designed for (Ministry of
Trade and Industry, Textile and Leather Industry Development Department, 2005). For instance
available data shows that in 2005/06, less than 50,000m 2 of fabrics has been produced by the
existing firm (CSA, Report on Large and Medium Scale Manufacturing and Electricity Industry
Survey, 2007). Basically the textile and garment factories by and large cater for the domestic
market, but they are currently striving to export to the American and European markets due the
presence of attractive incentives.

The demand for finished fabrics is a derived demand. That is, it depends on the demand for
finished textiles and readymade garments. In this connection, based on a careful assessment of
the global market and the possibilities of creating additional production capacities, the
government of Ethiopia has targeted to export USD 500 million worth of cotton, textiles and
garments by 2009 (Ministry of Trade and Industry, Textile and Leather Industry Development
Department, 2005). Of this the target for finished fabrics and garments constitutes USD 385
million (or 77%). To achieve this target and to guarantee a sustainable supply the same study
concluded that about 6 additional plants for dyeing, printing and finishing are required as the
current plants have become obsolete due to old age. This suggests the presence of potential
demand in the sector in view of the attention given by the government and the presence of
demand for the product for both the domestic market as well as foreign market.

2
 3.1.2 Projected Demand

In projecting the future demand for dyeing, printing and finishing of fabrics, the target set by the
government is used as it shows the future path of the sector. Accordingly, the plan sets to export
USD 160 million worth of Woven Fabrics and USD 225 million worth of readymade garments
by the year 2009 (Ministry of Trade and Industry, Textile and Leather Industry Development
Department, 2005). This requires roughly about 200 million square meters of textile. Thus,
conservatively assuming that demand for fabrics and garment increases marginally by 2.5
percent, the future demand for fabrics can be forecasted as shown in table 1 below.

Table 1: Projected Demand for Finished Fabrics (in million m2)

Year Projected Demand for

Finished Fabrics
2008/09 198
2009/10 203
2010/11 208
2011/12 213
2012/13 218
2013/14 224
2014/15 229
2015/16 235
2016/17 241
2017/18 247
2018/19 253

3.1.3 Pricing

Based on the market research result and the capacity of the envisaged plant, the price for dyeing,
printing and finishing fabrics is set to be on average Birr 2.95 per square meter of cotton fabric.

3.2 Plant Capacity

In view of the expected demand for finished fabrics presented earlier and the planned
technology, the envisaged plant is set to process 4.4 million meter squares of cotton fabrics
annually. This represents processing of about 2% of the fabrics planned to be produced by
2009/10. The plant shall use a set of colors based on the demand of the client.

3
 3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 3 shifts, where the remaining days will be holidays and for maintenance. During the
first year of operation the plant will operate at 60 percent capacity and then at 80 percent in the
2nd year. The capacity will grow to 100 percent starting from the 3 rd year. This consideration is
developed based on the assumption that logistics barriers would take place for the first two years
of operation.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials
The major raw materials used in the envisaged plant are dyes and chemicals. The type of d yes
and chemical used for the processing of fabric play a very vital role in the processing industry and
their quality should never be compromised. Therefore, the proposed plant will make use of dyes
imported from countries like Germany ,Korea, Japan, China and India.

4.2 Annual Requirement and Cost of Raw Materials and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant
are listed in table 2 here under.
Table 2: Material and Utility Requirement

Total Cost
Material and Input Quantity L.C. F.C.
Dyes and Chemicals 235 ton 3,500,000
Total Material Cost 3,500,000
Utility
Electricity 552,000 kwh 303,600
Furnace Oil 45,000 lit 315,000
Water 16,000 m2 42,400
Total Utility Cost 661,000

The total cost of material and utility at full capacity of operation is estimated to be Birr
4,161,000

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 5. Location and Site
The appropriate locations for the envisaged project in view of the availability of infrastructure as
well as market for the output are Bahir Dar and Combolcha.

6. Technology and Engineering

6.1 Production Process

The production process involves various steps as detailed here under

A. Inspection

The process starts with the receipt of fabric from the parties after confirmation of the required
color for processing. Then the received fabric is inspected prior to start the process of dyeing.

B. Dyeing

The fabric is placed in the dyeing machine and then the recipe of desired color consisting of
dyes, water and other chemicals are circulated in the machine to impart the desired color on the
fabric.

C. Drying and Tumbling

This is employed to dry the fabric and to control the shrinking of the fabric.
D. Calendaring

The final and important stage of processing is calendaring. At this stage, the fabric is pressed
through steel rollers to clear the wrinkles and give it a finished shape. This process brings
softness and shining in the fabric.

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 E. Quality Control

Before packing, fabric is checked with reference to the desired color shades and other defects in
fabric, and if color is not achieved according to the customer’s satisfaction, the process of dyeing
and finishing is repeated to obtain the desired color.

The processing technology described above is called knit fabric dyeing. The alternative
technology available is known as woven fabric dyeing. This technology, however, is not
recommended for the envisaged plant due to basic constraining factors. First and foremost, the
process of knit fabric dyeing is relatively simpler than woven fabric dyeing and comparatively
less capital is required to set up a knit fabric dyeing and finishing unit. In addition to this, its
demand in the world is higher than the alternative approach.

6.2 Machinery and Equipment

The machineries and equipment required for dyeing printing and finishing of fabrics is detailed
in table 3 below.
Table 3: Machinery and Equipment

Machinery and Equipment Quantity

Scouring, Bleaching and Dyeing Machines 3
Hydro Extractors 2
Tumblers 3
Calendaring Machine 1
Inspection Machine 1
Razing Machine 1
Lifting Crane 1
Boiler - 3 Tons Steam 1
Air Compressor (360 C.F.M) Pressure 5-7 Bars 1
Lab Equipment Set
Generator (100 KVA) 1

The total cost of machinery and equipment including freight insurance and bank cost is estimated
to be about Birr 7,500,000.

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The following are some of the suppliers’ addresses of the machineries for the envisaged project
1. FONG’s National Engineering Co. Ltd
219 G-II Model Town
Ph: 042-5883989,
Fax: 042-5883989
Akber@wol.com.
Lahore, Pakistan

2. Intertex Corporation
407,411,412 Uni Towers
I. I. Chundarigarh road,
Ph: 021-2415088-2410850
Fax: 021-2417247
intertex@super.net.pk
Karachi, Pakistan

3. Jaeggli-Meccanotessile Group
Address: Viale Giulio Cesare, 33 Bergamo 24123 Italy
Phone: +39 (0)35 282 224 or +39 (0)35 282 226
Fax: +39 (0)35 282 290
Email: jaeggli.bg@reggianimacchine.it

4. Minox Spa
Address: fraz. granero 99/100 portula - biella 13833 Italy
Phone: 39 015767653
Fax: 39 015766318
Email: minox@minox.it

6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 4,000m 2 where 3,500m2 is allocated
for the production place and the remaining space is left for stores (300m 2), office buildings and
facilities (200m2).

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 7. Human Resource and Training Requirement

7.1 Human Resource

The list of required manpower for the envisaged plant is stated in table 4 below.

Table 4: Human Resource Requirement

Monthly Total Annual

Position No. Required Salary Salary
Manager 1 5000 60000
Plant Manager 1 4000 48000
Finance
Head/Administrator 1 3000 36000
Accountant 2 1200 28800
Secretary 3 850 30600
Supervisor 3 1200 43200
Chemist 3 1500 54000
Store Keeper 4 800 38400
Technician 6 1000 72000
Operators 15 800 144000
Daily Laborers 9 400 43200
Cleaners 5 400 24000
Messengers 1 400 4800
Driver 2 800 19200
Guards 6 400 28800
Benefit (20%) 135000
Total 62 810,000

The envisaged plant therefore, creates 62 jobs and about Birr 810 thousand of income. The
professionals and support staff for the envisaged plant shall be recruited from Amhara region .

7.2 Training Requirement

Training of key personnel shall be arranged with the suppliers of the plant machineries. The
training should primarily focus on the production technology and machinery maintenance and
trouble shooting. Birr 100,000 will be allocated for training expense.

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 8. Financial Analysis
8.1 Underlying Assumption

The financial analysis of dyeing, printing and finishing fabrics 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 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
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

8.2 Investment

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The total investment cost of the project including working capital is estimated at Birr 19.36
million as shown in table 5 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.

Table 5: Total initial investment

Items L.C F.C Total

Land
12,000 12,000
Building and civil works
8,000,000 8,000,000
Office equipment
150,000 150,000
Vehicles
600,000 600,000
Plant machinery & equipment
500,000 7,000,000 7,500,000
Total fixed investment cost
9,262,000 7,000,000 16,262,000
Pre production capital expenditure*
813,100 813,100
Total initial investment
10,075,100 7,000,000 17,075,100
Working capital at full capacity
758,932 1,527,273 2,286,205
Total 10,834,032 8,527,273 19,361,305
*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 foreign component of the project accounts for 44% of the total investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 8.06 million as detailed in
table 6 below.

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 Table 6: Production Cost

Items Cost
1. Raw materials 3,500,000
2. Utilities 661,000
3. Wages and Salaries 810,000
4. Spares and Maintenance 487,860
Factory costs 5,458,860
5. Depreciation 1,447,620
6. Financial costs 1,163,321
Total Production Cost 8,069,801

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 1%, 1% and
17%respectively in the first year and are gradually rising. Furthermore, the income statement and
other profitability indicators show that the project is viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 23.5% of capacity utilization.

III. Payback Period

Investment cost and income statement projections are used in estimating the project payback
period. The project will payback fully the initial investment less working capital in 3 years time.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 23.9%.

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 V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
24.5% and the net present value at 18 % discount is Birr 4,696,593.96.

VI. Sensitivity Analysis

The envisaged plant is sensitive to changes in cost of production. That is the plant incurs loss of
Birr 235,420.49 only for the first year of operation when 10 % cost increment takes place in the
sector. This result is accompanied with more or less unchanged payback period.

9. Economic and Social Benefits and Justification

The envisaged project possesses wide range of benefits that help promote the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. It also
boosts inter sectoral linkage between the agricultural and industrial sectors. At the same time,
therefore, it helps diversify the economic activity of the region. The other major benefits are
listed as follows:

A. Profit Generation

The project is found to be financially viable and earns on average a profit of Birr 3.73 million per
year and Birr 37.35 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 14.5 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.

12
 C. Export Promotion and Foreign Exchange Earning

The envisaged plant promotes the export market as the finished fabric is exported in various
forms. This helps the country earn additional foreign exchange that will be used to finance other
vital and strategic sectors.

D. Employment and Income Generation

The proposed project is expected to create employment opportunity to several citizens of the
region. That is, it will provide permanent employment to 62 professionals as well as support
staff. Consequently the project creates income of Birr 810 thousand per year. This would be one
of the commendable accomplishments of the project.

E. Pro Environment Project

The proposed production process is environment friendly.

F. 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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ANNEXES

14
 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 60% 80% 100% 100%

1. Total Inventory 0.00 0.00 2208225.91 2944301.22 3680376.52 3680376.52

Raw Materials in Stock- Total 0.00 0.00 916363.64 1221818.18 1527272.73 1527272.73

Raw Material-Local 0.00 0.00 0.00 0.00 0.00 0.00

Raw Material-Foreign 0.00 0.00 916363.64 1221818.18 1527272.73 1527272.73

Factory Supplies in Stock 0.00 0.00 4520.61 6027.47 7534.34 7534.34

Spare Parts in Stock and Maintenance 0.00 0.00 31932.65 42576.87 53221.09 53221.09

Work in Progress 0.00 0.00 113015.13 150686.84 188358.55 188358.55

Finished Products 0.00 0.00 226030.25 301373.67 376717.09 376717.09

2. Accounts Receivable 0.00 0.00 849600.00 1132800.00 1416000.00 1416000.00

3. Cash in Hand 0.00 0.00 96283.64 128378.18 160472.73 160472.73

CURRENT ASSETS 0.00 0.00 2237745.91 2983661.22 3729576.52 3729576.52

4. Current Liabilities 0.00 0.00 849600.00 1132800.00 1416000.00 1416000.00

Accounts Payable 0.00 0.00 849600.00 1132800.00 1416000.00 1416000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS 0.00 0.00 1388145.91 1850861.22 2313576.52 2313576.52

INCREASE IN NET WORKING CAPITAL 0.00 0.00 1388145.91 462715.30 462715.30 0.00

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 3680376.52 3680376.52 3680376.52 3680376.52 3680376.52 3680376.52

Raw Materials in Stock-Total 1527272.73 1527272.73 1527272.73 1527272.73 1527272.73 1527272.73

Raw Material-Local 0.00 0.00 0.00 0.00 0.00 0.00

Raw Material-Foreign 1527272.73 1527272.73 1527272.73 1527272.73 1527272.73 1527272.73

Factory Supplies in Stock 7534.34 7534.34 7534.34 7534.34 7534.34 7534.34

Spare Parts in Stock and Maintenance 53221.09 53221.09 53221.09 53221.09 53221.09 53221.09

Work in Progress 188358.55 188358.55 188358.55 188358.55 188358.55 188358.55

Finished Products 376717.09 376717.09 376717.09 376717.09 376717.09 376717.09

2. Accounts Receivable 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00

3. Cash in Hand 160472.73 160472.73 160472.73 160472.73 160472.73 160472.73

CURRENT ASSETS 3729576.52 3729576.52 3729576.52 3729576.52 3729576.52 3729576.52

4. Current Liabilities 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00

Accounts Payable 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00

TOTAL NET WORKING CAPITAL REQUIRMENTS 2313576.52 2313576.52 2313576.52 2313576.52 2313576.52 2313576.52

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 8537550.00 10851126.52 8637600.00 10667200.00 13263200.00 12980000.00
1. Inflow Funds 8537550.00 10851126.52 849600.00 283200.00 283200.00 0.00
Total Equity 3415020.00 4340450.61 0.00 0.00 0.00 0.00
Total Long Term Loan 5122530.00 6510675.91 0.00 0.00 0.00 0.00
Total Short Term Finances 0.00 0.00 849600.00 283200.00 283200.00 0.00
2. Inflow Operation 0.00 0.00 7788000.00 10384000.00 12980000.00 12980000.00
Sales Revenue 0.00 0.00 7788000.00 10384000.00 12980000.00 12980000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 8537550.00 8537550.00 8530582.52 8281139.51 10604690.73 9695910.54
4. Increase In Fixed Assets 8537550.00 8537550.00 0.00 0.00 0.00 0.00
Fixed Investments 8131000.00 8131000.00 0.00 0.00 0.00 0.00
Pre-production Expenditures 406550.00 406550.00 0.00 0.00 0.00 0.00
5. Increase in Current Assets 0.00 0.00 2237745.91 745915.30 745915.30 0.00
6. Operating Costs 0.00 0.00 3192358.88 4200371.84 5208384.80 5208384.80
7. Corporate Tax Paid 0.00 0.00 0.00 0.00 1548202.38 1618001.62
8. Interest Paid 0.00 0.00 3100477.72 1395984.71 1163320.59 930656.47
9.Loan Repayments 0.00 0.00 0.00 1938867.65 1938867.65 1938867.65
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 0.00 2313576.52 107017.48 2386060.49 2658509.27 3284089.46
Cumulative Cash Balance 0.00 2313576.52 2420594.01 4806654.50 7465163.77 10749253.23

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00
1. Inflow Funds 0.00 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
Total Short Term Finances 0.00 0.00 0.00 0.00 0.00 0.00
2. Inflow Operation 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00
Sales Revenue 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00
Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00
3. Other Income 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL CASH OUTFLOW 9533045.66 9454966.78 9292101.90 7190369.36 7190369.36 7190369.36
4. 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
5. Increase in Current Assets 0.00 0.00 0.00 0.00 0.00 0.00
6. Operating Costs 5208384.80 5208384.80 5208384.80 5208384.80 5208384.80 5208384.80
7. Corporate Tax Paid 1687800.85 1842386.09 1912185.32 1981984.56 1981984.56 1981984.56
8. Interest Paid 697992.35 465328.24 232664.12 0.00 0.00 0.00
9. Loan Repayments 1938867.65 1938867.65 1938867.65 0.00 0.00 0.00
10.Dividends Paid 0.00 0.00 0.00 0.00 0.00 0.00
Surplus(Deficit) 3446954.34 3525033.22 3687898.10 5789630.64 5789630.64 5789630.64
Cumulative Cash Balance 14196207.57 17721240.79 21409138.89 27198769.53 32988400.17 38778030.81

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0.00 0.00 7788000.00 10384000.00 12980000.00 12980000.00

1. Inflow Operation 0.00 0.00 7788000.00 10384000.00 12980000.00 12980000.00

Sales Revenue 0.00 0.00 7788000.00 10384000.00 12980000.00 12980000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 8537550.00 8537550.00 4580504.79 4663087.14 7219302.49 6826386.42

3. Increase in Fixed Assets 8537550.00 8537550.00 0.00 0.00 0.00 0.00

Fixed Investments 8131000.00 8131000.00 0.00 0.00 0.00 0.00

Pre-production Expenditures 406550.00 406550.00 0.00 0.00 0.00 0.00

4. Increase in Net Working Capital 0.00 0.00 1388145.91 462715.30 462715.30 0.00

5. Operating Costs 0.00 0.00 3192358.88 4200371.84 5208384.80 5208384.80

6. Corporate Tax Paid 0.00 0.00 0.00 0.00 1548202.38 1618001.62

-
NET CASH FLOW 8537550.00 -8537550.00 3207495.21 5720912.86 5760697.51 6153613.58
- - -
CUMMULATIVE NET CASH FLOW 8537550.00 17075100.00 13867604.79 -8146691.94 -2385994.43 3767619.16
-
Net Present Value (at 18%) 8537550.00 -7235211.86 2303573.12 3481924.18 2971303.69 2689801.21
- - -
Cumulative Net present Value 8537550.00 15772761.86 13469188.75 -9987264.57 -7015960.88 -4326159.67

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

5
 PRODUCTION
5 6 7 8 9 10
TOTAL CASH INFLOW 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00

1. Inflow Operation 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00

Sales Revenue 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00

Interest on Securities 0.00 0.00 0.00 0.00 0.00 0.00

2. Other Income 0.00 0.00 0.00 0.00 0.00 0.00

TOTAL CASH OUTFLOW 6896185.65 7050770.89 7120570.12 7190369.36 7190369.36 7190369.36

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 0.00 0.00 0.00 0.00 0.00 0.00

5. Operating Costs 5208384.80 5208384.80 5208384.80 5208384.80 5208384.80 5208384.80

6. Corporate Tax Paid 1687800.85 1842386.09 1912185.32 1981984.56 1981984.56 1981984.56

NET CASH FLOW 6083814.35 5929229.11 5859429.88 5789630.64 5789630.64 5789630.64

CUMMULATIVE NET CASH FLOW 9851433.50 15780662.61 21640092.49 27429723.13 33219353.77 39008984.41

Net Present Value (at 18%) 2253636.71 1861333.45 1558831.96 1305307.38 1106192.69 937451.43

Cumulative Net present Value -2072522.95 -211189.51 1347642.46 2652949.83 3759142.53 4696593.96

Net Present Value (at 18%) 4,696,593.96

Internal Rate of Return 24.5%

Annex 4: NET INCOME STATEMENT ( in Birr)

6
 PRODUCTION
1 2 3 4 5
Capacity Utilization (%) 60% 80% 100% 100% 100%

1. Total Income 7788000.00 10384000.00 12980000.00 12980000.00 12980000.00

Sales Revenue 7788000.00 10384000.00 12980000.00 12980000.00 12980000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 2829638.88 3772851.84 4716064.80 4716064.80 4716064.80
VARIABLE MARGIN 4958361.12 6611148.16 8263935.20 8263935.20 8263935.20
(In % of Total Income) 63.67 63.67 63.67 63.67 63.67
3. Less Fixed Costs 1810340.00 1875140.00 1939940.00 1939940.00 1939940.00
OPERATIONAL MARGIN 3148021.12 4736008.16 6323995.20 6323995.20 6323995.20
(In % of Total Income) 40 46 49 49 49
4. Less Cost of Finance 3100477.72 1395984.71 1163320.59 930656.47 697992.35
5. GROSS PROFIT 47543.40 3340023.45 5160674.61 5393338.73 5626002.85
6. Income (Corporate) Tax 0.00 0.00 1548202.38 1618001.62 1687800.85
7. NET PROFIT 47543.40 3340023.45 3612472.23 3775337.11 3938201.99
RATIOS (%)
Gross Profit/Sales 1% 32% 40% 42% 43%
Net Profit After Tax/Sales 1% 32% 28% 29% 30%
Return on Investment 17% 25% 25% 24% 24%
Return on Equity 1% 43% 47% 49% 51%

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 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00

Sales Revenue 12980000.00 12980000.00 12980000.00 12980000.00 12980000.00
Other Income 0.00 0.00 0.00 0.00 0.00
2. Less Variable Cost 4716064.80 4716064.80 4716064.80 4716064.80 4716064.80
VARIABLE MARGIN 8263935.20 8263935.20 8263935.20 8263935.20 8263935.20
(In % of Total Income) 64 64 64 64 64
3. Less Fixed Costs 1657320.00 1657320.00 1657320.00 1657320.00 1657320.00
OPERATIONAL MARGIN 6606615.20 6606615.20 6606615.20 6606615.20 6606615.20
(In % of Total Income) 51 51 51 51 51
4. Less Cost of Finance 465328.24 232664.12 0.00 0.00 0.00
5. GROSS PROFIT 6141286.96 6373951.08 6606615.20 6606615.20 6606615.20
6. Income (Corporate) Tax 1842386.09 1912185.32 1981984.56 1981984.56 1981984.56
7. NET PROFIT 4298900.87 4461765.76 4624630.64 4624630.64 4624630.64
RATIOS (%)
Gross Profit/Sales 47% 49% 51% 51% 51%
Net Profit After Tax/Sales 33% 34% 36% 36% 36%
Return on Investment 25% 24% 24% 24% 24%
Return on Equity 55% 58% 60% 60% 60%

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION

8
 Year 1 Year 2 1 2 3 4
TOTAL ASSETS 8537550.00 19388676.52 20285819.92 21970175.72 23926980.29 25763449.75
1. Total Current Assets 0.00 2313576.52 4658339.92 7790315.72 11194740.29 14478829.75
Inventory on Materials and Supplies 0.00 0.00 952816.90 1270422.53 1588028.16 1588028.16
Work in Progress 0.00 0.00 113015.13 150686.84 188358.55 188358.55
Finished Products in Stock 0.00 0.00 226030.25 301373.67 376717.09 376717.09
Accounts Receivable 0.00 0.00 849600.00 1132800.00 1416000.00 1416000.00
Cash in Hand 0.00 0.00 96283.64 128378.18 160472.73 160472.73
Cash Surplus, Finance Available 0.00 2313576.52 2420594.01 4806654.50 7465163.77 10749253.23
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 8537550.00 17075100.00 15627480.00 14179860.00 12732240.00 11284620.00
Fixed Investment 0.00 8131000.00 16262000.00 16262000.00 16262000.00 16262000.00
Construction in Progress 8131000.00 8131000.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 406550.00 813100.00 813100.00 813100.00 813100.00 813100.00
Less Accumulated Depreciation 0.00 0.00 1447620.00 2895240.00 4342860.00 5790480.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 8537550.00 19388676.52 20285819.92 21970175.72 23926980.29 25763449.75
5. Total Current Liabilities 0.00 0.00 849600.00 1132800.00 1416000.00 1416000.00
Accounts Payable 0.00 0.00 849600.00 1132800.00 1416000.00 1416000.00
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 5122530.00 11633205.91 11633205.91 9694338.26 7755470.61 5816602.96
Loan A 5122530.00 11633205.91 11633205.91 9694338.26 7755470.61 5816602.96
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 3415020.00 7755470.61 7755470.61 7755470.61 7755470.61 7755470.61
Ordinary Capital 3415020.00 7755470.61 7755470.61 7755470.61 7755470.61 7755470.61
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought
Forward 0.00 0.00 0.00 47543.40 3387566.85 7000039.07
9.Net Profit After Tax 0.00 0.00 47543.40 3340023.45 3612472.23 3775337.11
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 0.00 0.00 47543.40 3340023.45 3612472.23 3775337.11

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 27762784.09 30122817.31 32645715.42 37270346.06 41894976.70 46519607.34
1. Total Current Assets 17925784.09 21450817.31 25138715.42 30928346.06 36717976.70 42507607.34
Inventory on Materials and Supplies 1588028.16 1588028.16 1588028.16 1588028.16 1588028.16 1588028.16
Work in Progress 188358.55 188358.55 188358.55 188358.55 188358.55 188358.55
Finished Products in Stock 376717.09 376717.09 376717.09 376717.09 376717.09 376717.09
Accounts Receivable 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00
Cash in Hand 160472.73 160472.73 160472.73 160472.73 160472.73 160472.73
Cash Surplus, Finance Available 14196207.57 17721240.79 21409138.89 27198769.53 32988400.17 38778030.81
Securities 0.00 0.00 0.00 0.00 0.00 0.00
2. Total Fixed Assets, Net of Depreciation 9837000.00 8672000.00 7507000.00 6342000.00 5177000.00 4012000.00
Fixed Investment 16262000.00 16262000.00 16262000.00 16262000.00 16262000.00 16262000.00
Construction in Progress 0.00 0.00 0.00 0.00 0.00 0.00
Pre-Production Expenditure 813100.00 813100.00 813100.00 813100.00 813100.00 813100.00
Less Accumulated Depreciation 7238100.00 8403100.00 9568100.00 10733100.00 11898100.00 13063100.00
3. Accumulated Losses Brought Forward 0.00 0.00 0.00 0.00 0.00 0.00
4. Loss in Current Year 0.00 0.00 0.00 0.00 0.00 0.00
TOTAL LIABILITIES 27762784.09 30122817.31 32645715.42 37270346.06 41894976.70 46519607.34
5. Total Current Liabilities 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00
Accounts Payable 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00 1416000.00
Bank Overdraft 0.00 0.00 0.00 0.00 0.00 0.00
6. Total Long-term Debt 3877735.30 1938867.65 0.00 0.00 0.00 0.00
Loan A 3877735.30 1938867.65 0.00 0.00 0.00 0.00
Loan B 0.00 0.00 0.00 0.00 0.00 0.00
7. Total Equity Capital 7755470.61 7755470.61 7755470.61 7755470.61 7755470.61 7755470.61
Ordinary Capital 7755470.61 7755470.61 7755470.61 7755470.61 7755470.61 7755470.61
Preference Capital 0.00 0.00 0.00 0.00 0.00 0.00
Subsidies 0.00 0.00 0.00 0.00 0.00 0.00
8. Reserves, Retained Profits Brought Forward 10775376.18 14713578.17 19012479.05 23474244.81 28098875.45 32723506.09
9. Net Profit After Tax 3938201.99 4298900.87 4461765.76 4624630.64 4624630.64 4624630.64
Dividends Payable 0.00 0.00 0.00 0.00 0.00 0.00
Retained Profits 3938201.99 4298900.87 4461765.76 4624630.64 4624630.64 4624630.64

10