You are on page 1of 15

210.

PROFILE ON PRODUCTION OF CANDLE

UTILITIES 210-7 210-7 210-7 V.210-2 TABLE OF CONTENTS PAGE I. PRODUCTION COST C. FINANCIAL ANALYSIS A. ECONOMIC BENEFITS 210-11 210-12 210-13 210-14 210-15 . FINANCIAL EVALUATION D. MARKET STUDY B. MARKET STUDY AND PLANT CAPACITY A. TOTAL INITIAL INVESTMENT COST B. SUMMARY 210-3 II. TECHNOLOGY B. RAW & AUXILIARY MATERIALS B. ENGINEERING 210-8 210-8 210-9 210-10 VI. MANPOWER & TRAINING REQUIREMENT A. TECHNOLOGY & ENGINEERING A. RAW MATERIALS AND INPUTS A. TRAINING REQUIREMENT 210-10 210-11 VII. PRODUCT DESCRIPTION & APPLICATION 210-3 III. MANPOWER REQUIREMENT B. PLANT CAPACITY & PRODUCTION PROGRAMME 210-4 210-4 210-6 IV.

and tallow (animal fat) candles have been made in Europe since the Middle Ages. The present demand for the proposed product is estimated at 2000 tones per annum. Candles are also used in traditional and religious ceremonies and also in hotels and restaurants. out of which Birr 0.5%. It is highly desirable in rural areas where there is no electric light. . spermaceti.3 million. The project is financially viable with an internal rate of return (IRR) of 19 % and a net present value (NPV) of Birr 578.170 discounted at 8. stearic acid (a solid fatty acid). The demand is expected to reach at 2960 tones by the year 2022. Hydrogenated vegetable oils and other waxes are also used. ordinary candles have been made from mixtures of paraffin wax. Beeswax candles were used by the Romans. was introduced for candles. a wax obtained from the heads of whales. and beeswax.210-3 I.5 million is required for plant and machinery. Since the mid-19th century. PRODUCT DESCRIPTION AND APPLICATION Candle is an illuminating device made of a fiber wick enclosed in a cylinder of wax or fatty material. In the 18th century. SUMMARY This profile envisages the establishment of a plant for the production candle with a capacity of 100 tones per annum. The plant will create employment opportunities for 8 persons. II. The total investment requirement is estimated at about Birr 1.

As could be seen from Table 3.789. On the other hand.0 1986.106.277. With regard to domestic production the quantity has declined from 769 tons in the year 1999/00 to 310 tons by the year 2004/05.Customs Authority for import and Statistical Abstract of Ethiopia (CSA) for domestic production. Table 3. Past Supply and Present Demand The source of supply of candles is both domestic production and imports.0 2.5 Domestic 769 559 677 614 437 310 Total 1.3 669.210-4 III. MARKET STUDY AND PLANT CAPACITY A.600. Despite the high fluctuation the annual average level of import was calculated to be 1045 tons.8 1967.095 1.8 92.1 SUPPLY OF CANDLE FROM IMPORT AND DOMESTIC PRODUCTION (TON) Year 1999/00 2000/01 2000/02 2000/03 2000/04 2000/05 Import 326.1 import of candles in the past six years has been highly erratic showing a big decline and increase from year to year without any trend. Candles that are supplied to the Ethiopia market from domestic production and import is given in Table 3. the total consumption (import and domestic) during the period considered generally indicates an increasing . MARKET STUDY 1.0 1230.8 769.5 Source: .1.3 1.8 2.

Accordingly. the yearly average consumption during the period 1999/00-2001/02 was about 1218 tons while during the period 2002/03 -2004/05 is about 2000 tons. The past supply trend also reveals that consumption has been increasing in the past few years. In addition. restaurants and the like for illuminating occasions. hotels. By associating with population and the service sector on annual average growth rate of 4% is taken to forecast the future demand (See Table 3.210-5 trend.2). For instance. its demand will exist even if other types of lightings are available whether in rural or urban areas. current demand for candles in Ethiopia is estimated at 2000 tons. candles are used in traditional and religious ceremonies. Table 3. To determine the current effective demand the recent three years average apparent consumption has been considered. Hence. 2. Demand Projection One of the uses of candles is for lighting in areas where there is no electricity.2 FORECASTED DEMAND FOR CANDLES (TON) Year 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Import 2080 2163 2250 2340 2433 2530 2632 2737 2846 2960 Domestic 310 310 310 310 310 310 310 310 310 310 Total 1770 1853 1940 2030 2123 2220 2322 2427 2536 2650 .

3. Allowing for cost increase Birr 20.275. respectively. In third year and thereafter. PLANT CAPACITY AND PRODUCTION PROGRAMME 1. .000 per ton is taken for sales revenue projection. Pricing and Distribution The average producer's price per ton of candle during 2004/05 is Birr 21.3. in the first and second year of production. Therefore. B. The capacity can be increased by increasing the number of working hours per day. Plant Capacity The proposed annual processing capacity of the envisaged plant only taking a share of 5. full capacity (100%) production shall be attained. based on 300 working days a year and a single shift of 8 hours per day. the capacity utilization rate will be 75% and 85%. Production Programme The production programme is indicated in Table 3.210-6 Due to the existence of wide unsatisfied demand a number of small to medium scale plants can be established in the region. 2.6 % to the forecasted demand of the year 2008 is 100 tones candles. The product will find its market outlet through the existing general merchandize wholesalers.

72255 207.5 5 429.92 78.25 5. Except beeswax. 2.817 207. Cost (‘000 Birr) FC ton ton. Product 2008 candles (tones) Capacity utilization (%) 75 75 Production Year 2009 85 85 2010-2017 100 100 IV.85 LC 75.3 PRODUCTION PROGRAMME Sr. 1.517 112.25 2 10. MATERIALS AND INPUTS A.12 36.5 1097. stearin acid. ton ton kgs. 89. RAW & AUXILIARY MATERIALS The major raw materials used in candle making are paraffin wax.92 78. Raw & Auxiliary Material Unit of Measure Qty.09 31.26 637. beeswax and dyes. No. Table 4.637 1 2 3 4 5 paraffin wax beeswax Wick stearin acid dyes Grand Total .78 750 1577. No.5 479. all the other raw materials have to be imported.12 5.77955 Total 504.210-7 Table 3.1 RAW & AUXILIARY MATERIALS REQUIREMENT AND COST (AT FULL CAPACITY) Sr. It is believed that paraffin wax can be easily obtained from refineries in the neighboring Sudan.

2 ANNUAL UTILITIES REQUIREMENT AND COST Sr. TECHNOLOGY AND ENGINEERING A. No Utility Unit of Measure Qty. molding. and insertion of wicks.The total annual cost of utilities is estimated at Birr 275. melting.000 0. into the moulds cavities up to the rim. i. UTILITIES The major utilities of the envisaged project are electricity and water.4736 3. Table 4. cooling.832.1 11. mixing of the ingredients. In the meanwhile.210-8 B.366 3. the ‘wick’ is tied in the mould and the parts of the mould closed tightly with clamps. Then these moulds are transferred to cooling trays where the wax hardens in about 15 minutes. ejection and packing. . Unit cost Total cost 1 2 Electricity Water Total kWh m3 24.e.2. it is powered with small tumbler having the upper rim bent like a lap. When the wax has melted..000 1.100 14.466 V. Production Process Candle making involves simple operations. TECHNOLOGY 1. The manufacturing process can be described briefly as follows: Paraffin wax is melted over slow fire in a melting pan. The annual consumption and cost of utilities is indicated in Table 4.

5 million. B. Machinery and Equipment The list of equipments of the project is indicated in Table 5. all are in local currency. if colored candles are desired. wax soluble dyes may be added to the molten wax. When the candles are ready.1 LIST OF MACHINERY AND EQUIPMENT Sr.1. 3. 5. Source of Technology The equipments and moulds required by the envisaged project can be obtained from locally available workshops those capable of manufacturing a product as per products specification. In the above. Item description Qty. No. Melting pot of aluminum with electric heater 1 2.210-9 The moulds are then opened. they are packed in cardboards boxes before sending to the market for sale. 4. The total cost of machinery and equipment is estimated at Birr 0. Table 5. however. 2. moulds Weighing scale tools bucket 10 2 set 10 . ENGINEERING 1. 1. wicks cut with sharp knives and unnecessary wax is stripped off from the upper portion of the mould.

000. MANPOWER REQUIREMENT The envisaged project requires 8 work forces. The list of manpower for the envisaged project is indicated in Table 6. The annual cost of labour including fringe benefits is estimated at Birr 62. out of which built-up area is 200m2. at the rate of 0. Land.1.000. The lease value of land. 3. Building and Civil works The total land requirement of the project is about 500m2. MANPOWER AND TRAINING REQUIREMENT A. Proposed Location and Site Tapi town at Yeki woreda is proposed as a location for the envisaged candle making plant. The total construction cost of building assuming a construction rate of Birr 1800 per m2 is estimated at Birr 360.000.640.210-10 2. . and for 80 years of land holding. The total cost of building and civil works is about Birr 364. is Birr 4. VI.10 Birr / m2.

400 9. No.600 52.200 750 900 1200 300 4.400 3.640 General Manager Accountant chemist Laborers Guards Sub-Total Benefits (20% BS) Grand Total 1 1 1 4 1 8 1.440 62.000. TRAINING REQUIREMENT The training of chemist will take place for about two weeks during the supplier and erection.200 10.350 870 5.220 B. . No.800 14. Monthly Salary (Birr) Annual Salary (Birr) 14.210-11 Table 6.1 MANPOWER REQUIREMENT AND ANNUAL LABOUR COST Sr. 1 2 3 4 5 Description Req. Laborers shall be trained by in-house staff during commissioning.000 10. The cost of training is estimated at Birr 10.

73 million. FINANCIAL ANALYSIS The financial analysis of the candle project is based on the data presented in the previous chapters and the following assumptions:- Construction period Source of finance 1 year 30 % equity 70 % loan Tax holidays Bank interest Discount cash flow Accounts receivable Raw material local Raw material.1.210-12 VII. import Work in progress Finished products Cash in hand Accounts payable years 8% 8.5% 30 days 30days 90days 5 days 30 days 5 days 30 days A. . of which 49 per cent will be required in foreign currency. TOTAL INITIAL INVESTMENT COST The total investment cost of the project including working capital is estimated at Birr 9. The major breakdown of the total initial investment cost is shown in Table 7.

7 1. No. while repair and maintenance take 2.210-13 Table 7. . 1 2 3 4 5 6 7 Cost Items Total Cost (‘000 Birr) Land lease value Building and Civil Work Plant Machinery and Equipment Office Furniture and Equipment Vehicle Pre-production Expenditure* Working Capital Total Investment cost Foreign Share 4 360. The material and utility cost accounts for 85 per cent.00 500.00 75 0 75 286.67 thousand ) training (Birr 10 thousand ) and Birr 65 thousand costs of registration.82 million (see Table 7.2). licensing and formation of the company including legal fees. B. PRODUCTION COST The annual production cost at full operation capacity is estimated at Birr 1.B Pre-production expenditure includes interest during construction ( Birr 75. commissioning expenses.300.74 per cent of the production cost.7 49 * N.1 INITIAL INVESTMENT COST Sr. etc.

47 50 31.68 14.86 100 C. the project will start generating profit in the first year of operation.72 % 84.72 0.43 1.74 1. Profitability According to the projected income statement.79 90. net profit to equity (Return on equity) and net profit plus interest on total investment (return on total investment) show an increasing trend during the life-time of the project.825.664.210-14 Table 7.14 91. The income statement and the other indicators of profitability show that the project is viable. Important ratios such as profit to total sales.2 ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR) Items Raw Material and Inputs Utilities Maintenance and repair Labour direct Factory overheads Administration Costs Total Operating Costs Depreciation Cost of Finance Total Production Cost Cost 1.22 0. FINANCIAL EVALUATION 1.79 2.88 1.44 20.57 1.5 70. .32 10.96 3.537.19 4.

ECONOMIC BENEFITS The project can create employment for 8 persons. Pay Back Period The investment cost and income statement projection are used to project the pay-back period. The establishment of such factory will have a foreign exchange saving effect to the country by substituting the current imports. In addition to supply of the domestic needs.210-15 2. BE = Fixed Cost Sales – Variable Cost = 27% 3. the project will generate Birr 473. 4. The project’s initial investment will be fully recovered within 5 years. Break-even Analysis The break-even point of the project including cost of finance when it starts to operate at full capacity (year 3) is estimated by using income statement projection. D. .5% discount rate is Birr 578.170.020 in terms of tax revenue. Internal Rate of Return and Net Present Value Based on the cash flow statement. the calculated IRR of the project is 19 % and the net present value at 8.