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PROFILE ON PRODUCTION OF
SODIUM SILICATE
45-2
TABLE OF CONTENTS
PAGE
I.
SUMMARY
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II.
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III.
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A. MARKET STUDY
45-4
45-6
45-7
A. RAW MATERIALS
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B. UTILITIES
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45-9
A. TECHNOLOGY
45-9
B. ENGINEERING
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A. MANPOWER REQUIREMENT
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B. TRAINING REQUIREMENT
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FINANCIAL ANALYSIS
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B. PRODUCTION COST
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C. FINANCIAL EVALUATION
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D. ECONOMIC BENEFITS
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IV.
V.
VI.
VII.
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I.
SUMMARY
This profile envisages the establishment of a plant for the production of sodium
silicate with a capacity of 1,350 tonnes per annum.
The present demand for the proposed product is estimated at 1,500 tonnes per annum.
The demand is expected to reach at 2,828 tonnes by the year 2020.
The total investment requirement is estimated at Birr 3.69 million, out of which Birr
990,900 is required for plant and machinery.
The project is financially viable with an internal rate of return (IRR) of 30 % and a net
present value (NPV) of Birr 5.31 million, discounted at 8.5%.
II.
Sodium silicate is one of various water soluble substances obtained in the form of
crystals, glasses, powder or aqueous solutions by chemical fusion of silica sand and
soda ash. At present, there are 40 varieties of commercial sodium silicate, each with a
specific use.
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III.
A.
MARKET STUDY
1.
Although sodium silicate has got various applications, in Ethiopia Soap and Detergent
Factories are the major consumers. The Pulp and Paper Factories also require Sodium
Silicate for hardening corrugated paper board and packaging materials. Factories
which produce pigments and adhesive and water treatment plants are among
significant users of the product in Ethiopia.
Source:
1995
538.6
1996
533.2
1997
183.0
1998
77.0
1999
241.6
2000
80.6
2001
800.0
2002
2,946.6
2003
557.1
2004
1,070.2
2005
2,366.7
2006
2339.9
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Table 3.1 shows that import of sodium is characterized by year to year fluctuation.
The highest import, 2366.7 tonnes, was made in 2006 while the lowest 77 tonns was
in year 1998. To estimate the present demand for the product the apparent
consumption, which is considered to be a fair approximation of demand, is used.
Accordingly, the apparent consumption of the product (i.e. import) during the last
four years, which is about 1,500 tonnes, is considered to reasonably reflect present
demand for sodium silicate.
2.
Projected Demand
The future demand for sodium silicate is a function of growth of the end-user
industries, mainly soap and detergent factories, pulp and paper mills, paint, pigment
and adhesive factories. Information obtained from Ethiopian Investment Authority
give strong indication that private investment in the aforementioned industries is
bound to grow. Hence, a modest growth rate of 5% would not be unwarranted to
forecast future demand. The demand forecast executed accordingly is shown in Table
3.2.
Table 3.2
PROJECTED DEMAND FOR SODIUM SILICATE
Year
Forecasted Demand
(Tonnes)
2008
1,575
2009
1,654
2010
1,736
2011
1,823
2012
1,914
2013
2,010
2014
2,111
2015
2,216
2016
2,327
2017
2,443
2018
2,566
2019
2,694
2020
2,828
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3.
Based on current market price of the product and assuming margins for distributors, a
factory-gate price of Birr 3000 per tonne is recommended for the envisaged plant. The
product can be directly supplied to end-users.
B.
1.
Plant Capacity
Based on the market study and nature of the plant, a capacity of 4.5 tonnes per day is
considered. On the basis of double shifts of 8 hours per day and 300 days per annum,
the total annual production would then be 1350 tonnes of sodium silicate.
2.
Production Programme
Table 3.3 shows the production programme of the envisaged project. It is prepared
based on the selected plant capacity and expected market share to be captured by the
project. At the initial stage of production, the plant may require some years to
penetrate into the market. Therefore, the plant initially will operate at 75% of its rated
annual capacity. During the second year the plant will operate at 85%, reaching 100%
capacity utilization in the third year and thereafter.
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Table 3.3
PRODUCTION PROGRAMME
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Projected
Production
Capacity
Demand
Demand
Programme
Utilization
Coverage
(Tonnes)
(Tonnes)
(%)
(%)
1,575
1,654
1,736
1,823
1,914
2,010
2,111
2,216
2,327
2,443
2,566
2,694
2,828
1,013
1,148
1,350
1,350
1,350
1,350
1,350
1,350
1,350
1,350
1,350
1,350
1,350
75
85
100
100
100
100
100
100
100
100
100
100
100
85.7
81.6
77.8
74.1
70.5
67.2
64.0
60.9
58.0
55.3
52.6
50.1
47.7
IV
A.
RAW MATERIALS
The major raw materials required for the production of sodium silicate are soda ash
and sand. Soda ash will be supplied from domestic sources and that of Silica sand is
abundant along the course of main rivers, found in the region.
The annual
requirement for raw materials at 100% capacity utilization and associated estimated
cost are given in Table 4.1.
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Table 4.1
ANNUAL RAW MATERIAL REQUIREMENT AND COST
Sr.
No.
Description
Soda Ash
Sand
Quantity
Unit Cost
Cost (OOO
(Tonnes)
(Birr)
Birr)
1,125
1,500
1,687.5
675
103.33
69.75
Total
B.
1,757.25
UTILITIES
Electricity, water and furnace oil are the major utilities required by the plant. The
total annual requirement at 100% capacity utilization rate and the estimated costs are
given in Table 4.2 below.
Table 4.2
UTILITIES REQUIREMENT AND ESTIMATED COST
Sr.
No.
Description
Units
Quantity
Cost ( Birr)
Electricity
KWh
37,375
17,700.8
Furnace Oil
Lit
100,000
541,000
Water
M3
1250
6,875
Total
565,575.8
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V.
A.
TECHNOLOGY
1.
Production Process
Sodium silicate is made by fusing sodium carbonate and silica sand in an open hearth
furnace. In most common commercial silicates, the ratio of sodium carbonate to
silica, on molar basis, varies from 1:2 to 1:3.2.
2.
Source of Technology
The machinery and equipment for the plant can be acquired from the following
company which is specialized in manufacturing of chemical plants.
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B.
ENGINEERING
1.
The list of major machinery and equipment for production of sodium silicate is
indicated in Table 5.1. The total cost of machinery is estimated at Birr 1,296,640 of
which Birr 990,900 is required in foreign currency.
Table 5.1
LIST OF MACHINERY AND EQUIPMENT REQUIRED
Sr.
No.
2.
Description
Unit
Qty
Furnace
Pcs
Autoclave
Pcs
Crusher
Pcs
Grinder
Pcs
Tank
Pcs
Pump
Pcs
Boiler
Pcs
Generator
Pcs
Weighing Hoppers
Pcs
The total area of the project is 2,000 m2 of which 850 m2 is a built-up area. The cost
of building of which at unit cost of Birr 1,800 per m2 is, thus, estimated at Birr 1.53
million. The lease value of land at a rate of 0.1 Birr per m2 for 80 years is about Birr
16,000.
3.
Proposed Location
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utilities like electricity, water & fuel. Sand could be made available from the zone
very easily.
VI
A.
MANPOWER REQUIREMENT
Details of manpower
requirement are given in Table 6.1. The total annual cost of labour is estimated at Birr
273, 6000.
Table 6.1
MANPOWER REQUIREMENT AND ANNUAL LABOUR COST
Sr.
No.
Job Title
No. of
Salary (Birr)
Person Monthly Annual
Salary
Salary
Plant Manager
2,750
33,000
Chemist
1,600
57,600
Secretary
850
10,200
Salesman
750
9,000
Accountant
900
10,800
Personnel
1,200
14,400
Shift Leader
1,300
15,600
Operator
600
36,000
Store Keeper
750
9,000
10
Purchaser
750
9,000
11
Mechanic
800
9,600
12
Driver
550
6,600
13
Guard
300
7,200
Sub total
20
19,000
228,000
3,800
45,600
22,800
273,600
Employees
Benefit
(20% of Basic Salary)
Total
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B.
TRAINING REQUIREMENT
Nine operators and a shift leader should be given a one week on -the-job training
during plant erection and commissioning by the experts of the machinery supplier.
The cost of training is estimated at Birr 20,000.
VII.
FINANCIAL ANALYSIS
The financial analysis of the sodium silicate project is based on the data presented in
the previous chapters and the following assumptions:-
Construction period
1 year
Source of finance
30 % equity
70 % loan
Tax holidays
Bank interest
3 years
8%
8.5%
Accounts receivable
30 days
30days
90days
Work in progress
5 days
Finished products
30 days
Cash in hand
5 days
Accounts payable
30 days
A.
The total investment cost of the project including working capital is estimated at Birr
3.69 million, of which 21 per cent will be required in foreign currency.
The major breakdown of the total initial investment cost is shown in Table 7.1.
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Table 7.1
INITIAL INVESTMENT COST
Sr.
Total Cost
No.
Cost Items
(000 Birr)
16.0
990.9
75.0
Vehicle
225.0
Pre-production Expenditure*
315.1
Working Capital
537.3
1,530.0
3,689.3
Foreign Share
N.B
Pre-production
expenditure
includes
21
interest
during
construction
(Birr
215.03
thousand) training (Birr 20 thousand ) and Birr 80 thousand costs of registration, licensing and
formation of the company including legal fees, commissioning expenses, etc.
B.
PRODUCTION COST
The annual production cost at full operation capacity is estimated at Birr 3.13
million (see Table 7.2).
The material and utility cost accounts for 74.23 per cent,
while repair and maintenance take 2.4 per cent of the production cost.
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Table 7.2
ANNUAL PRODUCTION COST AT FULL CAPACITY ('000 BIRR)
Items
Cost
1,757.25
56.15
565.58
18.07
75
2.40
164.16
5.25
54.72
1.75
109.44
3.50
2,726.15
87.11
Depreciation
248.89
7.95
Cost of Finance
154.33
4.93
3,129.37
100
Utilities
Maintenance and repair
Labour direct
Factory overheads
Administration Costs
Total Operating Costs
C.
FINANCIAL EVALUATION
1.
Profitability
According to the projected income statement, the project will start generating profit in
the first year of operation. Important ratios such as profit to total sales, 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.
The income statement and the other indicators of profitability show that the project is
viable.
2.
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.
BE =
Fixed Cost
Sales Variable Cost
= 16 %
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3.
The investment cost and income statement projection are used to project the pay-back
period. The projects initial investment will be fully recovered within 4 years.
4.
Based on the cash flow statement, the calculated IRR of the project is 30 % and the
net present value at 8.5% discount rate is Birr 5.31 million.
D.
ECONOMIC BENEFITS
domestic needs, the project will generate Birr 2.48 million in terms of tax revenue.
The establishment of such factory will have a foreign exchange saving effect to the
country by substituting the current imports.