SEA LABEL TRADING PLC

Feasibility Study

CORRUGATED IRON SHEETS

MANUFACTURING PROJECT

NEXUS
INVESTMENT SOLUTION
 Feasibility Study

Acronyms
CIS: Corrugated Iron Sheet
KOSPI: Kombolcha Steel products Industry
KMPF: Kality Metal Products Factory
CSA: Central Statistical Agency

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Contents
List of Tables v

List of Figures vi

1. Executive Summary ............................................................................................................................................. 1

2. BACKGROUND ...................................................................................................................................................... 4

2.1 VISION & OBJECTIVES OF THE COMPANY ................................................................................ 4

3. Market Study ......................................................................................................................................................... 6

3.1 GENERAL OVERVIEW .......................................................................................................................... 6

3.2 PRODUCT DESCRIPTION ................................................................................................................... 6

3.3 SUPPLIED SIDE ...................................................................................................................................... 7

3.3.1 Ethiopian Metal Manufacturing Industry ......................................................................... 7

3.3.2 LOCAL PRODUCTION .......................................................................................................... 10

3.3.3 Import ........................................................................................................................................ 14

3.3.4 Total Supply ............................................................................................................................ 16

3.4 Demand ................................................................................................................................................ 17

3.4.1 Economic Growth .................................................................................................................. 17

3.4.2 CONSTRUCTION SECTOR GROWTH .............................................................................. 18

3.5 DEMAND ESTIMATION ................................................................................................................... 26

3.5.1 Demand and supply Gap .................................................................................................... 28

3.5.2 Supply projection .................................................................................................................. 28

4. Marketing Strategy ........................................................................................................................................... 31

4.1 Market Strategy................................................................................................................................. 31

4.1.1 SWOT Analysis........................................................................................................................ 31

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4.1.2 Generic Strategy .................................................................................................................... 32

4.2 Marketing Mix .................................................................................................................................... 32

5. Raw Material and Inputs ................................................................................................................................. 34

5.1 Raw Material ....................................................................................................................................... 34

6. Technology & Engineering ............................................................................................................................ 35

6.1 Technology ......................................................................................................................................... 35

6.2 Engineering ......................................................................................................................................... 39

6.2.1 MACHINERY & EQUIPMENT ............................................................................................. 39

CORRUGATED IRON SHEETS (CGI) ................................................................................................. 39

6.3 UTILITIES .............................................................................................................................................. 39

7. ORGANIZATION & MANAGEMENT ............................................................................................................ 40

7.1 GENERAL .............................................................................................................................................. 40

7.1.1 GENERAL MANAGEMENT .................................................................................................. 40

7.2 Staffing ................................................................................................................................................. 43

7.3 Training ................................................................................................................................................ 43

8. FINANCIAL ESTIMATION AND PROJECT .................................................................................................. 44

8.1 Investment Cost ................................................................................................................................ 44

8.2 Source of Finance ............................................................................................................................. 44

8.3 PROJECTED FINANCIAL STATEMENTS ...................................................................................... 45

8.4 FEASIBILITY ANALYSIS .................................................................................................................... 45

8.5 Project Assumptions ........................................................................................................................ 46

8.6 Investment Cost ................................................................................................................................ 49

8.7 Projected Profit & Loss Statement ............................................................................................. 50

8.8 Working Capital Determination .................................................................................................. 51

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8.9 Projected Cash Flow Statement................................................................................................... 52

8.10 Projected Balance Sheet................................................................................................................. 53

8.11 IRR & NPV ........................................................................................................................................... 54

8.12 Sensitivity Analysis ........................................................................................................................... 55

8.13 Ratio Analysis ..................................................................................................................................... 57

8.14 Loan Repayment Schedule ............................................................................................................ 58

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List of Tables

Table 1: Ethiopian standard for corrugated iron sheets ---------------------------------------------------------- 7

TABLE 2: PAID –UP CAPITAL OF METAL & ENGINEERING INDUSTRIES ---------------------------------------- 9
TABLE 3: ACTUAL VALUE OF PRODUCTION AS PERCENTAGE OF YEARLY CAPACITY (BASIC METAL &
ENGINEERING INDUSTRIES), 2011 ------------------------------------------------------------------------------------- 9
TABLE 4: LOCAL SUPPLY POTENTIAL OF ROOFING MATERIALS ------------------------------------------------ 12
TABLE 5: IMPORT OF IRON/STEEL SHEETS (2007-2011) --------------------------------------------------------- 15
Table 6: Total supply or apparent consumption------------------------------------------------------------------- 16
TABLE 7: GROWTH RATES OF GDP BY ECONOMIC ACTIVITY AT CURRENT PRICES (%) ------------------- 20
TABLE 8 GOVERNMENT INTEGRATED HOUSING DEVELOPMENT PROGRAM (2006/2007 - 2010/2011)
-------------------------------------------------------------------------------------------------------------------------------- 22
TABLE 9 GOVERNMENT HOUSING CONSTRUCTION PLAN DURING THE GTP PERIOD -------------------- 23
TABLE 10: OWNERSHIP STRUCTURE OF HOUSEHOLDS' DWELLINGS ----------------------------------------- 24
Table 11: Summary Of Licensed All Investment Projects by Sector and Status --------------------------- 25
TABLE 12: CORRUGATED IRON SHEETS DEMAND (TON), time series method ---------------------------- 26
Table 13: Projected Demand------------------------------------------------------------------------------------------- 27
Table 14: Estimated demand of Corrugated Iron Sheets (tons) ----------------------------------------------- 28
Table 15 summary of licensed metal investment project by status and type during 2008-2012.----- 28
Table 16: Supply projection based------------------------------------------------------------------------------------ 29
Table 17: Demand and Supply Gap ----------------------------------------------------------------------------------- 29
Table 18TABLE 19 : SPECIFICATION OF RAW MATERIALS ------------------------------------------------- 34
Table 20: STANDARDS FOR CORRUGATED IRON SHEETS -------------------------------------------------------- 35
Table 21: UTILITIES ------------------------------------------------------------------------------------------------------- 39
Table 22: Summary of Salary and Wages of Employees --------------------------------------------------- 43
Table 23: Financing Structure------------------------------------------------------------------------------------------ 44

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List of Figures

FIGURE 1: NO. ESTABLISHMENTS OF BASIC IRON &STEEL INDUSTRIES, 2010/11 -------------------------- 8

FIGURE 2: REGIONAL DISTRIBUTION FOR BASIC IRON AND STEEL INDUSTRY ------------------------------- 9
FIGURE 3: LOCAL PRODUCTION OF IRON SHEETS ----------------------------------------------------------------- 14
FIGURE 4: IMPORT QUANTITY AND VALUE OF CORRUGATED IRON SHEETS IN ETHIOPIA (2007 - 2011)
-------------------------------------------------------------------------------------------------------------------------------- 16
FIGURE 5: PROJECT GDP ---------------------------------------------------------------------------------------------- 177
FIGURE 6: PROJECTED INDUSTRIAL GROWTH % GDP ------------------------------------------------------------ 18
FIGURE 7: DWELLING CHARACTERISTICS IN URBAN AREAS -------------------------------------------------- 245
Figure 8: CORRUGATED IRON SHEET PITCH AND LENGTH ------------------------------------------------------ 36
FIGURE 9: ORGANIZATION STRUCTURE ----------------------------------------------------------------------------- 42

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1. Executive Summary
This feasibility study prepared for Sea Label Trading PLC to assess the viability of
establishing a corrugated iron sheet factory at Debre-birhan some 130 km away from
Addis Ababa to the north.
Sea Label Trading PLC is owned by young, knowledgeable and energetic business men
and woman with the objective of trading and investment on Industry.
The study includes market, technical, organization & management and financial
feasibility study components.

Market

The market study conducted indicated that there is an ample demand for corrugated
iron sheet products that are basically used in the construction sector. The construction
industry makes significant contributions to the socio-economic development process of
the country. Its importance emanates largely from the direct and indirect impact it has
in all economic activities. The construction sector has been growing significantly over
the past decade. With a rapidly growing GDP, GDP growth rate by the construction
sector was 13% in 2001/02 and reached 26.2% in 2010/11. The ten year average GDP
growth rate by the construction activity is 22.05%.
Corrugated Iron sheets are mainly used for roofing and wall cladding purposes. Most
rural residences are covered by roofing made of grass. Due to the economic
development registered consecutively for the past six years, the per capita income has
shown significant growth. The rural home owner is changing the grass roofing with
corrugated iron sheets. This is being observed in every part of the country. In urban
areas, majority of dwellers are living in rented houses. There is an acute shortage of
houses all over the country. At the country level, the percentage of rented houses has
increased from 49.4% in year 2004 to 50.3 % in year 2011. This indicates that huge

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number of houses needs to be constructed all over the country demanding huge
quantity of corrugated iron sheet for roofing.

Corrugated iron sheets demand has been fulfilled through supply both from local
production and imports from countries like India. In this regard, the feasibility study
confirmed that unfulfilled demand will continue to increase.
The corrugated iron sheet demand is projected to reach 1,566,815 M. tons in year
2018.

Technical

The envisaged factory is planned to be located at Debre-Berhan, some 130km away

from the capital Addis Ababa to the north. The project site is ideal in that the necessary
infrastructure is fulfilled.
The plant will have a state of the art machineries and equipment for corrugated iron
sheet manufacturing.

The plant will have an annual capacity of profiling 7,582 tons of corrugated iron sheet
based on 300 working days. Accordingly, it is planned that the plant will produce
1,080,000 sheets of 0.2 mm (35 gauge), 440,791 sheets of 0.25 mm (32 gauge), 208,668
sheets of 0.32mm (30gauge) and 112,990 sheets of 0.4mm (28gauges).

Organization & Management

A lean and efficient organizational structure headed by General Manager, with the
supporting staff has been envisaged. The General Manager will function as the overall
Head and will be supported by Departmental Heads of Operation and Administration,
Marketing& Finance.

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The total manpower requirement for both the plant and administration has been
estimated to be 22 on the basis of functional requirement of a modern plant.

Finance

The total Investment cost of corrugated iron sheet factory project is estimated to be
Birr 35,301,905. Of this, Birr 9,379,189 is the cost of fixed assets while Birr 25,922,719
is the cost of working capital and pre operational costs.
The project’s investment cost will be covered from owner’s equity and Bank loan. The
projected profit and loss statement indicates that the engineering design and
fabrication unit will make a net profit of Birr 12.6 million Birr in the first year of
operation. The cash flow statement also indicates that the project is liquid.

Financial return analysis indicates that the project will generate an acceptable internal
rate of return.

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2. BACKGROUND
Sea Label Trading PLC a private company with limited liability, duly incorporated under
the laws of Ethiopia.

The founders of the company have long experiences and remarkable success records in
business and investment in Ethiopia.

A general manager appointed by the general assembly, runs the day-to-day activities of
the company through various departments and services. A general Manager will
receive guidance from the advisory board and report its activity to the advisory board.

2.1 VISION & OBJECTIVES OF THE COMPANY

The Company has a vision of becoming a leader in metal and engineering sector while
satisfying customers through high standard product and services. Sea Label aims to
provide quality steel products to its customers and believes that customers’
relationship is the key to the company prosperity. It also aims to contribute its share to
the country’s economic development.

The corrugated iron sheet manufacturing Industry has established its vision; as
becoming ‘a leading steel products manufacturer’. This will be achieved through
becoming a multifaceted company committed to providing maximum customer
satisfaction. To achieve this vision, it has been resolved upon a set of strategies.
Executing these strategies translates directly in to the ability to serve the company’s
vision and objectives. The company’s visions are to be implemented through local and
external partnership.

The company has the following objectives;-

 To generate income (profit) to the shareholders;

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 To manufacture and supply quality steel products to its customers.

 To contribute to the socio-economic development of the nation at large and
to the industrial sector in particular.
The company leverages the intrinsic values of the in-house capacity by adopting and
integrating it with new practices and efforts that complement the company’s core
objectives thereby allowing it to operate at maximum efficiency.

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3. Market Study
3.1 GENERAL OVERVIEW
According to the world steel association, demand for steel products will pick in the
years to come.
Apparent steel use in China is expected to grow by 3.5% in 2014 following a 1.9%
increase in 2013. In 2015, steel demand is expected to grow by 2.5% as the Chinese
government’s measures to control investment in an effort to rebalance the economy
will remain in place.
In India, steel demand is also expected to pick up and will grow by 5.9% in 2014
following 2.5 % growth in 2013 as monetary easing is expected to support investment
activities. In 2015, growth in steel demand is expected to further accelerate to 7.0%
thanks to the reform measures aimed at narrowing the fiscal deficit, coupled with
measures to improve the foreign direct investment climate.
In 2013, in the US, after growth of 8.4% in 2012 due to the automotive and energy
sectors and an increasingly resilient construction recovery, apparent steel use is
forecasted to grow by 2.7%. In 2015, steel demand is expected to increase by 2.9%.
Steel demand in the MENA region is expected to grow by 3.2% in 2014 after 2.2%
growth in 2013 aided by reconstruction activities in the Arab Spring countries and Iraq
as political turmoil in the region phases out. In 2015, steel demand in the region will
further accelerate to 7.1% growth to reach 70 Mt supported by strong construction
activities.
In Sub-Saharan Africa the steel demand will grow sharply, as most countries are
registering growth.

3.2 PRODUCT DESCRIPTION

Corrugated iron sheets: is a building materials made by cold rolling mild steel and
galvanizing it to produce a liner corrugated pattern. Corrugated iron sheets are
classified according to their thickness and surface area. Standard gauge sizes are 28, 30,

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32 and 35. It is usually manufactured 2 meters in length and 1 meter in width.

Corrugated iron sheets are mostly used for roofing and fencing.

The table below (Table 1) illustrates Ethiopian standard for corrugated iron sheets.
Table 1: Ethiopian standard for corrugated iron sheets
Thickness
t Breadth Length
(excluding coating) b l Zinc Coating Nominal
Mass per
sheet
(including
Nominal Tolerance Nominal Tolerance Nominal Tolerance Minimum Correspo
coating)
mm mm mm mass on nding
kg
two sides thickness
g/m2 on each
side
µm
0.16 2.88
±10% 875 +25 2000 +20 183 13
0.20 -15 -0 3.50
0.25 4.29
0.32 ±10% 875 ±10 2000 +20 -214 15 5.45
0.40 -0 6.71
0.50 ±10% 875 ±8 2000 +20 305 21 8.46
0.63 -0 10.50
0.50 ±10% 875 ±8 3000 +30 305 21 12.69
0.63 -0 15.57
Source: Ethiopian authority for standardization (ESA)

3.3 SUPPLIED SIDE

3.3.1 Ethiopian Metal Manufacturing Industry
With regard to increasing the output of the metal and engineering industries, the
Ethiopian Government, during the Growth & Transformation Period (GTP), planned to
increase per capita consumption of steel products and substitute imported goods with
locally manufactured products. This is done by increasing the volume of productivity
and quality of products of the sub-sector and increasing in capacity utilization of steel
and engineering industries. The major indicator for this is the gross value addition of
the sub-sector, per capita steel consumption and growth in capacity utilization.

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According to Metal Industry Development Institute (MIDI), the main vision of the
country with respect to metal and engineering industry is to see internationally
competitive metal and engineering industry in Ethiopia and to provide sector specific
and coordinated technology support by making use of capable professionals with the
view of enhancing the capacity and use of technology.

Currently, Ethiopian Iron and Steel industry is at its infant stage with few players
supplying the market with products like corrugated iron sheets, reinforcement steel
bars, hollow sections, nails, wires, etc. Figure 1 illustrates the number and form of
ownership of basic iron and steel industries in, 2010/11.

FIGURE 1: NO. ESTABLISHMENTS OF BASIC IRON &STEEL INDUSTRIES, 2010/11

39
40

30
18
20
9
10 4 3 2 2 1
0

SOURCE: CSA, 2012

As shown in the figure above, most of basic iron and steel industries are owned by
individuals while the rest are categorized under different ownerships.

With regard to the location, most are located in Addis Ababa followed by Oromia
Regional State.

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FIGURE 2: REGIONAL DISTRIBUTION FOR BASIC IRON AND STEEL INDUSTRY

Dire dawa, 2

Tigray, 8

Addis Ababa,
16
Oromia, 10

Amahara, 3

SOURCE: CSA, 2012

Metal industry is classified under capital intensive investments. The majority of the
industries stated above are heavy industries with registered capital of over a hundred
millions. However, there are also small scale metal industries that manufacture items
that need few equipment.
TABLE 2: PAID –UP CAPITAL OF METAL & ENGINEERING INDUSTRIES
<1,000,000 >1,000,000
No. of
13 26
establishments

SOURCE: CSA, 2012

The performance of Ethiopian metal and engineering industries is relatively low; with
an average capacity utilization of 53.48%.
TABLE 3: ACTUAL VALUE OF PRODUCTION AS PERCENTAGE OF YEARLY CAPACITY (BASIC
METAL & ENGINEERING INDUSTRIES), 2011
Actual value Value of production at Actual value of
of production full capacity production as % of
yearly capacity
In 000’ Birr 2,531,830 4,734,522 53.48
SOURCE: CSA, 2012

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As shown in Table 3 above, in year 2011, actual value of production as percentage of

yearly capacity is about 53.48%. The main reasons attributed to low capacity utilization
are shortage of supply of raw materials, lack of working capital and others.
3.3.2 LOCAL PRODUCTION
The Ethiopian metal industries produce EGA-roofing and wall cladding sheets, cut to
length sheets from coils, fine corrugated galvanized sheets, small U-channel sections,
secco-profiles (door and window frames), tubular hollow sections(circular, square and
rectangular), steel structures for various applications.

The industries producing/processing corrugated iron sheets are a mix of old and new
entrants. These industries are briefly discussed below:

Corrugated iron sheets

Corrugated galvanized iron sheet, commonly abbreviated CGIS, is a building material
made of galvanized mild steel and cold-rolled to have a linear corrugated pattern. The
corrugations increase the bending strength of the sheet in the direction parallel to the
corrugation.

In Ethiopia, Corrugated sheets have been used for roofing purposes since Emperor
Minilik’s time. During that time, only the royal families and homes of the king’s officials
were roofed by corrugated galvanized iron sheets. All the other houses were hut type
covered with grasses.

The first factory to produce corrugated iron sheets was the Akaki Metal Products
Factory established during Emperor Haile Silasie’s regime. As towns and cities
expanded and newly established in different parts of the country, corrugated iron
sheets became popular roofing material. This further promoted the demand for
corrugated galvanized iron sheets.

Today, there are many factories which produce different types of roofing materials.
Very recently, clay roofing, EGA sheets are becoming used for residential houses and

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industrial buildings. The major factories that supply corrugated galvanized iron sheets
(CGIS) are discussed below:

1. Kombolcha Steel products industry (KOSPI): a member of the MIDROC Ethiopia

technology Group, produces galvanized corrugated iron sheets which are used
for roofing and fencing, with length up to 3.66 meters and thickness of :
 0.20 mm (USG-35)
 0.25 mm (USG-32)
 0.32 mm (USG-30)
 0.40 mm (USG-)
KOSPI has an annual capacity of 40,000 tons at both its Kombolcha and Gelan
plants.

2. Alem Steel PlC: Is a privately owned steel company established in 1998. The
company is located in Addis Ababa, around Hana mariam area and produces
Galvanized roofing sheets. Alem steel has an annual capacity of 36,000 metrics
tones annually.
3. Osaka Steel Plc: Is a privately owned steel company established in 2002. The
company is located in Addis Ababa, around Hana mariam area and produces
Galvanized roofing sheets. Osaka steel has an annual capacity of 36,000 metrics
tones annually.
4. DH Geda is a private limited company that produced Galvanized iron sheets
with different gages. The company’s capacity under three shifts per
dayoperation is about 25,520 metric ton of light gauge and 31, 200Metric Ton
of heavy gauges per annum. The product classifications of DH-Geda corrugated
iron sheets are:
 020 mm x 875 mm x 2000 mm
 025 mm x 875 mm x 2000 mm
 032 mm x 875 mm x 2000 mm
 040 mm x 875 mm x 2000 mm

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5. Kaliti Metal Products Factory (KMPF): KMPF was established in 1968 by an

Italian owner.The factory used to be under Government ownership and is
currently transferred to private ownership. The factory is engaged in:
 Production of furniture and structural hollow sections
 Galvanized and black Secco and LTZ door and window
profiles
 Galvanized and pre-coated EGA sheets for roofing and
wall cladding
 Plain and press formed metal products.

The factory is located in Akaki- Kaliti sub city and has a manufacturing capacity
of 9,440 tons of corrugated iron sheets per annum.

6. Akaki Metal Products Factory: the factory is a privately owned manufacturing

plant located in Akaki town, about 25 km away from Addis Ababa. The factory
produces water pipes, corrugated sheets and square, circular and rectangular
hollow sections. Its annual capacity is about 22,000 tons of corrugated iron
sheets.

Table 6 illustrates that major factory that supply corrugated galvanized iron sheets
(CGIS) in local markets.
TABLE 4: LOCAL SUPPLY POTENTIAL OF ROOFING MATERIALS
No Factory
1 Yesu Plc
2 Alem Steel Plc
3 Kombolcha Steel Products Industry
4 Ethiopian Steel Plc
5 DH Geda Corrugated Galvanized Iron
Sheets Factory
6 Akaki Metal Products Factory
7 Kaliti Metal Products Factory
8 Bereket Corrugated Galvanized Iron
Sheets Factory

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9 Bahiru Corrugated Galvanized Iron

Sheets Factory
10 Gatepro Plc
11 Argawi Corrugated Galvanized Iron
Sheets Factory
12 Dashen Corrugated Galvanized Iron
Sheets Factory
13 Selam Steel Factory
14 Gelan Metal Industries Plc
15 Osaka Steel Plc
16 Hadeed plc
17 Alem Genet Steel Factory
18 BMK Steel Industry

A large proportion of the country’s requirement for corrugated iron sheets has been
met through domestic production. Figure 3 shows the supply of the product from
domestic productions. The average domestic production during 2005/06 to 2006/07
was about 359,598 tons. A huge increase is observed during recent years i.e. 2006/07-
2008/2009. By the year 2006/07 domestic production registered 604,973 tons and this
subsequently increased to 643,903 tons in year 2007/08. During the following two
consecutive years; local production reached its peak value of 785,925 tons in year
2008/09 and afterwards the production declined to 464,304 tons in year 2009/10. The
production further declined in year 2010/11 to 147,299 tons.

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FIGURE 3: LOCAL PRODUCTION OF IRON SHEETS

900,000
800,000
700,000
600,000

Units (ton) 500,000

400,000
300,000
200,000
100,000
0
2005/06 2006/07 2007/08 2008/09 2009/10
Units ( tones) 114,223 604,973 643,903 785,925 464,304

SOURCE: CSA
3.3.3 Import
Metals, in different forms are imported to Ethiopia each year. In fact, metals are one of
the major imported items. These products include:
 Butt welding fitting of iron or steel
 Threaded elbows, bends and sleeves of iron or steel
 Flags of iron or steel
 Tubes or pipe fitting of stainless steel
 Butt welding fitting (excel elbow and bends) of stainless steel
 Flanges’ of stainless steel
 Railway rails of iron or steel
 Hollow drill bars and rods of alloy or non-alloy steel
 Bars and rods of alloy steel
 Angles, shapes and section of iron or steel
 Sheet piling of iron or steel
 Wire of alloy steel
 U, I or H section of iron/steel, hot rolled, etc

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Each year, Ethiopia spends hundreds of millions dollar to import metal products. In the
past decades alone (2002-2011), the country has spent more than 3 billion dollars on
import of metal products.

CORRUGATED IRON SHEETS

The source of supply of corrugated iron sheets is both domestic production and
import. Corrugated iron sheets that are supplied to the Ethiopian market from
import in the past seven years are summarized in table 5 below.
TABLE 5: IMPORT OF IRON/STEEL SHEETS (2007-2011)

Year Net mass (ton)

2005 6,452.64
2006 592.02
2007 156.54
2008 763.48
2009 16,547.11
2010 17,051.95
2011 8,043.45
Source: ERCA
As could be observed from figure 4 below, import of CIS in the past seven years
has been very erratic. Import of Corrugated iron sheets in year 2005 was 6,452
M.Tons and this has decreased by 91% and reached 592 tons by the year 2006
and again declined to 156 tons by the year 2007. During the year 2008, the
imported quantity was about 763 M.Tons and when compared to the previous
year, imported quantity of CGI has increased more than four folds. A huge
increase is observed during the recent two years i.e. 2009 and 2010. In 2009
and 2010 the import volumes registered 16.5 thousand tons and 17 thousand
tons respectively. While in 2011 the import volumes of CGI declined by 53% as
compared to previous year.

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FIGURE 4: IMPORT QUANTITY AND VALUE OF CORRUGATED IRON SHEETS IN ETHIOPIA (2007 - 2011)

20,000.00

ton 15,000.00

10,000.00

5,000.00

0.00
2005 2006 2007 2008 2009 2010 2011

300,000.00
250,000.00
CIF Value ('000ETB)

200,000.00
150,000.00
100,000.00
50,000.00
0.00
2005 2006 2007 2008 2009 2010 2011

Source: ERCA

3.3.4 Total Supply

The apparent consumption or total supply of corrugated iron sheets in Ethiopia is
composed of domestic production and import. Table 6 indicates the total supply of
corrugated iron sheets during the period 2005 - 2011.
Table 6: Total supply or apparent consumption
Annual Import of Total production
production of CGI in ton in ton
CGI in ton
2006 114,223 592 114,815
2007 604,973 156 605,129
2008 643,903 763 644,666
2009 785,925 16547 802,472
2010 464,304 17051 481,355
2011 625,115 8043 633,158

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Total supply of corrugated iron sheets, exhibited an increasing trend.

The total supply or apparent consumption which was 114, 815 tons in year 2006,
increased to 644,666 tons in year 2008 after which, it increased to 802,472 tons in year
2009. However, in year 2010, supply has decreased to a level of 481,355 tons due to
low quantity of local production.

3.4 Demand
Corrugated iron sheet, the sole initial product of the envisaged project is used for
construction purposes. Hence, the demand for the product mainly depends on growth
of the economy in general and specifically on the growth of the construction sector.

3.4.1 Economic Growth

The economic growth plan, labeled the Five-year Growth and Transformation Plan
(2011- 2015), envisages the economy to grow, at worst, by 11pc every year .
The country, in the past five years, has been growing at an average rate of 11%, which
used as a basis for the projection of GTP years. The plan focuses on seven strategies,
called the pillars of the plan, which include the rapid growth of the agriculture sector,
industry, improvement of social services, etc.

FIGURE5: PROJECT GDP

11.4

11.2

11
GDP Growth rate

10.8

10.6

10.4

10.2

10

9.8
2010/11 2011/12 2012/13 2013/14 2014/15

SOURCE: GTP

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The growth is expected to be broad based. Agriculture is expected to grow by 8.6% per
annum while industry and services are expected to show average annual growth of
20% and 10%.
FIGURE 6: PROJECTED INDUSTRIAL GROWTH % GDP
Projected Industrial Growth% GDP
25

20

15

10

0
2010/11 2011/12 2012/13 2013/14 2014/15

SOURCE: GTP

3.4.2 CONSTRUCTION SECTOR GROWTH

The construction sector has been growing significantly over the past decade. This
increase is due to the significant increases in both private and government expenditure
in the industry. On the part of the government, massive road and building construction
activities have been undertaken. The private sector has also been actively involved
although overall construction is dominated by the government. Similarly the share of
real estate and rentals has increased significantly during the past few years from
around 6 percent in 2000/01 to about three fold in recent years. This increase in the
share of the real estate and renting is partly attributed to the increase in construction
sector and a relatively increased allocation of the share of household income to the
sector.
As described above the investment in the construction sector is largely dominated by
government investments.

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In 2011, the Ethiopian parliament approved a capital budget expenditure of Birr 16

billion. Of the total budget 27% planned for the construction sector while 14% put on
the rural road construction and the remaining 13% goes to urban development.
The boom in real estate and residential houses construction is another driving actor for
growth. The need for housing in the city has been a pressing issue for decades and to
address this sizable and growing deficiency by both the private and public sectors has
taken on a new level of prominence in the economy.

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TABLE 7: GROWTH RATES OF GDP BY ECONOMIC ACTIVITY AT CURRENT PRICES (%)

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003
Industry/Year 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/082008/9 2009/10 2010/11

Agriculture, Hunting and Forestry (10.6) 6.3 22.4 30.8 27.7 29.9 54.4 37.2 3.1 32.9
Crop (19.6) 13.9 32.0 38.3 29.7 36.6 65.4 39.6 (2.3) 31.9
Animal Farming and Hunting (1.5) (2.0) 11.6 25.9 29.7 19.2 32.8 35.1 17.8 39.6
Forestry 4.4 2.0 12.4 9.3 11.3 20.5 41.2 21.9 8.6 17.8
Fishing (0.1) (25.3) 97.2 33.8 24.5 17.4 43.3 30.5 31.3 9.6
Mining and Quarrying 6.5 13.8 4.1 18.4 20.8 (6.0) 44.9 37.9 94.9 217.2 (2.8)
Manufacturing 10.2 9.0 11.1 18.2 29.0 29.6 27.7 17.0 22.1 (6.5) 16.0
Large and Medium Scale Manufacturing 10.5 6.6 21.6 33.9 31.4 20.2 17.3 18.8
Small Scale and Cottage Industries 4.2 0.4 6.0 20.4 12.0 19.2 25.7 45.1 16.4 28.5
Electricity and Water 5.6 6.9 15.2 7.7 18.7 35.4 11.0 6.8 18.2 19.1
Construction 13.0 15.2 25.3 19.1 25.6 33.9 29.5 33.9 (1.2) 26.2
Whole Sale and Retail Trade (4.0) 18.6 14.1 20.8 31.9 37.7 44.3 52.4 12.4 25.0
Hotels and Restaurants 9.5 7.4 11.0 17.4 34.2 53.6 48.6 57.7 43.5 46.6
Transport and Communications 6.6 12.2 19.7 36.2 0.6 15.5 17.9 36.6 25.2 54.8
Financial Intermediation (26.6) 37.5 13.0 22.2 35.2 20.8 36.1 58.9 2.5 46.1
Real Estate, Renting and Business Activities 28.2 12.2 5.4 10.8 21.8 46.7 49.4 21.6 49.1 40.2
Public Administration and Defense 0.1 6.4 (0.5) 14.3 16.2 16.5 32.0 23.3 18.2 30.3
Education 17.3 27.0 5.9 15.7 27.0 27.4 28.2 19.3 19.6 12.4
Health and Social Work 3.0 (2.7) 16.5 22.3 14.9 21.9 32.9 21.0 18.5 25.1 (2.4)
Other Community, Social & Personal Services 16.7 13.8 15.4 22.5 27.9 39.8 44.3 11.1 23.8
Private Households with Employed Persons 6.4 8.1 10.0 6.5 32.2 15.7 36.5 33.1 8.1 31.6
Total (2.4) 10.6 16.1 23.7 24.6 31.0 44.8 36.7 12.1 33.8
Less: FISIM (37.5) 36.0 16.8 14.9 47.4 19.2 38.1 53.5 10.6 31.3
Gross Value Added at Current Basic Prices (2.0) 10.4 16.1 23.8 24.4 31.0 44.9 36.6 12.1 33.8
TaxesonProducts (3.6) 9.4 43.0 13.3 14.5 25.7 37.7 14.0 48.5 29.1
GDP at Current Market Prices (2.2) 10.3 18.0 22.9 23.6 30.6 44.4 35.1 14.2 33.5

Source: MOFED

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 Feasibility Study

As shown in Table 7 GDP growth rate by the construction sector has registered a substantial
increase over the years. The growth is characterized by a slight drop in some years. The average
ten year growth of GDP by construction sector is 22.05%.

Therefore, the construction sector has grown in recent years dramatically, where a number of
construction activities have been undertaken in different parts of the country.

Housing Construction Plan

The urban development policy underlines development of housing by associations & individuals,
Government and real estate developers. Housing production is impeded primarily by a severe
shortage of serviced residential plots. The low supply of residential land in relation to demand
has pushed prices beyond the reach of the large majority of the city dwellers. The price of
acquiring use rights to residential plots has risen much faster than the inflation rate in recent
years as a result of stagnant production and low availability.

In the capital Addis Ababa, The houses that are going to be constructed by associations and
individuals are becoming low in units as there are no enough plots allocated for such purpose. In
this regard, the current trend is mainly diverted to Government condominium houses and real
estate development activities.

Following the Growth and Transformation Plan, the Government of Ethiopia announced that it
will give land for association and individuals to enable them construct houses.
The Government has planned to construct low cost houses in all parts of the country. From year
2006/2007 to 2010/2011, the Integrated Housing Development program issued by the Ministry of
Works and Urban Development indicate that, 396,000 houses were to be constructed in 194
towns.

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 Feasibility Study

The table below shows the Government plan for year 2006/2007 to 2010/2011.
TABLE 8 GOVERNMENT INTEGRATED HOUSING DEVELOPMENT PROGRAM (2006/2007 - 2010/2011)
Region 2006/2007 2007/2008 2008/2009 2009/2010 Total
No. of No. of No. of No. of No. of No. of No. of No. of No. of No. of
Towns Houses Towns Houses Towns Houses Towns Houses Towns Houses
Oromiya 11 9020 14 12628 18 18040 23 27060 66 66748

Amhara 7 6710 10 9394 13 13420 18 20130 48 49654

Debub 7 4950 9 6930 12 9900 16 14850 44 36630
Tigray 5 4070 7 5698 9 8140 12 12210 33 30118
Diredawa 1 1650 1 2310 1 3300 1 4950 4 12210

Harar 1 1100 1 1540 1 2200 1 3300 4 8140

Addis 1 33000 1 38500 1 55000 1 66000 4 192500
Ababa
Total 33 60500 43 77000 5 60500 72 148500 194 396000

Source: Integrated Housing Development Program, Ministry of Works & Urban Development

According to Growth and Transformation Plan (GTP) document released recently, by the end of
2009/10, out of the planned 396,000 houses, only 213,000 houses had been built in various
regions and city administrations. The achievement stands at 54%, only a little above half. This is
very low aggravating the housing problem.

During the GTP period (2010/11 – 2014/15), low cost housing would also be promoted for the
low and middle income households particularly in Addis Ababa. The housing program is planned
to be executed in a way it promotes domestic savings, reduced slums and improves the urban
development.

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 Feasibility Study

The Government’s plan in the GTP period is summarized in the table below.
TABLE 9 GOVERNMENT HOUSING CONSTRUCTION PLAN DURING THE GTP PERIOD
Indicator Base Year Annual Targets(‘000)
(2009/10) 2010/11 2011/12 2012/13 2013/14 2014/15
Number of houses 53 30 30 30 30 30
constructed and transferred
to users in Addis Ababa (‘000)
Decreased in Slum Areas (%) 60 54 45 42 36 30

Number of low cost house 4 4 4 4 4

construction designs (‘000)
Source: Growth & Transformation Plan, Volume II: policy Matrix, MOFED

In other regional administration, condominium houses like that of Addis Ababa are not popular
and in some regional cities it has failed as there were no buyers. However, though not as much
gear as the previous planning period, Regional Governments will continue to build condominium
houses during the GTP period.

Household Characteristics

The central Statistics Agency undertakes household survey every four years. Dwelling and/or
other status of households demonstrates the economic welfare of the households.

Most rural people own their residence, made of inferior quality. This has contributed
tremendously to the national average figure of 84.3 (2004/05). In urban areas, one can estimate
that there is low dwelling ownership and this is manifested by acute shortage of houses in many
major cities of the country.

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 Feasibility Study

TABLE 10: OWNERSHIP STRUCTURE OF HOUSEHOLDS' DWELLINGS

Tenancy Status Survey year
and Place of 1996 1998 2000 2004 2011
Residence
Country
Owned 90.3 88.4 85.1 84.3 84.3
Rented 6.6 7.2 7 8.8 12.2
Rent Free 3.1 3.2 6.1 6.2 2.8
Others 0.1 0.2 0.7 0.7 0.6
Not Stated 0.0 1 1.2 0.0 0.0
Rural
Owned 97.5 95.3 91.4 92.1 95
Rented 0.4 0.9 0.6 1.2 1.9
Rent Free 2.4 2.7 6.3 6.1 2.2
Others 0.6 0.2 0.5 0.6 0.4
Not Stated 0.9 1.2 0.0
Urban
Owned 52 46.9 47.8 42.8 43.1
Rented 41 45.5 44.5 49.4 50.3
Rent Free 6.9 6 6 6.7 1.3
Others 0.1 0.3 0.3 1.1 0.1
Not Stated 1.4 1.4 0.0

Source: Welfare Monitoring Survey, Central Statistics Agency (CSA)

As shown in table 14 above, dwelling ownership in urban area is below 50%.

FIGURE 7: DWELLING CHARACTERISTICS IN URBAN AREAS
60

50
owned
40
rented
30
%

rent free
20 others
10 not stated

0
1996 1998 2000 2004 2011

SOURCE: CSA

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 Feasibility Study

Surprisingly, the rented percentage in urban areas increased from 49.4% to 50.3 % during 2004 to
2011 respectively. This indicates that housing problem has increased from year to year. The trend
indicated in figure 8 shows that current dwelling ownership is below 50%.

Due to favorable economic policy and investment environment, a number of investments are
being carried by foreign and local private investors.

The gradual integration of the country into the global economy coupled with the growing inflow
of foreign direct investment has caused a large number of people to come to the country.
Accordingly, the number is believed to grow significantly during the growth and Transformation
period (GTP).

These investments need corrugated iron sheets even for fencing.

Table 11: Summary Of Licensed All Investment Projects by Sector and Status
Since January 01, 1992 - 2012
No. of Projects
Investment Implementation Operational Pre-implementation Total
Type Phase Phase phase
Domestic 2,232 4,452 37,900 44,584
Foreign 501 1,258 5,898 7,657
Total 2,733 5,710 43,798 52,241
Source: Ethiopian Investment Agency
As shown in Table 11, the numbers of projects which are in under implementation and pre-
implementation phase are almost 85% of the total projects. Surely, these will demand huge
corrugated iron sheets.

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 Feasibility Study

3.5 DEMAND ESTIMATION

The demand for Corrugated iron sheets is projected based on the following two methods:

1. Historical growth (Time series): this method assumes that past supply trend will continue
in the future. The historical supply data is fitted to a power equation of
190016x0.8283 to project the future demand.

1,200,000
y = 190016x0.8283
1,000,000 R² = 0.5964

800,000

600,000

400,000

200,000

0
2006 2007 2008 2009 2010 2011

TABLE 12: CORRUGATED IRON SHEETS DEMAND (TON), time series method
Year Demand
(Ton)
2014 1,118,479
2015 1,226,418
2016 1,332,420
2017 1,436,700
2018 1,539,433

2. End user consumption Method: In this method the following assumptions are used to
project the approximate end user demand of corrugated iron sheets. These are:
The Ethiopian population will increase by 2.6% per annum.
According to CSA, household size about five people.
The trends that shift from grass and other roof construction materials to
corrugated iron sheets are increased by on average by 10 % per annum (basedon
GDP growth planned during the GTP).
One house will use at least 30 pieces of corrugated iron sheets.

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 Feasibility Study

Most of the time the house use 35 gages of corrugated iron sheets for roof and
this gages has 3.15 kg weight.

Based on those assumptions the demand for corrugated iron sheets are reached 1,474,196.85
tons in 2018. See the table below Table 13: Projected Demand
Year Population Household New House roof shift Total house Total T
house from other (roof with consumption of Cor
materials to CIS CIS) CIS in piece she
2014 88,762,679 17,752,535.86 449,869.33 10,314,496.55 10,764,365.88 1,017,232,575.41 1,
2015 91,070,509 18,214,101.79 461,565.93 11,345,946.20 11,807,512.13 1,115,809,896.73 1,
2016 93,438,342 18,687,668.44 473,566.65 12,480,540.82 12,954,107.47 1,224,163,155.84 1,
2017 95,867,739 19,173,547.82 485,879.38 13,728594.90 14,214,474.28 1,343,267,819.86 1,
2018 98,360,300 19,672,060.06 498,512.24 15,101,454.40 15,599,966.64 1,474,196,847.34 1,

Project demand iron sheets in tones (end user method)

Year Projected demand
2014 1,017,232.58
2015 1,115,809.90
2016 1,224,163.16
2017 1,343,267.82
2018 1,474,196.85

When an end user consumption method and times series analysis compared; both methods
resulted in similar trend quantities with close differences. Hence, the average of the two is taken
as the demand for corrugated iron sheets.

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 Feasibility Study

Table 14: Estimated demand of Corrugated Iron Sheets (tons)

Year Projected demand
2014 1,067,856
2015 1,171,114
2016 1,278,292
2017 1,389,984
2018 1,506,815

3.5.1 Demand and supply Gap

3.5.2 Supply projection

As described in section 3.3.4, the supply of corrugated iron sheets has shown an increasing
trend until 2009. It dropped in year 2010 and again picked in year 2011. The metal and
engineering industries are one of the key identified industrial subsectors that are given
emphasis during the five years Growth & Transformation Plan.
The supply projection made considers the growth trend of local industries and pipeline
projects.

3.5.2.1 New Entrants

According to information obtained from Ethiopian Investment Agency, 217investment

licenses have been issued to both local and foreign investors in the metal sector during the
period 2008-2012. The investments registered a total capital of Birr 5.6 billion. Out of the
total approved projects, majority (204) are under the pre-implementation phase while 6
projects are under implementation phase.
Table15summary of licensed metal investment project by status and type during 2008-2012.
Number of project
Investment Pre-implementation Implementation Operation Total
type
No. of Capital in Birr No. of Capital in No. of Capital in No. of Capital in
project ‘000 project Birr ‘000 project Birr ‘000 project Birr ‘000

Domestic 186 2,688,422 3 31,067 3 1,080 192 2,720,568

foreign 18 2,921,877 3 9,800 4 11,000 25 2,942,677
204 5,610,299 6 40,867 7 12,080 217 5,663,245

Source: Ethiopia Investment Agency, 2013

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 Feasibility Study

Almost all the pipeline projects are targeted towards establishing rolling mills for
reinforced bars, hollow sections, etc.

In order to project the supply, the trend of gross value of production at national level is
analyzed. The average growth of actual gross value production at full capacity at current
market price of metal industries, according to the data obtained from Central Statistical
Agency, grew on average by 4% during 2009/10 to 2010/11. As the corrugated iron sheet
manufacturing is classified under this category, it follows similar trend. Hence, assuming
the supply will grow with the above stated average rate, the supply is projected as below.
Table 16: Supply projection based
Project supply in tons
2014 718,782
2015 747,534
2016 777,435
2017 808,533
2018 840,874

The demand supply gap is calculated based on the demand and supply projection made
elsewhere in this document. Table 17indicated the projected demand and supply gap
for corrugated iron sheets in the coming years.

Table 17: Demand and Supply Gap

Projected Demand and
Project
Year demand supply Gap,
supply
M. Ton M. Ton
2014 1,017,232.58 718,782 298,450.11
2015 1,115,809.90 747,534 368,276.13
2016 1,224,163.16 777,435 446,728.04
2017 1,343,267.82 808,533 534,735.29
2018 1,474,196.85 840,874 633,323.02

As shown in the table 17 above, there is an ample gap indicating there will be a huge
demand in the years to come. In the future, new entrants may also join the sector because
the demand – supply gap still allows additional investment to the sector. In principle, every
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 Feasibility Study

new entrant is expected to undertake a detailed study to determine its capacity before
joining the sector up to the point where the demand - supply gap requires additional
investment.

In the past, demand is assumed to have been suppressed for a multiple of reasons. The
high level of the construction industry since recent times is a good indication for demand
growth. Additional demand is also expected as a result of better future economic growth in
all sectors.

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 Feasibility Study

4. Marketing Strategy
4.1 Market Strategy
The market strategy refers to the actions that Sea Label plans in response to or in
anticipation of changes in its external environment, its customers, and its competitors.

4.1.1 SWOT Analysis

The SWOT analysis of Sea label is discussed below.
Strength
 The Company has strong and knowledgeable owner and management staffs.
 Wealth of investment experience for realization of company vision.
 In depth experience of operational and entrepreneurial back ground of the team
members for realization of the company vision.
 Strong will to set up corrugated iron sheet factory.
 Geographic location of the company.

Weaknesses
 Relatively high startup costs that are associated with the investment
Opportunities
 The economic development favors increased construction activity, thereby
imposing higher demand for corrugated iron sheets.
 There is ample market
 Ability to expand during the initial years and that will ensure that the business is
able to rapidly expand and repay its debts on a timely basis.
 Favorable economic & demographic situation in Ethiopia.
Threats
 Barriers to entry as the working capital requirement are high.

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 Feasibility Study

4.1.2 Generic Strategy

The generic strategy for one cent comprises of a combination of differentiation and focus.
Differentiation
Differentiation is a prime marketing objective. It involves making Sea Label products
appear different in the mind of the clients. This means offering quality corrugated iron
sheets.

Focus
Using a focus strategy, Sea Label concentrates on a market area within Ethiopia. The
strength of a focus strategy is derived from knowing the customer and the product
category very well.
Hence, Sea Label’s generic marketing strategy shall rely on focus and differentiation. The
strategy concentrates on creating a market segment and within that segment attempts to
achieve differentiation. The strategy components are defined in the marketing mix
developed for Sea Label.

4.2 Marketing Mix

Based on the target market outlined above, the market analysis and the competition
discussed the marketing mixes of corrugated iron sheet products are summarized
below.
(i) Product: the products are corrugated iron sheets. In order to make the product
competitive, the products shall have:
 Features: the products shall have important features such as quality and
need to comply with Ethiopian Standards.
 Fit: products shall be tailored to customer needs.
 Reliability: the company shall be a reliable manufacturer. This will bond its
relationship with potential buyers. And assure long term business
relationships.

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 Feasibility Study

(ii) Place: place of sell and appropriate channels are important to reach
customers. The plant will sell its products to reliable agents who can
competitively distribute throughout the country.

(iii) Promotion: this includes all the advertising and selling efforts of the
marketing plan. The company shall participate in trade shows as a way to
promote the company’s products. Television, Radio and newspaper
advertisement will help a lot in promoting the product.

(IV) Pricing: price of a product is a key component in setting the marketing

mix. The pricing decision can dramatically affect the marketing mix and
channel of distribution. The pricing strategy of corrugated iron sheet
products is proposed to follow cost plus and relevant competitor’s price at
first and the price/quality strategy at later stage. Cost plus takes the cost to
process the products and adds the desired margin. In defining the margin,
competitor’s price shall be considered. At later stage, when consumers
know the products, pricing will be based on the quality offered.

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 Feasibility Study

5. Raw Material and Inputs

5.1 Raw Material

The envisaged plant will use Galvanized iron coil to produce corrugated iron sheet. Hence,
the plant will import galvanized iron sheets in coil.

The technical specifications of the raw materials are given below.

Table 18 : SPECIFICATION OF RAW MATERIALS
Type of Raw material Coil Internal Coil International Material Quality Surface Finish
Diameter weight Standard
(mm) (KG)
500-800 4,000- ISO 3575(E) Commercial(01) -Z18 (183gm/m2
6,000 from 0.16 up to
8,000- 0.25mm
10,000 -Z22 (220gm/m2)
from 0.3 up to and
including 0.6mm
Galvanized steel sheets slightly oiled
in coils (oiled) -Z25 ( 250gm/m2)
for 0.8 and 1 mm
slightly oiled
-Z27 ( 270gm/m2)
for 2.0

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 Feasibility Study

6. Technology & Engineering

6.1 Technology
As stated in previous sections, the major product of the envisaged corrugated iron sheet
factory is corrugated sheets.

Corrugation of galvanized iron sheet

Corrugated and plain sheets are manufactured using a simple profiling machine.
Plain sheets are made after straightening the coil and cutting to the required
length.

The corrugations are described in terms of pitch (the distance between two crests)
and depth (the height from the top of a crest to the bottom of a trough). It is
important for the pitch and depth to be quite uniform, in order for the sheets to be
easily stackable for transport, and to overlap neatly when making a join. Pitches
have ranged from 25 mm (1 inch) to 125 mm (5 inches). It was once common for
CGI used for vertical walls to have a shorter pitch and depth than roofing CGI. This
shorter pitched material was sometimes called "rippled" instead of "corrugated".
However nowadays, nearly all CGI produced have the same pitch of 3 inches (76.2
mm). The Ethiopian Standards for Corrugated steel sheets is provided below.
Table 19: STANDARDS FOR CORRUGATED IRON SHEETS
Thickness(t) Breadth(b) Length(l) Zinc
Coating Nominal
mass(kg/sheet)
Nominal Tolerance Nominal Tolerance Nominal Tolerance
mm mm mm mm mm mm
g/m2 kg
0.16 +_10% 875 +25, -15 2000 +20, -0 183 2.88
0.20 3.5
0.25 4.29
Source: Ethiopian Standards, Iron & Steel Products, Vol. 25

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 Feasibility Study

Sheet Length
Modern production methods enable corrugated sheet to be produced in lengths
much longer than is usually required. This means that most roofs can be covered in
a single row of sheets, eliminating the need for overlapping joins which are a major
source of corrosion.
These advantages need to be weighed against the change in appearance that full-
length sheets bring. On steeply sloping roofs of short sheets, the joins can be seen
as the shadow line of the overlapping sheet and, less obviously, the additional
nailing needed at the join. These provide a distinct horizontal element to the
appearance of many roofs and their loss may lead to a change in the character of
the roof.

Figure 5: CORRUGATED IRON SHEET PITCH AND LENGTH

In Ethiopia, sheet length of 2m is customary. Hence, the envisaged steel industry

will produce 1m x 2m sheets.

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 Feasibility Study

The corrugations increase the bending strength of the sheet in the direction
perpendicular to the corrugations, but not parallel to them. Normally each sheet is
manufactured longer in its strong direction.
CGI is light weight and easily transported. It was and still is widely used especially in
rural and military buildings such as sheds and water tanks. Its unique properties
were used in the developed countries from the 1840s, and it is still helping
developing countries today.

The corrugations are described in terms of pitch (the distance between two crests)
and depth (the height from the top of a crest to the bottom of a trough). It is
important for the pitch and depth to be quite uniform, in order for the sheets to be
easily stackable for transport, and to overlap neatly when making a join. Pitches
have ranged from 25 mm (1 inch) to 125 mm (5 inches). It was once common for
CGI used for vertical walls to have a shorter pitch and depth than roofing CGI. This
shorter pitched material was sometimes called "rippled" instead of "corrugated".
However nowadays, nearly all CGI produced has the same pitch of 3 inches
(76.2mm).

Clapping hands or snapping ones fingers whilst standing next to perpendicular

sheets of corrugated iron (for example, in a fence) will produce a high-pitched echo
with a rapidly falling pitch. This is due to a sequence of echoes from adjacent
corrugations.
If sound is traveling at 344 m/s and the corrugated iron has a wavelength (pitch) of
3” or .0762 m this will produce an echo with a maximum wavelength of that order,
which corresponds to a frequency of 4500 Hz or so (approximately the C above top
A on a standard piano). The first part of the echo will have a much higher pitch
because the sound impulses from iron nearly opposite the clapper will arrive
almost simultaneously.

Although galvanizing inhibits the corrosion of steel, rusting is inevitable, especially

in marine areas - where the salt water encourages rust - and areas where the local
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 Feasibility Study

rainfall is acidic. Corrugated steel roofs can last for many years if protected by a
layer of paint. There are two methods to corrugating iron sheets:

1. Barrel type Corrugating:-This method is a way of corrugating cut to length

sheets by feeding two to four sheets at a time depending on the thickness
of the sheet in the rotating barrel type roller manually and then the
corrugated sheet will pass through the pitch adjusting rollers to have
uniform pitch. The system needs at least four operators.
2. Cold rolled forming:-This method is a way of corrugating from a coiled strip
by cold forming process by arranging series of rolls along the width of sheet
gradually to form in different steps. The more the No. of steps the higher
will be its precision to have the nearest parameters.

Advantages of Barrel type corrugating machine:

 The parameters of corrugated sheets are uniform when compared
to the cold forming type.

Disadvantages of Barrel type corrugating machine:

 It needs more number of operators than roll forming type
 Less productive when compared to roll forming type.

Advantages of Cold Roll Forming type corrugating machine:

 It needs much less number of operators compared to barrel type.
 Highly productive
Disadvantages of Cold Roll forming type corrugating machine:
 Pitch, pitch depth, effective width might not be consistent.
Sea Label Plc will use cold rolled form forming machines for production of
corrugated iron sheets.

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 Feasibility Study

6.2 Engineering
6.2.1 MACHINERY& EQUIPMENT

CORRUGATED IRON SHEETS (CGI)

Cold roll forming line consists of uncoiler, profiling and cutting machine.

The general specification for cold rolled forming line is:

1. Raw material : Cold rolled steel sheet(Full hard)

2. Thickness: ………………………………………………….. 0.14-0.40mm
3. Width……………………………………………………………1,000mm
4. Weight of a coil…………………………………………….5,000kgs.max
5. Coil in side diameter………………………………………508 mm
6. Forming Speed of rolls: ………………………………….max. 50 m/min.(30-50m/max.)
7. Minimum dia. of Shaft …………………………………..75mm made from S45C material.
8. No. of Stands… minimum 24 sets of rolls made from die material and SK-2 hard
chrome plated.
9. Control method…………………………………………….By built-in computer system for
automatic production.
10. Electric source: ……………………………………………380V,50Hz,3phase

6.3 UTILITIES

The installed electric power is supplied by EEPCO and amount depends on the total power
required by all machineries and equipment selected for the establishment of the plant.

The specification of the supply shall adhere to most updated international standards
and best engineering practice. And finally the power factor corrector should be
considered during the implementation. Based on their capacity the power needs for
each product are listed below

Table 20: UTILITIES

Required power supply
Corrugated iron sheets 3 phase voltage =380V,50Hz

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 Feasibility Study

7. ORGANIZATION& MANAGEMENT
7.1 GENERAL
The proposed corrugated iron sheet factory performs well when it employs an efficient and
smooth organizational structure that allows flexibility and ease of communication among
departments. The proposed structure considered different manufacturing sections and is
designed to achieve:
 Well planned and effective Organizational support, and

 Optimum deployment of trained manpower.

The organizational structure and manpower requirement takes into account the available
manpower strength and their experience.
7.1.1 GENERAL MANAGEMENT
The day to day activities of the project will be managed and undertaken by a higher
professional manager who has an extensive and rich experience in the technology,
production and marketing of steel products. The manager will be responsible for the
overall planning, organizing, supervising and controlling of the factory. He will be
supported by two department managers, namely operation and Administration, Marketing
&Finance departments, all of which having distinct delegation of accountability and
responsibility. He will report to advisory board and receive guidance on overall
management of the Factory.

The Internal Auditor is in charge to follow each and every activity of the Factory including
all working process and device a system to avoid incorrect practices after having the
approval from the General Manager. The copy of the report of the Internal Auditor should
be sent to Advisory board.

The Operation department manager will be responsible for product mix design, production
plan, smooth production and plant operation as well as timely well managed maintenance
activities. He will be supported by the production section and technical section heads.

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Further, the Operation department manager has to be mechanical engineer by profession

with relevant experience in production of steel industry to come up with high quality and
standardized products.

The administrative, Marketing and finance department manager will be in charge of

manpower recruitment, training, supervision keeping proper financial records, financial
management and advocacy and for the establishment and follow up of internal controlling
systems. He is also responsible for managing the sales and marketing activities, purchasing
and warehouse administration and above all for aggressive and effective promotional
activities.

The project offers competitive salary based on the existing labor market in the industry,
especially to those who assume the managerial positions as to recruit competent
personnel from the open labor market.

The organizational chart of the project is presented hereunder:

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FIGURE 6: ORGANIZATION STRUCTURE

Advisory Board

General Manager

Internl Auditor

Operation Administration, Marketing

Department & Finance Depart.

Factory
Plant Operation Marketing Administrtion
Maintenance Finance Section
Section Section Section
Section

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7.2 Staffing

The following shows average salaries and wages of the personnel during CGIS factory
operation based on present bases and labor market estimate.

Table 21: Summary of Salary and Wages of Employees

Salary and Total (Birr)

Status Number wages/Birr salary and
(per month) wages/year
General Manager 1 10,000.00 120,000
Internal Auditor 1 6600 79,200
Managers 2 6,000 144,000
Skilled
Operator/Technicians 10 2200 264,000
Semi-skilled
employees 8 900 86,400
Total 22 693,600

7.3 Training
Training of the required manpower for the project has to be planned well in advance. The key
personnel should be selected and trained suitably. The training may be carried out in the
following manner:

 On Site training during the construction project

 On job training during the commissioning phase of the project
 On job training during operation of the plant immediately after commissioning.

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The Training of the key operating Personnel operators should be suitably carried out during
the construction, erection and operation phases in addition to training them by visits to
similar operational plants.

8. FINANCIAL ESTIMATION AND PROJECT

8.1 Investment Cost
The total Investment cost of the galvanization and corrugated iron sheet factory project is estimated
to be Birr 35,301,905. Of this Birr 9,379,189 is the cost of fixed assets while Birr 25,922,719 is the
cost of working capital and pre operational costs.

8.2 Source of Finance

The project’s investment cost will be covered from owner’s equity and Bank loan. The detail is
summarized in the table below
Table 22: Financing Structure
Financial Plan

Description Loan (Birr) Equity (Birr) Total Cost (Birr)

Land lease - -

Building and construction 3,869,587 3,869,587

Machineries and Equipment - 5,284,602 5,284,602
Vehicles
Office Furniture and Equipment - 225,000 225,000
Pre- operating Costs 1,500,000 1,500,000
Working Capital 21,022,719 3,400,000 24,422,719

Sub Total
21,022,719 14,279,189 35,301,908

Debt/Equity Ratio Excluding Preproduction 60% 40% 100%

Interest
Pre- Production Interest - -

21,022,719 14,279,189 35,301,908

Total Cost Including Preproduction Interest

Debt/Equity Ratio Including Preproduction 60% 40% 100%

Interest

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8.3 ROJECTED FINANCIAL STATEMENTS

Projections are made based on assumptions. Based on these assumptions, a complete set of
financial projections are provided in this section. These projections include profit/loss statement,
and statement of cash flow and balance sheets. The projections are prepared on an annual basis.
The projected profit and loss statement indicates that the project will make a net profit of Birr 8
million birr in the first year of operation. The cash flow statement also indicates that the project is
liquid.

8.4 FEASIBILITY ANALYSIS

Financial return analysis indicates that the project will generate an acceptable internal rate of
return. The internal rate of return (IRR) after tax for the project is 68 percent.

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8.5 Project Assumptions

1 Capacity and Capacity Utilization
1 Capacity
1.1 Working days per annum 300
1.2 Number of shifts per day 1

1.3 Working hours per shift 8

1.4 Product Mix of the Factory

Line speed 30 metres/min
in a day per single shift 14,400 metres
in a year 4,320,000 metres

this can produce ( e.g 35 gauge)

which is 3.51kgt/pc, one pcs 7,581,600 kg

lengeth is 2m 7,582 tons

Description Product Mix Quantity( Ton)

0.2mm (35 Gauge) CGIS 50% 3,791

0.25mm (32 Gauge) CGIS 25% 1,895

0.32mm (30 Gauge) CGIS 15% 1,137

0.40mm ( 28 Gauge) CGIS 10% 758

Description Kg/PCS Qunatity ( sheets)

0.2mm (35 Gauge) CGIS 3.51 1,080,000
0.25mm (32 Gauge) CGIS 4.30 440,791
0.32mm (30 Gauge) CGIS 5.45 208,668
0.40mm ( 28 Gauge) CGIS 6.71 112,990

1.5 The project is assumed to operate at the following capacity rate

Project Year Capacity Rate

1 50%
2 60%
3 to 10 70%

2 Revenue

Revenue at full capacity

Ser. NO Description Quantity(Sheets) Selling Price Revenue

1 0.2mm (35 Gauge) CGIS 1,080,000 115 124,200,000
2 0.25mm (32 Gauge) CGIS 440,791 130 57,302,791
3 0.32mm (30 Gauge) CGIS 208,668 155 32,343,523
4 0.40mm ( 28 Gauge) CGIS 112,990 175 19,773,174
Total Revenue 233,619,488
N.B. The selling price of the products is assumed to increase by 5% from the second year of projection onwards.

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3 Costs
3.1. Raw material Requirement and Cost
The raw material required for the production of Corrugated Galvanized Iron Sheets (CGIS) is coiled galvanized iron

Coiled Galvanized Iron Requirement at Full Capacity

Ser. NO Description Coiled CGIS production Total Coiled

Galvainzed Iron At Full Capacity Galvanized Iron
Requirement Requirement (In kg)
per Sheet(In kg)

1 0.2mm (35 Gauge) CGIS 3.51 1,080,000 3,790,800

2 0.25mm (32 Gauge) CGIS 4.30 440,791 1,895,400
3 0.32mm (30 Gauge) CGIS 5.45 208,668 1,137,240
4 0.40mm ( 28 Gauge) CGIS 6.71 112,990 758,160
7,581,600

Cost of Coiled Galvanized Iron Sheets

Ser. No Description Galvanmized

iron coil
Requirement Cost per ton Cost (FOB Mumbai
(In ton) ( in USD) Port), USD
1 0.2mm (35 Gauge) CGIS 3,791 900 3,411,720
2 0.25mm (32 Gauge) CGIS 1,895 900 1,705,860
0.32mm (30 Gauge) CGIS 1,137 900 1,023,516
0.40mm ( 28 Gauge) CGIS 758 900 682,344
Total (USD) 6,823,440

Cost of coiled Galvanized Iron 6,823,440

(FOB)
Freight (2.5%) 170,586
Insurance (1%) 68,234
Bank Charge (4.5%) 307,055
Port Handilng and Loading and 68,234
Unloading Cost(1%)
Inland Transport (1.5%) 102,352
Sub Total 7,539,901
Duty rate ( 10%) 753,990
VAT (15%) refundable
Sur Tax ( 0%) -
WHT ( 3%) refundable
Total cost in USD 8,293,891
Total cost of Coiled cold rolled 174,171,718
Iron
N.B. The annual cost of coiled Galvanized iron is assumed to increase by 5% from the second year onwards

Summary Revenue
Year Total Revenue
1 116,809,744
2 140,171,693
3 163,533,642

Summary Cost of Raw Material

Year Total cost
1 87,085,859
2 104,503,031
3 121,920,202

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4 Cost of Manpower
direct labor: 693,000

5 Marketing Expense

It is assumed as 1% of the sales revenue

6 Cost of Spare Parts and Maintainance

The annual cost of spare part and maintainance is assumed as 2% for the projection period from 1 to 5 and
3% for the projection period 6 to 10 of the cost of fixed investment.

Cost of Spare
Project Year Percentage Part
1 to 5 1% 40,946
6 to 10 2% 81,892

7 Utiilties

Electrcity & water

The annual cost of electric consumption is calculated as follows

Description Annual KWh consumption Cost/Kwh Service Charge Total cost

Electric & water Consumption 1,000,000

C. PTT (Postal,telex and telephone)

The annual cost of PTT is etimated at Birr 40,000

Summary of the cost for utilities

Description Cost
Electricity & water 1,000,000
PTT 40,000
Total Cost 1,040,000

8 Insurance

The annual insurance rate for fire, lightening, floud etc is assumed as 1.5% for building and machinery and 4% for vehicle

Total Cost of
Description Insurance Rate Insurance
Building and Machinery 1.5% 2,722,965
Total 2,722,965

9.00 Depreciation and Amortization

Annual
Description Depreciation Rate Investment Cost Depreciation
Land 2.5% - -
Building and Civil Work 5% 3,869,587 193,479
Machinery 20% 5,284,602 1,056,920
Other Fixed Cost 20% 225,000 45,000
Pre Production Cost 20% 1,500,000 300,000
Pre Production Interest
(Accrued Interest) 10% - -
Total Depreciation per annum 1,595,400

Birr
1 Euro 27
1 USD 21

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8.6 Investment Cost

1 Land
Land Lease value

1 Building and Civil Works

CGISLIne
Total 3,869,587
Total 3,869,587
2 Machinery
CGIS
Total cost in Birr 5,284,602
Grand total 5,284,602
3 Other Fixed Assests

Description Cost
Office Equipment 75,000
Office Furnitures 150,000
Total Cost 225,000

4 Pre production Cost

Description Cost
Pre-investment studies & Others 1,500,000
Total 1,500,000

6 Pre Production Interest (Accrued Interest)

Pre Production Interest
(Accrued Interest) -

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8.7 Projected Profit & Loss Statement

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year8 Year 9 Year 10

Sales Revenue 116,809,744 140,171,693 163,533,642 171,710,324 180,295,840 189,310,632 198,776,163 208,714,972 219,150,720 230,108,256

Plant capacity 50% 60% 70% 70% 70% 70% 70% 70% 70% 70%
Direct Materials & Input 88,820,439 106,324,340 123,832,577 130,024,206 136,525,416 143,351,687 150,519,271 158,045,235 165,947,496 174,244,871

Material Cost 87,085,859 104,503,031 121,920,202 128,016,213 134,417,023 141,137,874 148,194,768 155,604,506 163,384,732 171,553,968
raw material 87,085,859 104,503,031 121,920,202 128,016,213 134,417,023 141,137,874 148,194,768 155,604,506 163,384,732 171,553,968
Labor and staff 693,000 727,650 764,033 802,234 842,346 884,463 928,686 975,121 1,023,877 1,075,070
Labor and staff benefit 41,580 43,659 45,842 48,134 50,541 53,068 55,721 58,507 61,433 64,504
Utilities 1,000,000 1,050,000 1,102,500 1,157,625 1,215,506 1,276,282 1,340,096 1,407,100 1,477,455 1,551,328
Plant Overhead Costs 40,946 40,946 40,946 40,946 40,946 81,892 81,892 81,892 81,892 81,892

spare parts & maint. 40,946 40,946 40,946 40,946 40,946 81,892 81,892 81,892 81,892 81,892
Plant Cost 88,861,385 106,365,286 123,873,523 130,065,152 136,566,362 143,433,579 150,601,163 158,127,126 166,029,388 174,326,763
Administration & Selling Expenses 6,287,258 6,991,116 7,695,125 7,943,733 8,204,771 8,478,861 8,766,656 9,068,841 9,386,134 9,719,293
administration expenses 5,119,160 5,589,399 6,059,788 6,226,629 6,401,813 6,585,755 6,778,894 6,981,691 7,194,627 7,418,210
Professional Expense 20,000 21,000 22,050 23,153 24,310 25,526 26,802 28,142 29,549 31,027
Stationary & P.T.T 40,000 42,000 44,100 46,305 48,620 51,051 53,604 56,284 59,098 62,053
Insurance 2,722,965 2,722,965 2,722,965 2,722,965 2,722,965 2,722,965 2,722,965 2,722,965 2,722,965 2,722,965
selling expenses 1,168,097 1,401,717 1,635,336 1,717,103 1,802,958 1,893,106 1,987,762 2,087,150 2,191,507 2,301,083
Promotional Expense 1,168,097 1,401,717 1,635,336 1,717,103 1,802,958 1,893,106 1,987,762 2,087,150 2,191,507 2,301,083
Operating Costs 95,148,642 113,356,402 131,568,647 138,008,884 144,771,133 151,912,440 159,367,819 167,195,967 175,415,522 184,046,056
Depreciation & Ammortization 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400

Total Production Cost 96,744,042 114,951,801 133,164,047 139,604,284 146,366,533 153,507,840 160,963,219 168,791,367 177,010,922 185,641,455

Earning Before Interest & Tax (EBIT)

20,065,702 25,219,891 30,369,594 32,106,040 33,929,307 35,802,792 37,812,945 39,923,605 42,139,798 44,466,801
Interest 1,976,755 1,621,981 1,230,377 798,120 320,989 - - - - -
Earning Before Tax (EBT) 18,088,947 23,597,910 29,139,217 31,307,920 33,608,318 35,802,792 37,812,945 39,923,605 42,139,798 44,466,801
Income tax (30%) 5,426,684 7,079,373 8,741,765 9,392,376 10,082,495 10,740,838 11,343,883 11,977,081 12,641,939 13,340,040

Earning After Tax (EAT) 12,662,263 16,518,537 20,397,452 21,915,544 23,525,823 25,061,955 26,469,061 27,946,523 29,497,859 31,126,761

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8.8 Working Capital Determination

Working Capital Requirements

Minimum Requirements of Current Asets and Liabilities

(a) Accounts recievable 30 Days at operating costs

(b) Inventory
local rawmaterial 30 of the annual cost of the mterial
imported rawmaterial 90 of the annual cost of the mterial

Work-in-progress 1 Days @ plant cost

Finished Products 5 Days@ plant cost + administrative overheads
(c) Cash in Hand (pitty cash) 15 Days of total production cost less(Raw material, utility & depreciation)
(d) Accounts payable 30 Days for raw matrial & utilities

Working Capital Determination

Coverage Inv't Year 1 Year 2 Year 3 Year 4 Year 5 Year6 Year7 Year8 YeaR9 Year10

CURRENT ASSETS

Accounts Recievable 30 7,929,054 7,929,054 9,446,367 10,964,054 11,500,740 12,064,261 12,659,370 13,280,652 13,932,997 14,617,960 15,337,171

Inventory 23,323,587 23,323,587 27,976,143 32,628,773 34,258,287 35,969,276 37,766,497 39,652,863 41,633,547 43,713,265 45,896,969

Raw Material

imported raw material 90 21,771,465 21,771,465 26,125,758 30,480,051 32,004,053 33,604,256 35,284,469 37,048,692 38,901,127 40,846,183 42,888,492

Work-in-progress 1 246,837 246,837 295,459 344,093 361,292 379,351 398,427 418,337 439,242 461,193 484,241

Finished Products 5 1,305,285 1,305,285 1,554,926 1,804,629 1,892,941 1,985,669 2,083,602 2,185,834 2,293,178 2,405,889 2,524,236

Cash in hand(Pitty cash) 15 510,566 510,566 545,590 580,906 597,546 615,017 635,069 654,331 674,557 695,794 718,092

Total Current Assets 31,763,207 31,763,207 37,968,100 44,173,733 46,356,573 48,648,554 51,060,936 53,587,845 56,241,101 59,027,019 61,952,232

Increase in current Assets 6,204,893 6,205,633 2,182,840 2,291,982 2,526,910 2,653,255 2,785,918 2,925,214

CURRENT LIABILITIES

Accounts Payable 30 7,340,488 7,340,488 8,796,086 10,251,892 10,764,486 11,302,711 11,867,846 12,461,239 13,084,301 13,738,516 14,425,441

Increase in current liabilities 1,455,598 1,455,806 512,595 538,224 593,392 623,062 654,215 686,926

WORKING CAPITAL

Net working Capital 24,422,719 24,422,719 29,172,014 33,921,841 35,592,086 37,345,843 39,193,089 41,126,607 43,156,800 45,288,503 47,526,791

Increase in workng capital 24,422,719 - 4,749,296 4,749,827 1,670,245 1,753,757 1,847,246 1,933,517 2,030,193 2,131,703 2,238,288

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8.9 Projected Cash Flow Statement

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year6 Year7 Year8 Year9 Year10

CASH INFLOWS

Owner's Equity 14,279,189

Bank Loan 21,022,719

Net Profit 12,662,263 16,518,537 20,397,452 21,915,544 23,525,823 25,061,955 26,469,061 27,946,523 29,497,859 31,126,761

Depreciation & amortization 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400 1,595,400

Total Cash Inflows 35,301,908 14,257,663 18,113,937 21,992,852 23,510,944 25,121,223 26,657,354 28,064,461 29,541,923 31,093,258 32,722,160

Cash Outflows

Inv'ment on Fix. Assets 9,379,189

Working Capital 24,422,719 - 4,749,296 4,749,827 1,670,245 1,753,757 1,847,246 1,933,517 2,030,193 2,131,703 2,238,288

Pre-production Cost
1,500,000
& interest

Replacement 225,000

Loan Repayment 3,417,433 3,772,207 4,163,811 4,596,068 5,073,199 - - - - -

Tax Payable 5,426,684 7,079,373 8,741,765 9,392,376 10,082,495 10,740,838 11,343,883 11,977,081 12,641,939

Total Cash Outflows 35,301,908 3,417,433 13,948,187 15,993,011 15,008,078 16,444,332 11,929,741 12,674,355 13,374,077 14,108,784 14,880,227

Net Cash Flow - 10,840,229 4,165,750 5,999,841 8,502,865 8,676,890 14,727,613 15,390,106 16,167,846 16,984,474 17,841,933

Cum. Cash Balance - 10,840,229 15,005,979 21,005,820 29,508,686 38,185,576 52,913,189 68,303,295 84,471,141 101,455,615 119,297,548

*Investment on second phase of the project (Galvanizing plant) will be started after 2 years of operation as back ward integration.
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8.10 Projected Balance Sheet

Inv't Year 1 Year 2 Year 3 Year 4 Year 5 Year6 Year7 Year8 Year9 Year10

ASSETS
CURRENT ASSETS

Cash Balance 10,840,229 15,005,979 21,005,820 29,508,686 38,185,576 52,913,189 68,303,295 84,471,141 101,455,615 119,297,548

Current assets 31,763,207 31,763,207 37,968,100 44,173,733 46,356,573 48,648,554 51,060,936 53,587,845 56,241,101 59,027,019 61,952,232

Total Current Assets 31,763,207 42,603,436 52,974,079 65,179,553 75,865,258 86,834,130 103,974,125 121,891,140 140,712,242 160,482,634 181,249,780

FIXED ASSETS

Building and construction 3,869,587 3,676,108 3,482,628 3,289,149 3,095,670 2,902,190 2,708,711 2,515,232 2,321,752 2,128,273 1,934,794
Machineries and
5,284,602 4,227,682 3,170,761 2,113,841 1,056,920 - (1,056,920) (2,113,841) (3,170,761) (4,227,682) (5,284,602)
Equipment
Vehicles -
Office Furniture and
225,000 180,000 135,000 90,000 45,000 225,000 180,000 135,000 90,000 45,000 -
Equipment
Total Fixed Assets 9,379,189 8,083,789 6,788,390 5,492,990 4,197,590 3,127,190 1,831,791 536,391 (759,009) (2,054,409) (3,349,809)
Pre-Production Cost &
1,500,000 1,200,000 900,000 600,000 300,000 - (300,000) (600,000) (900,000) (1,200,000) (1,500,000)
Interest
Land lease - - - - - - - - - - -

Total Assets 42,642,396 51,887,225 60,662,469 71,272,543 80,362,848 89,961,320 105,505,915 121,827,531 139,053,233 157,228,225 176,399,972

LIABILITIES & Capital

LIABILITIES:

Current liablities 7,340,488 7,340,488 8,796,086 10,251,892 10,764,486 11,302,711 11,867,846 12,461,239 13,084,301 13,738,516 14,425,441

Tax Payable 5,426,684 7,079,373 8,741,765 9,392,376 10,082,495 10,740,838 11,343,883 11,977,081 12,641,939 13,340,040

Long term loan

Bank Loan 21,022,719 17,605,285 13,833,078 9,669,267 5,073,199 (0) - - - - -

Sub Total 28,363,207 30,372,457 29,708,537 28,662,924 25,230,062 21,385,206 22,608,684 23,805,122 25,061,382 26,380,455 27,765,482

CAPITAL:

Owner's Equity 14,279,189 14,279,189 14,279,189 14,279,189 14,279,189 14,279,189 14,279,189 14,279,189 14,279,189 14,279,189 14,279,189

Retained Earnings 7,235,579 16,674,743 28,330,430 40,853,598 54,296,925 68,618,042 83,743,220 99,712,662 116,568,581 134,355,301

Sub total 14,279,189 21,514,768 30,953,932 42,609,619 55,132,787 68,576,114 82,897,231 98,022,409 113,991,851 130,847,770 148,634,490

Total Liabil.& Capital 42,642,396 51,887,225 60,662,469 71,272,543 80,362,848 89,961,320 105,505,915 121,827,531 139,053,233 157,228,225 176,399,972

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8.11 IRR & NPV

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year7 Year8 Year9 Year10

BENEFIT

Revenue 116,809,744 140,171,693 163,533,642 171,710,324 180,295,840 189,310,632 198,776,163 208,714,972 219,150,720 230,108,256

Working capital recovery 47,526,791

Fixed asset recovery (3,349,809)

Total benefit - 116,809,744 140,171,693 163,533,642 171,710,324 180,295,840 189,310,632 198,776,163 208,714,972 219,150,720 274,285,239

COST

Investment 35,301,908

Replacement costs

Operating cost less Dep. 95,148,642 113,356,402 131,568,647 138,008,884 144,771,133 151,912,440 159,367,819 167,195,967 175,415,522 184,046,056

Income tax 8,741,765 9,392,376 10,082,495 10,740,838 11,343,883 11,977,081 12,641,939 13,340,040

Total cost 35,301,908 95,148,642 113,356,402 140,310,413 147,401,260 154,853,628 162,653,277 170,711,702 179,173,048 188,057,462 197,386,096

Net benefit (35,301,908) 21,661,102 26,815,291 23,223,229 24,309,064 25,442,212 26,657,354 28,064,461 29,541,923 31,093,258 76,899,143

FIRR 68%
NPV 105,207,181

N.B NPV @ 15% discounting rate

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8.12 Sensitivity Analysis

Revenue decrease by 5%

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year7 Year8 Year9 Year10

BENEFIT

Revenue 110,969,257 133,163,108 155,356,960 163,124,807 171,281,048 179,845,100 188,837,355 198,279,223 208,193,184 218,602,843

Working capital recovery 47,526,791

Fixed asset recovery (3,349,809)

Total benefit - 110,969,257 133,163,108 155,356,960 163,124,807 171,281,048 179,845,100 188,837,355 198,279,223 208,193,184 262,779,826

COST

Investment 35,301,908

Replacement costs

Operating cost less Dep. 95,148,642 113,356,402 131,568,647 138,008,884 144,771,133 151,912,440 159,367,819 167,195,967 175,415,522 184,046,056

Income tax 8,741,765 9,392,376 10,082,495 10,740,838 11,343,883 11,977,081 12,641,939 13,340,040

Total cost 35,301,908 95,148,642 113,356,402 140,310,413 147,401,260 154,853,628 162,653,277 170,711,702 179,173,048 188,057,462 197,386,096

Net benefit (35,301,908) 15,820,614 19,806,706 15,046,547 15,723,547 16,427,420 17,191,823 18,125,653 19,106,175 20,135,722 65,393,730

FIRR 48%
NPV 62,863,138

N.B , NPV at 15% discounting rate

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Cost increase by 5%

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year7 Year8 Year9 Year10

BENEFIT

Revenue 116,809,744 140,171,693 163,533,642 171,710,324 180,295,840 189,310,632 198,776,163 208,714,972 219,150,720 230,108,256

Working capital recovery 47,526,791

Fixed asset recovery (3,349,809)

Total benefit - 116,809,744 140,171,693 163,533,642 171,710,324 180,295,840 189,310,632 198,776,163 208,714,972 219,150,720 274,285,239

COST

Investment 35,301,908

Replacement costs

Operating cost less Dep. 99,906,075 119,024,222 138,147,080 144,909,328 152,009,689 159,508,062 167,336,210 175,555,765 184,186,299 193,248,359

Income tax 8,741,765 9,392,376 10,082,495 10,740,838 11,343,883 11,977,081 12,641,939 13,340,040

Total cost 35,301,908 99,906,075 119,024,222 140,310,413 154,301,704 162,092,185 170,248,899 178,680,093 187,532,847 196,828,238 206,588,399

Net benefit (35,301,908) 16,903,669 21,147,471 23,223,229 17,408,619 18,203,655 19,061,732 20,096,070 21,182,125 22,322,482 67,696,840

FIRR 55%
NPV 75,460,291

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 Feasibility Study

8.13 Ratio Analysis

Year 1 Year 2 Year 3 Year 4 Year 5 Year6 Year7 Year8 Year9 Year10

Liquidity Measurment Ratio

Current Ratio 4.33 4.32 4.31 4.31 4.30 4.30 4.30 4.30 4.30 4.29
Return Indicators
Return on Assets 2.25 2.31 2.29 2.14 2.00 1.79 1.63 1.50 1.39 1.30
Return on Equity 8.18 9.82 11.45 12.03 12.63 13.26 13.92 14.62 15.35 16.11
Debt Ratio
Debt Ratio 0.59 0.49 0.40 0.31 0.24 0.21 0.20 0.18 0.17 0.16
Debt _equity Ratio 2.13 2.08 2.01 1.77 1.50 1.58 1.67 1.76 1.85 1.94

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 Feasibility Study

8.14 Loan Repayment Schedule

Repayment Principal
Period Repayment Interest Payment Total Payment Outstanding Balance
Year 0 21,022,719

Year 1 21,022,719
st
1 Quarter 822,979 525,568 1,348,547 20,199,739
2nd Quarter 843,554 504,993 1,348,547 19,356,186
3rd Quarter 864,642 483,905 1,348,547 18,491,544
th
4 Quarter 886,258 462,289 1,348,547 17,605,285
3,417,433 1,976,755 5,394,188 17,605,285
Year 2
1st Quarter 908,415 440,132 1,348,547 16,696,870
2nd Quarter 931,125 417,422 1,348,547 15,765,745
rd
3 Quarter 954,403 394,144 1,348,547 14,811,341
4th Quarter 978,263 370,284 1,348,547 13,833,078
3,772,207 1,621,981 5,394,188 13,833,078
Year 3
1st Quarter 1,002,720 345,827 1,348,547 12,830,358
2nd Quarter 1,027,788 320,759 1,348,547 11,802,570
rd
3 Quarter 1,053,483 295,064 1,348,547 10,749,087
th
4 Quarter 1,079,820 268,727 1,348,547 9,669,267
4,163,811 1,230,377 5,394,188 9,669,267
Year 4
1st Quarter 1,106,815 241,732 1,348,547 8,562,452
2nd Quarter 1,134,486 214,061 1,348,547 7,427,966
rd
3 Quarter 1,162,848 185,699 1,348,547 6,265,118
4th Quarter 1,191,919 156,628 1,348,547 5,073,199
4,596,068 798,120 5,394,188 5,073,199
Year 5
1st Quarter 1,221,717 126,830 1,348,547 3,851,482
2nd Quarter 1,252,260 96,287 1,348,547 2,599,222
3rd Quarter 1,283,566 64,981 1,348,547 1,315,656
th
4 Quarter 1,315,656 32,891 1,348,547 (0)
5,073,199 320,989 5,394,188 (0)

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