Anatson Food Processing Project PDF

PROJECT FEASIBILITY STUDY 2019
ANATSON TRADING S.C.

FEASIBILITY STUDY FOR ESTABLISHMENT OF FOOD PROCESSING PROJECT
PROJECT PROMOTER:- ANATSON TRADING S.C.
COMPANY ADDRESS:-OROMIA REGIONAL STATE
FEBUARY, 2019
ADDIS ABABA, ETHIOPIA
ANATSON TRADING S.C. (FOOD PROCESSING) Page 1

PROJECTD BISCUIT FACTORY
Table of Contents
1. PROJECT DESCRIPTION ...................................................................................................7
1.1 PROJECT LOCATION .........................................................................................................7
1.2 PROJECT RATIONALE ......................................................................................................7
1.3 PROJECT STATUS ...............................................................................................................8
1.4 PROJECT IMPLEMENTATION SCHEDULE .................................................................8
1.5 BENEFITS OF THE PROJECT ...........................................................................................9
2. PROMOTER’S BACKGROUND .......................................................................................10
3. PRODUCT DEFINITION ...................................................................................................15
4. PROJECT MANAGEMENT AND HUMAN RESOURCE .............................................39
4.1 PROJECT MANAGEMENT ..............................................................................................39
4.2 HUMAN RESOURCE REQUIREMENT ..........................................................................40
4.3 TRAINING REQUIREMENT ............................................................................................42
5 MARKET ANALYSIS .........................................................................................................17
5.1 WHY AGRO-PROCESSING IS CRITICAL TO THE ETHIOPIAN ECONOMY? ....17
5.2 SUPPLY................................................................. ERROR! BOOKMARK NOT DEFINED.
5.3 DEMAND ..............................................................................................................................25
5.4 DEMAND AND SUPPLY GAP ...........................................................................................26

5.5 MARKETING STRATEGY ................................................................................................27
5.6 PRICE....................................................................................................................................27
6 TECHNICAL STUDIES ......................................................................................................30
6.1 RAW MATERIAL AND INPUTS ......................................................................................30
6.2 PRODUCTION PROCESS .................................................................................................32
6.3 CIVIL WORKS ....................................................................................................................34
6.4 PRODUCTION MACHINERY ..........................................................................................35
6.5 VEHICLES ...........................................................................................................................36
6.6 OFFICE EQUIPMENT AND FURNITURE ....................................................................37
6.7 UTILITY SUPPLY ...............................................................................................................37
6.8 ENVIRONMENTAL IMPACT ASSESSMENT ...............................................................39
7 FINANCIAL APPRAISAL ..................................................................................................42
7.1 INITIAL INVESTMENT COST .........................................................................................42
7.2 FINANCING STRUCTURE ...............................................................................................43
7.3 APPLIED FINANCIAL ASSUMPTIONS: ........................................................................44
7.4 WORKING CAPITAL.........................................................................................................45
7.5 OPERATING COST, VOLUME AND REVENUE .........................................................45
7.5.1 OPERATING COST ....................................................................................................45

7.5.2 PRODUCTION VOLUME AND REVENUE ............................................................48
7.6 PROJECT PROFITABILITY.............................................................................................50
7.7 PROJECT LIQUIDITY AND PAYBACK PERIOD ........................................................51
7.8 NPV & IRR ...........................................................................................................................53
7.9 SENSITIVITY TO COST AND REVENUE VARIATIONS ...........................................54
7.10 DEBT SERVICING SCHEDULE .....................................................................................55

I. EXECUTIVE SUMMARY
The prevailing project is food complex that produces wheat flour and biscuit in an integrated way.
Food processing is among the oldest of Ethiopia‘s manufacturing industries. Currently, the food
complex processing industry employed about 31% of all employees in the manufacturing sector.
The food processing industry can be broken into eight major sectors: one of these categories is the
wheat-based products manufacturing which is the subject matter of this feasibility study.
The project promoter, with trade name of ANATSON TRADING S.C. is a company founded by
young and energetic group of individuals. The project will be located in Oromia Regional State,
specifically at Bulbula Industry Park on 5,000 square meters of lease land to be acquired. The
promoter has executed 20% of the construction works required for the factory.
The project is designed to produce wheat flour and biscuit products. The market for all of the
envisaged products in the domestic market shows a consistent increment. The short of supply as
compared to demand forced the country to import each of the products this project has planned to
produce. Therefore, establishment of the food complex not only helps to contribute to narrow the
demand gap but also to lessen the hard currency required to import related food items. The desire to
create vertical integration to add more value to the flour products and the perception of demand gap
coupled with the government‘s incentive helped the promoter to enter into the Biscuit
manufacturing business.
The total investment cost required for the project is Birr 87.9 million. It is planned that 30% or Birr
35.00 million is contributed by the promoter and the remaining 70% or Birr 52.92 million would be
financed by bank. The investor has already contributed Birr 5.86 million from equity, in the form of
factory construction work, lease down payment and pre-operating expenditure. The Bank financing
of Birr 52.92 million is scheduled to be repaid within 8 years excluding the two years grace period
at 11.5% interest rate with quarter repayment.
Starting with initial capacity of 60% and increment by 10% per year, up to attainable capacity of
100%, the project would make attractive profit throughout its operational years and generate
positive net cash inflows. Within its assumed 10 years life it would return more than 53% of IRR
and more than Birr 241 million net present value.

Establishment of the food complex factory is a contribution to the country‘s real GDP as it has
positive impact in fixed asset generation and output quantity increments. Apart from creating
employment opportunity for the domestic labor, the project would reduce hard currency outlay.
The realization of the project as ascertained in the financial appraisal result enables the promoter to
generate higher net benefits, employment benefit to domestic labor, indirect employment for input
suppliers, tax revenue benefit and import substitution effect on saving hard currency. These
parameters are basic indications of the projects social desirability and economic feasibility.
Therefore, it is advisable to finance it either with equity or with debt or in a combination of both.

II. BACKGROUND INFORMATION

1.1 ESTABPROJECT
DESCRIPTION
The envisaged project is an integrated manufacturing of food complex. The factory produces Wheat
Flour and Biscuit by processing raw wheat. The proposed plant capacity of wheat flour is 30,000
and Biscuit 3,600 tons per year, respectively. 60% of the wheat flour manufactured in the factory
shall be sold in the local market, while the remaining 40% will be used for the production of biscuit.
The percentage proportion is determined based on the production capacity of the biscuit production
machinery.
1.1 Project Location
The food complex plant is located in Akaki-Kality Subcity. Akaki-Kality is located about 20
Kilometer South West of Addis Ababa on the Main Road from Addis Ababa to Djima. While
selecting location for such food complex factory; availability of raw material, adequate storage and
operation space, water and power supply, market outlet for finished products and availability of
labor are among the major factors to be considered. The Subcity is the host of other labor-intensive
factories due to its preferable attribute and proximity to the capital Addis Ababa.
1.2 Project Rationale
Food item is a commodity; its demand exists whenever human being exists. The demand increases
as population increases disregarding preference of consumers over the type of feeds and their
catering culture. Wheat flour based products such as biscuit are among the well-known and
commonly available products in the Ethiopian Market.
Food self-sufficiency is one of the prime objectives of the country. Labor intensive agro processing
industries play significant role in absorbing the large labor force and thus contribute their share to
the food self sufficiency move. The Agricultural products like wheat and the semi processed flour
shall be traded in a vertically integrated marketing methodology in order to ensure better wage to
the farmer and more value adding produces that preferably involve many labor to deploy the cheap
labor force of the country in productive sectors. The industry is a distinct sector of the economy,
which makes its direct contributions to the enhancement of social well being of productive citizens.

Apart from its attractive return, existence of stable demand and employment generation as well as
tax revenue to the government, establishment of such agro processing industry is a good opportunity
to the grain market stimulation and thus to the framers. It is rationale, therefore, to involve into an
activity that helps to tap the well-known business opportunity.
1.3 Project Status
The existing investment is begun after signing of the lease contract with Oromiya Regional
Government in the year 2003 E.C aiming to establish Food complex factory. So far the project
owner has invested about Birr 5.8 million on the existing project. Among others, the following are
the major investments made within the project compound.
2 Civil Works
40% of the civil works for the factory have been accomplished
3 Machinery
All required production machinery is being selected.
4 Vehicles, Equipment and Furniture
Vehicles, equipments and furniture are not purchased.
5 Raw Materials
The major raw materials are wheat and packaging materials. Communication with suppliers is
underway.
1.4 Project Implementation Schedule
The following chart shows major activities to be done during the implementation period.
Activity Mar Apr Ma June July Aug Sept Oct Nov Dec Jan Feb
2018 2019
Land acquisition Done
Document Preparation Done

Construction of Factory
Buildings
Debt Financing
Import of Machinery
Purchase of Veh.& Equip
Recruitment, Installation
and Commissioning
Operation
Grace Period One year construction and one year for pre-marketing period total two years
As indicated above and everything will go per our plan, the factory will be operational in the month
of January, 2014. One of the remaining activities is processing debt financing from bank to
supplement the implementation of the project. Two years grace includes pre-implementation and
pre-marketing period to popularizing the factory‘s product to the public so that higher sales would
be achieved.
1.5 Benefits of the Project

The major benefits include net returns on investment, supply of quality products to the local market
and income tax to the government. Establishment of the project is creating opportunity for
productive and unemployed portion of the labor force. Indirect benefits accrue to the country as a
whole in the form of generating potential investment capital and saving of foreign currency.
Experience of this project may be extended to the grain market by creating market the agricultural
produce.

III. BACKGROUND INFORMATION
2.1 ESTABLISHMENT
 Company Name: ……………..RUB-SOL Engineering (Elias W/Gebriel)

 Company Address: …………..Addis Ababa, Ak/Kality Sub-City, Wereda- 07
 Existing Business Type: ……..Metal and Rubber Products Fabrication
 Legal Formation: ……………..Sole Proprietor Ship;
 Company Status: ….…………..Existing Business;
 Licensing Agency: ………........Addis Ababa Trade & Dev’t Bureau
 TIN Certificate No.:..…………....004693886
 Existing Trade Regis. No: …....04/1/10/00322/003, dated-19/4/2003 E.C.
 Existing Trade License No.: ….KK/AA/14/706/4012618/2007; Dd-3/4/2007 E.C.
 Existing Initial Capital: ……….ETB 541,000.00
 New Project Name: ……………RUB-SOL Enrich Food Factory
 Project Status: ………………….New Establishment
 Products Composition: ………...Wheat Flour and Biscuit Products
 Investment Certificate: ………..To be Processed
 Trade License No.: …………….To be Processed
 Capital Needed for Project: ……????????????
2.2 Company Overview and Ownership

The Company, RUB SOL ENGINEERING is an existing business that registered and licensed in 2007
E.C. The business is Owned and managed by Mr. Elias W/Gebriel G/Hiwot, who has been founded and
running other business line (i.e. Rubber and Plastic Product Manufacturing) and delivery of similar
service businesses since 2000 E.C. The business was established by initial paid-up capital of ETB

541,000 with having the main focus on metal molding, welding, Fabrication of metal products and other
general metal works.
The promoter is at the middle age of life that possessed a good character and well appreciated
personality among the society. Besides, he has acquired pertinent business experiences on working
different metal moldings, welding and Fabrication of metal products for local market for many years. He
has been running the existing business and provides acceptable business operations with best
Ethiopian manner of business personality. Currently the promoter has working with many
Government Organization offices, Private companies and NGOs.
Furthermore, as part of existing business expansion on one-hand as well as exploring

manufacturing process of new product lines, Currently the promoter has inspired to establish the
new project targeting food processing investment lines mainly for manufacturing Wheat Flour
and Biscuit Products in new fashioned way.
In general, establishment of the underlying food processing project is intended to produces

wheat flour and different biscuit products in an integrated way, which in turn enabling the
promoter to play a role by contributing his own part on national plan for food sector development
activities.
2.3 Overall Project Objectives
The Company has planned to achieve set of objectives by implementing the newly envisaged food
processing project with enhanced production capacity and different product lines. Hence,
implementation of the underlying commercial purpose food products have an intention to attain set
of objectives at three (3) different levels:
 Regional and National Level Objective
The proposed project if it will be implemented will contribute to the attainment of the national
government strategies on eradicating poverty in the country and contributed to the attainment of
Millennium Development Goals (MDGs) of the United Nations. The project could even fill the gap

of the increasing demand of diversified manufacturing food related products in the domestic and
global market.
 Sectorial and Community Level Objectives
 To Contribute in the employment condition of the vicinity,

 To increase food sector productivity,
 To enhance the entrepreneurial skills and knowledge among the community
 To introduce new concept in the sector in regards to food processing, diversity and
sourcing of food input materials.
 To create quality product development and marketing linkages,
 To widen the establishment of commercial food items in the areas and encourage
potential access to capitalization.
 To increase present level of using commercial purpose food items among the society
and help augment the per capita income of the community
 To contribute on the overall attainment of the City administrative strategy on
industrial focus development.
 project specific objective includes:
 Primarily to secure Loan Facility of ETB ___ for planned project implementation
 To embark and achieve a reliable sources of Enriched food products
 To produce and supply reliable and diversified commercial food items for local and
global market, which encompasses at full capacity:-
 Wheat Flour Production and distribution with the capacity of 42T/day, which of
60% is assumed to be consumed by the factory and 40% will be for
domestic/local market;
 To manufacture various quality (60% hard and 40% soft) Biscuit Products from
wheat flour.
 To enhance the technical skills and thereby decreasing the incidence of low productivity
in food sector manufacturing, and
 To attain target profit earnings that allow the company for further investment expansion
in other regional areas
2.4 Vision Statement

Our Vision is to become one of the leading Integrated and Enriched Food Items Supplier for
commercial purposes in Ethiopia.
2.5 Mission
The mission of the company is to own a well functional Integrated and Enriched Commercial
Purpose Food processing business that highly operating within the community. The company‘s goal
is to implement attainable production and supply of top quality Enriched Food products for national
and international markets. The company‘s visions are to be implemented through a team of
professionals who have extensive work experience in the industry.
2.6 Project Rationale

Food item is a commodity; its demand exists whenever human being exists. The demand increases
as population increases disregarding preference of consumers over the type of feeds and their
catering culture. Wheat flour based products such as biscuit are among the well-known and
commonly available products in the Ethiopian Market.
Food self-sufficiency is one of the prime objectives of the country. Labor intensive agro processing
industries play significant role in absorbing the large labor force and thus contribute their share to
the food self-sufficiency move. The Agricultural products like wheat and the semi processed flour
shall be traded in a vertically integrated marketing methodology in order to ensure better wage to
the farmer and more value adding produces that preferably involve many labor to deploy the cheap
labor force of the country in productive sectors. The industry is a distinct sector of the economy,
which makes its direct contributions to the enhancement of social well-being of productive citizens.
Apart from its attractive return, existence of stable demand and employment generation as well as
tax revenue to the government, establishment of such agro processing industry is a good opportunity
to the grain market stimulation and thus to the framers. It is rationale, therefore, to involve into an
activity that helps to tap the well-known business opportunity.
2.7 KEY SUCCESSES & THREAT AREAS

2.7.1 Macro level Successes

 Access to credit provision at lower interest rate as compared to the business‘s return
and convenient terms and conditions of the loan;
 Attractive investment policy and other packages;
 Secured peace and stability throughout the country;
 Continuous increment in household income and associated increase in their
expenditure patterns;
 Availability of the required man power with relatively cheaper cost and other
resources to run every business.
2.7.2 Sector Level key Successes

 Availability of the required infrastructure;
 Availability of market for the intended food processing business lines;
 Government incentive and encouragement for Food sector development.
2.7.3 Firm level successes factors

 Strategic business areas of special focuses for industry line of businesses where others
are relatively lesser available;
 Well trained &motivated personnel;
 Long years of pertinent work experience of the owners/promoters;
 Well established business with plenty of good-will as well as social acceptances that
the promoter has earned so far.
 Availability of raw materials relatively with low-cost and nearest locations
2.8 Funding Requirement

The company‘s total investment costs required in lump-sum is assumed to be ETB ________;
which accounts for Wheat Flour Product line is ETB _____ and for Biscuit Production ETB ____
respectively. Out of the total investment cost, about 25% of total project financing (ETB ____) is
expected to be covered from promoter‘s equity contribution. Whereas, about 75% of total cost that
assumed to be ETB _______ is to be sought from external source as bank project loan facility,
which enables the company to cover part of fixed investment and working capital needs (i.e.
Running and Administrative costs, like, salaries, operating costs, Raw material purchase and
others).

2.9 PRODUCTS DESCRIPTION AND APPLICATION

2.9.1 Wheat flour
It is a powder made from the grinding of wheat used for human consumption. More wheat flour is produced
than any other flour. In terms of the parts of the grain (the grass fruit) used in flour—the endosperm or
protein/starchy part, the germ or protein/fat/vitamin-rich part, and the bran or fiber part—there are three
general types of flours. White flour is made from the endosperm only. Whole grain or whole meal flour is
made from the entire grain, including bran, endosperm and germ. Germ flour is made from the endosperm
and germ, excluding the bran. In general, Wheat flour is the finely ground endosperm of the wheat kernel.
Hence, Major Types of wheat Flour that the project intends to produce on commencement of operations are;
 All-purpose flour: It is white flour milled from hard wheat‘s or a blend of hard and soft wheat. It
gives the best results for many kinds of products, including some yeast breads, quick breads, cakes,
cookies, pastries and noodles. Protein varies from 8 to 11 %.
 Bread flour: This is white flour that is a blend of hard, high-protein wheat and has greater gluten
strength and protein content than all-purpose flour. Bread flour is milled primarily for commercial
bakers, but is available at most grocery stores. Protein varies from 12 to 14 %.
 Cake flour: It is fine-textured, silky flour milled from soft wheat with low protein content. It is used
to make cakes, cookies, crackers, quick breads and some types of pastry. Cake flour has a greater
percentage of starch and less protein, which keeps cakes and pastries tender and delicate. Protein
varies from 7 to 9 %.
2.9.2 Biscuit Products

Biscuits are the most consumable wheat-based bakery product. They are highly nutritious, easy to digest,
compact in size, can be preserved for a long time and are easily and cheaply transportable over a long distance
because of their lightweight. Biscuits are oven baked food items with greater nutritive value than plain
bread of equal weight. They are classified as Soft, Hard, sweet, plain, baked, filled of coated (or a mixture of
several of these options). Some biscuits satisfy special dietary needs, such as those for high fiber, protein or
extra vitamins (as in infant rusks). Biscuits also contain fat and often sugar, and are cut or molded into thin
layers and baked rapidly and thoroughly. If packed in a moisture proof material, biscuits can have a long
shelf life. It is a small, flat cake that is dry-hard or Soft and usually sweet. Biscuit is a family of candy group,
which is largely, consumed by children and teenagers.

In this regard, the envisaged project will produce biscuit products that will consists of two or more
varieties as partly with a flavored filling between them (in addition to the taste) including hardness,
crunchiness and crispness as perceived by a consumer.
2.9.3 Project’s Future Planned Products

 Oat Flakes
Oat flakes are breakfast meals eaten with milk and generally favored by the modern society. Oats
are high in protein and are particularly good source of thiamine, or vitamin B1. Oat flakes are
produced from oat flour in a processing plant.
 Baby Food Items
Baby or infant food is a supplementary food prepared for children below the age of two. The main
ingredients in the preparation of infant food are pulses, soybeans, milk, potato, corn and fruits. The
mixture of these ingredients is kept in such a way to fulfill the nutrition requirements of infants.
Carbohydrates and proteins are the major nutrient elements. Sweetness, palatability and tenderness
are the basic requirements for infant food. Infant food is served diluted in water and boiled to form
a stew or soup. It is also served as batter for spoon feeding. The main objective of preparing baby
food is to give the necessary nutrition to infants in addition to their mother milk so that the babies
are healthy and fit both physically and mentally.
 Pasta and Macaroni Products
Pasta is a food product made by extruding and drying unleavened dough of wheat flour, and that
forms the basis of much Italian cuisine, as well as Chinese, Japanese, Korean, and Southeast Asian
cuisines. Macaroni is a dried food product made from semolina and shaped in the form of slender
tubes. It is popularly believed that Marco Polo, the 13th Century Italian explorer, introduced pasta to
Europe from China. Italian pastas, such as spaghetti and macaroni, are traditionally made from
semolina flour derived from durum (extra – hard) wheat.
Pasta may be added to soups; boiled and served with a sauce; served cold with other ingredients in a
salad; stuffed with meat, cheese or vegetables and then boiled and baked. There are dozens of
varieties of Italian pasta, and they are usually named for their sizes and shapes. Pasta is a highly
nutritious food. A 56 - gram (2 - oz) serving of pasta has less than 1 - gram (0.04 - oz) of fat, no
sodium, no cholesterol, and about 210 calories.
IV. MARKET ASPECTS ANALYSIS

4.1 Market Overview and Ethiopian Economy
It is obvious that Ethiopia, which depends on agriculture of nearly half of its GDP, should give top
priority to the development of its agricultural sector. To this effect, the government has adopted an
Agricultural-Development Led Industrialization (ADLI) strategy to ensure sustainable agricultural
production for food self-reliance and promote industrialization. The rigorous implementation of the
ADLI strategy is recognized to result in surplus production of agricultural products. Rather than
exporting surplus primary products such as cereals, pulses, oilseeds and fresh produce, Ethiopia will
increasingly realize the benefits of exporting processed foods that add value to primary agricultural
products.
Therefore, the prospects for establishment of the food processing sub-sector are considerable. Food
processing factories of cereals, oilseeds, pulses, sugarcane, vegetables, fruits, meat, dairy products
and spices are expected to be established in large numbers. In all, agro-industry in general and food
processing in particular will play an increasingly important role in the Ethiopian economy.
In order to be competitive in the market, the Ethiopian food processing industry should increase the
degree of transformation of primary agricultural products and improve upon the quality of food
packaging. Therefore, use of modern technology will be very critical element in food processing
and packaging. In this connection, market access, management knows how and transfer of
technology would take up most.
Given the large agricultural resources potential of the country and relatively under developed status of
the manufacturing sector, the Ethiopian Government should as part of its ADLI strategy, initially focus
on the development of the country‘s agro-industry, especially the food processing industry, both for the
export and the domestic markets. The domestic market is important because growth in income of the
general population, combined with increased urbanization, will in time translate into increased domestic
demand for processed foods. Hence, the establishment of the underlying food processing project which
intended to produces wheat flour and different biscuit products in an integrated way is considered as part
of national strategic plan, which in turn enabling the promoter to play a role by contributing his own part
for food sector development activities.

4.2 GENERAL SUPPLY ANALYSIS

The food processing industry in Ethiopia consists of three scale-based classes; the dominant core, which
consists of large-scale manufacturers producing well-known brands account for a significant share of the
market when it comes to packaged foods such as biscuits and pasta/macaroni. The second & third class is the
competitive fringe consisting of medium and small scale enterprises that collectively account for a larger
share of the market for unbranded, staple (commodity) food items such as flour & bread. The 2016 CSA
Manufacturing Business Survey reports the total production value of the food processing sector to be
2,688,620,795 in Year 2015, which is about 11.93% of the manufacturing industry as a whole.
4.2.1 Wheat Flour Products
 Local Production
The Ethiopian Flour Milling industry comprises a number of players that can be segmented on the basis
of their production capacity and a type of services they provide. The major partakers of the flour industry are
the flour mills, pasta, macaroni and biscuit factories. Given the industry‘s high fixed cost requirement,
profitability is largely dependent on the company‘s ability to increase volumes of sales. The shortage of
sustainable supply chain of wheat grain in the domestic and international market is making the sector
challenging and it adversely affecting the operations and profitability of flour milling companies in the
country. According to CSA, 2015/16 report in Ethiopia there are 197 manufacturer of grain mill products of
which 57% are held in sole ownership, 30% are PLC and 5% are share companies as shown in the following
figure.
FIGURE 1: FLOUR MILLING PRODUCT MANUFACTURERS
Co- Others, 2% Public, 1%

operatives,
2%
PLC, 30%
Individual
share ownership,
company, 57%
5%
Partnership,
4%
Source: CSA, 2016

In Ethiopia, flour production breaks down in to three sub groups; wheat flour, other flours and, FAFA
and other flours. From 2012/13 to 2016/17 more than 1.3 million tons of flour has been produced. The
production grew with 27% average growth rate for the last five years. The maximum production is
attained in 2016/17, and on the same year the actual value of production as a percentage of yearly
capacity for all grain mill manufacturers is about 48.4% for public and private manufacturer. The
following table shows the total value of flour production for the period covering (2012/13 - to -
2016/17).
TABLE 1 : FLOUR PRODUCT MANUFACTURED (IN TONS)
Description 2012/13 2013/14 2014/15 2015/16 2016/17

Flour(wheat) 140,128 152,103 261,409 314,053 351,148
Flour(Others) 7,916 5,840 9,337 13,644 14,134
Fafa, Dube, Edget Meten,etc 11,924 11,382 10,990 37,971 21,058
Total 159,968 169,325 281,736 365,668 386,340
Source: CSA Report, 2016/17
The low level of capacity utilization for flour milling manufacturer is mainly due to shortage of quality; such
as durum wheat in the local market. To satisfy the need of mill product manufactures durum is imported in a
large amount in addition to local production.
 Supply through Import

During the years 2011/12 to 2016/17 more than Birr 1.7 billion worth of various types of flour has
been imported. During the period wheat flour, maize flour and Maize starch has an average 69%,
9%, 9% share respectively. The summary of imported flours for the years 2011/12 to 2016/17 is
presented in the table below.
TABLE 2: SUMMARY OF FLOUR IMPORT FOR THE YEARS 2011/12 to 2016/17
CIF Value Growth Growth Rate

Year Qty In Ton
('000 Br.) Rate (Qty ) Value ('000 Br.)
2011/12 109,280 292,276
2012/13 92,351 196,222 -15.5% -32.9%
2013/14 165,550 518,284 79.3% 164.1%
2014/15 126,517 228,269 -23.6% -56.0%
2015/16 117,688 161,724 -7.0% -29.2%
2016/17 133,499 307,535 13.4% 90.2%
AVERAGE 31,907 1,704,310 46.6% 136.3%
Source: ERCA

As can be seen from the above table, import of flours during the period under consideration has shown a
noticeable increasing trend except slight fluctuations. During the period import of flours has exhibited an
average annual growth rate of quantity in Tons was 46.6%; Where-as, in terms of CIF Value in LCY (Birr)
the average growth rate for the period was registered as 136.3% over six (6) years.
 TOTAL SUPPLY OF FLOUR
During the years considered as a base for this study purpose, the country consumed an average of
420,540 tons of flours out of which the local market contributed an average of 70.5%. The table
below presents the total supply of flours in Ethiopia for the years 2011/12 to 2016/17 and the share of
local production in the total supply. As can be observed from the table below, the total supply of flours
has consistently been increasing throughout the years 2011/12 to 2016/17 except a slight fluctuation on
quantity imported
TABLE 3: TOTAL SUPPLY OF FLOURS 2011/12 to 2016/17
Local Total Growth Rate of Share of Local

Year Import
Production Supply Total Supply Production
2011/12 159,968 109,280 269,248 0 59.4%

2012/13 169,325 92,351 261,676 -2.8% 64.7%
2013/14 281,736 165,550 447,286 70.9% 63.0%
2014/15 365,668 126,517 492,185 10.0% 74.3%
2015/16 386,340 117,688 504,028 2.4% 76.7%
2016/17 415,316 133,499 548,815 8.9% 75.7%
AVERAGE 296,392 124,148 420,540 89.4% 70.5%
4.2.2 SUPPLY BISCUIT PRODUCTS

 Domestic Production
Biscuits are very popular food items. They are pleasant in taste and do not require cocking and
hence ready to be served. Although the supply of Biscuit products is from local production and
through import, still there is un-met demand for biscuits in both cases. For this study purposes, we
considered supply situation from Domestic production for the period covering 2007/08-2016/17 as
shown in Table 4 below.

Table 4: DOMESTIC PRODUCTION OF BISCUITS (TONS)
Year Production
2007/08 20,115
2008/09 20,429
2009/10 23,994
2010/11 39,546
2011/12 89,259
2012/13 113,773
2013/14 154,251
2014/15 194,236
2015/16 223,548
2016/17 249,800
AVERAGE 112,895
Sources:- Central Statistics Agency (CSA), Large and Medium Scale Manufacturing Report (2017)
 Supply through Import
In addition to the domestic production, biscuits are imported from various parts of the world. Import of
biscuits for the period covering 2007/08 to 2016/17 is shown in Table-5 below.
Table-5: IMPORTS OF BISCUITS (TONS)
Year Import
2007/08 11,470
2008/09 11,039
2009/10 7,759
2010/11 11,531
2011/12 8,565
2012/13 9,636
2013/14 15,426
2014/15 24,500
2015/16 12,397
2016/17 10,250
AVERAGE 12,257
Source: Ethiopian Revenue and Customs Authority

As indicated in the above table, Imports of biscuits during the period were slightly fluctuating. The
highest imported quantity was during year 2013/14 and 2014/15, which stood at 15,429 tones and 24,500
tones, respectively. In the remaining eight years the imported quantity ranged from the lowest 7,759 tons
(year 2009/10) to the highest 12,397 tones (year 2015/16).
 TOTAL BISCUIT SUPPLY
During the years considered as a base for this study purpose, the country consumed an average of
420,540 tons of flours out of which the local market contributed an average of 70.5%. The table below presents
the total supply of flours in Ethiopia for the years 2011/12 to 2016/17 and the share of local production in the
total supply. As can be observed from the table below, the total supply of flours has consistently been increasing
throughout the years 2011/12 to 2016/17 except a slight fluctuation on quantity imported
Domestic Total Average Share of Local

Year Import
Production Supply Growth Rate Production
2007/08 20,115 11,470 31,585 0 63.7%
2008/09 20,429 11,039 31,468 -0.4% 64.9%
2009/10 23,994 7,759 31,753 0.9% 75.6%
2010/11 39,546 12,397 51,943 63.6% 76.1%
2011/12 89,259 8,565 97,824 88.3% 91.2%
2012/13 113,773 9,636 123,409 26.2% 92.2%
2013/14 154,251 15,426 169,677 37.5% 90.9%
2014/15 194,236 24,500 218,736 28.9% 88.8%
2015/16 223,548 10,250 233,798 6.9% 95.6%
2016/17 249,800 11,531 261,331 11.8% 95.6%
Total Supply 1,128,951 122,573 1,251,524 90.2%
with a mean figure of 12,257 tones over past ten years. For this reason, it was found appropriate to
take the last three years average (after skipping the outlier value of 2009) in estimating the 2012
import level. Hence, the 2012 import was estimated at 1,399 tons.

B. SUPPLY PROJECTION
The supply projection is made by taking in to consideration the installed production capacities of the existing
local factories and import has been excluded to show the available local capacity.
Assuming all other things remain constant, the local production of flours is projected to grow by
20% which is the average growth rate of the manufacturing sector during the GTP period. The table
below presents the projected supply, assuming that all conditions which are necessary for
production of flours are met. The flours local supply/production is projected to be 2.2 million tons
in the year 2014 and 11.6 million tons at the end of the projection period in 2025.
TABLE 4: PROJECTED FLOURS SUPPLY
YEAR PROJECTED LOCAL

SUPPLY IN TON
2016 2,247,988
2017 2,697,585
2018 3,237,103
2019 3,884,523
2020 4,661,428
2021 5,593,713
2022 6,712,456
2023 8,054,947
2024 9,665,936
2025 11,599,124
The wheat flour and Biscuit is mainly supplied by the local manufacturers. There are also some
traders that import these products irregularly from European & Gulf countries. In the last five

years, however, most of the consumption had been supplied by local producers. On top of that we
need not consider or disregard import figures from our supply projection as our main intention is
import substitution. Otherwise it may pose a question shouldn‘t we establish our factory, had the
import figures are significantly large? (we think the answer is no.)
Past ten years Trend:
Flour production in Growth rate Biscuit production in

Year Ton ton Growth rate
2000 185,437 - 11,781 -
2001 165,345 -11% 16,607 41%
2002 142,541 -14% 5,378 -68%
2003 136,669 -4% 5,639 5%
2004 155,669 14% 7,361 31%
2005 148,786 -4% 10,115 37%
2006 173,787 17% 10,429 3%
2007 177,263 2% 10,794 3%
2008 180,808 2% 11,172 4%
2009 184,424 2% 11,563 3%
2010 188,113 2% 11,968 4%
Average growth 1% 6%
Source: CSA reports of respective years.
The production capacity of the new entrant firm (nearly one) is unknown. However, on top of the
increase in capacity of the existing firms, prudently we assumed a 1% increase per annum for each
product (flour & Biscuit).
Supply Forecast-in tons
year flour supply Biscuit supply

2011 191,875 12,806
2012 195,713 13,702
2013 199,627 14,661
2014 203,620 15,688

2015 207,692 16,786

2016 211,846 17,961
2017 216,083 19,218
2018 220,404 20,563
2019 224,812 22,003
2020 229,309 23,543
2021 233,895 25,191
2022 238,573 26,954
2023 243,344 28,841
Within the projected period, the total supply of wheat flour increases from 199,627 -243,344 tons
and biscuit from 14,661 tons to 28,841 tons.
6.3 Demand
In order to forecast the demand for the next ten years, per capita consumption rate is applied. Other
things being constant, apparent consumption/demand is the amount purchased and consumed. This
equals Production + Import-Export. The third variable is almost zero in Ethiopian case as there is
no data on significant exports so far. Therefore, Demand equals Local Production plus Import.
According to the business development service, Ethiopia‘s per capita consumption for Wheat
Flour is 3.8 K.g and Biscuit 0.2 K.g. These rates are considered for the forecast. Population growth
of 2.4% plus 6% annual increase due to the increment of expending power of the population is
applied to forecast the demand as shown below: The population projection figures in this issue are
based on the results of the May 2007, National population and Housing Census of Ethiopia.
Therefore, the projected figures for the year 2012 become 84,320,987.
Year Population per capita flour consumption per capita biscuit consumption
in ton in ton
2,012 84,320,987 320,420 16,864
2,013 91,403,950 347,335 18,280
2,014 99,081,882 376,511 19,816
2,015 107,404,760 408,138 21,480
2,016 116,426,760 442,422 23,285

2,017 126,206,607 479,585 25,241

2,018 136,807,962 519,870 27,361
2,019 148,299,831 563,539 29,659
2,020 160,757,017 610,877 32,151
2,021 174,260,607 662,190 34,852
2,022 188,898,497 717,814 37,779
2,023 204,765,971 778,111 40,953
As shown above, the demand volume is expected to grow due to population increment and per
capita income improvement. According to the forecast, within the years from 2013 up to 2023:
Demand of wheat flour increases from 347,335- 778,111 tons and biscuit from 18,280-40,953 tons.
6.4Demand and Supply Gap
The demand-supply variance shows positive demand gap indicating that even after capacity
increment of existing factories, demand for the products would fully be met with additional
imported portion.
Demand Gap
year Flour in ton Biscuit in ton
2,012
2,013 147,708 3,619
2,014 172,892 4,129
2,015 200,446 4,695
2,016 230,576 5,325
2,017 263,502 6,023
2,018 299,466 6,798
2,019 338,727 7,657
2,020 381,568 8,609
2,021 428,295 9,661
2,022 479,242 10,825
2,023 534,766 12,112

In aggregate all the products have adequate demand gap that can be supplied by a number of new
entrants including this project.
6.5 Marketing Strategy, segmentation and distribution
The major customers of our products are Wholesalers, Retailers & service-based end-users. We plan
to sell products in bulk primarily to the first segment, wholesalers who in-turn sells it to retailers in
smaller quantities. The second segment comprises of large retail outlets such as supermarkets who
buy bulk quantities directly from the manufacturer and resell to the consumer.
The third customer segment, service-based end users comprises of institutions & organizations that
source products directly from the manufacturers either as raw materials or supplies for their
businesses/organizations.
The market & distribution system in Ethiopia consists of major wholesalers, regional wholesale
distributors, retailers, middlemen, traders and collectors in a long and complex value chain. Major
Wholesalers in particular have an excessively significant role to play with the function of bulking;
picking up large quantities for smaller wholesalers in regional cities who in turn distribute it to
retailers within the city. Intermediaries such as regional distributors and middlemen are involved in
logistics by covering the difference between the location of the product and the marketplace where
consumers purchase products. Other traders & entrepreneurs have multiple roles in getting goods
to various customer groups.
Major Wholesalers are concentrated in Merkato, the wholesale center of the country. Smaller
wholesalers are scattered throughout regional cities and work in specific territories. The regional
wholesalers seldom buy directly from the manufacturers as they often distribute a number of goods
and merkato is a one-stop destination for all goods distributed in the Country.
The smaller wholesalers are highly sensitive to price and local competition so they may or may not
carry the same type of products for a significant period. Thus, Merkato becomes an ideal
destination for the smaller wholesalers as it provides them with variety and information on price
comparisons as well as market intelligence in terms of the volume of a particular product that has
been sold to their competitors. Using this information, the smaller wholesalers choose the brands
and/or product mix they are willing to take back to their respective markets. This causes consistent
fluctuations in sales and production schedule for a manufacturer if regular market intelligence is

not conducted. Large-scale food processors have an advantage to determine price points if they
have penetrated the market well. For this purpose we will use penetration price strategy.
The development of the retail sector in terms of the emergence organized businesses with high
volume sales and high-traffic locations etc has fostered a growing direct-to-retailer sales trend
amongst manufacturers. Large-scale manufacturers are now distributing their products to
supermarkets and mini-marts through door-to-door sales/delivery route system. This system allows
the manufacturer and retailer to earn a higher margin by cutting out the middlemen. Despite the
benefits its offers, manufacturers generate low volume from the route sales system since the
addressable customer size is very small. The majority of the Country‘s retailers are inaccessible
neighborhood kiosks with low-volume sales. Thus, the Merkato-wholesale distribution system,
although very costly to local manufacturers is assumed to be the most efficient way to deliver
products making the intermediary group ‗the primary distribution channel‘.
The promoter will use aggressive promotion and product popularization through use of electronic
media especially via TV as visualizing the product will be more convincing. For the purpose 0.5%
of sales are allotted.
6.6.Price
Presently there are different types of flours and biscuits in the market both imported and locally
manufactured. Per our market survey currently, the factory gate price of flour ranges from birr
900-1,000 and for locally manufactured biscuit it ranges from birr 4,500-5,000 per quintal or 100
kg, respectively. As a penetration price the average lowest price of birr 900 and birr 4,500 for flour
and biscuit is considered in the analysis. The minimum market price for the by-product bran is birr
300 per quintal.
6.7Future Prospects
The project has an excellent and promising future since the life style of the consumer base is
changing in its favor. The following factors are expected to contribute positively to the sustainable
growth of the food sector in general.

 Urbanization:-Increased urbanization results in increased consumer demand for processed

food products like wheat flour, bread, pasta &biscuits. Increased number of catering
companies, hotels, universities, and Army consumption is also expected to increase.
 Urban consumer trends:
 Decrease in consumption of home-produced Injera due to the rising prices of Teff.

 Wheat bread replace traditional bread
 More food & drinks consumed outside from home
 Real income growth due to declining inflation rates
 Increased employment rates due to robust economic activity.
 Other Forces:- Population growth results in overall demand increase

V. TECHNICAL STUDIES
The most important technical considerations for this project is raw materials type and selection,
technology and capacity of plant, power source, water source, production process and production
support facilities like land and factory buildings. Each of them is discussed in the subsequent parts.
7.1 Raw material and inputs

The major raw material is wheat. Ethiopia is the largest wheat producer in sub-Sahara Africa.
Wheat production is the fourth largest production in Ethiopia with 3,075,640 ton in area of 1.5
million hectare in the year 2010.
Production (Int
Rank Commodity $1000) Production (MT)
1 Roots and Tubers, nes 930197 5439400
2 Maize 528815 3897160
3 Cereals, nes 821423 3207300
4 Wheat 466,686 3,075,640
5 Sorghum 452014 2971270
5
Source: FAOSTAT (2010)
The production is planned to increase through area expansion and yield improvement.
Ethiopia‘s wheat production increase in recent years appears to be a combination of both.
Wheat is the major raw material that accounts for approximately 74% of manufacturing cost. It is
made available locally, primarily through small-holder farms & government owned farming
enterprises. A cluster of privately held, large-scale agricultural enterprises have been emerging in
the past two years bringing the prospect of enhanced quality & dependable supply into the horizon.
It is not legal for the private sector to import wheat. However, the government supplies wheat for
food manufacturers.
Packing materials, flavors & food chemicals such as preservatives, improvers, colors etc. are not
available locally making imports the only option.
Manufacturers can import any raw materials except for wheat and sugar. A discounted import duty
of 10% is afforded to local manufacturers to boost the competitiveness of local products as opposed
to the 30-35%% duty imposed on importers in other sectors such as traders, service-based
enterprises & distributors.
Some raw materials and packaging such as sugar and cartons are normally sourced locally although
frequent shortages and price fluctuations cause a significant instability within the supply chain.
The other raw material is water. Usually for biscuit about 30% of the dough weight is constituted
by water. However, the water content removed back after the required shape is formed/Extruded/.
The following annual raw material requirement at full capacity is computed based on the following
input output relationship.
Wheat flour
Flour
Raw Material Intake Capacity/year Extraction Rate Yield Bran
Raw Wheat 300,000 0.76 226500 39,000
For 500kg biscuit we use the following amount of raw materials.

 flour- 335kg
 v. fat- 67kg
 sugar- 67kg
 ammonium bicarbonate- 4.5kg
 sodium bicarbonate - 4.5kg
 milk powder- 11kg
 flavors- 0.5kg
 glucose- 11kg
Input requirement for Biscuit line at full capacity

inputs Qty in kgs prices Total cost
Sugar 482,400 14.5 6,994,800
Fat 482,400 29 13,989,600
Milk powder 79,200 24 1,900,800
Sodium Bicarbonate 32,400 5.76 186,624
Ammonium Bicarbonate 32,400 5.24 169,776
Flavors 3,600 244 878,400
liquid glucose 79,200 12.64 1,001,088
total 25,121,088
Packaging Quantity pcs Cost at full capacity

Wheat Flour Sacks 25 kg (50% of production) 404,760 2,023,800
Wheat Flour Sacks (50kg 50% of production0 202,380 1,011,900
sub-total 607,140 3,035,700
PP Bag for Byproduct 39,000 195,000
Poly Film -Biscuit-in rolls 15,000 150,000.00
Cartoon for Biscuit 1,500,000 15,000,000
sub-total 15,345,000
Total 18,380,700
7.2 Production Process

7.2.1Cleaning
Whet received for milling contains field contamination, which includes plant parts, weed seeds,
stones, and lumps of soil. It may also have extraneous materials like metal fragments and other
grains. Raw wheat stored in bulk store requires regular recycling and dosing of fumigation tablets.
The wheat from the dumping pit, via bucket elevator is fed to the vibro separator. Materials to be
separated fall freely through the inlet onto the coarse screen of the vibiro separator, which removes
coarse impurities as string, straws, and stones. Fine sieves further remove broken kernels, sands and
other fine impurities. Tailing from sieve layer cleaned water is used at the outlet to separate light
particles by an aspiration channel.
7.2.2 Conditioning
Prior to milling water is added in process known as ―tempering‖. Hard wheat is normally brought
to 15-16% moisture, soft wheat 13-14% moisture. Tempered wheat is held 18-24 hourse at ambient
temperature in conditioning bins. The process toughness the seed coat /bran/ and softens the starchy
endosperm so that an efficient separation of bran and endosperm can take place.
7.2.3 Milling/Grinding/
The process of wheat milling is a complex procedure of repetitive grinding and sieving. The
grinding process is divided into the break, scratch and reduction operations.
The tempered wheat is grounded on a serious of corrugated break rolls, the objective being to open
up and scrap the wheat kernel to release endosperm from the bran. Each grinding operation is
followed by sifting operation, in which the coarse branny stock from the sifter is fed on successive
break rolls. Each grinding and bolting operation results in stream of flour of various breaks (1st, 2nd,
etc) that are collected from finest sieves as intermediate granular particles. The final products of
wheat flour are ready to go for the biscuit line and to store.
An average well-matured grain of wheat has 55% endosperm, 13% bran, and 2% germ. It is the
endosperm of the wheat grain that is converted to flour in milling. In theory, it should be possible to
remove or extract approximately 85% of the grains flour, however other structural features makes
it an impossible task in actual fact, the amount of flour produced may have some amount of bran,
while some flour is lost with the bran. Therefore, the commercial flour may have extraction rate in
the ranges of 73%-80%.
Biscuit
Biscuit manufacturing involves mixing of flour and other ingredients into homogenous dough,
forming the dough into a pre-established shape, backing the dough pieces into biscuit. Cooling the
biscuit and packaging it. These processes are performed on artisanal or industrial scale. The biscuit
manufacturing to be employed is fully automatic. Flour from the silos is pneumatically transported
to the mixing unit; the dough from the mixer is then automatically transferred to the forming unit,
from the forming unit to the oven then the final product through the cooling tunnel to the packing
unit. The following chart shows the major process flow of the products.
Wheat Flour and Biscuit processing flow Chart
7.3 Civil Works

 Land
The land at which the food complex plant is located is acquired on lease base from Addis Ababa
city Administration, Akaki-kality Subcity. The lease agreement for 5,000 m2 was concluded in the
2003 E.C and valid until the year 2083 E.C. i.e. for 80 years. The promoter has to pay Birr 6.5 per
meter square or Birr 2,600,000 in total within 40 years payment period. So far he has paid Birr
319,215 Including 10% down payment.
The project is located at the industrial zone of Sebeta-Akaki-Kality Subcity which is being selected
by the government considering infrastructure, proximity to the market, availability of manpower,
etc. In this case it seems that the decision for site selection is being made by the government instead
of the promoter.
 Building
The factory requires bigger production, raw material and finished products hall. Such store and
other construction works are already started and 40% completed. Among others, the factory
building consists of the following parts.
 Raw material store , Finished goods store, Offices, Two separate dressing rooms
The factory building is estimated to cost total of birr 13,534,233.41, so far the promoter has made
40% or about birr 5,541,379.
7.4 Production Machinery and lay out
Both the flour and Biscuit processing machinery are already been selected from different China
suppliers; namely HEBEI AFRICA MACHINERY CO.LTD and SHUNDE LIGHT INDUSTRIAL
PRODUCTS COM.LTD, respectively. Among others, the following points are our selection
criteria.
 Lower price
 They supply the complete plant while the others don‘t supply the complete plant
 The main parts of the plant are from very popular and reliable suppliers like Siemens
 The type of material from which the machineries made are the best quality
 They have been in the business for the long time and have good reputation. Moreover they
have supplied to many countries including Ethiopia and we have learnt from their customers
that they provide good quality machineries.
 They provide reliable spare parts
 The machineries run by latest technology.
The flour making machine has a designed production capacity of 30,000 ton per year while the
Biscuit machine can produce 3600 ton per year assuming 300 working days in a year.
The under shown table portrays the machinery and its associated costs per the proforma invoice
plus transaction costs computed based on Ethiopian investment agency, factor cost publication of
the year 2012 & access capital price data base.
production machinery cost break down
Wheat Flour Machinery Biscuit machinery Total flour & Biscuit
Production Machinery 551,570 587,700 1,139,270
Sea freight 29,200 28,175 57,375
Port clearing & Delivery
charge 8,640 7,560 16,200
Installation cost 26,400 18,000 44,400
Total in USD 615,810 641,435 1,257,245
Exchange rate 18.5 18.5 18.5
Sub-total in Birr 11,392,485 11,866,548 23,259,033
Insurance 17,089 17,800 34,889
Inland freight 40,000 35,000 75,000
Bank charge 171,744 178,790 350,534
Ticket and accommodation 370,000 185,000 555,000
Grand Total 11,991,317 12,283,138 24,274,455
 For flour machine-Two expatriate engineers and 2 technicians with monthly salary of
USD 2,000 and USD 2,400 per month shall stay in Addis for three months for
installation.
 For Biscuit Machine-2 expatriate engineers from Supplier Company with daily rate of
USD 100 will stay for 90 days for installation.
 Round trip air ticket costs birr 25,000 each expatriate. Accommodation and food
charge is estimated to be birr 750 per day.
NB. The production machinery lay out is annexed.
7.5 Vehicles
The total output (flour, biscuit and the by product) at 60% capacity is more than 53 ton per day. An
Isuzu NPR truck can load 3.5 ton at a time. Assuming a single truck can make two trips per day, the
project demands at least 7 trucks. However, with the assumption that most of the sales will be
made at factory gate and the promoter will use some vehicles on rental basis, it is planned to
purchase only two ISUZU trucks. Own vehicles will be used to reach far areas and address urgent
deliveries. The detail type and price of the vehicles is shown in the table below.
Vehicles
Type quantity Unit/price Total
ISUZU NPR truck model 2012/3.5ton 2 725,000 1,450,000
2% registration fee 29,000
Total 1,479,000
7.6 Office Equipment and Furniture
The factory has to be equipped with the necessary office equipment, furniture for the
administrative, and finance staffs as well as for market integration of input supply and finished
product quality control. The details with related costs are shown in the table below.
Furniture, Generator and Transformer
Description Unit cost/unit Total
Generator, transformer and electric
work one each 6,771,119 6,771,119
Dell computers with LCD monitor &
Speaker 25 14347.83 358,696
HP laser Jet printer 15 6086.96 91,304
Canon IR 2420 photo copy machine 1 27826.09 27,826
Managerial table-one side arch 5 3302.61 16,513
managerial table-bean type 180x90x75 8 3144.35 25,155
Single Pedestal table 140x80 21 2151.3 45,177
Executive Book shelf 4 4538.26 18,153
Gust chair 12 499.13 5,990
managerial swivel chair 5 2049.57 10,248
Dixon shelf 3 1466.09 4,398
sub-total 6,839,964 7,423,748
15% VAT 1,113,562
Total 8,537,310
As indicated from the table the project requires total investment of birr 8,537,310 for furniture,
transformer and generator acquisition.
7.7 Utility Supply
 Power Supply
The factory requires total 840KW (for flour mill 290+biscut line 550) power. The electric
installation cost including power transformer is indicated in the table above under part 6.6
supported by valid proforma invoice. The following table shows the computation of annual power
cost to the factory.
Annual Consumption at 24 Rate Per

POWER KW hrs/day, @100% capacity Unit Birr
Flour Mill
Line 290 2,088,000 0.58 1,211,040
Biscuit Line 550 3,960,000 0.58 2,296,800
Total 840 6,048,000 3,507,840
 Water
Water line is not availed to the project as a result estimated cost of birr 3,000 is allotted in the pre-
operating expenditure. For Flour and Biscuit production, water is an essential input. Including the
requirement for human use, the factory‘s annual water consumption reaches 3,000-m3 at birr
3.25/m3 consumption per day.
The detail is shown below.
Water m3/DAY Annual Consumption Rate/ m33 total

Flour Mill and biscuit line 10 3,000 3.25 9,750
 Fuel Consumption
Fuel Consumption
KM/day km. distance /litter price Total
200 6 20 400,000
5% oil & Lubricant 20,000
fuel consumption
Estimated hours power off liter/hr price Total
2 5 20 60,000
Total 480,000
As indicated above on average each vehicle is assumed to travel 200 km per day and will travel 6
kilometers per liter of fuel. Price of fuel is birr 20/litter. The annual fuel consumption for the two
trucks will, thus, be birr 400,000. Oil and lubricant expense is estimated to be 5 % of fuel.
Likewise, a stand by generator on average will work for 2 hours per day with 5 litter consumption
per hour at birr 20/litter, the annual fuel cost will be birr 60,000.
 Communication and Stationery
Telecommunication, Internet and fax service in today‘s business world have great importance in
exchanging information between raw material suppliers, intermediaries, consumers and producers.
The area is equipped with mobile network, landline, and internet service. Total cost for
communication and stationery is considered 3% of salary expense.
7.8 Environmental Impact Assessment

The project will not have an adverse impact on the environment as it is not associated with process
that emits hazardous effluents that can potentially endanger the working or surrounding
environment.
VI. PROJECT MANAGEMENT AND HUMAN RESOURCE

5.1. Project Management
The technical aspect of Wheat flour and biscuit production is a well-known profession in the
Ethiopian food-processing sector. As a result, qualified professionals are available in the market
hence; all the technical, marketing, finance & Administration and Production functions are
supervised and managed by Ethiopians. The owner is also member of the top management group of
the factory and other qualified professionals assume the Production, Marketing & Procurement as
well as Finance & Administration functions.
The would be organizational structure of the factory is as shown below:-

General
Manager
Secretary Legal Advisor
Head - Finance &

Head Marketing
Production and Administration
& Procurment
Technique Manager
Head- Sales and

Head Production Head Finance
Promotion
Head
Head Technical Head
Procurment and
Services Administration
Store
5.2. Human Resource Requirement

A total number of 300 permanent local employees are projected for the managerial, professional,
technical, and non-professional posts of the project. The 20% staff benefit includes, 8% pension,
transportation and other benefits. Monthly and annual salary expense is Birr 650,400 and Birr
7,804,800, respectively. The detail including the salary expense is shown in the following table.
No. of Monthly Monthly Salary Annual

Position posts Pay Expense Pay
General Manager 1 10,000 10,000 120,000
Executive Secretary 1 3,000 3,000 36,000
Legal Advisor 1 4,000 4,000 48,000
sub-total 3 17,000 17,000 204,000
Head Finance and Admin.
Department 1 8,000 8,000 96,000
Secretary 1 2,500 2,500 30,000
Administration Division 1 5,000 5,000 60,000
Personnel officer 1 3,000 3,000 36,000
Office girl 1 1,000 1,000 12,000
Personnel Clerk 1 1,500 1,500 18,000
General Service Clerk 1 1,500 1,500 18,000
Telephone Operator 1 1,500 1,500 18,000
Drivers 2 2,000 4,000 48,000
Assistant Drivers 2 1,000 2,000 24,000
Guards 6 800 4,800 57,600
Janitors 2 800 1,600 19,200
Gardeners 1 800 800 9,600
Finance Division 1 5,000 5,000 60,000
Senior accountant 1 4,000 4,000 48,000
Accountant 3 3,000 9,000 108,000
Data Entry Clerk 1 1,500 1,500 18,000
Casher 2 2,000 4,000 48,000
sub-total 29 44,900 60,700 728,400
Head Marketing and
Procurement 1 8,000 8,000 96,000
Procurement & store division 1 5,000 5,000 60,000
Purchaser 1 3,000 3,000 36,000
Store keeper 2 2,000 4,000 48,000
Head Sales division 1 5,000 5,000 60,000
Sales Officers 2 3,000 6,000 72,000
Sales Clerk 2 1,500 3,000 36,000
Invoice clerk 1 1,500 1,500 18,000
sub-total 11 29,000 35,500 426,000
Production and Technique
Depar. Head 1 8,000 8,000 96,000
Production Division Head 1 5,000 5,000 60,000
Shift leader 3 4,000 12,000 144,000
Different machines operators 20 2,000 40,000 480,000
Different machines assistant
operators 20 1,500 30,000 360,000
Packing supervisors 3 2,500 7,500 90,000
Packing workers 200 1,500 300,000 3,600,000
Quality Controller-chemist 2 3,000 6,000 72,000
Sub-total 250 27,500 408,500 4,902,000
Technical Division Head 1 5,000 5,000 60,000
Mechanical Forman 1 3,500 3,500 42,000
Senior mechanic 1 3,000 3,000 36,000
Mechanic 1 2,500 2,500 30,000
Senior electrician 1 3,000 3,000 36,000
Electrician 1 2,500 2,500 30,000
Tool Keeper 1 800 800 9,600
sub-total 7 20,300 20,300 243,600
Total 300 138,700 542,000 6,504,000
20% benefit 108,400 1,300,800
Grand total 650,400 7,804,800
Training Requirement
Training shall be carried out during plant erection and commissioning by machinery supplier. The
training and erecting period is scheduled to be for 90 days. The cost of installation and training cost
is included in the cost of production machinery.
VII. FINANCIAL APPRAISAL
8.1 Initial Investment Cost
The total initial investment cost required for the project is 87.92 million. The items and cost
breakdown is shown in the following table.
Investment Cost Schedule
Description Unit Total Investment cost
Land use tax Advance Payment Birr 319,215
Factory Building Birr 13,853,449
Production Machinery Birr 24,274,455
Vehicles Birr 1,479,000
Generator, transformer and office Equipment Birr 8,537,310
Sub-total Birr 48,463,429
Pre-operating Expenditure(water 3,000) Birr 14,660
Pre operating Interest Birr 10,055,145
Initial Working Capital Birr 29,437,446
Sub Total Birr 39,507,252
Total Birr 87,970,680
NB. Different legal expenses paid plus birr 3,000 water line installation cost to be paid)
(10,180.48+200+105+10+25+360+780+3000).
8.2 Financing Structure
Total Initial
Investment Cost Equity Contribution Debt Finance
Item Unit Amount % Amount % Amount
Land - Payment Birr 319,215 100% 319,215 0% -
Factory Building Birr 13,853,449 40% 5,541,379 60% 8,312,069
Production
Machinery Birr 24,274,455 30% 7,282,336 70% 16,992,118
Vehicles Birr 1,479,000 30% 443,700 70% 1,035,300
Generator,
transformer and
office Equipment Birr 8,537,310 30% 2,561,193 70% 5,976,117
Sub-total Birr 48,463,429 33% 16,147,824 67% 32,315,604
Pre-operating
Expenditure Birr 14,660 100% 14,660 0% -
Pre operating Interest Birr 10,055,145 100% 10,012,679 0% -

Initial Working
Capital Birr 29,437,446 30% 8,831,234 70% 20,606,212
Sub Total Birr 39,464,786 48% 18,858,573 52% 20,606,212
Total Birr 87,970,680 40% 35,006,397 60% 52,921,817
As indicated in the above table, it is planned that the promoter would contribute 40% of the total
investment cost and the remaining 60% would be financed by debt. Out of the equity requirement
of Birr 35 million, the promoter has so far committed more than birr 5.86 million for construction
of building, lease payment and pre-operating expenditures. The 60% bank financing, which is birr
52.92 million would be payable within 8 years exclusive of 2 years grace period at quarterly
repayments with 9.5% interest rate.
8.3 Applied Financial Assumptions:

1. Project life: Ten operational years excluding implementation period
2. Capacity Utilization Rate: Starts at 60% and increases by 5% every additional year up to
attainable capacity of 90%.
3. Working days per year: 300
4. Number of shifts: at full capacity = 3,
5. Working hours per shift : 8, total working hours per day, 24,
6. Tax holiday period: Nil,
7. Profit tax: 35% of IBIT and 15% VAT on sales.
8. Salvage value: Buildings 50%, Vehicles, Machinery, and Major Equipment, 20%.
9. Recovery rate: Full amount of the ending working capital amount,
10. Cost of Capital for discounting: 9.5%
11. Grace period: 2 years.
12. Financial Expense on debt finance: Fixed 9.5%,
13. Loan Repayment: Principal plus interest is paid per quarter within 8. years, however, interest
alone would be paid during grace period of 2 years,
14. Water average Rate Birr 3.25 Per M3
15. Power: average rate Birr 0.58 per KWH,
16. Stationery and Communication: 3% of salary expense,
17. Marketing and Promotion: 0.5% of sales revenue,
18. Uniform and miscellaneous : Birr 400 per employee/year,
19. Miscellaneous expense birr 20,000 per annum.
20. Salary Expense: Per the schedule shown in item 4.2,
21. Wage: Birr 50 per ton,
22. Depreciation: Buildings 5%, Machinery, Vehicle, Equipment and furniture 20%, land lease
1% based lease life.
23. Amortization: Pre-operating expense : 20%,
24. Property Insurance premium: would be 1.75 % for the buildings cost and 2.5% for
Machinery and Vehicles,
25. Repair including tier, spare parts, etc: 0.10% of the cost of building, Machinery, vehicle
and equipment for the first 5 years, then will increase by 10% then after.
26. Lease Fee: Birr 58,500 per year per lease agreement.
8.4 Working Capital
The major costs selected to be financed with debt are only cost of wheat, packaging, sugar, flavors.
Salary, wage, fuel, as well as power and light costs.
As indicated in the table below, the minimum days coverage considered for one turnover is 30-90
days. The working capital amount is determined to be Birr 29.43 million for year one. The
incremental working capital after year 1 due to increase in production capacity will be financed
from the internally generated cash.
WORKING CAPITAL Schedule

MDO
Cost Items/Year C Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7 Year-8
Cost of Wheat 60 21,600,000 23,400,000 25,200,000 27,000,000 28,800,000 30,600,000 32,400,000 32,400,000
Packaging 60 2,205,684 2,389,491 2,573,298 2,757,105 2,940,912 3,124,719 3,308,526 3,308,526
Sugar and other flavors 90* 4,521,796 4,898,612 5,275,428 5,652,245 6,029,061 6,405,877 6,782,694 6,782,694
Power and Light 30 210,470 228,010 245,549 263,088 280,627 298,166 315,706 315,706
Salary and Wage 30 870,696 878,214 885,732 893,250 900,768 908,286 915,804 915,804
Fuel 30 28,800 31,200 33,600 36,000 38,400 40,800 43,200 43,200
Total 29,437,446 31,825,527 34,213,607 36,601,688 38,989,768 41,377,849 43,765,929 43,765,929
Incremental WC 2,388,081 2,388,081 2,388,081 2,388,081 2,388,081 2,388,081 0
*MDOC-minimum days of coverage

** Import of one L/C takes 90 days
8.5 Operating Cost, Volume and Revenue
8.5.1 Operating Cost
The table below shows the factory operating cost before depreciation and interest expenses under
different production capacity. The assumptions for each cost and expense are indicated in the
aforementioned discussion under part 7.3 above.
Operating cost schedule
Capacity
Utilization 100.0 60% 65% 70% 75% 80%
Description/Yea
r - Year 1 Year 2 Year 3 Year 4 Year 5
Cost of Wheat 180,000,00 108,000,00 117,000,00 126,000,00 135,000,00 144,000,00
Flour 0 0 0 0 0 0
Power and Light 3,507,840 2,104,704 2,280,096 2,455,488 2,630,880 2,806,272
Sugar and Other
Flavors 25,121,088 15,072,653 16,328,707 17,584,762 18,840,816 20,096,870
Water 9,750 5,850 6,338 6,825 7,313 7,800
Fuel Cost 480,000 288,000 312,000 336,000 360,000 384,000
Packaging 18,380,700 11,028,420 11,947,455 12,866,490 13,785,525 14,704,560
Salary expense 7,804,800 7,804,800 7,804,800 7,804,800 7,804,800 7,804,800
Wage (Birr
50/tone 1,503,600 902,160 977,340 1,052,520 1,127,700 1,202,880
Property
Insurance 328,162 328,162 328,162 328,162 328,162 328,162
Land Lease 58,500 58,500 58,500 58,500 58,500 58,500
Repair &
Maintenance 481,442 481,442 481,442 481,442 481,442 481,442
Stationery&
Communication 234,144 140,486 152,194 163,901 175,608 187,315
Marketing and
Promotion 2,046,092 1,227,655 1,329,959 1,432,264 1,534,569 1,636,873
Auditing fee 20,000 20,000 22,000 24,200 26,620 29,282
Uniform 120,000 120,000 132,000 145,200 159,720 175,692
miscellaneous
expense 20,000 12,000 13,000 14,000 15,000 16,000
Operating Cost 240,096,11 147,582,83 159,160,99 170,740,55 182,321,65 193,904,44
Before Dep. 8 2 3 4 5 9
Depreciation 9,560,283 9,560,283 9,560,283 9,560,283 9,560,283
Operating Cost 240,096,11 157,143,11 168,721,27 180,300,83 191,881,93 203,464,73
Before Interest 8 6 7 7 8 3
Interest Expense 4,865,016 4,406,882 3,903,651 3,350,883 2,743,701
Total Operating 240,096,11 162,008,13 173,128,15 184,204,48 195,232,82 206,208,43
Cost 8 2 9 8 1 3
Cont.
Capacity Utilization 85% 90% 90% 90% 90%

Description/Year Year 6 Year 7 Year-8 Year-9 Year-10
162,000,00 162,000,00 162,000,00
Cost of Wheat Flour 153,000,000 0 0 0 162,000,000
Power and Light 2,981,664 3,157,056 3,157,056 3,157,056 3,157,056
Sugar and Other
Flavours 21,352,925 22,608,979 22,608,979 22,608,979 22,608,979
Water 8,288 8,775 8,775 8,775 8,775
Fuel Cost 408,000 432,000 432,000 432,000 432,000
Packaging 15,623,595 16,542,630 16,542,630 16,542,630 16,542,630
Salary expense 7,804,800 7,804,800 7,804,800 7,804,800 7,804,800
Wage (Birr 50/tone 1,278,060 1,353,240 1,353,240 1,353,240 1,353,240
Property Insurance 328,162 328,162 328,162 328,162 328,162
Land Lease 58,500 58,500 58,500 58,500 58,500
Repair & Maintenance 529,586 529,586 529,586 529,586 529,586
Stationery&
Communication 199,022 210,730 210,730 210,730 210,730
Marketing and
Promotion 1,739,178 1,841,482 1,841,482 1,841,482 1,841,482
Auditing fee 32,210 35,431 38,974 42,872 47,159
Uniform 193,261 212,587 233,846 257,231 282,954
miscellaneous expense 17,000 18,000 18,000 18,000 18,000
Operating Cost Before 217,123,95 217,148,76 217,176,04
Dep. 205,537,251 9 1 3 217,206,053
Depreciation 696,663 696,663 696,663 696,663 696,663
Operating Cost Before 217,820,62 217,845,42 217,872,70
Interest 206,233,914 2 4 6 217,902,716
Interest Expense 2,076,749 1,344,143 539,421 - -
219,164,76 218,384,84 217,872,70
Total Operating Cost 208,310,663 5 5 6 217,902,716
Per the above successive tables, the total annual factory cost is estimated to be Birr 162 million in
the initial year and increases to birr 219 million when it operates at attainable capacity of 90%.
8.5.2 Production Volume and Revenue
 Production Volume: the two-line machinery has an aggregate installed production capacity
of 30,000 tons and 3,600 tons per annum of wheat and biscuit, respectively.
 Per the table below the flour line will produce two types of flours of (grade 1 & 2 with equal
proportion). At full capacity with extraction rate of 76% the annual production of flour will
reach total 226,500 quintals and 39,000 quintal of bran.
 From the total flour production the biscuit line will use 11% or about 24,120 quintals while
the remaining 89% or about 202,380 quintal will be sold to local market. The flowing table
shows the production volume in detail for each of the production capacity.
Production Schedule In Quintal/100-kg

Year Year Year Year Year Year Year
At Full 1 2 3 4 5 6 7
Capaci
ty
Product 60% 65% 70% 75% 80% 85% 90%
Production of Wheat 101,92

Flour Grade 1 113,250 67,950 73,613 79,275 84,938 90,600 96,263 5
Production of Wheat
Flour Grade 2 113,250 67,950 73,613 79,275 84,938 90,600 96,263 101,92
5
135,90 147,22 158,55 169,87 181,20 192,52 203,85

Total-Flour 226,500 0 5 0 5 0 5 0
Flour to the Market 121,42 131,54 141,66 151,78 161,90 172,02 182,14
(89%) 202,380 8 7 6 5 4 3 2
Bran 39,000 23,400 25,350 27,300 29,250 31,200 33,150 35,100

Flour consumed by
biscuit use (11%) 24,120 14,472 15,678 16,884 18,090 19,296 20,502 21,708
Production of
Biscuits in qtl 36,000 21,600 23,400 25,200 27,000 28,800 30,600 32,400
Sales Revenue:
The net revenue of the project‘s products starts with Birr 245 million and increases to Birr 368
million when it operates at attainable capacity. The under shown table depicts the revenue for each
year under different capacity.
Revenue Schedule
Description/Year Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Y
Capacity
Utilization 60% 65% 70% 75% 80% 85% 90
Flour Sale 109,285,200 118,392,300 127,499,400 136,606,500 145,713,600 154,820,700 16
Biscuit Sale 97,200,000 105,300,000 113,400,000 121,500,000 129,600,000 137,700,000 14
Bran Sale 7,020,000 7,605,000 8,190,000 8,775,000 9,360,000 9,945,000 10
Total Revenue 213,505,200 231,297,300 249,089,400 266,881,500 284,673,600 302,465,700 32

with VAT 245,530,980 265,991,895 286,452,810 306,913,725 327,374,640 347,835,555 36
8.6 Project Profitability
The project would be profitable throughout the considered life years. It is expected to generate from
Birr 33 million up to 66 million net profits. The following table shows the forecasted income
statement of the project within its ten operational years.
Projected Income/Loss Statement
Description/Year Year 1 Year 2 Year 3 Year 4 Year 5
213,505,20 231,297,30 249,089,40 266,881,50 284,673,60

Revenue 0 0 0 0 0
Total Expense Before 157,143,11 168,721,27 180,300,83 191,881,93 203,464,73

Interest 6 7 7 8 3
Gross profit 56,362,084 62,576,023 68,788,563 74,999,562 81,208,867
Interest Expenses 4,865,016 4,406,882 3,903,651 3,350,883 2,743,701
Net Income 51,497,068 58,169,141 64,884,912 71,648,679 78,465,167
Profit Tax 18,016,024 20,351,249 22,701,769 25,069,088 27,454,858
Net Income After Tax 33,481,044 37,817,892 42,183,143 46,579,592 51,010,308

Projected Income/Loss Statement –connt.
302,465,70 320,257,80 320,257,80 320,257,80 320,257,80

Revenue 0 0 0 0 0
Total Expense Before 206,233,91 217,820,62 217,845,42 217,872,70 217,902,71

Interest 4 2 4 6 6
102,437,17 102,412,37 102,385,09 102,355,08

Gross profit 96,231,786 8 6 4 4
Interest Expenses 2,076,749 1,344,143 539,421 -
101,093,03 101,872,95 102,385,09 102,355,08

Net Income 94,155,037 5 5 4 4
Profit Tax 32,946,313 35,374,612 35,647,584 35,826,833 35,816,329
Net Income After Tax 61,208,724 65,718,423 66,225,371 66,558,261 66,538,755
8.7 Project Liquidity and Payback period
The project would produce positive net cash inflow starting from the first year and throughout its
life. The cumulative net cash inflow for year one and at the end of 10th year would be Birr 38
million and 578 million, respectively. The initial investment costs would be paid back with the
gross value of net-cash inflows at the end of 3rd operational year.
Cash Flow Statement For Financial Planning purpose

Description/Year - Year 1 Year 2 Year 3 Year 4 Year 5
Net Income 33,481,04 37,817,89 42,183,143 46,579,592 51,010,308
4 2
Depreciation and
Amortization 9,560,283 9,560,283 9,560,283 9,560,283 9,560,283
35,006,39
Equity 7 - - - - -
52,921,81
Bank Loan 7 - - - - -
Working Capital
Recovery
Salvage Value
87,928,21 43,041,32 47,378,17
Total cash Inflow 4 8 5 51,743,426 56,139,875 60,570,592
Initial Investment 87,928,21
Cost 4
Principal
Repayment 4,654,017 5,112,150 5,615,382 6,168,150 6,775,332
Incremental
working capital - 2,388,081 2,388,081 2,388,081 2,388,081
87,928,21
Total cash outflow 4 4,654,017 7,500,231 8,003,462 8,556,231 9,163,413
38,387,31 39,877,94
Net cash 0 1 4 43,739,964 47,583,644 51,407,179
Cumulative cash 38,387,31 78,265,25 122,005,21 169,588,86 220,996,04
inflow 1 5 9 4 3
Cont.
Net Income 61,208,724 65,718,423 66,225,371 66,558,261 66,538,755
Depreciation and
Amortization 696,663 696,663 696,663 696,663 696,663
Equity - - - - -
Bank Loan - - - - -
Working Capital
Recovery 43,765,929
Salvage Value 13,784,877
124,786,22
Total cash Inflow 61,905,387 66,415,086 66,922,034 67,254,924 4
Initial Investment Cost
Principal Repayment 7,442,284 8,174,890 8,979,612 - -
Incremental working
capital 2,388,081 2,388,081 - - -
Total cash outflow 9,830,365 10,562,970 8,979,612 0 0
124,786,22
Net cash 52,075,022 55,852,115 57,942,422 67,254,924 4
328,923,18 386,865,60 454,120,52 578,906,75
Cumulative cash inflow 273,071,065 0 2 6 0
8.8 NPV & IRR

The harmonizing up of the discounted cash inflows at the rate of 9.5% less the original outlay cost
resulted in (NPV) of Birr 241 million. The internal rate of return (IRR) is 53%, which is a good
deal on top of the considered cost of capital.
Cash Flow statement for Discounting

Description/Year y-0 Year 1 Year 2 Year 3 Year 4 Year 5
33,475,52 37,812,37 42,177,62 46,574,07 51,004,78
Net Income 0 4 1 2 1 8
Dep. and
Amortization 9,568,777 9,568,777 9,568,777 9,568,777 9,568,777
Interest expense 4,865,016 4,406,882 3,903,651 3,350,883 2,743,701
W/Capital
Recovery
Salvage Value
47,909,31 51,788,03 55,650,05 59,493,73 63,317,26
Total Cash Inflow 0 6 0 0 0 5
Initial Investment
Cost 87,970,680
Principal
Repayment 0 4,654,017 5,112,150 5,615,382 6,168,150 6,775,332
Incremental
working capital - 2,388,081 2,388,081 2,388,081 2,388,081
Total cash outflow 87,970,680 4,654,017 7,500,231 8,003,462 8,556,231 9,163,413
- 43,255,29 44,287,79 47,646,58 50,937,50 54,153,85
Net cash flow 87,970,680 9 9 8 0 2
NPV @ RRR 241,707,72
9.5% 8
IRR 53%
Cash Flow statement for Discounting, cnt.

Net Income 61,208,724 65,718,423 66,225,371 66,558,261 66,538,755

Depreciation and
Amortization 696,663 696,663 696,663 696,663 696,663
Interest expense 2,076,749 1,344,143 539,421 - -
Working Capital Recovery - - - 43,765,929
Salvage Value - - 13,784,877

Total Cash Inflow 63,982,135 67,759,228 67,461,454 67,254,924 124,786,224
Initial Investment Cost
Principal Repayment 7,442,284 8,174,890 8,979,612 0 0
Incremental working capital 2,388,081 2,388,081 - - -

Total cash outflow 9,830,365 10,562,970 8,979,612 0 0
Net cash flow 54,151,771 57,196,258 58,481,843 67,254,924 124,786,224
8.9 Sensitivity to Cost and Revenue Variations

Four scenarios are tested to assess how the net benefits of the project behave towards adverse
changes each by 10%. That is.
 Revenue decline
 fixed cost increment
 Operating cost increment, and
 Simultaneous increase in investment and operating cost
No. Scenario NPV in millions of IRR in %

Birr
Base 241 53
1 Decrease in revenue 140 36
2 Increase in Operating cost 172 42
3 Increase in fixed investment cost 233 49
4 Simultaneous increase in investment and 164 38

operating cost
Relatively, the project is not sensitive to increments in fixed investment cost but it is sensitive to
revenue and cost, suggesting a parallel decrease in operating cost and increase in revenue,
respectively. In all cases the however, NPV is positive with minimum IRR 36% which is far from the
discount rate of 9.5%.
8.10 Debt Servicing Schedule
The anticipated bank loan would be paid within 8 years excluding 2 years grace period, at quarterly
repayments and 9.5% nominal interest rate per annum. The two years grace period includes one year
construction period per implementation plan indicated in part_1.4 above and one year pre-marketing
period. The schedule is shown in the following table.
Loan Amortization, Equal Quarterly Repayment
Principal Payments Balance

Principal Interest
Year 0, 24 Months Grace
period. 52,921,817 - 10,055,145 52,921,817
52,921,817 1,122,865 1,256,893 51,798,952
51,798,952 1,149,533 1,230,225 50,649,419
50,649,419 1,176,834 1,202,924 49,472,584
49,472,584 1,204,784 1,174,974 48,267,800
Year 1,Sub Total 4,654,017 4,865,016
48,267,800 1,233,398 1,146,360 47,034,402
47,034,402 1,262,691 1,117,067 45,771,711
45,771,711 1,292,680 1,087,078 44,479,031
44,479,031 1,323,381 1,056,377 43,155,650
Year 2,Sub Total 5,112,150 4,406,882
43,155,650 1,354,811 1,024,947 41,800,838
41,800,838 1,386,988 992,770 40,413,850
40,413,850 1,419,929 959,829 38,993,921
38,993,921 1,453,653 926,106 37,540,268
Year 3,Sub Total 5,615,382 3,903,651
37,540,268 1,488,177 891,581 36,052,091
36,052,091 1,523,521 856,237 34,528,570
34,528,570 1,559,705 820,054 32,968,866
32,968,866 1,596,748 783,011 31,372,118
Year 4,Sub Total 6,168,150 3,350,883
31,372,118 1,634,670 745,088 29,737,448
29,737,448 1,673,494 706,264 28,063,954
28,063,954 1,713,239 666,519 26,350,715
26,350,715 1,753,929 625,829 24,596,786
Year 5 Sub Total 6,775,332 2,743,701
24,596,786 1,795,585 584,174 22,801,201
22,801,201 1,838,230 541,529 20,962,972
20,962,972 1,881,888 497,871 19,081,084
19,081,084 1,926,582 453,176 17,154,502
Year 6 Sub Total 7,442,284 2,076,749
17,154,502 1,972,339 407,419 15,182,163
15,182,163 2,019,182 360,576 13,162,981
13,162,981 2,067,137 312,621 11,095,844
11,095,844 2,116,232 263,526 8,979,612
Year 7 Sub Total 8,174,890 1,344,143
8,979,612 2,166,492 213,266 6,813,120
6,813,120 2,217,947 161,812 4,595,173
4,595,173 2,270,623 109,135 2,324,550
2,324,550 2,324,550 55,208 (0)
Year 8 Sub Total 8,979,612 539,421
52,921,817 23,230,445 76,152,262
Depreciation and Amortization

Rates Year 6-
Cost Item Original Cost Applied Year 1-5 10
Building 13,853,449 5% 692,672 692,672

Machinery, Equipment, Furniture
& Vehicles 34,290,765 20% 6,858,153
Land Lease-over lease period of
80 years 319,215 1% 3,990 3,990
Pre-operating Expenditure 10,069,805 20% 2,013,961
Total 58,533,234 9,568,777 696,663

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PROJECT FEASIBILITY STUDY 2019

ANATSON TRADING S.C.

PROJECT PROMOTER:- ANATSON TRADING S.C.

COMPANY ADDRESS:-OROMIA REGIONAL STATE

ADDIS ABABA, ETHIOPIA

ANATSON TRADING S.C. (FOOD PROCESSING) Page 1

1. PROJECT DESCRIPTION ...................................................................................................7

1.1 PROJECT LOCATION .........................................................................................................7

1.2 PROJECT RATIONALE ......................................................................................................7

1.3 PROJECT STATUS ...............................................................................................................8

1.4 PROJECT IMPLEMENTATION SCHEDULE .................................................................8

1.5 BENEFITS OF THE PROJECT ...........................................................................................9

2. PROMOTER’S BACKGROUND .......................................................................................10

3. PRODUCT DEFINITION ...................................................................................................15

4. PROJECT MANAGEMENT AND HUMAN RESOURCE .............................................39

4.1 PROJECT MANAGEMENT ..............................................................................................39

4.2 HUMAN RESOURCE REQUIREMENT ..........................................................................40

4.3 TRAINING REQUIREMENT ............................................................................................42

5 MARKET ANALYSIS .........................................................................................................17

5.1 WHY AGRO-PROCESSING IS CRITICAL TO THE ETHIOPIAN ECONOMY? ....17

5.2 SUPPLY................................................................. ERROR! BOOKMARK NOT DEFINED.

5.3 DEMAND ..............................................................................................................................25

5.4 DEMAND AND SUPPLY GAP ...........................................................................................26

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6 TECHNICAL STUDIES ......................................................................................................30

6.1 RAW MATERIAL AND INPUTS ......................................................................................30

6.2 PRODUCTION PROCESS .................................................................................................32

6.3 CIVIL WORKS ....................................................................................................................34

6.4 PRODUCTION MACHINERY ..........................................................................................35

6.5 VEHICLES ...........................................................................................................................36

6.6 OFFICE EQUIPMENT AND FURNITURE ....................................................................37

6.7 UTILITY SUPPLY ...............................................................................................................37

6.8 ENVIRONMENTAL IMPACT ASSESSMENT ...............................................................39

7 FINANCIAL APPRAISAL ..................................................................................................42

7.1 INITIAL INVESTMENT COST .........................................................................................42

7.2 FINANCING STRUCTURE ...............................................................................................43

7.3 APPLIED FINANCIAL ASSUMPTIONS: ........................................................................44

7.4 WORKING CAPITAL.........................................................................................................45

7.5 OPERATING COST, VOLUME AND REVENUE .........................................................45

7.5.1 OPERATING COST ....................................................................................................45

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7.6 PROJECT PROFITABILITY.............................................................................................50

7.7 PROJECT LIQUIDITY AND PAYBACK PERIOD ........................................................51

7.8 NPV & IRR ...........................................................................................................................53

7.9 SENSITIVITY TO COST AND REVENUE VARIATIONS ...........................................54

7.10 DEBT SERVICING SCHEDULE .....................................................................................55

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II. BACKGROUND INFORMATION

1.2 Project Rationale

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1.3 Project Status

All required production machinery is being selected.

4 Vehicles, Equipment and Furniture

Vehicles, equipments and furniture are not purchased.

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1.5 Benefits of the Project

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III. BACKGROUND INFORMATION

 Company Name: ……………..RUB-SOL Engineering (Elias W/Gebriel)

2.2 Company Overview and Ownership

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