Project Proposal for Purified Bottled

Water Factory

Bilan Springs

Owner: Abdulahi Ahmed Haji

Presented to: Dire Dawa Administration

Investment Buraeu

September 2021
Contents
0. EXECUTIVE SUMMARY ............................................................................................. 3
1. BACKGROUND........................................................................................................... 4
1.1. PROJECT OBJECTIVES ......................................................................................... 4
2. THE FACTORY ........................................................................................................... 5
2.1. BASIC INFORMATION OF THE COMPANY ........................................................ 5
3. MARKET SITUATION ................................................................................................. 5
3.1. OVERVIEW .......................................................................................................... 5
3.2. DEMAND ANALYSIS ...................................................................................... 5
3.3. PROJECTED DEMAND ....................................................................................... 7
3.4. OUR TARGET MARKET .......................................................................................... 8
3.5. PRICING AND DISTRIBUTION................................................................................ 9
Table: Prices ................................................................................................................ 9
3.6. OUR COMPETATORS ............................................................................................. 9
3.7. MARKETING STRATEGY ...................................................................................... 10
4. Production Process................................................................................................ 10
4.1. Product Packaging .......................................................................................... 10
4.2. Bottle Production Process Flow ...................................................................... 11
4.3. Bottling Process Flow ...................................................................................... 12
4.4. Production Sections ........................................................................................ 13
5. Manpower and Training Requirements ..................................................................... 17
5.1. Organization Structures ...................................................................................... 17
5.2. Human Resource Requirement .......................................................................... 17
6. FINANCIAL CONSIDERATIONS .............................................................................. 19
Table: Production Capacity ........................................................................................ 19
Table: Annual Revenue ............................................................................................. 19
Table: Revenue Forecast .......................................................................................... 20
Total Value of Fixed Assets ....................................................................................... 20
Table: Direct costs of sales (PET) ............................................................................. 20
Table: Direct costs of sales (Hunger, Cap & Label ) .................................................. 21
Table: Projection of direct costs of sales ................................................................... 21
Table: Summary of Capital Expenditure .................................................................... 21
Table: Depreciation.................................................................................................... 21
Table: Repair and maintenance costs based on the standard rate ............................ 22
Table: Operating Expenses ....................................................................................... 22
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 Table: Projection of expenses ................................................................................... 23
Table: Loan Repayment Schedule............................................................................. 25
Table: Profit and Loss Statement .............................................................................. 26
Table: Cash Flow Statement ..................................................................................... 27
Table: Balance Sheet Statement ............................................................................... 28

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0. EXECUTIVE SUMMARY
This project proposal is prepared to establish a new Purified Water Bottling
Factory to be located at Boren Kebele of Dire Dawa Admnistration. The
business will be owned and managed by Mr. Abdulahi Ahmed Haji.

At full capacity operation, the Factory will have a capacity of filling 10,000
Bottles per hour in a 350ml, 600ml, 1000ml & 2000ml bottles. Further, the
Factory will have additional line for the production of 20 liters Jars with a
capacity of filling 300 jars per hour.

Our market study and prior experience in the industry show that there is a
huge unsatisfied demand for purified bottled water in Dire Dawa City and
surrounding areas of Oromia and Somali Regional State.

The total investment cost of the project amount to ETB: 10,000,866, from
which ETB: 3,000,260 shall be financed by owners’ equity while the
remaining costs of ETB: 7,000,606 is expected to be financed by Bank of
loan.

The Factory is proposed to be established on a 30,000 msq land located at

Boren Kebele of Dire Dawa Administration. The project will create permanent
employment opportunities for 62 persons and also create temporary jobs for
more than 50 persons during construction phase.

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1. BACKGROUND

A decade ago, the idea of bottled water for many Ethiopians was a trend that
characterized the Diaspora and the modern, wealth-driven way of life.
Today, it is common to see people purchase bottled water along with their
groceries in super markets and kiosks. Young people order bottled water in
cafés and restaurants. In several offices, bottled water also has become
another choice in addition to the “tea or coffee” offered by secretaries to
visitors.

Bottled water has a constant presence at meetings and discussion forums.

Urbanites from many different walks of life have made it part of everyday
consumption.

There are many reasons for this fast growth. The general economic growth
the country has been registering in the past decade is just one reason.
Though this growth is accompanied by unprecedented inflation, the income
of the urban population has also shown tremendous growth. Further, the
changing life style trends of the urban population in drinking bottled water at
home, work place and recreation has contributed to this growth.

1.1. PROJECT OBJECTIVES

The general objective of the project owner, in preparing this business plan,
is to start up a purified water Factory with a capacity of producing 10,000
bottles per hour.

Specifically, we need this loan to procure the necessary machinery and

equipment as well as to arrange the continuous supply of raw materials and
other inputs so as to ensure operation of the factory at its full capacity.

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2. THE FACTORY

The Factory is proposed to be established on a 30,000 msq land located at

Boren Kebele of Dire Dawa Administration.

2.1. BASIC INFORMATION OF THE OWNER

Brand Name: Bilan Springs

Company Name: Abdulahi Ahmed Haji

Business Type: Manufacturing

Location: Dire Dawa Administration

Mr. Abdulahi Ahmed Haji is the owner of the envisaged project. Mr. Abdulahi
has got very good entrepreneurial skills and long years of experience in
different business activities.

3. MARKET SITUATION

3.1. OVERVIEW

As it is said above, the bottled water and beverage industries are vital for all
human beings and our economy. The availability and/or supply of these
products are also vital for Hotel and Tourism Industries.

However, the availability and/or supply of bottled water is still short of the
demand for the products in the country especially in the Eastern Region
Zone due to the absence of sufficient Factories.

3.2. DEMAND ANALYSIS

The country’s requirement for purified water is met through about 68

domestic productions and imports. The following Table shows the supply of
the product from domestic production and imports during 2010-2019. During
the period under reference, domestic production, imports and total supply

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averaged at 404,950 hectoliters, 789 hectoliters and 405,740 hectoliters,
respectively. Thus, domestic production, on the average, accounted for 99.8
percent of the total supply of purified water in the domestic market,
revealing the relatively limited share of imports (0.20%) in the total supply
of the product.

Table: Supply of Purified Water (Hectoliters

Market Share (%)

Year Domestic Import Total Domestic Import
Production Supply Production
2010 374,257 2,498 376,755 99.34 0.66

2011 390,068 967 391.035 99.75 0.25

2012 412,307 953 422,260 97.64 2.36

2013 399,763 1,007 400,770 99.75 0.25

2014 395,451 571 396,022 99.86 0.14

2015 394,632 198 394,830 99.95 0.05

2016 432,600 224 432,824 99.95 0.05

2017 398,844 47 398,891 99.99 0.01

2018 394,303 723 395026 99.82 0.18

2019 448,279 704 448,983 99.84 0.16

Average 404,950 789 405,740 99.81 0.19

Source: Customs Authority, External Trade Statistics, 2009-2018. CSA, Statistical

Abstract, various years.

During the period 2010-2019, the maximum total supply (apparent

consumption) of purified water was 448,983 hectoliters in the year 2007,

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while a minimum of 376,755 hectoliters was registered in year 2010. In the
remaining years, apparent consumption was fluctuating between these two
extremes quantities. The mean of the total supply was 405,740 hectoliters
and the average growth rate during the period under reference was 2%.

Accordingly, due to the fluctuating nature of the products total supply, it

appears more appropriate to consider the average of the last four years of
the period under reference (2016–2019) which was 418,931 hectoliters as
the effective demand for the product for the year 2008.

In estimating the present (2020) effective demand for the product, since the
consumption of purified water is associated with the urban population, the
demand for the product is assumed to grow at the rate of 4% which
corresponds to the annual growth rate of urbanization in the Country.

Accordingly, the present effective demand for purified water is, thus,
estimated at 435,688 hectoliters.

3.3. PROJECTED DEMAND

The future demand for purified water is a function of income, urban

population growth and growth of catering and recreational establishments.
Accordingly, the demand for purified water is forecasted to grow at a rate of
4% which is equivalent to the growth rate of urban population. Moreover,
assuming that existing domestic producers will maintain their current
production (year 2019) for the future, the unsatisfied demand for the
product is depicted in Table.

Table: Projected Demand for Purified Water (Hectoliter)

Year Projected Existing Unsatisfied

Demand Factories Demand
2021 453,116 448,279 4,837

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 2022 471,240 448,279 22,961

2023 490,090 448,279 41,811

2024 509,694 448,279 61,415

2025 530,081 448,279 81,802

2026 551,285 448,279 103,006

2027 573,336 448,279 125,057

2028 596,269 448,279 147,990

2029 620,120 448,279 171,841

2030 644,925 448,279 196,646

2031 670,722 448,279 222,443

2032 697,551 448,279 249,272

3.4. OUR TARGET MARKET

As a result of declining consumer confidence in the safety and quality of

municipal water supplies, the market for bottled water has increased
dramatically over the last few years, especially in our target market areas.
In response, individuals and businesses are purchasing bottled drinking
water for use in their homes and offices.

Our target market can’t be restricted to just a group of people, but all those
who reside in our target market locations that include: Cities in Somali
Region, Dire Dawa City, Harar, and other Cities in Hararghe Zone.

Assuming that our target market areas constitute 10% of the total country,
we can narrow down the above demand and demand gap projection for the
years 2010-2020 to reflect the same in our target areas. Accordingly, the

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average effective demand and unsatisfied demand in our target market
areas for the coming ten years (2011-2021) amounts to 58,662.00
hectoliters and 47,212.80 hectoliters respectively.

Therefore, the implementation of our project is a right idea at the right time.

3.5. PRICING AND DISTRIBUTION

The factory gate price of our products has a more than 10% price advantage
over the prices of main competitors in our target market areas. Below are
the average prices per liter of bottled water supplied by our major
competitors.

Table: Prices

Products by bottle size Price per Dozen (Birr)

600 ml 72
1000 ml 98
1500 ml 125
2000 ml 156

3.6. OUR COMPETATORS

Although purified water factories are booming in Dire Dawa Administration,

the market for is still saturated by products coming from Addis Ababa and
other Cities in the country. Thus, we understand that we have to be highly
creative, customer centric and proactive to sustain our presence in this
industry. We are aware of the stiffer competition and we are well prepared
to compete favorably with other bottled water products coming from Addis
Ababa City and throughout the Country.

Part of what is going to count as competitive advantage for our Company is

the vast experience of our management team, we have people on board who

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are highly experienced and understands how to grow business from the
scratch to becoming a national phenomenon.

3.7. MARKETING STRATEGY

Our Marketing Strategy consisted of 3 main categories

1. Deliver mineral water with unpatrolled packaging appeal, taste and

quality
2. Focus on distribution channels and Target segments of the market
ignored by local players.
3. Create awareness in Mineral water production and the health
benefits of filtered water produced with high standards.

4. Production Process

4.1. Product Packaging

Product packaging and presentation is one of the main dynamics, which

control the flow of target customers towards the product. Packaging should
be in line with the industrial norms.

The bottle should be clear and give a reflection of light sky blue color, which
is considered a natural symbol of the water. The water should give a shiny
and a glossy reflection. The color and the design will create a positive
perception for the new brand. The opening of the bottle should be large
enough to accommodate outflow and inflow of water. The bottles should be
placed in special racks and strand meant for bottled water at retail outlets,
which will be having a unique color and a unique design.

The wrapper of the bottle is suggested to be on four-color printing and

should have the following information in addition to the logo of the company.

 Water Specification

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  Certificate mark of the QSAE and ESA
 Expiry Date (Best Before Date)
 Name and address of the manufacturer
 Website address of the company
 Brand Name or Trade Name
 Net volume in System International / Metric system
 Batch number or code number

The containers shall be hygienic suitable completely clean and shall not
cause any undesirable change in the tastes, odor or color or quality of the
water. It shall be packed in hermetically sealed containers of food grade
material to prevent contamination of bottled water. Filling and sealing
operations of containers shall be done in an aseptic atmosphere so as to
prevent any contamination.

4.2. Bottle Production Process Flow

Plastic performs are made by injection molding, followed by a reheat stretch blow
molder which creates the final shape, followed by inspection and testing of the
plastic bottles to ensure application suitability.

 Raw Materials: - the plastic bottles are made from a light but strong plastic
known as polyethylene terephthalate (PET). Caps are also made from LDPE,
HDPE and coloring agents.
 Bottle Injection Molding Machine: - the first stage of stretch blow
molding is to heat PET pellets and put them in a mold to form what is known
as a "preform."
 Stretch Blow Molding: - the preform is heated again, placed in a bottle-
shaped mold and "blown" with high-pressure air that pushes or stretches the
plastic against the sides of the mold. A separate piece of plastic is added to
the bottom of the bottle so that it will stand up on its own. Once the plastic
bottle has been blow molded, it is cooled with water, moist air or liquid

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 carbon dioxide (CO2) as quickly as possible to prevent it from losing its
shape.
 Cap Injection Molding machine:- in the cap injection molding machine the
LDPE and HDPE pellets are mixed with the coloring agent and heated to be
put in a mold to form caps, it is cooled them as quickly as possible to prevent
from losing its shape.
 Conveyor belts will transport the bottles and caps from the bottle production
room to the bottling section.

4.3. Bottling Process Flow

The first step for setting up the water purification plant is the chemical analysis of
the source of water. After the chemical analysis, the specifications of the
purification plant are set.

 In the purification plant, source water is stored in the feed water tank
and then passes through the sand filter for preliminary water filtration.
 Water then passes through the dosing pump to the chlorination tank
where primary disinfection is brought about by bubbling chlorine gas.
Here chlorine is added to kill the microorganisms in the water.
 After the chlorination, the water is passed through sand filters for
trapping of un-dissolved impurities.
 The water after sand filtration is passed through Carbon filters for
removal of odor, color and also for de-chlorination (removes chlorine
from water). The carbon filters help in the maintenance of proper odor
and taste of the water.
 Water then passes through reverse osmosis module. This stage of the
process makes water clear from all the contaminations and minute
particles.
 Water is then passed through series of micro filters comprising 5
micron, 1 micron and 0.4 micron filter followed by ultraviolet
disinfection system.

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  After this stage, water undergoes Ultra Violet treatment to avoid any
contamination from bacteria and other microorganisms using UV light
energy.
 Water then passes through automatic washing, filling and capping
plant fitted with an Ozone generator. Here water is filled into bottles.
 The bottles after capping are shrink wrapped and packed in corrugated
boxes of one dozen each for 0.5 liter bottle water and half a dozen of
each for 1 and 1.5 liter bottled water.
 After packing bottles are taken into the warehouse or shipped to the
retailers. The complete process flow is shown in the annexed process
flow diagram.

4.4. Production Sections

The plant has 5 interconnected subdivisions.

I. Purification Section

Water received from the external source is passed through the purification
plant and stored in a stainless steel tank. Thereafter it is fed to the bottling
section. The capacity or flow rate is 1000 liter/hour.

The water is processed with multi stage purification processes such as:-
 Sand filter: - Eliminates load of total suspended solids in the raw
water.
 Activated carbon filter: - removes most of the organic
contamination and pesticide residuals from the water. It also controls
taste and odor of water
 Ultraviolet disinfection (UV):- water is exposed to UV light of
wavelength 245 nanometers (nm). A dosage of 16000
microwatt/sq.cm at 40° C for effective disinfection

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  Ultra filtration: - low pressure membrane process that removes
dissolved organic macro molecules, viruses, pyrogen enzymes etc.
 Reverse Osmosis:- eliminates dissolved impurities like unwanted
salts and retain minerals which are essential to human body
 Ozonization: - is the strongest oxidizer and disinfection agent which
acts on broad spectrum of microbiological organisms.
 Filtration: - pumps water through a microscopic filter that is rated for
a certain size organism. The standard size rating is the micron

II. Bottle Manufacturing Section

The plastic typically used in most clear pop bottles and water bottles is
Polyethylene Terephthalate (PET or PETE). The PET bottle preforms are
blown into bottles and a sufficient number of bottles, say 1000 pieces, kept
ready while the machine continues to produce more during the shift.

High Density Polyethylene (HDPE) and Low Density Polyethylene (LDPE) with
coloring agents are also used in this section to produce the caps. The
capacity of this bottle manufacturing section is 1100 pieces of bottles and
caps per hour of production using two bottle blow molding and one bottle
perform and cap injection molding machine.

III. Rinsing - Filling and Capping Section

This section receives the empty bottles, rinses them, fills and caps them.
Machine speed is dependent on the volume to be filled. Bottles are rinsed by
means of spraying pressurized water inside the bottle.

After rinsing, the bottles are loaded into the filling and capping machine one
by one. This section has a capacity of filling and capping 24 bottles per
minute for 1 liter bottle (1440 bottle per day) and is capable to fill 0.5, 1,
1.5 and 2 liter bottles.

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IV. Labeling Section

Expiry date and batch number could be printed on labels prior to their being
put on the bottles. The label will include information such as the name of the
product, ingredients and the chemical composition of the bottled water,
name and address of the manufacturer. The label and the neck sleeve are to
be manually put on the bottles which will then pass through the shrink
tunnels so that the label and neck sleeve, shrink and stick to the bottles.

V. Packing Section

This is the final section where a dozen of 0.5 liter bottles and half a dozen of
1, 1.5 and 2 liter bottles are packed in to a corrugated plastic package. The
bottles bounded in the plastic bag are allowed to pass through a heating
tunnel which shrinks and packs the bottles. The packages are then
transported to the warehouse to be distributed.

VI. Quality Control Section

It is important to maintain product consistency. Batches of products must

contain the same ingredients in the same quantities and the finished
products must taste the same and have the same chemical composition.
Products must be completely free of contaminants and the bottled product
must be clean and ready to be stocked on the shelves of sellers.

Laboratory technicians (the chemist) test products from each batch

produced to ensure consistency of quality and carries out operations related
to the development and implementation of quality-assurance programs. The
chemist designs and administers programs for health and safety, chemical
hygiene, hazard communication, environmental compliance, medical
surveillance, indoor air- quality monitoring, hazardous waste management,
emergency response, and training.

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Laboratory

Standardized laboratory should be arranged for assuring constant quality of

cleanse of the drinking water production with a team of experts. The set up
would comprise general laboratory materials and equipment including
deionized and distilled water, analytical balances, refrigerators, ovens,
glassware specifications and filters for processing samples for organic
determinations.

Sampling
 In any consignment all the bottles of the same size and belonging to
one batch of the manufacturer or supply would constitute a LOT.
 Each bottle of the sample would be marked with necessary details of
sampling and the bottles for bacteriological testing will be marked
separately.
 The bottles of the sample should be stored in such a manner that
there will be no deterioration of quality of water.
 The bottles for bacteriological testing should be brought to the
testing laboratory within one hour, of sampling. If this is not possible
the bottles should be stored at 10 ºC or below and transported to the
testing laboratory within 24 hours. In case of small units, the original
packing would be treated as sample.
 Sample shall be tested from each lot for ascertaining its conformity
to the requirements of the specification. The number of bottles to be
selected from a lot should be in accordance with the QSAE and ESA
standards.
The production processes for purified bottled water has three major
processes these are summarized as follows:

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 Water from Spring/Raw Raw Water Treatment Treated water Tank
Water

Washing and Filling

Bottled Water/Products Labeling and Packaging

5. Manpower and Training Requirements

5.1. Organization Structures

To achieve its vision, mission and strategic objectives effectively the factory
will be organized in such a way that all decision making processes,
communication flows and relationship and co-ordination should be efficiently
carried out. To do so the factory organizational structure is designed by
considering its capacity and business operations. Accordingly, the factory is
structured on four departments accountable to the factory manager as is the
following chart.

Figure: organization structure of the project

5.2. Human Resource Requirement

For this industry a total of 62 workers will be required to handle the production
operations of the industry. The business unit will work on two shifts basis (each 8
hours daily). The quality of the products and services that a project Produces and
renders depends on the competence of technical and administrative personal the
project recruits.

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Based on this fundamental principle the project will employ the following workers
with the level of qualification and skill necessary to run the project.

Total approximate manpower required for the business operations along with the
respective salaries are given in the table below:

Table: Man Power Requirement

No Job Title Qty Monthly Total Annual

Salary Salary
A) Administration Workers
1 General manager 1 15,000.00 180,000.00
2 Marketing Dept head 1 9,000.00 108,000.00
3 Finance head 1 8,000.00 96,000.00
4 Personnel 1 7,000.00 84,000.00
5 Sales 1 6,000.00 72,000.00
6 Accountant 1 6,500.00 78,000.00
7 Main cashier 1 4,500.00 54,000.00
8 Store keeper 1 4,500.00 54,000.00
9 Purchaser 1 3,000.00 36,000.00
10 Truck Driver 2 3,200.00 76,800.00
11 Min Bus driver 1 2,600.00 31,200.00
12 Vehicle driver 1 1 3,000.00 36,000.00
13 Secretary 2 3,000.00 72,000.00
14 Marketing officer 1 6,000.00 72,000.00
15 Cleaner 3 1800 64,800.00
16 Guards 4 1,800.00 86,400.00
17 Gardner 2 1500 36,000.00
Sub Total A 25 1,237,200.00
B) Technical/Production Workers

1 Production & Maintenance head 1 10,380.00 124,560.00

2 Quality Control head 1 7,000.00 84,000.00

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 3 Maintenance Mechanic 4 5,400.00 259,200.00
4 Lab Technician/Chemists Degree 2 5,000.00 120,000.00

5 Lab Technician/Chemists Diploma 2 3,000.00 72,000.00

6 Machine Operator 8 2,500.00 240,000.00

7 Unskilled laborers 10 1800 216,000.00
Sub Total B 28 1,115,760.00
Grand Total (A+B) 53 2,316,296.88

6. FINANCIAL CONSIDERATIONS

Table: Production Capacity

Products by bottle size Bottles per hour hours/day

350 ml 2,500 16
6000 ml 2,857 16
1000 ml 2,500 16
2000 ml 2,143 16
Subtotal 10,000
20 liter Jar water 300 16
20 liter Jar plastic 300 16
Total

Table: Annual Revenue

Products by bottle Bottles per Price per Remark

size hour Dozen Revenue/day Revenue/year
350 ml 2,500 79 262,166.67 78,650,000.00 102.245
6000 ml 2,857 107 408,571.43 122,571,428.57 139.425
1000 ml 2,500 137 457,600.00 137,280,000.00 178.464
2000 ml 2,143 172 490,285.71 147,085,714.29 223.08

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Subtotal 10,000 0.00 1,618,623.81 485,587,142.86 0
Price per Jar
20 liter Jar water 300 30.00 144,000.00 43,200,000.00
only for
20 liter Jar plastic 300 125.00 600,000.00 18,000,000.00 0ne month

Total 528,787,142.86

Table: Revenue Forecast

Year 1 Year 2 Year 3 Year 4 Year 5

Capacity utilization 70.00% 85.00% 100.00%

Total 370,151,000.00 449,469,071.43 528,787,142.86 565,802,242.86 605,408,399.86

Total Value of Fixed Assets

Description Total value

Building & construction 2,300,000.00
Machinery & equipment
2,045,394.87
with generator
Borehole 2,000,000.00
Total 6,345,394.87

Table: Direct costs of sales (PET Preform)

Items price/piece total hours/day cost/day cost/year
bottles/hour
350 ml 4.61 2,500 16.00 184,240.00 55,272,000.00
6000 ml 4.70 2,857 16.00 215,040.00 64,512,000.00
1000 ml 5.74 2,500 16.00 229,600.00 68,880,000.00
2000 ml 6.72 2,143 16.00 230,400.00 69,120,000.00
Subtotal 10,000 257,784,000.00

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20 liter Jar 100.00 300.00 16.00 480,000.00 14,400,000.00
plastic

Subtotal 14,400,000.00
Total 272,184,000.00

Table: Direct costs of sales (Hunger, Cap & Label )

Description price/piece cost/day cost/year
Hunger for 2 liters only 0.70 1,500.00 7,200,000.00
Caps 0.70 7,000.00 33,600,000.00
Label 0.70 7,000.00 33,600,000.00
Caps 0.70 3,360.00 16,128,000.00
Label 0.50 2,400.00 11,520,000.00
total 102,048,000.00

Table: Projection of direct costs of sales

Year 1 Year 2 Year 3 Year 4 Year 5
Capacity utilization
(Planned) 70.00% 85.00% 100.00%
Bottle 180,448,800.00 219,116,400.00 257,784,000.00 270,673,200.00 284,206,860.00
Hunger, Cap & Label 71,433,600.00 86,740,800.00 102,048,000.00 112,252,800.00 123,478,080.00
Total 251,882,400.00 305,857,200.00 359,832,000.00 382,926,000.00 407,684,940.00

Table: Summary of Capital Expenditure

Description Total value

Building & construction 2,300,000.00
Machinery & equipment with
2,045,394.87
generator
Borehole 2,000,000.00
Total 6,345,394.87

Table: Depreciation
Description Service life Original value (Birr) Annual Dep. (Birr)
Building &
40.00 2,300,000.00 57,500.00
construction

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 Machinery 30.00 2,045,394.87 68,179.83
Borehole 20.00 2,000,000.00 100,000.00
Total Fixed
6,345,394.87 225,679.83
Investment

Table: Repair and maintenance costs based on the standard rate

Description Percentage Total investment Repair & maintenance
costs
Building & 3.00% 2,300,000.00 69,000.00
construction
Machinery 3.00% 2,045,394.87 61,361.85
Borehole 3.00% 2,000,000.00 60,000.00
Total Fixed 6,345,394.87 190,361.85
Investment

Table: Operating Expenses

Expenses Value (Birr)
Salary Expense 2,316,296.88
Payroll Tax Expense-Pension 397,930.50
Car Rent Expense 701,932.08
Fuel & Lubricant Expense 627,238.14
Spare Part Expense 777,316.08
Repair & Maintenance 1,855,500.00
Expense
Office Rent Expense 31,552.50
Travel Expense 178,599.75
Guest House Rent Expense 252,648.90
Printing & Stationary Expense 92,653.79
Miscellaneous Expense 700,524.17
Advertising Expense 136,537.50
Cleaning & Deteregent 26,765.87
Expense
Terminal & Storage Charge 33,366.26
Transit Service Expense 570,807.95
Transportation Expense- 396,388.95
CARGO

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Telephone Expense 138,168.65
Insurance Expense 71,616.97
Colored Panel -Storage 80,729.48
Mat.Exp
Utilities Expense 436,121.79
Security Service Expense 30,360.00
Wage Expense-Daily Laborers 683,648.81
Store Rent Expense 86,535.00
Sales Commission Expense 26,231.25
Truck Expense -Djibouti to DD 850,290.00
Postage Expense 50,921.21
Depreciation Expense 2,162,500.00
Interest Expense 180,290.48
Total Expenses 13,893,472.93
Source: Adopted from a Similar Mineral Water Factory’s Income statement 2018

Table: Projection of expenses

Description Year 1 Year 2 Year 3 Year 4 Year 5
Capacity utilization 70.00% 85.00% 100.00% 0 0
Expenses 9,725,431.05 11,809,451.99 13,893,472.93 14,588,146.58 15,317,553.91
Total 9,725,431.05 11,809,451.99 13,893,472.93 14,588,146.58 15,317,553.91

Table: Working Capital Determination

Direct costs Days of Required working

coverage capital
Raw materials 7 2,623,775.00
Operating expenses 30 857,626.22
Miscellaneous (5%) 174,070.06
Total required working capital 3,655,471.28

Table: Total Investment

Description Total
Building & construction 2,300,000.00

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 Machinery & equipment with generator 2,045,394.87

Borehole 2,000,000.00

Subtotal (Fixed Investment) 6,345,394.87

Working capital 3,655,471.28

Total Investment Capital 10,000,866.15

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Table: Allocation of funds
Owners’ equity Bank loan
Description Total Costs
No. Amount % Amount %

1 Building & construction 2,300,000 690,000 30.00% 1,610,000 70.00%

Machinery & equipment with

2 2,045,395 613,618 30.00% 1,431,776 70.00%
generator

3 Borehole 2,000,000 600,000 30.00% 1,400,000 70.00%

4 Subtotal (Fixed Investment) 6,345,395 1,903,618 30.00% 4,441,776 70.00%

5 Working capital 3,655,471 1,096,641 30.00% 2,558,830 70.00%

Total Investment Capital 10,000,866 3,000,260 30.00% 7,000,606 70.00%

Table: Loan Repayment Schedule

Year Loan Repayment Interest (8.5%) Outstanding Balance

0 7,000,606
1 700,061 805,070 6,300,546
2 700,061 535,546 5,600,485
3 700,061 476,041 4,900,424
4 700,061 416,536 4,200,364
5 700,061 357,031 3,500,303
6 700,061 297,526 2,800,243

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 7 700,061 238,021 2,100,182
8 700,061 178,515 1,400,121
9 700,061 119,010 700,061
10 700,061 59,505 0

Table: Profit and Loss Statement

Description
1 2 3 4 5
Sales 370,151,001 449,469,072 528,787,144 565,802,243 605,408,400
Direct cost of sales 251,882,400 305,857,200 359,832,000 382,926,000 407,684,940
Gross Profit 118,268,601 143,611,872 168,955,144 182,876,243 197,723,460
Gross margin (%) 31.95% 31.95% 31.95% 32.32% 32.66%
Operational expense 7,204,060 8,747,787 10,291,515 10,806,090 11,346,395
Profit before tax and interest 111,064,540 134,864,085 158,663,629 172,070,153 186,377,065
Depreciation 225,680 225,680 225,680 225,680 225,680
EBITDA (Earning before tax, 111,290,220 135,089,765 158,889,309 172,295,832 186,602,745
interest and depreciation)
Interest expense 805,070 535,546 476,041 416,536 357,031
Profit tax (35%) 0 0 55,365,656 60,078,766 65,107,012
Net profit 110,259,471 134,328,538 102,821,932 111,574,851 120,913,022
net profit margin ratio 29.79% 29.89% 19.44% 19.72% 19.97%

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Table: Cash Flow Statement
Production Year

Cash in flow 0 1 2 3 4 5

Owners' equity 3,000,260

Existing Bank Loan 0

Additional Bank Loan 7,000,606

Net Profit 0 110,259,471 134,328,538 102,821,932 111,574,851 120,913,022

Depreciation 225,680 225,680 225,680 225,680 225,680

Total Cash in flow 10,000,866 110,485,151 134,554,218 103,047,612 111,800,531 121,138,702

Cash out flow

Replacement 0 0 0 0 0

loan repayment 700,061 700,061 700,061 700,061 700,061

Capital Expenditure 6,345,395 - - - - -

Working capital 3,655,471 - - - - -

Existing Working
0
capital

Pre-operating

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 expenses and interest

Total Cash out flow 10,000,866 700,061 700,061 700,061 700,061 700,061

Net Cash Flow 0 109,785,090 133,854,158 102,347,551 111,100,470 120,438,641

Cash balance 113,440,561 247,294,719 349,642,270 460,742,740 581,181,382

Table: Balance Sheet Statement

Description Investment Production Year

ASSETS 0 1 2 3 4 5
Current Assets
Cash 3,655,471 113,440,561 247,294,719 349,642,270 460,742,740 581,181,382
Other Current Assets 0 0 0 0 0
Total Current Assets 3,655,471 113,440,561 247,294,719 349,642,270 460,742,740 581,181,382
Fixed Asset
Building & construction 2,300,000.00 2,242,500 2,185,000 2,127,500 2,070,000 2,012,500
Machinery & 2,045,394.87 1,977,215 1,909,035 1,840,855 1,772,676 1,704,496
equipment with
generator
ISUZU & FSR (3) 2,000,000.00 1,900,000 1,800,000 1,700,000 1,600,000 1,500,000
Total Fixed Asset 0.00 0 0 0 0 0
Pre-operating Costs 0 0 0 0 0 0
including interest

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Total Asset 6,345,395 6,119,715 5,894,035 5,668,355 5,442,676 5,216,996
LIABILITIES 0 0 0 0 0
Short term liability 10,000,866 119,560,276 253,188,754 355,310,626 466,185,416 586,398,377
Long term liability
(Bank Loan)
Sub Total - - - - - -
CAPITAL 7,000,606 6,533,899 6,067,192 5,600,485 5,133,778 4,667,071
Owner's Equity 7,000,606 6,533,899 6,067,192 5,600,485 5,133,778 4,667,071
Retained Earnings
Earnings 3,000,260 3,000,260 3,000,260 3,000,260 3,000,260 3,000,260
Sub Total 0 110,259,471 244,588,009 347,409,941 458,984,792 579,897,814
Total Liability & Capital 110,259,471 134,328,538 102,821,932 111,574,851 120,913,022
Net Worth 3,000,260 113,259,731 247,588,269 350,410,201 461,985,052 582,898,074

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