Investment Project Proposal ON Plywood Manufacturing Factory

INVESTMENT PROJECT
PROPOSAL
ON
PLYWOOD MANUFACTURING
FACTORY
Owner:
Name: Alemayehu Boru
Address: Oromia Region, East Shoa zone, Adam
City
June, 2021
Feasibility study for establishing PLYWOOD Production Factory
Table of Contents
I. EXECUTIVESUMMARY.................................................................................................................................4
II. PROJECT BACKGROUNDINFORMATION......................................................................................................7
2.1. Back Ground Information of the Owner.........................................................................................7
2.2. Experience of the Owner to Work with local Financial Institutions................................................7
2.3. Back Ground Information of the Project.........................................................................................7
2.4. Objectives of the Project.................................................................................................................9
2.4.1. Main Objective..............................................................................................................................9
2.4.2. Specific Objectives.......................................................................................................................9
III. MARKETSTUDY...................................................................................................................................13
3.1. General Review of Market............................................................................................................13
3.2. Market potential (Empirical Evidence)..........................................................................................17
3.4. Demand considerations................................................................................................................19
3.5. Supply of Plywood........................................................................................................................22
3.5.3. Projected Supply..........................................................................................................................24
IV. SWOTANALYSES....................................................................................................................................27
V. ORGANIZATION, MANAGEMENT ANDMANPOWER..................................................................................29
5.1. Organizational structure...............................................................................................................29
5.2. Management and Manpower Requirement.................................................................................30
VI. TECHNICAL ASPECT OF THEPROJECT....................................................................................................32
6.1. Project Location, land Holding and Site Selection.........................................................................32
6.2. Building Requirement...................................................................................................................32
6.3. Machineries and Equipments........................................................................................................33
6.4. Vehicle..........................................................................................................................................35
6.5. Office Furniture and Equipment...................................................................................................36
6.6. Utilities.........................................................................................................................................37
6.7. Working capital of the project......................................................................................................37
6.8. Raw Material, Inputs and Availability..........................................................................................38
6.9. Production Process and ProductionProgram.................................................................................39
6.9.1. Production Program......................................................................................................................39
6.9.2. Production Process........................................................................................................................39
O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 2

6.10. Environmental ImpactAssessment................................................................................................41

6.11. Implementation Schedule..............................................................................................................41
VII. INANCIAL ANALYSIS OF THEPROJECT..............................................................................................43
7.1. Basic Assumptions........................................................................................................................43
7.2. Total Investment Cost...................................................................................................................43
7.3. Expected Financial Results...........................................................................................................44
7.3.1. Production Cost..........................................................................................................................44
7.3.2. Revenue......................................................................................................................................44
7.3.3. Profit.............................................................................................................................................45
7.3.4. Liquidity.......................................................................................................................................45
7.3.5. Balance Sheet Projection..........................................................................................................45
7.3.6. Ratios...........................................................................................................................................45
7.3.7. Break-even Analysis..................................................................................................................46
7.3.8. Pay-back Period.........................................................................................................................46
7.3.9. Internal Rate of Return..............................................................................................................46
7.3.10. Net Present Value......................................................................................................................46
7.4. Sensitivity Analysis......................................................................................................................47
VIII. SOCIO ECONOMIC BENEFIT OF THEPROJECT..................................................................................48
IX. CONCLUSION ANDRECOMMENDATION............................................................................................50
9.1. Conclusion....................................................................................................................................50
9.2. Recommendation.........................................................................................................................51

I. EXECUTIVESUMMARY
This is a project proposal for establishment of plywood factory owned by Ato

Alemayehu Boru, which is planned to be established in Adama City of Oromia regional
state, East Shawa zone on 10,000 m 2 plots of land to be secure from the regional
government via lease; with the objective of manufacturing plywood products.
Generally manufacturing sector is the current government priority area and Ethiopian
government gives many incentives to make the leading economic sector in the country.
However, it is still in its infant stage and as per MOFED report on Ethiopian Economy,
it accounts below 15% of the GDP of the economy which runs behind the government
expectation even though it shows a very crucial improvement as compared to the
previous minimal contributions.
As a result, the government is still working hard to put the sector in the right place and
to bring a structural change on the country’s economic system. To this end, the
government has continued in introducing many incentives to the investors to attract
them in to the sector and is relatively seen to be effective considering the number of
investors and the amount of investments in the sector especially for the last few years.
In this regard Ato Alemayehu Boru has planned to engage on the manufacturing of
plywood products being aware of the existing and future demand in the country for
quality plywood products, one of the inputs in the construction sector, in related to the
fast growing trend of the construction sector which makes its demand high in the
today’s market of the country in general and the construction sector in particular.
As stated above the objective of the project is to manufacture plywood products for the
local market in the short run and to the neighboring countries in the future considering
the contemporary and future demand for the product with a speculation on our
country’s construction sector growth and also the demand from neighboring countries
like Somali, South Sudan and Djibouti for plywood products.

The analysis of the market for plywood products shows that the construction and other
furniture related sectors in the local market as well as global market have excess
demand. Therefore, it is possible to say that the product does not face any market
problem and there is still huge amount of demand supply gap in the domestic and as
well as foreign economy. However, it has to be design a workable and effective
marketing strategy to be more effective so that advertisement and the provision of
relatively low price especially in the beginning years of its operation shall be taken as
penetration strategy even if the project’s product has adequate local market.
The promoter already considered the success factors from macro level opportunities as
well as to sector level success factors that lead the project to success. In opposite to
this, like that of any projects it is unhidden fact that it has risk factors emanated from
both the macroeconomic environment as well as from the sector which could be
mitigated through careful management and purchase of appropriate insurance policy
coverage.
When we see the technical aspects of the project, it has complete building which is
appropriate for intended purposes. Regarding the machineries and equipments, vehicles
and other auxiliary equipment, the project has planned to acquire through financial
support from local banks who can service long term credit or in the form of machinery
leasing and the company has selected the appropriate technology and equipments from
legitimate manufacturers and suppliers.
Furthermore, this feasibility study has considered the organizational structure and
management of the project for its optimal operation. Organizational structure of the
project is designed in line with the laws and regulations of the country in general and to
requirement of the factory in particular. It is organized to be fit for the objective of the
owner, the capacity and requirement of the industry depend on the production and
marketing of the planned products. Accordingly, the project shall have two departments
namely, Production &Technical and Administration & Finance departments. In
addition the project will recruit all the necessary technical and other professionals as
well as non professional staffs as a time of project implementation commissioning.

The project has also great contribution to the socio economic development of the
country by satisfying the domestic demand of plywood products arise from current
fast growing construction sector and other furniture factories, it can save hard currency
via import substitution and also could generate hard currency by exporting its product
to the neighboring countries (South Sudan, Djibouti and Somali) in the future when the
factory become well established at the local market, generating additional income for
the owner and creating permanent and temporary employment opportunity for skilled,
semi skilled as well as unskilled workers. It is also expected to contribute to the
Government’s treasury in the form of tax (profit and income tax). Moreover, the
environmental impact assessments on the project implementation shows that the project
does not have any significant effect on the environment except a little wooden dust
wastes which can be easily managed by the company. For raw material the company
uses commercial farm forests to be environmentally friendly and there will be no
market relation with natural plant wood suppliers and the promoter works to combat
deforestation.
The financial analysis on the investment outlay of the project and the financial results
has been thoroughly done. Accordingly, the total project cost is determined to be Birr
99,038,863.00, of these outlay 30% (birr 29,518,095.00) is contributed by the owner
own fund and 70% (amounting birr 69,520,768.00) is planned investment to be
financed from local financial institutions that can serve long term loan for industrial
projects except the pre operating interest Birr 2,078,396 planned to be covered through
equity.
The financial projection shows, the company will generate a net income of birr
14,562,378 and 30,898,212 at the beginning and end of the projection period
respectively. And also the cumulative cash flow for the exact projection period is Birr
11,490,304 and Birr 188,010,313 correspondingly. The internal rate of return (IRR)
after tax for the project is calculated to be 30%. The net present value (NPV) after tax
at a discounting rate of 12%, which above the national bank discount rate is nearly,
found to be Birr 98,971,415. These imply that the project will not face liquidity
constraint to finance its operational cost and meeting its debt obligation at the same

time. Hypothetically, the operating costs are stipulated as Birr 69,467,914 for the first
year operations considering 60% capacity utilization while the revenue is calculated to
be Birr 106,423,005 with its first year operation.

II. PROJECT BACKGROUNDINFORMATION

2.1. Back Ground Information of the Owner
This is as sole proprietorship project owned and directed by Ato Alemayehu Boru, who
is a good business man and very success full in his previous business truck record when
he working as a general manager in different industries and commercial businesses. He
has been working as a general manager of his commercial center and International Hote
established in Adama town. He will be the General Manager of the proposed project
and he can manage it properly based on his experiences in the manufacturing sector.
Hence, his business experience and market exposure in the sector will make him to be
competent to run this project very well. Therefore, from the above point of view one
can conclude that he had technical as well as managerial competency for managing the
project properly and the project does not face problem in related to its management.
2.2. Experience of the Owner to Work with local Financial

Institutions
As per the information obtained the owner, he and his spouse have no any credit
relation with any local banks except the day to day formal banking services.
2.3. Back Ground Information of the Project
The project, plywood production is planned to be establish in Oromia region, East

Shawa Zone, Adama City on 10,000 meter square plot of land secured from the
regional government via lease; with the objective of plywood production . The project
site is very close to both raw material supply and output market and the selected site
are technically acceptable for the establishment of such project. As stated on the lease
agreement, the leased land is acquired for period of eighty (80) years in the name of the
owner and for the purpose of the intended project. The total cost of the land is Birr
2,801,175 and the annual land lease payment will be Birr 73,715 repaid in 38years.

The main objective of the project is to produce plywood products for local market in
the project initial years and also for foreign market of neighboring countries in the
future when the company has built competitive capacity with international markets
which will be considerable demand for the product of the company. The establishment
of this project has many advantages for the promoters as well as for the economy of the
country by creating job opportunities, generating revenue both for the investor and
government, saving foreign currency through import substitution and also can generate
foreign currency by exporting to the neighboring countries especially to South Sudan,
Somali and Djibouti by the future when it becomes competent to cross border markets,
can support the development of modern construction finishing works and furniture
industries which use plywood products as inputs and also introducing new product,
new technologies and new knowhow for the economy of the country.
When the project turns to operational the promoter has planned to employee new and
modern technologies in producing the intended product with international standard
level. This project envisages the establishment of a plant for the production of plywood
with a theoretical capacity of about 60,000 M3 per annum and planned to start at 60%
capacity utilization rate and increase by 10% annually until it reaches maximum
attainable capacity of 90% on the fourth year of the projection and then operates with
this capacity constantly.
The owner and the general Manager of the company, Ato Alemayehu Boru have tried
to access the technologies and the production process and also the markets of the
products thoroughly depending on his experience on construction industries in the
country and found it is very important product for the country and it has huge demand
in the current flourishing construction sector and furniture industries which is meet
through importing of international markets especially from china and Japan. He has
good exposure on the market and also has a potential market linkage in the sub sectors
of construction and furniture industries since he has a good friendship relation to
contractorsandfurnituremanufacturingfactoryownersandalsotheideaoftheproject

is proposed by these long years experienced persons of the sub sector. As a result he
has a plan to use the market linkage of these individuals and industries as well.
Based on this, Ato Alemayehu Boru as a general manager has accepted the idea of his
friends engaged in the construction sector, furniture industries and other related
industry and strongly promote the establishment of this plywood manufacturing factory
with due consideration on the market.
2.4. Objectives of the Project
The project has the following main and specific objectives.
2.4.1. Main Objective
The general objective of the project is to establish plywood products manufacturing

plant that can process 60,000 meter cub of plywood for domestic market at its
theoretical capacity and also the project is environmental friendly since it can uses
different wood logs from commercial forests.
2.4.2. Specific Objectives
The specific objectives of this project after engaging on the production of plywood
products are:-
 To generate maximum profit for the company’s owner

 To generate Creates employment opportunity,
 To generate Contributes to Gross Domestic Product,
 To generate Generates revenue for government in the form of tax
 To Brings technology transfer to local firms
 To generate Support the fast growing construction industries by satisfying
the demand for plywood.
 To save foreign currency through import substitution and also can generate
foreign currency through exporting to the neighboring countries

2.5. A Rational to Established Plywood Manufacturing Factory and

Product Application
Plywood is a relatively new material that has many potential uses. The markets for
Plywood have been expanding recently and new applications are being pursued.
Different types of furniture, Door and window components, deck handrails and fencing
works are other markets for the Plywood industry. The flexibility of manufacturing
methods and product performance attributes provide the potential for a variety of new
markets.
Plywood is a manufactured wood which is made by gluing several thin sheets of wood
together with the grain alternately running along the sheet then across it. A common
reason for using plywood instead of plain wood is its resistance to cracking, shrinking
and changing shape. It is used to make a range of things from sheds,
to cladding to cabinets. It is graded on the quality, from class A to class D, A being the
best quality and being the worst quality.
Makers use different kinds of softwood and hardwood and methods, to make different
kinds of plywood. They are used for different purposes. Plywood is a sheet material
manufactured from thin layers or "plies" of wood veneer that are glued together with
adjacent layers having their wood grain rotated up to 90 degrees to one another. It is an
engineered wood from the family of manufactured boards which includes medium-
density fiberboard (MDF) and particle board (chipboard).
All plywood bind resin and wood fiber sheets (cellulose cells are long, strong and thin)
to form a composite material. This alternation of the grain is called cross graining and
has several important benefits: it reduces the tendency of wood to split when nailed in
at the edges; it reduces expansion and shrinkage, providing improved dimensional
stability; and it makes the strength of the panel consistent across all directions. There
are usually an odd number of plies; so that the sheet is balance this reduces warping.

Because plywood is bonded with grains running against one another and with an odd
number of composite parts, it is very hard to bend it perpendicular to the grain direction
of the surface ply.
Smaller much thinner plywood and lower quality plywood may only have their plies
(layers) arranged at right angles to each other, though some better quality plywood
products will by design have five plies in steps of 45 degrees (0, 45, 90, 135, and 180
degrees), giving strength in multiple axes. See the following pictures of plywood.
Plywood is a building material consisting of veneers (thin wood layers or plies) bonded
with an adhesive. There are two types of plywood: softwood plywood and hardwood
plywood. Softwoods generally correspond to coniferous species. The most commonly
used softwoods for manufacturing plywood are firs and pines. Hardwoods generally
correspond to deciduous species. For hardwood plywood, commonly used wood
species include oak, poplar, maple, cherry, and larch.
Softwood plywood is manufactured by gluing several layers of dry softwood veneers

together with an adhesive. Softwood plywood is used for wall siding, sheathing; roof
decking, concrete form boards, floors, and containers. Softwood plywood is classified
under Standard Industrial Classification (SIC) code 2436 and North American
Industrial Classification System (NAICS) code 321212 for “Softwood Plywood and
Veneer”. Hardwood plywood is made of hardwood veneers bonded with an adhesive.
The outer layers (face and back) surround a core which is usually lumber, veneer,
particleboard, or medium density fiberboard. Hardwood plywood may be pressed into
panels or plywood components (e.g., curved hardwood plywood, seat backs, chair
arms, etc.). Hardwood plywood is used for interior applications such as furniture,
cabinets, architectural millwork, paneling, flooring, store fixtures, and doors.
Hardwood plywood is classified under SIC code 2435 and NAICS code 321211, for
“Hardwood Plywood and Veneer”.

Softwood plywood plants typically produce softwood veneers and softwood plywood
on the same plant site. However, most hardwood plywood and veneer plants either
produce hardwood plywood or hardwood veneer. Hardwood veneer plants cut and dry
hardwood veneers. Hardwood plywood plants typically purchase hardwood veneers
and press the veneers onto a purchased core material.
Figure 2.1 examples of plywood
In the modern construction industries plywood products have very important

application and purposes and it has broad based market both in the local as well as
foreign markets. Therefore, the establishment of such projects has many advantages for
the owner and the country by supporting the construction sector that is why the
promoter is interested to engage in this sector.

III. MARKETSTUDY
3.1. General Review of Market
In this part of the feasibility study the market aspect (contemporary and projected
demand and supply, contemporary and future demand-supply gap, marketing
arrangement of the product, price trend and other related) issues will be addressed. In
general marketing is the flow of goods and services from the area of production or
service delivery to the area of consumption or utilization of these services with a
mutually agreed price and situations and the final exchange between the producer and
producer/service provider with a give time, price, place and condition is generally
referred as market.
Market for plywood is determined by different factors such as:
 Faster growth in the construction sector

 Improvement in knowledge and skills of stockholders in the construction sector
and end users of the product
 Easy access for quality products with a reasonable prices
 Sustainability of the product supply and price
 Availability and Price of the substitutes
 Experiences and changes in preferences of users
 Life style of the population
 Foreign trade policy
 Market direction and or destination of the country
 Distribution system (speed, continuity, advertising strategy and the like)
Generally, there are four main factors that make the use of plywood products
economical and attractive: (1) they enhance specific properties e.g. stiffness and
thermal behavior (2) they reduce the price of the material (3) they heavily improve the
bio-based share and (4) they are better recyclable when compared to glass fibers and

other related products. When compared with glass fiber, plywood offers a weight
reduction for construction, which can be an important factor in transport costs and even
economic life of the construction.
According to Statistics of MRC, the Global Plywood Market is accounted The Global
Plywood Market is poised to grow at a CAGR of around 9.3% over the next decade to
reach approximately $77.64 billion by 2025.
This industry report analyzes the market estimates and forecasts of all the given
segments on global as well as regional levels presented in the research scope. The study
provides historical market data for 2014, 2015 revenue estimations are presented for
2016 and forecasts from 2017 till 2025. The study focuses on market trends, leading
players, supply chain trends, technological innovations, key developments, and future
strategies.
The market data is gathered from extensive primary interviews and secondary research.
The market size is calculated based on the revenue generated through sales from all the
given segments and sub segments in the research scope. The market sizing analysis
includes both top-down and bottom-up approaches for data validation and accuracy
measures.
Rising construction activity worldwide, increase in the number of homes and the rising
application of plywood in the interior designing of home floorings, walls, and ceilings,
especially in high-cost residential spaces, along with a growing furniture industry are
expected to drive the global plywood market for the next few years.
The advantages of using plywood as a low-cost yet durable substitute for raw wood,
along with its growing demand make it imperative to study the global plywood market.
The global plywood market can be segmented in several ways, two of the prominent
ones being on the basis of product type and application type.
On the basis of product type, the global plywood market is segmented as follows:

 Commercial ply
 Semi-water proof ply
 Water proof ply
On the basis of application type, the global plywood market is segmented as follows:
 Soft wood plywood

 Hard wood ply wood
 Tropical ply wood
 Decorative ply wood
In recent times, manufacturers of commercial vehicles require increasing quantities of

chequered plywood for applications in automotive flooring. This is expected to propel
global plywood market growth in the near future.
Plywood also finds applications in the marine industry for the construction of decks.
The structural panel industry has also been a major consumer of plywood, thereby
driving the market.
However, the cost associated with plywood is relatively high as compared to oriented
strand board (OSB), which provides similar features to that of plywood. Thus, growth
rate of the plywood market could be hampered as a result of a shift of usage from
plywood to oriented strand board (OSB).
It should be noted that the North American region has been consistently dominant
globally, in terms of the market demand for plywood. This has been primarily due to
high plywood consumption by the construction sector. In terms of plywood demand,
North America is followed by the European region, which is mainly driven by the high
demand from Germany and the U.K. However, the region displaying a relatively high
market growth is Asia Pacific, as China, India and Japan have been witnessing massive
construction, thereby driving the demand for plywood applications to a considerable
extent.

It could be observed that countries with rich forest resources and wood plantations,
such as India, Brazil and South-East Asian countries have a potential to be key
suppliers of plywood in the near future, as they could look at possible vertical
integration to produce plywood after making relevant infrastructural investments for
the same, thereby driving the supply side of the plywood market. For instance, the rich
and varied forest wealth of India with a variety of deciduous, coniferous, tropical and
evergreen trees could be an important resource for the wood panel industry in the
future. Also, the growing indigenous demand for plywood in India as a result of rising
disposable income among the growing middle and affluent class and the growing
infrastructure in recent times is expected to make India an important consumer of
plywood in the near future.
However, it should be noted that the plywood demand growth has been facing
resistance from the packaging industry, which has been finding preferences of other
materials, such as metals, plastics and cardboards.
3,000,000
2,500,000
2,000,000
1,500,000
1,000,000 2010
2015
500,000
Figure 3.1 major producers of plywood in the world (2010 & 2015)

Plywood is still dominant, but technical applications and consumer goods rising. The
total volume of plywood production in Europe was 1,260,000 tons in 2012.
3.2. Market potential (Empirical Evidence)
Growing demand for housing and increasing usage of plywood in marine application
for checks are the driving factors for the market growth. The demand is increased due
to rising importance of plywood in buildings & construction industries. However, high
cost of plywood is a major restraining factor for the market. By geography, North
America commanded the largest market share during the forecast period followed by
Europe owing to increasing demand for housing and construction. In Europe, the
demand for plywood is mainly in U.K. and Germany. Asia Pacific is the fastest
growing region. The demand for this region is driven by emerging countries such as
Japan, India and China attributed to construction activities in thisregion.
The global plywood market is expected to reach USD 110 million in revenue by the
end of 2017. The plywood is anticipated to witness significant demand from
construction by application. Moreover, the economical price of the plywood is likely
to further drive the market.
Figure 3.2 market shares of hardwood and softwood

North American region has been consistently dominating the market globally, in terms
of the market demand for plywood. This has been primarily due to high plywood
consumption by the construction sector. It will be followed by North America and
Europe occupying the second position in the market. Asia Pacific is anticipated to
showcase robust growth in the next few years. Moreover, plywood market in Asia
Pacific will further increase due to the massive growth in construction sector. Apart
from this, the countries with rich forests and woods such as India, Brazil and South
Asian countries have the potential to be the key suppliers of plywood in the near future.
Further, the growing indigenous demand for plywood in India as a result of rising
disposable income among the growing middle and affluent class and the growing
infrastructure in recent times is expected to make India an important consumer of
plywood in the near future.
The growing demand for the plywood is driven by rising construction activities (both
for residential and commercial purposes) and growing preferences for well-designed
floors, home ceilings and walls. Robust population growth coupled with rising
disposable income as well as rising preferences for branded plywood has expanded the
plywood market at a global level. Besides this, rising application of plywood for
automotive flooring is further likely to escalate the growth of the market all across the
globe. Further, the plywood is increasing being used in the marine industry, which
might lead to increase in the demand of plywood by structural design company.
However, the plywood industry is facing resistance from the plastic industry and
increasing preference for the other materials such as metals. The companies across the
globe are incorporating the green practices in their manufacturing process. However,
the cost associated with the plywood is relatively high as compared to the oriented
strand boards (OSB). Thus, this is anticipated to impact the growth of plywood market
as the customers will start shifting from the plywood to OSBboards.

3.3. Plywood Market in Ethiopia
In Ethiopia the plywood and other related fiber board production sector is at its early
stage, like any of other industrial sectors. Although, the government exerts its effort to
enhance the performance of the industry sector in general through appropriate policies
and strategies, the sector shares in the economy is still very low.
When we see the particular market for plywood the product is new for the country and
as per the information accessed by this feasibility study there are some companies
which engaged in the production of this types of product but the demand for this
product is still beyond their production capacity and it is covered through import. In
addition this product may face stiff competition from substitute product manufacturers
like chip wood, agro stone and other construction materials.
3.4. Demand considerations
3.4.1. Contemporary Demand
The demand for plywood is a derived demand which arises from the demand for the
fast growing construction sector, modern furniture industries, automotive industries and
other related industries and even from households. plywood has various uses in the
construction sector for floors, doors, windows, walls and other finishing works and also
it can use for variety of furnishing activities such as cabinetry, shelves, tables and wall
paneling. The demand for these all products in turn depends on income, urbanization,
population growth and the growth of the construction industries.
Users of plywood in Ethiopia are activities those used as cheaper substitute of natural
wood include.
 Construction and housing works (doors, windows, partitions, floors and

finishing works)
 Automotive industries
 Furniture and fixture industries

 households
The major factors that influence the demand for plywood products are;
1) The growth of construction industries which is the main end user of the products
are currently believed to grow above 35% every year.
2) Modern furniture industries which also has a significant growth in the current
double digit economic growth of the country
3) Income of the population which increases in credential level and the per capita
income of the country reach above 694USD
4) Population growth which is estimated to be above 2.6% and also the current
population of the country is expected to be above 100million
5) Urbanization which is also the most dominant phenomena in the current
Ethiopian social and economic situations
Thus we can concluded that the demand determinate factors of plywood in Ethiopia has
a positive growth trend that is why the company has planned to engaged in this activity
among abundant economic sectors of the country which are open to all investors with
strong government support and none limitation.
Based on this and the available data on the potential demander (construction sector,
furniture industry, automotive industry and household) the demand for plywood
products is determined on the table below.

Table 3.1 plywood demand (2008-2016)
Demand from Demand from Demand from

Total Demand
Year construction automotive sector Furniture sector
(M3)
sector (M3) (M3) (M3)
2006 27,756 549 2,406 30,711
2007 28,497 564 2,470 31,531
2008 29,258 579 2,536 32,373
2009 36,107 654 2,789 39,550
2010 43,908 739 3,258 47,905
2011 58,793 856 3,869 63,518
2013 73,914 905 4,689 79,508
2014 94,442 1,008 5,793 101,243
2015 107,573 1,125 6,471 115,169
2016 135,555 1,213 7,610 144,378
Source: www.freedoniagroup.com
3.4.2. Projected Demand
By considering the current high level of GDP growth, it is also considered that the
sectors which require plywood as an input will grow highly and based of the past data
for the demand of plywood and other related products, it is assumed that the demand
for it will increase by 24% per annum and we forested the future demand forplywood.
Table 3.2 projected demand for plywood
Year plywood demand (M3)

2019 274,813
2020 340,577
2021 422,079
2022 523,085
2023 648,262
2024 803,395
2025 995,653
2026 1,233,918
2027 1,529,202
2028 1,895,150
2029 2,348,670
2030 2,910,721
Source: calculation based on the past growth rate

3.5. Supply of Plywood
3.5.1. Contemporary Supply
There are some companies which engaged in the production plywood products.
Moreover, there are different companies in the country which are involved in the
production of direct substitutes or related goods like chip wood, agro stone and other
related wood board product manufacturing to replace the high demand and less
available natural wood products. Moreover, in some extent there are companies which
imports plywood products to meet the current high demand for the product. However,
we did not consider in this market analysis with the assumption that if there is local
supply for it, any rational firm choose to buy from it because of many factories like
cost and time efficiency advantages. The table below shows the supply of plywood and
other related products by local industries.
Table 3.3 supply of plywood and related (direct substitutes) products by local firms
Supply From Supply From Supply from Other Total

Year 3
Plywood (M ) Chip wood (M3) related Goods (M3) (M3)
2006 1,275 2,815 4,256 8,346
2007 1,325 2,815 4,526 8,666
2008 1,423 3,246 5,236 9,905
2009 1,556 4,589 5,789 11,934
2010 1,760 5,056 6,180 12,996
2011 1,790 5,243 6,578 13,611
2012 2,231 5,789 7,123 15,143
2013 2,256 6,123 7,879 16,258
2014 2,260 6,403 8,125 16,788
2015 2,321 6,890 8,987 18,198
2016 2,697 6,905 8,992 18,594
Source: Investment Commission
Note: supply other related Goods includes agro stone, MDF, etc

3.5.2. Import of Plywood
The total imported quality of plywood over the past ten years is demonstrated in the
following table according to the data obtained from ITC trade map. Since
Density=Mass/Volume, average density of one typical species of eucalyptus tree, i.e.
Eucalyptus grand from a study has been taken for conversion of KG to meter cub with
a density of 450. Accordingly, the converted import quantity of plywood in meter cub
is tabulated as follows.
Table 3.4: Import of plywood in Ethiopia
Imported Quantity in Meter Cub

Year
(M3)
2007 27,149
2008 35,929
2009 30,522
2010 34,336
2011 31,776
2012 32,731
2013 34,041
2014 35,756
2015 37,190
2016 38,681
Geo-Mean (%) 4.01
Source: ITC Trade Map
As per the information obtained from investment authority there are new companies
which are expected to invest in the sector and start operation within the next few years
with annual expected production capacity of 62,000 meter cub per annum. However,
the companies’ plan may be different from the expected amount. As a result it is better
to determine based on the past experience or based on the average growth rate of past
supply. Further more, it is assumed there will be other investors which may join the

sector in the near future. Accordingly, the supply forecast is done by allowing new
investors to join the sector each year and the supply will increase by 8% per annum.
3.5.3. Projected Supply
As per the information obtained from investment authority there are new companies
which are expected to invest on the sector and start operation within the next few years
with annual expected production capacity of 6,200 meter cubic per annum. However,
the company’s planned may be different from the expect mount. As a result it is better
to determined based on the past experience or based on the average growth rate of past
supply. Furthermore it is assumed there will be other investors which may join the
sector in the near future. Accordingly the supply forecast is done by allowing new
investors to join the sector each year and then the supply will increase by 8% per
annum.
Table 3.5: projected supply of products (2019-2030)

Projected supply of plywood and related
products Import of Plywood Total
Year
(M3) (M3) (M3)
2019 23,730 41,845 65,575
2020 25,740 43,523 69,263
2021 27,920 45,269 73,189
2022 30,285 47,084 77,369
2023 32,851 48,972 81,823
2024 35,633 50,936 86,569
2025 38,651 52,978 91,629
2026 41,925 55,103 97,028
2027 45,476 57,312 102,788
2028 49,328 59,611 108,939
2029 53,506 62,001 115,507
2030 58,038 64,487 122,525
Source: calculation based on past experiences on supply

3.6. Demand Supply Gap
As it is seen in the table below the demand for plywood is much more than the
supply of the product through local production for the projected years and

based on the available data on the plywood and related products production and
demand.
Table 3.5 projected demand supply gap of plywood and related products
Projected demand Projected supply Demand Supply Gap

Year (M3) (M3) (M3)
2019 274,813 65,575 209,238
2020 340,577 69,263 271,314
2021 422,079 73,189 348,890
2022 523,085 77,369 445,716
2023 648,262 81,823 566,439
2024 803,395 86,569 716,826
2025 995,653 91,629 904,024
2026 1,233,918 97,028 1,136,890
2027 1,529,202 102,788 1,426,414
2028 1,895,150 108,939 1,786,211
2029 2,348,670 115,507 2,233,163
2030 2,910,721 122,525 2,788,196
The excess demand is expected to be fulfilled either through import of the product or
through local production for plywood and other related wooden board products.
As a result there will not be any market problem for proposed company since the
demand for the product will beyond the supply of the product both in the contemporary
as well as future market.
3.7. Marketing Arrangement and Strategy
According to the assessment made to identify the existing marketing trend and other
marketing related practices in the country with respect to proposed product sales.
Marketing strategy is knowledge about how a certain project will reach the desired
market and thus fulfill the organizational goals which is very crucial part of any
marketing study. In line with this, the current market arrangement shows a cash sales
practice is dominating the market, even there is also an advance payment and/or credit
sales when there is corporate customers and bulk requirement in the form of orders for

construction materials and the remaining balance will be paid during the product
delivery and/or payment for project owners. If there is a supply in the domestic market
with required quality standard there will be no problem of market since the product for
Ethiopian market is not satisfied with local production, in related to high growing
construction, furniture and other related industries. As a result the product market
does not required complex marketing strategy except some promotion works on the
products produced.
3.8. Marketing channels
The criterion chosen to assess the marketing channels for plywood, in Ethiopia is
focused on factory gate sales. This channel may allow the producer to serve its
customers better. From the nature of the product direct channel is suitable way to sell
the product because most of the users of the product are not households rather the users
are construction industries, furniture producers, automotive factories and other related
industries. Moreover, the company may offer indirect sales to its client without
elongated marketing channel by using construction material wholesalers in different
parts of the country. In addition the company will export the product to neighboring
countries in the near future after appropriate market linkage building with the selected
countries.
3.9. Pricing Trend
Pricing of this product depends on the quality and cost of production while consumers’
reaction and pricing policy of competitors also affects pricing strategy of a company.
For penetrating the market and achieve maximum efficiency, the current market price
trend of locally manufactured and imported plywood price is assessed and their average
price is above 250 birr per pieces or Birr 3,400 per meter cubic of plywood but in order
to penetrate the market easily the company will charge Birr 2,956 per meter cub of
output.

IV. SWOTANALYSES
A. STRENGTH
 As also discussed so far, the owner and the general manager of the company,
has a lot of experiences and also the operation is supposed to be managed by
hired professional with appropriate experience.
 The owner of the company, Ato Alemayehu Boru, has experiences in the
Ethiopian Construction sector and construction inputs marketing.
 The company’s commitment to improve & produce quality output in order
to satisfy the buyers and to be competitive in the Ethiopian and neighboring
Market.
 Use of modern technologies.
B. Weakness
 Absence of own forest farm for raw material and dependence on other
commercial suppliers.
 Moreover, some of inputs are imported from aboard which are fickle for price
fluctuations
 The initial investment cost of the project is very high as compared to other
small and medium scale business.
C. Opportunities
 Growing demand for plywood products market as a result of faster growth in

construction, modern furniture industries and other related sectors which use it
as input.
 A considerable change in the way of life of the people in use of modern and
simple household furniture equipments

 The selected area of the project is accessible for both input and output
markets and can make a market linkage easily.
 Abundant and cheap skill and un skill labor force in the projectarea
 Low land lease costs
 Government incentives through tax and providing the necessary assistance to
help those investors who are involved in manufacturing sector.
D. THREATS
 Price fluctuation: The price of the output and input is highly volatile in the
world market as well in our country
 High competition from import products.
E. MITIGATIONMEASURES
 To control the fluctuation of prices, the company should design workable

marketing strategy and must supply quality products with competitive price.
 Even though there is no supply problem in forest products for inputs of the
project in the area, the company should try its best to own its own farm for
minimizing raw material dependability.

V. ORGANIZATION, MANAGEMENT ANDMANPOWER

5.1. Organizational structure
An organizational structure is mainly hierarchical concept of subordination of entities

that collaborate and contribute to serve one common aim. It will determine the modes
in which an enterprise operates and performs. One organization can be structured in
many different ways and styles, depending on the business nature, operational period
and objectives of its establishment. It allows the expressed allocation of responsibilities
for different functions and processes to different entities.
Proper organizational structure and management will help a firm/enterprise to perform

its operation appropriately and to achieve objective of its establishment. Vice versa,
incompatible mode of organizational structure will probably lead to malfunctioning and
collapse of the project. As a result, careful assessment should be made while arranging
organizational structure of an enterprise.
Lastly, the organizational set-up of the industrial firms established by individual

preferably could structure in a way that it has a general manager and the owner at the
top to manage the operation in accordance to the plan. Besides, there should be
technical and general supervisors which are under the general manager.
When we see the organizational structure of this company it will be arranged based and
the theoretical organization structure principles and in addition to that there will two
departments, the Technical & Production and Administration & Finance department.
Technical and production department will follow each and every production and
technical operational of the project. The administrative and finance department will
make support to the operational process in managing the recourses. Lastly there will be
divisions and sub division and technical and professional staffs who are under the
umbrella of each department. The organizational structure of the firm is depicted on the
figure below:

Organizational Structure of the company
General Manager
Secretary
Project Manager
Administrative and Technical and

Production Dep't
Finance Department
Technical Production
Administration Division
Finance Division
Division
Division
Figure 5.1 organizational chart of the firm
5.2. Management and Manpower Requirement
In accordance with organizational structure, there is a need for staffing all the required
quantity and quality professional as well as non-professional employees. When we
tried to come across to the staffing, the owner, Ato Alemayehu Boru, will be the
General Manager of the firm. He has a lot of work experience in different working
environment which enables him to efficiently manage the project’s operation.

The General Manager will be supported by the different department managers,

especially the project Manager, which will be hired before the commencement of
project implementation based on the educational and relevant experience on the sector.
The company will employee around 30 employees permanently. Besides, so as to

enhance the company’s profitability and to confront the upcoming working problems or
risks, the project should also hire several professional and non-professional workers if
necessary.
Table 5.1 Manpower plan and with their respective salary
No Monthly Annual
Description salary
required Salary Salary
General manager office
General manager 15,000 1 15,000 180,000
Project Manager 10,000 1 10,000 120,000
Secretary 3,500 1 3,500 42,000
Production and Technical Department
Production and technical head 8,000 1 8,000 96,000
Production operators 4,500 6 27,000 324,000
Electrician 3,500 1 3,500 42,000
Mechanics 3,500 1 3,500 42,000
Quality Control Section head 8,000 1 8,000 96,000
quality Control expert 6,500 1 6,500 78,000
Administrative and Finance Department
Administrative and Finance department
8,000 1 8,000 96,000
head
Human resource officer 5,000 1 5,000 60,000
Drivers 4,000 2 8,000 96,000
Janitors 2,500 2 5,000 60,000
Guards 2,500 2 5,000 60,000
Accountants 5,000 2 10,000 120,000
cashier 3,600 1 3,600 43,200
Store keeper 3,500 1 3,500 42,000
Market research and information officer 6,000 1 6,000 72,000
Purchasing officer 6,000 1 6,000 72,000
Sales person 5,000 2 10,000 120,000
Total 30 155,100 1,861,200
Salary and wage is assumed to increase by 5% per annum

VI. TECHNICAL ASPECT OF THEPROJECT

6.1. Project Location, land Holding and Site Selection
The project is located in Oromia Region, East Shawa Zone, and Adama City.
Regarding the land holding the company has acquired land of 10,000 m 2 via lease
agreement from Oromia Regional state Adama City administration office for a period
of 80 years with a total cost of Birr 2,801,175 paid in 38 years and the annual lease cost
will be Birr 73,715. When we see the advantage of the selected site it very close both
input and output market.
6.2. Building Requirement
The owner has it existing building and construction which is appropriate for the
intended project and also it is constructed as per the plan and design specified on the
lease agreement and by the municipality of the town.
The project building and construction comprises all the necessary building and
construction works like manufacturing hall, input and output store, office building and
other buildings like fence which may necessary for the project smooth operation. The
building and construction is built on a total area of 2,448 meter square and the total cost
of building and construction is estimated to be birr 50,355,887 of which birr 7.039
million is covered through bank loan while the remaining cost is owner’s equity.
The reason for the cost variation between the previous feasibility study and this
feasibility study on building is that originally the building superstructure was planned
to be constructed fully with corrugated iron sheet but actually it is made from bricks
that highly increases the cost of the building and the finishing works. The detail of
building and construction cost is shown in the table below.

Table 6.1: Building and Construction of the project
Number
Unit Unit Price Total price
Description of
Meas. (Birr) (Birr)
Buildings
Production Hall No. 1 25,897,950 25,897,950
Store No. 1 15,897,500 15,897,500
Office Building No. 1 6,789,000 6,789,000
Employees Toilet and Other
No. 1 785,687 785,687
Utilities Buildings
Guard House and Generator House No. 1 985,750 985,750
Total 50,355,887 50,355,887
6.3. Machineries and Equipments
As it is obviously known, selection of machineries and equipments and applying the

appropriate technologies has critical importance since it has the capacity to determine
the quantity and quality standard of the product intended to produce. Therefore, it is
mandatory to thoroughly select the machineries and equipments from those are on the
market and to check all the necessary machineries & equipments which are required for
the project and included them on the project cost determination. Thus, the company has
selected the machineries and equipment and included all which are mandatory for the
major operation of the project and the total cost is found to be Birr 18,972,068 and the
promoter has owned the machineries through long term credit from local financial
institutions, CBE. However, during the loan approved of CBE the total cost of
machinery for the project is estimated to be Birr 13,545,528 which is not worthy to
cover even the FOB value of the machineries. Moreover, post FOB costs of imported
machineries are not properly evaluated. This challenges the smooth operation of the
project. Accordingly, we have amended the cost of machineries by including all these
post FOB cost and hence it is found to be Birr 18,972,068. The detail of machineries
and equipment of the project is depicted on the table below.

Table 6.2 Machineries and Equipment of the project
Unit Price Total price

Description Unit Meas. Qty
(USD) (USD)
4 ft Hydraulic debarking machine
Set 1 8,567 8,567
with wood log loader
4ft CNC Veneer lathe with wood
Set 2 19,237 38,474
log loader
Solid dryer 15 layer with working
Set 2 49,769 99,538
pressure 120 ton
Glue Mixer Set 1 2,852 2,852
4ft Glue Spreader machine Set 2 2,125 4,250
Plywood paving/Forming machine
Set 1 15,009 15,009
30 meter with 4ft cutting machine
400 tons cold press machine Set 1 25,947 25,947
500 tons 15 layers hot press Set 2 57,743 115,486
600 tons 15 layers hot press for
Set 1 66,433 66,433
laminated
8ft Knife grinder Set 1 8,097 8,097
Stainless steel pcs 30 386 11,580
Cushion pad pcs 30 232 6,960
Automatic plywood edge cutting
Set 1 18,935 18,935
saw with dust collector
2 head single side sanding
Set 1 17,380 17,380
machine with dust collector
3T Panel turnover machine Set 1 3,098 3,098
2T steam boiler with all pipe and
temperature protective materials
Set 1 25,242 25,242
for 3 sets hhot press and 2 sets
dryer burning type wood
3T Heli brand fork lifter diesel
Set 1 13,454 13,454
engine with manual transmission
Wood log cutting saw fixed table
Set 2 1,309 2,618
type
Wood log cutting saw arm holder
Set 2 119 238
type
Wood log cutting saw portable
Set 2 593 1,186
type
3 Ton hydraulic scissor lifter Set 3 1,432 4,296
2 Ton Manual hydraulic lifting
Set 3 833 2,499
trolley
Air Compressor (1m3/h) Set 1 2,863 2,863
Circular saw blade grinding
Set 1 246 246
machine

Moisture test Set 2 45 90

Viner thickness measurement Set 2 22 44
Arc welding machine 500 A
Set 1 593 593
220/380 V
Metal cutting machine Set 1 134 134
Long debarker knife pcs 6 119 714
Peeling machine peeling knife pcs 12 357 4,284
Peeling machine cutting knife pcs 8 119 952
Grinder accessories Set 2 238 476
Saw blaade Set 6 475 2,850
Sanding belt pcs 1200 22 26,400
Total FOB cost 531,785
Installation cost (5% of FOB Cost) 26,589
Freight and Insurance (5% FOB) 26,589
Bank Charge ( 4% OF FOB Cost) 21,271
Inland Transportation cost, loading unloading, clearing, port handling and other
local costs (5% of FOB Cost) 26,589
Total Cost 632,824
Total Cost In Birr 18,972,068
6.4. Vehicle
Originally the promoter was planned to have only three vehicles with a total cost of
Birr 4.8 million and the bank has also approved loan for these vehicles. But currently
the cost of vehicles is highly increased found to be more than double mainly because of
foreign exchange fluctuation and change in brand of one pick up vehicle and also one
minibus vehicle which is very critical for staff services is overlooked. Accordingly, the
vehicle requirement and respective costs are revised and with this amendment the
project planned to have four vehicles, Ford Double Cabin Pick Up, Isuzu FSR Truck,
Sino truck and Toyota minibus for administrative, output and input transportation and
staff services purposes respectively. The company has selected all this vehicles and
included on the project which are appropriate in cost wise and their function delivery to
the project and found that the total vehicle cost to be Birr 10,310,000 and it will be
granted either by leasing and long term credit from local financial institutions. The
details of the project selected vehicle and their respective costs are depicted on the
tablebelow.

Table 6.4: List of revised project Vehicles and their respective cost
Total price
(Birr)
Isuzu FSR Truck PCS 1 2,200,000
SINO HOWO DUMP TRUCK PCS 1 2,810,000
FORD DOUBLE CABIN Platinum diesel PCS 1 3,700,000
Toyota Minibus PCS 1 1,600,000
Total 4 10,310,000
6.5. Office Furniture and Equipment
Office furniture and equipments is also another important investment item which helps
smooth operation of the project. Knowing this the company has planned to purchase
office equipment and office furniture with a total cost of birr 242,510. The details of
office furniture and equipment are shown on the table below.
Table 6.4: office furniture and equipments

Furniture Total Cost
Description Unit meas. Qty Unit price (Birr)
(Birr)
Book shelf pcs 1 19,939 19,939
Guest chair pcs 4 7,711 30,843
L shape table pcs 2 9,925 19,851
Executive swivel chair pcs 3 11,348 34,045
Office table pcs 4 5,704 22,814
Managerial chair pcs 3 3,597 10,790
Secretarial Table pcs 2 9,925 19,851
Secretarial chair pcs 1 11,348 11,348
Total Cost before VAT 138,282
15% VAT 20,742
Total Cost including VAT 159,024
Office equipment
HP printer 127 fn (print scan copy) pcs 1 26,644 26,644
Dell computer pcs 1 31,307 31,307
Fax pcs 1 14,645 14,645
15% VAT 10,889
Grand Total 242,510

6.6. Utilities
Utilities like electric power, water and communication devices like telephone, internet
and fax are among important facilities that supposed to be fulfilled for smooth
operation of every project. Based on this fact the company made an assessment and
then collect data on their easy use when the project comes to commencement of
operation.
The company has confirmed the availability of utilities like electric power with a total
cost of birr 850,000 and also the company has planned to purchase 375 KV stand by
generator with a cost of birr 1,574,067 while the remaining utilities like water,
communication devices (telephone, internet and fax) are easily available in the area and
as result the company can have access to all at a time when it becomes necessary with a
moderate cost, may be with an operational costs.
6.7. Working capital of the project
Working capital is a measure of both a company’s efficiency and its short term
financial healthiness. Acceptingly, working capital is calculated as current asset minus
current liability of a business firm or organization. But as per the data for this
feasibility study, the company has no any current liability on hand. Theoretically, for
proper operation of the target objective any company should have enough amount of
working capital that enable it to operate smoothly and in a way that the company can
use the capacity of the installed machineries more efficiently. Based on the capacity
utilization of this particular project a total of Birr 22,810,706 including overhead
costs is determined as working capital and planned to be covered from long term
credits from local banks. From this amount the bank has already approved a loan
amount of Birr 10.33 million but this amount is less than half of the current working
capital requirement of the project and it affects the smooth operation of the project. The
reasonforthishighvariationintheworkingcapitalrequirementoftheprojectisthat

cost overrun on inputs and capacity estimation difference which must be reconsidered
for its smooth operation.
6.8. Raw Material, Inputs and Availability
Logs, which are suitable for plywood, urea resin, glue, ammonium chloride and electric
power, are materials and inputs used to produce plywood. Except for urea resin and
ammonium chloride which are to be imported, the other materials required are locally
available and also the imported materials are planned to purchase from local suppliers
since we can find it as required. Thus, we can see that there is no problem in related to
raw material availability. The annual raw material requirement is calculated on the
bases of the final output. The most raw materials used in the production of wood plastic
composite are listed on the table below
Table 6.5: lists of raw materials and inputs used in the production of plywood
Requirement @ different Capacity

Type Of Raw
Unit Meas.
Materials 1 2 3 4 and Above
Wood Logs M3 40,320 47,040 53,760 60,480
Urea resin MT 144 168 192 216

Ammonium
chloride KG 14,400 16,800 19,200 21,600
Glue MT 144 168 192 216
Direct Labor No. 43,200 50,400 57,600 64,800
Water M3 72,360 84,420 96,480 108,540
Electric power KWH 540,000 630,000 720,000 810,000
The above listed raw materials are usually used to produce standardized and quality
plywood products with alternative mixture based on the availability of the raw
materials.

6.9. Production Process and ProductionProgram
6.9.1. Production Program
The company is planned to operate one shift of 8 hours a day for a total working of 300
days a year by taking Sundays and national holidays into considerations. It is also
anticipated to operate at 60% of the theoretical capacity in the initial year and then
increases by 10% annually until it reaches a maximum capacity of 90% in the fourth
year and then after. The low production level at the initial stage is planned to develop
substantial market outlets for the product and to build up production capacity of new
equipment and the theoretical capacity of the company is planned to be 5,358 meter
cubic of plywood per annum.
6.9.2. Production Process
The manufacturing process of plywood comprises three major steps. These are:-
 Preparation of logs;
 Veneer manufacturing from logs; and
 Plywood manufacturing from veneer.
A) Preparation of logs
This section consists of two major log treatment operations. In the first one, logs are cut
by chain saw to a desired length and fed to the lathe to make veneer sheets, while in the
second high-density logs are cooked in cooking vats or steam chambers to facilitate the
cutting operation.
B) Veneer Manufacturing
Under this process several physical actions such as cutting, clipping, drying, joining,
etc are conducted on the log obtained from the first section in order to prepare good
quality veneer suitable for plywood making.

C) Plywood manufacturing from veneer
In plywood making, the initial operation is the preparation of glue for the process. The
proceeding step is the spreading of glue on the core veneer sheets and the final is the
pre-pressing of the stacked sheets by the cold press. After pre-pressing, the obtained
plywood is fed to hot-press machine, where it is subjected to a pressure at a specified
temperature. Then, the plywood is cut to a pre-determined size by cutting machine
and stored for delivery. The detail production process flow chart is shown in the figure
below.
Figure 6.1 production process of plywood

6.10. Environmental ImpactAssessment
Environment is the first concern in the current civilization process and economic build
up of a nation. It is high time for human beings to take the right action towards saving
the earths from major environmental issues. Most environmental issues are the result of
harmful of human activity on the biophysical environment. On the other hand
environmentalism is a social, economical and political movement to address
environmental issues through advocacy, education and activism.
In regarding this project has no significant negative impact on the environment and
even if it has a some none posing wastages with negligible impact, certainly that can be
mitigated through careful management and technology employment without any
damage on the physical condition of the environment. Moreover, plants used for log
production will be purchased from commercial forests in the surrounding area and
there will be no natural forest deforestation. Therefore, it has no significant negative
impact on the environment rather it may have positive impact through its market
linkage to commercial forest farms and then promote forestation of plants because of
its being as market for such activities.
6.11. Implementation Schedule
Implementation plan is a schedule that indicates the time frame for performing the
operation of project establishment. The schedule of project implementation may start
from idea generation or project identification and goes to commencement of operation
and lastly until marketing of the first bath product. In particular the implementation
schedule for this project is planned to begin from assessing fund for optimal operation
of the identified project idea since the owners has already execute some of the activities
like site selection, land owning and even building and construction works of the
project.

Thus the project implementation is planned to start September, 2019 and goes for one
year until the end August, 2020. The activities that should be under gone in the project
implementation are ranging from fund mobilization/machinery leasing to
commencement of operation and product marketing. The details of project
implementation schedule are shown on the table below.
Table 6.5 implementation schedule of the project activities
2021 2022
S/N Type of Activities
Sep Oct Nov Dec Jan Feb Mar Apr May Jun Jul Aus
Loan or machinery
1
lease Processing
Procurement of
3 Machineries and
Equipment
Procurement of raw
4
materials
Procurement of
7
Vehicles
Erection and
5 installation of
Machineries
Recruitment of
8
Employee
Commencement of
9
operation

VII. INANCIAL ANALYSIS OF THEPROJECT

7.1. Basic Assumptions
Number of working hours per day............................................................8

Numbers of working shift per day......................................................1
Numbers of working days per month….............................................22
Other holyday per day....................................................................12
Annual Number of working days...................................................300
Bank interest.............................................................................12%
Discount rate...................................................................................12%
Wage and salaries...............................................................increase 5% per annum
Fuel and lubricant............................................................increase by 5% per annum
Travel & Perdium....................................................................(10% salary)
Uniform & Protective....................................(Birr 3,490/Person/year for 11person)
Audit and Legal Fee.....................................................................20,000 birr per year
Utility Expenses......................................................................birr 60,000 per year
Miscellaneous Expense….....................................................Birr 50,000 per annum
Repair and maintenance…..............................0.93% original cost of fixed
Investment
Insurance......................................................0.75% original value of all fixed asset
Depreciation……10% original cost of all fixed assets except vehicles which is 20%
Advertisement…..............................................................Birr 50,000 per annum
Land lease cost….................................................................Birr 73,715 per annum
7.2. Total Investment Cost
Originally during the loan approval the total investment cost of the project was
estimated to be Birr 99,038,863.00 of which Birr 29,518,095.00 was owner’s equity
while the remaining amount Birr 69,520,768.00 was bank loan with approximate debt
equity ratio of 70:30. However, during implementation phase of the project this cost
cannot be sufficient and it require to revise the total investment cost of the project and

accordingly it is calculated based on the owner’s objective and the requirement

of investment items for the intended purpose, planned investment to cover the
cost of vehicles, Electric Installation, , Pre-production Interest and working
capital. The details of total investment cost of this project is depicted on the table
below
Table 7.1: Revised total investment cost of the project

Total Financial
Description Owner Equity Bank Loan requirement (Br.)
Building and Civil Work 24,249,121.00 26,106,766.00 50,355,887.00
Machinery and Equipments - 12,365,478.00 12,365,478.00
Vehicles - 10,310,000.00 10,310,000.00
Generator - 2,675,914.00 2,675,914.00
Electric Installation 850,000.00 850,000.00
Office Furniture & Equipments 242,510.00 242,510.00
Pre-operating Expenditure and Interest 6,159,394.00 6,159,394.00
Sub Total 24,249,121.00 58,710,062.00 82,959,183.00
VI. Working Capital 5,268,974.00 10,810,706.00 16,079,680.00
Total project cost 29,518,095.00 69,520,768.00 99,038,863.00
Expected Debt equity ratio (%) 30% 70% 100%
7.3. Expected Financial Results
7.3.1. Production Cost
The annual production cost at full operation capacity is estimated at Birr

69,467,914 in the first year and Birr 104,141,015 in the ten year. The
detail production cost is seeing in the appendix.
7.3.2. Revenue
The total revenue expected from this project is assumed to drive from the
planned activities to be performed. The projection for the income
statement is primarily derived from market based sale estimates which is
based on adequate market assessment and guaranteed sales from
previous experiences. The plywood products revenue assumption was
based on the current market prices with the pessimistic approach and it is
O r o m i a R e g i o n , East Showa z o n e , A dama City Page 45
calculated to be Birr 106,423,005 in the first year and Birr 159,634,507

at the end of the tenth years of operation. The detail is seen in the
appendix.
7.3.3. Profit
Profitability, the profit projection in the financial statement for the

consecutive ten years show a profit from the beginning year up to the
tenth year and the project can earn a net profit of Birr 14,562,378 and
Birr 30,898,212 in the first and tenth years of operation respectively. The
average annual return of the project is projected to be Birr 29,053,706.
7.3.4. Liquidity
The cash flow projection also shows a progressive cumulative cash

balance from Birr 11,490,304 of the first project year to Birr
188,010,313 of the last projection period implying that the project will
not face liquidity constraint to finance its operational costs meeting at the
same time its debit obligation.
7.3.5. Balance Sheet Projection
Balance Sheet Projection is used to provide insight into the assets of the
project and debts of the project at a particular point in time. Total assets
of the project expected to rise from Birr 111,274,631 in the beginning to
Birr 247,346,609 at the end projection period. For more information the
projected balance sheet at the annex.
7.3.6. Ratios
In financial analysis financial ratios and efficiency ratios are used as an

index or yardstick for evaluating the financial position of a firm. It is also
an indicator for the strength and weakness of the firm or a project. Using
the year-end balance sheet figures and other relevant data, the most
important ratios such as return on sales which is computed by dividing
net income by revenue, return on assets (operating income divided by
assets), return on equity (net profit divided by equity) and return on total
investment (net profit plus interest divided by total investment) has been
carried out over the period of the project life and all the results are found
to besat is factory.
7.3.7. Break-even Analysis
The break-even analysis establishes a relationship between operation

costs and revenues. It indicates the level at which costs and revenue are
in equilibrium. To this end, the break-even point for capacity utilization
and sales value estimated by using income statement projection are
computed as follows.
Break Even Sales Value is achieved when

Revenue=operating Break Even sale=sales-
operatingcostX100=35%averagely
Sales revenue
7.3.8. Pay-back Period
The pay- back period, also called pay- off period is defined as the period
required for recovering the original investment outlay through the
accumulated net cash flows earned by the project. Accordingly, based on
the projected cash flow it is estimated that the project’s initial investment
will be fully recovered within five years which can be said to be moderate
period of recovery.
7.3.9. Internal Rate of Return
The internal rate of return (IRR) is the annualized effective compounded

return rate that can be earned on the invested capital, i.e., the yield on the
investment. Put another way, the internal rate of return for an investment
is the discount rate that makes the net present value of the investment's

income stream total to zero. It is an indicator of the efficiency or quality of

an investment. A project is a good investment proposition if its IRR is
greater than the rate of return that could be earned by alternate
investments or putting the money in a bank account. Accordingly, the IRR
of this project after tax is computed to be 30% indicating the viability of
the project.
7.3.10. Net Present Value
Net present value (NPV) is defined as the total present (discounted) value
of a time series of cash flows. NPV aggregates cash flows that occur during
different periods of time during the life of a project in to a common
measuring unit i.e. present value. It is a standard method for using the
time value of money to appraise long-term projects. NPV is an indicator of
how much value an investment or project adds to the capital invested. In
principle, a project is accepted if the NPV is non-negative.
Accordingly, the net present value of the project after tax at 12% discount
rate is found to be Birr 98,971,415 which is acceptable. For detail
discounted cash flow sees Appendix.
7.4. Sensitivity Analysis
Under sensitivity analysis, different assessments have been done by

manipulating the expected results with possible negative outcomes or
adverse conditions. The profitability of the project will vary under various
circumstances that could probably happen. Thus, the project's sensitivity
to adverse circumstance is analyzed from three different scenarios: when
sales revenue decreases by 10%; operating costs increase by 10% and
increase in an investment costs by 10%. The outcomes of financial return
(FIRR) for adverse conditions are summarized as shown in the table
below:-
Table 7.3 Sensitivity Analysis

IRR Result NPVResult

Before After
Before Tax After Tax
S/N Possible Scenario Tax Tax
Normal Analysis 41% 30%

1 167,058,486 98,971,415
Revenue Decrease by 10% 29% 22%
2 94,419,610 51,756,145
Operating Cost Increase by 10% 33% 25%
3 119,877,254 68,281,460
Investment Cost Increase by 10% 37% 27%
4 156,600,914 89,813,323

VIII. SOCIO ECONOMIC BENEFIT OF THEPROJECT
As stated in many literatures, Ethiopia is among the countries that have fastest
economic growth in the world and the government tries to transfer the economy
towards industrialization. Therefore, the development and establishment of such
manufacturing industries are very important to form a practical change in the sector.
As such there will be a number of reasons to be stated that the establishment of this
project can achieve in the economy of this country. Among these socio economic
benefits one can easily state the followings:
a) It has high value in import substitution : on the contemporary market

situation, there are manufactured plywood products imported from international
markets. Thus, the establishment of such manufacturing factories has ample
contribution in minimizing of importation cost and saving foreign currency.
b) Create Job Opportunity: The contribution of such manufacturing industry in
job opportunity creation for a lot of workforces and there by salary/wage
income generation for the employees is also significant. The project is expected
to create new permanent employments for about 30 skilled, semi-skilled and
unskilled workers.
c) Source of Government Income: government get income in the form of income
tax from employees, and profit tax from the business.
d) GDP Contribution: The manufacturing sector is the major contributor for
economic growth of the nation and also the government of the country has
planned to be leading sector in the economy after the end of GTP2. So, this
project has its own contribution in attaining the huge plan of the country in two
main directions. The primary contribution is that the project can add its own
value on the economy. Secondly, it will have backward and forward linkages
two other industries.

e) Technology and Knowledge Transfer: The development of this subsector

transfer new technology and knowledge by introducing modern production
techniques that optimize production and quality of product.
f) It can support forestation: In addition to the above stated socio economic
benefits it can support the green economic policy of the country by promoting
forestation through market linkage with forest commercial farms.

IX. CONCLUSION ANDRECOMMENDATION

9.1. Conclusion
This feasibility study has gone through all aspects of the project, market, technical,
financial, socio economical, environmental and other issues and came up with the
following conclusions:-
Regarding the market condition even thought there is there are some factories
engaged on the manufacturing of plywood and other wood board products such
as chip wood, the demand supply gap analysis confirmed the existence of
unsatisfied demand which is filled with import .Therefore, if the project sticks
to its plan and supply quality product with reasonable price, it will be easy to
gain good marketshare.
Technical viability of the project has also been assessed. All the required
buildings and constructions have already been executed. The company has
selected the appropriate technology and the pro forma invoices for selected
Machineries and equipments collected and examined. Other necessary
investment costs are identified and included in this feasibilitystudy.
Considering the objective and work flow necessity of the project, the company
has planned to implement functional based organizational structure and the
project will hire 30 employees. Furthermore, training will be given for technical
employees when needed to assure good workingskills.
In addition to the above aspects, financial viability of the project has also been
assessed. As per the projection made on the financial part of this feasibility
study, the project is financially viable even in adverse conditions that can
possibly affect either its cost items orrevenue.
Finally other questions like socio economic benefit and environmental impact of
theprojecthasnoticedandinallaspectstheprojecthasfoundfeasiblewith

careful considerations to mitigate risk factors and some expected project

implementation unfortunates.
Thus, we can conclude that the project is viable in all aspects and it has no significant
negative impact on the environment and also it will contribute to the socioeconomic
development of the country as well if it is properly implement by mobilizing the
required fund from local banks that serve long term credit and/or machinery lease.
9.2. Recommendation
By considering all the above facts and findings, we recommended that the
implementation of this project has enormous advantage for the owner in particular and
for the country in general. Thus the implementation of the project should be practical
as per the study by mobilizing the required amount of fund which is birr 111,274,631
from the owner’s own source birr 50,645,049 (46%) totally as in kind investment and
the remaining amount birr 60,629,582 (54%) of total investment cost from local
financial institutions that can serve long term industrial loan particularly from CBE
both in existing and planned investments which will be repaid back within ten years
and additional two years of grace period before starting any principal loanrepayment.

X. APPENDIXES

ALEMAYEHU BORU PLYWOOD

FACTORYLIST OF INVESTMENT
ITEMS
Land Holding
Total land HoldinginM2 6,337.5
Total Cost ofland Holding 2,801,175 Birr
DownPayment -
AnnualPayment 73,715
Building and Construction
Number of Unit Price Total price
Description Unit Meas.
Buildings (Birr) (Birr)
Production Hall No. 1 25,897,950 25,897,950
Store No. 1 15,897,500 15,897,500
Office Building No. 1 6,789,000 6,789,000
Employees Toilet and Other Utilities Buildings No. 1 785,687 785,687
Guard House and Generator House No. 1 985,750 985,750
Total 50,355,887 50,355,887
Machineries and Equipments
(USD) (USD)
4 ft Hydraulic debarking machine with wood log loader Set 1 8,567 8,567
4ft CNC Veneer lathe with wood log loader Set 2 19,237 38,474
Solid dryer 15 layer with working pressure 120 ton Set 2 49,769 99,538
Glue Mixer Set 1 2,852 2,852
4ft Glue Spreader machine Set 2 2,125 4,250
Plywood paving/Forming machine 30 meter with 4ft cutting
Set 1 15,009 15,009
machine
400 tons cold press machine Set 1 25,947 25,947
500 tons 15 layers hot press Set 2 57,743 115,486
600 tons 15 layers hot press for laminated Set 1 66,433 66,433
8ft Knife grinder Set 1 8,097 8,097
Stainless steel pcs 30 386 11,580
Cushion pad pcs 30 232 6,960
Automatic plywood edge cutting saw with dust collector Set 1 18,935 18,935
2 head single side sanding machine with dust collector Set 1 17,380 17,380
3T Panel turnover machine Set 1 3,098 3,098
2T steam boiler with all pipe and temperature protective materials
Set 1 25,242 25,242
for 3 sets hhot press and 2 sets dryer burning type wood
3T Heli brand fork lifter diesel engine with manual transmission Set 1 13,454 13,454
Wood log cutting saw fixed table type Set 2 1,309 2,618
Wood log cutting saw arm holder type Set 2 119 238
Wood log cutting saw portable type Set 2 593 1,186
3 Ton hydraulic scissor lifter Set 3 1,432 4,296
2 Ton Manual hydraulic lifting trolley Set 3 833 2,499
Air Compressor (1m3/h) Set 1 2,863 2,863
Circular saw blade grinding machine Set 1 246 246
Moisture test Set 2 45 90
Viner thickness measurement Set 2 22 44
Arc welding machine 500 A 220/380 V Set 1 593 593
Metal cutting machine Set 1 134 134
Long debarker knife pcs 6 119 714
Peeling machine peeling knife pcs 12 357 4,284
Peeling machine cutting knife pcs 8 119 952
Grinder accessories Set 2 238 476
Saw blaade Set 6 475 2,850
Sanding belt pcs 1200 22 26,400
Total FOB cost 531,785
Installation cost (5% of FOB Cost) 26,589
Freight and Insurance (5% FOB) 26,589
Bank Charge ( 4% OF FOB Cost) 21,271
Inland Transportation cost, loading unloading, clearing, port
26,589
handling and other local costs (5% of FOB Cost)
Total Cost 632,824
Total Cost In Birr 18,972,068


FACTORYLIST OF INVESTMENT
ITEMS
Vehicles
Total price
(Birr)
Isuzu FSR Truck PCS 1 2,200,000
SINO HOWO DUMP TRUCK PCS 1 2,810,000
FORD DOUBLE CABIN Platinum diesel PCS 1 3,700,000
Toyota Minibus PCS 1 1,600,000
Total 4 10,310,000
Electric Installation
Total price
(Birr)
Electric Installation PCS 1 850,000
Total 850,000
Generator

(USD) (Birr)
375 KV Generator PCS 1 48,200 1,352,492
Total 1,352,492
Office Furniture andEquipments
Furniture Total Cost
Unit price (Birr)
Description Unit meas. Qty (Birr)
Book shelf pcs 1 17,338 17,338
Guest chair pcs 4 6,705 26,820
L shape table pcs 2 8,631 17,262
Executive swivel chair pcs 3 9,868 29,605
Office table pcs 4 4,960 19,839
Managerial chair pcs 3 3,127 9,382
Secretarial Table pcs 2 8,631 17,262
Secretarial chair pcs 1 9,868 9,868
15% VAT 18,037
Office equipment
HP printer 127 fn (print scan copy) pcs 1 23,422 23,422
Dell computer pcs 1 27,185 27,185
Fax pcs 1 12,740 12,740
15% VAT 9,502
Grand Total 211,131
Raw Material Cost at full capacity
(Birr) (Birr)
Direct Raw material Cost (Two Months)
Wood Logs M3 22,400 1,014.65 22,728,160
Urea resin MT 80 120,750.00 9,660,000
Ammonium chloride KG 8,000 5.60 44,800
Glue MT 80 30,000.00 2,400,000
Direct Labor No. 24,000 60.00 1,440,000
Water M3 40,200 15.00 603,000
Electric power KWH 150,000 0.99 148,440
Total 244,760 151,846 37,024,400


FACTORY LIST OF INVESTMENT
Existing Investment Cost ITEMS
Planned Investment Cost Total Project's Investment Cost
(Birr) (Birr) (Birr) %
Description
Owner's Owner's Bank Owner's Bank Share
Bank Loan Total Total Total
Equity Equity Loan Equity Loan
Land Holding cost - - - - - - - - -
Building and Construction 42,855,887 7,500,000 50,355,887 - - - 42,855,887 7,500,000 50,355,887
Machinery and Equipment 5,691,620 13,280,448 18,972,068 - - - 5,691,620 13,280,448 18,972,068
Vehicles - - - - 10,310,000 10,310,000 - 10,310,000 10,310,000
73.74%
Electric Installation - - - - 850,000 850,000 - 850,000 850,000
Office Furniture & Equipments - - - - 211,131 211,131 - 211,131 211,131
Generator - - - - 1,352,492 1,352,492 - 1,352,492 1,352,492
Total Fixed Assets 48,547,507 20,780,448 69,327,955 - 12,723,623 12,723,623 48,547,507 33,504,071 82,051,578
Pre-production Expense 2,097,542 - 2,097,542 - - - 2,097,542 - 2,097,542
Pre-production Interest - - - 4,314,805 4,314,805 - 4,314,805 4,314,805 5.76%
Sub-total 2,097,542 - 2,097,542 - 4,314,805 4,314,805 2,097,542 4,314,805 6,412,347
Working Capital - - - 22,810,706 22,810,706 - 22,810,706 22,810,706
20.50%
Sub-total - - - - 22,810,706 22,810,706 - 22,810,706 22,810,706
Total 50,645,049 20,780,448 71,425,497 - 39,849,134 39,849,134 50,645,049 60,629,582 111,274,631
Percentage 70.91% 29.09% 100.00% 0% 100% 100% 100%
46% 54% 100%
Percentage 64.19% 35.81%
O r o m i a R e g i o n , East Showa z o n e , A dama city Page60


FACTORYBASIC ASSUMPTIONS
Workingday 300 perannum
Effectiveworkhour 8 perday
Numberofshifts 1 perday
Theoretical capacity of theselectedmachine 25 M3/Hour
Annual production atfullcapacity 60,000 M3
start at 60 % increased by 10% at its maximum level of 90%
amount produced at amount produced at
Capacity Utilization
year full capacity capacity Utilization
Rate (M3) (M3)
1 60% 60,000 36,000
2 70% 60,000 42,000
3 80% 60,000 48,000
4 90% 60,000 54,000
5 90% 60,000 54,000
6 90% 60,000 54,000
7 90% 60,000 54,000
8 90% 60,000 54,000
9 90% 60,000 54,000
10 90% 60,000 54,000
REVENUE
Product Available Unit price Total Revenue
year
for Sale (M3) (birr) (Birr)
1 36,000 2,956 106,423,005
2 42,000 2,956 124,160,172
3 48,000 2,956 141,897,339
4 54,000 2,956 159,634,507
5 54,000 2,956 159,634,507
6 54,000 2,956 159,634,507
7 54,000 2,956 159,634,507
8 54,000 2,956 159,634,507
9 54,000 2,956 159,634,507
10 54,000 2,956 159,634,507
Note: The price of plywood is 220 per pieces
O r o m i a R e g i o n , East Showa z o n e , Adama City Page 61


FACTORYBASIC ASSUMPTIONS
Cost Of Raw Materials
Raw Material requirement and Cost at Full Capacity
Required Raw material
Type of Raw Unit Annual Unit Price Total Cost
amountper requiredper
Materials Meas. unit ofoutput Requirement productcycle (Birr) (Birr)
Wood Logs M3 1.12 67,200 22,400 1,015 68,184,480
Urea resin MT 0.004 240 80 120,750 28,980,000
Ammonium
chloride
KG 0.400 24,000 8,000 5.60 134,400
Glue MT 0.0040 240 80 30,000 7,200,000
Direct Labor No. 1.2 72,000 24,000 60 4,320,000
Water M3 2.0100 120,600 40,200 15 1,809,000
Electric power KWH 15.0 900,000 150,000 0.99 890,640
Total 111,518,520
Raw Material requirement and Cost at different Capacity
Type Of Requirement @ different Capacity Cost @ different Capacity (Birr)

Unit
Raw
Meas. 4 and
Materials 1 2 3 1 2 3 4 and Above
Above
Wood Logs M3 40,320 47,040 53,760 60,480 40,910,688 47,729,136 54,547,584 61,366,032
Urea resin MT 144 168 192 216 17,388,000 20,286,000 23,184,000 26,082,000
Ammonium
chloride KG 14,400 16,800 19,200 21,600 80,640 94,080 107,520 120,960
Glue MT 144 168 192 216 4,320,000 5,040,000 5,760,000 6,480,000
Direct Labor No. 43,200 50,400 57,600 64,800 2,592,000 3,024,000 3,456,000 3,888,000
Water M3 72,360 84,420 96,480 108,540 1,085,400 1,266,300 1,447,200 1,628,100
Electric 540,00
power KWH 0 630,000 720,000 810,000 534,384 623,448 712,512 801,576
Total 66,911,112 78,062,964 89,214,816 100,366,668

ALEMAYEHU BORU PLYWOOD FACTORY

WOPERATING
COSTS
PROJECT YEARS
Description
1 2 3 4 5 6 7 8 9 10
Raw material 66,911,112 78,062,964 89,214,816 100,366,668 100,366,668 100,366,668 100,366,668 100,366,668 100,366,668 100,366,668
wages &salary 1,861,200 1,954,260 2,051,973 2,154,572 2,262,300 2,375,415 2,494,186 2,618,895 2,749,840 2,887,332
Utilities
60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000
Repair
&maintenance 200,000 210,000 220,500 231,525 243,101 255,256 268,019 281,420 295,491 310,266
Engine& Gear
oil 3,200 3,360 3,528 3,704 3,890 4,084 4,288 4,503 4,728 4,964
Fuel &oil 160,000 168,000 176,400 185,220 194,481 204,205 214,415 225,136 236,393 248,213
Miscellaneous
Expense 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000
Marketing
expense 50,000 50,000 30,000 25,000 20,000 20,000 20,000 20,000 20,000 20,000
Audit Fees 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Uniforms 38,400 40,320 42,336 44,453 46,675 49,009 51,460 54,033 56,734 59,571
Insurance 40,286 40,286 40,286 40,286 40,286 40,286 40,286 40,286 40,286 40,286
Land Lease
73,715 73,715 73,715 73,715 73,715 73,715 73,715 73,715 73,715 73,715
Total 69,467,914 80,732,906 91,983,555 103,255,143 103,381,117 103,518,639 103,663,038 103,814,656 103,973,856 104,141,015

WORKING CAPITAL DETERMINATION
project years
Description
0 1 2 3 4 5 6 7 8 9 10
Raw materials (4
22,303,704 22,303,704 26,020,988 29,738,272 33,455,556 33,455,556 33,455,556 33,455,556 33,455,556 33,455,556 33,455,556
months)
Wages & salaries (2
310,200 310,200 325,710 341,996 359,095 377,050 395,903 415,698 436,483 458,307 481,222
months)
Utilities (1 month) 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000
Repair &maintenance
16,667 16,667 17,500 18,375 19,294 20,258 21,271 22,335 23,452 24,624 25,855
(1 month)
Engine &Gear oil (1
267 267 280 294 309 324 340 357 375 394 414
month)
Oil & Lubricant ( 1
month) 13,333 13,333 14,000 14,700 15,435 16,207 17,017 17,868 18,761 19,699 20,684
Misc. Expense
4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167 4,167
(1month)
Marketing expense
4,167 4,167 4,167 2,500 2,083 1,667 1,667 1,667 1,667 1,667 1,667
(1month)
Audit Fees (1 year) 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000
Uniforms (six months) 19,200 19,200 20,160 21,168 22,226 23,338 24,505 25,730 27,016 28,367 29,786
Insurance (1 year) 40,286 40,286 40,286 40,286 40,286 40,286 40,286 40,286 40,286 40,286 40,286
land lease (1 year) 73,715 73,715 73,715 73,715 73,715 73,715 73,715 73,715 73,715 73,715 73,715

Total 22,810,706 22,810,706 26,545,973 30,280,473 34,017,167 34,037,568 34,059,427 34,082,379 34,106,478 34,131,782 34,158,352
Increase in W/ capital - 3,735,267 3,734,500 3,736,694 20,401 21,859 22,952 24,099 25,304 26,570

ALEMAYEHU BORU PLYWOODFACTORY
PROJECTED PROFIT & LOSSSTATEMENT
PROJECT YEARS
Description
1 2 3 4 5 6 7 8 9 10
Gross Revenue 106,423,005 124,160,172 141,897,339 159,634,507 159,634,507 159,634,507 159,634,507 159,634,507 159,634,507 159,634,507
Operating Cost
Raw material 66,911,112 78,062,964 89,214,816 100,366,668 100,366,668 100,366,668 100,366,668 100,366,668 100,366,668 100,366,668
wages &salary 1,861,200 1,954,260 2,051,973 2,154,572 2,262,300 2,375,415 2,494,186 2,618,895 2,749,840 2,887,332
Utilities 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000 60,000
Repair &maintenance 200,000 210,000 220,500 231,525 243,101 255,256 268,019 281,420 295,491 310,266
Engine& Gear oil 3,200 3,360 3,528 3,704 3,890 4,084 4,288 4,503 4,728 4,964
Fuel &oil 160,000 168,000 176,400 185,220 194,481 204,205 214,415 225,136 236,393 248,213
Miscellaneous
50,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000 24,000
Expense
Marketing expense 50,000 25,000 15,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Uniforms 38,400 40,320 42,336 44,453 46,675 49,009 51,460 54,033 56,734 59,571
Audit fees 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000
Insurance 40,286 30,630 30,630 30,630 30,630 30,630 30,630 30,630 30,630 30,630
Total Operating cost 69,384,198 80,588,534 91,849,183 103,120,772 103,251,746 103,389,268 103,533,666 103,685,285 103,844,484 104,011,643
Profit before Interest
37,038,806 43,571,638 50,048,156 56,513,735 56,382,761 56,245,239 56,100,840 55,949,222 55,790,023 55,622,863
& depn.
Deprec.& Amort 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598
Interest 7,275,550 6,547,995 5,820,440 5,092,885 4,365,330 3,637,775 2,910,220 2,182,665 1,455,110 727,555
Profit before tax 22,403,658 29,664,045 36,868,118 44,061,252 44,657,833 45,247,866 45,831,022 46,406,959 46,975,315 47,535,710
Less: Profit tax 7,841,280 10,382,416 12,903,841 15,421,438 15,630,242 15,836,753 16,040,858 16,242,436 16,441,360 16,637,499
Net profit after tax 14,562,378 19,281,629 23,964,277 28,639,814 29,027,592 29,411,113 29,790,165 30,164,523 30,533,954 30,898,212


PROJECTED CASH FLOW STATEMENT
PROJECT YEARS
Description
0 1 2 3 4 5 6 7 8 9 10
Inflows
Own contribution 50,645,049
Bank Loan 60,629,582
Net profit - 14,562,378 19,281,629 23,964,277 28,639,814 29,027,592 29,411,113 29,790,165 30,164,523 30,533,954 30,898,212
Depreciation - 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598
Total Inflows 111,274,631 21,921,976 26,641,227 31,323,875 35,999,412 36,387,190 36,770,711 37,149,763 37,524,121 37,893,553 38,257,810
Outflows
Fixed investment 82,051,578 - - - - - - - - - -
Working Capital
22,810,706 - 3,735,267 3,734,500 3,736,694 20,401 21,859 22,952 24,099 25,304 26,570
& its increment
Pre Operating
Expense and 6,412,347
Interest
Bank loan
- 6,062,958 6,062,958 6,062,958 6,062,958 6,062,958 6,062,958 6,062,958 6,062,958 6,062,958 6,062,958
repayment
Dividend - 4,368,713 5,784,489 7,189,283 8,591,944 8,708,277 8,823,334 8,937,049 9,049,357 9,160,186 9,269,463
Total outflows 111,274,631 10,431,672 15,582,714 16,986,741 18,391,596 14,791,637 14,908,151 15,022,959 15,136,415 15,248,449 15,358,991
Net cash flow - 11,490,304 11,058,513 14,337,134 17,607,816 21,595,553 21,862,560 22,126,803 22,387,707 22,645,104 22,898,819
Cumulative net
- 11,490,304 22,548,818 36,885,952 54,493,767 76,089,320 97,951,880 120,078,684 142,466,391 165,111,495 188,010,313
cash
Retained earnings 10,193,664 13,497,140 16,774,994 20,047,870 20,319,314 20,587,779 20,853,115 21,115,166 21,373,768 21,628,748
Cumulative
- 10,193,664 23,690,805 40,465,799 60,513,668 80,832,983 101,420,762 122,273,877 143,389,043 164,762,811 186,391,559
Retained earnings


FACTORYDEPRECIATION
Percentage Project Years
of Depreciation
Sr. No Description Original cost
Original Annually 1 2 3 4 5 6 7 8 9 10
cost
A. Depreciation
Building and
1 50,355,887 5% 2,517,794 47,838,093 45,320,298 42,802,504 40,284,710 37,766,915 35,249,121 32,731,327 30,213,532 27,695,738 25,177,944
Construction
Machinery and
2 18,972,068 10% 1,897,207 17,074,861 15,177,654 13,280,448 11,383,241 9,486,034 7,588,827 5,691,620 3,794,414 1,897,207 0
Equipment
3 Vehicles 10,310,000 20% 2,062,000 8,248,000 6,186,000 4,124,000 2,062,000 10,310,000 8,248,000 6,186,000 4,124,000 2,062,000 -
4 Electric Installation 850,000 10% 85,000 765,000 680,000 595,000 510,000 425,000 340,000 255,000 170,000 85,000 -
Office Furniture &

5 211,131 10% 21,113 190,018 168,905 147,792 126,679 105,566 84,452 63,339 42,226 21,113 -
Equipments
6 Generator 1,352,492 10% 135,249 1,217,243 1,081,994 946,744 811,495 676,246 540,997 405,748 270,498 135,249 0
Sub Total 82,051,578 6,718,363 75,333,215 68,614,851 61,896,488 55,178,124 58,769,761 52,051,397 45,333,034 38,614,670 31,896,307 25,177,944
B. Amortization
Pre-production
7 2,097,542 10% 209,754 1,887,788 1,678,034 1,468,279 1,258,525 1,048,771 839,017 629,263 419,508 209,754 -
Expense
Pre-production
8 4,314,805 10% 431,481 3,883,325 3,451,844.23 3,020,363.70 2,588,883.17 2,157,402.64 1,725,922.11 1,294,441.59 862,961.06 431,480.53 (0.00)
Interest
Sub Total 6,412,347 641,235 5,771,113 5,129,878 4,488,643 3,847,408 3,206,174 2,564,939 1,923,704 1,282,469 641,235 (0)
Total 88,463,925 7,359,598 81,104,327 73,744,729 66,385,131 59,025,533 61,975,934 54,616,336 47,256,738 39,897,140 32,537,542 25,177,944
Depreciation Cost Per Annum 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,359,598 7,570,729 7,359,598
C. Replacement
Sr. No Description Project Years
1 2 3 4 5 6 7 8 9 10
1 Vehicle 10,310,000
Total 10,310,000 -

FACTORYBALANCE SHEET STATEMENT
PROJECT YEARS
Description
0 1 2 3 4 5 6 7 8 9 10
Assets
1.Current Assets
Cash - 11,490,304 22,548,818 36,885,952 54,493,767 76,089,320 97,951,880 120,078,684 142,466,391 165,111,495 188,010,313
Inventory 22,810,706 22,810,706 26,545,973 30,280,473 34,017,167 34,037,568 34,059,427 34,082,379 34,106,478 34,131,782 34,158,352
Sub-total 22,810,706 34,301,010 49,094,791 67,166,424 88,510,934 110,126,888 132,011,307 154,161,062 176,572,869 199,243,277 222,168,665
2.Fixed Assets
Building 50,355,887 47,838,093 45,320,298 42,802,504 40,284,710 37,766,915 35,249,121 32,731,327 30,213,532 27,695,738 25,177,944
Vehicle 18,972,068 17,074,861 15,177,654 13,280,448 11,383,241 9,486,034 7,588,827 5,691,620 3,794,414 1,897,207 0
Machinery 10,310,000 8,248,000 6,186,000 4,124,000 2,062,000 10,310,000 8,248,000 6,186,000 4,124,000 2,062,000 -
Computers &
850,000 765,000 680,000 595,000 510,000 425,000 340,000 255,000 170,000 85,000 -
accessories
Office Equipt &
211,131 190,018 168,905 147,792 126,679 105,566 84,452 63,339 42,226 21,113 -
furniture
Generator 1,352,492 1,217,243 1,081,994 946,744 811,495 676,246 540,997 405,748 270,498 135,249 0
Sub-total 82,051,578 75,333,215 68,614,851 61,896,488 55,178,124 58,769,761 52,051,397 45,333,034 38,614,670 31,896,307 25,177,944
Amortization
Pre-production
2,097,542 1,887,788 1,678,034 1,468,279 1,258,525 1,048,771 839,017 629,263 419,508 209,754 -
Expense
Pre-production Interest 4,314,805 3,883,325 3,451,844 3,020,364 2,588,883 2,157,403 1,725,922 1,294,442 862,961 431,481 (0)
Sub-total 6,412,347 5,771,113 5,129,878 4,488,643 3,847,408 3,206,174 2,564,939 1,923,704 1,282,469 641,235 (0)
Total Assets 111,274,631 115,405,337 122,839,520 133,551,555 147,536,467 172,102,823 186,627,644 201,417,801 216,470,009 231,780,819 247,346,609
Liability &Capital
Liability
Bank Loan 60,629,582 54,566,623 48,503,665 42,440,707 36,377,749 30,314,791 30,314,791 24,251,833 12,125,916 6,062,958.16 0
Capital
Owners equity 50,645,049 50,645,049 50,645,049 50,645,049 50,645,049 50,645,049 50,645,049 50,645,049 50,645,049 50,645,049 50,645,049
Retained earnings - 10,193,664 23,690,805 40,465,799 60,513,668 91,142,983 105,667,803 126,520,919 153,699,043 175,072,811 196,701,559
Total liab& Capital 111,274,631 115,405,337 122,839,520 133,551,555 147,536,467 172,102,823 186,627,644 201,417,801 216,470,009 231,780,819 247,346,609
- - - - - - - - - - -


Calculation of Financial Internal Rate of Return
Working Fixed Total Cost
Total Operating Net Benefit Net Benefit
Year Revenue Capital Asset Initial Inv't. Replacement Total Costs Profit Tax Including
Benefits Costs Before Tax After Tax
Recovery Recovery Profit Tax
0 - 111,274,631 111,274,631 111,274,631 (111,274,631) (111,274,631)
1 106,423,005 106,423,005 69,467,914 69,467,914 7,841,280 77,309,194 36,955,091 29,113,811
2 124,160,172 124,160,172 80,732,906 80,732,906 10,382,416 91,115,321 43,427,266 33,044,851
3 141,897,339 141,897,339 91,983,555 91,983,555 12,903,841 104,887,396 49,913,785 37,009,943
4 159,634,507 159,634,507 103,255,143 103,255,143 15,421,438 118,676,582 56,379,363 40,957,925
5 159,634,507 159,634,507 10,310,000 103,381,117 113,691,117 15,630,242 129,321,359 45,943,390 30,313,148
6 159,634,507 159,634,507 103,518,639 103,518,639 15,836,753 119,355,393 56,115,867 40,279,114
7 159,634,507 159,634,507 103,663,038 103,663,038 16,040,858 119,703,896 55,971,469 39,930,611
8 159,634,507 159,634,507 103,814,656 103,814,656 16,242,436 120,057,092 55,819,850 39,577,415

9 159,634,507 159,634,507 103,973,856 103,973,856 16,441,360 120,415,216 55,660,651 39,219,291
10 159,634,507 34,158,352 25,177,944 218,970,802 104,141,015 104,141,015 16,637,499 120,778,514 114,829,787 98,192,289
IRR Before Tax 41%
IRR After Tax 30%
NPV Before Tax 167,058,486
NPV After Tax 98,971,415


FACTORYPROJECTED FINANCIAL RATE
OF RETURN
If Revenue Decreases by 10%

Working TotalCost
Fixed Asset Total Initial Operating Net Benefit Net Benefit
Year Revenue Capital Replacement Total Costs Profit Tax Including
Recovery Benefits Inv't. Costs Before Tax After Tax
Recovery Profit Tax
0 - - 111,274,631 - 111,274,631 - 111,274,631 (111,274,631) (111,274,631)
1 95,780,704 95,780,704 69,467,914 69,467,914 4,116,475 73,584,389 26,312,791 22,196,315
2 111,744,155 111,744,155 80,732,906 80,732,906 6,036,810 86,769,715 31,011,249 24,974,440
3 127,707,605 127,707,605 91,983,555 91,983,555 7,937,435 99,920,989 35,724,051 27,786,616
4 143,671,056 143,671,056 103,255,143 103,255,143 9,834,230 113,089,374 40,415,913 30,581,682
5 143,671,056 143,671,056 10,310,000 103,381,117 113,691,117 10,043,034 123,734,151 29,979,939 19,936,905
6 143,671,056 143,671,056 103,518,639 103,518,639 10,249,545 113,768,185 40,152,417 29,902,871
7 143,671,056 143,671,056 103,663,038 103,663,038 10,453,650 114,116,688 40,008,018 29,554,368
8 143,671,056 143,671,056 103,814,656 103,814,656 10,655,228 114,469,884 39,856,400 29,201,172
9 143,671,056 143,671,056 103,973,856 103,973,856 10,854,152 114,828,008 39,697,200 28,843,048
10 143,671,056 34,158,352 25,177,944 203,007,352 104,141,015 104,141,015 11,050,291 115,191,306 98,866,337 87,816,046
IRRBeforeTax 29%
IRRAfter Tax 22%
NPVBefore Tax 94,419,610

If Operating Costs Increases by 10%

Total Operating Net Benefit Net Benefit
Year Revenue Capital Asset Initial Inv't. Replacement Total Costs Profit Tax Including
Benefits Costs Before Tax After Tax
0 - 111,274,631 111,274,631 - 111,274,631 (111,274,631) (111,274,631)
1 106,423,005 106,423,005 76,414,705 76,414,705 5,412,833 81,827,538 30,008,300 24,595,466

2 124,160,172 124,160,172 88,806,196 88,806,196 7,561,817 96,368,013 35,353,976 27,792,159
3 141,897,339 141,897,339 101,181,910 101,181,910 9,689,120 110,871,030 40,715,429 31,026,309
4 159,634,507 159,634,507 113,580,658 113,580,658 11,812,211 125,392,869 46,053,849 34,241,638
5 159,634,507 159,634,507 10,310,000 113,719,229 124,029,229 12,016,431 136,045,659 35,605,278 23,588,848
6 159,634,507 159,634,507 113,870,503 113,870,503 12,218,129 126,088,632 45,764,003 33,545,875
7 159,634,507 159,634,507 114,029,342 114,029,342 12,417,179 126,446,521 45,605,165 33,187,986
8 159,634,507 159,634,507 114,196,122 114,196,122 12,613,451 126,809,573 45,438,385 32,824,934
9 159,634,507 159,634,507 114,371,241 114,371,241 12,806,803 127,178,044 45,263,266 32,456,462
10 159,634,507 34,158,352 25,177,944 218,970,802 114,555,117 114,555,117 12,997,091 127,552,208 104,415,686 91,418,595
IRR Before Tax 33%
IRR After Tax 25%


If Investment Costs Increases by 10%

Total Initial Operating Total Profit Net Benefit Net Benefit
Year Revenue Capital Asset Replacement Including
Benefits Inv't. Costs Costs Tax Before Tax After Tax
0 - 122,402,094 122,402,094 - 122,402,094 (122,402,094) (122,402,094)

1 106,423,005 106,423,005 69,467,914 69,467,914 7,583,694 77,051,608 36,955,091 29,371,397
2 124,160,172 124,160,172 80,732,906 80,732,906 10,124,830 90,857,735 43,427,266 33,302,437
3 141,897,339 141,897,339 91,983,555 91,983,555 12,646,256 104,629,810 49,913,785 37,267,529
4 159,634,507 159,634,507 103,255,143 103,255,143 15,163,852 118,418,996 56,379,363 41,215,511
5 159,634,507 159,634,507 11,341,000 103,381,117 114,722,117 15,372,656 130,094,773 44,912,390 29,539,734
6 159,634,507 159,634,507 103,518,639 103,518,639 15,579,167 119,097,807 56,115,867 40,536,700
7 159,634,507 159,634,507 103,663,038 103,663,038 15,783,272 119,446,310 55,971,469 40,188,197
8 159,634,507 159,634,507 103,814,656 103,814,656 15,984,850 119,799,506 55,819,850 39,835,001
9 159,634,507 159,634,507 103,973,856 103,973,856 16,183,774 120,157,630 55,660,651 39,476,877
10 159,634,507 34,158,352 25,177,944 218,970,802 104,141,015 104,141,015 16,379,913 120,520,928 114,829,787 98,449,875
IRR Before Tax 37%
IRR After Tax 27%

Investment Project Proposal ON Plywood Manufacturing Factory

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Investment Project Proposal ON Plywood Manufacturing Factory

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INVESTMENT PROJECT

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 2

6.10. Environmental ImpactAssessment................................................................................................41

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 3

This is a project proposal for establishment of plywood factory owned by Ato

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 4

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 5

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 6

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 7

II. PROJECT BACKGROUNDINFORMATION

2.2. Experience of the Owner to Work with local Financial

2.3. Back Ground Information of the Project

The project, plywood production is planned to be establish in Oromia region, East

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 8

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 9

2.4. Objectives of the Project

The project has the following main and specific objectives.

2.4.1. Main Objective

The general objective of the project is to establish plywood products manufacturing

2.4.2. Specific Objectives

 To generate maximum profit for the company’s owner

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 10

2.5. A Rational to Established Plywood Manufacturing Factory and

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 11

Softwood plywood is manufactured by gluing several layers of dry softwood veneers

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 12

Figure 2.1 examples of plywood

In the modern construction industries plywood products have very important

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 13

Market for plywood is determined by different factors such as:

 Faster growth in the construction sector

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 14

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 15

 Soft wood plywood

In recent times, manufacturers of commercial vehicles require increasing quantities of

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 16

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 17

3.2. Market potential (Empirical Evidence)

Figure 3.2 market shares of hardwood and softwood

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 18

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 19

3.3. Plywood Market in Ethiopia

3.4. Demand considerations

3.4.1. Contemporary Demand

 Construction and housing works (doors, windows, partitions, floors and

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 20

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 21

Table 3.1 plywood demand (2008-2016)

Demand from Demand from Demand from

3.4.2. Projected Demand

Table 3.2 projected demand for plywood

Year plywood demand (M3)

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 22

3.5. Supply of Plywood

3.5.1. Contemporary Supply

Supply From Supply From Supply from Other Total

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 23

3.5.2. Import of Plywood

Table 3.4: Import of plywood in Ethiopia

Imported Quantity in Meter Cub

O r o m i a R e g i o n, East Shoa, Zo n e, Adama City Page 24

3.5.3. Projected Supply

Table 3.5: projected supply of products (2019-2030)