Investment Office ANRS

Project Profile on the Establishment of Burned

Clay Producing plant

Development Studies Associates

(DSA)

October 2008
Revasied 2016
 Table of Contents

1. Executive Summary............................................................................................1
2. Product Description and Application..............................................................1
3. Market Study, Plant Capacity and Production Program..............................2
3.1 Market Study...................................................................................................................2
3.1.1 Present Demand and Supply....................................................................................2
3.1.2 Projected Demand....................................................................................................2
3.1.3 Pricing and Distribution...........................................................................................3
3.2 Plant Capacity..................................................................................................................3
3.3 Production Program.........................................................................................................3
4. Raw Materials and Utilities..............................................................................4
4.1 Availability and Source of Raw Materials.......................................................................4
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................4
5 Location and Site...............................................................................................5
6 Technology and Engineering............................................................................5
6.1 Production Process...........................................................................................................5
6.2 Machinery and Equipment...............................................................................................6
6.3 Civil Engineering Cost....................................................................................................7
7 Human Resource and Training Requirement................................................7
7.1 Human Resource..............................................................................................................7
7.2 Training Requirement......................................................................................................9
8 Financial Analysis.............................................................................................9
8.1 Underlying Assumption...................................................................................................9
8.2 Investment......................................................................................................................10
8.3 Production Costs............................................................................................................11
8.4 Financial Evaluation......................................................................................................11
9 Economic and Social Benefit and Justification.............................................12
ANNEXES...............................................................................................................14
 1. Executive Summary

This project profile deals with the establishment of burned clay producing plant in Amhara
National Regional State. The following presents the main findings of the study

Demand projection divulges that the domestic demand for burned clay is substantial and is
increasing with time. Accordingly, the planned plant is set to produce 20,000 ton annually. The
total investment cost of the project including working capital is estimated at Birr 188.5 million
and creates 95 jobs.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 10.20% of capacity utilization and it will pay-
back fully the initial investment less working capital in three years. The result further shows that
the calculated IRR of the project is 41.6% and the net present value at 18 % discount is Birr
203.4 million.

In addition to this, the proposed project possesses wide range of economic and social benefits
such as increasing the level of investment, tax revenue, employment creation.

Generally’ the project is technically feasible, financially and commercially viable as well as
socially and economically acceptable. Hence the project is worth implementing.

2. Product Description and Application

Clay bricks are major inputs in the building industry. They are mainly used to construct outside
and inside (partition) walls of small and large buildings. Brick products are also used for roof
tiles. Common wall bricks have standard dimension of 25X12X6.5 cm. Most wall bricks are
solid, but there are also hollow bricks with different dimensions. Hollow bricks are relatively
light and have good insulating properties. In general buildings made of clay bricks are cool in
summer and warm in winter. Compared to building materials such as hollow blocks asbestos,
and other synthetic wall making products, clay bricks have long durability.

3. Market Study, Plant Capacity and Production Program

1
3.1 Market Study

3.1.1 Present Demand and Supply

Clay bricks are made from clay soil which can be found in many localities in the Amhara
Region. But there is not a single clay bricks making unit in the whole Region. Alls the
bricks requirement of the Region is transported form Addis Ababa. Clay bricks are one of
those construction materials which are expensive to transport long distances. They are
usually produced in location close to major construction sites such as main urban centers.
Building construction has been expanding during the last few years; and it seems this
trend will continue during the coming years.

Taking the size of new constructions in the regions the current regional demand for
burned clay is set at 100,000 tons. To be self-sufficient in this important building material
two or three clay bricks making factories should be established in the region.

3.1.2 Projected Demand

The demand is expected grow at average annual rate of 10%, the rate of growth of the
building construction in the region. The projected demand is depicted in Table 1.

2
 Table 1: Projected Demand
Regional
Demand
Year (ton)
2016 214,359
2017 235,795
2018 259,374
2019 285,311
2020 313,843
2021 345,227
2022 379,749
2023 417,724
2024 459,497
2025 505,447

3.1.3 Pricing and Distribution

Since bricks are widely produced, especially in and around Addis Ababa, the pricing is based on
the exiting market prices. The existing average market price is Birr 10,000/ton. Based on the
market research result and the capacity of the envisaged plant, the selling price has been
estimated at Birr 8.000 per ton.

Major contractors will purchase at factory gate.

3.2 Plant Capacity

Thus, given the expected demand for burned clay presented earlier, and the planned technology,
the envisaged plant is set to produce 20,000 tons annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year, where the remaining days will be holidays and for maintenance. During the first year
of operation the plant will operate at 40 percent capacity and then it grows to 50, 60, 70 and 80
percents in the 2nd, 3rd, 4th, 5th years. The capacity will grow to 100 percent starting from the 6 th

3
year. This consideration is developed based on the assumption that market and logistics barriers
would take place for the first five years of operation.

Mode of operation:
Table 2: Mode of Operation
Sections No. Shifts
Preparation and 2
forming
Stacking and transport 2
Drying Section 3
Counter travel kiln 3
Loading and unloading 2

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials

Sufficient clay soil is available in many parts of ANRS.

4.2 Annual Requirement and Cost of Raw Materials

and Utilities

The annual raw material and utility requirement and the associated cost for the envisaged plant is
listed in Table 3 & 4.
Table 3: Raw Material Requirements at Full Capacity
Price (Birr)
No. Material Qty Unit Total
1 Clay (ton) 250,000 513.2 128,300,000
Total 250,000   128,300,000

Table 4: Utility Requirements at Full Capacity

  Unit Unit Price Total Price
Electricity Kwh 1000000 550,000
Fuel ton 675 2,025,000
Compressed air Cum/hr 41120 20,560
Water M 3
10,000 26,500
Total     2,622,060

4
5 Location and Site

The appropriate locations for the envisaged project in view of the availability of input,
infrastructure as well as market for the output are Bahir Dar, Dessie, Gondar, Debre Markos

6 Technology and Engineering

6.1 Production Process

According to the nature of the available clay, the incoming raw material must be ground down to
a maximum grain size of 1.5 mm, which is done by a roller crusher and a finishing mill. Then
water is added to the clay until the material has reached a humidity degree of 20-25%.

After an intermediate storage the treated clay is homogenized under vacuum in a de-airing
extrusion thus preventing air-inclusions in the product. The preformed mass is cut to proper size
and taken to a drier via a conveying system. The drying takes about 42 hours eventually resulting
in a loss of weight of approx. 7%. The dry product is taken from the conveying system and set
onto kiln cars by hand. Burning in the kiln is done at 1,000 “C, which takes approx. 60 hours.
After the burning process, the final product is manually unloaded from the kiln cars and put on
palets or directly on trucks.

The reject material that results from the first steps up to the outlet of the drying stage, can be
completely re-conveyed to the process via the mill. Burnt material, too, can be added to the
process-flow again, at a portion of 10% of the quantity of raw material. Finally, reject material
may well be used for instance as an additive material for road construction.

There are two alternative technological processes promoted to revolutionaries the production
burned clay:

 One utilizes a more energy efficient kiln to produce burnt clay bricks, and
 the other replaces burnt clay brick with fly ash bricks which are manufactured without the
use of thermal energy.

Using automated machineries is an alternative technology that is more productive but costly.

5
 6.2 Machinery and Equipment

The machineries and equipment required for producing burned clay is detailed in Table 5.

Table 5: Machineries and Equipments

Item Description Qty.
Total
1 Box feeder 1  
2 Roller crusher 1  
3 Finishing mill 1  
4 Double-shaft mixer 1  
5 Box feeder for intermediate storage 1  
6 Circular feeder 1  
7 De-airing extrusion machine 1  
8 Cutter for bricks 1  
9 Conveying and stacking system 1  
10 Drier 1  
11 Counter travel kiln 1  
12 Loading and unloading system 1  
  FOB Price   111,621,000
  Installation 20%   22,324,200
  Total   133,945,200

The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about Birr 133.9 million.

Supplier Address:

J.R.Trade Impex Pvt. Ltd.

Deals in clay brick, manufacturing machine
Address: 1Bh/35 Dum Dum Road , Kolkata ,
West Bangal - 700 002 India
Phone No.: 91 - 33 - 25577823
Fax : +91 - 33 - 25577823

6
 6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 5,980 m2 (raw material shelter 2,000
sq.m, workshop 800 sq.m, administration 180 sq.m). Total lease price is estimated at Birr
358,800 and the costs of Building and civil works at Birr 5,029,360..

7 Human Resource and Training Requirement

7.1 Human Resource

The list of required manpower for the envisaged plant is stated in Table 6.

7
 Table 6: Human Resource Requirement
Salary/Wage (Birr)

  Job Title No. Monthly Annual

1 General Manager 1 12,830 153,960
2 Secretary 1 2,566 30,792
  Production   0 0
1 Production Head 1 8,981 107,772
2 Preparation and forming - skilled workers 2 3,079 73,901
3 Preparation and forming - unskilled workers 8 1,411 135,485
4 Stacking and transport - skilled workers 2 2,823 67,742
5 Stacking and transport -unskilled workers 8 1,283 123,168
6 Drier - skilled workers 3 2,566 92,376
7 Drier - unskilled workers 9 1,283 138,564
8 Counter travel kiln - skilled workers 3 2,566 92,376
9 Counter travel kiln - unskilled workers 9 1,283 138,564
10 Loading and unloading - skilled workers 2 2,309 55,426
11 Loading and unloading - unskilled workers 20 1,155 277,128
  Administration   0 0
1 Administration Head 1 6,415 76,980
2 Secretary 1 2,053 24,634
3 Accountant 1 3,849 46,188
4 Marketing Officer 1 3,849 46,188
5 Casher 1 2,053 24,634
6 Driver 6 3,849 277,128
7 Security /5th grade license/ 6 898 64,663
8 Clerks 4 1,283 61,584
9 Genitor 5 898 53,886
  Total 95 0 2,163,138
  Employment Benefits 20% of Annual Salary   0 432,628
      0 2,595,766

The envisaged plant, therefore, creates 95 jobs.

8
 7.2 Training Requirement

Training of key personnel shall be conducted. The training should primarily focuses on the
production technology and machinery maintenance and trouble shooting. Birr 205,280 will be
allocated as training expense.

8 Financial Analysis
8.1 Underlying Assumption

The financial analysis of burnet clay producing plant is based on the data provided in the
preceding chapters and the following assumptions.

A. Construction and Finance

Construction period 2 years

Source of finance 30% equity and 70% loan
Tax holidays 2 years
Bank interest rate 12%
Discount for cash flow 18%
Value of land Based on lease rate of ANRS
Spare Parts, Repair & Maintenance 3% of fixed investment

B. Depreciation

Building 5%
Machinery and equipment 10%
Office furniture 10%
Vehicles 20%
Pre-production (amortization) 20%

9
 C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30
Raw Material-Foreign 120
Factory Supplies in Stock 30
Spare Parts in Stock and Maintenance 30
Work in Progress 10
Finished Products 15
Accounts Receivable 30
Cash in Hand 30
Accounts Payable 30

8.2 Investment
The total investment cost of the project including working capital is estimated at Birr 188.8
million as shown in Table 7. The Owner shall contribute 30% of the finance in the form of equity
while the remaining 70% is to be financed by bank loan.
Table 7: Total Initial Investment & Working Capital

Total Initial Investment

Item Cost
Land 358,800.00
Building and civil works 5,029,360.00
Office equipment 256,600.00
Vehicles* 12,830,000.00
Plant machinery & equipment 133,945,200.00
Total Fixed Investment 152,419,960.00
Pre production capital expenditure** 7,605,359.70
Total Initial Investment 160,025,319.70
Working capital at full capacity 28,772,299.30
Total 188,797,619.00
* Five Heavy Trucks are important for the project
**Pre-production capital expenditure includes - all expenses for pre-investment studies, consultancy
fee during construction and expenses for company‘s establishment, project administration expenses,
commission expenses, preproduction marketing and interest expenses during construction.

10
 8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 169.1 million as detailed
in Table 8 below.

Table 8: Production Cost at Full Capacity

Items Cost
1. Raw materials 128,300,000.00
2. Utilities 2,622,060.00
3. Wages and Salaries 2,285,382.24
4. Spares and Maintenance 4,563,215.82
Factory costs 137,770,658.06
5. Depreciation 17,758,719.94
6. Financial costs 13,566,618.67
  Total Production Cost 169,095,996.67

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part (see annex 4) the project
will generate profit beginning from the first year of operation. Gross Profit/Sales, Net Profit after
Tax/Sales, Return on Investment and Return on Equity are 14.79%, 14.79%, 28.14%, 24.15% in
the first year and are gradually rising to 49.84%, 34.89%, 57.00%, and 142.50%, respectively.
Furthermore, the income statement and other profitability indicators show that the project is
viable.

II. Breakeven Analysis

The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 10.20% of capacity utilization.

11
 III. Payback Period

Investment cost and income statement projection are used in estimating the project payback
period. The projects will payback fully the initial investment less working capital in the third
year of operation.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 44.0%.

V. Internal Rate of Return and Net Present Value

Based on cash flow statement described in the annex part, the calculated IRR of the project is
41.6% and the net present value at 18 % discount is Birr 203.41 million.

VI. Sensitivity Analysis

The envisaged plant is profitable even with considerable cost increment. That is the plant
maintains to be profitable starting from the first year when 10 % cost increment takes place in
the sector.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits where it promotes the socio-economic
goals and objectives stated in the strategic plan of the Amhara National Regional State. These
benefits are listed as follows.

A. Profit Generation

The project is found to be financially viable and earns Birr 790 million within the project life.
Such result induces the project promoters to reinvest the profit which, therefore, increases the
investment magnitude in the region.

B. Tax Revenue

12
In the project life under consideration, the region will collect about Birr 308 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT). Such result create
additional fund for the regional government that will be used in expanding social and other basic
services in the region

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to 95 citizens of the region.
This would be one of the commendable accomplishments of the project.
D. Diversification/ Integration

The plant contributes to industrialization of the economy and enhances intersectional linkages.

13
ANNEXES

14
 Annex 1: Total Net Working Capital Requirements (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4

Capacity Utilization (%) 0 0 40% 50% 60% 70%

1. Total Inventory 0 0 16,700,601 20,875,752 25,050,901 29,226,052

Raw Materials in Stock- Total 0 0 5,598,545 6,998,183 8,397,817 9,797,455

Raw Material-Local 0 0 5,598,545 6,998,183 8,397,817 9,797,455

Raw Material-Foreign 0 0 0 0 0 0

Factory Supplies in Stock 0 0 69,795 87,244 104,693 122,142

Spare Parts in Stock and Maintenance 0 0 199,122 248,902 298,682 348,463

Work in Progress 0 0 1,744,865 2,181,079 2,617,297 3,053,512

Finished Products 0 0 3,489,729 4,362,162 5,234,594 6,107,026

2. Accounts Receivable 0 0 10,749,208 13,436,510 16,123,810 18,811,112

3. Cash in Hand 0 0 406,865 508,581 610,297 712,011

CURRENT ASSETS 0 0 22,258,128 27,822,658 33,387,191 38,951,723

4. Current Liabilities 0 0 10,749,208 13,436,510 16,123,810 18,811,112

Accounts Payable 0 0 10,749,208 13,436,510 16,123,810 18,811,112

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 11,508,921 14,386,151 17,263,381 20,140,608

INCREASE IN NET WORKING CAPITAL 0 0 11,508,921 2,877,230 2,877,230 2,877,230

1
 Annex 1: Total Net Working Capital Requirements (in Birr) (continued)
PRODUCTION
  5 6 7 8 9 10

Capacity Utilization (%) 80% 100% 100% 100% 100% 100%

1. Total Inventory 33,401,201 41,751,501 41,751,501 41,751,501 41,751,501 41,751,501

Raw Materials in Stock-Total 11,197,090 13,996,362 13,996,362 13,996,362 13,996,362 13,996,362

Raw Material-Local 11,197,090 13,996,362 13,996,362 13,996,362 13,996,362 13,996,362

Raw Material-Foreign 0 0 0 0 0 0

Factory Supplies in Stock 139,590 174,485 174,485 174,485 174,485 174,485

Spare Parts in Stock and Maintenance 398,243 497,807 497,807 497,807 497,807 497,807

Work in Progress 3,489,729 4,362,162 4,362,162 4,362,162 4,362,162 4,362,162

Finished Products 6,979,458 8,724,323 8,724,323 8,724,323 8,724,323 8,724,323

2. Accounts Receivable 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415

3. Cash in Hand 813,727 1,017,160 1,017,160 1,017,160 1,017,160 1,017,160

CURRENT ASSETS 44,516,254 50,270,714 50,270,714 50,270,714 50,270,714 50,270,714

4. Current Liabilities 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415

Accounts Payable 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415

TOTAL NET WORKING CAPITAL REQUIREMENTS 23,017,839 28,772,299 28,772,299 28,772,299 28,772,299 28,772,299

INCREASE IN NET WORKING CAPITAL 2,877,230 5,754,460 0 0 0 0

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 79,856,278 108,628,577 133,917,208 156,647,303 187,439,303 218,231,303
1. Inflow Funds 79,856,278 108,628,577 10,749,208 2,687,303 2,687,303 2,687,303
Total Equity 31,942,510 43,451,430 0 0 0 0
Total Long Term Loan 47,913,766 65,177,147 0 0 0 0
Total Short Term Finances 0 0 10,749,208 2,687,303 2,687,303 2,687,303
2. Inflow Operation 0 0 123,168,000 153,960,000 184,752,000 215,544,000
Sales Revenue 0 0 123,168,000 153,960,000 184,752,000 215,544,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 79,856,278 79,856,278 109,456,279 109,138,580 141,981,263 159,381,229
4. Increase In Fixed Assets 79,856,278 79,856,278 0 0 0 0
Fixed Investments 76,053,597 76,053,597 0 0 0 0
Pre-production Expenditures 3,802,681 3,802,681 0 0 0 0
5. Increase in Current Assets 0 0 22,258,128 5,564,533 5,564,533 5,564,533
6. Operating Costs 0 0 57,232,310 71,154,654 85,076,998 98,999,339
7. Corporate Tax Paid 0 0 0 0 21,182,158 26,921,600
8. Interest Paid 0 0 29,965,840 13,570,909 11,309,091 9,047,272
9.Loan Repayments 0 0 0 18,848,486 18,848,486 18,848,486
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 28,772,299 24,460,929 47,508,723 45,458,040 58,850,073
Cumulative Cash Balance 0 28,772,299 53,233,230 100,741,950 146,199,990 205,050,063

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 249,023,303 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000
1. Inflow Funds 2,687,303 0 0 0 0 0
Total Equity 0 0 0 0 0 0
Total Long Term Loan 0 0 0 0 0 0
Total Short Term Finances 2,687,303 0 0 0 0 0
2. Inflow Operation 246,336,000 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000
Sales Revenue 246,336,000 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 176,781,198 214,580,454 207,242,721 186,810,964 186,810,964 186,810,964
4. Increase In Fixed Assets 0 0 0 0 0 0
Fixed Investments 0 0 0 0 0 0
Pre-production
Expenditures 0 0 0 0 0 0
5. Increase in Current Assets 5,564,533 5,754,460 0 0 0 0
6. Operating Costs 112,921,682 140,766,370 140,766,370 140,766,370 140,766,370 140,766,370
7. Corporate Tax Paid 32,661,044 44,687,503 45,366,049 46,044,594 46,044,594 46,044,594
8. Interest Paid 6,785,456 4,523,637 2,261,819 0 0 0
9. Loan Repayments 18,848,486 18,848,486 18,848,486 0 0 0
10.Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 72,242,104 93,339,546 100,677,279 121,109,036 121,109,036 121,109,036
Cumulative Cash Balance 277,292,168 370,631,713 471,308,990 592,418,027 713,527,063 834,636,100

4
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 123,168,000 153,960,000 184,752,000 215,544,000

1. Inflow Operation 0 0 123,168,000 153,960,000 184,752,000 215,544,000

Sales Revenue 0 0 123,168,000 153,960,000 184,752,000 215,544,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 79,856,278 68,741,231 68,741,231 74,031,884 87,954,225 128,798,171

3. Increase in Fixed Assets 79,856,278 0 0 0 0 0

Fixed Investments 76,053,597 0 0 0 0 0

Pre-production Expenditures 3,802,681 0 0 0 0 0

4. Increase in Net Working Capital 0 11,508,921 11,508,921 2,877,230 2,877,230 2,877,230

5. Operating Costs 0 57,232,310 57,232,310 71,154,654 85,076,998 98,999,339

6. Corporate Tax Paid 0 0 0 0 0 26,921,600

NET CASH FLOW -79,856,278 54,426,769 54,426,769 79,928,116 96,797,775 86,745,829

- - -
CUMULATIVE NET CASH FLOW 159,712,554 105,285,785 105,285,785 -25,357,666 71,440,106 158,185,938

Net Present Value (at 18%) -67,674,812 39,088,458 39,088,458 48,646,718 49,927,214 37,917,402
- - -
Cumulative Net present Value 147,531,087 108,442,629 108,442,629 -59,795,909 -9,868,695 28,048,707

5
 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 246,336,000 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000

1. Inflow Operation 246,336,000 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000

Sales Revenue 246,336,000 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 148,459,956 191,208,333 186,132,418 186,810,964 186,810,964 186,810,964

3. Increase in Fixed Assets 0 0 0 0 0 0

Fixed Investments 0 0 0 0 0 0

Pre-production Expenditures 0 0 0 0 0 0

4. Increase in Net Working Capital 2,877,230 5,754,460 0 0 0 0

5. Operating Costs 112,921,682 140,766,370 140,766,370 140,766,370 140,766,370 140,766,370

6. Corporate Tax Paid 32,661,044 44,687,503 45,366,049 46,044,594 46,044,594 46,044,594

NET CASH FLOW 97,876,044 116,711,667 121,787,582 121,109,036 121,109,036 121,109,036

CUMULATIVE NET CASH FLOW 256,061,982 372,773,649 494,561,230 615,670,267 736,779,303 857,888,340

Net Present Value (at 18%) 36,256,374 36,638,713 32,400,146 27,304,768 23,139,634 19,609,860

Cumulative Net present Value 64,305,081 100,943,794 133,343,940 160,648,708 183,788,341 203,398,198
203398199
Net Present Value (at 18%)

Internal Rate of Return 41.6%

6
 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 40% 50% 60% 70% 80%

1. Total Income 123,168,000 153,960,000 184,752,000 215,544,000 246,336,000

Sales Revenue 123,168,000 153,960,000 184,752,000 215,544,000 246,336,000
Other Income 0 0 0 0 0
2. Less Variable Cost 55,274,049 69,092,562 82,911,075 96,729,586 110,548,099
VARIABLE MARGIN 67,893,951 84,867,438 101,840,925 118,814,414 135,787,901
(In % of Total Income) 141 141 141 141 141
3. Less Fixed Costs 19,716,980 19,820,810 19,924,641 20,028,472 20,132,302
OPERATIONAL MARGIN 48,176,971 65,046,627 81,916,283 98,785,940 115,655,596
(In % of Total Income) 100 108 114 118 120
4. Less Cost of Finance 29,965,840 13,570,909 11,309,091 9,047,272 6,785,456
5. GROSS PROFIT 18,211,130 51,475,718 70,607,193 89,738,668 108,870,143
6. Income (Corporate) Tax 0 0 21,182,158 26,921,600 32,661,043
7. NET PROFIT 18,211,130 51,475,718 49,425,035 62,817,068 76,209,099
RATIOS (%)  
Gross Profit/Sales 14.79% 33.43% 38.22% 41.63% 44.20%
Net Profit After Tax/Sales 14.79% 33.43% 26.75% 29.14% 30.94%
Return on Investment 28.14% 37.36% 34.32% 39.96% 45.42%
Return on Equity 24.15% 68.28% 65.56% 83.32% 101.08%

7
 Annex 4: NET INCOME STATEMENT (in Birr): Continued
PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%

1. Total Income 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000

Sales Revenue 307,920,000 307,920,000 307,920,000 307,920,000 307,920,000
Other Income 0 0 0 0 0
2. Less Variable Cost 138,185,125 138,185,125 138,185,125 138,185,125 138,185,125
VARIABLE MARGIN 169,734,875 169,734,875 169,734,875 169,734,875 169,734,875
(In % of Total Income) 141 141 141 141 141
3. Less Fixed Costs 16,252,893 16,252,893 16,252,893 16,252,893 16,252,893
OPERATIONAL MARGIN 153,481,982 153,481,982 153,481,982 153,481,982 153,481,982
(In % of Total Income) 128 128 128 128 128
4. Less Cost of Finance 4,523,637 2,261,819 0 0 0
5. GROSS PROFIT 148,958,348 151,220,164 153,481,982 153,481,982 153,481,982
6. Income (Corporate) Tax 44,687,503 45,366,049 46,044,594 46,044,594 46,044,594
7. NET PROFIT 104,270,842 105,854,115 107,437,388 107,437,388 107,437,388
RATIOS (%)  
Gross Profit/Sales 48.38% 49.11% 49.84% 49.84% 49.84%
Net Profit After Tax/Sales 33.86% 34.38% 34.89% 34.89% 34.89%
Return on Investment 57.72% 57.36% 57.00% 57.00% 57.00%
Return on Equity 138.30% 140.40% 142.50% 142.50% 142.50%

8
 Annex 5: Projected Balance Sheet (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 79,856,278 188,484,853 217,445,190 252,759,724 286,023,575 332,679,460
1. Total Current Assets 0 28,772,299 75,491,356 128,564,608 179,587,181 244,001,784
Inventory on Materials and Supplies 0 0 5,867,462 7,334,329 8,801,193 10,268,059
Work in Progress 0 0 1,744,865 2,181,079 2,617,297 3,053,512
Finished Products in Stock 0 0 3,489,729 4,362,162 5,234,594 6,107,026
Accounts Receivable 0 0 10,749,208 13,436,510 16,123,810 18,811,112
Cash in Hand 0 0 406,865 508,581 610,297 712,011
Cash Surplus, Finance Available 0 28,772,299 53,233,230 100,741,950 146,199,990 205,050,063
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 79,856,278 159,712,554 141,953,835 124,195,113 106,436,394 88,677,673
Fixed Investment 0 76,053,597 152,107,194 152,107,194 152,107,194 152,107,194
Construction in Progress 76,053,597 76,053,597 0 0 0 0
Pre-Production Expenditure 3,802,681 7,605,360 7,605,360 7,605,360 7,605,360 7,605,360
Less Accumulated Depreciation 0 0 17,758,719 35,517,440 53,276,159 71,034,881
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 79,856,278 188,484,853 217,445,190 252,759,724 286,023,575 332,679,460
5. Total Current Liabilities 0 0 10,749,208 13,436,510 16,123,810 18,811,112
Accounts Payable 0 0 10,749,208 13,436,510 16,123,810 18,811,112
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 47,913,766 113,090,913 113,090,913 94,242,426 75,393,940 56,545,456
Loan A 47,913,766 113,090,913 113,090,913 94,242,426 75,393,940 56,545,456
Loan B 0 0 0 0 0 0
7. Total Equity Capital 31,942,510 75,393,940 75,393,940 75,393,940 75,393,940 75,393,940
Ordinary Capital 31,942,510 75,393,940 75,393,940 75,393,940 75,393,940 75,393,940
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 18,211,130 69,686,846 119,111,880
9.Net Profit After Tax 0 0 18,211,130 51,475,718 49,425,035 62,817,068
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 18,211,130 51,475,718 49,425,035 62,817,068

9
 Annex 5: Projected Balance Sheet (in Birr): Continued
  PRODUCTION
5 6 7 8 9 10
TOTAL ASSETS 392,727,375 478,149,733 565,155,362 672,592,751 780,030,139 887,467,528
1. Total Current Assets 321,808,421 420,902,427 521,579,704 642,688,741 763,797,777 884,906,813
Inventory on Materials and Supplies 11,734,924 14,668,654 14,668,654 14,668,654 14,668,654 14,668,654
Work in Progress 3,489,729 4,362,162 4,362,162 4,362,162 4,362,162 4,362,162
Finished Products in Stock 6,979,458 8,724,323 8,724,323 8,724,323 8,724,323 8,724,323
Accounts Receivable 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415
Cash in Hand 813,727 1,017,160 1,017,160 1,017,160 1,017,160 1,017,160
Cash Surplus, Finance Available 277,292,168 370,631,713 471,308,990 592,418,027 713,527,063 834,636,100
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 70,918,954 57,247,306 43,575,658 29,904,010 16,232,362 2,560,714
Fixed Investment 152,107,194 152,107,194 152,107,194 152,107,194 152,107,194 152,107,194
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 7,605,360 7,605,360 7,605,360 7,605,360 7,605,360 7,605,360
Less Accumulated Depreciation 88,793,600 102,465,248 116,136,896 129,808,544 143,480,192 157,151,840
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 392,727,375 478,149,733 565,155,362 672,592,751 780,030,139 887,467,528
5. Total Current Liabilities 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415
Accounts Payable 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415 21,498,415
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 37,696,970 18,848,486 0 0 0 0
Loan A 37,696,970 18,848,486 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 75,393,940 75,393,940 75,393,940 75,393,940 75,393,940 75,393,940
Ordinary Capital 75,393,940 75,393,940 75,393,940 75,393,940 75,393,940 75,393,940
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 181,928,948 258,138,048 362,408,892 468,263,007 575,700,396 683,137,784
9. Net Profit After Tax 76,209,099 104,270,842 105,854,115 107,437,388 107,437,388 107,437,388
Dividends Payable 0 0 0 0 0 0
Retained Profits 76,209,099 104,270,842 105,854,115 107,437,388 107,437,388 107,437,388

10