PROJECT PROPOSAL

FOR

STEEL PRODUCTS MANUFACTURING PLANT

PROJECT TO BE IMPLEMENTED IN GELAN TOWN,

OROMIA REGION STATE

PROMOTER: -KARA GUDINA PLC

SEP, 2020

ADDIS ABABA, ETHIOPIA

TABLE OF CONTENT
TABLE OF CONTENT.....................................................................................................................................2
EXECUTIVE SUMMARY.................................................................................................................................4
1. INTRODUCTION...............................................................................................................................5
1.1. Objective of the project.............................................................................................................6
1.2. The Economic Significance of the Project.............................................................................6
1.3. Location and Premises Required............................................................................................8
1.4. Location Map of the Area (Gelan).........................................................................................10
2. MARKET STUDY AND PLANT CAPACITY................................................................................11
2.1. Market Study............................................................................................................................11
2.1.1. Demand and Supply Analysis........................................................................................11
2.1.2. Market Prospects............................................................................................................12
2.1.3. Marketing Strategy and Promotion...............................................................................12
2.1.4. Target customers............................................................................................................12
2.2. Plant Capacity and Production Program..............................................................................13
2.3. Pricing.......................................................................................................................................13
3. PRODUCTION AND TECHNOLOGY..........................................................................................14
3.1. Product Nature and Description............................................................................................14
3.2. Raw materials and Input........................................................................................................14
3.3. Technology..............................................................................................................................14
3.4. Production Description...........................................................................................................14
3.4.1. Production Process.........................................................................................................15
3.5. Machinery and Equipments...................................................................................................18
3.6. Project Design and Engineering............................................................................................20
3.7. Building and Construction Works..........................................................................................21
3.8. Utilities......................................................................................................................................21
4. MANPOWER AND ORANIZATIONAL MANAGEMENT............................................................21
4.1. Manpower................................................................................................................................21
4.2. Organizational Structure and management.........................................................................22

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 4.3. Training Requirement.............................................................................................................24
5. FINANCIAL REQUIRMENT and ANALYSIS...............................................................................25
5.1. Total Initial Investment Cost..................................................................................................25
5.1.1. Fixed Investment.............................................................................................................26
5.2. Annual Production Cost at Full Capacity.............................................................................29
5.3. Financial Analysis and Statements.......................................................................................32
5.3.1. Underlying Assumption...................................................................................................32
5.3.2. Sources of Fund..............................................................................................................33
5.3.3. Loan repayment Schedule.............................................................................................34
5.3.4. Depreciation Schedule...................................................................................................34
5.3.5. Revenue Projection.........................................................................................................35
5.3.6. Profitability........................................................................................................................37
5.3.7. Break-Even Analysis.......................................................................................................37
5.3.8. Pay-Back Period..............................................................................................................38
6. FUTURE DEVELOPMENT............................................................................................................38
7. ENVIRONMENTAL IMPACT OF THE PROJECT......................................................................38
7.1. Socio-Economic Environment...............................................................................................38
7.2. Environmental Impact Assessment of the Project..............................................................39

EXECUTIVE SUMMARY
1. Project name Steel products manufacturing plant

3
2. Project Owners KARA GUDINA PLC

3. Nationality Ethiopian

4. Project Location Gelan, Oromia Special Zone Surrounding Finfinne

5. Project Basic products Iron , steel, Aluminum and related products

Composition
6. Premises Required 20,000 M2 (2hec)

7. Total Initial Br 170,000,000 of which 30% equivalent to 51,000,000

Investment Capital
financed by the owners equity and the rest 70% equivalent to
119,000,000 financed through bank loan

8. Employment The total manpower required for the plant will be 500
Opportunity employees
Permanent Worker :- 200
Skilled and Unskilled
On Temporary Basic :- 300
Skilled and Unskilled

9. Benefits of the Produce and supply of quality Iron and steel melting Products,
factory For The
add value to the economy, Source of Revenue, Employment
Region/ Country
opportunity, Save Foreign currency, Benefit for the Local
Community, Stimulate the Local Economy and technology
transfer

10. Experience It’s has grown to successful to different business activates

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1. INTRODUCTION

Manufacturing Small and Medium Enterprises (SMEs) make up the largest and the most
important segment of the industrial sector in Ethiopia. In 2000, for example, SMEs
contributed to 68 per cent of gross value of production and over 80 per cent of
employment in the manufacturing sector. As will be shown below, SMEs, especially the
latter, are among the most dynamic and innovative enterprises in the country. In
reviewing the investment and technology policies of Ethiopia, therefore, it is pertinent
that special attention is paid to the pattern of development and the strengths and
weaknesses of SMEs in Ethiopia.

Besides, development of small and medium industries accelerates the fast-economic

growth of Ethiopia and will help the nation lay its economy foundation on strong
industrial base. However, there exist constraints on the transition of these industries to
the heavy one.

The government of Ethiopia has developed a conducive investment policy packages

and other sectoral reforms at federal and regional level to attract a huge private
investment including in MSEs for the wellbeing of the nation and its citizens as a whole.
Besides, it is also currently implementing the five years growth and transformation plan
gave a special focus for manufacturing, small, medium and large industries.

In this regard, the Oromia regional state government has been exerting its maximum
effort to expand investment opportunities in the region, so as to foster the economic
development of the region and subduing the region’s big enemy that is the trap of
poverty. Therefore, the regional government has been preparing a viable business
environment to attract many domestic and foreign investors so that the dream of making
poverty history turns to be true.

Therefore, the lucrative market potential and those viable investment policies attracted
the owners of this project to engaged iron and Steel melting factory in Gelan town,
Special Zone in Oromia region.

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The owners of this envisaged plant have a good business experiences and need to
extend this assets to this plant. Therefore, the owner is very determined to establish the
plant and considers getting the required support from regional government by
considering the existing facts and the multi benefits of this project.

1.1. Objective of the project

The main objective of the plant is to manufacture iron Steel melting and metal
products to sale with reasonable price for domestic and international market (in the
future).

1.2. The Economic Significance of the Project

The envisaged project deemed to contribute to the economic development of the nation
in general and the region in specific with following ways:

A. Supply of Quality Iron steel melting and aluminum related Products

The project under discussion will establish Iron and steel melting plant that will produce
quality and affordable metal and steel products for the country market. This will benefits
the users to get better product with better price and durability.

B. Value Add

The establishment of this factory will add a value to the manufacturing sector in specific
and in the economy in general.

C. Source of Revenue

As public policy of any nation, the government collects different forms of taxes from
different business organizations and individuals. Among the different forms of taxes,
business income taxes, VAT and payroll taxes are collected from undertaking business
activities. Therefore, the factory will serve as sources of revenue for both the region and
nation in general.

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 D. Employment Opportunity

One of the problems that our country faced is unemployment. Therefore, the current
objective of the government is working on tackling the problem of unemployment and
fostering the development process either through creating self employment or
employment in other organization. Hence, this factory will hire around 500 persons.

E. Save the Country’s Foreign Exchange

By minimizing the market gab for Iron steel melting and related products demand and
supply, the factory will help to reduce the nation’s foreign exchange cost to import these
materials. This will save the foreign exchange resource of the nation.

F. Benefit for The Local Community

As a corporate responsibility the company will engage in different development activities

on the surrounding areas (Gelan). This will better worse the community and contribute
for the development of the region.

G. Stimulate the Local and National Economy

This factory has positive externality in the zone that will encourage the economic
movement of local economy. Hence, there will be economic relationship and
transactions among different actors.

H. Technology Transfer

By producing steel and metal products, the project will train and develops the capacity
of the technical staffs. By doing this, the company will add value in technology transfer
for the nation.

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 1.3. Location and Premises Required

i. Location

The envisioned project is planned to be located in Gelan (which is around 20Km from
the capital), Oromia special Zone Surrounding Finfine, Oromia Regional State. The
main justifications behind the selection of this location are:

 Strategically located to the central and largest market of the nation (Addis Ababa)

 Relatively advanced development in infrastructure (Power, Water, Telephone

internet, road etc.

 All road to the nearest market outlets

 Accessibility of skilled labor force

 Conducive investment policy and governance

 Environmentally fit to manufacturing industry.

 Its nearest to modjo shipping and logistic service.

ii. Premises Required

The total land holding first mining of the project is 20,000 M2, the premises required
actual land so to change iron and steel melting production manufacturing as follows in
table 1

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 Table 1. Premises Required and Land Use Plan

No Description Land
Requirement /M2/
1 Production Hall 7,000

2 Warehouse  

2.1 Raw Material & Input 5,000

2.2 Finished Products 5,000

  Total Warehouse  

3 Office Building 500

4 Shop and Showroom 1,000

5 Waste Accumulation area 500

6 Green area, Buffer zone and Parking 1,000

Total 20,000
 

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1.4. Location Map of the Area (Gelan)

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2. MARKET STUDY AND PLANT CAPACITY

2.1. Market Study

2.1.1.Demand and Supply Analysis

The market potential is great because the construction industry is among the fastest
growing sectors of our economy. There is a lot of demand for doors, gates, windows
and burglar proofing etc. This sector is still informal as there are very many small scale
firms spread in major towns and trading centers in the country.

Besides, the demand for steel; goods is increasing with the growth in investment in
different sectors. Consumer demand in the country is growing for steel products.
Increase in purchasing power and changes in designs tend to increase the demand still
further. In addition, demand for Ethiopian steel and metal products are exports market
has gone up considerably in recent years. This aspect is relevant for the steel and
metal manufacturing industry.

At present most of the steel factories are involved in manufacturing household

equipments, construction materials, modification of simple machines etc. The main
target market of these plant is government and next the private individuals.

Manufacturing of modern house hold equipment is being introduced to substitute import

products .A few of the plant are also involved in machine modification works and use as
import substitution. Even though under and over design of modifying machines occur
during their start time they have proved that nothing is impossible if financial strength is
kept. Most of the workshops are also involved in producing construction materials. In
this regard, the establishments of this plant will be helpful in terms of increasing the
countries supply- demand gap by substituting exported items of the sector. The major
products which will be produced by the cluster are described in the table below:-

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 2.1.2. Market Prospects

From the above market demand and supply analysis for steel and metal products, there
exist huge market gab in Ethiopian market. Hence, the envisioned factory will be
successful by entering in to this market.

2.1.3.Marketing Strategy and Promotion

The company will follow the following promotional methods:

 Electronic Medias

 Advertising(Media, flayer and news paper)

 Public Relations

 Branding

The marketing strategy mainly focus on the satisfying the needs, orders and the
requirement of the customers.

2.1.4.Target customers
The In local market, the requirement for iron steel melting, aluminum and related others
products can be categorized into four namely:
 Construction sector
 Newly built house
 For dowry;
 For renovation;
 For Institutional buyer.
 For offices (public & private sector)

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The majority of customers in the domestic market belong to first and second category.
These customers require iron steel and melting and other aluminum products for their
newly built houses and usually buy range of products like steel melting and fero sets

with other materials (door and window) for their entire house.

2.2. Plant Capacity and Production Program

Considering the gradual growth of demand and the time required to develop the
required skill the rate of capacity utilization during the first, second and third year of
production will be 70%, 85% and 100% respectively. Full capacity utilization will be
reached during the third year of operation. The plant will operate 290 days per year.

2.3.  Pricing

It would be important to examine the possible level of price based on the competitor’s
action. In this connection, the existing average prices of similar metal workshop in Addis
Ababa were assessed for the benefit of comparison. Based on the existing price in the
market the firm stetted the price as follows;

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3. PRODUCTION AND TECHNOLOGY

3.1. Product Nature and Description

The factory will produce different products based on the customer desire and request. In
general the following products are designed by the plant to be produced

The envisioned plant will produce different iron steel and melting products based on the
customer desire and order. Besides, it will undertake different maintenance on demand
base.

3.2. Raw materials and Input

The major raw materials required for the production of the steel products include
steeled steel, RHS, sheet metal, rectangular bar, round pip, flat bar, pipe, metals
(includes galvanized iron) etc. The required raw materials will be imported or
purchased in the local market.

Different inputs and supplies are necessary to finalize those products.

3.3. Technology
Technologies used in this engineering plant use sophisticated and latest machineries for
a quality and branded products which are export standard. In different stage of
manufacturing- extreme care is required to ensure smooth polishing and proper platting.

3.4. Production Description

In general metal and iron steel work will have four production parts after the product
idea are generated. i.e, Design, Prototype, Develop and production.

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 3.4.1.Production Process
Activities performed to change a raw material into output product are called production
process. Production process, which is practiced by most of the workshops, is similar. In
broad, production process comprises pre-production, on-production and postproduction.

A. Pre- production
Preparation and arrangement of resources are under this stage. The question what to
do? Where to do it? When to do it? Who to do it? All are answered at this phase of
production process.

A well prepared and arranged resources results in production cost reduction and
meeting due time.

Some of the activities involved at this stage are:

 Making a design
 Material selection
 Purchasing of raw material
 Adopting flexibility of production places
 Hiring of skilled workers
 Inspection of raw-material

B. On-production
The already prepared and arranged materials, machineries and human resources are
organized to start the real production process. The strength of this stage depends on
the pre-production stage. It needs a managerial skill to coordinate the resources to
achieve desire product.

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Some of the activities involved in this stage are:

 Cutting of raw materials according to the specified dimension with tolerance

 Joining the raw materials according to the design
 Quality control of the welding joints
 Checking up functionality of product

C. Postproduction
Postproduction is the final stage where preparation of product for shipment under taken.
Now the product has got the required design but needs polishing to give good
appearance.

Some of the activities involved in this stage are:

 Grinding
 Sanding
 Painting
 Assembly etc.

Note: Quality inspection activity is practical in all stages to keep the quality of the
product and to decrease scraps and reworks.

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Fig 1 Production Process Flow Chart:

Metal and Iron Works

The metal work and fabrication industry is primarily concerned essentially

heating/welding and shearing/forming operations. In view of the high cost of most new
equipment and the relatively long lead-time necessary to bring new equipment into
operation, changes in production methods and products are made only gradually; even
new process technologies that fundamentally change the industry are only adopted over
long periods of time.

Shearing operations cut materials into a desired shape and size and include punching,
piercing, blanking, cutoff, parting, shearing, and trimming activities. Basically, these
produce holes or openings, or produce blanks or parts, the most common hole-making
operation being punching. Cutoff, parting, and shearing are similar operations with
different applications.

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Forming operations bend or conform materials into specific shapes by turning, twisting,
drawing, rolling, spinning, coining, and forging metal into a specific configuration.
Bending is the simplest forming operation; the part is simply bent to a specific angle or
shape. Other types of forming operations produce both two and three dimensional
shapes.

Machining refines the shape of a work piece when shearing and forming are complete,
by removing material from pieces of raw stock with machine tools. The main processes
involved are drilling, milling, and turning, shaping/planning, broaching, sawing, and
grinding.

Holding the different pieces together is achieved either by riveting, bolting or more
permanently by welding. Welding is the process primarily used to join metals, most
welds being achieved by fusion in which the materials being joined are melted at, and
around, the joint between them. Most of the welds are done with a rod of filler material
with the resultant weld being composed primarily of the filler. Increasingly though
autogenously welding is catching on, in which no added material is used. There are also
forms of pressure welding rather than fusion and combinations of the two. Welding is an
integral part of fabricating metal parts so as to form spheroids, boxes and cylinders. The
essential feature of a fusion welding process is a heat source either in the form of a
flame from a gas torch (most often oxyacetylene or propane) or an electric arc.

3.5. Machinery and Equipments

The following are the list of necessary machineries and equipments for the envisioned
metal and iron steel workshop plant;

 Sheet metal shear

 aluminum and steel roller (Rolling machine)

 Arc Welding machine

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 MIG Welding machine

 Portable electric hand grinder

 Portable drill machine

 Circular cutting of machine

 Centre

 Universal milling machine

 Air compressor

 Hydraulic press

 Oxy-Acetylene welding equipment

 Pipe bender

 Bedding borderer

 Work bench

 Shaping machine

 Welding stand

 Active reactive

 Generator

 Drum machine

 Hydraulic puncher

 Ban saw machine

 Puncher hand operated

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  Founder fun

 power hack saw

 Bed starching machine

 Electrical saw

 Electrical hydraulic press

 Steel cutter( round)

 Bench type grinder

 Electrical and manual press

 Mechanical wood presses

 450 cutter machine

 Band saw

 Portable rotary machine

 Worker Safety kit

3.6. Project Design and Engineering

The proposed project comprises stock of different components to be executed at

different phases of the project life. These activities include: Design and Construction of
various buildings (workshops), importing of machineries, additive chemicals and other
raw materials, import of product transporting medium vehicle.

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 3.7. Building and Construction Works

A very simple building may suffice for an initial startup, the main consideration being the
security of the equipment and secure connections to electrical supply. The building will
have to be designed along factory production lines allowing for smooth transitioning of
the raw materials into completed products and optimized for maximum efficiencies.

3.8. Utilities

A number of utilities would be put in place in order to ensure smooth functioning of the
factory. These utilities include:

 Water Supply,

 Supplementary Electricity supply,

 Telephone line

 Paved Road Transportation,

 Drainage Facility

4. MANPOWER AND ORANIZATIONAL MANAGEMENT

4.1. Manpower

At the top of the organizational structure, there will be a general manager with the
responsibility of supervising the overall activity of the factory. Depending up on the
nature of the center and the amount of work to be performs; there will be auxiliary units
under the general manager. Employees under each unit will be supervised by the unit
head that is accountable for the general manager.

The company will use efficient trained staffs in the area of marketing to be competitive
in the market. The opportunities of being serviced by well skilled professionals well
enable the company to evaluate the internal weakness and strength of the company as

21
well as to assess the global opportunity and risks in the world market so that the
company can cope up with the dynamics of the market situation. The company will hire
1,500 employees.

The detail human power requirement, monthly and yearly salary is indicated in part 5
financial part.

4.2. Organizational Structure and management

The organizational structure of the project is designed by including all the necessary
personnel under the right division. At the top of the organizational structure, there will be
a general manager with the responsibility of supervising the overall activity of the plant.
Employees under each unit will be supervised by the department head that is
accountable for the general manager. General Manager is accountable to the owner of
the factory as indicated in figure 3

Fig 3 Organizational Structure

Owner/s

General
Secretary
Manager

Production Admin. & Marketing &

Dept. Finance Dept. Sales Dept.

Hence the following section deals with the duties and responsibilities of some
departments.

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1. Manager
Duties and responsibilities

 She/he will plan, organize, direct and control the overall activities of the plant
 She/he will devise policies and strategies that will enable the plant to be
profitable.
 She/he will incorporate modern technological innovation that will facilitate the
service delivery of the project center and increase customer’s satisfaction.
 He/he will plan, organize, direct and control the human and non-human
resources of the factory so as to achieve the short and long run objectives of the
organization.

2. The Production Department

Duties and responsibilities:-

It is the core department of the project center and it has the following responsibilities.

 Design and prepared prototype aluminum and steel based products based on the
plant standard and customer preferences
 Use modern manufacture, processing technologies that will enhance the quality
of those products.
 Produce quality aluminum and steel products that will enable the factory
competent both in the domestic and international market.
 Control on the quality of raw materials, inputs, quality of the product and also the
overall production process.
 Produce products in least cost so that the profitability of the center is guaranteed.
 Moreover control over the quality of the final aluminum and steel products
3. Administration and Finance Department
Duties and responsibilities:-

 Will plan, organize direct and control the financial transaction of the factory by
using the entire necessary document.

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  Will develop sound financial control system by developing modern financial
control systems.
 Will prepare the annual financial statements and prepare condensed reports for
the general manager, owner and other concerned government body.
 Will control the human and non human resources of the plant, which include:
effective handling of the different inventories of the machineries, equipments, raw
materials, finished products, and devise strategies of controlling against fraud
and damage.
 Manage and execute the company national and international procurement
procedure
 Administer and control the company logistic resource
 Provide and manage general supportive service to the factory.

4. Marketing and Sales Department

Duties and responsibilities:-

 Will handle the overall marketing activities of the organization which include
planning, organizing, directing, and controlling.
 Gather information on new products, designs, fashions, profiles etc
 Approval of new products profile & brand plan analyzes market research.
 Plan and execute sales.
 Will develop effective customer handling strategies
 Will develop the marketing strategies for future project center’s development.
 Conduct both foreign and domestic market research for expanding the sales of
the company

4.3. Training Requirement

The production employees of the plant exacted to take basic metallic work production
skill training for 7 days. In addition training could be given to the mechanic and to the
supervisor will also take skill training from one of TVET Colleges or similar undertaking
factories in Eastern industry zone and Addis Ababa.

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5. FINANCIAL REQUIRMENT and ANALYSIS

5.1. Total Initial Investment Cost

The total amount of money that is required to establish iron steel and melting production
the envisaged plant is estimated to be birr 170,000,000

Table Total Initial Investment Capital

No Description Cost in birr in Br.

Land, Building & Construction 20,000,000

1.1
Machines & Equipments 50,000,000
1.2
1.3 Vehicles 8,400,000
1.4 Office Equipment 5,000,000
  Total Fixed Investment Cost 83,400,000
Raw Materials Purchase 50,221,212
2.1
Salary Expense 15,393,400
2.2
Other Operating Expense 2,500,000
2.3
Pre-operating Expense 1,500,000
2.4
Initial Working capital 69,614,612
  Total
  Contingency(Lump sum) 17,000,000
  Total Initial Investment Capital 170,014,612

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 5.1.1.Fixed Investment
A. Building & Construction
No Description Land Total cost in br.
Requirement(M2)
1 Production Hall 7,000
8,000,000
2 Warehouse , raw material and input  
5,390,000
3 Office Building, and finished product 5,000
3,000,000
4 Waste Accumulation area 5,000
2,210,000
5  
Green area, buffer and parking 200,000
6 500
Shops & Showrooms 200,000
1,000
7 Site Development 200,000
8 500
Design and supervision 300,000
9 Land lease initial  
500,000
  Total 20,000 20,000,000

B. Machineries and Equipments

The list of required machinery and equipment is indicated in Table below. The total cost
of machinery and equipment is estimated at Birr 50,000,000

Qty.
Type of Machineries and
Equipments Specification UOM
Sheet steel shear Up to 3mm thickness/ hand operated Unit 2
Sheet metal roller (Rolling up to 1.5 mm thickness / hand operated / Unit 1
machine) 1.5 - 2.2 m shaft length
Arc Welding machine Min 45 A. max 250A Unit 2
MIG Welding machine Max. 240A Unit 2
Portable electric hand grinder 180mm disc size Unit 2
Portable drill machine Max 13mm chuck size Unit 2
Circular cutting of machine 450mm disc size Unit 2
Centre Three sided jaw , diameter 200mm , center Unit  3

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 to center 2000mm
Universal milling machine Table size 1500X300mm, table swivel in Unit 1
both directions 450 , distance from spindle
to over arm 155mm
Air compressor 300 liter Unit 1
Hydraulic press Min. 5 tons Unit 1 
Oxy-Acetylene welding   Unit 2
equipment
Pipe bender Max. 1 1/2 diameter Unit 2
Bedding borderer   Unit 2
Work bench 150cm length Unit 2
Shaping machine   Unit 1
Welding stand Pair Unit 3
Active reactive   Unit 1
Generator   Unit 1
Drum machine   Unit 2
  Unit 2
Hydraulic puncher
  Unit 2
Ban saw machine
  Unit 2
Puncher hand operated
Founder fun   Unit 3
power hack saw   Unit 1
Bed starching machine   Unit 2
Electrical saw   Unit 2
Electrical hydraulic press   Unit 1
Steel cutter( round)   Unit 1
Bench type grinder   Unit 2
Electrical and manual press   Unit 2
Mechanical wood presses   Unit 1
450 cutter machine   Unit 1
  Unit 2
Band saw
  Unit 2
Portable rotary machine
Worker Safety kit   Set 1

C. Vehicles
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No Description Qty Unit Price in br. Total Price in br. Remark

1 Sino truck , 1 2,200,000 2,200,000

Duty free
2 Service 2 1,500,000 3,000,000 Duty free

3 pick up 2 1,000,000 2,000,000 Duty free

4 Forklift 1 1,200,000 1,200,000 Duty free

Total     8,400,000  

D. Office Equipments
No Description Qty Unit cost in br. Total cost in Br.

1 Managerial Tables 50,000 100,000

2

2 Secretarial chairs with table 30,000 300,000

10

3 Managerial Chairs 40,000 400,000

10

3 Computer and Printer 20,000 2,000,000

100

4 Shelf 5,000 1,000,000

200

5 Filing Cabinets 3,000 900,000

300

6 Assembly chair and table(set)     300,000

Total     5,000,000

E. Initial Working Capital

The initial working capital is estimated to be birr. 69,614,612.00

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 5.2. Annual Production Cost at Full Capacity
i. Raw Materials and Inputs

Sr. No Description UOM Qty Unit Cost in Br Total Cost in Br.

1 Cubic ft 1,500 5,000 7,500,000

steel sheet
2 Mild steel plate Pcs 1,500 5,000 7,500,000

3 Pcs 1,500 2,000 3,000,000

Tube Pipe
4 Angles lines Pcs 1,500 1,000 1,500,000

5 Pkt 1,500 5,000 7,500,000

Welding Rods
6 Pcs 1,500 2,500 3,750,000
Grilling Disc
7 Pkt 1,500 1,000 1,500,000
Filler paste
8 pair 1,500 1,500 2,250,000
Hinges
9 Pcs 1,500 1,500 2,250,000
U channel
10 Other Inputs(locks, LS     9,324,905
glue, nails, screw
Tapestry dressing,
matters,
11 Other Machine LS Lump sum   4,000,000
supplies
  Grand Total  
50,000,000

ii. Salary Expense

29
No. Description No. Qualification Monthly Annual
Salary in br Salary in br
1 General manager 20,0
1 BA in Business Management 00 240,000
2 Production Head 15,0
1 BSC in Industrial Engineering 00 180,000
3 Production Degree in production 10,0
supervisor 5 technology 00 600,000
4 Draftsman 3,
Designer 5 Diploma in draft technology 000 180,000
5 Machine man 3,
50 Diploma in general mechanics 000 1,800,000
6 Carpenter Diploma in wood work 3,
50 technology 000 1,800,000
7 Sales Diploma in salesmanship and 3,
20 marketing 000 720,000
8 Personnel 3,
5 Diploma in HRM 000 180,000
9 Finance head 5,
2 BA in Accounting 000 120,000
10 Polish man 2,
20 10+1 in wood work technology 500 600,000
11 Carving 2,
20 10+1 in wood work technology 500 600,000
12 Marketing Head 2,
20 BA in marketing management 500 600,000
13 Metal Worker 2,
140 10+2 in Metal work technology 000 4,800,000
15 Mechanic 2,
10 10+2 in General mechanics 500 300,000
16 Admin and 4,
Finance Head 1 BA in Management/Accounting 500 54,000
17 Accountant 3,
5 Diploma in accounting 000 180,000
18 Electrician 2,
10 10+2 in general electricity 500 300,000
19 Secretary 1,
5 Diploma in secretariat science 500 90,000
20 Clerk 1,
5 10 completed 500 90,000
21 Store keeper 10+2 in store and logistics 1,
5 management 500 90,000
22 Driver 1,
15 10 completed 500 270,000
23 Cashier 5 10+2 in Bookkeeping 1, 90,000

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 500
24 Office boy/girl 1,
5 10 completed 500 90,000
25 General service 1,
3 Diploma in management 500 54,000
26 Security 1,
5 Unskilled 000 60,000
27 Gardener 1,
5 Unskilled 000 60,000
28 Cleaner 1,
5 Unskilled 000 60,000
  Other workers 77   850 785,400
  Grand Total 500     15,393,400

iii. Other Operating Expenses

Sr. No Description Annual Cost in br Assumption Used

1 Property Insurance 500,000 1% of fixed Investment Cost
2 Audit & Legal Fee 100,000 350 per month
3 Uniforms 200,000 70*200br
4 Telephone, fax and postal 50,000 450 per month
5 Cleaning goods supplies 100,000 500 per month
2 % of the Fixed Investment
6 Repair and maintenance 845,000 Cost
7 Advertisement 155,000 % of sales
Stationery and other office
6 supplies 30,000 400 per month
8 Electricity 300,000 0.335*225,000KW per year
9 Water 50,000 1.5*3,000m3 per year
10 Fuel 60,000 3000 lit*20 per year
11 Oil and lubricant 60,000 10% of fuel cost
12 Miscellaneous Expense 50,000 3000 per month
  Total 2,500,000  

A. Pre-Service Expense

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No Description Cost in br.
1 Project proposal 20,000

2 EIA 50,000

3 Licensing fee and others 100,000

 4 500,000
Staff Capacity Building
5 830,000
For Adverting
Total 1,500,000

5.3. Financial Analysis and Statements

5.3.1.Underlying Assumption

The financial analysis of the envisioned factory is based on the data provided in the
preceding sections and the following assumptions.

A. Construction and Finance

Construction period 16 months

Source of finance 30% equity and 70% loan

Tax holidays 2 years

Bank interest rate 10 %

Operating Costs increase by 5% after year 3

Raw materials and wages increase by 5% after year 3

Salary and wages increase by 3 % after year 3

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 B. Depreciation

Building 5%

Machinery and equipment 15%

Office furniture 20%

Vehicles 15%

C. Working Capital

Accounts receivable 30 days

Raw material local 30days

Work in progress 5 days

Finished products 30 days

Cash in hand 5 days

Accounts payable 30 days

5.3.2.Sources of Fund
No Description % share Amount(in birr)

1 Owners Share 30 51,000,000

2 Bank Loan 70 119,000,000

Total 100 170,000,000

5.3.3.Loan repayment Schedule

Principal Total Annual
Year Interest (10%) Remaining Balance
Payment Payment

33
 0 0 0 0 170,000,000
1 17,000,000 17,000,000 34,000,000 153,000,000
2 17,000,000 15,300,000 32,300,000 136,000,000
3 17,000,000 13,600,000 30,600,000 119,000,000
4 17,000,000 11,900,000 28,900,000 102,000,000
5 17,000,000 10,200,000 27,200,000 85,000,000
6 17,000,000 8,500,000 25,500,000 68,000,000
7 17,000,000 6,800,000 23,800,000 51,000,000
8 17,000,000 5,100,000 22,100,000 34,000,000
9 17,000,000 3,400,000 20,400,000 17,000,000
10 17,000,000 1,700,000 18,700,000 0

5.3.4.Depreciation Schedule
Original Depreciation rate Depreciation Per
SN Description Value In Birr in % year

Construction and Civil 20,000,000

5 1,000,000
1 Work

2 Machines & Equipments 50,000,000 10 7,500,000

3 Vehicles 8,400,000 20 1,260,000

4 Office Equipment 5,000,000 10 1,000,000

  Total 83,400,000   10,760,000

5.3.5.Revenue Projection

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Based on the price and the capacity program of the factory indicated in previous chapter
(chapter 2), the revenue of the factory projected as indicated in the table below;

Balance Sheet

Asset

Current Asset  

Cash 119,779,000

Inventory of raw materials and inputs 50,221,000

Total Current Asset 170,000,000

Fixed Asset  

Land, Building and Construction 20,000,000

Machineries and Equipments 50,000,000

Office Equipment 8,400,000

Vehicles 5,000,000

Total fixed Asset 83,400,000

Total Asset  

Liability  

Account payable 119,000,000

Owners Equity 51,000,000

Capital  

Total Liability & Owners’ Equity 170,000,000

Income Loss Statement

Revenue Year 1 Year 2 Year 3

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Sales Revenue 100,900,000 201,990,000 294,800,000
Purchase of Raw Material & 52,732,050
Inputs 50,221,000 55,368,653
Gross profit 50,679,000 149,257,950 239,431,348
Expenses      
Salary Expense 15,393,400 16,163,070 16,971,224
Other Operating Expenses 2,500,000 2,500,000 2,500,000
Deprecation Building 1,000,000 100,000 100,000
Deprecation Machineries 7,500,000 750,000 750,000
Deprecation Vehicles 1,260,000 187,500 187,500
Deprecation office Equip 1,000,000 20,000 20,000
Interest Expense 17,000,000 15,300,000 1,700,000
Lease payment 45,000 45,000 45,000
Total Expense 45,698,400 35,065,570 22,273,724
Profit Before Tax 4,980,600 114,192,380 217,157,624
Tax(30% ) 1,494,180 34,257,714 65,147,287
Net Profit 3,486,420 79,934,666 152,010,337
Cash Flow Statement

 Year Year 0 Year 1 Year 2 Year 3

Equity Capital 51,000,000      
Loan principal 119,000,000      
Net sale 0 3,486,420 79,934,666 152,010,337
Total cash in flow 170,000,000 3,486,420 79,934,66 152,01
6 0,337
Cash payment        
Purchase of raw 0 52,732,050
materials 50,221,000 55,368,653
Salary expense 0 15,393,400 16,163,070 16,971,224
Pre operating expense 1,500,000 0 0 0
Investment  
Other Operating cost 0 62,068,162 62,068,162 62,068,162
loan repayment 0 17,000,000 15,300,000 1,700,000
Lease payment 195,000 45,000 45,000 45,000
Tax payment 0 0 0 262,723.29
Total payment 195,000 39,004,772 3,490,000 2,912,723
Cash surplus / Deficit 195,000.00 39,004,772.00 3,490,000.00 2,912,723.29

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5.3.6.Profitability
According to the projected income statement, the project will start generating profit in
the 1st year of operation. Important ratios such as profit to total sales, net profit to equity
(Return on equity) and net profit plus interest on total investment (return on total
investment) show an increasing trend during the lifetime of the project.

The income statement and the other indicators of profitability show that the project is
viable.

5.3.7.Break-Even Analysis
The break-even point of the project including cost of finance when it starts to operates
at full capacity (year 3) is estimated by using income statement projection.

BE = Fixed Cost / Sales – Variable cost = 57%

5.3.8.Pay-Back Period
The investment cost and income statement projection are used to project the pay-back
period. The project's initial investment will be fully recovered with in 9 year of operation.

6. FUTURE DEVELOPMENT

Every business undertakings be it large or small should have future development plan.
It is a plain fact that business activities are undertook in a dynamic business nature and
different environment. Therefore, the factory will have an expansion phase depending
on the condition of the industry character particularly in producing the Profile itself by
installing the plant. In this regard, the Factory will expand its capacity and production
varieties.

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7. ENVIRONMENTAL IMPACT OF THE PROJECT

7.1. Socio-Economic Environment

The owner will provide the land on lease bases, and all required compensation will be
paid for the project. The Livelihood of the local peoples around the project area is rural
dwellers of various occupation and economic background.

7.2. Environmental Impact Assessment of the Project

Environmental aspects are fundamental for the sustainability assessment of the current
and novel designs of any new project. In this regard the plant will undertake a separate
and detail Environmental impact Assessment.

To assess the impacts and design mitigation measure if any adverse impacts are there
so as to make the project benefited more society and nation.

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