Investment Office ANRS

Project Profile on the HONEY Processing Plant

Development Studies Associates

(DSA)

October 2008
Addis Ababa
 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 Pricing and Distribution..........................................................................................3
3.2 Plant Capacity..................................................................................................................3
3.3 Production Program.........................................................................................................3
4. Raw Materials and Utilities...............................................................................3
4.1 Availability and Source of Raw materials.......................................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities........................................4
5 Location and Site................................................................................................4
6 Technology and Engineering.............................................................................4
6.1 Production Process...........................................................................................................4
6.2 Machinery and Equipment...............................................................................................5
6.3 Civil Engineering Cost.....................................................................................................6
7 Human Resource and Training Requirement.................................................6
7.1 Human Resource..............................................................................................................6
7.2 Training Requirement......................................................................................................6
8 Financial Analysis...............................................................................................7
8.1 Underlying Assumption...................................................................................................7
8.2 Investment........................................................................................................................8
8.3 Production Costs..............................................................................................................8
8.4 Financial Evaluation........................................................................................................9
4 Economic and Social Benefit and Justification..............................................10
ANNEXES...............................................................................................................12
 1. Executive Summary
This profile envisages the establishment of a honey processing plant in Amhara National
Regional State.

According to CSA data, honey yield of the region amounts 6.9 million kg annually. The
envisaged plant processes 200,000 kg (200 tons) of honey per annum.

The total investment requirement is estimated at Birr 3.7 million out of which Birr 1.2 million is
for machinery and equipment.

The plant will create employment opportunities for 27 persons.

The project is financially viable with an internal rate of return (IRR) of 59.13% and a net present
value (NPV) of Birr 4.66 million discounted at 18%.

Establishing honey processing plant has wide range of economic and social benefits such as
increasing the level of investment, tax revenue, employment creation, modernization of
agriculture, better nutrition and public health.

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

Honey is the sweet substances produced by honey-bees from the nectar of blossoms or from
secretions of living parts of plant which they collect, transform and combine with specific
substance, and store in honey combs in the nest.

Honey consists essentially of different sugars, predominately glucose and fructose. Besides,
honey contains protein, amino acids, enzymes, organic acids, mineral substances etc. the color of
honey varies from nearly clourless to dark brown. The flavor and aroma vary but are usually
derived from its plant origin.

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 3. Market Study, Plant Capacity and Production Program

3.1 Market Study

With 20 percent of the honey bee population, ANRS comes second after Oromiya in honey
production. It’s share in the national out put is 25 percent. Bee keeping is an activity that is
practiced not only in rural areas, but also in urban areas.

If properly undertaken, it can make significant contribution to the regions food requirements
directly in the form of honey and indirectly through the role of bees on crops. Pollination by bees
in crucial for a good set of seeds and fruits

CSA’s estimate of honey yield of the region is 6.9 million kg annually, the estimate done by the
Bureau of Agriculture and Rural Development is 7.91 million kg. The difference is because
CSA’s estimate has not taken into account the yield obtained from intermediate and modern
beehives

In the region, yield of honey being harvested varies depending on the type of bee hive used. The
region’s average for traditional beehive is 6kg (range 5 to 7), intermediate beehive ( top –
beehive) is 15 kg (range 13-18), and modern bee hive (movable frame hive) is 20 kg (range 15-
25 kg).

Honey from the ANRS is noted for its high quality. It has a low moisture content of 18 to 21
percent. Gondar honey has 18.7 percent, Gojjam honey 18.9 percent and Wollo honey 20.5
percent1.

The plant aims at replacing the existing supply of crude honey by strained or processed honey.

3.1.1 Pricing and Distribution

1
Potential Assessment Survey – Livestock Report, DSA, December 2006

2
Currently, the price of processed honey is about Birr 75,000/ton. However, the proposed project
is planned to market its honey at Birr 60,000/ton.

The product can be distributed through wholesale retail chain as it has to reach wide range of
consumer in all towns.

3.2 Plant Capacity

The proposed plant will produce 200 tons of crude honey per year. Establishment of similar
plants in different cities is advisable since the current supply of crude honey is by far larger than
the specified amount.

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 60 percent capacity and then it grows to 70 percent in the
2nd year. The capacity will grow to 85 percent starting from the 3 rd year. Starting from the fourth
year, full capacity will be attained.

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

4. Raw Materials and Utilities

4.1 Availability and Source of Raw materials

The major raw material – crude honey – is available in large quantity in the region. Some
chemicals and additives will be imported.

4.2 Annual Requirement and Cost of Raw Materials

and Utilities

The types and costs of required raw materials are shown in Table 1 hereunder.

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 Table 1: Required Raw Materials
Cost (Birr)
No. Material Local Foreign
Crude honey (205 ton) 6,150,00  
 1 0
 2 Sanitary Chemicals 50,000
3 Lab. Chemicals   200,000
4  Filter Aids   500,000
 5 Glass Jars 1,500,000
 6 Cartons 250000 0
Total 7,900,000 750,000

Electricity and water are two basic utilities required by the project. When the plant operates at
full capacity the project will require 65,000 kwh of electrical energy; which is estimated to cost
Birr 3,575. Likewise, the project is expected to consume 10,00m3 of water/annum at estimated
cost of Birr 2,650. Accordingly, the total cost of utilities is estimated to be Birr 37,217.

5 Location and Site

The appropriate locations for the envisaged project should be selected in view of the availability
of honey production, infrastructure as well as market for the output. Thus, every major city of
Gojjam, Gonder and Wello are appropriate for this plant.

6 Technology and Engineering

6.1 Production Process

The production of honey begins with the application of heat water on crude honey that contains
bee wax, pollen and other impurities. This is usually done by water jacketed stainless steel trays
that are thermostatically controlled. These trays have a series of channels proof which pass the
meted honey and wax. This is followed by melting honey and wax mixture flows into a separator
leaving broad and pollen behind the tray thus giving a much cleaner product in box wax and
honey. Here the honey sinks and wax floats.

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From the separator, the honey flows into honey storage tank from where it is pumped through a
duplex filter to filter it. Then the honey passes through the filter to a semi-automatic filling
machine where the filling machine fills the empty jars. Then, the filled jars would be closed,
labeled and put into cartons so as to make it ready for delivery.

Alternative technology
After removing the crystals, a moderate heating system (solar one) could be useful to make the
raw honey melt. Then it can be packed in a sealed by a container.

Another alternative is to merge apiculture (beekeeping) with the honey processing business.

6.2 Machinery and Equipment

The required machineries and equipments are given in Table 2 below.

Table 2: Required Machineries and Equipments

Item Description Qty.
1 Strained/Extraction Machine 2

2 Filtering Machine 2
3 Storage tanks /vats 3
4 Filling machine 2
5 Packing machine 2
6 Rebelling machine 3
7 Work tables 5

The total cost of these machines and equipments are estimated at Birr 1.21million.

Supplier Address
These machines and equipments are available in Addis Ababa market.

6.3 Civil Engineering Cost

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The total site area for the envisaged plant is estimated to be 800m2 where 200m2 is allocated to
the production place. The land lease is estimated at Birr 48,000; while the civil engineering cost
is estimated to amount Birr 400,000.

7 Human Resource and Training Requirement

7.1 Human Resource

The human resource requirement is depicted in Table 3 hereunder. The project creates 27 jobs.

Table 3: Human Resource Requirement

Salary/Wage (Birr)

  Job Title No. Monthly Annual

1 General Manager 1 3,500 42,000
2 Secretary 1 850 10,200
3 Sales Staff 2 850 20,400
4 Accountant 1 1,000 12,000
5 Casher 1 800 9,600
6 Clerks 3 700 25,200
7 Operator-mechanic 4 1,000 48,000
8 Production workers 6 800 57,600
9 Guards 4 400 19,200
10 Genitors 4 400 19,200
  Total 27   263,400
  Employment Benefits 20% of Annual Salary     52,680
        316,080

7.2 Training Requirement

Periodic training is important. Birr 30,000 is included in the working capital to finance the
trainings.

8 Financial Analysis
8.1 Underlying Assumption

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

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 A. Construction and Finance

Construction period 2 years

Source of finance 40% equity and 60% 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%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

Raw Material-Local 30 days

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

8.2 Investment

The Total Initial Investment is estimated at about Birr 3.72 million of which Birr 1.21 million is
for plant machinery and equipments. The detail is shown in Table 4.

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 Table 4: Total Initial Investment & Working Capital

Total Initial Investment

Item Cost
Land 2,400.00
Building and civil works 400,000.00
Office equipment 30,250.00
Plant machinery & equipment 1,206,700.00
Total Fixed Investment 1,639,350.00
Pre production capital expenditure 81,967.50
Total Initial Investment 1,721,317.50
Working capital at full capacity 1,996,803.02
Total 3,718,120.52

*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.

8.3 Production Costs

The total production cost at full capacity is estimated at Birr 9.48 million. The details are shown
in Table 6.

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 Table 5: Production Cost at full Capacity

Total Production Cost at Full Capacity

Items Cost
1.      Raw materials 8,650,000.00
2.      Utilities 37,217.00
3.      Wages and Salaries 316,080.00
4.      Spares and Maintenance 49,180.50
Factory costs 9,052,477.50
5.      Depreciation 160,088.50
6.      Financial costs
267,704.68
  Total Production Cost 9,480,270.68

8.4 Financial Evaluation

I. Profitability
The income statement shows that the proposed project generates profit starting from the first year
of operation. Profit starts at undiscounted Birr 1.01 million in first year and reaches about Birr
1.9 million in the eight year of the project life. Gross Profit to Sales ratio starts at 14.08% and
reaches 22.86% at eight year. The total profit earned during the whole ten years of operation
amounts Birr to 17.16 million. These indicators prove that the project is profitable.

II. Breakeven Analysis

The breakeven analysis shows that the Total Revenue equals the Total Cost at 12.48% of
capacity which is achieved in the first year of operation.
III. Payback Period

The project pays back its initial investment at the first year of operation.

IV. Simple Rate of Return

The simple rate of return is 52.4%.

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 V. Internal Rate of Return and Net Present Value

The Internal Rate of Return is 59.1% and the Net Present Value at 18% discount rate per annum
is Birr 4.66 million.

VI. Sensitivity Analysis

A 10% reduction in sales reduces the total profit to 9 million and it still remains viable with an
IRR of 33.63%. A 10% increase in price of raw materials reduces the total profit to Birr 11.06
million.

4 Economic and Social Benefit and Justification

Based on the foregoing presentation and analysis, we can learn that the proposed project
possesses wide range of benefits that complement the financial feasibility obtained earlier. In
general the envisaged project 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 a total profit of Birr 17.16 million within
the project life.

B. Tax Revenue

In the project life under consideration, the government will collect about Birr 6.24 million from
corporate tax payment alone (i.e. excluding income tax, sales tax and VAT).

C. Employment and Income Generation

The proposed project is expected to create employment opportunity to 27 persons. Consequently

the project creates income of Birr 316,080 per year. This would be one of the commendable
accomplishments of the project.

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 D. Diversification and InterSectoral linkage

The proposed project helps to diversify ANRS and Ethiopian economy. It contributes to
industrialization of the region’s as well as the county’s economy.

E. Modernization
The proposed project will contribute a lot in modernizing the agriculture and accelerate the on-
going transformation in the sector.

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ANNEXES

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

Capacity Utilization (%) 0 0 60% 70% 85% 100%

1. Total Inventory 0 0 1,888,411 2,203,147 2,675,250 3,147,352

Raw Materials in Stock- Total 0 0 713,455 832,364 1,010,727 1,189,091

Raw Material-Local 0 0 517,091 603,273 732,545 861,818

Raw Material-Foreign 0 0 196,364 229,091 278,182 327,273

Factory Supplies in Stock 0 0 6,030 7,035 8,543 10,050

Spare Parts in Stock and Maintenance 0 0 3,219 3,756 4,560 5,365

Work in Progress 0 0 150,751 175,876 213,564 251,252

Finished Products 0 0 301,502 351,753 427,128 502,504

2. Accounts Receivable 0 0 785,455 916,364 1,112,727 1,309,091

3. Cash in Hand 0 0 23,125 26,979 32,760 38,541

CURRENT ASSETS 0 0 1,983,536 2,314,126 2,810,010 3,305,894

4. Current Liabilities 0 0 785,455 916,364 1,112,727 1,309,091

Accounts Payable 0 0 785,455 916,364 1,112,727 1,309,091

TOTAL NET WORKING CAPITAL REQUIREMENTS 0 0 1,198,082 1,397,762 1,697,283 1,996,803

INCREASE IN NET WORKING CAPITAL 0 0 1,198,082 199,680 299,520 299,520

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

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

1. Total Inventory 3,147,352 3,147,352 3,147,352 3,147,352 3,147,352 3,147,352

Raw Materials in Stock-Total 1,189,091 1,189,091 1,189,091 1,189,091 1,189,091 1,189,091

Raw Material-Local 861,818 861,818 861,818 861,818 861,818 861,818

Raw Material-Foreign 327,273 327,273 327,273 327,273 327,273 327,273

Factory Supplies in Stock 10,050 10,050 10,050 10,050 10,050 10,050

Spare Parts in Stock and Maintenance 5,365 5,365 5,365 5,365 5,365 5,365

Work in Progress 251,252 251,252 251,252 251,252 251,252 251,252

Finished Products 502,504 502,504 502,504 502,504 502,504 502,504

2. Accounts Receivable 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091

3. Cash in Hand 38,541 38,541 38,541 38,541 38,541 38,541

CURRENT ASSETS 3,305,894 3,305,894 3,305,894 3,305,894 3,305,894 3,305,894

4. Current Liabilities 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091

Accounts Payable 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091

TOTAL NET WORKING CAPITAL REQUIREMENTS 1,996,803 1,996,803 1,996,803 1,996,803 1,996,803 1,996,803

INCREASE IN NET WORKING CAPITAL 0 0 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 860,659 2,857,462 7,985,455 8,530,909 10,396,364 12,196,364
1. Inflow Funds 860,659 2,857,462 785,455 130,909 196,364 196,364
Total Equity 344,264 1,142,985 0 0 0 0
Total Long Term Loan 516,395 1,714,477 0 0 0 0
Total Short Term Finances 0 0 785,455 130,909 196,364 196,364
2. Inflow Operation 0 0 7,200,000 8,400,000 10,200,000 12,000,000
Sales Revenue 0 0 7,200,000 8,400,000 10,200,000 12,000,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 860,659 860,659 8,009,596 7,354,435 9,459,881 10,923,668
4. Increase In Fixed Assets 860,659 860,659 0 0 0 0
Fixed Investments 819,675 819,675 0 0 0 0
Pre-production Expenditures 40,984 40,984 0 0 0 0
5. Increase in Current Assets 0 0 1,983,536 330,589 495,884 495,884
6. Operating Costs 0 0 5,474,787 6,384,329 7,748,643 9,112,956
7. Corporate Tax Paid 0 0 0 0 620,454 764,546
8. Interest Paid 0 0 551,272 267,705 223,087 178,470
9. Loan Repayments 0 0 0 371,812 371,812 371,812
10. Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 0 1,996,803 -24,141 1,176,474 936,483 1,272,696
Cumulative Cash Balance 0 1,996,803 1,972,662 3,149,135 4,085,618 5,358,314

3
 Annex 2: Cash Flow Statement (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000
1. Inflow Funds 0 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 0 0 0 0 0 0
2. Inflow Operation 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000
Sales Revenue 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000
Interest on Securities 0 0 0 0 0 0
3. Other Income 0 0 0 0 0 0
TOTAL CASH OUTFLOW 10,396,551 10,370,237 10,339,005 9,935,961 9,935,961 9,935,961
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 0 0 0 0 0 0
6. Operating Costs 9,112,956 9,112,956 9,112,956 9,112,956 9,112,956 9,112,956
7. Corporate Tax Paid 777,931 796,234 809,619 823,005 823,005 823,005
8. Interest Paid 133,852 89,235 44,617 0 0 0
9. Loan Repayments 371,812 371,812 371,812 0 0 0
10. Dividends Paid 0 0 0 0 0 0
Surplus (Deficit) 1,603,449 1,629,763 1,660,995 2,064,039 2,064,039 2,064,039
Cumulative Cash Balance 6,961,763 8,591,526 10,252,520 12,316,560 14,380,599 16,444,638

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL CASH INFLOW 0 0 7,200,000 8,400,000 10,200,000 12,000,000

1. Inflow Operation 0 0 7,200,000 8,400,000 10,200,000 12,000,000

Sales Revenue 0 0 7,200,000 8,400,000 10,200,000 12,000,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 860,659 860,659 6,672,869 6,584,010 8,668,618 10,177,022

3. Increase in Fixed Assets 860,659 860,659 0 0 0 0

Fixed Investments 819,675 819,675 0 0 0 0

Pre-production Expenditures 40,984 40,984 0 0 0 0

4. Increase in Net Working Capital 0 0 1,198,082 199,680 299,520 299,520

5. Operating Costs 0 0 5,474,787 6,384,329 7,748,643 9,112,956

6. Corporate Tax Paid 0 0 0 0 620,454 764,546

NET CASH FLOW -860,659 -860,659 527,131 1,815,990 1,531,382 1,822,978

CUMULATIVE NET CASH FLOW -860,659 -1,721,318 -1,194,186 621,804 2,153,186 3,976,164

Net Present Value (at 18%) -860,659 -729,372 378,577 1,105,268 789,870 796,840

Cumulative Net present Value -860,659 -1,590,031 -1,211,453 -106,185 683,685 1,480,525

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 Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)
PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000

1. Inflow Operation 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000

Sales Revenue 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000

Interest on Securities 0 0 0 0 0 0

2. Other Income 0 0 0 0 0 0

TOTAL CASH OUTFLOW 9,890,887 9,909,190 9,922,576 9,935,961 9,935,961 9,935,961

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 0 0 0 0 0 0

5. Operating Costs 9,112,956 9,112,956 9,112,956 9,112,956 9,112,956 9,112,956

6. Corporate Tax Paid 777,931 796,234 809,619 823,005 823,005 823,005

NET CASH FLOW 2,109,113 2,090,810 2,077,424 2,064,039 2,064,039 2,064,039

CUMULATIVE NET CASH FLOW 6,085,277 8,176,087 10,253,511 12,317,550 14,381,589 16,445,629

Net Present Value (at 18%) 781,282 656,357 552,674 465,350 394,365 334,207

Cumulative Net present Value 2,261,807 2,918,164 3,470,839 3,936,189 4,330,553 4,664,760

Net Present Value (at 18%) 4,664,760.47

Internal Rate of Return 59.1%

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 Annex 4: NET INCOME STATEMENT ( in Birr)
PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 60% 70% 85% 100% 100%

1. Total Income 7,200,000 8,400,000 10,200,000 12,000,000 12,000,000

Sales Revenue 7,200,000 8,400,000 10,200,000 12,000,000 12,000,000
Other Income 0 0 0 0 0
2. Less Variable Cost 5,381,394 6,278,293 7,623,642 8,968,991 8,968,991
VARIABLE MARGIN 1,818,606 2,121,707 2,576,358 3,031,009 3,031,009
(In % of Total Income) 25.26 25.26 25.26 25.26 25.26
3. Less Fixed Costs 253,481 266,124 285,089 304,054 304,054
OPERATIONAL MARGIN 1,565,124 1,855,582 2,291,269 2,726,955 2,726,955
(In % of Total Income) 21.74 22.09 22.46 22.72 22.72
4. Less Cost of Finance 551,272 267,705 223,087 178,470 133,852
5. GROSS PROFIT 1,013,852 1,587,877 2,068,182 2,548,486 2,593,103
6. Income (Corporate) Tax 0 0 620,454 764,546 777,931
7. NET PROFIT 1,013,852 1,587,877 1,447,727 1,783,940 1,815,172
RATIOS (%)  
Gross Profit/Sales 14.08% 18.90% 20.28% 21.24% 21.61%
Net Profit After Tax/Sales 14.08% 18.90% 14.19% 14.87% 15.13%
Return on Investment 53.61% 59.49% 48.87% 52.78% 52.42%
Return on Equity 68.17% 106.77% 97.34% 119.95% 122.05%

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

1. Total Income 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000

Sales Revenue 12,000,000 12,000,000 12,000,000 12,000,000 12,000,000
Other Income 0 0 0 0 0
2. Less Variable Cost 8,968,991 8,968,991 8,968,991 8,968,991 8,968,991
VARIABLE MARGIN 3,031,009 3,031,009 3,031,009 3,031,009 3,031,009
(In % of Total Income) 25.26 25.26 25.26 25.26 25.26
3. Less Fixed Costs 287,661 287,661 287,661 287,661 287,661
OPERATIONAL MARGIN 2,743,349 2,743,349 2,743,349 2,743,349 2,743,349
(In % of Total Income) 22.86 22.86 22.86 22.86 22.86
4. Less Cost of Finance 89,235 44,617 0 0 0
5. GROSS PROFIT 2,654,114 2,698,731 2,743,349 2,743,349 2,743,349
6. Income (Corporate) Tax 796,234 809,619 823,005 823,005 823,005
7. NET PROFIT 1,857,880 1,889,112 1,920,344 1,920,344 1,920,344
RATIOS (%)  
Gross Profit/Sales 22.12% 22.49% 22.86% 22.86% 22.86%
Net Profit After Tax/Sales 15.48% 15.74% 16.00% 16.00% 16.00%
Return on Investment 52.37% 52.01% 51.65% 51.65% 51.65%
Return on Equity 124.92% 127.02% 129.12% 129.12% 129.12%

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[

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 860,659 3,718,121 5,517,427 6,864,402 8,136,680 9,745,172
1. Total Current Assets 0 1,996,803 3,956,198 5,463,261 6,895,628 8,664,208
Inventory on Materials and Supplies 0 0 722,704 843,154 1,023,830 1,204,506
Work in Progress 0 0 150,751 175,876 213,564 251,252
Finished Products in Stock 0 0 301,502 351,753 427,128 502,504
Accounts Receivable 0 0 785,455 916,364 1,112,727 1,309,091
Cash in Hand 0 0 23,125 26,979 32,760 38,541
Cash Surplus, Finance Available 0 1,996,803 1,972,662 3,149,135 4,085,618 5,358,314
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 860,659 1,721,318 1,561,229 1,401,141 1,241,052 1,080,964
Fixed Investment 0 819,675 1,639,350 1,639,350 1,639,350 1,639,350
Construction in Progress 819,675 819,675 0 0 0 0
Pre-Production Expenditure 40,984 81,968 81,968 81,968 81,968 81,968
Less Accumulated Depreciation 0 0 160,089 320,177 480,266 640,354
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 860,659 3,718,121 5,517,427 6,864,402 8,136,680 9,745,172
5. Total Current Liabilities 0 0 785,455 916,364 1,112,727 1,309,091
Accounts Payable 0 0 785,455 916,364 1,112,727 1,309,091
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 516,395 2,230,872 2,230,872 1,859,060 1,487,248 1,115,436
Loan A 516,395 2,230,872 2,230,872 1,859,060 1,487,248 1,115,436
Loan B 0 0 0 0 0 0
7. Total Equity Capital 344,264 1,487,248 1,487,248 1,487,248 1,487,248 1,487,248
Ordinary Capital 344,264 1,487,248 1,487,248 1,487,248 1,487,248 1,487,248
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 0 0 0 1,013,852 2,601,729 4,049,457
9. Net Profit After Tax 0 0 1,013,852 1,587,877 1,447,727 1,783,940
Dividends Payable 0 0 0 0 0 0
Retained Profits 0 0 1,013,852 1,587,877 1,447,727 1,783,940

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
TOTAL ASSETS 11,188,532 12,674,599 14,191,899 16,112,244 18,032,588 19,952,932
1. Total Current Assets 10,267,657 11,897,419 13,558,414 15,622,454 17,686,493 19,750,532
Inventory on Materials and Supplies 1,204,506 1,204,506 1,204,506 1,204,506 1,204,506 1,204,506
Work in Progress 251,252 251,252 251,252 251,252 251,252 251,252
Finished Products in Stock 502,504 502,504 502,504 502,504 502,504 502,504
Accounts Receivable 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091
Cash in Hand 38,541 38,541 38,541 38,541 38,541 38,541
Cash Surplus, Finance Available 6,961,763 8,591,526 10,252,520 12,316,560 14,380,599 16,444,638
Securities 0 0 0 0 0 0
2. Total Fixed Assets, Net of Depreciation 920,875 777,180 633,485 489,790 346,095 202,400
Fixed Investment 1,639,350 1,639,350 1,639,350 1,639,350 1,639,350 1,639,350
Construction in Progress 0 0 0 0 0 0
Pre-Production Expenditure 81,968 81,968 81,968 81,968 81,968 81,968
Less Accumulated Depreciation 800,443 944,138 1,087,833 1,231,528 1,375,223 1,518,918
3. Accumulated Losses Brought Forward 0 0 0 0 0 0
4. Loss in Current Year 0 0 0 0 0 0
TOTAL LIABILITIES 11,188,532 12,674,599 14,191,899 16,112,244 18,032,588 19,952,932
5. Total Current Liabilities 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091
Accounts Payable 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091 1,309,091
Bank Overdraft 0 0 0 0 0 0
6. Total Long-term Debt 743,624 371,812 0 0 0 0
Loan A 743,624 371,812 0 0 0 0
Loan B 0 0 0 0 0 0
7. Total Equity Capital 1,487,248 1,487,248 1,487,248 1,487,248 1,487,248 1,487,248
Ordinary Capital 1,487,248 1,487,248 1,487,248 1,487,248 1,487,248 1,487,248
Preference Capital 0 0 0 0 0 0
Subsidies 0 0 0 0 0 0
8. Reserves, Retained Profits Brought Forward 5,833,396 7,648,569 9,506,448 11,395,560 13,315,904 15,236,249
9. Net Profit After Tax 1,815,172 1,857,880 1,889,112 1,920,344 1,920,344 1,920,344
Dividends Payable 0 0 0 0 0 0
Retained Profits 1,815,172 1,857,880 1,889,112 1,920,344 1,920,344 1,920,344

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