ANRS INVESTMENT COMMISSIN

www.investamhara.gov.et

Project Profile on the Fabrication and assembly

of small mechanical threshers

Development Studies Associates

(DSA)

July 2016 Revised

Bahir Dar
 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..............................................................................3
4.1 Availability and Source of Raw Materials.......................................................................3
4.2 Annual Requirement and Cost of Raw Materials and Utilities.......................................3
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........................................................................................................................7
8.3 Production Costs..............................................................................................................8
8.4 Financial Evaluation........................................................................................................9
9 Economic and Social Benefit and Justification.............................................10
ANNEXES...............................................................................................................11
 1. Executive Summary
This project profile deals with the fabrication and assembly of small mechanical thresher in
Amhara National Regional State. The following presents the main findings of the study.

Demand projection divulges that there is ample demand for mechanical thresher. Accordingly,
the planned plant is set to produce 600 pieces annually. The total investment cost of the project
including working capital is estimated at birr 2.17 million and creates 16 job opportunity and birr
436,014.7200 of income.

The financial result indicates that the project will generate profit beginning from the first year of
operation. Moreover, the project will break even at 20.6% of capacity utilization and it will
payback fully the initial investment less working capital in 2 years time. The result further show
that the calculated IRR of the project is 35.2% and NPV at 18% discount rate of birr 1639497

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

Threshing is the action of separating the grain, for example of cereals from the stalk of the plant.
In Ethiopia traditional method of threshing is widely used. It is performed by driving cattle
repeatedly over the plants so that threshing occurs by the action of the hooves. An improvement
on that technique is to use an animal-drawn threshing sledge or threshing rollers. The main
problems of these types of animal-powered threshing are fouling, burying or cracking of the
grain.

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Basically, mechanical threshers are harvesting machines which separate seeds from straw
mechanically. There are different threshing machines for different types of crops. This project
profile deals with threshing machines for wheat, barley and oats.

3. Market Study, Plant Capacity and Production Program

3.1 Market Study
3.1.1 Present Demand and Supply
As clearly stated earlier the traditional method of threshing is the main method of threshing
where it is time consuming and above all inefficient. In this connection, the report of UNDP
point out that the pre and post harvest loss is estimated to be more than 20% of the current total
production. This is partly because some fraction of the harvest is lost in the ground where
threshing takes place traditionally. In the Amhara Region, more than 60 percent of grain
production is cereals. Thus, mechanical threshing machines do have ample demand as they save
time and reduce wastage of grain during threshing. With proper marketing and promotion it is
possible to attract group of farming families to own the equipment.

In other words, it implies that there is ample demand for the product. For instance, among the 3.7
million families (households) in the Amhara Region, about 3.33 million are farming families. Of
these, close to 2.3 million produce cereals. If we assume that one threshing machine will be
owned by five families, the potential maximum demand for mechanical threshing machines will
be 460,000 units. If we assume that only 10 percent of the maximum potential demand will be
realized during the introduction phase of the machines, demand will be about 46,000 units. This
by far exceeds the viable capacity of a mechanical threshing machine fabricating and assembly
plant.

3.1.2 Projected Demand

The future demand for the threshing machine is undoubtedly promising mainly for two reasons.
First, various studies indicate that agricultural production is increasing from time to time. This in
turn creates more demand to mechanical threshing devices. In addition to this the awareness to
the benefit of the technology is expected to improve in the coming years. This, therefore,
increases the future demand the threshing machine.

2
 3.1.3 Pricing and Distribution

Based on the market research result and the capacity of the envisaged plant, the selling price is
set to be birr 2,750 per unit. In distributing the machine the plant shall make use of the available
sales network.

3.2 Plant Capacity

Thus, given the expected demand for the product as presented earlier, and the planned
technology, the envisaged plant is set to produce 600 mechanical wheat threshers per year
annually.

3.3 Production Program

The program is scheduled based on the consideration that the envisaged plant will work 275 days
in a year in 1 shift, 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 75
percent in the 2nd year. The capacity will grow to 90 percent in the 3rd year and to 100 percent
starting from the 4th year. This consideration is developed based on the assumption that market
and logistics barriers would be minimized and eliminated within the first three years.

4. Raw Materials and Utilities

4.1 Availability and Source of Raw Materials
The main raw materials employed in the fabrication and assembly of thresher includes steel, ball
bearings, cycle components, bolts and the like. Except for steel, most of the other raw materials
are imported from abroad.

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 1 here under.

3
 Table 1 Material and Utility Requirement

Total Cost
Material and Input Quantity L.C. F.C.

Steel 30 ton 1,154,700 -

Ball bearings 5,400 pcs - 141,130

Cycle components Set - 92,376

Milling plates (drum), 2 pieces each 1,200 - 461,880

As
Bolts, electrodes, etc required - 128,300

Paint 900 lit 69,282 -

Total Material Cost   1,223,982 823,686

Utility      
195,000
Electricity kwh 107,250  

Water 3,000m3 7,950  

Total Utility Cost   1,339,182 823,686

According to the above table the total material and utility cost is estimated to be about birr
913,200

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 major towns of the region mainly Bahir Dar,
Combolcha, Gonder and Debre Birhan.

4
6 Technology and Engineering

6.1 Production Process

A thresher is a rotating drum with a good number of bent galvanized wires fixed on its surface
and forced to rotate in a cylindrical frame which is fitted with rigid wood to hit the grains for
their separation from the chaff or straw. In the fabrication process the steel is cut, bend and
welded to come up with a functional frame. Then ball bearing, pedal, drum and cycle
components are assembled. At last the machine is painted to make it attractive. This technology
is called the wire hoop mechanism.

There are alternative technologies of threshing fabrications. This includes the peg-type
mechanism. But such mechanism is suitable for beans only and hence is not recommended for
threshing of wheat and other similar cereals.

6.2 Machinery and Equipment

The machineries and equipment required for producing mechanical thresher is detailed in table 2
below

Table 2: Machinery and Equipment

Machinery and Equipment Quantity

 Centre Lathe, 30mm headstock capacity 1

 Electric Arc Welder, a.c. transformer type, 130

amp capacity 1

 Portable electric drill, 13mm capacity 1

Power Hacksaw  1

 Lathe Milling Attachment for slots and keyways 1

 Milling Machine 1

 Pillar Drill 38mm capacity 1

 Wood-cutting circular saw 1

5
 Power wood planing equipment 1
The, total cost of machinery and equipment including freight insurance and bank cost is
estimated to be about birr 185,000.
The following are some of the machineries suppliers’ address for the envisaged project
Perfect Machine Tools Pvt. Ltd.
                      Bell Building, Sir P.M. Road
                      Mumbai 400 001, India

Daulat Industrial Corporation (P) Ltd.

                      P.B. No.309, Civil Lines
                      Ludhiana, India.

B.P. Engineering Co.

                      13-A Industrial Estate
                      Batala, India

6.3 Civil Engineering Cost

The total site area for the envisaged plant is estimated to be 250m 2 where 200m2 is allocated to
the production place and the remaining space is left for stores (30m 2), office buildings and
facilities (20m2).

7 Human Resource and Training Requirement

7.1 Human Resource

The list of required manpower for the envisaged plant is stated in table 3 below

Table 3: Human Resource Requirement

Position No. Required Monthly Salary Total Annual Salary

Manager/Skilled Technician 1 8,981. 107,772
Accountant/Cashier 1 2,566. 30,792
Store Keeper and Sales Clerk 1 1,539. 18,475
Supervisor 1 2,566. 30,792
Operators 7 1,539. 129,326.

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Daily Laborers 3 769.8000 27,712
Guards 2 769.8000 18,475
Benefit (20%)   - 72,669
 Total 16 - 436,014

The envisaged plant creates 16 job opportunity and about birr 169.92 thousand of income. The
professionals and support staffs for the envisaged plant shall be recruited from Amhara region

7.2 Training Requirement

Training of key personnel shall be conducted. This can be arranged with the suppliers of the
plant machineries. The training should primarily focuses on the production technology and
machinery maintenance and trouble shooting. Birr 20,000 will be allocated as training expense.

8 Financial Analysis
8.1 Underlying Assumption
The financial analysis of mechanical thresher fabrication and assembly plant is based on the data
provided in the preceding chapters and the following assumptions.

A. Construction and Finance

Construction period 2 year

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%
Vehicles 20%
Pre-production (amortization) 20%

C. Working Capital (Minimum Days of Coverage)

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 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 1.06
million as shown in table 4 below. The Owner shall contribute 40% of the finance in the form of
equity while the remaining 60% is to be financed by bank loan.
Table 4: Total initial investment
Items L.C F.C Total
Land 750. 750.
0   0
Building and civil works 1,283,000. 1,283,000.
0 - 0
Office equipment 64,150. 64,150.
0 - 0
Vehicles - - -
Plant machinery & 205,280. 269,430. 474,710.
equipment 0 0 0
Total fixed investment cost 269,430. 1,822,610.
1,553,180.0 0 0
Pre production capital 35,538. 35,538.
expenditure* 0   0
Total initial investment 269,430. 1,858,148.
1,588,718.0 0 0
Working capital at full 180,259. 140,073. 320,332.
capacity 0 0 0
Total 409,503. 2,178,480.
1,768,977.0 0 0

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*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.

The foreign component of the project accounts for 23% of the total
investment cost.

8.3 Production Costs

The total production cost at full capacity operation is estimated at Birr 1.2 million as detailed in
table 5 below.
Table 5: Production Cost

Items Cost
1.      Raw materials 2,047,668
2.      Utilities 295,603
3.      Wages and Salaries 436,015
4.      Spares and Maintenance 18,239
Factory costs 2,797,525
5.      Depreciation 136,275
6.      Financial costs 164,216
  Total Production Cost
3,098,014

8.4 Financial Evaluation

I. Profitability

According to the projected income statement attached in the annex part (see annex 3) the project
will generate profit beginning from the first year of operation. Ratios such as the percentage of
net profit to total sales, return on equity and return on total investment are 11%, 25% and 29% in
the first year and are gradually rising. Furthermore, the income statement and other profitability
indicators show that the project is viable.

II. Breakeven Analysis

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The breakeven point of the project is estimated by using income statement projection.
Accordingly, the project will break even at 20.6% of capacity utilization.

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 2 years.

IV. Simple Rate of Return

For the envisaged plant the simple rate of return equals to 33.6%

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
36.2% and the net present value at 18 % discount is Birr 1,639,497

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. This result is accompanied with payback period of 2 years and 6 months.

9 Economic and Social Benefit and Justification

The envisaged project possesses wide range of benefits that promotes the socio-economic goals
and objectives stated in the strategic plan of the Amhara National Regional State. It also plays
positive role in diversifying the economic activity by enhancing the industrial sector of the
region. Moreover, it heavily minimizes the post harvest loss of production The other major
benefits are listed as follows:

A. Profit Generation

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The project is found to be financially viable and earns a profit of birr 7.72 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

In the project life under consideration, the region will collect about birr 2.88 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 several citizens of the
region. That is, it will provide permanent employment to 16 professionals as well as support
stuffs. Consequently the project creates income of birr 436 thousands per year. This would be
one of the commendable accomplishments of the project.

D. Pro Environment Project

The proposed production process is environment friendly.

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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% 75% 90% 100%
741,06 926,33 1,111,60 1,235,11
1. Total Inventory 0 0 7 3 0 1
295,77 369,71
Raw Materials in Stock- Total 0 0 1 4 443,657 492,952
100,14
Raw Material-Local 0 0 80,115 4 120,173 133,525
215,65 269,57
Raw Material-Foreign 0 0 6 0 323,484 359,427
Factory Supplies in Stock 0 0 1,920 2,400 2,880 3,200
Spare Parts in Stock and Maintenance 0 0 3,581 4,477 5,372 5,969
Work in Progress 0 0 48,008 60,010 72,011 80,013
120,01
Finished Products 0 0 96,015 9 144,023 160,025
277,12 346,41
2. Accounts Receivable 0 0 8 0 415,692 461,880
3. Cash in Hand 0 0 47,888 59,860 71,832 79,813
770,31 962,88 1,155,46 1,283,85
CURRENT ASSETS 0 0 1 9 7 2
277,12 346,41
4. Current Liabilities 0 0 8 0 415,692 461,880
277,12 346,41
Accounts Payable 0 0 8 0 415,692 461,880
493,18 616,47
TOTAL NET WORKING CAPITAL REQUIRMENTS 0 0 3 9 739,775 821,972
493,18 123,29
INCREASE IN NET WORKING CAPITAL 0 0 3 6 123,296 82,197

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%
1,235,11 1,235,11 1,235,11 1,235,11 1,235,11 1,235,11
1. Total Inventory 1 1 1 1 1 1
492,95 492,95 492,95 492,95 492,95 492,95
Raw Materials in Stock-Total 2 2 2 2 2 2
133,52 133,52 133,52 133,52 133,52 133,52
Raw Material-Local 5 5 5 5 5 5
359,42 359,42 359,42 359,42 359,42 359,42
Raw Material-Foreign 7 7 7 7 7 7
3,20 3,20 3,20 3,20 3,20 3,20
Factory Supplies in Stock 0 0 0 0 0 0
5,96 5,96 5,96 5,96 5,96 5,96
Spare Parts in Stock and Maintenance 9 9 9 9 9 9
80,01 80,01 80,01 80,01 80,01 80,01
Work in Progress 3 3 3 3 3 3
160,02 160,02 160,02 160,02 160,02 160,02
Finished Products 5 5 5 5 5 5
461,88 461,88 461,88 461,88 461,88 461,88
2. Accounts Receivable 0 0 0 0 0 0
79,81 79,81 79,81 79,81 79,81 79,81
3. Cash in Hand 3 3 3 3 3 3
1,283,85 1,283,85 1,283,85 1,283,85 1,283,85 1,283,85
CURRENT ASSETS 2 2 2 2 2 2
461,88 461,88 461,88 461,88 461,88 461,88
4. Current Liabilities 0 0 0 0 0 0
461,88 461,88 461,88 461,88 461,88 461,88
Accounts Payable 0 0 0 0 0 0
821,97 821,97 821,97 821,97 821,97 821,97
TOTAL NET WORKING CAPITAL REQUIRMENTS 2 2 2 2 2 2
INCREASE IN NET WORKING CAPITAL - - - - - -

2
 Annex 2: Cash Flow Statement (in Birr)
CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
957,48
TOTAL CASH INFLOW 7 1,779,459 2,817,468 3,244,707 3,879,792 4,280,088
957,48
1. Inflow Funds 7 1,779,459 277,128 69,282 69,282 46,188
382,99
Total Equity 5 711,784 - - - -
574,49
Total Long Term Loan 2 1,067,675 - - - -
Total Short Term Finances - - 277,128 69,282 69,282 46,188
2. Inflow Operation - - 2,540,340 3,175,425 3,810,510 4,233,900
Sales Revenue - - 2,540,340 3,175,425 3,810,510 4,233,900
Interest on Securities - - - - - -
3. Other Income - - - - - -
957,48
TOTAL CASH OUTFLOW 7 957,487 2,898,497 2,788,952 3,466,334 3,702,772
957,48
4. Increase In Fixed Assets 7 957,487 - - - -
911,89
Fixed Investments 2 911,892 - - - -
Pre-production Expenditures 45,595 45,595 - - - -
5. Increase in Current Assets - - 770,311 192,578 192,578 128,385
6. Operating Costs - - 1,704,326 2,125,620 2,546,914 2,827,776
7. Corporate Tax Paid - - - - 288,932 341,543
8. Interest Paid - - 423,859 197,060 164,217 131,373
9.Loan Repayments - - - 273,695 273,695 273,695
10.Dividends Paid - - - - - -
Surplus(Deficit) - 821,972 (81,029) 455,755 413,458 577,316
Cumulative Cash Balance - 821,972 740,943 1,196,698 1,610,155 2,187,471

Annex 2: Cash Flow Statement (in Birr): Continued

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 PRODUCTION
  5 6 7 8 9 10
TOTAL CASH INFLOW 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900
1. Inflow Funds - - - - - -
Total Equity - - - - - -
Total Long Term Loan - - - - - -
Total Short Term Finances - - - - - -
2. Inflow Operation 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900
Sales Revenue 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900
Interest on Securities - - - - - -
3. Other Income - - - - - -
TOTAL CASH OUTFLOW 3,551,397 3,533,878 3,510,887 3,214,202 3,214,202 3,214,202
4. Increase In Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
5. Increase in Current Assets - - - - - -
6. Operating Costs 2,827,776 2,827,776 2,827,776 2,827,776 2,827,776 2,827,776
7. Corporate Tax Paid 351,396 366,720 376,573 386,426 386,426 386,426
8. Interest Paid 98,530 65,687 32,843 - - -
9. Loan Repayments 273,695 273,695 273,695 - - -
10.Dividends Paid - - - - - -
Surplus(Deficit) 682,503 700,022 723,013 1,019,698 1,019,698 1,019,698
Cumulative Cash Balance 2,869,975 3,569,997 4,293,010 5,312,708 6,332,405 7,352,103

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED

  CONSTRUCTION PRODUCTION

4
 Year 1 Year 2 1 2 3 4
4,233,90
TOTAL CASH INFLOW - - 2,540,340 3,175,425 3,810,510 0
4,233,90
1. Inflow Operation - - 2,540,340 3,175,425 3,810,510 0
4,233,90
Sales Revenue - - 2,540,340 3,175,425 3,810,510 0
Interest on Securities - - - - - -
2. Other Income - - - - - -
3,251,51
TOTAL CASH OUTFLOW 957,487 957,487 2,197,510 2,248,916 2,670,209 6
3. Increase in Fixed Assets 957,487 957,487 - - - -
Fixed Investments 911,892 911,892 - - - -
Pre-production Expenditures 45,595 45,595 - - - -
4. Increase in Net Working Capital - - 493,183 123,296 123,296 82,197
2,827,77
5. Operating Costs - - 1,704,326 2,125,620 2,546,914 6
6. Corporate Tax Paid - - - - 288,932 341,543
(957,487
NET CASH FLOW ) (957,487) 342,830 926,509 1,140,301 982,384
(957,487 1,477,05
CUMMULATIVE NET CASH FLOW ) (1,914,974) (1,572,143) (645,634) 494,667 1
(957,487
Net Present Value (at 18%) ) (811,430) 246,216 563,902 588,154 429,409
(957,487
Cumulative Net present Value ) (1,768,916) (1,522,701) (958,799) (370,644) 58,765

Annex 3: DISCOUNTED CASH FLOW-TOTAL CAPITAL INVESTED (Continued)

PRODUCTION
  5 6 7 8 9 10
5
 4,233,90 4,233,90 4,233,90 4,233,90 4,233,90 4,233,90
TOTAL CASH INFLOW 0 0 0 0 0 0
4,233,90 4,233,90 4,233,90 4,233,90 4,233,90 4,233,90
1. Inflow Operation 0 0 0 0 0 0
4,233,90 4,233,90 4,233,90 4,233,90 4,233,90 4,233,90
Sales Revenue 0 0 0 0 0 0
Interest on Securities - - - - - -
2. Other Income - - - - - -
3,179,17 3,194,49 3,204,34 3,214,20 3,214,20 3,214,20
TOTAL CASH OUTFLOW 2 6 9 2 2 2
3. Increase in Fixed Assets - - - - - -
Fixed Investments - - - - - -
Pre-production Expenditures - - - - - -
4. Increase in Net Working Capital - - - - - -
2,827,77 2,827,77 2,827,77 2,827,77 2,827,77 2,827,77
5. Operating Costs 6 6 6 6 6 6
6. Corporate Tax Paid 351,396 366,720 376,573 386,426 386,426 386,426
1,054,72 1,039,40 1,029,55 1,019,69 1,019,69 1,019,69
NET CASH FLOW 8 4 1 8 8 8
2,531,77 3,571,18 4,600,73 5,620,43 6,640,12 7,659,82
CUMMULATIVE NET CASH FLOW 9 2 3 1 8 6
Net Present Value (at 18%) 390,705 326,295 273,900 229,897 194,828 165,108
1,049,66 1,279,56 1,474,38 1,639,49
Cumulative Net present Value 449,469 775,764 4 1 9 7
Net Present Value (at 18%) 1,639,497.00
Internal Rate of Return 35.20%

Annex 4: NET INCOME STATEMENT ( in Birr)

PRODUCTION
  1 2 3 4 5
Capacity Utilization (%) 60% 75% 90% 100% 100%

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1. Total Income 2,540,340 3,175,425 3,810,510 4,233,900 4,233,900
Sales Revenue 2,540,340 3,175,425 3,810,510 4,233,900 4,233,900
Other Income - - - - -
2. Less Variable Cost 1,580,531 1,975,663 2,370,796 2,634,218 2,634,218
VARIABLE MARGIN 959,809 1,199,762 1,439,714 1,599,682 1,599,682
(In % of Total Income) 97 97 97 97 97
3. Less Fixed Costs 260,069 286,230 312,391 329,832 329,832
OPERATIONAL MARGIN 699,740 913,531 1,127,323 1,269,850 1,269,850
(In % of Total Income) 72 74 77 77 77
4. Less Cost of Finance 423,859 197,060 164,217 131,373 98,530
5. GROSS PROFIT 275,880 716,471 963,106 1,138,477 1,171,320
6. Income (Corporate) Tax - - 288,932 341,543 351,396
7. NET PROFIT 275,880 716,471 674,174 796,934 819,924
RATIOS (%)  
Gross Profit/Sales 11% 23% 25% 27% 28%
Net Profit After Tax/Sales 11% 23% 18% 19% 19%
Return on Investment 29% 36% 32% 34% 34%
Return on Equity 25% 65% 62% 73% 75%

Annex 4: NET INCOME STATEMENT (in Birr):Continued

PRODUCTION
  6 7 8 9 10
Capacity Utilization (%) 100% 100% 100% 100% 100%
1. Total Income 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900

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 Sales Revenue 4,233,900 4,233,900 4,233,900 4,233,900 4,233,900
Other Income - - - - -
2. Less Variable Cost 2,634,218 2,634,218 2,634,218 2,634,218 2,634,218
VARIABLE MARGIN 1,599,682 1,599,682 1,599,682 1,599,682 1,599,682
(In % of Total Income) 98 98 98 98 98
3. Less Fixed Costs 311,594 311,594 311,594 311,594 311,594
OPERATIONAL MARGIN 1,288,088 1,288,088 1,288,088 1,288,088 1,288,088
(In % of Total Income) 77 77 77 77 77
4. Less Cost of Finance 65,687 32,843 - - -
5. GROSS PROFIT 1,222,401 1,255,245 1,288,088 1,288,088 1,288,088
6. Income (Corporate) Tax 366,720 376,573 386,426 386,426 386,426
7. NET PROFIT 855,681 878,671 901,662 901,662 901,662
RATIOS (%)  
Gross Profit/Sales 29% 30% 30% 30% 30%
Net Profit After Tax/Sales 20% 21% 21% 21% 21%
Return on Investment 34% 33% 33% 33% 33%
Return on Equity 78% 80% 82% 82% 82%

Annex 5: Projected Balance Sheet (in Birr)

CONSTRUCTION PRODUCTION
  Year 1 Year 2 1 2 3 4
TOTAL ASSETS 957,487 2,736,946 3,289,954 3,802,013 4,271,774 4,841,202
1. Total Current Assets - 821,972 1,511,254 2,159,587 2,765,622 3,471,323
8
 Inventory on Materials and Supplies - - 301,273 376,591 451,909 502,121
Work in Progress - - 48,008 60,010 72,011 80,013
Finished Products in Stock - - 96,015 120,019 144,023 160,025
Accounts Receivable - - 277,128 346,410 415,692 461,880
Cash in Hand - - 47,888 59,860 71,832 79,813
Cash Surplus, Finance Available - 821,972 740,943 1,196,698 1,610,155 2,187,471
Securities - - - - - -
2. Total Fixed Assets, Net of Depreciation 957,487 1,914,974 1,778,700 1,642,426 1,506,152 1,369,878
Fixed Investment - 911,892 1,823,785 1,823,785 1,823,785 1,823,785
Construction in Progress 911,892 911,892 - - - -
Pre-Production Expenditure 45,595 91,189 91,189 91,189 91,189 91,189
Less Accumulated Depreciation - - 136,274 272,548 408,822 545,095
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -
TOTAL LIABILITIES 957,487 2,736,946 3,289,954 3,802,013 4,271,774 4,841,202
5. Total Current Liabilities - - 277,128 346,410 415,692 461,880
Accounts Payable - - 277,128 346,410 415,692 461,880
Bank Overdraft - - - - - -
6. Total Long-term Debt 574,492 1,642,167 1,642,167 1,368,473 1,094,778 821,084
Loan A 574,492 1,642,167 1,642,167 1,368,473 1,094,778 821,084
Loan B - - - - - -
7. Total Equity Capital 382,995 1,094,778 1,094,778 1,094,778 1,094,778 1,094,778
Ordinary Capital 382,995 1,094,778 1,094,778 1,094,778 1,094,778 1,094,778
Preference Capital - - - - - -
Subsidies - - - - - -
8. Reserves, Retained Profits Brought Forward - - - 275,880 992,352 1,666,526
9.Net Profit After Tax - - 275,880 716,471 674,174 796,934
Dividends Payable - - - - - -
Retained Profits - - 275,880 716,471 674,174 796,934

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 Annex 5: Projected Balance Sheet (in Birr): Continued
PRODUCTION
  5 6 7 8 9 10
5,387,4 5,969,4 6,574,3 7,476,0 8,377,7 9,279,3
TOTAL ASSETS 31 18 94 56 18 79
4,153,8 4,853,8 5,576,8 6,596,5 7,616,2 8,635,9
1. Total Current Assets 27 49 62 60 57 55
502,12 502,12 502,12 502,12 502,12 502,12
Inventory on Materials and Supplies 1 1 1 1 1 1
80,01 80,01 80,01 80,01 80,01 80,01
Work in Progress 3 3 3 3 3 3
160,02 160,02 160,02 160,02 160,02 160,02
Finished Products in Stock 5 5 5 5 5 5
461,88 461,88 461,88 461,88 461,88 461,88
Accounts Receivable 0 0 0 0 0 0
79,81 79,81 79,81 79,81 79,81 79,81
Cash in Hand 3 3 3 3 3 3
2,869,9 3,569,9 4,293,0 5,312,7 6,332,4 7,352,1
Cash Surplus, Finance Available 75 97 10 08 05 03
Securities - - - - - -
1,233,6 1,115,5 997,53 879,49 761,46 643,42
2. Total Fixed Assets, Net of Depreciation 05 69 3 7 1 5
1,823,7 1,823,7 1,823,7 1,823,7 1,823,7 1,823,7
Fixed Investment 85 85 85 85 85 85
Construction in Progress - - - - - -
91,18 91,18 91,18 91,18 91,18 91,18
Pre-Production Expenditure 9 9 9 9 9 9
681,36 799,40 917,44 1,035,4 1,153,5 1,271,5
Less Accumulated Depreciation 9 5 1 77 13 49
3. Accumulated Losses Brought Forward - - - - - -
4. Loss in Current Year - - - - - -

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 5,387,4 5,969,4 6,574,3 7,476,0 8,377,7 9,279,3
TOTAL LIABILITIES 31 18 94 56 18 79
461,88 461,88 461,88 461,88 461,88 461,88
5. Total Current Liabilities 0 0 0 0 0 0
461,88 461,88 461,88 461,88 461,88 461,88
Accounts Payable 0 0 0 0 0 0
Bank Overdraft - - - - - -
547,38 273,69
6. Total Long-term Debt 9 5 - - - -
547,38 273,69
Loan A 9 5 - - - -
Loan B - - - - - -
1,094,7 1,094,7 1,094,7 1,094,7 1,094,7 1,094,7
7. Total Equity Capital 78 78 78 78 78 78
1,094,7 1,094,7 1,094,7 1,094,7 1,094,7 1,094,7
Ordinary Capital 78 78 78 78 78 78
Preference Capital - - - - - -
Subsidies - - - - - -
2,463,4 3,283,3 4,139,0 5,017,7 5,919,3 6,821,0
8. Reserves, Retained Profits Brought Forward 60 84 65 36 98 59
819,92 855,68 878,67 901,66 901,66 901,66
9. Net Profit After Tax 4 1 1 2 2 2
Dividends Payable - - - - - -
819,92 855,68 878,67 901,66 901,66 901,66
Retained Profits 4 1 1 2 2 2

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